Progressives and Regressives

Many smart people (and many others) refer to the Bush tax cuts as "the most regressive in American history." Yet, many of the same folks say very little about Social Security and the payroll tax.

What do we know?

1. The payroll tax is the fastest rising federal tax.
2. The payroll tax is the most regressive federal tax -- worst if you are minority with shorter life expectancy.
3. The Social Security and Medicare entitlements represent multi-trillion dollar unfunded liabilities with dim prospects in light of reasonable economic and demographic extrapolations.

What, then, do the "Progressives" who fret over regressive income tax cuts have to say about all this? That they will "fight to protect Social Security", e.g. the untenable status quo.

For all of the Republicans' faults, by making the "Ownership Society" a part of the platform, they are, at least, offering a discussion of alternatives to the untenable status quo. Self-directed savings that are actually vested and that can be willed to heirs and others are an incredibly attractive alternative to the untenable status quo.

LA Story

Just when I was becoming a gullible consumer of the NY Times' Sunday travel supplement, they feature "Your Car's Here, on Track 2: Seeing Los Angeles by subway, no valet needed". This is pure "Man bites dog." The story begins with, "Something must be said right away about riding the subway in Los Angeles: It may not take you where you want to go ..." The writer did visit some of the standard destinations in downtown LA and Pasadena but bravely concludes "I'd do it again, only next time I would put on sunscreen, carry a bottle of water and wear exercise shoes."

This must be why the Red Line (the only part that is subway) was advertised to serve 376,000 daily riders before it opened in 1983 and in 2003 ($7 billion plus later) attracted only 95,000 (thanks, Tom Rubin).

Not a problem. The story also reports that six more miles of route will be available by 2009. Our leaders are no match for Boston's in the mega-spending (other people's money) stakes but at least Boston's Big Dig will carry serious traffic.

Progressive Conservatives

Libertarians seem to split on school choice. Some like the idea of empowering parents (especially the poorest) and injecting competition into an industry that suffers badly from too little of it. Others worry about introducing government into private school systems that have achieved excellence. Perhaps U.S. universities are an apt example. Their strengths can be traced to the fact that they compete; their weaknesses can be linked to their ties to government and politics.

With another bleak political convention getting started, David Brooks, writing in today's NY Times Magazine, argues that "The Era of Small Government is Over". Republicans in power are unprincipled about big government, its pork and its scope. What to do?

Brooks looks for a way out and quotes George W. Bush as advocating that, "government can and should help citizens gain the tools to make their own choices." The new prescription drug entitlement includes some of this and Brooks-Bush see an acceptable trade-off in the idea of big federal government but one that offers recipients greater choice -- among other things. The Brooks piece is worth a look.

The sad part is the strong suggestion that this is the best that we can hope for. Socialism's failures are finally widely acknowledged, the Berlin Wall is gone, market economics is no longer deemed exotic or eccentric. Yet, while Democrats have embraced the label "progressive" and define it as New Deal-plus, Brooks' "progressive conservatives" would go along but for the price of including more choice.

Brooks does acknowledge that war changes everything and that we are in a war (foisted on us)against Islamic extremists. They embrace terror but it is not a war against inanimate terror but against the people who practice it: Islamic extremists. Norman Mineta take note.

Unemployment

"Campaign Rhetoric" by Matthew Miller in the current Forbes takes on just some of the problems in each major party's political platform. One of the items itemizes the 142 million Americans who do not work.

In 2000, the U.S. population was approximately 275 million. Of those, 135 million worked and 5.5 million were unemployed. The civilian labor force was just shy of 141 million.

We read almost everyday that the accounting is shaky. The proportions working, not-working-but-looking, not-working-and-not-looking interact in complex ways.

The Miller tally shows 72 million children, 33 million retired, 11 million college students, 8 million unemployed, 8 million disabled, 5 million stay-at-home moms, 3 million gave up looking for work and 2 million are in prison.

Travel surveys have, for years, shown that most daily person-trips are for non-work reasons. The proportion has been rising and hovers near 80%. In most cities one-half of AM-peak person-trips are non-work and two-thirds of PM-peak person trips are non-work. This is, of course, great ammunition for the advocates of peak-load pricing who are constantly berated by know-nothings talking about the "need" for workers to be on the roads at particular times.

It also responds to the question: "Who are all these people?" that those working regular hours ask when they occasionally pop out and see so many restaurants, malls and highways near filled to capacity.

Take away the prisoners and the busy stay-at-home moms and 137 million do whatever they do all day supported and served by a slightly smaller army of 135 million at work.

Conventional labor force participation is up but it's really not. More women are working outside the home than ever but they were always working. Adolescence is longer than ever. Etymologists report that the word was not even in use before 1785.

Networks

"In many economics faculty lounges, the mere suggestion that markets are something less than efficient is likely to elicit cool stares. But Kenneth J. Arrow, a 1972 Nobel laureate and professor emeritus at Stanford, recently turned a skeptical eye on the efficiency of one vast market -- the labor market -- and reached some intriguing conclusions about what distinguishes better paid workers from their lower-paid peers. It's not what you know, Professor Arrow, a prolific theorist suggests; it's who you know." So writes Daniel Gross in yesterday's NY Times, referring to the findings reported in "Limited Network Connections and the Distribution of Wages" by Arrow and Brozekowski.

Actually, many (perhaps most) economists are not averse to "market failure" findings. In fact, they like these every bit as much as liberal columnists do.

Yet, it's the straw man all over again. Who can take a labor market without an information market seriously? Information networks surely matter. Everyone knows this and business school (and other) students are reminded of it all the time.

Also, it is not good to be poor. Networking is much tougher. This is well known and Arrow and Borzekowski explain that networking differentials explain 15% of unexplained variations in wages.

The Gross column ends with the inevitable policy prescription: "To improve the lot and prospects of middle-income workers and the working poor, it may not be enough merely to focus on the traditional twin pillars of job training and education. Policy makers may also need to focus on upgrading the number and quality of workers' links to companies."

Will we ever hear from commentators on just how successful government job training has been? Will they ever tell us just how policy makers will facilitate networking?

Having botched job training and education, are they ready for a brand new task?

Olympic Spirits

What can we learn from the Athens Olympics? So far?

Dan Henninger in this morning's WSJ comments on the thrill of seeing teams from Afghanistan and Iraq -- ones that include women and ones that compete for the idea of non-primitive homeland states and societies.

Elsewhere in the same issue, Franklin Foer writes about the shame of letting an Iranian athlete avoid a match with an Israeli and letting him and his team make a political point with impunity.

One plus and one minus. My third impression, however, is positive. While fewer attend gymnastics, many more attend and enjoy beach volleyball -- and all the trappings. These are wholly American. And a great answer to the dreary, "why do they hate us so much?" and "why doesn't more of the world like us"?

Here is some of the story:

"X-Treme Envy: Olympics Makeover Lures Young Viewers
'Fuddy-Duddy' Sports Lose To Bikes, Bikinis, Disco; 'It's a Big Party Out Here'
By PETER WALDMAN and VAUHINI VARA Staff Reporters of THE WALL STREET JOURNAL August 18, 2004; Page A1

ATHENS -- During play on Center Court at the Olympic tennis complex, stadium entrances are sealed by tall metal gates. Battalions of ushers grimly stand guard, and the umpire admonishes the audience: 'Quiet, please!'

Across town at the Beach Volleyball Center, the Olympics enter a dimension more akin to the television show "Baywatch." Men play in surfing shorts, women in bikinis.
THE 2004 GAMES

Disco and heavy-metal tunes blare between points. A DJ who sounds like Wolfman Jack with a Greek accent announces the score and goads the audience, "Put your hands together and make some noise!" Between sets in the two-on-two matches, cheerleaders in scanty silver swimsuits prance and gyrate in the sand.

'It's a big party out here,' says Holly McPeak, a U.S. beach-volleyball player who has won both of her matches so far in her third Olympics. 'The fans go crazy.'

And there are lots of them. Unlike at the tennis stadium, where a thin crowd watched Americans Martina Navratilova and Lisa Raymond dispatch two Ukrainians in a first-round doubles match Sunday, evening sessions of beach volleyball have been packed.

'It's the scene, it's the people -- come on, you want to watch people play volleyball on the beach,' says NBC's Molly Solomon. She's directing her network's cable coverage of the Athens Games, which includes as many as four beach-volleyball games a day. 'Young people gravitate to it; we're trying to cater to that.'"

Perspective

Sidewalk psychiatry suggests that a sense of perspective is part of mental health. The hard part is: where and how do you get it?

Bill Bryson's A Short History of Nearly Everything brims with the stuff. Here is his version of all-earthly-history-in-24-hours:

"If you imagine the 4.5 billion-odd years of the Earth's history compressed into a normal earthly day, then life begins very early, about 4 A.M., with the rise of simple single-celled organisms, but then advances no further for the next 16 hours. Not until 8:30 in the evening, with the day five-sixths over, has Earth anything to show the universe but a restless skin of microbes. Then, finally, the first sea plants appear, followed twenty minutes later by the first jellyfish and the enigmatic Ediacaran fauna ... At 9:04 P.M. trilobytes swim onto the scene, followed more or less immediately by the shapely creatures of the Burgess Shale. Just before 10 P.M. plants begin to pop up on the land. Soon after, with less than two hours left in the day, the first creatures follow.

"Thanks to ten minutes of balmy weather, by 10:24 the Earth is covered in the great carboniferous forests whose residues give us all our coal and the first winged insects are evident. Dinosaurs plod onto the scene just before 11 P.M. and hold sway for about three-quarters of an hour. At twenty-one minutes to midnight they vanish and the age of mammals begins. Humans emerge one minute and seventeen seconds before midnight. The whole of our history, on this scale, would be no more than a few seconds ..."

Lots of history per phrase. This wonderful book is chock-full of fascinating information, always presented in lively and enjoyable prose. No need to be a science illiterate when there are people like Bryson to save us.

French Productivity

Hard to get away from the topic of the last blog after reading the Friday Financial Times' review of the current French best-seller, Bonjour Paresse ("Hello, Laziness: The Art and the Importance of Doing the Least Possible in the Workplace").

The review includes the book's 10 Commandments:

1. You are a modern day slave. There is no scope for personal fulfillment. You work for your pay-check at the end of the month. Full stop.

2. It's pointless to change the system. Opposing it simply makes it stronger.

3. What you do is pointless. You can be replaced from one day to the next by any cretin sitting next to you. So work as little as possible and spend time (not too much, if you can help it) cultivating your personal network so that you're untouchable when the next restructuring comes around.

4. You're not judge on merit, but on whether you look and sound the part. Speak lots of jargon: people will suspect you have an inside track.

5. Never accept a position of responsibility for any reason. You'll only have to work harder for what amounts to peanuts.

6. Make a beeline for the most useless positions, (research, strategy and business development), where it is impossible to assess your 'contribution to the wealth of the firm.' Avoid 'on the ground' operational roles like the plague.

7. Once you've found one of these plum jobs, never move. It is only the most exposed who get fired.

8. Learn to identify kindred spirits who, like you, believe the system is absurd through discreet signs (quirks in clothing, peculiar jokes, warm smiles).

9. Be nice to people on short-term contracts. They are the only people who do any real work.

10. Tell yourself that the absurd ideology underpinning this corporate bullshit cannot last for ever. It will go the same way as the dialectical materialism of the communist system. The problem is knowing when ...

The reviewer notes that the author, Corinne Maier, is an economist at the state-owned Electricite de France -- and that she is in some trouble with her bosses.

As with most humor, there is something to ponder besides the fun. The fact that this stuff resonates with French readers is interesting.

And what does all of this have to do with the U.S. left singling out French approval as a proper litmus test for U.S. foreign policy?

Overworked Americans

It's August and Niall Ferguson chimes in on why Europeans work less than Americans. "In 1999, according to the OECD, the average American in employment worked just under 2,000 hours a year (1,976). The average German worked just 1,535 -- fully 22% less. According to a recent U.S. study, the average Frenchman works a staggering 32% less."

I had recently referred to a selection of letters to the editor printed in the NY Times where the common (and predictable) refrain was that we have so much to learn from those Europeans.

Ferguson notes that the differences in work hours did not exist 25 years ago. He warms up Max Weber and concludes that, "the most remarkable thing about the transatlantic divergence in working patterns is that it has coincided almost exactly with a comparable divergence in religiosity, both in terms of observance and belief."

Perhaps. David Brooks evokes Americans' "future mindedness". They have come to expect that they can define and achieve their destiny -- and that it is within their grasp. He calls this their "nobility syndrome". This may dovetail with the religiosity that Ferguson alludes to.

It is certainly a more fascinating discussion than the left's vision of wage slaves, beguiled and indentured ("targeted" is often the favored descriptor) by all the diabolical consumerist (must remember "corporate") propaganda.

Industrial Policy (Part 995)

The LA Times reports: "L.A. City Council Votes to Restrict Superstores ... The law would require studies of possible harm before large centers such as Wal-Mart are built."

I imagine that the 13 of 15 L.A. City Council members who voted for this measure also dream of requiring studies of the "possible harm" before anyone can legally file to compete with them at the polls.

For now, the professional harm detectors have a windfall. The influence of politicians and their acolytes is extended. Inefficient retailers get a pass. The poorest customers have to travel further for lower prices and more variety. Entry level jobs are foreclosed, etc., etc., etc.

Conventional measure of the size of government understate the harm that politicians do. The full consequences of this stuff are not so easily detected.

Elections and Markets

Yesterday's NY Times reports that, "Polls Say Kerry. Futures Say Bush". It appears that Bush futures have a slight lead in both of the the major political futures electronic markets, the one at Intrade and the one at the University of Iowa -- and both are contradicted by various election polls.

The article, by Daniel Gross, reports that the electronic markets have the better track record in getting presidential election outcomes right. Gross notes that bets on futures markets are by people who are putting their money where their mouths are. He then stumbles by noting that, "The people who trade securities online look a lot more like the crowd at the '21' Club -- most of them affluent white men -- than the voter registration lists."

Huh? Are PC demographic descriptors relevant on any futures market? If so, there is money to be made.

I used to be confused when political pollsters were identified by their party affiliations and leanings. I thought that they were in the business of discovery. So what does it matter what their politics are? A little reflection suggested that their views do matter because polling is really about focus groups and testing campaign themes. It has much less to do with forecasting. Now that advances in communications and funds transfers have made more and more futures markets possible, the forecasting function of political polling is probably on the way out.

Well-offness

Marginal Revolution includes a nice post on the perennial discussion of what constitutes "well offness", what do happiness surveys tell us, myopia, etc.

Priests and professors (and many others) have for years been telling anyone who would listen that they are pursuing all of the false gods, including the worst of them all, Mammon.

This is a discussion that we will always have. Perhaps to the good. In the meantime, can we celebrate a situation where more of us have more free choice over what to pursue than ever?

This usually where the incoherent stumble. An occasional theme of the left is that people have "too many choices" (this is wasteful and/or causes sensory overload and headaches, etc.). Yet, many of the same critics also claim that the evolving built environment, for example, is sterile and devoid of truly "interesting" (to me) choices.

The latter complaint cannot be addressed without reference to microeconomics and scale economies. In open markets, market niches left unattended are unlikely unless the technology is such that profitable scale is much larger then the effective demand size of the niche.

Yet, it is a safe bet that even were all demand niches to coincide with all profitable scales, the discussion of elusive well-offness would proceed. Arguably, it touches on all seven of the deadly sins.

America's Industrial Policy

Just a week ago, the LA Times reported that the new LA-Pasadena light-rail Gold Line carries approximately 15,000 riders per day instead of the expected 30,000. Given the costs of the project, you don't want to know the costs per rider.

Today, the LA Times reports that local leaders have agreed to throw another $1.3 billion at the same project. It's other people's money. So, who's counting?

As a group, the 20 largest U.S. metro areas declined in transit use (all trip purposes; thank you, Wendell Cox) in the 1990s. Not relative decline but absolute decline.

As a group the areas with new (post-WWII) metros (San Francisco, Washington, DC, Atlanta and Miami) lost even more transit users than the group of 20.

There are a hundred ways to lay out the evidence and many have for many years. But it makes no difference. It's all part of "Smart Growth", this country's last bastion of Industrial Policy.

No wonder that developers are on board. Their trade group, the Urban Land Institute (ULI.org), publishes all sorts of document that extol the idea.

That's the way Industrial Policy works.

Primitives and Targets

The only silver lining in the War on Terror is that our enemies are primitives who believe that striking the NYSE or Citibank headquarters or even the IMF or the World Bank would have major economic consequences. We will win because they don't get it. We are economically (and spatially) decentralized. More than they can grasp. Terrible as the loss of life and the psychological hit would be, the economic consequences would be minor.

The World Trade Center Towers were tall and auspicious because of New York politics. They had no economic rhyme or reason. Losing them was a terrible loss of life but had little economic consequence. In fact, no major natural disaster in U.S. history (not Hurricane Andrew, not the Northridge Earthquake, nor any other that I can think of) had significant economic impact.

The primitives don't get it. Indeed, they cannot grasp the essence or the durability of decentralized systems. They are, after all, primitives.

Economic Models

Just as Europeans are re-thinking the work-leisure trade off ("Europe's workplace revolution" , this week's Economist), several letters to the editor in today's NY Times rue the fact that Americans work longer hours and have shorter vacations. (And which candidate will these writers support in November?)

On a more positive note, we'll always have Europe -- to visit and to dream about, if not to emulate.

The New Yorker's John Cassidy writes about "Winners and Losers ... The truth about free trade." Cassidy starts with Greg Mankiw's troubles in Washington, beginning when he praised the outsourcing of jobs -- and obliquely alluded to the economic importance of creative destruction (although he did not use the phrase). When politicians talk about free trade, it's all about jobs. Period.

Can democracy and free enterprise co-exist? In an election year, one wonders.

How, then, do we get by? We routinely underperform re our potential. But it apparently takes double-digit unemployment rates to concentrate the mind and rethink the European model.

Just when NY Times readers have fallen for it.