Never enough history

I thoroughly enjoyed Charles Mann's 1491 when it came out several years ago.  Everything that I thought I knew about the pre-Columbian Americas (not much) was challenged.

I just finished Mann's 1493 and it is (in my view) even better. 

First there was Pangaea and then the continents split; their flora and fauna evolved in very different ways for a few hundred million years.  With the Columbian Exchange, all of these could interact once more.  This was sometimes for the good (all those tomatoes from Mexico in Italy, all those potatoes from Peru in from China) and many times for the worse (silver mining, yellow fever, malaria, etc.).

The encounters across continents and cultures were not simply involving Europeans and Indians (Mann uses that descriptor and has an appendix explaining his use of terms), but reached to all the continents.  These are amazing and complex stories.

Here is one example:

American history is often described in terms of Europeans entering a nearly empty wilderness.  For centuries, though, most of the newcomers were African and the land was not empty, but filled with millions of indigenous people.  Much of the great encounter between the two separate halves of the world thus was less a meeting of Europe and America than a meeting of Africans and Indians - a relationship forged both in the cage of slavery and in the uprisings against it.  Largely conducted out of sight of Europeans, the complex interplay between red and black is a hidden history that researchers are only noe beginning to unravel (p. 331).

I am not a historian nor an anthropologist.  Perhaps this means that I can enjoy Mann all the more.  He does take up several economic themes and as far as I can tell gets them right.

We can never know enough history.  So I am grateful that folks like Mann are there to make it enthralling and great fun.  It is sad that books like his will not make it into a high school curriculum.   Perhaps some lucky home-schooled kids will get to read them.

Politics and models

This morning's LA Times reports that, "California orders hike in number of super clean cars ... The state's air board issues new rules to automakers as part of its effort to cut greenhouse gases."  Mandating sales of items that are not in demand may take some doing (including some spending of public funds), but what the hell.

In the name of "green", anything goes.  It gets more nutty when one notes that were California to shut down entirely, it would make little difference to the atmosphere (the biggest commons of them all) in light of the coal being burned throughout the world.

Yesterday's WSJ included this op-ed signed by sixteen prominent scientists:  "No Need to Panic About Global Warming ... There's no compelling scientific argument for drastic action to 'decarbonize' the world's economy."  Here is more:

In September, Nobel Prize-winning physicist Ivar Giaever, a supporter of President Obama in the last election, publicly resigned from the American Physical Society (APS) with a letter that begins: "I did not renew [my membership] because I cannot live with the [APS policy] statement: 'The evidence is incontrovertible: Global warming is occurring. If no mitigating actions are taken, significant disruptions in the Earth's physical and ecological systems, social systems, security and human health are likely to occur. We must reduce emissions of greenhouse gases beginning now.' In the APS it is OK to discuss whether the mass of the proton changes over time and how a multi-universe behaves, but the evidence of global warming is incontrovertible?"

Not only are long-run forecasts rife with uncertainty. Confidence bands keep widening, but that's for cases where there is a plausible and stationary model.  The sixteen scientists who signed the op-ed are disputing that there is even a basic model from which to forecast.

Speaking of the long run, much of the world is moving to cleaner natural gas which is cheaper than ever.  (H/T Carpe Diem)

And speaking of basic models, some of us thought that Adam Smith struck a fatal blow at mercantalism in 1776.  But read almost any newspaper and note that mercantilism lives.  Last week's State of the Union speech by Pres. Obama was replete with mercantalist rhetoric and policies, most of which received loud cheers from hundreds of our elite in the audience.

Producing ideas

Jonah Lehrer writes about "Groupthink" in the recent New Yorker.  "Brainstorming" is overrated, but serendipidous connections are crucial.  To get the latter, allow for propitious proximity and hope for the best. 

The writer cites Jane Jacobs' "knowledge spillovers," which are a huge topic with urban economists and urban planners.  He also cites Steve Jobs' ideas for the best office floor plan for Pixar (one that makes encounters possible) as well as how spatial arrangements made a difference at MIT's Radiation Lab as well as its Linguistics Department.

In my previous post, I mentioned "supply chains of new ideas".  The reason to put it that way is that we expect concentration in space (cities) to facilitate conventional production as well as idea production.  The latter is a comparatively new idea, but all of these supply chains must have the chance to form -- and thrive and re-form as circumstances change.  That's a huge task and a huge puzzle.  We expect that flexible land markets are a necessary condition. 

Growth is the criterion and metropolitan areas that grow are the places where spatial arrangements that best facilitate large numbers of supply chains win.  There are no "smart growth" (or other) planning guidelines that come close to meeting this immense challenge.

How did we get so rich?

Adam Smith famously asked:  Why are some nations wealthier than others?  Almost 250 years later, the discussion continues. Robert Lucas added, “Once you start thinking about economic growth, it’s hard to think about anything else.”  By all means.  How did we (in the West) get so rich?  Steven Landsburg put it this way:

Modern humans first emerged about 100,000 years ago. For the next 99,800 years or so, nothing happened. Well, not quite nothing. There were wars, political intrigue, the invention or agriculture – but none of that stuff had much effect on the quality of people’s lives.  Almost everyone lived on the modern equivalent of $400 to $600 a year, just above the subsistence level.  True there were always aristocracies who lived far better, but numerically, they were quite insignificant …  (WSJ, Jun 9, 2007)

The topic has preoccupied many smart people for many years. Niall Ferguson helpfully boiled it down to his famous “six killer apps”:

·         Competition – political (between states) as well as economic

·         Science – a way of studying and learning

·         Property rights – the rule of law

·         Medicine – the science that made health and life possible

·         The consumer society – the source of demand

·         The work ethic – a moral and cultural framework

What can we add?  Two things come to mind.  I have previously discussed the role of cities -- and how they become congenial to creativity and entrepreneurial discovery; how their evolving forms support networks that facilitate supply chains – including less formal but essential supply chains for good ideas.  Creative cities and how they attract and motivate creative people has made urban economics nearly "hot".

But there is always more.  The importance of trust in economic and personal realtionships is clear.  Ferguson does not include it.   In the market, we get widespread branding because buyers and sellers demand a trust relationship, especially if there repeated dealings.

But in this week's econtalk podcast, Russ Roberts' guest, David Rose makes the case for the importance of a much deeper level of trust based on moral principles.  This discussion helped me a lot and I look forward to reading Rose's book.

Candidates

I keep no open comments section on this blog.  They tend to be a mixed bag.  But there is feedback via email and these are often helpful.  I have been told that by evoking rhetoric in the previous post I was wading into old and complicated discussions of "good" vs. "bad" rhetoric. 

But both are inescapable. I recently posted re Daniel Kahneman's new book which places rhetoric alongside our penchant for lazy "System 1" thinking.  Perhaps the r-word has to be replaced or modified.

Think about Martin Luther King, Jr.  His impact was profound, in part because of his skilled use of rhetoric.  He changed people and history.  He successfully reminded many white Americans that they were not living up to their own cherished values.  He never challanged American values.  To the contrary, he challenged people to rise to their own values.  It worked.  In the current phrasing, King managed to be a game-changer (obviously for the better).

In last Sunday's NY Times, Ross Douthat wrote about the mediocrities who run for office in the U.S. (notably for President).  In today's WSJ, Bret Stephens writes "The GOP Deserves to Lose" (their #1 downloaded when last I checked).

MLK's do not come along often.  But nothing is gained by promising to stand tall for safe nothings.  Most people easily sense it when candidates simply sample from the old cafeteria of cliches.  This works with the candidate's "base", but it does nothing beyond the base. 

From rhetoric to platform

Modern presidential campaigns come close to resembling a freak show.  What will they say/do next?  It is partly our fault ("the media" do represent their audience).  And we expect much too much of politicians -- and we do enjoy some circus. 

George Will once referred to Mitt Romney as the Republican Michael Dukakis because Romney chose to simply define himself as a "competent manager."  That is apparently not enough to energize enough people.  Most suspect there is no "there" there. 

In an effort to garner the most votes, the candidates inspect the established cliches of U.S. politics and select the ones they think they can mold into sound-bites -- testing and modifying as they go along. 

Once in a while, we get a Lincoln, an FDR or a Ronald Reagan.  They win by going a little bit beyond the standard cliches.   Any leader who fancies him/herself as a "great communicator" will take on the great challenge of identifying a sound but novel idea and finding a way to make it presentable, thereby setting him/herself apart.

Here are some unconvential (by the standards of modern presidential politics) platform planks that wait to be honed and made presentable by the next great communicator (in no particular order):

1.  My economic advisors and I do not understand the business cycle well enough to involve ourselves in a serious way.  Our plan is to govern in such a way so as to not add to the uncertainties that risk-takers normally face.  I will appoint Federal Reserve Board members who will make clear and credible commitments re their monetary targets.

2.  Envy is one of the seven deadly sins and leaders should never incite it.  Equal opportunity beats equal outcomes.   Competition in the lower schools is a step in that direction.  Giving parents explicit school vouchers (as opposed to the implicit vouchers with strings they now get) is a step in that direction.  The Department of Education will do one thing only and that is award matching grants to school districts that move in a parental choice direction.  This will be the #1 social policy priority.  It will end the disastrous practice of forcing the poorest students into the worst schools.

3. The 65,000-plus page IRS code will be abolished in favor of a flat tax with generous exemptions at the lower end.  No VAT, no double-taxation (e.g., no corporate or estate taxes). This will end the myth of "progressivity" now attached to the IRS code.

4.  The federal "War on Drugs" will end.  Federal criminalization of drug use will end.

5.  Expand the talent pool. Immigration quotas will end.  Anyone without a record of criminal activity is welcome.  If they do crime after admission, they will be sent back to their place of origin.

6.  The bully pulpit of the President will be used to explain to the American public that most discussions of "inequality" are misleading.  A much better standard is upward mobility.  It makes no sense to compare snapshots of distributions because, over time, people move between quintiles (or whatever).  Many people now in the lowest quintile were not even here 20 years ago and most of them are better off than they were 20 years ago (wherever they are). 

7. Social Security and Medicare will be means tested.  And young people will have the option of directing their FICA "contributions" (including "employer share") to a 401k plan of their choice.

8.  Our strength will be our freedom and prosperity.  But there are crackpots in the world and some of them are very dangerous.  Nevertheless, no more nation building.  Adventures abroad will be limited to Congressionally approved drone/special ops attacks on leaders who seriously threaten us or our allies.  The crackpots will have to live with this credible threat.

9.  People have their limits and make mistakes.  But we recognize unfettered markets as a powerful and indispensible error-correction device.  Politicized choices, on the other hand, are far less amenable to correction.  Picking industrial "winners" will be left to capital markets.

10.  Hard choices must be made, but must always be cognizant of the paramount importance of human liberty.  All judicial and administrative appoitnments will be screened with this in mind.

To avoid the Dukakis label (and fate), a candidate has to find a way to package and promote just one interesting and timely idea.  (There are many others beyond these ten.) Blandness does not work.  And never underestimate the power of rhetoric.

ADDED

re immigration.

More visionaries

Today's WSJ includes "Zoning Laws Grow Up".  Here are some choice bits:

… times have changed and so has the New York City Zoning Resolution, which just passed its 50th anniversary last month. Once regarded with frustration and loathing, zoning in middle age is hot, the cougar of urban regulatory devices: more flexible and dynamic than ever. Actually, urban planners are more likely to invoke a thermostat metaphor—noting that zoning can raise or lower the habitability of the city by degrees. The layperson might also think of it as planning's magic wand—an implementation technique, not an avoid-at-all-costs, manipulate-as-possible rule or regulation.

… And in the Bloomberg administration, as wielded by the New York City Planning Commission and its director, Amanda Burden, zoning has assumed a more activist role than ever before. It not only shapes the blocks and writes the skyline, but also aims to curb obesity by offering incentives for fresh-food markets in low-income neighborhoods; buck up the mom-and-pop store; and promote an astonishing range of other quality-of-life benefits.

… "Zoning has always concerned itself, for better or worse, with social matters, such as banishing noxious uses," said Julia Vitullo-Martin, a senior fellow at the Regional Plan Association. "What's different now is that the planning commission is moving from zoning that's negative on social issues to being positive, like mandating green markets and bike rooms. It's reasonable for city government to encourage people to move in a beneficial direction. Whether zoning is the correct device is another matter. A market person might say it's better to go with incentives than mandates."

… Last month, the planning commission submitted a new initiative to public review. Called Zone Green, it will promote energy efficiency by making it easier to add photovoltaic panels, wind turbines, greenhouses and shading devices to the roofs and sides of older buildings. On Jan. 3, Commissioner Burden introduced a zoning amendment that will preserve small shops on avenues with a residential character and force new banks on the Upper West Side to shift most of their services from extended street fronts to second-floor locations. "We want New York to be a walkable city," Ms. Burden said, "with active, tree-lined streets and active retail frontages. This modest proposal will preserve that small-store character by allowing stores and banks a maximum of 25 feet on the street."

"Zoning is not going to solve world peace," she said in a recent interview. "But if we can figure out the issues now and address them, we can lay the foundations for the next administration so that what we start now will carry New York City into a better future."

This is exactly where I was not going in yesterday's post.  It's hard enough to figure out where the bus routes should go, so why not plan everything else too?  Do few things and do them well?  Or try the opposite?
 
NYC is an attractive place and officials think they can, therefore, set a high bar.  But can they ever know enough to get it right?  Can the rent-seekers be kept at bay?  What are the costs of the high bar?  Is it a cost of living that falls hardest on "the 99%"?
 
Land markets are not crazy.  Agglomeration impulses will co-locate complementary activities very nicely.  But the WSJ story shows it always just a hop-skip-and-jump to zoning as social engineering.

Cities succeed because they facilitate a very large number of complex supply chains -- including the human supply chains that generate new ideas.  This is why we emphasize interactions, networks and complementary spatial arrangements.   Getting it right (not this month and this year but all the time) is a huge combinatorial problem that no group of wise men and women (let alone politicians) can hope to "solve".

Visionaries

In teaching, I often use the following from the March 1, 1997, issue of The Economist:

In many economics textbooks, the presence of externalities is invoked as a justification for government intervention in the marketplace. Yet the private sector often finds its own solutions to externality problems. This is the secret of the shopping mall’s success. Because a property developer owns the entire shopping complex, its profits depend on the entire mall, not on any particular shop. By choosing the right mix of tenants and charging rents that reflect each store’s contribution to the mall’s overall revenues – including the business it brings to other stores – the developer can ‘internalize’ the externality and maximize its profits.

This is a refreshing antidote to the many discussions that evoke negative externalities ("market failures")  everywhere -- and which sees these as marching orders to "do something."

I have blogged about Paul Romer's Charter City idea.  He may yet find a way to get the green light to start a brand new charter city in Honduras, or in parts unknown.  What if he does?  What happens next?  Doe he enlist an architect or planner with a "vision" -- as described in Spiro Kostoff's The City Shaped?

Or does the cited passage suggest that scaling is not a problem and the new city can be sold in sections that intrigue developers so that they can take it (plan) from there?

There is a size distribution of firms in every industry.  That size distribution is endogenous -- and it changes all the time.  Developing and planning the new city is a problem much too big to be left to visionaries.

Sustainability

According to this source, 1955 auto imports to the U.S. were less than 1% of cars registered.  According to this source, the share of imports' sales grew from 15% in 1970 to 33% in 2010.  It's a well known story.

Ross Douthat wrote about "The Benefits of Bain Capitalism" in yesterday's NY Times.  He noted that:

... In the decades after World War II, the United States economy was highly regulated, highly taxed and highly successful. War, tyranny and ideological mania had devastated our competitors, and while Asia stagnated and Europe struggled to rebuild, America grew and grew and grew. It was a golden age for the liberal model of political economy, with a powerful regulatory state presiding over labor-management cooperation and a steadily expanding middle class.

But like all golden ages it passed. First in Europe and then in Asia, competitors emerged to challenge the United States’ economic dominance. In this new landscape, the pillars of the postwar economic order began to look like liabilities. Our heavily unionized industries seemed sclerotic, our regulatory system stifling, our tax rates punitive. And so American policy makers, C.E.O.’s and investors responded by changing their priorities — privileging growth over security, efficiency over equality, and embracing creative destruction on a scale that would have been unthinkable in the America of 1955. ...

... But keeping America’s edge came at a cost. Our economy became more efficient, but also more ruthless and Darwinian. Our G.D.P. kept rising, but the new wealth was less evenly distributed. The revolution delivered growth, but at the expense of stability and certainty. And for many Americans, even the “modest net impact” of private equity buyouts cost them a solid, good-paying job.

On the left, and now apparently in Newt Gingrich’s campaign shop, there’s a persistent suggestion that it could have been entirely otherwise — that the midcentury model could have somehow been sustained, that the private equity “vultures” could have been held at bay, and that what worked for the United States when Europe was in ruins and half the world was Marxist-Leninist could have worked in the age of globalization as well.

This is a fantasy, unfortunately — one that belongs to the world of Hollywood endings, where Gordon Gekko is defeated, Blue Star Airlines stays in business and Bud Fox’s dad gets to retire with a solid pension. Indeed, it’s such a fantasy that even Oliver Stone didn’t quite believe in it: In “Wall Street,” Blue Star was saved from Gekko’s clutches — and presumably, from the real-life fate of an Eastern Airlines or a Pan Am — not by a government subsidy or a benevolent Daddy Warbucks, but by a rival buyout specialist. ...

Economists love competition for all the obvious reasons.  Consumers benefit (in terms of prices, quality and choice) as they should.  What Douthat does not mention is that not only did American cars get better, but so did the imports.  Many had to withdraw from the North American market and re-tool. Huyndai and Kia are recent examples; Nissan was an earlier example.  Some never returned.  Remember Simca and Saab?

There are ways to create jobs that do not create wealth.  But that is not sustainable. 

Vision thing

Forecasting is hard work, which makes central planning very hard.  Here are the 2006 economic assessments by some very smart economists.  They were very wrong.  No doubt that Ben Bernanke is among the best and the brightest.  It is simply that central bankers have taken on more than anyone can handle.

I am a fan of Arnold Kling's Unchecked and Unbalanced.  He makes the point that increasingly decentralized information and increasingly concentrated authority amount to a serious and dangerous mismatch.

Matt Ridley worries that we may be due for another ice age.  Are our warming activities sufficient to stop it.  Shall we burn more carbon?  Would that be the new "sustainability"?

No one doubts that it was difficult in 2006 to peer one year into the future.  But the "sustainability" people assert that they can look many years into the future -- and that they know how we should re-allocate trillions of dollars of resources in light of that vision.

ADDED

Paul Gregory sees the 2006 Fed transcripts revealing a 9/11-type intelligence failure.

Bicycling in America

Many American transportation experts (notably John Pucher of Rutgers) argue for greater bicycle use in the U.S. and hold up some of the European cities as examples.  Here is a YouTube re how the Dutch did it (H/T David Boyce).

But whereas I have argued that many of the European cities have ever more similarities to U.S. cities (increasing auto use, more suburbanization than ever), I do not buy the bicycle argument because there are also important differences.

Here is a very sad story about bicycle theft in the U.S.  It is the story that most planners and enthusiasts ignore.  It is chilling and depressing (H/T The Browser).

The author keeps looking at a 17-minute surveillance video of his bike being stolen -- on a busy NYC street.  Then he launches into a discussion of some context (below).  But read the whole thing and how it all ends.

I WANT MY BIKE BACK. So do we all. With the rise of the bicycle age has come a rise in bicycle robbery: FBI statistics claim that 204,000 bicycles were stolen nationwide in 2010, but those are only the documented thefts. Transportation Alternatives, a bicycle advocacy group in New York City, estimates the unreported thefts at four or five times that—more than a million bikes a year. New York alone probably sees more than 100,000 bikes stolen annually. Whether in big biking cities like San Francisco and Portland, Oregon, or in sport-loving suburbs and small towns, theft is “one of the biggest reasons people don’t ride bikes,” Noah Budnick, deputy director of Transportation Alternatives, told me. Although bike commuting has increased by 100 percent in New York City during the past seven years, the lack of secure bike parking was ranked alongside bad drivers and traffic as a primary deterrent to riding more. It’s all about the (stolen) bike; even Lance Armstrong had his custom time-trial Trek nicked from the team van in 2009 after a race in California. Not every bike is that precious, but according to figures from the FBI and the National Bike Registry, the value of stolen bikes is as much as $350 million a year.

That’s a lot of bike. Stolen bicycles have become a solvent in America’s underground economy, a currency in the world of drug addicts and petty thieves. Bikes are portable and easily converted to cash, and they usually vanish without a trace—in some places, only 5 percent are even reported stolen. Stealing one is routinely treated as a misdemeanor, even though, in the age of electronic derailleurs and $5,000 coffee-shop rides, many bike thefts easily surpass the fiscal definition of felony, which varies by state but is typically under the thousand-dollar mark. Yet police departments are reluctant to pull officers from robberies or murder investigations to hunt bike thieves. Even when they do, DAs rarely prosecute the thieves the police bring in.

“It’s just a low priority, to be honest with you,” says Sergeant Joe McCloskey, a bike-theft specialist with the San Francisco police department who estimates that, of the scores of bicycle thieves he has caught, not one did jail time for the crime. Whether police go hard after thieves often depends on whether the officers themselves are passionate riders, like McCloskey, who at one point during our conversation geeked out over his Pivot Mach 5 mountain bike. (“The guy named it Mach 5 because, you know, Speed Racer drove a Mach 5.”) Departments that can muster a peloton, like those in San Francisco, Portland, and Houston, are generally more proactive. By contrast, NYPD officers openly discouraged me from filing reports on the stolen bicycles mentioned in this article, probably because their precincts are judged by crime stats.

Shopping in America

My friends in the urban economics biz pay most attention to the residential sector.  It is surely big, but there is a lot more to cities than housing.  Here is a link to some New York research being done on urban retail by my USC colleague Jenny Schuetz and her co-athors.

I have tried to to find national shopping data by location.  This is complicated. The International Council of Shopping Centers reports that there are about 100,000 “shopping centers” (including many “Lifestyle Centers”) which account for about 50 percent of all U.S. retail gross leasable area.  Whereas some of the centers are Edge Cities which include many of the functions once associated with downtowns, many others are developed at low densities that are seemingly under the radar (as in Edgeless Cities). 

So, rather, than downtown and the ‘burbs, it is an extremely complex arrangement.  And that's not bad.  From NHTS data, it appears that the many small “centers” and other retail places are spatially distributed so that the average shopping trip by central city vs. suburban residents in the U.S. were of similar duration, 14 minutes for central city residents and 16 minutes for residents of suburbs.  In fact, the 2001 and 2009 travel surveys show that the average shopping trip distance in 2001 and 2009 was the same at 6.7 miles each way (not walkable, but not bad). 

Note that in the intervening years, U.S. population had grown by 7.8 percent but shopping access had not gotten out of reach in spite of significant growth and development.  Not bad.

Demand, not capacity

I used to get worked up when politicians and their consultants lied about proposed rail projects (high ridership forecasts and low cost forecasts that had no basis) in order the wrangle the funds to build them.  But they kept getting away with it so eventually I thought they were simply a force of nature. 

But the work of Bent Flyvbjerg and his colleagues as well as Wendell Cox and Joe Vranich (as in this morning's WSJ) and others demonstrates that it is best to keep pushing back.  Florida and Ohio have actually walked away from high-speed rail. 

California hangs on, but this morning's op-ed recounts the absurdities used to justify the California project.  An old trick by boosters is to confuse capacity with demand.  Look how many riders rail can serve.  Cox and Vranich point out that the imaginative California proponents go a step further and double the capacity number (from 500 to 1,000 seats per train) in their calculations.  And this is all of a ploy by advocates is to suggest that it would be costly not to build high-speed rail.  Read the op-ed to believe it.

We get from city to city by car or by air.  In a very few cases, there is also highly subsidized Amtrak.  Arrive by car and you are not stranded when you arrive.  Go by air and you have to connect, often by car rental.  But arrive by train and you are also stranded. The "centers" and downtowns that rail buffs would connect in California do not approximate Manhattan or any of the traditional downtowns.  In Los Angeles, for example, I am really no better off access-wise if I land at rail hub Union Station near (not in) downtown as opposed to landing at LAX.  

USC's Gen Giuliano and Chris Redfearn and their colleagues mapped LA area jobs in 1990 and 2000 here.  Use these as a proxy for destinations. 

The authors' huge "LA Downtown-LA East" had more than one-half million jobs.  But accessing them from Union Station requires a car.   So does accessing the two-million jobs these investigators placed in the other 47 employment centers, not to speak of the five million jobs there were placed beyond any and all of the region's employment centers.

The study's airport area accounted for more than 53,000 jobs, but you would want a car to get there from LAX.  And LAX was as accesible/inaccessible as Union Station to the "Santa Monica-Wilshire-Hollywood" center's 420,000 jobs.

So it's not about rail's capcity. It has to be about demand. And that will be a problem because the advantages of arriving by rail these days are very few.

Just people

Daniel Kahneman's Thinking Fast and Slow (naturally) gets his readers to think.  There are many reviews and comments.  I enjoyed the ones I read in the NY Times Book Review by Jim Holt as well as the one in the NY Review of Books by Freeman Dyson.

There are two important themes in the book.  One involves a discussion of  the two systems we use in our thinking, the intuitive System 1 and the analytical System 2.  Both are, of course, useful.  But System 2 requires energy and effort.  We can get in trouble when we are too lazy to turn it on and just stick with System 1 conclusions.  

The other theme is an attack on the "rational man" assumption of much of economic modeling.  I have always thought of "rational" as deep and complicated.  I am happy to just assume that people respond to incentives.  Nevertheless, Kahneman is superb at documenting behaviors which challenge the "rational man" hypothesis.

Al of us contextualize just about everything that our senses preceive in unique and personal ways.  I take that as a given.  But our amazing material well being comes about as a result of successful cooperation/coordination.  There are an uncountable number of complex supply chains that routinely emerge to serve us.

We somehow manage all that in spite of the fact that we are just people.

Anything goes?

Just last week, the LA Times reported this: 

Review urges delay in borrowing billions for bullet train ... State-mandated panel concludes that the high-speed rail program 'is not financially feasible.' ... Gov. Jerry Brown's office signals that he isn't likely to be swayed by the findings.  ... In a scathing critique that could further jeopardize political support for California's proposed $98.5-billion bullet train, a key independent review panel is recommending that state officials postpone borrowing billions of dollars to start building the first section of track this year.

Today, in their standard fashion, they editorialized this way:

Keep California's bullet train on track ... Despite recent negative reviews by experts, in the long term the rail project still makes sense. ... California's proposed bullet train took another shot this week when an independent review panel issued a report concluding that the project wasn't financially viable. This followed negative reviews from the state auditor, the inspector general, the legislative analyst and the UC Berkeley Institute of Transportation Studies.

It's hard to argue with such a distinguished group of experts, whose logic is unassailable. ...

In other words, it is all about the boosters' rail religion.  Blind faith is promoted via an appeal to the "long term."  The editorial even evokes the pyramids of Egypt and their long term viability. 

But slaves were involved.  That should remind the authors that resources are scarce.  Adopt a discount rate of zero and in the long term, any and all projects make sense.  Fill the Gulf of Mexico to grow turnips, etc.  Anything goes?

ADDED

California HSR situation by Ken Orski.

Political economy

The WSJ reports "Kodak Teeters on the Brink".  This was expected.  Everyone I know uses their "phone" to take photos.  Creative destruction is the name of the game.  And that's a very good thing.

The dynamism of the market economy accounts for our material well being but is ignored by most critics of capitalism (who dwell on powerful and impregnable corporations).  The critics includes most "anti-trust" lawyers, judges and politicians.  Have they ever heard of "category busters"?  Is my iPhone a phone, a camera, a computer, a toy, etc.?  The question could usher in long and useless debates.

I tell my students that I teach "political economy".  It's an abused term, so it is useful to stress that keeping "economics" and "political science" in separate bins is not a good idea.  No politics without economics and no economics without politics.

Business that fail in the marketplace will seek help from political friends.  Other businesses know that having political friends cannot hurt.  Can we keep them apart? Creative destruction animates political economy.

ADDED

Fortune-500 Churn over the years (via Carpe Diem).

OWS people read Shoup

Rortybomb reports that the Zuccotti Park OWS library contained a copy of Don Shoup's The High Cost of Free Parking.  Amazing what rebels with time on their hands will read.

But the Rortybomb post then goes on to note and cite various views of privatization.   Can you have privatization without liberalization?  In other words, is there "enough" competition?   Also this:

“In just three words, ‘willing to pay’, we have swept away the inequality of wealth and power that any attempt to turn market mechanisms toward planned ends must confront…It follows that asking an extra dollar for parking hurts the well-being of the poor far more than the rich, and systematically privileges those who don’t need to think twice about paying six dollars for a parking space.”

Many parking spaces do not have perfect substitutes because of inevitable location rents.  The rents can go to a public entity, they can be dissipated via what Shoup has called "Cruising for Parking", or they can go to a private owner.  Private owners can pay the discounted value of future net revenues.  They can also be allowed to manage and price the space as circumstances dictate.

If we bring the well-being of the poor into the discussion, then we should recall that poor management of the infrastructure we have means that we are prompted to build new facilities.  And what would we then build?  These days, it has to be facilities that pass muster with the Baptists as well as the Bootleggers.   Tom Sowell reminds is that a policy conversation is not complete until we ask, "compared to what"?

 

What a year

What a year.  It is just over a day old and Alvin Rabushka peppers us with these very good "12 Questions for 2012." 

But I have to add #13.  In light of the fact that the best that Congress and the President can come up with is a two-month plan (the most recent budget agreement), why do those of us who have so many bright ideas for reform expect any of our proposals to be implemented?  I wish I knew.