Silence

Here is one of a very large number of essays that argue for the importance of public spaces. We are "balkanized" and an "archipelago nation."

Agreed that most public spaces in U.S. cities are not what they ought to be. I recently had early morning coffee in "tony" Westwood (in West L.A.) and a homeless person came in (as many do) and not to make a purchase. The staff tried to escort him out and he started spitting wherever he could. I asked the staff if calling the police was an option and they mentioned that the response rates are much too slow to make a difference.

A woman who helps us keep house is occasionally dependent on public transit, but reports that, aside from the serious time costs, there are some bus stations where she does not feel safe. Avoiding these makes her trip much longer.

All of the high-minded advocates of public spaces and public interaction are silent on the serious civility deficit in many of our public spaces. Perhaps they have nothing to say about a very serious problem.

Old questions

I'm reading Timothy Snyder's Bloodlands and it is not easy. One chapter a day is about all that I can handle. I've read a good bit of 20th-century European history, but the bottomless brutality-insanity is still dizzying. Which is worse the murderous sadists or the indifferent murderers? In any event, there were plenty of both.

And then there is this for much-needed uplift. (H/T Tom) Where would we be without people like Alice -- and her music? How do we get people like that (the ones who write the music and the ones who perform it)? Are they really from the same gene pool as the murderers Snyder writes about?

Successes

Here is Ed Glaeser describing the recent economic successes in Manhattan and in Santa Clara. He describes both as successful "cities". Glaeser has published many fine studies that call attention to the benefits of density and citihood.

I had already blogged here about research with Sandy Ikeda which pointed to success in the same two places as indicating that the simple consideration of population density tells us very little.

Clearly information networks matter a great deal. Such networks grow in a variety of urban settings. It's pretty clear that the future will bring many more Silicon Valleys than Manhattans -- and Manhattan is very likely to continue to adapt and hang on.

Where do they get this stuff?

Matt Kahn is justifiably upset over a remarkably inept review of his Climatopolis.

The LA Times has chosen to print some amazingly wild material in recent weeks. Today, it's business columnist described GM as having "blood on its hands" for "murdering" the EV-1. The fact that the car was a money loser is beside the point. Perhaps it was just timing. A few years later and bail-outs could have kept the EV-1 rolling forever.

In the same Sunday edition, the paper's architecture critic writes that "The movement for a public, mass-transit served city is resisted by those still tied to a suburban, car-centric city." The author should know that the county's high-water transit year was 1985. Ridership then plummeted as bus service was trimmed to pay for rail. Now, in 2010, we may be edging back to 1985 ridership levels, but we have added millions to the population and have spent billions on rail transit.

It's not only the reviwer of Kahn's book that is in no position to opine. Others in high positions on the same paper are equally uninformed.

Outrage?

This Washington Post report re the Justice Department's recation to the Black Panther voter intimidation episode is very troubling. (1) Armed thugs openly hang out at the entrance of a voting station; (2) the Justice Department is paralyzed; (3) the Justice Department is shown to vacillate because the thugs are the wrong ethnic group; and (4) this is on the watch of Obama Administration which was elected (in part) because of the appeal of a post-racial-politics position.

And where is the outrage?

What would Coase say?

The Oct 25 New Yorker includes Tad Friend's "Blowback: The great suburban leaf war". Without markets, there is politics and conflict. All politics are local and the most lively of these are the parts that involve home and neighborhood. Leaf blowers than have a special notoriety. They create noise, dust and the various gasoline engine emissions. All of these are hard to price so we are where we are.

What are the alternatives? Labor using rake and broom (and immigrant gardeners) is expensive. Pre-leaf blower, it was water via the right garden hose nozzle (or thumb). The author does note that "Blowers were hailed as an environmental boon: when Los Angeles was suffering from a water shortage in 1976 and 1977, the city instructed municipal workers to use them, rather than the traditional thumb stream from a hose, to clean sidewalks and driveways."

Just as perpetual "famines" in the old USSR and the current North Korea explain their starvation, we have had long-standing "droughts" in California. We actually have politicized water allocation and pricing. So the politics of water pricing brought forth the leaf blowers which brought forth all the politics described in the story.

The "law of unintended consequences"? Only when we ignore basic economics?

Housing recalculation

At econlog.org, Arnold Kling often writes about the Great Recalculation that is underway (and essential) as we get out of the Great Recession. Recalculation is, of course, routine in market economies and explains their success. But the crunch comes when large-scale shocks require large-scale recalculation -- and when the politicians ride to the rescue with their own surprises and shocks.

Here is the story of one such recalculation (H/T Planetizen). It's the story of how home builder Toll Brothers is working to cope with new realities of the housing market and looking for the new sweet spot in it's market: what sort of new homes can builders like this put on the market that their customers will buy as they are less optimistic, less willing to throw caution to the winds and more conservative in their approach and expectations re living space and living amenities?

All this is distinct from the point made in my post yesterday: the rethinking is not in response to the smart-growth ideas from the smart set. The bottom-up rethinking is essential -- and always more usful than what is proposed top-down.

Uncooperative consumers

I had previously blogged about Witold Rybzcynski's Last Harvest which I use as a case study in one of my classes. It is (among other things) all about the mysteries of demand seen through sellers' eyes. In this case, putting a new flavor of residential development (New Urbanist) on the market is a tough gamble. Finding the sweet spot where product quality (with all of its dimensions) and the price it will fetch cover all of the costs involved (including investor expectations) is shown to be very hard work. And the sweet spot is a moving target. This is much more interesting and more useful for the students than just throwing demand curves up onto blackboards or powerpoints.

Yesterday's NY Times Magazine included "The Elusive Small-House Utopia" which covers some of the same ground (with comments from Rybczyinski). The article does acknowledge demand uncertainties, but veers into old cliche land: peculiar U.S. policies explain Americans' demand for living space. But there are plenty of places abroad with higher home ownership rates than here. Persons-per-room is the same as the U.S. (average of 0.5) in Canada, the U.K., Germandy, Sweden, New Zealand. With six others at 0.6.

It's just like the automobile story. The cliche that the U.S. is different may have been true twenty and more years ago, but it's high time to drop it. Regardless of policy differences, consumers know what they want -- even if their betters don't approve.

Ideas and innovations

If you like lists, Steven Johnson's Where Good Ideas Come From (a splendid read) includes an appendix that lists key innovations, 1400-2000. Double-entry accounting is the first entry. Whereas economists and social scientists have come up with some good ideas too, they do not make the list. When does an idea become an innovation?

In this week's New Yorker, Adam Gopnik does a fine job of discussing Adam Smith ("Market man: What Adam Smith really believed"; gated) and does a fine job.

Today's LA Times has a front-page story about Don Shoup and his thoughts on prices (and the neglect thereof) and parking. Don is getting the recognition he deserves and, the piece notes, even beginning to change the world. Smith and Shoup can even be seen as innovators insofar as they have a hand in making the world better.

Words and labels again

Edward Lopez makes the point that what the FTC may see as a "market failure" (e.g., the decline of newspapers and the success of online news sources) is simply another example of creative destruction at work. But one cannot be too wary of market failure peddlers. Often they have an agenda and/or they just don't get it. It's a dynamic market, after all.

In this week's New Yorker, James Surowiecki describes how Netflix won and how Blockbuster lost. They each did their part. Netflix was inovative and Blockbuster was more like the famous dinosaur that tried to don roller skates.

Surowiecki does not call it creative destruction. Instead he refers to "category killers". "These stores killed off all the competition in a category by stocking a near-endless variety of products at prices that small retailers couldn't match." He names the usual big-box suspects.

But I have always thought that the category killers (category busters?) are those who offer a new combination of goods or services -- so that the conventional market share definitions used by anti-trust lawyers become meaningless. I can now get back rubs at the local Whole Foods.

Killing off all the local competition is the opposite. It's the kind of thing that keeps the "trust-busters" engaged.

For the ever expanding you-can't-make-this-stuff-up file

Detroit light rail.

Big question

When Vaclav Havel speaks, we should listen. And here he is speaking his mind about the modern world and also modern cities. (H/T FeedBurner)

But what is he saying? He does not like modern urban "sprawl." He seemingly blames architects, economists, modernists and others. Is he Prince Charles? I cannot be sure.

But in my previous post, I said some good things about modern cities and land markets. I fear that modern metro areas are too big and too complex for human design. They evolve from human action rather than from human design. But designers do come up with some wonderful things. Almost everything I can see or feel in my immediate surroundings represents some triumph of human design and engineering. So what is the proper division of labor? New Urbanists have great faith in their ability to craft almost the entire built environment. But that has Fatal Conceit written all over it.

When smart people like Havel speak up about cities, I wish they would address the division of labor question.

Explain that!

Readers of this blog know that I worry about aggregate measures used to describe large metropolitan areas. Here is a discussion that highlight's "L.A.'s traffic" and cites the latest Texas Transportation Institute congestion rankings. There is also a link to this report that criticizes the TTI approach.

TTI relies on the ratio of the metro area's lane-miles to its vehicle miles traveled (with minor tweaks). But is way too simple; it says nothing about sub-metropolitan variations -- and opportunities.

How is it that metropolitan areas have grown and yet survived and even lived to grow further? The biggest metros, after all, have managed to stay on top. Why is this key fact overlooked in all of the hand-wringing?

I do not know the answer to the second question, but the answer to the first question is fairly simple. It has two parts: (i) these metro areas provide offsetting advantages ("agglomeration economies"); and (ii) these places manage to grow in ways that mitigate the associated growth in congestion. Subcentering and suburbanization are not random "sprawl", but rather facilitate survival and competitiveness by offering agglomeration benefits outside the traditional center while also taking congestion pressures off the traditional center. Land markets do this. Nothing else can.

If, on the other hand, growth were accompanied by random sprawl, the stability of metro area rankings at the top could not be explained.

Spend more, get less

Here is a post by Wendell Cox that calls attention to the rise of working-at-home, as reported by the 2009 American Community Survey.

Alan Pisarski reviews the Census commuting data back to 1980. Commuting-at-home was 2.3 percent of the U.S. workforce in 1980 and 3 percent in 1990. We now know that it was 4.3 percent in 2009. This probably understates the impact of telecommuting, whereby many of us are neither strictly work-at-home, nor just work-at-workplace.

The Cox post compares transit use to work-at-home 2000-2009 trends for 52 of the nation's largest metro areas. In 37 of these, the work-at-home proportion exceeded the proportion using transit. The differences were negligible in six metro areas. Guess which way the wind is blowing?

Paul Krugman has a series of recent blogs that try to make the case for more rail transit spending. He mentions that auto use is subsidized, so why not transit? In fact, the highway trust fund subsidizes transit use and has for many years. Ron Utt documents all this here.Krugman also writes that public transit is a good investment because it takes cars of the roads.

But here is a post that mentions recent research by Paige Elise Kolisar and myself that does rail transit cost-benefit which accounts for the externality benefits of new-to-transit riders. Even then, losses per round-trip were in the range of $17 (weighted average of six post-WW-II heavy rail systems) to $40 (weighted average of eight post-WW-II commuter rail systems).

U.S. transit subsidies in 2006 exceeded $35 billion in 2006, up from $10 billion in 1978. In that period, transit market share (passenger-miles) fell, from about 3 percent to about just over 1.5 percent. Correlations do not denote causation, we all know. So we have to dismiss the thought that all that spending caused the decline.

Nice places to write or read about

Here is Paul Goldberger writing about the CityCenter of Las Vegas. And here is his punchline:

Even though there is more density to CityCenter than there is to anything else in Las Vegas, and more sophistication to its architecture, it doesn’t feel urban. Its planners have crammed more square footage into a tighter space than anyone else has managed in Las Vegas, and that may make this place seem like an antidote to sprawl. But it still isn’t much of a center, or much of a city. Indeed, as you drive around the site, you suddenly wonder if CityCenter only appears to be different from the rest of the Strip. After all, cutting-edge contemporary architecture by the likes of Libeskind and Foster has been migrating steadily into the cultural mainstream for years. Now, perhaps, it has reached the point where it is familiar enough, and likable enough, to be just another style available for imitation, like the Pyramids or Renaissance Venice. CityCenter is the Las Vegas you already know, but in modernist drag.

He could have said Y-A-W-N. Las Vegas fascinates, but it does so for some of us at a distance. There are the cities one likes to live in (but not visit as tourist) vs. the ones one likes to visit (but not live in) and we can also list the places we like to write or read about but not visit. Perhaps Dubai comes next. The most attractive urban places are the ones the offer the possibility of (pleasant) surprise. Designers have a devil of a time coming up with such venues and when they try (Disneyland, some shopping malls, Las Vegas, new towns, etc.) the results may be worth seeing. But for many people, once is enough. The real draws (who doesn't like the classics of old Europe?) are the ones we try to return to as often as possible.

Are we there yet?

Forbes' regular stock-picker David Dreman writes, "When it comes to popular investing gospel, the Capital Asset Pricing Model (CAPM) ranks right up there with its elder cousing the Efficient Market Hypothesis. As a value investor I don't think much of either of these. I make my living investing in market inefficiencies." Of course. The model depends on active arbitrageurs.

And this is why we love teaser stock market performance charts. Here is one of my favorites from Visualizing Economics. Is it a random walk? Are we there yet?

Lots of modeling depends on the equilibrium idea. And this is often misunderstood as a place that we are either at or not at.

Yesterday's WSJ headlined this: "Americans Sour on Trade ... Majority Say Free-Trade Pacts Have Hurt U.S. ..." When it comes to teaching the basics, we certainly aren't there yet.

Happiness

Michael Norton reports on his happiness research here. Here is his summary:

Does money buy happiness? We certainly behave as though it does, spending most of our waking hours pursuing it. If only we got that raise, owned that second home, third car or 3G iPad, things would be better, we tell ourselves. We would finally be happy.

Truth be told, people drastically overestimate the impact of changes in income on their well-being. In a survey I conducted with my colleagues Elizabeth Dunn and Lara Aknin at the University of British Columbia, we asked 315 Americans to rank their happiness on a 100-point scale and predict how happy they would be if they made ten different incomes, ranging from $5,000 up to $1,000,000. Those who reported earning $25,000 a year predicted that their happiness would double if they made $55,000. But when we measured the actual happiness of these two groups, the change was only 7%. Beyond that, our data showed that once people reach the median income in the U.S. (about $60,000), the happiness return on additional income is very small.

Hapless lotto winners, take heart. We did discover at least one way to buy happiness with your money: Give it away.

... To test our idea, we approached strangers on the street and gave them different sums of money ($5 or $20) and told them to spend it by 5 p.m. that day. Half were told to spend the money on themselves, while the other half were told to spend it on others. When reached that evening, those who spent the money on themselves bought things like coffee and food, while those who gave money to others reported spending it on things like gifts for their siblings or donations to the homeless.

The result? Those who had spent their money on others reported feeling much happier at the end of the day than those who had spent their money as they usually did, on themselves. There was no difference in happiness between those who spent $5 or $20, suggesting that it is not how much money you spend, but how you spend it, that boosts the spirits. When we asked people to choose what would make them happiest, most people predicted that spending money on themselves would make them happier than giving it away, suggesting that people overestimate the buzz they get from a new purchase and underestimate the warm-and-fuzzy benefit to social spending.

We've heard this before. So what is going on? Most of us are self-regarding as well as other-regarding. We have also evolved through eons when death by starvation was a serious threat and have learned to accumulate. And we have also been hard-wired to extend love and care to those close to us. Extending it to those less close is the challenge. We can extend the circle of care measure by measure beyond immediate family to close friends and even to less close friends. And many of them can do little things to antagonize us along the way (they are only human). But the rewards from seeing a smile on those who we can be good to are serious. We may still have a bit of trouble extending this to anonymous and distant candidates for our love and charity, but Norton and others are surely right. There are great rewards from from flexing our other-regarding muscles. There is even some happiness to be found.

The Arthur Brooks research on philanthropic giving adds another wrinkle. Those describing themselves as conservatives are more charitable. Those on the left (he finds) are generally stingier. That makes sense too. If you busy yourself with coercing society at-large to transfer wealth, your other-regarding juices might be spent.

But is there any happiness for the stingy coercers?

Words

Here are the "20 Top Urban Planning Successes of All Time" (H/T OnStreetLevel). One can quibble with almost every word in the title, including "urban planning". These places are all emerging (unplanned) orders that have have managed to be an amalgam that coordinates many plans by many participants. So if we stipulate a dose of bottom-up planning, then OK.

But a heavy dose of top-down planning can be seen in our own Portland, Oregon, which Wendell Cox examines here and sees as growing in all the "wrong" places -- in its most outlying Clark county. And that is not the way it was supposed to work out. So not only is "planning" not a simple concept, but neither is "success".

Progressivity in our future?

Over at Econlog, Bryan Caplan asked "Does the U.S. Government Increase or Decrease Income Inequality". Last I looked, there were 21 comments. It is not a simple question.

Conventionally measured inequality has grown while the role of the state has grown. The role of "the state" should include the actions of all levels of government because federal prompts state and local to spend via matching and all sorts of other devices.

Let's also add that it is much more than taxation because the distribution of expenditures can move the overall distribution.

So what do we have? (1) A progressive income tax schedule, but thousands of pages that describe special tax breaks and treatments; (2) many taxes and levels of taxation, including the large and growing and regressive FICA; (3) expenditure programs that involve large projects (defense and infrastructure to name two); (4) armies of expensive rent-seekers incited by the first three; and (5) this morning's WSJ includes "The Regulation Tax Keeps Growing". Whereas the federal budgets is 21% of GDP, the regulatory cost adds another 14%. Does anyone believe that this is a force for progressivity?

I will never know why those on the left believe that a larger role for the state will augur a push for progressivity.

More "curse of oil"

Brazil is apparently doing quite well. I wanted to compare to the basket cases and the folks at the Economist Intelligence Unit let me look at their Venezuela Country Report. The consequences of Hugo Chavez rule have been much worse than I had expected. Start with 3 years of negative GDP growth. And we call two negative growth quarters a "recession". There is also crime, inflation, press censorship, devaluation and on it goes. It is easily the region's disaster. Just when Brazil is taking off.

So sad. I did some work there in the 1980s and saw reasons to be optimistic. Upended by the "curse of oil"?

The EIU also forecasts declining 2011 GDP growth for the world, the OECD, the EU27 as well as the U.S. Not good.

Where "crises" are made

We are all taught that trust is hard to gain and easy to squander. So it is with credibility. We all know the liar who has to keep inventing new lies to cover the previous ones.

"Trust funds" attached to government programs have become anything but. It is by now well known that the Social Security Trust Fund has been raided by Congress. (Poor Al Gore was ridiculed in 2000 for his "lock box" talk.)

Perhaps less well known is the state of the Highway Trust Fund. Here is a recent analysis by Ron Utt. Here is a punch-line:

The largest diversion from the $52.7 billion in total spending authorized for fiscal year 2009 from the highway trust fund (including $2.0 billion in general revenues) is the $10.3 billion in direct spending for transit programs (trolleys, buses, commuter rail, etc). Transit riders are also the greatest beneficiary of the Congestion Mitigation and Air Quality program, which absorbs $1.8 billion of the trust fund. Although transit riders account for only 1.8 percent of surface travel passengers and 5 percent of commuters, they receive a subsidy from the fuel-tax-paying motorists amounting to approximately 20 percent of transportation spending.

We got potholed highways and underutilized public transit. Here is more on the state of the highways from a recent Reason report.

The nation's "infrastructure crisis" was made guess where?

Where we are

Here is a NY Times columnist writing about "The Angry Rich". I suppose that most of them do not want to pay their "fair" share, whatever that is. And many of them are that way, of course, because they are "greedy". And they are insensitive to the many "needs" of the federal government. No need to make this up. Another member of the smart set (writing about the estate tax) notes "It's Fair, and We Need the Revenue" (in today's WSJ).

I do not suppose that these commentators consider that there may be another view. Targeted tax rates are the problem because they feed class warfare attitudes and emotions -- as the language used in the debate so powerfully illustrates. Perhaps putting human envy aside is impossible, but making it the centerpiece of politics can be dangerous. And that is exactly where we now seem to be. Trust politicians (and their acolytes) to lock this bone firmly in their jaws.

UPDATE

Richard Epstein covers all this and much more in this outstanding podcast.

The churn survival option for cities involves their outward expansion

The Economist (Sep. 18, 2010) has this interesting piece re Chinese cities which includes this sub-head: "Policymakers should embrace mega-cities. Businessmen should escape them." What does that mean?

The piece alludes to city rankings that generally display "stability at the top" of the rankings but "churn further down." Wendell Cox has assembled U.S. decennial population data going back to 1950 at Demographia. These are for urbanized areas and their core cities. Just considering the 1950 top ten and over the six census years, the urbanized areas show 22 changes in rankings (of 50 possible), but the core cities show 27 changes. But for the 1950 top five, the urbanized areas show just three rank changes while the core cities show seven; for the next five it is 19 vs. 20.

More stability at the top and more stability for the larger spatial units. Metro areas survive by churning industries and by decentralizing. The suburbanization safety valve is vital and facilitates the churn.

It is well known that Number One did not budge. The New York urbanized area has long stayed on top and the New York core city has stayed on top. Both places have strong and durable advantages. As the world changes and new technologies displace old, the area is able to "churn" industries.

Yesterday's WSJ has a piece on Detroit "Motown Becomes Movietown ...Hollywood has a new favorite location. The Motor City is luring films and TV shows ..." Industrial churn may even bring back Detroit.

In the long run

Matt Kahn's Climatopolis is a good read. It acknowledges that doomsters are usually wrong because they don't understand market forces, that long run climate forecasts evoke a dire picture, that the world's poor are (alas) most at risk in case of any turn for the worse, that our policy makers are not good at getting the prices right (water, floodplain insurance, farm subsidies, etc).

He seems to accept many 70-100 year warming forecasts, but admits that long run forecasts can be bunk, but we don't really know. He compares the fix that we may find ourselves in with that of a 55-year old who buys life insurance, but lives to be 95.

In yesterday's WSJ, Bjorn Lomborg reiterated his view that knowing more in this situation is a good thing and that is within our grasp with more R&D funding. "The smart middle path means making green energy so cheap everyone wants it. There's nothing confusing about it."

Poor odds

Ken Orski's latest Innovation News Brief (Sep 8, 2010) discusses the recent Obama $50 billion "Plan to Renew and Expand America's Roads, Railways and Runways".

Ken takes the proposal seriously and addresses the politics of getting it passed. I took a pessimistic view of the whole idea in my September 7 post. There are four possibile outcomes via two binary variables: will any multiplier be positive? will most projects' NPV be positive? Pretty good if both are true. But what are the odds?

In today's LA Times, there is this:

How to keep jobs in L.A. (and in the U.S.)... Los Angeles is behind the curve in adopting a local preference ordinance, which would give local businesses an edge in landing city contracts. Washington should also act to keep jobs onshore.

Read the whole thing.

More benefits from Paris Metro

Heat exchange is a wonderful thing, often seen as a windfall by engineers. In this story on a Paris Metro station, we see that the heat generated by milling bodies waiting on a subway platform can be tapped to heat 17 apartment buildings.

One more reason to get that ridership up. But don't pick them up to soon. But don't let them wait too long either.

H/T Planetizen

The barricades

David Brooks wrote about "The Genteel Nation" and "gentility shift" last Friday. He was addressing long-term labor market problems that have nothing to do with aggregate demand or any lack of "stimulus," but rather with the tastes of young people making career choices. He cited the example of Michelle Obama, telling an audience of young women, "Don't go into corporate America ... become teachers. Work for the community. Be social workers. Be a nurse ... Make that choice, as we did, to move out of the money-making industry into the helping industry."

It's an old theme and many people think of the choices before them as between being self-serving and "helping people". I am not sure what sacrifices the First Lady has had to make in her personal life in order to get on the high road, but given a platform, we hold forth -- and also tell ourselves all sorts of stories about ourselves. There is always the lovely conceit that some of us are all about "helping people" and, thereby, so much better than the rest.

Labor markets provide their own signals (in terms of compensation packages as well as employment and unemployment prospects), but the problem with rhetoric such as the First Lady's in the Brooks cite is that it nourishes the idea that we see repeated on so often that our own pay is "unfair" in light of the job's assumed social worth.

Many public sector unions have managed to extract promises from their politician employers that these employers cannot keep. There is naturally unhappiness and resentment, but not at the employers. Rather, at the "stingy" taxpayers who just don't get it: those who have chosen to "help people" simply "deserve" more.

Labor markets signal facts of life that challenge the "gentility" view of the world. But the gentility view fortifies the idea that market signals are "unfair" and further politicization is the way. This is the way we get street demonstrations such as the ones we saw in Paris last week. We'll always have the barricades.

"It's all about jobs"

I could not pass this up. Here is the punchline:

Report: Investing in Transit Could Create 180,000 Jobs, for Free

by Noah Kazis on September 3, 2010

Between calls for renewed stimulus on the one hand and for deficit reduction on the other, Washington, D.C. is stuck. A new report by the Transportation Equity Network, however, shows one easy way out of that political stalemate: shifting our transportation spending to transit.

According to the report, written by University of Missouri-St. Louis researchers Todd Swanstrom, Will Winter, and Laura Wiedlocher, every dollar spent on funding transit creates more jobs than spending on roads. Specifically, each billion dollars spent on transit creates 36,108 jobs while the same figure can only buy 30,319 jobs. That means that by reassigning some federal spending from roads to transit, Congress could boost employment without adding a cent to the deficit.

On the positive side, these stories are gifts to teachers of economics. But on the other side, this thinking is taken seriously by large numbers of serious (and, alas, powerful) people. How many times have we heard that it's "all about jobs"?

H/T Planetizen

Infrastructure!

Whenever poor public school performance is highlighted, there is a chorus that brings up funding shortfalls as the explanation. But there is now considerable evidence that it's not so simple. When we do spend more, we still get poor outcomes because of (among other things) poor management. I suspect, however, that the academic research has worked its way into popular discourse and the "underfunded" mantra is now seen by increasing numbers of voters as special pleading by teacher's unions and their allies.

But we are not yet there where when it comes to infrastructure. The second nature presumption among many is still that we have lousy highways (among other things) because we do not spend enough. The problem of mismanagement of the spending that we do have is seldom brought to light. This is why President Obama can still gain political points by promising another $50 billion to be spent on "infrastructure". Baptists and bootleggers, anyone?

A timely new book by Clifford Winston presents the evidence that (as with the public schools) it is more a case of misspending than underfunding. Winston makes that case that this amounts to a $100-billion-a-year loss. Well conceived and carefully targeted deregulation and privatization, he shows, could help us re-coup some of that.

Only in the world of politics would anyone argue for stimulus "multipliers" (whatever these may be) attached to negative-NPV projects.

Glass half-full

The NY Times Magazine featured "What Is It About 20-Somethings?" about two weeks ago. Getting started is never simple. But not mentioned in the article is the simple fact that adolescence (whatever one calls it) has been getting longer for many years. That comes with increasing prosperity.

But today's Letters include the predictable explanations that invoke new job insecurities, outsourcing, etc. Unemployment levels have been much too high for too long, but the WSJ's Numbers Guy cites BLS data which shows remarkable 20-year stability in the job tenure distribution.

Frightening analogies

Having a graphologist analyze my handwriting was not pleasant. Who likes to be that exposed?

I got a similar feeling reading The Economist's Schumpeter column about American universities (September 4). "Will America's universities go the way of its car companies?" Here is how it begins:

FIFTY years ago, in the glorious age of three-martini lunches and all-smoking offices, America’s car companies were universally admired. Everybody wanted to know the secrets of their success. How did they churn out dazzling new models every year? How did they manage so many people so successfully (General Motors was then the biggest private-sector employer in the world)? And how did they keep their customers so happy?

Today the world is equally in awe of American universities.

The ensuing description of U.S. universities makes the case for the analogy to old Detroit. All analogies have their problems and, whereas Detroit received most of its bail-outs in recent years, the federal role in propping up universities via research as well as student funding has been steadily growing for many years.

Nevertheless, the story as it is presented in the column reminded me of the visit with the graphologist.

Makes me cringe

In this morning's WSJ, columnist David Wessel wonders ("Parsing Ascendant GOP's Economic Prescriptions") what Republicans might actually do if/when they score victories this November. At the Heartland Institute,
Joseph Bast has a 10-item to-do list for economic recovery ("Attracting Businesses During the Great Recession").

Both discussions mention lower tax proposals. Wessel thinks that what Republicans have articulated so far is either too vague or too unlikely to be broadly popular. Bast (who is apparently not running for office) is not at all vague and does not address the question of politics and broad support. He likes lower taxes, less corporate welfare, less powerful labor unions, lower minimum wages, reduced worker compensation costs, affordable housing (but via not the Chris Dodd approach), fewer regulations, less lawsuit abuse and also "attract members of the creative class."

The latter is from the Richard Florida playbook and now makes an appearance on a libertarian's wish list. But if one is going to be skeptical of industrial policy-crony capitalism, how can one take seriously the idea that governments anywhere can pick winners when it comes to people? There are the same old realities: (i) how would they/could they know? and (ii) how could they/would they keep the whole project from being politicized?

I have spent many years involved with university admissions. It is no secret that this is a highly imperfect process. If there ever was a "fatal conceit", it is surely the idea that politicians can do an adequate job of singling out potentially creative people.

And the appellation "creative class" makes me cringe.

Recognition

It's great to be included on this list of 50 Top Civil Engineering Blogs.

Never a simple story

Human settlement densities get a lot of attention for two reasons. First, the data are usually easy to get; we know the areas and the populations of many places. Second, we rightly suspect that most people do their best work when they are near (but not too near) others who have worthy ideas and are doing good work.

Trouble is that most of the places for which we have data (countries, states, metro areas, even large cities) are too big. Human settlement densities vary considerably and averages are misleading.

Recently Sandy Ikeda and I considered densities for PUMAs (Public Use Micro-Sample Areas). Their average size is 100,000 and they approximate large neighborhoods.

Here are some of the fun facts:

For 2005 and for the top-25 PUMAs in terms of in-migrants with a Master's degree or higher, we found that these people migrated to parts of Manhattan as well as to areas such as Silicon Valley. These people were attracted to opportunities found in “low density” as well as in “high density” places. Four of these top 25 PUMAs were in Manhattan; four of the top 25 were in Silicon Valley; the other top-25 destinations were in West Los Angeles or suburban Washington DC, suburban Seattle, Austin or San Diego. The densest receiving area (in Manhattan) was thirty-eight times as dense as the most spread out (in Silicon Valley), yet each one succeeded in attracting many highly educated people. The areal sizes varied from below ten square km (Manhattan) to just over 300 square km(Washington DC suburbs) and one just over 250 square km (Silicon Valley).

There is no simple story even when the areas are relatively mall.

Neurotic? So what?

Dan Neil writes about the new all-electric Nissan Leaf in today's WSJ and gives it a thumbs-up. He mentions the 100-mile range and "range anxiety", but dismisses that as "neurotic."

Perhaps, but that is no reason to bet that range anxiety will not get in the way of sales. Behavioral economists and Dan Neil and the entire mental health field may shudder at the neuroses of the buying public, but to dismiss them lightly is another matter.

Speaking of looking back on one's forecasts, Megan McArdle has this very nice "I Wuz Wrong" post. In the Internet age, it's best to get out in front and admit to one's forecasting errors before the rest of the world does it for you.

I'll have to give it more than one year, but if I'm still blogging in (say) three years, I will return to the range-anxiety story and fess up to whether "I wuz wrong" or not.

Almost lost to history

The Nazi death camps of Europe are, for the most part, preserved and visited. The same cannot be said for the gulag. The Aug. 30 New Yorker includes the haunting "On the prison highway: the gulag's silent remains" by Ian Frazier. It's stunningly eerie because the author had to work hard and hire a guide to discover and stumble over remote and snowed in prisoner-built roads to discover the out-of-the-way remains of just one of the gulag's slave labor camps. One can only wonder, and in no way really fathom, all of the misery undergone in that place -- one of so many that are also lost to obscurity. The piece is actually the conclusion of a series abstracted here.

The author notes, "What struck me and then still strikes me now was the place's overwhelming aura of absence. The deserted prison camp just sat there -- unexcused, untorn-down, unexplained ... The world more or less knows what it thinks of Hitler. Stalin, though, is still beyond us. As time passes, he seems to be sidling into history as one of those old-timey, soft-focus monsters -- like Ivan the Terrible, like Peter the Great ... Hitler killed millions, and we have a rough idea how many, but the millions of victims of Stalin are still difficult to count ..."

There is much more. Buy, find the magazine. Read and share the article.

"Law of unintended consequences"

It often takes a policy to fix the consequences of the last policy. In polite company, it's called "the law of unintended consequences". We know that employer-provided health insurance in the U.S. can be traced back to World War II price controls. Employers compete on many margins and controlling any one of them is never the end of the story. The health care cost curve that policy makers are now struggling to "bend" is the legacy.

Likewise with the new rules to police credit card penalty fees. Yesterday's WSJ led with "Credit-Card Rates Climb ... Levels Hit Nine-Year High as New Rules Limiting Penalty Fees Help Fuel Rise." The new rules, of course, are part of the new financial market "reforms" and "consumer protections" that politicians will take credit for through the coming election season.

Public transit in Santiago, Chile

Great podcast re pros and cos of public vs private transit in Santiago Chile, by Mike Munger and Russ Roberts

Buy them a health club membership

Freakonomics points us to yet another study that shows how the design of neighborhoods can contribute to weight loss. I am, of course, skeptical. Weight loss, I am told is not so easy.

But lets' accept these results (reported in the American Journal of Preventive Medicine) and ask "at what cost"? The case study involves the Lynx light-rail operating in Charlotte NC. In earlier posts I had written that these systems are likely to be cost-ineffective. The data that Paige Elise Kolesar and I recently assembled show that Lynx runs an annual operating deficit of almost $8 million. Account for capital costs (which transit agencies often ignore) and the annual deficit is almost $46 million. Add non-user benefits (as per Ian Parry and Ken Small's calculations; American Economic Review of June 2009) and the deficit goes down to $45 million per year.

Lynx only attracts about 2.26 million boardings per year. If these are round-trips and users board Lynx 300 times a year, we only have 3,750 weight loss beneficiaries. If society loses $45 million a year even after non-user benefits are taken into account, the estimated weight losses cost us $12,000 per beneficiary per year.

Cynics started doing the math many years ago and found that buying rail transit users a car would be far cheaper. But that would never fly with the smart set. So consider the 2010 update which suggests that buying them a bus pass plus health club membership is the way to go. The various "cash-strapped" governments would save money.

Not easy

In a historic reversal, in today's America the rich are thin and the poor are fat. But we now hear that it's not peculiarily American, but just the arc of prosperity; other affluent societies are heading in the same direction. Lionel Tiger in today's WSJ sums it up very aptly and with a dash of fun ("Please Sir, Can I Have a Bit Less?").

And eating habits had to become part of political platforms because everyone else's health is now the source of an externality. Think of it this way: today's LA Times includes "China tries in vain to keep bellies buttoned up ... Beijing has been on a manners kick for the last few years, but on the hottest summer days, there is no stopping men of all ages and shapes from rolling up their shirts and exposing their tummies."

Managing all of these externalities was never going to be easy.

Walk before you run

I just found this which owns up to the obvious:

Should economists and policy makers have identified the housing market bubble before it burst? The answer is most likely no, says the Federal Reserve Bank of Boston, because economic theory was not up to the challenge.

“Economic theory provides little guidance as to what should be the ‘correct’ level of asset prices — including housing prices,” the new paper published by the bank says. It was written by economists Kristopher Gerardi, Christopher Foote and Paul Willen.

I have not yet read the original paper, but have been dumbfounded by all the learned finger-wagging about something that (i) we can best define in hindsight; and (ii) we can bet on/bet against if we think we "know something".

In this morning's WSJ, Jeremy Siegel and Jeremy Schwartz argue that we are now in a bond bubble. The arguments and the data are laid out and we can make whatever bets we like. Some of us will be right and some will be wrong.

In recent house-price bubble history, a confluence of events worked in concert to push up house prices; we want policy makers to do less to contribute to such episodes. Perhaps stick with a Taylor Rule. But that's not the same as asking them to do more and deflate bubbles when they think they see them.

Doing good can be hard work

Using geographic boundaries to aggregate information has always been caused problems. Economists have long noted that place-prosperity is a poor indicator of people-prosperity. Anti-poverty policies often target poor neighborhoods, but all neighborhoods are somewhat diverse and if and when a program actually elevates someone out of poverty, he or she is likely to leave the area. Geographic indicators will miss that success.

Insurance companies and banks usually get in trouble when they use "redlining" as a shortcut for identifying more vs less worthy applicants.

Today's LA Times includes this which illustrates the problem in another light. Here is the punch-line.

Some affluent areas qualify for tax breaks intended to benefit the poor ...
Businesses can save up to $37,400 for hiring in an economically disadvantaged area. But those areas are designated based on large census tracts that don't always reflect the intended demographic.

Among the advantages for those who live in multimillion dollar houses on the hillside in Los Feliz are celebrity neighbors, sweeping views of the downtown skyline, the Griffith Observatory in their backyard and designation by state tax authorities that they are economically disadvantaged.

That means tens of thousands of California businesses can claim tax breaks worth up to $37,400 each for hiring some of Los Feliz's rich residents, through a program that provides benefits to companies for hiring welfare recipients, ex-convicts, military veterans and the chronically unemployed.

This one makes the front pages because it is so bizarre. Who was it that said that missing and detailed local knowledge stymies even well-meaning political programs?

Not even close

Most urban planning faculties include one or more economists, as they should. It is even better when one of these professors applies one of the core ideas of economics (that getting the prices wrong can be catastrophic) to one of the core problems of cities (managing the auto-highway system). UCLA's planning faculty has had the good sense to hire Don Shoup and Shoup has had the good sense to realize that how we manage parking has been terribly wrong. The prices are all wrong and the regulations are all wrong. Among Don's many writings, his The High Cost of Free Parking is the classic summary of his insight.

In Today's NY Times, Tyler Cowen nicely summarizes the importance of Don's ideas.

The bad news is that the same newspaper includes back-to-reality coverage re traffic and how real world planners and politicians get it all wrong. "New Stress Added to the Heart of LA Gridlock" describes a $1.3 billion project to add another car-pool lane. The story mentions all of the extra delay that the construction project causes. No mention is made of the fact that projects like this do nothing to convert people to carpooling. No mention of the fact that building something expensive is much preferred to pricing something and in any dollar-for-dollar comparison of the costs and the benefits, the two approaches are not even close.

People like Don Shoup and Tyler Cowen just have to start working harder.

A better study?

This morning's LA Times includes "Wilshire Grand developer seeks public assistance on $1-billion project ... The LA City Council's Housing Community and Economic Development Committee has authorized a study to be conducted to evaluate the type of assistance the developer might get ... The study would be carried out by independent consultants hired by the City, and funded from $250,000 that the developers have agreed to pay ..."

I know, stuff like this happens every day. It would be nice if there were a betting opportunity on what the study finally recommends. But studies like this are part of a cottage industry and they are usually a bunch of dressed up assertions.

But why not include double-entry bookkeeping in the study? There will surely be employment multipliers as part of the magic, but what about the multiplicand? Every dollar that presumably turns over when the City forks over the $1 billion comes from somewhere. Every additional dollar that the multiplier conjures comes from somewhere. Studies that add up all the plusses are standard. But most of these have offsetting minuses somewhere else. If $250,000 will be spent on the study, then why not show the offsets too? I think I know the answer.

Sticking with the playbook

The political allure of industrial policy is clear. Picking "winners" can easily be confused with picking voters.

All this has been fused to the "need" for ever more deficit spending. And Federal Reserve printing presses have been joined to state and local government "needs".

The critics pin President Obama's falling approval numbers on "not focusing enough" on the economy, but what can they possibly mean? The Administration's playbook is pretty clear. The critics say he should do even more in the way of deficit spending -- picking ever more "winners". Thomas Sowell has aptly summed up the thinking of Obama's critics on the left: "Heads-I-win-tails-you-lose." The poor showing for all the spending is not that it's bad policy, but there has just not been enough of it.

The beauty of it is that you can apply this model to anything that has not worked out so well. Spanking the incorrigible kid not working? You did not spank enough! War on Drugs not working out so well? Ramp it up.

When there is just one playbook, what else can you do?

Political math

Today's WSJ includes "Why I'm Not Hiring ... When you add it all up, it costs $74,000 to put $44,000 in Sally's pocket and give her $12,000 in benefits." This is by an employer and "Sally" is an alias for one of his employees.

The "wedge" is 25%. In a better world, I get a dollar for every learned discussion of why unemployment remains stubbornly high.

While I am greedy, I may as well claim another dollar for every complaint about increasing inequity when unabashed progressive redistribution has been federal policy ever since the New Deal. And how about another dollar for every complaint about deteriorating infrastructure when state and local government spending is bigger than ever?

Discussion starter

Every Econ 101 course includes discussions of rationing via price vs. the alternatives. But prices ration on the demand side while also sending valuable signals to the supply side. Take away prices and you lose both, and that's what made Soviet lines so awful.

A very nice background discussion of queuing appears in today's NY Times, "Getting in (and Out) of Line". The author alludes to all three options: prices, orderly lines or messy scrums (misunderstandings, conflicts and more than occasional ugliness). But he manages to avoid the fact that the best is the enemy of the good and ends this way:

In a way, the market’s spread is a return to another kind of scrum, one in which financial, and not physical, might means right. Perhaps one day lines will be remembered as antique, a quaint system in which things were granted simply for having shown up early, an interlude of relative equality between the scrums that reigned before and after.

Interesting analogy

Greg Mankiw comments on Christina Romer's resignation from her post as Chair of the Council of Economics Advisors. Having been in her position, he speculates on what is going through her head as she transitions back to her faculty position. All of this reminds me of one of my favorite passages from Paul Seabright's Company of Strangers. The author refers to "politicians", but the discussion may as well refer to any member of the crew. It goes like this:

Politicians are in charge of the modern economy in much the same way as a sailor is in charge of a small boat in a storm. The consequences of their losing control completely may be catastrophic (as civil war and hyperinflation in parts of the former Soviet empire have recently reminded us), but even while they keep afloat, their influence over the course of events is tiny in comparison with that of the storm around them. We who are their passengers may focus our hopes and fears upon them, and express profound gratitude toward them if we reach harbor safely, but that is chiefly because it seems pointless to thank the storm. (p. 25)

What if?

Here is how our leaders think about cities (and themselves). From an email blast that just arrived:

WASHINGTON Today, the Senate Banking Committee voted to approve the Livable Communities Act, a proposal to create the next generation of smarter, sustainable and energy-efficient communities. Sponsored by Chairman Christopher Dodd, this bill would authorize HUD's new Office of Sustainable Housing and Communities and create an interagency working group within the federal government to align the community planning and development functions of HUD, the U.S. Department of Transportation and other agencies to allow for a more coordinated and comprehensive approach to building better communities.

The following is a statement by HUD Secretary Shaun Donovan:

Today, the Senate Banking Committee took a bold and forward-thinking step toward creating the next generation of livable and sustainable communities. In particular, Chairman Dodd understands that if we're going to encourage the development of smarter, more energy-efficient communities, we have to break down the policy silos that keep many parts of our government from talking to each another. Not only does this measure align the collective energies of the federal government toward this task, but it will help generate jobs, encourage a new way of thinking about land use, reduce congestion, and generally make our neighborhoods better places to live.

But what what if cities are more like spontaneous orders than complex playthings amenable to politics? What if: (1) people will “truck, barter and exchange” (A. Smith) no matter what their leaders come up with? and what if (2) Prisoners Dilemma situations illustrate the limits of trade (insecure property rights, high transactions costs, low levels of trust), but one man’s problem is another man’s opportunity and entrepreneurs act to remedy prisoners dilemma situations when they can (E. Ostrom); and if (3) the rules of the game have many sources beyond our leaders, including bottom-up common law and many “unwritten rules” that Ostrom and others illustrate; and what if (4) public choice economics highlights the actions that are incited by any set of rules, including many “unintended consequences”; politicization is inevitable; and if (5) top-down planning is impossible; planners lack local knowledge and local knowledge is too complex to be fathomed by individuals or committees (Mises, Hayek); and if (6) planning is universal, but markets reconcile competing plans, and this also challenges the idea of top-down planning; and if (7) the most ambitious top-down planning (the Marxist legacy) has failed repeatedly, bringing on misery and starvation -- and state terror to manage starving populations (North Korea); and what if (8) large bunches of redistributionist policies are enacted with presumably progressive intent, but often end up being regressive; they have been a staple of U.S. politics since at least the New Deal, but complaints about increasing inequality are greater than ever; and if (9) land use controls in America help to explain housing affordability problems; and if (10) the world has been urbanizing for many years because cities are the “engines of growth”; cities encourage entrepreneurial success as long as they foster spatial arrangements that are congenial to entrepreneurial discovery; this includes spatial arrangements that internalize many positive externalities and minimize the possibility of many negative externalities; and if (11) such spatial arrangements are too complex for top-down planning (Jacobs, Mises, Hayek); and if (12) public goods market failures are minimized via Tiebout competition; and this includes private land use planning (in malls, industrial parks, private communities); and (13) designers do essential work; we willingly board airplanes, trusting the engineers who designed them.

And what if, in light of all this, we think very hard about what role is there for planners and designers when it comes to modern cities and decide that the presumption ought to be towards the lightest possible touch? Naw.

Trifecta

The U.S. War on Drugs is nuts. That's by now an old and ever more widely shared sentiment. But how can policy makers get out from under the mess? Is there a winning political coalition in sight? This morning's LA Times includes this story about Oakland, which may show the way.

Jeff Wilcox lopes across the nearly empty parking lot, aiming for a large brick building. Inside, he excitedly shows off the cavernous space, once used to make wire, vacant now for a decade. He imagines it running 24/7, filled with glowing lights, gurgling irrigation systems, whirling ventilators and workers coaxing thousands of pungent marijuana plants to bud.

And that's just one part of his proposal. Wilcox, a retired builder, owns a campus of aging, idled industrial plants. On a wall in an unused conference room, a sketch of the property shows how he could fill most of the 172,000 square feet with growers raising high-end pot and entrepreneurs turning out brownies, drinks, tinctures and other products.

"My idea was a business park of cannabis," he said.

The story mentions support from Oakland City officials. Just marry industrial policy to local government budget shortfalls to pot policy reform.

Cutting edges

Most teachers of introductory economics ("Econ 101") touch on price discrimination practices and also on copyright controversies. But I did not know that in the "real world" these are joined. And the inevitable litigation has implications for eBay, garage sales and your local public library. Today's WSJ includes this column by Eric Felten. Here is the story:

Omega, you see, sells its watches for far less money in some countries than in others, a common enough practice known to economists as "geographical price discrimination." The U.S. market will generally bear more than the market in a Latin American republic, and so Omega offers its goods to distributors in places such as Paraguay for less than it does to American distributors.

Which is where the grey market comes in. Given the difference in prices, there is a tempting arbitrage opportunity in importing Omega watches from Paraguay to the U.S. It is just such watches that Costco bought from a stateside importer, allowing the warehouse store to offer an Omega Seamaster for $1,299 when the brand preferred them sold in the U.S. for $1,999.

Omega eventually sued, after some savvy planning. The company couldn't complain that Costco was peddling fakes—the watches were authentic goods. Nor did U.S. trademark law give the Swiss company the power it needed to block the sales. And so Omega crafted a copyright strategy. They fashioned a small globe logo and copyrighted the device in the U.S. By engraving the tiny logo on the back of the watch, Omega could claim that it created a copyright in the watch as a whole, one that would give the company more control over when and where the watches are sold.

The appeals court ultimately agreed with Omega, and in so doing limited a long-standing principle of U.S. law known as the "first sale doctrine." The doctrine holds that, once a copyright holder sells a copy of his work, he loses any say in what the buyer can do with that particular copy. That doesn't mean making extra copies—by buying a book I don't gain the right to publish a new edition of it. But I can turn around and sell my copy of that book to whomever I choose without having to acquire the permission of the copyright holder.

The appeals judges decided that, since the first sale of the Omega watches in question happened outside of the U.S., America's first-sale doctrine doesn't apply. It is a small technicality that, in a global economy, could have large implications.

Constrain the first-sale doctrine and you throw a wrench into the business of used-book stores, garage sales (including the electronic garage sale that is eBay), and any and every sort of secondhand shop. And yes, even public libraries might find themselves facing the challenge of figuring out which books on the stacks were first sold in the U.S., and which were first sold abroad.

No doubt Omega was smart to turn to copyright law, given what an increasingly powerful tool it is. The number of years copyright lasts has been repeatedly lengthened, and juries have been known to hand down fines in the millions for illegally downloading a few dozen songs.

Fancy wristwatches are peculiar international signals of status. This is increasingly exposed for what it is because wearers of an Omega Seamaster are ever more likely to be carrying a smart phone that tells time (and much more). While there are cutting edge folks designing and building ever finer smart phones, there are also cutting edge lawyers watching out for the brands and the profits of the much more traditional companies.

Awful rules trump great subway

Once people have enough money to buy a car, they will. And when there are enough such people, traffic congestion will be pretty awful -- even when there is substantial public transit. (This is so unless roads are properly priced.) Moscow's pride-of-Stalin subway is only second in the world to Tokyo's in terms of passenger volume. And this was useful in impoverished Soviet days. But a measure of prosperity ended that. Details in this week's New Yorker (abstract here; rest is gated).

But the modern Moscow touch makes a bad situation much worse. The rules of the road are missing. Both law enforcement and driver etiquette leave much to be desired. Awful (or no) rules trump a great subway.

UPDATE

How about Beijing? H/T Craig Newmark

Before Earth Day

David Leonhardt writes about global warming and cap-and-trade politics in the context of the Ehrlich-Simon debate and wager. I always like to see the E-S bet make it to public discussion, but here is Leonhardt's concern that E-S is not relevant when it comes to global warming:

But global warming is different. The fact that carbon emissions are warming the planet doesn’t make it more expensive to produce those emissions. So companies do not have an ever-increasing incentive to emit less — the way they would if the problem were, say, a lack of oil. Global warming doesn’t solve itself the way that resource scarcity does.

But richer is cleaner. The clincher is that richer predicts greater longevity.

Absent unforeseeable calamities, our successors will be richer and they will laugh at the idea that we made long run forecasts that included impossible-to-predict technological change and that we used these to justify policies that could well impede progress. From burning wood to burning coal to oil to gas to who-knows-what, there is a trend. Cars are cleaner than horses. Considering just the air they breathe and the water they drink, most office workers would not trade for the farm or mine or factory work of their grandfathers.

And most of these improvements came before Earth Day and the EPA.

More on rail transit in America

Cato's Randal O'Toole has assembled data for a cross-section of U.S. rail transit lines and cannot find any good news. Here is the abstract of his paper.

Over the past four decades, American cities
have spent close to $100 billion constructing rail
transit systems, and many billions more operating
those systems. The agencies that spend taxpayer
dollars building these lines almost invariably call
them successful even when they go an average of
40 percent over budget and, in many cases, carry an
insignificant number of riders. The people who
rarely or never ride these lines but still have to pay
for them should ask, “How do you define success?”
This Policy Analysis uses the latest government
data on scores of rail transit systems to
evaluate the systems’ value and usefulness to the
public using six different tests:

• Profitability: Do rail fares cover operating
costs?
• Ridership: Do new rail lines significantly
increase transit ridership?
• Cost-Effectiveness: Are new rail lines less
expensive to operate than buses providing
service at similar frequencies and speeds?
• The “Cable Car” Test: Do rail lines perform
as well as or better than cable cars, the oldest
and most expensive form of mechanized
land-based transportation?
•The Economic Development Test: Do new rail
lines truly stimulate economic development?
• The Transportation Network Test: Do rail
lines add to or place stresses upon existing
transportation networks?

No system passes all of these tests, and in fact few
of them pass any of the tests at all.

Paige Elise Kolesar helped me augment Randal's data. In particular, we added auto external cost estimates from a recent American Economic Review paper by Ian Parry and Ken Small. According to these authors, such costs are in the range of 6 cents/mile (off-peak, Washington, DC) to 31 cents/mile (peak, Los Angeles). We also used Tom Rubin's estimate of how many rail riders are new-to-transit (median near 25%) and asked: What if all of them had substituted away from their cars?

The annualized values allowed us to compute costs (losses) per boarding after non-rider benefits as well as fares had been counted on the plus side of the ledger. The results for eight commuter rail lines were $19.50 per boarding (weighted average; almost $40 per round-trip); for six heavy rail projects, the comparable weighted averages were $8 and $16. For 20 light rail projects, $9 and $18.

These numbers speak for themselves and simply update suspicions that anyone who bothers to look at the data has long held. Of course, none of this makes a whit of difference to the many who know that we "need" to build many more such projects.

I am shocked!

Someone will say that you cannot make this stuff up.

Mass. Sen. Kerry docks yacht in RI, saving $500K

(AP) – 1 day ago

BOSTON — Massachusetts Sen. John Kerry is docking his family's new $7 million yacht in neighboring Rhode Island, allowing him to avoid paying roughly $500,000 in taxes to the cash-strapped Bay State.

If the "Isabel" were kept at the 2008 Democratic presidential nominee's summer vacation home on Nantucket, or in Boston Harbor near his city residence, he would be liable for $437,500 in one-time sales tax. He would also have to pay $70,000 in annual excise taxes.

Rhode Island repealed those taxes in 1993. That has made the state something of a nautical tax haven.

Kerry spokesman David Wade said Friday the boat is being kept at Newport Shipyard not to evade taxes, but "for long-term maintenance, upkeep and charter purposes."

Wade noted the vessel was designed by Rhode Island boat designer Ted Fontaine and purchased in the state. It was built in New Zealand by Friendship Yachts.

A Department of Revenue spokesman said Kerry would be liable for Massachusetts taxes if he berthed the boat in the Bay State within six months of its purchase. If the "Isabel" were brought to Massachusetts after that period, the state would have to decide if it wanted to pursue the taxes.

Massachusetts, like most other states, has been grappling with plunging tax revenues. Last year's budget decifict was $600 million, and officials are bracing for a $1 billion deficit this year.

The 76-foot sloop has two cabins, a pilot house fitted with a wet bar and cold wine storage, according to the Boston Herald, which first reported its Rhode Island berthing. It derives its moniker from the middle name of Kerry's mother and the name his wife, Teresa Heinz, planned to give a daughter.

Instead, she had three sons.

Coast Guard registration records show the vessel is owned by Great Point LLC, a limited liability corporation based in Pittsburgh, Heinz's longtime home. The millionaire heiress to the Heinz ketchup fortune is a philanthropist and environmentalist.

HT: Ross Selvidge, who cites the wisdom of Leona Helmsley.

UPDATE

Bob Higgs explains.

20-year anniversary

Calling attention to the bad fit between rail transit and modern cities gets tiring. But the Los Angeles MTA has now been in the rail transit business for 20 years and has nothing to show in the way of net transit ridership gains. But they can show that they have spent about $8-billion trying. Here is an update.

Note that the only way to add this much rail capacity without any net gain in ridership (while the county grew in population by more than one-million, mostly at the low-income immigrant end) is to reduce bus capacity. But rail offers a higher quality of service. Not exactly. If it were so, there would have been ridership growth.

How deep will the hole be in another ten, twenty years?

"Pricing for the guilt-ridden"?

Pigou Club economists like a carbon tax. Various politicians want cap-and-trade. Public choice economists worry that either one would be politicized and (perhaps) no policy is the best policy. Yesterday's post suggested that the Environmental Kuznets Curve is likely to kick in anyway.

Speaking of the real world, today's WSJ includes "How Green Is My Sneaker?" which mentions an Eco-Index that various manufacturers are developing. Information is always a good thing. But price discrimination is also in play. And why not? I believe that Tim Harford (or someone; apologies if I got it wrong) once described "pricing for the guilt-ridden."

Inconvenient truth?

Wendell Cox links to a European study which reveals that the US leads the world in greenhouse gas emissions reduction.

I imagine that not a single environmentalist would agree that we are doing enough. We are widely believed to be unenlightened laggards. So what is going on? Are we on the right side of the Environmental Kuznets Curve? There are many who would say we are (see here and here and here).

There will, of course, be many to argue that we can do much better. But that's the controversy. What would be the net effect of the various proposals that might make their way through Congress? We got to where we are (the right-hand side of the EKC) not because of inspired environmental policies, but because we found ways to get rich. Richer is apparently cleaner.

Sounds like a very inconvenient truth.

Pirates feeding beasts

Monty Python may have suggested that it it best to "tax all foreigners living abroad," but James S. Henry has has actually come up with the details. Writing in the July 19, 2010, Forbes, he says: "There is at least $15 trillion in private wealth sitting offshore. Let's tax it." (not available at the Forbes site). Here is how Henry would get it done:

"The pile of offshore anonymous loot is now large enough so that even a very modest 0.5% wealth tax would yield at least $75 billion a year. ... The majority of offshore wealth is managed by 50 banks." All of them have known addresses in places like NYC, London, Amsterdam, Zurich, Geneva, Frankfurt, Paris. "These highly visible institutions should be required to withhold a modest 0.5% annual tax, collected quarterly, on the value of their clients' assets. ... Only anonymous wealth should be taxed. If the beneficial owners can show that they're paying taxes on their offshore assets back home, they can claim rebates. Most will just pay up."

Two problems. First, the new taxpayers will not remain sitting ducks for long. They will refine their money laundering. Second, new revenues may just "feed the beast." But that's an old story. I prefer Henry's plan to all the others that I see coming down the pike.

More history lessons

This morning's NY Times includes "Women's Role in Holocaust May Exceed Old Notions .. Research Finds Greater Female Involvement." As if the Holocaust were not awful enough, I suppose one might have hoped that women would not sink as low as men. The new research evokes the argument of Daniel Goldhagen -- that quite ordinary Germans participated in mass murder.

There have been other holocausts and atrocities, but Germany had once been thought to exemplify a higher standard. It is exactly that idea which is examined in an accompanying book review of The German Genius (which goes on the ever growing to-read list). "By 1900, nearly everyone agreed that there was something special about Germans. Their philosophy was more profound -- to a fault. So was their music. Their scientists and engineers were clearly the best. Their soldiers were unmatched." Reviewer Brian Ladd mentions that Nazi propagandists and sympathizers hijacked this view for their own ends. But, "... the educated middle class was too weak to stop Hitler ... it abdicated its responsibility to do so and .. its antipolitical ideals taught a nation to welcome a charlatan's promises of a redemptive community."

As awful as all this is, my impression after several visits to Germany, is that today's Germans have learned from their history.

Why the gab fests?

In an Economist review of John Calvert's Sayyid Qutb and the Origins of Radical Islamism (which I have not read), the reviewer mentions Qutb's two years in the U.S. and notes that many have wondered whether that stay ("the sight of scantily clad women on the dance floors of Greely, Colorado") helped to radicalize him.

Yesterday's WSJ included "Exporting Broadway" which mentioned the popularity of Fiddler on the Roof ("The late Hisaya Morishige played Tevye 900 times over two decades") in Japan and Mary Poppins in the Netherlands (among many others).

Modernity has allure and American culture has been a huge export, probably since jazz and the early movies of the 1920s and 1930s. For some reason, I get "alerts" on the many conferences on "Globalization" around the world. I suppose that international gab fests are a fixture, but globalization will be and will be on its terms, no matter how many conferences or how much hand wringing.

These are worth looking at

On economic development.

On economic thinking.

Medical care.

Baptists and Bootleggers gone wild.

Never so simple.

Very good news.

Deficits.

Not so clean and green

It's a sure bet that federal income tax rates will soon go up. This will incite the usual debates re elasticities: will higher rates mean higher tax revenues?

Elasticities, of course, matter everywhere. This includes whether or not low-carbon ("clean") energy subsidies have the desired effects. This paper (may be gated, but guest access is usually available) by Emma Hutchinson, Peter W. Kennedy and Cristina Martinez suggests that under reasonable assumptions, subsidies of low-carbon emissions can have perverse effects. Here is the abstract,

We show that a production subsidy to low-carbon energy can have a perverse effect on emissions. The subsidy causes a shift in the composition of production towards the cleaner energy, but it also causes an offsetting consumption effect: energy consumption rises because the subsidy causes the equilibrium price of energy to fall. The net effect on emissions can be positive if the low-carbon energy is not significantly cleaner than the high-carbon energy it displaces. We derive
a necessary and sufficient condition for this perverse effect in the context of a competitive energy market. We calibrate an example for an ethanol subsidy in the U.S. and find that this policy is likely to cause an increase in carbon emissions for most plausible parameter values.

Not necessarily clean and green.

Go figure

"Pigou Club" or cap-and-trade? Is it moot because either can easily be politicized? The Obama Administration apparently wants a carbon-dioxide cap-and-trade law, but it's EPA is apparently undermining the existing (and by all accounts somewhat successful) sulfur-dioxide cap-and-trade. Read this.

Coming to a restaurant near you?

Paul, the octopus, is (for all we know) six-for-six in his World Cup picks. This is much better than most of us. The other Paul (Paul Bloom) writes about "essentialism" and all of the episodes that reveal our enjoyment of (and our bids for) artifacts that are "genuine" or that have been touched by the rich and famous. He wonders whether this is adaptive behavior or just a Spandrel. I enjoyed the book, but am not yet convinced of either side of the argument.

But never mind. Octopus appears on the menus of many fine restaurants and I am waiting to hear about the bidding for Paul (the octopus). Paul (the author) mentions that many cannibals are inspired by the idea that they inherit the qualities of the people they partake of.

UPDATE

The New Yorker has this long piece on the challenges of authentication. Score one more for Paul Bloom.

One more sport

I suppose that it's inevitable that discussions of the World Cup and soccer elicit political commentary. Hendrik Hertzberg does this in the July New Yorker. The Bryan Curtis-Eve Fairbanks discussion on bloggingheads.tv also covers this ground.

But the musings can get into the overreach area. For example, what is "socialist" about soccer? Marc Thiessen tries to make that case. I disagree. What the soccer players do on the field (the pitch) is much more improvisation than scripted. It is the opposite for American football, which is very much scripted (check out the quarterback consulting his wristband)-- and gets really interesting and spontaneous when there is a broken play.

Americans are different in that they have many sports and many entertainments to chose from. The commentators are adding their own sport to a crowded plate.

The smart set

On yesterday's Bloggingheads.tv, Brad DeLong argued for more federal stimulus because it is affordable because the long-term budget picture is OK over the next 75 years because of the new health care regime -- if Congress sticks to pay-go for 75 years.

In today's NY Times, Christopher Edley argues for Federal government advances of matching funds to the states when a state runs into fiscal trouble. Here is the punch-line:

What would this cost the federal government? Nothing. There would be zero risk of default, and a guarantee of full repayment plus interest equal to what Treasury pays in the bond markets to borrow. Congress would need only to appropriate the administrative costs of this program, which would be minimal.

Both opinions bank on credible commitments from politicians. If there is an anti-Washington tug among the voters of both parties it is because such credibility is now very low.

I do not believe that either of these gentlemen is a tea party plant. But they do provide fodder for those who wonder about the programs and policies being suggested by the smart set.

UPDATE

It appears that the Massacusetts health care reform is costing much more than proponents had promised.

The New Yorker's view of the world?

Today's WSJ, includes Joel Kotkin's "The Myth of the Back-to-the-City Migration". Many commentators live and/or work in Manhattan and cannot imagine that they are the outliers. Many others have not yet accepted the auto-oriented city -- which is here to stay. Still others cannot imagine that the suburbs offer enough in the way of "density" in various "sub-centers" to fulfill urban areas' role in providing all of the agglomeration benefits and opportunities.

It's akin to high-speed rail, rail transit, downtown convention centers and sports stadia, transit-oriented development, and many variants. One side of the brain (if brains actually have sides) says, "get used to it." The other side says, "this is waste, fraud, and even occasional theft."

I suppose this is why they have Tylenol.

One can never know enough history

I guess there were wheels in the Americas before the Europeans arrived. These people say so and they point to evidence of toys with wheels that archeologists have found in the Americas.

I went searching because there is no mention of wheels in Nathan Nunn and Nancy Qian's "The Columbian Exchange: A History of Disease, Food and Ideas." In any case, their research is fascinating. If you are enjoying globalization via the World Cup (or at your local restaurant), read their paper. Then read Charles Mann's 1491.

The more things change?

Today's auto-oriented cities are very different from pre-automobile cities. The internet has also changed our lives in many ways, but where is the physical evidence in our cities? Perhaps it's too soon to tell or perhaps very old decentralization trends have simply been reinforced. (And on flimsy evidence, some have even suggested that these trends have been weakened and/or reversed. But see here for some perspective.)

The Economist's Economics focus column mentions a recently published paper in the Economic Journal which describes the many survivors of the e-commerce revolution. Harvard Square (among others) is still populated by shops that involve old fashioned physical attendance.

And look at all those people seeking an internet connection at a public place (e.g., Starbucks and many others) when they already have one at home.