Matt Yglesias

Greenfield Transit Development

Dan Chinoy hops a ride onto a newish Beijing subway line:

As we went farther north, the crowd slowly thinned, eventually leaving me sharing a car with a pair of giggling, stylish Chinese girls playing with their iPhones, a couple evidently going to a costume party — the guy in a pirate hat, the girl wearing rabbit ears — and several young men in Air Jordans and Nike jackets. Once we arrived, I followed the couple up the escalator from the platform, stepped outside — and into the rubble of what was apparently once a small, poor, rural village.

I had, I realized, arrived in the vast borderland between Beijing’s urban center and its rural surroundings. The remnants of a farm were visible down the street, and a growing block of new high-rise apartments and cranes loomed jarringly in the distance. A brand new, almost empty highway implied expectations of greater things to come — expectations that perhaps also explained why it was necessary to put a rail station in a rural area underground.

This is, in principle, exactly what a growing city ought to do. When it comes to highways, people seem to get this. You don’t wait for suburban homes and shopping centers to get all build and filled in and then say “we need a highway.” Where would you put it? What you do is you build the highway in the expectation that the existence of infrastructure will make it an attractive place for development. Obviously it’s possible to miscalculate with this decision, but it’s also possible to get it right. Before cars existed, people also understood this. You build out the rail network first (that can be Upper Manhattan or it can be the Transcontinental Railroad) and then people start building structures at rail-appropriate density at the places the rail transit serves. Either way, a city expecting to grow needs to make some infrastructure plans. And the plans determine development patterns. A station in a former village outside of Beijing doesn’t “need” to be underground, but if you build it underground then a certain sort of place can grow around it that wouldn’t be feasible if you ran the trains in a highway median.

Social Impact Bonds And Their Limits

There are lots of things the public sector is involved with that are incredibly valuable if they actually work, but they’re often difficult to do and the public is naturally reluctant to support policy interventions that they don’t think are going to accomplish anything. David Leonhardt touts one potential solution to the problem, so-called “social impact bonds” that function as a kind of loan to service-providers:

The idea goes by one of two names: pay for success bonds or social impact bonds. Either way, nonprofit groups like foundations pay the initial money for a new program and also oversee it, with government approval. The government will reimburse them several years later, possibly with a bonus — but only if agreed-upon benchmarks show that the program is working.

If it falls short, taxpayers owe nothing.

What we tend to do right now is first look at a problem that it would be hugely valuable to solve, then we discount what we’re willing to spend on solving the problem for our estimate of the low probability of succes. The result is that we appropriate less money than it would be worth spending to solve the problem, but with no guarantee that our intervention is helping at all, and with some surety that if our intervention is helping we’re not doing enough of it. Then you get growing cynicism and passivity. The “impact bond” structure could solve that. It could allow a situation whereby successful policy interventions get lavish funding, failed ones get no funding, and the public grows more optimistic and generous about solving social problems. Obviously, though, there are about a thousand practical issues with this. Jeffrey Liebman has a report for CAP looking at many of them and how they can be solved.

I do, though, have a concern about this on another level. The underlying presumption of the proposal is that our programs lack efficacy because of a technical problem that needs a technical solution. I’d say we have something closer to a cultural or ethical problem. I think we had a version of that in DC when people were pretty openly saying that the city government should be seen as a jobs program, rather than a provider of high-quality social services. And we have it when Representative Roy Blunt (R-MO) openly talks about how it’s more important to protect farm subsidies than to feed poor families. SNAP is a program that could be improved. But you can see from Rep Blunt’s attitude that he doesn’t want it to be improved. He suffers from an ethical disorder in which he’s not interested in the well-being of poor Americans. And he’s operating in a political culture where this fact isn’t something he’s trying to hide, he’s discussing it openly in newspapers. Given Blunt’s views about the merits of funding farm subsidies vs funding nutrition assistance, it’s clear that given the opportunity to tweak SNAP program design Blunt would not be interested in increasing its efficacy as a nutrion program—he’d want to increase its efficacy as a hidden subsidy to agribusiness.

Which is all just to say that politicians can always screw things up if they want to.

Visualizing Unequal Growth

Via Kieran Healy, an excellent EPI data visualization tool that lets you dramatize some of Emmanuel Saez’s findings about inequality:

I think this way of looking at things ends up underestimating the gains of technological progress, but that’s always been true. The fact remains that in recent decades a much higher than usual share of growth has ended in the pockets of a narrow elite composed largely of financiers.

Why Not Me?

Kevin Warsh is stepping down from the Federal Reserve’s Board of Governors. And I’d like to replace him!

Here’s my plan. We’re going to start with this chart of total spending:

We’re going to say that the goal is to catch up with that red line. To that end, I’ll be phoning up random people and asking if they want to participate in my new Sock-Backed Lending Facility in which the Fed offers you a non-recourse loan of $100 in exchange for a pair of old socks. And I’m going to keep calling, keep offering, keep lending, and keep sock-collecting until we hit the line. Congress will complain, and Paul Krugman will worry that the promise isn’t credible, but it’ll be fine because I’m a writer who has no real desire for public office. I’ll serve my term implementing my insane scheme, and when I’m done I’ll write an awesome book about it.

Magical Beer and Regulatory Rents

Productivity growth in the tap beer sector:

As a productivity optimist, what I’d normally tell you is that the ability to make serving beer a less labor-intensive occupation will ultimately benefit consumers. Initially, you’d see increased profits from the owners of beer-selling establishments. But that will merely attract additional capital into the beer sector, leading to more intense competition. Soon enough, the extra profit rate is competed away and the consumer surplus grows. In this particular case there are, however, a number of problems.

One is just that the NHL and NBA are semi-cartelized and it’s not like competing pro basketball teams are going to come to the city. But the other is that in the more general case of selling beer, there are extreme constraints to introducing new competition. It’s obvious that an additional bar in Adams-Morgan could be profitable. But it’s illegal to start a new bar in Adams-Morgan. It’s also illegal to start a new bar on 17th Street near Dupont Circle. Residents of Barracks Row are actually frightened that successful bars might open in their neighborhood. And, indeed, liquor license moratoria are quite frequent in the city. But even in places where opening a new bar isn’t just blanket illegal, you still face a lot of regulatory hurdles to doing so. Generally speaking, people are pretty hostile to the idea of a bar opening on their block and there are a lot of tools at their disposal to block it.

Whatever you think of that, it creates an anomalous situation whereby productivity enhancing innovations in the beer-serving sector simply lead to higher rents for existing license holders. Insofar as a city wants to restrict the availability of beer-selling establishments, the smarter way to do it is with laxer regulation plus higher taxes which would ensure that productivity growth ends up in the pockets of the city (allowing for lower taxes and better services) rather than in the hands of the license holders.

License To Beg

(cc photo by Dear Edward)

Montgomery County’s not run by neoliberal sellouts, that’s for sure. They’re true friends of the working man:

Montgomery County panhandlers such as Garnes would have to apply for permits to ask drivers for spare change under legislation [County Executive Isiah] Leggett is requesting from state lawmakers. Leggett said panhandlers often stand in the median strip of county roads — which is allowed under county law — but that many approach drivers by walking into the street, which is not.

This business about where the beggars stand is a microcosm of one of the most prominent conceptual problems here. If the issue is people violating traffic laws, then devote more resources to enforcing the traffic laws. Why devote resources to creating a beggar licensing scheme and then devote more resources to enforcing it?

At any rate, laugh at this idea if you will. But even under Leggett’s plan it will be considerably easier for a poor person to get permission to beg in the street in Montgomery County than it will be for a poor person to get permission to rent a basement/attic/garage apartment from an empty nester couple that doesn’t need so much space anymore.

House Republicans Eating America’s Seed Corn

Here’s an excellent lead from Lori Montgomery and Shailagh Murray, detailing House Republicans’ FY 2011 appropriations vision:

House Republicans sketched their vision for a smaller federal government Wednesday, proposing sharp spending cuts that would wipe out family planning programs, take 4,500 cops off the street and slice 10 percent from a food program that aids pregnant women and their babies.

If it’s been said once, it’s been said a million times, a social conservative is someone who believes life begins at conception and ends at birth. But let’s talk about crime.

Is putting cops on the street an example of public sector waste? Not according to libertarian economist Alex Tabarrok whose research shows that morepolice means less crime. Here’s a “>good article in The Weekly Standard about how “federal budget dollars to pay for more cops on high-crime city streets” is an “uncommonly good spending idea.” Megan McArdle was writing back in 2007 about how cutting the ranks of police officers will lead to higher crime.

Back to malnourished children. Earlier in the month I was having a bit of a dispute with Ross Douthat about whether it’s a good idea to be focused on the budget deficit in 2011 when the 2011 budget deficit isn’t actually the source of any economic problems. These kind of ideas are exactly what I’m worried about. There is a real deficit problem in 2015 and a bigger problem in 2020 and in 2025. Cutting spending on child nutrition, prenatal health, and police officers in 2011 and 2012 doesn’t reduce the 2020 budget deficit. What it does is reduce the quantity and productivity of the workforce that will be available to meet our financial obligations to the retirees of the future.

Here’s a very strange boast:

“Make no mistake, these cuts are not low-hanging fruit,” Representative Hal Rogers, Republican of Kentucky and chairman of the Appropriations Committee, said. “These cuts are real and will impact every district across the country — including my own.”

What on earth is wrong with this guy? Any year is a great year in which to cut low-hanging fruit. By why cut the non-low hanging portion of the budget? There could be good reasons. Maybe we need to sacrifice in order to build more tanks to beat the Nazis. But that’s not happening. Or maybe high interest rates are crowding out private sector investment. But that’s not happening. Or maybe monetary actions necessary to keep interest rates low are leading to ruinous inflation. But that’s not happening either. So why make program cuts that have real negative impact in every district across the country? Shooting ourselves in the foot in 2011 doesn’t make it easier to afford Medicare in 2020, it means we’ll have more injured feet.

As American As Streetcars

Nowadays we think of trams as a charming European contrivance, but I recently read Henry James’ The American which, among other things, indicates that in the 19th century an American traveler in Europe could see them as a slice of home:

In the charming city of Brussels–his first stopping-place after leaving Paris–he asked a great many questions about the street-cars, and took extreme satisfaction in the reappearance of this familiar symbol of American civilization; but he was also greatly struck with the beautiful Gothic tower of the Hotel de Ville, and wondered whether it would not be possible to “get up” something like it in San Francisco.

Just a reminder of how arbitrary the construction of anti-urban policies as more authentically “American” is. Our biggest, densest city is considerably bigger than any European metropolis, we pioneered rail transport to just the same extent as we pioneered automobiles, etc.

Endgame

Tu prends toujours metro:

— Cool book cover.

— Preservationist groups recommend review board members, nobody from wards 4, 7, or 8.

— “Southern Discomfort”.

— What the NCTQ leaves out.

— Climate economics.

Here’s a piano version of Yelle’s “Je Veux Te Voir”.

Get Greenwald

A consortium of national security contractors, led by Palantir Technology, seems to have been shopping a counter-WikiLeaks strategy. This slide is about neutralizing Glenn Greenwald:

— Glenn was critical in the Amazon to OVH transition
— It is this level of support that needs to be disrupted
— These are established professionals that have a liberal bent, but ultimately most of them if pushed will choose professional preservation over cause, such is the mentality of most business professionals.
— Without the support of people like Glenn, Wikileaks would fold

I like that they’re on a first-name basis with Greenwald. Lee’s 2008 book, The Fortune Cookie Chronicles: Adventures in the World of Chinese Food, is highly recommended. And remember, without the support of people like you, the Yglesias Blog would fold!

Retirement Age Follies

Brian Beutler has Steny Hoyer reiterating his openness to the idea of a higher retirement age for Social Security benefits:

“Unlike Boehner [who supported raising the retirement age outright], what I said is it ought to be on the table,” Hoyer said. “We ought to consider all options, including raising the age, but there are a lot of other options also that can be considered and I also indicated that whatever we do needs to be done prospectively. And I think all parties agree with that.”

As it happens that puts him in just about the same boat as Boehner, at least with respect to the question of raising the retirement age. Many Democrats support the idea of raising the wage-cap on the Social Security payroll tax to shore up the program indefinitely, and the GOP doesn’t. But there remains fairly strong bipartisan support for considering a higher retirement age, too.

This idea has a kind of fake common sense quality to it. If I said, “how about a modest cut in Social Security benefits for rich people paired with a much larger cut in benefits for the poor” almost nobody would find that tempting. But life expectancy is correlated with income and this is getting truer over time:

In percentage terms, raising the retirement age from 68 to 70 would have a small impact on the expected Social Security benefits of a rich person and a large impact on the expected Social Security benefits of a poor person. It’s very regressive and a healthy share of the fiscal benefit will be lost on the back end in terms of increased disability claims.

The Immiseration of Labor?

Reader JS writes in with the question that eventually bothers everyone who thinks long enough about economic growth:

I would like to believe we’re heading for a future were everybody is so productive that they can live a good life working 20 hours a week. But I fear we’ll get a society where perhaps 10% of the people will own all the land and capital, and they will hire 60% of the people to work for low but comfortable wages, while 30% will be totally dependent on a welfare and the odd temporary job every now and then.

If this scenario is a real possibility, then the only solution I can imagine is highly progressive taxation and wealth distribution, so that the great masses can afford to employ each other (with restaurant meals and dance lessons).

So is it a possible scenario/olution, or am I missing something?

I have heard that during the great depression, many people feared this scenario becoming the new normal, and that even Marx predicted this would happen (and that after that, the masses would revolt and institute Marxism).

People often don’t realize it (though Karl Smith does) but Marx was in many ways working in the tradition of classical economists like David Ricardo and Adam Smith.

At any rate, I’m not blogging about land use at the moment because I’m hoping to build enthusiasm for a potential book, so let’s focus on the “capital” side of this arrangement. What’s missing from the doom analysis (and this is fresh in my mind since coincidentally I’ve been reading Ricardo) is the “human capital.” Employee compensation accounts for the majority of GDP because the majority of the actual capital available to the economy is inside people’s heads. There’s a Race Between Education and Technology and we haven’t seen this immiseration of labor happen because, on average, people have improved their human capital faster than physical capital has rendered it obsolete. But I don’t think this is a law of nature. You could imagine the development of effective, but highly expensive, genetic engineering technology totally destabilizing the situation.

The Wages of Disengagement

Senator Barbara Boxer is outraged by the slew of new anti-choice bills being offered up by House Republicans: “It breaks faith with a decades-long bipartisan compromise, and it risks the health and lives of women.”

Ann Friedman’s not buying it:

Oh wait, so all those times that Democrats caved on the issue of women’s health — years of rubber-stamping the Hyde Amendment, rolling over on contraception access, failing to do away with abstinence-only sex ed, shrugging off Stupak-Pitts — they were under the impression they were engaging in a bi-partisan negotiation to protect women’s rights? And now they are surprised (and maybe a little hurt?) that Republicans have been empowered by these compromises to introduce even more radical anti-choice legislation? STFU. Just… STFU.

The basic dynamic here should be familiar. When Democrats decided about ten years ago to stop pushing for gun control legislation, that didn’t take the issue off the table it led to a wave of envelop-pushing pro-gun bills. When the GOP temporarily stopped opposing Social Security in the wake of World War II, it led to 30 years of steady increases in Social Security beenfits and eligibility. Every conservative retreat from anti-gay bigotry inspires people to push deeper for equality. As long as a large minority of the public thinks people should be thrown in jail for having an abortion, we’ll either see continual fighting on this point or else continued slippage as the debate loses an anchor on the pro-choice side.

This is also the problem with the tactical decision to move toward “abortion is bad, but…” language when talking about the issue. Whether or not the median voter ever embraces the slogan of abortion on demand and without apology, it’s important for some people in positions of some prominence to be holding down that side of the fort.

Roy Blunt: Agribusinesses Subsidies Are More Important Then Feeding Poor People

The basic way that conservative politics works is that first you reduce taxes on rich people, creating a budget deficit. Then you rail against “spending” with reference to specific “weak claims” on the public purse. Then when it comes time to actually write a budget, you slash spending on “weak claimants,” vulnerable people with little political influence. Then you come back and do it all over again.

Representative Roy Blunt (R-MO), for example, wants to make sure that we take food out of the mouths of poor children rather than cutting farm subsidies:

Blunt says nutrition funding – which could account for 75 percent of ag spending in the next Farm Bill – should not be exempt.

“Are there better ways to deliver the food assistance programs without assuming that they just are untouchable and we’ll just look at the 25 percent that impacts direct payments and farm families and rural communities and cut that and take everything out of that?” Blunt offers.

Blunt says direct payments are lower now because of higher commodity prices and he advocates keeping programs in place that encourage farmers to continue to compete in the marketplace.

Note that giving customers money with which to buy food ends up enhancing farmers’ income. In that respect, it’s no different from offering farmers direct payments to grow food. The difference is that nutritional assistance specifically helps poor people as well as farmers, while “direct payments” specifically help “producers with eligible historical production of wheat, corn, grain sorghum, barley, oats, upland cotton, rice, soybeans, other oilseeds, and peanuts” along with consumers of those products. Ultimately, this program does a lot to serve the interests of large landowners whereas nutrition assistance can help people in need.

Without Licensing, How Will We Know Which Blogs to Read?

I read in comments yesterday some queries as to how people are supposed to find a quality masseuse in a world where anyone with a massage table is allowed to set up shop. I think that’s pretty easy. People would connect with service providers the same way we connect with service providers today—through recommendations, reviews, and branding.

I recently had some oral surgery to remove a cyst from my jaw and repair the bone with an alloplastic graft of some kind. I’m pretty certain the guy was a duly licensed surgeon, and I have no particular problem with surgeon licensing. But in the real world, I didn’t come to his office by looking him up on a surgeon registry at the licensing agency. Indeed, I didn’t even check his licensing status. What happened is that he was recommended by my dentist, who was recommended by a co-worker. What’s more the surgeon my dentist recommended was on Washingtonian’s list of the best doctors in the DC area. He even got a special star next to his name for doubleplusgood recommending.

An important nuance here is that fraud is already illegal. You can’t tell customers you won a James Beard Award unless you actually won a James Beard Award. Training and certification programs that are actually reliable indicators of quality shouldn’t need the force of law to gain traction in the marketplace. Lots of forms of necessary regulation can’t be replaced by better enforcement of fraud laws, but lots of the alleged problems that require licensing as a solution are dealt with perfectly well by general fraud rules.

The Inescapability of Judgment

Mark Bittman sensibly suggests that a vegan diet isn’t necessarily a health one:

Which brings us to the powerful person: Oprah. Ms. Winfrey, who has been on more diets than the rest of us combined, challenged her staff to “go vegan” for a week. Intriguing, except her idea of surviving without meat and dairy — no explanation given for why we should go from too much to none — is to fill your shopping cart with fake versions of both, like meatless chicken breasts and dairy-less cheese.

But the goal is not universal veganism, which is pie-in-the-sky; it’s health and sustainability. And we get there by preparing real food, vegan or not. (Remember: Coke, Tostitos and Reese’s Peanut Butter Puffs — yum! — are all vegan.) The answer is not fake animal products, whose advocates argue that they’re transitional to a kinder-to-animal diet. Indeed, that’s good, but a real food diet is better.

Bittman instead suggests we follow “Michael Pollan’s ground-breaking slogan — ‘Eat food. Not too much. Mostly plants.’” Or as Bittman puts it “You want an acronym? Let’s try ERF: Eat Real Food.”

I like Pollan’s books and appreciate what he’s trying to say, but I think this concept of “real” food bears much less analytical scrutiny than its proponents tend to think. Tofu and soy sauce are both examples of processed foods, whereas french fries are “real” food. Or if there’s something processed and unreal about french fries, it’s the oil in which they’re fried. But you can barely cook anything if you start to rule vegetable oils out bounds. It’s true that the traditional peasant diets of mediterranean countries are very healthful, but there’s nothing healthful about the traditional peasant diet of Ireland or Russia. Obviously, nothing in the Bittman or Pollan ouevres suggests they’re unaware that an all-potato diet could be improved by introducing the occasional tofu stir fry. But I think this slogan captures less of what they mean than they think.

Has Russia Won The Future?

To inform some of the discussion from yesterday, here’s a chart of labor force shares by sector in the world’s 20 largest economies. This tripartite scheme is admittedly simplistic, but it’s the only way to get internationally comparable data on labor force allocation:

Some observations to stir the pot. Service sector jobs outnumber industrial jobs in all 20 countries. Service sector jobs are a majority of employment except in poor (China, India, Indonesia, Turkey) countries with many farmers. The three countries with less industrial employment than the United States (Canada, UK, Netherlands) are all more egalitarian than the United States. Italy has a larger share of people working in industry than does Germany. Of major economies, the country with the largest share of people working in industry is Russia. America’s agricultural sector employs freakishly few people, especially when you consider our low population density and I assume that different approaches to farm subsidies are the reason.

Nothing about this proves anything one way or another as regards specific policy questions, but the point is that industrial employment will occupy less than a third of the labor force.

The Strange Case of Pro-Confederate Monetary Policy

Mike Konczal has a post up about Ron Paul’s monetary policy hearing today, in which he notes that one of Rep Paul’s key witnesses is a neoconfederate kook:

I like the title: does monetary policy ever really work? As for the witnesses, Thomas J. DiLorenzo is a senior fellow at the Ludwig von Mises Institute. He’s got the Lincoln stuff down pat. He appears to be best known as an author of “>Lincoln Unmasked: What You’re Not Supposed to Know About Dishonest Abe (example, see this interview:“I saw it as my duty to spread the truth about what a horrific tyrant Lincoln was…. I think secession is not only possible but necessary if any part of America is every to be considered “the land of the free” in any meaningful sense…Lincoln was almost exclusively devoted to Hamiltonian mercantilism — high protectionist tariffs, other forms of corporate welfare, a central bank modeled after the Bank of England to pay for it all, and political patronage and matching politics….The entire agenda of Hamiltonian mercantilism was put into place during the Lincoln administration — along with the first income tax, the first military conscription law, and the creation of the internal revenue bureaucracy, among other monstrosities”).

Konczal situates this in the context of the long-running feud between the supercrank libertarians of the Mises/Paul faction and the more mainstream libertarians of the Koch/Cato faction. And, indeed, the Mises crew’s obsession with the evils of Abraham Lincoln is certainly a distinctive attitude. What’s more, until very recently support of activist monetary policy to support the economy in times of depressed output was deemed an acceptably libertarian approach by Cato types. Milton Friedman, back in those days, counted as a libertarian. The interesting thing, though, is that on the subject of monetary policy the Kock/Cato people have decided the Mises faction is right and have been loudly denouncing Ben Bernanke as a socialist bound to create ruinous inflation.

Part of the story here is partisan opportunism, and part is genuine economic conversion. The point, however, is that the combination of steep recession with Barack Obama becoming president has led to the mainstreaming of demand denialism in mainstream center-right circles. This is a big shift from where things were two years ago, when people debating the merits of different demand-bolstering instruments (fiscal vs monetary, tax-side vs spending side) but agreed on the overall theory.

The actual CSA, it’s perhaps worth noting, did in fact suffer from ruinous inflation.

House Members Discovering That Health Care Status Quo Is Really Bad

Marin Cogan reports on the mismatch between House members’ zeal to repeal the Affordable Care Act, and the realities of their experiences with the health insurance market:

“I have a niece who has pre-existing conditions, and I worry about her if she was ever to lose her job,” said Florida Rep. Richard Nugent, one of the freshman lawmakers who declined federal health insurance benefits.

I worry too. But Nugent should note something. He worries about this only in case his niece actually loses her job. If she voluntarily switches to another job, she’s fine. But that’s thanks to a regulation that allows people who maintain continuity of coverage to keep it notwithstanding adverse selection issues. And the only reason Nugent’s niece’s employer offers group health benefits at all is that large insurers receive massive tax subsidies to do so. The health insurance market mostly works for most people most of the time only because it already involves massive government intervention. In an actual free market for health care, everyone would be like an unemployed niece with a pre-existing condition. You’d phone up an insurance company and say “I want to buy insurance that will pay for my health care if I get sick” and the company will quite naturally expect that you’re already sick and refuse to sell it at any non-extortionate price.

19th Century Fusionism

From David Ricardo’s 1817 book, Principles of Political Economy and Taxation:

It is a truth which admits not a doubt, that the comforts and well being of the poor cannot be permanently secured without some regard on their part, or some effort on the part of the legislature, to regulate the increase of their numbers, and to render less frequent among them early and improvident marriages. The operation of the system of poor laws has been directly contrary to this. They have rendered restraint superfluous, and have invited imprudence by offering it a portion of the wages of prudence and industry.

Apparently the welfare queens have been holding us back for two hundred years now. Bryan Caplan gives this argument its most up to date form. I stand with common sense that if you give poor people more money, that makes poor people better off.