Matt Yglesias

Endgame

All the kids in the neighborhood:

— Iceland, where recalculation is real.

— GOP contenders ranked by sanity and Mormonism. John Thune looks like a winner.

— Repealing the Clean Air Act is not so popular.

— Mubarak’s last push.

— Amazing photo from Egypt.

Diplo remix of Sleigh Bells, “Tell ‘Em”.

Everything Is a Remix

Watch, enjoy:

The Star Wars stuff is particularly striking in my view.

China Eying Pearl River Mega-City

Win the future:

The new mega-city will cover a large part of China’s manufacturing heartland, stretching from Guangzhou to Shenzhen and including Foshan, Dongguan, Zhongshan, Zhuhai, Jiangmen, Huizhou and Zhaoqing. Together, they account for nearly a tenth of the Chinese economy. Over the next six years, around 150 major infrastructure projects will mesh the transport, energy, water and telecommunications networks of the nine cities together, at a cost of some 2 trillion yuan (£190 billion). An express rail line will also connect the hub with nearby Hong Kong

As Ryan Avent points out, it’s not even that crazy:

The region is already quite densely populated, as you can see above, and the metro areas within the new city limits currently bleed into each other. Neither is the area of the new city that outrageous. It’s about 120 miles from Zhaoqing to Huizhou, not much more than the distance from Malibu to the eastern side of the Moreno Valley, between which spans the Greater Los Angeles metropolitan area (home to about 17m people).

What the Chinese effort actually seems to entail is a significant improvement in transportation around the region, harmonised local policies, and a rationalised metropolitan system of governance. And America could learn something from this. The New York metropolitan area (about half the size and population of the above mega city) stretches across four states. If the jurisdictions that make up the New York area were better able to coordinate, they city might not find itself cancelling critical infrastructure projects to close short-term budget gaps.

Indeed, check out a rough satellite view of the area and you’ll see that envisioning the Pearl River Delta as a mega-city seems fairly reasonable:

I would say the key merit of this plan isn’t just the possibility for more coherent regional planning (it might work out well, or the planning might be out of touch and inept) so much as it is the deliberate desire to keep filling in China’s most prosperous, highest-productivity area. And it’s quite reasonable to expect people to continue flowing away from the poor countryside to opportunity in richer areas, and specifically this area which is quite prosperous by Chinese standards. Rich, productive urban areas are, after all, where the best opportunities lie and it’s sensible for the Chinese to be planning for the infrastructure needs of a future in which more people flock to them.

The tragedy is that we’ve largely stopped doing this in the United States. Of course people still flock to the Boston-Washington corridor, the Bay Area, etc. But we don’t adopt the kind of infrastructure and zoning policies that would facilitate those areas becoming substantial denser. Consequently, instead of having the fastest net population growth in the richest metropolitan areas (or states) we have people flocking to Houston and Phoenix in search of cheap housing.

The Trouble With “Jobs”

Coming and going on vacation through DCA over the past week, I had occasion to see a bunch of ads about the 9.6 million jobs in the oil and natural gas industry. Here’s a representative sample:

This is, in fact, a good illustration of why progressive reform is hard. Dirty energy doesn’t just have a lot of money behind it, there are tons and tons of people working in the field and they don’t want to lose their jobs. And the same is true of health insurance, banking, and any other sector you might want to take on.

But as an argument on the merits, it’s a huge fallacy. Suppose someone invented a Magical Energy Device tomorrow, a cube that costs about $1,000 to build and provides enough energy to power a city the size of Philadelphia. Even better, the cube has no operating expenses and causes no pollution. What should we do? Well, obviously, we should start building MEDs! A lot of them. We’d need somewhere between 300-400 of them to power the whole country, and we’d want more than that since with this new source of basically free, zero-pollution electricity we’d want to pursue electrification of our automobile fleet very aggressively. This technological breakthrough would be an enormous step forward for mankind. And not because of the jobs that would be created in the MED-manufacturing sector. Even if all the MEDs were built in China, America would benefit, and even if all the MEDs were made in the USA the benefits would be modest since the total size of the global market for MEDs would be pretty modest in dollar terms.

The MED would be a boon to humanity, in other words, just because an unlimited supply of cheap pollution-free energy would be a great thing to have. And yet, just like all forms of dramatic technological progress it would, in fact, disrupt a lot of people’s careers.

Business and Growth

A friend emailed me to complain about ANC 6B’s concern that more bars and restaurants in Barracks Row will turn the area into “the next Adams-Morgan.” As he points out, you could just as easily call it “the next Bethesda.” They’ve got lots of restaurants and they brag about it. It’s nice. And I agree—entertainment, broadly construed, is a lot of what modern cities are about and it’s not all Adams-Morgan.

But I think the whole question of urban liquor licenses is an excellent parable about the insane “pro business” discourse we’ve recently been afflicted with here in Washington. The success of businesses, of for-profit firms, is crucial to economic growth and prosperity. But this is overwhelmingly a question of businesses that don’t currently exist. If you call up a bunch of incumbent businessmen and ask them what they want, then any relationship between their pro-business agenda and a growth agenda is going to be pretty coincidental. For example, whatever the merits of restrictive liquor licensing policies, they’re clearly bad for the growth of new businesses in the bar and restaurant sector. But they’re just fine for many incumbent bar and restaurant owners, particularly the less aggressive and less skilled ones.

If you’re concerned about growth you need to be concerned about the ability of people to found new firms, and about the ability of small firms to grow rapidly. Talking to executives at today’s large firms tells you basically nothing about this. You just chatting to a bunch of comfortable rich guys who want to pay lower personal income taxes and to get some firm-specific regulatory favors.

China’s US Dollar Holdings

Here’s a striking fact from Eichengreen’s Exorbitant Privilege: “Today, in contrast, Chinese holdings of U.S. government and agency securities exceed $1,000 per resident.”

That dramatizes the under-comprehended fact that China’s exchange rate policy is a huge ripoff for the bulk of the Chinese population. At market exchange rates, China’s per capita GDP is under $5,000 per head. Disbursing that horde of dollar-denominated financial assets to the population so that people could obtain additional foreign-made goods would be a boon to Chinese people’s welfare. But it would be bad for the owners of politically influential export factories, so it doesn’t happen.

Superman’s Immigration Status

Kay Steiger reflects on a British actor playing Superman and fighting for truth, justice, and the American way:

The reaction among some comic fans has been aghast, especially since Superman is generally considered the quintessentially American superhero (that is, considered that way generally by white, male comic book characters who look pretty demographically similar to Superman himself). In fact, if you have some time, you should read this award-winning student paper (PDF) on how comic books in the stretch between the Great Depression and the Cold War change to adapt to American ideals that are popular at the time.

But it’s important to remember that Superman, while very representative of Americans in certain ways, might be even more representative than you might think: After all, Superman was an illegal immigrant — one of the 9.3 million estimated to be living in the United States today. These days, he wouldn’t even qualify for in-state tuition.

As those of us who recall Action Comics Annual #3 know, this is wrong. When a strange set of circumstances led to Superman becoming a candidate for president his immigration status was litigated with the Supreme Court determining that since he was transported to the planet earth in a kind of artificial womb, he’s actually a natural born citizen of the United States of America.

President Superman went on to eliminate the national debt by teaming up with Aquaman to unearth a buried stockpile of gold,* and to pursue an Obama-esque agenda of ridding the world of nuclear weapons. Some may say that because this was merely an alternate timeline, my observation is invalid. But the facts of Superman’s birth are the same in the “canonical” universe as in this branch of time, and the case of Uatu v. Lewis (1993, supra) firmly established that counterfactual legal precedents are binding on lower courts until explicitly overruled by the Supreme Court.

Monetary Expansion Boots Employment

Hot new macroeconomic estimates from Hess Chung, Jean-Philippe Laforte, David Reifschneider, and John C. Williams investigate the impact of the Federal Reserve’s asset purchasing program:

An analysis shows that the Federal Reserve’s large-scale asset purchases have been effective at reducing the economic costs of the zero lower bound on interest rates. Model simulations indicate that, by 2012, the past and projected expansion of the Fed’s securities holdings since late 2008 will lower the unemployment rate by 1½ percentage points relative to what it would have been absent the purchases. The asset purchases also have probably prevented the U.S. economy from falling into deflation.

The basic shape should come as no surprise. Monetary expansion raises aggregate demand. That means more employment and more inflation. If the economy is already close to full employment, extra demand mostly means more inflation. But if the economy is far from full employment, then you mostly get more employment and more output.

Relatedly, the Hamilton Project is offering $25,000 as a prize to whoever comes up with the best job creating idea. I’m not long-winded enough to stretch this out into a 5,000 word essay, but it seems to me that if monetary expansion leads to job creation in a depressed economy and the economy is still depressed, then we ought to have more monetary expansion.

The Corporate Income Tax

David Leonhardt has a piece explaining the horrors of the American corporate income tax code, which manages to have both higher rates than almost any other developed country and also raises less revenue. Why? So many loopholes. Doing it that way, meanwhile, harms economic growth:

The problem with the current system is that it distorts incentives. Decisions that would otherwise be inefficient for a company — and that are indeed inefficient for the larger economy — can make sense when they bring a big tax break. “Companies should be making investments based on their commercial potential,” as Aswath Damodaran, a finance professor at New York University, says, “not for tax reasons.”

Instead, airlines sometimes buy more planes than they really need. Energy companies drill more holes. Drug companies conduct research with only marginal prospects of success.

So even though powerful vested interests will want to hold on to their breaks, there’s at least a strong lobby out there pressing for pro-growth reform, right? Well no:

The official position of the Business Roundtable, one of the most important corporate lobbying groups, is telling. The Roundtable says it supports corporate tax reform. But it actually favors only a reduction in the tax rate. The group refuses to say whether it also favors a reduction of loopholes. In effect, the Roundtable wants a tax cut for its members regardless of how much the tax code is simplified — or whether the budget deficit grows.

Now in principle there’s no particularly special reason that corporate income tax reform needs to be revenue neutral. You could make up the lost revenue with higher income taxes, or higher estate taxes, or higher gasoline taxes, or what have you. But of course business lobbies don’t support any of those options either. And yet revenue is currently near its lowest point in decades, even as the elderly share of the population is set to grow increasing demands for health care and pension services. We need more tax money, not less, and ideally we need to raise it in an economically efficient way. Instead the political system only seems to be be able to push rates down and expand loopholes.

Politics and Identity

Sarah Goodyear chats with Ed Glaeser, urbanist and right-of-center economist, about why America needs to show cities some love. Here’s his idea for relating to the populist nationalist authoritarians who are the core of the conservative movement in America:

You talk about all the factors, like the mortgage tax deduction, that are not just facilitating sprawl, but really, pushing people into living in sprawl. Yet now, there’s this perception that when the Obama administration is doing anything to create better conditions in cities, that that is coercion. There’s a lot of talk on the very far right that we’re being pushed to live in cities. Where is that perception coming from?

A. It gets back to your first question, why have cities fared so poorly in the political discourse over the past 200 year? The truth of the matter is that I think that the Obama administration is simply trying to give us a level playing field. It needs to be presented as that. To those Republicans, to those Tea Party activists who believe in the home mortgage interest deduction: Shouldn’t the U.S. government stop engaging in social engineering? Shouldn’t the U.S. government stop engaging in those policies that artificially push people out of the homes that they would have? Haven’t we had enough of activist government trying to shoehorn us into low-density living?

That’s how I try to present it, and I actually believe that. I have some libertarian bent. I think that things are problematic in part because they impinge on basic human freedom, the ability to choose cities if you want to choose cities. Given how anti-urban the broad spectrum of public policy is, if anyone attempts to depict the tiny things that are slightly pro-urban as being an attempt to socially engineer Americans into cities, I find that quite odd.

As you know, I agree with these sentiments. But I think there’s no reason to believe this kind of argument will be remotely persuasive. It’s certainly an interesting fact about conservative identity politics in the United States that it’s associated with talking about “freedom” and “free markets” but as Glaeser well knows actual public policy in the United States has basically nothing to do with this. If conservatives read Glaeser’s book (and they should—review forthcoming!) they’ll like his swipes at historic preservationists, at the environmental review process, and his skepticism about high speed rail. But they’re no more going to turn against pro-suburbanization or rural subsidization policies than Tim Pawlenty is going to cut an add about how about the gay wedding of two immigrants from Mexico exemplifies the true spirit of American liberty.

Anyone actually interested in the subject will swiftly see that (a) American public policy is strongly biased against high density living and (b) that this outcome is predictable from the structure of American political institutions. That people don’t realize this is largely a matter of willful ignorance.

When Ronald Reagan Built The Pyramids, He Beat Up Kublai Khan

Not satire:

VAN SUSTEREN: How is President Obama doing on Egypt?

NEWT GINGRICH: I don’t think they have a clue. I think it is very frightening to watch this administration.

VAN SUSTEREN: Would anybody?

NEWT GINGRICH: Reagan would have. Reagan would have had — Reagan would have thought about and studied radical Islam and Reagan would have had a strategy and would have pursued it. He didn’t do that in the 80s some are going to want to complain for a practical reason. Reagan had one foreign policy goal in the 1980s, defeat the Soviet Union. He didn’t divert himself because he wanted to defeat the Soviet Union.

Indeed, the only figure I can think of who’s in any way comparable is Brian Boitano:

The scary thing is that while Gingrich may not understand much, I think he does have a good grasp on the mentality of the modern American conservative.

Pepperoni Pizza Is Delicious

Apparently the food authenticity police are coming for our pepperoni on the grounds that there’s “one thing it is not: Italian.” John Mariani is quoted as saying it’s “Purely an Italian-American creation, like chicken Parmesan.” And like chicken parm, it’s delicious!

The re-discovery of authentic Italian cooking was an excellent corrective to a somewhat bastardized cuisine that had become compromised by weak access to ingredients and an ill-informed customer base. But the idea that the upshot of that rediscovery should be to throw out decades worth of Italian-American innovation is ridiculous. At the end of the day, tomatoes are from the Western Hemisphere and thus not “really” part of Italian cooking, but that would be a nutty way of looking at the situation.

On a related note, if WalMart manages to “drive mom and pop stores out of business” by selling affordable groceries to under-served urban neighborhoods, that’s what I would call a triumph for human progress.

Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System

As a book, Barry Eichengreen’s Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System perhaps suffers from an excess of sober-minded sensibility. He argues that the dollar almost certainly will lose its status as the global currency, but that it probably won’t happen too quickly, and it won’t necessarily be that big of a deal.

The key point here is that you need to get cause and effect straight. Growth in China, India, and Brazil are bad for the dollar’s unique status, but not in a way that’s bad for America. Similarly with Europe working its issues out. Alternatively, the dollar could use its unique status as the consequence of a catastrophic economic or budgetary collapse. That would be bad. And it would be bad for the dollar. But it’s the catastrophic collapse here that’s bad, not the dollar stuff, the dollar stuff is an effect. The basic thesis is well summed-up by this history lesson on the pound: “Sterling lost its position as an international currency because Britain lost its great-power status, not the other way around. And Britain lost its great-power status as a result of homegrown economic problems.”

Egypt Is A Very Large Proportion of the Arab World

I knew Egypt was the largest population of the Arab countries, but until I looked up the numbers I didn’t realize how dramatically the demographics of the Arab world are weighted toward Egypt:

What’s more, a healthy share of Iraqis are Kurds rather than Arabs so in some ways this understates it. The point is that a more open Egypt would have a huge cultural impact simply because such a large share of the Arab audience is an Egyptian audience. It’s also worth noting that the last time Egypt had a promising new post-revolutionary regime (i.e., in the 1950s), it swiftly used the combination of ideological vigor and demographic weight to identify the overall Arab cause with the Egyptian state. As detailed in Adeed Dawisha’s excellent Arab Nationalism in the Twentieth Century: From Triumph to Despair this didn’t exactly work out. But the basic logic of the situation is a reminder of why many regimes in the region were very happy with the moribund Mubarak regime.

Biblical Israel

Via Jon Chait, leading Christian Zionist leader Mike Huckabee explains his vision for Middle East peace—no peace:

Potential 2012 U.S. presidential candidate Mike Huckabee said Tuesday that if Palestinians want an independent state, they should seek it from Arabs — not Israel.

The evangelical minister and Fox News host said Jews should be allowed to settle anywhere throughout the biblical Land of Israel — an area that includes the West Bank and east Jerusalem.

He called the demand on Israel to give up land for peace an “unrealistic, unworkable and unreachable goal.”

A couple of points. One is that while Chait is right that “not even the Likud government opposes a Palestinian state in principle” I think it’s pretty clear that Netanyahu/Lieberman coalition does in fact oppose the creation of such a state. Its statements to the contrary are largely a matter of diplomacy based on what it thinks is a sustainable posture in an international context. But as we move more and more toward post-Jewish Zionism in the United States (and, its natural counterpart, post-Zionism among mainstream American Jews), I think the Israeli right will find that its ideas have a welcome home on the American right.

The other point I would make is about the actual boundaries of biblical Israel:

Here’s a slightly different stab at the question, again locating substantial swathes of present-day Jordan and Lebanon within the boundaries of Biblical Israel. You’d have to be a crazy person to try to base a 21st century state on these 3,000 year-old maps. But that, it seems, is exactly what Huckabee thinks should happen.

Selfishness and the Liberal Order

I’m with Mark Kleiman on this:

The essay by Edward Glaeser to which Matt Kahn points is, in my view, astoundingly wrong-headed. And, as Glaeser notes but doesn’t reflect on, the Adam Smith of The Theory of Moral Sentiments would have agreed with me, and not with Glaeser. The fact that selfishness constrained by law and the market can generate socially useful outcomes doesn’t make selfishness, or the freedom to pursue selfish ends, good things in themselves.

But I would go quite a bit stronger than this. If you think about a well-functioning liberal society with a (constrained) market economy and political liberty, you’re relying on an awful lot of non-selfish behavior by people to make it work. One key issue here is corruption and the efficacy of the public sector. A wise republic needs to think about the incentives facing public officials and design structures accordingly. But at the end of the day, well-functioning public institutions all involve a certain esprit de corps and sense of obligation. It’s not a coincidence that the most market-oriented societies (the Anglophone and Nordic countries) are also the ones with the best-functioning public sectors. Another issue has to do with parenting and family more generally. For a liberal society to function over time parents need to adopt an attitude toward their children that I don’t think is well-captured by the idea of selfishness. But then again, you can’t have everything collapse into nepotism either.

The point is that a society actually governed by the dual pillars of self-interest and obedience to the law is very unlikely to come out as a liberal market economy. What you’d get is a cesspool of rent-seeking and shakedowns. And I think that to the extent that the USA has become a society willing to accept an ethic of “greed is good” this is the direction we’ve headed in.

Nutrition Guidelines and the Limits of the State

Marion Nestle thinks the new food advice guidelines from the government are a step forward, but she’s still got some quibbles:

They still talk about foods (fruits, vegetables, seafood, beans, nuts) when they say “eat more.” But they switch to nutrient euphemisms (sodium, solid fats and added sugars) when they mean “eat less.”

They say, for example: “limit the consumption of foods that contain refined grains, especially refined grain foods that contain solid fats, added sugars, and sodium.”

This requires translation: eat less meat, cake, cookies, sodas, juice drinks, and salty snacks.

That’s politics, for you.

These are good points, especially the last one. And while I of course think Americans should push our government to release the best possible nutrion guidelines, the fact of the matter is that one ought to temper one’s expectations about the ability of a government of a major agricultural producer to get this right on a consistent basis. The good news is that this really isn’t a task that requires the full weight of the federal government to be done well. The costs involved in putting together a pamphlet of nutritional advice and distributing it over the Internet are pretty small and I think maintaining up-to-date and visually appealing advice along these lines is an excellent mission for a non-profit to undertake. I think the Mayo Clinic‘s website is leading the way in useful application of information technology to public health.

Alternatively, we have a lot of sub-national governments here in the United States. And some of them are jurisdictions with little or no agricultural production. If the governments of the country’s fifty largest cities pooled their resources to produce a National Dietary Guidelines document, they’d be well-positioned to give relatively unbiased advice. But just like Saudi Arabia’s not going to tell you to use less oil and Denmark’s not going to tell you to stop playing with legos, the US government is poorly-positioned to say people should eat less meat and grain.

Heading Home

After a lovely vacation here in the Turks & Caicos Islands, I’m flying home today and full-time blogging will recommence tomorrow. TCI has actually been the locus of a fairly fascinating economic and political collapse that’s involved the UK government suspending self-rule and essentially returning the islands to colonial status. Or maybe we should think of TCI as a kind of Charter City experiment.

At any rate, I’m expecting a magazine article from another writer to appear on this subject shortly and I’m looking forward to reading it.

Default By Another Name

Brian Beutler writes about Pat Toomey’s plan to have the government make good on its obligations to bond owners by defaulting on its obligations to seniors, soldiers, etc.:

“I intend to introduce legislation that would require the Treasury to make interest payments on our debt its first priority in the event that the debt ceiling is not raised,” Sen. Pat Toomey (R-PA) wrote in a Friday Wall Street Journal op-ed.

If passed, Toomey’s plan would require the government to cut large checks to foreign countries, and major financial institutions, before paying off its obligations to Social Security beneficiaries and other citizens owed money by the Treasury — that is, if the U.S. hits its debt ceiling. Republican leaders insist they will raise the country’s debt limit before this happens. But first, they’re going to try to force Democrats to accept large spending cuts, using their control over the debt limit as leverage. That means gridlock, and the threat that they’ll come up short.

Now of course this is nonetheless a kind of default. A person whose creditworthiness is above question meets all his financial obligations. Another kind of person might manage to stay current on his mortgage and make minimum credit card payments while leaving utility bills unpaid and welching on sundry promises to friends and business associates. That’s not grounds for foreclosure, but obviously it’s going to hurt your standing as a borrower.

Israel and Egypt

Call me crazy, but my guess (and I’ll certainly emphasize that it’s a guess and not the product of deep understanding of Egyptian politics) is that the full of Mubarak and the rise of a more democratic Egyptian regime would be good for Israel. The peace agreement with Israel was signed by Anwar Sadat for perfectly sound reasons of state and its been maintained for thirty years for equally sound reasons of state. Egypt, unlike Saudi Arabia or Iran, is actually adjacent to Israel so if it’s not at peace with Israel it’s at war—in a non-theoretical way—and war with Israel is not in the interests of the Egyptian public or state. And I think that ultimately paying attention to reasons of state will shed more light on the future course of Egyptian policy than will attempting to parse the theological musings of the Muslim Brotherhood.

But it’s easy enough to see how this fact could be obscured in the minds of many (or most) Egyptian people as the unpopularity and corruption of the regime comes to taint all the regime’s policies, including the ones that make sense. Ultimately, lack of regime legitimacy has sapped legitimacy from the peace deal and that’s bad for Israel. A more legitimate government will come around to Sadat’s calculus but also would be in a position to invigorate peace in a way that Mubarak simply can’t.

And I think a smart Israeli government would recognize this. Instead we have an Israeli government that’s committed to a short-sighted and morally indefensible policy in Gaza that Mubarak has cooperated with but a successor regime probably wouldn’t.