Thursday, December 31, 2009

Green shoots in Detroit

Markets recycle resources. This story mentions the conversion of parts of Detroit to farmland.

Growing cities reallocate peripheral land from rural to urban uses, but the reverse can also be an option. Some of the older places (New York, Boston) have been able to renew themselves by adapting to new technologies and industries. But not all cities can do this, including various places in the northeast and north central. Detroit may be the prime example. What else, then, but have it shrink? The highest and best use of some of its acres is in farming.

"Saving" GM and Chrysler is politically expedient, but land, labor and capital are best reallocated and recycled when politics are not involved.

In good times and in bad, the capability to reallocate scarce resources to their highest and best uses has first-order importance. Detroit's urban farmers show the way in bad times.

Wednesday, December 30, 2009

A thousand flowers bloom

In today's NY Times, William Falk ("Should Old Articles Be Forgot") itemizes what he sees as major news from 2009. He dwells on Robotic Warfare (ever more drone attacks over Pakistan and other places), Car-Crazy in China (duh), Real Working Wives (wives are now "needed" as breadwinners to keep ever more families "afloat"), A New Source of Stem Cells (superb), and Teeming With Planets (yup, we are unlikely to be alone or even unique).

Re China and cars, when people have money they want cars. And when people have cars, origins and destinations disperse. But then more people want cars, etc., etc., etc.

In today's WSJ, James B. Stewart cites Amazon's amazing sales in an economic downturn and describes a " ... paradigm shift: the coming-of-age of Internet shopping and the long, slow demise of the mall,"

Perhaps. Yesterday, I finally visited the Americana at Brand in Glendale, near LA. It is a mixed-use, vertical "lifestyle center" that could sustain downtown Glendale. It has lots of parking.

Paradigm shifts (such as Amazon and internet shopping) occasionally happen, but it is also fascinating that regional sub-centers (like downtown Glendale) can accommodate up-to-date developments that can give them new life. Glendale (its politicians and various local lobbies) and market-savvy developers found a way to live with each other -- as well as with "car-crazy" Southern Californians.

Thursday, December 24, 2009


Immigrants enrich this country in many ways. Today's NY Times includes "Taking Hold in Silicon Valley, a Ping-Pong Boom."

The Economist (Dec. 19) calls is "A Ponzi scheme that works ... The greatest strength of America is that people want to live there ... No matter where an immigrant hails from, he can find a cluster of his ethnic kin in America."

In a better world, those on the left who see the U.S. as a great evil, would spend some time looking at the world through immigrants' eyes. Those on the right who only see a threat to a romantized past would spend some time looking at America as it was before the arrival of immigrants gave us better science, medicine, art, music, food, sports, literature, you name it.

Wednesday, December 23, 2009

Who to trust?

The Independent Review (Winter 2010, apparently not yet online) includes "Lost Trust: The Real Cause of the Financial Meltdown" by Bruce Yandle.

Yandle cites the importance of trust in financial transactions and cites three "assurance mechanisms" -- credit ratings, international accounting standards, and credit-default swaps. All three collapsed when easy credit and policy makers' push to make housing more widely available combined in the crazy ways that we now read and talk about on a daily basis.

But the author's focus on how the three assurance mechanisms were overwhelmed by policy errors (well documented by the Yandle) is informative and eye-opening.

Markets expanded when trust was formed, and they collapsed when the politically distorted assurance devices failed to function. In the process, government, the lender of last resort, also became the owner of last resort.

Read it in print or when it comes online.


Here it is. Silly me.

Tuesday, December 22, 2009

Pigouvian subsidy?

The Copenhagen confab on climate change may have "failed", and we can only speculate on what "success" would have meant. The November 2009 HUD Research Works includes "Powered by the Sun". Look at Table 1. Place a $50,625 solar panel system on a New Jersey home and your outlay is $6,049 (just less than 12%).

Is this a Pigouvian subsidy? But Pigouvians (as well as Keynesians and many others) have given statists a club (and a gift). But public choice analysis does not get equal billing in the textbooks, nor anywhere else. Governments with rare exception grow. What does it take for Pigouvian and Keynesian study to be tempered by a discussion of how these are used to to grow the state? This is not a trivial matter.

Monday, December 21, 2009


Here is Reason's report on the nation's public roads and highways. California ranks 48th and I am not surprised. I was in Mexico last week where I found much better roads.

It has been California policy for years to divert gasoline taxes to pay for public transit. It's been lose-lose all the way because transit ridership is still going nowhere but the roads are generally awful.

There were 1200+ delegates in Copenhagen last week, most of them eager to give us many more such policies. And Copenhagen skeptics are seen as the ones who don't "get it."

Friday, December 18, 2009

If you can make it there ...

New York is the subway capital of the U.S., but in the 21st century, it's hard to sustain subways even there. Here is the story.

But last night on the Jim Lehrer Evening News, IPCC Chief Pachauri noted that more transit use in Houston was the way to go to reduce global warming.

Tuesday, December 15, 2009

Wine economics

This is excellent.

History, mathematics, economics

Of all the Paul Samuelson obits and reflections that I have seen, I liked this one by David Henderson best. A remarkbale man, economist, body of work as well as the state-of-the-discipline are all touched on, including Samuelson's "tin ear" re the fraudulent economic news from the Soviet Union.

Henderson touches on the tension between economists who rely on mathematics as opposed to those who look to history. Obviously, both have much to offer. But when it comes to being wrong about the most auspicious economic event of the twentieth century, the fall of communism (and the demise of Marxist economics), does that tell us something about how mathematical economics leavened by a deep understanding of history would have been helpful?

History and mathematics are each glorious, but the pendulum in economics graduate curricula has been pretty much stuck at the math extreme for many years. A pendulum is, of course, a model that fails to account for stickiness.

Saturday, December 12, 2009

Photo-op of the year

"The coming energy abundance" (H/T Manny Klausner) is much more plausible than "peak oil". The case for policy makers to sit on their hands (I know, impossible) rests on the fact that scientists and entrepreneurs are not sitting on their hands. This is why I have much more faith in technological advances than I have in political action to save us from rising sea levels.

From Poverty to Prosperity by Arnold Kling and Nick Schulz offers a delightful tour of the intelligence behind the optimistic view. I think it's a superb holiday gift (to yourself or others). It may even help one get over the depressing spectacle of LA's mayor and California's governor (among many others) jetting off to Copenhagen so that they do not miss the photo-op of the year.

Wednesday, December 09, 2009

Modernity is never simple

Bob Nelson has written a fair bit about religion and here he chimes in on the problem revealed by "climategate". Neither "sound science" nor "sound religion" are to be found.

Religion gets a bad name when zealots use it to violate one or more of the commandements. The episodes that make the news are the ones involving murder and mayhem by suicide bombers who think they are holy warriors.

But people who shade the truth because they see themselves as crusaders also present a serious problem. Brett Stephens discusses the various aspects that add up to a complex.

The East Anglia emailers as well as celebs that get caught in embarrassments are painfully waking up to the fact that it's now a whole world of paparazzi.

Monday, December 07, 2009

Some brew

It's not beating a dead horse to expand on yesterday's post re Prof. Frank's huge "if". The horse is not dead and the consequences are not pretty. New Urban News includes this item re $1.5 billion in stimulus money to promote "liveable communities" (H/T Alan Pisarski).

The spenders have no clue on whether or not real people want to live in what experts decree is "liveable". The built environment is hugely complex. Jane Jacobs had some things to say about the ability of planners to get this right.

It appears that in the name of "stimulus", anything goes. And in the name of "green", anything goes. What a brew.

Sunday, December 06, 2009

If pigs could fly

In today's NY Times, Economist Robert Frank writes "How to Run Up A Deficit, Without Fear ...Taking on debt can be a good thing, if government spends wisely."

That's a very big "if". Prof. Frank is clearly a smart man and many smart men and women speak this way. But at the $4 trillion margin, how fanciful is that "if"?

The politicization of most of these expenditures (and the same can be said of the revenue side) is clear. Add the simple idea that most of these programs are much too large and too complex to be managed by a bureaucracy (politicized or not) and one has to wonder how anyone can be serious about the "if".

Frank is a fan of Pigouvian taxes, but this is textbook stuff that statists feed on. But here is just one small ($700 billion) dose of reality from today's Washington Post.

Saturday, December 05, 2009

They can't beat our weather

Cities compete on many margins, but who would have thought of tours of the city's ganglands? Today's LA Times reports "The 'hood as a tourist attraction ... Activists hope to use money from bus tours for community good."

Most cities have cheerleaders who openly sanitize. What is interesting about the new LA venture is that the cited politicos are trying hard to sell tours of the "cradle of gang culture" as some sort of cutting edge eco-tourism. Why not? Newark, Camden, Baltimore, Detroit and many others can't beat our weather.

Friday, December 04, 2009

Opposite ends of the spectrum

Reason's Martin Bailey occasionally writes about "Markets, Not Mandates". In the January 2010 issue (not the one linked; the new one not yet online), he notes that if the tax credit now available only via employer purchased health insurance plans were universally available, many people would shop for cheap high-deductible policies.

Such policies are already available. The online clearinghouse eHealthInsurance pulls a quote of $131 per month from Anthem Blue Shield for a single 55-year-old male with a $3,000 annual deductible, no co-payment after the deductible, reasonable pharmaceutical benefits, and lifetime maximum benefits of $7 million with an option for health savings accounts. ... That was the cheapest plan, but more than 80 other insurance policies were available. As deductibles went down, of course, prices went up.

But imagine what would be available if the tax credit were widely available and if competition were not stifled by politicians.

It is, of course, revealing that the "reforms" that get all the attention (and that are likely to become law) are at the opposite end of the common sense spectrum. I can understand what the political class wants. It gets a little weirder when one tries to fathom how and why so many of the "elites" are in love with the most unpromising, the most expensive and the most politiczed plans.

Wednesday, December 02, 2009

Inconvenient poll

We are often told that Oregonians are more enlightened than the rest of us. So the report that "Poll finds Tigard residents prefer widening Oregon 99W to adding light rail" cannot be true (H/T The American Dream Communicator).

It's really a very old story. Public transit is best for other people. And this is why many more others should be obliged to pay for it. True believers have no trouble with this, just as they have no trouble dismissing inconvenient questions on climate change.

But the recent urban rail line additions have been much less costly than the planned high speed rail projects. "Kick it up a notch" as they say. At least on the cost side.

Sunday, November 29, 2009


I often cite Cox and Alm's Myths of the Rich and Poor when getting students to think about the poverty stats and the general hand-wringing over how bad things are. Most people take little time to reflect on the stunning differences between their own material wealth and that of their ancestors. Comparing the time it took the average worker to earn enough to buy a 3-lb chicken 100 years ago and now is a place to start.

Some of this is updated at this post at Carpe Diem.

The post's bottom line is worth repeating.

Bottom Line: As much as we hear about declines in median income, economic stagnation, the disappearance of the middle class, falling real wages, increasing income inequality, the data tell a much different story: The rich are getting richer and the poor are getting richer.

Saturday, November 28, 2009

The first ever?

Cap and trade = carbon tax plus corporate welfare. That's apparently a Greg Mankiw theorem. The corollary is that carbon taxes are the way to go. This morning's WSJ piece on AC Pigou cites the "bipartisan appeal" of Pigouvian taxes.

And these will not be politicized? Why is the U.S. tax code 17,000 pages long? Because clarity is not a useful political posture. It seems that unpoliticized taxes are a rarity. Will carbon taxes be the first?

Thursday, November 26, 2009

Researchers' bias

Dan Klein points me to this essay by Michael Marlow. Bias among researchers is what we prefer not to think about, but it is probably inescapable. Marlow notes "good intentions bias" in his discussion of research on smoking bans.

I tell students that reading widely is the only antidote. Waiting for unbiased findings in this life is fruitless. Read widely for perspective. It's the best use of your time.

There are many findings on climate change and there are many findings on smoking bans. They all compete for our attention.

And, yes, it's all made much more difficult when arm-twisting and other chicanery are involved. Exposing the egregious cases is, of course, essential. But in the end the onus is on each of us to reach conclusions. Sharing any wisdom thereby gained is also a serious responsibility.

Monday, November 23, 2009


Religion gets a bad rap whenever true believer zealots are prompted to use it to violate any or all of the 10 commandments. This is a very old story.

And some have claimed that Green has become the religion of those who cannot abide the old-time religions any longer. To be sure, many of these folks describe themselves as enthusiastically secular.

But now we have this. Quite a lot of nastiness is directed at the climate change heretics. We may have more religious tolerance in the West than ever in our history. But these moderns are trying to play it both ways.

I hope we don't have to worry that IPCC types get caught in an ACORN-type sting next.

Saturday, November 21, 2009

Planning for the future?

Alan Pisarski testified to a House sub-committee hearing on the reauthorization of the omnibus transportation bill. Among other things, he said this:

Design the transportation system of the future that will serve the needs of a population with a value of time double of that of today’s average traveler (say $50 an hour in current dollars) and serving an economy with an average value of goods moved double present average values per ton.

Good idea. But will they hear? Here is what Ron Utt says they are really up to. More backward-looking than forward-looking. And more wishful thinking than analysis or common sense.

Our leaders are running up record deficits and some economists are cheering them on. But aside from the raw deficit numbers, just look at where the money is going. I often hear that there is even more waste in the Department of Defense. That may be true, but the two-wrongs-make-a-right defense is pretty feeble.

Friday, November 20, 2009

Shedding light

Speaking of cool data, everyone has seen the famous satellite shot of lights for North v South Korea. Vernon Henderson and his colleagues have exploited accumulated lights data from outer space and are using them to test stories about development contrasts around the world. And in many places where the official GDP stats are questionable, the lights data are a fine truth test.

A Federal Govt Program You Have to Like

The Census Bureau abandoned its long-form questionnaire from the decennial census, but switched to annual (American Community Survey) surveys that cover the same ground (and more). There will soon be the beginnings of a time series of very rich data. I just heard a presentation by Bureau staff and got a taste of some of this. Next year, there will even be a question in health insurance coverage -- about which there has been some controversy.

Saturday, November 14, 2009

LA story

Friday's LA Times reported "Gold Line links downtown to East LA ... The 6-mile light rail extension, which cost $898 million, will open Sunday with free rides and entertainment." The report also mentioned that MTA expects 13,000 daily riders.

The original 13.7-mile Gold Line link from downtown LA to Pasadena opened six years ago and cost $859-million to build, included 13.7 miles of guideway and served about 18,500 boardings per day.

Both sets of numbers are dismal. I reported some time ago that, all things considered, the original Pasadena line accounts for a net negative $80-million per year of cost-effectiveness, including plausible non-rider ("externality") benefits.

Today's LA Times, however, calls attention to all the public art ("L.A. on track ... Eight new Metro Gold Line stations roll toward an exciting future").

I know, I know. The pyramids of ancient Egypt were also costly. The rulers of their day had slaves; we have compliant taxpayers (and reporters) who never do the math and who buy into the myth that projects like this are "green" and/or "create jobs".


Sunday's (Nov 15) LA Times includes this re the $5-billion extension of LA's Red Line Subway. That is expected to pull in "an estimated 49,000 daily boardings at the new stations and a total of 76,000 new daily boardings throughout the system." Cost-effectiveness is beyond the pale. Yesterday's story was all about what the Eastside gets and todays is about what the Westside gets. Getting this balance right exhausted the energies of everyone involved. Questions of mega-waste are not interesting.

Thursday, November 12, 2009

Who's counting?

Ken Orski reports the following:

In a revealing article that should be required reading for smart growth advocates everywhere, Gerrit-Jan Knaap, executive director of the National Center for Smart Growth Research and Education at the University of Maryland, offers a sobering appraisal of Maryland's smart growth policy. Writing in the current issue of the Journal of the American Planning Association, he concludes that there is little evidence after a full decade, that Maryland's smart growth laws have had any effect on residential development patterns. Ironically, the Smart Growth Center, was founded by the University of Maryland (and supported by former Governor Parris N. Glendening) to advance research and awareness of the very same policy whose effectiveness the Center is now questioning.

And Ed Stevens pointed me to State Exploring Strategy for Detailed Growth, referring to California.

And while we're on the topic, the WSJ notes Pfizer and Kelo's Ghost Town.

The Supreme Court's 2005 decision in Kelo v. City of New London stands as one of the worst in recent years, handing local governments carte blanche to seize private property in the name of economic development. Now, four years after that decision gave Susette Kelo's land to private developers for a project including a hotel and offices intended to enhance Pfizer Inc.'s nearby corporate facility, the pharmaceutical giant has announced it will close its research and development headquarters in New London, Connecticut.

The aftermath of Kelo is the latest example of the futility of using eminent domain as corporate welfare. While Ms. Kelo and her neighbors lost their homes, the city and the state spent some $78 million to bulldoze private property for high-end condos and other "desirable" elements. Instead, the wrecked and condemned neighborhood still stands vacant, without any of the touted tax benefits or job creation.

That's especially galling because the five Supreme Court Justices cited the development plan as a major factor in rationalizing their Kelo decision. Justice Anthony Kennedy called the plan "comprehensive," while Justice John Paul Stevens insisted that "The city has carefully formulated a development plan that it believes will provide appreciable benefits to the community, including, but not limited to, new jobs and increased tax revenue." So much for that.

Kelo's silver lining has been that it transformed eminent domain from an arcane government power into a major concern of voters who suddenly wonder if their own homes are at risk. According to the Institute for Justice, which represented Susette Kelo, 43 states have since passed laws that place limits and safeguards on eminent domain, giving property owners greater security in their homes. State courts have also held local development projects to a higher standard than what prevailed against the condemned neighborhood in New London.

If there is a lesson from Connecticut's misfortune, it is that economic development that relies on the strong arm of government will never be the kind to create sustainable growth.

It's been twenty years since the Berlin Wall fell and, yes, memories fade. If advocates want to argue that Kelo and Smart Growth are a kind of benign central planning that is worthy, the onus is on them.

Sunday, November 08, 2009

Still dull and boring

Richard Florida has had some success helping urban economics and urban geography (and related fields) shed their dull and boring images. Researchers now try to identify the places that the young, cool, hip, creative types prefer. But every so often, Joel Kotkin comes along to show us that it's not all that simple.

But even though the research is potentially trendier than ever, the researchers are still trying to pin labels on areas (counties or metro areas) that are much too big to be so easily characterized. Metro area average population density, for example, can be misleading. In previous blogs, I have noted that I am late-to-the-party in discovering the smaller PUMAs (Public Use Micro Sample Areas).

It's easy to take a leaf out of the playbook of the Creative Class researchers and study the link between "hip" in-migrants and PUMA population density. Occupation code 2600 is “Arts, design, entertainment, sports, and media occupations”. Correlate arrivals of these people with small area (metro PUMAs) population density and do it for the nine Census Divisions. The results are all over the map (sorry!). They range from 0.06 (Mountain States) to 0.41 (Mid-Atlantic). In five of the Divisons, the correlation between all arrivals and PUMA population density is higher than for creative arrivals.

Our field is probably stuck with dull and boring.

Thursday, November 05, 2009

Many densities, many foods

My favorite LA novel is The Tortilla Curtain by TC Boyle. Another great guide to today's LA is "The Scavenger: Pig's ear, octopus, and fish-kidney curry with LA's most adventurous eater" in the Nov 9 New Yorker.

The report follows the adventures of Jonathan Gold, "the high-low priest of the Los Angeles food scene." Gold describes LA as the "anti-melting pot". And "... unlike in New York, where immigrants quickly broaden and assimilate their cooking styles to reflect the city's collective idea of 'Chinese food,' the insular nature of Los Angeles allows imported regional cuisine to remain intact, traceable almost to the restaurant owners' villages of origin. 'The difference is that in New York they're cooking for us ... Here they're cooking for themselves' [Gold tells writer Dana Goodyear]."

Gold could have mentioned that LA also has plenty of the New York-style "they're cooking for us" options.

Urbanists keep writing about density, but neither explain what they mean or fall short with meanignless measures such as metro area or countywide density averages. The real fabric and the real nature is far too complex to capture with such vagaries. Interestingy, LA is melting pot and anti-melting pot. One can find the "cooking for us" dishes one day and the "cooking themselves" dishes the next. Whatever "the density" of LA is, it is, both "insular" and not-so-insular as to make both cuisines possible.

Perhaps urbanists can take the hint. Let a thousand densities bloom.

Tuesday, November 03, 2009

Was Ayn Rand boorish?

The November (2009) Reason includes "Are Property Rights Enough? Should libertarians care about cultural values? A reason debate".

It seems to me that libertarian (or any serious) discussions cannot avoid touching on cultural questions. But libertarian individuals and positions are another matter. All are products of a culture and all have individual interests in many aspects of that culture, but the three debaters do not pursuade me that there is a tight fit or connection between the libertarian approach to property (economics and politics) and all the rest.

We argue for standing up to those who want to tax us (on the left) as well as those who want to arrest us (on the right). And that alone can keep us quite busy. But we are also put off by the boorishness that we encounter every day, much of which is not linked to the agendas of those who want to tax or arrest us.

When my fellow concert or theater goers behave in ways that curtail my enjoyment and if it is the business model of the theater or concert hall owner to allow that kind of behavior, the property rights are clear and that is fine, but I still have a problem. I'll probably enjoy more entertainment at home. "Home theaters" are a growing phenomenon anyway. But I am not sure that any of this can be or should be a part of any "libertarian agenda". Much of life is beyond and independent of that agenda and that's fine.

When people bring their lifestyle priorities to political conventions and meetings, they usually do seek state sanction for their cultural positions (be it anti- or pro-abortion). I thought that libertarians were the ones who left that stuff at home when they do politics.

Saturday, October 31, 2009

Never easy being green

Everyone knows that social engineering is hard work. But look at this: "French Ideal of Bicycle-Sharing Meets Reality".

The thieves and opportunists are not moved by the plight of the polar bears or the shrinking ice caps.

But the good guys are not giving up. They are ready with their next move.

In an unsuccessful effort to stop vandalism, Paris began an advertising campaign this summer. Posters showed a cartoon Vélib’ being roughed up by a thug. The caption read: “It’s easy to beat up a Vélib’, it can’t defend itself. Vélib’ belongs to you, protect it!”

H/T Brad Hill

Thursday, October 29, 2009

More from the "You can't make this stuff up" dept.

From today's WSJ: "Politicians Butt In at Bailed-Out GM" Read more below. Setting the salaries of a few senior execs on Wall Street is nothing. Running one of the country's largest companies from Washington, now that's getting somewhere. Yes, a crisis is a terrible thing to waste if you are a politician looking for ways to expand influence and power.

The beauty of it is that GM will become another AMTRAK. Badly run, it will require ever more "support". GM will build "green" cars. It and AMTRAK will share the mission of reversing global warming.

Win-win unless you are just a taxpayer.

Montana Rep. Denny Rehberg was no fan of the $58 billion federal rescue of General Motors Co., saying he worried taxpayer money would be wasted and the restructuring process would be vulnerable to "political pressure." Now the lawmaker says it's his "patriotic duty" to wade into GM's affairs.

Along with Montana's two Democratic senators, the Republican congressman is battling to get GM to reinstate a contract with a Montana palladium mine nullified in bankruptcy court. "The simple fact is, when GM took federal dollars, they lost some of their autonomy," Mr. Rehberg says.

Montana Sen. Jon Tester, at a Stillwater Mine in Nye, Mont., is trying to protect the mine's GM contract.

Federal support for companies such as GM, Chrysler Group LLC and Bank of America Corp. has come with baggage: Companies in hock to Washington now have the equivalent of 535 new board members -- 100 U.S. senators and 435 House members.

Since the financial crisis broke, Congress has been acting like the board of USA Inc., invoking the infusion of taxpayer money to get banks to modify loans to constituents and to give more help to those in danger of foreclosure. Members have berated CEOs for their business practices and pushed for caps on executive pay. They have also pushed GM and Chrysler to reverse core decisions designed to cut costs, such as closing facilities and shuttering dealerships.

Richard Cummings Democratic Sen. Amy Klobuchar of Minnesota persuaded GM to rescind a closure order for a large dealership in Bloomington, Minn. In Tucson, Arizona Democratic Rep. Gabrielle Giffords did the same for Don Mackey, owner of a longstanding Cadillac dealership with 80 employees. Rep. Giffords argues it made sense, even for GM, to keep the Mackey dealership, which sold 750 cars last year. "All I did was to help get GM to focus on his case," she says.

Lawmakers say it's their obligation to guard the government's investments, ensure that bailed-out firms are working in the country's interests and protect their constituents.



Monday, October 26, 2009

I wonder

Were there serious policy errors that led to the current economic crisis? Or did people on Wall Street suddenly (ca 2004) become extraordinarily greedy? Listen to this.

Fun to read

The idea that "institutions matter" has been embraced by many economists and has garnered a bunch of Nobel prizes, including the most recent ones.

Does culture matter? Dumb question? Comparisons of the two Koreas, the two Germanies (until 1989), the various Chinas as well as Finland vs Estonia have been used to make the point that institutional differences are profound with respect to economic success even when culture is held constant.

Nevertheless, culture is a slippery idea. And it is not simple to isolate culture from institutions. But to think about this problem, look at Eric Jones' Cultures Merging: A Historical and Economic Critique of Culture. Then go back to see what Deepak Lal says about all this.

Clunkers and reformers

Last night's 60-minutes included a segment on Medicare fraud. The President's claim that Medicare has very low administrative costs had already been challenged, but last night's TV segment might get some "public option" fans to re-think this clunker.

One of the best analyses of where we are headed on health care "reform" was in yesterday's NY Times by Tyler Cowen ("How An Insurance Mandate Could Leave Many Worse Off").

The reformers are giving reform a bad name.

Friday, October 23, 2009

No joke

I always thought that Fox News' use of the "fair and balanced" moniker was a cute in-joke.

Yet, the current round of salary-setting by the administration is routinely explained with the same rhetoric.

Hubristic actions on Wall Street and in Washington DC combined in ways that ended up being a witches brew (tired of "perfect storm") which ended up being a financial crisis which ended up prompting an economic recession which ended up eliciting panicky bail-outs which ended up with third-party pay-setting which ended up with mock-serious "fair and balanced" explanations all around. But this time no tongue-in-cheek.


It's nice to be on this list. It's even nicer to stay on. So, remaining for a while is the project.

Wednesday, October 21, 2009


Here is one discussion of multipliers and what we know as the current experiment reveals itself.

There are two principles that are often skipped in these discussions. First, there are hypothetical multipliers that come out of macro-models and that require a ceteris paribus assumption. But the ex post evaluations of multiplier effects must relax the assumption and, therefore, require careful econometric work. The ex post findings can never match the theoretical multipliers. In fact, any expectation that they should suggests that someone ignored ceteris paribus.

Second, multiplier analyses ignore market adjustments and are only useful in the very short run. Suggesting that multiplier results hold over any longer period ignores markets. That would be a major omission.

These are two simple points and I wish they were made explicit in all of the current discussions (pre- and post-stimulus).

Monday, October 19, 2009


This morning's WSJ includes "5 Technologies That Could Change Everything." Yesterday;s LA Times included "He's light-years away from EU's bright idea ... Taking a dim view of the incandescent ban, a German scrambles to snag a lifetime bulb supply. He's not alone."

It's quite plausible that we will soon look back at today's Doomsday forecasts with the same bemusement that we attach to all the previous ones that now look so silly. But it's an old story. There is a steady demand for hand-wringing and a ready supply of policies that will soon be obsolete. The "green" policies that will be put in place in the developed countries will marginal (except on the cost side) and probably redundant and unnecessary. The developing countries will burn most of the coal. And for some years, they will use the power to fuel the cheap bulbs.

Julian Simon, wherever you are, are you laughing or crying?

Friday, October 16, 2009

Sin in the suburbs

Ken Orski nicely summarizes the debate over the Obama Administration's efforts to make the federal government a player in local "livability" land use-transportation planning. It is worth reading (below).

Sin taxes are supposed to raise revenues and reduce sin. Trouble is that it's very hard to get both results. Mostly, we get higher prices.

Most people like their cars and their single-family home lifestyle. This has irked planners and many other for years, but to no avail. So we get higher prices (the policy-induced "housing affordability crisis") and that's about it.

Politicians love junkets and they should take a very long one to inspect suburbanization and auto use in Europe. The policies they dream of implementing here have been in force there for years, but preferences usually trump policies. Most Europeans no longer live in the charming old city centers that tourists visit. As Bastiat keeps reminding us, some very important things are not immediately seen.

So what will come of the Administration's livability initiative? Think sin taxes.

The National Journal’s Transportation blog — a pretty accurate reflection of the concerns and preoccupations du jour of the transportation community— has recently featured a debate about "livability." "The Obama administration and leading congressional Democrats appear to be making the creation of ‘livable communities’... a central transportation policy goal," stated the introduction to the weekly blog. "Given this increasing focus on promoting livability, what role, if any, is appropriate for the federal government to play?"

Similar questions were framed at an October 13 seminar at the Brookings Institution on "Metropolitan Planning for Sustainable Growth" featuring the well-known urbanist Peter Calthorpe and a panel of local officials from around the country. The event announcement referred to the Obama Administration’s proposed new urban policy agenda that links transportation, housing and land use and asked "What is the federal role in this effort?"

Both events have focused attention on the Administration’s intent to increase the federal role in shaping local development patterns and influencing travel behavior. "Smart growth" planning and shifting more automobile travel to public transportation have been long-standing goals of progressive planners and assorted anti-sprawl activists, but these goals may now become a matter of federal policy under the Administration’s "livability" initiative. That initiative, whose full name is the "HUD-DOT-EPA Interagency Partnership for Sustainable Communities" is designed, in the words of the official announcement, "to help improve access to affordable housing, provide more transportation options, and lower transportation costs while protecting the environment in communities nationwide." The interagency partnership will coordinate federal housing, transportation and other infrastructure investments through a set of guiding "livability principles" and interagency agreements.

Predictably, opinion has split along familiar fault lines. Planners, environmentalists, champions of New Urbanism and smart growth advocates have welcomed the Administration initiative as a sign of its willingness to tackle the problem of sprawl, promote a wider range of transportation and housing choices, and encourage people to curb automobile use. The federal government must use the tools it has, coordinate its efforts and lead by example," wrote National Journal transportation blogger, Rep. Earl Blumenauer (D-OR).

Critics have focused on the "social engineering" and central planning nature of the "livability" initiative and its intrusiveness into people’s lives. Leading that charge have been three well-known and respected conservatives: columnist George Will; author and urban scholar Joel Kotkin; and Heritage Foundation’s Senior Research Fellow, Ron Utt.

In a May 18 Newsweek column, George Will mocked Transportation Secretary Ray LaHood as "Secretary of Behavior Modification." For many generations," Will wrote, "Americans by the scores of millions have been happily trading distance for space, living farther from their jobs in order to enjoy ample backyards and other aspects of low-density living. And long before climate change became another excuse for disparaging America’s ‘automobile culture,’ many liberal intellectuals were bothered by the automobile. It subverted their agenda of expanding government— meaning their supervision of other people’s lives. ... Today’s far-seeing and fastidious government, not content with designing the cars Americans drive and the light bulbs they use in their homes,...wants to say where their homes can be."

Joel Kotkin echoed these sentiments in an editorial in Politico: "Traditions governing land use that have existed since the beginning of the republic would be overturned," he warned, referring to the Livability initiative’s emphasis on denser housing patterns. "The preferred lifestyles of most Americans would come under siege." ("Smart Growth Must Not Ignore Drivers," September 14, 2009).

Ron Utt was equally suspicious of the Administration’s motives. "Recognizing that their efforts to demonize suburban living have failed to deter the millions of American families that still flock to the suburbs, Smart Growth advocates have now enlisted the federal government in their war against the suburbs, and the HUD-DOT-EPA partnership is the beginning of that effort," he wrote in a Heritage Foundation commentary (April 14, 2009).

Many aspects of the Livability initiative are commendable. Encouraging housing and retail activity in suburban communities to be more accessible on foot is certainly desirable, as is safe biking access to local schools. Promoting equitable, affordable housing in suburban communities is a worthy goal that has been widely accepted throughout the country. Expanding paratransit services in local communities for elderly residents is likewise a commendable and non-controversial objective. Reducing traffic congestion that prolongs commutes and chokes even smaller communities is an imperative that everybody can agree on.

But the debate has been needlessly polarized by some malapropos uttered by Transportation Secretary Ray LaHood. At a May 21 event at the National Press Club, LaHood was asked if the Administration’s Livability initiative might not be construed as an effort to "coerce" people out of their cars. The Secretary agreed with that interpretation, adding that "about everything we do around here is government intrusion in people’s lives." "I think we can change people’s behavior" he argued in the same forum. Those are not exactly words that would soothe the already aroused sensitivities of those who believe that government already intrudes too much into people’s lives

Another point of contention is the Administration’s efforts to couch its worthy intentions to revitalize depressed communities, facilitate access to jobs and offer more transportation options as a "Livability" initiative. To most people a "livable community" conjures up an image of a leafy neighborhood, good schools, low crime rates, a private back yard and the comfort and flexibility of personal transportation. It has little to do with "affordable housing," "infill development," or "densification." Nor does "livability" mean going the entire day "without having to get into your car," as the Secretary is alleged to have said.

Lately, there have been some efforts to tone down the government rhetoric. Administration sources we have talked to, concede that decisions about "quality growth" should not be centrally imposed but should be left in the hands of local officials, as speakers at the Brookings seminar and several National Journal transportation bloggers have urged. "Livability" principles, those officials agree, mean different things to different people and cannot be centrally defined or imposed. Other actions appear as mere internally-oriented bureaucratic initiatives. The HUD-DOT-EPA Partnership Agreement with its dense prose is, upon closer reading, a toothless instrument that even White House officials have trouble explaining. HUD’s proposed Office of Sustainable Communities, with its vague charter to "advance affordable, livable and sustainable living environments," has trouble getting congressionally authorized.

Above all, as Joel Kotkin points out, the majority of Americans live in a patchwork of towns and small suburban communities within large metropolitan regions. There are well over 65,000 general-purpose governments, many of them small enough to allow citizens to have a say in their governance. Overall, less than six percent of Americans use public transit, a percentage that has barely changed for decades, and almost 95 percent of Americans get around by car. To assume that the federal government, despite the growing concentration of power in Washington, could "coerce," "lure" or otherwise persuade people in these myriad communities that they should change how they choose to live and travel is a notion that thoughtful Administration officials we have talked to reject as both unreasonable and impractical.

Tuesday, October 13, 2009


Some weeks ago, the WSJ's wine critics wrote about all the bad stuff being shipped from Australia to the U.S.

These past days, we have been in Australia and tasted wines that are (here goes) divine. And I find that many of my favorites are not available at the web sites of U.S. retailers that I am familiar with.

Tyler Cowen cites the Alchian-Allen theorem in his wonderful new book. The theorem says that regions will export their best stuff first and over the longest distances. Apparently not true. I guess it's that ceteris paribus thing. Some partial equilibrium stories work badly in a general equilibrium world where competing wines from hundreds of regions compete for limited shelf space -- even in the age of internet shopping. That's life.

If you can get anything from Cape Mentelle, grab some.

Sunday, October 11, 2009

Contracts hung out to dry

Statists feast on the "market failure" idea. Trouble is that too few bother to be critical. "Externalities" are everywhere and allegations are sufficient to extend the police (or other) power of local (or other) government. "The environment" and "climate change" are special because they can be used to add sanctimony to the discussion.

Blame the teachers of economics? Note to self: Check popular textbook discussions of externalities and see if any nuance is included. Is there any discussion of thresholds that negative externalities must meet before voluntary contracts are trashed?

Today's NY Times includes this about private community clothesline bans voided -- in the name of you-guessed-it preventing some carbon emissions. Commercial dryers are becoming more energy efficient almost every year. But that's not the main point. Rather, rules adopted close to home should not be overridden by higher-level-government rules except when he case is clearly made. Otherwise, in the name of "saving energy", any contract can be voided by any legislature.

Wednesday, October 07, 2009

Another 800-pounder

All governments grow. But the details are always fascinating. In this piece, Fred Siegel and Dan Di Salvo write about the rise of public sector unions and their contribution to the problem. In all of the hand-wringing over state and local government budget problems, this part of the story has not gotten the attention it deserves.

Just as in yesterday's post, we keep bumping into 800-lb gorillas.

Tuesday, October 06, 2009

800-lb Fact

Becker-Posner blog about the Swiss health care system, its advantages and disadvantages as well as why it may not be a good fit in the U.S. They actually mention that the U.S. has a large underclass while Switzerland does not. Well, yes. But you're not supposed to mention that.

The historian Kenneth T. Jackson recently wrote: "Since World War II, America's northeastern and midwestern cities have been in both relative and absolute decline. Their once proud central business districts have typically slipped into retail and business irrelevance; their neighborhoods have lost their once dense networks of bakeries, shoe stores and pharmacies; and their streets have too often become dispiriting collections of broken, broken windows and broken lives. After dark, pedestrians retreat from the empty sidewalks, public housing projects come under the sway of gangs and drug dealers, and merchants lower graffiti-covered metal gates. Too often, no one is home." (Ballon and Jackson, 2007, p. 67).

We are in Perth where I will be talking to the AIUS. Perth is lovely. Why do we so much like exploring cities in (most) other countries? The carefree exploration of new cities is one of life's great pleasures. But you cannot do that in most American cities. You have to make damn sure of where you can and cannot go. As in walk or use public transit.

It's not just about health care. The 800-lb gorilla in the room is America's underclass problem and the welfare state's failure in doing anything meaningful about it . Job #1 is to admit it exists. Thank you, Becker-Posner.

Friday, October 02, 2009

Olympic interludes

The New Yorker's Jon Lee Anderson ("Gangland: Who controls the streets of Rio de Janeiro?") reports that Rio is "the top-ranked in the world for 'violent intentional deaths.'"

How will that work for the 2016 Olympics? Beijing got mixed results with efforts to dampen air quality problems. Los Angeles got better results with auto traffic in 1984. But in the first days of the '84 Olympics, an unexpected boost came from the locals staying away or staying home.

It's doubtful that Rio's gangs will also stay home. But the real point is that Olympic games are interludes. LA's road conditions are now about the same as in 1984, no better and no worse. Whatever LA or Beijing authorities did for the two weeks of the games, they could not duplicate it after the closing ceremonies.

But we all grasp for interludes. Look at the footage of cheering Brazilians.

Wednesday, September 30, 2009

Sex in the suburbs

Today's WSJ includes "The Next Youth-Magnet Cities". The piece reports the views of six experts who agree that Washington DC, Seattle, New York, Portland, Austin are the now the "hot" places where "cool" young people go (not the reporter's cliche).

Interestingly, in 2000-2008, all but New York had suburbs that outgrew the central city. As a group, the five suburbs outgrew the five central cities by about 2:1. (H/T Wendell Cox).

This does not detract from the story. Attractive suburbs and central cities complement each other. But the return-to-the-cities stories get lots of attention and perspective is useful.

Saturday, September 26, 2009

Highest and best use

This LA Times story indicates that a strip club near LAX is being torn down to be replaced by an airport parking lot. And in the WSJ piece re transit in LA in my earlier blog today, the report mentioned that Michael Dukakis takes the bus to LAX. If only there were more like him, the strip club might have survived.

Tax all foreigners living abroad

Monty Python once suggested "we tax all foreigners living abroad." Bob Nelson notes that this is exactly what Delaware's Robber Barons are doing. The Turnpike has few alternatives and most of its customers are from other states.

Those of us who advocate peak-load tolling should put on our public choice hats once in a while and consider that the tolling and spending would not be by well meaning technocrats, but rather by you-know-who.

Old story

Los Angeles will never be a transit town. Obvious to some, but others want to find out for themselves. First-hand experience is a pretty good teacher. Trouble is that planners and politicians continue to waste resources (read other people's money) in the vain pursuit.

Thursday, September 24, 2009

Not exactly

In the Sep 28 New Yorker, James Surowiecki writes: "When Barack Obama went to Wall Street last week,to make the case for meaningful financial regulation, he took well deserved shots at some of the villains of the financial crisis ... But to that list he could have added the credit rating agencies." And "... we need a divorce: the rating agencies shouldn't be government-sanctioned and government-protected instiutions ..." And "... last summer the SEC seriously considered enacting a series of proposals that would have gone some way toward uncoupling the rating agencies from the regulatory system. The plan fizzled, however, thanks in part to pressure from a surpirisng source: big investors."

In a fix like this, go to William of Ockham. The friar might have noted that the only true regulation is competition. Otherwise, we could be chasing our tails, as in the cited column.

I usually read Surowiecki in the New Yorker and enjoy him. But, like many other smart people, he continues to dream of enlightened regulators and is unable to square experience with the dream.

Wednesday, September 23, 2009

Good reading and good news

I thoroughly enjoyed reading Guy Sorman's Economics Does Not Lie. It is very readable and very smart. The author brings us up to date on the state of development economics as well as the status of various developing economies. The book can be enjoyed by any intelligent layman. You can even try giving it to the intellectuals on your gift list.

Institutions matter and a growing body of research elaborates this important idea. But I did not know that World Bank researchers had been at work defining and measuring intangible capital for the various countries.

This index will surely be refined over the years, but the fact that it is out there was a nice find for me.

Tuesday, September 22, 2009

Laugh or cry?

And they say that you can't make this stuff up. From Cafe Hayek.

Nor this. From today's WSJ.

Nor this. From Aid Watch.

You're not in Guatamala City, Dorothy. From the LA Times.

Will annual federal borrowing in 2019 equal annual interest owed by the Treasury? From Forbes.

Sunday, September 20, 2009

Success indeed

Taking a cue from Tom Sowell, I try to disuade students from talking about "solutions". There are only trade-offs. Second on the list of offenders is the easy use of "success". Today's NY Times includes "In Phoenix, Weekend Users Make Light Rail a Success".

Well, no. Just use the data in the article. $1.4 billion of capital costs, 33,000 riders per day and fares of $1.75 suggest $109.5 million of annual losses. Use 365 days (the story cites the many weekend users), 5 percent opportunity cost of capital, depreciate over 30 years. Add lowest-in-the-U.S. operating costs, San Diego's $1.15 per boarding. Fiddle with any of these and "success" is still far fetched.

Boosters love to cite non-rider benefits. $109.5 million a year is a very high hurdle.

Friday, September 18, 2009

Curve-benders and footprinters

We depend on market prices to inform us. But market prices are not omniscient and there has been a lively discussion on how to get the prices right when they are not. This is where it gets messy. Carbon taxes, if we ever get them, will be politicized. Domestic politics are not simple and international politics enter when an international commons is involved.

So we get "footprint" math. Today's WSJ has a nice piece on the some of the math involved: "Hate Calculus? Try Counting Cow Carbon". Yesterday's Financial Times included "If you can't measure your footprint, you can't shrink it"

Let's dream for a minute and pretend that policy makers do nothing. Would unplanned change be more benign than what they have cooking? Research on the Environmental Kuznets Curve is suggestive. Trouble is that "curve-bending" is now the new sport among politicians.

Thursday, September 17, 2009

More on September 2008

Here is a close-up of the financial meltdown of 2008: the New Yorker's "Eight Days: The battle to save the American financial system." (subscription required) Well written and dramatic. Alfred Hitchcock supposedly said that drama is life with the boring parts removed. No boring parts here. But the same old bogeyman about Bush-era laissez-faire.

A more serious discussion of regulatory failures during the Bush years (and before) is this by Arnold Kling. Kling makes various policy recommendations, but none of them are on anyone's agenda. Russ Roberts also speaks and seemingly evokes the New Yorker discussion of events: Don't look at what we say; look at what we do.

The good news is that we get really good drama. The bad news is that bad times breed bad policies. It would be nice if it were the other way.

Saturday, September 12, 2009

More on tracking the smarties

In my Sep 4 post, I said something about using PUMS data to address the question of whether the "creative" people gravitate to "high density" locations. This is a favorite theme of urban economists and many others.

The PUMS data are attractive because they report the education level of the migrants and many of the PUMS areas (PUMAs) are smaller than metro areas or counties. Average densities computed for large areas can mislead.

But colleague Sung-ho Ryu corrected me by noting that the sending PUMAs are spatial aggregations, so stick with the large sample (N=2077) of receiving PUMAs. I did say that I was late to the party.

So here we go again. In the 2006 survey, 83 percent did not report having moved, 3.5 percent moved within the same PUMA, and 13 percent moved to another PUMA. For the latter group, the correlation between the number of arrivals and the population density of the receiving area was 0.07, but for movers with a bachelor's degree, the correlation was 0.16, and for movers with an advanced degree, the correlation was 0.21. I'll stick to my story. Just population density (even for sub-metropolitan units) tells us little.

Friday, September 11, 2009

Profit is overhead?

There has been a bit of comment and reaction to the President's health care speech to the joint session of Congress. This morning's WSJ editorialized re some of the gaffes.

But I have seen no reaction to this:

Despite all this, the insurance companies and their allies don't like this idea. They argue that these private companies can't fairly compete with the government. And they'd be right if taxpayers were subsidizing this public insurance option. But they won't be. I have insisted that like any private insurance company, the public insurance option would have to be self-sufficient and rely on the premiums it collects. But by avoiding some of the overhead that gets eaten up at private companies by profits, excessive administrative costs and executive salaries, it could provide a good deal for consumers. It would also keep pressure on private insurers to keep their policies affordable and treat their customers better, the same way public colleges and universities provide additional choice and competition to students without in any way inhibiting a vibrant system of private colleges and universities.

Is profit a part of overhead? Why was there no outburst by anyone who has had an inkling of econ 101 -- or just business common sense? Why does stuff like this pass the lips of one who is constantly praised for his IQ and Ivy League education?

Monday, September 07, 2009


Driving the Built Environment: Going Compact has just been issued by the Transportation Research Board. You don't have to be a weatherman to figure out which way the wind is blowing. Although the committee-written report is laced with hedged language, the authors expect that more compact development is the way to go.

In a 180-page report that dwells on recommended policy choices, trade-offs are mentioned four times, but public transit is mentioned over 300 times. But what I found most interesting was the comparison of Phoenix to Atlanta. At least, these authors are not comparing Atlanta to Boston.

The report's (carefully hedged) comparison suggests that modern cities can grow at comparatively higher densities; Phoenix's new development is denser than Atlanta's (p110-111).

But the two pages that make the case say nothing about transit. Both places have comparatively low transit use, but Atlanta's is two times that of Phoenix -- 1.1% share of passenger-miles over 0.5%.

And Atlanta has one of the six U.S. passenger-rail systems that quality as heavy-rail. Its MARTA has been operating for almost 20 years.

Having cited the promise of rail transit hundreds of times throughout this report, the authors apparently overlooked it's part in making Atlanta the place that they single out as the one not to emulate.

Sunday, September 06, 2009

Spare the "vision"

"Map of the city" translates as Stadtplan in German. But can one have maps even when there are no plans? While there are many grand designs for cities (Daniel Burnham's 1909 Plan of Chicago shows up in many textbooks), there is also much of the "urban fabric" which comes about bottom-up. The interplay of bottom-up and top-down forces is discussed in this review of Anthony Flint's Wrestling with Moses, by Ed Glaeser (HT to Sandy Ikeda).

As my previous post suggests, when it comess to cities, statements like "size matters" or "density matters" are much too vague to be useful. The International Council of Shopping Centers reports that there are 102,000 shopping centers in the U.S. But there are many more small agglomerations of shops that do not rise to the level of a shopping center. There are also many places that can qualify as activity centers without being a shopping center.

Statements about "density" are meaningless unless the area considered is specified. This is why the report that "Los Angeles is more dense than New York" (true since 1990for the census bureau's urbanized areas) is so maddening to so many people. As the lens zooms in on both places, the picture changes dramatically. But these two (and all the other) vast urban areas are punctuated by an almost uncountable number of "centers" that come into being for the simple reason that all of us find social and economic benefit from various clustering opportunities. This suggests once again that open-endedness is essential. There can be no one grand vision for cities to guide city growth and development.

Friday, September 04, 2009

Tracking the smarties

Enter "urban economics" density, creativity, innovation in Google Scholar and you get quite a few papers, many of which report a statistical link between local population density and some measure of creativity or success. Many of the authors admit that their measure of population (or employment) density (at the metropolitan area level) is crude and possibly problematic. Many of these areas are counties or combinations of counties and the average U.S. county is over 1,000 square kilometers. Even if just the urbanized portions of these counties are studied, an average over such a large area can be very misleading. The state of small-area data is the bane of urban economics.

I am late to the party and have just been introduced to the recent PUMS data. These are interesting because many of the PUMS areas are smaller than counties. The file provide information on in- and out-migrants by education level. For the 2006 PUMS data, the most educated migrants are coded as MA+ (Masters degree or higher). One can rank PUMS areas with the most arrivals and the most departures of these highly educated folks. A propos the expectations of Richard Florida and others, I calculated the population densities of the the 100-top sending and the 100-top receiving areas. The correlation of receiving area density and inflow of highly educated is 0.277. The correlation of sending area density and outflow of highly educated is 0.225.

Most of us have been to Manhattan as well as to Silicon Valley. Each attracts large numbers of smart and creative people. Beyond that, they have little in common, least of all population density. That would be way too simple.

Monday, August 31, 2009

Model mood swings?

In yesterday's NY Times, Robert Shiller writes about mood swings ("An Echo Chamber of Boom and Bust"). In particular, "... the business cycle is tied to feedback loops involving speculative price movements and other economic activity -- and the talk that these movements incite." Yes, there are mood swings among investors and consumers. No one can model them. And, Shiller suggests, we do not know how to bring them into economic models anyway.

If particles had mood swings (not original), one can wonder at the progress that physics could ever make.

Mark Thoma at Economist's View and his commenters discuss all of this, but I cannot see that we are any further along than this discussion by Guy Sorman: He cites Gerard Debreu saying, "that the only thing economists cannot do is predict. This is not quite true: Economists can predict that a bad policy will necessarily lead to a catstrophe." (p. 5).

Sunday, August 30, 2009

More Big Mac news

When introducing students to international currency exchange rates and purchasing power parity, The Economist's Big Mac Index is usually a nice discussion starter.

As useful (to me, at least), when teaching about the problems of making welfare comparisons, is Cox and Alm's Myths of Rich and Poor, where they reveal how many hours the average worker had to toil some years ago vs. now to buy, say, a three-pound chicken (and many other items they include).

Now it seems that these two expository devices have been brought together. The Economist (August 29) reports results of a UBS study that tabulates "How many minutes to earn the price of a Big Mac?".

Uh, oh. Chicago and Tokyo are at the top, where the least toil buys a Big Mac. If there are international food police (at Interpol?), what will they do with this? Tokyo residents are a lot slimmer than most Chicagoans.

Thursday, August 27, 2009

How to make a lot of money

Paul Krugman finds reasons to be optimistic about the prospects of inter-city high-speed rail -- in some U.S. corridors: "we’ve got a bigger potential market for fast rail than any European country."

Call me crazy, but most comparisons with Europe and Japan are misleading. Most Americans are so used to driving their cars within cities that they are not likely to abandon them between cities. Our experience with urban transit experiments offers a worthy lesson. Since 1970, public transit's market share has declined almost continuously, from about 3.5% (all trips) tpo about 1.5% -- while transit subsidies rose almost continuously.

What would a betting man say about the prospects of HSR?

Here is a report that challenges the California HSR lobby. Official 2030 ridership projections are higher than for comaparable systems in Europe and Japan. When airline competition for the LA-SF run heats up, these fares have been known to plummet.

The Simon-Ehrlich wager is well known. Is there anyone out there willing to bet real money on these HSR ridership foreacasts? How about the forecast's authors?

Tuesday, August 25, 2009

As creepy as it gets

Blood libel against Jews was once a European staple and contributed to the ugly fact that Nazi exterminators found eager accomplices in most of the countries they occupied.

But we now see that the blood libel made a round-trip to the middle east and back to Europe -- as a thinly disguised anti-Zionism.

How else to explain the fact that a leading Stockholm daily reports (on the basis of only old hearsay evidence) that Israeli troops kill Palestinians to harvest their organs?

No one knows how many crazies this inspires to wreak mayhem on innocents.

There are many honorable Swedes, but this is creepy. There were also many honorable Germans in pre-WW II Germany. Neither has the excuse that conspiracy believers in the Third World (unfortunately) have -- that they are primitives.

Monday, August 24, 2009

Look around

The Economist has this on spatial "clustering."

Agglomeration economies and growth economics are slowly coming together in the literature -- as they must in a non-agricultural economy.

Chris Webster and Lawrence Lai have written about the "spatial order" -- as one of five spontaneous orders. This makes great sense as we are describing the continuous evolution of supremely complex and organic systems.

These systems resist central planning, which is moderately ironic because "smart growth" is all the rage. But one only has to take a close look at the similarities of urban forms in the developed nations (Europe and the U.S. in this cite), to see that policies are trumped by preferences. Here is a case where international comparisons are the place to start.

Saturday, August 22, 2009

Pay them!

Many who travel to third world destinations find themselves in a shake-down where some street cop wants cash to let the gringo/gringita on his/her merry way. The standard explanation is that salaries are so low that this is the only plausible remedy.

Now this from Germany. Large numbers of university professors have been found taking bribes from their doctoral students. And why do they sink to this? Because, they say, they are so poorly paid.

Yikes! Many universities across the US (including the University of California system) are now implementing pay cuts for faculty.

Perhaps Becker-Posner were right: It's much better to dig into endowments.

Friday, August 21, 2009

Call it stimulus

Ed Glaeser has published some posts that describe a sensible cost-benefit analysis of a high-speed rail line between Dallas and Houston. He finds that it is likely to be hugely cost-ineffective. I am not surprised, but I am also convinced that findings like this do not matter. There is a political coalition behind these planning-disasters-to-be and that's all that matters. Baptists and bootlegers.

In his most recent post, Glaeser looks for evidence that there would, nevertheless, be land use impacts. He concludes that these are unlikely.

If patronage on the HSR is low, how can there be any ancillary impacts? Would non-riders gravitate to stations they do not use? Not in non-negligible numbers. But if they did, planners would have invented the costliest land use policy ever.

But costs don't matter. Call it stimulus.

Wednesday, August 19, 2009

Fear or fantasy?

Christopher Buckley's Boomsday was a fun read. Before anyone had heard of ObamaCare, the idea that the Federal government was on the hook for the care and feeding of a growing cohort of oldsters was well known. Buckley's spoof that end-of-life would become a political issue was perhaps slightly ahead of its time.

The President said this in his NY Times interview: "It is very difficult to imagine the country making those decisions through the normal political channels. And that's part of why you have to have some independent group that can give you guidance."

The Blogginheads discussion on this matter between Robert Wright and Ann Althouse went round and round. Wright mentioned that all insurers offer end-of-life counseling; Althouse thought that it's not the same if the insurer doing the counseling is the government.

This morning's WSJ includes "The Death Book for Veterans". The VAs "guidance" is chilling -- and this is not from Sarah Palin's imagination. Can we imagine a government that does not come up with counseling like this? Once upon a time we did.

Sunday, August 16, 2009

The economist and the grocer

In today's NY Times, Richard Thaler writes that the "public option" of the health care "reform" platform is OK ... if. Count the number of times he uses "if".

In my view, it takes a grocer to come up with a more sensible plan. Here is John Mackey's plan. And this seems to be enough to launch boycott threats of Whole Foods.

Some of us plan to swoop in for the bargains if there is any sort of boycott.

Saturday, August 15, 2009

Colleges and race

The WSJ's Naomi Schaefer Riley recently wrote about "The Real Path to Racial Harmony". It is about the odd practices of U.S. colleges and universities when it comes to race and ethnicity.

I have long been baffled by selective color blindness as practiced at my institution. Separate graduation ceremonies for blacks and hispanics (and perhaps others) are welcomed. But integration by edict is practiced in other areas, including assigning students from different racial groups to share dorm rooms. Is this coherent? What is supposed to be achieved? I have blogged many times about the obvious fact that tribalism is poison. Why sanction any of it? If indivdiuals are more comfortable with others of similar background, that is their free choice. But why give it any official sanction, esepcially when a more integrated society is the goal?

Joyce Carol Oates is now my favorite writer of American fiction. Her Black Girl/White Girl explores some of the problems encountered by two young college women who should never have been paired but it is a match that cannot be undone by anyone because of racial sensitivities.

Why not strive to de-emphasize race as much as possible? But that is not the way of modern higher education. The society has moved on. Now go with the momentum.

Sunday, August 09, 2009

The most interesting thing I have read in a while

The Economist of August 8 includes "A link between wealth and breeding ... The best of all possible worlds? ... It was once a rule of demography that people have fewer children as their countries get richer. That rule no longer holds true."

This is one of the most interesting things that I have read in a long time. The demographic transition idea suggests that we get rich, stop breeding, and eventually disappear. I never liked that scenario. The new findings reported in the cited research are much more pleasing.

My colleague Richard Green recently blogged his critique of what he saw as weak claims that U.S. lifestyles will soon change in favor of higher density (and increased rentals) city living. Claims of such reversals pop up all the time and have always been wrong. If the news about fertility rates and wealth are right, then we have one more reason to doubt that settlement trends as we know them will reverse.

Saturday, August 08, 2009

The ears have walls

William Easterly has this hilarious and poignant response to Queen Elizabeth's question about why economists did not predict the current economic problems. Your majesty, think about efficient markets. But can he explain it to Prince Charles?

Jason Zweig writes that "Data Mining Isn't a Good Bet For Stock Market Predictions" in today's WSJ. Also must-reading for the Queen. This one is also fun to read. He finds this in Mark Leinweber's Nerds on Wall Street:

Mr. Leinweber got so frustrated by "irresponsible" data mining that he decided to satirize it. After casting about to find a statistic so absurd that no sensible person could possibly believe it could forecast U.S. stock prices, Mr. Leinweber settled on annual butter production in Bangladesh. Over an 13-year period, he found, this statistic "explained" 75% of the variation in the annual returns of the Standard & Poor's 500-stock index.

By tossing in U.S. cheese production and the total population of sheep in both Bangladesh and the U.S., Mr. Leinweber was able to "predict" past U.S. stock returns with 99% accuracy.

Tuesday, August 04, 2009

Listen to the cavemen

I first visited China in the early 1980s and got caught up in the population debates. The American as well as the Chinese I encountered agreed that there were "too many mouths to feed". I thought that it was eerie that no one mentioned that there was not enough food due to nutty policies (and institutions).

That was before I had read any of the work of Julian Simon. Each mouth is attached to a brain and the "ultimate resource" (human creativity) combined with the proper institutions finds the way we escape Malthusian subsistence living. This work has to be on anyone's short list of great social science insights.

This morning's WSJ includes columnist William Gurn's discussion of a study that I had not seen by two University of Oregon researchers, titled "Reproduction and the carbon legacies of individuals." Gurn nicely evokes the Simon position in commenting on the paper.

"Footprint" analysis is a funny thing. It leaves aside just about everything that we know about basic economics. There are prices that convey information and provide incentives; there are incentivized buyers and sellers; they animate a dynamic economy, etc., etc., etc.

My favorite New Yorker cartoon is the one of the two cavemen sitting around a fire and puzzling over the fact that "Something's just not right -- Our air is clean, our water is pure, we all get plenty of exercise, everything we eat is organic and free-range, and yet nobody lives past thirty."

Wednesday, July 29, 2009

Getting along in Washington DC

We have been taught that a crisis is a terrible thing to waste and we have seen large-scale special interest-pet-project-funding in the name of a all sorts of greater good.

Alan Pisarki now reports on the Urban Land Institute's just released "Moving Cooler" report. He wonders about the report's objectivity and sees it as just one more anti-auto and anti-suburban-development tome.

But that brings up the question of why the trade group that speaks for real estate developers has gone to these lenths to openly embrace the "green" agenda. Just plain Washington politics? The well known tactic of established suppliers using new regulations to keep out upstarts? Beltway kool-aid? A dash of each?

Some of us are too distant from crisis central to know the answer.

Tuesday, July 28, 2009

Another modest health care proposal

Congress' approval ratings are low but incumbents keep being re-elected. School voucher plans are often defeated because voters may find fault with how public schools are run, but they happen to like their local neighborhood school.

Now John Lott reports that most Americans like their own health care but have concerns over the U.S. health care "system". Read the paper for many other tidbits. Here is one:

... only 2.3 percent of Americans are both uninsured and very dissatisfied with the
health care they receive ...

The plot thickens.

Prof Charles Lave once calculated that giving all car-less Americans a small auto would cost less than what we spend subsidizing public transit. Would it also be cheapest to offer all of the uninsured-and-very-dissatisfied all-expense-paid travel to Canada for health care on a referral basis? The large number of Americans who like what they have get to keep it. Others would have the option of Canadian care straight from the source.

Monday, July 27, 2009

Let land markets function

This is not unintended self-parody, but it looks that way. There is now a fight over whether to "save" the 1960s era Century Plaza hotel in Century City in West LA. Why? Because Ronald Reagan was a regular? I have been there a few times and the place has very little going for it.

People here have organized to preserve a car wash, many oldie diners and all sorts of other marginally interesting "landmarks". Some people have time on their hands and pile on when they can.

But abridging owners' property rights has a huge downside. Consider the ramifications. Cities fulfill their key economic functions when land use arrangements are allowed to emerge bottom-up. When places cease being economically viable (for whatever reason), they generate huge costs for many years. We have all seen too many cities and neighborhoods that have ceased being lively and viable, but which have entered very long term decline. We already have too many of these.


Some correspondents take me to task for putting down a building that has considerable merit in their eyes. What to do? The only way out is for the fans to raise the funds to purchase and preserve the place. Place money near mouth?

Friday, July 24, 2009

The biggest black swan of them all

It's a truism that once we overcome one threat, we are simply lined up for the next one. Cure cancer and more will live to experience coronary problems -- and vice versa. Most humans have moved beyond subsistence living, but (we hear all the time) they are not happy. There is, of course, a vast collection of commentary and advice on how achieve peace, wisdom, perspective. And it's always easier said than done. If our wiring was achieved over millions of years of natural selection, when just staying alive required all of our capacities, it make sense that the post-subsistence life has challenges we are not so well equipped to handle.

Today's WSJ includes Michio Kaku's "Jupiter Gets a Black Eye ... We live in the middle of a cosmic shooting gallery." Kaku notes that Jupiter received a similar hit just 15 years ago, but scientists thought that events like this will occur "once every few thousand years." In other words, there is good reason to believe that at any second, there could be a smack(!) that ends it all.

Most of us will never walk on the Moon, but spending more time peering into space may be the next best thing.

Tuesday, July 21, 2009


In a better world, I would get $1 every time some well meaning people lecture us on the benefits of bike commuting. This (however) is never mentioned.

Pedagogical change in Econ 101

I have no idea whether there is a sub-genre within the history of economic thought that looks at the evolution of Readings supplements over the years. Teachers of economics (especially intro) get these in the mail all the time, but find ways to part with them as they clean office shelves every few years. I have held on to the earliest one I ever found, Arleigh Hess, et al. Outside Readings in Economics (1951).

The latest in my small collection is Craig Newmark's Readings in Applied Microeconomics: The power of the market, which I am thoroughly enjoying.

What changes over the years? Obviously, the questions that engage economists as well as the tools and approaches that they use.

There are many ways to track these changes. But following the evolution of the Readings collections involves a market test: Which selections are thought by editors and publishers to matter most to those who want to fashion the best possible introduction to economic thinking?

And, in my view, it is much better to teach or learn the stuff in 2009 than in 1951.

Sunday, July 19, 2009

The mandates we have

In today's NY Times Magazine, Peter Singer argues "Why We Must Ration Health Care." Part of the article knocks down a straw man because "rationing" has been misunderstood and misapplied by some in the health care debates. In light of scarcity, ration we must. The only question is how. Singer recommends the Australian way. Adapting it to the US would include what he calls Medicare for All, but with the option of better coverage purchased on the open market by those who choose to opt out. Medicare for All would include rationing based on cost-benefit assessments using quality-adjusted life-years (QALY) as the guide.

Who can object? The National Conference of State Legislatures offers this tour of health care currently mandated among the 50 states. The mandates we have are a pretty good clue as to the mandates we will get with a Singer-type proposal. That's the problem.

Thursday, July 16, 2009

Over there

The way we do things in the U.S. gets a lot of attention (some grudging, some not) abroad and many Americans wonder why we can't be more like Europe. I suppose that a certain amount of cosmopolitanism is not bad.

Many Americans return from stays in Europe and wonder why our cities (and our public transport) cannot be more like theirs. Now we hear much the same sentiment when health care "reforms" are discussed.

But the comparisons have limited usefulness. Let's face it: our culture (which I like a lot) does not bring forth the same public sector as is found in many (not all) European countries.

This morning's LA Times includes

"Waxing philosophical on the London Underground ...
On the Piccadilly Line, drivers have been given manuals filled with authors' quotations from which they may recite, in hopes of breaking the monotony of riding the Tube ... On a sweltering summer's day, packed in with sweaty passengers indifferent to the merits of deodorant, does anyone on the London Underground really need reminding that 'Hell is other people, as Jean-Paul Sartre wrote?

Apparently so, according to a quirky new campaign to show that commuting and contemplation on the Tube don't have to be mutually exclusive activities.

Drivers and other staffers on the subway system's well-traveled Piccadilly Line have been given manuals of quotations from famous authors and philosophers that they can intone over their crackly intercoms whenever the mood strikes.

Instead of being instructed to "have a nice day" like their American counterparts, passengers here in the British capital may now hear gems like, "A throne is only a bench covered in velvet" (said Napoleon Bonaparte, who never had to fight for a seat on the Tube) and, "There is more to life than increasing its speed" (said Mohandas Gandhi, who was never stuck on a stalled train while trying to rush to a job interview).

The punchy proverbs aren't just food for thought, says Transport for London, the body that operates the Underground. They're also art.

For years, the transit agency has tried to broaden passengers' horizons on the Tube, which logs, on average, about 3 million customer journeys a day. The agency's Art on the Underground program installs artwork at various stations and commissions new drawings for the cover of its pocket subway map, which has a print run of 5 million every time the map is updated.

The idea of sprinkling people's journeys with pearls of wisdom sprang from the mind of Jeremy Deller, a prize-winning artist who generally avoids taking the Tube but felt it worth trying to enliven the experience of those who do. Londoners have an ardent love-hate relationship with the Underground, with the emphasis usually on the latter.

Deller despises the incessant stream of admonitions to "let passengers off the train first" and "please take your belongings with you."

"It's soul-destroying," he said. He initially proposed what might be called a piece of nonperformance art: a day of no Tube announcements at all.

I have no idea how long this London experiment will last. But I do know that this can never happen here. Some ways just simply belong over there.

Monday, July 13, 2009


The print version of this NY Times piece has a more descriptive headline. It is "8,000 Federal Forms, 10 Billion Hours, In Spite of Paperwork Reduction Efforts ... The federal bureaucracy is booming, especially in electronic form." Read it and go to the link to the OMB report.

We can be sure that to a man and to a woman, all politicians deplore this waste. But there is nothing they can do. Leviathan is like that.

Sunday, July 12, 2009

California dreams and IOUs

The LA Times' Patt Morrison recently interviewed Kevin Starr about his new book, Golden Dreams: California in an Age of Abundance, 1950-1963, which I have not yet read. I have read (and greatly enjoyed) Starr's other books.

In the interview, there is this exchange:

From a historian's viewpoint, is California manageable now?

In our public life, we're on the verge of being a failed state, and no state has failed in the history of this country. In Sacramento, this dysfunction, this end of politics -- the people in my book, the good old boys and girls, they may have stayed up late at the Hotel Senator and drunk Maker's Mark, and some of them may have consorted with loose women occasionally, but when it came down to it, they understood the art of the deal, they understood politics as the art of the possible.

I am just appalled by [what's going on now]. I think we're playing a game of brinkmanship that's very dangerous. Why is it 50 or 60 years ago we had the capacity to lay down the physical, psychological, cultural, public infrastructure of a global mega-state, and today we are on the verge of being Honduras?

This discussion is now standard. What is different now, in comparison to the good old days when politics worked better? (To be sure, today's LA Times includes a review of A Bright and Guilty Place: Murder, Corruption, and L.A.'s Scandalous Coming of Age.)

The political economy that I keep coming back to is Albert Hirschman's Exit, Voice and Loyalty discussion. Low voter turnout is now a fact of life. It's sybling is low levels of interest or due diligence. It is safe to say that most Californians pay more attention to their choice of next refrigerator (or fill in the blank) than to what their political representatives are up to. We call it "rational ignorance", which sums it up nicely.

Affluence is wonderful, but it has this problem. Unless we happen to be policy wonks (or interest group members), we pay ever less attention. Politicians have more wealth to play with as well as more freedom to mess up.

Is there a fix? No one knows whether the current crisis (or recurrent crises) can provide any sort of antidote.