Thursday, February 28, 2008

Luddites on the left

In The Future and Its Enemies, Virginia Postrel stresses the important distinction between those who are comfortable with change vs those who are not. In fact, those who are most rattled by change scare me the most. Clearly those who fear trade and NAFTA (and who shamelessly pander to such fears) are in the latter group, despite their confused (hypocritical) attachment to the change slogan.

In yesterday's LA Times, T.C. Boyle writes movingly about "The final page ... After more than 20 years, an author closes the book on his favorite haunt, Dutton's." Dutton's book store is a five-minute walk from where I live an also one of my favorite places to go. I will miss it. But what makes Boyle's essay interesting is his ability to say a rueful good-bye. No tantrums; no insistence on hearings or lawsuits. Life goes on and change is seldom an unmixed blessing.

But the Luddites are wrong as well as creepy. And Luddites who claim to be "change-agents" are even worse than that.

Monday, February 25, 2008

Footprint Theory

Milton Friedman preferred to call micro-economics Price Theory. That made great sense but perhaps we should now call it Footprint Theory. Prices are footprints. And moderns may need this label to focus their full attention. The NY Times' William Safire recently offered a brief history of the modern usage of Footprint.

The Carter-era energy footprint advocates forgot that all resources (not just energy) are scarce and that we have to account for all of them. We also have to be ready to acknowledge that ever changing scarcity signals prompt us to adopt economizing substitutions -- in production and consumption. It's all about change. Where resources are unpriced, there are three choices: (i) adopt open institutions that allow insitutional entrepreneurs to find ways to bring them into the exchange economy (also about change); (ii) allow a politicized process to price them ("Pigou Club") or somehow ration them; or (iii) let the politicians devise other creative "solutions" (e.g., ethanol).

In the Februrary 25 New Yorker, Michael Specter writes about "Big Foot: In measuring carbon emissions, it's easy to confuse morality and science." Tesco, it appears, wanted to label everything it sells in terms of its carbon footprint but found that to be daunting. One researcher was even "a little bit shocked" at the immensity of the task.

Sunday, February 24, 2008

Right on time

Ralph Nader enters the race and McCain futures to win it all have (briefly?) inched up.

Are there $20 bills on the sidewalk? Is all the action and attention on who will be the Oscar winners? Had betters already priced the likelihood of a Nader run into their bids?

Friday, February 22, 2008

Experience and due diligence

We are told that experience counts but we know that Senators have rarely been elected to the Presidency. It's all that experience.

In 2008, the major presidential candidates are all from the Senate. Here is a service from Cato that scores Senators and Representatives in terms of how they voted on subsidies and trade barriers.

Rational voters may under-invest in due diligence but when modern communications lower its cost, we have to appreciate progress.

Thursday, February 21, 2008

Governance that works

Too bad that it often requires a crisis to enable reform. The big cities survive to the extent that innovation is possible in the small cities that make up their suburbs. Exit happens when voice loses its appeal.

The world is changing too fast for conventional big-city interest-group-driven government to cope. Those who dream of a resurgence of the big cities (see this in The Atlantic) do not pay adequate attention to big city governance.

John L. Chapman cites the privatization of public services in Indianapolis. The story is encouraging. Flexibility and the capacity to innovate are necessary for survival. To the extent that politics as usual moves in the other direction, it is poison.

I just heard Don Shoup deliver his paper "Zoning for Land Assembly and Urban Redevelopment" (at WRSA in Kona, forthcoming in the Journal of Public Education and Research). He cites innovators in the City of Simi Valley, a suburb of Los Angeles. They found that hold-outs in land assembly need not invite eminent domain condemnation. Rather, the City people hit on the idea of offering higher density zoning on larger sites. More profits became available to overcome transactions costs. Land assembly worked on a voluntary basis.

Monday, February 18, 2008

Confused on opportunity costs

The lead story on the Sunday Honolulu Advertiser's front page has the headline "9,100 may find jobs working on the rail ... Nine-year project seen as stabilizing factor for construction economy ... Honolulu's $3.7 billion commuter rail project could generate an average of 9,100 jobs during the nine years it takes to build it. Those direct and indirect jobs could provide a boost to Honolulu's economy - and the construction sector in particular - between 2009 and 2017. The project's massive scale, Hawaii's low jobless rate and the speciality skill required to build the rail transit system may result in an influx of workers from the mainland."

Unfortunately, the joining of pork to green delivers this sort of silliness on a regular basis. It is abetted by coverage that spells out the opportunity costs and then reverts to the idea that jobs are "created". Something for nothing. And something for nothing via politics.

There are still many people with a touching faith in what politics can and will deliver. But this requires that the idea of opportunity costs be banished. What world do these people live in?

Friday, February 15, 2008

Challenging record low approval ratings

Art DeVany has a nice post on the House grilling of Roger Clemens and Brian McNamee. What is it of Congress's business? The post mentions baseball's anti-trust exemption. This evokes Fred McChesney's classic Money for Nothing: Politicians, Rent Extraction and Political Extortion, which is applies to most of politics as we know it.

The gerrymandered gasbags know how to wield power and how to get TV time: wag fingers at a baseball icon.

But it's even weirder. The LA Times' Christine Daniels writes about how Representatives from the two parties were choosing sides. The Dems go after Clemens (the rich guy) while the Reps go after his accuser (the "working stiff"). Together, they present a spectacle. Having recently achieved record low approval ratings, they are never satisfied.

A good friend reminds me why he never votes. "It only encourages them."

Tuesday, February 12, 2008

Remembering Julian Simon

Julian Simon passed away just over ten years ago. In my view, he should have received the Nobel in economics as well as the Nobel Peace Prize. Nevertheless, he probably understood the power and reach of his ideas. And he did win the well publicized bet with Paul Ehrlich.

Peter Huber is one of the smart people who works and writes in the Simon tradition. His piece on "Techno-Optimism" (below) in this week's Forbes is on target.

Don't panic about subprime lending or rogue traders. This is a
time to be optimistic. Prosperity and profit still depend, above all, on human
ingenuity. Wetware is still the main asset you're holding in any
well-diversified stock portfolio. No serious student of science technology can
be anything but bullish about the long-term prospects for profit and growth in
the ingenuity-driven economy.

Information technology. IT translates human ingenuity into
binary code, imprints it on molecular-scale substrates and mass-produces it more
cheaply than newsprint. The quantity of processing power or storage capacity you
get per device and per dollar still doubles every few years. Because they
materialize our own intelligence, these technologies can streamline, improve and
automate anything. Nothing will stop them from continuing to boost labor
productivity in every sector of the economy. The highly automated factory, to
pick only one example, can out-compete any assembly line in the world that runs
the old-fashioned way, even if its workers are plugging in widgets and
tightening bolts for 30 cents an hour.

High-speed communication. Wired and wireless technologies are
still improving, and faster than ever before. So the cost of trade continues to
fall, and that lowers the effective cost of everything that's traded: raw
materials, labor, durable assets, consumer goods, capital, commodities and money
itself. In every market--and at every step from suppliers of raw materials to
consumers of finished goods--faster, cheaper communication lowers the cost of
producing and consuming.

Digital power. Electrical drive trains are displacing
mechanical ones in factories, ships, hybrid cars and all the other heavy-lifting
sectors of the economy. They're made possible by semiconductor chips that can
handle megawatts of power, rather than the microwatts that move the bits through
a laptop. Moving power this way is far lighter, faster, more precise and more
efficient than moving it mechanically through shafts and gears. Sibling
semiconductors are used in light-emitting diodes, solid-state lasers and other
technologies that generate heat and light far more precisely and efficiently
than conventional welders, torches, ovens and bulbs. Solar cells use similar
materials to do the same in reverse. And as everywhere else in the semiconductor
industry, performance doubles and redoubles, and prices keep

Biotech. Yet another hockey stick, and this one is right at
the bend, at about the point where silicon was two decades ago. Gene sequencers
can now read all the code that makes life tick. Biochemists can cut, splice and
reassemble it. Scientists now have the tools readily at hand to copy anything
that life can build, and beat it at its own game. They will soon bioengineer
bacteria to melt oil out of tar sands, turn grass into diesel fuel and scavenge
natural resources of every kind out of low-grade, thinly dispersed deposits.
They can design drugs to replace, boost or suppress anything in nature. While
the designing isn't cheap, pharmacology is much cheaper and vastly more
effective than hands-on medicine. The real cost of health care is falling and
will fall faster as these technologies continue to improve.

Nanotech. The tools of the semiconductor industry are now
being harnessed to mass-produce microsensors that let microprocessors see, hear
and feel what's going on all around. Chip-scale sensors already tell an SUV's
master computer when the vehicle is about to roll over and the Wii game
controller when the live player wants to swing the virtual bat. Within a decade
or two sensors will allow microprocessors to see, hear and feel far better than
we can. Microengineered materials are simultaneously transforming the
manufacture of clothes, cars, jets--just about everything people make--because
they're far stronger, lighter and more functional than metals, plastics and
natural fibers.

Can bad government policies impoverish us all, nevertheless?
Not easily. Ingenuity is too compact, powerful and portable to be defeated by
inept public policy that's implemented only here or there. Know-how is as
portable as capital; it can go where it's welcome and walk away from incompetent
central bankers, kleptocrats, tax collectors and economically irrational
regulators of every stripe. Lower prices, higher wages, better health insurance
and a clean environment can attract enterprise, capital and skilled labor from
places that lack them. No individual government runs the show

So sell everything and buy gold if you think that terrorists,
despots or feudal theocracies might soon pull off something big enough to stifle
global trade. Otherwise, buy and hold.

Monday, February 11, 2008

And More 'It's not easy being Green'

For the case of pollution, many economists recommend policies to get the prices right. Whether or not this puts them in good standing with Greens, many of whom want to change the world in more profound ways, remains an open question.

Last year, Parry, Walls and Harrington surveyed the literature and found that a charge of ten cents per mile would get the price of driving right. To what extent would such a tax change our cities and the way we live? No one knows. In a soon to be released paper, Alex Anas and David Pines ("Anti-sprawl Policies in a System of Congested Cities", Regional Science and Urban Economics), suggest some surprising results based on a theoretical model.

The "carbon footprints" people take another approach. They compare the carbon cost of alternate developments and see if exposing this will change the world.

Yesterday's NY Times included "Don't Let the Green Grass Fool You ... Some suburbanites are grappling with their enormous carbon footprint." But these approaches say little about trade-offs and the fact that all resources are scarce. The article includes a reference to a study by Reid Ewing, Lawrence Frank and James Chapman that shows "suburbanites use more energy and produce more carbon dioxide than city dwellers." To get this result, the authors study energy consumption by three household types in metropolitan Atlanta.

The trouble is that the Atlanta economy performs the way it does as a result of the interaction of all of its parts. Some analysts are fond of approvingly citing commuting habits of Manhattanites. So what? Manhattan is what it is because it is served by a vast hinterland and the aggregate accounts for the longest (solo auto) commutes in the U.S. This simple fact severly undermines what it is that Greens want to take away from the story.

Sunday, February 10, 2008

Good news

Class warfare rhetoric is the creepiest part of American politics. The John Edwards campaign is only one of many examples.

And the W. Michael Cox and Richard Alm 1999 analysis of consumption differences (over time as well as across strata; Myths of the Rich and Poor) had been studiouslly ignored by those who live by class warfare. All the hand-wringing is way off-base. This is why it is very nice to see these authors' "You Are What You Spend ... Consumption is a better measure of financial health than income" in this morning's NY Times.

Comparing top and bottom quintiles, the 15:1 income ratio becomes a consumption difference of just 2:1 (per person). Read their article. Buy their book. Don't (yet) give up on the NY Times.

Friday, February 08, 2008

Who knew?

Pollution happens. But there are trade-offs. And the record of cleaning up in market vs. centrally planned economies is clear. Nevertheless, many in today's market economies maintain a breathtakingly optimistic (ignorant) view of what central planning can accomplish.

FuturePundit cites recent research that biomass energy will increase CO2 in the atmosphere. The two major parties' political platforms will appear later this year. What will they say about all this? That politics is most likely to accelerate climate change? I don't think so.

Yesterday's NY Times included "In Many Communities, It's Not Easy Going Green". Who knew?

Thursday, February 07, 2008

Who's counting?

Well done video posts on topical issues are a thing to behold. John Stossel's work on network TV has provided some relief from the normal CBS-NBC-ABC-CNN echo chamber. Now the people at Reason.TV give us the Drew Carey Project, which I am happy to link to (blogroll on the left of this post). Seven well done spots on topical issues are already available (see their archive). They are emailable to your broadband friends.

They are especially useful in this election year when the dumb ideas are piling up fast. There is nothing quite like a "stimulus package" in an election year. Both parties are on board. But look at the difference between the House and Senate versions. The latter is a preview of what Democrat rule will be like. It's time at the trough for every identifiable group in the coalition. Call it Keynesian stimulus; call it turtle soup; call it national debt. Who's counting?

Wednesday, February 06, 2008

Trade in 2008

In the Feb 2008, Commentary, John Steele Gordon expands on "Look Who's Afraid of Free Trade." (Apparently not on the magazine's web version, both click on the link for other good stuff.)

The internet has speeded up everything, including creative destruction and outsourcing. It amounts to significant net gains for the U.S. economy but labor unions are more threatened and more protectionist than in recent memory. And Democrats cannot win without strong labor support. The upshot is that no one is against free trade; "they just insist on provisos in free-trade agreements that no sovereign nation can possibly accept."

A related discussion appears in today's WSJ ("The Candidates and Trade" by David Ransom, gated). "If Mssrs. McCain and Obama see foreign trade as a glass half-full, Mrs. Clinton, Mr. Romney and Mr. Huckabee see the glass as half empty."

Representatives of the media have figured out that creationist posturing by candidates is not respectable. If only their understanding of basic economics were as far along. All the blather about "fair trade" would not get a pass.

Monday, February 04, 2008

Post-racial politics II

Just when a post-racial politics emerges as a possibility (in the minds of some), the news from the provinces (in this case Sacramento and Berkeley) slams us back to reality.

Today's WSJ includes "The Color of Charity" (below). If there is to be an Obama nomination, the big question is whether he will be willing and able to publicly distance himself from the crazies. Even the first black president had his Sister Souljah moment.

Just when we thought we'd heard everything from the diversity
police, here they come trying to prescribe even the color of charity. The
California Assembly last week passed a bill sponsored by state Representative
Joe Coto to require foundations with assets of more than $250 million to
disclose the race, gender and sexual orientation of their trustees, staff, and
even grantees. Look for this to arrive in a legislature near

A Berkeley-based advocacy group called the Greenlining
Institute hatched this idea because, allegedly, racial minorities aren't well
enough represented in California policy debates. John Gamboa, Greenlining's
executive director, blames foundations for failing to donate enough money to
"minority-led" think tanks and community groups and businesses, and he hopes
this legislation will "shame" them into giving more. What counts as a
minority-led organization? According to Greenlining, the board and staff should
both be more than 50% minority.
This certainly takes the spoils system of
racial preferences to a whole new level. Heretofore the government has tried to
enforce a pigmentation principle in government jobs and contracts, and in
private employment through the threat of lawsuits. But this is about telling
private citizens how to give their own money away.

Mr. Gamboa says these philanthropies have tax-exempt status,
so the public has a right to this information. "Minorities are paying a little
more in taxes but are not receiving their fair share of benefits," he says. This
seems an odd claim, since so much private charity is targeted explicitly at
minorities. But it makes sense once you understand that what he means is that
not enough of this cash is channelled through certain minority-run activist
groups, such as, well, his own. It's no accident that such ethnic lobbies as the
Black Business Association and the Centro Legal de la Raza also love this

There's also the little problem of accountability and donor
intent. Private citizens typically establish foundations with specific
charitable goals in mind -- such as wetlands conservation, or medical research,
or even promoting free market ideas. If donors are suddenly supposed to allocate
grants by the color or sexual lifestyle of the grantee, that donor intent will
be distorted at the very least. Presumably we want money for cancer research to
support the most promising research ideas, not to be based on whether the labs
have a rainbow coalition of Ph.Ds. The goal is to cure cancer.

Paul Brest is a former NAACP attorney and president of the
William and Flora Hewlett Foundation, California's largest foundation. And in a
letter to the state Assembly on Mr. Coto's proposal, he put it this way: "[Our]
fundamental operating principle is to direct our resources to organizations that
have the promise of making the greatest difference in achieving [our
philanthropic] goals. Thus, we do not focus on the racial composition of our
grantees, but rather on how to achieve measurable impact in improving the lives
of the communities that our grant recipients serve."

Lest you think this idea is too wacky to go anywhere, it is
also expected to pass the California Senate and could soon land on Governor
Arnold Schwarzenegger's desk. The Greenlining staff is already lobbying House
Ways and Means Chairman Charlie Rangel for Congressional hearings. Foundations
and charities that don't want to start apportioning their donations by skin
color, or between gays and heterosexuals, had better start describing this idea
as the political shakedown it is.

Friday, February 01, 2008


Why be suspicious when all of the political hacks line up on one side? When the Hollywood types line up with them? When that side is near- hysterical in its self-righteousness? When they tip their hand by saying that the debate is over? And when that side's position is that the role of the state must be significantly expanded?

Everyone will recognize that I refer to the "global warming" faith. Joel Schwartz points us to the Planet Gore site -- and his January 23 post re the Yale 2008 Environmental Performance Index. The many entries at the site offer another side of the debate -- presuming, of course, that there is still a debate.