Friday, December 31, 2004

"Blame The New Yorker"

In last Sunday's NY Times Book Review, Walter Kirn wrote a review of The New Yorker's recently published collection of cartoons and titled it "Blame The New Yorker". He sought connections between high-brow attitudes, as revealed in "The Complete Cartoons of The New Yorker", and the post-election disconnect that some (some) of these folks now experience. Kirn made many good points but I doubt that they will impress his audience.

Right on schedule, this week's New Yorker contains a review of Jared Diamond's new book, "Collapse", a book that I have not yet read. Reviewer Malcolm Gladwell recounts Diamond's explanations for the decline of the Norse in Greenland, the Easter Islanders, and others. The common story appears to be that they managed "the land" poorly.

This brings Gladwell to a condemnation of Oregon voters for endorsing Measure 37. In Gladwell's view, enforcing property rights is no way to manage the land. Gladwell is a New Yorker staff writer.

Thank you, Walter Kirn.

Thursday, December 30, 2004

It's Politics

Many discussions of governance enumerate the pros and cons of more centralization vs more decentralization. The devolution of power and authority became a popular idea worldwide in the 1990s but "sprawl"-obsessed writers in the U.S. developed the idea that "regional government" is the answer to their concerns.

This suggestion begs for an analysis of actual experience. The most auspicious U.S. case is New York City which annexed its outer boroughs in 1898. Whereas we all have a sense that this was a mixed blessing, E.J. McMahon and Fred Siegel ("Gotham's Fiscal Crisis: Lessons Unlearned" in the Winter 2005 Public Interest; no link to the article available) document how the inevitable politicization that goes with bigger government has led to disasterous results. "New York City can be seen as the first large-scale American outbreak of ... the economic sclerosis suffered by liberal democracies held hostage to the demands of politically powerful labor unions and social service providers." ... "[i]t's not the economy, stupid -- it's politics. ..." conclude the authors.

They point to the way in which Californians are now addressing their state budget problems and note that there are, indeed, lessons unlearned.

Wednesday, December 29, 2004

Tragedies and Trade-Offs

Earthquakes, tsunamis, terrorist attacks and other calamities are almost unpredictable. Yet, much recent commentary addresses how we must do better to predict, detect, inform in the future.

Of course. But in a world of scarcity, the trade-off between anticipation (harm prevention) and resilience (coping after the event) policies must be carefully evaluated. Lynn Scarlett examined the trade-offs re eathquakes recently.

We may be bad at both but if the odds of making better forecasts are low, then we should tilt towards more in the way of investments in coping mechanisms.

Tuesday, December 28, 2004

The New Gifting

We cannot time disasters but we can imagine that had the Indian Ocean Tsunami hit some days earlier, many Americans (and others) might have diverted their gifting towards worthy donations (in the name of the recipients) for the victims. points to The Command Post, a site that lists information on groups that are helping the victims and that can well use our support. has recently included posts re updates and views of the "deadweight losses" that economists have pinned to traditional gifting. The researchers' results should surprise no one. There are plenty of exchanges, re-giftings, garage sales and storage space shortages that document the fact that much of America is now too materially wealthy for gifting to remain as always.

The internet can help. Families and groups of friends can post each member's favorite charities. We can then avoid the malls and the traffic and all of the other hassles that people love to complain about and make gifts that are much more significant than the stuff that we usually wrap and give. My own family has started on this path and I expect that many others have too.

The holiday sales news from Amazon and others confirms that the New Economy is, indeed, here. The New Gifting might be another idea whose time has come.

Monday, December 27, 2004

LA Disease

The Everyman is unlikely to have opinions on particle physics but in many areas that involve public policies, opining is widespread.

Urban planners have little resistance to this and are, unfortunately, as likely to go with the platitudes as with common sense, let alone well-crafted research.

Having, for the most part, eschewed rational road (or parking) pricing, planners will try anything else to "get people out of their cars", even signing on to the fool's errand of reshaping the built environment to impact auto use.

Auto uses are below average in Manhattan but it is unlikely that planners will ever design another one of these. Yet, serious people still espouse "downtown revitalization" and justify the costs with talk of less auto use.

This morning's LA Times reports: "Give Up the Suburb? Yes. Give Up the Car? No Way ... When urban planners first talked about the new residential boom in downtown LA, they conjured up idyllic streets where pedestrians -- their cars sold to ex-neighbors in the suburbs -- strolled happily to work along streets lined with cafes and bookstores ... People are moving downtown, all right. But this is LA. So they're bringing their cars with them."

Yes and no. Some people are moving downtown. They do so mainly because planners caused highly subsidized office space to be over-built and the lack of demand for all of the bare space (and more subsidies) induced some people to live downtown. These are mainly singles or young people without children.

And there is no way that people can get along in downtown, let alone Greater LA, without a car. And, outside of Manhattan, this is all standard operating procedure.

Nevertheless, the myths hang on and we are left with some sort of weird "LA disease" bottom-line to the Times' very belated discovery of the obvious.

Saturday, December 25, 2004

Home Entertainment

I cannot do a top-ten list so here are my favorite thirty DVDs -- in no particular order. That would take hours. Home entertainment is hot and I like Netflix -- and you can control the volume!

Under the Sun (Swedish)
Cinema Paradiso (Italy)
Il Postino (Italy)
Solas (Spain)
L'Auberge Espagnole (France)
Chaos (France)
Burnt by the Sun (Russia)
Lawless Heart (U.K.)
Mostly Martha (Germany)
In the Bedroom (U.S.)
Spellbound (U.S.)
Nowhere in Africa (Germany)
The Crime of Padre Amaro (Mexico)
The Housekeeper (France)
Secretary (U.S.)
The Big Night (U.S.)
Shall We Dance? (Japan!!!)
Jew-Boy Levi (Germany)
The Mystery of Rampo (Japan)
Together (China)
Dirty Pretty Things (U.K.)
East-West (France)
Russian Ark (Russia)
Man on the Train (France)
The Thief (Russia)
Swimming Pool (France)
Indochine (France)
Sex and Lucia (Spain)
The Barbarian Invasions (French Canada)
My Wife is an Actress (French)

Wednesday, December 22, 2004

Back to the Future for Economists

"When economics cast its fate with equilibrium analysis, it made analysis of both entrepreneurship and institutions difficult." So writes Dan Johansson in "Economics without Entrepreneurship or Institutions: A Vocabulary Analysis of Graduate Textbooks" in the current issue of Econ Journal Watch.

It's an interesting theme. Economists (and others) have missed the big story for some years -- but should not have because Adam Smith made it so very clear so many years ago: economic freedom causes economic development. There is a growing literature that resurrects these ideas but, as Johansson makes clear from his inspection of leading economics textbooks, most still miss the big story.

"In the 19 books there are many references to Nash equilibrium, Bertrand equilibrium, Cournot equilibrium, Concave utility functions, Euler equations, etc.; concepts that on the other hand are not used at all, in e.g., Austrian, Institutional and Schumpeterian traditions. Instead, they emphasize actors that have disjoint knowledge (that is, not merely asymmetric information, but asymmetric interpretations), the economy is a dynamic open-ended process in continuous change, and the scope and motivation for discovery is conditioned by social rules."

Many very smart people are working very hard on the wrong problems. Very inefficient.

Monday, December 20, 2004


We tend to be well served in those aspects of our lives where markets are allowed to function and we tend to be poorly served where supply is via the state, instead. Many view this statement as "ideological" but it is supported by a moutain of evidence.

An important addition to the body of evidence is a recently released study by Bahaa Seireg and Lisa Snell on "State and Local Obtsacles to Opening a New Private School". It is not simply that government-run schools are, on the whole, a disaster but governments also make it extremely difficult to open private schools.

The appeal of a school voucher scheme is that it would introduce consumer sovereignty to the supply side. Yet, vouchers or not, the whole policy environment is stacked against education. Looking at the California situation, Seirig and Snell identify "four goliaths" that stand in the way: the California Environmental Quality Act (CEQA), zoning laws, parking requirements and building codes are idententified as major obstacles.

Each of these are, of course, lauded by the high-minded (along with the ignorant and the corrupt) for their beneficial importance. Having arrogated the key functions of health and education to their own ambit, public sector players have completely botched their performance.

While they tend to be the shrillest about "equity", their ruinous management of health and education have resulted in stunning "inequities" -- as well as concurrent inefficiencies. They cheerfully care little about the latter but reveal their cynicism by how they choose to treat their charges' health and education.

Saturday, December 18, 2004

Smart Growth is Very Hard Work

Today's LA Times front page includes "True Love of Country in England ... City dwellers are moving to villages in record numbers. Rural economies benefit, but some say at too high a cost to locals."

The accompanying story includes data on 1981-2002 population growth with "rural" increasing by 13.7% vs 2.9% for urban.

The Great Dispersion (David Brooks' term) can be expected to show up in all of the developed countries. Evidence to this effect has been accumulating.

Preferences trump policies. Europeans and Canadians have land use and planning policies that U.S. planners dream about (high-priced gasoline, tough land use regs, more elaborate transit, etc.). But it makes no difference.

I commented on "Micropolis" and associated population trends last week. U.S. private sector job growth in the 1990s was 1.3% per year in the largest metros (above 5 million pop.), above 2% in the mid-sized and smaller metros, 2% in the micropolitan (exurban) counties and just less than 2% in the rural counties beyond exurbia. Manufacturing jobs declined everywhere since 1970 except micropolitan and rural counties.

The most interesting data are from abroad -- where "Smart Growth" has been prescribed for many years.

Friday, December 17, 2004

Blogging and Freedom (again)

The blogging and freedom theme is revisited by Dan Henninger in this morning's WSJ. He does it best, so here it is:

December 17, 2004


"Here's One Use Of U.S. PowerJacques Can't Stop"

"We see where a curator at France's Pompidou Center says his museum is opening a branch in Hong Kong, because 'U.S. culture is too strong' there, and 'we need to have a presence in Asia to counterbalance the American influence.' With the Pompidou Center?

"'American influence' is the great white whale of the 21st century, and Jacques Chirac is the Ahab chasing her with a three-masted schooner. Along for the ride is a crew that includes Egypt's Hosni Mubarak, Vladimir Putin, North Korea's Kim Jong-Il, Kofi Annan, the Saudi royal family, Robert Mugabe, the state committee of Communist China and various others who have ordained themselves leaders for life. At night, seated around the rum keg, they talk about how they have to stop American political power, the Marines or Hollywood.

"The world is lucky these despots and demagogues are breaking their harpoons on this hopeless quest. Because all around them their own populations are grabbing the one American export no one can stop: raw technology. Communications technologies, most of them developed in American laboratories (often by engineers who voted for John Kerry), have finally begun to affect an historic shift in the relationship between governments and the governed. The governed are starting to win.
Not that long ago, in 1989, the world watched demonstrators sit passively in Tiananmen Square and fight the authorities with little more than a papier-mâché Statue of Liberty. Poland's Solidarity movement had to print protest material with homemade ink made from oil because the Communist government confiscated all the printers' ink.

"In 2004, in Ukraine's Independence Square, they had cell phones.
Using the phones' SMS messaging technology, demonstrators sent messages to meet to 10 or so friends, who'd each SMS the message to 10 more friends, and so on. It's called 'smart-mobbing.'

"Meanwhile, community Web sites in Ukraine would post the numbers of tents on the square where medical help was needed, or the sites would recruit people with specific TV skills needed at Channel 5, the lone independent TV station. The Ukrainian Supreme Court's historic Dec. 3 decision, declaring the election a fraud, was streamed on the Internet live from a Kiev courtroom and watched real time in London, New York, Washington and Toronto, sent out on e-mail distribution lists so the next steps could be discussed by the reform network and put in motion within an hour.

"Until recently, one-party or no-party governments had a standing list of answers for people with a different notion: a) we don't care what you think; b) shut up; c) we kill you. There's no sure cure for c, but Plans a and b are becoming obsolete. Once impervious political authorities must now face the possibility of having their information monopoly hammered by an array of mostly American-engineered technology -- smart cell phones, communication satellites, e-mail, Web logs (or 'blogs') and a seemingly endless stream of information-sharing programs whose arcane names (RSS, Atom) hide their great power. The mass-market power of the older media -- radio, TV, print -- is also being integrated with the precision targeting of new technologies.

"This past weekend, a few hundred of the people creating and driving these things gathered at a conference organized by the Berkman Center for Internet and Society at Harvard Law School. It included individuals who are proselytizing the new communications technologies to Iran, China, Iraq, South Korea, Malaysia, India, Western Africa and even the U.S. military (individual GIs are running an estimated 100 Web logs).
Isaac Mao, a Chinese entrepreneur who runs a blog-hosting service, reported that in two years the number of personal, Chinese-language Web logs has grown from 1,000 to 600,000. Many are run by English speakers, who import, translate and distribute material from outside China.

"Anyone want to guess the third-most used language on the Web, behind English and Chinese? Farsi. Iran now has about 75,000 individual Web logs. That's because a young, Toronto-based Iranian journalist who publishes as Hoder created tools in Farsi to make it possible. Only 10% of the Iranian blogs could be called political; most discuss music, movies, poetry and Iranian or Western culture. 'Iran's most interesting political conversations take place in taxis,' said Hoder.

"There's more coming. Developers from California at the conference introduced the first Arabic-language blogging tool. Created with support from Spirit of America, it will be used now in Iraq. The Fadhil brothers of plan to assemble 25 Internet journalists to report the Jan. 30 election. This effort will be patterned after, the influential South Korean Web newspaper.

"China uses up to 40,000 bureaucrats to police its explosion of blogs. We'll no doubt find out how many anti-Web divisions Syria's President Bashar al-Assad has. (One provocateur at the conference plausibly suggested the greatest opportunities for these technologies lie with one of the world's most monopolized precincts -- local U.S. politics.) In Africa, by contrast, the best political communication occurs outside cyberspace, on talk-radio. The most interesting is Ghana's JoyFM (it maintains a lively Web site of Ghanaian news at

"There is no need to oversell the power of these technologies. What happened in Ukraine won't happen in Cairo next month. But unless Hosni Mubarak and Vladimir Putin can come up with a way to shut down every engineer and programmer in America who is inventing new ways to output/input ideas and tweaking the ones we already have, they've got a problem.

"Their problem -- and the promise here -- is that this stuff is moving the world's people, and fast, toward the one American product that governing elites really need to fear: free speech. Some at the Berkman conference worried this still isn't enough to change things. Jeff Jarvis, one of this movement's most intelligent thinkers set them straight: 'This is not about causes or organizing people. It's about us creating these tools and then simply having faith in people who use them elsewhere to do good.'

"Even the Pompidou Center won't stop that."

Thursday, December 16, 2004

Consolidation and Centralization

In a better world, just $1 would be delivered to me each time some serious person advocated that "regional government", "a metropolitan approach" or some similar form of local government consolidation is needed. The Brookings website alone would make me rich.

Just surfing the U.S. Statistical Abstracts, which are now available through for many years back, reveals the dimensions of the most auspicious government consolidation project in U.S. history: the consolidation of school districts. Sixty years ago, when there were about half as many school-age children, there were over 100,000 local school districts. There are now roughly 13,500. Anyone reading the newspapers knows how the comparative performance of U.S. students continues to slip badly.

Did consolidation cause the problems? No one knows. It surely did not prevent them.

Monday, December 13, 2004

Blogging and Freedom

The power of blogging, modern communications and the internet is hurdling the gatekeepers and asserting itself. deserves a look. Estimates are that there are already 100+ English language Iraqi bloggers; the software to create Arabic blogs is now being beta-tested and will shortly be in use by Iraqis. No country in the Arab world comes close.

I learned all this by attending a reception held by Jim Hake of, a volunteer group that supplies sewing machines, dental kits, tool kits and all sorts of useful tools to help Iraqis help themselves.

The Marines swear by Hake's group and their work. Volunteer procurement beats anything that government channels are capable of, improves people's lives, makes friends and makes allied troops safer.

It is hard not to get emotional when hearing bloggers Omar and Mohammed, U.S. trained Iraqi dentists who are touring the U.S. (they met with Pres. Bush), discuss their efforts and the impacts of Hake's work.

The Iraqis' message was clear. Iraqis want freedom and democracy; they are grateful for coalition support and they wish it to endure while they move forward.

"Wilsonian" foreign adventures are sniffed at by smart people. Yet, what are the alternatives in a world with too many failed states, a corrupt U.N, craven Europeans, and easy access to the tools of mass destruction (including airliners). In Wilson's day, tyranny's victims were less able to help themselves. In modern Iraq, a growing army of bloggers is providing a powerful alternative to Al Jazeera.


Among The NY Times Magazine's "4th Annual Year in Ideas" are the U.S. Census Bureau's new Micropolitan areas, suburban and exurban counties with a "core city" of between 10,000 and 50,000. These 500+ counties were home to 29 million people in 2000; the fastest growing among them are in the Sunbelt. They were recently discovered by the Census as well as by Karl Rove -- well after, the NY Times reports, Wal-Mart, Applebee's and others had set up shop there.

Useful definitions that describe dynamic settlement patterns are hard to come by (think "Edge Cities", "Sprinkler City", "Garden City", etc.). Americans keep "voting with their feet". Often, these votes tell us more than the ones recorded in the ballot booth.

Friday, December 10, 2004

It's the Politics, Stupid

Writing in the Dec. 13 New Yorker, James Surowiecki ("It Pays to Stay"; no link to the article available) spells out his concerns over local governments competing for (awarding tax breaks to) employers to stay or settle locally. He cites an academic study by Enrico Moretti (UCLA) and Michael Greenstone (MIT) that shows cities that won the compeititve bidding for jobs did experince some tax revenue and property value benefits.

Surowiecki is unhappy, however, "because the tax money spent on corporate welfare could otherwise go to more productive uses, such as education and infrastructure."

Well it could. But we have no reason to think that governments routinely channel expenditures to productive uses. Also, Surowiecki does not offer a comparison of the costs and benefits of the case he describes (Daimler-Chrysler being induced to remain in Toledo). In fact, the very complex incidence of money spent by the City (away from "productive" or whatever uses) vs the gains in local jobs and tax revenues and land values (with some gains going to Daimler-Chrysler's stockholders, customers, perhaps also some managers) substitutes one redistribution for the one that had been in place in Toledo previously.

In many cases, there are no complete contracts, causing occasional conflicts. Likewise, in many cases, there are no complete cost-benefit studies. This causes more heartburn.

As in yesterday's post, the bottom line is that with a wider scope for politics, we get more such conflicts. A narrower scope for politics and politicians is the only alternative. Some people will forever be chasing the chimera of better government. This shields them from the idea that the only option is less government.

Thursday, December 09, 2004

Glass Half Empty

In today's WSJ, Milton Friedman points out that socialists have lost the war of ideas -- but are still winning as measured by the growth of government influence in the U.S. The short article is included below.

So, it's not ideas or ideology, just politics. The insight that politics must be constrained inspired the framers of the U.S. Constitution. As too few people seem to realize, they were on to something big.

"The Battle's Half Won"
By MILTON FRIEDMAN December 9, 2004; Page A16

"In the almost six decades since the end of World War II, intellectual opinion in the United States about the desirable role of government has undergone a major shift. At the end of the war, opinion was predominantly collectivist. Socialism -- defined as government ownership and operation of the means of production -- was seen as both feasible and desirable. Those few of us who favored free markets and limited government were a beleaguered minority.

"In subsequent decades opinion moved away from collectivism and toward a belief in free markets and limited government. By 1980 opinion had moved enough to enable Ronald Reagan to win the presidency on a quasi-libertarian agenda.

"The collapse of the Soviet Union in 1989 delivered the final blow to the belief in socialism. Hardly anyone today, from the far left to the far right, regards socialism in the traditional sense of government ownership and operation of the means of production as either feasible or desirable. Those who profess socialism today mean by it a welfare state.

"Over the same period, the actual role of government in the United States also changed drastically -- but in precisely the opposite direction. In the first postwar decade, 1945 to 1955, government non-defense spending, federal, state and local, equaled 11.5% of national income, varying from a high of 16% in 1949 to a low of 8.5% in 1952. From then on, spending rose rapidly. By 1983, government non-defense spending reached 30% of national income, nearly triple the average amount in the first postwar decade. In addition, over the same period, government intrusion into business and private affairs exploded (a small sample: Medicare, Medicaid, Americorps, Head Start, Job Corps, EPA, OSHA, CPSC, LSC, EEOC). No doubt the growth of government was one reason for the shift in public opinion. Big government in practice proved less attractive than big government in prospect.

"Reagan's election brought the growth in government non-defense spending to a halt. As of 2003, government non-defense spending equaled 30% of national income, the same as it was in 1983. Government intervention through regulation and controls did fall somewhat during Reagan's presidency, but has since resumed its steady rise.

"To summarize: After World War II, opinion was socialist while practice was free market; currently, opinion is free market while practice is heavily socialist. We have largely won the battle of ideas (though no such battle is ever won permanently); we have succeeded in stalling the progress of socialism, but we have not succeeded in reversing its course. We are still far from bringing practice into conformity with opinion.
That is the overriding non-defense task for the second Bush term -- as President Bush clearly recognizes. It will not be an easy task, particularly with Iraq threatening to consume his political capital."

Wednesday, December 08, 2004

Preference Revealed

Many thanks to Stephen Roberts of USC for sharing the news about the nature of the demand for public transit in the U.S

The piece is a little old but precious and speaks for itself.

Monday, December 06, 2004

Racial Politics

Racial politics is always ugly. Can the Jim Crow history justify what goes on today?

The LA Times is running a five-part series (link to Part 2, here) on South-Central LA's King-Drew hospital. I have read the first two parts and, even having been aware of the mess for some years, am appalled.

Being sick or hurt is bad; being in a hospital can be worse; being in a government-run hospital can be even worse. Finding oneself in a government hospital that for many years has been governed by racial politics is apparently the very worst. Most of the victims are Black or Hispanic but the governing Los Angels County Board of Supervisors has chosen to treat the problem with kid gloves for years.

Paramedics report that the injured often flee when they realize where they are being transported. Those are the lucky ones. The Times story documents how some of the less aware have gone along -- and eventually died because of malpractice.

Sunday, December 05, 2004

Not Bowling Alone

The Sunday NY Times includes "Maybe It's Not All Your Fault". We purchase too many things we don't "need". The author distances himself from the well worn "shopper's victim defense" ... and then comes very close to embracing it.

Much odder is the NY Times Magazine story on "The Hidden (In Plain Sight) Persuaders". Marketers' use of stealth agents using word-of-mouth to friends and acqauintances to push products has been in the news -- and strikes me as a little creepy. The truly odd part of today's story has to do with 60,000 people who do this sort of thing as volunteers. The agents do earn points towards products -- but many never bother to cash in the points.

Some people prefer not to ask for directions when lost. Others do the opposite, asking for directions when they are not lost because it makes for conversation and social interaction. On top of that, some of the cited volunteers are happy to be neighborly and helpful by sharing their satisfaction with various products. The author notes that a "social market" is occuring.

The good news is that the volunteers and their willing listeners are not bowling alone.

Saturday, December 04, 2004

Moving Out of Harm's Way

USA TODAY's recent piece, "'Exurbs' flourish, but is this really what we want?" says it all. People are making choices that their betters do not like. And the folks who Tom Sowell loves to call "the anointed" say all sorts of things to make their point. Brookings' Bruce Katz is quoted as saying that this sort of settlement is just too costly.

The problem is that he has no evidence for this and he presumes that cost-minimization is a worthy goal.

Others cite surveys that show that people really do not want to live the exurban life style. They want something no one offers them. I would like London out my front door and Santa Monica out my back door when the pollster calls.

USA TODAY writer Ben Brown sums up: "In the age of decentralization, communities may find an advantage in re-aggregating in regional authorities to plan and regulate growth."

Not really. In the dreamworld of re-aggregated regional authorities, people would move out of harm's way even faster.

Wednesday, December 01, 2004

That's Why We Call Them Cliches

In all of the red state-blue state and red county-blue county discussions, we are getting dangerously close to a geography-is-destiny view.

Impossible in the dynamic and mobile U.S. For many years, the Census Bureau had been tagging people by whether they resided in a metro or nonmetro county; the former could have been living in that county's central city or its suburbs. (This is all slowly changing in favor of a better system of metropolitan and micropolitan areas.) The 2003 Current Population Survey reports that year, approx 11.6 million Americans moved from one of the three types of places to another. Most of them (54.5%) arrived in the suburbs (vs. 31% in central cities and 14.5% in exurban and rural areas). If you can get through the Bureau's PC racial groupings (and we used to sneer at Apartheidists and Nazis for their application of politics to race), you find that the groups most likely to arrive in the suburbs (given that they were moving) were "blacks only" (59.7%) and "blacks only or in combination with one or more other races" (58.8%).

In a better world, those who keep referring to suburbs vs center cities in stark white and black terms (reporters and academics still do this a lot) would get a headache or a leg cramp every time they stick to the old chestnut.

Tuesday, November 30, 2004

Sprawl and Health

"Is Sprawl Unhealthy" ask Alexia C. Kelly-Schwartz, Jean Stockard, Scott Doyle and Marc Schlossberg (all of U. of Oregon) in the latest Journal of Planning Education and Research. They write that, "... the results indicate that even with strong controls for individual variables, residents of areas with more highly accessible and gridded street networks have higher health ratings. At the same time, residents of more densely populated urban areas have lower health, net of individual-level measures. Measures of sprawl have no significant relationship to frequency of walking, body mass index, or diagnosis of various chronic diseases. However, among those with chronic conditions, including hypertension, diabetes, and lung disease, those who live in areas with more highly connected street networks have higher rated health."

Leaving aside any quibbles about methodology, data or inference, what are we to do with such findings? The authors conclude that, "... some aspects of compact development, such as street connectivity, [promote] better health, and other aspects, such as high density, potentially [detract] from better health."

Neither planners nor developers (nor their clients and customers) have shown any interest in low density development sited on tightly gridded street networks. There are trade-offs in production and in consumption that are reconciled in the real world -- often best reconciled in the markeplace.

Planners, policy makers and politicians should do (very) few things and do them well. There is very little for them to do in the realm of health and the physical environment. They will, of course, forever be on the lookout for simple associations that might expand their ambit.

Just last week the WSJ reported that, "CDC Study Overstated Obesity as a Cause of Death ... Admitting Errors, Agency Expects to Revise Findings; Big Health Concerns Remain ..." Of course.

Monday, November 29, 2004

Digital Divide

Forbes columnist Rich Karlgaard writes in the the Nov 29 issue: "Five years ago for the sake of the kids, my wife and I unplugged our television. ... Bottom line, the Karlgaards could not watch the election on TV. So we followed it on the Internet. Wise choice. Around 10 pm Eastern we knew George Bush had the vote in the bag, even in Ohio. The fat lady was singing lustily on the IP channels. I fired off an e-mail to a friend in Connecticut, urging him to relax and go to bed. Bush was sailing to an easy win. Television -- old, slow and biased -- wouldn't tell us the truth for another two and a half hours."

The "digital divide" that had obsessed class warriors for some years is actually about those who still get their news and entertainment from TV and those who do not.

Monday, November 22, 2004

Urban Myths

What does it take to deflate an urban myth? Are we all driving autos because various corporations successfully conspired to limit the transit option? George Hilton told us 30 years ago that, for the L.A. case, this was nonsense (see also Cliff Slater's more recent work). Yet, the myth was given new life in the 1987 animated fantasy "Who Shot Roger Rabbit?"

Beyond Hollywood, Prof Sharon Beder of the University of Wollongong (NSW, Australia), writing in "The Public Relations Assault on Transport Sustainability," also thinks it's all true.

It's getting to be an old story that in the world of ideological environmentalism, anything goes. And this reaches into the world of university research. The interesting question, then, is: What do the students take away from all of this?

In the U.S., various studies have shown that the ideological split among faculty is at least 90/10 towards the left. Yet, the country is now 50/50. Tom Sowell recently reported that the left picks up 5% of that from the left-leaning media. How much to add from the left-leaning professoriate? Perhaps nothing. This would be the result if the professoriate as a whole is "fair and balanced" (I wonder) -- or if undergrads are more bemused than impressed by their professors' political leanings (David Brooks' point).

Sunday, November 21, 2004

Bodies of Evidence

Colleague Martin Krieger recently reminded me that while evidence rarely causes people to change their minds, bodies of evidence occasionally do.

Ron Bailey's Global Warming and Other Eco-Myths: How the Environmental Movement Uses False Science to Scare Us to Death adds to the accumulating evidence. JulianSimon, Bjorn Lomborg and many others had gotten the ball rolling. Baily's anthology keeps it going.

I just spoke at the "Towards Sustainable Land Transport" conference in Wellington, NZ. When members of the audience admonished me to take seriously the report of the UN's Intergovernmental Panel on Climate Change (IPCC), it was very useful to refer them to the points made by John R. Christy in "The Global Warming Fiasco", Ch. 1 of Bailey's book.

As far as I could tell, no one fainted.

Saturday, November 20, 2004

Down Under

The Aussies eat their national animal but (surprisingly) sparingly. Kangaroos are abundant, breed like rabbits and are not about to become extinct. Tastes great and looks to be a sustainable diet.

The press and people one encounters in NZ and Australia are rabidly anti-American foreign policy; smart people embrace the craziest consiparcy theories (e.g., Bush and Powell conned the world for private "corporate" gain).

The Sydney monorail is nothing but a tourist trincket. The good news is that it is not an eyesore.

"Australian Idol" is very big. Bigger than anything I ever noticed about American Idol. I saw fireworks over Sydney's harbor -- on TV, Millenium midnight -- and again last night in person, as part of celebrations of the local taping of the latest episode. Politicians are eager to be seen with local contestants and the doings are front-page news in Sydney every day that I have been here.

Who knew?

Monday, November 15, 2004

Trouble in Paradise

Go to Tahiti and start spending French Francs. Actually you buy and spend Pacific French Francs, not Euros.

What is "French Polynesia"? It appears that there is ambiguity and controversy. Colonies are, of course, out and so are large island chains that include international waters. Add the efforts of the friends of French President Chirac to find him a job with immunity from any sort of criminal prosecution when his term expires in 2007, and contested elections and a royal family with ambitions -- and this really gets interesting.

Mr. Rene Hoffer takes all of this seriously. Enough to take the title President of Tahihi (sic). The French Supreme Court has taken up the case. Yet, is their jurisdiction settled? Is this a case for the UN?

Friday, November 12, 2004

The Election Was Stolen

I have had emails asking me to sign on-line petitions asking Congress to investigate the recent elections. The Michael Moore-left, which didn't get it before Nov. 2, is still without a clue. This is funny and sad. The country needs better than a clueless opposition.

Elections in America are actually awry when it comes to gerrymandered districts, the resulting power of incumbency, the Supreme Court's avoidance of the resulting disenfranchisement problem, and the silly diversion of campaign finance reform.

The morning's WSJ includes a pointed editiorial on "No Contest"

"There are 435 Members of the House of Representatives, but only seven incumbents lost last week. The political class would like us to think that those numbers represent the voters' satisfaction with their Congressmen. But everyone knows better.

"Election Day once again highlighted just how uncompetitive most Congressional races have become. Not only are most outcomes foreordained, but the contests aren't even close. Winners in just 37 House races this year received 55% or less of the vote, which is the conventional threshold for determining vulnerability in the next election cycle. That's down from 62 such races in 2000.

"Blame the perks of incumbency, and blame gerrymandering especially. The Founders required elections every two years because they designed the House to be the political body most responsive to the public. But politicians, through their ability to draw their own districts, have rigged the system to undermine those intentions and hold on to power. Computer databases now assess voter tendencies block by city block, and contests are effectively decided months before anyone pulls a lever.

"Of the seven incumbents who lost this year, four were Texas Democrats who went down because their districts were redrawn by Republicans. (The three others were a Democrat in Indiana and a Republican in Illinois and in Georgia.) Currently, the redistricting racket favors the GOP. But it hurt the party for years before 1994 and eventually it will again. In any case, the dearth of competitive House races is bad for the country because it makes for less accountable politicians.

"In more than 150 House races, the winner garnered at least 60% of the vote. More than 75 others -- double the number of competitive races -- were certifiable landslides, with the winner grabbing 70% or higher. Those types of results scare off potential challengers. Over in the Senate, by contrast, 11 of 34 contests were won with 55% of the vote or less, and two others by 56%. The politicians haven't found a way to gerrymander an entire state. Yet.

"If Republicans are now opportunistically using their majorities to reverse Democratic gerrymanders, then good-governance liberals aren't helping by making money their reform holy grail. While the politicians have built safe seats -- and the Supreme Court has blocked responses such as term limits -- John McCain and his friends on the left have peddled campaign finance reform as the panacea. But if they really care about making elections more competitive, they'll drop the fool's errand of trying to separate money from politics and instead push initiatives that would turn redistricting over to nonpartisan panels, as in Iowa and Washington state.

"A good place to start is California, which has 53 House seats, 12% of the entire nation's, yet not one of them switched parties last week. In 51 of those races, the winner received at least 60% of the vote. Nor is the entrenchment limited to Congress. "In all 100 state Assembly and Senate races," reports the Sacramento Bee, "the winner was either the incumbent or a candidate from the incumbent's party."

"The good news for Californians opposed to electing politicians for life is that they have a popular Governor in Republican Arnold Schwarzenegger who can do something about it. Voters followed Arnold's lead on 10 of his 14 initiative recommendations last week. Were he to back a ballot measure that removed control of redistricting from the Legislature -- and gave it to retired judges or another independent body -- it might stand a good chance of passing.

"Non-competitive elections only increase voter cynicism, and we seem to be holding more of them. Next to the bipartisan gerrymander scandal, the campaign finance debate that so preoccupies the media is an irrelevancy."

Thursday, November 11, 2004

Elite Opinion and Arafat

The LA Times embarrassed itself today by referring to the deceased Arafat as "A Guerilla and Statesman" on its front page.

Much better was the op-ed by columnist Max Boot:,0,7799128.column

"How Arafat Got Away With It"

"It is considered bad form to speak ill of the dead, but I will make an exception for Yasser Arafat, the pathetic embodiment of all that went wrong in the Third World after the demise of the European empires.

"All too many rulers of "liberated" nations in the second half of the 20th century — the likes of Mao Tse-tung (China), Sukarno (Indonesia), Robert Mugabe (Zimbabwe), Moammar Kadafi (Libya) and Gamal Abdel Nasser (Egypt) — proved to be devotees of the Louis XIV school of political philosophy: L'etat, c'est moi. Their rapaciousness knew no bounds. Neither did their cruelty.

"Yet even as these rulers were torturing their own people, they were lionized in the salons of the West. European and American intellectuals, motivated by a combination of guilt for their countries' past conduct, vicarious zest for revolutionary adventure and condescension toward Africans and Asians who were thought incapable of conforming to Western standards, were willing to excuse any crime committed in the name of 'national liberation.'

"Arafat benefited from this deference ever since taking over the Palestine Liberation Organization in 1969. He and his cronies pocketed billions of dollars and kept their grip on power through the cruel application of violence against various enemies and "collaborators." In return, Arafat reaped worldwide adulation and a Nobel Peace Prize.

"There has been no more successful terrorist in the modern age. Yet his biggest victims were not Israelis. It was his own people who suffered the most. If Arafat had displayed the wisdom of a Gandhi or Mandela, he would long ago have presided over the establishment of a fully independent Palestine comprising all of the Gaza Strip, part of Jerusalem and at least 95% of the West Bank. In fact, he seemed well on his way toward this goal when I met him in 1998 as part of a delegation of American scholars and journalists.

"The place was his Ramallah compound, the time after midnight (Arafat was a night owl). He was wearing his trademark fatigues, and his hands and lips were shaking uncontrollably. Much of the session was conducted via translator, but Arafat broke into English when asked a question about Palestinian violations of the Oslo accords. It was the kind of query a democratic statesman would have batted away without a second thought.

"Arafat, however, grew visibly agitated and stammered: 'Be careful when you are speaking to me! Be careful, you are speaking to Arafat!' The threat of violence hung in the air as we left. Clearly Arafat had not quite mastered the art of being a politician or, rather, he was a politician in the mold of Mugabe or Mao. His refusal to compromise, his unwillingness to give up the way of the gun consigned his people to economic and moral suicide. The current intifada, launched in September 2000 after Arafat turned down a generous peace offer from the Israelis at Camp David, has claimed three times as many Palestinian as Israeli victims. It has also led to a precipitous plunge in living standards in the West Bank and Gaza Strip — not something Arafat's wife and daughter would notice from their cozy Paris residence.

"As the uprising's failure became evident, many of his own people grew increasingly disenchanted with their corrupt and feckless leader, though they could not quite shake off a Stalinist cult of personality nurtured over many decades.Though Arafat, of course, bore ultimate responsibility for his many sins, he could not have been so destructive without so many outside enablers, ranging from the Soviet Union, which supported him from the 1960s to the 1980s, to the European Union and the United States, which stepped into the sugar daddy role in the 1990s. And let us not forget his fan club among the Western intelligentsia, many of whom even now weep for his passing as if he were a great man instead of a criminal with a cause.George W. Bush, alone among Western leaders, had the courage to stop dealing with the Palestinian thug-in-chief ..."

Tuesday, November 09, 2004

Mom and Pop Businesses

Data from the 2002 Economic Census are beginning to come in ( Preliminary results show that sales by "Mom and Pop"(nonemployer firms) grew faster than sales by firms that employ others, 32% vs 21% (current dollars, 1997-2002). The phenomenon was seen in Manufacturing, Finance and Insurance, Real Estate, Adminstrative Support, Educational Services, Arts and Entertainment, Accommodation and Food Services, and Other Services.

Many of these enterprises are immigrants being productive and competitive. Coming to a Red County near you.

Sunday, November 07, 2004

"Two Americas" Flop

After a Sunday of reading post-election punditry, I have found nothing substantial on the John Edwards flop and the wisdom of his ticket's "Two Americas" gambit. While class warfare is fascinating to artists, intellectuals, left politicians and their wannabees, it does not seem to click any more with American voters. This is nothing but good news -- and at least as interesting as the conversation over how happy we are (or are not).

Economists even have a name for the idea that people evaluate their prospects, not their status: Prospects of Upward Social Mobility (POUM). The POUM literature is mainly theoretical and establishes the formal conditions. Empirical results are harder to find -- unless one considers post-WW II elections.

One-party dominance can be scary. I am even sympathetic to the Los Angeles Times' call for Bill Clinton to replace Terry McCauliffe.

Friday, November 05, 2004

Patio Man and the Election

Re those red and blue counties again, some weeks ago, I posted the changing big-cities' shares of the U.S. population for various census years, 1900-2000. Those data showed an urbanizing population to about 1940 and a suburbanizing population since then. Exurbanizing-suburbanizing is probably more accurate.

The county-level employment data that I have only goes back to 1970. The decentralization story holds there too. Most commuting is now suburb-to-suburb.

I receive posts from a planners' listserv and the red-voting-county-exurban-suburban connection is a hot topic.

I assign David Brooks' "Patio Man and the Sprawl People" to my real estate development students. Patio Man is Brooks' exurban-suburban everyman, sketched with humor and insight. Yet, the humor derives from recognition and self-recognition. What the pundits (and politicians) are going to have to get used to is that the Patio Man demographic is growing -- and it does not conform to the hard-right ideologue image that pops up in all of the great-divide "culture wars" talk.

Thursday, November 04, 2004

Home Rule

Red states--blue states misses the point. The LA Times shows a map of red and blue counties -- along with a county-level population density map. The red counties tend to be low-density counties -- just as David Brooks pointed out on the Jim Lehrer news last night and just as he noted after the 2002 results.

These voters are not simply evangelicals but a large and growing slice of America. People tend to move to smaller communities (and to private comunities) because home-rule is their best hope for property rules (including zone changes) that they trust. Neighborhood change is a source of risk and home-rule is a form of insurance.

Regional planning advocates have not been listening. No surprise that in Oregon they have just been repudiated by (it appears) 60% of the electorate that supports Oregon's Prop 37. If regional land use rules diminish property values, the owners have to be compensated. What a concept!

Wednesday, November 03, 2004

They Only Have to Win Once

The current Forbes includes a round-up of "Thoughts" re politics, including John Kenneth Galbraith's "Politics consists of choosing between the disastrous and the unpalatable."

Wendell Cox tipped me to the Florida vote on high-speed rail; by a 2-1 margin, voters repealed a state constitutional requirement that high-speed rail be built.

Voters wisely saw that the amendement made no sense in the absence of a constitutional rule that requires people to ride high-speed rail.

Tripping around the net, however, I see that voters in Maricopa County, Austin and Denver voted to build more rail transit.

They only have to win once. In Phoenix, for example, rail transit initiatives had lost many times. When the stakes are big enough, however, the advocates simply re-group after each loss. Because they know that they only have to win once.

Tuesday, November 02, 2004

Mega-Projects Around the World

Bent Flyvbjerg et al. "Megaprojects and Risk: An Anatomy of Ambition" provide international data on these undertakings.

Having read their papers over the years, I had not yet seen the book. The JEL's reviewer, Peter Forsyth, notes that the authors' surveys show that, "Out of 258 projects across the world, 90 percent experienced cost overruns, and the average overrun was 28 percent. In a survey of 210 road and rail projects, actual demand for the projects was 39 percent less than the forecast average, though actual demand for road projects was 9 percent higher than forecast."

Once the boosterism boils, analysis and thought go out the window. The green-based romance re trains lives on. The reality of auto use is resisted. Cost-benefit analysis is abused, misused or not used.

Preparing for a class on the topic, I am told that Edith Stokey and Richard Zeckhauser's "A Primer for Policy Analysis" is the best. Yet, it is practically silent on the real problem.

Truth in advertising would insist that the subject matter is not for the timid. To be effective, CBA cannot be practiced by green-shade backroom types. The opposite is true. A new and adventurous breed that finds ways to work like "Cost-Benefit Practitioners Without Borders" seems to be the only way to rescue the field from irrelevance.

Monday, November 01, 2004

Markets and Elections

The election is tomorrow, the stock market has been gaining for a week, Bush leads in the Iowa Electronic Market. People who put their money where their mouth is are usually the best source.

Writing in the Spring, 2004, Journal of Economic Perspectives, Paul W. Rhode and Koleman S. Strumpf investigate "Historical Presidential Betting Markets."

"Wagering on political outcomes has a long history in the U.S. ... the market did a remarkable job forecasting elections in an era before scientific polling."

To the extent possible, the authors examine historical markets and conclude that they met (almost) the formal conditions for efficient markets.

Yet, the rise of scientific polling by itself did not curtail presidential betting markets. In addition, there was the increasing availability of other betting options as well as anti-gambling sentiment and legislation that sought to disqualify election bettors from voting.

Yet, now that there are more equity owners among the general public than ever, the public may be more sophisticated about futures markets than through the 20th-century.

It is the learning that comes via wealth acquisition that really concentrates the mind.

Sunday, October 31, 2004

Look Like America

Last Monday (10/25), the WSJ carried Harvard Prof. Ruth Wisse's op-ed, "John Kerry U". Here is the jist:

"Last spring, I was surprised by a call from the Harvard Crimson asking me to comment on my contribution to the Bush-Cheney re-election campaign. His inquiry was prompted by the disparity he'd discovered in donations by Harvard faculty of about $150,000 for Kerry to about $8,000 for Bush. (The figures have since chnaged but not the percentages.) I could have filled the whole issue of the paper with reasons for supporting Bush over Kerry, but as we both knew, the real story was the 'herd of independent minds' -- the image is Harold Rosenberg's -- charging through the academy.

"The Federal Elections Committee couild not have foreseen that when it required employment information on political donations over $200, it would expose the scandalous uniformity in a university community that advertises its diversity. The Sacramento Bee reported that the University of California system gave more to the Kerry campaign than any other single employee group, and that Harvard was second with only 15,000 employees to the UC's 160,000. Campus bloggers computed the percentages of Kerry contributions over Bush: Cornell 93%, Dartmouth 97%, Yale 93%, Brown 89%."

Other sources have noted that adding Greens and such to the Democrat total while adding Libertarians to the Republicans leaves the ratios unchanged.

One of the mantras of the left, of course, is that admissions and hiring ought to create groups that "look like America."

When it's convenient.

Saturday, October 30, 2004

Save the World

With much of Asia coming out of extreme poverty, many have asked, "what to do about sub-Saharan Africa?"

The Economist ("How to save the world", Oct. 30) cites recent work by Jeffrey Sachs that suggests $75 billion a year of aid.

Yet, Peter Bauer and others have pointed to the obvious fact that government-to-government aid has never paid off. Sachs, of course, knows this but suggests that aid with conditions can work. He even suggests that relatively uncorrupt Ethiopia be used as a trial case.

Africans outside of Africa do relatively well, just as Chinese expatriates and Indian expatriates had done much better than their stay-at-home countrymen. These comparisons are, of course, complicated by powerful emigration selection effects.

Nevertheless, the failed states of Africa beget civil wars and banditry which, in turn, spawn chaos and misery.

Iraq was to be the demonstration of deomocratic institutions -- and development -- imposed via invasion. Demonstrations, perhaps like Ethiopia, where investments and incentives can plausibly beget reform and development might accompany the Iraq mission. It could even involve the high-minded Europeans.

It would be awful if both fail.

Monday, October 25, 2004

Stop Me Before I (Home) Improve Again

Do people make uneconomic home improvements? In this era of booming home improvement, the question is often asked. Real estate columnists often compare the costs of a home improvement (such as adding a bath) to some datum on how the market values such an addition. A hedonic analysis was done in 2003 by G. Stacy Sirmans and David A. Macpherson and received substantial coverage. It seems that home improvers do all sorts of over- (and under) investing.

A recently published paper by Virginia Tech's Robert E. Lang (in Vol 1, No. 1 of Opolis) argues that, "features that add to a property's 'urban intensity' can lower the sales price of single-family detached suburban homes." Lang also notes that homeowners' associations have all sorts of rules to prevent owners from making these sorts of additions.

Interesting. It is quite reasonable that homeowners demand rules that sustain neighborhood quality (as Bill Fishel and Bob Nelson have been arguing for years). Lang adds that they are also buying into rules that (a la Tom Schelling?) help them to protect themselves from themselves.

Thursday, October 21, 2004

Oil Flow and Cash Flow

It's easy to become queasy when governments create and manage commodity stockpiles. So it is with the Strategic Petroleum Reserve which has (inevitably) been politicized.

As with all "good ideas", a minute's thought about such reserves suggests they are not. Steve H. Hanke summarizes all of this very nicely in today's WSJ ("Over a Barrel"). He even suggests how to make a good idea out of a bad idea:

" ... why not replace government-mandated release rules with a market-based approach? To do this, the government should sell call options on its oil stockpile. By doing this, it would generate revenue to defray some of its stockpiling costs. More importantly, the market would decide the release rates for the SPR. In consequence, the volatility in the oil markets would be dramatically reduced. In addition, spot prices would fall like a stone and once again be lower than futures prices."

Politicians (and media and other elites) do not easily grasp or accept economic thinking. Yet, Hanke's idea includes a cash flow aimed in their direction.

Tuesday, October 19, 2004

New and Exciting

In a recent post, I mentioned authors who developed book-length explanations of nearly everything, making use of the interactions of geography and selection -- and time. Jared Diamond's Guns, Germs and Steel is an example, as is Paul H. Rubin's Darwininian Politics.

In "Learning, Institutions and Economic Performance", C. Mantzavinos, Douglass C. North and Syed Shariq go considerably further.

Evolution gave us beings with brains and beings with large brains make choices, some good and some bad. The authors make use of the latest insights from cognitive science and conclude: "The analytical framework presented here provides a first approximation of the role that learning plays in the formation of institutions and in the economic games unfolded within them."

Why didn't anyone teach this stuff when I was learning economics?

Monday, October 18, 2004

Nothing New

This morning's WSJ includes an efficient-markets-vs-behaviorists (Eugene Fama-Richard Thaler) contrast on its front page -- and the suggestion that efficient markets economists are learning from the behaviorists: "Belief in Efficient Valuation Yields Ground to Role Of Irrational Investors ..."

There is, of course, the policy interest in light of social security privatization discussions.

The WSJ piece also notes that both, Fama and Taler, participate in portfolios that are not simply index funds. In other words, both act as though both sides' position is (half) correct. Many people in the market do make money -- and not simply by being lucky or by being wholly invested in index funds. They do so, expecting that there is always some short-term irrationality, to be remedied by long-term rationality -- and being wise enough to get it and taking appropriately timed action.

Put this way, there is absolutely nothing new under the sun; the whole learned debate leaves us where we have always been.

This is why, in a world of pension choice, some will opt in and some will opt out. Of the former, some will do well and some will not. The loosers will, of course, seek (and often get) political remedies. That's also old news.

What has changed? When social security was first hatched, self-directed accounts were not a serious option. Today, they are. The cohort of people who demand to steer their destiny has been growing and will continue to grow.

Friday, October 15, 2004

The New Yorkers' Map of the World

Some years ago, two very smart men, George Dantzig and Tom Saaty, wrote a not-so-smart book, Compact City: A Plan for a Liveable Urban Environment (out of print). By now there are other books and countless essays with similar names and themes.

The latest New Yorker magazine includes David Owen's "Green Manhattan: The environment needs more big cities" (no link to the article available).

The well-known New Yorkers' (Manhattan-centric) Map of the World was amusing self-parody.

Yet, there is also the occasional unintended self-parody. Owens argues that if more of the world were settled at Manhattan densities, and the Manhattanites' greener lifestyles (including the fact that "Eighty-two percent of Manhattan residents travel to work by public transit, by bicycle or on foot.") prevailed, the world would be a better place -- and David Goostein's pronouncement that this time we are (really, really) running out of oil would not be so troubling.

Where to start? I took the easy way and went to Wendell Cox's Wendell makes it all simple and clear but high-brow writers for the New Yorker take 5,000 words to erect a structure that the data, so easily accessible thanks to our host, easily undermine.

Owen neglects the fact that 70% of those who work in Manhattan are not Manhattan residents. And many of these folks do not walk or bicycle or take transit to work; large (and growing) numbers of them take very long drives via you-know-whats to get there. If not, they (unlike Owen) use cars to facilitate the non-commuting portion of their lives.

Moreover most of these long-distance commuters and their families could not afford Manhattan prices; they are unlikely to find that their tastes and resources match the options that the Manhattan set-up offers.

Trouble is that Manhattan is an island geographically but it cannot function without the almost 1.5 million who show up each day to help make the place work. In fact, it depends on its sprawling hinterland in more ways than just the daily commuting influx indicates.

Mr. Owen and his fellows can continue to pat themselves on the back only if that New Yorker map of the world is actually their frame of reference.


On Oct 13, the WSJ ran a story titled "In Bhutan, Happiness is King ... Society Values Well-Being Over GDP -- and Economists Take Note" (the link would only be useful to subscribers). An accompanying table,"How You Doing? ... Some Researchers are rethinking the value of measuring material wealth without regard to a broader notion of fulfillment. Below, well-being rankings, based on combined 'happiness' and 'life satisfaction' scores:"

1. Puerto Rico 4.69
2. Mexico 4.38
3. Denmark 4.24
4. Colombia 4.18
5. Ireland 4.16
6. Iceland 4.15
7. N. Ireland 4.01
8. Switzerland 3.88
9. Netherlands 3.86
10. Canada 3.86
15. U.S. 3.50
72. Albania -0.86
73. Bulgaria -0.87
74. Belarus -0.92
75. Georgia -1.11
76. Romania -1.30
77. Moldova -1.63
78. Russia -1.75
79. Armenia -1.80
80. Ukraine -1.81
81. Zimbabwe -1.88

The source given is the World Values Survey but I could not find this list at their website, altough the questionnaire is available.

Those of us afflicted with revealed preference thinking might reflect on the fact that, in just the last few years, 3.5% of Puerto Rico's population decamped from #1 to #15 (refers to net outmigration).

Perhaps the researchers who are busy "rethinking" all the balderdash re national wealth might say that it's always the wiser ones who stay where they are. And they hang on to a good thing, keeping it a secret about how good life is -- except perhaps when the rethinkers come around with their surveys.

Tuesday, October 12, 2004

Mega-Projects (contd.)

Many Californians (and others) like to think of a Golden Age when "things got done" and eye-catching large-scale public projects were actually built. From today's vantage point, Egypt's pyramids are also attractive but, then, those were the days when costs were not up for discussion. So, 5,000 years later, the Pharos get a pass.

Not so for Robert Moses, whose devices are nicely summarized by Gene Callahan and Sanford Ikeda in the Fall 2004 Independent Review ("The Career of Robert Moses: City Planning as a Microcosm of Socialism"): "The career of Robert Moses, which had a tremendous impact on the day-to-day life of tens of millions of people, presents a paradigmatic example of the fatal conceit of constructivist planners ..." (p. 260; see the article for the wrenching details).

No pass, either, for the planners of Washington DC's Metro. Wendell Cox looks at promise vs performance 25 years later -- and it is not a pretty sight. The ten-billion dollar system did nothing to help the capitol avoid the standard big-city decline in transit use -- and concurrent increase in private vehicle use.

To be fair, neither Moses nor the Metro planners used slave labor to build their projects.

Monday, October 11, 2004

The Cities Are (not) "Bouncing Back"

Since the mid-1990s, there has been steady drumbeat about US cities "bouncing back". This is, of course, unlikely but, nevertheless, provocative because turnarounds are big news.

I now have my 2003 US Statistical Abstract CD ROM (much handier than the hard copy) and here are the population shares since 1990 for New York city, for the top-20 cities and for the top-75:

PLACE(S) 1900 1940 2000

New York city 4.52% 5.65% 2.84%

Top 20 cities 15.73 18.97 10.96

Top 75 cities 22.03 27.42 18.24

Cities as interesting units of analysis have been eclipsed by metro areas and their exurban hinterlands. Nevertheless, Smart-Growthers, big-city politicians and their acolytes have been selling a fable to gullible media.

The cities, as we knew them, peaked near about 1940. There has been no turning back. For many years, national politicians worried over being seen as not having an "urban policy", e.g. pumping enough tax money into declining areas. The welfare policy that seemed to matter was all about places and not people. As people do better, they leave declining places behind. Political representatives, however, represent places, not people.

Sunday, October 10, 2004


A week or so ago, Patrick Crozier of Transport Blog was kind enough to respond to my post about a proposed maga-dollar extension of LA's underwhelming Red Line.

Pat pointed to an even more expensive extension of London's Jubilee Line which, he reports, is responsible for a development boom valued far in excess of the money spent.

There must be some projects in the world that, well timed and placed, did impact development -- even to the tune of garnering more development benefits (valued in land value increments) than was spent.

Urban economists would probably point to a distributional problem unless the affected landowners were made to shoulder the costs of the windfall that came their way. On top of that, as some neighborhoods boom, others may fade. Here are additional and complex impacts to discern and consider.

Mainly, however, the discussion suggests that there is some objective function that some land use planning group is maximizing -- and that they do so via clever investments in subways, or anything else for that matter.

This is every planner's dream but, largely, a fiction. 1) there is no agreement on what should be maximized; 2) there is no science to help us specify and rank maximands (although substantial regional science literature -- including some that I had a hand in when I was much more optimistic about such things -- suggests there is); and 3) there is no easy way to design the instruments that would do the work of achieving the goals.

OK. So we can, nevertheless, do it via successive approximations and compromises. I am reminded of the lesson that I got from reading Alan Altshuler and David Luberoff's Mega Projects: The Changing Politics of Urban Investment. Namely, it is all about getting something built. Anything. The specifics matter much less than local politicians succeeding in getting their hands on federal dollars to leverage. In fact, that seems to be all that the mega-planners did.

Wednesday, October 06, 2004

Good News

"The divorce between an interest in the psychological and cultural foundations of economic life and an interest in the consequences of economic interaction has been a peculiar feature of professional economics during the second half of the twentieth century ..." So writes Paul Seabright (p. 100) in The Company of Strangers: A Natural History of Economic Life. Many fine authors, including Seabright and Deepak Lal and Paul Rubin and others, have been working hard to reconcile the fields.

Geography and selection (nothing succeeds like success) can safely be taken as exogenous (Jared Diamond). It then becomes possible to say interesting things about how endogenous genetics, psychology and political economy interact.

Through history, groups coalesce, organize, and hill-climb, often to gain local optima. Local optima may be precarious and eventually give way -- sometimes, at great cost, including wars, revolutions and oppressions.

So, good news and bad news. But perhaps the bottom line is the following: " ... across the world, the average risk of violence faced by the world's citizens is almost as low as it has even been in our history" (p. 246). May it last.

Monday, October 04, 2004

Futures Markets Everywhere

Futurists, soothsayers and plain old forecasters may have finally had it. We can now see the advent and spread of futures markets for almost any event for which enough betters can be found. One firm ( now licenses the software whereby we can each create our own site to mediate bets on almost any forecast.

There will soon be enough such markets that arbitrage between them becomes attractive -- which will, in turn, make each of them a better source of information.

Hitch markets to broadband and good things happen. The more prescient get financial rewards and everyone else, including those on the sidelines, get to see the light sooner rather than later.

Friday, October 01, 2004

The More Things Change ...

Writing on "Our Fractious Foreign Policy Debate" in the Fall, 2004, issue of The Public Interest (no link to the article available), Fred Baumann demonstrates how both sides of the Iraq war debate still operate (and talk) in the shadow of the Vietnam debate -- which he says was never really resolved.

This is why the first Gulf War was approved by only one vote in the U.S. Senate and why intervening in the Balkans (not to speak of Rwanda) was so difficult.

September 11, the author claims, changed things only a little. Our use of force in Tora Bora, Fallujah and other places was constrained.

Reversals in Iraq now bring out the Vietnam-type legacies of isolationism, conspiracy suspicions, and moral condemnation. "This has led conservatives when in power to fight wars on tiptoe. They tend to counter dogmatic pessimism with a forced and precarious optimism. By cutting the margin of error too thin, they end up, paradoxically, strengthening the very fears their policies were meant to avert or placate."

And , " ... it is likely that even if Iraq ends reasonably successfully, the internal debate has already been so debilitating that no American administration will do anything like this for decades ..." In a world with too many failed states, nuclear proliferation and ruthless terrorists, this may be the real price we pay.

Baumann tries to end on a somewhat positive note: "Much depends on whether we look back on the period of 'Bush lied, people died' and Fahrenheit 9/11 as an episode of periodic craziness, like the Palmer raids, or whether, under the pressure of domstic anger and demoralizing foreign threats, it marks the entrenchment of a new style of American politics." Nothing in his fine article suggests that the latter is likely.

Thursday, September 30, 2004

The Mother of All Reforms

With election-year nuttiness about to peak this evening, it is time to refer to Leanard E. Read's proposal to pick our leaders by lottery. Here is an excerpt from the link:

"The first reaction to such a procedure is one of horror: 'Why, we might get only an ordinary citizen.' Very well. Compare such a prospect with one of two wrongdoers which all too frequently is our only choice under the two-party, ballot-casting system. Further, I submit that there is no governmental official, today, who can qualify as anything better than an 'ordinary citizen.' How can he possibly claim any superiority over those upon whose votes his election depends? And, it is of the utmost importance that we never ascribe anything more to any of them. Not one among the millions in officialdom is in any degree omniscient, all-seeing, or competent in the slightest to rule over the creative aspects of any other citizen. The recognition that a citizen chosen by lot could be no more than an ordinary citizen would be all to the good. This would automatically strip officialdom of that aura of almightiness which so commonly attends it; government would be unseated from its master’s role and restored to its servant’s role, a highly desirable shift in emphasis.

"Reflect on some of the other probable consequences:
a. With nearly everyone conscious that only "ordinary citizens" were occupying political positions, the question of who should rule would lose its significance. Immediately, we would become acutely aware of the far more important question: What should be the extent of the rule? That we would press for a severe limitation of the state seems almost self-evident.
b. No more talk of a "third party" as a panacea. Political parties, which have become all but meaningless as we know them, would cease to exist.
c. No more campaign speeches with their promises of how much better we would fare were the candidates to spend our income for us.
d. An end to campaign fundraising.
e. No more self-chosen "saviors" catering to base desires in order to win elections.
f. An end to that type of voting in Congress which has an eye more to re-election than to what’s right.
g. The mere prospect of having to go to Congress during a lifetime, even though there would be but one chance in some 10,000, would completely reorient citizens’ attention to the principles which bear on government’s relationship to society. Everyone would have an incentive to 'bone up,' as the saying goes, if for no other reason than not to make a fool of himself, just in case! There would be an enormous increase in self-directed education in an area on which the future of society depends. In other words, the strong tendency would be to bring out the best, not the worst, in every citizen."

Leanard Read enumerates just some of the advanatages. A moment's reflection suggests many more. Imagine politicians and their many acolytes having to join the productive economy.

Wednesday, September 29, 2004

No-Fault Transit Planning

Having spent $300-million per mile to build LA's rump Red Line, LA's leaders now want to spend another billion dollars to extend it. Council Backs Expansion of Red Line ... The officials agree that 'congestion has reached a breaking point' and support building the subway system westward .."

This is all getting tedious but silence in the face of craziness is not an option. The Red Line ridership forecast (Segment 1 and 2) made in the official 1983 EIR was for 376,000 daily boardings. The actual FY 2003 daily boardings for these segments was 95,100 (thanks, Tom Rubin).

Of course, $300-million per mile to build (and many more millions to operate since then) was not part of the 1983 vision.

Finally, the impact of the project on congestion reduction is nonexistant.

This is all old news -- except to the folks ready to move forward. Yesterday's LA City Council vote to start pushing was unanimous.

Tuesday, September 28, 2004

Wealth and Angst

Gregg Easterbrook's The Progress Paradox: How Life Gets Better While People Feel Worse is worth reading. While Simon and Lomborg and others have documented the material improvement part, they said little about why many people were not taking delivery of the good news. Easterbrook is very good at surveying both.

Actually, the book has three parts; in addition to a fine exposition of the details of expanded material welfare and corresponding increased grousing (especially by smart people), Easterbrook adds two chapters on how to improve the world. So, skip the last chapters (how to reign in greedy CEOs, calls for universal health care, a higher "living wage" and more foreign aid) and enjoy the author's thought-provoking surveys of material success and the accompanying widespread (though non-universal) angst.

Monday, September 27, 2004

Smart Growth and Smart Diets

Most of the popular media (and others) have been taken on by the cachet of "smart growth" and the many dumb ideas that it includes.

John Tierney, however, got it about right in yesterday's NY Times. He even writes, "... I don't like my own car ... But I no longer believe that my tastes should be public policy ...."

And, referring to experiments, as on the I-15 near San Diego, he notes, "The toll lanes have become so popular that they're being extended 12 miles further out of town, and the concept of variable tolls has become highway engineers' favorite solution to traffic jams. After decades of working on technological fixes like beam-control roads, they've turned to basic economics instead. They now see traffic jams as equivalent of bread lines in the Soviet Union, a consequence of an unimaginative monopoly run by politicians loath to charge the market price for a valuable commodity. To be fair, the Soviet politicians, though, at least they didn't blame the public for the problem they created. They didn't promote a smart-diet program urging people to eat less bread."

Sunday, September 26, 2004

Debt and Mega-Debt

The National Debt Clock puts the U.S. national debt at $7,394,068,208,622.52 as of 8:27:10 PM GMT, Sep 26, 2004. It will soon hit $10 trillion and not look back. Rightly, many are concerned.

Thomas R. Saving recently wrote in the WSJ that the Social Security and Medicare unfunded liability is $73 trillion, 10 times the national debt. The new drug benefit will quickly make this worse.

The national debt got to where it is because politicians like to spend money and cut taxes and because of wars and the problems with raising taxes during economic recessions. The Bush tax cuts are widely cited for their regressivity but the Social Security "payroll tax" is the most regressive federal tax we pay -- and the fastest growing.

Yet, many of those who fret most over the national debt and the Bush tax cuts vow to defend the Social Security status quo.

Perhaps it's back to the idea that the "smaller" numbers are more comprehensible. Elite opinion can fathom trillions but balks at tens of trillions.

Friday, September 24, 2004

Sprawl and Health

The sprawl-causes-obesity silliness has become a growth industry and we now have the inevitable sprawl-and-health follow-up. Life is too short to dwell on these but the latest research from RAND will surely get a lot of press play. It may even make "60-Minutes."

Sprawl is bad for your physical well-being -- although the authors could not establish links between sprawl and mental health.

Where to start? When the authors score "sprawling sites", they mean MSAs -- like LA county with hundreds of neighborhoods. Characterize all these with a single score?

Be that as it may. Among the control variables, it seems sensible to include how long respondents have lived in these hellish conditions -- a week, a year, a decade? I could not find anything that might even be a near-proxy.

Studies like these are funded by groups that insist that they know what "livable communities" are. They typically are not the ones that most people choose to live in.

We all know where that discussion leads.

The researchers should consider that suburbanization and life expectancy have both been increasing for many years. Surely, suburbanization causes long life.

Thursday, September 23, 2004

Doomsday, Horse Manure and Urban Planning Conferences

By now, we all know that long-run forecasts are a fool's errand and that all of the doomsday forecasts have been wrong. We also know that they keep on coming.

Historian Stephen Davies recounts "The Great Horse-Manure Crisis of 1894" in the current issue of The Freeman (some of contents on-line but, unfortunately, not Davies' piece). All urban non-pedestrian traffic was horsepowered and the stuff kept piling up. "In New York in 1900, the population of 100,000 horses produced 2.5 million pounds of horse manure per day ... " And, "Writing in the Times of London in 1894, one writer estimated that in 50 years every street in London would be buried under nine feet of manure."

Even better is Davies' reports that, "In 1898 the first international urban planning conference convened in New York. It was abandoned after three days, instead of the scheduled ten, because none of the delegates could see any solution to the growing crisis posed by urban horses and their output."

Wednesday, September 22, 2004

World Car-Free Day

It is hard not to like the WSJ's coverage of today's big non-event, World Car-Free Day. The piece says it all. Here it is:

"Honk if You Hate Cars"

"You may not know it from all the traffic, but today is officially "World Car-Free Day." As for all those environmental enthusiasts who intend to mark the moment by parking their Beamers and hybrids for the next 24 hours, the Competitive Enterprise Institute is issuing a little challenge.
Car-Free Day started with local activists more than a decade ago and has since grown into an official event for governments world-wide. The goal is to hang up the car keys for a day and contribute to building a fossil-fuel-less paradise by biking, walking and rollerskating about town. Many European cities will offer free or reduced-rate bus and commuter train service, while some U.S. places (Berkeley, California, for one) will shut down a section of the city to cars for the afternoon.
"And yet promoters have been perplexed to discover that several hundred fewer locales are taking part this year than did the 1,300 in 2003. Maybe it's because one test drive with a car-free world is inconvenience enough. Which gets to CEI's request that supporters of Car-Free day take part in a little "sincerity test." How hard is it, after all, to hide the garage door opener for one sunny afternoon when you've had months to plan?
"The real test, says CEI, is for all those participating in today's experiment to make it as real-world as possible. The group suggests that participants make their car-free trips today come rain or shine, carrying several bags of groceries, toting a baby if they have one, and to be sure to include a nighttime trip. This is, after all, how the world's love affair with the automobile began."

Tuesday, September 21, 2004


The legacy of Julian Simon roars on. Bjorn Lomborg's work is well known, the World Bank and others are chiming in with relevant international data findings (Sunday's post) and a new book edited by Terry L. Anderson, You Have to Admit It's Getting Better (Hoover Press) delivers recent research that adds still more. The authors suggest that the data show that sustainability is here. We are on the path.

One of the chapters (by Robert E. McCormick) even shows that net carbon emissions are subject to an Environmental Kuznets Curve. Economic growth eventually gives us a "race to the top."

Just when the NY Times Book Review had retained Al Gore as book reviewer for a book that stuck to the dim view.

Interestingly, my colleague Martin Krieger, in his "What's Wrong With Plastic Trees" was remarkably prescient about the sustainability mantra in 1973.

Yet, Martin could not have known, no one could have predicted what I discovered when I accompanied my friend Matt Ramsey to his school's Winter Sing, just a couple of years ago. Most of the the schmaltzy Christmas stuff had been replaced by songs about recycling!

I can only imagine what gets taught to these (and many other) kids throughout the year.

I did send Michael Sanera and Jane Shaw's Facts, Not Fear: Teaching Children About the Environment to Matt. The good news is that I can follow up with Krieger, Simon, Lomborg and many others.

Monday, September 20, 2004

People and Places

"Nobody goes there anymore. It's too crowded." So goes the old joke.

Now, researchers at the Nelson A. Rockefeller Institute of Government, in their Update on Urban Hardship, find that, in the years 1970-2000, St. Louis showed the most improved Intercity Hardship Index Score while Los Angeles' ranking declined the most.

Theirs is an index that combines six attributes: unemployment, dependency, education, income level, crowded housing, and poverty (see the report for precise definitions).

Trouble is that the place-prosperity vs. people-prosperity distinction highlights the fact that, over time, it is best to consider the fortunes and misfortunes of real people, rather than places (or quintiles, or deciles or such).

And to compare places, it is best to look at where people and capital are choosing to move. Those rankings never match the ones revealed in the study. That is the insight of the old joke.

Sunday, September 19, 2004

Doing Business

The World Bank's "Doing Business in 2005" includes estimates of how much a country's annual economic growth would gain by going from the being among the worst regulated to joining the least regulated: 2.2%. This is substantial and would compound quickly, making a big difference in some of the world's poorest places -- which have some of the world's worst regulations, including plenty of outright corruption.

Governments that have been kept in power by conventional aid programs, just as Peter Bauer predicted, are the most likely to add to the cost of doing business -- and more the problem than the solution.

Nevertheless, it's very good that the World Bank has finally discovered the obvious.

The IMF insists that macro-economic "reforms" go with its bail-outs. Much better to focus on what look sensible micro-economic reforms.

Thursday, September 16, 2004

Fake but Accurate

If we stoop to generalize U.S. politics in terms of a simple left-right spectrum, it appears that many on the left honestly see themselves as on the side of the angels (e.g., Dan Rather, et al.) while many on the right garner a sense of self-righteousness in reaction (e.g., "can you believe these guys?").

The current flap over the 60-Minutes Memogate slip-up corroborates the point. While Fox-TV News flaunts their "fair and balanced" mantra and everyone knows that it's a Rupert Murdoch joke, the much more serious left now defends the Dan Rather evidence embarrassment as simply being about some memos that are "fake but accurate."

Unintended self-parody.

"Fake but accurate" just might make it into the folklore of our time -- along with, "if the glove doesn't fit, you must acquit ...", "it depends on the definition of 'is', ..." and, of course, "fair and balanced."

It's just that the latter was fully intended self-parody.

Wednesday, September 15, 2004


What is the Zeitgeist to do with data from the BLS that we are not all overworked wage slaves?
We'll have to see.

Most social science data involve stuff that is transacted and taxed. Time diaries are few and far between and this new regular feature of federal data reporting is welcome.

Economists have always been keen to see how we respond when money prices change. It is probably as useful to know how we react to time prices. A standard question was always about how people handle worsening highway congestion. But time costs also fall. We have a much easier time accessing data of all sorts these days. (I am old enough to recall double-parking outside libraries, running around, searching and trying to find dimes to xerox precious pages, etc.).

Once this new data series gets rolling, we will know a lot more about how our activity choices respond to changing money costs. There are units and definitions to agree on but this will all be great fun.

Here is some of the story from the WSJ:

September 15, 2004

"New Study Suggests Americans Aren't Overworked After All"
By ALONSO SOLO and JON E. HILSENRATH Staff Reporters of THE WALL STREET JOURNALSeptember 15, 2004; Page D2
"The high-tech economy and global competition may be increasing pressure on everyone to work harder and longer, but a new study suggests full-time U.S. workers still put in a standard eight-hour day and, in general, Americans get plenty of sleep.
"The Bureau of Labor Statistics, in the first of a new series of surveys on time use here, found Americans over the age of 15 on average sleep 8.6 hours a day and full-time workers on average clock in 8.1 hours on the job. That's more work than occurs in many European countries, but still leaves time for other activities.
"The findings also confirmed the picture of an increasingly sedentary society that spends about eight times more time a day (2.57 hours) watching television than exercising (0.3 hour) and three times more than socializing (0.78 hour).
"Here is a list of who spends the most amount of time on certain daily activities.
• Eating and Drinking Men 65 years and older (1.65 hours) • Household Activities Women 65 and older (3.06 hours) • Shopping Women (0.96 hours) • Caring for Family Members Women 25-34 years (1.64 hours) • Caring for Non-Family Members Women 55-64 years (0.52 hours) • Phone Calls, Mail, E-mail Women 65 and older (0.36 hours)
Source: Bureau of Labor Statistics
"Using data from interviews with 21,000 Americans across a cross section of the population last year, the American Time Use Survey aims to analyze the American worker's behavior and provide a fuller picture of how Americans use free time. Updates will be conducted annually.
Economists are increasingly drawn to time-use studies to examine issues ranging from climbing obesity rates to productivity of the nation's work force. Productivity measures, for instance, are influenced by how many hours individuals spend at work. By getting a fuller picture of the workday, economists might get a better understanding of the forces underlying productivity trends, which are essential to economic growth. Obesity, meanwhile, could be an offshoot of the sedentary lifestyle.
"'Certainly, the most salient fact [in the report] is the vast number of hours spent watching television,'" said Edward Glaeser, a Harvard economics professor. "'This is in line with previous studies, but the numbers remain staggering.'"
"BLS researchers said men work about an hour more (8.01 hours on average among full- and part-time workers) than women do (7.06 hours among full- and part-time workers), but working women are juggling more responsibilities: They spend about an hour more a day than working men doing household activities and caring for household members.
"To be sure, a detailed breakdown of the data showed that not all workers are putting in standard hours. Male full-time workers, for instance, on average spent 8.7 hours on the job on weekdays. And 33% of all survey respondents said they spent some time working on weekends or holidays.
"The survey provides insight into the increased incidence of telecommuting. Nearly one in five Americans -- 18.6 million individuals -- reported spending time working at home. Well-educated workers were the most likely to bring their work home. Thirty-three percent of college graduates, or 9.6 million individuals, do some work from home, compared with 13% among workers with no more than a high-school degree.
"Economists said the findings would help track nonmarket activities that are important to better understand the nation's economy. "Time use is critical for our economy," said Steven Landefeld, director of the Commerce Department Bureau of Economic Analysis, which produces monthly estimates of gross domestic product, the broadest measure available of the nation's output of goods and services. "This is one of the widest gaps we have with our knowledge of the U.S. economy."

Friday, September 10, 2004

Economists Gone Wild

The recent confab of economics Nobelists has produced copy that has appeared in various places. The WSJ's Fredrick Kempe offers this interesting summary:

"How De Niro Boosted Global Growth"

"LAKE CONSTANCE, Germany -- To illustrate a point, Nobel laureate Robert Mundell offers a pop quiz for doting economics graduate students arrayed around his dinner table here. What movie, he asks, has contributed most to the global economy?
"One student guesses 'Gone with the Wind.' Another ventures: 'Titanic.' None lands on the answer before Professor Mundell volunteers: 'Taxi Driver.' He says the 1976 Martin Scorcese movie starring Robert de Niro and a waifish Jodie Foster brought a cool couple of trillion dollars into the world economy. 'No other movie comes close.'

"By way of explanation, Mr. Mundell -- the father of supply side economics -- first recounts that Congressman Jack Kemp only pulled out of the 1980 Republic presidential primary after Ronald Reagan promised to make Mr. Kemp's tax reduction plan part of his platform. He continues that President Reagan never could have pushed the Kemp-Roth bill through a Democrat-controlled Congress if not for his increased stature following his stylish survival of a 1981 assassination attempt outside the Washington Hilton.
"That brings Mr. Mundell back to Taxi Driver. The would-be assassin was John Hinckley, who was inspired by the movie and his own deranged, DeNiro-esque desire to impress Ms. Foster, who was then attending Yale University. So without the movie, Mr. Mundell winks, the U.S. may not have had Mr. Reagan's growth-generating tax cuts -- which inspired low-tax policies elsewhere.
"Now that Professor Mundell has his audience's attention, he speaks of how President Reagan's tax cut plan was just one of several 20th century economic revolutions that have prepared the ground for a uniquely promising 21st century. His optimism reflects the general consensus among eleven Nobel Prize economic laureates that gathered here at a roundtable last week on the island of Lindau for a unique summit of international graduate students and assorted VIPs (The Wall Street Journal and Handelsblatt were media partners). It was accompanied by a survey this paper conducted to gauge the thinking of the 32 living Nobel laureates in economics. Read the answers1 of the 12 laureates who responded.
"Taking together, the laureates' ideas about the future are a timely reminder that many of the trends that wiped out European fascism and the Soviet bloc -- technological progress, globalization, democratization and the growth of free markets -- are still at work and in some ways have grown more powerful in their potential. It isn't that these men (for that is what they all are) don't worry about matters like nuclear proliferation, overpopulation, global warming and Mideast violence -- they just consider the countervailing positive opportunities to be more powerful and lasting.
"Mr. Mundell's revolutions begin but don't stop with the broad acceptance since the Reagan years that punitively high tax rates stymie growth. The European Union still has skeptics in places like Germany and France who would prefer that the more competitive small European economies adopt their bad tax policies. But the tide is against them -- newly elected European Commission President Jose Manuel Barroso appears to know better, having kept the French and Germans out of jobs from where they could better dictate anti-competitive tax harmonization. A Latvian named Ingrida Udre will be responsible for tax policies -- and her country has eagerly embraced the Irish low-tax model.
"Mr. Mundell's second revolution is trade liberalization, which will continue to spread despite occasional reversals. The third is a productivity revolution driven by information technology that is holding inflation down and pushing growth and efficiency up. Another revolution was mentioned by Milton Friedman in response to our survey. He said it was the acceptance of the idea that inflation is a monetary phenomenon -- 'producing more than two decades of relatively low inflation in most developed countries, relatively stable economic output, a high level of employment and well-being.'
"Professor Mundell also considers the introduction of the single European currency, which he championed early in these pages, as a further positive push. He counts it as one of the best economic ideas the world has had in a long time -- moving the world beyond notions of national economies and currencies. He recognizes that the euro zone isn't a perfect currency area, but there are increasing indications that the euro's advocates are being proven right: Sharing a single currency and interest rate leads to healthy competition among euro members for smart economic policies where best practices eventually win out. Protests in Germany show how painfully these changes can be, yet the reforms of Social Democratic Chancellor Gerhard Schroeder also prove that they are inevitable.
"Another encouraging sign this week was a World Bank report that credited increased competition in the newly expanded European Union as the catalyst for business deregulation in several member nations. The report analyzed how regulation and legal systems in 145 countries affected entrepreneurs' ability to start and operate businesses. Slovakia led the list of the 10 countries that had done best at reducing the cost of doing business along with six other EU members: Lithuania, Poland, Belgium, Finland, Portugal and Spain.
"Finally, China's quarter century of rapid economic growth, now followed by India, is triggering yet another revolution. The Nobel laureates in our survey mostly believed that world wealth would be more evenly distributed in 2054. Gaps may continue to widen within countries, as they have in China. Yet most of the laureates believed that the income gap between the First and Third world would shrink. The Berkeley economist Bradford Delong (not part of this Nobel group) has predicted that the boom in developing countries -- spurred above all by China and India -- would see them converge toward the developed world norm at twice the pace seen in the late 20th Century. The introduction of fiber-optic cable and the satellite made it possible for people living anywhere in the world to compete for jobs that were once the exclusive property of the Western middle class.
"It's easy to poke holes in optimistic scenarios. And these Nobel Prize winners see their share of threats: terrorism, global warming, extreme poverty in sub-Saharan Africa, the difficulty of holding down the inefficiencies of big governments, financing the health care and pension systems of the aging societies in the Western world, stubborn subsidies and barriers to free trade and migration. It's also clear that while liberal economists have won the intellectual battle of the last twenty years, they still haven't won the political one in many places. Transatlantic political strains have also made too many Europeans and Americans focus on their superficial differences rather than the fact that they are the ultimate drivers of positive change and comprise the world's largest and most dynamic cross-investment and trade area.
"'We are going to live with painful uncertainty for a long time,' shrugs Mr. Mundell. Yet he believes even the worst terrorist attack and the least visionary leaders can only interrupt but not stop the stream of positive economic change."

Putting aside the really weird De Niro story, Mundell and the others remind us once more that good ideas inevitably win.

The primitives seem to sense some of this and are resorting to desperation that includes putting dynamite belts around young women so that they can blow up large numbers of little children.

These nihilists may not get it but the West will always supply many writers and thinkers and pundits who support substantial parts of their view of the world.

There must be better rejoinders than allusions to Taxi Driver, Jodie Foster and Warren Hinkley.