Thursday, October 27, 2016

Minimum wage

Over at Cafe Hayek, they post these three outstanding videos. Watch and enjoy. Very stiff competition for those of us who try to teach this. Competition is a wonderful thing.

Tuesday, October 25, 2016

They'll take romance

It may be time to give up on hopes for a Kotlikoff-Leamer or a Johnson-Weld victory -- or even a non-majority in the Electoral College. All of these scenarios presumed that Trump and Clinton would self-destruct at about an even pace. But it's very hard to keep up with Trump in that department.

What is next best?  I saw a post (somewhere) where someone asked what they would miss most about Obama. The answer in this conversation was "Congressional gridlock". My next best hope is divided government.

That is not the view of Alan Blinder, writing in today's WSJ.  He sees Congressional gridlock as the problem.

OK for him if he dreams of a Clinton win and a sympathetic left-leaning Congress. But what would they do? Is a further drift to statism beneficial? Would a further left EPA be helpful? Would a more complicated tax code be useful? Would more Dodd-Frank and more politicized health care do any good? Would more power to the education establishment help anything but strengthen that group?  Would more tightly regulated land use do anything for housing affordability or labor mobility? I could go on.

"Politics without romance" never caught on with most people or with most economists. Blinder and others stick with romance? Do romantic notions have a place in serious discourse?


Don Boudreaux notes the "nirvana fallacy."

Sunday, October 23, 2016

China stagnation?

Everyone's favorite question about China is: how long can they keep it [amazing growth] up? Performance following the Deng Xiaoping reforms has been unparalleled in world history. The Communist Party is still in charge and the standard view is that the Party and the population have struck a bargain: leave the vast Party apparatus in power and they will deliver ever rising standards of living. Again, for how long can the bargain work?

A good friend reminds me that there is something wrong with the first question. China is not a country but a continent. Many parts (the major cities) do quite well but, please, do not generalize about the whole continent. And generally speaking, cities do better that countries. Some coalitions are just too big.

On top of that, Blumenthal and Scissors think that the "bargain" is unsustainable. The country's debts are too high, official data releases cannot be trusted, the military and security establishment require constant care and feeding and will soon become unaffordable, the Deng-era reforms have stopped.

That's the bad news. The good news is that China's investments in education have been spectacular; education is serious and (from what I could tell) unfettered. Best of all, there are signs of a significant return talent migration.  I have seen this at both ends, talented Chinese leaving the U.S. to return home and (this visit) encountering some now in Shanghai who have returned from their U.S. sojourn and prospered..

Friday, October 14, 2016

Eve of (self-) destruction

There are many things one can say about the two major party candidates for President but no one has suggested that either is Churchillian. Lee Pollock recently posted "What would Churchill think of Trump and Clinton?" in the WSJ (gated by now). The piece includes two of the great man's (attributed to him) most memorable (and relevant to this election year) utterances. “The best argument against democracy is a five-minute conversation with the average voter.” And “Democracy is the worst form of government except all those other forms.” Did he ever attempt to reconcile these two? What flavor of democracy was he thinking about?

Our flavor includes an Electoral College whereby most states award that states' electoral votes on a winner-take-all basis. The Wikipedia post site mentions that there are two exceptions, Maine and Nebraska. The post's authors say this about these two states: 

Except for Maine and Nebraska, all states have chosen electors on a "winner-take-all" basis since the 1880s.[5] That is, each state has all of its electors pledged to the presidential candidate who wins the most votes in that state. Maine and Nebraska use the "congressional district method", selecting one elector within each congressional district by popular vote and selecting the remaining two electors by a statewide popular vote.
Given all this, can Gary Johnson garner enough electoral votes to put the selection into the House of Representatives?  The House apparently most chose from the top three vote-getters.

By then, two will be seen as exposed and as losers -- and we could get an adult.

My previous posts on this topic presumed that Trump and Clinton would self-destruct at about the same pace so that there would be no clear Electoral College majority by early Nov. Each have tendencies to self-destruct but they do so unevenly and unpredictably.

FiveThirtyEight has a slightly different version.

Saturday, October 08, 2016

Policy #12, the cities

Here are eleven policy suggestions to boost the economy for the next president from Brookings researchers. These are all good and we have heard them before. I have two thoughts. First, issue another paper on why these have been unattainable -- and how and why they can become attainable. That would be a longer paper.

My other quibble is that cities ought to be included as policy #12 -- or the existing entry on productivity should include a discussion of cities. Cities are "engines of growth" because the ideas that boost productivity are spawned in cities. Moreover, cities are where supply chains are located and thereby realized. I have mentioned before that Coase's what-to-make vs what-to-buy challenge to entrepreneurs and managers must include what to buy where. The Coase question cannot be fully evaluated unless spatial choices are included.

What, then, is the policy challenge? Brookings and many other have chimed in on the unproductive (anti-productive) land use regulations that have been embraced by greens and others. These have been used by NIMBYs to freeze or slow development and have undermined housing affordability as well as labor mobility.

But at the same time, supply chain formation is stymied.  Cities are the spatial realization of large numbers of (emergent) supply chains. I include supply chains for ideas. Ideas can be exchanged face-to-face or electronically. Following, Mokyr, we can say people are keen to find useful knowledge. To do so, people network (shmooze?) at the mall or on the golf course or you name it. Most (perhaps all) people and firms evaluate and choose locations as well as blend of networks based on the many supply chains they participate in.

The Feds dole out so much money to cities that approvals simplification (how about a one-stop approvals process?) could be a requirement from Washington.

Silly me. I almost forgot who the two major candidates are.

Sunday, October 02, 2016

Laugh or cry?

Here are John Cochrane and Russ Roberts talking about economic growth -- and why we have so little of it. Most economists stake out positions on various fiscal or monetary policy stimuli -- and usually argue for their preferred version or mix. But the inability of fiscal and/or monetary policies in the developed countries to have any significant impact these days is ignored. The third option ("third rail"), reform of the bizarre regulations and codes now on the books, is the one Roberts and Cochrane take up.

"Third rail" says it all. Tax code reform has been talked about for years but Congress and President are impotent when it comes to taking on all of the cronies who live off and love our IRS code. Is news of Donald Trump's taxes -- and the very "Trumpian" defense that his clever use of the code is something to behold, a game-changer? Is all this a gift from the heavens, not just to the Clinton camp, but the even usefully to beleaguered tax reform advocates? I keep looking for the good in all the nonsense?