Saturday, April 18, 2015

Superb history

We hear that young people don't know much about history. Perhaps their teachers should have them  read the works of Stephen Ambrose, whose Undaunted Courage: Meriwether Lewis, Thomas Jefferson and the Opening of the American West is what they used to call a page-turner. But it is also essential and well documented history.

Jefferson was a visionary (a word that usually makes me cringe). The Louisiana purchase was a good idea. So was the thought that there might be a water route to the Pacific via the Missouri and Columbia Rivers -- not found, to the great disappointment of all involved. So also was the choice of Meriwether Lewis to assemble the group of explorers and lead them through unknown territory and back. Jefferson was also wise to have Lewis move into the White House as part of his preparation so that the two men could share all that Jefferson knew of the relevant geography, navigation, natural life, etc. Lewis was instructed to bring back information as well as examples of plant and animal life. There was no thought to finding gold or silver. Ambrose calls all this emblematic of the "American enlightenment."

We see that trade and new trade routes were seen for their fundamental value and importance (unlike many commentators today). We learn that Indians who had never seen white men were ready and eager to trade. Aside from one episode, whites and Indians were able to avoid confrontation and violence. This in spite of their mutual strangeness and no common language.

Yes, Lewis and his men referred to the Indians as "savages".  Lewis and others of the expedition saw that it was natural to own black slaves. They were men of their time. But when major route choice decision time came, "[t]his was the first vote ever held in the Pacific Northwest. It was the first time in American history that a black slave had voted, the first time a woman had voted" (p. 316).

Lewis came to  a bad ending. He was a much better explorer than a politician. Jefferson's great failing was appointing him Governor of the Louisiana territory on his return from the expedition. Lewis and Clark failed to follow up and get their valuable journals published. That was left to others. "... [T]he journals he [Lewis] wrote are among his greatest achievements and constitute a priceless gift to the American people, all thanks, apparently, to lessons learned from Mr. Jefferson during his two years of intimate contact with the president in in his house" (p. 67). Read the book.

Wednesday, April 15, 2015

Big tent

Timothy Snyder's Bloodlands: Europe Between Hitler and Stalin is indispensable. The area was a tough neighborhood even before the two dictators arrived. Borderlands are that way. But modern industrialized killing made everything much worse. George Kaufman makes a similar point. He writes about Flashpoints and updates the story in order to address today's many conflicts in Europe. It's always a "new ballgame" and (Friedman notes) it's not.

Both authors make the point that Hitler and his band murdered millions in the name of race war; Stalin and his followers murdered millions in the name of class war. But Stalin and his heirs (Mao, Ho, Fidel, Che, Hugo, to name a few) still get a better press than the Hitlerites because race war has (rightly) become unfashionable (exclude the jihadists) while class war is still very popular. (What would politicians do without it?)

Writing in the current Independent Review, Andrei Znamenski ("From 'National Socialists' to 'Nazi': History, Politics and the English Language"), notes that Nazis did not refer to themselves as "Nazis." They liked to be called National Socialists. But the label "Nazi" is now preferred by most people in the West so as not to taint the label "socialist". There is supposedly honor in class war so we must be careful who to include in any "socialist" big tent.

Saturday, April 11, 2015

Specialists, not regulators

This morning's WSJ opines (as do many these days) re California water ("California's Farm-Water Scapegoat"). The piece begins this way:
Perhaps the only issue on which Bay Area liberals and conservatives down California’s coastline agree is that farmers use too much water and should be rationed. The fortunate in Silicon Valley and Marin County need a tutorial in Golden State water allocation.

According to the fable of the prodigal farmer spun by environmentalists, farmers are producing too many water-intensive crops and over-pumping groundwater. Big Agriculture is said to have negotiated dirt cheap water rates with the government that are subsidized by city dwellers and suburbanites. As a purportedly even greater injustice, Governor Jerry Brown’s new mandate to cut statewide water usage by 25% exempts farmers.

The reality is that farm water has already been rationed for more than two decades by the ascendant green politics, starting with the 1992 federal Central Valley Project Improvement Act. Federal protections for the delta smelt, salmon, steelhead and sturgeon (2008-2009) further restricted water pumping at the Sacramento-San Joaquin River Delta, so 76% of inflows, mainly from the Sierra Nevada mountains, spill into San Francisco Bay.
The piece goes on to describe some of the adaptations/distortions that result when allocations are mandated.

But there are two problems in the cited passages. First, water (everything) is always rationed -- by price, by fiat, by convention, etc. To complain of "rationing" is very odd, especially for WSJ writers. The same inaccurate rhetoric comes into the health care debates.  It is never rationing-vs-non-rationing. But, rather rationing how.

Second, the editorial sounds like the Ralph Nader theme that "my regulators would be better than your regulators." The authors of the editorial would regulate California water allocations so that farmers get more and wildlife less than in recent years. But no breed of regulator can possibly arrive at a sensible answer because the details of water allocation are too complex to be knowable by any body of well meaning (or not) officials. All investments and all plans involve risk-taking and are best left to the specialists, those who have a stake in the outcome.

Wednesday, April 08, 2015

Rand Paul

Radio guy Larry Elder redefined himself some years ago from Libertarian to Libertarian-Republican, as "Republitarian." Likewise, Rand Paul will look for votes among those who want liberty returned to U.S. political discourse but who also fear the consequences of isolationism abroad. We have come a long way and people like Elder and Paul and many others deserve credit for mainstreaming views that had been missing from political discourse for too long.

I have often mentioned Arnold Kling's useful three-axes model. Republicans look at a civilization-barbarism axis; progressives use oppressor-oppressed; libertarians prefer freedom-coercion. Understanding the views of others is always desirable.

"Mainstream" opinion follows the progressive view -- and loves to evoke "fairness." The complexity of "fair" is ignored -- as are the baleful consequences of the embraced (default) policitical allocations.

This morning's LA Times includes, "Some charities fear L.A. wage could hurt their own efforts for workers." Complicated! Mandated wage hikes were supposed to be funded by fat cats -- and that is that. Oppressors pay and oppressed benefit. Labor demand elasticities do not exist and life is simple. But if you are confined to viewing the world along the progressive axis, then struggle -- as the people in the Times story seem to.

Paul gets all this. There is plenty of high ground for him to claim. Politicized allocations are most "fair" to cronies. Freedom makes upward mobility possible; 50 years of "war on poverty" policies have failed that test -- witness the chorus of complaints about increasing inequality.

Monday, April 06, 2015

Not easy being "green"

Two things struck me as I arrived at USC early this morning. The campus seemed unusually littered. A clean-up crew was hard at work with their power-blowers, gathering all the litter. The other was that I picked up the campus daily which headlined. "Greenfest educates and entertains attendees ... The event ran alongside Springfest and promoted energy awareness."

ADDED

Related to all this is Radical Secularization? which some people may find clarifying.

ADDED 2

Mondays are great because Econtalk appears.  Here are three smart people discussing the works of Adam SmithLearning these ideas, including what it means to be sociable, may be a better use of time than marinating in some undefined "sustainability". 

Saturday, April 04, 2015

"Fixing" the problem.

Policy failures bring on policy "fixes" that usually make things even worse. Various clear elaborations of the problem are in Burton Abrams' The Terrible 10: A Century of Economic Folly. See, especially, his chapter on "Government Failure and the Great Recession."  The various "fixes" that have been served up since then are not promising.  See last Friday's jobs report.

Where to begin? It appears that politicized water allocations in California ship most water to almond growers. But polite company only sees "drought" and the "need" for more water wisdom from Sacramento. I do not think that these people have ever put "price" and "water" into the same sentence. More awfulness will follow.

The latest Economist leads with "Space and the City: The high cost of wasting land."  Bingo. Restrictions push up prices. "Affordability" problems follow.  But somehow the leader's author also thinks that better top-down land use planning is possible.  Good luck.

The follow-up piece in the same issue cites recent research by Enrico Moretti and Chang-Tai Hsieh ("Growth in Cities and Countries").  The authors model the economic costs of U.S. workers separated from the jobs where they would be most productive -- separated by the high costs of living nearby. They find that the annual cost is $1.7 trillion (with a "t").

And then comes another possible "fix". "Alternatively, a possible solution is the development of forms of public transportation that link local labor markets characterized by high productivity and high nominal wages in local labor markets characterized by low nominal wages. One obvious example is the high speed train currently under consideration in California ..." (p. 7).

Among the "root causes" of the Watts riots cited in the McCone Commission analysis of events was joblessness caused by poor transit connections to jobs centers. Ever since, public transit funding has been promoted as a remedy for unemployment. The money was duly spend but inner city unemployment never got better. It's those "fixes" again.

Thursday, April 02, 2015

Bizarre

In his New Yorker review of two recent books about the Holocaust ("The System ... Two new histories show how the Nazi concentration camps worked") Adam Kirsch notes once again that Nazi barbarity continued with ferocity, even as it exacted a high cost in terms of Germany's losing war effort; the victims had been effectively dehumanized in the German mind. "Once a prisoner ceased to be human, he could be brutalized, enslaved, experimented on, or gassed at will, because he was no longer a being with a soul or a self but a biological machine."

But then Kirsch goes off the rails. "The enemies we kill in war, the convicted prisoners we lock up for life, even the distant workers who manufacture our clothes and toys—how could any society function if the full humanity of all these were taken into account."
I like my iPhone and I am happy that supply chains now extend to China and beyond -- and that "distant workers" in poor countries have new and better labor market options than ever. Death and despair are not the rule. China's growth has been good for hundreds of millions of Chinese. There are workplace tragedies and we expect that they are attended to as they come to light.

Non-zero-sum outcomes are not easily accepted by many smart people. We see that all the time.  But analogizing the customers of developing country exporters to Nazi death camp sadists is bizarre. 



 
 

Sunday, March 29, 2015

Actual exploitation

I do feel guilty about enjoying college sports. Covering the sport, today's WSJ includes an interview with ESPN's Jay Bilas who invokes the only appropriate descriptor, "exploitative."  "The NCAA will rake in about $800 million from broadcasting rights to this year's tournament -- a more than 500% increase from two decades ago. Yet this represents a mere sliver of the nearly $12 billion in revenues that flow annually through college athletic programs -- principally, men's football and basketball."  Everyone gets fat except the players who contribute most of the value added. Players are prohibited from offering their services to the highest bidder. The NCAA has strict rules and the legal power to enforce.

The story has been told many times. (See, for example, Joseph Epstein in Friday's WSJ). I cite it here because "exploit" and "exploitative" roll off the tongue in casual conversation all the time, mostly inaptly. It is apt when there are legally sanctioned cartel agreements that consign the talent (usually African-American in this case) to the crumbs while sanctimonious college and league officials (and politically connected alums) pile it on about the "amateur" status of "student athletes."

Let's reserve "exploitation" to the cases where legal coercion is in play.

Saturday, March 28, 2015

Hockey sticks and feedbacks

History is hard. Louis Menand (writing in the current New Yorker) has some thoughts on how hard. This is how he begins: "Once, history was a game played with giant billiard balls: wars, revolutions, scientific inventions, the major awards shows. You knocked a combination of these together and you got our world. Then people realized that wars, revolutions, the Grammys, etc., are not explanations at all. They are themselves things that need to be explained. Something made them possible, too. Was it money? Ideas? Genes? Germs? Great men? Deepwater ports?" He continues. The whole thing is worth reading.

When we look for simple explanations, we easily fall for apparent cycles (the virtuous as well as the vicious).  My favorite is Surjit Bhalla's rendering of the positive feedbacks between economic freedom and prosperity.  In The Measure of Civilization: How Social Development Decides the Fate of Nations, Ian Morris compiles and presents economic and demographic data that go back several millennia.  He focuses on mankind's ever increasing success at capturing and utilizing energy. He also finds a positive feedback cycle: "Information technology and energy capture have been involved in a feedback loop" (p. 237).

Do these loops interact?  Probably.  We do know that climate scientists work with many connected feedback loops. Our challenge is to explain a very big deal, the very recent hockey stick of human prosperity. Positive feedback loops are handy as we try to explain our good fortune.

Wednesday, March 25, 2015

Mandatory voting

"The Unappetizing Effect of Minimum-Wage Hikes ...In San Francisco and Oakland, restaurants are already shutting down" is from today's WSJ.

What do we know? Economic growth is the most powerful anti-poverty device. And poverty reduction via economic growth may be accompanied by increasing inequality (March 16 post). What to do? The mainstream answer seems to be to seek direct redistribution instead -- and hope that it works. But theory and evidence strongly suggest this will be counter-productive. What to do?  Pretend otherwise and push for minimum wages hikes anyway. Sounds crazy but there it is. 

Populist themes are a plague that infects voters of both political parties. Public choice theory's rational ignorance hypothesis suggests that voter turnout and voter enthusiasm  is a function of having a parochial interest item on the ballot. Bryan Caplan's work is even more depressing:  most of those who do bother are not very well informed and see little reason to change. What is to be done? Write and speak out to those outside your Charles Murray "bubble" What is the worst that can be done? Make voting mandatory.

ADDED

George Will's splendid and logical argument may cause fainting spells in some places. "Inequality benefits everyone."

 

Tuesday, March 17, 2015

Conversation about cities

Here are Paul Romer and Russ Roberts discussing cities -- especially Romer's interest in charter cities.

Romer and Roberts also love New York city and give the impression that it is simply a matter of high density plus the subways to service it.  Romer mentions that most people like NYC and they also like good weather.  So could Long Beach, California, fill the bill and possibly offer both?  Allow high enough densities there, add good transit, and get a Manhattan but with a Mediterranean climate?  I doubt it.

On another point, I have often noted that cities are "engines of growth" because they are the places where new ideas are hatched and incubated.  Romer talks about developing country cities, where the real urban problems are likely to be, and makes the important point that the discussion should be about the adoption of existing ideas for the local context of catch-up growth.  This is a neat point and should be made every time ideas and cities are discussed.

Romer likes the New York plan of 1811 and cites it as a worthy example of laying out the street grid for large undeveloped areas many years before development arrived.  He prescribes this approach for Third World cities that are likely to experience lots of in-migration very soon.  Listen to the whole podcast.

Monday, March 16, 2015

Inequality!

It's very hard to turn around these days without stumbling on yet another discussion of increasing inequality.  It is surely an election year favorite.  Is there a politician who can resist the theme -- and adding his/her promise to do more to "help" the down-and-out?

Concerns over poverty are surely justified. But poverty and inequality are not the same thing -- and they are purposefully muddled by those with an agenda. There is a "teaching moment" in the following thought experiment: imagine that a doubling of all incomes could somehow be achieved; it would surely end poverty but it would also increase inequality. Should we do it (if we could)?  The thought experiment gives many true believers a headache.

Poverty and inequality are not the same.  Tyler Cowen and his commenters add the idea that measuring poverty is not simple -- and if we make the proper corrections the actual U.S. poverty rate is much lower than what we hear and read about.

The poverty=inequality misconception is fed by the suspicion that wealth is most likely ill-gotten and/or we live in a zero-sum world. If most people (most voters?) believe either one or the other these, we have a problem.  And the election is more than one and one-half years away -- not that we will have much relief after the votes are counted.

Saturday, March 14, 2015

Paradox?

Here is how The Economist explains Houston's well being:
Paradoxically, perhaps the city’s biggest strength is its sprawl. Unlike most other big cities in America, Houston has no zoning code, so it is quick to respond to demand for housing and office space. Last year authorities in the Houston metropolitan area, with a population of 6.2m, issued permits to build 64,000 homes. The entire state of California, with a population of 39m, issued just 83,000. Houston’s reliance on the car and air-conditioning is environmentally destructive and unattractive to well-off singletons. But for families on moderate incomes, it is a place to live well cheaply.
Why "paradoxically"?  Is politicized zoning a better way to match supply and demand?  Why "sprawl"? Cities that grew up in the late 20th century are auto-oriented. Letting people chose when and where to travel is more efficient than the alternatives?  Will there be pockets of congestion?  Inevitably as long as the owners of the roads and highways have no incentive to price the roads. "Market failure"?  Sounds more like a policy failure.

Alex Anas notes that, "The data on the largest U.S. MSAs show that commute times increase only slightly with city size: the elasticity of the average commute time with respect to the number of workers was about 0.1 in 1990 and 2000." (2012, p. 145.)

This is not from inspired land use and transportation planning throughout urban America. The land markets we have, such as they are, are still able to pull the bacon out of the fire. It's a little like the strong dollar. Consider the competition and the context.

Wednesday, March 11, 2015

No distortion


We know the story of the original Disneyland (Anaheim in the 1950s) developed in a then rural area and soon enriching nearby landowners as the park boomed.  The corporation soon figured it out and when Disney World was developed near Orlando in the 1970s, they bought most of the nearby land (or options to buy) so that the benefits they create would accrue to them.
Today's WSJ includes "Apple gets sweet deal from mall developers ... As a traffic magnet, iPhone maker is able to negotiate lower terms for rent ..." What may have been mysterious to the Disneys in the 1950s is common knowledge today. Land markets can internalize externalities. This is especially the case where there is a single land owner (residual claimant).
Textbooks (and many others) routinely refer to externalities as case of "market failure." But there can also be incentives to internalize any externality. Why else bother to assemble all those parcels?
The WSJ's writer speaks of Apple's deal as "... distorting the market for mall rents ..."  No distortion at all.