Denial

Some months ago, James Q Wilson speculated in a WSJ op-ed on some of the reasons that reported crime in the U.S. is down.  On his list was this one:

Another possible reason for reduced crime is that potential victims may have become better at protecting themselves by equipping their homes with burglar alarms, putting extra locks on their cars and moving into safer buildings or even safer neighborhoods. We have only the faintest idea, however, about how common these trends are or what effects on crime they may have.

In the last few days, there has been a murder on LA's Red Line subway and a stabbing on the Gold Line light rail.  LA Times columnist Sandy Banks has written about these, and devoted today's column to readers' reactions and her reactions to their views.  Here are some outtakes (readers remarks to Banks in quotes):

"I have seen several violent arguments, many extremely crazy people and I would never be surprised if someone pulled a gun and started shooting," wrote Dan, who rides the Red Line regularly from North Hollywood to Staples Center.

"If you have any sense, you should be afraid and wary," he wrote. The Red Line "is the Wild West."

So, apparently, is the Green Line, according to a reader who feels the need to carry pepper spray and a stun gun on his rides from Norwalk to Redondo Beach. A few months back, a fellow passenger tried to push him from his seat. "I punch him in his face and spray him," he wrote. "He jumped off the train at the next stop."

"You have no idea what we have to put up with a daily basis."

It's too simplistic to say that we see only what we expect to see. But the divergent descriptions I received can't be reconciled with the notion of a singular reality.

Crime and accident figures show that riding the subway is certainly safer than walking in some neighborhoods or driving on our traffic-clogged streets. The Red Line attack was the first homicide in the subway's 18-year history.

Safety is about perception, though, not just bare statistics. And passengers feel safe when they trust one another and have confidence in the system to protect them.

Reader Dan spent his career "around violent people, so I am not easily intimidated," he wrote. On his Red Line ride, he sees rude passengers "taking up two seats and daring you to protest" and rule-breakers "who board with ELECTRIC GUITARS (battery packs) and begin torturing the riders" with music.

Across town, on the Green Line, "the ride is pure hell," the man with the pepper spray said. "You have people talking loud with foul language, thugs menacing riders, transients stretched out sleeping on the train all day long.…

"And there's never a policeman around when it happens. Most people I know carry some type of weapon on the Green Line," he wrote. "I'm not saying that the killing on the Red Line was justified, but I know there are very unreasonable people riding the Metro trains, and I don't intend to be one of their victims."

In other words, a sense of lawlessness on the trains may push reality closer to perception.
For some riders, putting a mirror to society is part of the joy of subway travel.
"There's a sense of equality on the trains. Everyone is using it for one reason or another. They don't have a car, maybe they can't drive, or they want to reduce their carbon footprint."

They're all crammed in together, regardless of reason or circumstances. And "unlike buses, the train drivers are cut off from passengers. So it is your fellow passengers who must aid and assist you," Compton said.

Passengers might not be willing to break up a fight or wrestle a man with a knife to the ground. But when a teenage boy had a nosebleed on her train, "everyone came to his aid, offering Kleenex, handkerchiefs and even cold bottled water."

So she doesn't mind the man peddling candy in the aisle or the "vagabond musicians, who play and sing and hope you toss them a monetary donation."

It's a rare chance in sprawling, subdivided Los Angeles for people from different walks of life to rub shoulders.

Our transit system, like our city, is unwieldy, unpredictable, incomplete and often inconvenient. Embracing public transit requires a mind-set change — a willingness to make accommodations, to mix it up, to improvise.

What if Wilson is right?  Some of the reduction in crime stems from the fact that more of us have gotten better at avoiding bad people and bad situations.  The public-space-public-facilities-public-schools-public-transit fans rightly point to the value of  "rubbing shoulders".  But denial is never useful.  Sermonizing that it's cool to just "mix it up" falls on deaf ears.  I suspect that many of Banks' critics understand very well what Wilson is talking about and have it on their list to get out of harm's way just as soon as they can afford to do so.

Are they kidding?

Daniel Hamermesh summarizes recent research on the economic benefits of being blessed with good looks, in today's NY Times ("Ugly? You May Have A Case").

I have to defer to the researchers who claim that they have found ways to identify the beautiful people who might earn a substantial economic premium from their appearance.  I always thought that there is a difficult-to-describe package of look, walk, talk, etc. ("charisma", perhaps) which turns heads.  But the research seems to rest on just a "look".

Whatever it is, we all know that life is unfair.  We can also supect that there are complex feedbacks between pleasing appearances, worldly successes, confidence gained and pleasing appearance.  A winning smile and countenance are the obvious examples.

What floored me is Hamermesh's thoughts on a "new legal frontier" whereby the homely would get the protections of labor law litigation.  The mind boggles at the sorts or experts, consultants, legal specialists and legislators who would get in on the act.  Is the back page of the Times' new Sunday Review section the satire page? 

Creative cities

The Handbook of Creative Cities (edited by David Emanuel Andersson, Ake E. Andersson and Charlotta Mellander) is about to hit the stands.  Sandy Ikeda and I worked hard on Chapter 22 ("Does Density Matter?") and fully expect that all of the contributors labored at least as much.   

Modernity once more

With the changing of the guard at Apple, there is another round of commentary on "How Steve Jobs Changed The World" (this one Andy Kessler's piece in today's WSJ).  It's another opportunity to celebrate the entrepreneurial spirit, the modern world, global capitalism and many related themes. 

At the other extreme, there are always the Luddites.  But there are also many more people who grasp half the story.  They may love their cool gadgets, but they remain lukewarm when it comes to markets and the modern world. 

On a related theme, I have mentioned many times that tribalism has been humanity's scourge, but the modern world may conquer it.  The modern world represents not only our hope of conquering disease and famine, but also the tribalism scourge.  This is why I am a big fan of inter-marriage, which is on the rise across ethnic as well as national divides.

All this is to introduce Tammie Harrison's "My Life as a Chinese Dating-Game Star" (also in today's WSJ).  American TV and pop culture have long been popular abroad.  In recent years, there have been local adaptations which are always interesting.  There must be at least a dozen versions of "Who Wants To Be A Millionaire?" in other countries.  I have seen the ones in Poland, Germany and UK.  Tammie Harrison writes about the Chinese TV dating show on which she (a U.S. student abroad) appeared.  Her story is a brief tour of the inevitable cultural stumbles that happen in these types of situations. 

But its a world where modern comunications do their magic.  Globalization means many things, including these small steps and stumbles toward world peace.

Not so sure of stagnation

Measured in terms of our material well-being, we are easily better off than ever.  Here is Steve Horwitz with some of the data.  Associated comparisons of what an hour of work buys these days vs. the past was pioneered by Cox and Alm, but elaborated since then.

In yesterday's NY Times, Tyler Cowen wrote about declining productivity in the U.S.  As in his The Great Stagnation, Cowen acknowledges the weaknesses in our productivity measures, but sticks to his case.

The "stagnation" thesis when combined with the material well-being comparisons constitute a riddle unless we go back to the idea that there is lots of cool new stuff that we have trouble measuring.

Here is one small example.  My wife and I subscribe to the Berliner Philharmoniker Digital Concert Hall.  For about $200 per year, we get access to all of their concerts, live (if we like) or recorded 24/7.  We watch and listen on our simple desktop equipment and get exquisite sound and visuals of one of the world's great orchestras and their starring guest performers.

When economists discuss substitutes, they note that the "good" and the "bad" substitutes are subjective judgements that are "in the eye of the beholder."  Live vs. digital, staying home vs. long-distance travel and hassle, $200 vs many thousands of dollars involve complex trade-offs that people can have fun arguing about.  But they will also vote with feet and wallets.

Suffice it to say that the experiences of subscribers to this package (as well as countless like it) add to the quality of our lives in significant ways that are not captured by standard productivity measures.

Class war and race war

It is sad but true that some very smart people are also very dumb.  This morning's WSJ includes an essay on Eric Hobsbawm ("How a True Believer Keeps the Faith").

Here are some choice passages: 

In a now infamous 1994 interview with journalist Michael Ignatieff, the historian was asked if the murder of "15, 20 million people might have been justified" in establishing a Marxist paradise. "Yes," Mr. Hobsbawm replied. Asked the same question the following year, he reiterated his support for the "sacrifice of millions of lives" in pursuit of a vague egalitarianism. That such comments caused surprise is itself surprising; Mr. Hobsbawm's lifelong commitment to the Party testified to his approval of the Soviet experience, whatever its crimes. It's not that he didn't know what was going on in the dank basements of the Lubyanka and on the frozen steppes of Siberia. It's that he didn't much care.

I have several times cited Timothy Snyder's Bloodlands because the author provides all of the awful details of Stalin's and Hitler's mass murders.  But many years later, Hitler is recognized for what he was while Stalin still has defenders such as Hobsbawm.  Both dictators were monsters, but mass murder for reasons of class warfare seemingly gets a pass in some quarters whereas mass murder for reasons of race war is condemned as it should be.

I get antsy when class war rhetoric invades our politics.  Discomfort over inequality gets confused with discomfort over the poverty of some.  Policies that address the latter deserve a hearing, but can we ever have politics without class warfare?  It would probably be unrecognizable.

David Henderson would rather fight envy than inequality.  The likes of Hobsbawm seals his case.

Worthwhile read

Having just finished Peter Berger's Adventures of an Accidental Sociologist, I can only ask, "where do I go to take one of his classes?"

The man is very smart, writes in a plain style, and recounts a remarkable career in which he (Forrest Gump-like?) manages to find himself involved in interesting places and/or timely policy-relevant intellectual pursuits.  It's a fascinating trip through the culture and politics of the last 50-60 years.

And the jokes!  He likes them and they are all over the book.  Here is just one from the section on occupations:  "An economist: someone who knows everything -- and nothing else."

Berger can be funny as well as profound with just a few well-chosen words.  It's a very short book.

Out of this world Keynesian

Last Sunday, I worried over negative-NPV stimulus.  No problem.  Paul Krugman believes that even a false-alarm invasion of the space aliens would get us to spend our way out of our current economic situation -- as did World War II.   I had thought that Bob Higgs had successfully debunked the latter.  I would love to see Higgs' arguments taken on by Krugman and anyone with similar views.   

Romer on start-up cities

Here is a video recording of a recent panel discussion on cities.   I found all of the panel participants worth listening to.  But when Paul Romer participates, he outdistances the others.  He talks here about his Charter Cities project which has much to recommend it, and esepcially his work in Honduras.

I liked Romer's discussion of start-ups in business.  The big established firms do miss the boat many times and this creates a role for start-up firms.  Why not start-up cities for the same reasons?

Romer's remarks come on the heels of Geoffrey West's panel presentation, featuring his finding on scale economies in cities.  What better rejoinder than to discuss the phenomenon of start-ups.  The cities we have may not be able to innovate -- for all sorts of economic and political reasons.  All the more reason for start-up cities. 

Wheeling out convenient narratives

In "Gee, Officer Krupke", (West Side Story), Stephen Sondheim had one of the characters tell the judge:

"Hey, I'm depraved on account I'm deprived."

Richard Sennett and Saskia Sassen take up a version of this theme in this NY Times op-ed.  They begin with thinning police presence, but quickly move to the "Tea Party's dream come true."  It's the austerity.  More spending and more programs is the simple story that is regularly wheeled out when large numbers of people start marauding in cities of the Western World. 

In my view, Peggy Noonan offers a more compelling story in this morning's WSJ.  First, it's not just in the UK:

What does this have to do with America? What we're seeing on the streets in Britain right now is something we may be starting to see here. It hasn't come together in a conflagration, but it is out there, and I think it's growing. And as in Britain, it doesn't have anything to do with political grievances per se.

Philadelphia right now is under curfew because of "flash mobs." Young people send out the word on social media, and suddenly dozens or hundreds of them hit a targeted store, steal everything on the shelves, and run, knowing no one will stop them or catch them. It's happened in other cities, too. Sometimes the mobs beat people up on the street and take their money. There are the beat-downs in McDonald's, where the young lose all control and the old fear to intervene. There were the fights and attacks last weekend at the Wisconsin State Fair. You've seen the YouTubes of fights on the subways. You often see links to these stories on Drudge: He headlines them "Les Miserables."

This is must reading for anyone interested in the importance of public spaces and common areas.  But it's a topic that's usually avoided in polite company.  It's so much simpler to allude to something or other being "underfunded."
Noonan concludes this way:

The normal, old response to an emerging problem such as this has been: The government has to do something. We must start a program, create an agency to address juvenile delinquency. But governments are tapped out, cutting back, trying to avoid bankruptcy. Which means we can't even take refuge in the illusion that government can solve the problem. The churches of America have always helped the young, stepping in where they can. That will continue. But they too are hard-pressed these days.


Where does that leave us? In a hard place, knowing in our guts that a lot of troubled kids are coming up, and not knowing what to do about it. The problem, at bottom, is love, something we never talk about in public policy discussions because it's too soft and can't be quantified or legislated. But little children without love and guidance are afraid. They're terrified—they have nothing solid in the world, which is a pretty scary place. So they never feel safe. As they grow, their fear becomes rage. Further on, the rage can be expressed in violence. This is especially true of boys, but it's increasingly true of girls.

What's needed can't be provided by government. When the riot begins or the flash mob arrives, the best the government can do is control the streets, enforce the law, maintain the peace.

Many of us love modernity.  But that does not mean that we stop talking about its downsides.  It does not mean that we simply reach for with an "underfunded programs" narrative.  Step one (as they say) is to fully recognize the problem.

Can a mega-project not become the next Great Planning Disaster?

F.A. Hayek famously taught us to appreciate the division of knowledge that goes with Adam Smith's division of labor.  Arnold Kling has recently elaborated and wondered how it is that "experts" can possibly be expert when discussing ever more complex systems.  Knowledge is ever more dispersed and specialized, so who can possibly be expert?  National economies are a case in point.  Experts opine and offer "solutions", but very few of them have a respectable track record.

We expect that it's best to leave things to market forces whenever possible. Anything that can be metered can be privatized and (it is thought) priced and provided much less wastefully than via politicians advised by experts.

But there are exceptions.  Among them are the "mega projects".  Market demand is hard to identify when it comes to one-of-a-kind projects. And project scale and/or uncertainty limit the possibility of attracting private capital.  The "mega" projects, then, are the ones not benefiting from market discipline and the trial-and-error learning of owners. Peter Hall has famously written about Great Planning Disasters, all of which were mega-projects?  What to do? 

Cleaning my office, I came across Charles Lave's "Playing the Rail Forecasting Game" (TR News, September-October, 1991), which I cannot find on-line.  Lave suggested that mega-project consultants and others behind those rosy performance forecasts should be required to post bond to guarantee that their projections are reasonable.  This great idea naturally comes to mind whenever I hear about how many people are "projected" to ride high-speed rail.

Closer to home, the LA Times reports "Los Angeles OKs outlines of downtown football stadium deal."  There will be fans and jobs and nothing but benefits to the local taxpayers.  Fine.  But will the various consultants place some of their fees in escrow until we can tell how accurate they were? 

Probably not a chance.  But thanks to Prof Lave (unfortunately deceased) for suggesting that there is a way to deal with the inevitable mega-projects. 

Jobs

Who says our leaders are divided?  They all get behind "jobs."  In fact, commentators routinely and helpfully suggest that the President (or anyone else in politics) should "focus on jobs".  With the downgrade of U.S. credit, this is now the universal mantra.

But there are, as we know, serious differences re how to get there.  I found this post by Jerry O'Driscoll useful:

" ... stimulus has not two but three stages. It may boost growth when added, but must slow growth when withdrawn. The third stage comes when taxes (current or future) must be paid to fund the stimulus. That stage is always negative in its effects."

The various political sides consider and weight the stages of stimulus (as well as their magnitudes) very differently.  While they all "focus on jobs", they disagree on policy and, more specifically on how many stages of stimulus there are and how they each matter.

I would like to add a fourth stage.  Pay for negative-NPV projects (high-speed rail, "green jobs" and the like) with stimulus and the productivity of the economy declines.  Is that any way to "focus on jobs"?

Exit from No Exit

David Wessel's "Prescriptions for Getting Out of the 'Liquidity Trap'" in this morning's WSJ is not cheery and gives one a No Exit kind of feeling.

Time out.  Regional economists had been writing about Growth Poles as a development strategy for developing countries for over fifty years.  This approach emphasized interregional differences in agglomeration opportunities and development potential.  The new-wine-in-old-bottles have been the "Technopoles" and, more interestingly, Paul Romer's Charter Cities idea which has also been seen as having just a developing country focus.  So far.  Read about the Shenzhen example.  Think about one in California -- or any other state.

Regional employment and growth differences within the U.S. are well known.  Here is a recent comment regarding these.  And there are also significant local policy differences.  Here is recent research by Wendell Cox that highlights these.  Less local control and light touches make a difference.

The point of all this is that, bleak as Wessel's report  and other news are, we lose by forgetting about local area policy differences and differences among local opportunities.  Not all labor and capital are equally mobile, but "stickiness" is part of almost all economics.

It's also part of an old story about what we lose when we aggregate and start thinking that it's only about the aggregates and the "big" stories.  Local difference and local policies matter.  Why not Charter Cities somewhere in the U.S.?

Fun with Burgernomics

Anyone teaching economics will have more fun with The Economists' Big Mac index (BMI) than purchasing-power-parity (PPP). The magazine's editors even evoke "Beefed-up burgernomics" in this week's 25-year celebration of the index's existence.

It would be lovely if a PPP-based judgment on what is "overvalued" or "undervalued" were sufficient to guide currency trades.  Investors hold currencies for all sorts of reasons, including current-year trades of goods and services, but much more is usually at stake. 

This week's write-up discusses the flaws of the BMI, but then introduces results of a cross-section regression on another flawed index, GDP per capita.  Observations off the estimated "line of best fit" indicate over/undervaluation currency valuation. 

Nice. But I think I'll just keep on looking for a Holy Grail indicator that will make me rich.  It must be here somewhere, I must be getting closer. :-) 

The speculators!

"Speculation" and "speculators" are convenient scapegoats and villains for anyone ignorant of market economics.  Unfortunately, that's a large group. 

Adding to the confusion, teachers of introductory economics (when they pay attention to it) usually single out speculation instead of including it in the standard discussion of supply and demand.  All supplies and all demands are in light of market participants' understanding of the future.  This means that there are large numbers of current prices and futures prices that are inextricably linked.

I liked this piece in today's WSJ.  "Traders Eye Oil-Tanker Play ... Spread Between Futures Contracts Makes Stashing Crude Offshore Attractive"

It's a nice story for classroom use because it highlights the (natural) complexity of speculation.  Leave oil in the ground or take it out?  Then what?  The choices are huge.  Keep it in the tanker or not?  For how long?  Where?

It's all speculation and it's a natural and normal part of business.  In fact, being constantly challenged on how we deal with an uncertain future is a normal part of everything.