Sunday, November 28, 2010

Another mandate? Another gadget?

I recently blogged re the reports of the Cameron government's interest in compiling data on the happiness of Brits. This week's Economist asks "Should governments pursue happiness rather than economic growth?"

But are they any good at either one?

I have never been convinced that the "happiness" or the "nudge" research were good ideas. Happiness will always be hard to define and a moving target. Even the non bi-polars have their mood swings. And when I picture the cast of characters that are busy trying to improve our lives, whether in Washington or Sacramento or Los Angeles (my case), I do not want them nudging me. In fact, I want them to not even entertain the thought.

But Bruno Frey and Alois Stutzer claim to square the circle here. Their wrap-up is copied below:
Happiness research and public choice can both benefit from taking each other’s key insights into account. Improvements in the measurement of individual welfare allow us to confront
public choice hypotheses in a new way with empirical evidence. This has been illustrated for basic assumptions on the partisan model of political business cycles, theories of government size and rents in the public bureaucracy.

The huge progress in the measurement of individual welfare makes it tempting to pursue the old dream of maximizing aggregate happiness as a social welfare function. Improvements in individual welfare are claimed to be directly measurable, and politics is seen as following advice and implementing it with suitable interventions in the political process.

Based on public choice analysis, we argue that the appropriate approach is not to maximize aggregate happiness directly by seeking to improve outcomes through direct interventions. Rather, we see the role of happiness research as seeking to improve the nature of the political processes. Individuals should have more opportunity of advancing what constitutes their idea of the good life, both individually and collectively. They should bemade aware that different issues require different measures and indicators of well-being. Happiness research should remain open to constructing a number of different indicators, reflecting well-being according to different aspects of life. Plurality is a necessary consequence of the procedural view outlined. This is in stark contrast to the maximization approach requiring one single objective. From a constitutional standpoint, we conclude that people are best served with comparative institutional analyses on subjective well-being.
I'm not sure I buy it. For better or worse, I walk around with mental images of the cast of characters. Do we want them to have yet another mandate and yet another research gadget?

Friday, November 26, 2010

Not so simple

There is the "creative" city, the "consumer" city, the "mega-city", and who knows how many others. Joel Kotkin writes about the "efficient" city in today's WSJ.

While Kotkin makes international comparisons, he singles out the "big gainers" for the U.S., places with 100,000-2.5 million residents. That's a wide range and whenever "cities" are discussed, many analysts refer to metropolitan areas. I prefer the "urbanized areas" (UZAs) when looking at the U.S. case. These do not follow political boundaries, but represent more functional units. Their data are, however, only reported for the census year.

Matt Kahn comments on Kotkin's piece here. He also evokes "mellow" and "superstar" cities.

What do we know? "Cities" compete and must adapt to survive. They also specialize to varying degrees. They also include a complex mix of different spatial enclaves.

If we collect data for national aggregates, we expect that national economic growth benefits from a well-performing system of cities -- which can include many of the types listed above. And they cannot all be above average. They cannot all belong to the class of cities that performs best in some window of time. I have already commented on the amazing stability-at-the-top of city-size rankings.

As mentioned in my last post, UZA data are available for the census years, 1950-2000. No idea when we will get 2010.

For each of the decades, population size and subsequent population growth are negatively associated -- as expected. Looking at just the top 50 UZAs (in 1950), here are the five size-growth associations: 1950 size vs 50-60 growth, 1960 size vs 60-70 growth, etc.: -0.26, -0.27, -0.25, -0.14, -0.07. The effect of size on subsequent growth had been falling.

Using the 2.5 million cut-off, the sample gives us the top 15 (San Diego - New York; 2.67 to 17.8 million in 2000) and the smaller 35 (Birmingham - Minnesota; 0.66 to 2.39 million. The average 1990-2000 growth for the bigger group was 21% vs.19% for the smaller group. For that decade, bigness was not a handicap.

Tuesday, November 23, 2010

Prompts from near and far

Most U.S. data for urban areas locks us into "central city" vs. "suburbs" categories. Not great, but that's the way it is. Do these places perform as complements or substitutes? The central city "exploitation" by their suburbs was a staple of some of the early literature, but Richard Voith showed us in 1992 that complementarity dominated -- for 28 MSAs of the Northeast and North-central census regions. Though there were negative growth correlations for populations in the 1960s, they were positive for the 1970s and 1980s.

Robin Leichenko published an analysis for the 1970s, 1980s and 1990s and also found a complex pattern but leaned to complementarity.

I had previously mentioned that Wendell Cox pointed me to population data that go back to the 1950s. A sample of twenty-four areas across the U.S. is available if we want populations for the urbanized areas, their core cities and the remaining suburbs.

What were the inter-decadel population growth correlations?

The positives have it, but the associations get weaker over time. Growth prompts now come from far and wide.

Sunday, November 21, 2010

"Needs vs. wants"

Today's LA Times includes an op-ed by Milken Institute researchers James Barth, Tong Li and Rick Palacios Jr., titled "McMansion economics ... The typical American home has grown about 40% larger over the last 30 years. Downsizing houses would free up income for education and healthcare."

Some of this is well known. Tax and other policies have for years favored home ownership. But the authors do not mention this. Instead they discuss American's "love affair with McMansions." They want the love re-directed towards education, cultural enrichment, infrastructure, etc. They do not look for new policy measures. "It only involves individuals rethinking their needs versus their wants."

What a thin reed! Some of us have a tough time pinning down needs vs. wants -- especially when we consider all of the margins of consumption. We only want policy to be neutral so that we can enjoy the freedom to choose.

Saturday, November 20, 2010

Third way?

I was just going to call reader's attention to a nice Buttonwood (in this week's Economist) summary of Austrian business cycle theory, in contrast to the popular deference to either-or Keynesian vs monetarist explanations of the current crisis. In the nick of time, I noticed that David Theroux has already done this. So, best to look at Buttonwood via Theroux here.

Laugh or cry?

The 9/11 terrorists may have been stupid enough to think that disabling the Twin Towers would cripple American capitalism. But they were smart enough to realize that terror and the ensuing fears leavened with just enough bureaucratic-political stupidity would hand them a win. Our TSA and it's patrons provide pretty clear evidence.

Art Carden provides a lucid summary here.

Bob Poole has been arguing for saner measures for a long time here.

Reason.tv has chimed in with great commentary and video here and here.

Is our "cerebral" but recently "shellacked" President going to cede this one to the Tea Party too?

UPDATE

The WSJ's Eric Felten finishes his wonderful column on TSA nuttiness with this:

The old saw is that a conservative is a liberal who got mugged. Tom Wolfe riffed that "a liberal is a conservative who has been arrested." We might add one more variation: A libertarian is anyone whose wife and children have had their groins groped by the TSA.

Friday, November 19, 2010

Generosity

James Surowiecki notes that a majority of seniors voted Republican in the recent election. He finds some irony, but is not surprised, that seniors' attitude prompted by Obamacare was "I've got mine -- good luck getting yours." It's linked to today's economy. He cites Benjamin Friedman's The Moral Consequences of Economic Growth. People are less likely to be generous when times are bad. Yes, Social Security was enacted in bad times, but things were so bad then that social solidarity took over.

There is always more than one story. People not living in welfare states tend to be more generous. Here is a cross-country comparison of charitable giving. Daniel Hannan cites US-UK comparisons of giving that are even more stark.

I hope that the evolution of the US welfare state has not pushed us to the point where we are less generous with others.

Wednesday, November 17, 2010

Livability

Readers of this blog know my thoughts. Alan Pisarksi says it best. Read it and pass it on.

What would George Orwell say?

It appears that the Cameron government is about to launch a UK happiness survey.

Perhaps it might be the better to Nudge the Brits with.

Many people can lead long and perplexed lives in search of elsuive happiness. But what do they know? I can easily see that policy makers with a new toy will be able to argue for a host of new policies (or excuses for failed policies) with the survey results in their pockets.

Happy to see that the Brits are ahead of us on this one.

Monday, November 15, 2010

The long run

Bjorn Lomborg argues that the wise thing to do about global warming is to accelerate research on alternative energy sources.
World-wide public spending on research and development for clean energy technologies is a paltry $2 billion a year. Increasing this to $100 billion a year could be a game-changer. Not only would it be almost twice as cheap as the $180 billion a year cost of fully implementing Kyoto, but the effect of this kind of spending would be hundreds of times greater. But this should not be our only response to global warming. We should also invest considerably more in adaptation to global warming's effects, and research geo-engineering technologies as a potential backstop.
George Gilder suggests that market forces have been and are pushing us towards cleaner energy.

The irony is that a century-long trend of advance in conventional "non-renewable" energy—from wood to oil to natural gas and nuclear—has already wrought a roughly 60% drop in carbon emissions per watt. Thus the long-term California targets might well be achieved globally in the normal course of technological advance. The obvious next step is aggressive exploitation of the trillions of cubic feet of low-carbon natural gas discovered over the last two years, essentially ending the U.S. energy crisis.
But most people have fallen for the "green jobs" idea. We get economic recovery and environmental improvement as a two-fer. Californians just elected Jerry Brown on such a platfrom -- and approved the State's AB 32 by a wide margin.

But picking winners is a bad idea. (1) It is politicized; (2) it assumes that the we have knowledge we do not have; (3) it relies on impossible long run forecasts; (4) it embraces autarky.

Re the latter, 20 or so years ago, some smart people suggested that Los Angeles not only go with the switch to rail transit use, but that we also build the trains in Southern California!

Where are they now?

They now want us to produce green energy and "green jobs" in California. What the hell. It gets votes and contracts. Where will they be in 20 years? I have no idea. Long run forecasts are for the smart set.

A mountain to climb

For those of use not seeking political office, balancing the federal budget using this NY Times interactive site is quick and easy -- and fun.

Trouble is that there are not enough options at the site. But perhaps the Times' effort will spawn similar gadgets. I would add this: "no payments or credits to anyone above the poverty line." There are, of course, many other possibilities. But making a game out of it (even an app?) makes it slightly less abstract and may (perhaps) involve more people in serious thought about the mountain to climb.

UPDATE

Here is a better "modest proposal".

UPDATE

According to this writer (and many others), all of this deficit cutting is inappropriate in a weak economy. Yes, if you buy into the failure-of-aggregate-demand story. But what if radical deficit cutting restores confidence in the U.S. economy? In my view, to ask the question is practically to answer it.

Saturday, November 13, 2010

What will they do?

I have no idea how people who have shoehorned themselves into endorsing federal support for the Atlanta streetcar -- or a thousand similar proposals -- will live with the principles articulated by the fiscal commission. But they would not be where they are if they had not mastered the art of political rhetoric, whereby they are able get away with precisely this sort of sleight of hand.

It does take two to tango. The politician has to be flashy (charismatic?) and shameless. The electorate has to be disengaged to the point where they are not bothered by inconsistent positions. But these are the people we have.

So these are interesting times. We will do well if I am completely off base. I hope so.

Thursday, November 11, 2010

Walter Isard

Walter Isard, who passed away the other day, was my mentor at U. of Penn. and an original. Like many others, I was smitten by his Location and Space-Economy book (the one published in the late 1940s, I believe; oops, see NY Times obit, below). He made the case that space, distance and location had been overlooked by most of economics and that this was no small matter. I had an interest in cities and urbanization and Isard's insights were an inspiration. This is why I applied to his program.

Oddly, urban economics was not emphasized -- even though Bill Alonso's book was based on the first dissertation out of Penn's Regional Science program. But Isard was an enthusiastic big-tent guy and would never exclude anything from his vision of Regional Science. It was the 1960s and most social scientists were optimistic. Isard was eager to develop tools of analysis that sophisticated regional planners and policy makers could utilize.

I do not know how long Walter held this view. But he was an enthusiast.

I now lean to the view that cities are spontaneous orders. The New Urbanist view that they are the purview of planners, it seems to me, is a Fatal Conceit. Sandy Ikeda and I have a paper (forthcoming) that speculates on how the insights of Jane Jacobs and F.A. Hayek mesh in this regard. But there are many loose ends. Randall Holcombe has an insightful paper on these problems wherein he suggests a division of labor between markets and planners. The latter do the best infrastructure planning they can and let land markets do what they do best.

The problem is that infrastructure planning is usually anchored to some view of what the land use arrangements are or will be. This is OK in a static world, but very difficult in a dynamic context. Urban designers can invoke a dozen cliches (put office high rise near transit station), but these fall way short. Real life complexity is another galaxy.

English speakers learn about a city by consulting a city map. In many other languages, these are referred to as the "city plan". People get a document that can be construed as a plan only in a static world.

UPDATE

Here is more abut Walter Isard. A full life.

Tuesday, November 09, 2010

Divided government

In "Divided we thrive", Jonathan Rauch notes that there has been divided government in Washington DC for 21 of the past 30 years. He develops an explanation that goes back to the realignment of the two parties. With the demise of the Southern Democrats, the parties became more ideological and less able to compromise. "... Democrats, when in total control, have little choice but to govern from the left." It can work the other way too and that's no way to govern the country and stay in office.

But there is also the old problem that power corrupts. And hubris is a turn-off. And overreach follows.

Just the other day, Allan Meltzer wrote about Fed policy and entered the fray on what Milton Friedman would say. He also made his case for the best alternative policy. Uncertainty is the biggest problem. "I want a moratorium on new regulations and on tax rates."

Is Rauch's story the way to Meltzer's policy? Does this explain 21 for 30? Perhaps.

Saturday, November 06, 2010

Poison

Is there good reason to be optimistic about moral progress? In Guns, Germs and Steel, Jared Diamond retells his conversation with a Guinean native who actually began life in the Stone Age. His companion tells Diamond that if he encountered anyone not from his tribe, the first decision he would have to make was whether to try and kill the stranger or not. Has tribalism receded in our day?

We are now in Germany and in this lifetime, it was policy to murder me an many like me for tribal reasons. Germany has seemingly changed (and to be fair, Germans, unlike many others, acknowledge their crimes). I mentioned Timothy Snyder's Bloodlands in my Oct 27 post. Bryan Caplan quotes one of many chilling passages from the book that shows how easily tribalism can trump normal civility. This echoes Daniel Goldhagen's work. Snyder recounts mass murder orchestrated by Stalin as well as by Hitler.

Snyder shows how class warfare as well as race warfare each provided a banner for under which mass murder could occur. While not in the same league, U.S. elites still toy with too much of each. I think that each is poison.

So is there moral progress? I do not know. I enjoyed Robert Wright's The Evolution of God. Kwame Anthony Appiah's The Honor Code is next on my list. It will take quite a bit to get over Bloodlands.

Friday, November 05, 2010

Tuesday and Paris

When Parisians hit the streets to protest working to age 62, it was noticeable that many of the protestors were young. One young man told the TV interviewer that if this change is allowed, there may be no retirement benefits when he reaches retirement. One would think that the opposite is true.

Traveling and speaking with the occasional European, it's easy to get the impression that when members of the middle class do not expect upward mobility in their lifetime, then a future via welfare state benefits is what is left. And as long as Americans do bet on upward mobility in their lifetime, they have less interest in welfare state benefits.

How to interpret the results of Tuesday's election? The welfare state promises of the 2008 majority were just not that attractive. Benefits via upward mobility is still idea favored by most Americans.

It is fashionable to scoff at upward mobility as a realistic prospect. But what do we know? Immigrants routinely place big bets on the prospect of personal advance via their own efforts. Tuesday's results suggest that a majority of voters feel the same way.

Tuesday, November 02, 2010

No surprise

Housing in the U.S. has been politicized for many years. The recent boom-bust were inevitably touched by politics. The question of exactly how much of the "perfect storm" (which and how many weather fronts) originated in Washington DC is a difficult question that will occupy researchers for many years. Here is new evidence of the political roots of subprime lending.

There are still many people who sincerely believe that the consequences of growing political involvement are benign -- or even progressive (as in progressive redistribution). Many of the same folks also bemoan increasing inequality. I have no idea how they square that circle. But when several trillion dollars of GDP are politicized, there will be consequences -- and it is not a good bet that the resulting consequences will be either benign or progressive.

Monday, November 01, 2010

Young and crazy

The question of whether striving and acquiring make us happy will probably always be a teaser and conversation starter. But Virginia Postrel suggests that the attractions of the trappings that go with success are worthy because they incite the actions that go with progress.

What about procreation? In past times, natural lust was thought to take care of that. But ever since that link has become an option, we can ask about the priors that would-be parents start with. Perhaps crazy optimism among the young is a good thing. Julian Simon would probably agree. Pessimism and caution in old age also seem to be useful adaptations. It is pessimism among the young that has no easy explanation -- and that is seemingly rare.