Regional Government (again)

Bismarck may have been the first to warn about politics and sausage making: if you enjoy either one, you do not want to observe either being made. Many people have figured this out. Many now realize that politics can cause them grief. Perhaps they also book fewer guided tours of sausage factories.

Most Americans also own a risky asset portfolio, having the largest share of their wealth tied up in the real property that is their home. They, understandably, have a demand for property rules, including zoning and subdivision laws. Professor Bill Fischel has written most clearly about the "homevoter hypothesis" and points out that people look to local government to protect their prime asset. Their interest in municipal government is, therefore, greatest.

Among municipal governments, Americans seem to balance their skepticism of local government with their demand for its services by moving to smaller cities. Between 1980 and 2002, most growth has been in the mid-sized cities, those with a population in the range of 50,000-250,000. Not only have these gained the greatest population share but this group is the one with the most of the newly incorporated cities. The numbers are in Table 29 of the latest Statistical Abstract. It is always wonderful to see what one learn just by looking.

People suburbanize for many reasons and most of these newly incorporated places are in the suburbs. What else do we know? We know that most big-city leaders and their acolytes want "regional government" whereby the escape to small cities that so many people choose would be denied them. It is a safe bet that most of the regional government advocates want Microsoft to compete but are reluctant to do so themselves.

Modern-day Luddites

The Luddites are always on the wrong side of history and, looking back, a source of some bemusement. Yet, as Brink Lindsey has forcefully demonstrated (Against the Dead Hand), the sentiment can be costly beyond imagination. Lindsey considers the industrial counter-revolution, the widespread reaction to fast-paced change, and connects it to most of the bloodshed of the 20th century. Populist and protectionist politicians (and their ideological allies), then, are playing with fire.

Learning and teaching history, therefore, is more important than ever. Yet, we now do less of it than ever. Much of what now passes for history instruction dwells on victims and their oppressors; these stories are usually connected to a vague anti-Western platform. Not only are many young people left essentially defenseless in the face of election-year rhetoric but a widespread response to terrorist abominations boils down to: "Why do they hate us so much?"

Hubris may be distasteful and dangerous but so is its craven opposite.

Progressive Talk-Radio

Can one simultaneously hold all three of the following beliefs? 1) Rational policy analysis and policy making are feasible; 2) It is unethical and/or foolish to try placing a dollar value on human life; 3) a robust public sector is desirable. Yes, many people do, in spite of the obvious inconsistency. This morning's NY Times Magazine has a short piece inspired by the Frank Ackerman-Lisa Heinzerling book, Priceless: On Knowing the Price of Everything and the Value of Nothing that challenges the idea of valuing a statistical life but does not address the implications re the cited inconsistency.

There has also been some buzz about the arrival of liberal ("progressive") talk radio as well as hand-wringing over why it took so long. If conservatives can gain ratings by tossing red meat at their audience, why can't liberals do the same? I am tempted to bet that liberal talk radio will fall short. If so, there will be many explanations. One may simply be incoherence. There may be more due diligence applied to radio talk than to candidates' utterances. Voting for one of the presidential candidates is a one-time thing. Voting for radio favorites is a steady on-going activity.

Modern European Attitudes

Humans are capable of great good and great evil. Religion is supposed to tilt us towards the former but, too often, has tilted many towards the latter. James Carroll in Constantine's Sword wrote about the historic roots of Christian anti-semitism and finds that Auschwitz was simply the most modern expression of a deeply rooted European tendency. The Church stood against the Nazi euthanasia programs when directed against the mentally infirm in the 1930s, causing the murderers to back down, but did almost nothing when many others, notably Jews, were the victims in the early 1940s.

It appears that European anti-semitism is back. Europeans had exported it to the Muslim world and now European Muslims are re-importing back to Europe. Not much has changed, except for the fact that in polite company, hateful acts now get a pass via the left's pro-Palestinian stance.

Most European opinion towards Jews still ranges from the hateful to the indifferent.

Schools, Courts and Cities

America's schools have been in decline for too many years. If not our worst social problem, surely a contender. All sorts of causes and many reforms and remedies have been proposed over the years. Most of what has been attempted has failed. The least credible of these, from the education establishment and their allies, has been "spend more money". Being an adjunct of politics, this approach is usually tried first. An earlier post alluded the to the evidence accumulated by researchers that puts the popular prescription into doubt.

Heather MacDonald reviews two recent books that highlight a problem that every parent (even politicians with kids) understands: too many public schools are unsafe. There is no way that kids can learn. What has changed? The law and the extension of new rights and privileges to children. Civil rights lawyers and judges typically presume that they are on the side of the angels but, according to the books reviewed, have done far more harm than good.

Those worried about "urban sprawl" might want to imagine how our cities would look if escaping bad schools were not a family priority in so many places.

SPONTANEOUS ORDERS AND ROADS TO SERFDOM

Thanks to Lanlan Wang for pointing me to Robert Fromani's Are We Serfs? The author notes that we have, perhaps, escaped Hayek's most pessimistic forecasts: the politicians and regulators have continued piling on (as Hayek predicted) but an argument can be made that we are freer and richer in spite of all this (we are not serfs).

People can be expected to be creative and to do their very best to circumvent rules and regs. Unpredictable discovery proceeds "in Hayekian fashion." Even the centrally planned economies survived as long as they did because of black market activities. Punishment for those caught "doing business" was severe but informal markets kept going.

Interesting that the herald of spontaneous orders was reluctant to go with a more optimistic forecast.

THE MORE THE MERRIER

Population has been an easy scapegoat for failed regimes and their policies -- and their apologists. Third World examples of the 60s and 70s come to mind, notably India and China. Julian Simon was among the first to demonstrate that the neo-Malthusians were horribly wrong.

Simon died before completing The Great Breakthrough and Its Cause but Timur Kuran did the world a service by editing the unfinished work and seeing it through to publication.

The hand-wringers would do well to look at Simon's arguments and the data he presented to back them up. More people interacting with each other generate new ideas and new possibilities; they also spur demand that the new ways of doing things respond to. Institutions that allows price signals to coordinate all of this are indispensible.

FOOTPRINTS

The sustainability people live in a world of no trade-offs, an ignorant position from which to advocate a long and radical agenda. So, what else is new? Go to their latest product to fully appreciate the associated political goals.

There is also a pseudo-scientific argument that a Genuine Progress Indicator (GPI) should replace conventional GDP.

Perhaps a useful and timely undergrad (or grad) econ (or other) final would be an assignment to spot the conceptual flaws in the GPI approach. Students that have really grasped their economic thinking ought to do very well.

This is the least we can do for undergraduates, before they end up in a class that takes GPI seriously -- before their own kids bring GPI home as part of a school assignment.

ORGANIZING OUR LIVES

We are told that the first cave paintings represent the first evidence of the universal human desire to seek organization in chaos, to make sense of things. In this morning's NY Times, a writer cites the modern version: "Sounds of Silence". She discusses the popularity of Real Simple magazine and the up-to-date gizmos (such as "e-mail filters and air filters, noise-canceling machines, noise-canceling headphones, ..." etc.) that it features to help us organize our lives. Pretty quickly you know where this is going. "Minivans, the original suburban bubble ..." are cited, as is Robert Putnam's Bowling Alone. The dark side of progress, the dark side of the choices free people make to organize their lives, are often grist for comment and disapproval. The more socializing choices (having coffee at Starbucks, hanging out at "lifestyle centers" where we do more than shop but also meet friends and others for a conversation, a drink or a meal) that are blooming all around are most interesting for their dark side (coffee worker exploitation abroad and suburban sprawl here).

The concern over illegal border crossings is entirely misplaced. It should be simple to place large signs all along the border that report "No Jobs", "Health Care Hard to Get", "Growing Inequality", "Anomie and Alienation", "Money Will Not Make You Happy", "Sprawl", etc. The blockbuster might read: "Beware: Many Personal Trade-offs and Lifestyle Choices Available."

ANGER AND ELECTION-YEAR POLITICS

Sharon Begley's Science Journal appears in each Friday's WSJ and is usually a good way to start the weekend. Today, she cites recent Behavioral Economics research by CMU's Jennifer Lerner on shopping ("How Do You Keep The Public Shopping? Just Make People Sad"). Begley also notes, "Last year, researchers found that anger makes people assess situations more optimistically, downplaying risks and overestimating potential benefits ..." And, "Manipulating customers' emotions to make them overpay (Piping dirges into used-car lots? Running clips of Beth's death scene in 'Little Women'?) is ethically dodgy."

At least two other opinion pieces in today's WSJ cite the anger of John Kerry (before him, Howard Dean) and speculate on the reasons. One columnist ascribes Dems' anger to the way the 2000 election ended. Demagogery may smell ethically dodgy but we usually avoid the label, perhaps expecting less of our politicians than of our sales people.

The insight of Public Choice economics is that political actions can be explained by economic motives. Does this extend to Behavioral Economics? Probably not? Have the Democratic candidates concluded that angry voters will be more likely to take risks -- and vote for them?

The CMU lab experiments were low-cost. The one unfolding before our eyes is much more expensive.

OIL FOR FOOD

The WSJ op-ed page has been running a variety of pieces re the UN's Iraq oil-for-food sham. Other major outlets have, to this point, avoided the topic.

I have always wondered about the left's fascination with "the international community". Hans Blix noted on the Jim Lehrer news last night that a Security Council-sanctioned "action" (his word) in Iraq would have been "legitimate". Are all of the voting members at the UN (Security Council and other councils) "legitimate"? The last time I looked, some members in good standing countenanced slavery, repression, torture and all sorts of human rights abuses. Nevertheless, the Blix view is now part of the anti-war mantra.

Countries that respect human dignity have their differences, yet a consensus from this bloc would be a much more plausible basis for the label "legitimate". If there has to be a UN-type group, how about one without the thugs? How to screen them? The EU screens applicants, as does the OECD and many other international groups. Applicants have even been known to work on cleaning up their act. Imperfect and arguable but vastly preferable to today's UN.

LIFESTYLE CENTERS DOWNTOWN

Fast-paced change in US cities has many dimensions. Traditional downtowns have mostly been downsizing for years while planners and politicians have mounted programs to reverse the trend. Many of these have failed or been too pricey to be worth imitating.

At the same time, Americans' shopping habits are fast evolving; we now visit "lifestyle centers" where we can shop, meet, relax, etc. Developers savvy enough to fathom our evolving culture have facilitated this consumer-driven trend. Even many supermarkets aspire to become such centers and are undergoing facelifts that include adding mini-coffee bars, delis, wine shops, ATMs, flower shops; some even have massage therapists to deflect the stresses of shopping.

The privatization option has even been discovered in some of the traditional downtowns. Google Business Improvement Districts (BIDs) and get approximately 16,000 hits. These are public-private ventures, abetted by favorable rules that (depending on local particulars) feed some revenues to private groups, allowing them to be innovative about their downtown neighborhoods. The results include some new oases, including lifestyle centers downtown. It may not be our fathers' downtown and it is part of the broad downscaling trend but it sure beats traditional ham-fisted renewal.

All that has recently been written about the new Times Square suggests it includes some of both.

THE BAD GUYS WIN ONE

A special queasiness sets in when, in rapid succession, innocents are murdered and maimed by the hundreds and thousands, the brew of European anti-Americanism and craveness kicks in, and (as represented by this morning's LA Times lead editorial) we are told once again that its all our own fault. Go with the UN and the "international community" (of oil-for-food corruption and sham fame), treat it all like a law enforcement matter, and they will leave us alone.

This was the view in 1939, through much of the Cold War, and (in some quarters) after 9/11. University "teach-ins" were held to let us know that we are the real culprits.

This goes much deeper than I can fathom. Many people cannot unlink prosperity from shame. If we live well, we must be doing something wrong. Zero-sum is a deeply held and widespread view.

WHERE ARE THE JOBS?

This has become the political and punditry question of the season. Writing in the WSJ last week, Robert Barro addressed it -- and the related question of disparities between the payroll and household surveys. He raised and dismissed various possible explanations. One of these was the rise of self-employment in the age of eBay (not likely to show up in the payroll survey).

The longer-run trend is perhaps more interesting. The BEA's REIS data show a steady rise in the share of non-farm proprietor jobs, from 10.5% in 1969 to 15.5% in 2001. Which regions and states lead? The red states? Which counties lead? The red counties? Anyone buying election futures may want to think about all this. Trouble is that productive people are often too busy to vote.

TRADE-OFFS FOR PROGRESSIVES

If the post-Cold War left prefers the label Progressive, that's their choice. More interestingly, those who have lived happily in a world of no trade-offs where all sorts of "sustainability" agenda items were thought to be free lunches, have now bumped into one within their own ranks. Sierra Club factions are again stuck on immigration. Having embraced the idea that they can control the future, including international flows of labor and capital, they now find themselves facing charges of "bigotry" from their peers (Rebecca Solnit expressed it this way in Friday's LA Times).

They may have trouble computing the economic costs of barriers, but they are expert at detecting "ethnic bigotry" and the like. It's not easy being Green.

IT'S NOT WHAT THEY DON'T KNOW ...

Will Rogers has been widely quoted as worrying more about "what people know that's wrong" than about what they don't know. More up-to-date scholars like to point out that we do not know anything; it is all about cultural constructs.

The problem with knowing is how we measure and how we interpret. (The latter via the rules of evidence, not political trendiness.) When researchers point their Hubble lenses at the evolving global distribution of income and wealth, they necessarily find a fuzzy picture but the more they focus, the better it looks. The Economist features several pieces that summarize the news.

Undergraduates, reporters and politicians are slow to update their views. So, it seems, are many scholars.

THE VERY SLOW MARCH OF GOOD IDEAS

Taking exception to people's tastes can be an unrewarding and time consuming project. Most people's tastes for music, movies, books and political platforms do not match mine so I take satisfaction from the fact that we live in a world where people's integrity is respected by the fact that they have choices available to them. Of course, there are those who find fault with "too many choices" and there is even a new book devoted to this theme (I choose not to link to it).

Turning to politics, where to start? The Washington Post (March 8) reports that one of the things that may assure passage of the transportation appropriations bill is the inclusion of large amounts of "popular transit spending", especially light-rail. A mountain of evidence demonstrating the incredible waste resulting from these projects may as well be invisible.

But, there is worse. Educational quality is surely near the top of this country's problems. The popular position among almost all candidates and parties is that more money is needed. (Anti-war speakers like to take the high ground and suggest that war spending hurts the schools). Here too, the evidence points convincingly the other way. Prof. Eric Hanushek's research is especially compelling. More money spent per student has had no detectable impact. It's not the money.

I do believe that good ideas drive out the bad ones but it is a very slow process.

MOVERS AND STAYERS

Forbes' Rich Karlgaard writes about his explorations on coldwellbanker.com and reports on the huge cost-of-living disparities between selected coastal metros (NY, LA, SF) and much of the rest of the US. He notes that a chunk of the differences have to do with vastly different local tax rates -- and suggests that some very profitable moves are available.

Why do people like it where they are? The American Housing Survey (2001) asked. Only 28 percent answered "convenient to job". Twenty percent liked their house. Forty-nine percent cited the things outside the home that really matter (convenient to friends and relatives 19%, look and design of neighborhood 18%, good schools, 9%, convenient to leisure 3%). Just 1.6% liked the public services and another 1.6% liked convenient access to public transportation.

Lots more is available at the Census' Why People Move. Interestingly, many of us do move but the disparities cited in Forbes have not caused an uptick in recent years.

INSOURCING AND OUTSOURCING

"Toyota is the best thing that ever happened to GM," has long been a glib assessment of the benefits of trade. Now Consumer Reports finds that new U.S. autos are in fact better than the imports. Quality has been imported -- as has been the durability of an industry and its jobs.

The perils of international job outsourcing are now the subject of widespread handwringing. The benefits of trade have been derided by the likes of Lou Dobbs as relics of from the age of David Ricardo and Adam Smith. Buicks that are better than BMWs, however, is no abstraction. It may even be invoked against all the demagogery.

SETTLEMENT CHANGE

Accelerating pace of change in most areas defines the modern world. More than ever, people move about between places, changing them more rapidly than ever. Revitalizing traditional downtowns is still a policy goal even though these are less important than ever. There are no correlations between the welfare of downtowns and the welfare of surrounding metro areas and the policy rationalizations are generally thin.

More significant are large numbers of suburban "lifestyle centers" in the U.S. These are the places where shopping, visiting, socializing and relaxing now occur. Developers have their ears to the ground and innovate continuously. There are no closed malls under construction in the U.S. today. No one knows how they will evolve in the coming years. There are payoffs to getting it right and this is why competing developers within a climate of flexible rules are the way to efficient outcomes.

Survey results published by I-Sung Kang of Florida State University show that five new planning tools are widely used; some introduce flexibility (performance zoning and transfer of development rights); others limit flexibility (density bonuses and urban service boundaries).

The weight of other evidence for net outcomes throughout the U.S., however, points to a loss of land market flexibility.

BOWLING ALONE

Robert Putnam's Bowling Alone arouses interest in many circles. He seems to be everywhere these days, recently spotted at 10 Downing Street by The Economist, reportedly discussing growing demographic diversity and the resulting decline of social capital. Critics of the book, while respecting the research, have noted that the author had been looking in all the wrong places. Old social networks decline (and this can be documented) but new ones emerge -- ones that are hard to find when only the old ones are examined. Putnam does not like urban sprawl and alleges that as suburbanites spend more time commuting (wrong), they have less time to be social. The trip survey data from the NPTS/NHTS show that travel choices and consequences between central city and suburban residents in the U.S. do not differ. Suburbanites take about as many "social" trips -- of approximately the same duration -- as their central city fellows.

As always, it is the supply and demand of/for news that matters. All news are sorted in the marketplace and some messages get more play, etc. The market-clearing price this year, if high enough, prompts extra supply next year, etc.

On the bright side, supply responds to other signals too.

SOCIAL ENGINEERING LAND AND HOUSING MARKETS

Evoking this topic (again) may be like shooting fish in a barrel but it involves large amounts of our money. So, here we go again.

Many people worry about urban sprawl and dream of a transit revival. They put these together and argue (successfully) for large public subsidies to “get people out of their cars,” onto transit and into “transit oriented development”. Cities will then become “liveable”, etc.

Some $400 billion in public transit subsidies since the mid-1960s plus uncounted subsidies to various favored builders have not turned the trick, so the Smart Growth advocates cast an ever wider net.

Visiting the EPA website is sobering; it cites 207 Smart Growth programs and policies in place around the country. I expect that many more are virtual SG insofar as they are implemented on the wings of SG rhetoric.

Here is one. A recent federal housing finance innovation is the Location Efficient Mortgage or Smart Commute Mortgage. No kidding. Low-income home buyers are presumed to have more disposable income if they locate near transit – and, perhaps, use it in place of driving a car. They should, therefore, qualify for home loans that they might not otherwise get, given their actual income. This is all calculated in great detail -- in terms of likely dollars saved and made available for home payments.

A recent generally favorable review of the program (by Kevin Krizek, Housing Policy Debate, 14:4) mentions that, “to date there have only been a few dozen closings nationwide.” And, “they are likely to offer only marginal respite for problems related to regional growth management.”

WHAT WOULD OCCAM SAY?

Everyone (almost) espouses interdisciplinary work in the social sciences and a few actually do something about it. Daniel Kahneman's Nobel lecture is in the Dec., 2003, American Economic Review. The piece is a wonderful exposition of significant progress at the intersections of economics and psychology. Offshoot behavioral economics is hot right now.

It even made the NY Times Magazine on June 8, 2003. One of the article's punchlines is reprinted in Bernard Saffran's "Recommendations for Further Reading" in the Fall, 2003 Journal of Economic Perspectives, under "Discussion Starters": "Interestingly, irrational- and rational-market experts provide much the same advice for investors: buy index funds that are pegged to broad swaths of the market rather than trying to play selected sectors. Then hold. You might expect that advice from efficiency mavens, but how do the behaviorists -- who say you should be able to exploit the crazy market players -- square the conservative circle? 'While behaviorists think that it is theoretically possible to beat the market,' Richard Thaler says, 'individual investors do not have the time or training to do that on their own, and finding superior skills among active mutual fund managers is not easy, either. So a reasonable strategy to adopt is to settle for average returns and low fees offered by index funds.'"

Behavioral economics pioneer Thaler applies old-fashioned Economic Thinking when it counts.

THINKING AND PLANNING OUT OF THE BOX

Perhaps the most auspicious migration within the U.S. today is the one into private communities. More than 50 million Americans are now living in various such arrangements, where most of the rules of property come from private associations. The rules (CC&Rs) are typically drafted by developers and are subject to a market test. A small number of commentators have been tracking this trend (some included in The Voluntary City). Robert Nelson's soon-to-be released Private Neighborhoods: A Revolution in Local Government promises to be the latest word.

There are all sorts of parallel privatizations spontaneously emerging; many denote novel public-private arrangements. In a setting of flexible institutions, these will also be subject to market tests and the best will spread. One example, noted in this morning's LA Times, is Pasadena's revived business district where the parking meter revenues go back to the district, not the city, to be used to upgrade local facilities. Common sense parking arrangements, like this one, have been written about by Don Shoup for some years.

Given a chance, good ideas will drive out the bad ones.

IT'S NOT EASY BEING GREEN II

Jane Shaw demonstrates that suburbs and nature are encroaching on each other. It is not a one-way thing; the re-forestation (as farmers grow more on less land) of America occurs simultaneously with suburbanization. The Smart Growth platform, factually wrong about almost everything, missed this one too.

Whenever people presume that they are on the side of the angels, they can rationalize their own bad behavior. Ignoring inconvenient facts is just one of them. Arson and other crimes have been committed in the name of greenery, which has become a religion that thrives in this "secular age", including widespread allusions to the spiritual primacy of nature and tacky bumper stickers.

So far, the state promotion of greenery has not been challenged on First Amendment separation of church and state grounds. Enforcement zeal is, again, highly selective.