Sunday, December 24, 2017

Every time

Today's NY Times includes "The Megacity, Untethered ... Urban giants are going global, but losing their connections with smaller neighbors."

What do we know?  (1) This is the age of AI, expanding platforms, and disruptions. New applications of blockchain technology will boost all of this. (2) Humans are alpha-everythings because they (we) communicate/cooperate better than any competitor. We easily dominate rivals who are much stronger and much faster. (3) Our wealth comes from our productivity.  Our productivity comes from new ideas. Our new ideas are new combinations of old ideas. The clearer the networks in our brains, the better we are at coming up with new combinations. (4) Being good communicators, we can do even better. Our brains are actually networked networks. What we do in cities is to cultivate and form networks. We network in many ways, in person as well as electronically. We are prompted to seek the best blend of networking options.  The blend is peculiar to each individual's mission and includes choice of location and travel. (5) This is how the physical forms in which we operate (including cities) evolve. But they are also a constraint. They are durable and they adapt slowly. The crony capitalism that gives us the rules and regulations of land use assure that the adaptations will be slow and costly.

But tech will beat regulators every time.  Regulators will slow tech every time.


Evidence that the world is getting better (H/T Cafe Hayek) does not get nearly the attention it deserves. My blog post simply highlights how our cities are part of the story.

Wednesday, November 29, 2017

Inequality and cities

The trend to bigger government and bigger politics is clear. With that we get ever more discussions of inequality. Current tax reform discussions gravitate to who will get (or lose) what. Growth (a bigger pie instead of allocating pie slices) gets second place.

In a world of Death of Distance or The World is Flat, cities would have a minor part in the increasing inequality discussion. But neither of these have come to pass. The highly skilled are paying big bucks to be near similar people.  They surely engage in electronic interaction but feel strongly about complementing these with the possibility of personal interactions. Hence the value of proximity (even if not cheek-by-jowl) -- and very high rents in San Francisco (and environs), Los Angeles, New York, etc.

That's the demand side.  The supply size and the role of regulation have been commented on in various places. For one-stop shopping (reading) has assembled much of the relevant research. See also Enrico Morretti's The New Geography of Jobs.

Many people now have the wherewithal to bid high for selected locations and, in the process, greatly enrich property owners in these places. We get housing wealth inequality compounding the inequality trend.

What can be done? Make it less difficult to build and develop. A minor irony involves the fact that those who fret most about housing "affordability" problems like the tough regulations the most. Their answer is more "affordable" housing provided via various programs. But programs make it worse -- and will never match what market forces could accomplish -- if allowed to.

Sunday, November 12, 2017

Driverless future: not everyone aboard

Randal O'Toole writes "It's the Last Stop on the Light-Rail Gravy Train ... Mayors want new lines that won't be ready for a decade. Commuters will be in driverless cars by then." Sounds ironic but only if one ignores Bootleggers and Baptists cronyism.

Jim Moore and Tom Rubin write about LA's MTA. Fewer riders but evermore spent on expensive fixes rail. This is the MTA's long-running and continuing story. In their alternate universe, red ink is not a sign of flagging demand but an indicator of "underfunding".

The mega-dollar waste is plain enough. But in an age of dazzling entrpreneurial breakthroughs, think of the opportunity cost. Dollars diverted from genius work hurts more than ever.

Today's New York Times Magazine has a special issue devoted to driverless cars. Just as Henry Ford's inventions changed the world, so will driverless cars. Futurism is hard but several writers take their shots. The imaginative Molly Young writes about "The Future of Sex in Cars."


Wendell Cox adds information on the expanding alternate universe.

Friday, November 10, 2017

Not about profit-loss

Don Boudreaux has been (almost daily) punching away at protection and the crony capitalism involved.  Here is a sample.

Almost daily we hear that Wharton grad Trump sees the balance of trade (and the "trade deficit") as the economy's (the country's?) profit-loss statement.  This mistake pops up in almost all of his remarks on trade, including who is"winning" and who is "losing."  But this silliness is picked up by many others. Whether it is Fox News or the PBS News Hour, the talk is the same. What will we do about that perennial trade deficit?

Smart people should know better. The U.S. dollars that foreigners accumulate eventually come back. Either via trade or via investment. Capital "imbalances" and trade "imbalances" cancel each other almost every day because exchange rates are always adjusting. There is no reason for panic or anything like it. Instead, celebrate that there are the adjustments and responses throughout.  Each of us benefits via the links to the world's sellers and the world's investors.

The economic ignorance goes way beyond Trump and his followers.  That's the problem.

Tuesday, October 31, 2017


What is charisma?  You know it when you see it.  Reports cited in the WSJ go a bit further. Various studies are cited.  Here are the results of one:
“What we found is charisma is composed of two elements,” says the paper’s lead author, Konstantin Tskhay, who now works as a consultant at Deloitte. “One relates to influence, or the ability to guide others, and the other to affability, or making other people feel comfortable and at ease.” ...
Political success is measured by an ability to build and sustain coalitions.  This usually means issuing more than one message on any issue to more than one potential constituency -- and worrying less about inconsistencies. It means getting away with it: doing so without being thought of as duplicitous. It means sticking to the bland and crowd-tested cliches -- and getting away with it.  FDR and LBJ managed to build and sustained coalitions. All political actors carefully hone their approach and their rhetoric.  But are they a turn-off or a turn-on?  Ask Hillary Clinton.

Many people (here and abroad) were dazzled by (fell in love with) the charismatic Barack Obama. Many still like Bill Clinton. Infatuations are funny. Our natural BS detectors go limp for a while.

Celebrities (usually from entertainment these days, from the military in the past) presumably have charisma. Recently, Maureen Down speculated whether or not Mark Cuban would run for the presidency. It is not simple. Ronald Reagan made the entertainment-politics transition. Arnold Schwarzenegger and Jesse Ventura were less successful. Who knows about Al Franken?

My guess is that the jury is no longer out on Donald Trump; his approval ratings appear to be stuck below 40%. Not a sign of successful coalition building -- or of charisma as the cited authors define it. His efforts, just feeding red meat to the true believers, are not adequate.

Friday, October 13, 2017

Networked networks

Tyler Cowen noted that Cities and Suburbs Are Becoming Pretty Similar.  Of course.  A city-suburb dichotomy is much too simple. Nevertheless because Census and others report many data series this way, we keep using the two categories.

The idea of (suburban) "sprawl" is useless and specious. Qian An, Jim Moore and I showed some time ago that, using conventional travel time data, means as well as variances for work as well as shopping trips varied little no matter whether the traveler was "urban" or "suburban". In other words, most people and businesses have an interest arranging themselves spatially so as not to have to put up with irksome distances.

People and businesses in cities want two things: space and accessibility. We now say they want to network profitably. "Space" can proxy for a preferred amenities package. How can they get both? When large numbers of people and businesses consider the possibilities and the trade-offs available to them they make workable choices. The outcome is the cities we have.

There is enough movement of people and capital among cities that they must see themselves as competing. Uncompetitive packages of location and travel costs cannot survive for very long.

Robin Dunbar thought that a village of 150-250 would be as large a community that our brains could cope with -- in the interests of group survival.  Our "villages" are now much bigger.  The networks in our brains are networked with the networks in the brains of very many fellow citizens -- the ones with whom we interact physically and/or electronically.  That's modern accessibility; we can seemingly manage the blend of networks we want whether in the "city" or the "suburbs."

Friday, September 29, 2017

Not "in the air"

Russ Roberts interviewed Philip Auerswald on populism. Rapid change divides the population; some thrive while others are left behind and become resentful. The two discuss rural-urban divisions but focus on the big cities (they mean metropolitan areas) vs the rest. The success of these places as breeding grounds for new ideas (end enhanced productivity) is an old idea. We talk about "engines of growth."

Roberts and his guest evoke "density" as a proxy to explain how it is that new interactions and new ideas are spawned. They discuss "water cooler effects", coffee houses and places to meet for breakfast gatherings. Ray Oldenburg calls them "The Great Good Place". From Vienna's coffee houses to Starbucks -- and many more. The discussants also mention that big cities are places where good ideas are "in the air."

I prefer to talk about supply chains. The fundamental lesson of economics is that these are formed by profit seekers responding to market signals. There are supply chains for things and supply chains for ideas. All of us participate in many of these -- as buyers and/or as sellers. We choose locations as we trade off all of these roles.

The Coasian what-to-make-vs-what-to-buy choice (in light of transactions and monitoring costs) involves what to buy where.  Overcoming distance involves a key transaction cost. All supply chains have a spatial realization.  This is how we get the spatial patterns that characterize the cities we know.  Location choices in light of supply chain participation(s) over many interaction modes (including electronic) are constrained by many things, including land use controls and historical facts on the ground. The former involve policy choices.

Supply chains for things are based on technological requirements ("recipes") while supply chains for  ideas make sense in light of Joel Mokyr's idea that we are all keen to find useful knowledge.

Ideas, trust and social capital are made in cities. But not from or in "the air." They are formed (emerge) via the deliberations, choices, and actions, of motivated individuals.

I prefer this story to the much invoked idea of "agglomeration."  Agglomeration and "clusters" (also vague) occur via many densities and many spatial arrangements. The point is to understand how and why specific arrangements emerge.

Monday, September 11, 2017

Love and markets

Just a few days ago I posted this:
When natural disasters occur, supply and demand is a lifesaver. It is the way to reallocate resources to stricken areas (people). Price signals do their work when they are allowed to reflect new realities: when they ration on the demand side and elicit on the supply side.  But banning price hikes (anti-gouging laws) stymies both adjustments, making bad situations worse.
The standard debates that always follow pose the usual questions.  (1) Is altruism not enough?  (2) Why not enough altruism? (3) Do market responses crowd out altruism? (4) Would not altruism be better?

The inevitable politics of pander follow with price controls that offer fake answers to serious questions.

We hear much the same when it comes to markets for human organs.

One would think that Adam Smith settled this some years ago. "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest." He apparently had not. The same dance seemingly follows every calamity.

Non-zero-sumness is a wonderful thing. We find it in markets and we find it in altruism (love).  They are both good news. The bad news is that many people see the two phenomena as absolute substitutes; e.g. you cannot have one without the other.
Read more at:

Saturday, September 09, 2017

Amazon's RFP

Amazon wants a second headquarters. But where? Near or far? Reasons for nearby expansion involve scale economies but (as always) there can also be scale diseconomies -- including the group-think that can set in.

Amazon has invited cities to bid for the plum. Here is the RFP. Not that they have asked me but I would suggest a place with light-touch and flexible land use regulations.  The fact that tough regulations show up as slow construction and housing affordability problems is well known. Wendell Cox (and many others) have documented the link many times.

But there is more. Amazon understands supply chains. Whenever I cite value chains, I add that there are chains for things and chains for ideas. We are all involved in many of these and choose locations in light of many participations (as buyers as well as sellers).

Cities are the spatial realizations these choices: the spatial realizations of large numbers of supply chains.

For Amazon (any company) and the host city to do well, it must be a place where supply chains can be formed -- and re-formed as necessary.

An improved Amazon RFP might include a way to tell local officials that ham-fisted land use regulations are not beneficial or promising.

Time to reiterate that this is not a matter of being "pro-business" which is often synonym for an open door to crony capitalism.  Rather it is clearly pro-market.  Start calling the latter pro-people in this age of tweets and shortened attention spans.



Wednesday, August 30, 2017

Teaching Econ 101

In Adam Smith's day, it was moral philosophy.  But for many years, that has been replaced with what Deirdre McClosky calls Max U (or Samuelsonian or standard textbook) economics.  It has not been a good trade.

When natural disasters occur, supply and demand is a lifesaver. It is the way to reallocate resources to stricken areas (people). Price signals do their work when they are allowed to reflect new realities: when they ration on the demand side and elicit on the supply side.  But banning price hikes (anti-gouging laws) stymies both adjustments, making bad situations worse.

This is simple and clear.  But we teachers of Econ 101 have seemingly not done the job of imparting simple ideas like this. Look at the protectionist utterances of Wharton grad Donald Trump -- and many, many others. (I notice that ABC_TV news loves to report on products that are Made in America.)

In light of the Houston floods, the usual suspects are arguing for price controls ("anti-gouging laws) and thereby claiming the moral high ground.

Teachers of Max U note the fine points of efficiency when they should first deal with Question #1: in which settings are people most likely to have better lives?  The most noted thought experiment of our time may be John Rawls' "veil of ignorance": when considering political choices, do not think of where in the wealth distribution you are but where fate might deposit you.

Do you want to be inside or outside an exchange economy? If it's a hard choice, look at the real world and place yourself behind a veil of ignorance.

Perhaps if we taught this first and Max U second, there would be fewer grating rants about the immorality of markets.


And while we're at it. Here is how young people view socialism vs capitalism.

Sunday, August 20, 2017

Statists rule

The Economist includes a nice summary of Pigouvian taxes (or subsidies) as a straightforward remedy to the problem of uncompensated externalities. When market coordination is missing for any  reason, here is the (seemingly) simple policy fix.

But missing from the discussion (almost all such discussions) is the politics. Who administers the tax? How do they choose who and how much to tax, when and where.

Public choice economics points to a non-trivial answer:  crony capitalism and the threat of regulatory capture are always in play.

Today's NY Times Book Review includes a review of Nancy MacLean's Democracy in Chains: The Deep History of the Radical Right's Stealth Plan for America.  The print edition uses the lede, "Minority Rule: How the economist James McGill Buchanan laid out the game plan for the radical rights." This is turn-off laced with smear job. The electronic version switches to "How the Radical Right Played the Long Game and Won."

This is all bizarre and I have no plans to read the book. Don Boudreaux has been tirelessly exposing MacLean's errors and misconceptions at Cafe Hayek.

Are the problems of democracies and majorities really new and arcane for anyone?  We learn about the Bill of Rights at a very early age.  Limiting majoritarianism addresses a very old and well known problem and is not a part of some vast right wing conspiracy.

The Economist and a string of others are strangely resistant to public choice analysis, as the many discussions of the elixir of Pigouvian taxes indicates.

I do not get it. Are we to maintain a blind faith in the ability of elected officials to somehow divine the "public will"? And do so while maintaining a near-virginal innocence? And these are the people we see in the news all day?

How obsessed and blinkered a statist does one have to be to go on living and believing that way?

Tuesday, August 01, 2017

Anti-Econ 101

"Many of the recommendations for growth and prosperity found in just about any standard 'Econ 101' textbooks are the right place to start ..." (Brynjolfsson and McAfee, 2014, p, 206).

Econ 101 instructs that are always opportunity costs. David Henderson and John Cochrane make the point in "Climate Change Isn't the End of the World ... Even if world temperatures rise, the appropriate policy response is still an open question." Scarcity suggests opportunity costs which call for thinking, deliberation and hard choices. This perplexes the religious left. Here are Henderson and Cochrane:
" Global warming is not even the obvious top environmental threat. Dirty water, dirty air and insect-borne diseases are a far greater problem today for most people world-wide. Habitat loss and human predation are a far greater problem for most animals. Elephants won’t make it to see a warmer climate. Ask them how they would prefer to spend $1 trillion—subsidizing high-speed trains or a human-free park the size of Montana. ...

" ..we need to know what effect proposed policies have and at what cost. Scientific, quantifiable or even vaguely plausible cause-and-effect thinking are missing from much advocacy for policies to reduce carbon emissions. The Intergovernmental Panel on Climate Change’s 'scientific' recommendations, for example, include 'reduced gender inequality and marginalization in other forms,' 'provisioning of adequate housing,' 'cash transfers' and 'awareness raising & integrating into education.' Even if some of these are worthy goals, they are not scientifically valid, cost-benefit-tested policies to cool the planet."  
Elephants, high-speed trains and reduced gender inequality? Opportunity costs.

The LA Times reports that actual construction of the California high-speed train is well underway.  Look for the antithesis of opportunity costs, the misused sunk cost argument: having started the project, we cannot stop because of all that money already spent.

Why does any business ever close its doors? Why is any product line ever shut down? 

How many people use public transit in California? Very few. Here are some 2012 comparisons. New York city is #1 with 229.8 per year per capita. San Francisco is #2 with 131.5. Los Angeles is #15 with 54.9 and most of California is below that. The story has been told a thousand times. (Here is the up-to-date U.S. summary.)  There are too few transit users in California to merit more transit capacity of any kind. Climate change is being used to make bad ideas look not so bad.

Yes. Econ 101 is the anti-politics. Politics is the anti-Econ 101.

Friday, July 21, 2017

Not subtle

Bjorn Lomborg reminds us that "California is handling climate change all wrong."  Climate is a global commons and prisoners' dilemma problems are endemic. Go-it-alone California will bear significant costs while the benefits will be negligible.

But people who claim to be on the side of science (and the angels) disagree.  Here is a letter to the WSJ editor from Governor Jerry Brown defending the California approach. No mention of Lomborg's key point. Cap-and-trade may be a fine idea (as Brown claims) but he ignores the context.

Prisoner's dilemma is the flip side of gains from trade. The presumed subtlety of the gains-from-trade story is baffling. Most people cooperate; they trade an uncountable number of times and easily see that both parties acquiesce voluntarily -- for obvious reasons. The same people also have eyes and (must) notice that, around the world, those who are more involved in an exchange economy have better lives.  How many migrants in the world move away from an exchange economy to one where exchange is absent or difficult?

Bruce Yandle's Bootleggers and Baptists is the best explanation. I do not know whether Jerry Browns' place in all this is as the "Baptist" or as the politician who appreciates the phenomenon. I suppose one can be both. This is not subtle either.

Monday, July 17, 2017

It's bi-partisan

Timothy Taylor (citing Brian Taylor) offers a clear summary of the argument for congestion pricing on roads and highways. But spending and building is more fun than managing if you are in politics.  All the problems of democracy are in play: voters pay limited attention; lobbyists and special interests pay a lot of attention.

Competing "dog whistles" describes the discourse we have in the age of fast news and fast breaks. But there is one "dog whistle" that is special because it is bi-partisan. Everyone likes "infrastructure." Much of what we have is in poor shape. Almost everyone gets behind the idea of mega-spending to fix the problem.

But mega-spending American-style rarely does more good than harm. The Economist writes about "Notes from Underground". The WSJ describes Amtrak's "Summer of Hell."  It's very simple. Politicians are beholden to contractors and unions. More money will not fix this. It may make it worse.

Crony capitalism describes much of modern America. In this morning's WSJ, Elon Musk cites the "AI threat" and advocates a policy to regulate artificial intelligence. It's a terrible idea and I expect that Musk expects to be involved with the new regulatory agency. This would be the case no matter which party holds power. It's bi-partisan.

Wednesday, July 05, 2017

The good and the bad

We would love to believe that high culture makes people better.  But Nazi Germany (and many fellow travelers) deflated all that. High-brow elites caved in to the brutes. Among the highest brows of those days were the Berlin and Vienna Philharmonics. Look at Terry Teachout's "Orchestras and Nazis" which recounts the very sad story. It remains that how and why people turn good or bad is not simple.

Amos Elon's The Pity of It All elaborates all this. The author notes that Pre-Hitler, Europe's Jews assumed that Germany would be a safe place to be: German high culture would provide a haven.

On the brighter side, the NY Times book review of Toscanini: Musician of Conscience notes that the maestro made it a point to distance himself from Nazis and fascists.  The review also touches on Toscanini's amorous affairs. If you think of his adventures with many women as not so admirable, you again to face up to the complexity of human nature.

From the book review, here is Toscanini: "Every time I conduct the same piece I think about how stupid I was the last time I did it." If you are an aware person and reach the ripe old age of X years, you will wonder how innocent you were at X-5 years. Perhaps this awareness marks the good. 

Thursday, June 22, 2017


In a few words, Mike Munger sums up the new world of the sharing economy (H/T Café Hayek):

"Portable platforms (mostly smartphones) using software (often modular, self-contained apps) and connecting over the internet mean that transaction costs are plummeting. Uber doesn’t sell taxi rides; Airbnb doesn’t rent hotel rooms. These companies, and a thousand others, “sell” reductions in transaction costs. ...

... We’ll need a lot less stuff and a lot fewer parking spaces if we can take better advantage of what we already have. And cities will have a lot more space once we aren’t paying the costs of storing cars in parking lots and loads of equipment and clothing in self-storage facilities."

The WSJ (June 21) includes "The End of Car Ownership ... Ride sharing and self-driving vehicles are going to refine our relationship with cars ..."

Planners' holy grail for as far back as I can remember was to get people out of their cars. Mega-billions spent on public transit and HOV lanes had no effect (except all the red ink).  But the profit-seekers have now entered the picture to bail out all the smart people.

We hear a lot about "stagnation" and also "disruption".  Inevitably, there are both.  Are there trends? N-gram viewer says "no".  Each has held its own.

It comes back to things I often mention. If you had a choice, in which year would you choose to live? The latest one possible? Two words: "medical science".  When next you go for any treatment, you would never say, "please treat me the way you would have X years ago."

All of this in the very politicized U.S. health care system that's in the news all day. What would it be like if the disrupters were really allowed to operate? Perhaps the stagnation, to the extent that it is real, can be pinned on our politics.

Monday, June 19, 2017

Niches, not cities vs suburbs

Here David Warsh speculates on what the new chapter of the Amazon-Walmart rivalry means. Is it good for cities? Is it good for suburbs? Both? The urban vs suburban distinction is no longer useful. Both contain niches and a variety of situations and opportunities.

Here Russ Roberts and his colleagues discuss emergent orders. Mike Munger mentions that cities are emergent orders. Of course. The complexities and the stakes are too great to imagine any other way. Higher high-rise buildings are seen in major cities all the time. It's partly better building technologies (supply) and partly the benefits of location (demand and agglomeration). But it is not "a return to the cities". Think complexities and niches, not urban vs. suburban. The cliche is that cities change slowly. But many people now choose neighborhoods that do not fall on either side of an urban-suburban divide.

A Whole Foods or similar enterprise can serve any of them. Holman Jenkins writes "Amazon Will Free You From the Minivan ... With his Whole Foods purchase, Jeff Bezos takes aim at groceries -- and car ownership."

Stratechery argues that Amazon with its high-fixed-cost delivery infrastructure has actually bought a customer, Whole Foods and its shoppers.

It's hard to know when and where there are substitutes or complements. Order on-line or walk/bike to Whole Foods to see/touch/feel the melons but have them shipped home?

Tuesday, June 13, 2017

Watch out?

No $20 bills on sidewalks is pretty clear. Also clear is the logic of the efficient markets hypothesis (EMH):  in the race for profit, new information is quickly scooped up and acted on -- and "baked into" asset prices. (To be sure, EMH is also misunderstood by many who bizarrely expect any and all surprises to also be reflected in asset prices.) Also clear is evidence that many investors have accepted the logic of the efficient markets hypothesis and have moved their holdings from stock pickers to index funds.

Stock market prices are the original "big data" -- and an unavoidable temptation for study by finance experts. Slightly less expert are those who look for portentious episodes in daily life (business and other).  Joe Kennedy supposedly got out of the stock market just before the 1929 crash because his shoeshine guy tipped him to buy.

This morning's WSJ includes "Does Anyone Remember How to Make a Subprime Mortgage? ... Brokers willing to learn the lost art of making risky mortgages are in demand again."  Your mileage may vary -- and there are many mortgage markets in the U.S.  But mortgage originators have been able to sell the mortgages they make. And the U.S. government GSE's (Fannie and Freddie) and others who buy them have been known to get bail-outs when things do not work as planned (wished for).

The usual caveats apply.

Monday, June 05, 2017


With all the hand wringing over the Trump withdrawal from the Paris climate accord, it is refreshing and useful to get this short (just over 100 words) and clear statement from Cato.  The accord is at best simply a feel-good measure; at worst it is an awful waste.  More details at this conversation by Nick Gillespie with Bjorn Lomborg.  Perhaps the well worn Paris photo of over a hundred heads of state posing and posturing and smiling smug over their success in reaching the agreement says it best.

So it is ironic that there is so much breast-beating, now that the carpet has been pulled.

For some years, the best and brightest in urban planning have offered a simple solution to urban traffic.  Price parking.  Get one price right.  In fact, it is easier than it sounds because so many places have nearby commercial parking.  The market signals are abundant and easy to find.

But despite the clarity and simplicity, most parking remains under-priced.  And a thousand expensive and impotent "solutions" have been offered instead.  These include expensive parking requirements, expensive transit, expensive bike lanes, expensive HOV lanes, expensive vehicle mandates and subsidies, etc.

The people who cannot get one price right are eager to "fix" climate, health care, education, poverty, hunger, world peace, you name it.  Is there better word than irony?

Sunday, May 28, 2017

Beyond our bubbles

Arnold Kling's The Three Languages of Politics: Talking Across Political Divides may be the best ratio of good ideas to pages of text I have seen. It is a revision and update of his previous book on the same topic.

Most of our political disagreements can be traced to differing favorite narratives. Kling points to three tribes in modern American politics. Progressives emphasize an oppressor vs oppressed angle; Conservatives emphasize a conflict between barbaric vs civilized impulses; Libertarians emphasize a liberty vs coercion axis.  The author applies his model to a number of cases, the Nazi holocaust, tax reform, the Israel-Palestine conflict, etc. to make his case.  It works. Try it on any contentious topic of our day.

Kling favors the third axis but admits that all three must contain a grain or truth. He wants us to discard our favored bubbles and make an effort to understand the axis favored by those with whom we disagree. He prefers that we take the most charitable view we can of the positions of the other tribes. We should spend less effort marshaling motivational arguments; we are not lawyers trying to win a case in court.

A interesting addition to Kling's previous volume is the author's introduction of a fourth axis, "The Donald Trump Phenomenon" -- a populist vs elite axis. He alludes to David Brooks' Bobos and thinks that we are in a Bobo vs anti-Bobo moment.

Partisan divides are sharper than within memory and give Kling a lot of credit for throwing a light on the problem -- as well as some advice on getting outside our bubbles.

Sunday, May 21, 2017

Supply and demand for favors

In Today's NY Times, Robert Shiller writes "How Tales of  'Flippers' Led to a Housing Bubble ... Conventional data aside, narratives show a shifting mentality for quick profits."

In 2008, the explanation was a sudden epidemic of "greed". Now it is "shifting mentality."  So who needs economics? Who needs political economy?

Led by a politicized Fannie and Freddie, lending standards were relaxed in the late 1990s and early 2000s. Low-FICO scores were acceptable. Twenty percent down payments were put aside. Fan/Fred may have been conceived as a way to tap international capital markets to help Americans become home owners.  But why extend this benefit to the purchase and/or guarantee of 2nd and 3rd homes? Were politics involved? This ground has been covered many times.  See, for example, this paper by Calabria.

To be sure, there are always mood swings among buyers, sellers, bankers, etc.  And these interact with the political economy involved.  Let's not ignore supply and demand -- in this case, supply and demand for favors. What passes for housing policy and monetary policy in modern American involves a good dose of supply and demand for favors.

Monday, May 15, 2017

Urban land use

The WSJ includes an interesting piece about urban land use, "A Farm Grow in the City: Startups are leading the way to a future in which more food is grown closer to where people live."

Is it land? Is it capital?  Neither? Aggregation is a problem.

In Conceptualizing Capitalism, Geoffrey Hodgson describe economists' post-1960s scramble to elaborate the idea of capital. "Health capital", "religious capital", etc. He cites 23 variants (p. 191-192). The author wonders which ones are actually alienable -- and therefore analytically useful?

In a previous post, I cited Ake and David Andersson's approach to the problem. Here, I repeat the key passage from their discussion.

 “Land may consist of scarce natural resources such as gold or oil, and then it takes on all the characteristics of physical capital. Access to natural resources – including land formations that are valuable because of their beauty – is yet another physical capital attribute. But land is also valuable for the access is provides to other people, in which case land should be conceptualized as a bundle of social capital attributes. Thus, the traditional definition of capital corresponds to a bundle of physical capital attributes, ‘land’ is a bundle of physical and social capital attributes, and labor similarly consists of a bundle of human and social capital attributes.” (p. xx).

Two thoughts: (1) Modeling provides clarity of thought and requires clear definitions. But these can cause problems. The urban economists' textbook model of land use suggested concentric rings around the center -- with the outermost ring being agriculture. The new hybrid land-capital-agriculture land use vastly complicates the idea of a "ring". (2) Change accelerates and we will have to rely on market signals more than ever. Those top-down land use plans are going to be less useful than ever.

Saturday, May 06, 2017

Health politics U.S. style

Minimally politicized health care would be best. But it is an ideal that we are drifting ever further away from.  What would minimally politicized health care include?  Here are five pillars: (1) A light-touch FDA that tests for safety and lets efficacy be judged by doctors as they consider the complexities of the cases before them; (2) Light-touch insurance regulations that focus on the solvency of health insurers; let competing insurers disrupt and innovate; (3) A mandate that everyone open a health savings account; (4) A mandate that everyone purchase catastrophic care policies; (5) Subsidize the catastrophic insurance purchases of the poorest.

Can anyone assemble a winning political coalition for this approach?  Unlikely.

Obama-care mustered a winning coalition the day it was signed into law. But Democrats have lost four straight elections since then -- probably because the coalition fizzled after the real thing was up and running.

The replacement is not yet  known -- and will have to work its way through the sausage factory. The WSJ's Holman Jenkins writes "GOP Health-care Sausage is Good for You". But what could possibly emerge?

Health care politics is big in the U.S. -- and has been for a long time. As many have pointed out, World War II price controls spawned non-wage competition among employers, including employer-provided tax-sheltered health care. Add Medicare and Medicaid and today most medical procedures are paid for by third parties. This means ever less scrutiny and ever more politics. It also means unsustainable expectations.

On top of that, there are now too many health care "insiders" with "skin on the game" who have set up shop in Washington. After all of the disappointments and all the "sausage," what can enough of them possibly agree on?  Not the 5-part approach mentioned above. Unfortunately, it might be universal single-payer.

Will that solve anything? We are not Denmark. U.S.-style single-payer is likely be VA medical care for everyone.  Note that every incoming administration coming to Washington promises to "fix" VA medical care. None has yet been able to do so.

Friday, April 21, 2017

Let it be

The New Yorker's Adam Davidson writes about the "Sweet Smell of Success", in this case the cluster of firms involving cosmetics that project (or counter) odors, located in New Jersey (in and around I-95 "the stink highway").  Many other industries seek and find the clustering that serves them.

Economics is obviously spatial but this truism (still) gets surprisingly little attention from most economists. Economic growth (and how to get it) is all the rage. But cities are rightly called “engines of growth.” Advanced economies are urbanized because cities facilitate innovation and efficient production. Agglomeration economies and productive clusters of activities are often cited. There is a spatial dimension to explain how and why cities succeed. Densities matter but densities can also impose costs. Complex trade-offs are involved. Many densities emerge.
In market economies complex supply chains emerge. Each firm (each link in the chain) processes decisions regarding what to make vs what to buy. But this involves questions of producing where and also buying from where? Supply chain emergence has a spatial dimension and involves evaluations of the costs and benefits of locating at various sites. 

Innovation is key. But less studied but also essential are supply chains for ideas. Producers and consumers are keen on acquiring useful knowledge (Mokyr, 2002). From where? How? Location choice bears on this also. Most of us also seek to add value in the supply chains for ideas that we are involved with.

All of this is further complicated by the fact that while there is mode choice involved in the emergence of supply chains for things (deliveries by land, sea or air?). Information also comes at us in many ways. Face-to-face or electronic is an obvious contrast. Most of us utilize both. Again, the mix we choose and the site we choose are co-determined.

Many things and many ideas come and go via multiple modes to and from many places. Adamson cites Pontus Braunerhjelm of Sweden's Royal Institute, "it is all but impossible for government to create a cluster."  The complexity is beyond even (especially) the best and the brightest. But they all want the next Silicon Valley. 

Where is the original plan for Silicon Valley?  Emergence beats planning. The trick is to stand back as much as possible -- and let emergence happen where and how it may.


Labor and capital (many kinds in each case) are each mobile. But degrees of mobility differ. They each land somewhere.  The places they leave from as well as the places they go to define the ambit and the range of their relationships.  Social relationships? Economic relationships? Surely both. Supply chains for things and supply chains for ideas each have geographic dimensions (opportunities, constraints).

Friday, April 14, 2017

Friendlier skies

It is a cliche to say that where transacting does not occur there will be conflict -- even violence. Everyone has now seen the United Airlines thugs doing their thing on a recent domestic flight. Economists (notably Julian Simon) have long suggested that silent auctions would be much better.  ("Please go to our website and ..." ) The usual suspects however want more and better regulations (oxymoron?) -- such as a ban on overbooking.

A better antidote (also from Econ 101) is more competition.  That can easily be accomplished. International airlines that have already landed at a U.S. airport are banned from picking up passengers and ferrying them to the next U.S. destination. The ban is pure crony capitalism and should be lifted. Most other countries have no such ban.

Part of the stand-up comedy by airline attendants is when they say "we know you have a choice ...". How about many more choices?


"Thugs" was the wrong descriptor. Uniformed law enforcement people find themselves in impossible cluster situations (such as the one described) all the time.


Timothy Taylor has a short discussion of Julian Simon's thoughts on using auctions to clear an overbooking problem.

Sunday, April 09, 2017

Cities and markets

The fundamental insight of economics is that choices based on market prices give us the best allocations of scarce resources.  It follows that prices that come to us from any other sources can be problematic. The fundamental insight of urban economics is that good and bad things can happen when people crowd into cities. It follows that cities will grow and prosper if and when the costs of crowding are somehow mitigated. Prof Don Shoup put both of these insights together some years ago and made the case for wiser pricing of parking.

The Economist of April 8 has come around. "Sacred Spaces: Never mind public transport, bicycle lanes or elegant architecture. What really determines how cities look and move is their parking rules" and "Aparkalypse now: The average car moves just 5% of the time. The improve transport and cities, focus on the other 95%."  Print and electronic headlines not the same but these guys do know how to write.

The third relevant insight is from Hayek. Prices set without the benefit of market discovery are likely to be wrong -- and problematic. What then are we to do with all of the Pigouvian ideas re somehow getting the prices right in cases of external costs?

One approach is to let land markets be. (Not planners' favorite idea.) Land markets can help to arrange land uses in ways that reduce the likelihood that potential negative externalities become realized externalities. The hard-of-hearing will bid for residential space near places like airports -- if we let them.  So here we have it again. Rely more on markets.

For cities, the market failure theme was thoroughly embraced while the potential for policy failure was thoroughly ignored.

Thursday, April 06, 2017


The End of History was nice while it lasted. There are only cycles (a truism) but we never know the their timing (another truism). Mercantilism, nationalism and xenophobia are apparently back. When it comes to trade, we may get less when more would be better. The same is true of immigration.

"Fairness" is always a daunting concept. But here is the easy part: the accident of birth is unambiguously unfair. This recent New Yorker story helps to make the point. The only serious antidote is immigration. But this is where the hard part, political troubles, comes in. Are there models of applicant vetting that have a chance of influencing the debate? I would say that finding these is job #1. Philanthropists may consider seeding efforts along these lines.

We also know that economic success depends on entrepreneurs. Here is one more study that documents the fact that we get more entrepreneurs when we get more immigrants. Always recall that these great people want badly to come here.

So the current retreat from win-win liberal ideas leaves us where? First, we look for occasional bright-side evidence on people's attitudes towards immigration -- wherever we may find it. Second, we recall that the pendulum will swing back. It always has. As always, we do not know when.

Monday, March 27, 2017

Cities too big?

The usually sharp Ross Douthat of the NY Times has recently been writing about "implausible" or "ridiculous" (his words) policy proposals. What to do in the early days of a Trump administration?

Yesterday's version was "Break Up the Liberal City ... Cities as conspiracies against the public good." Douthat wants to treat the cities "as trusts that concentrate wealth and power and conspire against the public good."

He seems to confuse the city (the place, the economic entity) with city government.  When you say "Los Angeles" (or any other), be clear if you mean the place or the government.  Too bad that many people use them interchangeably.

What do we know about the place? (1) There are many flavors and sizes of cities; (2) The big cities like New York are complex jig-saw puzzles with many interlocking pieces (people); they are not uniformly "liberal"; (3) The cities (actually metropolitan areas that include city hinterlands) that grow (attract capital and labor) do so because they offer a winning combination of attributes and opportunities; (4) Cities are where interactions occur; new ideas are spawned, which is how and why they make labor and capital productive; this is why they are "engines of growth"; (5) The "breaking up" part is typically overdone in anti-trust actions anyway; lawyers and judges cannot easily tell who is "too big"; do prices fall? is innovation proceeding? That is the only relevant test. Amazon and Google are not (yet) "too big".

What do we know about city governments? Yes, too large and, therefore too awful. The scale diseconomies are clear.  Did post-war public school consolidation into large districts do any good?

There was a time when many preached the benefits of regional government. Too many small cities!  That would remove what choice there is and entrench all the wrong people. Extend the power and reach of big city governments into the suburbs? I think that Douthat is suggesting the very opposite.

Saturday, March 25, 2017

New exit

Perhaps the most insightful work on political economy is Albert Hirschman's Exit, Voice, and Loyalty. Staying clear of anarchy, we are stuck with governments and politics. These present problems that complicate our lives and our well-being. Perusing each day's news (newspapers) makes the case.

In any market economy there are inevitably forces that push towards the wrong capitalism, crony capitalism. What can be done? Exit and voice are two possibilities. Neither is without cost but in modern American life, exit is the more plausible option. Exhibit A is the lower schools. In most cases, real improvement is hard to achieve and parents have decided that vying for places in charter schools or competing for vouchers (where that is an option) is the best use of their time. "Fighting city hall" is far less promising.

We look to tech to disrupt monopolies. Uber and Lyft are the favorite examples but I expect that many more will soon emerge.

This morning's WSJ includes a review of Seasteading: How Floating Nations Will Restore the Environment, Enrich the Poor, Cure the Sick and Liberate Humanity from Politicians (which I have not yet read). The essay by Shlomo Angel suggests that technological advances (getting food and energy from the sea) are coming our way. These could make the seasteading idea plausible for some.

The San Francisco Bay Area is attractive to large numbers of tech workers and entrepreneurs (and many others).  But the combination of high attractiveness and local NIMBYISM has elevanted housing costs into the crazy realm.  Development is now being pushed to various corners of the Bay Area. Can seasteading in the mild waters off the California coast be another option? Can some tech (or other) firms set up shop off shore? Recall that California and Bay Area politicians get fat from the "sun tax": they get to do dumb things as long as California remains so attractive to so many. 

Off shore settlement beyond the 12-mile limit but within ferrying distance of SF Bay (there are already 15,000 commuters who ferry across the Bay) may be a check on some of the taxing and regulating. It's still a long shot but perhaps a way to get the benefits of California without all the costs. Mark Twain was wrong about land. "They're not making it any more." He should have mentioned location. There may soon be good enough substitutes for some land (at some locations).

Monday, March 13, 2017

Good old days?

Whenever someone evokes "the good old days," I answer with two words: "medical science." The ailments that we have experienced (or will experience) are best treated by today's (or tomorrow's) medical science, not that of 10, 20, 30, 50 years ago.  The long run longevity improvement trends are clear.

The other trend I celebrate is the rise in interracial and interfaith marriage. It and the mixed heritage offspring are the best antidote to ancient tribalisms that are our heritage -- and often our plague.

I'll take this year over any other.

But the arc of human progress is not easy to fathom up close. Numerous declinist essays and arguments have been floated in recent years. Nicholas Eberstadt writes about "Our Miserable 21st Century: From work to income to health to social mobility, the year 2000 marked the beginning of what has become  a distressing era for the U.S." in the recent Commentary.

Tyler Cowen makes similar arguments in his widely reviewed and well received The Complacent Class. To be sure, Cowen tempers his pessimism. 

Re Ebertstadt, be careful suggesting a uniquely U.S. predicament. Has not most of Europe also experienced a productivity and economic growth slowdown? Do not both, the U.S. and Europe, have to cope with an aging population that works and invents less? Are not both afflicted with sclerotic politics and bureaucracy?  Have not both gone through a financial crisis brought on by a concocted housing boom? Is not catch-up growth (unlike China's) no longer an option for both?

Re Cowen, its more complicated.  He cites similar outcomes as Eberstadt but he devotes his argument to the idea that Americans have lost the adventurousness that characterizes their history.  Thus the title of the book. How and why did mass complacency happen? "Ultimately America decided it didn't want a redo of the turmoil of the 1960s and 1970s, and it did what was needed to stop that from happening" (p. 11). Cowen believes in cycles.  Economic models that include demographics will give you cycles but the models are not so useful when it comes to the specifics of durations and amplitudes.

One of the many recent U.S. trends that Cowen studies involves improved matching capabilities and opportunities (including "assortative mating" which has a been written about a lot). These are mixed blessings. The author elaborates in Chapter 3 of the book, "The Reemergence of Segregation".  "Reemergence" does no suggest Jim Crow forced segregation -- and the painful efforts to overcome it; it is not I-have-a-dream integration but it is not Jim Crow either. Consider a recent LA Times report about Leimert Park, a middle-class mainly black LA neighborhood. There is apparently a backlash against "too many" white families moving in. Not that many years ago, few would have thought that any integration would be protested by blacks. The fact that people, like many in Leimert Park, prefer voluntary segregation may be an unpleasant surprise for 1960s freedom riders. Improved matching opportunities makes sorting (and segregation) in many activities easier. Mixed blessings.

My other caveat re Cowen is over his treatment of upward mobility. He writes that it has been been "outsourced": most of it is now by the immigrants. "Any country with a lot of immigration will have much more upward mobility than its published numbers indicate" (p.150). Of course. The original status of immigrants is by definition absent form the data that mobility researchers rely on. But you can also put this in the good news column. Ambitious people (to the extent that they can get here) have the U.S. as a place to go and thrive.  We get external benefits -- and economic growth prospects. Much has been written about the entrepreneurial spirit of immigrants -- high tech as well as low tech. Cowen would like to see more upward mobility by the U.S.-born. While we wait for that, the more that can come here, the more upward mobility in the U.S. (however measured) and the world.

We cannot have open borders but we can work to discover how to do better vetting to reduce the Type I and Type II errors. Make that a priority. Let more people in and get more of that "outsourced" upward mobility.  This may seem like a stretch but so are Cowen's favorite fixes (p. 194-196).

Back to Eberstadt who makes much of the shock that many felt at the Trump win in November. Many blue-state residents were indeed comfortable inside their own bubble -- from which they could not grasp the world view of the left-behind. Eight years of Obama-Clinton elitist moralizing hardly assured these people. But (pace Middlebury College hoodlums) Charles Murray deserves all the credit here. He did great work in his Coming Apart -- and the "bubble test" he included. All this was written well before the Trump election. Murray showed that most of us spend too much time inside comfortable bubbles.  Murray wants us to get out more -- even beyond our comfort zone(s).

Diversity of thoughts and ideas, amicably and thoughtfully exchanged, are the ideals. All three of the cited writers want that.  Many more of us, including  "The resistance", ought to take up the banner.

Wednesday, March 08, 2017

Sausage factory rules

Conor Dougherty writes abut NYC street traffic in today's NY Times. "Self-Driving Cars Can't Cure Traffic but Economics Can."  There is congestion because there is no pricing. Take one rationing method off the table and another becomes the default. This has been the relevant economic insight for as many years as economists have looked at the problem. While textbooks speak of congestion as a "market failure," the failure to price is actually a failing of policy makers and politicians.  Transactions costs have been removed as an obstacle by modern technology and the arrival of easy, fast and cheap scanning and billing.  These have been implemented and tested in various parts of the world, in particular where there are bottlenecks such as at bridges and tunnels.  The remaining objection has been over the regressivity ("fairness") of pricing. But Uber's "surge pricing" has been seen as entirely sensible by most people.  Matinee pricing, early bird specials and similar time-of-day or season-of-the year demand-responsive pricing have been around for a long time. It's when prices emerge via the political sausage factory that the predictable positions are wheeled out.

Sausage factory rules also explain why the regressivity of taxing people (often via sales taxes) to pay for enormously expensive and often underused subways and similar transit is usually ignored.

Tuesday, February 21, 2017


Here is the L.A. Times noting that LA Metro ridership is still falling -- even though billions have been (mis)spent on extra capacity over the last 30+ years. By my count that's the second time this year that the Times has broached this tender topic. As a member in good standing of the LA "good government" (googoo) establishment, the paper had for many years chosen to tip-toe around the bad news.

Readers of this blog may know that some of us began flogging the dead horse in the mid-1970s. Go to the attached proceedings and read the contribution by the late UCLA Prof. George Hilton. He was among the first to write sensibly and clearly that LA is not NY -- and trying to make it so would be a phenomenal waste. But even LA Times coverage will be for naught. Billions more will be spent. Pouring good money after bad is what the great and the good in city hall do for a living.

We are in the the early years Uber/Lyft and all manner of ICT information sharing.  These are the game-changers. For the past two months, my wife and I have graduated from a two-car household to a one-car-plus-Uber-plus-walkable-neighborhood HH. The game-changers are here. Conventional transit was never a game-changer.


Latest from Wendell Cox

Monday, February 20, 2017

Why have economists in the room?

Good politics makes bad economics and vice versa. The Trump administration's ideas on trade prove it. In today's WSJ, we see that "Trump eyes change in counting U.S. exports that could make trade gap look bigger."

Adam Smith pointed out many years ago "Nothing can be more absurd than the balance of trade." This "balance" (current account deficit) is reported and fretted over regularly. But less noticed is the simple fact that the deficit is necessarily mirrored by an equal and opposite surplus on the capital account.

Currency exchange rates reflect the supply and demand for any and all currencies. Supply and demand for any nation's goods and services as well as supply and demand for any nation's capital goods determine supply and demand for any nation's currency.  At the end of the day, currency values price and prompt all of these trades. 

Put it another way: Americans get to consume more than they produce because the world wants to invest in American capital goods. This also means that American taxpayers (and politicians) can consume more than they produce. Sweet deal all around.

What are the lessons? The world wants to invest in the U.S. Good news. The "trade gap" proves it.

It would be even better if the federal government (politicians) did not reap the benefits. These "investment opportunities" though attractive abroad (for the most part) do little good.  Far better if foreigners used their U.S. dollars to make productive U.S. investments.

Gains form trade are fundamental and beneficial.  Double-entry booking is also fundamental and beneficial.  I understand the politics. But why have economists in the room if they simply parrot the politics?

Wednesday, February 15, 2017

Practicalities, reputations, gossip

Dan Klein has a forthcoming paper (Independent Review) on "The Joys of Yiddish and Economics." Dan looks at the Leo Rosten classic as well as the essentials of Smithian-Hayekian economics and finds various parallel insights. Smith-Hayek famously noted the information content of prices and the useful embellishments of reputations -- whenever we buy or sell.

The characters that Rosten described were practical men and women. Survival was job #1. They could not afford to neglect practicalities. As such gathering information was fundamental. Where and when they could get it at low cost was part of survival. The humor is usually from the joy of recognition.

Thanks to the web, we now live in a sea of information. But we still engage in gossip (in person and on social media) because trust is always being tested. We network electronically as well as the old fashioned way. We seek (and find) the blend of networking opportunities (face-to-face as well as electronic) that works best for us in light of our personal situations.

It's really not so different from Rosten's characters and their situations.

Wednesday, February 08, 2017

The public (politicized) schools

Here is Eric Hanushek, arguably the most astute scholar on U.S. lower school performance (and what can be done about it), commenting on flat and dismal Pisa scores for U.S. students.  Note that he says U.S. scores have been "stagnant for the last decade". He also addresses and deflects the standard criticisms (excuses) for the status quo that are traditionally offered. Read the whole thing.

Below are data compiled by AEI's Mark Perry on what we pay for this tragedy.  All of this is poignant because the most contentious Trump cabinet appointment to date has been the confirmation of Betsy DeVos. It's telling that her critics charge that she is not from the education establishment. Revealing. They are unaware that they cite her most distinguishing qualification.

Vouchers would not destroy the public schools.  Rather, all schools would be incentivized to earn their public subsidies rather than receive them as an entitlement. There is nothing like competition and innovation. Both have been missing. This is why we have the sorry mess we are in.  Let 100 (actually many more) flowers bloom.

Here is the WSJ's Daniel Henninger explaining how and why those who live and breathe "social justice" are obliged to show their true colors on this issue.

ADDED From a Feb 10 Ed Glaeser WSJ book review: "My preferred course would be a single-minded devotion to skills—learned in charter schools and on the job and at the breakfast table and while sitting patiently in a house of worship ..."  From Edward Conrad's The Upside of Inequality: "Today U.S. growth demands properly trained talent ..." (p. 13). 

As always, how we we get from here to there?

Wednesday, February 01, 2017


Globalization, immigration, and trade hit some Americans hard and many turned to Trumpian populism.

Here Russ Roberts interviews George Borjas to discuss Borjas' We Wanted Workers (which I have not yet read). Early in the conversation, Borjas explains "we wanted workers but we got people" is closer to the real experience and complicates the story way beyond the simple economic models.

The conversation is, as always, useful and enlightening, but the two economists hit what are in my view two dead ends. First, they wonder whether rather than limiting immigration, can native workers be better prepared to compete? Both men favor "better education." But how will that happen?  American kids have been posting lousy Pisa scores for as long as I can remember - no matter what is done or what is spent on the schools. And which Trump cabinet choice is in trouble at this moment? Betsy DeVos who promises to be the first Secretary of Education not in the pocket of the education establishment -- which is why she is in trouble. So much for the education fix.

Elsewhere in the conversation, Borjas and Roberts note that immigrant assimilation was once the choice of most immigrants as well as of most Americans. But no more. "Melting pot" is now a microaggression on some college campuses. Yes! Not a bad joke.

Tribalism around the world accounts for countless deaths and wars.  Coming to America as way out of tribalism was the great American achievement. It never meant that ethnic ties would be lost.

But identity politics and confusion now reign and we have lost something notable and precious.

Those still puzzling over the Trump win might reflect on political correctness jammed down our throats for years. The Ft Hood shootings were simply "workplace violence". Yup, and we're all stupid. And the geniuses who came up with this tactic knew what they were doing. Not really. What we do know is that they will be puzzling over (and writing about) the Trump (who I did not support) phenomenon for many years.

Arrogant cluelessness (just like elections) has consequences.

Thursday, January 26, 2017

No escaping Downs' Law

Take pricing off the table and the alternatives are not promising, much worse than tying just one hand behind your back. This is true for almost any public service.

Some years ago, Anthony Downs elaborated and popularized the idea with his "Law of Peak Hour Congestion."  Here is a nice summary. Without pricing, extra road capacity will simply attract traffic from other sources (other modes, other routes, other times of day, new trips, etc.). Congestion will not be "solved." The idea is simple -- and the lesson has been ignored a thousand times. Officials are loathe to price but love building things. This is "bi-partisan". Crony capitalism is non-denominational.

Elon Musk has now made another media splash by promising to "solve" LA's traffic problems (which have eluded all of the previous "solutions" for the same reasons) by promising new capacity via a tunnel under the Hollywood Hills. It's big, it's splashy and it's Elon Musk. What could go wrong?

Subways are thought to "work" in NYC for historic reasons. But even there, the costs (in light of U.S. construction practices) have escalated enough to make the whole idea questionable. Would a Musk super subway be any different. There is nothing there that addresses Downs' Law.

Thursday, January 19, 2017


There is cringe-worthy economics coming out of Washington on a regular basis. This morning, one reporter without a hint of irony referred to the Trump trade agenda as an "America-first trade agenda." Trade is not about winning but (once more) good politics is often bad economics.

In my fantasies, the know-nothings would learn from some of my favorite books. When it comes to money, start with Money Changes Everything: How Finance Made Civilization Possible by William Goetzmann.  As the title states, the author tells us about history while he tells us about economics. (Should we ever have one without the other?)

Try to explain money. These days, I try to explain Bitcoin (any crypto-currency) to friends and family. What "backs" these? What backs any fiat money? The trust in and the credibility of the issuer. When I shop with "Peter Gordon IOU's" I don't get very far.

Economic historians like Goetzmann have the real goods. Consider this from page 450:

“Having repudiated its foreign debt and fought off the attempts by the world’s leading investor nations to reverse the October Revolution, Russia still needed to raise money.  In the Yale collection of historical financial documents is a printed bill, about twice the size of a modern dollar. On the front of the bill is a picture of a farmer sowing a field. The inscription on the bill identifies it as a short-term loan from 1923:  an obligation of the government.  Oddly enough it does not promise payment in rubles but instead it can be redeemed for one sack of rye flour.  Karl Marx would have been proud.  The young Soviet government had bravely dispensed with the object of money fetishism – the veil that concealed the true value and encouraged capitalist monetary accumulation.  Instead, the idealistic Bolsheviks introduced a more fundamental source of value as a medium of investment and exchange.  Lest Russians imagine that the grain itself held value, the romantic pastoral image of the farmer sowing the grain pictured the labor theory of value.  The commodity was worth the amount of honest labor used in planting and harvesting it.  What is not clear from the document is whether the bill represented fiat money or whether it was truly redeemable.  If it were actually a short-term note used to redeem a sack of rye, there is missing information.  The bill does not state when and where the sack can be collected.  Perhaps it was really a manifestation of the labor theory of value.  Alternatively, it could have been a manifestation of the weakness of the young Soviet state.  Russia was in the throes of hyperinflation in the early 1920s as the needs of the state outstripped its resources.  Perhaps the rye bond was an inflation-protected currency.  Then again, who knows how many sacks of rye the government had to deliver on such promises – or indeed, whether they ever did.  The fact that you can buy one of these bills today for less than $50 suggests that many of them were left unredeemed.”
 There are many more gems like this one. Enjoy.