Saturday, April 24, 2004
Internet Shopping
Traditional shopping at stores is down and internet shopping is up, just as we would expect despite all of the tut-tutting by dot.com "bubble" schadenfreude enthusiasts. It is only the beginning because people comfortable with electronics are replacing older people with little or no experience with them -- and this is happening worldwide. So, keep buying those internet stocks. Even better, figure out which the next eBay will be.Virginia Postrel's NY Times discussion of recent MIT research makes the point that it is the huge increase in choice, not just more price competition, that is the real draw. Just looking at some of Amazon's sales, the researchers found that shoppers' consumer surplus (the difference between the maximum that people would have paid rather than do without and what they actually paid) was augmented by variety as well as lower prices. But, it was mostly variety. Postrel noted that Amazon's tag line is "world's biggest bookstore", not world's lowest prices.
No one is predicting the end of traditional shopping. Traditional bookstores are still a good place to browse, have coffee, and feel civilized and social. Many bookstores have wisely added a coffee bar and will evolve in other ways to stay in the game.
It is a near certainty that almost everyone on the planet gets it and wants to live in a market economy. Many are not given the option because they are oppressed by kleptocrats and worse. Others are blinded by ideologies (and hatreds) that wrongly stress that it's a zero-sum world.
Friday, April 23, 2004
The Price of Peace
The Economist alludes again to the Copenhagen Consensus project, the joint enterprise between it and Denmark's Environmental Assessment Institute. The effort appears to be an uninhibited application of cost-benefit analysis to the world's biggest problems. Among these are the horrific civil wars in some of the world's poorest places, averaging losses (all things considered, including the dollar value of lives lost) of $128 billion per year.What to do? By a wide margin, the study's authors conclude, the most efficient policy is "military intervention by a foreign power."
Economic analysis, by definition, leaves out many considerations. And in the year of Iraq and elections, the infeasibility of the prescribed policy may be underscored.
Yet, in hindsight, reasonable people seem to agree that the Rwanda genocide was preventable and should have been prevented. In a better world, this discussion would take place first, way ahead of the ones that otherwise preoccupy most of us.
Thursday, April 22, 2004
Cost-Effective Rail Transit?
Large-rail U.S. cities, notably New York City, have more transit riders than the others. People using transit also tend to own fewer autos and have lower out-of-pocket commuting costs. This is a large part of the argument made in Todd Littman's Comprehensive Evaluation of Rail Transit Benefits.Yet, most people around the world overwhelmingly prefer personal transportation. This is why autos are a big hit everywhere. This is also why transit's share of U.S. commuting in the U.S. fell from 12% in 1960 to less than 5% in 2000 -- in spite of hundreds of billions of dollars of public subsidies over these same years. (Wendell Cox has assembled the relevant evidence and made it easily accessible.)
People (unlike some researchers) understand the trade-offs. They gladly spend more cash in return for the time savings -- and all of the satisfactions of personal transport.
This is all perfectly obvious. It is when "rail investments" are presented as cost-effective that the litany bears repeating.
By all means, tax auto use for any and all external costs. This is now easy to implement. Yet, unimaginative politicians in the U.S. cannot make the leap and expect (hope) that more rail transit will "get people out of their cars."
Studies like Littman's are available to rationalize this continuing public policy failure.
Wednesday, April 21, 2004
"The Great Dispersal"
David Brooks may have given the current suburbanization-exurbanization the label that sticks. Many of us have been documenting suburbanization-exurbanization for some years. It is the continuation, indeed acceleration, of longstanding and entirely plausible economic, demographic and social trends.Ken Orski notes, "Nor is the exurban dispersal likely to lose strength anytime soon. The biggest factor influencing future population movements is the projected addition of some 64 million people by 2020. It is hard to conceive that this population bulge could be accommodated in existing built-up areas where neighborhood opposition to increased density through infill developments is already fierce. Future historians are likely to view the 'smart growth' movement as yet another example of a planning ideology that has foundered for lack of a realistic understanding of the power of demographic pressure, market forces and consumer preferences."
When ideologies are confronted with stark facts (in this case a ton of them), the ideologues work overtime to protect their human capital. Watch for "smart growth" to be taught and advocated for many more years.
Tuesday, April 20, 2004
The Real Monopoly
Economics textbooks, even many of the newer ones, still have the circa 1930s chapter about monopolies and anti-trust. Very few of them include concerns about politicizing the size-distribution of firms and/or losing the one that markets generate. Even fewer go so far as to suggest that the real source of monopoly power is the law -- and politics. In other chapters, these same texts extol regulation as a source of consumer safety. Market critics add the occasional complaint about the lack of choice. (Too few low-mileage SUVs; too little low-income housing with an ocean view, etc.)
In Entrepreneurship Gets Slaughtered, Jonathan Turley offers an account that belongs in the textbooks:
"Creekstone Farms is a little slaughterhouse in Kansas with an idea that would have had Adam Smith's mouth watering. Faced with consumers who remain skittish over mad cow disease -- especially in Japan -- Creekstone decided that all its beef would be tested for mad cow, a radical departure from the random testing done by other companies. It was a case study in free-market meatpacking entrepreneurship. That is until the Bush Administration's Department of Agriculture blocked the enterprise at the behest of Creekstone's competitors ... Creekstone invested $500,000 to build the first mad cow testing lab in a U.S. slaughterhouse and hired chemists and biologists to staff the operation. The only thing needed was testing kits. That's where the company ran into trouble. By law, the Department of Agriculture controls sale of the kits, and refused to sell Creekstone enough to test all its cows. The USDA said that allowing even a small meatpacking company like Creekstone to test every cow it slaughtered would undermine the agency's official position that random testing was scientifically adequate to assure safety. ... The rest of the meatpacking industry was adamantly opposed to such testing, which is expensive, and had no desire to compete with Creekstone's fully certified beef."
Makes perfect sense -- in Washington DC.
Read on and it gets worse. This is not the Upton Sinclair meatpacking morality tale that has made it into American folklore.
Monday, April 19, 2004
Second Homes
More Americans than ever are buying or considering buying second homes. Increasing wealth and an aging population will do that. Recent estimates put the number of second homes in the U.S. at 7 million -- over 5 percent of the U.S. housing stock. Precise definitions do not yet exist; some people like the label "vacation homes" and it is unclear what occupancy characteristics define a second home. Investors may want to consider the most likely locations of the next wave of second home development. The mountain states are a good bet, providing open spaces and recreational opportunities. Access to remote places will also improve as the airline industry continues to grow specialized niche carriers and services. Expanded broadband access will also make a difference.
Two or more cars per household in the U.S. were a luxury half a century ago and are common now. Two homes per household as a household staple is not far off.
Sunday, April 18, 2004
The Nanny State(s)
Thinking about relocating to another state? The internet is your friend. Go to www.acinet.org to see what job prospects are like. There is even a link to help arrivals get licensed in order to practice in various professions.It is possible to search by state or by occupation. I only looked at California's long list which includes barbers, manicurists, matchmakers -- and matchmakers' assistants. Each state of the union showcases its own peculiar nuttiness.
Licensing is often defended as a way for consumers to cut search costs. Or, elites like to remind us, most people are not equipped to make good choices.
These arguments are trumped by the actual lists of occupations with barriers. There is a demand for licensing but it comes from those eager to limit the competition -- and their political enablers.
