Sunday, December 30, 2012

Fickle Facts

Organizing my materials in my office has always been a problem.  This was true in the paper age, the PC age and even in the Internet age.  Samuel Arbesman in The Half-life of Facts says "Forget about it." Most of them are not worth remembering anyway.  Many are quickly outdated and (the fun part of his story) hang on because we do have our cognitive biases.

The author is a fine writer and takes us through an amazing amount of material in very few pages.  There are many knowledge growth paths that follow a logistic curve trajectory, but phase transitions kick in whereby we jump to the next logistic path. This is relevant when Arbesman quickly considers the Santa Fe Institute work on cities. There are important empirical links of many urban phenomena to city size (he mentions gasoline stations) but there are scale economies whereby the number of stations per capita is not fixed. But there are also phase changes whereby we jump to the next logistic path.

Arbesman does not elaborate, but new facts of life signaled by new prices prompt the phase transitions. Think about how cities have changed as autos and highways came into use.  This phase transition rendered established relationships moot. Costs of Sprawl are a case in point.  The Santa Fe data are fitted across phase changes that are always lurking because price signals are always at work. Those fickle facts.

Thursday, December 27, 2012

Taking on the f-word

I frustrate many students when I warn them about using the four letter f-word.  "Fair" inspires much serious work (and fun) by philosphers, but its free and easy use in daily discourse (don't even mention politicians) causes confusions and many problems. At best, recognize "fair" as a rhetorical device.

I am impressed with Stephen Asma's Against Fairness.  The author takes the strongest position on problems of the promiscuous use of the word.  Asma argues that "You can't love humanity.  You can only love people."  We are disposed to play favorites toward kith and kin -- and this is to the good.

He has some fun with the hypocrisy of those who favor a "color-blind" society and in the next breath lobby for affirmative action programs.  A blanket "fairness" towards all is an impossible goal.  Ghandi was a nut.

Asma takes up the dangers of "metaphysical tribalism" (Hitler's Germany, Rwanda, Bosnia), but is much too brief on the boundaries between "good" and "bad" tribalism.  He praises Sonia Sotomayor for her honesty (if not naivete) in admitting during her confirmation hearings that her background disposes her to a particular view of the law.  Much better than dishonest sanctimony.


Review by Meghan Clyne.

Tuesday, December 25, 2012

On the right track

The end-of-year double-issue of The Economist is usually worth waiting for.  The one that came this week includes several very nice essays.  The one I liked best describes life in Kibera, a Nairobi slum.  Here are some short outtakes:
Upwardly mobile Africa ... Boomtown slum ... A day in the economic life of Africa’s biggest shanty-town ...To equate slums with idleness and misery is to misunderstand them ... Kibera is a thriving economic machine. Local residents provide most of the goods and services. Tailors are hunched over pedal-powered sewing machines. Accountants and lawyers share trestle tables in open-air offices. Carpenters carve frames for double beds along a railway line. Whole skinned cows hang in spotless butcher shops. “Give me 30 bob,” says a customer to a paraffin seller, who has just taken delivery of several jerry cans from a porter with a steel-frame wheelbarrow. All day long, sweaty porters cart supplies along filthy lanes, hissing to shoo people out of the way. .. Life in Kibera can be harsh. Disease is rife, food is short for some, and death can come suddenly.
Just after eleven o’clock an explosion thunders past the paraffin seller. Lights in the shops along the lane expire instantly, then a mob charges past, accompanied by sharp screams and a sizzling, dancing power cable that has blasted off a faulty transformer overhead. The cable eventually goes limp and the crowd disperses. Minutes later the lights come back. ... The transformer, like all power in Kibera, is run by shady types who tap into the city grid. They are less than scrupulous when it comes to safety and they charge heavily. But at least Kibera has power, unlike many other parts of Africa. Soft drinks sold in shops are chilled. Rooftops are awash with TV aerials and mobile phones are as ubiquitous as in the West.
Kibera may be the most entrepreneurial place on the planet. ... The key to making it in Kibera is access to capital. A market of one million potential customers crowds in on entrepreneurs, but raising the money to start a business is hard. Most banks won’t lend to them because they have no collateral, perhaps not even a fixed address. Those who manage to borrow face high interest rates. Moses Mwega pays 25% a year and considers himself lucky. Over the years he has built up a cosmetics shop selling creams, wigs and shampoos. The bank recently accepted his stock, a television set and a second-hand sofa, including lace doilies, as collateral. He got 350,000 shillings ($4,000) to expand his business.
There are entrepreneurs all over the world.  For most of them, access to capital is the problem.  Thanks to the internet, crowd-funding has a role.  I am a big fan of Kiva and do most of my giving through them.  Here is an academic paper (by Tillman Bruett) that shows how they and others like them are on the right track.

Sunday, December 23, 2012

Those taste buds

The various end-of-year best-books lists are out there.  But of many good 2012 reads, I keep coming back to Jonathan Haidt's The Righteous Mind.  Good people can have honest disagreements on profound questions because they are prompted by deeply engrained and different moral "taste buds" (Haidt's great label).

In my view, not enough people have digested Haidt's findings.  An exception is Arnold Kling's applications of "Three axes of concern" (civilization-barbarism by political conservatives, oppressor-oppressed by modern liberals, and freedom-coercion by classical liberals or libertarians) as he probes policy debates.

The current gun control discussions illustrate the problem.  I just fnished my Sunday morning ritual reading of the NY Times and am grateful that they place Ross Douthat's column at the end of the Review section, well after the standard weekly ritualistic breast beatings.

There will be new gun control legislation but I do not expect it will curtail the mass shootings.  There are 200-300 million guns out there; they will not be confiscated.  Being on the side of the angels and promoting schools as "gun-free" zones simply makes them places where killing sprees can occur.

Here is a thought experiment.  Which gun law would have stopped the gunman in the Newtown tragedy?  Or assume that one or more on the school staff is trained in the use of firearms.  Identifying and vetting such people and encouraging them to be armed and alert (if they choose) would dash the idea that these places are simply protected by a lock behind a glass window.  Which option offers better odds to potential victims?

I think the answer is clear.  But lying between thought experiments and advocacy (and policy) are those moral taste buds.     

Friday, December 21, 2012

Hard work

Matt Ridley (in the Dec 19 WSJ) wrote about "Cooling Down the Fears of Climate Change ... Evidence points to a further rise of just 1 degree C by 2100. The net effect on the planet may actually be beneficial."  So it was interesting to look at the Dec 24/31 New Yorker and find Keith Gessen's "Polar Express ... A journey through the melting Arctic, with sixty-odd thousand tons of iron ore."  It is a detailed account of a haul of iron ore from Murmansk, Russia, to Huanghua, China, via a new Northeast Passage, that is now available because of ice melt.  The author notes savings (including less fuel burned) over alternative routes via Suez or around the Cape of Good Hope. 

People have been looking for better trade routes through most of recorded history.  Polar Express is simply the latest example. Most of the inhabitants of the Americas, for example, are where they are as a result of such explorations. (There are, of course, politicians now seeking to block U.S. natural gas exports, claiming that not trading would be a benefit to the U.S. economy.) 

Climate change is not new and those seeing opportunities will seek to realize them.  As Ridley suggests, it is not all bad news.  Besides, who believes that we can extrapolate anything to 2100 with any confidence?  On the other side, Gessen notes the irony that the haul he accompanied was moving iron ore to China where it would be combined with coal to yield new steel as well as extra carbon into the atmosphere.  Irony on irony would be U.S. natural gas exports to China, enabling them to burn less coal.

Long run forecasting is very hard work. 

Tuesday, December 18, 2012

Cities and dreamers

I recently cited Alain Bertaud's new paper ("The costs of Utopia, Brasilia, Johannesburg, Moscow").  It's provocative and interesting.

Introducing economists' monocentric model of cities, Bertaud notes (p. 5), "The work of Alonso, Muth and Mills made an important -- but often overlooked -- contribution to urban planning: it demonstrated that the spatial structure of many cities is generated by a self-organizing principle driven by economic forces." 

Yes and no. Cities have changed to the point where the original model is no longer relevant.  Why? Automobiles and traffic congestion externalities have made the model as well as the actual monocentric cities untenable. But the polycentric form that Bertaud writes about was not planned but also came about via a self-organizing principle; it was driven by market forces. In fact, polycentricity is now widespread and obvious. The challenge of defining and identifying urban subcenters is now grist for urban researchers with enough patience and data.

Traffic externalities did not create traffic doomsday ("gridlock"); rather, they prompted land market responses to forestall doomsday.  The remarkable stability of average commuting travel times has been cited by many researchers.  A stronger test of spatial self-organization is the related finding that travel time stability extends to non-work travel also.  The complex land use arrangements that make this possible cannot be planned top-down.

Bertaud sees market forces trumping the efforts of designers. "Haussman did design street patterns in ninteenth century Paris, so did L'Enfant in Washington.  However, these 'urbanists' only designed the boundaries between public and private use ... they did not decide who was going to live where, they did not decide where offices and residential areas will be located and what should be the density in these urban areas. Market forces were left free to fill the bulk volumes alloacted to private use." 

Of course.  There is enough labor and capital mobility in the world so that any traffic doomsday city settings cannot compete.

On this theme, Bertaud studies the "utopian" cities and finds that their dispersion (as he defines it) is the most extreme. 

Likewise, Ed Glaeser writes on Oscar Niemeyer's passing: "Brasilia's hubris is a warning to urban dreamers ... The structures in this artificial capital are impressive, yet few want to walk its barren streets."


I should have been clear.  Dispersion by itself is neither a positive nor a negative.  "Good" dispersion is a land market accommodation that keeps travel distances in check; "bad" dispersion does not manage this. The median commute in spread out  Tokyo is 46 minutes (their mean would be longer), which is considerably longer than U.S. average commuting times. 

Saturday, December 15, 2012

The hard part

Mass murders terrify us; when kindergartners are slaughtered we sink into despair or beyond. 

Many scramble to be on the side of the angels. This morning's NY Times ("Death in Connecticut") concludes this way: 

"The more that we hear about gun control and nothing happens, the less we can believe it will ever come. Certainly, it will not unless Mr. Obama and Congressional leaders show the courage to make it happen."

We want the guns to be in the hands of the responsible people.  But how do we get from a country where anywhere between 200 million and 300 million firearms are in private hands to one where they are just in "responsible" hands?   Authoritarian regimes know how to disarm their citizens, but that route is not an option.

PBS NewsHour's Mark Shields mentioned last night that it is tougher in the U.S. to rent a car than to buy a gun.  True enough.  But how about "getting a car" or "getting a gun?"

As in so many cases, articulating a preferred end-state is simple.  The getting there part is the tough part.  It is the part that is usually skipped over.

If we cannot identify and disarm the irresponsible, there is no choice but to arm the responsible.  School teachers and officials are the ones that can be vetted. 

Thursday, December 13, 2012

Widening divide

Do we live to work or do we work to live?  When I press students, they quickly agree it is the latter.  (This usually introduces the question of whether we import to export or export to import.)  But the recent election showed that people worry about jobs, less about why there are jobs and what they produce.  The President famously blamed ATMs for job losses.  Where will this go if slow growth is with us for years?

I just listened to Russ Roberts talk to Chris Anderson about the latter's Makers: The New Industrial Revolution.  It's a fine discussion and introduced me to "the democratization of manufacturing."  The latest game-changer allows innovators to become manufacturers. I first saw a 3-D printer create gold crowns at my dentist's about ten years ago.  More capabilities move to the desktop all the time.  Add crowd-funding for capital and amazing things will happen.  I also learned that "Tijuana is the Shenzhen of North America."  Who knew?

There are many versions of what divides people.  Charles Murray warned us about one and there are many others that come to mind.  But perhaps the divide to concern us is between those who get the future and those who fear it. Virginia Postrel noted this some years ago. But I fear that divide is widening.

Tuesday, December 11, 2012

Happiness research we can use

Economist Joel Waldfogel has demonstrated that most gifting is a waste.  There would be no deadweight losses if we give cash.  But non-cash gifting is also universal and has been around for a very long time.  What is going on?  The giver and the receiver usually get something from the act which goes above and beyond the item being gifted.

I have no idea whether tongue-in-cheek prompts Waldfogel, but we should all grasp the limits of homo economicus.  It is a useful theoretical abstraction, but like all such abstractions, it cannot be taken to extremes.  Critics love the straw man and use it to attack all economic thinking.

These thoughts come to mind as I read a gift I just received, Paul Zak's The Moral Molecule:  The Source of Love and Prosperity.  On the book's jacket, Helen Fisher calls it "an important book".  Tyler Cowen says of Zak, "We need more daring economists like him."  There is also praise from Matt Ridley and Frans de Waal.

Zak concludes (p. 209) this way:  "In the nineteenth and twentieth centuries, economics tried to achieve scientific rigor by cutting off recognition of the human element of motives, epxectations and psychological uncertainties.  Fortunately, behavioural economics and now neuroeconomics, has put us back on what I consider the right track, which is a path that combines both rigor and perspective."

Zak's research on the moral molecule explains traditional gifting and acts of kindness.  It also helps us understand various virtuous cycles.  The positive feedbacks between trust, exchange and prosperity are just a few that Zak elaborates.

It is safe to gift Zak's book and not worry you are being wastful.

Sunday, December 09, 2012


"Fiscal cliff" talk is everywhere and most views are necessarily about generalities.  This is because the details are almost impossible to know.  The NY Times has performed a service by itemizing and publishing some of the details of what is spent these days by the feds.  Who said that "the hell is in the details"?

Economist Robert Frank offers wise counsel to both sides (also in today's NY Times) on how to bargain.  But how about this:

"Both parties could curry favor by embracing proposals to restore money for the programs that voters value most, and the president could delay cuts while Congress was debating those proposals."

Is that really how it works?  Do Frank and the other optimists look at some of the Times' data on where the money goes -- and then dream of some rational process by which it is restored/spent?

I have Sunday-morning TV talk show hangover.  Why not have everyone immerse him/herself in the Times' data, think how we got there and then opine how easily we get out?  

Friday, December 07, 2012

"Smart" or scalable?

Two related posts came my way quite concidentally within a few minutes.  They are worth considering as a pair because of the concerns they illustrate. 

The first is from Richard Sennett who worries about what may come of a confab now in progress.  "No one likes a city that's too smart ... Let's hope Rio rather than Songdo or Masdar is the inspiration for the urbanists gathering in London this week." 

There are amazing new technologies coming into our lives.  Can they replace the spontaneous order nature of successful cities? Sennett ends sensibly with this:  "We want cities that work well enough, but are open to the shifts, uncertainties, and mess which are real life."

On a similar theme, the second post is from Bertrand Renaud who writes about "The Costs of Utopia".  It's actually an old problem but ignored by by people who still see cities as entities they can design.  From The Urbanization Project, here is Renaud's punch-line:
Haussman did design street patterns in nineteen century Paris, so did L’Enfant in Washington. However, these “urbanists” only designed the boundaries between public and private use. They only allocated precise functions to public space: streets, avenues, parks, and public buildings. But they did not design the city in the sense that, with the exception of public monuments, they did not decide who was going to live where, they did not decide where offices and residential areas will be located and what should be the density in these areas. Market forces were left free to fill the bulk volumes allocated to private use.
Yes, it's mostly in-fill which the grand designers have very little to do with.  Sandy Ikeda has many times elaborated the idea that Jane Jacobs was the F.A. Hayek of cities.  Both Sennett and Renaud are writing in the same spirit.

Another way to say it is to consider the scalability of design.  But what does that mean? We rely on designers to do great things.  A pencil, a 787 Dreamliner, a comfortable chair, a skyscraper, my iPhone and countless other wonderful things in our lives rely on the skills of many sorts of designers.  But these involve designs that must meet a market test.  They must be susceptible to error correction.  The utopians that Sennett and Renaud worry about could be tackling a scale that does not easily avail itself of error correction.  Get a Hoover Dam or a high-speed rail line from Madera to Bakersfield California or a Burj Khalifa tower wrong and that's that.

Wednesday, December 05, 2012

No mystery

About a hundred years ago, privately owned and operated streetcars plied the streets of major U.S. urban thoroughfares.  Then they declined and eventually disappeared because (a) there was a nefarious corporate conspiracy to replace them with cars; or (b) most people preferred private autos for all the obvious reasons. 

Many seemingly serious people pick version (a), ignoring the idea of a market test.  But that's no problem because voter coalitions can often be formed/found to stick taxpayers (here, there and everywhere) with the bill for new ("restoration") streetcars.  Phoney cost accounting often helps. 

This is now an old story and has been repeated many times.  California is now building high-speed rail justified on specious grounds, with final financing unknown.  Making promises that cannot be kept is not new in American politics.

Today's case in point is the recently approved L.A. Streetcar.  Questionable downtown baubles are not new in American cities but LA has a special problem. It is the nation's #2 city (in size) but it it's downtown does not come close to #1 (or even to rival San Francisco's) up the coast.  In my estimation, it never will.

But they keep trying.  Here is some of the L.A. Times front page report from today's edition:
Streetcar line called downtown's missing link ... Approval of a $125-million project is hailed as the way to finally make cars optional in the city center — but skeptics say the money would be better spent elsewhere.

In a city that is often derided for its lack for public transportation, downtown L.A. is the one exception.

The city center has light-rail lines, a subway, a maze of bus routes and shuttles, links to commuter rail and even a tiny funicular that trudges up and down Bunker Hill.

But many residents and developers say that it can still be difficult to get around the far-flung city center without a car. So urban planners and downtown boosters have spent considerable time on what may have once been considered impossible: creating a truly car-optional neighborhood in the center of a region defined by its car culture.

Voters in downtown Los Angeles this week approved key financing for a $125-million streetcar project that might finally put this theory to the test. The streetcar would run mainly along Broadway, and Hill and Figueroa streets, three of downtown's main arteries, connecting various neighbors, including the old banking district, South Park, Civic Center and the fashion district.

Developers — and some residents — see the streetcar as a missing transportation link.

"If you're in New York, or San Francisco or Portland, you forget about your car. You walk, you take public transportation, and you get a much richer experience," said Scott Denham, vice president at Evoq Properties, a downtown developer. "The whole concept of being in L.A. and not having to drive to have a whole Saturday or Sunday to experience downtown… It's really not that far off in reality."
The story points to the political economy we have.  Every evening's news features furrowed brows fretting over deficits, fiscal cliffs, unfunded liabilities, etc.  But there is no mystery.  Milton Friedman explained it clearly in just over two minutes.

Tuesday, December 04, 2012

Some political economy

"Equity-efficiency trade-offs" are a staple of textbooks.  Best to keep it in quotes because "equity" and "efficiency" are not simple.

Beyond that, there are many cases where there is no trade-off.  End farm subsidies, for example.  The average subsidy recipient is better off than the average taxpayer.  And the efficiency of ending this pork is pretty clear. 

In our crony-capitalism world, there are surely many other subsidy programs that could be ended with similar win-win consequences.  This is apt in light of the current "fiscal cliff" situation.  It is still widely presumed that just about every tax dollar flows to good causes.

I just listened to Russ Roberts' interview with Casey Mulligan at econtalk.  Mulligan's research points to an explanation for high unemployment: a generous safety net.  There is more to the current recession than the standard credit crisis story.

I have yet to read Mulligans' book, but the discussion was interesting and provocative, to say the least.  He depicts cases where there is a high cost from policies that "help people."  Mulligan is careful not judge that the cost is too high.  He simply wants to document the fact that this time there is a trade-off.

While I am on this topic, I just finished Mark Pennington's Robust Political Economy.  It is a superbly written and up-to-date summary of how and why an understanding of classical liberalism is essential in these post-2007 years when markets-misunderstood is the cudgel used to push us deeper into debt and mess.

Knowledge and benevolence are in short supply.  This applies to "private" as well as "public" sectors.  But only the former allows (and punishes) failure -- if we let it.  That is all we have. 

Sunday, December 02, 2012

Talent pools

The Journal of Economic Perspectives is my all-time favorite journal.  Much of the good stuff is at the back with Timothy Taylor's "Recommendations for Further Reading."  I had not known about recent research by Pete Klenow.  Here is the abstract in the Fall 2012 JPE:
Pete Klenow reports some calculations about greater equality of opportunity and economic output in “The Allocation of Talent and U.S. Economic Growth.” “In 1960, 94 percent of doctors were white men, as were 96 percent of lawyers and 86 percent of managers. By 2008, these numbers had fallen to 63, 61, and 57 percent respectively. Skilled occupations have become more equally distributed across race and gender, as have earnings within occupations. The result is arguably better allocation of talent and human capital investment. . . . How much of overall growth in income per worker between 1960 and 2008 in the U.S. can be explained by women and African Americans investing more in human capital and working more in high-skill occupations? Our answer is 15% to 20% . . .White men arguably lost around 5% of their earnings, as a result, because they moved into lower skilled occupations than they otherwise would have. But their losses were swamped by the income gains reaped by women and blacks.” Stanford Institute for Economic Policy Research Policy Brief. July 2012. At
Letting merit dominate all other considerations is a very good idea.  Expanding the talent pool has many benefits.  It's always good to see the evidence confirm the expectation.

Good ideas are our only hope.  They usually win, but it often takes a depressingly long time.

This morning's LA Times includes various contributions that respond to concerns over the 7-billion world population mark.  Most of the writers discuss their ideas for more as well as more effective family planning.  But some of the really good ideas are not covered.  1. Economic growth prompts spontaneous family planning; and 2. More open borders by the population-poor countries would be a boon to the places that cannot get their institutions in order to facilitate economic growth; it would also refresh and replenish the talent pool of the receiving countries

Only one writer mentions economic growth and he sees it as a consequence of fewer people rather than the other way around.


Reader Larry Holt sends this update on fertility trends.

And the Dec 3 WSJ includes an op-ed:  "Obama vs. Silicon Valley on Immigration … Antiquated rules are causing a brain drain of skilled workers.

… Republicans in the House passed a bill that would expand visas for skilled workers, easing the waiting list that can be a decade or longer for technologists from populous countries such as China and India. It would repeal a law that limits visas from any one country to 7% of the total—a quota system modeled on the Asian Exclusion Act of 1924, which limited immigrants from any country to 2% of the number of people from that country already in the U.S. as of 1890."