Connected and "Hyperconnected"

Many of us like cities.  We vote with our feet and choose to live in, work in, play in, and visit these places.  We also know that cities are good for economic growth which is good for people.  Many supply chains benefit from some degree of clustering.  This includes the less formal supply chains by which we become inventive and creative.

And these human chains also nurture our keen interest in sociability and groupishness.  And the latter feed back to the economic benefits.

Nicholas Christakis and James Fowler address the many ways that we connect. Some are well known.  Many others are worth learning about.  The authors offer a wonderful and readable survey in their Connected: How your friends' friends' friends affect everything you think feel and do.  They note that we are now "Hyperconnected" (their Chapter 8).  The book was published in 2009.  We must know be moving beyond the "hyper".

Most people who write about cities love "density" and use it to proxy for all the networking options cities make possible.  That story is much too interesting to leave it to one aggregate index.  

Politicizing the numbers

We know two things about most aggregate economic indices.  First, they are never simple.  Second, many of them are controversial and politicized.  The official poverty rate is a prominent example.  It can be fiddled up as well as down.

Many economists advocate consumption-based, as opposed to income-based, poverty measures.  This recent paper by Bruce Meyer and James Sullivan, two researchers who have spent serious effort on the question for some years, concludes:

Official poverty statistics suggest that poverty has increased over the past forty years. This claim is inconsistent with our results which show substantial improvements in income based poverty over the past forty years and even larger improvements in consumption based poverty, especially in the last decade. These poverty results are corroborated by other indicators of well-being for those with low income such as increases in car ownership and evidence of improved living conditions including larger living units that are more likely to have air conditioning and other features. While the deficiencies in the official poverty measure have been the subject of much previous research, most poverty scholars still rely on the official measure as the definitive measure of trends in poverty and draw important conclusions based upon it.

These views have been around for some time. But there is inevitable opposition to "defining poverty down".  The safety net is not adequate; we "need" a new and better net.  That goes with the idea of defining economic success and prosperity down.

At the other end of the spectrum, this week's Economist includes "Argentina's dubious poverty line ... rumbling stomachs, grumbling citizens".  This sounds like North Korea and the other economic failures.  Our people are well-fed, thank you.  This is all about defining political failure down.

Nothing new here.  Political agendas intrude on scoring and counting.

A good place to start

The Congressional Budget Office has a tough mandate and my impression is that they have worked hard to maintain a reputation for credible research.  They consider costs and benefits when asked; they are often tasked with related analytic work.  There are no slam-dunks in policy analysis, but CBO reports are often a good place to start.

Today's WSJ includes "Bill Aims at Rules' Costs, Benefits ...The measure would require an independent cost-benefit analysis of federal regulations."  We have heard this song many times before.  Common sense suggests that the costs and benefits of proposed rules are things we want to know about.  Again, knowing these is a good place to start.

The Progressives of one-hundred years ago were optimistic that governance could be reformed so that decision making would be more fact-based than had been the practice.  Since that time, various abuses of applied cost-benefit analysis have been cited as reason to dump the practice altogether.  But abuse can occur in any realm. It should prompt a demand for good analysis instead of a rejection of analysis.

It can be done and this is why I cited CBO.  Imperfect, to be sure, but a good place to start.

MR University

MR University is on the way.  Have a look.  Sounds very good.

While not watching the conventions

I have enjoyed all of Brink Lindsey's books and can say the same about his new Human Capitalism: How Economic Growth Has Made Us Smarter--and More Unequal.  He shows how U.S. economic dynamism has collided with what he calls cultural "stickiness".  This means that many are able to respond to incentives (high paying work in "new economy" sectors) and  thrive, but many others are unable or unwilling to respond.  The latter fall further behind.  The old "leisure class" were those at the top.  The new "leisure class" are those stuck at the bottom.  

Lindsey's concluding chapter ("Reforming Human Capitalism") argues for his favorite policy antidotes.  They are: "Maintain Economic Growth by Encouraging Entrepreneurship", "Reform K-12 Education by Unleashing Competition", "Compensate for Disadvantaged Environments through Early Childhood Interventions", "Combat Social Exclusion of Low-Skilled Adults", "Improve Higher Education by Limiting Tuition Subsidies", "Remove Regulatory Barriers to Entrepreneurship and Upward Mobility". In each case he cites recent research that supports these ideas.

Perhaps it is not a good idea read about all this while the political conventions are on TV.  Neither party's platform comes close to policies like the ones Lindsey suggests.  In fact, the platforms and speeches can be read as roadmaps for avoiding them.

This morning's WSJ includes a review ("The Grievance Brigades ... The most traditional branches of Western learning have been replaced by disciplines designed to serve radical political ends") of Bruce Bawer's The Victim's Revolution (which I have not yet read).  Perhaps I'll pass on that discussion.  Better to watch re-runs of political convention highlights on YouTube.

Wrong feedback

JP Morgan's Jamie Dimon was recently grilled by a Senate subcommitte re a $2 billion trading loss at the company.  If you are not a stockholder or have any business affiliation with the company, why do you care?  Why do U.S. Senators care?  Because everyone in the room (including Dimon) assumed that large losses are now subject to taxpayer bail-out.  That is where we are in 2012.

Today's NY Times includes "At Least Fun In the Sun Isn't Banned For Now ..." which takes some digs at nanny-state regulations proposed, and many adopted, in California.  It's a silly piece that looks for contraditctions with the area's supposed "frontier menality" heritage.  Blue-state California is, of course, anything but frontier-minded.  Look at California's legislature.

In modern America, we are linked by the ever more popular presumption of socialized losses which does make every other private act a potential "externality". There is a feedback loop here. If taxpayers foot the bill for my bad health habits, they can argue that my behaviors are their business. 

Where do feedback loops end?  It's hard to say and it can be bad.

ADDED

Speaking of bail-outs, here is a must-listen conversation between Neil Barofsky and Russ Roberts 

Comfortable assumptions

Writing in the September, 20120, Commentary, Joseph Epstein (full text gated) notes, "... the comfortable assumption that political liberalism and moral goodness are one and the same."  It is a clear and simple description of most of the people I encounter, in person or via their writing.

Dan Klein writes about "The Forsaken-Liberty Syndrome: Looking at Published Judgments to Say Whether Economists Reach a Conclusion."  He contrasts the on-record conclusions by economists addressing key policy issues in their research on eleven specific issues with opinions on these eleven voiced by economists at-large. Klein describes these contrasts in terms of what is revealed about at-large economists' attitudes toward liberty.  He asks:  "Does the set [of eleven essays] serve as meta-evidence of a forsaken-liberty syndrome wherein liberalization finds more consistent support among on-record economists than at-large economists?"

I think that the Epstein description fits the at-large economists Klein describes. Attachment to vague notions of moral goodness comes easy when we are comfortable assuming that our liberty has been secured.

Problem with "market-friendly" interventions

Buy a car and you incur significant fixed costs.  The more you drive, the lower your average cost.  When ownership taxes add to the fixed cost, they encourage more driving.

Research by National University of Singapore economists investigates the specifics for that city's Certificate of Entitlement (COE, applied to auto ownership) plus its Additional Registration Fee (ARF, applied to new car purchases).  Specifically, as the tax goes up by 1 percent, kilometers driven increase by 0.345 percent.

Singapore planners have been widely praised for having implemented road congestion pricing in 1975.  The other taxes were meant to complement it.  But even "market-friendly" interventions can have a downside that has to be considered.  In this case, the COE and the ARF work against the congestion tax.

Who "killed" the Chevy Volt?

The short answer is market reality.

But smart people "know" who "killed" General Motors' EV1.  In fact, they also "know" who "killed" Los Angeles' original street car system (Snell Report).  Conspiracies are easier to digest for some than the workings of markets.  The fact that markets reflect revealed preference realities makes it extra important to conjure fairy tales.

We are not quite ready for "Who killed GM's Volt?"  But it may be time to outline some screenplays and talk to people about financing possibilities.

Today's WSJ reports "GM Curbs Volt Plant Production ... General Motors Co. said it plans to suspend production of its battery powered Chevrolet Volt for 26 days as part of a move to pare excess inventory."  Uh oh!

GM had been declining for many years and should have been allowed to go into normal bankruptcy.  But politicized bail-outs of large unionized companies are hard to resist.  To compound the problem, picking "green" winners is also politically appealing.   Add the appeal of federal consumer tax credits, which are topped off in some states.

Put them all together and we get the Chevy Volt.  Explaining away the failure should be simple.  It's been done many times.

ADDED

Randall Holcombe points out that MPG goals are not policies.  The goals are feel-good soothing.  The policies (above) ar the killers.

Helping the NY Times to be helpful

When the Republicans hold their conventions, the New York Times usually offers its readers a helpful guide to the various species of Republican. I recall that in 2004 when the event was in NYC, the Times felt the obligation to help readers in case one actually encounters a Republican in the streets of the city.  NYC is supposed to be as cosmopolitan as the U.S. gets.

But perhaps Times editors are not as helpful as they think. Today's guide describes the Party's Libertarians as "pro-business".  It's an unfortunate but profound error.  Being "pro-market" and "pro-business" are very different.  Most business people are eager to become crony capitalists and, thereby, a serious threat to economic success.  Crony capitalism is where and how those on the left and the right hold hands.  It is also the source of a long list of policy errors and economic failings.

A helpful guide to Times writers and editors must start with a primer which teaches that "pro-market" and "pro-business" are anything but synonymous.

ADDED

Mark Perry hits the same theme.

Two exotic water options

Matt Kahn rightly call attention to the fact that public discussions of "drought" never mention the water pricing option.  Subsidized state-allocated water is surely a big part of the problem.  But politicized allocation is deemed by many to be somehow superior to market allocation.

Today's WSJ includes "Your Are Drinking What? ... With water in short supply across the country, it's time to take a serious look at recycling sewage."  Even the WSJ's writer cannot bring himself to note the pricing alternative.  Yes, short of privatization, state agencies can price.  They do own the meters.

But pricing is still viewed in many quarters as exotic or sinister or not "fair" -- to the extent that drinking the treated urine of the population at-large is a more palatable option.

I am OK with the science of recycling wastewater.  If we can discuss it in polite company, perhaps we can also discuss the pricing option. 

The big win-win

Craig Newmark has fun with this list of young economists' big ideas. 

But on a more serious note, James Surowiecki writes about The Track-Star Economy. He cites all of the athletic successes at the London Olympics by foreign atheletes who trained in the U.S.  He elaborates on the importance of letting in the "stars" from any an all fields.  But U.S. immigration policy is not there yet.

The national debate on immigration makes it seem as if immigrant workers were competing with native-born workers for shares of a fixed pie. That’s always a questionable assumption, but in the case of skilled immigrants it’s simply wrong. Their presence makes the pie bigger for everyone.

In theory, fixing the system should not be a tough thing to do, since the immigration of highly skilled workers is one of the few issues on which there is genuine bipartisan support. Mitt Romney and Barack Obama, remarkably enough, have called for streamlining the system in similar ways, and John Conyers, a Democrat, and John Chaffetz, a Republican, are sponsoring a recent House bill that would make it easier for small-business owners in the U.S. to get green cards. The catch is that, for all this bipartisan comity, there is no urgency in Washington on the issue, and voter anxiety about the weak economy and the scarcity of jobs gives politicians an excuse for inaction. Tough times have always lent themselves to nativist sentiments and closed-door policies. But in the case of highly skilled immigrants these policies are a recipe for stagnation. The U.S. is excellent at importing cheap products from the rest of the world. Let’s try importing some human capital instead.

I agree.  But the international talent pool also includes many non-stars and each should have the chance to go where he or she is most valued.  Even the non-stars should find their niche (and thereby enrich) any number of supply chains.  The real economic win-win is realized in this way.

Pesky critters and trade-offs

It's easy to be critical of the "green jobs" mantra.  Free lunches are very rare. 

At the risk of a compound bad pun, I have to point to "To Battle Iguanas, Purto Rico has a New Plan: Put Them on Menu ... Overrun With Reptiles, Island Hopes to Export Their Meat ..." (WSJ, August 20). Yes, there are countries near Puerto Rico where people like to eat these green-toned critters. The story mentions that the export project would double as pest control and create jobs too.

Speaking of "green" it's not pretty when politicians talk about energy sources and espouse support for "all of the above".  Federal subsidies currently do support all of them, but in vastly different magnitudes.  Federal support for "none of the above" would be best.

The WSJ recently contrasted the various levels of federal support on a "dollars-per-megawatt-hour" basis.  Just looking at the extremes, oil and gas get $0.64 per megawatt-hour, but solar gets $775.64.  That's a ratio of 1212.

It's sad that "all of the above" sounds good on the stump and on the evening news.

Up from the past

Here is Mark Perry on the 40th anniversary of the Club or Rome's report.  They were simply the latest in a long line of way off-base doomsayers.

Here is an updated worry ("The cost of cool") from today's NY Times.  What will we do when the world's poor start consuming air conditioning?

There are some things the author might think about.  First, if the world's urban poor become consumers of A/C it is because they have become more productive.  The pool of goods and ideas will have expanded.  Second, the technology is never static and it is a good bet that A/C will become more efficient.  Third, pricing externalities is always an option.

There have always been forces may be at work that the pessimists overlook

This week's Economist includes "A continent goes shopping ... Africa's growing middle class has money to spend."  The picture, like all others, includes setbacks and rough spots.  But who on Earth wants to swap places with their ancestors?  The future has its challenges, but the past was much worse.

ADDED

Ronald Baily has much more on the failed doomdsay theme.

Reach for the rose-colored glasses

Political campaigns, especially presidential elections, can be depressing.  Robert Barro recently cited the astounding level of economic ignorance that both presidential candidates had embraced (in the WSJ):

The level of economic commentary during the presidential campaign has not been high. Democrats have accused Mitt Romney of the crime of shipping jobs abroad while at Bain Capital, and Mr. Romney has responded by denying the charge. No one takes the economically appropriate position for a job outsourcer: "Yes, I shipped some jobs abroad to save money, and this choice was correct not only for my company but also for the U.S. economy."


Outsourcing is essentially the same as importing a good from a foreign country. In the former, a company buys foreign labor services. In the latter, a company buys the good that embodies foreign inputs, particularly labor services. So, it makes no sense to be a free trader with respect to imports and exports of goods while opposing outsourcing. Opposing either is protectionism.

The central issue is why free trade is attractive. ...

One day later, Jerry Brown (LA Times Aug 15) showed why state-level campaigns are not much better as he plugged for a California tax hike ballot measure.

Flanked by education and labor leaders, dozens of schoolchildren and his dog, Sutter, Gov. Jerry Brown formally kicked off his campaign Wednesday for Proposition 30, the measure on the November ballot that would raise taxes on state sales and incomes of more than $250,000.


Brown used a Sacramento high school as the backdrop for the event, calling Proposition 30 a choice about whether Californians want to provide more funding for schools. In vintage Brown style, he quoted from the New Testament to make his pitch to voters, urging them to ask the state’s wealthiest residents to pay higher taxes to boost education spending.

“To those who much has been given, much will be required,” he said quoting from the Gospel of Luke, saying the state’s highest earners “now have an opportunity to give back.”

There are, of course, an uncountable number of similar examples. Tuning out is tempting but we live in a world where politicians matter. They influence huge chunks of GDP and much more.

But I always reach for the rose-colored glasses.  Dean Stansel pointed me to his "An Economic Freedom Index for U.S. Metropolitan Areas."  There is apparently significant variability (and choice) at this level of geography.  Half of the twenty lowest-ranked metro areas are in California.  Eleven of the twenty top-ranked ("freest") areas are in Florida.

Cities and growth

David Emanuel Andersson has ably edited The Spatial Market Process, which includes various efforts (including one by me) to apply Austrian Economics to cities. Jane Jacobs is cited often.

Everyone has seen footpaths worn over lawns in places where the designer should have built a path, but did not. Whereas, markets help to align quantities supplied with quantities demanded, getting highway networks that align supply with demand is a peculiar problem. There are many highway links that are over crowded and occasionally ones that are over capacitated. And on some lawns we even get spontaneously developed links.

All of us participate in various supply chains, including various networks which I have called “supply chains for ideas”. We form the demands and occasionally also lend a hand on the supply side.

For physical entities, route choice, mode choice, trip frequency choice and trip scheduling are mostly in our hands. When it comes to highways, the supply side is out of our hands; when it comes to social networks, we create the demands as well as the network at the same time.

Moving things usually involves transactions. But we also interact in ways that do not involve transactions. These are the negative and positive externalities. They do not involve networks, but they do involve nearness because they dissipate with distance. What we call “the technology” forms the necessary conditions for an externality, but propitious locations determine which ones become realized.

When the dust has settled, there are patterns of location (land use), network flows of people and goods and ideas -- and realized positive as well as negative externalities. All this is selected from a huge combinatorial space.

This is a very big order, made much bigger and much more interesting because the dust never settles. It is always agitated.

We get economic growth (including the formation of good ideas) when and if the pieces are continuously re-oriented beneficially. The pieces do this best when price signals are clear and when a clear rights regime is in place. And even in our world of second-best, we usually manage to move ahead.

All of this is way beyond abstract theories of cities. Rather, it applies the best economic theories to understanding cities.

Politicians gone wild

Acemoglu and Robinson asked "What's the Matter with Argentina?"

They use its history as a case study of what goes wrong when "extractive institutions" run roughshod.

 Patrick Sullivan points me to the Seattle Times coverage of the Buenos Aires subway shutdown.

"A strike that began Aug. 3 over wage disputes has halted subway service in Argentina, where a million commuters are stuck amid a power struggle between Argentina's president and the mayor of Buenos Aires. ...

You have to read the whole thing to believe it.  We are almost used to the craziness that comes out of Argentine politics.  But this is pretty amazing.

Just when we lose patience with home-grown politicians, we must not forget to look at how their counterparts act in much of the rest of the world.   

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.