Tuesday, May 31, 2005

Mass affluence

Early in the 20th century, autos in Europe and the U.S. were a plaything for the wealthy. In mid-century in the U.S., there was the "family car". Now there are more cars per household than children -- or drivers.

For 2000, the census reports that there were 133.6 million autos registered for private and commercial use and 85 million trucks also registered for private and commercial use. Many of each are, of course, dual use.

But, we do know that there were 81.2 million Americans 19 or younger in 2000. There were 104.7 households in the U.S. that year or less than 0.8 19-or-younger per household. Less than 0.6 14-or-younger per household.

But the 2001 NHTS reports 1.75 drivers per household and 1.90 personal vehicles per household. At 108.2 million households that year, this makes 205.6 million declared personal vehicles.

It's mass affluence.

The National Association of Realtors recently reported that there were 43.8 million "second homes" in the U.S. in 2003. This included 6.6 million vacation homes and 37.2 million investment units. The remaining 72.1 million were owner-occupied housing units.

Unlike the second car, the second home can be for personal as well as for investment use. For 2002, the census' analysis of vacant homes revealed that of the 14.8 million vacant units, 11.3 million were year-round vacant and many for good reason: 5.6 million were held off the market because the owners uses them occasionally, had a residence elsewhere or had some other good reason not to rent them.

Will the second home become as common as the second car? Of course. When and where? Brad Hill suggests that portfolio analyses of household wealth are where to start looking.

Monday, May 30, 2005

Memorial day

The Economist's review of Jung Chang and Jon Halliday's Mao: The Unknown Story (which I have not yet read) notes that the book paints Mao as, "a magalomaniac of unremitting evil." And, "[h]e encouraged the Vietnamese to escalate war with America in order to draw in American troops ..."

Part of the tragedy of war is how it gets started in the first place, often with the connivance of maniacs and blunderers on all sides.

Some of the outcomes and aftermath are on display in Barbara Sonneborn's Regret to Inform. Countless war movies focus on the tragic but this one, in my view, does it best.

Sunday, May 29, 2005

Old news that must be repeated

Funny thing about supply and demand: 1) it explains a lot; and 2) it is routinely omitted/avoided in spite of its power. To simple? Not very post-modern? Who knows.

There is almost a bubble in housing bubble talk. This morning's LA Times includes the latest rehash ("It's Not a Bubble Until It Bursts"). The NY Times has a long piece, "California Looks Ahead, and Doesn't Like What It Sees", which reminds readers that, "[n]ew state and federal population estimates show California gained 539,000 residents last year and is on track to reach 46 million residents by 2030. That would amount to an increase of 13 million -- roughly the population of Illinois -- in the period following the 2000 census." And in this environment, there is ever more resistance to development.

The Texas Transportation Institute divides metros by how much road building they allow. And, guess what? Those that build the fewest roads, have the most congestion. And they all experince some congestion because they will not price. Worst of all, the transit-oriented development advocates believe that their approach is a way out of the problem. (Thanks to Tico Moreno for calling my attention to a piece by Paul Jacob on all this).

The surgeon who, when asked why they operate so much, reportedly answered that when you are holding a hammer, everything looks like a nail suggested a problem. It is also a problem when you want to practice (or discuss) bridge building or tunnel construction, for example, but eschew Newtonian physics.

Friday, May 27, 2005

The aura

In Tom Wolfe's I Am Charlotte Simmons, one of the characters (the university president, I think) explains that first-tier college athletic progrms are not money makers; they are actually subsidized and universities pour money into them for the sake of "the aura".

They product differentiate as best they can. Many of them can more esaily join the ranks of athletic powerhouses than spend decades accruing a reputation for academic distinction. In the process, student athletes are exploited (yes, the term is actually appropriate here) and university presidents and others justify their NCAA cartel with bromides about the virtues of amateur sport.

Today's WSJ includes coment on the Knight Foundation report that comes to essentially the same conclusions.

"A Numbers Game"

"The world of college sports got an interim report card this week when representatives of the Knight Foundation Commission on Intercollegiate Sports and the National Collegiate Athletic Association met in Washington. There was good news and bad, so you might say that Joe College and his school are still on probation. Above all, it appears that everybody could use a crash course in the perils of taxing and spending.

"When the independent Knight Commission was established in 1989, its stated goal was to press for reforms in 'a climate in which commercialization of college sports often overshadow[s] the underlying goals of higher education.' Although scandals make headlines -- when coaches are caught conspiring to fake grades so their star athletes remain eligible to play, or when players do drugs -- the greater crime is that many kids recruited to play college sports never get an education. As Knight Commission associate director Amy Perko notes, while a tiny handful of student players may strike it rich in the pros, many 'suddenly find themselves in a world that required skills their universities did not require them to learn.'

"In one sign of progress by the commission and the NCAA, schools soon will have to meet minimum standards, involving retaining academically qualified student-athletes, or be subject to penalties. A test-run begun last February suggested that 26% of football teams would be in the zone for penalties if the new Academic Progress Rate standards were already in effect. At least now everyone has a goal to aim for.

"Yet the most surprising figures to come out of this week's meeting were not about graduating. They were about what some call an "arms race." It seems that spending on college athletics has been growing four times faster than overall university spending. According to data compiled in several studies for the NCAA, the spenders may not be getting much bang for their bucks, either.

"In 2001-2003, both revenues and expenditures of Division 1-A athletics programs rose by an average of about 17%. If you exclude the extra money universities cough up in "institutional support" for sports, only about 40% of all Division I programs report that they run athletics in the black. More ominous yet, that statistic doesn't reflect capital spending, e.g. for building stadiums. If that's factored into the equation, as few as 12 of the division's 325 member programs may be self-sufficient.

"Meanwhile, spending on scholarships and coaching salaries continues to soar. This despite studies indicating that, on balance, pumping money into athletics does not increase winning rates, or bring in more donations from alumni.

"For the time being, a train wreck is being delayed in part by institutions contributing more out of their general budgets to sustain athletics programs. Then there's the tax otherwise known as the "student athletic fee." For example, one public university in Florida raised more than $11 million this way in 2003-2004 and students at another state school now pay more than $11 per credit hour to finance athletics, whether they have any interest in sports or not.

"So far nobody has proved that funneling cash into athletics programs hurts a university's ability to fulfill its primary, academic, mission. Even so, the leadership of the NCAA and the Knight Commission clearly realize that in yet another arena of collegiate sports -- financial integrity -- priorities are getting out of whack. Wouldn't it be ironic if, in that regard, college athletics turned out to be a losing proposition?"

Thursday, May 26, 2005

Getting the (parking and riding) prices right

Getting the prices right where they aren't (usually because of some misguided policy) is always a good idea. The trouble is that there are few good examples to point to.

UCLA's Don Shoup has been pointing to mispriced parking for years -- and has gone to the trouble of calculating and demonstrating its costs. He can also identify some success stories. Shoup and co-authors Jeffrey Brown and Daniel Baldwin Hess won the American Collegiate Schools of Planning's Chester Rapkin Award for best article ("Fare-Free Public Transit at Universities") for 2004.

Writing about their work in the Summer 2005 Journal of Planning Education and Research, the authors report that:

"Our evaluation of the fare-free public transit program at UCLA found that bus ridership for commuting to campus increased by 56 percent during the first year and by a further 27 percent during the second year; more than one thousand former solo drivers who shifted to transit gave up their campus parking spaces. These results show that paying the fare for a bus ride to campus is far cheaper than building a parking space on campus -- UCLA's most recent parking structure cost $47 million, or $31,500 per space. Avoiding the expense of new parking spaces is thus a major benefit of fare-free public transit. Unlimited Access [the name of the program] programs allow universities to satisfy ther transportation demand with a smaller parking supply, and at a much lower cost.

"Fare-free piblic transit is even more effective when combined with parking reforms. Most universities now sell parking permits by the month, semester or year, and this arrangement distorts prices; drivers pay an up-front cost for the permit and a zero marginal cost for parking on each trip. This arrangement increases the demand for parking once drivers have bought their permkits. The zero marginal cost of parking invites permit holders to drive to campus alone, encourages excessive use of scarce spaces during peak hours, and leads to shortages that generate demands for more campus parking.

"In contrast, some universities charge a marginal cost for parking but no fixed cost. The University of Oregon and the University of Wisconsin use in-vehicle meters (which resemeble debit cards) to pay for parking. Drivers use these in-vehicle parking meters to pay by the minute. They pay for parking on every trip, and they pay only for the exact time they use -- no more, no less. This arrangement gives everyone an incentive to consider the alternatives to solo driving for every trip, because they can always save on parking by carfpooling, riding transit, bicycling, or walking.

"Pay-as-you park-pricing for drivers and unlimited Unlimted Access to transit riders changes the price of travel in two important ways. First, replacing parking permits with in-vehicle meters shifts the price of parking to a marginal cost with no fixed cost, and this reduces solo driving. Second, Unlimited Access shifts the price of riding the bus to a fixed cost with no marginal cost, and this increases transit ridership. Thes two price reforms will together have a much greater impact on travel behavior than will either one acting alone because in combination they will turn transportation prices upside down."

Wednesday, May 25, 2005

Transit-oriented development

The idea that 15-million U.S. households ("double the number that live in these neighborhoods today") will want to live in transit-oriented developments (TODs) by 2025 has been suggested by a group called Reconnecting America. It's one of those factoids that gets repeated and cited to the point that it will soon make its way into many serious discussions.

On the industry side, one real estate newsletter breathlessly reported that, "this presents a significant opportunity for developers, ... by partnering with local governments, TOD developers can receive assistance with land assemblage, tax increment financing, enactment or modification of zoning or other land use restrictions, funding infrastructure and rallying community support."

In other words, the transit subsidies can be leveraged with more local subsidies.

On the reality side, the American Housing Survey of 2003 reported that of the 106 million U.S. households, 11.4 million used transit "at least once a week".

More interestingly, of the 17.9 million households that had reported changing residences in the past year, only 1.4 million said that being "closer to work, school or other" was the main reason for the move; 2.0 million reported that it was one of the reasons for the move.

Twenty years of, say, 1.5 million annual mover households that move for better accessibility, makes 30 million by 2025 -- and 25 percent of these (7.5 million) make the move to be near transit?

That's a real stretch -- and a betting opportunity. Too late: the consultants have already been paid.

Tuesday, May 24, 2005


On more than one occasion, Milton Friedman has recently praised Alan Greenspan's handling of the money supply. Considering the source, this is very high praise. The price of Greenspan's guidance was a credit-induced investment boom in the late 1990s --with the post-2000 bust being the standard result. We now have a credit-induced housing boom -- and people are rightly wondering when and where the other shoe will fall.

Yet, everyone knows that housing is different. We also know that the various investment cycles are never in synch.

And a recent FDIC examination of a large number of housing booms shows that most of them end in stagnation and not in a "bust".

Besides, as this morning's WSJ "Ahead Of The Tape" reminds us, "bubbles don't end when everybody is screaming about how there is a bubble ..."

Monday, May 23, 2005

Fair taxation

Forbes (June 6) reprints Steve Forbes' testimony ("The Federal Income Tax: Start Over!") before the President's Advisory Panel on Federal Tax Reform. He does a fine job of promoting his favorite idea, the flat tax to replace the federal tax collection apparatus.

"There isn't a human being alive who knows what's contained in the federal tax code. To put it in perspective: Abraham Lincoln's Gettysburg Address, which defined the American nation, is 272 words in length. Our Declaration of Independence is some 1,300 words. The Bible, which spans several thousand years of human history, is 773,000 words. But the federal tax code, with all its attendant rules and regulations, is 9 million words and rising.

"Since 1986, when the last serious attempt at tax simplification was made, the code has been amended 14,000 times. Its length has grown by 3 million words ...

"Billions of hours of lost productivity -- the equivalent of 3.3 million full-time jobs are squandered on tax compliance. At last count, A,ericans spent a staggering 6.6 billion hours perparing their tax forms."

Two obvious questions are these: 1) How in the world does the U.S. economy muster a respectable performance in light of the federal tax monstrosity? and 2) How did we get into this fix?

Forbes refers to his flat tax proposal as "fair". But, because no one can agree on what is or is not "fair", we get a code that is infinitely complex -- so much so that the assessments or discussions of "fairness" become buried in complexity and the result is incomprehensibility and ambiguity.

We invoke the fairness standard, we cannot define it, and we do what we do as a result.

Sunday, May 22, 2005

Decisions, decisions

The economic decisions that households in various straits make are hard to fathom (or predict). That's the nature of the beast. U.S. households save very little (per BEA which compares incomes [not from all sources] with spending) or they have been adding to net worth at a fast clip -- even when the accounting excludes home appreciation, according to the NY Times' Daniel Gross ("Is It a Savings Crisis Or a Math Error?").

The discussion should prompt economists to consider the weights to be attached to the two measures,ones that would best predict consumption, work, more saving, etc. All that we now know is that these weights are not likely to be zeroes and ones.

Untill we know more, I prefer 50-50 -- and an end to the idea that it is the one or the other that matters.

Saturday, May 21, 2005

The fight over judges

In "The Hapless Toad" Atlantic Monthly (May, 2005), Benjamin Wittes writes: "Amid all the liberal hysteria about the threats posed by a conservative Supreme Court, one threat tends to be ignored -- and it happens to be the biggest one."

No, not repeal of Roe v Wade, actually the biggest red herring. Were it repealed, how many states would outlaw abortion? Very few.

Wittes worries about conservative interpretations of the commerce clause. Last week's ruling re interstate wine sales pitted states-rights advocates vs commerce-clause champions. Many of us like it when protectionist measures are voided -- but we also know that a wide-open commerce clause was used to accommodate the worst New Deal legislation. There are good reasons for last week's court split -- and for the readers of the Atlantic to worry.

Friday, May 20, 2005

Attention shoppers

It often takes the perspective of a foreigner to tell us interesting things about ourselves. De Tocqueville famously did so in 1831 and on the bicentennial of his birth, The Atlantic Monthly asked Bernard-Henri Levy to write "In the Footsteps of Tocqueville" (subscribers can download the full text; first installment in the May, 2005, issue).

Curiously, the writer is surprised by Americans' ideologies and ideologues, both of which he had expected to see less of than in France. He also sees assimilation (and aspirations to assimilation), moreso than in his homeland.

Levy also visits the Mall of America -- but neglects to mention that is has a much more powerful hold on Americans than all of our ideologues put together. More Americans shop than vote and more Americans care to be savvy about shopping than about politics.

That's not all bad.

Wednesday, May 18, 2005


Updating two recent blogs,

(i) David Sucher writes that my take on global warming and the Copenhagen Consensus was wide of the mark. The concern was more with the proposed antidotes than with the actual problem. The Economist wrote on April 29, 2004, "Policies to deal with global warming do not produce the short-term gains of many other development policies." Thank you, David.

(ii) The LA Mayor's votes are in and all of the reports of Antonio Villaraigosa's win are incomplete. The winner apparently received 261,000 votes vs the incumbent's 184,000. The LA Times reoports that of the City's 3.8 million, only 1.4 million are registered to vote. Of these, the winner received 18.6% while the incumbent came in with 13.1%. More than 68% of those registered stayed away. All of this in a City where approximately 1.9 million are eligible to vote (over 18 and citizens). The proportions, then, were more like 13.7 % for the winner, 9.7% for the looser and 75% for "whatever".

In any case, the morning after is no time to parade on anyone's reign.

Tuesday, May 17, 2005

Predictions and perspective

The Doomsday people have been wrong every time. Will they finally be right on global warming? No one can know but their batting average is a fact of life.

An interesting and temperate approach is by Indur M. Goklany, who asks: "Is Climate Change the 21st Century's Most Urgent Environmental Problem?" We know that the Copenhagen Consensus had concluded that it is not.

Goklany looks at the plausible "good", "bad" and "indifferent" consequences of climate change. Only if these are understood, can the costs of Kyoto (or similar) protocols be placed into perspective. Yes, warmer weather also has beneficial effects. Here is one I like: the decrease in forest cover would be reversed. Goklany cites "Fingerprints of Global Warming on Wild Animals and Plants" from Nature (2003) that suggests that we would get more forest cover -- and some stemming of CO2 growth.

The food fight that is now underway detracts from a hard look at the complex synergies -- and a clearer perspective.

Monday, May 16, 2005

Class and mobility

Tyler Cowan at Marginal Revolution cites some recent research by David Card on immigrant assimilation.

At the same time, the NY Times ("Class in America: The Shadowy Line That Still Divides") and the WSJ ("As Rich-Poor Gap Widens in the U.S., Class Mobility Stalls", citing work by Bash Mazumder at the Chicago Fed) are both running series on income mobility.

Trouble is that the best mobility studies rely on panel survey data which, by definition, exclude the immigrants. High immigration rates also undermine the value of income-gap stories. Until there is a way to fix these problems, all that we are left with is to try and balance the pro-assimilation good news from the immigrant studies with the mixed or negative news from the mobility studies.

It is safe to say that all those trying mightily to cross the southern border are not making some huge mistake. Or, then again, perhaps they are. Have behavioral economists looked at immigration yet?

Saturday, May 14, 2005

Social capital and secession

This coming Tuesday, two seemingly indistinguishable mayoral candidates will be on the City of Los Angeles ballot. In the March, 2005, primary, these two and a field of others managed to turn out less than 27 percent of the 1.4 million registered voters -- out of a population of 3.8 million.

Public choice economists wonder why anyone votes at all. But there are two caveats to the rational ignorance hypothesis: (i) members of interest groups may identify a rational reason to support a candidate or a cause; and (ii) a vague feeling of civic responsibility, sometimes identified as "social capital". There may also be interaction between these two phenomena; as the domain of interest groups expands and more go to the polls because of (i), the stock of social capital is likely to fall.

Unattractive and uninspiring big-city politics exist because big cities exist. They have not been allowed to downsize because the rules of secession maintain the status quo. This was shown once again when citywide voters were allowed to overrule the wishes of San Fernando Valley residents to secede in 2002.

Social capital is unlikely to flourish in this context.

Wednesday, May 11, 2005

Nanny-state economists

Social Security is a Ponzi scheme backed by the federal government's power to tax. Most people (with notable exceptions on the hysterical left) have grasped this as well as the notion that even the power to tax has limits.

Reform may (or may not) include some small and restricted scope for individuals to manage private accounts. It is interesting how much hand-wringing this sets off in some quarters. The mere suggestion of a moderate retreat from paternalism is causing major heartburn for many people.

This morning's LA Times (front page) features, "Experts Are at a Loss on Investing ... Nobel winners and other top academics fumble the sorts of decisions Bush's Social Security overhaul would ask average Americans to make ..." The longish article goes on to quote Harry Markowitz, Robert Shiller, Joseph Stiglitz, Clive Granger, William Sharpe and others to the effect that (get this) because they have trouble managing their own portfolios, how can the average Joe possibly do it?

This is all jaw-dropping. Very few academic economists have accumulated wealth and a tiny subset of these may have done it by applying what they write about. And no one should be surprised. Proving theorems does not qualify as market savvy.

Faith in the nanny-state trumps any interest in the intergity of the individual. Which theorems support that faith?

Tuesday, May 10, 2005

Policy failures

The Texas Transportation Institute (TTI) garners headlines each year when they publish their "congestion index" and accompanying data. This morning's LA Times cites some of this in "LA Traffic Moving a Bit Faster", although the TTI results are usually bleak and make good news copy.

What do we know?

1. Roads and highways are generally not priced in the U.S. and this policy failure is the real problem. Congestion, as every Econ 1 student knows, is the default rationing mechanism.

2. Suburbanization and the general spreading out of origins and destinations is the safety valve that generally prevents overall "gridlock" -- in spite of the policy failure.

3. TTI typically uses a ratio of available lane-miles vs vehicle miles traveled, usually by county. Yet, for large counties, as origins and destinations move from the core to the periphery, the improvements cannot show up in the TTI index.

4. Survey-based commuting data for the three major national surveys (the decennial census, the NHTS or the American Housing Survey) all tell a different story. They do pick up these relocations and improvements -- explaining the fact that correlations between these (aggregated to counties and metros) and the TTI results are very low.

5. Some of the usual suspects will use the problematic TTI reports because they want to keep on building the usual projects. They will not use them to promote congestion pricing because there is more cash flow in pork projects.

One policy failure begets many others.

Monday, May 09, 2005

Immigration and assimilation

Put a poor country next to a rich country and labor will move from the former to the latter. Even Japan has its share of undocumented workers from other parts of Asia.

Almost alone among the receiving countries, however, the U.S. has a history of assimilation. Robert A. Levine documents "Assimilation, Past and Present" in the current (final issue) of The Public Interest. Levine's analysis is sobering, even inspiring. He cites convergence of incomes, locations and language habits of second- and third- generation descendants of Hispanic immigrants with other Americans -- mirroring the paths of previous arrival groups. "The evidence is that there is no danger, at least from Hispanic Americans. Taking a larger view, it is clear that Hispanic immigration is part and parcel of broader American patterns of assimilation and integration. Their story, like that of the Irish, Jews and Italians before them, is an American story."

Things would be even better if politicians were somehow able to resist group-think and identity politics, go easy on welfare state policies and pander less to the crazies on either side of the immigration debate.
In any event, Levine's analysis is worthy and timely.

Sunday, May 08, 2005

The value of mothers

What fun is it to know the value of everything and the price of nothing?

A Sunday NY Times piece on "The Economic Unit Called Supermon" cites, "[o]ne financial planning company ...[that] has in fact added up the annual salaries of workers among the 17 occupations engaged in by a busy mother (pet care, housekeeping, etc.) and come up with an annual estmated $707,126 annual paycheck ..."

The U.S. Census reports that there are now 82.5 million mothers in the U.S. They also report that 55% are working moms, most of whom are probably earning a lot less that $707k. Suppose, however, that 25% of the 82.5 million are stay-at-home moms actually adding in the high six figures to annual GDP.

That would more than double GDP!

I always knew that a mom's work is crucial and that leaving it out of GDP is a distortion. Only now do we have a handle on the dimensions of that omission.

Saturday, May 07, 2005

More on "too many choices"

The Economist ("Profiting from obscurity: What the 'long tail' means for the economics of e-commerce") cites Chris Anderson's "The Long Tail" as reminding us the when and where there are very large numbers of choices, markets will rise to the occasion and develop tools to help buyers cope and sort. Amazon and Netflix regularly guide customers through their huge inventories ("customers who have bought x also like y"). Search engines, likewise, are getting ever more helpful in this endeavor.

Indeed, the discussion highlights the fact that niche markets in the the "long tail" will emerge and many will prosper as enough buyers are guided to the non-blockbuster and less popular speciality items. It is win-win.

So, on reflection, the naysayers are even more wrongheaded than one would have thought. Of course.

Friday, May 06, 2005

Big and small business

Great questions beget wonderful research. In 1937, Ronald Coase asked: "Why do firms exist?" Since then, we have considered and have learned a lot about transcations costs; in the years of the Web, we have seen them fall dramatically.

Last Nov. 9, I posted Economic Census comparisons between 1997 and 2002 which showed dramatic sales increases by small (nonemployer firms), 32 percent over the five years, vs. 21 percent for all other firms.

The 2002 data include the very early internet years and so are only indicative. We now know that the number of firms with employees grew by 7.4 percent in five years and jobs per firm grew by a modest amount, from 15.8 workers in 1997 to 16.5 workers in 2002. Many markets had grown in response to more global opportunities and new scale economies became available in selected cases.

Globalization and the internet go hand-in-hand and the nature and the composition of industry changes accordingly. New giants appear and old giants recede. Yet, it is the rise of small firms and solo free lancers that is so exciting. Not just J.K. Galbraith, but the whole chorus that equates the market with "big business" is missing the fun part.

Thursday, May 05, 2005

A great migration and a spontaneous order

In California, 40 percent of all new single-family housing is in a planned development; 60 percent of all new housing is governed by some form of community association. While most attention has been focused on a small subset of these, the gated communities, the larger significance of these developments is only slowly being recognized.

At the forefront of those helping us to understand the phenomena is Robert Nelson, whose new book, Private Neighborhoods and the Transformation of Local Government (Urban Institute Press) will be available this summer. I will be using it as a text in my summer class in USC's Master of Real Estate Development program.

Having evolved in Hayekian fashion, this new mode of living has important implications for governance, for development, and for the way that "public" goods and facilities are managed and supplied. "Market failures" and "government failures" are not the last word as long as institutions are flexible enough for institutional entrepreneurs to respond and provide superior alternatives.

Nelson carries the story much further because he suggests that the best way to help older neighborhoods (especially the poorer ones where conventional policy measures have been a bust) is to extend the benefits of a privately run neighborhood to its denizens. They would have new and stronger property rights and they will be less subject to corrupt and inept big-city governments (the real monopolists in America). It makes perfects sense once someone articulates it.

The move to private neighborhoods is one of the great migrations of our time. The prescription for the privatization of the inner city is timely. Both are beyond the pale for most planning professionals who fret over "sustainability", "regional jobs-housing balance", downtown redevelopment, and all sorts of related and irrelevant (and costly) silliness.

Wednesday, May 04, 2005

Too many choices

Virginia Postrel looks at the "too many choices" argument in "Consumer Vertigo", in the current Reason (apparently not yet online). Barry Schwartz's The Paradox of Choice is placed into proper perspective.

The Robin Williams character in Moscow on the Hudson demonstrated the consumer vertigo that many who had just emerged from the Marxist nightmare may have temporarily felt. It was a comic-poignant moment but Schwartz and his followers didn't get it. (Or they are kidding and I don't get it.)

We encountered a young couple in Leipzig recently and engaged them in conversation about how their lives had changed since 1989. The husband complained about "too many choices" in his new post-Communist life. I had the feeling that he was not kidding and (for a change) did not launch into my own patented response(s).

I think that most people agree that super-stores, the Web, Netflix, Amazon and (many, many) other modern outlets are great to have around -- and that there will always be cranks. Also, "too many choices" works as another "market failure" story for the connoisseurs of that stew. They are lost in the modern world.

The scary part is that those who were spooked by rapid change a hundred years ago made the twentieth century difficult in America and hellish abroad.

Yes, this morning's WSJ includes "Plan Paralysis: Why a Wealth of Choices In 401(k)s May Not Make Investors Rich" by Jonathan Clements. This is why we have dartboards -- which may (or may not) make investors rich. This also why we have index funds -- which may (or may not) make investors rich.

Tuesday, May 03, 2005


The Economist ("The end of the line?" 4/23/05) notes: "It is not hard to think of reasons to kill off Amtrak. In 34 years, it has burned up $29 billion in federal subsidies. And yet there are few passengers -- just 25.1 million in 2004, up slightly from 22.5 million in 2000. The vaunted Acela train arrives on schedule only three-quarters of the time and has had several glitches, including toilet doors that spontaneously fly open."

In comparison, regional/commuter air carriers served approximately 83 million passengers in 2001, with scant subsidies from taxpayers at-large. They were also more likely to be on-time and less likely to have toilet doors fly open.

Wendell Cox offers more background -- for those who can take it. For those who fret over the privatization alternative: any worse than the status quo is inconceivable.

Monday, May 02, 2005

Slippery slopes

All debt is not equal. But the Keynsian legacy is to treat it that way: the more dissaving by one sector, the tougher it is for the others. And leave it at that.

Yesterday's NY Times ("The Outer Limits of Debt") cites an "IOU Pile" that stacks up Medicare obligations, Social Security obligations, "debt held by the public", etc. ($40.6 trillion total) and compares it to a conceptual overall national "sound debt limit" (150% of GDP = $18 trillion).

Economists like debts incurred for the sake of increased future productivity -- in the not too distant future -- and markets typically ration credit this way. This includes consumers-incurred debt -- which reflects the choices that individuals like, albeit skewed by various tax code carrots and sticks.

Government-incurred debt, on the other hand, rests on the dubious merits of choices incurred via representative government. The great sleight-of-hand is the fraud that government expenditures are "investments".

Be it Enron, or whatever, questionable accounting, once accepted is one very big slippery slope.

Sunday, May 01, 2005

Elite opinion

Good odds are the best that we can hope for in this world and I like these odds:
  • Economic freedom is good for prosperity.
  • Prosperity creates a demand for political freedom as well as more economic freedom.
  • Prosperity and growth are the best antidotes to poverty.
  • There is an environmental Kuznets curve and prosperity is good for the environment.
  • Democracies are loathe to make war on each other.

In other words, property rights are amazingly cost-effective. All of this makes the current fight in the U.S. Senate about putting pro-property rights judges on U.S. courts (including the Supreme Court) so very important.

While there is growing scholarship that elaborates all of the bullet points, much of elite opinion is still hostile (and/or uninformed). This is why Jeffrey Rosen's "The Unregulated Offensive" (link may no longer work) in The New York Times Magazine of two weeks ago (and the responding letters to the editor in today's edition) so interesting.

Rosen began with: "They believe an individual's economic RIGHTS [caps are his] are inviolable. Which leads them to NOT believe in the constitutionality of the Environmental Protection Agency, the Occupational Safety and HEALTH adminsitration, Social SECURITY and the minimum wage. They have built a NETWORK of scholars, public-interest lawyers and sympathetic activist judges. The next SUPREME Court appointment could be one of theirs."

I saw this and imagined fainting spells among Times readers, from Connecticut to Malibu. Those who steeled themselves to read on would have encountered a well written (one hopes thought provoking) piece.

The response letters in today's edition are, for the most part, pretty tame. One writer links property to slavery, suggesting that he is out of intellectual ammunition.

Some very strange things on judicial confirmations may still happen in the U.S. Senate but I voted for the incumbent President twice mainly because I feared the rear-guard judicial doctrines and appointments that would be forthcoming from the Kerry-Biden-Kennedy-Boxer-Dodd group.