Tuesday, May 31, 2011


Here is Don Boudreaux's challenge bet made in this morning's WSJ.  The approach is inspired by the famous Julian Simon-Paul Ehrlich wager.  Bravo, Don!

Monday, May 30, 2011

Driverless is not very macho

Tyler Cowen wrote about the potential of driverless cars, and why they are slow to emerge, ("Can I See License, Registration And CPU?") in yesterday's NY Times.

Granted that absent peak-load pricing, we waste a lot of time stuck in traffic.  (The title of a pretty good book on the problem.)  And granted that as the highway system is politicized and auto engineering and production are heavily regulated (and, of course, politicized), available new technology will become available too slowly.  A privatized highway system would be better in all respects.  These points have been made over the years by many writers.  I like this collection by Gabriel Roth and friends.

The only thing missing from Cowen's essay is that fact that most people love to drive.  Many grudgingly choose automatic transmission and miss the real thrill of actually driving. The cliche is "ask any teenager".  Many people prefer "motoring" to "driving".  And then we get into discussions of the psychological factors ("macho motoring") that come into play.  Dargay and Gately show the demand is pretty universal.

Sunday, May 29, 2011

Transportation planning with hands tied

Gilles Duranton and Matthew Turner have "The Fundamental Law of Road Congestion: Evidence from U.S. Cities" coming out in the American Economic ReviewHere is the pdf.  They investigate whether new highway or new transit investments relieve traffic congestion and find that the answer to both questions is "no".  And "Surprisingly, our data also suggest that a new lane kilometer of roadway diverts little traffic from other roads."  Their empirical work is interesting because it has to address the problem of simulteneity between road capacity and the demand for road use.

The findings corroborate Anthony Downs' "Fundamental Law of Highway Congestion" which is just one more way of saying that the absence of pricing messes things up.  Not only is congestion the default rationing device, but the build-option has limited usefulness if the price-option is discarded.  It' a little bit like having one hand tied behind your back. These thoughts are well understood and it is very good to have them corroborated via serious analysis.

Friday, May 27, 2011

Research help

Here are the submission guidelines for the Journal of Spurious Correlations.  This is good to keep handy for at least two reasons.  First, if your favorite journal rejects your work because referees report that it is simply about spurious correlations, it's good to have a back-up place to send your manuscript.  Or you could go to the JSC first. 

But the second reason is a new and handy research tool called Google correlate which expedites data mining.  The WSJ offers this wonderful example of a useful application.  They show the great fit between three variables that were always suspected of being causally linked:  Fed Balance Sheet, How to Get Over a Guy, and Nausea Remedies. 

The report does suggest the need for further research.

Wednesday, May 25, 2011


"Insider trading" is hard to define and successful prosecutions are rare.  The recent conviction of Raj Rajaratnam is an exception.

Alan Ziobrowski and his colleagues have recently published "Abnormal Returns From the Common Stock Investments of Members of the U.S. House of Representatives" in the Berkeley Electronic Press.  Here is a link to the abstract.  I have no idea whether investigations are underway and if there will be accusations, prosecutions and convictions.  I'm not even sure these would be feasible.  But exposure as in the cited paper is nice.

Hillary Clinton made some astute cattle futures trades in her First Lady days and quickly made a lot of money.  She explained it all with "I read the Wall Street Journal," and that was that.  Some of us are inevitably better placed than others to make lucrative market bets.  That's life.  It goes back to the quaint old idea that the only antidote is a smaller role for politics and politicians.

H/T Brad Hill

Monday, May 23, 2011

Tomorrow's transport?

Today's WSJ has a whole section ("Tomorrow's Transport") devoted to transportation.  Some of it is OK and some not. 

The lead piece by Robert Puentes leaves the impression that existing public sector transportation programs leave much to be desired, but they can be fixed.  That begs the important question of which and how many epiphanies there will be among our elected officials.  The companion piece by Richard Geddes ("Where the Money Is [Hint: It Isn't Government"]) boosts public-private partnerships.  These can be a source of cash, but crony capitalism may not be a source of wisdom and practicality.

"Highway Robbery" features some of the Texas Transportation Institute's cost estimates of U.S. urban road congestion.  The dollar value of delay costs and fuel costs for the U.S. add up to $115 billion a year.

On the positive side, the section alludes to some of the transportation projects that had been highlighted in past years as collected at Paleofuture.  But nearby, there is "Has the Monorail's Future Finally Arrived?"  Unintended irony?  The accompanying graphic shows Monorail performance where such systems run.  (Disneyland's excluded.)  The biggest (not counting projections) is Chongqing's (which I recently rode) which gets 380,000 daily riders which is more than double Disneyland's, but not much for a metro area of about 14-million residents.

There are more pieces, most of them pretty good converstation starters.

Sunday, May 22, 2011

Learning from trial-and-error is the only way

Most of the problems we come up against are much too complex to benefit from an analytical solution.  There is only one option and that is to be open to trial-an-error learning.

Tim Harford applies this insight to various episodes from politics (including war), science and business. His Adapt: Why Success Starts with Failure is well worth reading.

Harford malkes his case by carefully describing the successes as well as the failures.  Of the latter, he studies several of them and finds that, "[Leonid] Kantorovich, [Salvador] Allende, [Robert] MacNamara and [Donald] Rumsfeld all seemed to operate on the assumption that better computers and better communication links would help the process of centralisation, gathering everything into one place where a planner could make the key decsision.  The exact opposite is true ... " (Location 1246)

But before we scoff at these four failures, we are reminded that their mind-set is widely shared.  In fact, all who resist learning from their own past mistakes are candidates for the fate of failure.  Yes, Harford also writes about the financial crisis of 2008.

Towards the end of the book, he briefly writes about his own three-year old daughter briefly lost in a car-free area of London and having a great time, oblivious to anything wrong.  He concludes this way:
The ability to adapt requires this sense of security, an inner confidence that the cost of failure is a cost we will be able to bear.  Sometimes that takes real courage, at other times all that is needed is the happy self-delusion of a lost three-year old.  Whatever its source, we need that willingness to risk failure.  Without it, we will never truly succeed.


Here is the author discussing Adapt on Econtalk

Saturday, May 21, 2011

The R-word and the S-word

Here is Ken Green on wind power.  Here is Matt Ridley on renewable energy.  Anyone interested has surely seen various discussions of the silliness of "renewables".

While "sustainability" is often left undefined and used to evoke feel-good responses, many of the discussions do end up with the idea of somehow promoting a switch from "non-renewable" to "renewable" fuels.

There are at least two problems that the two cited links bring up.  Ridley reminds us once again that the stone age did not end because our ancestors ran out of stones.  We rarely "run out" of stuff and then move on.  Price signals kick in way before that.  Secondly the "renewables" that are so often touted (like wind and sun) are not free.  Instead they are very expensive.  What is "sustainable" about that?

Suffice it to say that it makes no sense.  But how many course syllabi come up with "sustainability" mentioned when you do a Google search?  About two-million.


It's just a Google search.  Try "sustainability" with "syllabus" and you get 1.2 million hits.  "Economics" and "syllabus" gets 4.4 million; searching "sex" along with "syllabus" gets 5.5 million.

Thursday, May 19, 2011

Migration and the job market

Ruben Hernandez-Murillo and colleagues report on "Patterns of Interstate Migration in the U.S. from the Survey of Income and Program Participation."  Panel data (which the SIPP is) that report on individuals before and after some event (in this case migrating) are the best.  And I am drawn to these types of studies because macro-level labor market analyses can mislead. Unemployment remains high in many places and many sectors because of bad matches between jobs and workers. Migration can help.

The authors are able to consider before-and-after wage and employment characteristics of the movers.  They can do this for by gender, age, race, and level of education.  An odd result is  that they find that the employment rate falls for all groups.  Then why move?  For reasons that are unclear the authors only look at a three-month window at either end of the move.  Do people eventually become better off?  Or are the movers making a huge mistake?   

The authors can also compare origin vs. destination unemployment rates, incomes, foreclcosure rates school rankings and homicide rates.  That's the good news.  The bad news is that even their rich data source tells them little. "Surprisingly, there seems to be little difference between between a majority of the characteristics."  I think that it's a problem of aggregation.  The authors also had metropolitan-level data available from the SIPP, but only for two of the panels, 1996 and 2001.  I expect that a five-year window and smaller areas would have been more useful.  So I wish they would not have done a state-level study.

There is good news and bad news.  Panel data are best.  Maximum spatial disaggregation is best and wider time-windows are a good idea.  There are dissertations to be written.

Tuesday, May 17, 2011

Making the right call is not enough

Fred Foldvary is one of the smartest economists I know.  I have cited his Public Goods and Private Communities many times.  Charles Tiebout advanced our thinking of local public goods and Fred Foldvary took it the next logical step.  There are market signals and markets for the local public goods that have a spatial ambit.  Fred calls them "territorial goods" and we find them in private communities, shopping malls, industrial parks, cruise ships and all sorts of other places.  This upends much of the public goods/market failure story that is still pedaled so widely.  

This piece by Mason Gaffney tells the story of how Fred was right once again while much of the economics profession was not.  And to make matters worse, he did not get the credit he deserves.  The failure of so many economists to call the crash of 2008 is well known, but Fred made the call in his 1997 paper.  He wrote about cheap money and housing. 

Here is the abstract to Gaffney's report:
In 2010 there was a contest to discover and recognize the economists who foresaw and warned of the crash that came in 2008. Fred Foldvary foretold the crash exceptionally early and exceptionally precisely, writing in a refereed journal article in 1997: “the next major bust, 18 years after the 1990 downturn, will be around 2008, if there is no major interruption such as a global war.” Although Foldvary was nominated for the prize by some thirteen separate individuals, his name was excluded by the prize organizers. Instead the prize went to two of the “family” members of the prize organization, and one other person. I compare the predictions by the prize-winning “family” members to the prediction by Foldvary. The ideas represented by Foldvary’s research deserve attention.

Monday, May 16, 2011

Going green

Not so long ago (Feb 7, 2008), the NY Times included "In Many Communities, It's Not Easy Going Green."  Going green is not a free lunch.

But yesterday's NY Times included a review ("Behind the Greening of Wal-Mart") of Force of Nature: The Unlikely Story of Wal-Mart's Green Revolution (which I have not yet read).  Apparently, attention to the bottom line made them "go green."

Can both be true?  Of course.  Management has to make customers happy and some may choose green products and retailing in their shopping.  Management also has to please various local governments and any hurdles they put up.  And management has to be able to post performance numbers that impress capital markets.

They can apparently do all three up to a point.  Decent management is, after all, a full-time activity of dynamic discovery of new ways to do just about everything the company does.  This is how and why a behemoth can remain successful -- unlike some others we can name that look for hand-outs to stay alive.

This does not mean that Wal-Mart's managers will follow the environmentalist playbook, but perhaps the story will move some commentators away from the tired juxtaposition of "business vs. consumers" or "business vs. the environment" or you name it.

Wednesday, May 11, 2011

Build it and they will come?

I am interested in U.S.-western Europe city comparisons and found "Transit and Density: Atlanta, the U.S. and Western Europe" by Alain Bertaud and Harry Richardson (chapter 17 in Richardson and Bae).  Here is the paragraph I liked best:

Hypothetically, suppose that the city of Atlanta wanted to provide its population with the same metro accessibility that exists in Barcelona, i.e. 60 percent of the population within 600 meters from a metro station.  Atlanta would have to build an additional 3,400 kilometers of metro tracks and about 2,800 new metro stations.  This huge new capital investment would allow Atlanta's MARTA to potentially transport the same number of people that Barcelona does with only 99 kilometers of tracks and 136 stations.  The effect of density on the viability of transit is far from trivial. (p. 307)
U.S. planners have learned about this the hard way.  Look at rail transit's performance in U.S. cities. 

Or have they?  The response is actually, "build it and they will come."  "Transit-oriented development" will make Atlanta more like Barcelona.

Is the high-speed rail discussion any different?  Remember this from January 26 of this year?
Our infrastructure used to be the best, but our lead has slipped. South Korean homes now have greater Internet access than we do. Countries in Europe and Russia invest more in their roads and railways than we do. China is building faster trains and newer airports. Meanwhile, when our own engineers graded our nation's infrastructure, they gave us a "D."
We have to do better. America is the nation that built the transcontinental railroad, brought electricity to rural communities, constructed the Interstate Highway System. The jobs created by these projects didn't just come from laying down track or pavement. They came from businesses that opened near a town's new train station or the new off-ramp.

So over the last two years, we've begun rebuilding for the 21st century, a project that has meant thousands of good jobs for the hard-hit construction industry. And tonight, I'm proposing that we redouble those efforts.

We'll put more Americans to work repairing crumbling roads and bridges. We'll make sure this is fully paid for, attract private investment, and pick projects based [on] what's best for the economy, not politicians.

Within 25 years, our goal is to give 80 percent of Americans access to high-speed rail. (Applause.) This could allow you to go places in half the time it takes to travel by car. For some trips, it will be faster than flying -- without the pat-down.  As we speak, routes in California and the Midwest are already underway.
It's safe to say that Atlanta will never be anything like Barcelona and that U.S. travellers will not adopt the habits of Chinese or Europeans.


Speaking of Barcelona, here are some thoughts about its urban problems.  H/T Urban Demographics


Brookings study shows providing transit access to jobs in U.S. cities is not simple.  Is anyone surprised?


Adrian Moore and Bob Poole take up these issues and fittingly invoke the S-word (sustainability).

Tuesday, May 10, 2011

Cheap is (mostly) good

It is by now well known that obesity and diabetes afflict the poor disproportionately.  Here is reference to a recent case study. 

Through history (and in parts of the world today) the poorest were at risk because of the reality of malnutrition and famine.  But our successes include better technology that makes calories cheaper and within the reach of more people.  Writing in last Saturday's WSJ, Matt Ridley offers "Three Cheers for the Cheapeners and Cost-Cutters ... The greatest impact of a new idea comes not when it's dreamed up, but when it becomes cheap enough for many people to use." 

Arnold Kling here notes that smart phones used to be seen on people wearing business attire, but now they go with any attire, including that of the young and the thuggish (my descriptor, not his).

Affluence (like anything) is a mixed blessing.  But I will take obesity over famine any day.  In Bonfire, Tom Wolfe referred to the wealthy ladies of the NYC Upper East Side as "social x-rays".  The rich are now thin and the poor are not.  What what would life be without all these ironies?

Sunday, May 08, 2011

The future

Tell anyone that you are an economist and pretty soon they want to know if you can share what you know about where the economy is going -- ans what to do about it.  Economists have brought this on themselves by often taking on the posture of a forecaster.  Back in the day, undergrad econ majors were taught things like "cobweb models" (micro) and Evsey-Domar models (macro), but I do not think that there was ever the hint that these are useful for making forecasts.  What then?  They were useful for grasping some market fundamentals so that we could think about markets clearly.  Forecasting is an entirely different matter.

In today's NY Times, Greg Mankiw addresses this topic "If You Have Answers, Tell Me."  He discusses three topical questions, all of which begin with the words "How long ...?"  These three questions are unanswerable, but they are inevitably asked and pondered by many people, inside and out of government and business and also in private life.  The story of bad forecasts is very old, but there is an understandable demand for advice about the future and some will then show up to supply it. 

Also in today's NY Times Book Review, there is Francis Fukuyama's review of Ronald Hamoway's collection of Hayek's works in particular his edition of The Constitution of Liberty.  The headline writer notes that (gasp!) "The economist F.A. Hayek believed that no government could know enough to plan for society."

Perhaps he did, but what is the hot topic on campuses, bookshelves and all sorts of journals?  I would nominate "sustainability."  We can make predictions about the future and we can control the future.  Double-gasp!

Thursday, May 05, 2011

Regional government or home rule?

Why can't Los Angeles be more like New York?  This is not something that Rex Harrison sings in My Fair Lady, but the subtext of "Los Angeles Is 88 Cities, Many of Them Corrupt" in the April 28 Atlantic.  It is all pretty predictable. 

The writer likes the way New York is run, Mayor Bloomberg, its City Council and the politics of the five boroughs.  He likes the centralization of NY and compares it favorably to LA county and its 88 cities.  This is all apples and oranges.  (The pun just snuck in.)

The LA metropolitan area is actually spread over parts of five counties and includes twice as many cities as writer Conor Friedersdorf cites.  The Orange county-LA county boundary is invisible to most of us.  And even granting Friedersdorf's view of the world, trading the 88 cities he acknowledges for even more authority accruing to the LA County five-member Board of Supervisors would be no great boon.  These five already have much more power and money than they can wisely administer.

There are many good reasons that Americans migrate to the suburbs and one of them is home-rule.  Another one is a measure of local government choice.  The City of Bell and some others have been found to be corrupt.  But the fact that the bad guys have a small jurisdiction to steal from rather than a big one is a good thing. 

One very important, though imperfect, check on local government corruption is competition among local governments.  This trumps the fact that Friedersdorf's girl friend has a dog not licenesed in Santa Monica, the place that she prefers to take him.  Yes, boundaries create problems, but there are also huge advantages.

Tuesday, May 03, 2011

Life on the slow track

Here is Wendell Cox, responding to this piece in The Economist.

An old trope is that Europeans wisely invest in infrastructure (especially rail) while dumb Americans are stuck in their cars in heavy traffic.  Read no further than their lede:  "America's transport infrastructure: Life in the slow lane."  One should immediately be suspicious.  Wendell's post sets the record straight, but look for the magazine's report to be widely cited and quoted.

I have mentioned in previous posts that I have been looking at the EU's Urban Audit which includes city-specific and metro area-specific commuting data.  Urban Audit and The Economist's source both have Hungary/Budapest with the worst travel times.  But even if I include Budapest, an unweighted average for 13 major European cities for 2001 is 34 minutes one-way (all modes).  It is slightly less for 12 major metro areas (Dublin included in city list only), 32 minutes one-way.  In most cases, the metro numbers are lower because they include the less congested suburbs.

Go to the survey that The Economist links to and they report an EU average commute for 2000 of 37.5 minutes (clarification: one-way).

I had reported earlier that the 2009 (NHTS) averages for U.S. commuters were lower, 25 minutes for urban areas and 24 minutes for suburbs (22 minutes for what they call "second city", and edge city label).  These are also one-way and all modes.

Why are the U.S. averages lower?  Probably because we have more suburb-to-suburb commuting.   But that's the last thing that a proper and cosmopolitan reporter would come up with.

Monday, May 02, 2011

Good for politics and good for cities

Former Milwaukee Mayor John Norquist wrote thoughtfully about school choice in his The Wealth of Cities: Revitalizing the Centers of American Life.

He repeats some of this in today's WSJ ("School Choice and Urban Diversity ... Many more middle-class parents would live in big cities if they could pick the public schools their kids attend.")  I get the impression that Norquist would be agreeable to removing "public" from the quote.

Many have wondered how those on the left square their concerns for poor people with their support of the education establishment's opposition to school choice.  This is why it is so nice to see that it is possible for someone with real political as well as Democratic party cred to break out of that logjam.  It suggests the possibility of progress for U.S. politics as well as for American cities.

Sunday, May 01, 2011

Urban planning success

The current problems with drugs and violence in Mexico have heightened interest in Colombia and the successes of the Uribe regime.  Francis Fukuyama and Seth Colby provide some interesting observations in the May/June 2011 Foreign Policy ("Half a Mircale: Medellín's rebirth is nothing short of astonishing. But have the drug lords really been vanquished?")

Notably included are urban planning successes in Medellín.

... It would take a political revolution, however, to turn the ideas into a real-world policy agenda. This revolution was led by a newcomer to politics: Sergio Fajardo, a professor with a Ph.D. in mathematics from the University of Wisconsin who became mayor in 2004, boosted by an unorthodox coalition of business people, grassroots community organizers, and the middle class.
Telegenic with his trademark blue jeans, open shirt, and curly locks, Fajardo began writing a regular column in the 1990s for the Medellín newspaper El Mundo about local politics. "We realized," Fajardo told us, "that politicians are the ones who make important decisions in society whether we like it or not, so we said to ourselves that we have to get into politics. Instead of saying how things should be, we said this is the way it is done." In Fajardo's view, Medellín had two fundamental, and related, problems: extreme inequality and a culture of violence. Fajardo believed that policies aimed at repairing the city's damaged social fabric could alleviate both.
The most striking feature of Fajardo's approach was his plan to erect high-quality public architecture in Medellín's poorest neighborhoods. "Architecture sends an important political message," he says. "When you go to the poorest neighborhood and build the city's most beautiful building, that gives a sense of dignity." Fajardo and his colleagues believed in social urbanism: the idea that modernist buildings and transportation systems of the sort Libia Gomez now enjoys would help bridge the enormous gulf of distrust separating the poor from mainstream society. In barrios like Santo Domingo and Comuna 13, the city created digitized maps of every street and building, noting where drug gangs operated and money flowed, and devised architectural features to disrupt them.

This sounds like "broken windows" on steroids.  Pay attention to appearances in a credible way and good things happen.  Good things here happened in the context described in the rest of the piece.


I should be clear.  I am not referring to "broken windows" in the Bastiat parable sense, which parodied the idea that there are stimulative benefits from destruction.  I meant to refer to the Kelling-Wilson idea that physical repairs signal that there is civilization rather than anarchy.