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Welcome to Pingree's Potato Patch, my online research lab for the study of Detroit's economy. I'll be keeping track of the results of my investigations here, along with collections of useful data. Feel free to leave comments on any of the posts, and if you want to contact me, you can use this form to send me email.

The Detroit Free Press has posted a very detailed series of charts explaining what happened to Detroit's financial situation over the last 6 decades. In a nutshell the city's debt took off in the mid-90s and hasn't slowed down yet. Interestingly during Coleman Young's administration total debt was lower than annual revenues, but budgets were only balanced during the Archer administration. This suggests that it would be interesting to see how much of the year change in debts was due to general operating budget deficits and how much was due to infrastructure spending and other forms of investment (worthwhile or not).

So, I saw earlier today that Snyder has appointed Kevyn Duane Orr as Detroit's new Grand Poobah. My first thought was "who's that?" So, I decided to find out. Here's what I was able to dig out from the interwebs: More...

Add Comment 27 August 2011 - Ownership: The Cornerstone Of A New Strategy For The Left? by David

I was reading an interview in Salon discussing the relative lack of success of the left in the United States in comparison with Europe. It attributes most of the difference to long-term influences of the formal class structures in Europe, which lead to traditional political alignments along class lines which never took hold in the US for more than brief stretches. The problem today for most progressives/liberals/whatever is that formal or not it does appear that a strong class division has established itself in our society in the last thirty years as wealth and income inequality has grown. However, the traditional villain of the left, capitalism, is almost as ineffective a boogie-man with the US public as communism, Tea Party sound and fury aside. People believe capitalism and relatively unhindered markets are the best options we've got, and as an economist I don't think they are completely wrong. As right-wing visionary (and sometime economic crank) Louis Kelso argued, Marx's analysis was right: the capitalist system is inherently unstable, with a definite tendency for wealth to concentrate in existing hands.

The basic instability stems from the fact that the owners of capital tend to capture most economic growth - aside from the basic issue of profits going to the owners, you've also got the Fed capping wage growth as one of the primary drivers of inflation, and finally that corporate investment raises the value of the shares held by the existing owners - money follows money. However, the public doesn't want government owning businesses (which to be fair has not worked that well over the last hundred years outside of public goods like water, security and other utilities, where government is a somewhat logical provider), and clearly the wealthy are rebelling against the New Deal political equilibrium, where government diffused class hostilities by placing a thumb on the scales through progressive taxation and regulatory oversight. Our political discourse today really doesn't contain any ideas for addressing this instability.

People who know me well may feel I'm a broken record here, but I believe that as a political project, the left needs to focus on making capitalism work by picking up the needle on Marx and putting it in a new groove. Workers do need to control the means of production if we're going to stabilize and humanize the economy, but the last two hundred years have shown many, many ways to do it without resorting to government expropriation. The left needs to build a political agenda around community wealth building: the mass expansion of cooperatives, employee ownership, credit unions, and the whole gamut of engines for building wealth at the level of the average citizen. It's a straightforward concept that voters could understand, and its has many spinoff benefits that could tie into other elements of a broader platform, such as urban economic development, improved international competitiveness, environmentalism.

The left's successes have almost always come from arguing for equity and fairness. We should return to that theme.

27 June 2011 - Wayne State Alumni Mag Fumbles The Story by David

I don't know if anybody else has read the Wayne State alumni magazine (honestly, I don't know if anybody reads it, full stop), but this issue had a cover story on the "midtown revival", and it has me a tad peeved. The narrative runs 10 pages with lots of photos, talking about all of the wonderful things going on in Midtown. So, let's see here, they mention Avalon Bakery (they'd almost have to)... and then midway through the article give a list of the other types of stores that have opened in the area, mentioning the name of nary a one. What they do mention in profusion is all of the anchor institutions, office buildings, and so forth which have been in place for decades, to which they grant the majority of the credit for the revival of the area.

Now, I really haven't heard much to suggest that the anchors have done much of anything in the last ten years to encourage the establishment of the businesses and refurbishment of the residential clusters in the area which are the heart of the revival, but I may have missed something (not that the article makes much of a case for their role to date). But putting that aside, the growth in businesses, restaurants and residential population is the story here, so the fact that they spent 10 pages focusing on photos of hospitals and talking about the stuff that will happen, may happen, should happen, but not what's actually happening, is kind of ridiculous.

A story about the Midtown revival is a great idea for the Wayne State alumni magazine, and I hope they actually publish one someday...

So, I got an email today from the Detroit city government containing a spiffy Powerpoint Δ encapsulating the Mayor's response to the City Council's proposed budget cuts. The most important thing I see is that to save roughly $28 million (apparently beyond$20 Bing claimed he and the council agreed on at the Mackinac conference), the cuts are likely to disqualify the city from $106 million in federal funding, at least some of which has already been spent and would have to be repaid. The rest of it's a touch hard to parse, as it doesn't note how many of the services it lists as shutting down are explicit in the council's cuts and how much is the mayor's office's judgement as to what the cuts will entail. Given what I've seen from inside a couple of public institutions, plus the fact that forgetting about federal dollars seems to be typical in poorly thought out budget cutting, I'm inclined to give Bing the benefit of the doubt. So, taking the Powerpoint at face value, the cuts will result in the closure of Hart Plaza as of July 1, the beach and restrooms at Belle Isle, and the People Mover, in addition to the fire and police layoffs. All in all, it's pretty nasty... Add Comment 06 January 2011 - Groupon and the Golden Football by David I was bouncing around the web while wikifying the Mythic Detroit site and stumbled across an article by Evan Miller called "The Golden Football which argues that part of Groupon's success stems from it enabling violations of the normal rules surrounding price setting in environments with brand differentiation. Add Comment 30 December 2010 - ♩ ♬ ♪ Oh, Sweet Mystery Of Life, At Last I've Found You... by David I just discovered the wonder which is Sage, an Open Source mathematics software package. It's capable of doing matrix manipulations with symbolic algebra, which has been the slowest part of the entire Local Economy Model process by a massive margin. Yay! Seriously, if you don't have the money for a Mathematica license, this thing is pretty damn impressive. Add Comment 28 October 2010 - Local Economy Model, v1.0 by David I've been working with a toy model for a couple of months as a way of exploring the consequences of "buy local" campaigns, and I'm pretty much done with this iteration, so I thought I'd share. I've got all of the messy mathematics sequestered elsewhere on this site, but here are the guts of the model. It's based around three sectors: households (H), locally-owned firms (L), and national chains (N). I use Y to represent Gross Municipal Product, the overall size of the local economy, and I use the subscripts i and e to represent Income received by and Expenditures made by H,L and N. We'll define the economy thusly: {${:(H_i = alpha_0L_e + alpha_1N_e), (L_i = beta_0L_e + beta_1N_e + beta_2H_e), (N_i = (1-alpha_0-beta_0)L_e + (1-alpha_1-beta_1-r)N_e + (1-beta_2)H_e), (Y = H_i + L_i + N_i) :}\$} All of the coefficients on He, Le and Ne (the αn and βn terms and the sums involving them) represent fractions of the whole, and thus are restricted to between 0 and 1. Also, the coefficients on the household and local expenditures terms add up to 1: household expenditures get split between local firms and national chains, and local firm expenditures are split between households, other local firms, and national chains. However, take note of the r in the expression for national expenditures. Unlike households and local firms, the national chains direct some of their expenditures out of the local economy in the form of licensing fees, profits, and so forth, which is represented by the fraction r ; it basically acts as a "leak" out of an otherwise sealed system.

Again, the math is hidden elsewhere, but in a nutshell I was able to find how various the different coefficients affect the sectors of the economy, with my main interest being how things affected H. I found the following consequences of this model:

• Spending at national chains tends to have a negative effect on the local economy when compared to the effects of spending at locally owned businesses.
• The household sector can increase its income by redirecting spending away from national chains and toward locally-owned businesses.
• Rational national chains will tend to export a larger fraction of their earnings the less they depend upon the local economy for resources and the larger the fraction of local consumption they absorb.

Again, these conclusions fall immediately out of the model and its assumptions, which are clearly quite simplified (no larger regional economy, no investment, no government, etc.), but as a first step it's reasonably satisfying, at least to me. My next steps are adding a government sector and taxation to the model (which will begin in a moment), and interfacing the current model with the contents of the Andersonville study which undergirds a lot of the rhetoric of the 3/50 Project and similar buy local campaigns.