Monday, February 28, 2005

Ownership society

"'Market-augmenting government' is the answer Mancur Olson developed in response to the question of what type of government is needed for economic growth. The idea that markets are the best mechanism for facilitating growth now dominates prescriptions for economic development, but the circumstances in which markets develop are not fully understood ..." So begins the first chapter of Omar Azfar and Charles A. Cadwell's excellent anthology Market-Augmenting Government: The Institutional Foundations of Prosperity.

The book's contributors highlight the details of market-augmenting government. In addition to having to fathom the details, we have to jettison the politics of the New Deal and also the mindset that sees widespread market failure everywhere. The current move to an "ownership society" is apparently a no less than a serious first step on this road.

Tuesday, February 22, 2005

"Voices of Iraq"

No matter what one thinks of the Iraq war, Voices of Iraq (Magnolia Pictures, 2004 on DVD) is a must-see. "The producers of this grounbreaking doumentary distributed 150 digital video cameras across Iraq to enable everyday people -- mothers, children, teachers, sheiks, even insurgents -- to voice their perspectives on issues such as war, terror and the democratic reform. The result is a unique tableau documenting Iraqis' lives, and their hopes as they struggle with years of turmoil and strive to build a civil society. Note: Contains graphic content" (from the wrapper).

We will never know how representative the views expressed are. My impression is that they are moreso than what I get from the evening news. There is tragedy (mostly remembrances of the past regime) and hope and optimisim. Mainly the latter.

Interestingly, among the of-hand on-camera comments are references to Saddam's link to Al Qaeda and Syria's link to the inusrgents (which is also celebrated on interspersed jihadist recruitment video).

The project itself once again demonstrates how new technologies (in this case the user-friendly cameras) undermine the gatekeepers. It may have been a worse year for Dan Rather than he knows.

Sunday, February 20, 2005

"Despotism by stealth"

The Economist reports on current eminent domain litigation in the U.S. under the heading "Despotism by stealth." Governments that enforce property rights can also take them away. Eminent domain is litigated because "public purpose" is a very slippery slope. In various times and places, schools, hospitals, roads, liquor stores and restaurants have been "private" and they have been "public".

How, then, to put the genie back in the bottle?

I have no idea how the lawyers and judges will approach this. Roads and highways could all be private. So could schools and all the rest. Bruce Benson adds that holdout problems are not typically large enough to justify eminent domain. The long list of abuses cited in The Economist make his point.

"Good government" is a chimera while limited government can be more easily defined and specified. That would be in a better world. In the interim, the only way is via judges on the bench who are sensitive to the strong links between property, liberty and prosperity.

The rhetoric used by many in Congress has it that these are the judges who would "turn back the clock." Yes, some clocks do need serious re-setting.

Friday, February 18, 2005

Micropolitana (again)

How to get a useful handle on The Great Dispersion? The OMB and Census Bureau's new Micropolitan areas define something in-between a rural and an urban place. They are usually counties focused on small central cities (between 10,000 and 50,000 pop.). Even so, there are almost 600 of them and they span a huge range.

Lang and Dhavale sliced and diced the data the in many ways. Their ten fastest growing Micros grew by 67% in the period 1990-2000. These were within 100 miles (average) of the nearest Metro area. Those ten Micros nearest a Metro area (34 miles average distance) grew by 7% over the decade. This was less than the country as a whole.

Another way to go is with the USDA's new "Urban Influence" codes. These denote three types of Micropolitan areas: adjacent to a large Metro area (above 1 million pop), adjacent to a small Metro area (less than 1 million pop), or not adjacent to any Metro area. Only the first group grew faster than the U.S. in the 1990s in terms of people. But, both the first and the third grew faster than the U.S. in terms of private sector jobs. In fact, the first group topped all other USDA-area categories in terms of retail and wholesale job growth. The third group was first in terms of manufacturing job growth.

The Great Dispersion is a many splendored thing. We are just beginning to understand it. George W. Bush carried 97 of the 100 fastest growing counties last Nov. Perhaps he and his people have a clue.

Thursday, February 17, 2005

Kyoto and the Popperian question

Yesterday was Kyoto Protocol Day. Why not pose and answer the Popperian question? In an exchange on climate change in the Jan-Feb 2005 edition of The Freeman, reader Dan Karlan and writer Christopher Lingle do just that.

Karlan asks: "What evidence would cause you to reconsider your position and accept the position you have so far rejected?"

Lingle rises to the occasion and writes: "First, I would have to see evidence that reconciles the differing data from surface temperatures that suggest a warming trend with the data from weather balloons and satellites that do not support the notion of a warming trend. I would also have to see evidence that modeling of climate involves more complexity so that solar flaring and water vapor can be accounted for. These natural phenomena are much more important in influencing climate and weather than the combined actions of mankind. Indeed, one large volcanic eruption will disrupt weather patterns and alter climate to a much greater extent than decades of anthroprogentic effects."

Refreshing and useful.

Monday, February 14, 2005

More good news

The Economist reports a rebasing of its 160-year old commodity-price index. Chinese demand has lately burst on the scene but the bottom line is still that commodity prices are now at 30% of their 1845 index value. This is literally through thick and thin, including population expansion from approximately 1.5 billion to near 6.5 billion, most of them consuming appreciably more (and longer) than their great-great grandparents.

Cause and effect are always tough calls. Yet, the economic explanations offered by Julian Simon and others look much better than anything else on the horizon.

In the U.S., the pessimists write most of the books but the optimists win most of the elections.

Saturday, February 12, 2005

Core competence

One of the things that makes Robert Higgs' Against Leviathan so enjoyable is that Bob's anger is rooted in his erudition. Our liberties and our wealth are regularly expropriated under the cover of law and due process. Under the U.S. Constitution, we should do much better.

The sorts of episodes that Higgs notes are, of course, part of an open-ended book. Today's LA Times includes "City OKs Hotel Subsidy Deal". The LA City Council voted 14-0 to throw $177 million at a Anshutz Entertainment Group to build a hotel near the white-elephant LA Convention Center. No mention in the story that there is a hotel industry that has long avoided making an investment like this. Or that the LA Convention Center (as well as billions of dollars spent on LA's downtown over the years) have been nothing but waste and graft.

The story right below the one about the hotel deal notes that the same City Council had voted against hiring extra police just the day before the hotel vote. The Council (and their LA Times acolytes) also regularly moan about not enough cash flow to fund all sorts of "needed" city services.

Governments do not waste time developing core competencies. Driving LA's deteriorating pavements these days takes its toll on eveyone's autos -- including womens' and minorities'.

Thursday, February 10, 2005

Progress a good thing

A refreshing analysis of the Procter & Gamble-Gillette deal by James Surowiecki in the current New Yorker ("The Customer Is King", but no link to the article that I could find) notes that, while the popular view is that these manufacturers need the added clout to deal with powerful Wal-Mart, it is more likely that Wal-Mart's clout really reflects consumers' new power. "The real transformation of the past 30 years is not the rise of the of the American retailer but the rise of the American consumer. That's why Wal-Mart is so tough to negotiate with and so relentless in its quest for lower prices and lower costs." Yes, progress is a good thing.

Wal-Mart The Predator has become almost a staple of mainstream media. Yet, the old-media New Yorker maintains the good sense to have writers like Surowiecki who occasionally rattles the blue-state worldview.

Tuesday, February 08, 2005

Big Picture

Dismantling the New Deal was never going to be quick and easy. Yet, any U.S. President that takes on social security and farm subsidies in the same term deserves some credit. We do not, of course, know how these initatives will turn out.

Both programs are regarded as entitlements by vocal and well organized groups. Both of these constitutencies and their supporters will demagogue the "deserving poor" theme when and where they can.

That's all old news. What may be new is the fact that environmentalists have begun to worry about subsidized farming and 401(k) savers have learned about compound interest and equity. And these are both groups that are growing in size and influence.

Nothing like a growing middle class when it comes to undermining the New Deal platform. And once the platform has been splintered, the middle class will will grow and prosper even more, etc.

At least the Big Picture looks pretty good.

Monday, February 07, 2005

Agglomeration and clustering

There is no "death of distance", no matter how cheap communicating becomes. Rather, the many advantages of clustering will continue to be attractive -- but available over a larger space so that the many costs of crowding (including congestion and high-rise development) can be avoided. Lower Wall Street represents a tight 19th-century cluster whereas Silicon Valley is a spread-out modern cluster (even spanning SF Bay by some estimates). Pierre Desrochers has been writing about this evolution for some years. He evokes Jane Jacobs, among others, describing the variety of actors and roles that create fertile soil for innovation.

The trouble is that planners and policy makers around the world have embraced the idea that they can create and/or manage successful clusters. What if their heavy hand stifles creativity instead? What if this variant of industrial policy pushes resources to the wrong places at the wrong times? To ask the question is to answer it.

In the face of all this, many scholars are looking at models of increasing returns and path-dependence. These forces cannot be denied. Rather, the question has to do with how important they are.

Globalization is one way to describe the unpredictable dynamics of the movements of labor and capital. Another is to look at U.S. county-level private sector job growth. Looking at just the 100 largest counties (by pop. in 2000), thirty-year growth rates ranged from -36% (St. Louis) to just over 400% (Orange county, FL); the median growth was 90% (Fulton county, GA). Is there momentum? Inevitably, yes. Momentum is a default last-resort investment strategy only.

Friday, February 04, 2005

Competing and behaving

Michael New's reporting on Colorado's Taxpayers' Bill of Rights (TABOR) is convincing and enlightening. The payoffs to Colorado residents in terms of economic success are already clear.

Two questions emerge: 1) How did Colorado do it? and 2) Why have the other states been so slow to follow suit? According to New, Colorado's success was serendipitous, bottom-up, and underwent a nasty birth. Then Gov. Roy Romer compared the upstarts to Nazis and terrorists. Hysteria is always revealing.

Astute tax reformers in other states now have the advantage of the Colorado example. Blue states are less likely to be early adopters.

Yet, in the new world of political blogging, voter initiatives and activism by fed-up entrepreneurial types, we may be getting nore TABORs in more states. As we do, mometum will develop. There is no escaping the fact that in the modern world of ever more mobile labor and capital, governments have to compete -- and behave.

Wednesday, February 02, 2005

Thinking about what matter most

If the last ice age subsided 15,000 years ago and if the material condition of humanity began its stunning ascent 300 years ago, then the last 2% are the stand-out years that raise all of the interesting analytical questions.

The intuition is that, very roughly, a virtuous cycle is at work: economic freedom begets prosperity and prosperous people demand economic freedoms. The evidence for this view has been accumulating. My favorite contribution is the recent Cato Journal piece by Gwartney, Holcombe and Lawson. The policy implications cannot be overstated.

We are also lucky to be alive at a time when such analyses are possible and are being well done. In the same issue of the Cato Journal as the GHW piece, there is one byMeir Kohn ("Value and Exchange") that tracks the most recent evolution of economic thinking.

Tuesday, February 01, 2005

No trade-offs here

Land use regulations crimp supply and push up housing prices. It's a no-brainer but it always helps to have hard evidence to assure that nothing is overlooked when applying Econ 101. Some of the evidence is presented in a recent paper by Glaeser, Gyourko and Saks.

I have never been able to understand how so many people can voice concerns for the plight of the poor and at the same time champion highly regulated land markets. They seem to resolve the paradox by insisting that "affordable housing" be mandated -- when not directly supplied by the state. But these approaches also have repercussions and costs.

But they also expand the role and reach of the state and, perhaps, that is what is so attractive. Expanding the role of the state, they enlist developers who are attracted to what is proferred and who reciprocate, etc.

The textbooks highlight equity-efficiency trade-offs. There are some, to be sure. Yet, these are mainly absent from the world of policy, where we simply get less of both.