Tuesday, February 28, 2006

Before his time

George Dantzig had already established his reputation as one of the most important applied mathematicians of our time (think linear programming) so he can be excused for writing a dumb book. Compact City: A plan for a liveable urban environment (1973) is one of those instances where smart person overreaches and embarrasses himself.

Just a little urban economics would have been sufficient to reveal to the great man that there are agglomeration-congestion trade-offs -- and they are peculiar to each setting. In downtown NYC, the trade-off is met via one urban form and in Silicon Valley it is met via another. One size does not fit all.

USC's Bumsoo Lee reports that in 2000, drive-alone commuters to Manhattan's CBD averaged 56 minutes each way; at the other extreme (among the largest U.S. metros) were those driving to dispersed places of employment in Phoenix (25 minutes each way).

Which is better? What are we optimizing? The point is that (fleeting) equilibria work out differently in light of history and available infrastrucutre.

Why bring all this up? Because compact settlement is still the implicit or explicit prescription in hundreds of today's New Urban plans and projects.

In that sense, Dantzig was not simply wrong but wrong and ahead of his time.

Sunday, February 26, 2006

Too many ironies

I recall encountering some former east Germans while in Leipzig, three years ago, entering into an interesting conversation with them, asking the inevitable question about their impressions of life before and after 1989, and being bemused when they brought up that they now have "too many choices."

Then there is Barry Schwartz and co-authors, who ask (and answer) "Is Freedom Just Another Word for Many Things to Buy? ... That depends on your class status." in today's NY Times Magazine.

Yikes! I have no idea what the right number of choices is. And I have no idea who would decide. The authors do not even address these pesky questions.

What the authors do think about is class and status. But the most magnificent achievement of modern America is that class and status matter less than ever and less than anywhere. People expect to move between strata and many do.

Our borders and entry points continue to be magnets. And I have never seen any studies of large-scale migrations that conclude that, all things considered, the migrants made a dumb mistake.

It is not about too many choices. It appears to be about too many ironies when smart people can be so dim.

Tuesday, February 21, 2006

Rewarding read

My "to do" and "to read" lists keep getting longer so there is not a "to re-read" list. Yet, I have had occasion to have another look at Chris Webster and Lawrence Wai-Chung Lai's Property Rights, Planning and Markets and find it thoroughly rewarding.

They expand on five orders that they see. "Organisational 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 insitutions allocate property rights over scarce resources. Spatial order emerges as individuals and firms seek locations that minimise both travel-related transaction costs and information search costs and that balance these against congestion costs in 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 ... and thereby reduce the costs of competition, and in the extreme, the costs of anarchy." p. 11. Much of the rest of the book fills in the details.

What a fine way to introduce readers and students to Smith-Mises-Hayek-Coase-Williamson-North and many others.

Sunday, February 19, 2006

Back to the future

Two weeks ago, Ray Bradbury wrote in the LA Times that monorail was the way to go for LA. Very silly.

Today, Tom Kirkendall shares the latest news from Las Vegas, re its monorail and, you guessed it. But this is less silly because there is real waste involved.

Today also, the LA Times reports our mayor's views: "Tall, Green, Vital: L.A. as Mayor Dreams It ... Villaraigosa sees a city of parks, high-rise housing, a subway to the sea ..." This view suggests that we try to buck some very powerful trends. But spend enough money and you can put a man on the Moon.

Twenty-five years ago, all of elite opinion saw downtown L.A. as the future financial capital of the Pacific rim. To that end, tons of other people's money were spent on downtown-serving rail and office high-rise. Those investments were wasted. Visionaries spending other people's money are always a problem.

In the past 35 years, LA county's population grew at an annual rate of 1.02%, lagging the U.S. as a whole which posted 1.09%. The outlying counties, where the densities are lower, grew at over 2.8% per year. For private sector job growth over the same period, the numbers were 1.43 % for the county, 4.28% for the outlying counties and 2.02% for the U.S. And L.A. city's growth usually lags the county's.

The county and its four outlying counties divide the whole metro at about 60/40 in terms of the area's population and jobs; it is not the case of comparing growth rates in very unequally sized units.

So, it's back to the future. The elites and the know-nothings will embrace visions that entail the transfer of resources from the public at-large to those who will gain from the construction of projects that have little economic rationale.

We should not forget that the movers are usually the same people who don't miss a chance to posture on behalf of "equity".

Friday, February 17, 2006

Don't do as I do ...

I suspect that the voyeuristic fantasies of professors include wondering what goes on in the classrooms of their colleagues. Just sitting in is perfectly legal but done by very few. We would probably find uplifiting as well as depressing experiences.

At Harvard, the most popular course is now Psych 1504 and, from this review, it sounds like therapy masquerading as academics. But does it matter?

We hear the steady lament about too few domestic students bothering with engineering and science. But international students are more than happy to take the places that American students cannot be bothered with. And many of them stay and work here, enriching us all.

My only worry is that the rest of the world has a way of wanting to copy what we do. What then happens to our supply of budding scientific talent when courses like Psych 1504 become the fad in Asia?

Tuesday, February 14, 2006

Divided about being divided

James Q. Wilson asks "How Divided Are We?" in the Feb. Commentary and worries that "Polarization is a force that can defeat us."

Arthur C. Brooks writes about "Extreme Makeover" in this morning's WSJ. "... [T]here is abundant evidence that extreme political opinions lead to personal demonization of fellow citizens. ... For our political leaders, a bit of anger management would be in the public interest."

And I had bought into much of the popular red state-blue state thing. It turns out that we can all learn about real people in the real world from Hallmark. Here is part of the AP report, from today's LA Times.

"This Card Says It All, Everywhere

From Associated PressFebruary 14, 2006

"KANSAS CITY, Mo. — Turns out love may actually be a universal language.

"The world's largest greeting card maker, Hallmark Cards Inc., has for the first time analyzed individual cities' data for top-selling Valentines, and it yielded a surprising result. They were all the same — a result of the exhaustive research Hallmark carries out before any card goes on the shelf. It's a process of analyzing sales numbers and trend hunting in search of the perfect valentine.

"Researchers at the Kansas City-based company expected the choices of customers to be as different as the cities they call home. But it turned out V330-5, one of the thousands of options Hallmark offered last Valentine's Day, was the top choice of card buyers in New York and Los Angeles, Minneapolis and Miami, and virtually every other city in the country.

"'We thought it would be a different card in every city,'" spokeswoman Rachel Bolton said.

"Jessica Ong, product manager for the company's Valentine's card line, said, 'It speaks to the fact that people are more alike than they are different.'"

And, right on time, in the same edition of the LA Times, its editorial writers declaim "Massacre Valentine's Day".

Monday, February 13, 2006

Gatekeepers keep loosing

Update Apple's brilliant 1984 Super Bowl ad. Today's WSJ reports that more individuals are swinging more sledge hammers at more gatekeepers than ever. As expected, the gatekeepers don't get it and keep trying to hang on. That's the bad news. The good news is that time is not on their side.

"Great Firewall...Chinese Censors Of Internet Face 'Hacktivists' in U.S.
... Programs Like Freegate, Built By Expatriate Bill Xia, Keep the Web World-Wide ... Teenager Gets His Wikipedia"

By GEOFFREY A. FOWLER February 13, 2006; Page A1

"Surfing the Web last fall, a Chinese high-school student who calls himself Zivn noticed something missing. It was Wikipedia, an online encyclopedia that accepts contributions or edits from users, and that he himself had contributed to.

"The Chinese government, in October, had added Wikipedia to a list of Web sites and phrases it blocks from Internet users. For Zivn, trying to surf this and many other Web sites, including the BBC's Chinese-language news service, brought just an error message. But the 17-year-old had loved the way those sites helped him put China's official pronouncements in perspective. 'There were so many lies among the facts, and I could not find where the truth is,' he writes in an instant-message interview.

"Then some friends told him where to find Freegate, a software program that thwarts the Chinese government's vast system to limit what its citizens see. Freegate -- by connecting computers inside of China to servers in the U.S. -- enables Zivn and others to keep reading and writing to Wikipedia and countless other Web sites.

"Behind Freegate is a North Carolina-based Chinese hacker named Bill Xia. He calls it his red pill, a reference to the drug in the 'Matrix' movies that vaulted unconscious captives of a totalitarian regime into the real world. Mr. Xia likes to refer to the villainous Agent Smith from the Matrix films, noting that the digital bad guy in sunglasses 'guards the Matrix like China's Public Security Bureau guards the Internet.'

"Roughly a dozen Chinese government agencies employ thousands of Web censors, Internet cafe police and computers that constantly screen traffic for forbidden content and sources -- a barrier often called the Great Firewall of China. Type, say, 'media censorship by China' into emails, chats or Web logs, and the messages never arrive.

"Even with this extensive censorship, Chinese are getting vast amounts of information electronically that they never would have found a decade ago. The growth of the Internet in China -- to an estimated 111 million users -- was one reason the authorities, after a week's silence, ultimately had to acknowledge a disastrous toxic spill in a river late last year. But the government recently has redoubled its efforts to narrow the Net's reach on sensitive matters. ..."

Sunday, February 12, 2006

Around the blogosphere

Randy Crane of UCLA has launched his urban planning research blog. Randy may be more optimistic about urban planning than I am but he is always smart and thorough. Good luck, Randy.

Econbrowser includes an interesting discussion of oil prices, consumer spending and the housing boom. Revenues from home refinancing enabled consumers to keep spending in spite of higher oil prices. A nice coincidence of home and oil price movements.

Becker-Posner go through the standard discussion of traffic congestion externalities and the argument for time-of-day pricing. Yet, they only consider commuting when the problem has most to do with the growth in nonwork traffic (more income, more cars, more nonwork errands on the highways). In fact time-of-day pricing is likely to be more potent because so many non-work trips occur during the peak hours.

Cafe Hayek includes an antidote to widespread fretting over trade deficits. Capital imports can be wealth creating -- and after 30 years of trade deficits offset by capital imports that seems to be what has happened.

Friday, February 10, 2006

The closer you get, the worse it looks

"The antidote for bad cost-benefit analysis is good cost-benefit analysis." This is from the usual introductory lecture on CBA to public policy students. The remark obscures the analytical problems that go with CBA (what are "existence" values?, which discount rates?, etc.) and the bigger problem of inevitable politicization.

Bent Flyvbjerg recently visited USC and reported on some of his work on the topic. Ex poste, he finds the "megaproject disaster gene": vastly underpredicted costs and vastly overestimated benefits. Bent notes that this is an international problem and cites recently published work on the Chunnel (by R. Anguera, Transportation Research A40, 2006) that its NPV and IRR are both in the bizarre-negative area ($-17.8 billion; -14.5%, respectively).

On a very different note, Frank Ackerman, Lisa Heinzerling and Rachel Massey ("Applying Cost-Benefit to Past Decisions: Was Environmental Protection Ever a Good Idea?" http://ssrn.com/abstract=576161) cite three recent episodes where the "right" policy choices were made in spite of (not because of) CBA.

I imagine that one can easily find many more where CBA (done right) would have had the opposite effect. But Flyvbjerg's work shows that CBA (done any which way) by itself is never a barrier; ex ante, it can be all smoke and mirrors and awful mega-projects go forward.

I read this morning that "... in 1987, President Reagan vetoed a spending bill because it contained 121 earmarks. The number of earmarks has skyrocketed over the past decade, from 4,126 in 1994 to 15,268 in 2005 ..." (WSJ op-ed by Sen. Tom Coburn, p. A18).

Who or what will stop them?

Tuesday, February 07, 2006

Romantics vs. fanatics

We all know that Tookie Williams was nominated for the Nobel Peace Prize but that it went to the IAEA. In today's WSJ, former Swedish deputy PM Per Ahlmark makes the case for a recount. No, not to give it to Tookie (he's no longer with us) but, instead, to Kenneth Timmerman and John Bolton -- who had been right all along about the mullah's nuclear ambitions.

We do not know if the romantics of the world will be the death of us all but who wants to find out?

Speaking of Nobelists, economics laureate Tom Schelling has been citing the post-WW II history of the nuclear taboo and has been arguing that if and when Iran gets the bomb, they can be held to honor it with the right kind of diplomacy. To me, this is a very thin reed. These are primitives and fanatics with Armageddon fantasies.

Let the Nobel Go Nuclear
WSJ, By PER AHLMARKFebruary 7, 2006; Page A26

"Let us focus on the good guys. The fools of the Iranian nuclear tragedy we already know. The International Atomic Energy Agency was duped for 18 years. Since its start in 1985, Iran's atomic program has been an ambitious, highly deceptive project. However, the IAEA gave the regime a clean bill of nuclear health, over and over again. The first 12 of those years, gullible Hans Blix, IAEA director general, believed in almost everything Tehran told him. He arrogantly dismissed warnings. The likely Blix legacy: atomic bombs in the hands of the mullahs. His successor, Mohamed ElBaradei, inherited the illusions in 1997 and proceeded on a similar path. But disclosures by experts in the West -- confirmed by militant groups within Iran -- made the IAEA denial absurd. Mr. ElBaradei revealed the truth on Nov. 10, 2003, in a stunning report to the IAEA board of governors: Iran had been lying to the IAEA for almost two decades.

"Who, in all this, are the good guys? Did the Norwegian Nobel Committee realize the gathering storm in Iran when it last year decided to give its peace prize to the IAEA? Maybe they chose to award a U.N. agency, which had been a fiasco for so long, hoping the prize would speed up its recovery. If so, a beautiful idea. My feeling is different. It's time to express admiration of personalities who have not been cheated by the Iranians. That's why I have nominated two Americans for the Nobel peace prize for 2006. One is an independent researcher who never gave up his quest to uncover the truth, the other a government official. Separately, but on parallel tracks, they have been alerting us that a tremendous threat to peace is in the offing.

"Kenneth Timmerman has for 20 years exposed Iran's nuclear intentions. In books, reports, speeches, articles and private meetings he has told us of specific detail as well as the big picture -- a full-fledged, official plan to game the system of international safeguards. His latest book, 'Countdown to Crisis: The Coming Nuclear Showdown with Iran,' lays this out in chilling detail; and it was his report for the Wiesenthal Center in 1992 that first detailed Iran's ties to Pakistani nuclear scientist A.Q. Khan.

"John Bolton, former undersecretary of state, has with unusual energy tried to find ways to counter this threat. Friends and foes agree -- he never gives up. He has repeatedly underlined the threat of Iran pursuing two paths to nuclear weapons: One is the use of highly enriched uranium, achieved by thousands of centrifuges, which Iran has developed and tested. A large buried facility at Natanz is intended to house up to 50,000 centrifuges. Iran resumed activities there just four weeks ago (in direct defiance of the IAEA). The second is through plutonium. Mr. Bolton knows that a heavy-water production plant and the Bushehr light-water reactor can be exploited as cover for sensitive nuclear fuel cycle activities. He says another 'unmistakable indicator' of nuclear intentions is Iran's habit of 'repeatedly lying to and providing false reports to the IAEA.'

"The danger is even more serious as Iran is a leading sponsor of terrorism. Mr. Bolton, now U.S. ambassador to the U.N., is also a father of the Proliferation Security Initiative, an international effort to interdict shipments of WMD components, materials and the ballistic missiles needed to deliver them. Thanks to this PSI, the U.S. and others managed to seize centrifuge components en route to Libya in 2003. This led to the breakup of the network of A.Q. Khan, mastermind of the proliferation business in recent years.

"European leaders have become a bit more active than before when supporting united efforts to prevent Iran from going nuclear. But there is still a sense of wishful thinking around them. Don't they understand that Iran's messianic President Ahmadinejad is serious when he says "wipe Israel off the map"? Appeasing fanatics does not work. We have learned that already in the last century. The work of John Bolton and Kenneth Timmerman provide stark reminders of that most important lesson of history."

Sunday, February 05, 2006

Transit fact and fiction in L.A.

The L.A. newspapers (yes, there is more than one) this Sunday have three op-eds re transit in this area. The Daily News includes "Rail wrong way: LA's system costs more than it saves" (not yet up on their site) by my colleagues Jim Moore, Tom Rubin and myself. The piece reiterates the point that the $7.6 billion of rail added to LA county's transit system over the last 15 years serves between one-quarter and one-half percent of all daily county trips but stacks up net losses of $575 million per year -- which can be pared to a $560 million a year deficit if favorable assumptions about nonrider benefits are invoked.

Why go over this again? On the same day that our piece appeared, the LA Times has two op-eds re LA transit. Ray Bradbury writes in "L.A.'s future is up in the air" that "Sometime over the next five years, traffic all across L.A. will freeze," and "The answer to all this is monorail." The link to this one works, so am not making any of this up.

Nearby, Times editorial writer Dan Turner writes about local transit service, "An Antarctic expedition is tough, but try going to LAX by train or bus." From his home to LAX by transit takes him two hours and 47 minutes -- and he reports that he was not carrying any luggage.

I can offer three bets. First, all LA traffic will not freeze in five years. Second, more wasteful rail transit will be built, surely worsening the bottom line that we estimated. And the second outcome will have nothing to do with the first.

Please, Ray Bradbury or anyone, I can use the money.

Saturday, February 04, 2006

Man bites dog and economist discovers free lunch

In his January 27 op-ed, Paul Krugman delivers his "Health Care Confidential".

"... I know about a health care system that has been highly successful in containing costs, yet provides excellent care. And the story of this system's success provides a corrective to anti-government ideology. For the government doesn't just pay the bills in this system -- it runs the hospitals and clinics."

He likes our VA as a model for health care provision. And here is one of the secrets: "... the veteran's health system bargains hard with medical suppliers, and pays far less for drugs than most private insurers."

This is very cool. I imagine that nearly everything could be obtained cheaply if only the federal government were put in charge to "bargain hard."

Silly me. I fear that the government is an expensive middleman. I fear that it is a highly politicized middleman. And I fear that with enough hard bargaining, suppliers will leave the industry -- as many have ever since Medicare and Medicaid began to "bargain hard."

Think of the many readers of the NY Times op-ed page, many predisposed to this silliness, who get their public policy economics from Krugman.

Thanks to Teri Burgess for the pointer.