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.

Tuesday, August 28, 2018

Immigration and vetting

What do we know? (1) Immigration expands the talent pool, with potential economic as well as cultural benefits, (2) the accident of birth is the concrete example of "unfairness" ("fair" and "unfair" are otherwise vague and widely exploited rhetoric by politicians everywhere), (3) beyond some unknown tipping point, immigration gives rise to populist backlash. What to do?  The Economist ("Governments need better ways to manage migration") offers various suggestions.
"No country has a perfect system. But four policies can help maximise the benefits of immigration, minimise its costs and boost public support for it. First, the influx should be orderly and legal as well as humanely handled. ... This is not just because the rule of law matters. It is also because the perception of disorder fuels anti-immigrant sentiment. ...  Migrants should be encouraged to work. They should be helped to fit in. And they should be seen to pay their way." 
Good ideas all. But how do we get from here to there?  Better and more sophisticated vetting? How would we do that? The Economist's four-part plan is unlikely via the leaders we have. It also smacks of "getting to Denmark" fantasies. Do we have the right civil service ethos and staffs to make it work?

The good-ideas people seldom ask the question. Surely, politicizing the civil service was the wrong direction. Unionizing the civil service politicized it. Complaints about service at the DMV and the post office are common. Why would any politician ever even try civil service reform as long as a public sector union is involved?

I would like more migration. But I would also like better vetting.  I have no idea how we would get there from here.

Tuesday, August 14, 2018

Planned obsolescence

When in casual conversation someone mentions "planned obsolescence" it's time to end the discussion.  This was once a favorite of know-things and is evermore silly. There is still enough competition in the world that sellers are compelled to offer better and more durable product.

I well remember the "family car(s)" of the 1950s (and beyond) ones that were not expected to last 100k miles -- and if they did, that was not easily achieved. Many visits to the mechanic. The WSJ includes "Capitalism Fixed My Car ... All kinds of goods are improved by 'trade-tested betterment.'" Exceeding 100k miles is now routine.

I noticed the PBS Evening News reports on the troubles in Venezuela. They cite the drop in the world price of oil!  Occasionally, news people note "economic mismanagement."  They cannot bring themselves to cite the disasters that socialism inevitably bestows -- including what it does to the poor, which seems to be the concern of today's many appeals to "democratic socialism".  What does the qualifier add? More cronyism to what is already endemic?

Don Boudreaux notes that the European Union is hot on the case re "planned obsolescence."

Thursday, August 02, 2018

Could it be any other way?

Economics is about human action. It points us away from discussions of inanimate objects and, instead, towards the actors, the real people, doing the choosing.  So better to talk about politicians than government.

Politicians are real people making complex choices and not able to ignore their personal preferences and constraints. How could they? Hubris inevitably creeps in and we hear about "public interest" and "public service" and such.

So drop "publicly provided" in favor of "politically provided."  My good friend Jim D points us to "Subway Ridership Dropped Again in New York as Passengers Flee to Uber" in a recent NY Times report. Could it be any other way?  Look for stories about "budget shortfalls" and "underfunded" which is the only way out if the human action part (famously brought to politics by James Buchanan) is ignored.

Federal government deficits and national debt, and the prospect of their durability, are no mystery. Republicans used to voice concerns. But even that has gone away.

ADDED

Why would this idiotic project NOT move forward?


Sunday, July 22, 2018

Trapped?

Austan Goolsbee worries that sellers have found ways to "trap" us. Branding is, of course, the name of the game. As sellers, we want to stand out from the crowd. Some succeed in standing out; others cannot. As buyers, many of us choose to become attached to a brand or a seller. Many choose the closer retailer and a spend few extra bucks. I have driven Toyotas all my life and choose that brand at the car rental desk for the obvious and simple reason that it will be an easier and simpler adaptation.

Albert Hirschman's Exit, Voice, Loyalty makes the point beautifully. When it comes to our shopping, we can complain (voice) or we can walk (exit) or we can choose to hang around -- all things considered (loyalty).  It is always a three-option. game.  What do sellers call the programs that Goolsbee worries about?  Loyalty programs.

Switching away from comfortable brands can be hard. It carries the risk of moving into unexplored territory. Attitudes to risk-bearing, we know, vary tremendously among people.

Tech and platforms make loyalty programs possible. Goolsbee seemingly worries that all of this suggests a decline in competition and consumer choice. Or does he not like the choosing he sees? "Trap" is dramatic. But tech and platforms also give us a world of apps and choices.

How many choices do I have? And are they "good" or not so "good" choices? Do I see them as "good" or "bad". Or are third party observers the unhappy ones?

Most of us have great choices when we shop.  It's not as good when we vote.  Not surprisingly, we shop much more often than we vote.  Shopping is where the interesting choices are. Clinton or Trump anyone?  Feel trapped?


Saturday, June 30, 2018

The drift

Below are data from The Economist re public transit's problems in major U.S. cities. This is old news.  Most people prefer their private modes, mainly autos. But people's preferences are a distant second (or worse) when it comes to political allocations. There, Bootleggers and Baptists rule.

Private transit allocations are also in the news. Voluntary investments flow to where there are prospects of demand.  Here are Matt Kahn's musings re The Bird. It (and others that are already on the case and more that will follow) might even be a last-mile option for some would-be transit users. That might slow the long-term decline ("down the tubes") which goes back much further than the chart shows, no matter how big the subsidies.

An all-bus system for LA, including buses on freeways, had been suggested as early as the 1960s. But Manhattan dreams have always been a badge of urbanist sophistication. A great irony. Planners now promise even more of poorly performing rail. The dream (mendacity) goes on no matter decades of poor performance. Costs will continue to escalate and bus service will be cut further.  Policy and reality will keep drifting further apart.

Disruptions describe innovation and competition in the modern market economy. Innovators provide the app and the platform -- and fill in with "gig" workers who, in this case, take care of the refueling and re placing them around town.

Sunday, June 10, 2018

Roots

What is the best book I have read (so far) this year?  It is a delightful question as we are fortunate to have so many smart people writing for us. So the question cannot be simple. Let me suggest, however, David Reich's Who We Are and How We Got Here: Ancient DNA and the New Science of the Human Past.

We humans (and others) carry an inherited tribalism. We learned to communicate and to form and sustain teams in order to survive -- and dominate the planet. Dunbar suggests that teams up to about 150 had worked best for our kind. Politicians and others conveniently muddle all this by harping on the idea that we all belong to one nation, one "community", etc. It Takes A Village. But be very careful about the extent of the village.

Demagogues understand all this and fuel convenient myths of tribal identity and origins. Exhibit A might be Hitler's peculiar stories about ancient and Aryan roots of the German "volk". It worked -- to make smart people very stupid and very nasty. But there are many others examples. Name a demagogue who does not follow a similar script.

Along comes David Reich who shows how modern DNA science strongly suggests that stories about "roots" are mainly bunk.  The evidence shows that our ancestors were many, that they moved around a lot and that they bred promiscuously enough to challenge the idea of any simple genetic commonality.

There are, to be sure, cultural commonalities but they are not "blood" bonds. Which, then, are the better cultures? The ones that accept newcomers. Melting pot is still a great idea. Roots is a horrible and a dangerous idea.

ADDED

Here is Arnold Kling re the Dunbar number.