Matt Yglesias

Endgame

Do it well:

— Gen Y likes walkable urbanism, but as I never tire of pointing out it’s generally illegal to build it.

— Senator Mike Lee thinks child labor laws are unconstitutional.

— “Structural” unemployment is only a small share of the total.

— Monetary morality.

— Is China already number one? (I think there are some conceptual problems with using PPP to compare aggregate output).

M.I.A., “Bad Girls”.

Tunisia

I haven’t said anything about Tunisia because:

(a) what do I know about Tunisia? and
(b) everyone knows dictatorships are only bad when they’re also geopolitical adversaries of the United States.

But Tyler Cowen observes that as far as dictatorships go, Zine el-Abidine Ben Ali had one of the better ones:

I’ve never been to Tunisia, but from readings I’ve found the country especially difficult to understand. They’ve had a corrupt autocracy for a long time, but some areas of policy they get (inexplicably?) right. And usually they are by far the least corrupt country in the Maghreb. Dani Rodrik called the place an unsung development miracle. Maybe that was exaggerating but for their neighborhood they still beat a lot of the averages and they’ve had a lot of upward gradients. They’ve also made good progress on education.

I see this as a reminder that dictatorship is basically incentive-compatible. You’d much rather be a member of Singapore’s governing elite than of North Korea’s. That’s not to say authoritarianism is good, but simply that even authoritarians ought to be interested in improving public policy. The more growth your country experiences, the bigger the pie you have to skim off.

What’s the Vitriol About?

Paul Krugman says there’s no room for middle ground in American politics:

One side of American politics considers the modern welfare state — a private-enterprise economy, but one in which society’s winners are taxed to pay for a social safety net — morally superior to the capitalism red in tooth and claw we had before the New Deal. It’s only right, this side believes, for the affluent to help the less fortunate.

The other side believes that people have a right to keep what they earn, and that taxing them to support others, no matter how needy, amounts to theft. That’s what lies behind the modern right’s fondness for violent rhetoric: many activists on the right really do see taxes and regulation as tyrannical impositions on their liberty.

There’s no middle ground between these views. One side saw health reform, with its subsidized extension of coverage to the uninsured, as fulfilling a moral imperative: wealthy nations, it believed, have an obligation to provide all their citizens with essential care. The other side saw the same reform as a moral outrage, an assault on the right of Americans to spend their money as they choose.

Jon Chait agrees and says this kind of right-wing Randianism is “the question that is driving most of the contemporary divide.”

I sympathize with this argument, but as I said yesterday the strange thing is that so much of this furious opposition to activist government appears to be make-believe. The American Enterprise Institute did a poll of self-identified conservatives and found that “only 3 percent of respondents favored reforming Social Security and Medicare.” The 2010 elections put a lot of new conservative governors in office, and I’m guessing that exactly zero of them will abolish mandatory minimum parking requirements in their states. Nor do I expect to see Rep Frank Lewis slash farm subsidies.

It’s a bit puzzling. The gap is really not just between conservatives and non-conservatives, but between conservatives’ self-image and the reality of their program. Paul Ryan, for example, can’t quite seem to decide if he wants to slow the growth of Medicare while maintaining a credible safety net for elderly Americans (in which case his “roadmap” proposal is the starting point of a discussion) or if he’s an Ayn Rand devotée who’s trying to liberate America from enslavement at the hands of the welfare state. Indeed, he doesn’t really even seem to see that these are different ideas!

The Stopped Clock

Reading over the just-released full 2005 FOMC transcripts I note that Kansas City Fed President Thomas Hoenig consistently seemed to feel that his colleagues were underestimating inflation risks.

I wonder if it ever bothers the longest-serving Fed President that this is what he always says and that he’s never been right. If I kept making the same prediction, year after year, for two decades and was invariably wrong I’d start to wonder. Doesn’t this bother him? Doesn’t it bother the Kansas City Fed’s Board?

Public Services For the 21st Century

Lydia DePillis has an excellent profile of DC Chief Librarian Ginnie Cooper who’s led the drive to refurbish the physical plant of DC’s libraries and turn them into appealing public spaces.

This does make me think of some broader issues. Libraries are, along with the Postal Service, an example of a kind of public service that I think is a bit weirdly focused on 18th century technological conditions. The big idea of a library is that there’s a lot of deadweight loss involved in exclusive private ownership of bigs. After all, at any given time the vast majority of privately owned books are just sitting around on bookshelves. By establishing book-sharing systems, it’s possible to achieve massive efficiency gains. This can be done by private associations (to wit: universities) but it can also be usefully performed at the municipal level.

We’re moving into a world, however, where there’s some much juicier low-hanging fruit in the realm of book-related deadweight loss. The DC Public Library system is, wisely, getting in on the e-book game. But e-books that are under copyright come with tons of restrictions. Public domain e-books can, by contrast, be distributed essentially for free to as many people as want to read them. As of January 14, 2011 devices capable of reading e-books are basically a niche product for prosperous people but that’s obviously not going to be the case forever. We’re on the verge of a world where every citizen can get nearly instant access to essentially every public domain book for free.

That means that funds—whether they’re funds from the government or from charitable sources of library funding (again, think universities)—expended on acquiring the rights to works and releasing them to the public domain could be associated with huge welfare gains. As an even cheaper alternative, we could return to America’s traditional practice of time-limited copyrights that ensured that the passing of each year entails a new year’s worth of works entering the public domain. Relatively few people understand that in recent years Congress has changed its practice and begun routine retroactively copyright term extensions that guarantee that no new works will become free to the public. If Chris Christie decided to save money by removing a couple of decades worth of works from New Jersey’s libraries, I bet people would get pissed about that.

Changing the Tone

By request from Joseph Benaiah Cox:

As someone who frequently points out that Jonah Goldberg is a moron unsuited for any work in the public, let along public intellectual debate, how do you feel about calls to tone down the rhetoric? While obviously yours is not violent rhetoric, it probably doesn’t make anyone feel too charitable. I enjoy your candor, but as someone who has a blog award for bravery named after him I wonder if you could chew on your own role in the public discourse. Do you regret things you have said? Do you think that you contribute to the devil shift?

I have definitely said some things over the years which I regret. But I draw a distinction here. I don’t think people should pretend to like people they dislike or avoid saying what they mean. But I do think people should be careful to avoid a certain kind of tendentious rhetoric. Some of the participants in our political debate are quite stupid, some are corrupt, some are dishonest, and some combine multiple unattractive qualities.

What should be avoided is the tendency to dramatically overstate the ideological stakes in our political debates. The choice between Democratic candidates and Republicans ones is important and has important consequences. But in the grand scheme of things, you’re seeing what’s basically a friendly debate between two different varieties of the liberal tradition. I think efforts to elide the difference between the religiously inflected populist nationalism of George W Bush and the religiously inflected populist nationalism of Mullah Omar are really absurd, as are the efforts by Glenn Beck to elide the difference between the progressive income tax and Joseph Stalin. This stuff is mostly unserious, but I also think it’s potentially dangerous. If you really thought prominent American politicians were plotting to fundamentally subvert the American constitutional order tand supplant it with a totalitarian dictatorship, you’d be prepared to countenance some pretty extreme countermeasures.

The problem here isn’t really about “civility” or being nice, it’s about accuracy and not treating your audience like you respect them. Beck thinks of his audience as marks, which is just plain wrong, and some day I’m afraid the con may lead someone to do something equal in craziness to the yarn Beck is spinning.

Recent Italian Economic History

I find myself periodically blown away by new representations of Italian macroeconomic performance:

They had two extra recessions! Now this in part reflects the demographic situation which points toward population shrinkage in the near future. But Italy has an extremely high debt:GDP ratio and the debt:GDP ratio doesn’t care about evaluating your data in per working age citizen terms. The country’s not that high on the list for a short-term sovereign debt crisis, but I don’t really understand what the medium-term resolution here is supposed to be.

Renminbi Denominated Hedge Funds

(my photo available under cc license)

Sam Jones reports for the FT:

Pharo Management is becoming the first hedge fund manager to offer shares in its investment vehicles denominated in renminbi.

The move for its flagship fund underscored the extent to which the future of the US dollar and the rising power of the Chinese currency are becoming concerns for the markets’ most sophisticated investors.

To give this an alternative interpretation, rapid economic growth in China is creating the largest pool of suckers the world has ever seen. Real world individuals exhibit bounded rationality, and lots of Chinese people who may have been extremely smart at getting rich in China’s industrial revolution may be quite foolish about their decisionmaking regarding complicated western financial products. American rich people are much better-positioned than Chinese rich people to avoid getting ripped off, and yet a large number of people were taken in by Bernie Madoff’s rather crude fraud. China is a treasure trove of potential marks and Pharo is getting in on the game.

Don’t Look To The White House For Tax Reform

Lori Montgomery observes that Barack Obama’s promise not to raise taxes on anyone in the bottom 98 percent of the income distribution means you can’t do efficiency increasing tax reform:

President Obama’s refusal to raise taxes for the vast majority of Americans will prevent him from pursuing a broad overhaul of the tax code and is making it difficult for him to achieve his goals for reducing the budget deficit, according to administration and congressional sources.

I’ve noted this before, but I think it’s a real conceptual problem with this overall approach to tax politics. This is because the pledge prevents even reforms that make the tax code more progressive. In general, if you eliminate a tax credit and offset the revenue gain with a higher personal exemption, that will make most middle class households better off financially while also making the tax code more growth-friendly. That’s good policy. But it’s still the case that some middle class households would be better off with the old code.

That said, I don’t think the specifics of the pledge are a huge deal in this case. That’s because thinking of tax reform as a White House initiative is a mistake. If the President goes and leads the charge for tax reform, what happens is that tax reform passing becomes “a victory for the White House” and we start getting stories about “President Obama’s goal of overhauling the tax code.” And a proposal like that will be dead on arrival. Fundamental tax reform has a chance if and only if there’s a bipartisan group of hardworking members of the House and Senate who sincerely want to reach consensus on a tax reform proposal. The role of the White House in a scenario like this is to be quietly encouraging, while making sure it doesn’t become the tax that Republican who works on tax reform is immediately branded a traitor.

In general, people are eager to overrate the merits of intensive presidential involvement in difficult congressional fights.

Brooklyn Bucks

(cc photo by j_barry)

Here’s a random paragraph from Paul Krugman’s opus on the Euro:

I think of this as the Iceland-Brooklyn issue. Iceland, with only 320,000 people, has its own currency — and that fact has given it valuable room for maneuver. So why isn’t Brooklyn, with roughly eight times Iceland’s population, an even better candidate for an independent currency? The answer is that Brooklyn, located as it is in the middle of metro New York rather than in the middle of the Atlantic, has an economy deeply enmeshed with those of neighboring boroughs. And Brooklyn residents would pay a large price if they had to change currencies every time they did business in Manhattan or Queens.

I guess I wonder how inconvenient this would really be in 2010 as opposed to 1970. Individuals wouldn’t, after all, really need to “change currencies” every time they went to Manhattan. You could buy things with your credit or debit card, and if you only had Brooklyn Bucks in your pocket, American dollars are only an ATM visit away. I think the real issue here isn’t so much that it would be too inconvenient as that it wouldn’t be inconvenient enough—getting US dollars and dollar-denominated financial assets would be so simple that US dollars would circulate widely in Brooklyn and Brooklyn Bucks would wind up being marginalized.

That’s a long-winded way of saying that I think modern information technology has tended to erode the practical benefits of large currency areas and that the more “cashless” we get the more this will be the case.

Christians at War

Jeh Johnson is going to be getting some roundhouse condemnations for this:

Jeh C. Johnson, the Defense Department’s general counsel, posed that question at today’s Pentagon commemoration of King’s legacy.

In the final year of his life, King became an outspoken opponent of the Vietnam War, Johnson told a packed auditorium. However, he added, today’s wars are not out of line with the iconic Nobel Peace Prize winner’s teachings.

“I believe that if Dr. King were alive today, he would recognize that we live in a complicated world, and that our nation’s military should not and cannot lay down its arms and leave the American people vulnerable to terrorist attack,” he said.

See Adam Serwer for the refutation in detail.

What I’ll observe is that this is a mere sub-set of the “Who Would Jesus Bomb?” problem in American public life. Martin Luther King was a Christian and a pacifist, and it certainly seems to me that any straightforward reading of the Gospel would support King’s views on these matters. But though Christians are common in the United States, pacifists are exceedingly rare. What’s more, in the US at least belief in the divinity of Jesus Christ is actually highly correlated with a tendency to embrace violent nationalism as an approach to the world. Consequently, people inclined to agree with the upshot of peace-loving Christian universalism of an MLK are relatively unlikely to embrace the Christian ethics that underly it, and vice versa.

Land vs Housing vs Real Estate

An offhand Scott Sumner remark says “here’s a bad DeLong post, where he makes the common mistake of assuming a bubble prediction was correct, that was in fact wrong.” DeLong is quoting a 2006 Paper Economy post that, in turn, cites a 2002 Wall Street Journal interview with Charles Kindleberger:

For weeks, Mr. Kindleberger has been cutting out newspaper clippings that hint at a bubble in the housing market, most notably on the West Coast. Nationwide, median home prices are up about 7% from a year ago, even though the stock market has tanked and the economy has floundered. Over the long term, economists agree, housing prices can’t continue to outpace growth in household incomes. Mr. Kindleberger says he isn’t certain there is a housing bubble yet, “but I suspect it is.”

The trick with spotting real-estate bubbles, he says, is that they don’t always spread. In 1925, for instance, real-estate prices in Florida soared and crashed, but that didn’t spread to the rest of the country. Yet he notes that something is distinctly different about the nation’s housing market today, when compared with 1925.

Sumner’s point, I take it, is that in most markets if you bought in 2002 you’re still in fine shape notwithstanding the recent crash.

But here’s a different point. When you buy a house, you’re typically buying two different things. On the one hand, you’re buying some land. On the other hand, you’re buying a physical structure that’s located on the land. (If you’re like me and own a condo, it’s more complicated, but condo ownership is rare). The house plus the land is “real estate,” although the house/land combo is often referred to on its own as “housing.” Land and houses are, however, different things. And it might both clarify people’s thinking and help retail real estate purchasers make better decisions to separate the two. Something really unusual (it might come to be regarded as an architectural masterpiece) would need to happen for the price of a house to increase over the long-term, whereas the value of a piece of land could go up or down for all kinds of reasons.

Endgame

If you don’t really care:

— Ah, counterinsurgency; it’s not a destroyed village it’s “A Time to Build”.

— Michael Chabon blogs and it’s good.

— I think the message here is that Estonia is screwed.

— Supreme Court Justices try to think like criminals.

— Every once in a while I like to link to an insightful Steve Sailer post just to stir the pot and make people mad.

Kanye West featuring an awful lot of folks, “So Appalled”.

The Pace of Change

Reacting to a story about the friendship between Debbie Wasserman-Schultz, Gabrielle Giffords, and Kirsten Gillibrand, Shani Hilton observes:

It’s good that the women who are there have been able to support one another, but this is a reminder that women haven’t made many inroads in Congress — or the congressional leadership — in nearly a decade. The 2010 election saw the first drop in women in Congress since 1979, from 93 to 90. It was also the first year since 1979 that women did not increase their ranks. There are currently 72 women serving as representatives: that’s just over 16 percent of the 435 members. In the Senate, women fare a bit better, where 18 serve. The numbers have increased at a trickle, as Rutger’s Debbie Walsh told CNN: “We tend to go up a few every cycle, three or four, maybe five seats, but women don’t seem to be making any serious strides in terms of numbers.”

I see the tactical and strategic case for emphasizing the negative—the pace of positive social change should always be higher—but that actually strikes me as a pretty remarkable record of steady progress. What’s more, within the past ten years we also saw the first woman House Minority Leader and later speaker, we saw women head the DSCC and NRSC for the first time, etc.

The Corporate Bureaucracy

Microsoft is a highly profitable firm. And it shows all signs of being able to continue to obtain large profits selling Windows and Office. By contrast, as Karl Smith observes, its “Online Services” effort to compete with Google sucks up large and growing quantities of cash:

Now it is possible that Microsoft will thrive, raise the dividend and deliver real gains to its shareholders. Yet, it is equally possible that Microsoft will lose in the new environment, go out of business or be forced to limit its dividend increases to less than the rate of inflation. In that case shareholders will lose money by having invested in Microsoft.

There is a simple way out of this. Shutdown the Online Services Division. Double or even triple the dividend and payout the profits to shareholders.

What’s your guess on the probability that Microsoft will do this?

But, obviously, Microsoft won’t do this. Successful companies basically never do this. And in particular companies like Microsoft with hugely successful businesses that will predictably decline in the future are especially loathe to just take profits while they can and accept eventual decline. The firms want to live! They want to grow and prosper. They want to reinvest profits in new lines of business. They want to conquer the world. The firm, in other words, is “captured by its corporate bureaucracy” and I agree with Smith that this is an underrated source of loss to the American economy.

I note that mitigating this problem is supposed to be one of the main advantages of fancy financial shenanigans. And there was a brief moment in which shenanigans were being deployed to reorganize conglomerates and unlock shareholder value. But that process seems to have essentially ground to a halt even as the quantity of shenanigans has exploded.

It’s Always a Good Time to Regulate Well!

Ezra Klein and Kevin Drum have an interesting back and forth about Michael Mandel’s idea that regulations should be somehow “counter-cyclical” which, in his formulation, basically amounts to saying they should be laxer during recessions.

The more I think about this, though, the more I think the insights here basically just amount to “it’s always a good idea to have sound public policy.” If you imagine some rule that’s really important to preventing cans of beans from giving people botulism, that rule doesn’t suddenly become less important in a recession. What’s more it’s hard to imagine a 12-month holiday on food safety rules for canned goods leading to a spike of job creation. It would mostly freak people out. Conversely, an unwise regulation like the rule in some parts of DC giving preference to franchised chain restaurants over non-franchised chain restaurants (or consider this) doesn’t actually become worse during a recession.

I think that when there are downturns, public policy questions just become more salient. Good micro policies are, however, always really excellent things to have. Nonetheless, I don’t think anyone really thinks the Italian labor market is holding up better than the American because of superior microeconomic policies.

Hunger and Inequality

Heavily subsidized Swiss cow (cc photo by LKM)

Tom Philpot goes long and global food shortages, but reaches a conclusion I’m not sure I entirely share:

But there’s no reason to plunge into Malthusian anguish about a coming global population plunge. A lot people across the world are thinking hard about how to grow sufficient food without sucking dry the global water supplies or burning through fossil fuels like there’s no tomorrow. For a bit of hope after imbibing a dose of Brown’s bitter truth, check out WorldWatch’s State of the World 2011 report, which surveys interesting sustainable-agriculture projects across the globe.

I agree that we don’t need to plunge into Malthusian anguish either. And there’s a more fundamental reason for that, actually. Global population is predicted to peak at around 9 billion people and I’m pretty confident we easily grow enough food to feed that many people right now. That’s because eating meat is an extremely inefficient way of turning vegetation into food. If everyone gave up meat—or even just ate pork instead of beef—we’d have a big grain glut. The issue, of course, is that people don’t want to give up meat. On the contrary, as the world gets richer people are shifting toward incorporating more meat into their diets. That, in turn, creates a kind of food chain gentrification problem for those individuals who aren’t, personally, getting richer since it pushes up the price of grain.

The optimistic reading of that is that for all our horrible mismanagement of global water resources, it’s really really unlikely that we’ll reach a state of affairs where we’re actually unable to produce the requisite calories to feed the world’s population. The pessimistic reading is that producing enough food isn’t enough—rapid growth in a handful of large poor countries can produce terrible consequences for poor people in other, still-poor countries.

Wilson Chandler vs Carmelo Anthony

Someone asked for more basketblogging, so I thought I’d take the opportunity to say that I think the value of acquiring Carmelo Anthony is being widely overstated in the basketball press. Like suppose you had to choose between Anthony and Knicks small forward Wilson Chandler, both of whom play 35 minutes per game this season.

Well if you care about rebounds, Anthony is doing quite a bit better, snagging 8.3 per game. His career average is only 6.3 but he’s having a career-high rebounding year right now. Chandler grabs 6.3 rebounds per game. Advantage Anthony. They’re the same in steals, Chandler blocks more (1.4 per game versus 0.6) and Anthony turns it over more than twice as often (1.4 to 2.9 per game). Then of course there’s scoring. Anthony, I’ve been told by broadcasters, is the “best pure scorer in the game” reeling in an impressive 23.9 points per game while Chandler settles for a measly 17.7 PPG. But then again, Anthony’s TS% is only .527 while Chandler’s .579 is considerably more impressive.

Opinions differ about the merits of volume scoring versus efficiency. But Carmelo Anthony is currently paid $17 million to Chandler $2.1 million, so you would need to think Anthony was a lot better for a straight-up swap to look appealing. What’s more, Anthony is currently 26 years old and looking for a maximum extension, meaning that four years from now you’ll be paying him much more, though he’s overwhelmingly likely to be a worse player by then. Chandler will be getting paid more four years from now than he’s paid today, but he’ll still be cheaper than Anthony and he’ll be three years younger to boot. In general, it seems to me that NBA GMs underplay the problems with giving out max deals to Anthony-type players. Given the scale of the annual raises normally built into NBA contracts, a max extension for a 26 year-old is a kind of leveraged investment in a depreciating asset. There are circumstances under which that might make sense, but they’re pretty rare.

The Seduction of the Secret

A smart observation from Spencer Ackerman:

It’s always fun to catch up with people about six months to a year after they go to work in the national-security apparatus. Some enter with visions of new worlds of secret information suddenly exposed to them, like the briefcase opening in Pulp Fiction. More often than not, it’s an endless stream of banality, reported in minute, picayune detail, telling you what you already knew from a halfway attentive scan of your RSS feed.

This is something I’ve talked about before, but in a world drowning with information it’s remarkably easy to get too caught up in the idea of finding out secrets. Just think of all the banal, publicly available factual information that’s relevant to foreign policy and that most of us can’t rattle off the top of our heads. What’s the age structure of the population of Egypt? Is the Christian population growing faster or slower than average? Because of differential birth rates or differential emigration rates? Does Okun’s law hold up there like in Canada, or has it broken down like in the United States? But if you tried to write an article about this in the popular press, nobody would care. A scoop about a “secret report” on Egypt would, by contrast, be a kind of news even if it didn’t amount to much more than embassy gossip or slightly informed speculation.

Bicycling

From the requests thread:

Following one of your strong suits, urban development, and personal interests (yours and mine), it would be interesting to see more about urban cycling programs, e.g., bike lanes, and bicycle sharing. How much do bike lanes actually promote cycling? How successful are bike sharing programs, i.e., how much of a subsidy do they require, if at all?

I don’t write about this all that frequently because I’ve come to the view that it’s a topic that’s easy to overthink. The number one factor in making a city a congenial place for cycling is . . . having lots of other people ride bikes. When lots of people ride bikes, bike riding is safe since everyone is conscious of the presence of cyclists. A mode of transportation that’s safe, healthy, and cheap will naturally attract some adherents but it’s only safe if it has adherents. Consequently, the real impact of any kind of bike-friendly measure is likely more in the fact that it signals “hey think about biking” than in the details.

This is why I’ve tended to shift more in the direction of big picture stuff. If you have dense development and don’t have parking minimums, some people will start to bike around. And having those people bike around is the best pro-bicycle measure on earth.