Tuesday, March 12, 2019

Non-partisan?

There are probably good medical definitions of overweight and underweight. There are many other serious examples. But many other casually used overs- and unders- are hard to define.  They are rhetoric. We hear many complaints about things "overpriced." More that I want to pay? Or the popular "I am underpaid," even "underappreciated?" Many more.

In private life there are bankruptcies and business failures. In public life, these are rare. Instead, many agencies or services are "underfunded." There is seldom recognition that something is wrong and the outfit should re-group and leave us alone.  Perhaps some private businesses on the verge of bankruptcy entertain thoughts of being underfunded. But if capital markets do not come to the rescue, there are probably good reasons. (Seeking cronies in government is another unfortunate approach.)

At the local level, is there an excuse for potholed streets? Why do the folks with clear responsibilities for the basic duties of local government fail?  One would think that fixing the potholes is non-partisan. One would think that the things that really matter to most people are the purview of local governments. One would think. (And that may be the case for smaller jurisdictions. The Homevoter analysis suggests the same.)

One would be wrong. Big cities are different. By all means, pay attention to this when referring to "local government".  This is not a simply defined sector. At the large-city level, instead of the basics there is preoccupation with social justice and climate change programs. Why fix the roads? Big-city politicians secure election by looking after a coalition of labor unions (their pay and their pensions) plus the fans of "good causes." Bootleggers and Baptists is powerful as always.

Non-partisan suppliers of public services indeed.

ADDED

The people who cannot fix the potholes do embark on transit projects that cost huge amounts but serve very few people. In fact, net ridership increases are negligible (in a good year) but usually negative. Here is the latest for L.A.  Again, stop talking about "local government". Big-city local government is special and not in a good way.

More on "underfunded".

Monday, February 25, 2019

Slippery

Socialism and Capitalism are fraught labels that many people will define in their own convenient way. Crony capitalism is surely the wrong capitalism but perhaps defines our unstoppable drift. Both political parties inevitably find cronies with whom they would like to do business: special dispensation in return for political support. Too many businesses sign up for the deal.

Millennial voters are supposedly prompting a shift to the left among would-be candidates for the Democrat Party's nomination for President. Interesting political footwork will be on display for some months. Democrat Party Chair Tom Perez was on one of the news shows this AM showing off some of his dance steps.  Many of the things that many voters seemingly enjoy, he mentioned, were once deemed "socialist." He cited Social Security and minimum wage laws. Others add the modifier "democratic" socialism to distance themselves from the well known socialist catastrophes; Venezuela's Maduro and the plight of his nation are in the news daily. Others prefer current European examples. Arnold Kling notes that they get the story less than half-right.

Russ Roberts and Mike Munger discuss crony capitalism in this week's Econtalk. Is crony capitalism inevitable? Does our Constitution protect us?  Does our culture protect us? Are both layers of protection fraying? Did both political parties (and most economists) wrongly embrace bail-outs in 2008? Did they give away the store? Did they provide ammunition to the left that will be used to challenge defenders of market economics for many years?

I enjoyed the conversation and encourage others to listen to it. I did not come away with the feeling that the drift to cronyism can be arrested. I do not see a modern-day Churchill with the rhetorical and intellectual skills to turn the tide and make the case that "democratic socialism" or cronyism are slippery slopes to avoid. Far from it.


Monday, February 18, 2019

Sunk costs


In recent weeks, California’s new governor canceled (actually scaled back) California’s high-speed rail (previous post), Airbus canceled further work on the A-380, and Amazon has second thoughts about New York city. Is it the end of the sunk cost fallacy? Not really. The sunk cost fallacy results from the natural human tendency to not admit mistakes – and to somehow strive to redeem mistakes. Gamblers seldom walk away from a losing streak (casinos make a lot of money).  Couples and friends with relationships gone sour often stick with them for many years. (We seemingly have no data on this).

Throwing good money after bad has limits. More than half of new business fail within five years. But this is less clear when other people’s money is involved. It is also less pronounced when Bootleggers and Baptists coalitions are in play. Finally, when (especially) vain politicians think of their legacy (and “legacy projects”, e.g. Jerry Brown and the bullet train) the plot thickens. Amazon walked away from a bad prospect way earlier than California did.

I expect that many more economists teaching intro courses talk about market failure than government failure.  I will never know why.

ADDED

http://www.newgeography.com/content/006228-airbus-a380-death-plane-born-die

Sunday, February 03, 2019

Infrastructure!!!


Pharaohs, popes and politicians like(d) mega-projects. Peter Hall has documented Great PlanningDisasters. Bent Flyvjberg and his colleagues have that shown such failures are endemic.

Nevertheless, China’s economic accomplishments over the last 30 years, including all those bullet trains, have garnered fans for this-time-is-different central planning.  

Today’s New York Times Magazine includes “The Trillion-Dollar Nowhere”.  It’s about China’s Belt and Road Initiative. The project “will link China’s coastal factories and rising consumer class with Central, Southeast and South Asia, with the Gulf States and the Middle East; with Africa; and with Russia and all of Europe, all by way of lattice and land and sea routes whose collective ambition boggles the mind.” 

The article does a good job evoking some on-the-ground realities. These include nationalisms, politics, ethnic antagonisms and suspicions, historical grievances, etc. The original Silk Road(s) were no picnic – and was eventually by-passed in favor of improved sea transport. It is only now being revisited, about 2,000 years later, because of modern Chinese planning hubris.

What do we know? Grandiose projects attract a natural Bottleggers-and-Baptists constituency. Politicians and planners overreach. One-off projects are naturally difficult and risky. Rational ignorance-plus-politics is easy prey for sunk-cost fallacy thinking.

Almost everyone laughs or scoffs at the California BulletTrain but who cares? It will go forward.

ADDED

I was wrong. Gov Newsom stopped this turkey in its tracks (oops). Nixon-goes-to-China moment? 

Saturday, January 19, 2019

"Solutions"

"Fatal conceit" is precious.  How much wisdom can be crammed into a two-word phrase!

It is amazing (but not surprising) that those who are largely ignorant presume to manipulate a system they cannot really understand.  Knowledge is dispersed and complexity is the rule. Again, Hayek said it best: "The curious task of economics is to demonstrate to men now little they really know about what they imagine they can design."

This morning's WSJ includes a brief discussion of how ignorance kills. People in Los Angeles (and other big cities) moan and groan about traffic congestion.  They do not rue un-priced access because pricing is exotic and/or nefarious. But "solve" they must.  Today's WSJ includes "Vision Zero, a 'Road Diet' Fad, is Proving Deadly ... Emergency vehicles get stuck on streets that have been narrowed to promote walking and bicycling."  How could it be otherwise?

What else do we know? The people who  bring us crackpot ideas and policies keep getting re-elected. In the extreme, when elites tell Little Sisters of the Poor that they must get behind contraception, there is revolt and revulsion.  We get Trump and Trumpism. Problem solved?

Saturday, December 29, 2018

Coffee blends


We know that many of the geniuses of fin de siècle Vienna met in the café’s of that city’s first district to produce great conversation and ideas. The magic of those times and places is impossible replicate but many have tried to approximate the idea. Starbucks (and competitors) filled a void in many cities here and abroad. Yes, they’re even in Vienna. 

But there is simply no way to mass market and mass replicate the legendary café’s that Shachar Pinsker writes about in A Rich Brew: How Cafes Created Modern Jewish Culture. Pinsker focus is Jewish culture but we know that conviviality and conversation are a universal human desire. The fact that great ideas and great art come about this way is a wonderful bonus and, under the right circumstances, to be expected. We think best when we interact and network.

Pinsker ends his tour of the erstwhile landmark coffee houses of Odessa, Warsaw, Vienna, Berlin, New York, Tel Aviv with a lament about where we are now. “It is hard to think of significant poetic or intellectual groups meeting in cafes on a regular basis …” (p. 303). Where these occur it is serendipitous and unlikely to be packaged in the Starbucks formula. But that would be asking a lot.

This is the age of screens and screen time. People like to interact face-to-face and they also like their screen time.  They understand that we benefit from many types of interactions, personal, electronic, near and far. All have their place. We get too pick the blend that works for us.

Wednesday, December 12, 2018

Elites

Climate change, to the extent that it is human-caused is a global commons. The Prisoners' Dilemma indicates the futility of individual action.  The chart below (from The Economist) shows that in recent years, the U.S. has been an over-achiever reducing carbon emissions. China and India are under-achievers.



Why, then, the California Bullet Train?  Perhaps it will never get built. If it does, it will have huge costs and offer negligible benefits. If it does not, huge sums will have been wasted. The State's public pension commitments are underfunded. The roads are potted. Public spaces are the domain of the homeless.

You do not have to visit the U.K, France, Greece, etc. to see the consequences government by out-of-touch elites. But do read about the  clueless here, there, and everywhere in Martin Gurri's The Revolt of the Public.  Elites are may still think Bootleggers and Baptists but in the age of the internet, locking in legacies the old-fashioned way may not work. When elites get clobbered, they apparently revert to Manchurian-candidate-from-Russia fantasies. Any self-awareness is missing. 

Wednesday, November 28, 2018

Cronyism

The problem of congested roads is explained by the absence pricing. For some strange reason, most analysts call this a "market failure".  Here is one of many examples.  But the failure to impose a policy is more accurately a policy failure (or government failure). The error shows up in most discussions of road pricing I have seen. 

(A notable exception is the best guide to highway planning I have read in recent years, Bob Poole's  Rethinking America's Highways.)

In this week's Econtalk, Russ Roberts interviews Anat Admati on the causes of the 2008 financial crisis. Both are unhappy that while Ben Bernanke and friends now take victory laps for having "saved us" from financial ruin, these are the people who got us into the mess by accepting low capital requirements and over-leveraging. Roberts and Admati agree that nothing has been learned and over-leveraging is still accepted -- as are "too big to fail" and bail-outs as an option.

Towards the end of the podcast, Admati calls it a "market failure" Roberts chimes in and says "government failure." They leave it at that.

It is both, it is crony capitalism, about which we do not talk enough. I went back to Baumol et al's Good Capitalism Bad Capitalism and found that cronyism is missing from their survey. Randall Holcombe's "Crony Capitalism By-Product of Big Government", as the title suggests, hits the nail on the head.

What to do? How do we get to smaller government? To a less over-reaching government? Both U.S.  political parties are big-government parties. Our third party, Trumpism, has rolled back some regulations but has embraced mercantilism in a big way. Holcombe alludes to the various economic freedom indices as a way to identify the problem. But a better index is needed.

We keep an eye on separation of church and state. An equal devotion is needed to the separation of business and state. No government agency can keep an eye on this. The documentation job awaits some of the bright folks at the various libertarian-leaning think tanks -- of which we now have a few.



Thursday, November 22, 2018

Confusion

Socialists avoid confronting socialism's failures (and tragedies) by claiming that the "real" socialism has not yet been tried. The dodge seems to work in some circles. The leftward drift of half of America means ever more of this.

Writing almost 30 years ago, James Buchanan noted that "Socialism is Dead; Leviathan Lives ... The loss of faith in socialism has not been accompanied by a faith in markets. There remains a residual unwillingness to allow the market to organize itself." (WSJ, July 18, 1990).

Jonah Goldberg explores how and why the loss of faith has been avoided (by some) and why Leviathan is still with us. "Modern society's most important divide is between the external impersonal order of contracts, commerce and the personal order of family friends and community. We live in both realms simultaneously, even though the rules for different realms could not be more different ... Humans were not designed to live in the market order of contracts, money or impersonal rules, never mind the huge societies governed by a centralized state." (2018, p. 62). This is a leaf out of Hayek.

The centralized state Goldberg mentions is likely to rely on force and terror because it has no way to win people's minds and heart. But from a safe distance, this awfulness gets a pass via the strange logic mentioned at the top of this post. Goldberg cites "social-ism" the willful and dangerous delusion that the personal order of family friends and community can succeed at any scale.

Monday, November 05, 2018

Voting

Cognitive dissonance (holding two opposing ideas at the same time) is supposed to be stressful. Perhaps and perhaps not.

"Every vote counts" is uttered and repeated an uncountable number of times. But it is not true. At the margin, votes that count (in majoratorian situations) are the ones that tip the outcome. Such results are exceedingly rare to say the least. This means that the odds of my vote having any significance are almost zero.  When I tell my friends that I do not plan to vote tomorrow, most are incredulous. My simple explanations fall on deaf ears -- to be polite about it.

Go to a country that does not have a history of the popular vote and see people line up, often for hours, to cast their ballots. The thought that their integrity is respected to the point where they are invited to cast their vote thrills them. In that way, it thrills me too.

Trouble is that in our secular age, political action attracts those who need to believe and to join. The urge to say and do reprehensible things for "the team" is less than thrilling. 

Thursday, November 01, 2018

Philosophers and social scientists

Here is Russ Roberts writing about lonely men with guns. Do read the whole essay.
I don’t think it’s a coincidence that almost all of the acts of mass murder and terrorism are committed by men, mostly lonely men, disaffected, alienated from modern life, alienated from the standard of success our culture aspires to, disconnected from those around them. No one pays much attention to them until people are forced to pay attention at the point of gun. No one pays much attention until the headlines that scream that these lonely men have finally achieved something people are going to have to notice.
Roberts writes about people with no love in their life. This is the real inequality, not the one we hear about so much from politicians and pundits.

We encounter many of the broken as street people in our major cities. Having a loose bill in hand to give them is all I can think of.

Philosophers write about the human condition and often end up wringing their hands via a nihilistic theoretical conclusion.  Desperation and the absence of happiness have been themes at least since the thinkers in Athens BC.  John Gray offers a wonderful and concise tour of many more writers' thoughts -- even including the views of grand nihilist, Marquis de Sade. Many of these thinkers are themselves serious depressives.

Social scientists tend not to be depressives or philosophers and, instead, they dig for explanations (stories) that suggest a "fix". Many espouse "programs". In quotes because the word has become cringy.

But does anyone really know how to confiscate millions (hundreds of millions) of firearms? Does anyone know how to treat the alienation from modern life that Roberts mentions?  Honesty demands that they admit they do not know.  Roberts essay is a good place to start.

Here is Timothy Taylor on kinlessness. Again, no "program" in sight that would make a difference. Offer a hand to the broken people you encounter.

Monday, October 08, 2018

Growth, prosperity, "tech hubs" and Paul Romer

Here is today's NY Times piece on the two new economics Nobelists. In efforts to make their work accessible to the public, much has been and will be written about them. As always, there is much useful material at Marginal Revolution. Alex Tabarrok's video on Paul Romer is clear and on point. Everyone knows about the importance of new ideas and how entrepreneurs scramble to jump on them first -- to be the first to profit from innovative product that implements new ideas.

"Tech hubs," notably Silicon Valley and the many wannabees, that incubate all this by assembling the ideas people with the money people, are written about almost daily.  What took the growth economists so long?  Economists were stuck on the textbook lesson that ideas (that are "in the air") are a "public good" accessible to all at zero cost. How then to profit from developing (let alone investing in) new ideas?  It happens all the time but can we explain in?

Once again, markets get it and demonstrate. The way to overcome the free access problem is to be the first mover. Patents can help but being first to solve all the messy problems of implementation is the key.  There will be copycats and being a first mover only confers temporary advantage but for many that is enough.

One can say that Joel Mokyr solved the problem some years ago by emphasizing useful knowledge. Purposeful action is highlighted in spite of the obvious problem of free riding. Entrepreneurs are the folks who are focused and aware. They actively seek specific knowledge and specific ideas. They want to make the world better -- and they want to profit. They have some inkling of what they are looking for and where they might find it. Hence the tech hubs that so many mayors and development authorities dream of.  Does Nobelist Romer suggest what to do?  I think he would say that Mr and Ms mayor can signal that they are open to the emergence of of spatial arrangements that let people exchange ideas.

Does this mean high densities?  How high? No one knows. Best to let the intricate order happen. Jane Jacobs (1961) knew. "Their intricate order -- a manifestion of the freedom of countless numbers of people to make and carry out countless plans is in many ways a wonder." 

Tuesday, October 02, 2018

Econ 1 v. the roadblocks

Here is Don Boudreaux referring to Leland Yeager's remarks to the effect that Econ 1 (or Econ 101) is all you really need. The uncountable confusions that we hear from writers and talkers, especially the with reference to trade, are painful.  And the marginal benefits of more advanced econ are marginal (manner of speaking). This underscores the analytic power of the basics.  It also evokes some of the confusions of high-octane theory. "Secular stagnation" anyone?

There are many super-accessible texts that any bright high schooler can easily grasp.  The Economic Way of Thinking, my favorite, is cost-effective: many powerful ideas presented clearly.  So what is the problem?  How can so many smart people remain so confused -- about the gains from trade -- among many other such topics? How many prominent commentators would be laughed out of the room when they expound on "fair trade", free tuition, minimum wages, etc., were the audience not so confused?

Here are my five top roadblocks to greater understanding: First, non-zero-sumness is counter-intuitive to many -- even though cooperative behavior has been observed among primates and other animals. How then to grasp gains from trade among strangers, including those that populate international supply chains? Second, many people trust their own vague sense of "fair" outcomes and are loath to admit that fairness is a very difficult idea mainly invoked as rhetoric. Third, many retain an amazing trust in top-down "solutions", especially ones that are cooked up via a "democratic" process.  Fourth, too many people are ignorant of history. They simply do not know that they are amazingly well off compared to the vast numbers who came before them whose lives were simply "nasty brutish and short."  They also do not know that it is the exchange economy that lifted us to where we are. Fifth, conventional economic instruction can easily fail.  Young (and some less young) professors prefer to talk about the high-brow econ they learned in grad school. They do not grasp its irrelevance to non-economists.

It will be uphill for a very long time.

ADDED

"Many of the recommendations for growth and prosperity found in just about any standard 'Econ 101' textbook are the right place to start ..." (Brynjolfsson and McAdeem 2015, p. 206)

Wednesday, September 12, 2018

Sunstein's world?

I greatly enjoyed Cass Sunstein's The Cost-Benefit Revolution. I would recommend it to anyone who wants to learn about project and policy evaluation.

Sunstein is optimistic that we have made great progress bringing sober analysis to policy making. The author has spent considerable time in Washington, including the White House, and his judgment is worth listening to.

But there is also (still) considerable nonsense and waste in the policy arena. I take the climate scientists at their word (and note that there are some very smart and notable dissenters). But we also know that while California accounts for approximately 0.2% of U.S. greenhouse gas emissions (a global commons), its leaders and elites want us to make huge sacrifices for further emissions reductions. This is not Sunstein's world.

Today's LA Times includes coverage of yet another religious-fervor summit on climate being held in San Francisco.  I mentioned the California bullet train (weirdly justified by concerns about climate) in the previous post.  Here Tom Rubin notes the substantial on-going waste in Los Angeles transit policy.  Ever more is spent and beneficial effects are negligible or worse. Not Sunstein's world either.

People who claim to be scrupulous about the climate science find a way to be bizarrely wrong about their policy analysis. We say that there are problems and mysteries  Science and faith.  Some people are content to be scientific about one problem but not the other.