Knowing and Making

Alan Sugar has belatedly discovered an important economic concept: the idea of incidence . The star of The Apprentice and former owner of Tottenham Hotspur has just realised that when new income pours into a competitive industry which relies on scarce resources, incumbent companies don't get to keep the money. The standard example of this in economics is farm subsidies. Although one might think farm subsidies are good for farmers, that is not really true. Because there's a fixed supply of farmland, whose price is determined by how much money a farmer can generate from it, all of the extra money is - eventually - captured by landlords in higher rents. Farmers might benefit in the short term, as this paper suggests , but when their leases are up for renewal the rent will go up. Football is no different - there's a limited number of talented players, and all the clubs want to buy them. So now that the Premier League makes £2 billion a year (twelve times the amount of 20...

I was intrigued recently to learn of the existence of the World Blind Football Championship - the BBC has now written a detailed article about it  so I have found out some more. Footballs with ball bearings...some careful and limited shouting techniques between the five players on each team...rebound walls and no throw-ins...opaque eye patches to keep players on an equal footing, since some of them have partial sight and others are fully blind. Would be fascinating to watch, although I don't think it will have TV coverage. It's interesting to read about the various compromises they've designed into the game to keep it competitive and exciting and allowing visually impaired players to fully express their talents for the game. The goalkeepers, for example, can be sighted and do not wear the eyepatches, but may not leave their areas. And there's no offside rule. Apparently they also tried to find blind referees to officiate the matches... ...but they are all busy ...

Ireland has a problem. It is at risk of getting into some terrible debt. Its fiscal deficit has soared this year to about 14% of GDP, more than almost any other country, and on current path its debt is forecast to reach 126% of GDP by 2016. This is mainly due to a collapse of over a tenth in Irish GDP during the recession - which, under the informal definition, qualifies as a full depression in Ireland. What is to be done? The government is willing to take fairly drastic steps to cut its deficit, even though the economic recovery is still tentative (as a very export-oriented economy, Ireland can afford countercyclical fiscal policy better than most nations). But can the government carry its citizens with it? An Economist article last week offers a clue. Take a look at the chart at the top of the article. Ireland's figures look bad, but it has an advantage: it starts from a reasonable public debt position. On this projection, in 2011 Irish public debt will be 96% of GDP w...

Robert Peston highlights a nice, rather knotty, little economics problem for Arsenal Football Club . This conundrum highlights a number of areas of economic theory: Generalised agency problem . The interests of the different stakeholders in the club all, potentially, conflict with each other. The fans want maximum money spent on good players so they have a chance of winning something for the first time in years. The management of the club want (I guess) stability and a profitable business, which probably means accepting a lower probability of sporting success. The different shareholders want different outcomes: Usmanov may want an equity issue because, with more cash available than the other shareholders, it would probably allow him to increase his stake. Other shareholders want to preserve their stake relative to him, so they are less keen on the increase in investment. The players and manager presumably want to be successful on the pitch, well-paid and - in Wenger's case - to hav...