Life as opera

In today's WSJ, Bjorn Lomborg writes about "Storm Surge ... If global warming will raise sea levels, why are we moving to the coast?" (excerpted below). The obvious give-away is that the alarmists know only one song, the apocalypse theme. The fact that all the doomsday forecasts that ever were have been wrong is of no consequence. Life as opera has its charms.

Presumably, our goal is to help humans and the planet. Cutting
carbon is a very poor way of doing that. If coastal populations kept increasing
but we managed to halt climate warming, then research shows that there would
still be a 500% increase in hurricane damage in 50 years' time. On the other
hand, if we let climate warming continue but stopped more people from moving
into harm's way, the increase in hurricane damage would be less than
10%.

So, which policy knob should we turn first: The climate knob
that does so very little, or the societal knob that would do 50 times more? It
is obviously unrealistic to believe that we could turn either knob all the way.
We cannot halt climate change entirely, just as we cannot hold back the wave of
people moving into beach houses.

If the United States and Australia were to sign up to the
Kyoto Protocol and its binding restrictions were to last all the way until 2050,
very little would be achieved: Hurricane damage would increase by half a percent
less than it would without Kyoto.

There are many more effective things we could do. Communities
at risk should have better education, evacuation plans and relief distribution.
These are "ambulance at the bottom of the cliff" measures, but there are also
plenty of proactive options, like regulating vulnerable land and avoiding
state-subsidized, low-cost insurance that encourages people to build
irresponsibly in high-risk areas.

Policy makers can improve and better enforce building codes to
ensure structures can withstand higher winds, and maintain and upgrade the
protective infrastructure of dikes and levies. More investment could be made in
improved forecasts and better warning systems. Reducing environmental
degradation and protecting wetlands would mean fewer landslides and stronger
natural barriers against hurricanes.

Conservative estimates suggest we could halve the increase in
damage through these incredibly cheap and simple social policy measures. This
was shown powerfully in a previous weather disaster, Hurricane Katrina, when one
insurance company found that 500 storm-hit locations that had implemented all
the hurricane-loss prevention methods experienced one-eighth the losses of those
that had not done so. By spending $2.5 million, these communities had avoided
$500 million in damage. Often, big benefits can come from cheap and simple
structural measures like bracing and securing roof trusses and walls using
straps, clips or adhesives.

Mea culpa

The current Journal of Economic Literature (June 2007) includes "Automobile Externalities and Prices" By Ian W.H. Parry, Margaret Walls and Winston Harrington.

They begin by noting "Of all consumer products, few are taxed more heavily or regulated more extensively than automobiles ..." They then survey the large literature covering all possible manner of externalities (greenhouse warming, oil dependency, local pollution, congestion, accidents) and add them up for a sum of 10 cents per mile. They conclude: "It could be argued that the externality rationale for higher fuel taxes has come and gone. Electronic road pricing offers the only real hope for addressing relentlessly increasing urban gridlock, while encouraging a transition to mileage-based insurance would inprove highway safety more effectively."

Harry Richardson and I have long argued for the benefits of flexible land markets as a traffic safety valve. But as these become clogged with fees, controls, politics and approvals requirements, the weight given to the tolling option grows.

But in my previous posts on the costs and benefits of rail transit in LA I had assumed 90 cents per mile for auto externalities. I now appears that had been wildly overstating transit's economic efficiency. Mea culpa.

Another one bites the dust

I am backward enough to believe that American exceptionalism has a lot to do with a decent (not perfect, of course) history of assimilation. Immigrants like to come here and after they do, most aspire to the American Dream.

Well-meaning colleagues often correct me and the proper PC term is "acculturation." Beats me.

By now most people have heard of Robert Putnam's study on diversity. He finds that it is not an unmixed blessing. Of course. But assimilation offers a bridge whereby people can overcome phobias and fears.

I have Chinese relatives and Jewish relatives and some who are both. Each cherish their heritage as well as their Americanization (I have no idea whether that's a bad or a good word). We do not have fetishize ethnic differences. And they should not dominate our politics.

I like the lead in by Dan Henninger in today's WSJ:

Diversity was once just another word. Now it's a fighting
word. One of the biggest problems with diversity is that it won't let you alone.
Corporations everywhere have force-marched middle managers into training
sessions led by "diversity trainers." Most people already knew that the basic
idea beneath diversity emerged about 2,000 years ago under two rubrics: Love thy
neighbor as thyself, and Do unto others as they would do unto you. Then suddenly
this got rewritten as "appreciating differentness."

George Bernard Shaw is said to have demurred from the Golden
Rule. "Do not do unto others as you would have them do unto you," Shaw advised.
"Their tastes may not be the same." No such voluntary opt-out is permissible in
our time. The parsons of the press made diversity into a secular commandment; do
a word-search of "diversity" in a broad database of newspapers and it might come
up 250 million times. In the Supreme Court term just ended, the Seattle schools
integration case led most of the justices into arcane discussions of diversity's
legal compulsions.

More recently it emerged that the University of Michigan, a
virtual Mecca of diversity, announced it would install Muslim footbaths in
bathrooms, causing a fight.

Now comes word that diversity as an ideology may be dead, or
not worth saving. Robert Putnam, the Harvard don who in the controversial
bestseller "Bowling Alone" announced the decline of communal-mindedness amid the
rise of home-alone couch potatoes, has completed a mammoth study of the effects
of ethnic diversity on communities. His researchers did 30,000 interviews in 41
U.S. communities. Short version: People in ethnically diverse settings don't
want to have much of anything to do with each other. "Social capital" erodes.
Diversity has a downside.

Protectionists in sheep's clothing

None of the presidential candidates are protectionists but they all favor "fair trade". They use this dodge to have it both ways.

I am greatly enjoying Ian Kershaw's Fateful Choices: Ten Decisions that Changed the World, 1940-41. The author stresses that leaders of Germany, Italy and Japan openly linked military conquest with their quest for resources.

These same countries, of course, did gain access to all of the resources they wanted after the war via trade. Has there ever been a lesson learned at a higher cost?

There were imperial dreams and hegemonic ambitions but, Kershaw points out again and again, these were always fortified by the avowed quest for resources, but without any thought to obtaining them via trade. "... the mentalities of the 1940s were light years away ... " from such ideas (p. 128).

It is not enough to remind the protectionists of the gains from trade. On more than one occasion mercantilism has had horrifically lethal outcomes.

Footloose

Yesterday's NY Times included ("Off to Resorts, And Carrying Their Careers"). The article mentioned the growing numbers of location-neutral businesses, giving many people the option of relocating to mountain-state areas with amenities.

"The New Urban Refugees" is the accompanying graphic that showed most 1980-1990 (county-level) home value appreciation was in the SF bay area and the NewYork-Nantucket ambit. In the 1990-2000 the top home-value appreciating counties were in the mountain states.

Jobs have been becoming more footloose for many years and the trend will accelerate. This will increase the scope for individuals to choose. Localities will have to compete more than ever. This is as it should be.

Competition means that markets will have a hand in picking and choosing neighborhood styles and forms. Smart Growthers will have to get used to the fact that there will be more bottom-up and less top-down planning.

The various voices of this discussion are well represented in Planetizen's recently published Contemporary Debates in Urban Planning.

Extra creepy

Today's LA Times reports that "Major work begins on Expo Line". Not only have I lost a parking space and a view (and gained a continuing tax bite to pay for this turkey' shortfalls) but I will also get endless spinning by local officials to make a bad idea look good.

"Standing amid mounds of dirt at the edge of USC on Friay, political leaders celebrated a milestone for L.A.'s fledgling rail system: the start of major construction for a rail line from downtown to the Westside." This time, it was all visible from my office window.

This morning's report mentions an initial 8.6-mile alignment that will experience 43,000 daily boardings by 2025. That's about 5,000 boardings per day per mile of line. But local officials think big and it appears that they really want to extend the project to 15.6 miles which they say will serve 72,000 boardings per day.

The same folks gave us three other light-rail facilities (the Blue, the Green and the Gold Lines) that together amount to 54.9 miles of route and that serve almnost 126,000 boardings per day (the last time I looked). That's 2290 per mile of alignment per day. Benefit-cost-wise (and adding generous non-rider benefit assumptions), these three account for a negative $250-million per year.

Rail transit in LA (and in most other places) is a jobs program that has nothing to do with sensible transportation planning. But it's extra creepy just outside my office window.

Small book confronts big problems

Paul Collier's The Bottom Billion has many attractive qualities. Start with the title. We live in times whan most of the world is advancing but many are still missing the boat and Collier has identified them. He refers to "Africa+", much of sub-Saharan Africa, plus various unfortunate places, including Haiti, Bolivia, the Central Asian countries, Laos, Cambodia, Yemen, Burma and North Korea.

Next he identifies his target audience, those who have anything to do with G-8 policy towards the developing countries -- and who share some of the blame for getting it wrong.

Then he brings to bear the best of social science, research equally grounded in academic rigor and on-site experience.

Finally, he distills it all (he finds four "traps" and suggests plausible antidotes) and writes about it with exceptional clarity. Collier identifies the Conflict Trap, the Natural Resources Trap, Landlocked with Bad Neighbors, and Bad Governance. His discussions of the antidotes are compelling.

This morning's WSJ includes "The Kids Are All Right. It turns out that 53% of high school seniors taking the NAEP's econ exam answered (b) to: "Which has been most important in reducing poverty over time: a) taxes, b) economic growth, c) international trade, d) government regulation?"

If they have made it that far, they should be able to grasp Collier's arguments. And then they may appreciate that there is more to be done about the problem of world poverty than attending rock concerts.

The best questions

I blogged about Tyler Cowen's Discover Your Inner Economist a couple of days ago and mentioned the Tom Schelling influence. I have just finished Robert H. Frank's The Economic Naturalist: In Search of Explanations of Everyday Enigmas and note that it is dedicated to Tom Schelling, as it should be.

The WSJ (Aug. 3) unkindly linked both books ("Economics for Copycats") with Freakonomics and More Sex Is Safer Sex when there are actually important differences. Reading all of them is not redundant.

Frank covers the most ground, including many (paraphrased) essays by his students from when they were assigned to apply economic thinking to various puzzles. He includes perhaps over 100 of them (I did not count), including some that are oldies (Why did kamikaze pilots wear helmets?), some obvious ones (Why do women pay more for dry cleaning?) and others that some of us may have not paid enough attention to. For example, why do brides spend a small fortune on wedding gowns, that they will never wear again, while grooms are OK with renting a tux off the rack? Read the book for the explanation.

Friend Heather Neff (not an economist but a female) added that brides also choose unflattering bridesmaids' gowns so that the bride shines all the more. Who knew?

The best questions prompt the best thinking.

Politics as usual

American public schools are not performing poorly because they are underfunded. Likewise, bridges are not collapsing because surface transportation is underfunded. Rather, both are funded via a wasteful political process.

No one knows how many earmarks there are pending in Congress at any moment. Some say as many as 32,000. It is safe to say that these projects are not the ones favored because they scored high on any benefit-cost analysis.

But whenever there is a calamity such as the collapse of the I-35W in Minnesota, there will be the drumbeat to spend more -- but without any discussion of how to spend better or where to trim.

Randal O'Toole reports that it is even worse because bureaucracies move very slowly. Even when funds are allocated to worthy projects, there is usually a very slow and cumbersome process. Twenty years can pass between approval and actuality.

Just like the income tax, arcana and unnecessary complexity are supposed to give the impression that there are safeguards against graft and inefficiency.

Free lunch

Just when I had come around to the PC view that unexamined wage gaps are proof of gender discrimination, the NY Times reports on a wage gap that favors women. I read the article twice but could find no references to sexism. I guess that many employers are missing the boat: they can save money by hiring cheap male labor. A free lunch, at last.

The power of economic thinking

Tyler Cowen has established a reputation for, among other things, many worthy blogs at Marginal Revolution. He has now assembled and embellished many of them in his Discover Your Inner Economist: Use Incentives to Fall in Love, Survive Your Next Meeting, and Motivate Your Dentist.

Most non-economists think that economics is all about a narrow dollars-and-cents accounting and, thereby, miss the important point that economics is about a much broader and more comprehensive treatment of incentives.

And people are complex enough to strive for status when it will give them things that they would be shamed to purchase for cash -- such as social and sexual partners. See how values and markets interact and intersect.

But this is just the tip of the iceberg. Our world is challenging and interesting and the appreciation (and application of) the broad array of motives and incentives is very useful, as Tyler shows.

The book is great fun to read and appreciate. My favorite passages were about food. Tyler elaborates the idea that the best food exists were income inequality is the greatest because good restaurants require lots of cheap labor and many wealthy guests. You are not likely to eat well in Scandinavia but you will eat well in the ethnic neighborhoods of U.S. cities.

Tom Schelling pioneered this brand of economic thinking many years ago -- and received a Nobel prize for his approach and his insights. It works when practiced by smart people and, as the Cowen book, shows, it can also be explicated and taught.

Trains and brains

One of my favorite fantasies is receiving one dollar each time someone suggests the no-brainer (literally) to "just add a monorail."

Where to start? Tom Rubin (via Wendell Cox) discusses the latest of many such planning disasters. This time its the Las Vegas monorail, along a high-density strip and to serve large numbers of out-of-towners, the perfect setting -- not.

I have no idea whether the authorities placed Elvis impersonators on the trains. Let's not go there.

It takes a storm

When I visited New Orleans a year ago, I found little in the way of good news except charter schools. Katrina was the long overdue death blow to the dysfunctional school district so reform was the only way to go. Forbes of August 13 includes "Katrina's Surprise: In the hurricane's aftermath, a charter school in New Orleans defies the odds and thrives."

This is very good for New Orleans and will develop into an example that could well benefit the whole country -- much of which still debates "saving the public schools."

... Nicknamed the Little Red Schoolhouse and perched on dry
land in the French Quarter, comfortably above sea level, the school now brims
with energy, ambition and rising test scores among its 420 students, more than
90% of them from low-income African-American families. Remarkably, it thrives in
a still toppled city in the midst of one of the worst school systems in the
nation.

"It took a hurricane to speed up and really jump-start the
reform efforts in New Orleans," says Gary Robichaux, principal of McDonogh 15
(named for a slave owner who over a century ago left an endowment for building
public schools in New Orleans). "Before, we were tied up in what became a
complex bureaucracy. Now we have the autonomy to do what we need to get done to
make our schools successful."

For months after Katrina's assault many children now under his
watch showed signs of post-traumatic stress disorder: scared to leave their
parents, angry or tearful, unable to focus. Some relived the hurricane over and
over in their heads, while others cowered in thunderstorms. In art therapy they
drew pictures of corpses, flooded houses, lost pets and people escaping in boats
and cars.

Today McDonogh 15 is more accustomed to happy hallways
bursting with the colors of Mardi Gras and the strains of adolescents playing
New Orleans jazz in the school band. Student uniforms come in green shirts for
prekindergarten through first grade, gold for second grade through fourth and
purple for fifth through eighth grades, each shirt bearing an uplifting slogan
("No short cuts. No excuses." "Work Hard. Be Nice.").

The school day runs extra long, from 8 a.m. to 5:30 p.m., plus
a half-day every other Saturday. Discipline is strict, but classes are livened
up with clapping and chanting--"Read, baby, read!" Students go home with two
hours of homework each day, and they can call their teachers' cell phones with
any questions. The heavy emphasis on reading is leavened with daily creative
arts classes that include French and jazz band. Good behavior earns the kids
"paycheck points," which add up to such rewards as invites to a school dance or
a trip to SeaWorld in San Antonio.

In just one year since opening in August
2006 McDonogh 15 students have made great strides. About 85% of kids grades
three through eight began the school year two or more grade levels behind, on
one reading evaluation. Now all but 29 children are at grade level or better. In
September 2006 the reading skills of McDonogh 15's eighth-graders were better
than only 22% of eighth-graders nationwide, and now they read better than 41%.
The class' math scores soared, from the 21st percentile in September 2006 to the
80th percentile in May 2007, meaning they now outscore 80% of the nation's
13-year-olds. Other grades posted equally impressive
improvements.

It is a surprising departure from a deplorable history. The
school district in New Orleans was failing, financially and educationally, even
before Katrina struck on Aug. 29, 2005. It ranked second to last in the state,
and some high schools had twelfth-grade dropout rates approaching 40%. A school
corruption probe that began in 2003 brought convictions of 23 people on charges
of kickbacks and fraud, including a former school board head, two teachers and a
contractor.

In the hurricane's aftermath the state took control of 107 of
the city's 128 schools. Now, in what some are calling a grand experiment, 31 of
the 58 public schools that have reopened in New Orleans are operating as charter
schools, freeing them from school board oversight and letting them set their own
curriculums and hire and fire at will. In New Orleans charter schools now
educate half the city's 27,000 students, a larger portion than anywhere else in
the country. Nine more charter schools have the go-ahead to open in the
fall.

"It's a stunning transformation of public education, given
that there was nothing there to begin with that could provide a model," says
Jeanne Allen, president of the Center for Education Reform in Washington,
D.C.

McDonogh 15 is one of 55 public charter schools that make up a
nationwide network known as KIPP ("Knowledge Is Power Program"), dedicated to
serving low-income and minority students with a rigorous curriculum. It was
founded in 1994 by Michael Feinberg and David Levin, who had spent two years
working in the Teach For America program. Since then Gap founders Doris and
Donald Fisher have donated $45 million.

Environmental justice

The EU is an opportunity for Europe to benefit from a much larger electricity grid which makes wind power plausible. Who knew? The Economist of July 28 includes an article that makes the case.

We all knew of the benefits of a larger extent of the market and it makes perfect sense here too. But it is not simply because of deeper specialization among traders. In this case, because nature makes wind unevenly available, a larger grid is the way to handle the problem.

It's just that the old-fashioned windmills that we associate with the Dutch landscape look so much better than the modern ugly ones that we see on wind farms. But it is positively heartwarming to see the wealthy environmentalists of Martha's Vineyard demand their fair share of "environmental justice."

Many coastal areas here and abroad have wind as well as rich people, many of whom may come to see that it is all about tough trade-offs.

Wild stuff

I had not planned to see "Sunshine". The Hollywood version of climate change was bound be an over-the-top fanatsy that upends (and feeds) the daily dose of doom that is now standard fare. Anthony Lane's review ("Hot Stuff") in The New Yorker suggests that the film is actually much (much) worse than I had feared.

But back in the real world, Joel Schwartz writes about a recently published piece in Nature which also has more to do with implausibly extreme scenarios than with anything real and serious. Schwartz take us through mind-boogling overreaching and sleight-of-hand by the scientists. He concludes:

So there you have it. Another “authoritative”-but-wrong paper
in a premier scientific journal that will henceforth be used to support
unwarranted alarmism about climate change and air pollution.

Smell test

William M. Gray of the University of Colorado writes about "Hurricanes and Hot Air" in today's WSJ. Here are the parts I loved most:

Some scientists, journalists and activists see a direct link
between the post-1995 upswing in Atlantic hurricanes and global warming brought
on by human-induced greenhouse gas increases. This belief, however, is
unsupported by long-term Atlantic and global observations.

Consider, for example, the intensity of U.S. land-falling
hurricanes over time -- keeping in mind that the periods must be long enough to
reveal long-term trends. During the most recent 50-year period, 1957 to 2006, 83
hurricanes hit the United States, 34 of them major. In contrast, during the
50-year period from 1900 to 1949, 101 hurricanes (22% more) made U.S. landfall,
including 39 (or 15% more) major hurricanes.

The hypothesis that increasing carbon dioxide in the
atmosphere increases the number of hurricanes fails by an even wider margin when
we compare two other multi-decade periods: 1925-1965 and 1966-2006. In the 41
years from 1925-1965, there were 39 U.S. land-falling major hurricanes. In the
1966-2006 period there were 22 such storms -- only 56% as many. Even though
global mean temperatures have risen by an estimated 0.4 Celsius and CO2 by 20%,
the number of major hurricanes hitting the U.S. declined.

One reason may be that the advocates of warming tend to be
climate modelers with little observational experience. Many of the modelers are
not fully aware of how the real atmosphere and ocean function. They rely more on
theory than on observation.

The warming theorists -- most of whom, no doubt, earnestly
believe that human activity has triggered nature's wrath -- have the ears of the
news media. But there is another plausible explanation, supported by decades of
physical observation. The spate of recent destructive hurricanes may have little
or nothing to do with greenhouse gases and climate change, and everything to do
with the Atlantic Ocean's currents.

People who rely on theory and models and who have little observational experience usually get it wrong. Of course. One has to temper the other.

Growing wealth in a black swan world

To recover from Taleb's The Black Swan, I found and read Peter Bernstein's Capital Ideas Evolving. It updates his earlier Capital Ideas. If anyone wants to see the unfolding of modern finance but presented in an "inside baseball" format, this is it.

Ever since the expulsion of ancestors Adam and Eve, most knew that black swans are a fact of life. But Taleb beats this idea into the ground while real people are making money -- and the world gets richer. We get richer in a black swan world. Taleb spends too little on this important idea but Bernstein celebrates and explains it better than anyone.

I am not giving anything away by quoting from his summary.

The miraculous vitality of markets is impossible to suppress,
as even communist countries have learned. But the great theories of
Capital Ideas have nurtured and guided the development of today's markets to a
much greater extent than most of the participants in these markets stop to
realize. In the most vivid manner, Adam Smith's Invisible Hand is always
in play, while Joseph Schumpeter's "perennial gale of creative destruction"
blows compellingly, to a point where as Schumpeter also reminds us, "Profit ...
is temporary by nature: it will vanish in the subsequent process of competition
and adaptation." (p. 246)

Saving lives in spite of elite opinion

Free markets for organs would save lives but the high-minded among us would never stand for that. So we have dumb laws that kill. The high-minded have blood on their hands.

David Undis has found a clever way to get around our laws and yet incentivize would-be donors. He has created LifeSharers. His recent piece in the Baltimore Sun explains it best. The high-minded are no match for clever people.

Are you a registered organ donor? If so, you should get a
break. But instead you're getting the shaft.

Now registered organ donors around the United States are
uniting to get fair treatment. If you've agreed to donate your organs when
you die, your generosity can save lives. Last year in the United States,
about 22,000 people received organs transplanted from deceased donors.

But registered organ donors who need transplants are treated
no better than people who have declined to donate their organs when they die. As
a result, every year, thousands of registered organ donors die waiting for
transplants when the organs that could have saved their lives are given to
nondonors.

LifeSharers is an organization that seeks to rectify the
situation by giving preference to organ donors. Not only would this make the
system fairer, but the effect of moving donors to the front of the line would be
to increase the number of donated organs available for everyone.

Keep in mind that the large and growing shortage of organs
in the United States is really a shortage of donors. About 8,000 Americans die
every year because there aren't enough organs for everyone who needs one. But
every year, Americans bury or cremate countless transplantable organs.

Tremendous efforts have been made to persuade Americans to
stop throwing away organs that could save their neighbors' lives. Charitable
organizations and the federal government have spent hundreds of millions of
dollars educating everyone on the need for more organ donors. State governments
have made signing up to become an organ donor as easy as checking a box on a
driver's license. Newspapers and television stations have run countless stories
about the organ shortage, and radio stations have broadcast countless public
service announcements.

These efforts have not stopped the organ shortage from getting
bigger and bigger. It's time to try something new.

Let's move registered organ donors to the front of the
transplant waiting list, and let's move people who won't donate to the back. If
the United Network for Organ Sharing, which operates the national organ
allocation system, adopted this policy, it would save thousands of lives every
year because just about everybody would sign up to be a donor. Very few people
would choose to put themselves at the back of the waiting list. After all, there
are already more than 96,000 people on the list, and more than half of them will
die before they get a transplant.

What about people who can't donate their organs? Well, all
Americans can offer to donate their organs when they die - no matter what their
health status is. Nobody knows today whose organs will be transplantable
tomorrow. Surgeons transplant many organs that they would have rejected just a
few years ago.

But shouldn't organs be given first to the people who need
them the most? Not if these people aren't willing to donate their own organs. If
people are unwilling to save their neighbors' lives, should we really elevate
their needs above everyone else's? Besides, moving nondonors to the back of the
waiting list could increase the supply of organs so much that even nondonors
would get organs.

LifeSharers members agree to donate their organs when they
die. They also agree to offer them first to other members, if any member needs
them, before offering them to others. This is done through directed donation,
which is legal under federal law and in all 50 states. There is no age limit,
and parents can enroll their minor children. LifeSharers has more than 9,200
members and has doubled its membership in the last year.

Even people already registered as organ donors have reason to
join LifeSharers. Members increase their chances of getting a transplant if they
ever need one. They also help make organ allocation fairer. Perhaps most
important, by offering their organs first to other organ donors, they give
everyone a good reason to stop throwing away organs that could save their
neighbors' lives.

More public goods

Newmark's Door points us to this very cool blog. Talk about public goods!

Compared to what?

Ben Bernanke has to be a good economist as well as a cool customer. I caught some of his televised testimony to Congress this week. The questioners used the occasion to position themselves squarely on the side of "fairness" and to assert their concern that there was too much inequality.

But writing in yesterday's WSJ, Arthur C. Brooks notes, "... the evidence reveals that it is not economic inequality that frustrates Americans. Rather, it is a perceived lack of opportunity."

Do most Americans aspire or envy? Cannot increasing wealth at the top signal greater opportunities to aspire to? Can that incite more entreperenurial activity? Do we then get more growth? "The rich are getting richer faster than the poor are getting richer. So what?" asks Brooks?

Robert H. Frank introduces the concept of "Positional Externalities." Greater income inequality is a source of unhappiness as it reveals itself via increasing consumption inequality. Frank makes an efficiency argument for a progressive consumption tax (to replace the progressive income tax).

Clearly status quo tax law and practice compare poorly with almost any reform proposal. Comparisons with reforms that would incite greater entrepreneurial success would be far more useful.