Sunday, August 31, 2008

Leavening talk with facts

There are competing claims as to whether Mark Twain or Will Rodgers had fun with all the things that many people "know" that are not true. That's life. But in the an internet world, there is hope.

I often try to link to the data that Wendell Cox gathers and posts. His new post is dear to my heart, because I hear all the time about the "fact" that most western Europeans cheerfully use public transit, making them better human beings and also showing that public transit is not 100 years out of date. All those who "know" this to be true might pause to look at these data.

Friday, August 29, 2008

So near yet so near

I am not sure how much NAFTA-bashing occurred in Denver this week. But trade-bashing has been a staple for all the Democrats through the campaign. This morning's LA Times includes "Opening the spigot for liquid natural gas imports ... With the help of Mexico President Felipe Calderon, San Diego-based Sempra Energy on Tuesday inaugurated its $1-billion Energia Costa Azul gas import terminal to serve fast-growing energy demands in the southwestern U.S. and Baja California." Yesterday's LA Times included "It's full speed ahead for Mexican seaport ... Calderon will open bidding for infrastructure deals today. The project may transform [Baja California] village of Punta Colonet. ..."

Politicians on both sides of the border may do some dumb things, but trade opportunities are powerful and, perhaps, strong enough to prevail.

The Times piece is wrong about "may" transform Punta Colonet. And the story includes a large photo of a guitar-strumming San Diego tourist who may lose her perch on a Mexican cliff with an ocean view.

Trade-offs everywhere, Dorothy. But markets do a better job of weighing these than campaigning politicians or newspaper writers.

"Poor Mexico. So far from God, so close to the U.S.," so goes the saying. So close to astonishing economic opportunities and so close to the disastrous U.S. War on Drugs, which may ruin Mexico before the benefits of trade can save it.

Wednesday, August 27, 2008


What can you say about people who get teary-eyed at a political convention? The TV camera people found a few of these at the Democrats' convention and they will probably find some at the Republicans' convention next week.

Hayek had some things to say about dangerous confusions when we mix up the "micro-cosmos" (he referred to families, tribes, extended families, etc.) and the "macro-cosmos" (he referred to wider civilization). The rules and norms that work in one do not work in the other. The market works for us by harnessing and organizing the incentives of very large numbers of strangers. But this is not how allocations within families work. Likewise, it is futile and dangerous to think of the larger society as a family. At worst, we look for (and find) a pater familius. The history of these quests is ugly.

This week's Becker-Posner blog includes speculations on why most of the members of the entertainment industry are on the political left. One of Posner's points is that people with little depth are drawn to extremes and left-extreme views are more palatable than right-extreme views.

Perhaps. But this brings me back to the teary-eyed. It seems that they are confused in ways that Hayek recognized. This is why the political platforms ring with promises to help all of those who are (or feel they are) down and out. Creepy.

Monday, August 25, 2008

Reorganize the Federal Government

Here is the lead story in today's LA Times: "FBI saw threat of loan crisis ... A top official warned of widening mortage fraud in 2004, but the agency focused its resources elsewhere."

I recall that when Leslie Stahl interviewed Alan Greenspan on "60 Minutes", after he left office and was pushing his book, she asked him about the credit crunch and his answer was: "We didn't see it coming."

Many economists and others did write about the "housing bubble", but few if any linked the inevitable decline of housing prices to fallout into the wider credit markets. The WSJ had long been editorializing about Freddie/Fannie problems but most economists (and of course politicians) applauded the agency's efforts to expand howeownership.

Now we find that the FBI, which had hundreds of agents spend who-knows-how-many man-years on the anthrax investigation, only to have to pay millions of dollars in settlement because they had been hounding the wrong guy, and which drove another suspect to suicide (and we still do not know how strong that case is), was the one group that got the housing-credit mess right.

Reshuffle responsibilities? Give the FBI a stronger role in macro-economic analysis? Keep them from focusing too many resources on crime and terrorism? It's a thought.

Saturday, August 23, 2008


On July 2, the WSJ's Holman W. Jenkins, Jr., wrote "What is GM Thinking?" I have to admit that it took Jenkins' column to get me to see the light. GM's investment in its 2010 Chevy Volt is a political and not a market move.

Now we see that during NBC's Olympics coverage, GM runs a strange ad for its 2010 Chevy Volt. I cannot buy it for a while (and Holman suggests I would not want to anyway), so why are they not using valuable air time to push their 2009 models?

This morning's NY Times includes "Automakers to Seek More Money for Retooling Vehicle Plants". Aha! It's the politics, stupid. With politicians of both parties honing their "investing in energy alternatives" message, the ailing Detroit automakers can smell the pork.

Combine two sentiments du jour ("too big to fail", "end our addiction to oil") and, presto, a new boondoggle. I finally get it.

Friday, August 22, 2008

What could be better?

The Apple 1984 TV commercial is many people's all-time favorite. This week's Forbes includes "DIY Democracy". That's part of it's series on grass-roots innovation. Here is the former.

"The humblest citizen in all the land, when clad in the armor of a righteous cause, is stronger than all the hosts of error."

William Jennings Bryan thundered those words at the 1896 Democratic convention. Wouldn't he be thrilled with the digital revolution? It's snatching power from the establishment and handing it to the little guy.

Citizens with handheld cameras fight police brutality. Bloggers can unhorse a pompous news anchor. In the industrial counterpart to desktop publishing, amateurs are taking on Sony and even NASA.

Someday--maybe--John Q. Public may wrest power away from the political machine in the task of drawing legislative districts. You can see what the insiders come up with when left to their own devices. The public be damned; the objective is to create safe districts that guarantee lifetime jobs to incumbents. Gerrymandering has made congressional elections into a farce in which only one district in seven is competitive. Democracy? A politician from Zimbabwe would be embarrassed to call it that.

Until recently only political parties had the manpower and the tools to redraw boundaries while keeping districts equal in population. Now anybody can play this game, at least as a kibitzer. For as little as $3,500 the geographic analysis firm Caliper Corp. will let you have the software and census data you need to try out novel geometries on a PC screen. Harvard researcher Micah Altman and others have put together a program that draws compact districts. His software is free.

Democratic redistricting could work like this. After a census, a commission in each state entertains proposals from the political parties and any do-gooder group or individual willing to compete. The commission picks the most compact solution, according to some simple criterion. (Say, add up the miles of boundary lines, giving any segments that track municipal borders a 50% discount, and go for the shortest total.) The mathematical challenge might inspire some gifted amateurs to weigh in.

In most states redistricting is now in the hands of state legislators. It's a stretch, but not an absurdity, to think they might be shamed or forced into ceding the power. Iowa has a nonpartisan system to draw districts, and California will get one (albeit only for state legislative districts) if a ballot initiative passes this fall. In nonreferendum states the hacks might be willing to swear off gerrymandering as of a distant future date, like 2030.

Free people create very cool technology. And they use it to challenge an evil system; they unseat the enemies of democracy, aka the hacks and thieves. What could be better?

Thursday, August 21, 2008

They're in session!

There are many old jokes about the dangers that lurk when the legislature is in session. This morning's LA Times includes "Legislature takes aim at urban sprawl ... A Senate bill calling for financial incentives to control greenhouse gases would be the first such law in the nation" and "A smart plan for smart growth".

Wendell Cox also blogs about all this.

I have blogged about this stuff often and (but) it won't go away. There are two questions to ask people of the green faith. 1) Can you define "urban sprawl"? 2) Have you seen any credible evidence that spread out development causes long commutes?

This morning's WSJ includes "Going the Distance to 'Save Gas' ... Extreme Runners Commute by Sneaker, Pushed by Pump Prices -- and a Bit of Fanaticism"

The extreme commute stories always make the news, so this qualifies. The accompanying map shows a commute from south San Francisco to a distant job in the Palo Alto area. That's a "reverse" commute for those who are stuck thinking about cities as they were 100 years ago.

Wednesday, August 20, 2008

Unintended and unplanned consequences

University of Paris Professors Pierre Kopp and Remy Prudhomme made few friends in France when they showed that reallcoating road space from cars to public transit in central Paris did more harm that good. (Ch 13 in this volume but available in French from various sources). Too few Parisians behaved in ways that planners dreamed of and would not switch from autos to buses and trams, even though many more of these were put in service. And we all know what Parisians pay for gasoline.

This morning's WSJ includes "San Francisco Ponders: Could Bike Lanes Cause Pollution?" Well, yes. San Franciscans, like Parisians, do not behave the way planners want them to. Even with new bike lanes, many stick to their cars, but make do with less road space and ebdure slower traffic. So they foul the air all the more.

In Paris as well as San Francisco, central plannning is very hard work, especialy the "green" sort. "Fatal Conceit" or "Law of Unintended Consequences"?

Monday, August 18, 2008

Worse than doom

There are always reasonable people who differ over whether the glass is half-full or half-empty. Yesterday's NY Times Magazine ran a respectful feature on Nouriel Roubini ("Dr. Doom").

Doomsayers are a-dime-a-dozen, but what to do when smart people get into it? The article is slightly more nuanced than its title and the interview may have been even more nuanced. But the ending is odd. Roubini is quoted this way: "Once you run current-account deficits, you depend on the kindness of strangers. This might be the beginning of the end of the American empire."

But these strangers are unlikely to see themselves as charities. And Roubini thinks they are all dummies because they are buying the paper of a fading empire. Dummies on both sides of the deal might augur worse than just plain old doom.

Saturday, August 16, 2008

Silly us

Some of us placed an op-ed in yesterday's LA Daily News questioning the wisdom and the merits of raising the sales tax by one-half cent (possibly to be voted on in LA County in November)to pay for new transit and transportation infrastructure, mainly more rail transit. It was the old story, looking at ridership and costs and benefits.

Silly us. That's the exact phrase ("Silly you.") that LA Times columnist Tim Rutten uses in his column of August 13, ("Transit held hostage"). He does not address us (ours ran a couple of days later) directly, but he notes (and worries) that the measure may not reach the ballot because of a dispute between two local county supervisor about whose district would get the most pork.

Of course. These are jobs programs that happen to appeal to "greens" and those who expect everyone else to use transit. Silly us. But for the time being, we'll gladly take the political gridlock.

Friday, August 15, 2008

How crazy is that?

Are they statists because they are pessimists, or are they pessimists because they are statists? Don Boudreaux argues that it is the latter. That's creepy.

But it does resolve a paradox because we are, for the most part, talking about fairly smart and cosmopolitan people -- including people who embrace climate doomsday predictions predicated on hundred-year climate change projections that presume today's energy technology options are the ones that will persist for all those years.

Wednesday, August 13, 2008

Housing's Holy Grail?

Here is HUD's new version of a housing affordability index. But it's actually a housing+transportation affordability index. Urban economics is all about the trade-offs between rents paid for housing and accessibility savings. The authors note that,

While housing costs are well-understood, transportation costs are often dramatically underestimated or ignored, creating an urban information gap.

To investigate this, KnowledgePlex and the Urban Markets Initiative of the Brookings Institution present an online discussion about a new way to measure true affordability of housing: the Housing and Transportation Affordability Index. Incorporating housing costs with the costs associated with that location, this analytic tool enables developers, transportation planners, and individuals to uncover the hidden price of transportation that dramatically shapes household budgets.

Last Friday, the NY Times cited models of home prices that assess over- or under-valuation of homes for major metro areas. Can the HUD-Brookings index be used to do same at a more local level? The safe answer is: probably not. It goes back to the idea that forecasting is tough and we are still looking for economics-based forecasting that helps.

Good forecasting of actual home values is the Holy Grail for many Americans. Perhaps the HUD-Brookings approach is a place to start.

Tuesday, August 12, 2008

No reports of widespread fainting spells

The legislative and policy-making process has been likened to a sausage factory, so no one knows how this will come out. But in light of the discussion of applying economic principles to public policy problems (exotic and even sinister for some, but not for others), here is today's WSJ editorializing on peak-load pricing at airports. No reports of widespread fainting spells yet.

Fixing the Unfriendly Skies

Here's your political puzzle for the day: Whose side would you be on in a tussle that features the Federal Aviation Administration and New York City Mayor Mike Bloomberg squaring off against Texas GOP Senator Kay Bailey Hutchison, Democratic Senator Chuck Schumer and the Port Authority of New York and New Jersey?

That's a tough one for people who like to think the mere presence of one of these players means little good could happen. Hint: What's on the table is a proposal to auction takeoff and landing slots at the nation's most congested airports.

This is a good idea, and we have to admit the real ringer in that lineup is the FAA, not normally associated with anything rational. In fact, the FAA is suggesting that market forces be allowed to untangle the ungodly mess of "traveling" through LaGuardia, JFK or Newark airports. Alleviating this nightmare with the FAA's proposal "seems to me to make a lot of sense," Mayor Bloomberg remarked. "You encourage big planes that carry more people." But from the Port Authority and Senators Schumer and Hutchison has come a simple response: Never!

Yesterday, the Air Transport Association -- the airline lobby -- challenged the auction in court, calling the government "intellectually dishonest." The Port Authority has promised to ban any airliner that uses an auctioned slot. Senator Schumer says the DOT is "hell-bent on jamming" the plan down New Yorkers' throats. Senator Hutchison is the top Republican on the Commerce Committee, and bonus points to readers who've already figured out a Texan's interest in faraway New York City.

Many airlines have admirably invested in airport infrastructure. Theoretically deregulated, the industry still has had the federal government allocating slots. Since 1969 when the High Density Rule put a limit on LaGuardia's flights, all three airports have been subject to limited operations each hour, causing constant delays.

Now comes the FAA with a strategy to, of all things, get the government out of the business of determining supply. Opening a market system where airlines would be free to bid on the slots they value most would increase capacity and lower ticket prices. Today some slots are consistently overbooked, with others left nearly empty. Even if a slot is underperforming, the airlines hold onto it. Why sell when there is no market? The entry barriers to entrepreneurs remain formidable.

The FAA has a fair proposal on the table. The auctions would occur over five year periods and enable carriers to lease their slots to other carriers, giving them the opportunity to buy back into the market.

The Port Authority replies the FAA has no right to "confiscate" the slots, which they claim as their own. But this property is derived from the FAA. The Port Authority also says auctions might raise marginal costs. But when new entrants join the market, fares likely will drop. Southwest Airlines expanded into Philadelphia International Airport in 2004 and fares dropped considerably.

There's no doubt the fuel-price spike has made life uncomfortable for the likes of American Airlines and Continental Airlines, both based, by the way, in faraway Texas. We suspect that most regular travelers have opinions of their own about the comfort level at these three chronically delayed airports. The FAA's auction idea deserves a chance to untangle one of travel's worst problems.

Sunday, August 10, 2008

Ideology and economics

The Economist of August 9 cites the petition by 100 or so U. of Chicago faculty opposing the the naming of a campus instititute after Milton Friedman ("One great brain v. many small ones ... The trouble with Friedman").

The signers were concerned over the "ideological and disciplinary preference" that the naming carried with it. One's opponents are always the ones weighed with the ideological baggage. But what I find much more interesting goes to Friedman's remark in the old Newsweek jousts between Paul Samuelson and Friedman. In an interview, Friedman mentioned that they all practice the same economics, but what separated them was that only one of them thought to apply it to public policy (or something like that; I cannot find the actual reference).

Both men wrote about public policy on a regular basis, but Friedman's apparent innovation was to suggest that considerations of incentives, marginal analysis, property rights, etc. bear profoundly on policy discussions.

I still think that he was on to something. One can be labeled an "ideologue" by one's opponents if one seriously suggests that price controls, legalized barriers to commerce, industrial policy-type programs, etc. have a serious downside -- because that is where economic theory points us.

This also explains why Paul Krugman's columns in the NY Times are not "ideological."

Tuesday, August 05, 2008


Much has been said and written on the passing of Alexander Solzhenitsyn.

Today's WSJ reprints his speech at Harvard in 1978:

Very well-known representatives of your society, such as
George Kennan, say: We cannot apply moral criteria to politics. Thus we mix good
and evil, right and wrong and make space for the absolute triumph of absolute
Evil in the world. On the contrary, only moral criteria can help the West
against communism's well-planned world strategy. There are no other criteria. .
. .

In spite of the abundance of information, or maybe because of
it, the West has difficulties in understanding reality such as it is. There have
been naive predictions by some American experts who believed that Angola would
become the Soviet Union's Vietnam or that Cuban expeditions in Africa would best
be stopped by special U.S. courtesy to Cuba. Kennan's advice to his own country
-- to begin unilateral disarmament -- belongs to the same category. If you only
knew how the youngest of the Moscow Old Square officials laugh at your political
wizards! As to Fidel Castro, he frankly scorns the United States, sending his
troops to distant adventures from his country right next to

However, the most cruel mistake occurred with the failure to
understand the Vietnam war. Some people sincerely wanted all wars to stop just
as soon as possible; others believed that there should be room for national, or
communist, self-determination in Vietnam, or in Cambodia, as we see today with
particular clarity. But members of the U.S. antiwar movement wound up being
involved in the betrayal of Far Eastern nations, in a genocide and in the
suffering today imposed on 30 million people there. Do those convinced pacifists
hear the moans coming from there? Do they understand their responsibility today?
Or do they prefer not to hear? The American Intelligentsia lost its [nerve] and
as a consequence thereof danger has come much closer to the United States. But
there is no awareness of this. Your shortsighted politicians who signed the
hasty Vietnam capitulation seemingly gave America a carefree breathing pause;
however, a hundredfold Vietnam now looms over you. That small Vietnam had been a
warning and an occasion to mobilize the nation's courage. But if a full-fledged
America suffered a real defeat from a small communist half-country, how can the
West hope to stand firm in the future?

I am reading Tony Judt's wonderful Reappraisals: Reflections on the Forgotten Twentieth Century. It's all quite stunning, especially the author's recollections of the century's intellectual giants who could not and would not face up to Communism's horrors. Even after they had all become common knowledge.

Here is Judt's final judgment on one of many of the greats that he covers.

"Eric Hobsbawn is the most naturally gifted historian of our time; but rested and untroubled, he has somehow slept through the terror and shame of the age."

Sunday, August 03, 2008

That's why they call them cliches

Jobs-housing "balance" is often invoked by urban planners and others as if it had meaning. It is presumed that commuting can be minimized if the balance is somehow achieved. But the idea has problems. First, at what geographic scale? Second, there is more to life that commuting, which is traded off against many other priorities. Third, a certain amount of balancing will occur naturally because employees and employers tend to srike balances (better use of the term) that work for them. So JHB is another one of those top-down fools' errands.

Wendell Cox manages to get to the data before some of us slow pokes and he manages to present and share them in very useful ways. Here is his latest on commuting in the New York area. Again, most of the cliches about New York and commuting in New York are shown to be wrong.

Saturday, August 02, 2008

New York

I have several times cited to Bumsoo Lee's findings re employment in U.S. metros. In 2000, the New York metro area included about 9.42 million jobs and about 10 percent were located in the two CBDs of Manhattan. Thanks, to Martin Kaplinsky, I just came across a gem of a report (not online) titled Residence and Employment in the New York Metropolitan Area, 1950 (State of New York, Department of Labor, Division of Employment, Bureau of Research and Statistics). It shows 3.6 million jobs in (what was then) the NY metro area with 50 percent in the two Manhattan CBDs.

Good to know

Commons problems are everywhere, often right before our noses. This week's Economist includes "Commons Sense ... Why it still pays to study medieval English landholding and Sahelian nomadism". The piece cites Elinor Ostrom's work and the many examples of spontaneous cooperation to resolve commons abuse. (My own favorite is Robert Ellickson's Order without Law: How Neighbors Settle Disputes.)

And who knew that "[b]efore he died, Hardin admitted that he should have called his article 'The Tragedy of Unmanaged Commons'"?