Monday, March 29, 2010

No surprises

Almost 400 years ago, some immigrants bumped up against Plymouth Rock. Most population and migration trends since then can be seen as attempts to correct that mistake. The westward drift and the snowbelt-sunbelt migration are well established, although the interruptions and exceptions are always newsworthy. Wendell Cox calls attention to the latest developments, which are punctuated by housing market bubbles and busts of various intensities. Bubble differences and house price differences, not surprisingly, are seen, as is the propensity of international immigrants to go where there are strong network effects (the presence of previously settled arrivals from the newcomers' home country or region).

Look at Cox's top-ten metro areas and how they score in terms of domestic migration. Three large sunbelt metros (Dallas-Ft. Worth, Houston, Atlanta) continue to be the magnets. These are the ones where prices were less crazy.

Colleagues Gary Painter and Zhou Yu tell a similar story here and corroborate the expected pull of established networks for international immigrants.

There are still some things in the world that make perfect sense.

Saturday, March 27, 2010

The long view

David Henderson has already blogged about the Gary Becker interview in today's WSJ, so there is not point in trying to say much the same. Becker is old enough and accomplished enough to merit being seriously referred to as "wise". This is why I find his optimism so attractive.

Day-to-day, there is plenty to fret about and there is enough ugliness in the world for serious worry. But the long view is not so bad. Who better to take the long view than someone who we can seriously accept as being wise?

Thursday, March 25, 2010

Moving targets

No one has an easy time defining "middle class". It helps that so many people move up and down the income distribution.

James Surowiecki has an equally tough time defining middle market ("Soft in the Middle") in the March 29 New Yorker.

Most accountrements (cars, electronics, attire) are now so widely available that they defy easy links to any "class" of customer. He writes:

The boom in information for consumers has also severely weakened middle-market firms. In the past, these companies were able to charge a premium price because their brands were taken as signals of reasonable quality and reliability. Today, consumers don’t need to rely on shorthand: they have Consumer Reports and J. D. Power, CNET and Amazon’s user ratings, and so on, which have made it easier to gauge differences in quality accurately. The result is that brands matter less: a recent Nielsen survey found that more than sixty per cent of consumers think that stores’ generic products are equal in quality to brand-name ones. In effect, the more information people have, the tighter the relationship between quality and price: if you can deliver a product or service that is qualitatively better, you can charge top dollar. But if you can’t deliver the quality you can’t get the price. (Even Apple, after all, couldn’t make Apple TV a hit.)
Of course. Retailing and merchandising were never simple. Fashionistas will forever be looking ways to signal status. But as the writer seems to acknowledge, hierachies are ever more difficult to nail down. And this trumps the class-warfare rhetoric that so man low-lifes cling to.

Monday, March 22, 2010

Hope and change

Governments grow, but the specifics from recent U.S. history are interesting. Thomas Garret, Andrew Kozak and Russell Rhine of the St. Louis Fed have just published "Institutions and Government Growth: A Comparison of the 1890s and 1930s." Here is their abstract:

Statistics on the size and growth of the U.S. federal government, along with the rhetoric of President Franklin Roosevelt, seem to indicate that the Great Depression was the event that started the dramatic growth in government spending and intervention in the private sector that has continued to the present day. Through a comparison of the economic conditions of the 1890s and the 1930s, we argue that post-1930 government growth in the United States is not the direct result of the Great Depression, but rather is a result of institutional, legal, and societal changes that began in the late 1800s.
The trends cited are familiar and powerful. Politicians are loath not to compete on the basis of promises and favors to voters. In the U.S., we get big-government Democrats competing with big-government Republicans. Is there any room for optimism re a lighter touch on the morning after the health care vote? There probably is. Here is the opening of Thomas Friedman's column in yesterday's NY Times ("America's Real Dream Team"):

Went to a big Washington dinner last week. You know the kind: Large hall; black ties; long dresses. But this was no ordinary dinner. There were 40 guests of honor. So here’s my Sunday news quiz: I’ll give you the names of most of the honorees, and you tell me what dinner I was at. Ready?

Linda Zhou, Alice Wei Zhao, Lori Ying, Angela Yu-Yun Yeung, Lynnelle Lin Ye, Kevin Young Xu, Benjamin Chang Sun, Jane Yoonhae Suh, Katheryn Cheng Shi, Sunanda Sharma, Sarine Gayaneh Shahmirian, Arjun Ranganath Puranik, Raman Venkat Nelakant, Akhil Mathew, Paul Masih Das, David Chienyun Liu, Elisa Bisi Lin, Yifan Li, Lanair Amaad Lett, Ruoyi Jiang, Otana Agape Jakpor, Peter Danming Hu, Yale Wang Fan, Yuval Yaacov Calev, Levent Alpoge, John Vincenzo Capodilupo and Namrata Anand.

No, sorry, it was not a dinner of the China-India Friendship League. Give up?

O.K. All these kids are American high school students. They were the majority of the 40 finalists in the 2010 Intel Science Talent Search, which, through a national contest, identifies and honors the top math and science high school students in America, based on their solutions to scientific problems. The awards dinner was Tuesday, and, as you can see from the above list, most finalists hailed from immigrant families, largely from Asia.
We still get a steady infusion of people who cherish and understand an open economy. To be sure, not all of them are immune to rent-seeking, but it's great to see them enrich the talent pool and bet on the possibility of upward social mobility.

Sunday, March 21, 2010

Light touch? Don't be silly!

Public choice economics has been around for a while, has earned James Buchanan a Nobel, but still has remarkably little traction even among economists. Most still see "market failures" almost everywhere and look to politics to make things right.

Don Boudreaux and Russ Roberts discuss the unexamined romance that most people have with democracy (ergo politics) in this podcast.

In this morning's NY Times, Douglas Holtz-Eakin describes "The Real Arithmentic of Health Care Reform ... With fantasy accounting, Democrats pretend to reduce the deficit." But it's not just Democrats. The Congressional Budget Office is required to judge the bill before it in terms of a 10-year window. So why not rig the bill so that the 10-year accounting looks good while the 11-year, 12-year, etc. accounting are less attractive. No one will notice.

Trouble is that the cheats are right. The gimmick works. Night after night, TV bubbleheads report that the CBO has discovered that money can be saved by actually spending more because the smart people in Washington have rolled up their sleeves and thought hard about how to fix health care.

The health care status quo has problems, of course, but light-touch incremental approaches (extend the tax exemption to non-employer insurance contracts, allow more insurance provider competition, make medical retailing simpler, etc.) have also never achieved any traction.

But even the smart people should know that light-touch incrementalism is the only way to go because the topic is much too complex for grand plans and grand planning. Social engineering is, indeed, impossible. The light touch is the only touch.


Here is the way Doug Elemndorf explains it:

That calculation reflects an assumption that the provisions of the legislation are enacted and remain unchanged throughout the next two decades, which is often not the case for major legislation. For example, the sustainable growth rate mechanism governing Medicare’s payments to physicians has frequently been modified to avoid reductions in those payments, and legislation to do so again is currently under consideration by the Congress. The current legislation would maintain and put into effect a number of policies that might be difficult to sustain over a long period of time.


Greg Mankiw's posts of March 19 and March 21 elaborate.

Thursday, March 18, 2010

Policy problem?

Elizabeth Kolbert writes about some of the recent books on happiness in this week's New Yorker, "Everybody Have Fun: What can policymakers learn from happiness research?" I suppose it was inevitable that this would become a question of policy. The article notes the study commissioned by Pres. Sarkozy to look into the matter. The investigation was headed by Amartya Sen and Joseph Stiglitz and included the sensible reminder that GDP does not do a good job of measuring happiness.

But there is so much more. Daniel Kahneman points out that the happiness we experience and the happiness that we recall of the same event are not the same. This makes it very difficult. Daniel Gilbert had written that the happiness we plan for and work for are also problematic because we cannot really predict what the future us is going to be like or will enjoy. Bobby McFerrin says, "Don't worry, be happy." Kolbert makes it even more difficult by mentioning "fun", which almost everyone confuses with happiness.

None of them mention (as far as I can tell) the old rabbinic idea (I expect that it also pops up in other faiths) that happiness is forever elusive, but being good may be within our reach. And some may even find happiness when they do good.

When politicians of all stripes are busy fanning the populist flames, it may be too much to add that some people even do well when they do good.

Wednesday, March 17, 2010

How do they sleep at night?

"Progressives" like to keep the poorest kids in the worst schools, keep these schools afloat, wring their hands over the state of the cities, and complain about earnings at the low end of the income distribution. Here is their latest victory. They seemingly resolve the dilemma by offering to ever spend more on the public schools (and the folks who routinely vote for them). But this has not worked.

It's worth adding that this crowd thinks of itself as the most compassionate as well as the most intelligent as well as the most high-minded. The last I heard, they have no trouble sleeping at night.


Theodore Hesburgh puts it this way in the WSJ (gated).

Monday, March 15, 2010

Doomsday on hold?

Econbrowser includes this discussion of oil availability in the near term. The Economist includes this discussion of game-changing ways to drill for natural gas -- even mentioning an impending "glut".

It's almost a cheap shot to side with the optimists. Long run forecasts without prices are an impossibility -- as in Club of Rome. If global warming results from humans burning fossil fuel, that will change for the better; technology is never fixed or predictable. Gas burns cleaner than oil and it just got cheaper. If warming is not caused by humans burning fossil fuels then all the "green" policies in the world are irrelevant.

Sunday, March 14, 2010

New look, new URL

New look and new URL. You are now at

Visitors to old URL will be automatically redirected.

Now if we can only find a way to get away from losing an hour in the Spring, only to get it back in the Fall. I hate having to make interest free loans of my time. And electricity uses and personal time schedules are more complex and idiosynchratic than ever. I doubt that the original rationale for the policy make sense any longer.

Saturday, March 13, 2010

Gap police

If you've never heard of supply and demand, you are probably walking around with a cost-mark-up theory of prices. If you happen to wield political power and have the politician's instinct to grandstand, then rising prices are easily cast as a law enforcement issue (opportunity).

Today's LA Times reports on the Obama Adminstration's effort to investigate food prices. It's all here. But the punchline is simple:

The government is also trying to ferret out reasons for the sometimes vast gaps between what farmers are paid for the food they produce and the retail prices that shoppers pay at the grocery store. Time and again, federal officials underscored that the government was going to push for more transparency in the food sector's business practices.

There are probably "vast gaps" all over the place. I have even heard of people who enjoy gaps between their cost of living and their salary.

Friday, March 12, 2010


Here is Jim Lehrer News' Paul Solmin's interview with MIT Prof. Andrew Lo.

Lo suggests that an investigation by an "independent panel" into the recent financial crisis can uncover the culprits. He likens the crisis to an airplane crash and mentions that a 747 is pretty complex; if we can learn the one, we can learn the other. Huh?

And who would form the "independent panel"? Who would be appointed?

Absent any panel, some very smart people are working very hard to unscramble the eggs re the Great Recession -- as well as the Great Depression.

Some years ago, friends and I were working in Mexico. We befriended a young man who told us he was a federal "secret agent." We did ask about his current case and he mentioned that he was investigating the high price of sugar. We wished him well and told him that we hope he finds the bad guys.

Crazy story, but what to do with Prof. Lo's proposal?

Wednesday, March 10, 2010

Moral progress?

Is humanity making moral progress? And how do we know? These belong on anyone's short list of The Big Questions. Some of us tend towards optimism and cite data on improved longevity in most of the world. These are explained by the fact that we are killing each other less frequently than ever and we cooperate more than ever to keep each other alive (as in better food, shelter and medical care).

But read The Economist's coverage of "Gendercide ... What happened to 100 million baby girls?" It's almost embarrassing to ask about moral progress in this light.

Modernity scares many people, but it is so much more attractive than the alternatives.

Tuesday, March 09, 2010

This time is different?

David Cutler knows much more about health economics than I ever have or ever will. He gives a thumbs-up to the Obama health plan in an op-ed in today's WSJ. He ends it this way:

My own calculations, mirrored by other observers and a host of business and provider groups, suggest that the reforms will save nearly $600 billion over the next decade and even more in the subsequent one.

Of course, no one knows precisely how much medical spending increases will moderate. But one cannot doubt the commitment to try. What is on the table is the most significant action on medical spending ever proposed in the United States. Should we really walk away from that?

But here is the Administration's report on $18.6 trillion of unfunded liabilities that were never planned or counted on.

What will be different this time?

28th Amendment

I just received this proposal via email from a friend.

Proposed 28th Amendment to the United States Constitution:

"Congress shall make no law that applies to the citizens of the United States that does not apply equally to the Senators and/or Representatives; and, Congress shall make no law that applies to the Senators and/or Representatives that does not apply equally to the citizens of the United States".

What took us so long? Are the founding fathers (wherever they are) blushing at their oversight?

Monday, March 08, 2010

"Jobs, jobs, jobs"

Today's WSJ includes (gated) Robert Litan's "Visas for the Next Sergey Brin ... To create more jobs, let's import more employers ..."

It's one of my favorite themes and I cited recent supporting research in Saturday's blog. But Litan points out that this is more than a long-term growth strategy; it is available for doing something about today's unemployment fairly quickly.

And it sounds like a much better bet than ever more "stimulus". It is a way that politicians can actually do something to "create jobs".

Use it or lose it

The phrase "use it or lose it" is pretty unambiguous. It turns out that it's true. Susann Rohwedder and Robert J. Willis report results of their tests (in the Winter 2010 Journal of Economic Perspectives)of whether we retire because our cognitive skills have slid or whether retirement is the cause. They find that we do have some control and should stick with an "engaged life style".

Saturday, March 06, 2010

Let more of them in!

It's too bad that these authors have to rely on metropolitan area data. Nevertheless, the finings are interesting and plausible. Inventive types from various immigrant groups cluster and (apparantly) flourish when doing so. This paper makes the point by studying the spatial distribution of patents awarded (in the name of the patent applicant) and does so using ethnic name lists.

Thursday, March 04, 2010

Three in one morning

Whether it is comparative crime statistics, obesity counts, traffic congestion, or a number of papers by urban economists writing about the joys of population density, most rely on metropolitan averages.

The crime, obesity and traffic reports all came my way in one morning.

I too have been guilty and metro areas are often as detailed as the data get. But many of these areas house millions of people. The NY and LA metro areas account for almost 18 and 12 million, bigger than many countries. The variances are often huge and should at least be mentioned.

To be sure, I cannot describe the LA area (where I live) as particularly obese or svelte. Traffic is heavy or amazingly light, depending on where you happen to cruise. There are plenty of areas where you never want to walk at night. The density contrasts are staggering.

I realize that some writers like to categorize whole countries as happy or unhappy. Others like to speak of the whole Earth as warming or cooling. I know, I know, "climate change" is much preferred and much more accurate.

Wednesday, March 03, 2010

How did he know?

When alcohol became legal in the U.S. in 1933, politicians got to tax it. They never looked back. Yet, antipathies to other "vices" are so powerful that even the prospect of new revenue sources has not been enought to get them to legalize, say, prostitution or pot. (Even congestion pricing has been a hard sell.)

But why be subject to the trade-off? Keep it illegal and tax it too. According to "A fine too far" in the Feb 20 Economist, quite a few governments do attempt to tax illegal stuff.

Yes, the report mentions Kafka. How did he know all this?

Monday, March 01, 2010


Here is a survey that reports 88% of Americans want high-speed rail. Does Hugo Chavez win support this wide?

Where to start? Who did the survey? Poke around the website to see what business these folks are in. Where is the questionnaire that was used? We are told that 88% of respondents are "open" to high-speed rail. That's probably a sound basis for spending mega-bucks. It is even bracing that the press release comes clean that the 88% is down slightly from recent highs.

Crazy. It did make it to the Scientific American website here.