Tuesday, March 28, 2006

2006, not 1968

And what did you do during the (Paris) revolution?

Most people went about their lives, little affected by sturm und drang a few blocks away. No reference to that in the papers.

Nevertheless, it's a good time to be reading Benjamin Friedman's The Moral Consequences of Economic Growth. "Economic stagnation begets movement away from openness, tolerance, mobility, fairness, democracy."

Some of many reasons to opt for growth -- and to banish the equity-efficiency trade-off idea that so many textbooks still peddle.

Wednesday, March 22, 2006

A thing to behold

Charles Murray does the math and shows that we are rich enough to engage in serious redistribution but without the politicians and without an army of bureaucrats.

In today's WSJ, Murray describes "A Plan to Replace the Welfare State ... Give every American $10,000 a year -- and nothing else." And require that $3,000 per year must be spent on health care. Job lock-in would disappear. Incentives to build families would increase. It is all elaborated in his new book, In Our Hands, How to end poverty and restore the American Dream.

The plan is bold, provocative, and (as they say) dead on arrival. Yet the mountains of literature on how to tinker with what we have amounts to a failure of imagination. Bold strokes are welcome.

Productivity is surging and will only accelerate. It is the New Economy of unprecedented wealth. All that we are missing is the good sense to move ahead with sensible redistribution.

When Milton Friedman proposed school vouchers many years ago, the idea was also radical; it now has every teachers' union on the defensive. The power of good ideas is a thing to behold.

Sunday, March 19, 2006

Tricky for oldies

The March 20 New Yorker has a fascinating article, "The Raid: How Carl Icahn came up short," referring to his aborted raid on Time-Warner. It's all about big deals and big stakes.

The story also includes: "With much less success, Icahn went after Blockbuster. In December, 2004, he announced that his nearly ten-percent ownership of the video-rental chain made him its largest individual shareholder, and he championed a merger between Blockbuster and a rival, Hollywood Entertainment. Icahn also demanded that shareholders be paid a three-hundred-and-thirty-million-dollar dividend, and he waged a proxy fight to elect himself and two other dissidents to the seven-member board of directors. Icahn won the three seats, but he misjudged the business.'He operates on instinct,' an Icahn advisor said. 'He thought Blockbuster was a monopoly and was poorly run. He didn't know about Netflix ...'"

Making big bucks bets in the fast-moving digital world is tricky for oldies.

Thursday, March 16, 2006

That's why they call it dogma

In the April, 2006, Reason (no link available yet), Bob Nelson writes, "Local government has been increasingly privatized since the 1960s. I don't mean government services; I mean government itself. In 1965 less than 1 percent of all Americans lived in a private community association. By 2005, 18 percent -- about 55 million people -- lived within a homeowners association, a condominium, or a cooperative. Since 1980 about a half of all new housing units in the U.S. have been built within such associations; in California, the figure now is at least 60 percent."

Impressive numbers. But the phenomenon, as far as I can tell, is largely ignored in the academic urban planning journals. When it is cited, it is wrongly characterized as all about gated communities, which constitute a very small part of the trend.

Bob Nelson has been documenting the rise of private communities for many years. He elaborates in his 2005 book, Private Neighborhoods and the Transformation of Local Government. I have been using it in my economics for real estate developers class.

Chris Webster and Lawrence Lai, in Property Rights, Planning and Markets (2003) elaborate five emerging spontaneous orders:

"Organizational order emerges as individuals pool property rights to form firms. Institutional order emerges as society invents systems of rules and sanctions that reduce the costs of competition. Proprietary (ownership) order emerges as those institutions allocate property rights over scarce resources. Spatial order emerges as individuals and firms seek locations that minimize both travel-related transaction costs and information search costs and that balance these against congestion costs of crowded cities. Public domain order emerges as individuals engage in collective action through governments and other agencies to clarify property rights over jointly consumed goods (externalities, public goods and natural resources) and thereby to reduce the costs of competition and in the extreme, the costs of anarchy."

Several of these orders are evolving simultaneously in the private comunities trend that Nelson writes about.

And events are undermining planning dogma which remains stuck in the time warp of top-down ("sustainability") planning.

Tuesday, March 14, 2006

Central planning is hard work

Central planning is very hard work (impossible according to some) and the one-size-fits-all fallback usually makes things worse.

Today's WSJ includes "China's Winter of Discontent ... Mao-Era Policy Provides Heat Up North but None in South; Shivering Citizens are Fed Up ..."

Sad but true. Planners drew a line across the map of one of the world's largest land masses and ruled heat on one side of the line, no heat on the other.

It's an old story but the absurdities have to be pointed out. The fallback position of many smart people all over the world is still that "the government" will somehow take charge and make things right.

Monday, March 13, 2006

No new taxes

California folklore has it that once upon a time, wise government in Sacramento and sensible taxpayers planned and funded forward-looking infrastructure mega-projects. Then in about 1978, mean-spirited tightwads voted for Prop 13, cutting property taxes and the golden age ended. Gov Schwarzenegger will soon be asking for bond measures so that neglected and underfunded projects can again be implemented.

There are some problems with the tale. First, public officials have ways of wasting the funds and the cost-effectiveness of their choices is always open to question. "Chaos Reigns at Model School ... Newly opened South L.A. High has Big Mac's. a chef's kitchen and a ballet studio. It also has drugs, guns -- and gangs posturing on the quad," reported the LA Times. Not a case of underfunded infrastructure.

A highly politicized school board cannot deliver no matter how gilded the buildings. Meanwhile, far away from the Left Coast, "Indiana Gov. Mitch Daniels has embarked on an ambitious plan to lease the Hoosier state's 157-mile toll road to a private company in order to save money and improve the condition of the road. The plan calls for a 75-year lease to an Australian-Spanish consortium that will pay Indiana $3.85 billion to maintain and collect tolls on the road." The Bluegrass Institute provides the details. No new taxes.

(Blogger not accepting links today).

Japan's dual economy is made up of a world class export sector and an overregulated domestic sector. The U.S. economy includes a dynamic private sector and a sluggish public sector -- but with some exceptions.

Thursday, March 09, 2006

Cut out the middleman

Howard Husock writes about "Privatizing the Welfare State" in today's WSJ:

“No matter whose priorities prevail in this year’s budget debate, it is a certainty that the federal government will continue to devote billions to activities known as ‘social services.’ These include everything from foster care to drug abuse prevention; indeed, the Administration for Children and Families alone supports no less than 60 such programs at an annual cost of $13 billion, in addition to the cash welfare payments it handles. Billions more are spent on purposes by state and local governments, often through contracts with private ‘providers.’ Robust public debate has developed as to whether other parts of the New Deal legacy still make sense, but the central role of government in providing or paying for social services appears settled – with the only question being how best to achieve efficiency and effectiveness.

"But should this role be considered beyond debate? It is a question worth pondering today because of a historic confluence of circumstances: an impending wave of charitable giving at an unprecedented level; long-term projections of federal deficits, undermining the assumption that social programs can best be funded by government; and a new generation of so-called social entrepreneurs, looking to try creative approaches to help those in need, and do so on a large scale. These circumstances, moreover, emerge in the context of heightened, post-Katrina public dissatisfaction with the quality of government-provided public services. Together, they provide the possibility of imagining a modern society where major social service efforts are provided on a large scale outside the government, through privately funded, not-for-profit charitable organizations. ...

And right on schedule, today's LA Times reports: "Panel Run by Reiner to Be Audited ... Lawmakers react to reports of spending by First 5 California Children and Families Commission on ads for a new preschool initiative ... A state commission founded by Hollywood filmaker Rob Reiner is facing increased state scrutiny ... "

It just may be that money raised from taxpayers "for the children" is being used, instead, to further the political agenda of a well known Hollywood-left actor.

As Husock reminds us, we can be much more other-regarding when we do not involving a third-party Leviathan.

Tuesday, March 07, 2006

Help is on the way

Those of us who teach introductory economics are always sifting through all the new products that regularly become available. Some years ago, I was smitted by Paul Heyne's The Economic Way Thinking -- which is now in its 11th editon, by Heyne, Boettke and Prytchitko after Paul's untimely passing.

I have just discovered Arnold Kling's Learning Economics. How could I have missed something so wonderful? It will now appear on my various syllabi, right next to HBP.

Grad students from various disciplines who have wandered into my classrooms have been challenged by Heyne. They will undoubtdely be challenged by Kling. The challenge from both books is not via obfuscation but the opposite. They make ideas so clear and so pointed that they engage readers who might not be disposed to agreeing with them. What could be better?

In Hollywood, they think that Oscar-winner Crash describes the world. Good that we have incisive writers who have a shot at penetrating even the thickest skulls.

Sunday, March 05, 2006

Supply and demand not an option

Growth control advocates have always been stymied by the pesky fact that their policies push up housing prices and limit housing affordability -- and hurt families at the lower end of the income distribution most.

There are many other areas where the controllers' positions make no sense -- such as the notion that it is a good idea to "get people out of their cars." People like their cars and mobility and choice.

And the externalities can be managed by pricing.

Today's NY Times Magazine covers all this and more in (in "Home Economics"), citing Ed Glaeser and research by him and his colleagues that exposes the costs of a dumb agenda -- one that presumes that paying attention to supply and demand is an option.

We can only hope that the news does not cause fainting spells all the way from Boston to New York.

Friday, March 03, 2006

Wal-mart, the critics, and time machines

The Economist (Feb 25, 2006) includes a review of the latest Wal-Mart books as well as an Economc Focus column that summarizes some of the recent research. Creative destruction is not popular in polite company so economic efficiency, innovation, low prices, consumer satisfaction -- as evidenced by high profits -- come in only as occasional after thoughts.

The focus is onWal-Mart's impacts on the status quo, wages employment, etc. "There are two sides to every penny it pinches."

It's a no-brainer but what if all of the critics (enjoying their current longevity and lifestyles) were somehow able to subject all of (or just some of) the many past innovations that contributed to their present well being to the same scruitiny -- and the ensuing politics?

Ignorance of historical fact is always a problem -- and we do not have time machines. Yet.