Fickle Facts

Organizing my materials in my office has always been a problem.  This was true in the paper age, the PC age and even in the Internet age.  Samuel Arbesman in The Half-life of Facts says "Forget about it." Most of them are not worth remembering anyway.  Many are quickly outdated and (the fun part of his story) hang on because we do have our cognitive biases.

The author is a fine writer and takes us through an amazing amount of material in very few pages.  There are many knowledge growth paths that follow a logistic curve trajectory, but phase transitions kick in whereby we jump to the next logistic path. This is relevant when Arbesman quickly considers the Santa Fe Institute work on cities. There are important empirical links of many urban phenomena to city size (he mentions gasoline stations) but there are scale economies whereby the number of stations per capita is not fixed. But there are also phase changes whereby we jump to the next logistic path.

Arbesman does not elaborate, but new facts of life signaled by new prices prompt the phase transitions. Think about how cities have changed as autos and highways came into use.  This phase transition rendered established relationships moot. Costs of Sprawl are a case in point.  The Santa Fe data are fitted across phase changes that are always lurking because price signals are always at work. Those fickle facts.

Taking on the f-word

I frustrate many students when I warn them about using the four letter f-word.  "Fair" inspires much serious work (and fun) by philosphers, but its free and easy use in daily discourse (don't even mention politicians) causes confusions and many problems. At best, recognize "fair" as a rhetorical device.

I am impressed with Stephen Asma's Against Fairness.  The author takes the strongest position on problems of the promiscuous use of the word.  Asma argues that "You can't love humanity.  You can only love people."  We are disposed to play favorites toward kith and kin -- and this is to the good.

He has some fun with the hypocrisy of those who favor a "color-blind" society and in the next breath lobby for affirmative action programs.  A blanket "fairness" towards all is an impossible goal.  Ghandi was a nut.

Asma takes up the dangers of "metaphysical tribalism" (Hitler's Germany, Rwanda, Bosnia), but is much too brief on the boundaries between "good" and "bad" tribalism.  He praises Sonia Sotomayor for her honesty (if not naivete) in admitting during her confirmation hearings that her background disposes her to a particular view of the law.  Much better than dishonest sanctimony.

ADDED

Review by Meghan Clyne.

On the right track

The end-of-year double-issue of The Economist is usually worth waiting for.  The one that came this week includes several very nice essays.  The one I liked best describes life in Kibera, a Nairobi slum.  Here are some short outtakes:

Upwardly mobile Africa ... Boomtown slum ... A day in the economic life of Africa’s biggest shanty-town ...To equate slums with idleness and misery is to misunderstand them ... Kibera is a thriving economic machine. Local residents provide most of the goods and services. Tailors are hunched over pedal-powered sewing machines. Accountants and lawyers share trestle tables in open-air offices. Carpenters carve frames for double beds along a railway line. Whole skinned cows hang in spotless butcher shops. “Give me 30 bob,” says a customer to a paraffin seller, who has just taken delivery of several jerry cans from a porter with a steel-frame wheelbarrow. All day long, sweaty porters cart supplies along filthy lanes, hissing to shoo people out of the way. .. Life in Kibera can be harsh. Disease is rife, food is short for some, and death can come suddenly.

Just after eleven o’clock an explosion thunders past the paraffin seller. Lights in the shops along the lane expire instantly, then a mob charges past, accompanied by sharp screams and a sizzling, dancing power cable that has blasted off a faulty transformer overhead. The cable eventually goes limp and the crowd disperses. Minutes later the lights come back. ... The transformer, like all power in Kibera, is run by shady types who tap into the city grid. They are less than scrupulous when it comes to safety and they charge heavily. But at least Kibera has power, unlike many other parts of Africa. Soft drinks sold in shops are chilled. Rooftops are awash with TV aerials and mobile phones are as ubiquitous as in the West.

Kibera may be the most entrepreneurial place on the planet. ... The key to making it in Kibera is access to capital. A market of one million potential customers crowds in on entrepreneurs, but raising the money to start a business is hard. Most banks won’t lend to them because they have no collateral, perhaps not even a fixed address. Those who manage to borrow face high interest rates. Moses Mwega pays 25% a year and considers himself lucky. Over the years he has built up a cosmetics shop selling creams, wigs and shampoos. The bank recently accepted his stock, a television set and a second-hand sofa, including lace doilies, as collateral. He got 350,000 shillings ($4,000) to expand his business.

There are entrepreneurs all over the world.  For most of them, access to capital is the problem.  Thanks to the internet, crowd-funding has a role.  I am a big fan of Kiva and do most of my giving through them.  Here is an academic paper (by Tillman Bruett) that shows how they and others like them are on the right track.

Those taste buds

The various end-of-year best-books lists are out there.  But of many good 2012 reads, I keep coming back to Jonathan Haidt's The Righteous Mind.  Good people can have honest disagreements on profound questions because they are prompted by deeply engrained and different moral "taste buds" (Haidt's great label).

In my view, not enough people have digested Haidt's findings.  An exception is Arnold Kling's applications of "Three axes of concern" (civilization-barbarism by political conservatives, oppressor-oppressed by modern liberals, and freedom-coercion by classical liberals or libertarians) as he probes policy debates.

The current gun control discussions illustrate the problem.  I just fnished my Sunday morning ritual reading of the NY Times and am grateful that they place Ross Douthat's column at the end of the Review section, well after the standard weekly ritualistic breast beatings.

There will be new gun control legislation but I do not expect it will curtail the mass shootings.  There are 200-300 million guns out there; they will not be confiscated.  Being on the side of the angels and promoting schools as "gun-free" zones simply makes them places where killing sprees can occur.

Here is a thought experiment.  Which gun law would have stopped the gunman in the Newtown tragedy?  Or assume that one or more on the school staff is trained in the use of firearms.  Identifying and vetting such people and encouraging them to be armed and alert (if they choose) would dash the idea that these places are simply protected by a lock behind a glass window.  Which option offers better odds to potential victims?

I think the answer is clear.  But lying between thought experiments and advocacy (and policy) are those moral taste buds.     

Hard work

Matt Ridley (in the Dec 19 WSJ) wrote about "Cooling Down the Fears of Climate Change ... Evidence points to a further rise of just 1 degree C by 2100. The net effect on the planet may actually be beneficial."  So it was interesting to look at the Dec 24/31 New Yorker and find Keith Gessen's "Polar Express ... A journey through the melting Arctic, with sixty-odd thousand tons of iron ore."  It is a detailed account of a haul of iron ore from Murmansk, Russia, to Huanghua, China, via a new Northeast Passage, that is now available because of ice melt.  The author notes savings (including less fuel burned) over alternative routes via Suez or around the Cape of Good Hope. 

People have been looking for better trade routes through most of recorded history.  Polar Express is simply the latest example. Most of the inhabitants of the Americas, for example, are where they are as a result of such explorations. (There are, of course, politicians now seeking to block U.S. natural gas exports, claiming that not trading would be a benefit to the U.S. economy.) 

Climate change is not new and those seeing opportunities will seek to realize them.  As Ridley suggests, it is not all bad news.  Besides, who believes that we can extrapolate anything to 2100 with any confidence?  On the other side, Gessen notes the irony that the haul he accompanied was moving iron ore to China where it would be combined with coal to yield new steel as well as extra carbon into the atmosphere.  Irony on irony would be U.S. natural gas exports to China, enabling them to burn less coal.

Long run forecasting is very hard work. 

Cities and dreamers

I recently cited Alain Bertaud's new paper ("The costs of Utopia, Brasilia, Johannesburg, Moscow").  It's provocative and interesting.

Introducing economists' monocentric model of cities, Bertaud notes (p. 5), "The work of Alonso, Muth and Mills made an important -- but often overlooked -- contribution to urban planning: it demonstrated that the spatial structure of many cities is generated by a self-organizing principle driven by economic forces." 

Yes and no. Cities have changed to the point where the original model is no longer relevant.  Why? Automobiles and traffic congestion externalities have made the model as well as the actual monocentric cities untenable. But the polycentric form that Bertaud writes about was not planned but also came about via a self-organizing principle; it was driven by market forces. In fact, polycentricity is now widespread and obvious. The challenge of defining and identifying urban subcenters is now grist for urban researchers with enough patience and data.

Traffic externalities did not create traffic doomsday ("gridlock"); rather, they prompted land market responses to forestall doomsday.  The remarkable stability of average commuting travel times has been cited by many researchers.  A stronger test of spatial self-organization is the related finding that travel time stability extends to non-work travel also.  The complex land use arrangements that make this possible cannot be planned top-down.

Bertaud sees market forces trumping the efforts of designers. "Haussman did design street patterns in ninteenth century Paris, so did L'Enfant in Washington.  However, these 'urbanists' only designed the boundaries between public and private use ... they did not decide who was going to live where, they did not decide where offices and residential areas will be located and what should be the density in these urban areas. Market forces were left free to fill the bulk volumes alloacted to private use." 

Of course.  There is enough labor and capital mobility in the world so that any traffic doomsday city settings cannot compete.

On this theme, Bertaud studies the "utopian" cities and finds that their dispersion (as he defines it) is the most extreme. 

Likewise, Ed Glaeser writes on Oscar Niemeyer's passing: "Brasilia's hubris is a warning to urban dreamers ... The structures in this artificial capital are impressive, yet few want to walk its barren streets."

ADDED

I should have been clear.  Dispersion by itself is neither a positive nor a negative.  "Good" dispersion is a land market accommodation that keeps travel distances in check; "bad" dispersion does not manage this. The median commute in spread out  Tokyo is 46 minutes (their mean would be longer), which is considerably longer than U.S. average commuting times. 

The hard part

Mass murders terrify us; when kindergartners are slaughtered we sink into despair or beyond. 

Many scramble to be on the side of the angels. This morning's NY Times ("Death in Connecticut") concludes this way: 

"The more that we hear about gun control and nothing happens, the less we can believe it will ever come. Certainly, it will not unless Mr. Obama and Congressional leaders show the courage to make it happen."

We want the guns to be in the hands of the responsible people.  But how do we get from a country where anywhere between 200 million and 300 million firearms are in private hands to one where they are just in "responsible" hands?   Authoritarian regimes know how to disarm their citizens, but that route is not an option.

PBS NewsHour's Mark Shields mentioned last night that it is tougher in the U.S. to rent a car than to buy a gun.  True enough.  But how about "getting a car" or "getting a gun?"

As in so many cases, articulating a preferred end-state is simple.  The getting there part is the tough part.  It is the part that is usually skipped over.

If we cannot identify and disarm the irresponsible, there is no choice but to arm the responsible.  School teachers and officials are the ones that can be vetted. 

Widening divide

Do we live to work or do we work to live?  When I press students, they quickly agree it is the latter.  (This usually introduces the question of whether we import to export or export to import.)  But the recent election showed that people worry about jobs, less about why there are jobs and what they produce.  The President famously blamed ATMs for job losses.  Where will this go if slow growth is with us for years?

I just listened to Russ Roberts talk to Chris Anderson about the latter's Makers: The New Industrial Revolution.  It's a fine discussion and introduced me to "the democratization of manufacturing."  The latest game-changer allows innovators to become manufacturers. I first saw a 3-D printer create gold crowns at my dentist's about ten years ago.  More capabilities move to the desktop all the time.  Add crowd-funding for capital and amazing things will happen.  I also learned that "Tijuana is the Shenzhen of North America."  Who knew?

There are many versions of what divides people.  Charles Murray warned us about one and there are many others that come to mind.  But perhaps the divide to concern us is between those who get the future and those who fear it. Virginia Postrel noted this some years ago. But I fear that divide is widening.

Happiness research we can use

Economist Joel Waldfogel has demonstrated that most gifting is a waste.  There would be no deadweight losses if we give cash.  But non-cash gifting is also universal and has been around for a very long time.  What is going on?  The giver and the receiver usually get something from the act which goes above and beyond the item being gifted.

I have no idea whether tongue-in-cheek prompts Waldfogel, but we should all grasp the limits of homo economicus.  It is a useful theoretical abstraction, but like all such abstractions, it cannot be taken to extremes.  Critics love the straw man and use it to attack all economic thinking.

These thoughts come to mind as I read a gift I just received, Paul Zak's The Moral Molecule:  The Source of Love and Prosperity.  On the book's jacket, Helen Fisher calls it "an important book".  Tyler Cowen says of Zak, "We need more daring economists like him."  There is also praise from Matt Ridley and Frans de Waal.

Zak concludes (p. 209) this way:  "In the nineteenth and twentieth centuries, economics tried to achieve scientific rigor by cutting off recognition of the human element of motives, epxectations and psychological uncertainties.  Fortunately, behavioural economics and now neuroeconomics, has put us back on what I consider the right track, which is a path that combines both rigor and perspective."

Zak's research on the moral molecule explains traditional gifting and acts of kindness.  It also helps us understand various virtuous cycles.  The positive feedbacks between trust, exchange and prosperity are just a few that Zak elaborates.

It is safe to gift Zak's book and not worry you are being wastful.

Cliff

"Fiscal cliff" talk is everywhere and most views are necessarily about generalities.  This is because the details are almost impossible to know.  The NY Times has performed a service by itemizing and publishing some of the details of what is spent these days by the feds.  Who said that "the hell is in the details"?

Economist Robert Frank offers wise counsel to both sides (also in today's NY Times) on how to bargain.  But how about this:

"Both parties could curry favor by embracing proposals to restore money for the programs that voters value most, and the president could delay cuts while Congress was debating those proposals."

Is that really how it works?  Do Frank and the other optimists look at some of the Times' data on where the money goes -- and then dream of some rational process by which it is restored/spent?

I have Sunday-morning TV talk show hangover.  Why not have everyone immerse him/herself in the Times' data, think how we got there and then opine how easily we get out?  

"Smart" or scalable?

Two related posts came my way quite concidentally within a few minutes.  They are worth considering as a pair because of the concerns they illustrate. 

The first is from Richard Sennett who worries about what may come of a confab now in progress.  "No one likes a city that's too smart ... Let's hope Rio rather than Songdo or Masdar is the inspiration for the urbanists gathering in London this week." 

There are amazing new technologies coming into our lives.  Can they replace the spontaneous order nature of successful cities? Sennett ends sensibly with this:  "We want cities that work well enough, but are open to the shifts, uncertainties, and mess which are real life."

On a similar theme, the second post is from Bertrand Renaud who writes about "The Costs of Utopia".  It's actually an old problem but ignored by by people who still see cities as entities they can design.  From The Urbanization Project, here is Renaud's punch-line:

Haussman did design street patterns in nineteen century Paris, so did L’Enfant in Washington. However, these “urbanists” only designed the boundaries between public and private use. They only allocated precise functions to public space: streets, avenues, parks, and public buildings. But they did not design the city in the sense that, with the exception of public monuments, they did not decide who was going to live where, they did not decide where offices and residential areas will be located and what should be the density in these areas. Market forces were left free to fill the bulk volumes allocated to private use.

Yes, it's mostly in-fill which the grand designers have very little to do with.  Sandy Ikeda has many times elaborated the idea that Jane Jacobs was the F.A. Hayek of cities.  Both Sennett and Renaud are writing in the same spirit.

Another way to say it is to consider the scalability of design.  But what does that mean? We rely on designers to do great things.  A pencil, a 787 Dreamliner, a comfortable chair, a skyscraper, my iPhone and countless other wonderful things in our lives rely on the skills of many sorts of designers.  But these involve designs that must meet a market test.  They must be susceptible to error correction.  The utopians that Sennett and Renaud worry about could be tackling a scale that does not easily avail itself of error correction.  Get a Hoover Dam or a high-speed rail line from Madera to Bakersfield California or a Burj Khalifa tower wrong and that's that.

No mystery

About a hundred years ago, privately owned and operated streetcars plied the streets of major U.S. urban thoroughfares.  Then they declined and eventually disappeared because (a) there was a nefarious corporate conspiracy to replace them with cars; or (b) most people preferred private autos for all the obvious reasons. 

Many seemingly serious people pick version (a), ignoring the idea of a market test.  But that's no problem because voter coalitions can often be formed/found to stick taxpayers (here, there and everywhere) with the bill for new ("restoration") streetcars.  Phoney cost accounting often helps. 

This is now an old story and has been repeated many times.  California is now building high-speed rail justified on specious grounds, with final financing unknown.  Making promises that cannot be kept is not new in American politics.

Today's case in point is the recently approved L.A. Streetcar.  Questionable downtown baubles are not new in American cities but LA has a special problem. It is the nation's #2 city (in size) but it it's downtown does not come close to #1 (or even to rival San Francisco's) up the coast.  In my estimation, it never will.

But they keep trying.  Here is some of the L.A. Times front page report from today's edition:

Streetcar line called downtown's missing link ... Approval of a $125-million project is hailed as the way to finally make cars optional in the city center — but skeptics say the money would be better spent elsewhere.

In a city that is often derided for its lack for public transportation, downtown L.A. is the one exception.

The city center has light-rail lines, a subway, a maze of bus routes and shuttles, links to commuter rail and even a tiny funicular that trudges up and down Bunker Hill.

But many residents and developers say that it can still be difficult to get around the far-flung city center without a car. So urban planners and downtown boosters have spent considerable time on what may have once been considered impossible: creating a truly car-optional neighborhood in the center of a region defined by its car culture.

Voters in downtown Los Angeles this week approved key financing for a $125-million streetcar project that might finally put this theory to the test. The streetcar would run mainly along Broadway, and Hill and Figueroa streets, three of downtown's main arteries, connecting various neighbors, including the old banking district, South Park, Civic Center and the fashion district.

Developers — and some residents — see the streetcar as a missing transportation link.

"If you're in New York, or San Francisco or Portland, you forget about your car. You walk, you take public transportation, and you get a much richer experience," said Scott Denham, vice president at Evoq Properties, a downtown developer. "The whole concept of being in L.A. and not having to drive to have a whole Saturday or Sunday to experience downtown… It's really not that far off in reality."

The story points to the political economy we have.  Every evening's news features furrowed brows fretting over deficits, fiscal cliffs, unfunded liabilities, etc.  But there is no mystery.  Milton Friedman explained it clearly in just over two minutes.

Some political economy

"Equity-efficiency trade-offs" are a staple of textbooks.  Best to keep it in quotes because "equity" and "efficiency" are not simple.

Beyond that, there are many cases where there is no trade-off.  End farm subsidies, for example.  The average subsidy recipient is better off than the average taxpayer.  And the efficiency of ending this pork is pretty clear. 

In our crony-capitalism world, there are surely many other subsidy programs that could be ended with similar win-win consequences.  This is apt in light of the current "fiscal cliff" situation.  It is still widely presumed that just about every tax dollar flows to good causes.

I just listened to Russ Roberts' interview with Casey Mulligan at econtalk.  Mulligan's research points to an explanation for high unemployment: a generous safety net.  There is more to the current recession than the standard credit crisis story.

I have yet to read Mulligans' book, but the discussion was interesting and provocative, to say the least.  He depicts cases where there is a high cost from policies that "help people."  Mulligan is careful not judge that the cost is too high.  He simply wants to document the fact that this time there is a trade-off.

While I am on this topic, I just finished Mark Pennington's Robust Political Economy.  It is a superbly written and up-to-date summary of how and why an understanding of classical liberalism is essential in these post-2007 years when markets-misunderstood is the cudgel used to push us deeper into debt and mess.

Knowledge and benevolence are in short supply.  This applies to "private" as well as "public" sectors.  But only the former allows (and punishes) failure -- if we let it.  That is all we have. 

Talent pools

The Journal of Economic Perspectives is my all-time favorite journal.  Much of the good stuff is at the back with Timothy Taylor's "Recommendations for Further Reading."  I had not known about recent research by Pete Klenow.  Here is the abstract in the Fall 2012 JPE:

Pete Klenow reports some calculations about greater equality of opportunity and economic output in “The Allocation of Talent and U.S. Economic Growth.” “In 1960, 94 percent of doctors were white men, as were 96 percent of lawyers and 86 percent of managers. By 2008, these numbers had fallen to 63, 61, and 57 percent respectively. Skilled occupations have become more equally distributed across race and gender, as have earnings within occupations. The result is arguably better allocation of talent and human capital investment. . . . How much of overall growth in income per worker between 1960 and 2008 in the U.S. can be explained by women and African Americans investing more in human capital and working more in high-skill occupations? Our answer is 15% to 20% . . .White men arguably lost around 5% of their earnings, as a result, because they moved into lower skilled occupations than they otherwise would have. But their losses were swamped by the income gains reaped by women and blacks.” Stanford Institute for Economic Policy Research Policy Brief. July 2012. At http://siepr.stanford.edu/?q=/system/files/shared/pubs/papers/briefs/July_2012_brief.pdf.

Letting merit dominate all other considerations is a very good idea.  Expanding the talent pool has many benefits.  It's always good to see the evidence confirm the expectation.

Good ideas are our only hope.  They usually win, but it often takes a depressingly long time.

This morning's LA Times includes various contributions that respond to concerns over the 7-billion world population mark.  Most of the writers discuss their ideas for more as well as more effective family planning.  But some of the really good ideas are not covered.  1. Economic growth prompts spontaneous family planning; and 2. More open borders by the population-poor countries would be a boon to the places that cannot get their institutions in order to facilitate economic growth; it would also refresh and replenish the talent pool of the receiving countries

Only one writer mentions economic growth and he sees it as a consequence of fewer people rather than the other way around.

ADDED

Reader Larry Holt sends this update on fertility trends.

And the Dec 3 WSJ includes an op-ed:  "Obama vs. Silicon Valley on Immigration … Antiquated rules are causing a brain drain of skilled workers.

… Republicans in the House passed a bill that would expand visas for skilled workers, easing the waiting list that can be a decade or longer for technologists from populous countries such as China and India. It would repeal a law that limits visas from any one country to 7% of the total—a quota system modeled on the Asian Exclusion Act of 1924, which limited immigrants from any country to 2% of the number of people from that country already in the U.S. as of 1890."

"Planned obsolescence"

JK Galbraith introduced the idea of "planned obsolescence" many years ago.  Competition and an eye to profits, one would think, challenge the concept.  Yet a check of Google Scholar reveals quite a few serious academic papers that model planned obsolescence.  Here is one that relies on "oligopoly" (another idea I have trouble with).

As one who drives a 1998 model car and has no thought of giving up on it, I enjoy reports like this one.  I am not the only one who is happy to keep driving an oldie.  Cars last longer than ever.  And they are cheaper than ever (in terms of hous worked to acquire one).

It's pretty clear that the likes of Apple get many fans to ditch their iPhone in favor of the newer and better one.  The newer is seen as better by enough customers to fuel the smart-phone arms race.  So is failure engineered into products?  No, success is engineered into ever better ones.  No "planned obsolescence."

More on churn and stability at the top

Matt Ridley praises Taleb's Antifragile in today's WSJ.

What about cities?  I have mentioned before that churn is great, but when it comes to cities, there is less churn towards the top of the rankings.  Paradoxically, this does not mean that these places are static.  To the contrary, it means that they have the means to adapt and remain competitive.  I should have said that they have means to be antifragile.

Whereas I referred to city size (actually metro size) rankings, there is also stability at the top when one looks at metro GDP rankings. Look at this at Urban Demographics.

Call it flexibility, adaptability, or (from now on) antifragility.  We even get it in our world of second best.  Note that New York, Los Angeles and Chicago have remained one-two-three not because they are well run by a central city leadership but, quite the opposite, because they benefit from extensive hinterlands.  For the largest U.S. metro areas, just 26 percent of the population is in the historic core.  We know that competition is great.  We can now add that it gives us antifragility.  "Fragmentation," lamented by many, is not so bad.

Why we pay?

In "Tax Time ... Why we pay", Jill Lepore (New Yorker, Nov 26) starts with Oliver Wendell Holmes' "Taxes are what we pay for a civilized society" and elaborates for about 3500 words.  Yes, we look to governments to pave the roads and fill the potholes (which they have trouble doing where I live), but Holmes' glibness is exactly what we do not need as we approach a fiscal cliff. 

Governments in the U.S. do a million things way beyond the standard "public goods" discussions.  (And even these are dated; anything that can be metered can be privatized. And metering is cheaper than ever.)  If there is going to be a useful discussion it cannot be hobbled by aggregating to "taxes, yes or no".  Rather if there is going to be a move from a twenty-percent-of-GDP federal government to the twenty-five-percent version, questions have to be addressed in terms of the many pieces and programs that get us from twenty to twenty-five.

But the recent election and its aftermath indicate that we do not have the deliberative democracy whereby we examine the many items that move us from twenty to twenty-five (or beyond).  We are seemingly unable to discuss whether to privatize the post office and Amtrak, whether to pare farm subsidies, or a thousand others.  That's the problem.

Lepore ends with, "Taxes are a pact. The pact needs renewing."  No.  The much bigger problem is that we are not anywhere near having a discussion of which items our taxes should be used to fund.  Holmes-Lepore help us ignore this basic problem.

Are you ready for some poker?

Our brains are conditioned by our evolutionary past and we often jump to conclusions.  This was once a pretty good survival tactic.  But we are also endowed with the capacity to learn.  So we screw up -- but we also have some good ideas about how to screw up less.  This is a crude way to sum up Nate Silver's message in The Signal and the Noise: why so many predictions fail -- but some don't.

It's a great read with many good example and stories (chess, politics, climate, earthquakes, poker, anti-terrorism, etc.).  If you are one who uses markers to flag the good passages, your marker will soon run dry.

Silver wants us to be Bayesians.  (I will never grasp how one cannot be.) You must start with good prior beliefs (specified as odds) and you must update these systematically.  To do this, you have to be open, flexible -- and smart enough to known which of the many signals you encounter are worthy (signals and not noise).  This is all solid advice, easy to grasp but less easy to follow through.  Silver's book is really a good pep talk that we can do it.

"Distinguishing the signal from the noise requires both scientific knowledge and self-knowledge: the serenity to accept the things we cannot predict, the courage to predict the things we can, and the wisdom to know the difference."  (p. 453).

But are you now ready to play poker?  I suggest that readers read the last chapter first.  Then read the book, then read the last chapter again.  Then decide.

Mega-projects and "antifragility"

It's unlikely that earthquake prediction will soon advance to the point where it can limit our earthquake exposure risk.  So it is best to invest in adaptability, flexibility, resilience, etc.  Matt Khan makes this point with respect to climate change. 

Nassim Taleb takes this thinking a step further by suggesting that we seek "antifragility".  It is great to bend with the wind, but even better to be strengthened by the stress.  He summarizes this argument in "Learning to Love Volatility: In a world that is constantly throwing big, unprecedented events our way, we must learn to benefit from disorder," in the WSJ. He alludes to his new book which I have not yet read, so I can only respond to the essay.

Taleb suggests "five policy rules that can help us establish antifragility as a principle of our socioeconomice life." They include "Rule 1: Think of the economy as being more like a cat than a washing machine;" "Rule 2: Favor businesses that benefit from their own mistakes ...;" "Rule 3: Small is beautiful, but it is also efficient;" "Rule 4: Trial and error beats academic knowledge;" "Rule 5: Decision makers must have skin in the game."  These rules are all good conversation starters and prompt the question of how they relate to each other.

For example, take #4.  Real "academic knowledge" is by definition unsettled and open to trial-and-error learning.  If not, what is it?  Blind faith?  Take #3. The author attacks blind faith in economies of scale.  Again, blind faith, where it exists is always a problem.  But I think that most people understand that there are also diseconomies of scale -- and finding a sweet spot where each are contained is a great idea.

We can always expect problems where error-correction is not possible.  Where we engage in one-off projects, we take the biggest risks.  Get the Chunnel wrong and what do you do?   Manhattan Projects and NASA projects do not lend themselves to cost-benefit analysis.  No competition means no error-correction possibilities. One way to heed all five of Taleb's admonitions is to minimize the number of mega-projects in our lives.  Start by forgetting about high-speed rail.

CORRECTION

Cost-benefit analysis is not even applied in the simple cases.  The Nov 20 WSJ includes "California Spurs Electric Cars ... Chrysler Group LLC next week plans to unveil an unusual automobile -- an electric car that doesn't stand a chance soon of turning a profit and is unlikely to draw many customers. So why is the company doing it? It has to. California requires it."

Half-full?

This morning's LA Times' Travel section includes the umpteenth piece on how "interesting" it is to see Cuba.  We are often implored to visit places on Earth that have not yet been "spoiled".  This usually means places where people are still condemned to living in conditions that readers (and potential visitors) would not tolerate in their own lives.  Sad to say that many who live a pretty good life in market economies have no idea why they are rich and others are poor.

Governor Cuomo thinks that the way to handle fuel shortages is to make the available supply available for free -- with predictable results.  This is just one example.  There are many people like Cuomo (many in high office) to whom pricing is either exotic or sinister or both.

Transportation officials in Los Angeles are finally taking belated baby steps towards road pricing.  Access to an Express Lane is now available for purchase on Los Angeles' busy I110, which goes through the downtown.  Small progress is indicated by gruding acceptance by the LA Times' Steve Lopez ("Doing the math on 'Lexus lanes' ... Congestion pricing pencils out for those who want to travel faster.  And it takes some of the burden of funding transit off the poor.")

It is still "Lexus lanes".  Free should be the default.  We call the damn things "freeways."  The fact that "the poor" have been hammered by the rail transit fetish is still beyond Lopez.

Is the glass half-full?

Amazing disconnect

Watching the election returns on TV, I heard more than one commentator note Mitt Romney's problems stemming from his unclear embrace of the auto bailouts -- which directed about $65 billion of TARP money to GM and Chrysler.  But the auto bail-outs are simply a case of unusually unsubtle crony capitalism. I have posted previously that those who complain about hundred of millions of dollars spent by super-PACS on political campaigns remain strangely silent about the hundred of billions that clearly fall into the crony capitalism category.

One who is not fooled is Neil Barofsky, author of Bailout and former Inspector General in charge of oversight of the $700 billion Troubled Asset Relief Program (TARP).  Barofksy describes himself as a "lifelong Democrat" and served as Special Inspector General charged with looking at how and where the TARP billions went -- in the Bush as well as the Obama Administrations.  His book is important in that it details how old Washington hands worked very hard to mask the crony capitalism at the heart of TARP.  Barofsky also notes that, "Dodd-Frank didn't change the post-crisis status quo of too-big-to-fail; it cemented it" (p. 220).  So much for the Washington "reformers".

There is no "good" vs "bad" crony capitalism. There is only big money flowing in and out of big government with predictable results.  One of the most amazing disconnects in modern America is in the minds of those who rationalize big government but who cringe at the money flowing into politics.

Thriving and growing

In yesterday's NY Times, Adam Davidson wrote about "$5 Watches vs. $5 Coffee ... The battle for 29th Street might portend the future for the global economy. ... Years ago it no longer made economic sense to concentrate meatpacking in Lower Manhattan.  But globalization makes a wholesale district in a crowded urban center more economically viable than ever."  Read the whole thing.

It's a theme that Ed Glaeser and others have been developing for some years.  New York has been and remains the #1 U.S. metro area for many years.  How does it do it?

Consider that the NY urbanized area's share of 1950 U.S. population was just below 18 percent but has fallen steadily to just under six percent in 2010.  But NY is still #1.  The U.S. mean population center has been moving steadily southwest, but NY hangs in at #1.

Churn is the sign of a dynamic economy (though fighting it gives many politicians a career).  The neighborhood churn that Davidson describes is the sign of a successful city -- which is an essential ingredient of a dynamic economy.

Immigrants keep refreshing the NYC talent pool.  And there has to be enough regulatory flexibilty to permit the neighborhood evolutions that Davidson describes. He cites places with free WiFi where locals mix and mingle. He also notes "low-end glovalization" which "brings goods and technologies to the poor."  This is some of the stuff that is bought for export to Nigeria on 29th Steet. 

I have noted previously that the higher up the urban hierarchy, the greater the stability of city rankings.  The bigger the place, the more likely that it will not slip in the rankings.  A growing talent pool and flexible land markets are essential.

Letting the new talent in and letting the land markets churn is anathema to many political instincts, but it is the way places thrive and grow. 

More pork on the way.

It appears that Los Angeles County's Prop J (to boost sales taxes to pay for transit "temporarily" for another 30 years) failed because it did not muster the required two-thirds vote.  But it was close, coming within two percent of passage.

Whereas we have divided government in Washington DC, after last Tuesday there may no longer be a similar blessing in Sacramento. Will California voters next repeal Prop 13?  Will two-thirds voter approval requirements go?  We shall see.

I have posted re transit policy in LA many times.  The county's high-water transit use year was 1985 when there were 497.2 million boardings (data found at the U.S. Federal Transit Administration's  National Transit Database site)-- and when the county's population was 9.327 million.  But then they started building rail transit.

Transit use fell as fares were raised and bus service cut.  Although county population grew and rail capacity was added, transit's 1985 high-water mark was never equaled.  The closest was 495.2 million boardings in 2007 (county population then at 10.276 million).  In 2007, bus use accounted for approximately 80 percent of transit boardings while new heavy rail accounted for 10 percent and new light rail another 10 percent.

LA's transit renaissance never came.  We simply chose to move fewer people (and a smaller proportion of a growing population) at much higher cost.  On a per capita basis, 2007 was 10 percent worse than 1985.  And we are still below 2007. 

There is no way that serious people can make an outcome this bad look good.  But absent the two-thirds voter approval requirement, which could go, the spinning will conitnue and more political pork of this sort will be on the way.

People who get their climate news and policy analysis from people like Al Gore may take us all along for the ride.  (Look at the promo poster for the movie.  Love the hurricane coming out of the smokestack?) Where did most of those "yes" votes on Prop J come from?

ADDED

Reader Rob Dawg reminds me that it's even worse. "The massive backbone reorientation (away from hub'n'spoke and ) of the LAMTA (and ancillary agencies) has resulted in a large increase in 'boardings' per completed one way trip.  What was a single seat trip in 1985 can now easily be counted as three boardings.  Second. the introduction of passes has inflated the number of discretionary trips.  Lots of two-three block walks are now casual boardings.  The actual number of people being moved is far smaller than 'boardings' would imply."

And "while not affecting ridership itself, the population within 1/4 mile of service has grown far more than the raw regional population served meaning popularity is not even holding even."

Bad and good tidings

Some people want to "get the money out of politics" and get huffy about the Citizens United decision of the U.S. Supreme Court.  But these same folks embrace bail-outs and all manner of industrial policy crony capitalism.  Politicized auto bailouts (sold with the help of scare talk and misinformation about bankruptcy) sure did not hurt Barack Obama win re-election.  He's the guy who tut-tutted the Supreme Court justices attending his state of the union speech for Citizens United.

Perhaps Mancur Olson was right that this is the fate of mature democracies. In a Mancur Olson world, can policy on budget matters be anything but kick-the-can-down-the-road?  That would not be good.

But here are the positives.  A president not looking for a second term, but towards history's judgement, tries for creativity in fiscal policy.   He spends some political capital and considers incremental polices like those listed by James Hamilton.  Chastened Republicans grab the opportunities.

No relief in sight

Today's WSJ includes "Health Law Spurs Shift in Hours ... Some Low-Wage Employers Seek to Avoid Overhaul's Insurance Requirements With More Part-Timers."

There are countless examples like this. The law of supply and demand takes no prisoners. But most people like to see themselves as compassionate. Both of the major presidential candidates are eager to make the case that they believe.  One recent president was more than clear:  "I feel your pain."

Jonathan Haidt reports that the "care and fairness" values are most prominently weighted by those on the political left (where Haidt writes he is most at home).  This is powerful stuff.  Never mind that coerced compassion is often involved.  Never mind that the "compassionate" policies often backfire.  Feeling good about oneself comes first.

Some are glad that the political campaign ends tomorrow.  But it does not. The compassion derby never stops. 

Modern times

Just when I was going to cancel my subscription to The Economist, they come up with "A sense of place ... Geography matters as much as ever, despite the digital revolution ..."  There is no "death of distance" (and no "end of history").

All of us form many networks.  Some of them are digital while some are maintained by face-to-face contact -- whether we walk, drive, fly to maintain them.  The internet and the cities are complements, not substitutes.  What is new is the speed at which we adjust our uses of networks in repsonse to the new opportunities.  We get around cities better and faster with an array of apps at hand.

With speed of network adjustment (and flexibilty and openness) more germane than ever, is it time to re-consider  "smart growth", "new urbanism", "compact development", "transit-oriented development", etc.?  Flexible land markets are critical. It is a bad time to nurse sunk intellectual capital.

Speaking of complements and substitutes, today's WSJ includes "After Sandy, Wired New Yorkers Get Reconnected with Pay Phones."

ADDED

Facilitating help networks.

Any bets?

An Ngram search establishes the post-1950 decline in the use of the word "monopoly". 

Most people can easily see the battle between Apple, Microsoft, Google and others and gather that these giants are anything but monopolists.  Most economics textbooks, nevertheless, still preach that monopoly is a "market failure" to be corrected by government action.  Go figure.

But we know that the real monopolies are the ones established by law.  And even these are precarious in modern times.  The U.S. Postal Service has a legal monopoly on the delivery of "first-class" mail, but that has become mostly an expensive jobs program.  Most of us no longer use USPS.  In an election season, we see that it is simply a means to clutter our lives with junk mail -- delivered at subsidized rates and felling trees that could be absorbing CO2.

Today's WSJ includes "Taxi Apps Face Bumpy Road ... E-Hailing Startups See Soaring Demand, but Cities Say They Violate the Law." Most cities work hard to protect licensed taxi operators.  The rising price of a NY taxi medallion (the legal right to operate in a restricted market) tells the story.  

Inter-city travelers using a taxi at both ends of the trip often see that their taxi expenses are not so much less than their flight costs.  On an LA-SF run, a bargain air fare makes it very close.

But in the race between tech (app developers and the supporting smart phone infrastructure) and city hall (politicized regulators), who will you bet on?

No Goldilocks

Students and others looking for a place to start often ask, "If I could read just one book about xxxx, which would you suggest?"  When it comes to cities, I have a new favorite.  It is Shlomo Angel's Planet of Cities.  The author studies an amazing amount of data covering the world's 3,646 cities (usually, metropolitan areas) with population of 100,000 or more in 2000.  This is one amazing data base and Angel makes the best of it, addressing the interesting questions surrounding growth, spread, "sustainability", etc.  Yes, cities spread out everywhere and "containing" them is undesirable as well as implausible.

Angel evokes the "Goldilocks Principle" more than once and wonders if there is a population density which is not too low and not too high.  As I have often mentioned, the question obscures the real story.  Metropolitan areas are very big and diverse. The Los Angeles-Orange area covers more than 3,250 square miles. In 2000, the population residing in that area was 12,366,000 and the number of jobs was 5,292,000.  Annual sub-metropolitan data are available for Public Use Microsample Areas (PUMAs) of which there are 84 in LA-Orange with an average size of about 40 square miles.  The average PUMA density was 8,748 per square mile but the standard deviation of the PUMA densities was almost as large, 8,456.

Angel argues (as have many others) that there is no "optimal" urban size.  There is, likewise, no "optimal"  urban density.  There are complex density distributions in all of the metropolitan areas.  These are endogenous and it takes flexible land markets to hone in on the most suitable (congenial to growth) ones in each case.

Behold the preferences

In recent years, I have started and ended the semester by showing this well-known graphic depicting long-term (200-year) average annual U.S. per capita GDP growth of 2 percent. Has the U.S. had incredibly good fortune?  Can it last?  Is it too soon to tell?

Two-hundred years is a long time and I am prepared to remain optimistic.  But at the same time, the increasing influence of the political coalitions and lobbies that Mancur Olson described is undeniable.

Which will dominate? The long term U.S. trend (e.g., all of the institutional, cultural and geographic phenomena that explain it)? Or the forces described by Olson?

Here is a related question.  Cities here and abroad keep spreading out in spite of widespread policy efforts to somehow stop or reverse the trend.  "Return to the cities" episodes keep being uncovered by advocates, but they are usually too minor to matter in the big picture.

Wendell Cox has assembled 33 case studies from around the world in his Evolving Urban Form series. All of them offer the same lesson:  cities growth by spreading out. Robert Bruegemann has made the case for the universality of "sprawl", as have many others. I have argued here that suburbanization is why and how urban growth can continue.  It represents the market's way of accommodating to the stresses and problems of bigness.  People manage to find the spatial arrangements that work for them.  This is how and why the net agglomeration economies that cities offer remain available.

There are two questions and they have the same answer.  Expressions of people's preferences are a thing to behold.

City not beautiful

Most of us like green spaces to break up city drab.  Here are two photos taken at a location about 1.5 miles from where I live (not a poor area).  The City had created a small pocket park which quickly became an encampment.  The City then closed off the place with a permanent encircling locked iron fence.  A never used park bench is visibile in the top photo.  A mini-encampment then bloomed under a tree just outside the fence (bottom photo).

Parks and green spaces are universal favorites, but advocates are almost silent on why we have so few.  Not only do we not have ideas or policies that address the problem of street people, but we rarely even discuss what we might do.

Until we gain the nerve to seriously address the problem, let's put all the other discussions on U.S. big cities on hold.  We routinely counsel addicts to get past denial as a first big step.  The folks who write learned essays about the problems and prospects of large U.S. cities should do the same.

No candidates

Inequality is a great question in election years.  People disagree passionately but never bother to try and agree on basic terms definitions.  Inequality of what? Looks?  Health? Longevity? Happiness? Wealth? Income? (One can go on.)

Most discussions focus on the latter two, but without bothering to be clear?  If income? Over just a one-year period?  Before or after taxes?  Count full compensation package (with perks? with in-kind transfers?)  Include changes in net worth?

Static or dynamic?  Count upward mobility chances?  Count access to opportunity?  How?

This will not be an election where any of these questions are addressed.  The candidates will continue to make vague claims about "fairness" and their unshakeable commitments to the "middle class" and similar banalities.

Or is meritocracy the most "fair"?  Is meritocracy most likely to result in growth?  Does growth take us away from the focus on envy?  Benjamin Friedman says "yes".

Amazing that there are no candidates who can get behind this message. 

Matches

Without taking anything away from the two new economics Nobel laureates, David Henderson comments on the context:

Once Mr. Roth confronted the medical market, it wasn't that big a step to thinking about an especially knotty problem doctors faced: matching live kidney donors and recipients. The fact that the federal government has made it illegal for people to sell their kidneys means that there is a shortage. Mr. Roth's "market design" solution led to the New England Program for Kidney Exchange, which allows husbands and wives with incompatible kidneys to "swap" a kidney with another incompatible pair.

Mr. Roth's solution has not ended that shortage because his solution is essentially one of barter. The only suppliers in the market are those who want kidneys for their loved ones. But his system gives a better match.

There is a more fundamental solution to the kidney shortage. Don't "design" a market; simply allow one. A ban on selling kidneys is essentially a price control of zero and, like other price controls, causes a shortage. There are thousands of "demanders." There are also thousands of potential suppliers who, at a price of zero, are not willing to give up a spare kidney. A straightforward solution is to allow the sale of organs.

Now that the Nobel Peace Prize has been given to such an amorphous entity as the European Union, perhaps next year the Nobel in economics should go to the free market, which would do more than all the market designers to get kidneys to desperate people.

Steven Landsburg makes the point in fewer words:

So Alvin Roth wins the Nobel Prize for, among other things, figuring out the best way to allocate kidneys subject to the constraint that you’re too damned dumb to use the price system.

Next up: A Nobel prize in medicine for figuring out the best way to prolong your life while repeatedly shooting yourself in the head.

And it's been noted many times that Iran has a market in kidneys.

Avoiding the market option also costs lives.  Many viable organs are never made available because many people take them to the grave.  With incentives, some of them might choose to will body parts rights to heirs or directly to an organ exchange.

No politicized sermons

Information markets are better than ever.  Thanks to the internet, we can consult Yelp, TripAdvisor, Rotten Tomatoes, WebMD and many millions of others.  But are they "objective"?  Who is?  The hard work of investigating and judging will always remain with each one of us.

Most of us like the First Amendment to the U.S. Constitution because we rightly fear politicized speech.  Why then invite politicized speech in the form of government provided food labeling?  I recently posted re my fears of proposed GMO food labeling in California.

Today's NY Times includes Mark Bittman's "My Dream Food Label".  I know he is not kidding, but I did have to look twice.  Bittman proposes that labels be simplified and that foods be scored in terms of "Nutrition", "Foodness", and "Welfare". 

Consider the latter. "This would include the treatment of workers, animals and the earth. Are workers treated like animals? Are animals produced like widgets? Is environmental damage significant? If the answer to those three questions is 'yes' — as it might be, for example, with industrially produced chickens — then the score would be zero, or close to it. If the labor force is treated fairly and animals well, and waste is insignificant or recycled, the score would be higher."

Interesting stuff, but not from the FDA or the USDA or any other possibly politicized group.  Just as we do not want speech to be politicized, we also want to avoid politicized sermonizing.

Parlor game

Last night, the PBS News Hour's Paul Solman tried to highlight the differences between election polling, econometric modeling (in this case, Ray Fair's) and betting markets ("Political Polls, Professors and Election Markets Predict the Presidential Race").  But it took commentator David Brooks, appearing a few minutes later, to explain.  These approaches offer competing readings on today's electorate, but predicting the election results is entirely another matter.  Brooks did not mention Black Swans, but they can easily materialize.

One would think that of the three, only the betting markets were forward looking.  The models are based on historical data, the polls are random chat (who decides to answer the phone and stay on the line), but people putting up cash might be looking ahead (as best they can) as well as backward.

This is another area where the News Hour report was muddled.  Polling and betting go on until almost the last minute.  They offer many readings along the way.  Which of these are scored when evaluated against the actual results?  The very last ones.

It's an old story.  Forecasting is a fool's errand.  Some people must plan and take a stand in some situations.  For others, it's simply a parlor game.  

Live with them

Witold Rybczinski ("Ask the people") has his doubts abou the value of "public participation" and "public input".  He is writing about the design process, but it is a view worth considering.  What do we know?  (1) Who shows up at hearings?  Who is "the public"?  How representative are such folks?  The answers are pretty clear. In fact, public choice economics suggests that when participation is invited, interests with a strong stake will mobilize first; and (2) Talk is cheap.

From Rybczinski's post: "Speaking recently at a British conference on urbanism, Daniel Libeskind called for a greater degree of public participation in the design process. 'The people have to be empowered to be involved in shaping the program, not just the program but also the actual space, he said. Let the voice of the people be heard!"

These are simple points.  But when I cite market tests and how they vet worthy vs. unworthy projects, I am often reminded that there are analogous opportunities outside the market.  These are elections and other channels of public participation.  Democracy has its well known problems, as does "public participation".

I have blogged before about a plausible division of labor.  At most scales error correction is possible (although never trivial).  This is critical for better resource allocations.  But at large enough scales, error correction becomes almost impossible.  These are the mega-projects.  In those cases, soothing evocations of public participation are not nearly enough and we have to live with the mistakes. 

ADDED

From a more recent WR blog post: “'I want my architect to have already made all his mistakes,” a developer friend once told me."  I had not heard it put this way before.

More "help"?

"I'm from the government and I'm here to help you."  This is seemingly a gag line for some. But most of what I hear from both presidential candidates is about how ready and eager they are to "help" anyone within earshot.  Earnest commentary is usually along the lines of "But did he signal his readiness to help [fill in the blank]?"  It is worse when news people interview prospective voters, most of whom complain that the man they had just seen/heard did not say enough about how he would help them.

Today's NY Times has an op-ed piece along similar lines.  Under the mock newspaper banner "Republicans to Cities: Drop Dead" ( take off of the NY Daily News' "Ford to City" 1975 headline), there is, "The party can't get past its disdain for the very idea of urban life."

But consider the source.  "Urban life" to writer Kevin Baker and his editors means Manhattan or something similar.  Baker acknowledges that while the country is four-fifths urban, most of that is suburban.  And, "... as urban areas continue to grow, they become more and more intertwined with what once were the distant suburbs ..."  Yes, there are thousands of distinct comunities and neighborhoods out there.  (And we are no longer in an era of 1960s Model Cities programs when "help" was rooted in a view of urban America as a world of dysfunctional "inner cities".) Baker and his editors must grasp that "the cities" we have are extremely varied.  This complexity and variability is well beyond the capability of federal officials and politicians to "make policy" for or to "help."

"Do few things and do them well," is gone.  What we have instead is, "Do many more things and do not stop to consider that you have no prospect of doing them well."  

Who do you trust?

Matt Ridley writes that there is almost no new risk from growing or consuming genetically modified foods.  In fact, progress in food cultivation saves people from starvation.  It is also an environmental boon.

But acceptance is opposed by protectionists, holding hands with the usual Luddites.

What exactly is the risk that we are being protected against? More than a trillion GM meals have been eaten worldwide and nobody is known to have had a tummy upset as a result. Genetic modification is a technique, not a product. To say it carries risks is like saying cooking carries risks so you should ban cooking. The older alternative to genetic modification - gamma irradiation of crops - is neither banned nor its products subject even to safety testing. Its products are used by the organic movement without a murmur. 

Nor is there a risk to the environment from genetic modification: indeed, the reverse. GM crops are proving to be unambiguously, spectacularly good for wildlife. Insect resistant crops mean half as much insecticide is used: all over China, India, South Africa, the birds, bees and butterflies are coming back into cotton crops. Higher yields save wilderness. Even the "spiritual" (or "yuck factor") arguments have been exploded. Geneticists now know that genes cross species barriers in nature too.

And this is just the first generation of GM crops. In the pipeline are ones that use less nitrogen; hoard water better; have added nutrients making them better as feed for pigs or salmon; and have omega-3 fatty acids in them, giving us all health benefits. North America, South America, China, India, Australia and increasingly large parts of Africa are now growing these crops and are delighted at the impact on yield, price and wildlife. Only Europe and some African countries that Europe has managed to bully are digging in their Luddite heels. 

Americans merrily eat not only 100 percent pure GM seeds in their food, but also the animals that eat these seeds. Yet we in Europe are not allowed to eat 0.01 percent GM food. This is not just ludicrous; it is scandalous. The bully boys of the environmental movement, whose chief interest in the subject was that it enabled them to get on the TV news for a while, have found common cause with the Eurocrats who love enforcing rules so they can justify trousering more of your money doing so. 

I recently walked out of a restaurant because its menu boasts of not serving GM ingredients. I support a technology that gives cheaper food and cuts down on insecticide use and the destruction of virgin forest.

On November 6, California voters will be asked to vote on Prop 37 which would require labeling of GM foods.  This is in spite of the fact that most people who shop for food have access to Google and can read what Matt Ridley and many others have to say; they can also find reader discussions of almost anything available at the local grocer. I doubt that politically inspired labeling will add anything useful.  In fact, it may even be misleading.

On the same ballot, I will have the opportunity to vote on LA County Proposition J, "Accelerating Traffic Relief Job Creation. To advance Los Angeles County traffic relief, economic job growth by accelerating light rail/subway construction. ... "

Let's see.  We have had light rail and subway construction in the County since the early 1980s.  In the last thirty years, no on has found any evidence that these activities have benefited the County's jobs picture or that traffic has improved.  There is a labeling problem when it comes to Prop. J.

It's safe to say that I do not want these guys in charge of labeling my food or anything else.

Complements, substitutes or sweet spots?

I understand the Baumol Cost Disease story, but am not sure I buy it. It's a cinch that we can now enjoy more and better music in the home than ever. Technology does augment the reach and productivity of all those string quartets.  Uneven productivity advances are normal.

I have previously blogged about our fine experiences enjoying the Berliner Philharmoniker at home.  We recently found Jewish High Holy Day services on the net which were splendid.  I was pleasantly surprised.

Substitutes or complements?  Some people like their beer and bourbon together and others think of an interlude with one or the other.  As always, it is all about subjective and personal choices.

MIT President Rafael Reif writes about "What Campuses Can Learn From Online Teaching ... Searching for the sweet spot where cyberstudents around the world pay a small fee that helps make the 'residential' college more affordable" in today's WSJ.  Are the two modes substitutes or complements?  I am a great believer in the idea that competition breeds experimentation which breeds discovery.  Sweet spots will be found.

I have been looking at on-line courses for years.  Some are awful and some are pretty good.  It is no surprise that Marginal Revolution University looks very good.  Many will be looking for the "sweet spot" whereby this freeby complements their teaching.

No simplicity, no transparency no nakedness

Election season is not the happiest time of the year. I will not be watching the debate this Wednesday evening and I am not keen to see whether the astute businessman or the cerebral law professor is the better China-basher-mercantalist-nativist.

This morning's NY Times includes a federal income tax reform proposal by Richard Thaler, "For the Wealthy, a 28 Percent Solution."  He suggests that all income over $1 million be subject to a flat 28 percent tax rate with no deductions or exemptions.  The messy code would remain in place for those earning more. Thaler writes that this is in the spirit of “lowest possible tax rates on the broadest base.”

But we also hear about the current 66,000 page IRS code which costs Americans several hundred billion dollars of annual effort to cope with.  Why this mess?  Why are real reforms a long shot?

I can think of three reasons.  First, it is impossible to get anything near a consensus on what a  "fair" tax code and tax burden would be.  Second, targeted rates and favors pass for policy making (as in "energy policy," "trade policy," "housing policy," etc.).  Third, complexity is a convenient place for politicians to hide.  Simplicity and transparency are akin to nakedness.  We did not get to where we are by accident or oversight.

The race (still) goes to wealth creation

Today's WSJ lists their "Top 50 Start-Ups".  Thirty-seven are in California, 30 in the north (Bay Area-Silicon Valley) and seven in the south.  Of the 13 in other parts of the U.S., five are in the NYC area; three in the Boston area, two in Bellevue-Seattle, one in Durham, one in Boulder, one near Dallas.

Living in California, I see plenty of abysmal governance; third-world class potholed streets and highways plus high-speed rail are at the top of my long list. 

But we also know about the power of agglomeration economies.  Where is the deepest and brightest labor pool?  I expect that pools of talent are found in many parts of the U.S.  But 60 percent of the top U.S. start-ups located in a cluster of three counties is eye-popping.

In the race between bad governance and wealth creation, the latter is still winning.  May it last.

Revealing discourse

I am a great fan of Russ Roberts' econtalk.  I have pointed readers of this blog, students, friends, anyone who will listen, to many of the fine interviews posted there.

This week it's a discussion Russ has with economist Robert Frank on Infrastructure.  It's an old story and Frank has made the argument many times, including in the pages of last Sunday's NY Times.  We "need" lots of infrastructure repair and replacement; the Treasury can borrow at very low rates; we can put people back to work.  Let's do it.

It's a nice discussion.  Both participants come across as well intentioned and well informed.  But (differences over Keynesian stimulus aside) they fundamentally disagree on what government can do.  Frank talks about the government and infrastructure planning we should have while Roberts talks about the ones we do have.  I urge people to listen for themselves.

My own bottom line is one I have mentioned many times.  I find it stunning that smart people can be so naive about politics.  This is not simply "government bashing" (Frank's phrase).  We are not Scandinavia and their civil service is not a plausible model for the U.S. 

At the margins, we can probably make improvements (Frank cites a new and improved DMV in his home state), but the discussion involves a non-marginal $2 trillion infrastructure program.  At that scale, I'm afraid we have to focus on the politics and politicians we have, not the ones we could have in a better world. 

Take that, Luddites!

Are we getting smarter?  It's a lovely thought.  James Flynn says that by conventional measures we are.  Actually, IQ (and related) tests identify how good we are at performing tasks that matter in the modern world.  We can say that modernity has made us smarter.

Steven Pinker argues that we have become more peaceful.  He cites the Flynn effect as one of the causes. 

Modernity (including industrialization) make us wealthier and smarter and more peaceful.  Take that Luddites!

To be sure, I do not expect that Luddites care about very much about these three trends.

Commuting

Wendell Cox has summarized the latest ACS report on commuting in America.  He shows three years of data for the major travel modes, 2000, 2010 and 2011.  Skip the one-year change and look at the eleven-year comparisons.  The biggest loser has been car/vanpooling (all those diamond lanes have not helped).  Bicycling is up, but from a very small base.

The biggest numerical gains are in drive-alone. "Getting people out their cars" continues to be a challenge.
Work-at-home is also up appreciably.  That did not cost the public a lot in new infrastructure.  No worries over "who built that."

One more irony

The NY Times recently reported that U.S. CO2 emissions are down.  The substitution of natural gas for coal is the cited reason.  The political favorites (wind, solar, biofuels, etc.) did not get any of the credit.  In terms of the 2012 game of "you did not build that," it is clear that the credit goes to private energy markets.

No, they are not totally free of tax credits and other meddling, but that would not be a bad idea.

This morning's LA Times reports the extent to which taxpayers and ratepayers will be on the hook for more of the least cost-effective alternatives.  These have already spawned lobbies to assure that they will go on. We know the ethanol story.  It is so awful that it has no serious support, but it may be here to stay.

The other story is that the U.S. has slipped from it's position as #1 carbon emitter.  China is now #1.  What to do?  Export more windmills?  There is a better way.  Become an exporter of cheap natural gas.  The latter can actually happen.  The WSJ documented the falling price of natural gas -- and the prospects for U.S. natural gas exports.


Carbon is a global common pool. The capacity of markets to "solve" the global CO2 problem will always be pitted against the efforts of policy makers to do the same thing.  You would think they could work together and you would be wrong.

Food for thought

There is much discussion of the "religious right", but much less of the "religious left".  The Google ratio is 16:1.  The religious right is populated by folks who cannot accept evolution; the people who I place on the "religious left" are the well educated modern-day Luddites who cannot accept/grasp the idea of gains from trade.  And you thought this was settled by the writings of the classical economists.  (Steven Landsburg has looked at the economics of our presidential candidates and has settled on describing them as Dunce and Other Dunce.)

Pierre Desrochers and Hiroko Shimizu take on some of the religious left in their splendid The Locavore's Dilemma: In praise of the 10,000 mile diet.  The great success story of our time (not just for Americans but for residents of half of the 34 OECD countries) is that most of us are more at risk for obesity than famine. 

Foods of great variety reliably delivered via an international supply chain consisting of an uncountable number of specialists is an amazing achievement.  And it was not always so, but (sad to say) many people don't get it.  They love their "locally grown" (fine), but ignore the costs (dumb) and often want to impose their romanticized choices on others less wealthy (worse than dumb).

"Isn't it possible that crushing bugs and removing weeds by hands were neither very effective nor the most productive use of one's time?" p. 185. There are many compelling lines like this, scattered through the book.

Tyler Cowen wrote about "World Hunger" in yesterday's NY Times.  He cited dumb food policies here (biofuels) and abroad (trade controls and price controls).  (Today, he blogs about the sorry state of the debate over GMOs.)

Further research, please

It's hard to have a policy discussion without alluding to Bruce Yandle's Bootleggers and Baptists.  When the true believers find common cause with the rapacious, what can be done?  In modern times, the former are often "green" while the latter, as always, are shameless.

But that is not the whole story.  Don Boudreaux , in today's WSJ, describes the problem of adding hubris to the mix:

A market economy is indescribably vast and complex—its success depends on so many intricate, changing details all somehow being made to work smoothly together that the "facts" that are essential to its thriving cannot be catalogued with anywhere near the completeness that can be achieved by a 21st-century scientist studying and cataloging the "facts" that enable sparrows to fly. A sparrow is complex compared, say, to a limestone rock. Compared to the modern market economy, however, a sparrow is extremely simple. ...

Awareness of these facts, and of knowledge of workable options of how to respond to them, are key to the growth and continued success of any market economy. These facts are dealt with successfully only in market economies and only to the extent that individuals on the spot are free to respond to these facts as they, individually, see fit.

Yet no observer or planner or regulator can see and catalog all these highly specific facts. The facts—each of which must be dealt with—are far too numerous at any moment for an observing scientist to catalog even if that moment were to be frozen for decades. ...

Nevertheless, too many people, including politicians, continue to believe that because they can observe a handful of bulky facts about the economy, they can thereby know enough to intervene into that economy in ways that will improve its operation. That belief, though, is hubris. It's very much like believing that you'll fly if you simply strap on a pair of wings and commence to flapping madly.

If that's not bad enough, in the same paper, there is this, cited and summarized by David DiSalvo:

Psychopaths and successful U.S. presidents may share some common psychosocial territory.

 

Both possess "fearless dominance," a trait of swagger or extreme confidence that may contribute either to criminality and violence or to successful leadership, a new study suggests. The analysis drew upon personality assessments of 42 presidents through George W. Bush, compiled by Steven Rubenzer and Thomas Faschingbauer for their book "Personality, Character and Leadership in the White House."

More than 100 experts, including biographers, journalists and scholars who are established authorities on one or more U.S. presidents, evaluated their target presidents using standardized psychological measures of personality, intelligence and behavior.

Theodore Roosevelt ranked highest in fearless dominance, followed by John F. Kennedy, Franklin D. Roosevelt, Ronald Reagan, Rutherford Hayes, Zachary Taylor, Bill Clinton, Martin Van Buren, Andrew Jackson and George W. Bush.

Scott O. Lilienfeld and five other authors, "Fearless Dominance and the U.S. Presidency," Journal of Personality and Social Psychology (September)

Bootleggers, Baptists, the hubristic and the psychopathic?  How do you face down that line-up?  All good science ends with the call for further research.  That would be putting it mildly.

Connected and "Hyperconnected"

Many of us like cities.  We vote with our feet and choose to live in, work in, play in, and visit these places.  We also know that cities are good for economic growth which is good for people.  Many supply chains benefit from some degree of clustering.  This includes the less formal supply chains by which we become inventive and creative.

And these human chains also nurture our keen interest in sociability and groupishness.  And the latter feed back to the economic benefits.

Nicholas Christakis and James Fowler address the many ways that we connect. Some are well known.  Many others are worth learning about.  The authors offer a wonderful and readable survey in their Connected: How your friends' friends' friends affect everything you think feel and do.  They note that we are now "Hyperconnected" (their Chapter 8).  The book was published in 2009.  We must know be moving beyond the "hyper".

Most people who write about cities love "density" and use it to proxy for all the networking options cities make possible.  That story is much too interesting to leave it to one aggregate index.