Growth, Sprawl and Planning

Year after year, the Census reports that the fastest growing cities in America are the ones that many might describe as the most "sprawling". Last year, Gilbert, Arizona, came in first. Do they sprawl because they grow or do they grow because they sprawl? Whereas elite opinion equates growth and sprawl with the lack of adequate top-down controls (revealing a touching naivete about the possibilities of top-down planning), it is probably safe to say that people are moving to these places because they like them.

So what is the problem? Are these places unduly subsidized? No. Most public subsidies, in fact, go to projects designed to prop up the older and declining cities and neighborhoods.

Another line of attack is that new and low-density settlements are expensive in terms of their infrastructure costs. Yet, whenever people bother to take a serious look, they find the opposite -- as recently reported by Cox and Utt.

Besides, are any of us simply cost-minimizers?

As if on schedule, this morning's LA Times reports: "Higher Density Projects Urged ... Regional Planners say such a strategy is needed to deal with growth issues ... To help Southern California cope with growth in decades to come, regional planners Tuesday unveiled a strategy that calls for more high-density development in urban centers and near transportation corridors ..."

Old Time Religion

Julian Simon won his famous bet with Paul Ehrlich re resource depletion almost 10 years ago. The bet and the win received media coverage but that was that. What looked like a neat refutation to economists (long-term commodity prices keep falling, corroborating the idea that human inventiveness staves off increasing resource scarcity) did not make much of an impact in the rest of the world. In a Letter to the Editor of last Sunday's NY Times Book Review, Don Boudreaux reminded the Review's readers (and editors) that a reviewer of Ehrlich's latest book had completely missed this episode as well as any of its implications.

This is common input selectivity and reminds us once again that we are talking about a modern secular religion rather than economics or biology or meteorology or any of the other relevant sciences.

The piece by Clifford Orwin in the Spring 2004 edition of The Public Interest makes a related and relevant point. We hear all the time that "that old-time religion" is still strong in the U.S. Not really, says Orwin, in a very thoughtful discussion of organized religion in modern America.

Envy, Politics, Economics and GPAs

Richard A. Epstein, writing on "It's Win-Win situation, Even if Some Win More Than Others", concludes that: "The threat of skepticism to human progress must be rejected. In its place I would adopt what might be termed a 'non-envy principle': If there are two states of the world, such that everyone in state A is better (or at least as well) off as everyone in state B, then choose world A, even if the resulting inequalities leave some people envious. Don't grouse because Bill Gates is richer than the average Microsoft employee -- instead celebrate the productive processes that continue to bring substantial benefits to all of us across the board."

Point taken. And it is probably the case that more Americans aspire than envy. If true, this is a remarkable achievement -- as well as an engine of further economic progress as well as an antidote to much poisonous politics.

People will always grouse -- and will always rediscover the truth that "material wealth does not bring happiness". Yet, talk is cheap and it is their actions that matter.

It is the American culture of striving that David Brooks celebrates in On Paradise Road. Many were weaned on the politics of envy in their schools but quickly disregard it on graduation. Brooks explains this by noting that undergrads have a bemused view of the professoriate's left-leaning, accepting it much like people had always associated absent-mindedness with the role.

He also notes that undergrads have discovered the benefits of their mentors' liberal mind-set: it means that -- in certain discussions, exams, papers -- anything goes and poor grades are less of a threat. Grade inflation.

Talk Radio

Writing in the current The Public Interest, William G. Mayer discusses "Why Talk Radio is Conservative" (not available at the link).

He surveys and rejects the standard explanations (the Rush Limbaughs are better show people than their liberal counterparts, there are fewer radio-sized liberal sound-bites, corporate owners block liberal talk shows, etc.). Mayer suggests, instead, that the easy answer has to do with the fact that there are simply more conservatives in America than liberals. He cites poll data on ideological self-identification that has conservatives dominate 1.8 to 1. He adds that this does not necessarily translate into electoral strength because most Americans' lack of a well developed ideology means that they can be all over the place on specific issues.

If true, it also suggests that national elections are conservatives' to loose.

He also mentions that other media are widely seen as liberal-biased, creating a demand that talk radio addresses. Also, the liberal side is more beset with fragmentation and identity politics; their minority constituencies are more likely to tune into Black or Hispanic radio than Air America -- which the WSJ reported last week has money problems.

One part of the puzzle that Mayer does not address is the following: in his of heart of hearts, I expect that Bill O' Reilly knows he is on the right ("fair and balanced" notwithstanding); most of his colleagues trumpet the fact that they are -- while I expect that most of the TV network news and national newspaper types actually see themselves as "fair and balanced" rather than the liberals that they are. The oldies come from the era of the FCC's "fairness clause" when open political bent was taboo. They may have come to believe their own posturing

The historical explanation helps to explain how the news media terrain has come to be settled the way it is. Much like the fact that the Northeastern U.S. remains heavily settled -- and the population center of gravity is only slowly moving towards the southwest -- because in 1620 the Pilgrims bumped into Plymouth Rock instead of Long Beach, California.

Wealth

How rich are we? The BEA's "Net Stock of Fixed Reproducible Tangible Wealth" series has recently been updated to 2000 and can be found at Table 679 at www.bea.gov/bea/an/wlth2594/maintext.htm.

Looking at 1980-2000 growth (in chained 1996 dollars), net U.S. wealth had grown from $14.269 trillion to $26.680 trillion, up 87%.

The breakdown for 2000 was:

Private 70%

Nonresidential equipment and software 16%
Nonresidential structures 21%
Residential structures 33%

Government 18%

Federal 5%
State and Local 14%

Consumer Durable Goods 11%

Not clear why the last entry is separate from private.

The fastest growing of these over the last twenty years was consumer durables, just beating out nonresidential equipment and software.

Milton Friedman has written, that all things considered, about half of U.S. GDP is directly or indirectly controlled by governments. That's depressing but there may be a better story when we focus on wealth.

Wal-Mart

In the minds of the zero-sum set, if I am rich, it is because you are poor, or vice-versa. So a successful Wal-Mart must be getting away with murder.

Whether it is their labor practices or their land use ("big-box") practices, or whatever, something must be amiss. Never mind that they are among retailing's most auspicious innovators.

One of the world's most successful enterprises chooses to discriminate against half of the planet's talent pool. In a better world, the assertion would be seen as laughable.

Yet, labor markets are now politicized. Bi-variate associations that show males and females of similar classification averaging different compensation packages are taken seriously. Lawyers, consultants, politicians, media representatives and the like pile on.

Add the normal control variables and the gender wage gap inevitably shrinks. Does it go to zero? Or, who to listen to? Those who specify the models or competing owners and managers who are daily judged by bottom-line performance?

Americans' material wealth is, in great part, due to the state of our economic freedoms. The ease with which markets are politicized these days and the fact that economic growth persists, nevertheless, attest to the amazing power of free enterprise.

Voting With Feet

International cross-sectional data are a headache, as are data about comparative migration. Stalker's Guide to International Migration is, nevertheless, appealing.

The Guide cites the UN as the source for the fact that 175 million people now live in a country not of their birth. For the US, it is 11.1% of the population (2001) which is 32 million which is 18% of all the world's foreign born.

People can be expected to migrate to the richer places. In the years 1998-2001, the G-7 nations took in 10.6 million immigrants. Most (30%) went to the US. Germany with its relatively open borders took in 25%. As a proportion of its native population, Germany took in more. In fact, as a proportion of native-born population, the US was fifth of seven -- just ahead of Japan and France.

While the picture is complicated by policy differences and geography, looking at how people vote with their feet is always instructive. Open borders are interesting but so are open cultures and open markets.

The Best of Times

Would you rather spend $100 at Sears (or a comparable store) today or spend the same $100 on items in the 100-year old Sears catalogue? It's an old econ exam question but I happen to be holding a facsimile (with an introduction by Cleveland Amory) of the 1902 edition (#111) in my hand. It is published by Grammercy Books (New York) and is a treasure of entertainment.

There are thousands of products listed and described, many with accompanying illustrations. Practically each one makes food for thought.

After some time with the catalogue, I thought I would have trouble writing a concise answer to the question. It might be easier to get to the point and admit that all the ways we use to make inter-temporal comparisons of well-offness are rough.

Would you want their best 1902 camera for $7.90? Probably not. High-end cutlery for 6 for $1.79? Why not? A great western saddle for $8.95? Sure.

It's the Sears "Drug Department" that is the real eye opener. "Fat Folks, Take Rose's Obesity Powders and Watch the Result ... $4.20 per dozen boxes." Herb laxative teas for 16 cents a box may be OK. Dr. Rose's Arsenic Complexion Wafers 35 cents a box may have few takers today. Vin Vitae for 69 cents ("Not a Medicine ... Not Merely a Tonic"). The "White Ribbon Secret Liquor Cure" went for $2.50 a box. The list goes on and does focus the mind.

At the celebration of the last millennium, the NY Times assembled various intellectuals and had each write a short essay on which century they would have preferred to live in and why.

I do not recall that any preferred the present century. The no-brainer response is, of course, to live in the present (preferably in the U.S., in my view) because the no-brainer "why" can be answered in just two words: medical science.

Progressives' Environmental Legacy

Fred L. Smith ("The Progressive Era's Derailment of Classical-Liberal Evolution" in The Freeman of June 2004)offers the most cogent summary I have seen lately of the problems that go with the environmentalist view and the politics it prompts. He concludes, "We must repair the impoverished state of our instititutional framework for addressing the environmental concerns that we all share. To fail in this task is to risk further losses to economic liberty. Eco-socialism is even more complex than traditional socialism. It will fail. Our challenge is to ensure that as this occurs, a free-market alternative is available and is understood. There is much work to do."

Smith reviews the policies of the Progressive era that set aside reliance on the accumulated common law of trespass and nuisance in favor of abridged property rights, statutory law and regulation. He notes that, at the time, this was quite acceptable as economic growth was a priority and environmental priorities secondary -- and much was simply misunderstood.

With Progressivism and the like, we put aside the evolutionary mechanisms whereby we had managed to innovate ways to bring what had been common properties into the exchange economy. Smith notes that underground oil rights were sorted out pre-Progressivism while underground water rights were not. "The result of those different treatments of comparable underground liquid resources is striking: The relatively scarce commodity (petroleum) has become ever-more abundant, while the relatively abundant commodity (water) has become ever scarcer."

Branding and Community

Economics textbooks (and lots of highbrow economics) bemoan the efficiency losses from "monopolistic" and "oligopolistic" industry organization. It is not until information asymmetries are examined that successful product differentiation is seen as having two sides: consumers are willing to pay for reputable goods and services and sellers can earn profits by maintaining that reputation. Both sides benefit.

Reviewing The Culting of Brands (by Douglas Atkin; WSJ 6/16), Daniel Akst notes that it often goes much further. Akst quotes Atkin: "People today pay for meaning more than they pray for it."

The reviewer notes that,"... Atkin has written an unusually readable book that focuses on how a cultlike devotion to products and brands arises from the human needs for belonging and satisfaction -- needs that may be especially acute in today's free-wheeling culture, in which ties to family, church, community and workplace are looser than ever. Cult brands such as Macintosh, answer some of these needs by helping people recognize who they are and form communities of their own kind. He observes that BMW motorcycle riders, whose cult is even more mysterious than that of Harley-Davidson, published a directory of 12,000 BMW owners ... willing to help other BMW owners who are hurt, lost or just have a flat tire far from home. This network is reminiscent of such fraternal groups as the Masons or Orthodox Jews who take in observant wayfarers on the Sabbath."

Again, what's not to like?

Cool Cities

In democracies, it is unlikely that governments (politicians) can actually live up to the ideal of doing few things and doing them well. The opposite usually occurs. Most big cities end up being badly managed and declining and/or loosing market share to powerful decentralizing forces.

Most big-city governments in the U.S. respond to their plight by committing to Economic Development campaigns, signing on special staff and really extending the reach of politics -- and, thereby, often making things worse. It is hard to find an Economic Development success. When areas do bounce back, it is often for reasons that have nothing to do with city hall's programs or it is after outlandish time and money have been invested. When advocates claim "success", it is never in cost-effectiveness terms. It's not their money, after all.

"Lonely Town Seeks Hip Young Professionals ... To Combat Brain Drain, Cities Boost Efforts to Court Graduates ... As college students and recent graduates ponder what to do next, a range of midsize and smaller cities -- and even some larger ones -- are launching new programs designed to lure them there ... Cleveland's program, which started last year, now offers 55 interns 10 weeks of living, working and schmoozing with civic leaders ... Other cities are looking into everything from building museums and art spaces to encouraging the development of loft apartments ... Michigan has even embarked on a statewide 'Cool Cities' initiative that hopes to remake overlooked communities into hip neighborhoods ..." reports yesterday's WSJ.

Very cool ... and much less boring than lowering taxes, cutting regulation, politics and bureaucracy (including the economic development staff), improving schools by offering choice to parents, etc.

Fat City

My colleague Harry Richardson is working on a piece on the sprawl-makes-you-fat silliness which he will call Fat City. People whom Tom Sowell likes to call "The Anointed" have never been happy with the choices that real people make, especially their lifestyle choices. So, these scholars throw caution (and all sensibility) to the wind and conjure attention-getting connections. Lawrence Frank of the University of British Columbia goes so far as to conclude that every extra minute spent commuting by auto makes us so much fatter. Wendell Cox (www.publicpurpose.com/pp77-fatubc.pdf) offers us a preview of this work.

I do my own research in this field on an almost daily basis. In Los Angeles, I notice that transit use also makes people (how can I say this?) un-svelte and, in growing proportions, it also makes them short!

I had once written off the field of commuting mode choice but am only now realizing that it is much deeper than I had ever thought.

Pessimists

Where do I line up to claim just $1 for every printed discussion of equitable distributions that focuses on statics and eschews the good news that comes from a dynamic analysis?

Donald Krueckeberg, writing in Housing Policy Debate ("The Lessons of John Locke or Hernando de Soto: What if Your Dreams Come True?"), offers an interesting summary of the Locke-deSoto position but worries that, "This theory lacks any criteria governing equity, limits, and balance." And (you guessed it) more homeownership in the U.S, would contribute to more, "urban sprawl and its inefficiency, waste, individual excesses and inequity in access to employment." (I have to quickly pull out David Brooks' "On Paradise Drive" if I want to balance the gloom that quotes like this bring on.)

Going back to yesterday's post, how is it that most Americans retain any optimisim? Are they fools? Or is Krueckeberg and company's focus on statics just plain misleading?

Optimism

On the heels of the week's discussions of Ronald Reagan's optimistic attitude, today's NY Times shows some of the evidence from a Pew Research Center 2002 international poll. Responding to the statement, "Success in life is pretty much determined outside our control," Americans were most likely to disagree. (Canadians and Japanese were among the few groups with a majority disagreeing; Britons were not, being apparently less optimistic than Venezuelans(!) but more optimistic than the French.)

Americans are more likely to aspire than to envy. This is why class-warfare politics is less successful here. Equality and liberty are less likely to be in conflict when people have reason to be optimistic about their future -- when they expect that their destiny is substantially under their control -- when they focus on dynamics and the future. Steve Hayward and Kevin Starr explain further in the thoughtful article.

In this setting, politics becomes less important and political participation is less attractive. The bad news is that interest groups are more likely to thrive when the rest of us have bigger fish to fry. There are always good news and bad news

Purchasing Power Parity

Over- or under- anything, such as overvalued or undervalued, evoke the old question: compared to what?

The Economist of May 29th asks: "How big is the world economy? That sounds like a straightforward question. Simply add up the size of the world's national economies would seem to be the obvious way to answer it. But how that is done yields radically different results, and therein lies a tale. The most commonly used method is to convert national economic outputs to a single measure, namely the American dollar, using the market exchange rates of all national currencies." Use purchasing power parity (PPP) conversions, instead, and the world economy grows from $36 trillion to $50 trillion.

Moreover, the Intergovernmental Panel on Climate change projects implausibly high future carbon emissions based on heroic growth assumptions for the poor countries -- and values their future GDP in U.S. dollars.

What to do? Trust market rates or PPP? No one has gotten rich using PPP as a guide to currency speculation. Do markets include knowledge (beliefs) that PPP misses? Apparently so; otherwise there would be no discussion.

The comparisons are, perhaps, interesting but it is unclear that are clear signals for personal or policy actions.

First Drafts of History

I am listening to Lady Margaret Thatcher's beautiful eulogy to Ronald Reagan as I post this.

A claim made for the Reagan legacy in recent weeks has been that he inspired resistors in the East bloc to stand up against Soviet power. This morning's column by Lech Walesa corroborates this important point: "Poles fought for their freedom for so many years that they hold in special esteem those who backed them in their struggle. Support was the test of friendship. President Reagan was such a friend. His policy of aiding democratic movements in Central and Eastern Europe in the dark days meant a lot to us. We knew he believed in a few simple principles such as human rights, democracy and civil society. He was convinced that the citizen is not the state but vice-versa, and that freedom is an innate right." This was supposed to be U.S. message all along but it was, apparently, a much more believable message during the Reagan years.

On the same page of the WSJ, Milton Friedman (who else?) does the obvious, correcting the pundits, who liked to point out that Reagan never did shrink the size of government, as he had promised. Separate defense spending from the rest and the federal government did shrink after 1984. There are two good reasons for making this simple point: i) extra defense spending in those years paid off handsomely; and ii) it is actually mandated by the Constitution, unlike much of the rest.

Outsourcing Eldercare

The dynamic U.S. economy continues to be a magnet for immigrants. The pluses and minuses of open borders will always be debated but there is no denying that this means that the U.S. labor force will not age as quickly as that of other advanced economies. This is no small advantage in light of all the fretting over how growing cohorts of the elderly will support themselves -- and how they will be supported.

Yet, international migration is a two-way street. Many U.S. social security recipients have already discovered the joys of taking their U.S. pensions and savings in some lower cost-of-living place. Calculators are available that give an inkling of the possibilities: move from Boston to Barcelona and cut your cost of living by 25%.

It's not for everyone (and it is not a political platform) but some of the pressures on our system can be alleviated as more people consider the options. Tomorrow's elderly will be more likely to have traveled abroad and many should be less averse to a new chapter of their lives in some semi-exotic place where they can kick up their standard of living.

Not only that but, as with most migrations, there will be economic gains at the origin as well as at the destination.

"Money, Sex and Happiness"

A brief discussion of the Blanchflower-Oswald NBER paper on "Money, Sex and Happiness" has been the WSJ's most downloaded for over a day. As far, as I can tell, the NY Times has not given it any coverage -- and if it had, would the sober Times readers have made it the #1 downloaded? (To be fair, last Sunday's NY Times reported on a survey by Men's Car magazine that concluded, "Porsche drivers get less action of a non-automotive kind than the drivers of VWs, BMWs, or even Volvos.")

Who says that contemporary economists overlook life's big questions? Blanchflower-Oswald process data from the National Opinion Research Center's General Social Surveys and find that (according to the WSJ piece), "going from having sex once a month to having it at least weekly is roughly equivalent to the amount of happiness an extra $50,000 of income would bring the average American. 'The effect of sex on happiness is statistically well-determined ... and large,' the authors conclude. 'This is true for males and females, and for those under and over the age of 40.'"

All of this goes to researchers' discussions of Revealed Preference vs Stated Preference as a good source of consumer information. The former is the traditional study of actual purchases; the latter is based on interview data -- and has been criticized as being less credible.

Consider that, at the margin, the study's findings imply that an extra episode is worth $1,300 - $1,400.

Ronald Reagan

Virginia Postrel's blog at Dynamist.com includes a perceptive memoriam and a few links to reflections on Ronald Reagan.

By being able to tap into much that is essentially and uniquely American, Reagan got elected and re-elected(usually by landslides) but also changed the course of history, mostly for the better. He did this in spite of the fact that his thoughts and values had been dismissed and denigrated by elite opinion, here and abroad.

Elite opinion is likely to be the last to get it -- and must now spend some weeks grappling with the Reagan legacy. At the looney left, you get the LA Times' Robert Scheer, describing "A Nice Guy's Nasty Policies". Others, invoke clear-eyed hindsight, and remind us that the USSR was weak, ready to fall, and did not need much of a push.

Yes, and who said so at the time? In those days, the further left on political the spectrum one went, the more likely it was that the view was that both sides are equally corrupt and that the wise policies were neutrality (the European left) or peaceful co-existence along with cultural exchanges (U.S. elite opinion).

It does not take much clear-eyed memory to appreciate the RR legacy.

Vermont

"National Trust Names State of Vermont One of America's 11 Most Endangered Historical Places". Why not? Dynamic Creative Destruction has given us unparalleled material wealth. And one vehicle has been innovative retailing, which includes "big box" stores and Wal-Mart.

The hard part is: how would statewide land use planning actually work? All land use decisions can be described as including some "externalities". So, everyone has standing to challenge any and all land use plans? This simply politicizes these plans -- moreso than they already are.

In a world of private communities, the Wal-Marts would deal directly with the neighborhood association. They would arrive at a deal that is acceptable to both sides. Yes, there are still (inevitably) association politics but standing in the dispute would not extend over the whole state.

Either-Or Choices

Dan Klein asked What Do Economists Contribute? Good question. Can applied economics affect the public policy discussion? Only if economists make it a point to address the "everyman".

Bjorn Lomborg (with support from The Economist) has assembled eight economist luminaries together in the Copenhagen Project to rank-order policy initiatives -- if $50 billion were available. The ranking puts disease control (HIV/AIDS), micronutrients (to limit malnutrition) trade liberalization and the control of malaria first. Global warming policies are all last.

Predictably, critics scorn the exercise as getting us involved in "either-or" choices. As they say: "Hello!"

Micropolis

According to this morning's WSJ ("New Outposts ... Granbury, Texas, Isn't a Rural Town: It's a 'Micropolis' ... Census Bureau Adopts Term For Main Street America, And Marketers Take Note ... Beans, Ribs and Starbucks"), census data are now compiled by geographic units that reflect the Great Dispersal.

The days of "downtown vs the suburbs" are long gone. Aside from a few assorted boutique downtown districts, ever more investors and households are now choosing between suburban, exurban and rural settings.

The new spatial definitions ought to make it possible for social scientists to catch up.

Scholarship and Clarity

UC Berkeley's Prof Mel Webber just keeps getting better. His editorial in Access, "Spread-City Everywhere", is the most concise summary of urban development trends that I have seen. My May 5 post offered some supporting data and the evidence keeps accumulating. Yet, as per yesterday's post, mounting evidence and conventional wisdoms can remain far apart for long periods. And it matters. We live in a world where hugely expensive policy mistakes are made in the service of serious misunderstandings.

What to do? Keep clarifying, just as Mel Webber has just done.

Doomsday Once More

Ronald Baily ("What Doom Will Look Like This Time Around") offers an interesting review of "One with Nineveh" by Paul and Anne Ehrlich. This time, they warn about the dire consequences of global warming.

Baily notes: "In the Ehrlich's simplistic summary, environmental Impact equals Population x Affluence x Technology, the notorious I = PAT identity. Impact is, of course, always negative. One notes that the three factors aren't merely added togther, their allegedly deleterious effects are multiplied."

I confess that I started some of the Ehrlich books but could not finish any of them. So, I may be (may be)missing something, but Paul Ehrlich's doomsday forecast track record is well known. He has even lost real money, betting against the late Julian Simon. Simon later wrote that the idea of cash bets was a sign of his own exasperation. Poor Julian has passed on and would probably be exasperated all over again. Doomsday tomes are likely to be with us for some time because there is a tremendous demand for them. Why?

I can only speculate:

1. Some people have a puritanical nature and expect that they will have to pay for their material comforts.
2. Others may be uncomfortable with (or suspicious of) the fruits of market successes but are attracted to Kyoto-style economic planning.
3. With the demise of socialism, many may have intellectual capital on hand which they would rather use than discard.

Perhaps it's all inevitable human nature.

Saddest is the occasional comment from a reputable scientist to the effect that hyperbole is OK when the stakes are so large. So, where's the science?