Sunday, March 31, 2019

Time horizons

Robert Shiller writes “Modern Monetary Theory Makes Sense, to a Point” (MMT) in today’s NYT.  What is MMT?  It comes out of the Bernie Sanders campaign (among others) and seems to say “print all the money you want -- because you can.”  Sound silly? 

The printing must be for “good causes.” But aren’t they all? 

And increased national debt is not a problem “because we owe it to ourselves.” But who is “us”?  Mercantilism (you would have thought) was disposed of many years ago.  Are nations meaningful economic entities?  Most people are interested in with whom they trade insofar as whether they trust them enough to arrange a mutually attractive deal. Nationality only enters the discussion when political economy becomes tribalist crazy. There is way too much tribalism in the world without this.

I have been driving Japanese cars almost my whole (driving) life.  The national origins of the product are irrelevant.  So it is with most purchases – unless politicians seize on national origins of product for their own jingoist reasons.

But say this for the MMT people. They have three things going for them. (1) Americans (for the most part) have stopped caring about the national debt. (2) And – to this point – they have been right. The world continues to want U.S. securities in their portfolios.  (3) And politicians love to spend but hate to tax.

So go for it? Political time horizons are what they are. Reason #995 for small government.


Arnold Kling calls it Modern Ponzi Theory

Wednesday, March 27, 2019

Planners and policy makers, call your office

People who talk about macroeconomics are captivated by the Philips curve trade-off between unemployment and inflation.  The thinking has been re-packaged many times but the idea seems not to go away.  When there is economic growth, there is the possibility of "overheating" and inflation. So, do something! Trouble is that the theory tells us nothing about timing.  So mistakes are made and policy-induced business cycles follow.

Likewise, when it comes to cities, there is usually just one (old) idea. Spread and "sprawl" are costly and must be avoided.  Contain "sprawl" and do "containment," "clustering," urban "growth boundaries," etc. Evidence that this is misbegotten arrives almost daily. Look at  Also look at this morning's WSJ which includes "A Decade After the Housing Bust, the Exurbs Are Back."

Rank the top ten U.S. urbanized areas for all of the recent census years. In 1950, the top ten (in order of population) were New York, Chicago, Los Angeles, Philadelphia, Detroit, Boston, San Francisco, Pittsburgh, Knoxville, St. Louis. For the 2010, it was New York, Los Angeles, Chicago, Miami, Philadelphia, Dallas, Houston, Washington, D.C., Atlanta, Boston. Gordon and Lee report the ranking for all of the seven intervening census years.

Here are number of intercensal rank changes (from the top): 0,1,1,1,2,2,4,4,6,6.  New York was always #1 but there is natural churn.  More churn as you move down from New York. Stability towards the top.

Growth happens when net agglomeration economies prevail. How do the bigger places retain a net agglomeration advantage? By growing at the edges. No costs of sprawl. Quite the opposite.

Planners and policy makers, call your office. And do read Alain Bertaud's Order without Design.

A Decade After the Housing Bust, the Exurbs Are Back

Tuesday, March 12, 2019


There are probably good medical definitions of overweight and underweight. There are many other serious examples. But many other casually used overs- and unders- are hard to define.  They are rhetoric. We hear many complaints about things "overpriced." More that I want to pay? Or the popular "I am underpaid," even "underappreciated?" Many more.

In private life there are bankruptcies and business failures. In public life, these are rare. Instead, many agencies or services are "underfunded." There is seldom recognition that something is wrong and the outfit should re-group and leave us alone.  Perhaps some private businesses on the verge of bankruptcy entertain thoughts of being underfunded. But if capital markets do not come to the rescue, there are probably good reasons. (Seeking cronies in government is another unfortunate approach.)

At the local level, is there an excuse for potholed streets? Why do the folks with clear responsibilities for the basic duties of local government fail?  One would think that fixing the potholes is non-partisan. One would think that the things that really matter to most people are the purview of local governments. One would think. (And that may be the case for smaller jurisdictions. The Homevoter analysis suggests the same.)

One would be wrong. Big cities are different. By all means, pay attention to this when referring to "local government".  This is not a simply defined sector. At the large-city level, instead of the basics there is preoccupation with social justice and climate change programs. Why fix the roads? Big-city politicians secure election by looking after a coalition of labor unions (their pay and their pensions) plus the fans of "good causes." Bootleggers and Baptists is powerful as always.

Non-partisan suppliers of public services indeed.


The people who cannot fix the potholes do embark on transit projects that cost huge amounts but serve very few people. In fact, net ridership increases are negligible (in a good year) but usually negative. Here is the latest for L.A.  Again, stop talking about "local government". Big-city local government is special and not in a good way.

More on "underfunded".