Thinner lab rats?

The New Yorker's James Surowiecki ("Downsizing Supersize") looks to behavioral economics to find something kind to say about Mayor Bloomberg's proposed soda ban.

 ... perhaps the most cunning aspect of Bloomberg’s proposed ban is that it would function as a kind of stealth tax on consumption, while leaving average-sized sodas untouched. Currently, on a per-ounce basis, large drinks are much cheaper than smaller ones—which encourages people to supersize. The soda ban should shift this. Two sixteen-ounce servings are bound to be more expensive than one thirty-two-ounce serving, which creates another disincentive to drink more.

If all this sounds as if New York’s soda consumers were about to become the subjects of an elaborate social-science experiment designed to reshape their behavior and desires, well, that’s kind of true. But then we’ve been the subject of just such an experiment, run by beverage and fast-food companies, for the past forty years. If Bloomberg has his way, we may start feeling like we’re white rats in a maze, but at least there’s a good chance we’ll be thinner rats.

But who wants to be the rat in any mayor's lab?  That's exactly the "nudge" problem.  It gives politicians another lever.  I do not like "soft paternalism" -- or any other kind.

I know there is the perennial externalities argument: fewer obese folks, lower health costs and benefits all around.  But there has to be a cost-benefit analysis to back this up.

How much effect would the ban really have?  How big would the dollar savings really be?  In light of the easy access to cheap sugar highs in our world, to ask the question is to answer it.

Unsustainable

Whenever I see a city ambulance make an emergency call, they are accompanied by a fire truck and crew even when there is no visible fire; the firefighters just hang out.  I had never bothered to think twice.  We do know that fire retardants and fire prevention are better than ever.  It stands to reason that there are fewer fires. But fewer firefighters is not an option for local leaders. Holman Jenkins takes this up in this morning's WSJ.

It takes twice as many firefighters to put out half as many fires as it did 30 years ago. Fewer fires because of better fire safety is one reason, but another is the dispatch of overqualified firefighters and their vehicles to things that aren't fires.

In Orange County, Calif., only 2% of responses involve fires. In Massachusetts the figure is 5%—only because Massachusetts doesn't count emergencies that don't result in injury or property damage.

The Orange County Grand Jury, an official watchdog agency, is the latest to plumb this phenomenon: "This transition from fire emergencies to medical emergencies has not generated major changes in the operation model. . . . Each emergency call generally results in both fire trucks and ambulances being dispatched to the site of the emergency regardless of the type of emergency."

Many towns and cities try to get by with two or three firefighters per truck, which makes sense when a truck is responding to a fender bender or bicyclist who fell down. The firefighter-dominated National Fire Protection Association insists on five firefighters per truck—which makes sense when a truck is responding to a fire.

What would really make sense, of course, is properly manned fire trucks responding only to fires, leaving other emergencies to one- or two-person police or ambulance crews. But firefighter unions are among the most politically potent in the country.

I have often complained that LA roads are in a state of disrepair worthy of a third world backwater.  I was in China last year and the city roads I was on were all much better.  Our city, county and state leaders are chained to their union supporters.  Wage and pension commitments are the natural result.  (Here is where I get to say "unsustainable.")  

Daniel DiSalvo documents politicized commitments to public sector unions in this latest book.  I have not yet read the book but listened to an author interview this morning.  I plan to add the book to my "must read" pile.

Ethics

Randy Cohen ("If Kant Were a  New York Cyclist", NY Times, Aug 5) makes what he claims is an ethical case.  "The rule-breaking cyclist that people decry: that’s me. I routinely run red lights, and so do you. I flout the law when I’m on my bike; you do it when you are on foot, at least if you are like most New Yorkers. My behavior vexes pedestrians, drivers and even some of my fellow cyclists. Similar conduct has stuck cyclists with tickets and court-ordered biking education classes. But although it is illegal, I believe it is ethical. ..."

Our cities and our traffic laws are geared to autos.  Everyone likes their cars, but many also feel a bit cowed.  The "green" and morally superior thing to do is walk or bike.  Cohen sees his acts as victimless and also superior and, hence, ethical.
 
Ethical arguments for law-breaking usually involve weightier issues.  Cohen must know that once there are enough law breakers like him, there could be real problems.

My first trip to China was in the early 1980s and I witnessed tremendous etiquette by large numbers of bicyclists who, not contending with many cars, but just each other, seemingly managed very well.  Pedestrians, even foreigners, once they got the hang of slowly wading across busy streets, had no problem.  The streams parted gently around you.      

But Manhattan is clearly not 1980s China. I worry when Cohen evokes Amsterdam and Copenhagen.  Manhattan does not come close to these either.

Perspective

Some of my best memories from grad school are sitting in classes and listening to the impromptu musings of Brit Harris.  He may have been the first to refer to "gi-go" as "garbage in-gospel out".  Brit was a pioneer modeler of urban structure and he knew what he was talking about.

Post-2008, many people are taking a second look at macro-economic models.  Nevertheless, there is always the problem of people reporting their model results with a little too much enthusiasm.

Matt Ridley takes up the theme in today's WSJ, "How Bias Heats Up the Warming Debate."  He notes, "The late novelist Michael Crichton, in his prescient 2003 lecture criticizing climate research, said: 'To an outsider, the most significant innovation in the global-warming controversy is the overt reliance that is being placed on models.... No longer are models judged by how well they reproduce data from the real world—increasingly, models provide the data. As if they were themselves a reality.'"

Models are essential, but so is perspective.

Dreaming

The LA Times' Steve Lopez took some heat from the usual suspects for being skeptical of the value of Los Angeles' new (not really new ) Grand Park which is just latest add-on to Los Angeles' uninteresting Civic Center complex.

The complex now has the Walt Disney Concert Hall, but even that addition has not provided the boost that boosters have sought for almost a hundred years.  People do show up for the music, but most run away after the show.  This is still LA. Venues are scattered and the possibilities for pedestrian exploration are limited.

LA Live, LA's Chinatown and Little Tokyo have their modest attractions, but they do not easily link to Grand Park. The government office buildings which dominate civic center are dead at night and not much better during the day.

Many who live here and enjoy LA seem to have trouble coming to terms with the fact that it is not New York or San Francisco or Seattle or Paris or you name it.  It will never be any of these. 

There are even people who dream of the pathetic LA River as taking on the role of a Danube or Seine or Thames. 

Dreamers are fine, but somehow they often want me to pay for their projects.

 

To your health

Last Saturday, the NY Times lede was "Doctor Shortage Likely to Worsen With Health Law."  Yes, if demand expands, something has to give.  The accompanying story is standard fare and reports that, "The Obama administration has sought to ease the shortage."  Thirty years ago, "manpower planning" was all the rage for people unfamiliar with labor markets.

Today's LA Times' lede is more promising. "In-store clinics look to be a remedy for health care influx."  The phenomenon is hard to miss.  The story quotes skeptical doctors but does mention that, "These in-store clinics have performed well thus far.  Studies by Rand found that these clinics provide care at costs that are 30% to 40% less than similar care provided at physician's office and that the care for routine illness was of similar quality."

Those lucky enough to have gold-plated medical insurance have choices, but many others do not.  For the latter group, the likes of CVS, Target and even the evil WalMart may be a godsend.

Let them be

Richard Florida kindly sites "Does Density Matter?" by Sandy Ikeda and myself in today's WSJ.  I have cited our story a few times on this blog.  It is Ch 22 in the Handbook of Creative Cities.

Sandy and I each had doubts about a "the more density, the better" view -- which we have encountered many times.  The more nuanced "Jacobs density" is Sandy's phrasing, but it captures our "let a hundred flowers bloom" story.

We all want economic growth which requires human capital to be creative and inventive.  That occurs when and where people can form the networks that work for best for them.  Beyond that, it is very hard to specify the "best" settings.  That's what land markets a for.  Until we somehow become much wiser, let them be.

ADDED

Wendell Cox has more re the density confusion.

Read this first

When there is rapid asset price appreciation, many people (including bankers, politicians, and many others) are tempted to leverage and buy into the boom. This helps to prolong the boom.  But nothing is forever and asset prices reverse ("bubble" pops) then people are eager to de-leverage and that prolongs the bust.

That is the textbook "credit cycle" which often becomes a bigger "business cycle".  That's the dry textbook version.  Michael Lewis has a much better name.  He prefers to call it "Boomerang". 

Lewis is obviously a great writer, keen observer and very smart guy.  He makes it his business to go to Greece, Iceland, Ireland, Germany and California to see and hear the real players.  He calls it "a new opportunity for travel: financial-disaster tourism."  In each case, he manages to tease out delightful insights (and occasional confessions).  In some cases, there are also terrific character profiles.  His Santa Monica bike ride with Arnold Schwarzenegger is worth the price of admission alone. 

Tough questions

It is sad but true that parking in U.S. cities is badly managed and so is public transit.  When you put them together, the difficulties multiply.

Here is the Seattle story of parking poachers (h/t Patrick Sullivan). Put underpriced parking next to underused trains and planners have to start looking at parking rate hikes to balance the two. But that might turn away some transit riders which would further reduce train use.

The story in Denver is slightly different.  Here is the WSJ's report on how and why park-and-ride lots have taken up real estate that could be used for transit-oriented development.  Which is better for transit use?  Very tough question.

I attended a conference some years ago (cannot recall which one) where a speaker noted that one of the Northwestern states or cities or counties (again, not sure) had welcoming poster that included a picture of a bear snaring a salmon out of a mountain stream.  The speaker wondered which side an environmentalist would be on. Also a very tough question.

Update, please

This report argues that "the suburbs" are diverse.  You bet. In 2010, just the U.S. major metropolitan area's suburbs included 167 million people, more than 54 Percent of the U.S. population. That is more people than included in most countries.  I have argued many times that we have to move to more refined classifications.  "The suburbs" has a 1940s-1950s ring to it.

Yesterday, the NY Times tried it's hand at describing Los Angeles' San Fernando Valley, "Los Angeles? The Valley is Way Cooler".

But at 260 square miles, there is not much of a neighborhood feel to describe.  There are many neighborhoods which are radically different from each other.  "Valley Girls" exist in bad movies and TV shows.  "The Valley" may have been a place once upon a time.  But that was almost 70 years ago.

"You didn't build that"

Peggy Noonan comments on Pres Obama's "failure to communicate" when he wandered into "you did not build that."  We expect more from a Barack Obama than we do from a standard issue politician. The president has fashioned and delivered some eloquent speeches; he is clearly intelligent and he is also a savvy politician.

But gaffes are interesting because they are revealing.  The "You did not build that" discussion is revealing in two ways.

First, every one of us routinely depends on an uncountable number of supply chains of unfathomable complexity that involve large numbers of strangers. So it is clear that we rely on the cooperation of strangers, but they do all this voluntarily and on the basis of mutual benefit.

Second, this is not what the president seemed to have in mind.  He wanted his listeners to appreciate what they get from their government.  But that is not a mutual benefit deal.  In the same newspaper as the Noonan column, there is David Wessel's "Everything You Ever Wanted to Know About The Budget* ... "But Were Afraid to Ask ... A lot of what government does is siphoning money from some and giving it to others ..."  People building a business will have to strain to see all this as a source of "help" to them.

Their game

The new iPhone is on the way and uncountable new apps and other electronic marvels come at us daily.  This is somehow the same world in which our political leaders want to build more trains.  Brookings' Cliff Winston takes up the story in today's WSJ ("Paving the Way for Driverless Cars ... Instead of focusing on an enormously expensive high-speed rail system, government should promote modern highway design.")  Yes, they should.  But who are we talking about?

One thing that politicos are pretty good at is reading the minds of their voters.  That, after all, is their bread and butter.  You don't have to go far before you encounter otherwise informed and thoughtful people who seriously believe that if we build enough of these projects, people will use them and the world will be a better place.

As I write this, Gov. Jerry Brown is at LA's Union Station to sign the funding bill.  There will be smiles all around.  Why?  Because they know their game.

"Sergei Brin is still in California"

It is not surprising that many city managers, city council people and other boosters dream of their city becoming the next Silicon Valley.  In fact, there are quite a few places around the world that call themselves Technopolis.  City planners still hope to find the magic when it comes to creating the best clusters of high-tech firms or shells for such.  But there is no known way to bottle the magic.

Randy Holcombe (in Handbook of Creative Cities) says it best. "The idea of planning a creative city misses the whole point of creativity." (p. 403).

I had not heard about Skolkova, Russia, until I found "Can Russia create a new Silicon Valley ... Sergei Brin is still in California" in The Economist. No one knows how to create the culture that links original thinkers with innovate risk takers. And these are never stand-alone. They are part of a supply chain.  The Economist piece rightly refers to a proper "ecosystem".

When Russians last tried this, they got the Boikonour Cosmodrome and Sputniks.  But that venture helped to bankrupt the place.

Those four T's

It is remarkable that so much economic analysis ignores the public choice dimension.  "Stimulus", for example, is presumed to be "well designed".  Instead, it is simply a collection of political favors and bail-outs.  Supporters then gasp at poor multiplier outcomes.  That's the position of Joe Stiglitz in this conversation. "Timely, Targeted, Temporary and Transformative: Crafting an Innovation Based Economic Stimulus Package" adds alliterative punch and much more.

But similar criticism must be directed at public policy analysis.  The overwhelming number of studies also ignore the political context.  An uncountable number of benefit-cost studies seek to identify economically sensible public projects -- as though that can ever be the whole story, or that it even matters.

In today's WSJ, Allysia Finley writes about the politics of California's high-speed train project.  "How Insider Politics Saved California's Train to Nowhere ... The high-speed rail line may never be built, but it will save a few Democratic seats."  It's an old story, but Finley also places it in the context of Governor Brown's current campaign to raise taxes on "the rich."

... Next year taxpayers will have to start paying interest on the rail bonds—about $380 million annually for the next 30 years—assuming investors bite. That's nearly as much as the governor is proposing to cut from higher education if voters don't approve his millionaires' tax initiative in the fall.

 This plundering of higher education should serve as a warning to voters who think that approving the millionaires' tax will somehow save them from one day becoming sacrificial lambs on the government's altar. Nothing is sacred.

Failure

The core lesson of economics is that specialization and exchange are the road to prosperity. The idea predates Smith and Ricardo.  They and many others articluated the idea, but humans had spontaneously practiced it for millenia.  There is some speculation that Neanderthals never got the hang of it and lost in the competition with our ancestors.

I have to conclude that economists have done a poor job of teaching the core lesson of their field.  Michael Kinsley writes in today's LA Times about "Outsourcing's bad rap ... Even if Mitt Romney sent jobs overseas, is that so terrible?"

It seems reasonable to assume that most of the likely voters had some class in their background where some economics was taught.  If so, and if any of it stuck, the current debate would not be hobbled by the kind of flat-earthism where one candidate seeks to capitalize on an outsourcing accusation and the other does a horrible job of explaining that there are serious benefits from specialization and trade. There would be plenty of sneering from commentators if party leaders argued over whether the moon was made of blue cheese. 

If this level of economics cannot be explained in ways that people get it, why bother with all the rest?

Where do the workers live?

I did not know much about the late Senator "Scoop" Jackson of Washington.  The July/August Commentary includes (one-time Jackson staffer) Joshua Muravchik's "'Scoop' Jackson at One Hundred: The conscience of a neoconservative giant" (gated).  The author presents a refreshingly modest, even shy and self-effacing, but yet successful, politician.  This sounds like a rare breed.

The essay is also interesting in how the author describes the evolution of the Democratic Party. "In those innocent days before it absorbed an admixture of angry, arrogant 1960s leftism, liberalism was a vaguely defined creed that attempted to give political expression to the impulse to do good. ... The two cardinal programmatic ideas of that philosophy were devotion to the 'common man' and the conviction that government had nigh limitless power to make people's lives better.  The common man was an American concept more elastic than the European notion of class. ..."

I know a few people who describe themselves as "Truman Democrats".  Muravchik claims many of these folks were also "Reagan Democrats".  I imagine the huge question for 2012 is whether any of them can see themselves as "Romney Democrats".

I have the occasional academic visitor from Europe who, new to LA, asks "where do the workers live?" I want to say "all over the place".  Whereas I see lots of "common man" folks all around me, I do not think of them as a class of "workers" as the label is used in Europe. 

This is where we usually go into social-economic mobility stories -- and data.  Here Rampell sees a glass half-empty. I do not.  Even those U.S. politicians who feed on class-warfare rhetoric claim to champion "the middle class" rather than "the workers".

Corner of the labor market

I had occasion today to hire some men from a nearby truck rental place to help me with some manual labor.  They did good work and were well compensated.  We even seemed to enjoy each others company.  The two men who helped me say they had been at this for about 20 years.

I tried to learn a little about this part of the labor market.  Times are slow and the guys on this lot expect about three days of work per week.  Busiest days are Friday, Saturday, Sunday.  The number of day-labor candidates who show up each day is in synch with this rhythm.

Other than the expected odds of getting work, is there a check on supply? This is where it gets not so pleasant.  My informants report that race matters.  In a black neighborhood, the number of blacks "allowed" to wait for work is unlimited but the number of Hispanics is limited. In Hispanic areas, it's the other way around.

I cannot vouch for the generality of any of this.  But it makes sense.  Rules make the world go round and people come up with these.  By now everyone should know of Lin Ostrom's contributions on this and also Robert Ellickson's  That's the good news.  The bad news is that tribalism is still the basis for organization in so many places.

ADDED

Many people have enjoyed T.C. Boyle's Tortilla Curtain which is the author's patented take on the experience of Hispanic immigrants in LA.

A more than decent movie on the topic is A Better Life.

Just another "Bootleggers and Baptists" moment.

The late Senator William Proxmire famously awarded his annual Golden Fleece Award to the silliest or most wasteful federal program.  A worthy successor migh be a Bootleggers and Baptists award, perhaps awarded by Prof. Bruce Yandle or his followers.   I realize the competition would be intense because there are so many contenders.

Today's LA Times reports "California Senate vote keeps bullet train alive ... In a victory for Brown, the Legislature approves funds to begin the system in the Central Valley."   California politicians do not want to surender their $3 billion federal grant.  But no one has any idea how much matching from State taxpayers will be required. 

No serious economist or transportation expert believes this project has any merit.  I cited some of the discussion here.

The Obama and Brown Administrations have been pushing hard for this boondoggle.  "Green jobs" says it all.  Jobs at any cost dressed up as "green".  But who can blame them?   "Green jobs" is nothing but Bootleggers and Baptists.  These guys know what they are doing.

ADDED

Yet another bus beats train.  H/T Patrick Sullivan.

Cities, "creative" types and entrepreneurs

I had earlier blogged my appreciation of Enrico Moretti's The New Geography of Jobs. Here Adam Ozimek mentions the same book and notes that Moretti's work indicates that "Richard Florida Is Wrong About Creative Cities".  Moretti describes Berlin, which is apparently a magnet for "creative" people but suffers economic stagnation.

To be fair, Berlin has a unique history.  Until the fall of The Wall, the island of West Berlin was a heavily subsidized outpost kept alive at high cost for political reasons.  That ended just over 20 years ago and no one knows whether an enterpreneurial culture can take root in that short a time span.

Closer to home, Stolarick, Lobo and Strumsky (SLS) take up the more interesting angle.  They address a key related question when they ask, "Are Creative Metropolitan Areas Also Entrepreneurial?" 

Florida suggests how to count who is "creative", but SLS look for ways to measure the presence of entrepreneurs.  They study the National Establishment Time Series data base (NETS).  "NETS measures the birth and death of establishments, and the change in employment associated with establishments' births and deaths, the expansion and contraction of existing establishments and the movement of establishments in and out of an area."  SLS report that the average number of new firms arriving in a metropolitan region in any year is surprisingly small, about 2.2% of all new firms.

But that is not the whole story.  The number of surviving, expanding or newly opened firms (“births”), also indicate the arrival of new capital and perhaps new entrepreneurs.  SLS report that they have found an empirical link between entrepreneurs and an area's "creative" talent pool.

I like this study because the discussion moves beyond "creative" people and "creative cities."  The magic comes from enterpereneurs.  If we can identify these and where and why they move, then we have progressed.

What do we know?

Matt Drennan and Charles Brecher ask "Can Public Transportation Increase Economic Efficiency?" It's a great question which should include consideration of the cost side.  The cost side can sink the argument if the transit choices are the high-cost political favorites -- which I have complained about many times (as recently as last Friday on this blog).

That aside, the authors study 42 U.S. metropolitan areas and consider square feet of office space in each.  They pay attention to the proportion of metropolitan area office space concentrated in the area's central business district (CBD), reasoning that the high rents paid there signal the presence of agglomeration opportunities.  And these must be the places where good things happen, including knowledge spillovers and information sharing.

Then it's a hop-skip-and-jump to testing, via regression analysis, whether public transit makes a difference. "For those CBDs with more than 30 percent of the total metropolitan office space, the effect of transit use on rents is small but positive and statistically significant. For suburbs in those MSAs the effect is similar.  By contrast, the results show that transit use has no effect on office rents in places with a low concentration of office space in the CBD."

There are, of course, questions of mutual causation. Have new transit systems prompted new office agglomerations?  And, again, at what cost?

What do we know?  Transit subsidies have been growing for many years and most cities keep suburbanizing -- as they grow.  Growing cities manage to capitalize on the agglomeration econonomies where they can find them.  And most new office space is outside traditional CBDs.

Chinatown, not the movie

Art Carden summarizes all sorts of recent research on Wal-Mart here.  Less formal research notes that customers line up to shop at Wal-Mart and workers line up to work there.  But simple markets tests are beyond many people. This is why today's LA Times reports that "Thousands rally against Wal-Mart in Chinatown ... Several union and civil rights activists speak at the event opposing a new Wal-Mart store in Chinatown, and Rage Against the Machine guitarist Tom Morello plays 'This Land Is Your Land.'"

As with all such protests, they come from two quarters.  Some are completely incoherent; others have everything to fear from competition and real people voting with their real dollars.

It is sad that these are the two groups are the natural constituencies of City Hall and much of the local news media.

The young lady in the photo holds up a banner which says "Wal-Mart: Keep your hands off Chinatown."  She should know that LA's real Chinatown is now about ten miles east in the San Gabriel Valley and has been for some years.  That's where LA's great Chinese restaurants are and that is where most of the region's many Chinese and/or Chinese-American shoppers go.  Many of the rest of us go there when we want a really good Chinese dining experience. 

The old downtown LA Chinatown is pathetic and people should be celebrating the fact that the neighborhood attracts the interest of any investors.

Expensive learning

In 1988, the late John Kain published "Choosing the wrong technology:  Or how to spend billions an reduce transit use"  Here is the abstract:

In spite of a broad consensus among transportation analysts that bus rapid transit, whether operating on exclusive rights-of-way or on uncongested high occupancy vehicle lanes or general purpose limited access facilities, provides higher performance and has significantly lower costs per passenger trip than rail transit in medium and low density cities, nearly all Sunbelt cities are building or planning heavy or light rail systems. This paper reviews previous studies of the cost-effectiveness of heavy and light rail transit with bus-rapid transit and the growing experience with busways and transitways and concludes, once again, that some form of bus rapid transit would be a far more effective way of providing improved transit in these cities than heavy or light rail transit. Not only would bus rapid transit be substantially cheaper, but it would provide a higher quality of service than light or heavy rail transit for virtually all users. Finally, the paper speculates on the reasons for the continued, “blind” commitment to rail transit by policymakers in Sunbelt cities and on the refusal of policymakers in all but a few of these cities to even consider bus rapid transit.

Kain was angry and frustrated because he and colleagues Robert Meyer and Martin Wohl had made the case back in 1965 in The Urban Transportation Problem, copies of which are hard to come by after all the years.
 
In the age of the auto-freeway system, "freeway flyer" buses on freeways and occasionally using special bus lanes are the appropriate form of public tranit.  Flyers would be cheaper and more flexible than rail. And some of the buses could be their own feeder lines, once off the freeway.  No transfers and no park-and-ride.  The book followed from Ford Foundation-funded study for RAND, back in the days of great optimimism about the application of social science to "solving" urban problems. 
 
Like many other good researchers, these scholars skipped the public choice aspect of the problem.  The "wrong" technologies, rail transit, were the enthusiastic first choice because they cost billions.  The 1965 book and the 1988 paper were just 23 years apart.  Now, 24 years, after the 1988 study, we see the following in yesterday's LA Times:

Orange Line busway is Metro's quiet success story ... The Orange Line in the San Fernando Valley, which will soon be extended, has prompted a new focus on the role of rapid buses in L.A.'s transit plans.

As Los Angeles County pumps billions of dollars into its expanding commuter rail network, a different kind of mass transit has become an unlikely hero of the San Fernando Valley. ... The 7-year-old Orange Line, a 14-mile east-west busway connecting North Hollywood to Warner Center, has been a less-flashy workhorse of success for the Metropolitan Transportation Authority.

Less than a year after its opening, the Orange Line busway's projected ridership more than tripled to 22,000 a day, and a study by UC Berkeley researchers found it even slightly helped relieve morning traffic on the 101 Freeway, which parallels the busway. By May of this year, daily ridership had climbed to 26,670 on a line that was significantly cheaper to build than it's light-rail counterparts, such as the Blue, Green and Gold lines.

"It's much easier to ride this than it is to drive," said Gale Johnson, 52, a retired security worker who lives downtown and was riding one of the busway's sleek, extra-long buses to a doctor's visit in Van Nuys. "It's like a train on wheels."

The Times has been beating the drums for rail transit in LA for as long as the idea has been around.  But almost a half-century after the case for bus rapid transit was first laid out in great detail, their reporter found a successful example close to home.

Learning via real life experiments is nice but, as the title of Kain's 1988 title suggests, also very expensive.

 

Shout it across the Rio Grande

Every econ 101 textbook goes through the long list of reasons that GDP per capita is a poor proxy for a nation's material well-being.  But happiness researchers in economics have gone a step further because they worry about non-material well being.  Much has been written about all of the framing problems that come up when questionnaires ask respondents to report how happy they are.  But researchers persist in telling us that self-reported happiness is only weakly related to material well being.

But it gets really silly when operational national happiness measures are proposed.  Writing in today's WSJ, Matthew Sinclair has fun with the Happy Planet Index.  "How Cuba Became a 'Happy Country' ... Citizens flee on rafts.  But environmentalists know better."

People vote with their feet -- when they can.  Migrations are powerful signals that indicate a lot about material as well as non-material well-being.  Revealed preferences are always best.

But this only works if people are actually allowed to leave a place.  If they are not allowed to leave Cuba, the statistical people have to meet the challenge of measuring and inferring how great a place it really is.

But look at the map.  Mexico gets a better color (score) than the U.S. 

And the Supreme Court had to rule on Arizona's immigration rules!  These are unnecessary.  People crossing the border into the U.S. are just confused.  They are making a terrible mistake, not having seen the HPI.  Just shout HPI scores from the rooftops and save everyone a lot of bother

     

Back to the future?

It is no secret that many conventional city governments in the U.S. are in trouble.  Here is a report that cites $574 billion in unfunded city and county pensions.  Voters in various places got the message and some recent ballot measures to address the problem by trimming pension benefits won handily.

A more drastic approach would extend privatization and contracting to the max.  The example of Sandy Springs, Ga., is described in today's NY Times.  Here is last year's video coverage by ReasonTV (h/t Yin Xie).

The Times piece cites the workability of the Sandy Springs approach, but also cites some of the possible objections.  These include the threat of a "two Americas" scenario as well as a possible redefinition of what local governments are for.

HOVERING around the debate about privatization is a basic question: What is local government for? For years, one answer, at least implicitly, was “to provide steady jobs with good wages.” But that answer is losing its political tenability, says John D. Donahue of the John F. Kennedy School of Government at Harvard. “A lot of jobs in government are middle-class jobs that in the private sector are not middle-class jobs,” he says. “People aren’t willing to support conditions for public workers that they themselves no longer enjoy.”

In a way, what Sandy Springs and other newly incorporated towns have done harks back to a 19th-century notion of taxation, which was much less about cross-subsidies and much more about fee for service.

"Local government" is an inanimate object.  Better to consider the players. City and county politicians may want to be seen as "job creators", but I do not think that most city taxpayers see themselves as in the job creation business when they pay up.

In fact, the Times story goes on to evoke redistribution from Sandy Springs voters to surrounding Fulton County residents. But that approach has not been working so well.  "Widening divide" concerns have been growing steadily, alongside the steady expansion of redistribution in the U.S.  And that 19th-century notion does not look so bad in light of today's $574 billion of unfunded municipal liabilities.

The redistribution we have had is not all that progressive.  Cronies get rich and others get crumbs.  Much better to have the Sandy Springs folk be free to prosper and innovate.  That might do more for the rest of Fulton County than all of the conventional redistributions that we have gotten to know so well.

The fine details make all the difference

Here is Geoffrey Wests' TED talk on cities.  Here is recent coverage of his group's work on cities in The Economist.   The researchers are mining considerable amounts of city data, seeking regularities and even "laws".  They seemingly come up with incredible amounts of generalizing.  Here is an example:

Between 1990 and 2000 the surfaces of each of the 120 cities he and his team studied grew on average more than twice as fast as their populations. These rates, he says, are unlikely to change. That means that the amount of urban land will double in only 19 years, whereas the urban population will double in 43 years.

Note the "on average".  What was the variance? 

Aside from that, there should be no surprise that metropolitan areas grow outward, denoting declining average urban densities.  Findings like that can still bring on fainting spells in some circles.

But the size/growth story is incomplete.  The reality is much richer and much more interesting.  Cities grow because they can -- when they can.  They compete because most labor and capital are mobile.  How do mobile factors choose where to settle?  Where do they sense they can most benefit from local supply chains -- chains that involve transacting as well as chains that do not, including social ties that help incubate ideas?   This means interacting with many others already there -- which involves a look at location patterns as well as interaction opportunities.  There is a cost side.  Land and accessibility and other costs must be noted and weighed agains the benefit assessment.

Its a cinch that most expected net benefit packages are found in peripheral areas -- as the cited passage corroborates.  The fact of growth and the placement of growth cannot be separated.  I have noted many times in these posts that there is no single "best" density for anything.  Local conditions vary considerably and offer unique packages and solutions.  It is all about the fine details of spatial arrangements, not simply overall city size.

Consider the simplest cases of land use planning.  How do mall developers create site and leasing plans?  Is there one "best solution?"  Not likely.  The profit-maximizing mall developer chooses a desired site plan from a very large combinatorial space.  The favored choices vary a lot; we see very little successful cookie-cutter design.  And these are just the simplest of spatial arrangement problems.

NYNY

I have to be careful about using the word "subsidy" -- as in crony capitalism.  There may be explicit cash transfers or there may be political favors (or both).  In the process of land development and the ever more complex "approvals process", the latter can be signficant.  This is typically the case for "transit oriented development".

But the most interesting U.S. case to study in the TOD field has to be New York city.  And if researchers have time series data for many small local geographic areas, that is as good as it gets.

David King pointed me to his recent paper which addresses all these points.  He is interested in the chicken-and-egg question involving land development and the opening of subway stations.  Here is the abstract.  I learned a lot reading his paper.  The author notes that, "the [NY] subway system was substantially completed in the absence of substantial competition from autombiles" (p. 30).  Planners take note. 

NY then and LA now in transit

On June 6, I cited recent reports that indicate only minor subsidies (today's standards) in the early phases of New York city subway development.  But Patrick Sullivan wrote to indicate that there may have been no subsidies.  He pointed me to this site that which I had not seen.  Look at the January 18, 1900, entry.  The developer had posted a substantial bond.

In the days when developers would also become private operators, this made all the difference.  It would not happen today.  Charles Lave did once propose that consultants bond their ridership and cost forcasts.  That is, of course, unlikely because in most cases no one cares.  Politicians simply want the money to flow.

Nevertheless, nycsubway.org is amazing.  Just the "history" section offers many gems and hours of fun.  I am not enough of a NY history buff to be any more than an appreciative reader and I want to thank Patrick.

Tom Rubin points me to this site for LA's MTA, where ridership data for the agency's bus lines can be found.  LA's new Expo light rail now serves just less than 11,500 boardings per day.  But it cost $932 million just to build.  It is being extended west for another $1.5 billion.  These numbers are pathetic when compared to the performance of many of the agency's bus lines.  Add the fact that local transit planners often cut bus service to pay for rail. 

With rare exception, very few people object, but self-congratulation is widespread.

We are the world

We are all citizens of the world and cosmopolitanism beats nationalism.  People who agree will enjoy this study.  Here is the abstract Antonio Spilimbergo's "Democracy and Foreign Education" (gated; in the March 2009 American Economic Review):

Despite the large amount of private and public resources spent on foreign education, there is no systematic evidence that foreign-educated individuals foster democracy in their home countries. Using a unique panel dataset on foreign students starting in the 1950s, I show that foreign-educated individuals promote democracy in their home country, but only if the foreign education is acquired in democratic countries. The results are robust to several estimation techniques, to different definitions of democracy, and to the inclusion of a variety of control variables, including democracy in trading partners, neighboring countries, level of income, and level and stock of education.

This is very nice.  I have always cherished my international students.  They bring human capital with them and they take human capital back to their home country.  But, apart from the clear market benefits, there are also civil society benefits.  The cited study also shows that whatever the international students may pick up at Moscow's Patrice Lumumba U. (renamed People's Friendship U.), it has a much smaller effect once they return home.

Trust and whoppers

Dan Walters goes after Jerry Brown for equating the importance of a California high-speed train with the Golden Gate Bridge. (More on this from Ken Orski.)  Tyler Cowen cites Americans' declining trust in state and local government. 

Whoppers or mistrust; which comes first? 

Or is it simple a nasty vicious cycle? The less trust, the greater the partisanship, the bigger the whoppers.  And the bigger the whoppers, the less trust extended by anyone but by true-believer partisans.  Once the odds of discourse with anyone beyond the choir are diminished, feeding the faithful with whoppers is all that is left.  This is why it only gets worse.

Add to this the simple idea that trust is very hard to establish, but very easily broken, "years to earn and seconds to break".

Agglomeration and industrial organization: choices involving organizational and spatial shells

Across regions, there are convergence forces (arbitrage) that work against agglomeration forces. The strengths of these opposing forces are hard to sort out. A recent paper ("Clusters, Convergence, and Economic Performance" by Mercedes Delgado, Michael E. Porter, Scott Stern) that made an attempt concludes this way:

These findings suggest a number of policy implications, many of which diverge from the received wisdom among some practitioners. First, effective regional policy should harness complementarities across related economic activity rather than prioritize high-wage or high-tech clusters where there is little pre-existing strength within the region. Hence policy makers should pursue policies that leverage a region‟s cluster strength … Our evidence thus reinforces the view that policy action should focus on building upon pre-existing comparative advantage.

Second, regional economic performance depends crucially on the composition of economic activity rather than the vagaries of political boundaries. The spillovers arising from related economic activity typically span multiple jurisdictions (and even states). Policies aimed at shifting the location of activity within narrow areas will be much less effective than those which operate to harness complementarities across jurisdictions.

What do we know? Ever since Coase, we have known that managers face tough choices in terms of what to do inside vs. outside the firm. There are actually many “organizational shells.” But there are also industrial clusters that agglomerate in cities -- sometimes to include the suburbs, exurbs and even over extended rural areas. There are many “spatial shells.”

Choices are being made with respect to two sets of shells; the many supply chains that form to serve us involve choices over both sets of shells, the organizational and the spatial.

Elinor Ostrom

Elinor Ostrom titled her 2009 Nobel lecture "Beyond Markets and States: Polycentric Governance of Complex Economic Systems" (reprinted in the June 2010 American Economic Review).  She uses Figure 1 of the article to establish how she and Vince Ostrom elaborated and expanded previous understandings (e.g., Samuelson and Buchanan) of the various goods and allocation arrangements that we see in the real world. 

Nothing beats looking at what real people actually do.  We now know of (and at her death are reminded of) the Ostroms' important contributions identifying the various common pool resources that are spontaneously allocated without government interventions but which are, nevertheless, not "market failures."  A million textbooks are not yet with it.

Today's WSJ includes "The Shared Backyard ... Homeowners Exchange A Bit of Privacy for More Garden and Socializing."  Read it. It's amazing how much better we see what is all around us once some smart person has called our attentiont to it.  Elinor Ostrom would have appreciated this news item -- just as we appreciate her all over again whenever we encounter stories like this one. 

Getting one price right

I have not yet read Michael Sandel's What Money Can't Buy, but I enjoyed Paul Solman's interview with the author on the Evening News last night.

Economists who see "market failures" and suggest that policy makers can "get the prices right" are challenged on two fronts -- by the "fairness" argument as well as the public choice criticism that policy makers have many other agendas than efficient allocations, some of them pretty awful.  Nevertheless, we celebrate the few examples of dynamic roadway pricing where we see them -- and keep suggesting that they are harbingers. 

The standard rebuttal to the "fairness" critique is to ask just how "fair" the status quo is.  Relieve highway congestion by building subways partly financed by sales taxes?

The June 9 Economist includes "Visas for entrepreneurs ... Where creators are welcome ... Australia, Canada and even Chile are more open than America."  I know that immigration law and procedures are a hash, but letting entrepreneurs with capital go to the head of the line should be the ultimate no-brainer -- especially for politicians who prattle on about their interest in "creating jobs".

I am persuaded that open borders are best (see Clemens), but if we cannot get there, how about some simple and reasonable immigration rules?

Spatial aggregation

Atlantic Cities includes this "brainiest cities" ranking.  They actually mean metropolitan areas and they refer to Richard Florida's work.  But getting the spatial units right matters.

This time, "density" is not mentioned as the key ingredient, although Florida evokes the importance of population density in much of his work.  I have noted several times at this blog that metropolitan area densities (which almost everyone uses) are a lousy proxy.  Aggregation causes problems, in some cases big problems.

Mr. Demographia refers me to 2000 urbanized area density data for 461 U.S. areas.  Their average density was 2163 people per square mile, with standard deviation of 878 and coefficient of variation of 0.41.

Also for 2000, we can get PUMS area (PUMA) densities for each of the metropolitan areas.  The Los Angeles metro area can be cut up into 111 of them.  Their average 2000 population density was 6857 people per square mile, with standard deviation of of 5869 and coefficient of variation of 0.86.

Here, there is more density variation within than between metropolitan areas. 

Links

How many "green jobs"? If you just know how to keep score, we are drowning in "green jobs".  H/T Carpe Diem.

Being on the side of the angels (and against sweat shops) does nothing to help poor people -- but really works as narcissistic signaling.  H/T Bleeding Heart Libertarians.

The Nordic model.  High time to update one's priors. H/T Reason.

Austerity now or later? Tax reform now or later? Credible commitments ever?  Keith Hennessey nails this one.

The nightly news on Syria usually brings up the latest from the UN.  Keep it?  Close it?  Reform it? H/T The Browser.

ADDED

Me at The Beacon.

Those were the days

Ezra Klein (h/t TMG) cites Tim Lee, who in turn cites Clifton Hood, to the effect that the public sector chipped in about $3.8 billion (in today's dollars) to build the New York Subway.  Those were the days.

Paige Kolesar and I wrote about six newer U.S. subways last year.   Converting the reported capital costs of those systems to today's dollars, Miami (22 stations) cost $4.4 billion, Baltimore (14 stations) cost $6 billion, Atlanta (38 stations) $13.3 billion, Los Angeles (my favorite with 16 stations) $12.4 billion, Washington DC (86 stations) $73.7 billion and San Francisco (43 stations) $73.1 billion.  We showed that dollars per station, per mile, per passenger, per you-name-it make no sense.

But this matters for nothing.  Here is Wendell Cox's report on the latest lopsided transportation plan for Atlanta.  The mode with the fewest riders gets the most funding.  One upon a time, there was an argument that this was the way to change the world.  But that argument is beyond silly today.

Amazingly profound

Paul Heyne was a breath of fresh air.  His introductory textbook, The Economic Way of Thinking, (kept alive by Peter Boettke and David Prychitko after Heyne's death) is probably the best way to enter the field.  His A Student's Guide to Economics is a pocket-sized introduction to his introduction.

Here, Don Boudreaux points us to Heyne's last lecture.  He clarifies much -- for those new to the field as well as those already immersed.

Here is just one gem:  Every standard discussion introduces "the economic problem" as based on the hard fact of scarcity -- and the implied problem of how to figure out what to do with the scarce resources that are available at any moment.  Markets are then shown to be a pretty good way to get the job done.  The more abstract the presentation (or the curves or the math), the less useful.

But Heyne clarifies.  The real problem, he notes, is one of coordination.  Market prices coordinate immense complexity. 

Here is the simplest mental experiment:  Try to think about all of the supply chains that have (somehow) formed to serve any one of us.  We have no hope of ever fathoming these.

But an uncountable number of supply chains form -- and update -- all the time. And that is how markets address the scarcity problem.  Heyne's approach, then, is the one that is much deeper and considerably richer.

A great mind can say a great deal by developing very basic thoughts and insights.

The right stuff

The use of "sustainable" and "sustainability" took off in the 1970s.  Here is the N-gram.  Perhaps as the world becomes more dynamic, there has to be some backlash involving static and parochial perspectives.

The antidote is the amazing David Deutsch, in The Beginning of Infinity, who puts it this way:

... progress is sustainable, indefinitely. But only by people who engage in a particular kind of thinking and behavior -- the problem-solving and problem-creating kind characteristic of the Enlightenment.  And that requires the optimism of a dynamic society (p. 423, italics in the original).

Craig Venter, profiled in today's New York Times Magazine, appears to be one of the people Deutsch describes.

ADDED:  Ane here is one more guy who fits the mold.

Still New York-centric after all these years

When it comes to U.S. cities, there is still this popular New York-centric view: 

But in the space of two short decades, the laws of urban physics have changed: Prosperous urbanites stopped fleeing the city core. Their universe ceased to expand. Gravity asserted itself and has again drawn in an affluent class that is remaking and restoring the inner city.

This is Joseph Abrams reviewing -- and also putting into perspective -- Alan Ehrenhalt's The Great Inversion and the Future of the American City, in the June 2012 Commentary.

The NY Times recently included "A Gap in College Graduates Leaves Some Cities Behind."  They meant metropolitan areas.  Some are doing well and some are not.

But suburban growth still has a significant upper hand. Here are several Census tables that summarize 2010-2011 migration patterns in the U.S.  There were 302 million Americans over the age of one tabulated.  Of these, 267 million did not move but 35 million did (Table 1).  The net gains or losses for "principal cities" (largest cities in each metropolitan area) vs. the suburbs are shown.  Whereas the metropolitan areas as a whole showed a net gain of 115,000 (at the expense of non-metro areas), the suburbs as a whole gained 1.9 million while the principal cities as a whole lost 1.8 million (Table 15).

But what is most interesting is that the principal cities-suburb net balance is parsed by sex, age, race, relationship to householder, education, marital status, nativity, housing tenure, poverty status, income, labor force status, major occupation, major industry (90 categories in all).  The "principal city net migration" column showed minuses for 89 of them; "armed forces" was the only group with a plus in the column.

Yes, Manhattan and some other places bounced back in recent years.  But let's not lose sight of still dominant trend.

Wonderful read

Bob Kalaba, one of the brightest and finest people I have ever known, once mentioned in passing that, "regression is an admission of defeat."  Jim Manzi, author of the wonderful Uncontrolled: The Surprising Payoff of Trial and Error for Business, Politics and Society, would agree.

Manzi argues that the better way to go in order to figure out what works (and why) involves randomized field trials.  Many businesses perform RFTs all the time.  Capital One does 60,000 of them per year.  With their web-based customer data and access, they can easily do this -- as do many others.

Private sector entrepreneurs are incited by competition to get discovery right.  Discover prices, product mix, opportunities, etc.  This is their great contribution. 

Can their public sector counterparts discover "sweet spots"?  Manzi says "yes" if they embrace RFT.  There is policy variability in the world, but it is not yet suitably evaluated.  Students going to school within and across districts encounter different classroom modes.  There are data here to be mined.

The fifty States should seek and get federal policy waivers in order to experiment.  But are we still in RFT-land here?  In passing, Manzi notes that different communities have sharply different policies re Wal-Mart and big-box stores.  Evaluate variations in outcomes.

But there is a problem here that the author overlooks.  Most communities are not consistent when it comes to a pro- or anti- big-box policy.  There might be a deal one day and no deal another, depending on who has lined up who in city hall.

Minor quibbles aside, this is an amazingly useful (and enjoyable) book.  Students (and others) get good background in scientific method and evaluation.  Business school or policy school students (as well as many others) should read Uncontrolled.   

Pricey popcorn

The economist Steven Landsburg is one of the smartest guys around.  I visit his blog all the time and have enjoyed several of this books.  More Sex is Safer Sex is typical of his approach.  Economic thinking a la Landsburg can be used to reach counter-intuitive conclusions.  Landsburg deploys his ET in this way and (I suppose) finds that the method keeps students awake and readers reading.

The revised version of The Armchair Economist provides more examples of the Landsburg approach.  But the trouble is that his own method can get him into trouble.  He includes a chapter on the oldie "Why popcorn costs more at the movies and why the obvious answer is wrong."  He tries on a price discrimination explanation: the serious cinephiles like the movies-and-popcorn experience and they can be made to pay a differential price via expensive popcorn.  Finding a way to extract higher prices from those with higher reservation prices is the name of the game.

But the author lets this explanation go because no movie theatre is a monopoly; any price discrimination profits made would be competed away.  In Landsburg's brief discussion of price discrimination, he mentions "monopoly" twelve times.  But this is where standard vanilla-flavored textbook econ misleads.  We do not live in a world where there are "perfect" competitors and "monopolists" -- and occasional "oligopolists" if you like game theory.  Rather, there are  varying degrees of pricing power everywhere.  In a world of "imperfect" competition and limited comparison shopping (and only 24 hours in each day), buyers are obliged to fork over some of their consumer surplus.  It happens all the time. 

Landsburg ends the chapter with his popcorn riddle left hanging in the air.  (He recounts all this as part of a discussion he has with a seatmate on an airplane.) I am certain that he gets my point, but he leaves the discussion where it is because he is seemingly attached to the standard model (where price discrimination is only practiced by "monopolists").  That's my point.

"Network Society"

Ed Glaeser has written on the enduring advanages of New York City; Joel Kotkin has been writing about the advantages and the re-bound of areas in what many once called "fly-over" country.  Both make good points and both phenomena are also complementary.

Economists know all about specialization and diversification and how these are dynamic and subject to innovation.  They also know about the charms of amenities (natural in California and cultural in New York).

Ever cheaper and ever better communications opportunities are the new normal and we get "The Network Society".  The label is not mine, but the title of a piece by the amazing Peter Drucker in the March 29, 1995 WSJ -- which I have clung to for classroom use.

Drucker saw that, "In 10 or 15 years, organizations may be outsourcing all work that is 'support' rather than revenue-producing, and all activities that do not offer career opportunities into senior management."

Not the "death of distance", but the ever changing ways in which distance costs, communications costs and transactions costs re-shape the world.

  

Coase and land markets

Here is Russ Roberts' splendid interview of Ronald Coase, who is a treasure at 101 years of age.  Many good people have lives that are much too short.  But Coase puts his longevity good fortune to good use.

Part of the discussion involves the Coase Theorem -- even Coase's qualms about the label and many popular interpretations.

Suffice it to say that market transactions can take place that undermine the argument for Pigouvian taxes or subsidies.

My favorite example involves land markets, especially as in proprietary communities.  But discussions of the Coase Theorem rarely see Coase as a land economist.

Should deaf people locate next to airports?  Will deaf people locate next to airports?

In the simplest ceteris paribus case, a potential negative externality becomes an effective nullity.  In fact, the owners of the adjacent land would see it in their interest to
recruit deaf renters.

In a more complex case, the deaf renters as well as the landlords see the possibility --but trade it off against their real world alternatives.  Would the deaf outbid the warehouses? 

Jim Moore and I once tried to write down all of the possible trade-offs. Bidders compete for sites and site owners compete for the attention of bidders.  The bidders evaluate and trade off (i) the natural characteristics of sites; and (ii) access costs to and from other sites with respect to other locators whose accessibility is valued; and (iii) the positive and negative externalities that might be available because of proximities at each site.  The math is simple.  Too simple.  We never saw all of this as Coasian.

Utopians and murder

Matt Ridley wrote how "Red Tape Hobbles a Harvest of Life-Saving Rice" in this weekend's WSJ.  This is how he finishes:

"Golden rice"—with two extra genes to make beta-carotene, the raw material for vitamin A—was a technical triumph, identical to ordinary rice except in color. Painstaking negotiations led to companies waiving their patent rights so the plant could be grown and regrown free by anybody.


Yet today, 14 years later, it still has not been licensed to growers anywhere in the world. The reason is regulatory red tape deliberately imposed to appease the opponents of genetic modification, which Adrian Dubock, head of the golden rice project, describes as "a witch-hunt for suspected theoretical environmental problems...[because] many activist NGOs thought that genetically engineered crops should be opposed as part of their anti-globalization agenda."

It is surprising to find that an effective solution to the problem consistently rated by experts as the poor world's highest priority has been stubbornly opposed by so many pressure groups supposedly acting on behalf of the poor.

Utopians with an earth-bound agenda can be murderous.  This is an old story.

It is, of course, ironic that libertarians are routinely described as utopian.  But they are little more than Smithians, who want to take humans as they are, and who seek institutions (property rights and competition) that channel the impulses of humans as they are.

This means fewer laws, less politics, fewer visionaries, less coercion by majorities.  That's far less likely to be murderous.

Strong words, but take it from Ridley:

Vitamin A deficiency affects the immune system, leading to illness and frequently to blindness. It probably causes more deaths than malaria, HIV or tuberculosis, killing as many people every single day as the Fukushima tsunami. It can be solved by eating green vegetables and meat, but for many poor Asians, who can afford only rice, that remains an impossible dream. To deal with the problem, "biofortification" with genetically modified food plants is 1/10th as costly as dietary supplements. 

Some good news

Visit a developing country and what is the most important question to ask?  How big is your middle class these days?  Not surprisingly, there are few clear answers.  We expect that a growing middle class indicates an interest in liberal (19th century version) values and the possibility of market-led growth and stability.

To be sure, current events in Europe do challenge this comfortable view.

This piece from the FT offers a nice summary of the challenges to measuring the size of any country's middle class in any year:  Look at car ownership rates. The data in most places are pretty reliable,  And the news is good.  The world's middle class is about twice as big as we had thought.

And expect more "urban sprawl" (aka auto-oriented development).

H/T The Browser.

Sagacious

Kori Schake offers a succinct summary of polcies being pursued by Greece's new leaders. Give us more or we default. This may not play well with German voters, but it does tickle just enough Greek voters.

Bryan Caplan had it right when he wrote The Myth of the Rational Voter: Why Democracies Choose Bad Policies.

Rational ignorance had been an appealing idea. It makes economic sense that those without a direct stake in ballot issues, either do not vote or they vote on spurious grounds. Wrong. Most voters stay and retain emotional attachments to silly platforms.  Caplan shows that the individual's calculus comes down to sticking with bad ideas.  He surely got it right.

IPO

What is the most important thing we can say about what goes on in markets?  (a) a process of error correction by which prices are discovered; or (b) a process wherey market equilirium is found?

Google Scholar shows 22,000 entries for "price discovery" and 90,500 for "market equilibrium". 

Which one preoccupied traders in today's Facebook IPO?

Enough said.  Market participants have a lot to teach those who write about the workings of markets. 

Opportunity

Ross Selvidge points me to this news item about the Politechnico di Milano going all English.  We criticise south Europeans for being stalwarts, but this move points in the other direction.

English rules the world and that makes life easy for Americans. But it makes us less cosmpolitan and deprives us of the many ways that multi-lingualism makes us brighter and better learners.

There was once the opportunity cost argument.  Why spend time learning another language when you do not have to and can learn something else isntead?  But look at all of the "something elses" so many students take up instead.  I am waiting for an innovative school to make the case that they push foreign language excellence.

ADDED

Here is Jonah Lehrer ln the benefits of bi-lingualism.

Creativity in cities

Despite an unfavorable review in yesterday's NY Times, I enjoyed reading Jonah Lehrer's Imagine: How Creativity Works.  Creativity involves activities within and among brains. 

There are networks formed in our heads and there are networks that we form with others -- by which we get into their heads (and vice-versa).  In developing all this, Lehrer mentions the work of Jane Jacobs, Paul Romer, Ed Glaeser and many others who I have cited previously.

We get new things by discovering new combinations of old things (Romer).  But first we have to discover new ideas, which are new combinations of existing ideas -- from those ideas already in our heads as well as those in the heads of people in our network.  The latter is critical. Many of our social networks are formed in the urban spaces where we choose to live, work and play.

But spatial arrangements are also combinations of things we call land uses.  And the combinatorial space is again very large.  This last thought is not explicitly in Lehrer's book, but I have mentioned it several times on this blog.

In fact most combinatorial spaces are much too large for mere humans to identify a "best" or "near best" "solution".  That leaves a hugely important role for flexible land markets.

Slip sliding

Richard Thaler writes about "Slippery-Slope Logic" in this morning's NY Times. Slippery slopes are rhetorical devices.  As such, they may be good conversation starters, but that is all.  I get that. 

Thaler takes aim at Justic Scalia's "broccoli" comment during the recent oral arguments before the Court over Obamacare.  He ends this way:

More generally, we would be better off as a society if we could collectively agree to ignore all slippery-slope arguments that aren’t accompanied by evidence that said slope exists. If you are opposed to a policy, state your case based on the merits — not on the imagined risk of what else might happen down the road. The path of that road is so unpredictable that it may even produce a U-turn.

But on the other side of the discussion, look at Robert Levy and William Mellor's The Dirty Dozen: How Twelve Supreme Court Cases Radically Expanded Government and Eroded Freedom.  This is from their conclusion:

Over the past seven decades, the U.S. Supreme Court has rewritted major parts of our Constitution, including the General Welfare Clause, Commerce Clause, Contracts Clause, Non-Delegation Doctrine, and the First, Second, Fourth, Fifth and Fourteenth Amendments.

Constitional law is not my field, but the authors' case-by-case analysis of the "Dirty Dozen" is eye-opening.  I even wish that there had been more attention to slippery slopes over the past seven decades.

Load, aim, fire ... at own foot (or other body part)

Here are excerpts from an editorial in today's WSJ on an asinine proposal in Congress to de-fund the annual American Community Survey.  It speaks for itself.

The GOP's Census Takers ... Republicans try to kill data collection that helps economic growth ...

The House voted 232 to 190 to abolish the Census's American Community Survey, or ACS, which is the new version of the long-form questionnaire and is conducted annually. Republicans claim the long form—asking about everything from demographics to income to commuting times—is prying into private life and is unconstitutional.

In fact, the ACS provides some of the most accurate, objective and granular data about the economy and the American people, in something approaching real time. Ideally, Congress would use the information to make good decisions. Or economists and social scientists draw on the resource to offer better suggestions. Businesses also depend on the ACS's county-by-county statistics to inform investment and hiring decisions. As the great Peter Drucker had it, you can't manage or change what you don't measure.

The ACS costs about $2.4 billion a decade, which is trivial compared with the growth it helps drive. National statistics are in some sense public goods, which is why the government has other data-gathering shops like the Bureaus of Economic Analysis and Labor Statistics. The House action is like blaming the bathroom scale for your recent weight gain. 

Florida freshman Daniel Webster denounced the ACS as "the definition of the breach of personal privacy, the picture of what's wrong in Washington D.C., unconstitutional." This diminishes all the other things the government does that really are unlawful, especially since the Founders told Congress to enumerate the population "in such Manner as they shall by Law direct." As for privacy, anyone not living in a Unabomber shack won't be much inconvenienced by making this civic contribution. ...

This is pretty good, but I have some additional thoughts. To avoid purely political arguments over the division of labor between private and public sector efforts, as well as worries over which level of government performs which public function, think in terms of comparative advantage.  The ACS is something that the Census Bureau does best.  No one else can come close.  But should it be done in the first place?  The data have widespread uses and applications.  Finally, it is easy to agree with the idea that "basic" research is a government function.  Many (not all) ACS users are social scientists engaged in what we can call basic research.  To take a familiar example, Charles Murray's Coming Apart is (in my view) profound, appeals across the political spectrum, is widely read, and would not exist if the author did not have access to Census Bureau data.

Inspired designers subject to profit-loss

It's truism that one size does not fit all.  Yet, there are fads and some people have to re-learn the truism.  Here is a summary of U.S. pedestrian malls, showing a mixed record of success. 

It's safe to say that the designers of private malls, subject to profit-loss risk, will be less likely to be faddists. If they still are and if they are wrong, they pay the price, as they should. 

In a slightly different context, Chairman Mao suggested we let a hundred flowers bloom. But as Paul Romer has taught us, it is all about combinations.  Designers are the ones who discover newer and better combinations of elements.  Design a chair or design a shopping mall and many more than a hundred outcomes are possible.  The combinatorial space is daunting.  Inspired designers subject to profit-loss is the only approach that I can think of in light of the scale of the problem.

No "death of distance"

Is it a "flat world" or are agglomeration economies more powerful than modern electronic communications?  The next time you fly, see how many people do not fondle a communications device before take-off or after landing. But, then, these are the people who are physically going to or from someplace.

To get back to the question at hand, agglomeration economies win (over space as well as over time, as in path-dependence).  The case is well made by Enrico Moretti in The New Geography of Jobs.  The author cites plenty of facts (for the U.S.) and relevant theory.

Yet, in my view, Moretti stumbles twice.  Too much time is spent on the "decline" of U.S. manufacturing.  It is a jobs decline, but an improvement in productivity.  We went through all this with agriculture.  There is also too much in the way of "market failures" to be fixed by wise policy makers.  Although, to be fair, towards the end of the book a more ambivalent tone is achieved with respect to the track record of U.S. industrial policy.

I did very much like Moretti's discussion of the three types of agglomeration.  1. Size (of metro area) matters; 2. Local "ecosystems" of venture capitalists physically near the inventors and tinkerers is important. ("An increasingly important part of the job involves active monitoring, nurturing and mentoring of new businesses." p. 157); and 3. Knowledge spillovers matter; important connections happen in the elevator, in the office, or anywhere within a zero to 25-mile radius.

"Death of distance" indeed.

Bottom up

Everyone talks about diverse neighborhoods, but who actually does something about them?

To be frank, I had to see Brooklyn's Ditams Park and its Cortelyou Road to believe it. I have never seen such a range of people from the corners of the world as well as the U.S. I was able to infer all this from signage on door fronts and restaurants. It was all pretty amazing.

I got the story of how all this happened from Jan Rosenberg, one of the movers, who explained it all to me -- and sent me to this blog post from 2008 where she had described the work that was done.

It was bottom-up and it was sponatenous and it involved some energetic local people getting serious.

I get very antsy about the "visions" propounded by public officials carrying water for developers and exploiting eminent domain. Even worse, these eposides do not deliver like Jan Rosenberg and her Ditmas Park neighbors.

Good news

I had missed the boat, but it is true that NY has legalized it's gypsy acabs. From what I understand from a chat with a a driver, the legalized drivers can only pick up fares outside mid-town Manhattan, but they can drop off fares anywhere. My one trip (from participating on a panel at CCNY to my hotel in mid-town) with Harlem Car & Limousine was a flat fare. I have yet to find out more, but I like the demonstration effect. This is great ammunition for advocates of legalization in other cities. Will it spread? Stranger things have happened.

Call it "social equity"

Over at Bleeding Heart Libertarians, there is a fascinating discussion of what the phrase really means.  In fact, the site name's sub-head says "Free markets and social justice".  The first part is pretty clear, but the second part is up for grabs.

Philosphers make it their business to probe gems like "social justice" and that's all to the good.  The problem is that weasel words cause serious problems in other realms.

This morning's WSJ includes an editorial headed this way"  "The New Earmarkers ... Cost analysis for transit projects gives way to 'social equity.'"

The text mentions the following:

Under the existing New Starts guidelines, local governments competing for grants must compare the cost of their transit projects with alternative solutions. The Obama Administration's proposed rules would do away with this comparative cost analysis. The new rules put more weight on "social equity and environmental considerations." Such as? Such as the "degree to which policies maintaining or increasing affordable housing are in place."

At the top of the FTA's queue is San Francisco's proposed Chinatown subway, which couldn't get a full funding grant agreement under a more rational review process. The 1.6-mile line will cost $1.6 billion to build and draw just 5,000 new daily riders. Subway commuters would have to descend eight floors to catch the train and then walk the length of four football fields to connect with light-rail lines.

Call it "social equity" or any such thing and the craziest public expenditure is rationalized.  Earmarks, by definition, reward favored constituencies.  How equitable is that? 

California now has the most potholed roads and highways in memory.  Many out-of-staters would be shocked.  Expenditures are hoplessly politicized and basic services are run down.

If the Chinatown subway's $1.6 billion were left instead to generate a 2% annual rate of return, it would make $32 million available each year.  At $75,000 to re-pave one lane-mile, we could rescue 425 lane-miles of California's awful roads each year.

Everyone know that 425 lane-miles of road serves many more people than 1.6 miles of subway.  But does it achieve more "social equity"?  I bet it does.  And I cannot even define "social equity".