Saturday, December 03, 2016

Another one bites the dust

"Industrial policy" is the polite term. Trumpian "bullying" is more accurate. The Carrier deal agreed to last week is a case in point -- and just the beginning. It would be much better to separate politics from economics.  Here are the big four reasons why:

1. No third party is equipped to second-guess any business decision.
2. Third parties are easily involved in political grandstanding. This makes them worse than ill-quipped to intervene.
3. Politicians inevitably over-promise. Delivering is the hard part. The Obama forces may still be puzzling over Democrats' thrashing last week. But it's very simple. "Hope and Change" set expectations much too high.
4. Over-promising also leads to restiveness that invites despotism and repression. Venezuela, Cuba, North Korea and many others are in this state. This is where it gets really ugly.

These are well known non-trivial dangers. The unseen (Bastiat) is always the problem.

Trouble is that both political parties love this stuff. Particularly awful us how the normally sober Peggy Noonan (WSJ) and Mark Shields (PBS NewsHour) also cheer. This is not about elites vs non-elites. One more cliche just died.

ADDED

Dan Griswold reminds us of the danger of "blowback" retaliation from abroad. Yes, the hole being dug can get pretty deep.

Monday, November 28, 2016

Explanations, please

The "fix infrastructure" chorus is bi-partisan. That may be a problem. Here is James Surowiecki's Nov 28 New Yorker column. It mentions that "Debt-fueled extravagance was bad for his [Trump's] companies, but it could be good for America' s economy and infrastructure ... Done right, a big infrastructure spree would boost demand and make travel more efficient."

Done right? Pure win-win? What do we know?

1. There will be pork projects, including bullet trains to nowhere. No one has suggested a vetting procedure that de-politicizes the fest. We have very little history of getting this right.

2.  Those looking for a macro-economic demand boost owe us an explanation of why the Obama stimulus of 2009 fell flat. That one took place when there was significantly more unemployment than now.

3. Stimulus dreams assume that unemployed resources are easily available and easily malleable. Neither is true. We are now told that the U.S. economy is near full employment. (To be sure, Tyler Cowen has suggested that large numbers of undocumented immigrants would like to work on these projects.) 

4. Surowiecki seems to agree with those who want the U.S. to borrow more. But the federal debt (plus unfunded liabilities) is too big and there is no plan to address it.  Servicing the debt will be a bigger problem as interest rates rise.

There are other reasons to be concerned . But start with these four. Infrastructure enthusiasts have some explaining to do.

Saturday, November 19, 2016

Negation and skipping classes

I share Arnold Kling's enthusiasm for Martin Gurri's The Revolt of the Public. Here is Kling's review. When you read the book, try to keep in mind that it was published in 2014. I hope the author made many bets on the recent election. I expect he would have bet on a Trump win -- and made a lot of money. That does not mean I see Gurri as a fan of Trump.

There is little I can add to Kling's review. Gurri writes about recent political protest movements in Egypt, Spain, Israel and the U.S.  He notes, "Like their brethren in Spain and Israel, the OWS [Occupy Wall Street] protesters were energized primarily by the force of their repudiations. They made no demands, but felt free to accuse. The objects of their loathing -- a predatory economic system, a corrupted government, a society ruled by money -- united them in a way that common goals did not. They spread the notion that the top 1 percent of Americans tyrannized the bottom 99 -- and that they, a handful of white, middle-class youngsters, represented the vast American public, the people in revolt. OWS injected these once-marginal attitudes into the mainstream, where they became fodder for liberal politicians. The romance of condemnation, in my judgment, has become the most conspicuous feature of Obama's mode of governance ..." (loc 1904 on Kindle).

More negation and protest than demands. Post-election, young people protest Trump by boycotting their college classes. What's to lose? If they still graduate, do most of them care about missing a few lectures?  Any bets that most of them are not from college majors where hard content is taught? Or perhaps they can get academic credit writing papers on what all makes them feel bad. Do not bet against it.

Read Gurri's book.

Monday, November 14, 2016

Emergent

When I write about cities and cite the bottom-up as well as the top-down forces that shape cities, I usually end up with the conclusion that most of urban form is emergent. Journal referees often challenge all this with references to infrastructure which was presumably installed top-down. The favorite story is usually Manhattan's street grid and the Commissioners' Plan of 1811.

But Los Angeles is different. A friend points me to Reyner Banham's Los Angeles; The Architecture of Four Ecologies, particular its Chapter 4, "The Transportation Palimpsest." There were ox cart and horse trails, including the Camino Real, many of which predated the alignments of railroads.  Most of the rails were private,  many installed to guide buyers to outlying real estate developments. Many of LA's freeways, most of which came in the 1960s, followed routes quite similar to or nearby the old train tracks.

Banham's Figure 30, "Route Map of the Pacific Electric, 1923" (p. 62-63) has much in common with an LA freeway map of today.

The major spines of the freeway plan are apparently emergent alignments. I would not be surprised if there are stories like this in other places. You can never know enough history.

Friday, November 11, 2016

Bad news bearers

My favorite theme is human progress.  Many of us are blessed to be living in a time and place where it is so apparent. But this does not mean that it is apparent to all of our friends and neighbors.

There are so many good books on progress that it is hard to say where to start. The names Deaton,    Lomborg, Maddison, McCloskey, Mokyr, Phelps, Radelet, Pinker, Ridley, Simon, and Shermer are good places to start. There are many others.

Among the clearest and most concise is Johan Norberg's Progress: Ten Reasons to Look Forward to the Future.  I am not trained in psychiatry so I can only speculate why young people are taught more about the bad news than about all the good news.

Here is one snippet from Norberg (page 161):  "After winning the Second World War against the Nazis' brutal form of racism, the Allied democracies showed how many problems still remained among themselves. When General de Gaulle wanted French troops to lead the liberation of Paris on 25 August 1944, American and British commanders accepted it on the condition that no black colonial forces were included, even though they made up two thirds of the Free French forces." The author includes other snippets like this, all guaranteed to hit you over the head.

They hit you over the head because they are so crazy from today's vantage point. Like Norberg, some of us celebrate how far we have come in a short space of time. Yes, there is never a time to simply stop and be smug.

I mention all this because, in spite of progress, so many among us prefer to look at the election results as simply the result of racism. No. Barack Obama was elected two times by large margins. And his popularity rating remains amazingly high for an incumbent at the end of his second term.

Those who cannot accept progress, but instead like to dwell on the past, cannot accept the idea that the Obama policies and mode of governance, not to speak of all the Clinton detritus, were the real problems.

I say this as someone whose side (divided government) lost. May our side prevail soon.


Sunday, November 06, 2016

For the children

I briefly cited Edmund Phelps' wonderful economic history, Mass Flourishing, in this post a while back. A brief version of his argument is in the NYRB of August 12, 2015.  Here is the link. 
On election day next week, voters across the country will be asked to approve all sorts of new school bonds and taxes, "for the children." But we (should) know from long and sad experience that throwing money at the problem is ineffective. Phelps has a better idea. 
Below is lengthy quote from his NYRB essay. It is quite wonderful but very far afield from the standard election year talk about schools. As always, there is the unaddressed question of how we get from here to there. That would be another essential book.
How might Western nations gain—or regain—widespread prospering and flourishing? Taking concrete actions will not help much without fresh thinking: people must first grasp that standard economics is not a guide to flourishing—it is a tool only for efficiency. Widespread flourishing in a nation requires an economy energized by its own homegrown innovation from the grassroots on up. For such innovation a nation must possess the dynamism to imagine and create the new—economic freedoms are not sufficient. And dynamism needs to be nourished with strong human values.
Of the concrete steps that would help to widen flourishing, a reform of education stands out. The problem here is not a perceived mismatch between skills taught and skills in demand. (Experts have urged greater education in STEM subjects—science, technology, engineering, and mathematics—but when Europe created specialized universities in these subjects, no innovation was observed.) The problem is that young people are not taught to see the economy as a place where participants may imagine new things, where entrepreneurs may want to build them and investors may venture to back some of them. It is essential to educate young people to this image of the economy.
It will also be essential that high schools and colleges expose students to the human values expressed in the masterpieces of Western literature, so that young people will want to seek economies offering imaginative and creative careers. Education systems must put students in touch with the humanities in order to fuel the human desire to conceive the new and perchance to achieve innovations. This reorientation of general education will have to be supported by a similar reorientation of economic education.
We will all have to turn from the classical fixation on wealth accumulation and efficiency to a modern economics that places imagination and creativity at the center of economic life.

Wednesday, November 02, 2016

The real question

Last January, I was temporarily cheered by the LA Times'  uncharacteristically critical examination of LA's rail transit madness.  The awful record made it to their front page. Check it out.

That was then. Now it's election time and various propositions to vote to throw more good money after bad are on hand. Measure M is on the ballot. It would bump up the county sales tax by anther half penny to fund more transit boondoggles (and various trimmings to make it appear to be "multi-modal").

Yesterday's Times front-page "L.A.'s traffic battle plan: transit, yes, but cars too" cites the MTA chief's goal of converting 20-25% of the county's population to regular transit users. LA transit use has been near 6% of commute trips for some years. Is the chief a betting man -- with his own money?

Re the proposal, the Times' story these days is "yes, but."  If we could allow and prompt more high-density and mixed development near transit stations, then perhaps we have a shot. But what are the odds? And what are the costs? And who pays?

Finally, what are the essential details? Airy statements about density and mixed use miss the point. It is the details of what goes on the ground that matter. What density? What mix? There are thousands of details that only the actual risk taker can be trusted with.

Will developers have the leeway? Probably not in the politicized (cronyist) arena of LA planning. Can the rules be made simple and clear and minimal? These, and not another tax increase, are the essential questions.

Thursday, October 27, 2016

Minimum wage

Over at Cafe Hayek, they post these three outstanding videos. Watch and enjoy. Very stiff competition for those of us who try to teach this. Competition is a wonderful thing.

Tuesday, October 25, 2016

They'll take romance

It may be time to give up on hopes for a Kotlikoff-Leamer or a Johnson-Weld victory -- or even a non-majority in the Electoral College. All of these scenarios presumed that Trump and Clinton would self-destruct at about an even pace. But it's very hard to keep up with Trump in that department.

What is next best?  I saw a post (somewhere) where someone asked what they would miss most about Obama. The answer in this conversation was "Congressional gridlock". My next best hope is divided government.

That is not the view of Alan Blinder, writing in today's WSJ.  He sees Congressional gridlock as the problem.

OK for him if he dreams of a Clinton win and a sympathetic left-leaning Congress. But what would they do? Is a further drift to statism beneficial? Would a further left EPA be helpful? Would a more complicated tax code be useful? Would more Dodd-Frank and more politicized health care do any good? Would more power to the education establishment help anything but strengthen that group?  Would more tightly regulated land use do anything for housing affordability or labor mobility? I could go on.

"Politics without romance" never caught on with most people or with most economists. Blinder and others stick with romance? Do romantic notions have a place in serious discourse?

ADDED

Don Boudreaux notes the "nirvana fallacy."


Sunday, October 23, 2016

China stagnation?

Everyone's favorite question about China is: how long can they keep it [amazing growth] up? Performance following the Deng Xiaoping reforms has been unparalleled in world history. The Communist Party is still in charge and the standard view is that the Party and the population have struck a bargain: leave the vast Party apparatus in power and they will deliver ever rising standards of living. Again, for how long can the bargain work?

A good friend reminds me that there is something wrong with the first question. China is not a country but a continent. Many parts (the major cities) do quite well but, please, do not generalize about the whole continent. And generally speaking, cities do better that countries. Some coalitions are just too big.

On top of that, Blumenthal and Scissors think that the "bargain" is unsustainable. The country's debts are too high, official data releases cannot be trusted, the military and security establishment require constant care and feeding and will soon become unaffordable, the Deng-era reforms have stopped.

That's the bad news. The good news is that China's investments in education have been spectacular; education is serious and (from what I could tell) unfettered. Best of all, there are signs of a significant return talent migration.  I have seen this at both ends, talented Chinese leaving the U.S. to return home and (this visit) encountering some now in Shanghai who have returned from their U.S. sojourn and prospered..

Friday, October 14, 2016

Eve of (self-) destruction

There are many things one can say about the two major party candidates for President but no one has suggested that either is Churchillian. Lee Pollock recently posted "What would Churchill think of Trump and Clinton?" in the WSJ (gated by now). The piece includes two of the great man's (attributed to him) most memorable (and relevant to this election year) utterances. “The best argument against democracy is a five-minute conversation with the average voter.” And “Democracy is the worst form of government except all those other forms.” Did he ever attempt to reconcile these two? What flavor of democracy was he thinking about?

Our flavor includes an Electoral College whereby most states award that states' electoral votes on a winner-take-all basis. The Wikipedia post site mentions that there are two exceptions, Maine and Nebraska. The post's authors say this about these two states: 

Except for Maine and Nebraska, all states have chosen electors on a "winner-take-all" basis since the 1880s.[5] That is, each state has all of its electors pledged to the presidential candidate who wins the most votes in that state. Maine and Nebraska use the "congressional district method", selecting one elector within each congressional district by popular vote and selecting the remaining two electors by a statewide popular vote.
Given all this, can Gary Johnson garner enough electoral votes to put the selection into the House of Representatives?  The House apparently most chose from the top three vote-getters.

By then, two will be seen as exposed and as losers -- and we could get an adult.

My previous posts on this topic presumed that Trump and Clinton would self-destruct at about the same pace so that there would be no clear Electoral College majority by early Nov. Each have tendencies to self-destruct but they do so unevenly and unpredictably.

FiveThirtyEight has a slightly different version.

Saturday, October 08, 2016

Policy #12, the cities

Here are eleven policy suggestions to boost the economy for the next president from Brookings researchers. These are all good and we have heard them before. I have two thoughts. First, issue another paper on why these have been unattainable -- and how and why they can become attainable. That would be a longer paper.

My other quibble is that cities ought to be included as policy #12 -- or the existing entry on productivity should include a discussion of cities. Cities are "engines of growth" because the ideas that boost productivity are spawned in cities. Moreover, cities are where supply chains are located and thereby realized. I have mentioned before that Coase's what-to-make vs what-to-buy challenge to entrepreneurs and managers must include what to buy where. The Coase question cannot be fully evaluated unless spatial choices are included.

What, then, is the policy challenge? Brookings and many other have chimed in on the unproductive (anti-productive) land use regulations that have been embraced by greens and others. These have been used by NIMBYs to freeze or slow development and have undermined housing affordability as well as labor mobility.

But at the same time, supply chain formation is stymied.  Cities are the spatial realization of large numbers of (emergent) supply chains. I include supply chains for ideas. Ideas can be exchanged face-to-face or electronically. Following, Mokyr, we can say people are keen to find useful knowledge. To do so, people network (shmooze?) at the mall or on the golf course or you name it. Most (perhaps all) people and firms evaluate and choose locations as well as blend of networks based on the many supply chains they participate in.

The Feds dole out so much money to cities that approvals simplification (how about a one-stop approvals process?) could be a requirement from Washington.

Silly me. I almost forgot who the two major candidates are.

Sunday, October 02, 2016

Laugh or cry?

Here are John Cochrane and Russ Roberts talking about economic growth -- and why we have so little of it. Most economists stake out positions on various fiscal or monetary policy stimuli -- and usually argue for their preferred version or mix. But the inability of fiscal and/or monetary policies in the developed countries to have any significant impact these days is ignored. The third option ("third rail"), reform of the bizarre regulations and codes now on the books, is the one Roberts and Cochrane take up.

"Third rail" says it all. Tax code reform has been talked about for years but Congress and President are impotent when it comes to taking on all of the cronies who live off and love our IRS code. Is news of Donald Trump's taxes -- and the very "Trumpian" defense that his clever use of the code is something to behold, a game-changer? Is all this a gift from the heavens, not just to the Clinton camp, but the even usefully to beleaguered tax reform advocates? I keep looking for the good in all the nonsense?

Tuesday, September 27, 2016

There's a pony here somewhere

Here are Bryan Caplan's reasons for disdaining politics. I feel the same. In fact, I could add to it. But the point is made. This political season has not helped. The fact that Americans' cynicism towards politics grows is not a good sign. I have no idea if any of  this is reversible. Where do we go after Clinton-Trump? There are cliches about "hitting bottom" and then somehow bouncing back.

In all this it's good when politicians connect dots. We did have a short spate of de-regulation under Carter-Reagan. And that was it for a while.

So here is some good news. Almost everyone has by now seen hard evidence that restrictive land use policies are the cause of the widely lamented housing affordability problem. Green land use policies have had this effect since the UK 1947 Town and Country Planning Act. So in 2016, we finally get "Obama takes on zoning laws in bid to build more housing, spur growth." Is it a sign? We'll have to see.