Expensive learning

In 1988, the late John Kain published "Choosing the wrong technology:  Or how to spend billions an reduce transit use"  Here is the abstract:

In spite of a broad consensus among transportation analysts that bus rapid transit, whether operating on exclusive rights-of-way or on uncongested high occupancy vehicle lanes or general purpose limited access facilities, provides higher performance and has significantly lower costs per passenger trip than rail transit in medium and low density cities, nearly all Sunbelt cities are building or planning heavy or light rail systems. This paper reviews previous studies of the cost-effectiveness of heavy and light rail transit with bus-rapid transit and the growing experience with busways and transitways and concludes, once again, that some form of bus rapid transit would be a far more effective way of providing improved transit in these cities than heavy or light rail transit. Not only would bus rapid transit be substantially cheaper, but it would provide a higher quality of service than light or heavy rail transit for virtually all users. Finally, the paper speculates on the reasons for the continued, “blind” commitment to rail transit by policymakers in Sunbelt cities and on the refusal of policymakers in all but a few of these cities to even consider bus rapid transit.

Kain was angry and frustrated because he and colleagues Robert Meyer and Martin Wohl had made the case back in 1965 in The Urban Transportation Problem, copies of which are hard to come by after all the years.
 
In the age of the auto-freeway system, "freeway flyer" buses on freeways and occasionally using special bus lanes are the appropriate form of public tranit.  Flyers would be cheaper and more flexible than rail. And some of the buses could be their own feeder lines, once off the freeway.  No transfers and no park-and-ride.  The book followed from Ford Foundation-funded study for RAND, back in the days of great optimimism about the application of social science to "solving" urban problems. 
 
Like many other good researchers, these scholars skipped the public choice aspect of the problem.  The "wrong" technologies, rail transit, were the enthusiastic first choice because they cost billions.  The 1965 book and the 1988 paper were just 23 years apart.  Now, 24 years, after the 1988 study, we see the following in yesterday's LA Times:

Orange Line busway is Metro's quiet success story ... The Orange Line in the San Fernando Valley, which will soon be extended, has prompted a new focus on the role of rapid buses in L.A.'s transit plans.

As Los Angeles County pumps billions of dollars into its expanding commuter rail network, a different kind of mass transit has become an unlikely hero of the San Fernando Valley. ... The 7-year-old Orange Line, a 14-mile east-west busway connecting North Hollywood to Warner Center, has been a less-flashy workhorse of success for the Metropolitan Transportation Authority.

Less than a year after its opening, the Orange Line busway's projected ridership more than tripled to 22,000 a day, and a study by UC Berkeley researchers found it even slightly helped relieve morning traffic on the 101 Freeway, which parallels the busway. By May of this year, daily ridership had climbed to 26,670 on a line that was significantly cheaper to build than it's light-rail counterparts, such as the Blue, Green and Gold lines.

"It's much easier to ride this than it is to drive," said Gale Johnson, 52, a retired security worker who lives downtown and was riding one of the busway's sleek, extra-long buses to a doctor's visit in Van Nuys. "It's like a train on wheels."

The Times has been beating the drums for rail transit in LA for as long as the idea has been around.  But almost a half-century after the case for bus rapid transit was first laid out in great detail, their reporter found a successful example close to home.

Learning via real life experiments is nice but, as the title of Kain's 1988 title suggests, also very expensive.

 

Shout it across the Rio Grande

Every econ 101 textbook goes through the long list of reasons that GDP per capita is a poor proxy for a nation's material well-being.  But happiness researchers in economics have gone a step further because they worry about non-material well being.  Much has been written about all of the framing problems that come up when questionnaires ask respondents to report how happy they are.  But researchers persist in telling us that self-reported happiness is only weakly related to material well being.

But it gets really silly when operational national happiness measures are proposed.  Writing in today's WSJ, Matthew Sinclair has fun with the Happy Planet Index.  "How Cuba Became a 'Happy Country' ... Citizens flee on rafts.  But environmentalists know better."

People vote with their feet -- when they can.  Migrations are powerful signals that indicate a lot about material as well as non-material well-being.  Revealed preferences are always best.

But this only works if people are actually allowed to leave a place.  If they are not allowed to leave Cuba, the statistical people have to meet the challenge of measuring and inferring how great a place it really is.

But look at the map.  Mexico gets a better color (score) than the U.S. 

And the Supreme Court had to rule on Arizona's immigration rules!  These are unnecessary.  People crossing the border into the U.S. are just confused.  They are making a terrible mistake, not having seen the HPI.  Just shout HPI scores from the rooftops and save everyone a lot of bother

     

Back to the future?

It is no secret that many conventional city governments in the U.S. are in trouble.  Here is a report that cites $574 billion in unfunded city and county pensions.  Voters in various places got the message and some recent ballot measures to address the problem by trimming pension benefits won handily.

A more drastic approach would extend privatization and contracting to the max.  The example of Sandy Springs, Ga., is described in today's NY Times.  Here is last year's video coverage by ReasonTV (h/t Yin Xie).

The Times piece cites the workability of the Sandy Springs approach, but also cites some of the possible objections.  These include the threat of a "two Americas" scenario as well as a possible redefinition of what local governments are for.

HOVERING around the debate about privatization is a basic question: What is local government for? For years, one answer, at least implicitly, was “to provide steady jobs with good wages.” But that answer is losing its political tenability, says John D. Donahue of the John F. Kennedy School of Government at Harvard. “A lot of jobs in government are middle-class jobs that in the private sector are not middle-class jobs,” he says. “People aren’t willing to support conditions for public workers that they themselves no longer enjoy.”

In a way, what Sandy Springs and other newly incorporated towns have done harks back to a 19th-century notion of taxation, which was much less about cross-subsidies and much more about fee for service.

"Local government" is an inanimate object.  Better to consider the players. City and county politicians may want to be seen as "job creators", but I do not think that most city taxpayers see themselves as in the job creation business when they pay up.

In fact, the Times story goes on to evoke redistribution from Sandy Springs voters to surrounding Fulton County residents. But that approach has not been working so well.  "Widening divide" concerns have been growing steadily, alongside the steady expansion of redistribution in the U.S.  And that 19th-century notion does not look so bad in light of today's $574 billion of unfunded municipal liabilities.

The redistribution we have had is not all that progressive.  Cronies get rich and others get crumbs.  Much better to have the Sandy Springs folk be free to prosper and innovate.  That might do more for the rest of Fulton County than all of the conventional redistributions that we have gotten to know so well.

The fine details make all the difference

Here is Geoffrey Wests' TED talk on cities.  Here is recent coverage of his group's work on cities in The Economist.   The researchers are mining considerable amounts of city data, seeking regularities and even "laws".  They seemingly come up with incredible amounts of generalizing.  Here is an example:

Between 1990 and 2000 the surfaces of each of the 120 cities he and his team studied grew on average more than twice as fast as their populations. These rates, he says, are unlikely to change. That means that the amount of urban land will double in only 19 years, whereas the urban population will double in 43 years.

Note the "on average".  What was the variance? 

Aside from that, there should be no surprise that metropolitan areas grow outward, denoting declining average urban densities.  Findings like that can still bring on fainting spells in some circles.

But the size/growth story is incomplete.  The reality is much richer and much more interesting.  Cities grow because they can -- when they can.  They compete because most labor and capital are mobile.  How do mobile factors choose where to settle?  Where do they sense they can most benefit from local supply chains -- chains that involve transacting as well as chains that do not, including social ties that help incubate ideas?   This means interacting with many others already there -- which involves a look at location patterns as well as interaction opportunities.  There is a cost side.  Land and accessibility and other costs must be noted and weighed agains the benefit assessment.

Its a cinch that most expected net benefit packages are found in peripheral areas -- as the cited passage corroborates.  The fact of growth and the placement of growth cannot be separated.  I have noted many times in these posts that there is no single "best" density for anything.  Local conditions vary considerably and offer unique packages and solutions.  It is all about the fine details of spatial arrangements, not simply overall city size.

Consider the simplest cases of land use planning.  How do mall developers create site and leasing plans?  Is there one "best solution?"  Not likely.  The profit-maximizing mall developer chooses a desired site plan from a very large combinatorial space.  The favored choices vary a lot; we see very little successful cookie-cutter design.  And these are just the simplest of spatial arrangement problems.

NYNY

I have to be careful about using the word "subsidy" -- as in crony capitalism.  There may be explicit cash transfers or there may be political favors (or both).  In the process of land development and the ever more complex "approvals process", the latter can be signficant.  This is typically the case for "transit oriented development".

But the most interesting U.S. case to study in the TOD field has to be New York city.  And if researchers have time series data for many small local geographic areas, that is as good as it gets.

David King pointed me to his recent paper which addresses all these points.  He is interested in the chicken-and-egg question involving land development and the opening of subway stations.  Here is the abstract.  I learned a lot reading his paper.  The author notes that, "the [NY] subway system was substantially completed in the absence of substantial competition from autombiles" (p. 30).  Planners take note. 

NY then and LA now in transit

On June 6, I cited recent reports that indicate only minor subsidies (today's standards) in the early phases of New York city subway development.  But Patrick Sullivan wrote to indicate that there may have been no subsidies.  He pointed me to this site that which I had not seen.  Look at the January 18, 1900, entry.  The developer had posted a substantial bond.

In the days when developers would also become private operators, this made all the difference.  It would not happen today.  Charles Lave did once propose that consultants bond their ridership and cost forcasts.  That is, of course, unlikely because in most cases no one cares.  Politicians simply want the money to flow.

Nevertheless, nycsubway.org is amazing.  Just the "history" section offers many gems and hours of fun.  I am not enough of a NY history buff to be any more than an appreciative reader and I want to thank Patrick.

Tom Rubin points me to this site for LA's MTA, where ridership data for the agency's bus lines can be found.  LA's new Expo light rail now serves just less than 11,500 boardings per day.  But it cost $932 million just to build.  It is being extended west for another $1.5 billion.  These numbers are pathetic when compared to the performance of many of the agency's bus lines.  Add the fact that local transit planners often cut bus service to pay for rail. 

With rare exception, very few people object, but self-congratulation is widespread.

We are the world

We are all citizens of the world and cosmopolitanism beats nationalism.  People who agree will enjoy this study.  Here is the abstract Antonio Spilimbergo's "Democracy and Foreign Education" (gated; in the March 2009 American Economic Review):

Despite the large amount of private and public resources spent on foreign education, there is no systematic evidence that foreign-educated individuals foster democracy in their home countries. Using a unique panel dataset on foreign students starting in the 1950s, I show that foreign-educated individuals promote democracy in their home country, but only if the foreign education is acquired in democratic countries. The results are robust to several estimation techniques, to different definitions of democracy, and to the inclusion of a variety of control variables, including democracy in trading partners, neighboring countries, level of income, and level and stock of education.

This is very nice.  I have always cherished my international students.  They bring human capital with them and they take human capital back to their home country.  But, apart from the clear market benefits, there are also civil society benefits.  The cited study also shows that whatever the international students may pick up at Moscow's Patrice Lumumba U. (renamed People's Friendship U.), it has a much smaller effect once they return home.

Trust and whoppers

Dan Walters goes after Jerry Brown for equating the importance of a California high-speed train with the Golden Gate Bridge. (More on this from Ken Orski.)  Tyler Cowen cites Americans' declining trust in state and local government. 

Whoppers or mistrust; which comes first? 

Or is it simple a nasty vicious cycle? The less trust, the greater the partisanship, the bigger the whoppers.  And the bigger the whoppers, the less trust extended by anyone but by true-believer partisans.  Once the odds of discourse with anyone beyond the choir are diminished, feeding the faithful with whoppers is all that is left.  This is why it only gets worse.

Add to this the simple idea that trust is very hard to establish, but very easily broken, "years to earn and seconds to break".

Agglomeration and industrial organization: choices involving organizational and spatial shells

Across regions, there are convergence forces (arbitrage) that work against agglomeration forces. The strengths of these opposing forces are hard to sort out. A recent paper ("Clusters, Convergence, and Economic Performance" by Mercedes Delgado, Michael E. Porter, Scott Stern) that made an attempt concludes this way:

These findings suggest a number of policy implications, many of which diverge from the received wisdom among some practitioners. First, effective regional policy should harness complementarities across related economic activity rather than prioritize high-wage or high-tech clusters where there is little pre-existing strength within the region. Hence policy makers should pursue policies that leverage a region‟s cluster strength … Our evidence thus reinforces the view that policy action should focus on building upon pre-existing comparative advantage.

Second, regional economic performance depends crucially on the composition of economic activity rather than the vagaries of political boundaries. The spillovers arising from related economic activity typically span multiple jurisdictions (and even states). Policies aimed at shifting the location of activity within narrow areas will be much less effective than those which operate to harness complementarities across jurisdictions.

What do we know? Ever since Coase, we have known that managers face tough choices in terms of what to do inside vs. outside the firm. There are actually many “organizational shells.” But there are also industrial clusters that agglomerate in cities -- sometimes to include the suburbs, exurbs and even over extended rural areas. There are many “spatial shells.”

Choices are being made with respect to two sets of shells; the many supply chains that form to serve us involve choices over both sets of shells, the organizational and the spatial.

Elinor Ostrom

Elinor Ostrom titled her 2009 Nobel lecture "Beyond Markets and States: Polycentric Governance of Complex Economic Systems" (reprinted in the June 2010 American Economic Review).  She uses Figure 1 of the article to establish how she and Vince Ostrom elaborated and expanded previous understandings (e.g., Samuelson and Buchanan) of the various goods and allocation arrangements that we see in the real world. 

Nothing beats looking at what real people actually do.  We now know of (and at her death are reminded of) the Ostroms' important contributions identifying the various common pool resources that are spontaneously allocated without government interventions but which are, nevertheless, not "market failures."  A million textbooks are not yet with it.

Today's WSJ includes "The Shared Backyard ... Homeowners Exchange A Bit of Privacy for More Garden and Socializing."  Read it. It's amazing how much better we see what is all around us once some smart person has called our attentiont to it.  Elinor Ostrom would have appreciated this news item -- just as we appreciate her all over again whenever we encounter stories like this one. 

Getting one price right

I have not yet read Michael Sandel's What Money Can't Buy, but I enjoyed Paul Solman's interview with the author on the Evening News last night.

Economists who see "market failures" and suggest that policy makers can "get the prices right" are challenged on two fronts -- by the "fairness" argument as well as the public choice criticism that policy makers have many other agendas than efficient allocations, some of them pretty awful.  Nevertheless, we celebrate the few examples of dynamic roadway pricing where we see them -- and keep suggesting that they are harbingers. 

The standard rebuttal to the "fairness" critique is to ask just how "fair" the status quo is.  Relieve highway congestion by building subways partly financed by sales taxes?

The June 9 Economist includes "Visas for entrepreneurs ... Where creators are welcome ... Australia, Canada and even Chile are more open than America."  I know that immigration law and procedures are a hash, but letting entrepreneurs with capital go to the head of the line should be the ultimate no-brainer -- especially for politicians who prattle on about their interest in "creating jobs".

I am persuaded that open borders are best (see Clemens), but if we cannot get there, how about some simple and reasonable immigration rules?

Spatial aggregation

Atlantic Cities includes this "brainiest cities" ranking.  They actually mean metropolitan areas and they refer to Richard Florida's work.  But getting the spatial units right matters.

This time, "density" is not mentioned as the key ingredient, although Florida evokes the importance of population density in much of his work.  I have noted several times at this blog that metropolitan area densities (which almost everyone uses) are a lousy proxy.  Aggregation causes problems, in some cases big problems.

Mr. Demographia refers me to 2000 urbanized area density data for 461 U.S. areas.  Their average density was 2163 people per square mile, with standard deviation of 878 and coefficient of variation of 0.41.

Also for 2000, we can get PUMS area (PUMA) densities for each of the metropolitan areas.  The Los Angeles metro area can be cut up into 111 of them.  Their average 2000 population density was 6857 people per square mile, with standard deviation of of 5869 and coefficient of variation of 0.86.

Here, there is more density variation within than between metropolitan areas. 

Links

How many "green jobs"? If you just know how to keep score, we are drowning in "green jobs".  H/T Carpe Diem.

Being on the side of the angels (and against sweat shops) does nothing to help poor people -- but really works as narcissistic signaling.  H/T Bleeding Heart Libertarians.

The Nordic model.  High time to update one's priors. H/T Reason.

Austerity now or later? Tax reform now or later? Credible commitments ever?  Keith Hennessey nails this one.

The nightly news on Syria usually brings up the latest from the UN.  Keep it?  Close it?  Reform it? H/T The Browser.

ADDED

Me at The Beacon.

Those were the days

Ezra Klein (h/t TMG) cites Tim Lee, who in turn cites Clifton Hood, to the effect that the public sector chipped in about $3.8 billion (in today's dollars) to build the New York Subway.  Those were the days.

Paige Kolesar and I wrote about six newer U.S. subways last year.   Converting the reported capital costs of those systems to today's dollars, Miami (22 stations) cost $4.4 billion, Baltimore (14 stations) cost $6 billion, Atlanta (38 stations) $13.3 billion, Los Angeles (my favorite with 16 stations) $12.4 billion, Washington DC (86 stations) $73.7 billion and San Francisco (43 stations) $73.1 billion.  We showed that dollars per station, per mile, per passenger, per you-name-it make no sense.

But this matters for nothing.  Here is Wendell Cox's report on the latest lopsided transportation plan for Atlanta.  The mode with the fewest riders gets the most funding.  One upon a time, there was an argument that this was the way to change the world.  But that argument is beyond silly today.

Amazingly profound

Paul Heyne was a breath of fresh air.  His introductory textbook, The Economic Way of Thinking, (kept alive by Peter Boettke and David Prychitko after Heyne's death) is probably the best way to enter the field.  His A Student's Guide to Economics is a pocket-sized introduction to his introduction.

Here, Don Boudreaux points us to Heyne's last lecture.  He clarifies much -- for those new to the field as well as those already immersed.

Here is just one gem:  Every standard discussion introduces "the economic problem" as based on the hard fact of scarcity -- and the implied problem of how to figure out what to do with the scarce resources that are available at any moment.  Markets are then shown to be a pretty good way to get the job done.  The more abstract the presentation (or the curves or the math), the less useful.

But Heyne clarifies.  The real problem, he notes, is one of coordination.  Market prices coordinate immense complexity. 

Here is the simplest mental experiment:  Try to think about all of the supply chains that have (somehow) formed to serve any one of us.  We have no hope of ever fathoming these.

But an uncountable number of supply chains form -- and update -- all the time. And that is how markets address the scarcity problem.  Heyne's approach, then, is the one that is much deeper and considerably richer.

A great mind can say a great deal by developing very basic thoughts and insights.

The right stuff

The use of "sustainable" and "sustainability" took off in the 1970s.  Here is the N-gram.  Perhaps as the world becomes more dynamic, there has to be some backlash involving static and parochial perspectives.

The antidote is the amazing David Deutsch, in The Beginning of Infinity, who puts it this way:

... progress is sustainable, indefinitely. But only by people who engage in a particular kind of thinking and behavior -- the problem-solving and problem-creating kind characteristic of the Enlightenment.  And that requires the optimism of a dynamic society (p. 423, italics in the original).

Craig Venter, profiled in today's New York Times Magazine, appears to be one of the people Deutsch describes.

ADDED:  Ane here is one more guy who fits the mold.

Still New York-centric after all these years

When it comes to U.S. cities, there is still this popular New York-centric view: 

But in the space of two short decades, the laws of urban physics have changed: Prosperous urbanites stopped fleeing the city core. Their universe ceased to expand. Gravity asserted itself and has again drawn in an affluent class that is remaking and restoring the inner city.

This is Joseph Abrams reviewing -- and also putting into perspective -- Alan Ehrenhalt's The Great Inversion and the Future of the American City, in the June 2012 Commentary.

The NY Times recently included "A Gap in College Graduates Leaves Some Cities Behind."  They meant metropolitan areas.  Some are doing well and some are not.

But suburban growth still has a significant upper hand. Here are several Census tables that summarize 2010-2011 migration patterns in the U.S.  There were 302 million Americans over the age of one tabulated.  Of these, 267 million did not move but 35 million did (Table 1).  The net gains or losses for "principal cities" (largest cities in each metropolitan area) vs. the suburbs are shown.  Whereas the metropolitan areas as a whole showed a net gain of 115,000 (at the expense of non-metro areas), the suburbs as a whole gained 1.9 million while the principal cities as a whole lost 1.8 million (Table 15).

But what is most interesting is that the principal cities-suburb net balance is parsed by sex, age, race, relationship to householder, education, marital status, nativity, housing tenure, poverty status, income, labor force status, major occupation, major industry (90 categories in all).  The "principal city net migration" column showed minuses for 89 of them; "armed forces" was the only group with a plus in the column.

Yes, Manhattan and some other places bounced back in recent years.  But let's not lose sight of still dominant trend.