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?

Tuesday, September 27, 2016

There's a pony here somewhere

Here are Bryan Caplan's reasons for disdaining politics. I feel the same. In fact, I could add to it. But the point is made. This political season has not helped. The fact that Americans' cynicism towards politics grows is not a good sign. I have no idea if any of  this is reversible. Where do we go after Clinton-Trump? There are cliches about "hitting bottom" and then somehow bouncing back.

In all this it's good when politicians connect dots. We did have a short spate of de-regulation under Carter-Reagan. And that was it for a while.

So here is some good news. Almost everyone has by now seen hard evidence that restrictive land use policies are the cause of the widely lamented housing affordability problem. Green land use policies have had this effect since the UK 1947 Town and Country Planning Act. So in 2016, we finally get "Obama takes on zoning laws in bid to build more housing, spur growth." Is it a sign? We'll have to see.

Tuesday, September 20, 2016

Teamwork and fun

Nobelist James Buchanan's public choice (politics without romance) ideas are profound. But public choice is still missing from most economists' "toolkit". It is seemingly easier to find departures from Nirvana economics (models built on assumptions of perfect information, perfect foresight, perfect rationality, etc.) and hop-skip-jump to the conclusion that markets fail -- and a wise and dispassionate tribe of experts should get to work fixing things. It's the old progressive idea. It is seductive and it seemingly appeals to people who dream of social order -- and also many brainy people, perhaps elevating their self-image as the engineers of such order.

But beyond that, one sees the problem every time a political candidate speaks -- and when listeners jump and shout for joy. Nothing may make logical sense. But people are tickled to be there and to be participants. The human instinct is that people desperately want to be on a team -- just like at sporting events. The impulse to form teams and bands is a favored evolutionary tale of how sapiens came to dominate all of the other faster and stronger species roaming the planet.

All of this is stark in 2016. It has been many times noted that Clinton and Trump are flawed candidates. But Clinton's lying is no big deal; Trump will become "presidential" anytime soon! Many are desperate to be on a team -- and tie themselves into knots to find a way get behind one or the other of the unappealing candidates. People cheering at the game Saturday afternoon are having a lot more fun than those who stayed away, attending to their normal lives.

Small government (small politics) advocates will always have a tough time. What they offer comes up short in the fun department.

Wednesday, September 14, 2016


Here is Issi Romen's Romem's "Can U.S. Cities Compensate for Urban Sprawl by Growing Denser?"
It's a thoughtful piece.  Here are my top five thoughts and responses.  Readers of this blog may have encountered these five "pillars" (apologies to David Henderson) before.

1. "Sprawl" is vague, pejorative and misleading. We have auto-oriented development -- because autos are dominant.
2.  "Density" is likewise misleading. Can we describe a large urban area via just one number? There are many densities in most places -- to accommodate a variety of tastes and interests.
3.   Planning policies are a mixed picture. The ones in place and the ones advertised may not be the same. A lot happens in the approvals process. This includes too much cronyism.
4.  Market forces are the prime movers of development. Development that fails the market test has a bleak future. In the event, even government subsidies can only go so far.
5. There is no way for planners (or anyone) to know the right (or wrong) density. There is a diversity of tastes and opportunities out there. These are best evaluated and responded to by people with (i) local knowledge; and (ii) the capacity to take risks.

Sunday, September 11, 2016

Not the full story

Millions of Americans have gone through some sort of college, taken the standard principles of economics course, and heard about specialization and trade. Exchange means more consumption and more consumer well-being. Prices are lower, variety is greater, as is innovation. Consumer sovereignty is the best way to allocate scarce resources.

Strangely, however, the simple story is ignored in standard political discourse. Trump, Clinton, Sanders and all the others only talk about jobs lost (trade) or gained (protection). Cronyism, xenophobia and ignorance are a miserable brew. Among the ironies is the fact that most Americans do poorly in school (by international standards, OECD PISA comparisons) yet live very well (again, by international standards). The apparent irony cannot ever be addressed if terms of trade are never explained.

I had hoped for clarification via Nathaniel Popper in today's NY Times, "We know plenty about the losers in global trade. Why don't we know more about the winners?" But he too sticks to the jobs gained vs jobs lost narrative.

Live to work or work to live? Most people would say it's the latter. But even the smart people, like Popper for example, only highlight the work part. It is not the full story. In fact, it's misleading.

Wednesday, September 07, 2016


California's establishment (a large club) cannot fix potholes but they want to build a bullet train. I get that. More baffling is the fact that many leading economists (and others) ignore all this and promote ever more spending on "infrastructure". When it comes to public spending, it's apparently OK to double-down on multi-billion dollar waste.

The real game-changer (challenge to the growth of private auto use) is from the likes of Uber. The Economist of Sep 3 includes "From zero to seventy (billion) ... The accelerated life and times of the world's most valuable startup." Ironies everywhere. Uber's billions, for new ideas and approaches, are volunteered; transit's billions for old tech are coerced -- with predictable results. And transit's politician friends do what they can to throttle Uber -- and protect the taxi status quo.

What will Uber-plus-self-driving technology do? Door-to-door personal transportation will beat fixed-route collective transit in most cases. Serving the public does not involve "public servants." Quite the opposite.


Cowen re Uber.

Sunday, September 04, 2016

History riddle

The WSJ links to Gary Saul Morson's "The house is on fire! ... On the hidden horrors of Soviet life." There is a discussion of who murdered more, the Nazis or the Communists? In the early 20th century, class war and race war rhetoric were widely invoked. But since the Holocaust, race war rhetoric is decidedly unfashionable (at least in polite company). But class war rhetoric is almost a mainstay of political campaigns around the world. The free-lunch brigade exploits it all the time.

Morson mentions that the body-count casualties of class war (Stalin, Mao, Castro, Kim, Pol Pot, etc.) are largely out of sight-out of mind. But that begs the question. Why should it be so?

Both of the socialisms (national socialism and bolshevik socialism) were utopian. Both promised to create a "new man" (and woman, I suppose).  But the Nazis were German-centric while the bolsheviks talked in international terms (their anthem).

Morson's punchline is one of those laugh-or-cry East bloc jokes:
 ... a story, set during the Great Purges, about some families in a communal apartment who are awakened at 4 a.m. (the usual time for arrests) by a peremptory banging at the door. Finally one old man, with less life left to lose, answers, disappears into the corridor, and at last returns. “Comrades, relax!” he explains. “The house is on fire!”

I am reading Svetlana Alexievich's Seconhand Time. Today's Homo Sovieticus is tragic in many ways.

Tuesday, August 30, 2016

Climate news

The climate news most likely to make it into the popular discourse tends to be one-sided. Matt Ridley ("An Ice-Free Arctic Ocean Has Happened Before ... When the Arctic loses all it sea ice one summer, will it matter?") reminds us once again that the real story is quite complex -- and not easily amenable to the kind of posturing that is so popular in politics, media -- and beyond.

Wringing of hands over distant climate change is required of all right-thinking people. We can thank Bjorn Lomborg for reminding us that in a world of scarcity, it is important to prioritize. The only tool we have is serious cost-benefit analysis -- with all the proper caveats about inevitable uncertainties. Large numbers of people face awful conditions right now that are remediable sooner rather than later. High on the list are toilets for the millions that do not have them. The health and dignity benefits are clear. This is about the plight of people now.

The important point is that technological change does not cease. Timothy Taylor cites research on making fuel from carbon dioxide.  Russ Roberts and Chuck Klosterman discuss the almost inevitability of being wrong -- and  perhaps prompting those who come after us to someday roll their eyes? "They used x-ray?!"

Who most likes doomsday scenarios? There is always a Bootleggers and Baptists coalition with a keen interest to "do something." Included among the spiritual seekers are those with an attachment to the idea of state action.


The WSJ's Holman Jenkins is blunter than I was.

Friday, August 26, 2016

Mal-investing as policy

The revised second-quarter GDP numbers are here -- and again dismal. What to do? "Janet Yellen is calling for investment in public infrastructure ... monetary policy tools have reached their limit .."

But here is a more plausible view: The Perils of Public Capital. Read the whole thing. It cites the many bridges to nowhere and other similar missteps. Are all of these failures invisible to Yellen and Summers -- and the many others of their persuasion?

The blinders seem to come on when the old-time religion, more public spending, is evoked. One can excuse the pandering and posturing Clinton and Trump, but the smart people are another story.

Here are two thoughts. First, for many academics, their intellectual capital is their whole being. Hold on to it at all costs. If nearly $1 trillion of spending on "shovel-ready" projects did nothing, suggest to spend even more. The model says so. Second, and related, many smart people have a strong need for closure. Ambiguity and open-endedness are no fun. The theory has to work.

So why all this sidewalk psychiatry? Because it is bizarre that our best and brightest will say anything on behalf of good old-fashioned public spending. And convenient for you-know-who.

Econ 101 says that capital markets are essential so that scarce resources not go into mal-investments. But we are in the unfortunate situation where public infrastructure and mal-investment have become almost synonymous.

Monday, August 22, 2016

"Youthful safety and adult immaturity"

There are few if any unmixed blessings. Almost everyone likes and uses the internet. But there are obvious downsides. Ross Douthat takes up that theme in Sunday's NY Times, "The Virtues of Reality ... Online realms can make us safer, but stunted." Virtual sex and computer game violence mean that young people have been less likely to get in trouble. But neither are many of the young ready to get out, join the workforce and sample non-virtual reality. Many stay with parents, stay home,  and make do with not much of what we can call a life. 
"... I want to advance a technology-driven hypothesis: This mix of youthful safety and adult immaturity may be a feature of life in a society increasingly shaped by the internet’s virtual realities.
Douthat moves the discussion away from the standard (boring) talking-heads litany of political errors and political opportunities. And the young people least equipped are most likely to use internet addictions to avoid getting a real life. "The poor spend more time online than the rich ..." There was a time, of course, when class warriors embraced the "digital divide" concern. They were apparently wrong.

Read Douthat's whole piece on this. When I get the Sunday Times, I look at his column first.

Friday, August 19, 2016

What would they do all day?

There are many pithy ways economists use to make important points ("no free lunch", "compared to what?" etc.). Among the most useful is Thomas Sowell's "and then what?".

Today's WSJ cites a short piece from Esquire on some of the consequences of marijuana legalization. The "War on Drugs" has been a disaster on many fronts and legalization is the way to go. But partial legalization also has consequences. These were harder to anticipate. Here is the story:

... The heroin epidemic was caused by the legalization of marijuana.
We wanted legal weed, and for the most part, we got it. Four states have legalized it outright, others have decriminalized it, and in many jurisdictions police refuse to enforce the laws that are on the books, creating a de facto street legalization.

Good news, right?

Not for the Sinaloa Cartel, which by the time Colorado passed Amendment 64 in 2012 had become the dominant cartel in Mexico. Weed was a major profit center for them, but suddenly they couldn’t compete against a superior American product that also had drastically lower transportation and security costs.
In a single year, the cartel suffered a 40 percent drop in marijuana sales, representing billions of dollars. Mexican marijuana became an almost worthless product. . . . Once-vast fields in Durango now lie fallow.
More good news, right?

Yeah, no. Guzmán and his boys are businessmen. They’re not going to take a forty-point hit and not do something about it. They had to make up those profits somewhere.

Looking at the American drug market as it existed, Guzmán and his partners saw an opportunity. An increasing number of Americans were addicted to prescription opioids such as Oxycontin.

And their addiction was expensive. One capsule of Oxy might sell on the street for thirty dollars, and an addict might need ten hits a day.

Well, s—, they thought. We have some of the best poppy fields in the world. Opium, morphine, Oxy, heroin—they’re basically the same drug, so . . .

The Sinaloa Cartel decided to undercut the pharmaceutical companies. They increased the production of Mexican heroin by almost 70 percent, and also raised the purity level, bringing in Colombian cooks to create “cinnamon” heroin as strong as the East Asian product. They had been selling a product that was about 46 percent pure, now they improved it to 90 percent.

Their third move was classic market economics—they dropped the price. A kilo of heroin went for as much as $200,000 in New York City a few years ago, cost $80,000 in 2013, and now has dropped to around $50,000. More of a better product for less money: You can’t beat it.

At the same time, American drug and law-enforcement officials, concerned about the dramatic surge in overdose deaths from pharmaceutical opioids (165,000 from 1999 to 2014), cracked down on both legal and illegal distribution, opening the door for Mexican heroin, which sold for five to ten bucks a dose. ...
Partial legalization is the problem. People's capacity to discover (and supply) substitutes is vast. To avoid messes like the one described, go back to principles. Prohibit nothing that has the potential to only harm the individual exercizing his or her free choice.

Freedom is inherently attractive and also so practical. But the freedom idea also places a lot off-limits to the state. What would politicians do all day?

Tuesday, August 16, 2016

Urge to mandate updated and cleaned up

Ironies make us think. And there are plenty of them. We know that in U.S. politics, "liberal" is now the opposite of its original meaning. We also know that people who would have claimed that label as recently as 20 years ago now prefer to be called "progressives." People who see themselves as "liberal" in the old fashioned sense now prefer the label "libertarian".

But, on examination, the original progressives of the Progressive Era were not the congenial folks we learn about in high school. Fred Siegel covers this ground in his The Revolt Against the Masses: How Liberalism Has Undermined the Middle Class.  Thomas C. Leonard does much the same in his Illiberal Reformers: Race, Eugenics & American Economics in the Progressive Era. Most disturbing is the fact that, in the great desire to be be modern and scientific, the Progressives embraced eugenics. We now know how badly that ended.

Almost all of polite company these days favors raising the minimum wage in the service of "helping people." But the original Progressives were quite explicit about their motives. They also got their econ 101 right. Here is Leonard (on page 130): "Thus did many observers accuse inferiors of accepting low wages and undercutting the American workingman. Sometimes inferior workers were portrayed as explicit dupes of the capitalist. At other times they were portrayed as the capitalists' accomplices. Often they were made out to be both. In all events, the threat was the same: the low standards of inferior workers."

That sort of candor has been updated and cleaned up. It is now about "helping people." Trouble with that is it just ain't so. The Law of Demand, as they say, "takes no prisoners."

Don Boudreaux makes a similar point.