Saturday, April 26, 2014

Some contradictions

I don't know much about "sustainability" -- except that it evokes near-religious reactions on most college campuses and other such venues.  And it is not so clear. It is “… development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (UNConference on Sustainable Development, 1987). We can count our blessings that this stuff was not practiced 100, 200, 500, etc. years ago.

Matt Ridley is always worth listening to.  In today's WSJ, he writes about "The Scarcity Fallacy ... Ecologists worry that the world's resources come in fixed amounts that will run out, but we have broken through such limits again and again. How innovation improves the environment." In just a few hundred words, he itemizes about 75 things that the conventional wisdom gets wrong. And this is the stuff that elites believe -- and the basis of policies they yearn to impose on the rest of us.

Here are just two of my favorites. "... the Intergovernmental Panel on Climate Change's recent forecast that temperatures would rise by 3.7 to 4.8 degrees Celsius compared with preindustrial levels by 2100 was based on several assumptions: little technological change, an end to (italics mine) the 50-year fall in population growth rates, a tripling (only) of per capita income and not much improvement in the energy efficiency of the economy." And "In his recent book 'The View from Lazy Point,' the ecologist Carl Safina estimates that if everybody had the living standards of Americans, we would need 2.5 Earths because the world's agricultural land just couldn't grow enough food for more than 2.5 billion people at that level of consumption."

Think about it. If everybody lived at the living standards of Americans (and I wish they could) that would mean that hundreds of millions have become massively more productive than they are now.  If so, we would have to re-visit the IPCC assumptions that Ridley cites. He would have us believe that the "green" platform contains some contradictions.


More by Ridley, same idea.

Wednesday, April 23, 2014


Supply and demand is seemingly simple. Trouble is that many of the prices and wages that result strike many people as "wrong".  The "just price" discussion is ancient but has not gone away.

I watch the PBS NewsHour because I expect it is the adult rendition of TV News. The program has recently looked at the $15 minimum wage proposal in Seattle ("How much does it really cost to live in a city like Seattle?").  Wages should be linked to what people "deserve" or what they "need". Supporters also expect that more "justice" would follow from politicizing the whole thing.

The report also includes a researcher who cites "hundreds of studies" that show "no impact" when there are "moderate" wage hikes. Many people, even the adult PBS audience, cannot square supply and demand with their own subjective feelings about who and what should fetch how much.

Part of the problem is that so many cannot abide high levels of CEO compensation.  The WSJ's Holman Jenkins addresses this in "Mulally vs. Piketty ...The great inequality theorist offers a shallow analysis of CEO pay." He argues that Ford's stockholders got a pretty good deal with Alan Mulalley.

The very readable and  enjoyable The Second Machine Age by Brynjolfsson and McAfee includes an endorsement of a of higher marginal tax rates on high salaries. But why does the IRS code take up 73,954 pages? Does it take that much heft to get a "just" result? Or does it take that many pages to spell out all the special dealing that our lawmakers specialize in?

I suspect that greater justice would be via a postcard-size flat tax with a very high exemption. 

Sunday, April 20, 2014

A very good day

I am pretty sure that everyone favors "fairness." Most also frown on "inequality." Nothing beats being on the side of the angels. But there are serious (almost endless) problems of definition and measurement. The flies in the ointment are best avoided.

Almost all of the increasing inequality stories are flawed because they compare snapshots rather than real people -- who cannot be permanently pegged via one year of (measured and reported) income data. Thomas Sowell has been pointing out this simple (but inconvenient) fact for many years.

But today is a very good day because the simple fact has penetrated the pages of the NY Times ("From Rags to Riches ... The income gap isn't as static as we think.")
Rather than talking about the 1 percent and the 99 percent as if they were forever fixed, it would make much more sense to talk about the fact that Americans are likely to be exposed to both prosperity and poverty during their lives, and to shape our policies accordingly. As such, we have much more in common with one another than we dare to realize.
 Read the whole thing and keep it handy. You will be hearing about the the 1 percent and 99 percent a lot.

Saturday, April 19, 2014

The wrong capitalism

Crony capitalism is disdained by almost everyone but, according to Google trends, is an evermore popular usage. It seemingly describes the modern world nicely.  That's a great pity.  The political right as well as the political left disdain it (as in Tea Party and the Occupy people; the latter think it's the only kind of capitalism there is). Somehow they keep electing people who implement cronyism full throttle. This morning's LA Times front page includes "LA should be more selective with hotel tax breaks ..." You bet. Read the whole thing. I'm pretty sure the reporter is not posing as a satirist. The people he quotes know all about which area "needs" how many hotel rooms -- and they all agree whose pockets they "need" to pick so that this "need" does not go unmet. The word "shameful" never comes up.

Thursday, April 17, 2014

Modern brokering

Why do people pay big bucks for a "seat" on the NY Stock Exchange? One of the reasons is that there is money to be made in brokerage -- and it sure helps to be located where the trading action is.

Brokerage also reduces price spreads and facilitates more accurate asset price signals available to the rest of the world.

And arbitrageurs make some money -- and they pay some of that for their privileged location. That's access cost plus location rent which describes the use and the price of every site in every city on Earth.

Don Boudreaux writes about the NY tunnel that Michael Lewis (and many others) have recently discovered -- which serves about the same function (updated) as a "seat" on the NYSE.  Some people have paid a lot of money to be the quicker broker. Location rent all over again.

But Burton Malkiel and Arthur Levitt ("We Are All High-Frequency Traders Now") comment on the inevitable new front-running ("scalping"). This refers to large buy or sell orders that are detected before they can be executed. They write:
The answer is not to set a speed limit to slow down to the pace set by those unwilling or unable to compete. Instead, solutions should be directed toward fixing problems inherent in the system such as front-running. 
Identifying "insider" trading has always been perplexing and difficult. "Solutions" are hard to come by. Defining and identifying wrongdoing has never been simple. It will be at least as challenging here.  There is no such thing as an "even playing field." If there are clear rules of the game that are broken, we hope that impartial enforcers are on the case.

Sunday, April 13, 2014

Laugh or cry?

Much has been written about the life and work of Steve Jobs. I enjoyed PBS' Jobs bio, One Last Thing.  Towards the end, one commentator mentions that while Thomas Edison can be credited with three technological revolutions (electric power, motion pictures, recorded music), Steve Jobs can claim four (personal computers, recorded music, animated motion pictures, and smart telephones). Three vs. four. Comparisons and rankings of this sort are difficult but entertaining and tantalizing.

Inequality is the "defining" issue (in some eyes) of our times but much of it is driven by the rewards bestowed on new ideas and the work of entrepreneurs. Aside from hagiographies such as the one I cited and near-riots by consumers when a new gadget goes on sale, this is seldom mentioned. I once heard (cannot recall the source but the idea seems plausible) that about 80% of the fruits of innovation go to consumers at-large while 20% goes to the inventor.  Is that "fair"?  Would I accept that division of spoils from behind a "veil of ignorance?" I surely would.  This is how we get economic growth -- which is the very best we can do for the poor and less well off.

But these simple thoughts are ignored in the feel-good sanctimoniousness of the inequality debate.  Ross Douthat in this morning's NY Times ("Diversity and Dishonesty") calls attention to the suggestions of Sandra Y.L. Korn of Harvard U.
... I would like to propose a more rigorous standard: one of “academic justice.” When an academic community observes research promoting or justifying oppression, it should ensure that this research does not continue.
Why the hell not? Discourse and ideas diversity is pretty corny these days.

Wednesday, April 09, 2014

Tricky "common sense"

Many of us cognition non-specialists used to think in terms of vague "left brain" vs. "right brain" functions.  Daniel Kahneman's  Thinking Fast and Slow provided a much needed corrective; many of us are a now little bit smarter about how our very complex brains function. I had previously only considered lazy vs. non-lazy thinking. 

The fast and the slow thinking approaches each have their usefulness and it is up to each of us to be wise about how we deploy our various capabilities. Humans working with computers (and gadgets) face the problem of how to allocate responsibilities. The same challenge applies to sorting out the work for our "fast" and "slow" brain modes.

Duncan Watts, in Everything is Obvious: How Common Sense Fails Us, calls attention to the challenge. We face incredible complexities everywhere and must be alert to how easy it is to fool ourselves.  Things are "obvious" when we are simply stuck in "lazy" mode. That mode is always available; our job is to apply some thought before we decide to simply let it fly.


Division of labor has always been a moving target.  Have you met your robot? Target now picking up speed.

Saturday, April 05, 2014


The importance of responsive markets is a seeming no-brainer.  I have noted impressive co-location in U.S. cities that limits the lengths of commuting as well as non-work trips. The Economist of April 5 includes "Metroland spreads out ... The cost of strict planning laws is measured in longer commutes."  How can it not?  It is the old story that planners (anywhere) have no way of assembling all of the information they need in their quest to make cities function better.  F.A. Hayek and many others have endlessly called our attention to this fundamental fact. It works for cities too.

Thursday, April 03, 2014

"Those who cannot remember the past ..."

Natural gas is much in the news because it is the weapon of choice by Russia as well as (perhaps) the West in the new Cold War. V. Putin uses threats to shut the pipelines that connect Russian supplies with much of Europe.

But the West is not yet sure whether to respond -- via signals and/or actions -- that they plan to expand world supplies, push down the world price, and give Russian elites something to think about.

In any event, labor and capital are ever more mobile. Seasteading, as suggested by Patri Friedman, is the logical extension. If taxes and other impediments on the land become onerous enough, move operations to the high seas -- just beyond any national jurisdiction. The extra costs have been labeled the "sea tax" and they can be compared with the costs of operations at conventional sites.  Today's WSJ notes that a tipping point may have been reached "Asian Gas Demand Spawns Floating Superfactories ... Energy Companies Aim to Cut Costs With LNG Production Plants at Sea."

The original Cold War was won when the economic weakness of the side that denied economic freedom realized that the world was accelerating away from the East bloc. That realization may soon dawn on Putin and the Russian elites. "Those who cannot remember the past ..."