Exploitation

The WSJ's Rachel Bachman ("Enough Already With the Little Guy ... Why College Football's Power Conferences Should Ditch the Smaller Ones; the $2000 Question") explains why San Diego State is joining the Big East conf and why the colleges balked at the idea of throwing a $2,000 crumb to atheletes.  It's the money and it's shameless exploitation by colleges. There are now more than thirty college football bowl games.  More than half of the NCAA's Tier I-A schools play in a bowl game.  The games are on TV and for most of them the stands, while not empty, are sparsely populated.  Bachman explains that the way the gravy is spread, there is money for the poorer programs if they can attach themeselves to a rich conference.  Some of the poorer schools even end up pouring (diverting) money into their football programs, once they join high-rent conferences.

The NY Times' Joe Nocera ("The College Sports Cartel") is less kind.

In fact, the N.C.A.A.’s real role is to oversee the collusion of university athletic departments, whose goal is to maximize revenue and suppress the wages of its captive labor force, a k a the players. Rarely, however, will the cartel nature of the N.C.A.A. be so nakedly on display as at this year’s convention.

The convention nixed the idea of offering athletes an extra $2,000 stipend.  They also rejected four-year scholarships in favor of two-year, further sticking it to the players and also revealing the real game being played.  Bachman reports that the schools already losing money had the most votes.  This supports her idea to get the little guys out of the top tier.   But that is unlikely.  Consider that Nocera ends this way:

... it certainly would be worthwhile to see someone challenge its cartel behavior in court. The inevitable rollback of the $2,000 stipend and the four-year scholarship would be an awfully good place to start.

Good luck to Bachman and Nocera.  The more schools in the cartel, the more alumni cheering their bowl-bound programs, the less likely that Congress or the Department of Justice will lift a finger.  Yes, they take stands against "monopolies", but they also count votes.

UPDATE

The Jan 1 NY Times shows where some of the college football money goes.  I have no problem with star coaches getting what the market will bear, but the colleges' treatment of their players is show to be all the more shabby.

UPDATE1

And here is the knockout delivered also by Joe Nocera

Muddling through

Megan McArdle argues that most people do not save enough.  We hear that a lot and it's probably true. It is also true that many of us are less than perfect in forecasting our future wants, capabilities, successes and failures.  Nevertheless, sage advice cannot hurt.

James Surowiecki writes about the return of lay-away.  When borrowers and lenders were optimistic, credit cards were easily available and widely used.  But mood swings and business cycles have pushed many the other way.  Now many borrowers as well as lenders have opted to trade for big-ticket items via commitments to save rather than commitments to re-pay loans. 

But I wish the author had avoided "... our economic system is set up to encourage overspending."  Who "set up" the "system"?  As a rule, whenever "the system" gets mentioned, I wonder where the story is headed.

It makes sense to recognize that in a world of semi-myopic savers, borrowers and middlemen we will muddle along -- and necessarily wander from the "best" path.

What it takes

Over at Urban Demographics, they link to The Atlantic's photo essay on Landscape Absurdism: Las Vegas.  Quite a few planners (and many others) love this stuff.  It plays to the idea that there are "chaotic" and "wasteful" land use patterns, especially in sunbelt suburbs and perhaps most especially in Las Vegas.

We know now that there was suburban over-building, not just in Vegas, but in most places and this had very little to do with lax lands use planning practice.  In fact, there is evidence that the most controlled places experienced the biggest house price bubbles.

How do we know "waste" when we see it?  From the air?  There is no way that visual inspection can tell us about "better" or "worse" land use arrangements.  Richard Peiser showed some years ago that it is possible to build inter-temporal models which indicate that "leapfrog" development can be economically efficient, leaving important space for later infill development.

Besides "waste" is always a complex idea -- and almost never what it is suggested to indicate.  Is washing my shirt the 25th time and wearing it again more wasteful than replacing it? 

When it comes to land use patterns, the acid test is is simply whether the urbanized area grows or not.  Does it attract labor and capital in ways that they can make a go of it?  Las Vegas did very well in the years 1960-2000 (years for which we have data), its urbanized area exceeded large-urbanized area growth by a factor of almost twenty.

Labor and capital go where they expect to be productive.  This includes opportunities to interact with a variety of other nearby activities -- at a price that makes it all possible.  This involves the spatial arrangement of activities and is much too big a problem to be solved by bird's-eye visual inspections of land use patterns, followed by prescriptions for more compact development.  Rather, it takes flexible land use markets.  That's the best we have.

ADDED

Ed Glaeser seems to be saying "let a thousand flowers bloom."  There is no one density or arrangement that works best.

Some good news from 2011

End-of-year stock-taking and list-making are all around.  I pay too much attention to political events and these tend to be uninspiring.  On top of that, the end of the year is not a great vantage point.  Several years hence, we may find that the leaders we had in 2011 and their political ploys weren't so awful.  Perhaps.

In my view, America's three greatest policy errors are (1) letting teachers' unions and their allies continue to be influential; we inflict the worst schools and teachers on the poorest kids; (2) our drug laws criminalize behaviors that have their worst ancillary effects when driven underground; we get crowded prisons, an overwrought criminal justice system and we make people in other countries (mainly to our south) pay an unconscienable price; (3) our immigration laws make no economic sense, here or abroad; a more open policy would be win-win.

In 2011, #1 and #2 entered popular discourse way beyond the standard outlets and venues.  Waiting for 'Superman' (actually 2010, but DVD in 2011) went a long way to popularizing the case for reform of the public schools.  Ken Burns' PBS series Prohibition went some of the way towards doing the same for drug policy.  Each of these went where policy wonks and policy wonkish stuff does not go.  I am guessing that movement towards more elightened policy discussions on these two fronts began with these releases in 2011.

Now if we could only get some enlightened group fund a similarly creative visual re immigration policy.  We have enough in the way of studies and "white papers".  There has to be something for the people who watch the Presidential debates and who get their news via the late night comedy shows.

ADDED

Re Topic #3, read this.  (H/T Marginal Revolution)

Dark history

I greatly enjoyed Erik Larson's In the Garden of Beasts.  There are hundreds of reader reviews at the Amazon site and I agree with most of them.  World War II and the rise of Hitler's Nazis is a long, complex and difficult story.  But seen through the eyes of U.S. Ambassador to Germany William E. Dodd and his family (mainly his adventurous daughter), there is lots that is interesting.

It evokes the old question: How could the land of Beethoven and Goethe let itself be seduced by a gang of murderous and thuggish crazies?

Larson mentions this (page 56): "Beneath the surface, however, Germany had undergone a rapid and sweeping revolution that reached deep into the fabric of daily life.  It had occurred quietly and largely out of easy view.  At its core was a government campaign called Gleichschaltung -- meaning 'Coordination' -- to bring citizens, government ministries, universities and cultural and social instiutions in line with National Socialist beliefs and attitudes." 

Timur Kuran has written about preference falsification and we see sycophancy mix with terror and appeals to nationalism, tribalism, and the like in most autocratic states.  Some cite "forcible coordination." 

I liked this movie treatment of the phenomenon in Nazi Germany.  If the population is amenable, the "forcible" aspect is minor.  Larsen's story gets going before the Night of the Long Knives.

ADDED

"Coordination" is too bland.  "Gleich" means "even" or "same" or "equal".  "Schaltung" means "shift" or even "gear change".  This may be even more sinister than "preference falsification."

Secular theocracy?

The state religions of the 20th century were heinous and the current tributes to the recently deceased Kim Jong-il evoke all over again the creepiness of state-as-religion.

Closer to home, we have Christmas and political correctness.  The PC screen filters faith-based assertions.  Some pass and some do not.  What are actually faith-based assertions re the merits of "alternative energy" (and a hundred other programs) are taken seriously by those who insist on their own secularist credentials.  

Is this the modern American civic religion?  Have we moved in the direction of a Secular Theocracy?  David Theroux argues that we have in Part I of this essay.  It is worth reading.

ADDED

On a related theme, I liked Ross Douthat's tribute to Christopher Hitchens.

Indicators

Last week, Burton Malkiel reviewed Emanual Derman's Models Behaving Badly (which I have not yet read) in the WSJ (Physics Envy: Creating financial models involving human behavior is like forcing 'the ugly stepsister's foot into Cinderella's pretty glass slipper.')  Malkiel revisits the arguments over why economics is not physics and why misplaced scientism can lead to misunderstandings and errors.  Physicists work with particles that do not experience mood swings.  Mood swings are tough.

Malkiel knows well that market forces are such that entrepreneurial types are hard at work trying to correct prices, but that prices are mostly "wrong".  We are mostly out of equilibrium.  The on-going error correction derby is all we have, but it is very nice to have around.

In yesterday's NY Times Magazine, Adam Davidson wrote about economic indicators (Indicators are supposed to help us predict a recovery or a double dip. But what can nail-polish sales really explain anout the recovery?)   This is a little bit like the fountain of youth.  This is not about theorists, but about pundits and punters.  The Malkiel essay suggests that the theorists (and pundits) are likely to remain frustrated, but the error correction derby suggests that the search for indicators will never stop.  If nail-polish sales predict anything, they will only do so just once.

Is all this why we chuckle at this economist joke (via Craig Newmark)?

Bill or Rights week

It is Bill of Rights week.  A good time to link to the WSJ's "Federal Police Ranks Swell to Enforce A Widening Array of Criminal Laws."  As there are ever more regs, there are ever more guys with badges and guns.  It's inevitable that bad things will happen and the report documents a few of them.

Bill Frezza in Forbes writes about "Watching The Wheels Coming Off the Green Machine."  This does not quite measure up to violating the due process rights of citizens, but forcibly taking their money and channeling it to cronies in the name of "sustainability" and "jobs" also illustrates how we have trashed the Bill of Rights (see 10th amendment).

Personal freedoms as well as economic freedoms have been lost.  There is very little difference.  It is the same slippery slope.

Breaking the logjam

I mentioned some of the writers who have investigated the success of the West in my Monday post.  The importance of culture and institutions shows up in each one of their studies.  But public choice economics points to obstacles such as the likelihood of predation and we see crony capitalism all around us.  Paul Romer has taken up the challenge of trying to break this logjam by elaborating his Charter Cities idea.  He has also devoted considerable energy promoting the idea in order to bring it to fruition.

The Economist (December 10) describes the current state of Romer's quest in "City building: Hong Kong in Honduras -- An ambitious development project aims to pull a Central American country out of its economic misery.  Can it work?"

The piece describes an effort to develop a Charter City in Honduras.  This involves setting up an international "transparency commission" charged with establishing something like a Nightwatchman State and a credible barrier to normal political predation.  If that works (a very tall order), nature will take its course and labor and capital will move in.  No five-year plan required.

If it works, there could be imitators.  It could be quite thrilling.  There is nothing like tangible small steps towards a better world.  The bonus is a test of the power of ideas, free institutions and free markets.

Does zoning matter?

Houston is the only major U.S. city without zoning.  Does it matter?  Some year ago, Bernard Siegan argued that it does not.  He compared Dallas (with conventional zoning) to Houston, attempting a kind of "twins" study and found few appreciable differences.

Where there is no conventional zoning, there is still an understandable demand for property rules.  Developers find ways to supply them.  Where there is zoning, it is often shaped by development pressures.  

I have not seen the Siegan comparison revisited, but Wendell Cox has been the keeper of urbanized area (UZA) population data from 1950-2000, so I looked there.  To be sure, UZAs are bigger than cities, but they are functional (not political) boundaries that are adjusted every ten years (2010 data not yet available).  And in each case, there are UZA jurisdictions beyond the core city; in 2000, the city of Houston was 51% of the UZA, for Dallas it was 29%.

In the attached, I looked at just the UZAs with more than 3-million pop in 2000.  The data include square miles, so population densities can be studied.  I have blogged many times that large-area densities are averages that include large variances so am always concerned when inferences are made about small-area attributes such as ease of mingling and networking.  But that is not the point of this post.

In the spreadsheet, look at the five Sunbelt UZAs with a 2000 population above 3-million, the relevant comparison group for Houston and Dallas. It appears that (1) Dallas and Houston have more in common with each other than with the other Sunbelt UZAs; (2) Dallas was more dense in 1950, but has ever since been less dense (more "sprawling"?) than Houston; (3) their density differences have gotten smaller; (4) in 2000 they had about the SAME density.  2946 pop/sq-mi vs 2951 pop/sq-mi are well within any margin of measurement error.

Dress

Many people have seen Niall Ferguson's "Six Killer Apps of Prosperity" talk at the TED blog site.  I greatly enjoyed his book Civilization: The West and the Rest, which elaborates.  It's a great topic and many people, inlcuding Joyce Appleby, Gregory Clark, Hernando deSoto, Francis Fukuyama, Deepak Lal, David Landes, and Deirdre McCloskey (and many others) have had their say. 
 
One of Ferguson's Killer Apps is "Consumption".  He starts with clothing.  The industrial revolution made cotton garments cheaper and more affordable for large numbers of people around the world.  The author points us to the 1909 photo collection by Albert Kahn showing the variety of garb worn in 50 countries around the world and noting that this variety was soon to end as more and more people could afford what they really wanted, Western dress. The invention of the Singer sewing machine speeded it all up.

It's then a hop-skip-and-jump to blue jeans which the communists could never get right and by which Ferguson highlights that system's great weakness:  it could not meet consumer demand.  Sputniks, yes; levis, no. In fact, jeans were officialy scorned, but that did not help.  When James Dean, John Wayne, Marilyn Monroe and others acted and appeared in jeans it was really all over for party-line efforts to villify them.

Ferguson has many stories like this.  Historians will surely challenge some of them, but I found the book fascinating.

Cronies

Mario Rizzo posts this amazing Venn diagram showing the overlap between the Federal government and Goldman Sachs.  No comment necessary.

Laugh or cry?

Reason.tv has fun with LA's rail transit.  "17 miles in just 78 minutes."  If it is laugh or cry, laughing is better. Today's LA Times refers to LA MTA's problems with federal auditors.

David Levinson has a bunch of links and commentators chiming in on the question of whether transportation in the U.S. is "overpriced".  In quotes because it's a tricky question.  It evokes some kind of cost-plus accounting.  But that relies on accounting assumptions, including how to allocate sunk costs and what residuals or subsidies we can or should assume.  But are costs incurred too high?  How could they not be in the land of politics, regulations, subsidies and monopolies?

Are consumer electronics "overpriced"?  It's a silly question because steeply declining prices along with amazing quality improvements have been breathtaking.  Competition and minimal regulation are the source of the magic. 

We seemingly have one foot in that world and the other foot in the world that the reason.tv clip visits.  What a life.

Love or money?

The sports news in LA today is that the Angels have signed Albert Pujols for a reported $331 million. 

The Dodgers, on the other hand, have been in the news because the team is for sale.  Former owners Frank and Jamie McCourt seemingly made a hash of running the team and developed their own domestic problems along the way.  So the team (including parts thereof, including telecast rights) is on the market. 

Times columnist Carl Erskine likes the Green Bay Packers model and suggests that the Dodgers become community owned as a non-profit with stocholders who are OK with no prospect of dvidends or stock appreciation ("Best owner for the Dodgers would be you and me").  The Green Bay team is even able to sell new meaningless shares.  Erskine ends his column this way:

So, while fat cats circle our beloved Dodgers here on the coast, back in the heartland, shares of Packers stock are doing fly patterns off the shelves. It's as if the front office is printing its own currency, for the shares offer no dividend or appreciation, really nothing much more than bragging rights.

Love or money?  Many people like love.  But would there ever be enough love in LA to pay Pujols-scale money?  I was ready to dismiss Erskine's idea as pretty silly -- until I recalled that the Dodgers have an additional fan base 3,000 miles away in Brooklyn, New York.  There might be enough love in LA if it were complemented by Brooklyn love.  In fact, the whole might be greater than the sum of the parts.  Love is like that.

Business as usual in California

Here is California Governor Jerry Brown proposing to put a tax hike (mainly on "the rich") on the California ballot.  Here is the California high-speed rail authority admitting that HSR will cost $98.5 billion (for starters and a couple hundred percent over their previous estimate).  And here is the same Gov. Brown endorsing the project.  These three events are apparently not inconsistent. 

I expect that some have even convinced themselves that this is all "good policy"; they may also have concluded it is good politics -- and they may have scrambled the two.  Costs are "benefits" because politicians want to be seen "creating jobs".  If there is a green spin, all the better.  Construction and union and environmental interests hold hands.  (The first two have solid self-serving interests in HSR, but environmentalists who believe that HSR will be good for the environment are amazingly deluded.)

This is all old stuff.  But chickens have now come home to roost in Europe.  I had thought (silly me) that the message would be seen here too, but we are seemingly not there yet.  Our politicians still cannot say "no". 

There are street riots on Athens, S & P downgrade threats, and we have all seen news clips of the Italian Labor Minister Elsa Fornero breaking down in tears.  But in California it is business as usual.

ADDED

Mark Perry suggests an alternative to Amtrak, perhaps even HSR.

Creative destruction

My previous two posts involve a contradiction. In Friday's I noted some sensible policy reforms elaborated in Alex Tabarrok's new book.  But are the policy makers we read about each day the ones to implement such reforms?  In the post just before Friday's I described a policy catch-22 because politics as we know it is anathema to the creative destruction that is essential to a dynamic economy.

In full gotcha mode, yesterday's LA Times has this above the front-page fold: "Romney's focus wasn't on jobs then ... At the private equity firm he headed, the priority was creating wealth ..."  Everyone likes job creation.  Most Democrats tout public spending as the means.  Republicans are trapped and counter that entrepreneurs create jobs.  True enough.  But that is never their mission.  The mission is wealth creation, but you cannot say so because reporters such as at the LA Times (and many others) are on the case.  Job creation plays to the crowd as creative destruction cannot.

What to do?  James Buchanan famously suggested various amendements to the U.S. Constitution.  But how likely are these to get a hearing?  The only amendment proposals that do get a hearing once in a while involve some version of a balanced budget amendment.  Warts and all, is that the best we can get?  Is half a loaf better than none?  I wonder. 

Smart policies

Life is good.  It took me about a minute to download Alex Tabarrok's Launching the Innovation Renaissance: A New Path to Bring Smart Ideas to Market Fast to my Kindle. The cost of the eBook is just $2.99.  It is short and easy to read.  And it is full of good ideas. 

Alex explains how and why we can and should reform our attitudes and policies regarding patents, prizes, education, global markets and cosmopolitanism. Just when we worry about the duration of the Great Stagnation and (even worse) listen to the many gasbags in high office who claim they know what to do about it, Alex's ideas are especially refreshing.

Alex introduced me to this thought some years ago:  "Many economists are theoretical empirics; they make empirical statements on the basis of theory." Sure. There are models that suggest that without monopoly protections, the incentives to innovate will not be adequate.  Patents law is necessary. Case closed. 

Trouble is that the evidence for this claim is remarkably thin.  Tabarrok points to the high costs of imitation; most patent protections are unnecessary. The high costs of monopoly privilege include plenty of rent seeking (many lawyers and lobbyists) and the whole thing is mostly unnecessary. 

There are many other worthy insights. Read the book, spread the word.