Saturday, July 03, 2004
Government Money
Add money to a barter economy and transactions costs fall dramatically. Yet, money is inevitably a commodity and its own price becomes the subject of bets. But the price of money affects all other prices so swings in monetized relative prices become much more complex.Relative prices are supposed to change flexibly. "Price levels" are not supposed to change. But how can we tell which is which?
CPI reports, for example, feebly differentiate between measured inflation and "core inflation" once volatile food an energy prices are subtracted.
In truth, central bankers simply do not know what is going on. The Economist reports on a paper by economist Stephen King that points out that there was no threat of a U.S. deflation last year. Rather, there was, "a reduction in overall prices caused by rapid technological change, improvements in terms of trade and other factors."
Central bankers, like all central planners, have two problems: politicization and limited information. Alan Greenspan and Paul Volker are rightly given credit for avoiding the politicization that their predecessors had sunk to, but have they "solved" their information problems? Not if Greenspan and the FRB fought off a non-existent deflation last year -- and are not likely to read the tea leaves any better soon.
Privatize social security, the schools, the mails, water delivery, the highways, the radio waves --- and money. The sectors beset with the "crises" that we hear so much about.
Friday, July 02, 2004
Preferences or Policies?
Critics of modern American cities and Americans' overwhelming choice of suburban lifestyles like to blame peculiar U.S. policies (interstate highways, favorable tax treatment of home ownership, large-lot zoning, etc.) because they cannot concede that they are challenging the free choices of free people. This line of attack is buttressed by breathless reports from those coming back from the Grand Tour of European capitals with the sure knowledge they have witnessed superior European lifestyles -- and, by inference, policies that we should mimic.
A good test of the assertion is to study urbanization abroad, analyzing real data rather than gossip.
A small set of research papers along these lines have been accumulating over the years. Most suggest that preferences dominate policies.
Now, Wendell Cox shows us the nature of urbanization in all of the world's "high-income" regions (U.S., Canada, Western Europe, Japan, Australia and New Zealand, Hong Kong and Israel). Growth for the areas' 101 largest metro areas shows that 96% was in the suburbs. Moreover, variation across the regions was minor, ranging from 92% of urban growth in the suburbs in Japan to 114.2% in the suburbs in Western Europe (where core city growth was negative).
Celebrated policy differences apparently matter very little. Preferences overcome them and are remarkably similar everywhere.
Thursday, July 01, 2004
Flexible Land Markets
Between 1990 and 2001, highway miles in the U.S. grew by just 2% (Table 1076 of the 2003 Statistical Abstract). In that time, U.S. population grew by 14%, passenger-miles via privately operated vehicles grew 33% and ton-miles via trucks grew 43%.
Give this mismatch of capacity and demand growth, traffic worsened. Over the 11-year span, worktrip travel times (privately operated vehicles) went up by 12% if you live in the suburbs and 20% if you lived in central cities (NPTS/NHTS data). Yet, suburban population grew by 55% while the central cities as a group lost population in the interval.
And the highways are mismanaged; access is mostly free and rationing is by crowding.
The glass is apparently half-full. Some have given credit to land market flexibility ("sprawl") that has allowed job sites and workers to co-locate in the suburbs.
Yet, as the sage said: "There's always something." As mentioned in yesterday's post, the "Smart Growth" game is now to apply more top-down planning so that flexibility can be replaced with management.
It's back to the Progressive Era in some quarters.
Wednesday, June 30, 2004
Growth, Sprawl and Planning
Year after year, the Census reports that the fastest growing cities in America are the ones that many might describe as the most "sprawling". Last year, Gilbert, Arizona, came in first. Do they sprawl because they grow or do they grow because they sprawl? Whereas elite opinion equates growth and sprawl with the lack of adequate top-down controls (revealing a touching naivete about the possibilities of top-down planning), it is probably safe to say that people are moving to these places because they like them. So what is the problem? Are these places unduly subsidized? No. Most public subsidies, in fact, go to projects designed to prop up the older and declining cities and neighborhoods.
Another line of attack is that new and low-density settlements are expensive in terms of their infrastructure costs. Yet, whenever people bother to take a serious look, they find the opposite -- as recently reported by Cox and Utt.
Besides, are any of us simply cost-minimizers?
As if on schedule, this morning's LA Times reports: "Higher Density Projects Urged ... Regional Planners say such a strategy is needed to deal with growth issues ... To help Southern California cope with growth in decades to come, regional planners Tuesday unveiled a strategy that calls for more high-density development in urban centers and near transportation corridors ..."
Tuesday, June 29, 2004
Old Time Religion
Julian Simon won his famous bet with Paul Ehrlich re resource depletion almost 10 years ago. The bet and the win received media coverage but that was that. What looked like a neat refutation to economists (long-term commodity prices keep falling, corroborating the idea that human inventiveness staves off increasing resource scarcity) did not make much of an impact in the rest of the world. In a Letter to the Editor of last Sunday's NY Times Book Review, Don Boudreaux reminded the Review's readers (and editors) that a reviewer of Ehrlich's latest book had completely missed this episode as well as any of its implications.This is common input selectivity and reminds us once again that we are talking about a modern secular religion rather than economics or biology or meteorology or any of the other relevant sciences.
The piece by Clifford Orwin in the Spring 2004 edition of The Public Interest makes a related and relevant point. We hear all the time that "that old-time religion" is still strong in the U.S. Not really, says Orwin, in a very thoughtful discussion of organized religion in modern America.
Sunday, June 27, 2004
Envy, Politics, Economics and GPAs
Richard A. Epstein, writing on "It's Win-Win situation, Even if Some Win More Than Others", concludes that: "The threat of skepticism to human progress must be rejected. In its place I would adopt what might be termed a 'non-envy principle': If there are two states of the world, such that everyone in state A is better (or at least as well) off as everyone in state B, then choose world A, even if the resulting inequalities leave some people envious. Don't grouse because Bill Gates is richer than the average Microsoft employee -- instead celebrate the productive processes that continue to bring substantial benefits to all of us across the board."Point taken. And it is probably the case that more Americans aspire than envy. If true, this is a remarkable achievement -- as well as an engine of further economic progress as well as an antidote to much poisonous politics.
People will always grouse -- and will always rediscover the truth that "material wealth does not bring happiness". Yet, talk is cheap and it is their actions that matter.
It is the American culture of striving that David Brooks celebrates in On Paradise Road. Many were weaned on the politics of envy in their schools but quickly disregard it on graduation. Brooks explains this by noting that undergrads have a bemused view of the professoriate's left-leaning, accepting it much like people had always associated absent-mindedness with the role.
He also notes that undergrads have discovered the benefits of their mentors' liberal mind-set: it means that -- in certain discussions, exams, papers -- anything goes and poor grades are less of a threat. Grade inflation.
