Best and brightest

I have now experienced two "best and brightest" Presidential administrations.  JFK's administration prompted David Halberstam to give us that apt phrase, but assassination and myth-making blurred the lesson for most people.  Some people fall in love with the idea that the "best and the brightest" are in office and "run the country."  Falling in love has some well known risks.

The second "best and brightest" episode is the one that began sometime in 2008.  The second episode also included many voters falling in love with the candidate. 

There is not much left to say about Solyndra.  Industrial policy has the twin Achilles' heels (either one would be bad enough) of inevitable politicization and ignoring the knowledge problem.  Knowledge is much too dispersed for top-down wisdom to replace market vetting.  But "green jobs" and "stimulus" were just too much temptation.   Paul Gregory summarizes all of this very clearly. 

There is every reason to believe that the Bushies would have gone forward with the Solyndra deal (or others like it) but they would never have been as slick or effective in their staging and presentation as the news conference now being played by all the TV news shows of Obama's 2010 unveiling speech at the Solyndra facility.

So what is there left to say?  We can be surprised that people are surpised by the whole episode.  And we can be disappointed that the lesson that many choose to take from the episode is that it was just a matter of moving too fast and "inadequate vetting."  I have not yet heard "the law of unintended consequences" being invoked, but that one is always within reach.  

UPDATE

"Ex-Solyndra Employees Now Applying for Trade Adjustment Assistance"  H/T Carpe Diem.

Images

Governance and politics are vastly complicated and therefore fascinating.  We know that images are all-important, but are nevertheless fascinated when the masks come off.  Today's LA Times includes "Jackie Kennedy, warts and all ... Interviews from 1964 give us a less than flattering but fuller portrayal of the iconic first lady."

I have never understood how the Richard Nixon image (package) worked for as long as it did. Some of the mystery is clarified by David Halberstam in his masterful The Fifties.  I have only limited recall of those days, but Halberstam reminds readers of the weight of fears of Communism in American life and politics, the influence of Joe McCarthy, the Republican effort to regain power, their interest in Eisenhower, their preception that a Nixon could do some things that an Eisenhower could not, etc.  Interestingly, Eisenhower could never really understand Nixon and there is lots of evidence that he disdained his VP.  Ike tried to dump him from the ticket in 1952 an again in 1956 -- each time stinging the old Nixon paranoia re his outsider status.

Halberstam devotes half of the Nixon chapter to wife Pat (Ryan) Nixon, her past and her role in the image-making behind the Nixon successes.  Richard Nixon was every bit as weird as his odd look.  (Sam Rayburn is quoted on his assessment that Nixon's was the most hateful face he had ever seen in the House of Reps.)  But Halberstam evokes the emergence of the Nixons and the Ryans from poverty and (outsider status) -- and the eventual successful Dick-and-Pat image.  The Nixons evidently pioneered the use of the adoring wife prop in their politicking.  Her posture in the TV and other campaign appearances (including the "Checkers" speech) was their innovation.

It is all much more complex than I can describe here.  The good news is that we manage to survive these characters.  May it last. 

Governance choice

Alex Tabarrok calls our attention to Cities as hotels.  He cites some of the background discussions in The Voluntary City.  The latter includes Spencer MacCallum's "The Case for Lend Lease versus Subdivision: Homeowners' Associations Reconsidered,"  which elaborates the arguments in his The Art of Community as well as his wonderful "The Quickening of Social Evolution."

It's all good stuff.  Conventional government means politics and homeowners' associations means more politics.   MacCallum held up the hotel as an alternative.  It includes all manner of public services and public facilities.  Occupants consume them as part of a contract that they sign when they check in.  It's the "public" vs the "private" alternative, here meaning the headaches of politics vs the headaches of principal-agent problems.  The latter is a threat to any large organization.  How do the owners make sure that the interests of the many people working for them are aligned with theirs?  It is not simple.

In fact, the choice of headaches is not simple either.  The way to go is to allow choice and switching.  Cities could become hotels or "cities as hotels" could become cities.  Bob Nelson has long been arguing for ways to given neighorhoods the option to secede and privatize.

Fudges

We often use fudge words or phrases to close out or finish an argument.  These are usually standard rhetorical devices.  Perhaps the most abused involves "fair" or "fairness".  When pressed, very few can spell out what they have in mind.

"Fair" gets twice as many Google hits as "sex".  Perhaps that's not a fair comparison.

In today's NY Times, Greg Mankiw writes about the problems that policy makers have in getting business people to invest.  Conventional "stimulus" may do more harm than good.  He ends this way:

Economists often rely on the convenient shortcut of separating long-run and short-run issues. Recessions are then viewed as short-run problems that require short-run solutions. That approach, however, may be simplistic. Lack of investment spending is a large part of the economy’s current difficulties, but capital investments are always made with an eye toward the future.


The best fix for our short-run problems may be to focus on policies that will foster long-run growth as well.

Let's do X in the short-run, but Y in the long-run, is another famous fudge.  We owe the reader some sense of what we mean.  That's never simple, but don't broach the topic if you do not know.  Spend now, but attend to deficits later?  Please provide readers with an inkling of what you have in mind.  If you have no idea, then say so. 

It's the investing -- or lack of it

Most people have pretty good recall of when and where they were at the moment of auspicious events, such as 9/11.  Other indelible recollections are with respect to personal moments.  This sounds way beyond nerdy, but one of those moments for me was sitting in an econ class at U Penn in the late 1960s and (finally) figuring out that, whereas there was pretty good theory and evidence for household consumption expenditures, our understanding of business investment expenditures was not anywhere close to that.  In fact, the latter are more volatile and subject to hard-to-quantify business-people's mood swings.  "Animal spirits" is too glib.

But the cliche is that as most of demand comes from consumers, we have to get them to spend.  Robert Higgs shows here that consumers are spending, but it is business owners that are not.  Will Obama's latest make a difference in that department?  There has not been a rousing reception at today's NYSE where the Dow shed over 300.  I know that there is plenty of economic worry all over the world, but bidders also jump all over good news when they sense it.

Platform idea

My favorite features at Marginal Revolution are their "markets in everything" posts.  They have even created a seperate URL for their collected posts on the topic.  I see that various other bloggers have picked up on the idea.

Here is one I have not seen before:  this morning's LA Times includes this story about a local university that will pay employers to hire their grads.

This week's game-of-the-week is to anticipate what President Obama will say when he gives his "jobs" speech.  And we are into election season and all of the candidates are getting on board with their stories on how they will "create jobs".

I stick to the idea that market participants "create jobs" but politicians can get in the way; they cannot "create jobs" although they eagerly talk as though they could because of the widespread belief (hope) that they have such powers. 

Offering to "get out of the way" does not resonate any more.  Voter are eager to believe that politicians can "create jobs" and politicians are eager to pander to the idea.  Democracy is a mixed blessing. 

I am still waiting for the candidate who pledges that he or she will not run for a second term if specific targets are not met by a certain date.  Targets could include a specific jobless rate (or employment rate), and inflation rate (any measure specified in advance), a spending level, unfunded liability level (Medicare) and/or any others.  I would love to see one of them offer to tie themselves to the mast.  They might then discover the merits of a lower policy profile.

Density

In his latest weekly WSJ "Mind and Matter" column, Matt Ridley concludes this way: "Sometimes, both in biology and in technology, two good ideas live so far apart that they rarely get a chance to mate."  This is a riff on the widely quoted line from his The Rational Optimist, "I believe that at some point in human history, ideas began to meet and mate, to have sex with each other." 

Ridley evokes the heart of modern urban economics.  Cities thrive and are important because this is where ideas are spawned and refined.  In today's NY Times, Ryan Avent takes it a step further in "One Path to Better Jobs: More Density in Cities."  He criticizes Bay Area (and similar) NIMBY policies that limit densities, push up land prices and, thereby, put a crimp in the whole business.

But that is not the whole stort.  Some of the writers in Randall Holcombe and Benjamin Powell's Housing in America also show that a blind insistence on greater density can be costly. 

So what do we know?  (1) The big metropolitan areas include millions of land parcels and "the correct" density for each cannot be known by planners and policy makers; this is why we have land markets; (2) land markets are supposed to bring forth a pattern of densities that make the whole thing work; you may be the "land use planner" of your very own shopping mall, in which case you would not dream of making a blanket statement that it should be developed at "high" or "low" densities; you would have a complex design in mind, whereby the various parcels are occupied in ways that make the whole project a success; (3) much of the discussion of "density" is incomplete, often simply asserting that density ought to be "high" or "higher"; it is much more complicated; see #1, above.

Prejudice revealed

Frederic Bastiat famously noted that "If goods do not cross borders, armies will."  Make that supposedly, because there is an interesting controversy surrounding the provenance.

The story of borders involves the powers of any state vs the power of markets.  The U.S. southern border is famously porous and we know that labor will always seek to cross borders (and distances) in pursuit of greater rewards.

Huge movements of mobile capital illustrate a more recent phenomenon.  Some Americans fret that the U.S. is now a "debtor" nation while others celebrate the continued international popularity of U.S. assets, including U.S. Treasury debt.  The near panic over the purchase of iconic assets by Japanese interests in the 1980s has been succeeded by a similar panic over acquisition of favorites by Chinese interests.  Today's LA Times includes this op-ed: "Dodger Red: A Chinese government bid for the home team?  Say it ain't so."  The piece includes a red-background mock-up of the odious Mao-Tse Tung wearing a L.A. Dodgers cap.

Emotional attachments to sports teams are complex. When the current owner (Frank McCourt) bought the Dodgers some years ago, there were complaints that he was not a local native and, therefore, not qualified.  But as unpopular (and unsuccessful) as the McCourts are/were (Frank and Jamie McCourt are battling over team ownership in divorce court), "the Chinese" would be the last straw.

Market forces eventually prevail over politics and they will also conquer emotional sports team allegiances.  We are just seeing another minor skirmish on the path of globalization/cosmopolitanization.  How do I know?  If the new owners (from China or anywhere) field a winning team, they will be forgiven and (more importantly) one more prejudice will be revealed for what it is.

Denial

Some months ago, James Q Wilson speculated in a WSJ op-ed on some of the reasons that reported crime in the U.S. is down.  On his list was this one:

Another possible reason for reduced crime is that potential victims may have become better at protecting themselves by equipping their homes with burglar alarms, putting extra locks on their cars and moving into safer buildings or even safer neighborhoods. We have only the faintest idea, however, about how common these trends are or what effects on crime they may have.

In the last few days, there has been a murder on LA's Red Line subway and a stabbing on the Gold Line light rail.  LA Times columnist Sandy Banks has written about these, and devoted today's column to readers' reactions and her reactions to their views.  Here are some outtakes (readers remarks to Banks in quotes):

"I have seen several violent arguments, many extremely crazy people and I would never be surprised if someone pulled a gun and started shooting," wrote Dan, who rides the Red Line regularly from North Hollywood to Staples Center.

"If you have any sense, you should be afraid and wary," he wrote. The Red Line "is the Wild West."

So, apparently, is the Green Line, according to a reader who feels the need to carry pepper spray and a stun gun on his rides from Norwalk to Redondo Beach. A few months back, a fellow passenger tried to push him from his seat. "I punch him in his face and spray him," he wrote. "He jumped off the train at the next stop."

"You have no idea what we have to put up with a daily basis."

It's too simplistic to say that we see only what we expect to see. But the divergent descriptions I received can't be reconciled with the notion of a singular reality.

Crime and accident figures show that riding the subway is certainly safer than walking in some neighborhoods or driving on our traffic-clogged streets. The Red Line attack was the first homicide in the subway's 18-year history.

Safety is about perception, though, not just bare statistics. And passengers feel safe when they trust one another and have confidence in the system to protect them.

Reader Dan spent his career "around violent people, so I am not easily intimidated," he wrote. On his Red Line ride, he sees rude passengers "taking up two seats and daring you to protest" and rule-breakers "who board with ELECTRIC GUITARS (battery packs) and begin torturing the riders" with music.

Across town, on the Green Line, "the ride is pure hell," the man with the pepper spray said. "You have people talking loud with foul language, thugs menacing riders, transients stretched out sleeping on the train all day long.…

"And there's never a policeman around when it happens. Most people I know carry some type of weapon on the Green Line," he wrote. "I'm not saying that the killing on the Red Line was justified, but I know there are very unreasonable people riding the Metro trains, and I don't intend to be one of their victims."

In other words, a sense of lawlessness on the trains may push reality closer to perception.
For some riders, putting a mirror to society is part of the joy of subway travel.
"There's a sense of equality on the trains. Everyone is using it for one reason or another. They don't have a car, maybe they can't drive, or they want to reduce their carbon footprint."

They're all crammed in together, regardless of reason or circumstances. And "unlike buses, the train drivers are cut off from passengers. So it is your fellow passengers who must aid and assist you," Compton said.

Passengers might not be willing to break up a fight or wrestle a man with a knife to the ground. But when a teenage boy had a nosebleed on her train, "everyone came to his aid, offering Kleenex, handkerchiefs and even cold bottled water."

So she doesn't mind the man peddling candy in the aisle or the "vagabond musicians, who play and sing and hope you toss them a monetary donation."

It's a rare chance in sprawling, subdivided Los Angeles for people from different walks of life to rub shoulders.

Our transit system, like our city, is unwieldy, unpredictable, incomplete and often inconvenient. Embracing public transit requires a mind-set change — a willingness to make accommodations, to mix it up, to improvise.

What if Wilson is right?  Some of the reduction in crime stems from the fact that more of us have gotten better at avoiding bad people and bad situations.  The public-space-public-facilities-public-schools-public-transit fans rightly point to the value of  "rubbing shoulders".  But denial is never useful.  Sermonizing that it's cool to just "mix it up" falls on deaf ears.  I suspect that many of Banks' critics understand very well what Wilson is talking about and have it on their list to get out of harm's way just as soon as they can afford to do so.

Are they kidding?

Daniel Hamermesh summarizes recent research on the economic benefits of being blessed with good looks, in today's NY Times ("Ugly? You May Have A Case").

I have to defer to the researchers who claim that they have found ways to identify the beautiful people who might earn a substantial economic premium from their appearance.  I always thought that there is a difficult-to-describe package of look, walk, talk, etc. ("charisma", perhaps) which turns heads.  But the research seems to rest on just a "look".

Whatever it is, we all know that life is unfair.  We can also supect that there are complex feedbacks between pleasing appearances, worldly successes, confidence gained and pleasing appearance.  A winning smile and countenance are the obvious examples.

What floored me is Hamermesh's thoughts on a "new legal frontier" whereby the homely would get the protections of labor law litigation.  The mind boggles at the sorts or experts, consultants, legal specialists and legislators who would get in on the act.  Is the back page of the Times' new Sunday Review section the satire page? 

Creative cities

The Handbook of Creative Cities (edited by David Emanuel Andersson, Ake E. Andersson and Charlotta Mellander) is about to hit the stands.  Sandy Ikeda and I worked hard on Chapter 22 ("Does Density Matter?") and fully expect that all of the contributors labored at least as much.   

Modernity once more

With the changing of the guard at Apple, there is another round of commentary on "How Steve Jobs Changed The World" (this one Andy Kessler's piece in today's WSJ).  It's another opportunity to celebrate the entrepreneurial spirit, the modern world, global capitalism and many related themes. 

At the other extreme, there are always the Luddites.  But there are also many more people who grasp half the story.  They may love their cool gadgets, but they remain lukewarm when it comes to markets and the modern world. 

On a related theme, I have mentioned many times that tribalism has been humanity's scourge, but the modern world may conquer it.  The modern world represents not only our hope of conquering disease and famine, but also the tribalism scourge.  This is why I am a big fan of inter-marriage, which is on the rise across ethnic as well as national divides.

All this is to introduce Tammie Harrison's "My Life as a Chinese Dating-Game Star" (also in today's WSJ).  American TV and pop culture have long been popular abroad.  In recent years, there have been local adaptations which are always interesting.  There must be at least a dozen versions of "Who Wants To Be A Millionaire?" in other countries.  I have seen the ones in Poland, Germany and UK.  Tammie Harrison writes about the Chinese TV dating show on which she (a U.S. student abroad) appeared.  Her story is a brief tour of the inevitable cultural stumbles that happen in these types of situations. 

But its a world where modern comunications do their magic.  Globalization means many things, including these small steps and stumbles toward world peace.

Not so sure of stagnation

Measured in terms of our material well-being, we are easily better off than ever.  Here is Steve Horwitz with some of the data.  Associated comparisons of what an hour of work buys these days vs. the past was pioneered by Cox and Alm, but elaborated since then.

In yesterday's NY Times, Tyler Cowen wrote about declining productivity in the U.S.  As in his The Great Stagnation, Cowen acknowledges the weaknesses in our productivity measures, but sticks to his case.

The "stagnation" thesis when combined with the material well-being comparisons constitute a riddle unless we go back to the idea that there is lots of cool new stuff that we have trouble measuring.

Here is one small example.  My wife and I subscribe to the Berliner Philharmoniker Digital Concert Hall.  For about $200 per year, we get access to all of their concerts, live (if we like) or recorded 24/7.  We watch and listen on our simple desktop equipment and get exquisite sound and visuals of one of the world's great orchestras and their starring guest performers.

When economists discuss substitutes, they note that the "good" and the "bad" substitutes are subjective judgements that are "in the eye of the beholder."  Live vs. digital, staying home vs. long-distance travel and hassle, $200 vs many thousands of dollars involve complex trade-offs that people can have fun arguing about.  But they will also vote with feet and wallets.

Suffice it to say that the experiences of subscribers to this package (as well as countless like it) add to the quality of our lives in significant ways that are not captured by standard productivity measures.

Class war and race war

It is sad but true that some very smart people are also very dumb.  This morning's WSJ includes an essay on Eric Hobsbawm ("How a True Believer Keeps the Faith").

Here are some choice passages: 

In a now infamous 1994 interview with journalist Michael Ignatieff, the historian was asked if the murder of "15, 20 million people might have been justified" in establishing a Marxist paradise. "Yes," Mr. Hobsbawm replied. Asked the same question the following year, he reiterated his support for the "sacrifice of millions of lives" in pursuit of a vague egalitarianism. That such comments caused surprise is itself surprising; Mr. Hobsbawm's lifelong commitment to the Party testified to his approval of the Soviet experience, whatever its crimes. It's not that he didn't know what was going on in the dank basements of the Lubyanka and on the frozen steppes of Siberia. It's that he didn't much care.

I have several times cited Timothy Snyder's Bloodlands because the author provides all of the awful details of Stalin's and Hitler's mass murders.  But many years later, Hitler is recognized for what he was while Stalin still has defenders such as Hobsbawm.  Both dictators were monsters, but mass murder for reasons of class warfare seemingly gets a pass in some quarters whereas mass murder for reasons of race war is condemned as it should be.

I get antsy when class war rhetoric invades our politics.  Discomfort over inequality gets confused with discomfort over the poverty of some.  Policies that address the latter deserve a hearing, but can we ever have politics without class warfare?  It would probably be unrecognizable.

David Henderson would rather fight envy than inequality.  The likes of Hobsbawm seals his case.

Worthwhile read

Having just finished Peter Berger's Adventures of an Accidental Sociologist, I can only ask, "where do I go to take one of his classes?"

The man is very smart, writes in a plain style, and recounts a remarkable career in which he (Forrest Gump-like?) manages to find himself involved in interesting places and/or timely policy-relevant intellectual pursuits.  It's a fascinating trip through the culture and politics of the last 50-60 years.

And the jokes!  He likes them and they are all over the book.  Here is just one from the section on occupations:  "An economist: someone who knows everything -- and nothing else."

Berger can be funny as well as profound with just a few well-chosen words.  It's a very short book.

Out of this world Keynesian

Last Sunday, I worried over negative-NPV stimulus.  No problem.  Paul Krugman believes that even a false-alarm invasion of the space aliens would get us to spend our way out of our current economic situation -- as did World War II.   I had thought that Bob Higgs had successfully debunked the latter.  I would love to see Higgs' arguments taken on by Krugman and anyone with similar views.   

Romer on start-up cities

Here is a video recording of a recent panel discussion on cities.   I found all of the panel participants worth listening to.  But when Paul Romer participates, he outdistances the others.  He talks here about his Charter Cities project which has much to recommend it, and esepcially his work in Honduras.

I liked Romer's discussion of start-ups in business.  The big established firms do miss the boat many times and this creates a role for start-up firms.  Why not start-up cities for the same reasons?

Romer's remarks come on the heels of Geoffrey West's panel presentation, featuring his finding on scale economies in cities.  What better rejoinder than to discuss the phenomenon of start-ups.  The cities we have may not be able to innovate -- for all sorts of economic and political reasons.  All the more reason for start-up cities. 

Wheeling out convenient narratives

In "Gee, Officer Krupke", (West Side Story), Stephen Sondheim had one of the characters tell the judge:

"Hey, I'm depraved on account I'm deprived."

Richard Sennett and Saskia Sassen take up a version of this theme in this NY Times op-ed.  They begin with thinning police presence, but quickly move to the "Tea Party's dream come true."  It's the austerity.  More spending and more programs is the simple story that is regularly wheeled out when large numbers of people start marauding in cities of the Western World. 

In my view, Peggy Noonan offers a more compelling story in this morning's WSJ.  First, it's not just in the UK:

What does this have to do with America? What we're seeing on the streets in Britain right now is something we may be starting to see here. It hasn't come together in a conflagration, but it is out there, and I think it's growing. And as in Britain, it doesn't have anything to do with political grievances per se.

Philadelphia right now is under curfew because of "flash mobs." Young people send out the word on social media, and suddenly dozens or hundreds of them hit a targeted store, steal everything on the shelves, and run, knowing no one will stop them or catch them. It's happened in other cities, too. Sometimes the mobs beat people up on the street and take their money. There are the beat-downs in McDonald's, where the young lose all control and the old fear to intervene. There were the fights and attacks last weekend at the Wisconsin State Fair. You've seen the YouTubes of fights on the subways. You often see links to these stories on Drudge: He headlines them "Les Miserables."

This is must reading for anyone interested in the importance of public spaces and common areas.  But it's a topic that's usually avoided in polite company.  It's so much simpler to allude to something or other being "underfunded."
Noonan concludes this way:

The normal, old response to an emerging problem such as this has been: The government has to do something. We must start a program, create an agency to address juvenile delinquency. But governments are tapped out, cutting back, trying to avoid bankruptcy. Which means we can't even take refuge in the illusion that government can solve the problem. The churches of America have always helped the young, stepping in where they can. That will continue. But they too are hard-pressed these days.


Where does that leave us? In a hard place, knowing in our guts that a lot of troubled kids are coming up, and not knowing what to do about it. The problem, at bottom, is love, something we never talk about in public policy discussions because it's too soft and can't be quantified or legislated. But little children without love and guidance are afraid. They're terrified—they have nothing solid in the world, which is a pretty scary place. So they never feel safe. As they grow, their fear becomes rage. Further on, the rage can be expressed in violence. This is especially true of boys, but it's increasingly true of girls.

What's needed can't be provided by government. When the riot begins or the flash mob arrives, the best the government can do is control the streets, enforce the law, maintain the peace.

Many of us love modernity.  But that does not mean that we stop talking about its downsides.  It does not mean that we simply reach for with an "underfunded programs" narrative.  Step one (as they say) is to fully recognize the problem.

Can a mega-project not become the next Great Planning Disaster?

F.A. Hayek famously taught us to appreciate the division of knowledge that goes with Adam Smith's division of labor.  Arnold Kling has recently elaborated and wondered how it is that "experts" can possibly be expert when discussing ever more complex systems.  Knowledge is ever more dispersed and specialized, so who can possibly be expert?  National economies are a case in point.  Experts opine and offer "solutions", but very few of them have a respectable track record.

We expect that it's best to leave things to market forces whenever possible. Anything that can be metered can be privatized and (it is thought) priced and provided much less wastefully than via politicians advised by experts.

But there are exceptions.  Among them are the "mega projects".  Market demand is hard to identify when it comes to one-of-a-kind projects. And project scale and/or uncertainty limit the possibility of attracting private capital.  The "mega" projects, then, are the ones not benefiting from market discipline and the trial-and-error learning of owners. Peter Hall has famously written about Great Planning Disasters, all of which were mega-projects?  What to do? 

Cleaning my office, I came across Charles Lave's "Playing the Rail Forecasting Game" (TR News, September-October, 1991), which I cannot find on-line.  Lave suggested that mega-project consultants and others behind those rosy performance forecasts should be required to post bond to guarantee that their projections are reasonable.  This great idea naturally comes to mind whenever I hear about how many people are "projected" to ride high-speed rail.

Closer to home, the LA Times reports "Los Angeles OKs outlines of downtown football stadium deal."  There will be fans and jobs and nothing but benefits to the local taxpayers.  Fine.  But will the various consultants place some of their fees in escrow until we can tell how accurate they were? 

Probably not a chance.  But thanks to Prof Lave (unfortunately deceased) for suggesting that there is a way to deal with the inevitable mega-projects. 

Jobs

Who says our leaders are divided?  They all get behind "jobs."  In fact, commentators routinely and helpfully suggest that the President (or anyone else in politics) should "focus on jobs".  With the downgrade of U.S. credit, this is now the universal mantra.

But there are, as we know, serious differences re how to get there.  I found this post by Jerry O'Driscoll useful:

" ... stimulus has not two but three stages. It may boost growth when added, but must slow growth when withdrawn. The third stage comes when taxes (current or future) must be paid to fund the stimulus. That stage is always negative in its effects."

The various political sides consider and weight the stages of stimulus (as well as their magnitudes) very differently.  While they all "focus on jobs", they disagree on policy and, more specifically on how many stages of stimulus there are and how they each matter.

I would like to add a fourth stage.  Pay for negative-NPV projects (high-speed rail, "green jobs" and the like) with stimulus and the productivity of the economy declines.  Is that any way to "focus on jobs"?

Exit from No Exit

David Wessel's "Prescriptions for Getting Out of the 'Liquidity Trap'" in this morning's WSJ is not cheery and gives one a No Exit kind of feeling.

Time out.  Regional economists had been writing about Growth Poles as a development strategy for developing countries for over fifty years.  This approach emphasized interregional differences in agglomeration opportunities and development potential.  The new-wine-in-old-bottles have been the "Technopoles" and, more interestingly, Paul Romer's Charter Cities idea which has also been seen as having just a developing country focus.  So far.  Read about the Shenzhen example.  Think about one in California -- or any other state.

Regional employment and growth differences within the U.S. are well known.  Here is a recent comment regarding these.  And there are also significant local policy differences.  Here is recent research by Wendell Cox that highlights these.  Less local control and light touches make a difference.

The point of all this is that, bleak as Wessel's report  and other news are, we lose by forgetting about local area policy differences and differences among local opportunities.  Not all labor and capital are equally mobile, but "stickiness" is part of almost all economics.

It's also part of an old story about what we lose when we aggregate and start thinking that it's only about the aggregates and the "big" stories.  Local difference and local policies matter.  Why not Charter Cities somewhere in the U.S.?

Fun with Burgernomics

Anyone teaching economics will have more fun with The Economists' Big Mac index (BMI) than purchasing-power-parity (PPP). The magazine's editors even evoke "Beefed-up burgernomics" in this week's 25-year celebration of the index's existence.

It would be lovely if a PPP-based judgment on what is "overvalued" or "undervalued" were sufficient to guide currency trades.  Investors hold currencies for all sorts of reasons, including current-year trades of goods and services, but much more is usually at stake. 

This week's write-up discusses the flaws of the BMI, but then introduces results of a cross-section regression on another flawed index, GDP per capita.  Observations off the estimated "line of best fit" indicate over/undervaluation currency valuation. 

Nice. But I think I'll just keep on looking for a Holy Grail indicator that will make me rich.  It must be here somewhere, I must be getting closer. :-) 

The speculators!

"Speculation" and "speculators" are convenient scapegoats and villains for anyone ignorant of market economics.  Unfortunately, that's a large group. 

Adding to the confusion, teachers of introductory economics (when they pay attention to it) usually single out speculation instead of including it in the standard discussion of supply and demand.  All supplies and all demands are in light of market participants' understanding of the future.  This means that there are large numbers of current prices and futures prices that are inextricably linked.

I liked this piece in today's WSJ.  "Traders Eye Oil-Tanker Play ... Spread Between Futures Contracts Makes Stashing Crude Offshore Attractive"

It's a nice story for classroom use because it highlights the (natural) complexity of speculation.  Leave oil in the ground or take it out?  Then what?  The choices are huge.  Keep it in the tanker or not?  For how long?  Where?

It's all speculation and it's a natural and normal part of business.  In fact, being constantly challenged on how we deal with an uncertain future is a normal part of everything. 

He who lives by the federal grant ...

Dean Stansel sent me his "Why Some Cities are Growing and Others Shrinking".  He finds that low tax rates go with better economic performance.

One of his tables lists the "Ten Highest Tax Large Metro Areas."  Stansel's measure is "State and Local Taxes as a Percentage of Personal Income, 1977-2002 Average."  The top seven of his top ten are all in the same state.  Can you guess?  It's New York.

In 2007 (the latest Census of Governments year), the State received almost 10 percent of all federal transfers, but accounted for just over 6 percent of the national population.

Keith Hennessey speculates how the Treasury will pay its bills if/when you-know-what happens.  He suggests that payments to the states will be first to stop.  Fifty governors will be pressed into action. 

He who lives by the federal grant ...

Hollywood

"Hollywood comeback continues" is only one of a thirty-year-plus series of almost identical popular press reports on all of the wonderful things that the Los Angeles Community Redevelopment Agency has brought to the area.  The LA Times loves this stuff and there are just enough red carpet events and tourists milling around Graumann's theatre to obscure the reality.  But Hollywood is still mostly a nasty place that attracts large numbers of hookers, hustlers, druggies, runaways, pimps and other predators that usually follow. 

"Budget crises" have a silver lining, including the possibility that California may lose some of the redevelopment scam.  The Insitute for Justice elaborates.

I have always cringed at the misleading (polite term) boosterism that surrounds talk of the Hollywood "comeback" and this is why I looked at the Reason.tv interview with Nancy Rommelman as she discussed her new novel The Bad Mother.

It is one of those short, spare and honest stories that follows the misadventures of a pathetic bunch of Hollywood street people.  None of it is pretty.  But it quietly explodes the official "Hollywood comeback" fantasies that are a staple of LA media.  It's very short and I hope it gets a wide reading.   

Nothing but trade-offs

Two of my all-time favorite pieces from the New Yorker are (1) the famous cover depicting the mock "New Yorker's view map of the world"; and (2) the more recent cartoon of two cavemen sittting around a fire with one saying to the other: "Something's just not right -- our air is clean, our water is pure, we all get plenty of exercise, everything we eat is organic and free-range, and yet nobody lives past thirty."  This is also a cute joke and I use it all the time in classes and other presentations.

But I suspect that Timothy Egan's "What We Can Learn From Carmageddon" in this morning's NY Times is no joke. We closed a segment of I-405 for a part of the weekend and there was more biking, more walking, more transit use and more good old-fashioned stay-at-home fun.  Here is the punch line:

No, the big lessons of Carmageddon are not about transportation. They are about something else, something less easily quantified. They are about the small salves in life that make a day easier, or even memorable. When millions of Angelenos decided to hold a block party, or go to the park, or ride a bike, or play soccer, or spend half a day at the farmers market, or take advantage of free admission at some museums, they found a city far removed from that awful commuter stress index.

Most of us do not want to move back in the direction of the cavemen existnce and most of us understand that we live lives involving complex trade-offs. Permanent freeway closures would make that very clear very quickly

Auto-oriented

Here is a report by Brookings' Alan Berube on the 2010 census and what these data say about U.S. metropolitan areas.  He documents "demographic convergence."

This make sense.  Income, ethnic and class distinctions aren't what they used to be and they are not as easily plotted on city maps as, say, fifty years ago.

There are employment centers and sub-centers all over the place.  Many of the traditional downtowns offer residential variety.  Commuting is more complex than ever.  San Francisco is a dramatic example.  Its former "bedroom" communities along the Bay Area's penninsula are now the places where many who now live in SF go to work.

The 2010 census data show once again that it's an auto-oriented world.  Auto-oriented is a much better descriptor than "sprawling."  It describes most development in most U.S. metropolitan areas.  "Central city" vs. "suburb" are dusty labels still used in academic literature, but they are fading as useful descriptors for most others. 

These hard to find budget cuts

For years, it has been planning dogma that carpool lanes will induce carpooling and thereby reduce road congestion.  Trouble is that, just like public transit, the renaissance never came.  But the beat went on and on and on. Kevin Drum wrote about the billion-dollar-405-carpool lane-project and the hyped Carmageddon last week, just before the big nothing, and also voiced some concern about the whole idea.  Back in January, the NY Times had this piece about the decline in carpooling generally.

The recently released 2009 NHTS (first table listed) shows that worktrip vehicle occupancy is 1.13 for cars and 1.15 for all private vehicles. Table 16 of this report shows that these numbers had not budged since 1990 (also NHTS surveys).  Adding all those carpool lanes did nothing for carpooling.

But it's "green".  So seemingly adult men and women keep the myth (and the "investing") going.  Bob Nelson says its religion.  Bruce Yandle has a similar idea.

It's all pretty amazing, especially in the context of all the hand wringing in Washington and other capitals over figuring out where we can possibly cut the spending.

Progress in urban economics

A recurrent theme of this blog has been to question the popular idea of "urban sprawl".  No one is quite sure what it means and (far worse) it is used to spawn countless (and hopeless) statist policies (with feel-good names like "liveability" and "smart growth", etc.).

Many of us have documented the remarkable stability of commuting times.  Most metro areas grow, but they find ways to accommodate the growth.  Otherwise, they would not grow; capital and labor would go elsewhere.  Traffic "doomsday" is (as Steve Polzin reminds us) forever impending.  Land markets (imperfect though they are) must be doing something right.

Alex Anas has been doing the heavy lifting on these topics for some years via his work on computable general equilibrium models of cities.  Here he applies his model to explain commuting trends.  He finds that, "From the microeconomics of the model, we see how the location of jobs influences where residences are located and how, in turn, the location of residences influences where jobs locate" (p. 17).

If it were not so, we would indeed have a "sprawl" problem.

Another big nothing

Here is LA's Mayor Villaraigosa assuring us that we have a good chance of surviving Carmaggedon.  In fact, he and his team are on the traffic and transportation case with all sorts of extra rail and bike lanes coming to a neighborhood near you.  And here is Reason's Tim Cavanaugh reporting that the whole thing is a big nothing.  There is no Carmageddon.

Doomsday narratives are attractive to politicians and other statists because it is then a hop-skip-and-jump to their agenda to "help" people -- including their well connected donors and constitutents.  And were they to grasp the simple fact that most people are much smarter than lemmings who march over the cliff, they might have chosen another line of work.

In fact, most people have pretty good sensors and are keen to employ them in continuous trial-and-error learning.  Here is Tim Harford spelling it out beautifully.  In fact, Harford points out that trial-and-error learning is the perfect antidote to the God complex.  God-complex people have no use for a trial-and-error world.  What would they do for a living?

Haunting movie

What makes a film great?  My simple answer involves the extent to which it haunts me long after I have seen it.  Perhaps this is why I do not watch them a second time. I have just seen Of Gods and Men and it is going on my list of great ones.  The link takes you to reviews (mostly very positive) and more description of what is involved. 

It is based on  a true story of a small group of French Trappist monks living and working by a small Algerian village during the 1990s civil war.  One of the monks is the locals' only source of basic medical care.  The monks are caught between jihadist terrorists, a corrupt Algerian government (and army), their loyalties to the villagers who are also terrorized and the monks' understanding of their own vows.  Several Europeans in the area were just murdered.  Should the monks stay or go?

First, this is not about a "clash of civilizations."  The Algerian side has many expressions and even the small group of monks cannot easily converge to a single view or understanding.  Good acting, music, photography and all that.  But what is best about the film is the depiction of the agonies of conscience and faith experienced by each of the conflicted monks.  The viewer grasps and experinces these without a the benefit of lot of dialog.

We see and read news clippings about tragedy and devastation in Afganistan, Iraq, Lybia, Pakistan and many other places in that region on a daily basis.  These conflicts are a big part of our times and this film does take us to a corner of that world.

Three ways to better public policy

Which is worse, U.S. immigration policy or the way we finance our highway system?  Both are addressed via sensible op-eds in today's LA Times.

Peter Schuck writes about immigration policy and suggests rational reforms.  In light of the tremendous value of a green card to the U.S., auction them.  Let employers identify talent whatever and wherever it may be and allow them (or anyone, any group) to bid.  If we must have an immigration policy, then base it on market mechanisms.

Lisa Schweitzer (my colleague at USC) writes about privatizing infrastructure.  This addresses several problems, including the sorry state of much of our highways and the politicized administration and provision of most infrastructure.  Schweitzer notes that letting facilities continue to run down simply pushes down their market value.

Third, the WSJ editorialized the other day on their backing of soccer star Abby Wambach ("She's a header above anyone else") for U.S. President.

I am reading Morgenson-Rosner on Reckless Endangerment and eager for relief, including policies and people that I can get behind.

Those 1930s suburbs

Wendell Cox tipped me to Population: The Growth of Metrpolitan Districts in the United States, 1900-1940.  In those days, the discussion cited "metropolitan districts," including and their "satellite areas" which seemingly refers to the suburbs.

On page 8, the report summarizes 1930-1940 changes.  "Thus for the first time the major increase in numbers in our metropolitan districts was found in the satellite areas and the slower growth of metropolitan districts as a whole, which might have been expected to retard decentralization, had just the opposite effect."

In 2008, Wendell Cox and Chris Redfearn and I responded to a QJE paper by Nate Baum-Snow in this issue of EconJournalWatch.  Baum-Snow had sought to demonstrate that U.S. suburbanization was very much the product of the post-1956 Interstate Highway System.  That is the view of many who see suburbanization as being an artifact of policy.  We argued that policies followed preferences, rather than the other way around.

The right stuff

With the last NASA Space Shuttle launch, just fifty years after Alan Shepard's flight, all of the old debates over manned vs unmanned space flight come up all over again.  Some of that is captured in Tom Wolfe's The Right Stuff (the book and the movie).  One of the things that stand out in my memory of the book was the astronauts having to fight the engineers for the inclusion of a window in the cockpit.  These guys were pilots and they wanted windows.  The pilots won and they got windows, but deep space exploration, even if it does include humans on board will be ever less than traditional piloting.  Differences of degree eventually grow into differences in kind.

Discussions like this will surface as soon as driverless cars are perfected.  Will Americans want driverless cars?  I don't think so. Autos are one part conveyance and many parts piloting. 

The early astronauts were right.  Take the piloting out of spacecraft and you may as well stay home.  I realize that many air force pilots are becoming drone operators, but I expect they see this as a step down. 

Most Americans (and others) spend a lot of time in their cars not stuck in traffic.  Just look at how much they spend on their cars and all of the fru-fru they pack into them.  It's as close as most will ever get to being pilots and fantasizing about the right stuff.

It's time

To all those who have been saying that congestion pricing on freeways is "an idea whose time has come", it is here.  Specifically, the LA Times reported that it is at last coming to some of LA's freeways.  Here is that story.

There is a cliche that markets are regarded most seriously in the U.S.  That is not necessarily so.  Here is Bjorn Harsman and John Quigley's summary of how congestion pricing came to Sweden, including an analysis of the politics involved.  While they do have politics everywhere,  it appears that the Swedes are a bit more "hip" than the Americans when it comes to being imaginative in their public policy.


UPDATE

This reason.tv video vividly shows that capitalism, where it exists in the U.S., is under threat from shameless crony capitalism.

UPDATE2

Here is good capitalism.  H/T Dan Klein

CAFE

I have to say that I was (almost) at a loss for words when I saw that the Obama Administration chose this time to almost double the never-a-good-idea CAFE standards.  Mandate new product and (somehow) that's what people will buy.  Not a huge problem, of course, in a world of auto industry bail-outs.  But the WSJ's Holman Jenkins has plenty of words.

Praying for the insanity to blow over is the auto industry's strategy for dealing with the Obama administration latest urge to double down on fuel economy mandates. Auto makers, wishing to appear deferential to the government that bailed them out, only plead that any new targets be ratcheted up slowly so future administrations will have plenty of chance to repeal the rules before they take effect. ...

If ever a president seems to have learned nothing from the times he's living in, Barack Obama is it. Economies around the world are foundering from an accumulation of policy excesses produced by the sort of straight-line, robotic thinking he's applying to so-called corporate average fuel economy rules.

If more money for less work is popular, thought Greece, twice as much money for half as much work will be even more popular.

If 64% of Americans owning their own homes is a good thing, thought Bill Clinton, 67% is better. If 67% is good, thought George Bush, 69% is better.

If forcing auto makers to build cars that deliver an average of 35.5 mpg is good, believes Mr. Obama, forcing them to deliver 56.2 is even better.

Engineering is absent. Any appreciation of the law of diminishing returns is absent. Sean McAlinden of the authoritative Center for Automotive Research recently pointed out that many of the materials needed for ultra-high-mileage vehicles would outstrip current world production several times over.

Asking consumers, meanwhile, to bear the cost of fuel-economy improvement they don't value will cause them to keep their old cars on the road longer. And in pursuit of what benefits? If we junked every gasoline-powered car and truck in America, it would have no appreciable impact on global carbon dioxide. If, as Mr. Obama intends, we switch to electric cars, those cars would be powered by coal, so the alleged atmospheric dividend will be doubly elusive.

The idea that we would save money by not buying oil, even if the alternative energy is more expensive, is the protectionist fallacy in modern cloak. The idea that we'd save money on wars and military adventures is the kind of Hollywood oversimplification that history can be counted on promptly to gut.

If his goals were rational and important, Mr. Obama would pursue them rationally—asking Americans for permission to tax gasoline to incentivize purchase of high mileage cars. He does not. Early in his administration, he gave a speech delineating the goal of one million electric cars on the road by 2015. He liked the round number. He liked the Kennedyesque ring. Now his bureaucrats are pursuing that goal as mindlessly as his predecessors pursued an increase in the rate of homeowning, because they liked the sound of it. ...

In the end, only a psychiatrist might explain this urge to pile up new policy excesses, destined someday to blow up in our faces, in an age when history clearly calls us to confront past excesses. But Mr. Obama is not deep. His presidency has been a presidency of shibboleths, of endless boasts that he's delivering on the bien-pensant slogans that others just mouth. ...

This is all hard to grasp.  This stuff appeals to anyone so in love with "green" that they stop thinking.  Carbon taxes would be the vastly superior policy. 

Is the Administration so anxious about a tax approach that they embrace CAFE nuttiness instead?  Do they fear that the tax would have to be susbtantial -- and/or ratcheted up for many years?  Are they so eager to pander to the command-and-control crowd that they throw common sense to the winds?  Are they simply true believers in the righteousness of their cause?  Are they enthralled by regulatory visions (and their own capacities as regulators)? 

I suspect that it is all of the above.  It suggests that sending the Best and the Brightest to Washington is perilous.  There are many dunderheads on the right, but will we have to choose between the arrogant ignorant and the just plain ignorant?

Local governance debate

Bob Nelson and Evan McKenzie debate private comunities here.  Nelson considers the upside and McKenzie takes the other side.  They actually compare two types of governance (conventional vs. private) and find examples of government failure in each case.  That should not be surprising. 

Conventional zoning rules are actually rights vs protections trade-offs.  These trade-offs are also available via developer sponsored (market vetted) association rules.  The possibility of government failure comes with any non-market preference aggregation procedure.  But in which case is it a bigger problem?

What I find most interesting is that both debaters consider reforms that might improve private governance.  They do not suggest ways to improve conventional government.  But why has there been the rise of associations that both document? 

Nelson makes the point the suburban cities were first formed to block the annexation of newly developed land by the old central city.  That role has gone to private associations in many states.   

McKenzie makes the point that most new private association resident-owners do not even bother to read the association's rules.  Nelson wants to administer a quiz whereby new owners must demonstrate that they have read the rules.  Both of the experts suggest other reforms -- of the private governance approach.

Better chicken

Chidem Kurdas describes the game of budget-chicken now being played in Washington and is not optimistic; the Democrats' "salami strategy" is winning.  "The money has been spent, we have to find a way to pay for it, etc."

Reagan's Starve the Beast did not work (the beast kept growing) so now we will get Feed the Beast.  What's left?

The Congressional Budget Office describes their mandate this way:

CBO's mandate is to provide the Congress with:


Objective, nonpartisan, and timely analyses to aid in economic and budgetary decisions on the wide array of programs covered by the federal budget and

The information and estimates required for the Congressional budget process.

That's much too vague.  I would prefer that all programs (taxation and expenditure) were tagged along two dimensions:  (i) what are the long-term growth implications, pro-growth or not? and (ii) what are the redistribution effects, neutral, regressive or progressive?

Of the six possible tags, my own preference is pro-growth and redistribution neutral, although I could see the argument for pro-growth and progressive.  The analysis is tricky, but so is everything CBO already does.  Honest analysis will require honest caveats, but this is already part of their mode.

If we have reached a point were large segments of the electorate have accepted that "kicking the can down the road" is no longer acceptable, then the current game will be repeated, but the analysis CBO already publishes does not do enough to inform the public or the players of the chicken game. 

So, for starters, let's have the most useful analysis and then let the game begin.

Gays, creatives and densities

I found this at Marginal Revolution.  It includes a list of metro areas with the highest concentrations of gay coupples.  It also includes the following comment by Richard Florida:

The densest concentrations of such families are not necessarily in the places where you'd expect to find them. Especially surprising are the metros that don't make the cut -- like San Francisco and New York.

The mantra had been that (1) Gays tend to be prominent among the Creative Class; (2) Creative Class people go to the densest places: and (3) It is sufficient to estimate the densities of where the gays and/or creatives live or work by considering the metro area average density.  At least #2 and #3 are put in doubt by Florida's post.

Gay marriage supporters argued that gays are just like everyone else.  Why not leave it at that?  Why double back and buy into some stereoptype of the extra cool and hip.  And why take the next leap that the extra cool are the extraordinarily creative.  I imagine that some are and some are not. 
   
Many local governments clamor for a simple and magic formula for revitalization and prosperity.  Florida's approach caters to that.  But we know that knowledge is dispersed and highly specialized and we can guess that creativity is too.  It is much more dispersed than Florida's simple association with gayness suggests.

Some transportation ironies

Here is an LA Times report on parking problems at UCLA.  This is funny (or sad) for several reasons.  First, these were the controversies many (many) years ago when I was there.  Second, same old problem because no one is ready to use market mechanisms.  Third, the report cites UCLA parking expert Prof Michael Dukakis, but the same faculty has a certain Donald Shoup on its team -- who happens to write eloquently about all of the reasons to price parking.  Pricing is not even mentioned in the article.  So nothing changes.  If you do not price ...

Market fundamentals are also valid in Europe.  A recent NY Times includes "Across Europe, Irking Drivers is Urban Policy."  At least this report mentions "hefty congestion charges" in London and Stockholm.  Absent these, there are the many ways to irk drivers.  Ban cars, narrow some roads, cap the number of parking spaces, etc.

Back home, the roads in the Los Angeles area are abysmal.  And this too is the policy.  Highway funds have been shifted to public transit for years, but there has been no shift towards greater transit use.  The only consequence is a miserable ride. 

In some very poor countries, a miserable ride is the consequence of poverty.  Closer to home, it is the consequence of carefully considered policy.

The future of cities?

Here is James Howard Kunstler writing about the future of cities. As readers of this blog can easily see, there is nothing here that I can agree with.  Kunstler sees doomsday and substantial contraction in our future.  We will be retreating to dense small cities in the face of global warming, energy shortages, etc.  You've heard it all before, but here are some of Kunstler's expectations (H/T Planetizen)

But I think the general theme going forward, certainly in the U.S., will be the comprehensive contraction of just about everything.
I see our cities getting smaller and denser, with fewer people. Skyscrapers will be obsolete, travel greatly reduced, and the rural edge more distinct. The energy inputs to our economies will decrease a lot, and probably in ways that prove destabilizing. The first manifestations of climate change will be food shortages, one of the reasons I think super slum cities will be short-lived. The growth of urban megaslums in the past one hundred years has been predicated on turning oil into food, and the failure of that equation is aggravating weather-related crop failures around the world. Food shortages will quickly bend the arc of world population growth downward from the poorer margins and inward to the “developed” center—with stark implications for politics and even civil order. The crisis of money is already hampering the operation of cities and will soon critically impede the repair of water systems, paved streets, electric service, and other vital infrastructure. We are heading into a major reset of daily life, a phase of history I call The Long Emergency. Tomorrow will be a lot more like a distant yesteryear in terms of reduced comforts, commerce, and the scale of things.

In sharp contrast, here is a recent report re natural gas finds and "fracking" which has on more than one occasion been referred to as a game-changer.  There have been quite a few positive game-changers in the past and I expect their arrival to accelerate.

So which way?  We know that the resource doomsayers have always been wrong.  But we also know why.  They ignored the ideas of Adam Smith, Joseph Schumpeter, Julian Simon, Paul Romer and many others.  The facts of our improved material well being and the theories to explain it match up very well.  How can anyone ignore all this?

Las Vegas

Auto-oriented development meets the democratization of luxury.  You can call it Las Vegas which simply represents the extreme version.  Both phenomena represent success stories that are dismissed and/or disparaged by the smart set.  And both phenomena are also symbiotic and irrepressible.

The experts, instead look for "smart growth" which challenges both phenomena and criticizes them as "wasteful".  Unable to admit that the critics are deeply offended by the revealed preferences of a vast segment of the middle class, they stoop to rhetoric.  But finding the sweet spot price-and-quality combinations that work in the market place is anything but wasteful.  It is the opposite.  Calling it "waste" is a cheap shot reach for rhetorical advantage.  Its use really signals analytic ineptness.

Peasants

Europeans used to refer to Americans as "peasants with money."  The whole thing speaks volumes.  But the fact that it has become easier for large numbers of people to become wealthy than to become refined also has an upside. 

It is similarly without irony that many critics lament that we have "too many choices."  And who decides how many toothpastes there should be?

It is perhaps inevitable that many Americans have accumulated assets faster than they have learned to manage them.  The currect economic troubles have provided ammunition for the critics.  And that story plays into the hands of those who are reluctant to let individuals manage their own choice of foods, health plans, retirement plans, etc.  Yes, some of us (many of us?) make mistakes, but is the polticization of our lives and wealth a good alternative? 

A third possibility is more and better financial education.  But a recent paper by Lauren E. Willis (linked here), "The Financial Education Fallacy" argues that it's not so simple. The student audience is in a state of "abysmal" financial ignorance.  Financial instruments are complex and constantly changing.  Rules-of-thumb have limited usefulness; personal financial differences are too complex.  Audience-tailored instruction would be very expensive.  And Willis' list goes on and on. 

What to do?  The author leans to better financial regulation.  But that poses as may challenges as the "more and better education" idea.  She even writes, "A society that is unwilling to pay for a K-12 education system that produces a populace that can perform basic math is not goint to pay for one that can do this and more."  That's a bad place to end.  Our education system does not underperform because it is "underfunded." 

I am always amazed by seemingly sophisticated writers who leave no room at all for standard public choice analysis and who fall back on the "more money" fix.

Given the choices, better to have peasants with money than the other kind.

Sprawl is good

Here is Nicholas Lemann talking about his New Yorker review of recent books by Richard Florida, Ed Glaeser and Elijah Anderson and John Kasarda.  The audio is not as interesting as the print review.  (Lemann likes to talk about his old days in NYC and the where is various old girlfriends lived.)

To his credit, Lemann steers the interviewer from cities to a more useful conversation of the much larger metropolitan areas.  He describes them this way: "When you fly in at night, it's where the lights start."  I thought that I had coined this one, but it is more likely that many others had the same idea.  But more to the point, Lemann is mainly right (in my view) that there is plenty to think about outside of Manhattan and similar enclaves.

Look at it this way.  There is remarkable stability of the size distribution of U.S. urbanized areas at the top.   These (not the metropolitan areas, which are based on county boundaries) are the ones made up of functional boundaries that are redone every ten years and where the lights really do start as you approach at night.

At demographia, there are population data for these for each of the census years, 1950-2000.  So there are five rank changes possible for each area.  But for the top five urbanized areas, there are only three rank changes over the fifty years (out of a 25 possible); for the next five there are 19 (out of 25 possible).  The biggest places find ways to get bigger.  They build on their agglomeration advantages by growing outward -- and without losing their competitiveness via "sprawling." That's the big news.  Can it be that sprawl is good?

Embarrassment of riches

As both IBM and the Carnegie Foundation turn 100 at about the same time, The Economist has launched this conversation starter:  "Has the multinational business or universal philanthropy done more for society?"   The story cites a recent Robert Barro WSJ op-ed wherein the economics professor corrected Bill Gates who, in explaining his new life in philanthropy, had seemingly not fully appreciated how much his business enterprise had improved the world.  Barro thought that more good might come from Gates not switching from entrepreneur to philanthropist.

The magazine piece wanders all over the place and ends this way:  "The achievements of IBM and the Carnegie Corporation are impossible to quantify mathematically. What seems clear, though, is that as it enters its second century, IBM can plausibly hope that its best years lie ahead. Alas, that seems most unlikely for Carnegie."

But a couple of points are missing.  First, fortunes must first be amassed before they can be given away.  While I would like less poverty in the world, I have no problem with inequality.  The possibility of great riches makes it possible to have the Carnegies as well as the Gates's.  Second, if anyone wants to make a difference in more than one way (as Bill Gates seemingly does), that's his choice and if the prospect animated him to have become the creative entrepreneur in the first place, then so much the bettter.

So it's a conversation starter, but there is simply good news.

Every thing's up to date in Washington city

Reports on dumbing down as revealed by quizzes of the population (or students) are usually horribly depressing.  This one is about abysmal results to a very basic history quiz.

So was the President pandering (he is a politician) or is it even worse when he talked like a Luddite. Many of us scoff at modern-day Luddites.  And President Obama is widely regarded as better educated than many of his peers and predecessors.  But look at this item in today's WSJ:

Blogger Jim Treacher on President Obama's understanding of economics.
Jim Treacher writing at DailyCaller.com, June 15:

Obama thinks ATMs cause unemployment—No, really, he does! That's not a joke headline. He said it out loud in front of the whole world and everything. On yesterday's "Today Show," Obama told Ann Curry his brilliant theory about why the economy hasn't been doing so well since he became president: "There are some structural issues with our economy where a lot of businesses have learned to become much more efficient with a lot fewer workers. You see it when you go to a bank and you use an ATM, you don't go to a bank teller, or you go to the airport and you're using a kiosk instead of checking in at the gate."

That's right, the Smartest President Ever just said innovation is a job-killer. His next step, presumably, will be to demonize the Republicans for making such deep cuts to the Department of Buggy Whips. Hey, why is the President of the United States blaming machines for unemployment . . . on TELEVISION? Doesn't he care about all those out-of-work town criers?"

The right thing, but late

In a better world, we would try common sense first.  Here Mark Perry cites up-and-running private inter-city bus service which might be a better deal than much of the proposed high-speed rail.

Right on time, the Los Angeles planners are proposing express bus service along Wilshire Boulevard.  Actually, they are way late.  Many of us began fretting over subway service along Wilshire many years ago.  But that project went forward and has been a huge waste.  Ridership is one-half of what was "projected" and cost "over-runs" mean that $7-billion have been spent -- and counting.

But costs and benefits aside, there is now a 99-cent store at Wilshire and Fairfax, once the top of LA's Miracle Mile.  This was not how it was supposed to work out.  Lavish transit was supposed to create lavish transit-oriented development and all the cool urban stuff that planners dream about.

This post began with an appreciation of express bus better late than never.  Winston Churchill supposedly remarked that 'You can always count on Americans to do the right thing – after they’ve tried everything else!'  Perhaps he was being kind.

Life beyond Manhattan

Today's NY Times includes "Suburban Hip Is Where It's At ... UBS might like Manhattan. But for all the talk of an urban renaissance, most of the growth is happening beyond the city." 

Yup.  Every ten years we get pretty good data and a reality check.  The story cites Joel Kotkin noting that for the greater-than-one-million-population metros, less than ten percent of 2000-2010 growth had been in the traditional core cities.  The renaissance/revival/regeneration fantasies will have to be placed on hold one more time.

The International Council of Shopping Centers reports that there are more than 100,000 “shopping centers” (including many “Lifestyle Centers”) which account for about 50 percent of all U.S. retail gross leasable area.  Whereas some of the centers are Edge Cities which include many of the functions once associated with downtowns, many others are developed at low densities that are seemingly under the radar (as in Edgeless Cities).  So, rather, than downtown and the ‘burbs, it is an extremely complex arrangement. The many small “centers” are spatially distributed so that the average shopping trip by central city vs. suburban residents in the U.S. were of similar duration, near 15 minutes, no matter where people live (2009 NHTS data).

Yes, there is considerable life outside Manhattan and, yes, shoppers and sellers find ways to co-locate so that they can do business with each other.

Business and state

Here is James Surowiecki's take of Elizabeth Warren's charge as head of the new Consumer Financial Protection Bureau.  But here is Viginia Postrel's account of how policy makers from the same gene pool actually made the rules governing which light bulbs ought to be produced and consumed in the U.S.

Postrel sees waste and crony capitalism verging on corruption.  Surowiecki trusts that Warren and her Bureau will work to the advantage of consumers as well as honest bankers. 

Having just been through a period when it was Washington policy to push debt at people, and having seen where this led, I cannot muster optimism about a new Bureau's ability to stand up to the inevitable Wall Street-Washington double-teaming that will occur. That's the coalition that has brought us to where we are and I do not see it receding.

One would think that Progressive Era thinking was plausible just over 100 years ago, but that we are somewhat less naive these days.  We do a pretty good job separating church and state.  I doubt that we will ever separate business and state.  I understand that Washington hosts ever more lobbyists, no matter which party happens to be in control. 

Big problem and big idea

Making poor places less poor is one of the biggest and toughest challenges.  Many smart people have been grappling with the problem for many years.  It is interesting that most of these discussions have said little about the role of cities.  Development economists recognize the importance of organization, but usually do not go the next step and recognize spatial organization.  Once you think about it, it is hard to imagine a plausible model of development that is not also an urban model.  Cities are where ideas incubate.

How do we get new cities that might be auspicious in making poor places less poor?  Paul Romer has recognized that it is all about instiutions and cities.  This is how he has promoted his Charter Cities idea.  Here is a TED talk in which he makes his case.

Pro-family?

Here is a report from The Economist on the "Perils of Commuting."  It seems that long commutes increase the chances of divorce. 

And here is a report that compares auto commuting times with transit commuting times from the recent NHTS.  According to these data the average U.S. auto commute in 2009 was just under 23 minutes while the average transit commute was about 53 minutes.

Lavish public subsidies have not succeeded in "getting people out of their cars" but persist like all such policies because, once in place, they have constituencies that politicins find almost impossible to neglect.

But who ever thought of transit policy debated as a "social issue?"

Gains from trade

I am not the first to suggest that specialization and the gains from trade constitute the most important insight of economics.  And it is beyond depressing that politicians of all stripes and their acolytes either miss the point or purposefully misrepresent it.

I am reading Adam Hochschild's To End All Wars: A Story of Loyalty and Rebellion, 1914-1918 which offers many more grounds for depression.  Most readers already know about the spectacular losses, blunders, cruelties and tragedies of the Great War, but Hochschild's narrative is probably a must-read even to those who have been over this ground before.

Here is the author's report of British-German trade at the height of the slaughter:

More than any previous war, this one depended on huge quantities of industrial products and the raw materials to make them ... Among the more important goods was precision optical equipment ... The British military however was running disastrously short of binoculars. An appeal to the public brought in some 2,000 pairs (including 4 each from the King and Queen), but not the tens of thousands needed ... And so, in mid-1915, just as preparations were getting under way for the big attack at Loos [France], British authorities turned to the world's leading manufacturer of precision optics: Germany ... From London, an agent of the Ministry of Munitions was quietly dispatched to neutral Switzerland to propose a deal. The answer from Germany was prompt and positive, and the outlines of an agreement were sketched out. The German War Office would immediately supply 8,000 to 10,000 each of two types of binoculars, one for infantry and one for artillery officers ... And what did Germany want in return for this astonishing bounty of tools that would better aim British rifles and howitzers at German troops? One treasured commodity, vital for everything from telephone wires to factory machinery to the tires and fan belts of motor vehicles, a commodity unnavailable to Germany because of a tight blockade imposed by the Royal Navy, but abundant in the Allies' African and Asian colonies: rubber ... The rubber, it was agreed, would be delivered to Germany at the Swiss border. During August 1915, the first month of the top-secret devil's bargain, the Germans delivered to the British even more than first agreed to: some 32,000 pairs of binoculars, 20,000 of them the higher-quality types for officers ...

The gains from trade are, of course, a no-brainer.  But listen to all the mercantilists at all levels of government, starting of course in the White House.  In fact, the foolishness is compounded.  We want to make sure that those solar panels and windmills are Made in America. 

Great question

In this week's New Yorker, Louis Menand writes about U.S. higher education and review's In the Basement of the Ivory Tower: Confessions of an Accidental Academic, by Prof X (when will X reveal himself?).

Menand tries to make sense of mass-higher education which comes close to sounding like an oxymoron.  Before I read the essay, what did I "know"?  Many high schools graduate students who are terribly underprepared.  Many of these people go on to college because they can.  They are affluent enough to postpone entry into the workforce.  And there is plenty of room for them and often some financial aid (affluence).  In a better world, all of our students would be better motivated and better prepared.

But Menand goes deeper.  "If there is a decline in motivation, it may mean an exceptional phase in the history of American higher education is coming to an end.  That phase began after the Second World War and lasted fifty years.  Large new populations kept entering the system. First there were the veterans who attended on the G.I. Bill ... Then came the great expansion of the nineteen-sixties, when the baby boomers entered and enrollments doubled. Then came co-education ... Finally, in the nineteen-eighties, there was a period of remarkable racial and ethnic diversification.  These students did not regard college as a finishing school or a ticket punch ...  College was a gate through which once only the favored could pass.  Suddenly the door was wide open: to vets, to children of Depression-era parents ... to women ... to nonwhites ... to people who came to the U.S. precisely so that their children could go to college.  For these groups, college was central to the experience of making it.  ... They were finally getting a bite at the apple ..." 

Menand then harks back to a question a student asked in class: "Why did we have to buy this book?"  In light of his discussion, he concludes that it's a great question and he hopes we keep getting students who ask it.  I may be wrong about the oxymoron.

Walkability

David Levinson points us to this report on pedestrian traffic mishaps.  The report is timely.  There are 47,000 pedestrian deaths in the U.S. each year.  This comparison caught my eye:

"Canada and Australia, both developed countries with a similar infrastructure to the U.S., have pedestrian fatality rates of 1.1 and 0.9 per 100,000, respectively, compared to 1.6 for the U.S."


I walk every day (and I live in LA and I live in a seemingly pedestrian-friendly neighborhood) and it's pretty clear that many motorists have no interest in ceding righ-of-way to pedestrians. It's also apparent that law enforcement when it comes to auto traffic in my neighborhood is spotty and pretty lax.

Oddly, the report says nothing about this, preferring design "solutions".  There are many "good ideas", although there is not a lot of attention to trade-offs.  Taking lanes away from traffic and making streets more bike- and people-friendly is nice, but never free.  There is also the standard objection that summarizing pedestrian-safety and pedestrian-friendliness by metro area is almost useless.  Variations within metro areas are vast when it comes to these conditions. I was unable to eyeball any correlation between the report's "Pedestrian danger index" and "Percent of traffic deaths that were pdestrian."  Such are the problems of indices applied to very large and varied places.

Nevertheless, the report is useful.  Walking is a good thing and "walkable" enclaves do exist that can be made much safer by even moderate enforcement of laws that are already on the books.  More civility would also be nice.

UPDATE

Alex Tabarrok kindly sent me the correction that the 47,000 deaths refers to a whole decade.  That does change things.  My error and thanks, Alex!