Wednesday, February 26, 2014

Not inconsistent

These days, everyone seemingly worries about global warming and rising sea levels. In true Bootleggers and Baptists fashion, one can line up spiritual support for most boondoggles by making the claim that it is in the service of halting the rise in temperatures, the melting of ice caps, the rising of the seas, etc.

To be consistent :-), these advocates would find a way to end taxpayer subsidies of flood insurance. But it is not working out that way in the U.S. Congress. The Senators voted 64-35 to continue the moral hazard. Its all about "relief."
"I am here to say hallelujah," said Sen. Bill Nelson, D-Fla., about the strong likelihood for Senate passage. "It looks we are finally coming to the point at which we can grant the homeowners and businesses of America some relief from the huge, gargantuan, tenfold sometimes, increases in flood insurance premiums."
But, on reflection, spending taxpayers' money to subsidize flood insurance for beachfront properties and spending money for crackpot projects that might "get people out of their cars" (but never seem to) do have something in common.  Both of them spend other people's money and direct it to favored constituents. One simply has to look more deeply. 


These flood insurance subsidies are not even in the service of reducing inequality. The poor do not occupy beachfront properties.

Tuesday, February 25, 2014


Are we in Smartphone city yet? Mobile devices and their applications are everywhere. Growth projections are "off the charts." Even attempting to plot the future of all this is probably futile. 

A Census report enumerating the number that worked at home at least one day during a typical workweek is here. Wendell Cox analyzes 2000-2009 Census work-at-home data and notes that working at home had surpassed transit commuting in many U.S. metropolitan areas.  Admittedly, working at home as recorded by the Census is just a proxy for the phenomenon.  Electronic networking is better than ever and we do not know the extent to which it substitutes for or complements the old fashioned kind.

Better and cheaper travel and communications have always caused cities to spread out.  Can they spread to the point where they cease to be cities?  Some will say that this has already happened.

It is safe to say that cities are labor markets.  If one lives within a an acceptable commuting radius, then he or she resides in "the city".  The U.S. large-city commuting average has been hovering near 25 minutes for some years (see Table 3).  Anas in this volume concludes that "the elasticity of the average commute time with respect to the number of workers was about 0.1 in 1990 and 2000." (p. 146)

I recently listened to an urban geographer discuss the San Diego area.  In passing, he mentioned that Camp Pendleton would not be allowed to close because if that ever becomes a prospect, San Diegans will resist the possibility of becoming a part of a Greater Los Angeles metropolis.

Yes, spreading out will continue. There will be more and bigger meglopoli (what a coinage!). But within these, it is likely that most people will be able to work (even commute to work) quite productively within a comfortable commuting range.

Transformative technologies pop up almost routinely.  But their adoption is never simple or easy.  Where and how they will manifest themselves will surprise us. Beaulier, Smith and Sutter ponder all this in an interesting essay.

Thursday, February 20, 2014

Head scratchers

We suspect that many people are not well informed.  Why should they not believe that wages can be set by edict and that there are no consequences?  Why not believe in free lunches?  This study suggests that widespread ignorance is even worse than we suspect. 

There is also What is Seen and What is Not Seen (Bastiat). Raise the minimum wage and there will be winners and losers. The CBO Report provides the details. But the winners are easily seen; no one can see a job that was never offered.

But in a world where many believe the Sun circles the Earth, backers of the wage hike can challenge the CBO Report with impunity. The evening news can feature people who challenge, ponder and/or scratch heads at such an astonishing study.

Timothy Taylor puts the minimum wage boost in context. But asking the Sun-circles-the-Earth people to grasp the context is a very big order.

Tuesday, February 18, 2014

Four strikes

Writing about stirring up redistribution ("The Truth About the 'One Percent'"), James Pierson  (today's WSJ) notes:
This crusade is based on three questionable claims. One is that the wealthy are mostly Wall Street bankers benefitting from rising stock and real estate prices, or executives who pay themselves extravagant salaries. Another claim is that such people unfairly benefit from a system that taxes capital gains at half the highest marginal rate paid by those who earn salaries and wages. Then there is the assertion that the "super rich" have abundant funds that can be taxed to improve the living standards of everyone else. All of these claims are false.
Read the whole thing.

Arthur C. Brooks in Commentary writes ("Be Open-Handed Toward Your Brothers"):   
The 2008 election marked the return of progressive politics in America. For the first time in 16 years, Democrats won both houses of Congress and the White House. They wasted no time in articulating a progressive agenda they claimed would offset the Great Recession and turn America toward greater fairness and compassion. Lifting up the poor, decreasing inequality, and curbing runaway income gains among the wealthiest Americans ranked high among their stated priorities.
It has been five years. How has their project turned out?
Since January 2009, the Dow Jones Industrial Average has more than doubled. Last year brought the largest annual increase in the S&P 500 since the late 1990s. And the vast bulk of this sustained market surge has accrued to the extremely wealthy. According to New York University economist Edward Wolff, the top 10 percent of earners own 81 percent of stocks and mutual funds, 95 percent of financial securities, 92 percent of business equity, and 80 percent of non-home real estate. So it comes as little surprise that nearly all the real income growth that President Obama’s “recovery” has generated would flow to the wealthiest Americans. According to University of California, Berkeley, economist Emmanuel Saez, 95 percent of all recovery gains have accrued to the much-vilified “top 1 percent.”
At the same time, the poor have become even more desperate. The number of Americans receiving aid through the Supplemental Nutrition Assistance Program (known as food stamps) has increased by almost 50 percent since January 2009, from 32.2 million to 47.7 million. One in six citizens in the richest country in the world now rely on food aid from their government.
Today, a lower percentage of Americans are in the workforce—63 percent, according to the Bureau of Labor Statistics—than at any time since the infamous days of Jimmy Carter. This has the effect of reducing the official unemployment rate, which led Binyamin Appelbaum of the New York Times to quip: “We are basically ‘recovering from the recession’ by reducing the share of Americans who participate in the labor force. Hurrah!"
And what has happened to income inequality? A central theme in each of the president’s campaigns, this is one metric by which committed egalitarian liberals might judge this administration. Economists measure inequality with the Gini coefficient, a number from 0 to 1. Zero denotes complete equality, and 1 would be complete inequality, with all income possessed by one person. Since January 2009, the Gini coefficient has moved from 0.47 to 0.48.
In sum, the administration’s ostensibly pro-poor, tough-on-the-wealthy agenda has led us toward a new American Gilded Age. Our putatively progressive president has inadvertently executed a plutocratic tour de force. 
What do we know? Envy is not pretty. Stirring up envy for political purposes is worse. The facts involved are shaky. The record of those leading the charge is dismal. Four strikes.

Thursday, February 13, 2014


I have often cited the Simon-Ehrlich wager in my teaching.  Putting "money where mouth is" is rare and worth noting when it happens.  Seeing an appreciation of markets and prices put to use (Simon) against someone who seems oblivious to them (Ehrlich), and seeing Simon win added to my interest in the episode.

I enjoyed Paul Sabin's stories behind the story as recounted in his The Bet and also the author's discussion with Russ Roberts on Econtalk.  Both try hard to be even handed.  Both bring to life the 1970s-1980s historical context.

From page 181 of the book: "One day in October 1990, Julian Simon picked up his mail at his house in suburban Chevy Chase, Maryland,  In a small enevlope sent from Palo Alto, California, Simon found a sheet of metal prices [the actual subject of the bet] along with a check from Paul Ehrlich for $576.07. There was no note."

Of course. Writing a check is one thing. Eating crow is another. Quit the opposite. The nastiness on both sides just escalated.

I had not known how badly U. of Maryland had treated Simon (page 207). I also did not know how the whole episode impacted Simon's health and seemingly killed him. He died of a heart attack just short of his 66th birthday and just missed news of the arrival of his first grandchild.


Today's LA Times includes "Don't give up the the bullet train, California".  I have not been able to find anyone of the advocate side willing to bet (their own) money on any of the official numerical forecasts re ridership, costs and revenues.

Tuesday, February 11, 2014

Set us free

Critics of Obamacare were wrong to see the recent CBO report on its job market effects as vindication of their "job killer" claim.  Alan Blinder makes that case in today's WSJ. ("ObamaCare Is a Job-Killer? Not at All")  In fact defenders of Obamacare celebrate the CBO's idea that Obamacare eliminates "job-lock" -- the idea that people stay in jobs they would rather leave because it is their lifeline to health insurance. Many now get a new lifeline and it is via mandates and new taxes.

This is, as they say, "rich".  Freeing people to make personal choices is a great idea. Trouble is that this is not where Obamacare defenders live. Practically all of Washington politics is about rules and taxes enacted to constrain and guide people's choices. The Economist (May 25, 2013) recently brought us up-to-date on the IRS code 
-- Changes to IRS code since 2001 = 4680
-- Number of words in the tax code = 4 million
-- Man-years spent complying each year = 3 million
-- Percent filers paying for help = 89% (excl software = 59%)
-- Money spent on compliance = $168 billion
Why all of the complexity?  Because the code is a sea of penalties and prompts. I am eager to join Alan Blinder and his allies to seize the momentum of the CBO study -- and keep on freeing Americans from the wisdom of their betters.

Monday, February 10, 2014

Uniters and dividers

It's human nature that we treat each other best when we think we belong to the same family, band, tribe, etc. That seems to be the way of our evolution. It follows that very bad things can happen when we revert to tribalism.  We also know that most politicians are not above appealing to race and class to exploit this foible.  Racial appeals are less fashionable these days but class warfare never seems to go out of fashion.

Last Friday's WSJ included "Argentina War on Inflation Gets Personal ... Street Posters Target Retail Executives; Government Asks Citizens to Police What They Deem 'Abusive' Price Increases."  It is sad irony that the "Government" mentioned is responsible for the inflation.

One need not go to Argentina to see spectacles like this in play. It's just too easy for various politicians to shore up support by fomenting hatreds. Some of them even get away with claims that they would rather be "a uniter" than "a divider."

The best way to improve the situation of those who are struggling is to promote an environment of economic growth. Here is one eloquent proponent:
        “Over the centuries those who have been blessed with wealth have developed many remarkably ingenious and persuasive justifications for their good fortune.  The instinct of the liberal is to look at these explanations with a rather unyielding eye. Yet in this case the facts are inescapable.  It is the increase in output in recent years, not the redistribution of income, which has brought the greatest material increase to the well-being of the average man.  And, however suspiciously, the liberal has come to accept the fact.”  J.K. Galbraith The Affluent Society, 1958, pp 96-97
That was then. These days, Galbraith's concluding thought has seemingly, perhaps disastrously, been discarded.

Thursday, February 06, 2014

Free stuff

Russ Roberts interviews Erik Brynjolfsson this week and the conversation is as usual worthy.  Roberts has an amazing batting average.  Listen to the whole thing.

Many people are critical of the economic metrics we use, especially GDP.  In the interview, the guest notes that if I pay for a set of Encyclopedia Britannica, GDP goes up but if I use Wikipedia instead, GDP is not boosted or may even fall if I squirrel away the savings. We get ever more stuff free, enjoying ever more consumer surplus, but making our conventional metrics ever less useful.
Guest: Yeah. Let me build on the optimistic part and then give some caveats. We do have a chapter on free goods and we talk about Wikipedia. It turns out I've done some research on the value of free goods in the economy, and the consumer surplus is probably on the order of $300 billion a year from just the Internet free goods.
$300 billion is about 20% of GDP and surely rising. It's hard to take declinist talk seriously.

It's about peace

Evolution has equipped us with the capacity to cooperate (and survive) in small bands. But we are far less likely to cooperate beyond the band.  We are more tribal than cosmopolitan.  Jonathan Haidt suggests we are 90% chimp and 10% bee. What to do?  Joshua Greene cites the "Tragedy of Commonsense Morality: moral tribes that can't agree on what's right or wrong."  But he also suggests that our dual-mode minds ("Thinking Fast and Slow") have the capacity to "put our divisive tribal feelings aside and do whatever produces the best overall results" (p. 349).

We humans have made some progress, "replacing warfare with gentle commerce, autocracy with democracy and superstition with science." But we can do more. Because we have two modes of thinking available to us, think slow more often.

Robert Wright ("Why we fight -- and can we stop?") is unimpressed. Read the whole essay. I read it before I read the book. Both are worthy.

Wright does not mention "gentle commerce."  But this is within our reach. Obama wants more of it. Many others in Congress (of both parties) do not. If Bill Clinton and Al Gore could get Congress to accept NAFTA, I would hope that Barack Obama and Joe Biden can follow their example in 2014.  It is not just about "jobs".  It's about peace.  Obama is aspires to be thought of as transcendent. This is a place to start.  

Sunday, February 02, 2014

A denser future?

The latest issue of Cityscape includes "Point of Contention: A Denser Future?" involving five essays. One way to frame the question is to ask whether market forces or planners' policies will dominate in the future? Another is to ask which market forces?
We know two things. First, market forces have dominated in the past. Second, market forces dominate in most European cities which continue to decentralize in spite of much tougher planning policies in place for many years. I feel safe saying that market forces will continue to dominate here and there.
Some of the authors highlight all of the new transit infrastructure recently put in place. But that is simply "if we built it, they will come" -- which is highly unlikely. 
I recently noted that cities (here as well as European) have gone through stages, from the “walking city” (pre-1880) to the “streetcar city” (1880-1920) to the “automobile city” (post- 1920) – to “smartphone city” (post-2007).  Elements of each co-exist in many large cities. But smartphone city is new on the scene and still in the process of unfolding. The paraphernalia of smartphone city is the infrastructure we should be thinking about. Kotkin and Cox note that the rise of telecommuting requires no new transit and now new high density development.