Thursday, February 26, 2015

Car culture?

Declining VMT per capita (left graphic below) is a relatively new thing. Is it economics? Demographics? Changing life styles? Unscrambling the eggs is never simple. Iain Gately (Rush Hour) cites a recent KPMG study that this way: 
They divide the population of the USA into four generations: Baby Boomers (anyone over 45); Generation X (35-45 years old); Generation Now (15-34) and Digital Natives (younger than 15). Whilst Baby Boomers and X-ers were in love with cars and got their licences young - in 1978, for instance, 75 per per cent of American seventeen-year-olds had theirs- Generation Now aren't quite so obsessed. In 2008, only 49 per cent of their age cohort had passed their driving test by the age of 17. If a machine does it for them, they won't care. They're happy to limit their driving experiences to Grand Theft Auto (p 322-323).

A similar generational divide is apparent in data shown in The Economist (right graphic, below).  It is the old question: is new tech a good or a bad substitute for old tech?  The nature of substitutes is always in the eyes of the beholder. Beholders of different ages come at this is different ways - and entirely as we might expect.


Various age-related trends in 15 countries.

Monday, February 23, 2015


The labels "Malthusian" and "neo-Malthusian" in modern usage obscure more than they convey. Robert Mayhew, in Malthus: The Life and Legacies of an Untimely Prophet, goes a long way to place Malthus into context and perspective. Malthus was clearly a giant in the age of the classical economists.  His influence was profound and he was right about how the world works for much of human history -- until very recent times.  It is fair to say that much of the world has only very recently escaped the sad fates of "the Malthusian trap."  Angus Deaton is one of meany who informs us about the "post-Malthusian-trap" state of most of the world.

Julian Simon deserves tremendous credit.  Whereas economists love to talk about scarce resources, it was Simon who described how one resource, human ingenuity, is not scarce; it is infinite -- in a context of economic freedom. This kryptonite for the neo-Malthusians and explains how and why Simon made and won his bet with Paul Ehrlich.  I suspect you can take Simon's side in similar bets and win 9 out of 10 times.

I say all this because it is perplexing that, in an otherwise fine book, Mayhew lumps Simon (and also Bjorn Lomborg) with a group he refers to as "neo-conservative."  Hmmmm. Here is Hayek's encomium on the book jacket of Simon's book:  "I have never before written a fan letter to a professional colleague, but to discover that you have ... provided the empirical evidence for what with me is the result of a lifetime of theoretical speculation, is too exciting an experience not to share with you."  Good historians like Mayhew should take note.

Mahew ends the book giving attention to the world's trouble spots and allowing for the fact that some places have not shed the prospect of Malthusian checks. But most of these are societies mired in civil wars and not yet able to hop onto the virtuous cycle -- good institutions and prosperity feed each other.“It is evident from the experience of the countries that have successfully reformed policies that the payoff for shifting to a virtuous circle can be enormous.  Better understanding of the political-economic interactions that can enable this to happen is therefore of major importance for improving the development prospects of those countries still mired in the ‘stop-go’ cycle of detailed controls and intervention and gradually decelerating economic performance.”  Anne Krueger, The American Economist (1994)

Thursday, February 19, 2015

"Conversations" and "root causes"

When you hear talk of "root causes," guard your wallet.  The current White House summit re terrorism is looking for its root causes.  In fact, the WSJ's Dan Henninger quotes Susan Rice: “Before I go through the elements of this strategy, I want to note how our approach may differ from what others may recommend. We believe in the importance of economic growth, but we insist upon investing in the foundations of American power: education and health care; clean energy and basic research.”

To "invest" is Washington-speak for funding cronies. I wish the White House summit good luck but applying what sound like ever more "War on Poverty" programs to any old problem is not promising.  Bernard Lewis and Timur Kuran have worked hard to understand why so many of today's Muslim societies have a problem with modernity.

Over 50 years ago, Daniel Moynihan suggested that cultural trends cannot be ignored when explaining poverty, especially inner city black poverty.  He was ignored in favor of a barrage of "programs". What do we have after all these years and programs? Steady hand-wringing over "increasing inequality."  Doubling down on all this, as the WH conference and Susan Rice's remarks suggest, is not at all promising.  Quite the opposite.

We cannot easily prompt cultural awakenings but economic growth is a good place to start -- for its own sake as well as for the ancillary benefits.  Perhaps the WH conferees can look at U.S. trade and agricultural policies and how they hurt poor farmers abroad.  (Briefly touched on by Russ Roberts and Daniel Sumner.) Policy wonks who love "conversations" can work on this one.


Here is Arnold Kling on the WH summit.  He does not know whether to laugh or cry.

Saturday, February 14, 2015

Hidden in plain sight

Most people and most politicians agree that a higher minimum wage is a good thing.  But hell-bent, they throw common sense out the window.  You can bet that they purchase less when prices rise; many of them also advocate internalizing pollution taxes and also sin taxes -- to change behavior they proudly claim.

To approximate some sort of cogency, the same advocates accept all sorts of make-believe stories. First, fat cat employers will simply shell out the extra labor costs when prompted by law. Second, employees are necessary to any operation and not easily laid-off and replaced.

Re the first, I recently ate at a SF restaurant where an extra charge for "San Francisco mandates" was clearly displayed on both the menu as well as the check.  Some cost may be shifted from sellers to buyers. How much each group ends stuck with time will tell.  What about Wal-Mart?  What if some costs are shifted to the customers?  Are they among the fat cats?

Regarding labor demand elasticity, we have all experienced the heroic efforts to which many companies will go in order to make do with less labor.  Call centers will switch you to a human after all sorts of suggestions or maybe not at all.  Below are photos taken mid-day at SFO where the "help" desk was not attended by any human but rather by a sign that kindly guided travelers to three automated alternatives. People seeking help when their flight is cancelled of they missed connections would probably love face-to-face contact with a human.  Again, proportions of losses for the airline, its employees and its customers will be unknown for a time. But we do know that there is no free lunch.

Monday, February 09, 2015


On Oct 30, 1969, the NY Times reported "School Integration Ordered by Supreme Court." That was not a long time ago. Some of us celebrate remarkable progress -- while wanting ever much more.

In The Moral Arc, Michael Shermer joins others who have documented that humanity is generally on a good path.  History is a hard read but I believe that Shermer makes a strong case (as do Steven Pinker, Joshua Greene, Deirdre McCloskey, Robert Wright, and many others).

The worst impulses (and the worst atrocities) occur when people revert to tribalism. One of the charms of Shermer's analysis are his demonstration that humanity has (for the most part) been moving away from tribalism towards greater cosmopolitanism.  He offers a schematic that he calls "The Expanding Moral Sphere" (above).

In the recent Commentary, Noah Rothman writes "The 'Conversation About Race' That Isn't a Conversation"  He suspects a lot of demagoguery. Race-baiting for votes is retrogressive and dangerous.  It is also a digression from the expanding moral sphere.

Thursday, February 05, 2015

Disappointing discourse

In the current New Yorker, James Surowiecki cites research that finds minimum wages hikes are really good for everyone.  This is counter-intuitive for at least two reasons.  First, it is hard to deny the law of demand; we buy less at higher prices.  Second, its hard to believe that it has never dawned on many millions of business people that they could do themselves a big favor by unilaterally raising the wages of their lowest paid workers. "Better-paid workers tend to work harder ..." Surowiecki notes.  There is always a finding the "sweet spot" problem that we expect all owners to discover if they plan to stay in business.

To be sure, there are spontaneous salary hikes all around -- when employers find that the market is telling them that to retain the services of key people, they have to cover that worker's opportunity cost -- as it is signaled by the relevant labor market.

The Surowiecki piece disappoints for other reasons. He and the people he cites use "fair" as if waving that flag solves all problems.  Call that the "unfair" reliance on rhetoric.

He cites stagnating wages in recent years but we cannot know any of this by comparing snapshots; the fortunes of real people must be tracked.  This is hard.  So an uncountable number of lazy commentators fall back on comparing snapshots of different people in different years who may be in the same bracket or fit the same profile.

The writer also cites the fact that many companies are making a lot of money.  But they also compete on capital and many other markets; it is unlikely that they can easily dip into deep packets. More "sweet spot" problems.

Finally, the NY Times recently posted data on the shrinking middle class.  Where had these people gone?  Most had moved up. Have a look.

Monday, February 02, 2015


China is, to say the least, fascinating. Coase and Wang are mainly optimistic. I would like to be too.  I teach there occasionally and find that the students are smart, inquisitive, thoughtful and well trained.  The Chinese students that I encounter at USC are usually superb.

China's growth record of the last 30+ years is a thing to behold; hundreds of millions were lifted out of abysmal poverty.  But was it a case of starting at a very low base and taking available ideas and technologies "off the shelf" so to speak?  Or will there be home-grown endogenous high tech breakthroughs and innovation?

We do not know.  But the news that Chinese authorities are tightening censorship and threatening to shut down VPN internet access to the outside world is awful (Gordon Crovitz comments in this morning's WSJ). The free exchange of information and ideas is the last thing to do if the regime wants to achieve economic pre-eminence.  The internet is a blessing in this area; ham-fisted control is the curse.

I think that Peter Boettke once commented on the race between the three S's (Smithian exchange, Schumpeterian entrepreneurialism and political stupidity).  The first two have to work very hard because the the third formidable. We see it in the U.S. almost every day.  But there is nothing like an international perspective.