Elections, war, peace and tech gadget addiction

Very few people in Iowa will soon caucus in that state's primaries. Political junkies feast, nevertheless. 

Voter participation in the U.S. is low. Public choice economists say they know why: most people have figured out that the odds that their vote can make a difference are very low. Theorists call their disinterest "rational ignorance". Outsized influence then accrues to interest groups. Those who cannot pass up team sports also remain involved -- for the thrills.

Buchanan's "Politics without romance" represents profound insights. Bryan Caplan goes further and suggests irrational ignorance.  Many of those who do vote (and/or participate somehow) embrace policies that will actually hurt them.  In a recent post on his blog, Caplan opines that most Americans' politics can be described in terms of their ADHD (Attention Deficit Hyperactivity Disorder) -- and that can be a good thing; they espouse awful policies but their ADHD causes them to not embrace these with any tenacity.  We are saved from the full consequences of the worst policy choices by a general lack of determination and follow-through.

Awful political choices have been with us through recorded history. Witness the many pointless and horrific wars. Steven Pinker sees these declining; our worst instincts are (very slowly) receding. That or mass ADHD, as we sink into in ever more tech gadget addiction.

LA transit (again)

Today's LA Times reports on transit in LA this way:  "Southland transit agencies report shrinking ridership as investments continue to grow." Spend-more-get-less" has been going on for years. What is new is that this has finally been "discovered" by the Times.

But "Metro plans to spend more than $12 billion over the next 10 years to build two new rail lines and three extensions, the largest capital investment of any transit agency in the country." This speaks for itself. The included graphic shows the high-water mark for transit use in LA since 1985 -- just before authorities began diverting funds to rail -- and when there were fewer people in the region -- and fewer low-income immigrants.

In 2010, Clifford Winston wrote:  "Although U.S. cities have spent close to $100 billion since 1970 building, and billions more operating, new urban rail transit lines, ... less than 5 percent of all commutes to work were taken on urban transit in 2004, down from 21 percent in 1960." (p. 61). That was then.

These mega-projects were supposed to be game-changers and "to entice people out of their cars." Hasn't happened.  People and planners are often not on the same page.

Might Uber (and similar outfits) be the game-changer? Perhaps. Just like cheap energy: not because of policy but in spite of it. City hall cronies in many places work hard to stifle the Ubers.

ADDED

There is an endless parade of these disasters. Here is one more. What do they all have in common?

Culture, language, cities

Napoleon, the Corsican, played heavily on French nationalism; Stalin the Georgian, ended up doing the same with Russian nationalism; Hitler, the Austrian, played on the dreams of German nationalism. Can we say that nationalism is pliable and manipulable? This is a theme of Benedict Anderson's Imagined Communities. Similar ground is covered by Joseph Henrich in his The Secret of Our Success.

I had previously cited the Yuval Harari book which makes the point that we humans dominate the planet because of our great success forming and working in teams. He cites our tendency to create the stories ("imagined orders") that form the basis for teams. Most of us become fans of various sports teams. Many others are attracted to the team aspect of politics. Still others revel in nationalism(s) or even strong regional alliances.

Nationalisms form around language groups. The ability to learn from each other is the key -- and common language makes that possible. But how did we get language? This fundamental ability is Henrich's favorite theme: Our cumulative (and continuing) culture-gene co-evolution. [This is quite complex and makes the book well worth reading.] The way best to use the language is infused with social norms: facial and other bodily expressions add a great deal; face-to-face meetings are still important. Add social norms and their reputational consequences.

We get to form "larger collective brains" (Henrich, p. 227). Stories as to how and why cities are "Our Greatest Invention", (E. Glaeser) are the obvious elaboration. These days, we communicate via many channels, including the occasional face-to-face meetings. Cities will spread out but there will always be agglomerations.

Not pretty

Electioneering seems to bring out the worst in the candidates -- and the voters. You often heard candidates promise to "fight for you."  That's ominous in so many ways.   Democracy has always had its detractors but just look at it when the size and scope of our government are bigger than ever.

The textbooks evoke the idea of "equity vs. efficiency" trade-offs. Google Scholar beings up 2,680 citations for the exact phrase ("equity-efficiency trade-off"). There may be other ways to say it and not all of the citations use the textbook definition, but a quick check suggests that most do.  Never mind that "equity" can mean many things.

But how plausible is the trade-off idea in a world of crony capitalism. Farm subsidies, for example, enrich rich farmers at the expense of taxpayers and misallocate resources at the same time. Less "equity" as well as less economic efficiency. This Mercatus report makes essentially the same point. Is there any reason to doubt that most of the laws and policies on the books do not give us less of "equity" as well as less economic efficiency?

As is often the case, the textbooks cannot let go of a seemingly simple idea -- no matter how implausible it is.  There are of course many other examples: "perfect competition" and "perfect knowledge", ubiquitous "market failure" and "monopoly power", high and dry "equilibrium" etc., etc., etc.

Here is a slightly dated reference to research by William Baumol that finds 80% of the benefits of innovation go to the public at-large while 20% go to the investors. Is this "fair" is it "equitable"?  I would say "yes" and many others (especially in an election year stump speech) would say "no."

Innovation? No thanks! Not exactly revealed preference but not pretty either.

Our elections

I have no idea what Donald Trump did (or learned) in his years at Wharton.  Neither, it seems, do the writers at that university's student newspaper. Read this.

There must have been an Econ 101 and they must have taught Lesson #1, that trade is all about the gains from trade. I did catch Trump's thoughts on trade with China as part of last night's debate. They are, of course, bizarre.  He is also uninformed about how currency exchange rates are formed and sees nothing but clever manipulators outfoxing our less clever manipulators. This as the Chinese economy tanks -- and sinks lower whenever hapless policy people test another intervention.

Trump leads in the polls so this may just be how our politics goes. The Hillary-Bernie economic pronouncements are no better. Democracy is not always pretty. In fact, it's often awful.

The three biggest voting blocs these days are people who do not vote at all, those who vote with a paper-thin level of interest and those who love being on a team. This is about what public choice economics predicts. The model also predicts the quality of politics (and policy) that results.

Who won in 2004? Not who you think.  The New York Times of Dec 26, 2004, (p. 16) reported the results of that year’s presidential election. Most people think that George W. Bush was the winner (over John Kerry and Ralph Nader). But the reported vote totals were these: Nader with 407,992; Kerry with 59,026,003; Bush with 62,027,582; eligible and not voting were 79,279,000. The “I don’t care” vote won by a huge margin. This is not an electoral college total but very suggestive.

Pro-football, Playboy mansion, LA transit

Sometimes things just fall into place. The WSJ's Jason Gay notes the opportunity posed by two concurrent events, the plan of the St Louis Rams to return to Los Angeles and the vacancy at the Playboy mansion ("Say Hello to the Playboy Rams" ... Forget the L.A. Coliseum, Hugh Hefner's mansion is on the market so naturally the Rams should play there for a couple of years").

But not so fast. The LA MTA's light-rail Expo Line stops at the Coliseum's doorstep and will soon open its Phase 2, which will extend it all the way to Santa Monica. The current Expo Line (Phase 1) garners just short of 31,000 average weekday riders with just over 22,000 on Saturdays and just above 17,000 on Sundays -- not great for a $1 billion project but cost-effectiveness was never the MTA's strong suit. The agency reports that on completion, it will be a $2.5 billion project and serve 64,000 riders per day, better than doubling (2.3x) current performance. At that rate, Sundays would account for 40,000 riders.

But all that was before the announced move of the Rams back to the L.A. Coliseum -- at least for two years. For eight home-game Sundays, they could add extra trains and even have some full trains. Yes, but 40,000+ extra bodies just eight times a year is not much, an annual uptick, just over 1% for the year. Nevertheless, the Playboy mansion, now and forever, accounts for near zero transit service.

Get lovely

Leave it to our German friends to worry over "Das Adam Smith Problem".  How could one man author both, The Wealth of Nations and also The Theory of Moral Sentiments? Not a problem, says Russ Roberts in his very readable and enjoyable How Adam Smith Can Change Your Life. Smith always thought of himself as a moral philosopher, not an economist.

What do we know?  We humans dominate the planet like none other.  We dominate because we are good at forming teams. We have discovered non-zerosumness in a big way. We cooperate via impersonal exchange in markets. But there is more. Roberts notes that Smith thought that we also want be loved and, therefore, to be lovely (lovable).

"There are two ways to be loved, to satisfy the desire we all have to be noticed and to be somebody. The first path is to be rich, famous, powerful. The second path is to be wise and virtuous." (p. 112). We develop our morality via the latter.

As always, excepting those who resist (fear) modernity.

Love and markets are the two channels of non-zerosumness that we have discovered and made use of. Both have helped us to become cooperators and team players. Generally, we extend NZS via both channels ever more widely.

Around each of us, there are ever larger concentric circles of people with whom we cooperate. We cooperate with some of them via exchange (ever larger supply chains); we cooperate with others via (ever larger) links of loyalty and love. The two are linked because as we extend trust to ever larger circles, we reduce transactions costs and transact (and benefit) more.

Buld a better city

Writing in today's WSJ, eminent architect and planner Moshe Safdie worries about densities in Manhattan, "How to Build a Better City ... How crowded should or can cities get? What should be driving tower design?"  He begins this way:

The flurry of high-rise tower construction now under way in New York will bring about a quantum leap in density, one that will forever change our urban environment. The city is now home to seven of the 100 tallest buildings in the world. The current building campaign will produce five more. They are a reminder that towers have become the dominant building type in most major cities around the world, increasing congestion as they accumulate.

These developments raise fundamental questions: How crowded should or can cities get? What should be driving tower design, be it residential, commercial or mixed use? Are our current planning and zoning regulations adequate in guiding this growth, in mitigating the impact of density? Or do we need new tools for a new era of mega-scale construction? Finally, towers create fundamental questions about the nature and character of the public realm.

Neither the prevailing tower designs nor current planning practice world-wide are able to cope with the new reality

First some quibbles about facts.  Manhattan was far denser in years past. Wikipedia dates the high point over 100 years ago. We get into these debates because the data exist for spatial aggregates and we are obliged to use large-area averages.  I have noted many times that Los Angeles' urbanized area has (for some years) had a higher population density than New York's.

High rise towers do create externalities, some positive and some negative. These discussions always bump up against issues of scaling. World class designers like Safdie are great at coming up with designs for buildings and site plans for collections of buildings and spaces. But none among us can tackle (design) whole cities or whole Manhattans. The complexities are too vast. If there is to be a top-down plan for all of Manhattan, it must be a minimalist, one that leaves room for designers like Safdie to create great site plans.

Safdie cites an example: "Qinhuangsao, a Chinese city of three million people, has a local ordinance that requires that three hours of sunlight, as measured in the winter solstice, must each each apartment."  OK, but by all means allow development rights to be tradeable. If there is an overachiever developer who allows more sunlight, let him build somewhere else in the same city but with a reduced sunlight requirement.  He would bid (use up his rights or buy some) to do so if he had a powerful reason, including the economic benefits of higher density. There has to be a way that the widely dispersed bottom-up wisdom of large numbers of site developers can enter the big plan.

Progressives and progess

Did Los Angeles (and other US cities) "lose" their streetcars because of a corporate consipracy? It's an old and tired view that some people cannot shed. Most of us drive cars (here and abroad) for the obvious reason that they serve us best. Consumer choice still guides resource allocation. We can be grateful.

Today's LA Times mentions the demise of LA's Red Cars once more. The author of the piece ends up agreeing with the obvious, but not after a detour that respectfully reviews the consipracy view.

My nomination for best nonfiction of 2016 (so far) is Fred Siegel's The Revolt Against The Masses. The Progessive view, on full display via today's Democratic party and Europe's Social Democats, has been evolving for about 100 years. Progressives have long  rejected or dismissed the idea of progress (D. McCloskey calls it The Great Fact). Siegel's thought is that progress is untenable for Progressives because they did not have a hand in the creating the material progreess we all enjoy. A disnmissive view is natural. The beauty of bottom-up resource allocation is beyond the pale.

GDP misses

Leave it to economists to point to the dead-weight losses associated with giving gifts.  Here is the formal argument.  "Scrooge" catcalls usually follow. Then again, markets do help with those unwanted gifts.

What about the joy of giving? But best of all, here is Joyce Carol Oates on the joy of getting (perhaps overlooked in most economic models). This is from her excellent The Lost Landscape (2015, p. 312):

"Look, Daddy! This is for you -- my brother and I would plead with our father, who might be reading a newspaper, or involved in one or another household chore, and would barely glance at us.

"We'd thought our father so strange, not to care -- not to care about a present.

"For children, even for teenagers, nothing seems quite so exciting as a wrapped present. For days beforehand my brother and I would speculate on the contents of packages beneath our Christmas tree, ..."

Note the importance of the wrapping.  Torn open in seconds but nothing deadweight about it.

More stuff missing from the GDP tallies.

Lose-lose

It's that time of year when we hear the refrain that "the consumer" is not spending enough. Consumer spending is a big chunk of GDP and there are Keynesian multipliers, etc.  But there is also the mantra that Americans are not saving enough for their retirement.  How can both be true?

They cannot. Talk is cheap -- and both choices cannot be judged by third parties. Personal time preferences are all over the place, as are personal consumption-smoothing plans and strategies. Policies designed to tweak personal plans introduce a costly wedge -- whereby some individuals are prompted to game the tweaks, which makes everything worse.

Re the mother of all wedges, in this morning's WSJ, Jeremy Siegel documents "My Sorry Social Security Return." Read the article. He does the math. "So are affluent seniors making out like bandits? Not at all. The bandit is the federal government, which provides benefits that are millions of dollars short of what anyone whose earnings are at or above the tax cap easily could have accumulated on his own."

Forced savings are counter-productive as well as wasteful.  Strictly lose-lose.

"Waste!"

"Waste" is one of those casually used and misleading words that economic thinking clarifies. My favorite is still Alchian and Allen's explanation from Exchange and Production. "Empty apartments per se are not waste. They are a method of production to economize on the high costs of predicting the future and also of the high cost of immediately producing whatever a person wants" (p. 155).

Fast forward to the present -- and technologies that drastically cut transactions costs and make sharing inexpensive and practical. Think Uber and AirBnB. In the Winter 2016 edition of The Independent Review, there is Michael Munger's "Tomorrow 3.0: The Sharing Economy." (Not yet online.) He writes about disruptive technologies.  "Almost everything we own will soon be a potential rental item, or we won't own it at all because we'll rent it from someone else" (p. 391) "In a short time ... many of us will have much less stuff" (p. 394).Think about that "extra" lawnmower in you and your neighbor's garages. How often are they used? How often is it a waste? In Alchian and Allen's day, it was not waste for the reasons that they explain. Search and information were much costlier and scarcer and then.

But, how times have changed! Fewer purchases! Less "waste"!

And we are much richer (thanks to markets and tech) than our GDP data suggest (than they can suggest). GDP still hangs on what we purchase. Listen to all the talk surrounding Janet Yellen's announcement yesterday.

Growth poles

Today's WSJ includes "Burgeoning Cities Turn Into Digital Labs." (slightly different title in online version). It is about big cities and big data.  It is also Manhattan-centric -- as most U.S. media coverage of cities tends to be. Everyone knows that most of the U.S. (most U.S. cities) are very different.

The author mentions that "cities generally are more efficient than suburbs." What does that mean? In the U.S., suburban areas continue to outgrow, outdraw, the suburbs. Here is the latest from Wendell Cox. "More efficient" is also slippery unless carefully defined. Finally "city and "suburbs" -- no matter how defined -- are parts of an integrated metropolitan whole. They complement and depend on each other. Supply chains easily criss-cross imaginary boundaries.

It's about growth. Where do labor and capital go? Where do they see desirable opportunities and complementarities -- at acceptable prices? Where do the highly skilled/highly educated go?  Everyone knows, for example, that many go to Manhattan and many go to Silicon Valley.  There are many other such magnets in the U.S. but stick to the iconic two: population density varies by at least a factor of 10.

Manhattan is lovely but not at all representative. Ask yourself which one of them is more likely to be copied?  It's very hard to duplicate either one but we will not have another Manhattan; we will have many low density growth poles.

Slow learners

The Economist reports "Demand, meet supply: Most Americans would get married, if only they could find someone suitable." This is a very old story. Finding Mr or Ms Right is not easy or simple.

Why then do planners and politicians think that they can somehow succeed at jobs and people matching? They believe in land use planning that prompts some kind of local area "jobs-housing balance" -- to reduce big-city unemployment, reduce commuting, highway congestion and air quality problems?

Officials around the world under-price most modes of transportation. This is why we have so much crowding and traffic. Having created the problem, they then propose "solutions." One could stop there and wonder. But there is more. International comparisons (below) show that U.S. urban traffic is some of the best in the world. Why? Because we use more cars and highways and less transit.

The recently passed five-year federal transportation bill contains the usual 4:1 allocation for highways vs transit. But transit use (for commuting purposes) has been knocking about 5% for some years. Auto use in 2013 was about the same in 2013 and 1980. Look at Fig 3 here. Lopsided funding allocations have not budged mode choice. Error correction is slow to non-existent in our democracy.

Cities and economic growth

Frank Rose reviews Matt Ridley's The Evolution of Everything: How New Ideas Emerge in yesterday's NY Times. I am enjoying the book. I'm a huge fan of Ridley so all of this is great fun.

In the review, Rose mentions "Highways are designed; traffic happens." Of course. The world we have is the upshot of top-down as well as bottom-up actions. The latter is much better at error correction and learning from feedback.

A la Ridley, consider the big picture. Prosperity and economic growth require robust specialization and exchange. This means the formation and maintenance of numerous complex supply chains. These include supply chains for things and supply chains for ideas.

All supply chains have a geographic dimension. Firms carefully choose what to make vs what to buy and also where to buy it, from near or far. The whole system tends to a pattern of locations that denote realized transactions (and transactions costs) as well as realized externalities. The city remains a competitive producer if these costs are contained.

Cities have been seen as “engines of growth.” This means they offer attractive supply chain formation and management opportunities. Networking and location opportunities are significant as these choices are made. Flexible land markets, if we can have them, denote more such opportunities. 

ADDED

http://www.newgeography.com/content/005111-white-house-economist-links-land-use-regulations-housing-affordability-and-inequality

Smart Planning

Here is the new LA Mobility Plan -- and LA Times coverage. Here is yesterday's L.A. Times report that some of the nation's worst traffic bottlenecks are in the LA area. A case can be made that the two are not from the same universe.

Here are 2010-2014 commuting trends by mode. One day it may dawn on planners and politicians (and their friends) that most people like their cars. If that day ever arrives, then accommodating to autos via a clever blend of facility expansion and management will be seen as the best policy.  Reason's Mobility Plan just released hits nail on head in this regard.  (Full disclosure: I read and commented on early drafts).

What is to be done. Don Shoup has hit on the obvious (but not obvious until someone points it out).  Return some of the parking as well as time-of-day pricing road toll revenues to the locals -- and watch them line up as advocates for the policy.

Serious transportation planning as well as the political implementation are within our reach. What else? Call it "Smart Planning."

The "all of the above" energy fantasy

An "all-of-the-above" energy policy has been a political dodge, recently promoted by the White House.  The authors of this report are smart economists and they well understand that we live in a world of scarcity and must choose among various tough trade-offs.

Take away the recent U.S. energy boom and the report collapses. Yes, relatively clean natural gas production and usage are up but this has not exactly been a policy success. The White House loves to be seen as opposing anything having to do with fossil fuels. The Keystone pipeline project was deep-sixed after years of political hide-seek-dodge.

Yes, renewables are up but spend enough money and you can put a man on the moon. There are no cost-benefit studies in the WH report. In the world of serious policy analysis, cost-benefit studies are essential.  For a while, it was fashionable to cite the many poor cost-benefit studies done over the years. I forgot who said it but it is fundamental that the antidote for poor cost-benefit studies is good cost-benefit studies.

The antidote is surely not the pretense that scarcity and trade-offs are not relevant -- and that we can live the "all of the above" fantasy. I mention all this because I just read Matt Ridley's post on the topic. "By preventing investment in gas, the dash for wind has done real harm ..." Read the whole thing.

The democracy we have

Prof Adam Grant writes about "The Virtue of Contradicting Ourselves ... We don't like flip-floppers, but we should consider voting for them." (today's NY Times.) A good way to test our views is to see how they stand up against other views we hold dear. But we should be open to attaching some weight and some importance to views we hold that are not consistent with the otherd. Do we abhor war? Do we resist military adventures abroad? Do we recoil at the idea of taking no action against the Paris bombers and their ilk?

Grant also writes, "Using neuroscience to track activation in different brain regions, Professor [Eddie] Harmon-Jones and his colleagues found that inconsistent beliefs really bother us only when we have conflicting implications for action. People have little trouble favoring both abortion rights and tax cuts. But when it comes time to vote, they confront a two-party system that forces them to align with Democrats who are abortion rights advocates but against tax cuts or Republicans who are anti-abortion but for tax cuts. ..."

The democracy we have forces us to live with binary choices. Some people complain about too many toothpastes and detergents at the super-market, but shelf space is scarce and products that do not sell are quickly pulled (and sent to the 99-cent store). Fewer choices does not make things simple. If we choose to vote, we have just two options. The winner of the binary-choice election will make many appointments (judges, commissioners, others) and promote many causes and policies. We cannot fine tune to match our preferences; we are obliged to "purchase" vast bundles.

Place this next to the Adam Grant comment and notice that the problem grows as the scope and size of government (run by the people we elect) expand. The binary choice problem is less onerous where a smaller set of policies is involved. The problem grows as the scope and size of government grow.

Bad inequality, good inequality

I often cite Baumol, et al's Good Capitalism, Bad Capitalism, and the Economics of Growth and Prosperity for the simple reason that many critics see only the Bad and suggest that this is all there is. Some writers cite crony capitalism. The irony is that many of the prescribed "fixes" open the door to more cronyism. Why is the IRS tax code, lengthy, bulky, complex, always growing and likely to remain so? Because it is chock-full of special treatments.

Increasing (reported) inequality is everywhere red meat for demagogues. It is time for a companion volume that describes "good" vs. "bad" inequality.  First, the big three: (1) Not all gains or riches are ill-gotten; entrepreneurial success must be rewarded; it is indispensable because it assembles new ideas and new products that enrich others; the rule of law means that ill-gotten (and only those) gains are pursued at great risk; (2) We do not live in a zero-sum world; the gains by some are not at the expense of others; (3) Increasing poverty is not equivalent to increasing inequality; magically double all incomes and poverty declines while inequality increases.

And three more: (4) Most reports of increasing inequality are flawed; comparing statistical groups over time is meaningless; the key measure is economic mobility as seen via panel data; the rare panel data we have are inadequate; the most upwardly mobile, the immigrants, are excluded; (5) It's a safe conjecture that more Americans aspire than envy; economic growth provides more upward mobility possibilities; redistributionist interventions are likely to stunt growth -- and create more cronies and more inequality; (6) All of the acknowledged national income measurement problems and shortcomings make their way into the inequality discussion; not everything that counts can be counted; the greatest inequalities involve longevity, health, general well-being -- all beyond the scope of traditional national income accounts.

There are surely more. The problem we have is that the mere waving of the "inequality" flag often ends the discussion.

Winners

The Economist has a very nice cover story on blockchains and trust ("The trust machine: How the technology behind bitcoin could change the world"). Technology helps people find ways to reduce transactions costs, promote trust and enhance productivity and wealth. The story begins where Hernando de Soto leaves off: there is "dead capital" when and where people do not have clear title to their property. So they remain poor. But better record keeping is expensive. It appears that that proper record keeping and all that follows is now within the reach of many via the application blockchain technology.

Economic growth is natural (people want to make money) but it's movers have to contend with an army crony capitalists and redistributiuonists. (Even now the latter have not grasped the fact that the harder they work, the less there is to redistribute.) The U.S. economy usually grows impressively after a downturn. But after the Great Recession, we got the Great Regulation -- and growth that's less than half what it should be, still hovering at near just 1.5% annual GDP growth.

That aside, in the derby between the forces for growth and the redistributionists, I remain optimistic that growth will win. Blockchain technology powers Bitcoin electronic currency but could just as well advance all of the other transactions that require record-keeping and verification -- and therefore trust. Here is how The Economist's Leader for the story concludes:

The notion of shared public ledgers may not sound revolutionary or sexy. Neither did double-entry book-keeping or joint-stock companies. Yet, like them, the blockchain is an apparently mundane process that has the potential to transform how people and businesses co-operate. Bitcoin fanatics are enthralled by the libertarian ideal of a pure, digital currency beyond the reach of any central bank. The real innovation is not the digital coins themselves, but the trust machine that mints them—and which promises much more besides

Many have experienced Uber and they quickly get it. But this is just the start. The winners will be not just be the smart and inventive people but the rest of us who too.