Wednesday, August 29, 2007

Top 100 econ blogs

It's great to be included in this list. Even if in the miscellaneous group. I'll interpret that as "complex and beyond easy pidgeonholing."

It's not easy being Green (again)

It was about 20 years ago that it first dawned on me that it was very cool to drink bottled water and that tap water was uncool and/or suspect. Fads are fickle, of course, and of late it has become uncool (un-Green) to consume the bottled stuff and tap water has been making a comeback. You can now proudly tell the waiter that you just want tap water.

When I last checked, the local Whole Foods was still stacking the bottled stuff, in many assorted bottle colors at fairly high prices and from exotic places. I counted roughly 20 brands but many bottlers have gotten the drift and have added food colors, vitamins, minerals -- not to mention very unusual bottle shapes.

Last Sunday's LA Times included an op-ed that implored us to get over the "yuck factor" and embrace recycled "indirect potable reuse". Trouble is that local DWP officials have switched to the much clearer "toilet-to-tap" label. Alliteration has its uses.

It's not easy being Green and it's confusing. Wind power is good but not when the windmills are placed anywhere near Nantucket. Drinking water is acceptable from the toilet or bottled from Northern Italy, Iceland, Hawaii, France, Poland. Lugging millons of glass bottles thousands of miles leaves one hell of a carbon footprint, etc.

No one knows where this will end. Are the Perrier people thinking about the export potential right under their noses in French toilets? (I didn't start this!)

Monday, August 27, 2007

Horse manure

Eric Morris writes about "From Horse Power to Horsepower" in the Spring 2007 issue of Access. The story has been around for some time but it is much too good not to revive.

In 1898, delegates from across the globe gathered in New York
City for the world's first international urban planning conference. One topic
dominated the discussion. It was not housing, land use, economic development, or
infrastructure. The delegates were driven to desperation by horse

The horse was no newcomer on the urban scene. But by the late
1800s, the problem of horse pollution had reached unprecedented heights. The
growth in the horse population was outstripping even the rapid rise in the
number of human city dwellers. American cities were drowning in horse manure and
well as other unpleasant biproducts of the era's predominant mode of
transportation: urine, flies, congestion, carcasses, and traffic accidents.
Widespread cruelty to horses was a form of environmental degradation as well.

The situation seemed dire. In 1894, the Times of
London estimated that by 1950 every street in the city would be buried nine feet
deep in horse manure. One New York prognosticator of the 1890s concluded
that by 1930 the horse droppings would rise to Manhattan's third-story
windows. A public health and sanitation crisis of almost unimaginable
dimensions loomed.

And no possible solution could be devised. After all,
the horse had been the dominant mode of transportation for thousands of
years. Horses were absolutely essential for the functioning of the 19th
century city - for personal transportation, freight haulage and even mechanical
power. Without horses, cities would quite literally starve.

All efforts to mitigate the problem were proving woefully
inadequate. Stumped by the crisis, the urban planning conference declared
its work fruitless and broke up in three days instead of the scheduled

The rest, as they say, is history. Does the episode suggest that we should remain sketpical over the modern doomsday forecasts? To ask the question is practically to answer it.

Simple extrapolations of known ways of doing things have always been pointless.

Sunday, August 26, 2007

National debt

For those who do not stop there regularly, The Skeptical Optimist offers must-reading on the national debt and who owns it. It is not an outlandish share of GDP; it is not overhwelmingly in Chinese hands; Chinese investors are not crazy enough to dump it.

Political candidates, media hand-wringers and other know-nothings, take note.


Today's NY Times includes "Quarter-Degree Fix Fuels Climate Fight". The piece recounts the running argument between Stephen McIntyre ( and NASA's James Hansen. McIntyre cites room for doubt and disagreement while Hansen reportedly claims that, "the evidence for human-driven warming remains robust."

The article includes a chart. "This month, scientists at NASA adjusted their annual estimates of average air temperature in the lower 48 states, a change that shifted the ranking of the warmest years since 1895." It appears that 1934 is actually the warmest of the warmest and 2001 is the coolest of the warmest. Oops!

Saturday, August 25, 2007

Nothing like the real thing?

Business use of teleconferencing surged after September 11, 2001. The trend will surely continue, boosted by continuing technological improvements and refinements. The Economist of August 25, 2007, includes "Behold, telepresence ... Far away yet strangely personal ..." The link includes a photo of the very cool "telepresence" technology. At first glance, you cannot tell that all the players are not in the room.

How good a substitute is it for the real thing? The market (and time) will tell. My guess is that this is not promising for airline, hotel or car rental company stocks. Telecom will innovate faster than air travel. The latter is more beholden to politicians and regulators.
The result is something called “telepresence”, which HP and
other technology firms are just beginning to sell. It is basically a spruced-up
version of videoconferencing, but its creators insist that the technology is so
improved as to be unrecognisable. Users still communicate via live audio and
video feeds, but the speed and quality of transmission have increased, and the
screens have grown and multiplied, in order to create the illusion that the two
parties to a conversation are not continents apart but at opposite ends of the
same table (as in the picture above). The aim, telepresence's boosters say, is
to get participants in such meetings to forget, or at least stop caring, that
they are not in the same room.

Videoconferencing was supposed to put an end to corporate
travel. But positioning people in front of a camera, fiddling endlessly with
controls and then either giving up or proceeding to stare at a tiny picture of a
blurry face often seems less satisfactory than the humble telephone. Such
“conversations” are often a sequence of time-delayed interruptions and missed
social signals. Just as the technologies that were supposed to deliver “the
paperless office” actually deluged it in print-outs, videoconferencing sometimes
works so badly that it leaves users feeling alienated, and so keener to meet
face-to-face than they had been in the first place, say Andrew Davis and Ira
Weinstein at Wainhouse Research, a consultancy.

Correcting these flaws has been difficult. Designers want
people in telepresence meetings to appear life-sized, and the tables and rooms
at the two ends to blend together seamlessly. (Rooms, furniture and even
wallpaper are often identical, to aid the illusion.) People must also feel that
they are making eye contact, which involves multiple cameras and enormous
computing power. The delays in sight and sound must be negligible (ie, below 250
milliseconds, the threshold at which the human brain starts to notice), so that
people can interrupt each other naturally. Sound must be perceived to come from
the direction of the person speaking. And getting things started must be
simple—ideally involving a single button or none at all.
Several firms have
started selling such systems over the past 18 months. HP was the first big
vendor, followed by Cisco, which makes many of the innards of the internet. The
two leaders in old-fashioned videoconferencing, Polycom and Tandberg, are
switching to telepresence. Smaller firms, such as Teliris and Telanetix, are
also getting in on the act.

HP charges $350,000 for every room it kits out for
telepresence and, in America, a further $18,000 a month for service. Cisco
charges up to $299,000 per room. Dominic Dodd, of Frost & Sullivan, a
research firm, says that buyers of such systems find that despite their high
cost they quickly pay for themselves by keeping travel bills down. Cisco claims
that it has cut its own spending on travel by a fifth this year, and that the
100-odd telepresence rooms at its own offices around the world are almost
constantly in use.

In addition to saving money, Cisco argues that telepresence
saves time. The firm recently completed a takeover in eight days (as opposed to
the usual weeks or months) by putting the lawyers in telepresence rooms instead
of on aeroplanes. Lee Scott, the boss of Wal-Mart, the world's biggest retailer,
is said to see great scope for improving his supply chain.

Friday, August 24, 2007

Life as opera

In today's WSJ, Bjorn Lomborg writes about "Storm Surge ... If global warming will raise sea levels, why are we moving to the coast?" (excerpted below). The obvious give-away is that the alarmists know only one song, the apocalypse theme. The fact that all the doomsday forecasts that ever were have been wrong is of no consequence. Life as opera has its charms.
Presumably, our goal is to help humans and the planet. Cutting
carbon is a very poor way of doing that. If coastal populations kept increasing
but we managed to halt climate warming, then research shows that there would
still be a 500% increase in hurricane damage in 50 years' time. On the other
hand, if we let climate warming continue but stopped more people from moving
into harm's way, the increase in hurricane damage would be less than

So, which policy knob should we turn first: The climate knob
that does so very little, or the societal knob that would do 50 times more? It
is obviously unrealistic to believe that we could turn either knob all the way.
We cannot halt climate change entirely, just as we cannot hold back the wave of
people moving into beach houses.

If the United States and Australia were to sign up to the
Kyoto Protocol and its binding restrictions were to last all the way until 2050,
very little would be achieved: Hurricane damage would increase by half a percent
less than it would without Kyoto.

There are many more effective things we could do. Communities
at risk should have better education, evacuation plans and relief distribution.
These are "ambulance at the bottom of the cliff" measures, but there are also
plenty of proactive options, like regulating vulnerable land and avoiding
state-subsidized, low-cost insurance that encourages people to build
irresponsibly in high-risk areas.

Policy makers can improve and better enforce building codes to
ensure structures can withstand higher winds, and maintain and upgrade the
protective infrastructure of dikes and levies. More investment could be made in
improved forecasts and better warning systems. Reducing environmental
degradation and protecting wetlands would mean fewer landslides and stronger
natural barriers against hurricanes.

Conservative estimates suggest we could halve the increase in
damage through these incredibly cheap and simple social policy measures. This
was shown powerfully in a previous weather disaster, Hurricane Katrina, when one
insurance company found that 500 storm-hit locations that had implemented all
the hurricane-loss prevention methods experienced one-eighth the losses of those
that had not done so. By spending $2.5 million, these communities had avoided
$500 million in damage. Often, big benefits can come from cheap and simple
structural measures like bracing and securing roof trusses and walls using
straps, clips or adhesives.

Sunday, August 19, 2007

Mea culpa

The current Journal of Economic Literature (June 2007) includes "Automobile Externalities and Prices" By Ian W.H. Parry, Margaret Walls and Winston Harrington.

They begin by noting "Of all consumer products, few are taxed more heavily or regulated more extensively than automobiles ..." They then survey the large literature covering all possible manner of externalities (greenhouse warming, oil dependency, local pollution, congestion, accidents) and add them up for a sum of 10 cents per mile. They conclude: "It could be argued that the externality rationale for higher fuel taxes has come and gone. Electronic road pricing offers the only real hope for addressing relentlessly increasing urban gridlock, while encouraging a transition to mileage-based insurance would inprove highway safety more effectively."

Harry Richardson and I have long argued for the benefits of flexible land markets as a traffic safety valve. But as these become clogged with fees, controls, politics and approvals requirements, the weight given to the tolling option grows.

But in my previous posts on the costs and benefits of rail transit in LA I had assumed 90 cents per mile for auto externalities. I now appears that had been wildly overstating transit's economic efficiency. Mea culpa.

Thursday, August 16, 2007

Another one bites the dust

I am backward enough to believe that American exceptionalism has a lot to do with a decent (not perfect, of course) history of assimilation. Immigrants like to come here and after they do, most aspire to the American Dream.

Well-meaning colleagues often correct me and the proper PC term is "acculturation." Beats me.

By now most people have heard of Robert Putnam's study on diversity. He finds that it is not an unmixed blessing. Of course. But assimilation offers a bridge whereby people can overcome phobias and fears.

I have Chinese relatives and Jewish relatives and some who are both. Each cherish their heritage as well as their Americanization (I have no idea whether that's a bad or a good word). We do not have fetishize ethnic differences. And they should not dominate our politics.

I like the lead in by Dan Henninger in today's WSJ:
Diversity was once just another word. Now it's a fighting
word. One of the biggest problems with diversity is that it won't let you alone.
Corporations everywhere have force-marched middle managers into training
sessions led by "diversity trainers." Most people already knew that the basic
idea beneath diversity emerged about 2,000 years ago under two rubrics: Love thy
neighbor as thyself, and Do unto others as they would do unto you. Then suddenly
this got rewritten as "appreciating differentness."

George Bernard Shaw is said to have demurred from the Golden
Rule. "Do not do unto others as you would have them do unto you," Shaw advised.
"Their tastes may not be the same." No such voluntary opt-out is permissible in
our time. The parsons of the press made diversity into a secular commandment; do
a word-search of "diversity" in a broad database of newspapers and it might come
up 250 million times. In the Supreme Court term just ended, the Seattle schools
integration case led most of the justices into arcane discussions of diversity's
legal compulsions.

More recently it emerged that the University of Michigan, a
virtual Mecca of diversity, announced it would install Muslim footbaths in
bathrooms, causing a fight.

Now comes word that diversity as an ideology may be dead, or
not worth saving. Robert Putnam, the Harvard don who in the controversial
bestseller "Bowling Alone" announced the decline of communal-mindedness amid the
rise of home-alone couch potatoes, has completed a mammoth study of the effects
of ethnic diversity on communities. His researchers did 30,000 interviews in 41
U.S. communities. Short version: People in ethnically diverse settings don't
want to have much of anything to do with each other. "Social capital" erodes.
Diversity has a downside.

Wednesday, August 15, 2007

Protectionists in sheep's clothing

None of the presidential candidates are protectionists but they all favor "fair trade". They use this dodge to have it both ways.

I am greatly enjoying Ian Kershaw's Fateful Choices: Ten Decisions that Changed the World, 1940-41. The author stresses that leaders of Germany, Italy and Japan openly linked military conquest with their quest for resources.

These same countries, of course, did gain access to all of the resources they wanted after the war via trade. Has there ever been a lesson learned at a higher cost?

There were imperial dreams and hegemonic ambitions but, Kershaw points out again and again, these were always fortified by the avowed quest for resources, but without any thought to obtaining them via trade. "... the mentalities of the 1940s were light years away ... " from such ideas (p. 128).

It is not enough to remind the protectionists of the gains from trade. On more than one occasion mercantilism has had horrifically lethal outcomes.

Tuesday, August 14, 2007


Yesterday's NY Times included ("Off to Resorts, And Carrying Their Careers"). The article mentioned the growing numbers of location-neutral businesses, giving many people the option of relocating to mountain-state areas with amenities.

"The New Urban Refugees" is the accompanying graphic that showed most 1980-1990 (county-level) home value appreciation was in the SF bay area and the NewYork-Nantucket ambit. In the 1990-2000 the top home-value appreciating counties were in the mountain states.

Jobs have been becoming more footloose for many years and the trend will accelerate. This will increase the scope for individuals to choose. Localities will have to compete more than ever. This is as it should be.

Competition means that markets will have a hand in picking and choosing neighborhood styles and forms. Smart Growthers will have to get used to the fact that there will be more bottom-up and less top-down planning.

The various voices of this discussion are well represented in Planetizen's recently published Contemporary Debates in Urban Planning.

Saturday, August 11, 2007

Extra creepy

Today's LA Times reports that "Major work begins on Expo Line". Not only have I lost a parking space and a view (and gained a continuing tax bite to pay for this turkey' shortfalls) but I will also get endless spinning by local officials to make a bad idea look good.

"Standing amid mounds of dirt at the edge of USC on Friay, political leaders celebrated a milestone for L.A.'s fledgling rail system: the start of major construction for a rail line from downtown to the Westside." This time, it was all visible from my office window.

This morning's report mentions an initial 8.6-mile alignment that will experience 43,000 daily boardings by 2025. That's about 5,000 boardings per day per mile of line. But local officials think big and it appears that they really want to extend the project to 15.6 miles which they say will serve 72,000 boardings per day.

The same folks gave us three other light-rail facilities (the Blue, the Green and the Gold Lines) that together amount to 54.9 miles of route and that serve almnost 126,000 boardings per day (the last time I looked). That's 2290 per mile of alignment per day. Benefit-cost-wise (and adding generous non-rider benefit assumptions), these three account for a negative $250-million per year.

Rail transit in LA (and in most other places) is a jobs program that has nothing to do with sensible transportation planning. But it's extra creepy just outside my office window.

Friday, August 10, 2007

Small book confronts big problems

Paul Collier's The Bottom Billion has many attractive qualities. Start with the title. We live in times whan most of the world is advancing but many are still missing the boat and Collier has identified them. He refers to "Africa+", much of sub-Saharan Africa, plus various unfortunate places, including Haiti, Bolivia, the Central Asian countries, Laos, Cambodia, Yemen, Burma and North Korea.

Next he identifies his target audience, those who have anything to do with G-8 policy towards the developing countries -- and who share some of the blame for getting it wrong.

Then he brings to bear the best of social science, research equally grounded in academic rigor and on-site experience.

Finally, he distills it all (he finds four "traps" and suggests plausible antidotes) and writes about it with exceptional clarity. Collier identifies the Conflict Trap, the Natural Resources Trap, Landlocked with Bad Neighbors, and Bad Governance. His discussions of the antidotes are compelling.

This morning's WSJ includes "The Kids Are All Right. It turns out that 53% of high school seniors taking the NAEP's econ exam answered (b) to: "Which has been most important in reducing poverty over time: a) taxes, b) economic growth, c) international trade, d) government regulation?"

If they have made it that far, they should be able to grasp Collier's arguments. And then they may appreciate that there is more to be done about the problem of world poverty than attending rock concerts.

Tuesday, August 07, 2007

The best questions

I blogged about Tyler Cowen's Discover Your Inner Economist a couple of days ago and mentioned the Tom Schelling influence. I have just finished Robert H. Frank's The Economic Naturalist: In Search of Explanations of Everyday Enigmas and note that it is dedicated to Tom Schelling, as it should be.

The WSJ (Aug. 3) unkindly linked both books ("Economics for Copycats") with Freakonomics and More Sex Is Safer Sex when there are actually important differences. Reading all of them is not redundant.

Frank covers the most ground, including many (paraphrased) essays by his students from when they were assigned to apply economic thinking to various puzzles. He includes perhaps over 100 of them (I did not count), including some that are oldies (Why did kamikaze pilots wear helmets?), some obvious ones (Why do women pay more for dry cleaning?) and others that some of us may have not paid enough attention to. For example, why do brides spend a small fortune on wedding gowns, that they will never wear again, while grooms are OK with renting a tux off the rack? Read the book for the explanation.

Friend Heather Neff (not an economist but a female) added that brides also choose unflattering bridesmaids' gowns so that the bride shines all the more. Who knew?

The best questions prompt the best thinking.

Monday, August 06, 2007

Politics as usual

American public schools are not performing poorly because they are underfunded. Likewise, bridges are not collapsing because surface transportation is underfunded. Rather, both are funded via a wasteful political process.

No one knows how many earmarks there are pending in Congress at any moment. Some say as many as 32,000. It is safe to say that these projects are not the ones favored because they scored high on any benefit-cost analysis.

But whenever there is a calamity such as the collapse of the I-35W in Minnesota, there will be the drumbeat to spend more -- but without any discussion of how to spend better or where to trim.

Randal O'Toole reports that it is even worse because bureaucracies move very slowly. Even when funds are allocated to worthy projects, there is usually a very slow and cumbersome process. Twenty years can pass between approval and actuality.

Just like the income tax, arcana and unnecessary complexity are supposed to give the impression that there are safeguards against graft and inefficiency.

Sunday, August 05, 2007

Free lunch

Just when I had come around to the PC view that unexamined wage gaps are proof of gender discrimination, the NY Times reports on a wage gap that favors women. I read the article twice but could find no references to sexism. I guess that many employers are missing the boat: they can save money by hiring cheap male labor. A free lunch, at last.

Saturday, August 04, 2007

The power of economic thinking

Tyler Cowen has established a reputation for, among other things, many worthy blogs at Marginal Revolution. He has now assembled and embellished many of them in his Discover Your Inner Economist: Use Incentives to Fall in Love, Survive Your Next Meeting, and Motivate Your Dentist.

Most non-economists think that economics is all about a narrow dollars-and-cents accounting and, thereby, miss the important point that economics is about a much broader and more comprehensive treatment of incentives.

And people are complex enough to strive for status when it will give them things that they would be shamed to purchase for cash -- such as social and sexual partners. See how values and markets interact and intersect.

But this is just the tip of the iceberg. Our world is challenging and interesting and the appreciation (and application of) the broad array of motives and incentives is very useful, as Tyler shows.

The book is great fun to read and appreciate. My favorite passages were about food. Tyler elaborates the idea that the best food exists were income inequality is the greatest because good restaurants require lots of cheap labor and many wealthy guests. You are not likely to eat well in Scandinavia but you will eat well in the ethnic neighborhoods of U.S. cities.

Tom Schelling pioneered this brand of economic thinking many years ago -- and received a Nobel prize for his approach and his insights. It works when practiced by smart people and, as the Cowen book, shows, it can also be explicated and taught.