On more than one occasion, Milton Friedman has recently praised Alan Greenspan's handling of the money supply. Considering the source, this is very high praise. The price of Greenspan's guidance was a credit-induced investment boom in the late 1990s --with the post-2000 bust being the standard result. We now have a credit-induced housing boom -- and people are rightly wondering when and where the other shoe will fall.
Yet, everyone knows that housing is different. We also know that the various investment cycles are never in synch.
And a recent FDIC examination of a large number of housing booms shows that most of them end in stagnation and not in a "bust".
Besides, as this morning's WSJ "Ahead Of The Tape" reminds us, "bubbles don't end when everybody is screaming about how there is a bubble ..."
Tuesday, May 24, 2005
Monday, May 23, 2005
Fair taxation
Forbes (June 6) reprints Steve Forbes' testimony ("The Federal Income Tax: Start Over!") before the President's Advisory Panel on Federal Tax Reform. He does a fine job of promoting his favorite idea, the flat tax to replace the federal tax collection apparatus.
"There isn't a human being alive who knows what's contained in the federal tax code. To put it in perspective: Abraham Lincoln's Gettysburg Address, which defined the American nation, is 272 words in length. Our Declaration of Independence is some 1,300 words. The Bible, which spans several thousand years of human history, is 773,000 words. But the federal tax code, with all its attendant rules and regulations, is 9 million words and rising.
"Since 1986, when the last serious attempt at tax simplification was made, the code has been amended 14,000 times. Its length has grown by 3 million words ...
"Billions of hours of lost productivity -- the equivalent of 3.3 million full-time jobs are squandered on tax compliance. At last count, A,ericans spent a staggering 6.6 billion hours perparing their tax forms."
Two obvious questions are these: 1) How in the world does the U.S. economy muster a respectable performance in light of the federal tax monstrosity? and 2) How did we get into this fix?
Forbes refers to his flat tax proposal as "fair". But, because no one can agree on what is or is not "fair", we get a code that is infinitely complex -- so much so that the assessments or discussions of "fairness" become buried in complexity and the result is incomprehensibility and ambiguity.
We invoke the fairness standard, we cannot define it, and we do what we do as a result.
"There isn't a human being alive who knows what's contained in the federal tax code. To put it in perspective: Abraham Lincoln's Gettysburg Address, which defined the American nation, is 272 words in length. Our Declaration of Independence is some 1,300 words. The Bible, which spans several thousand years of human history, is 773,000 words. But the federal tax code, with all its attendant rules and regulations, is 9 million words and rising.
"Since 1986, when the last serious attempt at tax simplification was made, the code has been amended 14,000 times. Its length has grown by 3 million words ...
"Billions of hours of lost productivity -- the equivalent of 3.3 million full-time jobs are squandered on tax compliance. At last count, A,ericans spent a staggering 6.6 billion hours perparing their tax forms."
Two obvious questions are these: 1) How in the world does the U.S. economy muster a respectable performance in light of the federal tax monstrosity? and 2) How did we get into this fix?
Forbes refers to his flat tax proposal as "fair". But, because no one can agree on what is or is not "fair", we get a code that is infinitely complex -- so much so that the assessments or discussions of "fairness" become buried in complexity and the result is incomprehensibility and ambiguity.
We invoke the fairness standard, we cannot define it, and we do what we do as a result.
Sunday, May 22, 2005
Decisions, decisions
The economic decisions that households in various straits make are hard to fathom (or predict). That's the nature of the beast. U.S. households save very little (per BEA which compares incomes [not from all sources] with spending) or they have been adding to net worth at a fast clip -- even when the accounting excludes home appreciation, according to the NY Times' Daniel Gross ("Is It a Savings Crisis Or a Math Error?").
The discussion should prompt economists to consider the weights to be attached to the two measures,ones that would best predict consumption, work, more saving, etc. All that we now know is that these weights are not likely to be zeroes and ones.
Untill we know more, I prefer 50-50 -- and an end to the idea that it is the one or the other that matters.
The discussion should prompt economists to consider the weights to be attached to the two measures,ones that would best predict consumption, work, more saving, etc. All that we now know is that these weights are not likely to be zeroes and ones.
Untill we know more, I prefer 50-50 -- and an end to the idea that it is the one or the other that matters.
Saturday, May 21, 2005
The fight over judges
In "The Hapless Toad" Atlantic Monthly (May, 2005), Benjamin Wittes writes: "Amid all the liberal hysteria about the threats posed by a conservative Supreme Court, one threat tends to be ignored -- and it happens to be the biggest one."
No, not repeal of Roe v Wade, actually the biggest red herring. Were it repealed, how many states would outlaw abortion? Very few.
Wittes worries about conservative interpretations of the commerce clause. Last week's ruling re interstate wine sales pitted states-rights advocates vs commerce-clause champions. Many of us like it when protectionist measures are voided -- but we also know that a wide-open commerce clause was used to accommodate the worst New Deal legislation. There are good reasons for last week's court split -- and for the readers of the Atlantic to worry.
No, not repeal of Roe v Wade, actually the biggest red herring. Were it repealed, how many states would outlaw abortion? Very few.
Wittes worries about conservative interpretations of the commerce clause. Last week's ruling re interstate wine sales pitted states-rights advocates vs commerce-clause champions. Many of us like it when protectionist measures are voided -- but we also know that a wide-open commerce clause was used to accommodate the worst New Deal legislation. There are good reasons for last week's court split -- and for the readers of the Atlantic to worry.
Friday, May 20, 2005
Attention shoppers
It often takes the perspective of a foreigner to tell us interesting things about ourselves. De Tocqueville famously did so in 1831 and on the bicentennial of his birth, The Atlantic Monthly asked Bernard-Henri Levy to write "In the Footsteps of Tocqueville" (subscribers can download the full text; first installment in the May, 2005, issue).
Curiously, the writer is surprised by Americans' ideologies and ideologues, both of which he had expected to see less of than in France. He also sees assimilation (and aspirations to assimilation), moreso than in his homeland.
Levy also visits the Mall of America -- but neglects to mention that is has a much more powerful hold on Americans than all of our ideologues put together. More Americans shop than vote and more Americans care to be savvy about shopping than about politics.
That's not all bad.
Curiously, the writer is surprised by Americans' ideologies and ideologues, both of which he had expected to see less of than in France. He also sees assimilation (and aspirations to assimilation), moreso than in his homeland.
Levy also visits the Mall of America -- but neglects to mention that is has a much more powerful hold on Americans than all of our ideologues put together. More Americans shop than vote and more Americans care to be savvy about shopping than about politics.
That's not all bad.
Wednesday, May 18, 2005
Updates
Updating two recent blogs,
(i) David Sucher writes that my take on global warming and the Copenhagen Consensus was wide of the mark. The concern was more with the proposed antidotes than with the actual problem. The Economist wrote on April 29, 2004, "Policies to deal with global warming do not produce the short-term gains of many other development policies." Thank you, David.
(ii) The LA Mayor's votes are in and all of the reports of Antonio Villaraigosa's win are incomplete. The winner apparently received 261,000 votes vs the incumbent's 184,000. The LA Times reoports that of the City's 3.8 million, only 1.4 million are registered to vote. Of these, the winner received 18.6% while the incumbent came in with 13.1%. More than 68% of those registered stayed away. All of this in a City where approximately 1.9 million are eligible to vote (over 18 and citizens). The proportions, then, were more like 13.7 % for the winner, 9.7% for the looser and 75% for "whatever".
In any case, the morning after is no time to parade on anyone's reign.
(i) David Sucher writes that my take on global warming and the Copenhagen Consensus was wide of the mark. The concern was more with the proposed antidotes than with the actual problem. The Economist wrote on April 29, 2004, "Policies to deal with global warming do not produce the short-term gains of many other development policies." Thank you, David.
(ii) The LA Mayor's votes are in and all of the reports of Antonio Villaraigosa's win are incomplete. The winner apparently received 261,000 votes vs the incumbent's 184,000. The LA Times reoports that of the City's 3.8 million, only 1.4 million are registered to vote. Of these, the winner received 18.6% while the incumbent came in with 13.1%. More than 68% of those registered stayed away. All of this in a City where approximately 1.9 million are eligible to vote (over 18 and citizens). The proportions, then, were more like 13.7 % for the winner, 9.7% for the looser and 75% for "whatever".
In any case, the morning after is no time to parade on anyone's reign.
Tuesday, May 17, 2005
Predictions and perspective
The Doomsday people have been wrong every time. Will they finally be right on global warming? No one can know but their batting average is a fact of life.
An interesting and temperate approach is by Indur M. Goklany, who asks: "Is Climate Change the 21st Century's Most Urgent Environmental Problem?" We know that the Copenhagen Consensus had concluded that it is not.
Goklany looks at the plausible "good", "bad" and "indifferent" consequences of climate change. Only if these are understood, can the costs of Kyoto (or similar) protocols be placed into perspective. Yes, warmer weather also has beneficial effects. Here is one I like: the decrease in forest cover would be reversed. Goklany cites "Fingerprints of Global Warming on Wild Animals and Plants" from Nature (2003) that suggests that we would get more forest cover -- and some stemming of CO2 growth.
The food fight that is now underway detracts from a hard look at the complex synergies -- and a clearer perspective.
An interesting and temperate approach is by Indur M. Goklany, who asks: "Is Climate Change the 21st Century's Most Urgent Environmental Problem?" We know that the Copenhagen Consensus had concluded that it is not.
Goklany looks at the plausible "good", "bad" and "indifferent" consequences of climate change. Only if these are understood, can the costs of Kyoto (or similar) protocols be placed into perspective. Yes, warmer weather also has beneficial effects. Here is one I like: the decrease in forest cover would be reversed. Goklany cites "Fingerprints of Global Warming on Wild Animals and Plants" from Nature (2003) that suggests that we would get more forest cover -- and some stemming of CO2 growth.
The food fight that is now underway detracts from a hard look at the complex synergies -- and a clearer perspective.
Monday, May 16, 2005
Class and mobility
Tyler Cowan at Marginal Revolution cites some recent research by David Card on immigrant assimilation.
At the same time, the NY Times ("Class in America: The Shadowy Line That Still Divides") and the WSJ ("As Rich-Poor Gap Widens in the U.S., Class Mobility Stalls", citing work by Bash Mazumder at the Chicago Fed) are both running series on income mobility.
Trouble is that the best mobility studies rely on panel survey data which, by definition, exclude the immigrants. High immigration rates also undermine the value of income-gap stories. Until there is a way to fix these problems, all that we are left with is to try and balance the pro-assimilation good news from the immigrant studies with the mixed or negative news from the mobility studies.
It is safe to say that all those trying mightily to cross the southern border are not making some huge mistake. Or, then again, perhaps they are. Have behavioral economists looked at immigration yet?
At the same time, the NY Times ("Class in America: The Shadowy Line That Still Divides") and the WSJ ("As Rich-Poor Gap Widens in the U.S., Class Mobility Stalls", citing work by Bash Mazumder at the Chicago Fed) are both running series on income mobility.
Trouble is that the best mobility studies rely on panel survey data which, by definition, exclude the immigrants. High immigration rates also undermine the value of income-gap stories. Until there is a way to fix these problems, all that we are left with is to try and balance the pro-assimilation good news from the immigrant studies with the mixed or negative news from the mobility studies.
It is safe to say that all those trying mightily to cross the southern border are not making some huge mistake. Or, then again, perhaps they are. Have behavioral economists looked at immigration yet?
Saturday, May 14, 2005
Social capital and secession
This coming Tuesday, two seemingly indistinguishable mayoral candidates will be on the City of Los Angeles ballot. In the March, 2005, primary, these two and a field of others managed to turn out less than 27 percent of the 1.4 million registered voters -- out of a population of 3.8 million.
Public choice economists wonder why anyone votes at all. But there are two caveats to the rational ignorance hypothesis: (i) members of interest groups may identify a rational reason to support a candidate or a cause; and (ii) a vague feeling of civic responsibility, sometimes identified as "social capital". There may also be interaction between these two phenomena; as the domain of interest groups expands and more go to the polls because of (i), the stock of social capital is likely to fall.
Unattractive and uninspiring big-city politics exist because big cities exist. They have not been allowed to downsize because the rules of secession maintain the status quo. This was shown once again when citywide voters were allowed to overrule the wishes of San Fernando Valley residents to secede in 2002.
Social capital is unlikely to flourish in this context.
Public choice economists wonder why anyone votes at all. But there are two caveats to the rational ignorance hypothesis: (i) members of interest groups may identify a rational reason to support a candidate or a cause; and (ii) a vague feeling of civic responsibility, sometimes identified as "social capital". There may also be interaction between these two phenomena; as the domain of interest groups expands and more go to the polls because of (i), the stock of social capital is likely to fall.
Unattractive and uninspiring big-city politics exist because big cities exist. They have not been allowed to downsize because the rules of secession maintain the status quo. This was shown once again when citywide voters were allowed to overrule the wishes of San Fernando Valley residents to secede in 2002.
Social capital is unlikely to flourish in this context.
Wednesday, May 11, 2005
Nanny-state economists
Social Security is a Ponzi scheme backed by the federal government's power to tax. Most people (with notable exceptions on the hysterical left) have grasped this as well as the notion that even the power to tax has limits.
Reform may (or may not) include some small and restricted scope for individuals to manage private accounts. It is interesting how much hand-wringing this sets off in some quarters. The mere suggestion of a moderate retreat from paternalism is causing major heartburn for many people.
This morning's LA Times (front page) features, "Experts Are at a Loss on Investing ... Nobel winners and other top academics fumble the sorts of decisions Bush's Social Security overhaul would ask average Americans to make ..." The longish article goes on to quote Harry Markowitz, Robert Shiller, Joseph Stiglitz, Clive Granger, William Sharpe and others to the effect that (get this) because they have trouble managing their own portfolios, how can the average Joe possibly do it?
This is all jaw-dropping. Very few academic economists have accumulated wealth and a tiny subset of these may have done it by applying what they write about. And no one should be surprised. Proving theorems does not qualify as market savvy.
Faith in the nanny-state trumps any interest in the intergity of the individual. Which theorems support that faith?
Reform may (or may not) include some small and restricted scope for individuals to manage private accounts. It is interesting how much hand-wringing this sets off in some quarters. The mere suggestion of a moderate retreat from paternalism is causing major heartburn for many people.
This morning's LA Times (front page) features, "Experts Are at a Loss on Investing ... Nobel winners and other top academics fumble the sorts of decisions Bush's Social Security overhaul would ask average Americans to make ..." The longish article goes on to quote Harry Markowitz, Robert Shiller, Joseph Stiglitz, Clive Granger, William Sharpe and others to the effect that (get this) because they have trouble managing their own portfolios, how can the average Joe possibly do it?
This is all jaw-dropping. Very few academic economists have accumulated wealth and a tiny subset of these may have done it by applying what they write about. And no one should be surprised. Proving theorems does not qualify as market savvy.
Faith in the nanny-state trumps any interest in the intergity of the individual. Which theorems support that faith?
Tuesday, May 10, 2005
Policy failures
The Texas Transportation Institute (TTI) garners headlines each year when they publish their "congestion index" and accompanying data. This morning's LA Times cites some of this in "LA Traffic Moving a Bit Faster", although the TTI results are usually bleak and make good news copy.
What do we know?
1. Roads and highways are generally not priced in the U.S. and this policy failure is the real problem. Congestion, as every Econ 1 student knows, is the default rationing mechanism.
2. Suburbanization and the general spreading out of origins and destinations is the safety valve that generally prevents overall "gridlock" -- in spite of the policy failure.
3. TTI typically uses a ratio of available lane-miles vs vehicle miles traveled, usually by county. Yet, for large counties, as origins and destinations move from the core to the periphery, the improvements cannot show up in the TTI index.
4. Survey-based commuting data for the three major national surveys (the decennial census, the NHTS or the American Housing Survey) all tell a different story. They do pick up these relocations and improvements -- explaining the fact that correlations between these (aggregated to counties and metros) and the TTI results are very low.
5. Some of the usual suspects will use the problematic TTI reports because they want to keep on building the usual projects. They will not use them to promote congestion pricing because there is more cash flow in pork projects.
One policy failure begets many others.
What do we know?
1. Roads and highways are generally not priced in the U.S. and this policy failure is the real problem. Congestion, as every Econ 1 student knows, is the default rationing mechanism.
2. Suburbanization and the general spreading out of origins and destinations is the safety valve that generally prevents overall "gridlock" -- in spite of the policy failure.
3. TTI typically uses a ratio of available lane-miles vs vehicle miles traveled, usually by county. Yet, for large counties, as origins and destinations move from the core to the periphery, the improvements cannot show up in the TTI index.
4. Survey-based commuting data for the three major national surveys (the decennial census, the NHTS or the American Housing Survey) all tell a different story. They do pick up these relocations and improvements -- explaining the fact that correlations between these (aggregated to counties and metros) and the TTI results are very low.
5. Some of the usual suspects will use the problematic TTI reports because they want to keep on building the usual projects. They will not use them to promote congestion pricing because there is more cash flow in pork projects.
One policy failure begets many others.
Monday, May 09, 2005
Immigration and assimilation
Put a poor country next to a rich country and labor will move from the former to the latter. Even Japan has its share of undocumented workers from other parts of Asia.
Almost alone among the receiving countries, however, the U.S. has a history of assimilation. Robert A. Levine documents "Assimilation, Past and Present" in the current (final issue) of The Public Interest. Levine's analysis is sobering, even inspiring. He cites convergence of incomes, locations and language habits of second- and third- generation descendants of Hispanic immigrants with other Americans -- mirroring the paths of previous arrival groups. "The evidence is that there is no danger, at least from Hispanic Americans. Taking a larger view, it is clear that Hispanic immigration is part and parcel of broader American patterns of assimilation and integration. Their story, like that of the Irish, Jews and Italians before them, is an American story."
Things would be even better if politicians were somehow able to resist group-think and identity politics, go easy on welfare state policies and pander less to the crazies on either side of the immigration debate.
In any event, Levine's analysis is worthy and timely.
Almost alone among the receiving countries, however, the U.S. has a history of assimilation. Robert A. Levine documents "Assimilation, Past and Present" in the current (final issue) of The Public Interest. Levine's analysis is sobering, even inspiring. He cites convergence of incomes, locations and language habits of second- and third- generation descendants of Hispanic immigrants with other Americans -- mirroring the paths of previous arrival groups. "The evidence is that there is no danger, at least from Hispanic Americans. Taking a larger view, it is clear that Hispanic immigration is part and parcel of broader American patterns of assimilation and integration. Their story, like that of the Irish, Jews and Italians before them, is an American story."
Things would be even better if politicians were somehow able to resist group-think and identity politics, go easy on welfare state policies and pander less to the crazies on either side of the immigration debate.
In any event, Levine's analysis is worthy and timely.
Sunday, May 08, 2005
The value of mothers
What fun is it to know the value of everything and the price of nothing?
A Sunday NY Times piece on "The Economic Unit Called Supermon" cites, "[o]ne financial planning company ...[that] has in fact added up the annual salaries of workers among the 17 occupations engaged in by a busy mother (pet care, housekeeping, etc.) and come up with an annual estmated $707,126 annual paycheck ..."
The U.S. Census reports that there are now 82.5 million mothers in the U.S. They also report that 55% are working moms, most of whom are probably earning a lot less that $707k. Suppose, however, that 25% of the 82.5 million are stay-at-home moms actually adding in the high six figures to annual GDP.
That would more than double GDP!
I always knew that a mom's work is crucial and that leaving it out of GDP is a distortion. Only now do we have a handle on the dimensions of that omission.
A Sunday NY Times piece on "The Economic Unit Called Supermon" cites, "[o]ne financial planning company ...[that] has in fact added up the annual salaries of workers among the 17 occupations engaged in by a busy mother (pet care, housekeeping, etc.) and come up with an annual estmated $707,126 annual paycheck ..."
The U.S. Census reports that there are now 82.5 million mothers in the U.S. They also report that 55% are working moms, most of whom are probably earning a lot less that $707k. Suppose, however, that 25% of the 82.5 million are stay-at-home moms actually adding in the high six figures to annual GDP.
That would more than double GDP!
I always knew that a mom's work is crucial and that leaving it out of GDP is a distortion. Only now do we have a handle on the dimensions of that omission.
Saturday, May 07, 2005
More on "too many choices"
The Economist ("Profiting from obscurity: What the 'long tail' means for the economics of e-commerce") cites Chris Anderson's "The Long Tail" as reminding us the when and where there are very large numbers of choices, markets will rise to the occasion and develop tools to help buyers cope and sort. Amazon and Netflix regularly guide customers through their huge inventories ("customers who have bought x also like y"). Search engines, likewise, are getting ever more helpful in this endeavor.
Indeed, the discussion highlights the fact that niche markets in the the "long tail" will emerge and many will prosper as enough buyers are guided to the non-blockbuster and less popular speciality items. It is win-win.
So, on reflection, the naysayers are even more wrongheaded than one would have thought. Of course.
Indeed, the discussion highlights the fact that niche markets in the the "long tail" will emerge and many will prosper as enough buyers are guided to the non-blockbuster and less popular speciality items. It is win-win.
So, on reflection, the naysayers are even more wrongheaded than one would have thought. Of course.
Friday, May 06, 2005
Big and small business
Great questions beget wonderful research. In 1937, Ronald Coase asked: "Why do firms exist?" Since then, we have considered and have learned a lot about transcations costs; in the years of the Web, we have seen them fall dramatically.
Last Nov. 9, I posted Economic Census comparisons between 1997 and 2002 which showed dramatic sales increases by small (nonemployer firms), 32 percent over the five years, vs. 21 percent for all other firms.
The 2002 data include the very early internet years and so are only indicative. We now know that the number of firms with employees grew by 7.4 percent in five years and jobs per firm grew by a modest amount, from 15.8 workers in 1997 to 16.5 workers in 2002. Many markets had grown in response to more global opportunities and new scale economies became available in selected cases.
Globalization and the internet go hand-in-hand and the nature and the composition of industry changes accordingly. New giants appear and old giants recede. Yet, it is the rise of small firms and solo free lancers that is so exciting. Not just J.K. Galbraith, but the whole chorus that equates the market with "big business" is missing the fun part.
Last Nov. 9, I posted Economic Census comparisons between 1997 and 2002 which showed dramatic sales increases by small (nonemployer firms), 32 percent over the five years, vs. 21 percent for all other firms.
The 2002 data include the very early internet years and so are only indicative. We now know that the number of firms with employees grew by 7.4 percent in five years and jobs per firm grew by a modest amount, from 15.8 workers in 1997 to 16.5 workers in 2002. Many markets had grown in response to more global opportunities and new scale economies became available in selected cases.
Globalization and the internet go hand-in-hand and the nature and the composition of industry changes accordingly. New giants appear and old giants recede. Yet, it is the rise of small firms and solo free lancers that is so exciting. Not just J.K. Galbraith, but the whole chorus that equates the market with "big business" is missing the fun part.
Thursday, May 05, 2005
A great migration and a spontaneous order
In California, 40 percent of all new single-family housing is in a planned development; 60 percent of all new housing is governed by some form of community association. While most attention has been focused on a small subset of these, the gated communities, the larger significance of these developments is only slowly being recognized.
At the forefront of those helping us to understand the phenomena is Robert Nelson, whose new book, Private Neighborhoods and the Transformation of Local Government (Urban Institute Press) will be available this summer. I will be using it as a text in my summer class in USC's Master of Real Estate Development program.
Having evolved in Hayekian fashion, this new mode of living has important implications for governance, for development, and for the way that "public" goods and facilities are managed and supplied. "Market failures" and "government failures" are not the last word as long as institutions are flexible enough for institutional entrepreneurs to respond and provide superior alternatives.
Nelson carries the story much further because he suggests that the best way to help older neighborhoods (especially the poorer ones where conventional policy measures have been a bust) is to extend the benefits of a privately run neighborhood to its denizens. They would have new and stronger property rights and they will be less subject to corrupt and inept big-city governments (the real monopolists in America). It makes perfects sense once someone articulates it.
The move to private neighborhoods is one of the great migrations of our time. The prescription for the privatization of the inner city is timely. Both are beyond the pale for most planning professionals who fret over "sustainability", "regional jobs-housing balance", downtown redevelopment, and all sorts of related and irrelevant (and costly) silliness.
At the forefront of those helping us to understand the phenomena is Robert Nelson, whose new book, Private Neighborhoods and the Transformation of Local Government (Urban Institute Press) will be available this summer. I will be using it as a text in my summer class in USC's Master of Real Estate Development program.
Having evolved in Hayekian fashion, this new mode of living has important implications for governance, for development, and for the way that "public" goods and facilities are managed and supplied. "Market failures" and "government failures" are not the last word as long as institutions are flexible enough for institutional entrepreneurs to respond and provide superior alternatives.
Nelson carries the story much further because he suggests that the best way to help older neighborhoods (especially the poorer ones where conventional policy measures have been a bust) is to extend the benefits of a privately run neighborhood to its denizens. They would have new and stronger property rights and they will be less subject to corrupt and inept big-city governments (the real monopolists in America). It makes perfects sense once someone articulates it.
The move to private neighborhoods is one of the great migrations of our time. The prescription for the privatization of the inner city is timely. Both are beyond the pale for most planning professionals who fret over "sustainability", "regional jobs-housing balance", downtown redevelopment, and all sorts of related and irrelevant (and costly) silliness.
Wednesday, May 04, 2005
Too many choices
Virginia Postrel looks at the "too many choices" argument in "Consumer Vertigo", in the current Reason (apparently not yet online). Barry Schwartz's The Paradox of Choice is placed into proper perspective.
The Robin Williams character in Moscow on the Hudson demonstrated the consumer vertigo that many who had just emerged from the Marxist nightmare may have temporarily felt. It was a comic-poignant moment but Schwartz and his followers didn't get it. (Or they are kidding and I don't get it.)
We encountered a young couple in Leipzig recently and engaged them in conversation about how their lives had changed since 1989. The husband complained about "too many choices" in his new post-Communist life. I had the feeling that he was not kidding and (for a change) did not launch into my own patented response(s).
I think that most people agree that super-stores, the Web, Netflix, Amazon and (many, many) other modern outlets are great to have around -- and that there will always be cranks. Also, "too many choices" works as another "market failure" story for the connoisseurs of that stew. They are lost in the modern world.
The scary part is that those who were spooked by rapid change a hundred years ago made the twentieth century difficult in America and hellish abroad.
Yes, this morning's WSJ includes "Plan Paralysis: Why a Wealth of Choices In 401(k)s May Not Make Investors Rich" by Jonathan Clements. This is why we have dartboards -- which may (or may not) make investors rich. This also why we have index funds -- which may (or may not) make investors rich.
The Robin Williams character in Moscow on the Hudson demonstrated the consumer vertigo that many who had just emerged from the Marxist nightmare may have temporarily felt. It was a comic-poignant moment but Schwartz and his followers didn't get it. (Or they are kidding and I don't get it.)
We encountered a young couple in Leipzig recently and engaged them in conversation about how their lives had changed since 1989. The husband complained about "too many choices" in his new post-Communist life. I had the feeling that he was not kidding and (for a change) did not launch into my own patented response(s).
I think that most people agree that super-stores, the Web, Netflix, Amazon and (many, many) other modern outlets are great to have around -- and that there will always be cranks. Also, "too many choices" works as another "market failure" story for the connoisseurs of that stew. They are lost in the modern world.
The scary part is that those who were spooked by rapid change a hundred years ago made the twentieth century difficult in America and hellish abroad.
Yes, this morning's WSJ includes "Plan Paralysis: Why a Wealth of Choices In 401(k)s May Not Make Investors Rich" by Jonathan Clements. This is why we have dartboards -- which may (or may not) make investors rich. This also why we have index funds -- which may (or may not) make investors rich.
Tuesday, May 03, 2005
Amtrak
The Economist ("The end of the line?" 4/23/05) notes: "It is not hard to think of reasons to kill off Amtrak. In 34 years, it has burned up $29 billion in federal subsidies. And yet there are few passengers -- just 25.1 million in 2004, up slightly from 22.5 million in 2000. The vaunted Acela train arrives on schedule only three-quarters of the time and has had several glitches, including toilet doors that spontaneously fly open."
In comparison, regional/commuter air carriers served approximately 83 million passengers in 2001, with scant subsidies from taxpayers at-large. They were also more likely to be on-time and less likely to have toilet doors fly open.
Wendell Cox offers more background -- for those who can take it. For those who fret over the privatization alternative: any worse than the status quo is inconceivable.
In comparison, regional/commuter air carriers served approximately 83 million passengers in 2001, with scant subsidies from taxpayers at-large. They were also more likely to be on-time and less likely to have toilet doors fly open.
Wendell Cox offers more background -- for those who can take it. For those who fret over the privatization alternative: any worse than the status quo is inconceivable.
Monday, May 02, 2005
Slippery slopes
All debt is not equal. But the Keynsian legacy is to treat it that way: the more dissaving by one sector, the tougher it is for the others. And leave it at that.
Yesterday's NY Times ("The Outer Limits of Debt") cites an "IOU Pile" that stacks up Medicare obligations, Social Security obligations, "debt held by the public", etc. ($40.6 trillion total) and compares it to a conceptual overall national "sound debt limit" (150% of GDP = $18 trillion).
Economists like debts incurred for the sake of increased future productivity -- in the not too distant future -- and markets typically ration credit this way. This includes consumers-incurred debt -- which reflects the choices that individuals like, albeit skewed by various tax code carrots and sticks.
Government-incurred debt, on the other hand, rests on the dubious merits of choices incurred via representative government. The great sleight-of-hand is the fraud that government expenditures are "investments".
Be it Enron, or whatever, questionable accounting, once accepted is one very big slippery slope.
Yesterday's NY Times ("The Outer Limits of Debt") cites an "IOU Pile" that stacks up Medicare obligations, Social Security obligations, "debt held by the public", etc. ($40.6 trillion total) and compares it to a conceptual overall national "sound debt limit" (150% of GDP = $18 trillion).
Economists like debts incurred for the sake of increased future productivity -- in the not too distant future -- and markets typically ration credit this way. This includes consumers-incurred debt -- which reflects the choices that individuals like, albeit skewed by various tax code carrots and sticks.
Government-incurred debt, on the other hand, rests on the dubious merits of choices incurred via representative government. The great sleight-of-hand is the fraud that government expenditures are "investments".
Be it Enron, or whatever, questionable accounting, once accepted is one very big slippery slope.
Sunday, May 01, 2005
Elite opinion
Good odds are the best that we can hope for in this world and I like these odds:
- Economic freedom is good for prosperity.
- Prosperity creates a demand for political freedom as well as more economic freedom.
- Prosperity and growth are the best antidotes to poverty.
- There is an environmental Kuznets curve and prosperity is good for the environment.
- Democracies are loathe to make war on each other.
In other words, property rights are amazingly cost-effective. All of this makes the current fight in the U.S. Senate about putting pro-property rights judges on U.S. courts (including the Supreme Court) so very important.
While there is growing scholarship that elaborates all of the bullet points, much of elite opinion is still hostile (and/or uninformed). This is why Jeffrey Rosen's "The Unregulated Offensive" (link may no longer work) in The New York Times Magazine of two weeks ago (and the responding letters to the editor in today's edition) so interesting.
Rosen began with: "They believe an individual's economic RIGHTS [caps are his] are inviolable. Which leads them to NOT believe in the constitutionality of the Environmental Protection Agency, the Occupational Safety and HEALTH adminsitration, Social SECURITY and the minimum wage. They have built a NETWORK of scholars, public-interest lawyers and sympathetic activist judges. The next SUPREME Court appointment could be one of theirs."
I saw this and imagined fainting spells among Times readers, from Connecticut to Malibu. Those who steeled themselves to read on would have encountered a well written (one hopes thought provoking) piece.
The response letters in today's edition are, for the most part, pretty tame. One writer links property to slavery, suggesting that he is out of intellectual ammunition.
Some very strange things on judicial confirmations may still happen in the U.S. Senate but I voted for the incumbent President twice mainly because I feared the rear-guard judicial doctrines and appointments that would be forthcoming from the Kerry-Biden-Kennedy-Boxer-Dodd group.
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