Monday, July 30, 2012

To your health

Last Saturday, the NY Times lede was "Doctor Shortage Likely to Worsen With Health Law."  Yes, if demand expands, something has to give.  The accompanying story is standard fare and reports that, "The Obama administration has sought to ease the shortage."  Thirty years ago, "manpower planning" was all the rage for people unfamiliar with labor markets.

Today's LA Times' lede is more promising. "In-store clinics look to be a remedy for health care influx."  The phenomenon is hard to miss.  The story quotes skeptical doctors but does mention that, "These in-store clinics have performed well thus far.  Studies by Rand found that these clinics provide care at costs that are 30% to 40% less than similar care provided at physician's office and that the care for routine illness was of similar quality."

Those lucky enough to have gold-plated medical insurance have choices, but many others do not.  For the latter group, the likes of CVS, Target and even the evil WalMart may be a godsend.

Saturday, July 28, 2012

Let them be

Richard Florida kindly sites "Does Density Matter?" by Sandy Ikeda and myself in today's WSJ.  I have cited our story a few times on this blog.  It is Ch 22 in the Handbook of Creative Cities.

Sandy and I each had doubts about a "the more density, the better" view -- which we have encountered many times.  The more nuanced "Jacobs density" is Sandy's phrasing, but it captures our "let a hundred flowers bloom" story.

We all want economic growth which requires human capital to be creative and inventive.  That occurs when and where people can form the networks that work for best for them.  Beyond that, it is very hard to specify the "best" settings.  That's what land markets a for.  Until we somehow become much wiser, let them be.


Wendell Cox has more re the density confusion.

Thursday, July 26, 2012

Read this first

When there is rapid asset price appreciation, many people (including bankers, politicians, and many others) are tempted to leverage and buy into the boom. This helps to prolong the boom.  But nothing is forever and asset prices reverse ("bubble" pops) then people are eager to de-leverage and that prolongs the bust.

That is the textbook "credit cycle" which often becomes a bigger "business cycle".  That's the dry textbook version.  Michael Lewis has a much better name.  He prefers to call it "Boomerang"

Lewis is obviously a great writer, keen observer and very smart guy.  He makes it his business to go to Greece, Iceland, Ireland, Germany and California to see and hear the real players.  He calls it "a new opportunity for travel: financial-disaster tourism."  In each case, he manages to tease out delightful insights (and occasional confessions).  In some cases, there are also terrific character profiles.  His Santa Monica bike ride with Arnold Schwarzenegger is worth the price of admission alone. 

Wednesday, July 25, 2012

Tough questions

It is sad but true that parking in U.S. cities is badly managed and so is public transit.  When you put them together, the difficulties multiply.

Here is the Seattle story of parking poachers (h/t Patrick Sullivan). Put underpriced parking next to underused trains and planners have to start looking at parking rate hikes to balance the two. But that might turn away some transit riders which would further reduce train use.

The story in Denver is slightly different.  Here is the WSJ's report on how and why park-and-ride lots have taken up real estate that could be used for transit-oriented development.  Which is better for transit use?  Very tough question.

I attended a conference some years ago (cannot recall which one) where a speaker noted that one of the Northwestern states or cities or counties (again, not sure) had welcoming poster that included a picture of a bear snaring a salmon out of a mountain stream.  The speaker wondered which side an environmentalist would be on. Also a very tough question.

Monday, July 23, 2012

Update, please

This report argues that "the suburbs" are diverse.  You bet. In 2010, just the U.S. major metropolitan area's suburbs included 167 million people, more than 54 Percent of the U.S. population. That is more people than included in most countries.  I have argued many times that we have to move to more refined classifications.  "The suburbs" has a 1940s-1950s ring to it.

Yesterday, the NY Times tried it's hand at describing Los Angeles' San Fernando Valley, "Los Angeles? The Valley is Way Cooler".

But at 260 square miles, there is not much of a neighborhood feel to describe.  There are many neighborhoods which are radically different from each other.  "Valley Girls" exist in bad movies and TV shows.  "The Valley" may have been a place once upon a time.  But that was almost 70 years ago.

Saturday, July 21, 2012

"You didn't build that"

Peggy Noonan comments on Pres Obama's "failure to communicate" when he wandered into "you did not build that."  We expect more from a Barack Obama than we do from a standard issue politician. The president has fashioned and delivered some eloquent speeches; he is clearly intelligent and he is also a savvy politician.

But gaffes are interesting because they are revealing.  The "You did not build that" discussion is revealing in two ways.

First, every one of us routinely depends on an uncountable number of supply chains of unfathomable complexity that involve large numbers of strangers. So it is clear that we rely on the cooperation of strangers, but they do all this voluntarily and on the basis of mutual benefit.

Second, this is not what the president seemed to have in mind.  He wanted his listeners to appreciate what they get from their government.  But that is not a mutual benefit deal.  In the same newspaper as the Noonan column, there is David Wessel's "Everything You Ever Wanted to Know About The Budget* ... "But Were Afraid to Ask ... A lot of what government does is siphoning money from some and giving it to others ..."  People building a business will have to strain to see all this as a source of "help" to them.

Wednesday, July 18, 2012

Their game

The new iPhone is on the way and uncountable new apps and other electronic marvels come at us daily.  This is somehow the same world in which our political leaders want to build more trains.  Brookings' Cliff Winston takes up the story in today's WSJ ("Paving the Way for Driverless Cars ... Instead of focusing on an enormously expensive high-speed rail system, government should promote modern highway design.")  Yes, they should.  But who are we talking about?

One thing that politicos are pretty good at is reading the minds of their voters.  That, after all, is their bread and butter.  You don't have to go far before you encounter otherwise informed and thoughtful people who seriously believe that if we build enough of these projects, people will use them and the world will be a better place.

As I write this, Gov. Jerry Brown is at LA's Union Station to sign the funding bill.  There will be smiles all around.  Why?  Because they know their game.

Monday, July 16, 2012

"Sergei Brin is still in California"

It is not surprising that many city managers, city council people and other boosters dream of their city becoming the next Silicon Valley.  In fact, there are quite a few places around the world that call themselves Technopolis.  City planners still hope to find the magic when it comes to creating the best clusters of high-tech firms or shells for such.  But there is no known way to bottle the magic.

Randy Holcombe (in Handbook of Creative Cities) says it best. "The idea of planning a creative city misses the whole point of creativity." (p. 403).

I had not heard about Skolkova, Russia, until I found "Can Russia create a new Silicon Valley ... Sergei Brin is still in California" in The Economist. No one knows how to create the culture that links original thinkers with innovate risk takers. And these are never stand-alone. They are part of a supply chain.  The Economist piece rightly refers to a proper "ecosystem".

When Russians last tried this, they got the Boikonour Cosmodrome and Sputniks.  But that venture helped to bankrupt the place.

Saturday, July 14, 2012

Those four T's

It is remarkable that so much economic analysis ignores the public choice dimension.  "Stimulus", for example, is presumed to be "well designed".  Instead, it is simply a collection of political favors and bail-outs.  Supporters then gasp at poor multiplier outcomes.  That's the position of Joe Stiglitz in this conversation. "Timely, Targeted, Temporary and Transformative: Crafting an Innovation Based Economic Stimulus Package" adds alliterative punch and much more.

But similar criticism must be directed at public policy analysis.  The overwhelming number of studies also ignore the political context.  An uncountable number of benefit-cost studies seek to identify economically sensible public projects -- as though that can ever be the whole story, or that it even matters.

In today's WSJ, Allysia Finley writes about the politics of California's high-speed train project.  "How Insider Politics Saved California's Train to Nowhere ... The high-speed rail line may never be built, but it will save a few Democratic seats."  It's an old story, but Finley also places it in the context of Governor Brown's current campaign to raise taxes on "the rich."
... Next year taxpayers will have to start paying interest on the rail bonds—about $380 million annually for the next 30 years—assuming investors bite. That's nearly as much as the governor is proposing to cut from higher education if voters don't approve his millionaires' tax initiative in the fall.
 This plundering of higher education should serve as a warning to voters who think that approving the millionaires' tax will somehow save them from one day becoming sacrificial lambs on the government's altar. Nothing is sacred.

Thursday, July 12, 2012


The core lesson of economics is that specialization and exchange are the road to prosperity. The idea predates Smith and Ricardo.  They and many others articluated the idea, but humans had spontaneously practiced it for millenia.  There is some speculation that Neanderthals never got the hang of it and lost in the competition with our ancestors.

I have to conclude that economists have done a poor job of teaching the core lesson of their field.  Michael Kinsley writes in today's LA Times about "Outsourcing's bad rap ... Even if Mitt Romney sent jobs overseas, is that so terrible?"

It seems reasonable to assume that most of the likely voters had some class in their background where some economics was taught.  If so, and if any of it stuck, the current debate would not be hobbled by the kind of flat-earthism where one candidate seeks to capitalize on an outsourcing accusation and the other does a horrible job of explaining that there are serious benefits from specialization and trade. There would be plenty of sneering from commentators if party leaders argued over whether the moon was made of blue cheese. 

If this level of economics cannot be explained in ways that people get it, why bother with all the rest?

Wednesday, July 11, 2012

Where do the workers live?

I did not know much about the late Senator "Scoop" Jackson of Washington.  The July/August Commentary includes (one-time Jackson staffer) Joshua Muravchik's "'Scoop' Jackson at One Hundred: The conscience of a neoconservative giant" (gated).  The author presents a refreshingly modest, even shy and self-effacing, but yet successful, politician.  This sounds like a rare breed.

The essay is also interesting in how the author describes the evolution of the Democratic Party. "In those innocent days before it absorbed an admixture of angry, arrogant 1960s leftism, liberalism was a vaguely defined creed that attempted to give political expression to the impulse to do good. ... The two cardinal programmatic ideas of that philosophy were devotion to the 'common man' and the conviction that government had nigh limitless power to make people's lives better.  The common man was an American concept more elastic than the European notion of class. ..."

I know a few people who describe themselves as "Truman Democrats".  Muravchik claims many of these folks were also "Reagan Democrats".  I imagine the huge question for 2012 is whether any of them can see themselves as "Romney Democrats".

I have the occasional academic visitor from Europe who, new to LA, asks "where do the workers live?" I want to say "all over the place".  Whereas I see lots of "common man" folks all around me, I do not think of them as a class of "workers" as the label is used in Europe. 

This is where we usually go into social-economic mobility stories -- and data.  Here Rampell sees a glass half-empty. I do not.  Even those U.S. politicians who feed on class-warfare rhetoric claim to champion "the middle class" rather than "the workers".

Monday, July 09, 2012

Corner of the labor market

I had occasion today to hire some men from a nearby truck rental place to help me with some manual labor.  They did good work and were well compensated.  We even seemed to enjoy each others company.  The two men who helped me say they had been at this for about 20 years.

I tried to learn a little about this part of the labor market.  Times are slow and the guys on this lot expect about three days of work per week.  Busiest days are Friday, Saturday, Sunday.  The number of day-labor candidates who show up each day is in synch with this rhythm.

Other than the expected odds of getting work, is there a check on supply? This is where it gets not so pleasant.  My informants report that race matters.  In a black neighborhood, the number of blacks "allowed" to wait for work is unlimited but the number of Hispanics is limited. In Hispanic areas, it's the other way around.

I cannot vouch for the generality of any of this.  But it makes sense.  Rules make the world go round and people come up with these.  By now everyone should know of Lin Ostrom's contributions on this and also Robert Ellickson's  That's the good news.  The bad news is that tribalism is still the basis for organization in so many places.


Many people have enjoyed T.C. Boyle's Tortilla Curtain which is the author's patented take on the experience of Hispanic immigrants in LA.

A more than decent movie on the topic is A Better Life.

Saturday, July 07, 2012

Just another "Bootleggers and Baptists" moment.

The late Senator William Proxmire famously awarded his annual Golden Fleece Award to the silliest or most wasteful federal program.  A worthy successor migh be a Bootleggers and Baptists award, perhaps awarded by Prof. Bruce Yandle or his followers.   I realize the competition would be intense because there are so many contenders.

Today's LA Times reports "California Senate vote keeps bullet train alive ... In a victory for Brown, the Legislature approves funds to begin the system in the Central Valley."   California politicians do not want to surender their $3 billion federal grant.  But no one has any idea how much matching from State taxpayers will be required. 

No serious economist or transportation expert believes this project has any merit.  I cited some of the discussion here.

The Obama and Brown Administrations have been pushing hard for this boondoggle.  "Green jobs" says it all.  Jobs at any cost dressed up as "green".  But who can blame them?   "Green jobs" is nothing but Bootleggers and Baptists.  These guys know what they are doing.


Yet another bus beats train.  H/T Patrick Sullivan.

Thursday, July 05, 2012

Cities, "creative" types and entrepreneurs

I had earlier blogged my appreciation of Enrico Moretti's The New Geography of JobsHere Adam Ozimek mentions the same book and notes that Moretti's work indicates that "Richard Florida Is Wrong About Creative Cities".  Moretti describes Berlin, which is apparently a magnet for "creative" people but suffers economic stagnation.

To be fair, Berlin has a unique history.  Until the fall of The Wall, the island of West Berlin was a heavily subsidized outpost kept alive at high cost for political reasons.  That ended just over 20 years ago and no one knows whether an enterpreneurial culture can take root in that short a time span.

Closer to home, Stolarick, Lobo and Strumsky (SLS) take up the more interesting angle.  They address a key related question when they ask, "Are Creative Metropolitan Areas Also Entrepreneurial?" 

Florida suggests how to count who is "creative", but SLS look for ways to measure the presence of entrepreneurs.  They study the National Establishment Time Series data base (NETS).  "NETS measures the birth and death of establishments, and the change in employment associated with establishments' births and deaths, the expansion and contraction of existing establishments and the movement of establishments in and out of an area."  SLS report that the average number of new firms arriving in a metropolitan region in any year is surprisingly small, about 2.2% of all new firms.

But that is not the whole story.  The number of surviving, expanding or newly opened firms (“births”), also indicate the arrival of new capital and perhaps new entrepreneurs.  SLS report that they have found an empirical link between entrepreneurs and an area's "creative" talent pool.

I like this study because the discussion moves beyond "creative" people and "creative cities."  The magic comes from enterpereneurs.  If we can identify these and where and why they move, then we have progressed.

Tuesday, July 03, 2012

What do we know?

Matt Drennan and Charles Brecher ask "Can Public Transportation Increase Economic Efficiency?" It's a great question which should include consideration of the cost side.  The cost side can sink the argument if the transit choices are the high-cost political favorites -- which I have complained about many times (as recently as last Friday on this blog).

That aside, the authors study 42 U.S. metropolitan areas and consider square feet of office space in each.  They pay attention to the proportion of metropolitan area office space concentrated in the area's central business district (CBD), reasoning that the high rents paid there signal the presence of agglomeration opportunities.  And these must be the places where good things happen, including knowledge spillovers and information sharing.

Then it's a hop-skip-and-jump to testing, via regression analysis, whether public transit makes a difference. "For those CBDs with more than 30 percent of the total metropolitan office space, the effect of transit use on rents is small but positive and statistically significant. For suburbs in those MSAs the effect is similar.  By contrast, the results show that transit use has no effect on office rents in places with a low concentration of office space in the CBD."

There are, of course, questions of mutual causation. Have new transit systems prompted new office agglomerations?  And, again, at what cost?

What do we know?  Transit subsidies have been growing for many years and most cities keep suburbanizing -- as they grow.  Growing cities manage to capitalize on the agglomeration econonomies where they can find them.  And most new office space is outside traditional CBDs.

Sunday, July 01, 2012

Chinatown, not the movie

Art Carden summarizes all sorts of recent research on Wal-Mart here.  Less formal research notes that customers line up to shop at Wal-Mart and workers line up to work there.  But simple markets tests are beyond many people. This is why today's LA Times reports that "Thousands rally against Wal-Mart in Chinatown ... Several union and civil rights activists speak at the event opposing a new Wal-Mart store in Chinatown, and Rage Against the Machine guitarist Tom Morello plays 'This Land Is Your Land.'"

As with all such protests, they come from two quarters.  Some are completely incoherent; others have everything to fear from competition and real people voting with their real dollars.

It is sad that these are the two groups are the natural constituencies of City Hall and much of the local news media.

The young lady in the photo holds up a banner which says "Wal-Mart: Keep your hands off Chinatown."  She should know that LA's real Chinatown is now about ten miles east in the San Gabriel Valley and has been for some years.  That's where LA's great Chinese restaurants are and that is where most of the region's many Chinese and/or Chinese-American shoppers go.  Many of the rest of us go there when we want a really good Chinese dining experience. 

The old downtown LA Chinatown is pathetic and people should be celebrating the fact that the neighborhood attracts the interest of any investors.