Saturday, February 28, 2004
When the six-year cycle of the federal transportation bill's re-authorization coincides with the four-year election cycle, bad things are bound to happen. The bidding war between House and Senate versions of the bill was covered on last evening's Jim Lehrer news. Pious pronouncements about all of the jobs that would be created were even countered by an interviewee who reminded the audience that higher gas taxes divert spending and destroy at least as many jobs as the bill's advocates claim.Over 200 years ago, Frederic Bastiat ridiculed the porkmeisters of his day by proposing a "negative railroad." When they proposed adding stops to the proposed Paris-Madrid train to "create jobs", he suggested many more stops to augment the effect. In fact, make it nothing but stops; the train would never get anywhere but think of all the jobs.
Ready to deflect piercing jokes about how politicians can create jobs ("outlaw all farm machinery", "break more car windows", etc.) are all sorts of specious stories and stats provided by some of the biggest lobbies in Washington. A way to really "get the money out of politics" would be to get politics out of transportation.
Perhaps another relevant dynamic involves selective memory and what people remember from their economics classes way back when. Wasn't there talk about public spending being a good thing that "brought us out of the depression?" Many people who would smile at Bastiat's joke can always reach for this chestnut.
All economies have inevitable ups and downs. Investors are just human and predict the future imperfectly. Robert Higgs has demonstrated that the depression of the 1930s was lengthened and deepened by New Deal policies.
Friday, February 27, 2004
Californians will soon go to the polls to consider a number of State budget-balancing measures that could only have been written by Sacramento politicians. Real budget reform proposals have been around for some time but are not an option on election day. RPPI's Citizen's Budget is just one example of opportunities avoided. Asset sales and privatization are also off the table. Yet, even the ballot propositions do not satisfy those who hanker for "modest" tax increases on "the rich" to would avoid "draconian" cuts. That, of course, evokes the class-warfare rhetoric on which many politicians thrive.
The newest Statistical Abstract of the U.S., Table 19, shows State Resident Population -- Components of Change: 2000-2003. California is only topped by New York in terms of internal migration losses (made up by international immigration here but not in New York); Texas experienced gains from both sources.
Tax increases and other policy failures in a federal system run the risk that capital and labor relocate. Listening to the Democratic candidates' views on outsourcing, one gets the impression that the relocation option would also be dealt with were they elected. They would have about as much success curbing out-migrations as they have had curbing illegal in-migrations.
It is discussions of this caliber that leave us with the budget proposals that we have. Vote "no" and hope that the next round of proposals will be better?
Thursday, February 26, 2004
The U.S. Census Bureau has just released city-level survey results for 2002 commute times. Metros and cities are large areas and it is hard to generalize. Ask people which U.S. city has the worst commute and most would probably answer L.A. Yet, L.A. is at the bottom of the worst top-ten list, placing at #9 in 2002 (it placed #5 in the same survey in 2001 and #10 in 2000). What was consistent over the last three surveys was #1, New York city. In fact, NYC was the outlier in all three years -- 38.4 minutes one-way vs 28.5 minutes in L.A. vs the median 23.3 minutes (Las Vegas and St Louis), in the latest survey.NYC has too much transit use and downtowns that are too densely packed -- if we care about time spent commuting.
It has long been a mantra that the "solution" to traffic congestion and long commutes is to "get people out of their cars" and promote higher densities. This prescription is even called "Smart Growth" by many smart people. The real problem is that Smart Growth garners huge subsidies across the country. Spending other people's money on good causes is inevitably politicized and survives with the skimpiest of covers.
Wednesday, February 25, 2004
The economic and social mobility story is perhaps America's most significant one. Thomas Sowell, again, is clearest about what the data reveal about it. Yet, election year rhetoric nourishes the much bleaker class-warfare story. One of my favorite catch-phrases about modern times is "the democratization of luxury." The political candidates and most of the voters must know that most of us have changed our consumption to what used to be considered high-end or luxury goods. The "family car" is no longer a standard reference because it is no longer relevant for most people. There are more cars per household in America than drivers per household (and also children per household). Likewise, a second home was once associated with great wealth but is becoming a standard in the upper reaches of the middle class. Because of the power of the trend, the second-home market may be the most important one for real estate investors and developers to be thinking about. Can it be that people's every day experiences and the rhetoric that they abide in politics do not jibe? Is there a political cognitive dissonance? Does the "rational ignorance" insight from public choice theory say as much about the level of interest and due diligence by voters (and non-voters) than simply their odds of bothering to vote?
Tuesday, February 24, 2004
Thomas Sowell notes, in this morning's WSJ, that the public discourse on topics that touch on Econ 1 (trade, tax cuts, price controls, etc.) is abysmal. Citing the incentive structures facing academic economists, he concludes that they are not doing enough to get the word out. There is certainly some truth in this. As one who has been teaching economic principles (Economic Thinking, using Paul Heyne's much better label) for many years, I want to add that there are other problems. Among the cultural baggage that many people carry around is a deep faith that the world is basically zero-sum -- and a suspicion of (or discomfort with) positive-sum outcomes. This presumption is endorsed in many other messages that young people get -- in and outside the classroom. Another aspect is the fact that not all economists actually agree with Econ 1. Many have considerable intellectual capital invested in market-failure theory and theorems. There are many more of these than there are policy-failure theorems. Why is it so? There has been some discussion on the public choice listserv that public choice theory does not yet have a canonical model. Perhaps. Yet, good ideas do eventually drive out the bad ideas. It often takes a long time.
Monday, February 23, 2004
The latest Cato Journal includes several papers that continue the exploration of the statistical links between economic freedom and prosperity. Some are careful to distinguish between economic and political freedom and find that the former is the most potent. These results augment what FreeTheWorld.com has been showcasing for some years. As the international data and the statistical methods improve, the evidence accumulates. This literature is perhaps Adam Smith's most interesting legacy -- moreso than welfare theorems from general equilibrium economics.Sunday throw-away Parade magazine yesterday updated their Ten-Worst-Dictators list. Curiosity got me to open it. Yes, the ten-worst differs from last year's because Saddam is off, as is Charles Taylor; Qaddafi no longer makes the cut. Interestingly no mention of trampled property rights. (Mugabe's land grab is simple referred to as playing the race card.) Yes, no elections, torture, lack of due process are horrid but property rights are a key human right. The international agencies that the Parade reporter sourced apparently do not think so.
Sunday, February 22, 2004
Economist and CEA head Greg Mankiw was recently batted about for noting the obvious, that the international outsourcing of jobs is a good thing. He had to quickly recant, claiming that what he really meant was that trade "creates jobs".In an election year, employment and unemployment are perhaps the most fathomable of economic indicators. Yet, for about as long as there have been national income statistics, there have been discussions about their limits. Lawrence W. Reed recently offered a nice discussion of some of the problems.
Today's NY Times (p. BU 6) includes a summary of reasons why the two BLS surveys (of households and of businesses) differ. There are many reasons, including the hard-to-estimate growth of off-the-books work.
An interesting elaboration is by Virginia Postrel in today's NY Times Magazine ("Sure, the country is losing manufacturing jobs, but who's counting all the ones it's gaining among manicurists and spa workers and graphic designers?").
It is likely that even Alan Grenspan and the Fed's Board of Governors and their large and able staff only have a hazy idea of economic conditions. How, then, can they manage the money supply and economc growth? They probably cannot. The real question is whether their actions do more to dampen than to deepen economic ups and downs.
Interestingly, Milton Friedman (of all people!) recently wrote in a WSJ op-ed that the Fed is now doing a pretty good job.
