Help is on the way -- not

As the stimulus package comes into focus, we see the inevitable pork fattening. How could it be otherwise? The WSJ has cited the realization of a "40-Year Wish List".

Wendell Cox has focussed on more money for public transit. He notes:

The economic stimulus bill that recently passed the House included $12 billion in spending on public transit. When Republican Rep. Jeff Flake attempted to cut nearly a billion going to Amtrak and intercity-rail service, House Democrats quashed the effort and condemned opponents of transit spending. According to the Wall Street Journal, “They have been urging a big boost in spending after the number of riders on Amtrak and many mass-transit lines surged to record levels last year. They have argued that bolstering rail and bus service helps create ‘green’ jobs and gives consumers environmentally friendly transportation choices.”

Transit is enjoying a resurgence of popularity, or more accurately hype. We have been reminded, most recently by Democrats in the House, that as gas prices were rising and driving declining, that transit ridership was growing strongly. Yet, the reality is that transit captured no more than 3 percent of the decline in urban driving. Strong growth rates on an insignificant base produce insignificant increases (barely 1.5 percent of urban travel in the United States is on transit) and outside New York, the number is below 1.0 percent. Record ridership of this kind shouldn’t be rewarded with new spending, nor should we fall for the canard that it’s an effective way to have an environmental impact.

There are some very smart people who claim that desperate measures are called for. But desperate measures can also make matters worse. Printing money to finance questionable projects that enrich lobbyists, empower bureaucrats and entrench politicians is surely not a promising signal to investors here or abroad.

Makes you think

We are in the age of mass higher education. It is not exactly an oxymoron, but it does create a variety of tensions and problems. I bristle when "years of education" or "graduation rates" (high school or any other) are casually used as meaningful indicators. When the variances become huge, the simple stats fail.

These are among the ideas discussed by Arnold Kling and John Merrifield in their respectful but critical review of Claudia Goldin and Lawrence Katz'z The Race Between Education and Technology. The review is in the latest EconJournalWatch. Makes you think.

Minor irony

Results for the 2007 American Housing Survey have just been released. For those who like commuting data, the AHS reports medians rather than means (which the Census reports), although commuting modes are not separated.

Compare national data for 1997 and 2007. The median commute for those residing in central cities rose from 20 to 21 minutes. For those residing in the suburbs, the increase was from 21 to 23 minutes. Central city population (actually measured as housing units by the AHS) grew by 2.5% in the ten years; suburban units grew by 6.8%.

Not bad. I usually part company with the many traffic doomsters. Yes, our unwillingness to price makes congestion the default rationing device. To get commuting times this good in that light is phenomenal. Traffic doomsday is invited by policy makers who reject pricing. But they are bailed out by land use adjustments that explain the benign results for median minutes commuting. Enough employees and employers are seemingly able to chose locations that permit a decent commute.

Much better than decent by world standards.

Pretty good for second-best market results. Also a minor irony that markets are bailing out policy makers.

Keeping score

A colleague called my attention to Expenditure patterns of young single adults: two recent generations compared... "Differences in spending patterns for young, never-married adults in 2004-05 and their counterparts in 1984-85 may reflect differences in demographics; however, whether these changes indicate an increase or decrease in economic status remains unclear."

Whew!

Author Geoffrey Paulin is careful about the difficulties involved in making comparisons. And he focuses on expenditures rather than income. But yesterday was the 25th anniversary of the introduction of the Mac. And some people have pretty good recollections of that one -- and how it compares to its latest counterpart.

But computers (or iPhones, or iPods, or HDTVs, or ATMs or 10,000 related items) are not mentioned in the report, but new job oppoertunities in computer tech are. In fact, electronics are not mentioned. The internet is not mentioned -- expect in several footnotes with links to citations and sources.

Medical care is only mentioned insofar as there are apparently no statistically significant differences in expenditures between the two cohorts. I know that young folks can avoid most medical procedures, but for the few that do not, would any of them settle for what was available 20 years ago?

My points are obvious and have been made many times before. But just when we get a steady diet of pietistic hand wringing from all around, we must be sure not to lose sight of the many good things that we are fortunate enough to have access to.

Animal spirits

Michael Boskin wrote that "Investors Want Clarity Before Taking Risks". Tyler Cowen refers to the proposed "stimulus" as a "Hail Mary".

"Animal spirits", Keynes' view of capitalists, reeks of detachment and some condescencion. Trouble is no one really knows how to incite the barnyard or rattle the cage. The past six months of ad hoccery have not helped and I am pessimistic about the next chapter, guessing that whatever comes out of the Washington sausage factory will do more harm than good. Bad times do breed bad policy. And there is now very little sympathy for getting the taxman (and the politician) out of the way.

Richard Little and I recently wrote about "Building Walls Against Bad Infrastructure Policy in New Orleans." We argue for open-endedness as people grope for ways to settle in areas with natural hazard risk. We'd like to enlist rather than panic the "animal spirits".

Perspective

Voter turnout in the U.S. Presidential election of 2008 was the highest in 40 years. In the recent presidential elections it had on occasion slipped below one-half of those eligible. In most other elections it is well below 50 percent.

I have mixed feelings about this. I know about opportunity costs and the idea that many people have bigger fish to fry is attractive.

One also has to be careful about romanticizing democracy and, by extension, the state.

But I greatly appreciate voting with feet. Accidents of birth are profound and many people find the stength and the opportunity to do something about it. This is why maps of the world ought to color countries by whether people are struggling to get in or to get out.

The U.S. leads the pack as the place to get into. It has done so for many years and will probably continue in that role for a while. Of all of America's positives, my favorite is the (relatively) low place of tribalism. Around the world, people slaughter and maim each other (and always have) for reasons of historic tribalism. Modern man is worthy of the label if and when he finally moves away from this pre-historic legacy.

Come to America and you may get to marry someone from a different tribe. You may also strive for any high office, no matter your roots.

This is why I disagree with the discussants on last evening's Jim Lehrer News (and many other venues) who inevitably want "a conversation about race".

No. Communist-style re-education camps are a horrible idea. Much better to ride the wave and leave race and tribalism behind us. We should always learn from history, but we should not wallow in it to make political points.

On the way to the Super Bowl/Super Trough

Many have noted that three of the four NFL play-off teams have logos that involve birds. But, writing in today's WSJ, Jerry Bowyer ("Sports Mania Is a Poor Substitute for Economic Success ... There's a reason so many Steeler fans have left Pittsburgh.") notes that three of the four (not the same three) have benefited from taxpayer financed stadia, strategically placed in those cities' downtowns. And whereas the teams are doing well, the downtowns are not.

"Maybe America should take a look at Baltimore, Philadelphia and Pittsburgh before getting behind Mr. Obama's plan to use public-works projects to lead us out of economic morass."

Revitalization, renewal, regeneration are all euphemisms for industrial policy. And when it comes to industrial policy, there is no science. There is only politics.

Stimuli

The latest version of the stimulus proprosal includes $30 billion for transportation. Of that, about 30 percent is for transit, mostly the expensive rail stuff that very few use.

The 2007 American Housing Survey results just arrived. As usual, journey-to-work data are included. Only 4.5% used public transit to get to work. But 3.4% reported working at home.

But huge subsidies to transit over many years have not done much to increase the share of transit users. There is no need to prolong that experiment.

But if we are going to play industrial policy, we can embark on a new experiment. Why not see if massive subsidies to home workers swell their ranks? If that worked, we would get much more in the way of less congested roads, cleaner air, less fossil fuel imports, less greenhouse gases, etc.

But that's only the half of it. We still have to find a way to "create jobs" --easily unionized jobs, being best.

Better to leave well enough alone. Perhaps the stimulus package as is has all the angles covered.

Not funny

A Year Without "Made in China" One Family's True Life Adventure in the Global Economy even includes a chapter titled "A Modest Proposal". And I thought that this was Jonathan Swift brought up to date. But I was wrong. I was fooled.

Author Sara Bongiorni is apparently serious. She is a mercantilist-protectionist, not some clever writer who is able to present David Ricardo in modern and Swiftian terms. Yes, she really wants to protect Chinese workers from those awful manufacturing jobs -- and send them where she does not say or know.

Her family goes through great pains to avoid Chinese goods (OK to buy Taiwanese, German, etc.). And this is all presented with some humor. And I thought that this was the point. But silly me. The author kind of comes clean towards the end.

But is a lifelong boycott what I really want? I'm not at all sure that it is. On the one hand, it's been satisfying to know learn firsthand that China really hasn't taken over the planet, or our lives, at least not entirely, although sometimes it looked that way, especially in the toy and electronics aisles and in the shoe store. Of course, we're not out of the woods yet. I have a feeling China is just getting started when it comes to world domination.

Francisco Rodriguez's review in the Dec 2008 Journal of Economic Literature had me hoping that this book could be a neat teching device. But I kept looking for wink-wink-nod-nod and it's not there.

Round up

I could not resist reading The Panic of 1907: Lessons Learned from the Market's Perfect Storm.

The authors begin with this quote attributed to Mark Twain: "History may not repeat iself, but it rhymes." They go on to write,

To fully understand the panic of 1907, one must consider its context. A Republican moralist was in the White House. War was fresh in mind. Immigration was fueling dramatic changes in society. New technologies were changing people's everyday lives. Business consolidators and their Wall Street advisers were creating large, new cominations through mergers and acquisitions, while the government was investigating and prosecuting prominent exceutives -- led by an aggressive young prosecutor from New York. The public's attitude toward business leaders, fueled by a muckraking press, was largely negative. The government itself was becoming increasingly interventionist in society and, in some ways, more intrusive in individual life. Much of this was stimulated by postwar economic expansion that, with brief interruptions, had lasted about 50 years. ...

This morning's LA Times included "Southern California officials draw up wish lists for federal stimulus money." I have a hunch that similar activities are in full swing across the country.

But today's WSJ includes Philip Levy's "An 8.3% Deficit [today's] Is Plenty of Stimulus".

Fredric Bastiat is always helpful. He noted that "When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it."

And, in this interview, Pete Boettke cites the race between the 3 S's: Adam Smith's prosperity from specialization, Joseph Schumpeter's prosperity from entrepreneurial discovery, and stupidity from the sausage factory.

UPDATE

And there is the Secretary of the Treasury-designate who "forgot" to pay his taxes. He'll be running the IRS?

More on Kiva

I blogged about Kiva.org a few days ago. This video just came to my attention. It is for all those who are as new to this organization as I am.

Many of us suspect that person-to-person beats politician-to-politician every time. If only Peter Bauer were around to see this.

Three questions

Just as there is near-breathless anticipation of the Obama stimulus, there is also some skepticism from Greg Mankiw in today's NY Times. Mankiw writes that "If the stimulus package takes the form of bridges to nowhere, a result could be economic expansion as measured by standard statistics, but little to increase economic well being." Well, yes.

And "The way to avoid this problem is a rigorous cost-benefit analysis of each governement project."

Let me see. Who will be doing all this? And how many government projects pass such a screen? Can we have that conversation?

Listen, learn, enjoy, vote

I am a big fan of EconTalk with Russ Roberts. The weekly podcast interviews (old ones archived) are wonderful.

If you are already a fan, go to this site and give them your vote.

Party, party, party

The front page of today's LA Times includes "State Closer to Tax Refund IOUs". The front page of today's WSJ includes "When It Comes to Cash, a Thai Village Says, 'Baht, Humbug!' ... To Beat Credit Crisis, Santi Suk Supplements National Currency With One of Its Own Making."

If central bankers around the world can throw a party, so can others. Yes, we all know how this ends. But how many times have I heard serious people intone that the Fed is watching and will step in to sop up liquidity once things get out of hand? These sentiments come from people who are thrashing the Greenspan Fed from the other side of their mouths.

It is the same as fretting over the actions or inactions of the previous SEC but pronouncing that the next cadre of regulators will do a better job. Why? The next group will be staffed by people from the same gene pool, facing the same constraints and similar temptations.

Asking a lot

California's roads are awful. Driving on many of them is painful and/or dangerous. It is not that there are not enough funds, but that the funds that are available have been wasted on public transit. The cliches (transit is "starved", autos and highways are favored) are way off.

A recent report from the Public Policy Institute of California includes a chapter on transportation by Jon Sonstelie that is must reading. "California stands out ... in the way it allocates total transportation expenditures between highways and mass transit. In 2002, highway spending per capita was lower in California than in the rest of the country. ... At the same time, spending per capita on mass transit was higher in California than in the rest of the country" (p. 128).

Starving highways to get people into transit was the acknowledged policy and it was never promising. Industrial policy is that way. And we are now in the situation where one reads and hears nothing but how politicians are about to "create jobs" by making wise investments in infrastructure, "green" this and that, and all sorts of other silliness.

Asking the believers to connect the dots may be asking a lot. They really ought to drive around California's roads and also check where and how the money has been spent. Do these first and spout about policy directions later.

The experts can make airplanes stay in the air, but ...

In today's WSJ, columnist Jason Zweig writes "Investing Experts Urge 'Do as I Say, Not as I do' ...

I once asked Harry Markowitz, who shared the Nobel Prize in economics in 1990 for his mathematical explorations of the relationship between risk and return, how he diversified his portfolio.

Dr. Markowitz first got to choose how to divide his assets between a stock fund and a bond fund not long after publishing his pioneering article "Portfolio Selection" in the prestigious Journal of Finance. Following his own breakthroughs, he should have made intricate calculations, based on historical averages, to find the optimal trade-off between risk and return. But, Dr. Markowitz told me, that isn't what he did: "Instead, I visualized my grief if the stock market went way up and I wasn't in it -- or if it went way down and I was completely in it. My intention was to minimize my future regret."

Dr. Markowitz paused, then added wryly: "So I split my contributions 50/50 between bonds and equities."

He is just the tip of the iceberg.

I love this story because many (many) years ago when I signed up for my university's 403b plan (and had no clue), I filled out the standard forms and when it came to the boxes on allocating monthly contributions, the woman behind the desk casually mentioned that most people just choose 50/50.

Pyongyang did not make the cut

This Forbes piece cites research by Jeff Kenworthy on the cities with the World's 10 Best Commutes. They are (in David Letterman order, with the last being best): Berlin, Krakow, Mumbai, Beijing, London, Osaka, Dakar, Chennai, Tokyo, Hong Kong. I have only been to six of these cities, but I do not buy it.

Economics professors like to warn their students that measuring inputs is not a good substitute for measuring outputs. The Kenworthy study looks at the percent of people using bicycles and public transit, estimated energy costs, etc.

As we embark on programs of infrastructure/stimulus spending, our leaders will be looking everywhere for "good" ideas. That's the problem.