Thursday, December 18, 2008

Proposed SLC Infrastructure Projects

The nation's mayors have made their request for federal stimulus dollars. You can view their report here.

There are 8 Utah cities that list projects here: Brigham City, Herriman, Holladay, Murray, Orem, Provo, Salem, and Salt Lake City.

I didn't realize we had a Salem; seems to be down in Utah County. (They want a sewage treatment plant.)

The reasoning behind the stimulus package is to get jobs created. Construction is a good candidate for this sort of package, because the technology is fairly simple, and we can put people to work quickly.

Salt Lake City makes the biggest request among Utah cities, with almost $800 million in projects. The big dollars are for trains --- Sugarhouse trolley, Trax, other stuff.

The strangest SLC request? $350,000 for an Iron Sponge at the Water Reclamation Plant. What the heck is that? I thought sponges were made of, well, ... I have no idea what sponges are made of.

Tuesday, December 16, 2008

Utah Demographics

I hinted in the last post about Utah's interesting demographics. Everything I've learned about that subject comes from Pam Perlich --- Here's a link to her latest report on how Utah's population is changing.

Thursday, December 11, 2008

Utah Salaries

A reporter asks about salaries for professional occupations in Utah.

First, some facts:

Here is data on average salaries for some professional occupations in a few western metro areas. This is from the Bureau of Labor Statistics' Occupational Employment Statistics Survey. You can get to this data here.

Accountants and Auditors
Phoenix $55,050
SF Bay $72,340
Denver $67,450
SLC $60,570

Computer Software Engineers, Systems Software
Phoenix $79,220
SF Bay $101,490
Denver $90,550
SLC $78,720

General and Operations Managers
Phoenix $99,060
SF Bay $123,850
Denver $107,880
SLC $95,140

Financial Managers
Phoenix $89,020
SF Bay $130,370
Denver $112,330
SLC $94,590

Compensation and Benefits Managers
Phoenix $68,550
SF Bay $106,820
Denver $92,480
SLC $93,660

You can see that for the most part, salaries are lower than SF and Denver. But higher, mostly, than Phoenix.

I think there are a few reasons for this:

(1) Composition of employers. I think there may be fewer corporate headquarters here than in Denver and SF, so on average managers here may not be as high on the corporate ladder.

(2) Our area is quite differentiated. What I mean by this is that people tend to have strong opinions one way or the other about Utah. For many of us, there is no place else we'd want to live. For individuals who value the strong LDS community or the very easy access to skiing, there is almost nowhere else on earth that offers comparable amenities.

For others, the cultural conservatism of our area can be off-putting. Think here of a non-religious, wine connoiseur who doesn't ski. For such individuals, our area might not be a good match.

What does this mean in terms of the labor market?

It means there is a set of workers that is going to live here even if wages are low. It is also means there's a substantial set of workers who wouldn't move here even if wages were much higher.

This means that local demographics matter a lot, or at least relatively more than in other parts of the country. If we have excess demand for managers, then wages will rise... but this increase in managerial wages won't draw workers from around the country to the same extent as it would in a less differentiated region. Similarly, if we have excess supply, wages will fall, but this might not push workers out of Utah to the same extent as it would in other locales.

Interesting, the demographic trends in Utah are quite different from those in other states, due to high fertility rates and the like. Pam Perlich is the U's expert on this stuff.... Maybe she'll guest blog for me someday on this. (Are you out there Pam?)

Tuesday, December 9, 2008

Talk on "The Economy"

I'm giving a talk downtown tomorrow on "The Economy". Kind of a big topic for 50 minutes, but I'll do my best. Here's a link to my slides.

Monday, December 8, 2008

Sugar Bowl

There is some economics at the end of this post... Just wait.

Utah is going to the Sugar Bowl, where they will have no shot at winning the NCAA football championship, despite the fact that they may finish the season as the only team without a loss.

The NCAA says it supports sportsmanship. But is it sporting or fair to tell a team that it cannot win the championship, no matter how well it performs on the field? Of course not.

The real reason we don't have a college football playoff can be found in the work of one of the 2007 Nobel Prize winners in economics. Roger Myerson and Mark Satterthwaite's paper on bargaining shows that two parties can fail to reach an agreement even if it is common knowledge that gains from trade exist. The necessary ingredient is asymmetric information.

That's exactly what's going on here. Everyone --- everyone --- in college athletics knows that a college football playoff would be a huge moneymaker. Huger (is that a word? if not, it should be) even than the current bowl system. It's common knowledge that a playoff could make everyone better off.

We don't have it, for the following reason. Suppose the current system nets $9 Zillion for the BCS conferences, and $1 Zillion for the non-BCS conferences. Suppose everyone knows that a playoff would result in at least $10 Zillion, but that nobody knows exactly how much.

The extra money needs to be split among the schools. But how? Should the non-BCS schools get half? Should they get a 10%? Should they get a payment that's proportional to their current revenues?

It's simply not clear how this extra should be split. The BCS conferences want a large share of it. So do the non-BCS schools. So no one is willing to make a deal.

Wednesday, December 3, 2008

Auto Bailout

JB points out that much of the discussion about the auto bailout centers on promises by the car companies that they'll innovate to produce more fuel efficient cars. It's related to my earlier point that ExxonMobil might not be best able to make investments in renewable energy.

One interesting wrinkle in the auto business is that innovation in fuel efficiency complements existing auto technology. What does this jargon mean? The innovation we need is new, more fuel efficient engines. But those new engines then need to be paired with wheels and tires and doors and steering wheels and all the other stuff that's in cars.

This makes the innovation game tricky. Detroit is really good at internal combustion engines. This suggests that Detroit might not be that good at developing technologies that replace internal combustion engines.

But Detroit is also really good at doors and wheels. And this means that anyone who does develop an economically viable electric drive train will want to combine that innovation with Detroit's skill at wheels and doors and other car stuff. An electric-car entrepreneur would be (a bit) at the mercy of Detroit in terms of capturing the value of this innovation.

To put it back into jargon, an electric engine would substitute for Detroit's knowledge of internal combustion. This suggests that Detroit might not be good at developing electric engines. But an electric engine would complement Detroit's knowledge of wheels and doors. This suggest that Detroit might be good at developing electric engines.

So it's not clear to me whether our car innovations are going to come from Detroit, or from non-Detroit entrepreneurs like Tesla. There was an interesting 60 minutes piece on this a couple months ago.

My colleague Lyda Bigelow studies this sort of stuff, using historical data from the auto industry in the 1920s.