Bulletins from the gender wars

"Parents Won't Say if Tot is a Boy or a Girl ... because they believe gender is a social construction. ... A Swedish couple's decision to keep their toddler's gender a secret is stirring debate, especially now that the parents are expecting a second child...'Pop' is 2 ½ years old, but so far only those who change the child's diapers know whether the youngster is a boy or a girl."

The kindest thought that comes to mind is that we have all heard of perfectly mainstream parents who have also messed up their kids. And I am still convinced that procreating should not be subject to licensing or other state sanction.

In the June, 2009 Journal of Economic Literature, there is Rachel Croson and Uri Gneezy's "Gender Differences in Preferences". The authors survey the evidence from a large number of controlled economic experiments and report "robust differences in risk preferences, social (other-regarding) preferences and competitive preferences."

Many of us had thought all along that men and women are different. Croson and Gneezy cite nature and nurture influences.

Perfect storm means many weatherfronts

I have now seen a few timelines that recap the history of current economic downturn. These are always useful, but all miss the important role that local conditions play. Local supply and demand differ drastically from place to place. In the U.S., coastal and sunbelt places are where the demand is and (often) where permitting is toughest and supply most constrained. Home price "bubble" effects differed hugely from place to place.

This morning's LA Times includes "Hard times? Depends on where you live ..." Of course. Here is an early warning.

There is already reason to worry that the histories that are (or have been) written will miss the role of the local regulations weatherfront in the perfect storm.

Strange competition

The President has promoted the idea of a new "Public Company" health insurance provider option as "a little competition" that all those market crazies should embrace.

All I recall is that the audience did not laugh. Medicare is a public company with an unfunded liability that runs into the trillions of dollars.

But those on the left like to dismiss trillion-dollar unfunded liability talk as politicized hysteria. Don't the worry warts realize that the power to tax and the power to inflate are available to rescue the public companies that we already have?

Competition? But not on a level playing field.

Give me land, lots of land

Wendell Cox reports that recent census data show continued population exurbanization -- for the period 2000-2007. That's where the land is, where permitting is (mostly) simpler, and where most people want to be. It's an old story.

Our research (with colleagues Harry Richarsdon and Soojung Kim) considered employment decentralization for the years 1969-2004 (using the BEA's REIS data file). We examine county-level data aggregated into broad categories that include the relatively recent metro-micro area designations. We look at differences, local less U.S. growth, filtering national cycles. Figure A (below) shows job growth (five-year moving averages, dark line) trends for the "large" (over one-million pop.) metro areas; the other figures show the concurrent trends for "small" (less than one-million) metro areas, micropolitan areas adjacent to large and small metros as well as non-adjacent micropolitan counties and finally adjacent as well as non-adjacent non-core (not metro, not micro) counties. Very roughly, these represent the urban-rural hierarchy.

What do we see? First, there are cycles but no discernible trends. The rise of the Internet, for example, is not observable. Second, for private employment growth, the cycles become more pronounced as we move down the urban hierarchy. Third, the larger areas consistently do better in terms or proprietor employment growth. Fourth, the two types of micropolitan areas display very similar growth paths, but with the one exception that the ones adjacent to the large metros have stronger proprietor employment growth in the late 1990s, perhaps reflecting the beginnings of the boom in tech start-up firms. Fifth, the remaining three areas show similar growth patterns with the most remote ones (non-core nonadjacent) experiencing slightly sharper fluctuations.

The pulses are the reverse mirror image of the large metros -- and they extend ever more sharply down the urban hierarchy.

REIS_FIGS.doc

Foxes watching over chicken coops

In today's WSJ, Abraham Verghese writes about "The Myth of Prevention". With respect to Medicare (and the President's chiding of his AMA audience last week), the writer notes that:

Cut, poke, sew, burn, insert, inject, dilate, stent, remove and you get very well paid; if you learn how to do this efficiently, maybe set up your own outpatient center so you can do it to more people in a shorter time (which is what happened when this payment system was put in place in 1989) and you are paid even more. If, however, you are a primary care physician, and if, just like the young doctor who saw my parents yesterday, you spend time getting to know your patients, and are willing to play quarterback when your patient enters the hospital, so that you can herd the consultants and guide the family through a bewildering experience that gets surreal if you are in the intensive care unit, then you may have great personal satisfaction but you will make five to tenfold less than your colleagues in the doing-to disciplines.

In the same newspaper, Jason Zweig writes approvingly of the proposed financial sector regulations.

Over at The Austrian Economists, Peter Boettke sums up the insights of James Buchanan as "Don't let the fox guard the chicken coop."

That's the problem. In the old dueling-economists days at Newsweek, when Milton Friedman and Paul Samuelson went at it, I recall one of them writing that they agreed on the lessons of economics, except that one of them applied them to public policy questions. That was a clarifying moment.

Suspend disbelief, ignore public choice, and you enlist foxes to watch over chicken coops. How could it turn out any other way?

Curses

There really is a "curse of oil." And I am a great admirer of William Easterly's writings. Combine oil with aid and you get the likes of Omar Bongo. "Mr. Bongo made no distinction between Gabon and his private property. He had ruled for so long, 42 years, that they had become one."

I was in Mexico in (I think) 1976 when Pres. Lopez Portillo was sworn in. I recall his address to the nation and he boasted that there are two kinds of countries, those that have oil and those that do not. He paused and then said: "And we have it." And there were wild cheers.

Must read

We have an emotional and a rational side (they are not left-right) and this has been understood and written about for centuries. But now we have neuroscience and many clever people who dream up and conduct very clever experiments. And we have writers like Jonah Lehrer who put it all together in readable prose. His How We Decide is light reading for smart people. That is very high praise.

There are now many books that cover similar territory, but this one is (in my view) the best. The author covers decision making by airline pilots, athletes, singers, voters, shoppers, investors, generals, gamblers and others. He knows enough about the current science to clearly explain the successes and the failures in each field.

The emotions and the intellect can work wonders if they interact properly. And that's a big "if". Read the book (Spock!) to get the full story.

I am also reminded of Vernon Smith's criticism (this econtalk interview) of the many experiments that find us so irrational. The experiements have us make decisions and choices solo that we actually always make after some deliberation and consultation with friends and family. That part never gets into the laboratory and it undermines some of the findings.

It's been a long time coming

I used to react to LA Times editorial and op-eds on land use and transportation issues. But the almost-Pavlovian response has waned. So I managed put aside Tim Rutten's "Congestion pricing: A slippery slope to toll roads." But just when I thought I had kicked the habit, an editor asked for my response. And here it is.

But the real story is that the Times editorial board has finally come around --sort of. They also see a flow of funds to pay for more public transit. I guess that it depends on what you mean by "public transit."

Not connecting dots

In 2002, the NY Times Magazine included John Tierney's "Amtrak Must Die". The writer had actually stepped on-board for a first-hand look. Today's NY Mag includes Jon Gernter's "Getting up to speed .. Last fall, Californians voted to approve the most expensive infrastructure project in the country's history. But how do you actually build a high-speed train that will take you from LA to SF in 2 hours and 40 minutes?"

Again, the writer actually rides the rails (LA-Sacramento) and again experiences a ridiculously (almost comically) inadequate ride. The TransSiberian could not be worse. LA to Sacramento "costs" $5 more than auto (the writer confuses price with cost), takes twice as long, and is completely inadequate.

But undaunted, the writer interviews bureaucrats, from the Governor on down, and buys into the idea that a ton of money can make a difference. How to fix a failing program? Spend (much) more. Heard that before. And the project "will instantly create thousands of jobs." The writer does not connect any dots, but ends on the politically correct upbeat note.

Call it turtle soup

So they wheeled out Larry Summers to assure the world that his boss is a "Defender of Free Markets". In the speech, Summers detailed the President's economic goals, including "energy independence." Huh?

Bill Clinton famously parsed the meaning of "is", but he was a registered of serial politician. I thought that Summers was selected to sell the "Obama-hearts-free- markets" message because he is who he is. I guess in much of the beltway-media world, "energy independence" and "free markets" mean whatever you want them to mean. You could call them turtle soup.

Seasteading

I first learned about Patri Friedman's Seasteading ideas and the work he has been doing on this via the Russ Roberts econtalk interview. There is now an article with more in the July 2009 Reason.

Seasteading will happen, but we do not know when.

We do know three things. Liberty is a powerful draw, and technology is progressing faster than ever (on the side of seasteading feasibility), and politicians will keep doing what comes naturally, pushing ever more people into the "exit" option (as in Albert Hirschman's Exit, Voice Loyalty).

I do not see any of these three phenomena receding. So seasteading will happen.

White is the new green

Wendell Cox compares Secretary Chu's idea to "Paint the world white" with the other less worthy proposals to keep us cool.

And compare this to another doomsday report from a group that Kofi Annan is affiliated with (described in today's WSJ).

"In the blood"

The Economist ("In the blood") points us to "Culture, Context and the Taste for Redistribution" by Erzo Luttmer and Monica Singhal. They look at the preferences of recent immigrants and find that national background explains a significant amount of varying tastes for redistribution policies. The authors conclude:

By studying immigrants, we are able to credibly disentangle cultural determinants of
preferences for redistribution from economic and institutional determinants. We find that individuals’ preferences for redistribution are strongly affected by preferences in their countries of birth: the average preference for income redistribution in the culture where an immigrant is raised continues to have an effect once they emigrate. This effect is highly statistically significant and robust to rich controls for economic factors and to the choice of sample and
specification. Our results show that these cultural influences also affect real behaviors, such as voting. Cultural determinants of preferences for redistribution appear to be strongly persistent across generations. At a fundamental level, this paper provides evidence on the nature of preferences for
redistribution.

But is it that the surveyed immigrants like or dislike government efforts to redistribute? Or is it that the immigrants happen to be sanguine about politicians' rhetoric? Is it that immigrants are less skeptical that programs will deliver what backers promise? The paper does not raise the possibility.

A debate over the ethics of top-down redistribution is one thing. A debate about how culture shapes one's attitudes is another. But what does the analysis of immigrants' stated preferences reveal?

In any case, it's a interesting paper that made my day.

Truth-telling?

Almost to the day that the President came out strongly for "truth-telling", his Secretary of Transportation launched this, which falls far short of the goal. (HT John Niles).

Take this howler:

In fact, each 1% of regional travel shifted from automobile to public transit increases regional income about $2.9 million, resulting in 226 additional regional jobs. Other economic benefits include increased productivity, employment, business activity, investment and redevelopment.

The Secretary is talking about an industry that serves many fewer riders now than it did before hundreds of billions of dollars of public subsidies were sent it's way. That's a decline in the absolute number of passenger miles in spite of population growth and huge subsidies.

It's negative NPV all the way.

Way beyond

This NBER study shows that CAFE standards have been a disaster. HT to Ed Stevens.

Holman Jenkins notes that this is all pretty obvious, but that the apostle of "change" has gone along with the same old political nonsense. Trouble is that it is now way beyond nonsense as taxpayers own the companies that politicians are undermining.

Let's face it: CAFE has done nothing to reduce gasoline usage or oil imports (car owners just end up driving more miles). In 34 years, not a whisper of testimony has come from any quarter that the policy actually works. It only causes U.S. manufacturers to make small cars and dump them at a loss on the public, subsidized with the profits of pickups and SUVs.

Detroit doesn't have to match the transplants in wages and benefits, but CAFE distorted what would have been the Big Three's natural path of adaptation to the natural fact of growing diversity in the marketplace with the arrival of foreign manufacturers. Detroit would have focused on market segments where it could compete profitably even with its higher labor cost -- on bigger, pricier vehicles where labor cost is a lower share of value added.

Unfortunately, Mr. Obama, that freethinker, took to the CAFE fraud like a bat to a belfry. He signaled his arrival on the presidential stage by sternly demanding higher mileage standards early in his campaign. The "change" candidate who might have broken with a generation of political cant about CAFE instead appropriated the fraud for his own careerist purposes.

That tangled web now catches him in a fatal contradiction as he pours tens of billions of taxpayer dollars into the failed business model that CAFE foisted on Detroit.

Horses, nationalizations and czars

I have just finished reading The Horse in the City (by Clay McShane and Joel Tarr), which does a fine job documenting what went on (in American cities) between the years of the "pedestrian city" and the "automotive city". The book is a fascinating bit of research on modern urban history.

We learn, for example, that “In 1890, 9,163 establishments manufactured carriages and wagons or their parts, employing more than 90,000 workers to make over one million vehicles worth over $32 million.” (p. 31).

But GM sold just over 2-million vehicles in 2005. The Detroit Big-3 sold 5.33 million. The U.S. population in 2005 was about 4.7times that in 1890. The ratio of vehicles then and now is 1:5.33. So we are in the ballpark. But McShane and Tarr make no mention of demands for bail-outs or nationalization because the industry of its day was "too big to fail."

The folks that gave us the Cimarron, Chevy II and the Nova (and many other duds) should have failed many years ago. The only way that progress happens is when market forces punish inefficient firms (and models) and competition brings forth better ones.

Arguments to throw good money after bad come easily (AMTRAK, Postal Service and many more). The big change at GM is that explicit politicization has replaced implicit politicization (a la Fannie Mae and Freddie Mac).

Much has been written about all this, but I did enjoy yesterday's WSJ which included the testimony of a real Car Czar, Ion Mihai Pacepa who was given the job in Romania in the 1960s by Nicolae Ceausescu.

The current Administration does to see the irony and talks openly about appointing various "czars" to run various industries.

Voluntary collective action

Voluntary collective action is a wonderful thing. We find it in various places and some of this has been documented in The Voluntary City, a project that I co-edited.

In yesterday's NY Times, Robert Frank wrote about "Carbon Offsets: A Small Price to Pay for Effciiency". This morning's LA Times has a story that provides some examples ("Forests as good as carbon in the bank"). People get to put their money where their mouth this.

These have been described as a complement to cap-and-trade. Trouble is that they may be seen as substitutes instead. We do not want cap-and-trade that crowds out voluntary collective action. Much better to let the people that gave us open-source software to innovate in this area.

Something for the true believers on Washington to think about.