Matt Yglesias

Murder in Libya

Just a placeholder to note that I, along with the rest of the world, am aware of the massacres being perpetrated against protestors in Libya today and to express my hope that justice will be done.

Building DC Out

There’s a giant surface parking lot amidst downtown Washington, where the convention center used to be but construction on the replacement will begin within months and then there’s little space left for downtown development:

Gerry Widdicombe, Director of Economic Development for the Downtown Business Improvement District (BID) notes the difference 185,000 s.f. of retail will make for downtown. “This is really the capstone for downtown DC. We have about 5 million square feet [of buildable space] left on vacant lots or dilapidated office buildings…the old convention center site is about 2.5 million [s.f.] of that, 1.8 million is the air rights building, then we’re almost built out.” Widdicombe credits former city leaders with setting parameters of a strong residential presence rather than solely office space – despite the commercial’s greater tax base value, and for fostering a vision of a retail center. “Everything’s working pretty well. The thing we’re lacking is retail, hopefully we’ll have an Apple store, maybe a Bloomingdales, to get us over 500,000 s.f. of destination retail.” He notes that when the BID formed downtown had 95 surface paking lots and 30 dilapidated buildings. “Now we’ve got 5.”

What we need are some taller buildings. With taller buildings we wouldn’t face this sharp tradeoff between “parameters of a strong residential presence . . . despite the commercial’s greater tax base.” Instead, we’d get a ton more office space up to the point where commercial rents decline enough to make the market indifferent between housing and offices. The denser volume of people and jobs would make downtown DC a more attractive place to locate destination retail.” And the stronger tax base would allow us to have better public services and lower tax rates.

I know that many people like the look and feel of a city with no skyscrapers. But DC has both a lot of problems and a fair amount of extremely valuable land. Failing to use the land efficiently is extremely costly and makes it much harder for us to solve our problems.

Happy President’s Day!

I thought this might be a fun occasion for a trip to the Confederate White House down in Richmond. After all, Jefferson Davis was a kind of President. We’ll see….

The Value of Diversity

Debating Mike Pence’s amendment to defund Planned Parenthood, Rep Jackie Speier talked about her abortion (“For you to stand on this floor and suggest that somehow this is a procedure that is either welcomed or done cavalierly or done without any thought, is preposterous”) and Rep Gwen Moore discussed her experience as a teen mother.

Dana Goldstein makes a smart point about this:

These two women serve as reminders of why we need many more women and people of color serving in public office. To suggest so much is often derided as playing “identity politics,” but really, it’s just an acknowledgement that people with identities that differ from the status quo of political life–old, white, affluent, and male–have experiences that add something to the public debate and decision-making process. They’ve been single mothers. They’ve endured the tragedy of losing a wanted pregnancy. They’ve been poor.

I think people would appreciate this point better if they understood the fact that public opinion and interest group politics only constrain politicians very loosely. Both of those factors matter, of course, but politicians actually have a fair amount of autonomy. What they think in their heart—and especially which priorities are dear to them—actually makes quite a bit of difference. People with different backgrounds and life experiences are likely to have different ideas about what matters, and that can really change political outcomes.

Politics Under Autocracy

People sometimes look at the sometimes-pathological political process in the United States and then look at rapid economic growth in the People’s Republic of China and conclude that somehow in an authoritarian country you don’t have politics or special interests. But it’s not true, politics happens everywhere—China, America, North Korea, anyplace. The recent events in Egypt have brought forth a lot of stories that illustrate the point well, including today’s Anthony Shadid article on a town built by patronage.

The Fantastic Fitzgeralds

Gail Collins:

In Wisconsin, the new Republican governor, Scott Walker, wants to strip state employees of their collective-bargaining rights because: “We’re broke. We’ve been broke in this state for years.” Wisconsin’s Democratic state senators went into hiding to deprive the Republican majority of the quorum they need to pass Walker’s agenda. The Senate majority leader, Scott Fitzgerald — who happens to be the brother of the Assembly speaker, Jeff Fitzgerald — believes the governor is absolutely right about the need for draconian measures to cut spending in this crisis. So he’s been sending state troopers out to look for the missing Democrats. The troopers are under the direction of the new chief of the state patrol, Stephen Fitzgerald. He is the 68-year-old father of Jeff and Scott and was appointed to the $105,678 post this month by Governor Walker. Perhaps the speaker’s/majority leader’s father was a super choice, and the fact that he was suddenly at liberty after having recently lost an election for county sheriff was simply a coincidence that allowed the governor to recruit the best possible person for the job. You’d still think that if things are so dire in Wisconsin, the Fitzgerald clan would want to set a better austerity example.

A helpful reminder that patronage is the practical alternative to bureaucratic civil service rules. Though to be fair, Charlie Peters memorably made the case for the spoils system over 20 years ago in The Washington Monthly.

What Does It Mean To Have An Overpaid Public Sector?

In the wake of yet another study comparing private sector and public sector compensation, I continue to think the question of is a bit ill-posed. You need some kind of concept of an alternative. Carmelo Anthony is “overpaid” in the sense that other players making identical salaries are clearly superior, to wit LeBron James. But viewed in another light, James and Anthony are both underpaid relative to what they could command on an open market unconstrained by salary caps and the details of the collective bargaining agreement. Yet on the third hand, James at least has already shown some willingness to forego salary in pursuit of playing alongside Dwayne Wade and Chris Bosh. Or maybe he’s just savvy about the tax implications of playing in Florida. Alternatively, there’s a “just price” account by which star athletes are systematically overpaid since the work of a mere entertainer is often thought to lack social value.

What does this have to do with the public sector? Think about your community. Or, rather, I’ll think about my community. It seems to me that if we cut MPDC officers’ compensation by ten percent, that this would end up having a deleterious impact on the crime situation. So I don’t think the cops are overpaid. By contrast, though I have absolutely no idea what the eight manicure licensing enforcement officers employed by the state of Kentucky are paid, I’m certain that it’s too much. What bad consequences will flow from cutting their pay? Nothing. But the issue here isn’t “overpaid” manicure inspectors, it’s that Kentucky doesn’t need to be employing these people at all.

At the federal level, it’s now cliché to deplore talk of cutting spending by cutting “waste and abuse.” The recent focus on public sector pay largely strikes me as a revival of the same trope. In either case the name of the game is to persuade people that lower taxes are compatible with an identical level of government services. We’ll have all the same people do all the same stuff but just pay them less! I don’t buy it. Of course if you cut teacher salaries across the board they don’t just all quit and leave to be replaced by worse people. But what happens at the margin is that the best people leave, to be replaced by worse ones. There are (big) problems with teacher compensation schemes in the United States, but that doesn’t solve any of them.

Bad Ideas

Chris Hayes tweeted yesterday “Hard at moments of maximum polarization to retain an open mind and not demonize ideological foes. It’s Power we stand against, not people.”

It’s a nice sentiment. But I think it also reflects a widespread tendency in political dialogue to underrate the idea that actual mistakes and bad ideas are a source of political problems. It gets easy to think that the broad public’s ignorance is irremediable and the elites on “the other side” are either hopelessly corrupt or else hopelessly stupid. But if I think about myself, I think I’m constantly improving my own understanding of politics and policy. Does that mean I was hopelessly corrupt or hopelessly stupid 18 months ago? I don’t think I was. So why should anyone else be any different? It’s always possible to improve my own understanding and so I hope other people’s understanding can and will be improved too. Meanwhile, sixty years ago most adults hadn’t finished high school while even today a large share of adults can’t read which is going to be a large barrier to both the formation and the expression of sound political ideas. But these are remediable problems, just as I could (and should! and will!) obtain actual information about what Swedish labor unions do instead of speculating as I do in the post below this one.

Labor Unions and Me

Ezra Klein’s weekend question: “Almost forgot! Have you or anyone close to you belonged to a union? How did that change your impressions of organized labor in general?”

I’m generally speaking an out-of-touch pointy headed elite, but as it happens throughout my life my father has been a union member. Specifically, he’s in the Writers’ Guild of America a small (but important in its sector) AFL-CIO affiliated union. He’s even been an official in the union.

The main thing I’d say I learned from that is about how difficult it is to maintain unionization gains in the context of a union-hostile environment. In television there’s been a big move away from using unionized writers and unionized actors in favor of shows oriented around non-unionized “real people” as the performers and non-unionized “editors” and “producers” to create the storyline. The distinctions here are metaphysically questionable but they hold up legally, and the US policy environment makes them very difficult to fight. The way to organize “reality” TV, it seems to me, would be through secondary strikes. But that’s illegal. The studios are, however, allowed to execute what amounts to secondary strikes in reverse in replace union-made scripted shows with with non-union “reality” ones. This not only directly weakens the land of labor in collective bargaining, but it sets up a dilemma. The capital of TV studios naturally flows to the most profitable sectors of television. So insofar as labor succeeds in extracting a larger share of the surplus in scripted programming, that merely accelerates the shift to non-scripted programming. Alternatively, labor can seek to slow the shift to the non-scripted sector by reducing its demands for workers to get a larger share of the surplus. Either way, the prognosis is bad unless it’s actually feasible to unionize the non-union sector which under the Taft-Hartley legal regime it isn’t.

This is structurally the same problem faced by the United Auto Workers vis-à-vis factories in “right to work” states. I think the classic postwar American dynamic of an economy with a large minority of the workforce unionized is fundamentally unstable. In the long-run the two equilibria are toward a non-union economy or else toward the Nordic model where virtually everyone is in a union. In the latter case, I think the unions become organizations of a more political character than anything else. In theory, Swedish labor unions could use their dominant labor market position to increase workers’ compensation by making Swedish firms less profitable than non-Swedish ones, but that would be bad for everyone. What you get instead is a kind of Mirror Universe version of the Chamber of Commerce, a politically powerful institution interested in maximizing the income growth of the median Swede rather than the median Swedish CEO.

Separation of Teaching and Credentialing

Another thing to consider about college costs is the strange way that we’ve fused the instruction and credentialing functions. The supply of prestigious credential-bestowing institutions is necessarily constrained because that’s what it means to be prestigious. But there’s no reason to think that it’s necessarily expensive to operate a prestigious credential-bestowing institution. MIT isn’t prestigious because its TAs are unusually competent at grading problem sets. Teaching by contrast seems expensive to do properly but also in principle open to unlimited competition.

But right now a lot of our conventional practices are upside down. For example, Paul Krugman and Greg Mankiw are both high-profile economists attached to prestigious institutions (Princeton and Harvard) who both have introductory economics textbooks. One is a liberal and one is a conservative. Now suppose that instead of having competing economics textbooks they came together to collaborate on creating the Mankiw-Krugman Introduction to Economics Certificate. The MKIEC would be a test, basically, administered on regular dates and it would say “hey, these famous guys say people who get a good score on this know introductory economics.” Of course you’d have a problem with regulatory and accreditation cartels. But even so, there could be some value. Personally, I sometimes need to admit in a slightly embarrassed tone that I’ve never actually taken an intro economics course. The best I can say is that I have read both the Krugman and the Mankiw textbooks and I think I understand the material well enough to be taken seriously by economics bloggers with PhDs and everything. But if I had a test blessed with the good housekeeping seal of approval of an ideologically diverse set of famous economists, that would have some value to me.

But what’s more, if you could somehow persuade Harvard and Princeton to both start giving the MKIEC test to their own undergraduates the ball would really be rolling. Suddenly any institution in the country—an accredited college or otherwise—could compete on a level playing field with fancy ivy league schools in terms of teaching introductory economics. Then instead of a buch of institutions competing to recruit the most famous economists to teach their intro classes or competing to recruit the students with the highest SAT scores, you’d actually be competing to deliver skills in a cost-effective manner because the prestige factor has been outsourced to MKIEC.

Montana Considers Bill To Repeal Science

Cute:

Republican Rep. Joe Read of Ronan aims to pass a law that says global warming is a natural occurrence that “is beneficial to the welfare and business climate of Montana.”

This seems like fruitful territory. Imagine what could be achieved by simply passing laws that say tax cuts raise revenue and defense spending doesn’t count as spending.

Disrupting College

As Tyler Cowen suggests my view of the college cost conundrum is that this is likely to be tackled initially at the low end. As Mark Kleiman says, to solve the Baumol effect problem in education you’d basically need to start offering something that doesn’t at all look like our canonical image of a college. Incremental change in what the University of Michigan does won’t cut it, you’d need a qualitatively different kind of institution. But to create something that’s qualitatively different from, but as good as, and also cheaper than the University of Michigan would be a mind-boggling logistical and regulatory challenge.

What you could plausibly hope to see happen is the creation of an institution of higher education that’s (a) much worse than the University of Michigan, (b) better than nothing, (c) radically cheaper than the University of Michigan, and (d) scalable. Then you could imagine a model like that moving incrementally up the quality ladder. CAP put out an interesting paper from Clayton M. Christensen, Michael B. Horn, Louis Soares, and Louis Caldera laying out some of the fundamentals here.

I know a lot of people, especially people working in or around academia, find this kind of talk unpleasant. But people thinking about education really do need to confront the Baumol problem. Around the margin, government subsidies can and should step in to make college affordable to talented students from poor families. But tuition subsidies as a share of GDP can’t just rise every year. Either a college education will turn over time into something that only a narrow elite can afford, or else our idea of what “a college education” looks like has to transform into something with a lower cost structure and more scalability. Even people who do focus on the cost-side like Matthew Kahn here often seem to me to be looking too much at the level rather than the shape of the curve. If tuition leapt 50% then stayed flat as a share of income, that would be fine; 5% a year forever isn’t sustainable.

Collective Bargaining Map

I’d been hoping to find a map of states’ collective bargaining policies and Josh Marshall found one:

As with a lot of things in American life, it’s all tied up with region, history, and political culture. Plenty of states seem to manage to have budget crises much severe than Wisconsin’s with less union-friendly legal regimes.

Cutting $100 Billion

My colleagues Michael Ettlinger and Michael Linden have put together a useful interactive tool that lets you try your own hand at cutting $100 billion out of the domestic discretionary budget. It’s, um, hard! Especially if you take the view that the country shouldn’t eat its seed corn by slashing research and infrastructure spending, you basically have no choice but to hammer the poor and pare back all kinds of regulatory agencies and just kind of hope that doesn’t make it too easy for people to get away with malfeasance.

Of course I suspect that to many conservatives making it easier to get away with malfeasance is feature and not a bug.

Impossible Tax Swaps

GS writes:

On ‘grand bargains’ and regressive cuts…

Doubling the gas tax would bring an additional 20-30 billion in revenue… it would also have a significantly positive environmental impact.

Why not trade a 20-30 billion tax increase for a 20-30 billion tax decrease on, for example, FICA?

That’s easy—status quo bias. This is good policy, but like anything that that swaps FICA for anything it’s bad for retired people. And like anything that begins to dismantle America’s sprawl-driven industrial policy it’s bad for people who drive a more than mean amount and auto firms that sell lots of SUVs and pickup trucks. What’s more, some people would be disquieted about the potential destabilization of dedicated funding streams for Social Security and transportation. In a political system that permits thousands of ways to kill a proposal, the change won’t be made.

In America, it’s very difficult for policy to make modest shifts. Instead, the vast majority of the time nothing happens. Then sometimes you get big shifts. I’ve learned recently that in technical terms the policy change curve has a leptokurtic rather than normal distribution.

The Death of The Recordings-Sale Industry

Via Brad DeLong a striking chart that’s mislabeled “The Death Of The Music Industry”:

This measures something that’s both larger and smaller than the “music” industry. The newspaper industry isn’t the words industry or even the news industry. People still listen to music. People still play music. People who play music even still earn money. But the business of selling recordings of music is shrinking. Which, of course, is exactly what ought to be happening to it. Distributing a digital copy of an album to a person’s computer is much cheaper than manufacturing and distributing a physical CD to a retail store. In a competitive market, the price of a widget ought to approximate the marginal cost of producing an additional widget. That’s one reason why this blog is free to read. Thanks to copyright, a recordings-seller does have some level of market power to allow him to seek monopoly rents. But there’s a pretty high degree of substitutability between different songs, so the competition is still pretty intense and the prices are low.

This is one reason why I would discourage bands from trying to underprice tickets at their own shows as a reward to fans. Since digital copies of recordings are non-rival and basically free to make, any non-zero sale price entails some deadweight loss. And since concert tickets are necessarily scarce, any sub-market price entails some deadweight loss. The optimal strategy for a popular band that wants to do something nice is market pricing for concert tickets, plus free recordings. Or even better, you could release your records into the public domain.

Endgame

Like a train on a track:

— The ECB’s price stability cartoon.

— Interesting corporate income tax reform idea.

— I don’t mind ecommerce killing off sales taxes . . . eventually we need to switch to carbon tax.

— Mitt Romney would very much like to be president.

— Turks and Caicos: what went wrong?

Florence and the Machine, “Dog Days Are Over”

Union Member Voting Behavior

I thought I’d look up how union members voted in the 2010 Wisconsin midterms. The exit polls didn’t actually provided the data, but they did ask about whether you live in a union household. Not surprisingly, union households like Democrats:

That’s a strong showing for Barrett but not nearly as strong as, say, his pull of 87 percent of the African-American vote. Had unions delivered 70 percent of the union household vote to Barrett, he would have won. Russ Feingold pulled 59 percent of the union household vote in his failed re-election bid. Nationally, 61 percent of union household voters pulled the lever for a House Democrat in 2010.

Shakespeare and Copyright

Your bizarre argument of the day is Scott Turow, Paul Aiken, and James Shapiro invoking Shakespeare in defense of copyright maximalism. You’d think an essay on the subject of copyright and Shakespeare might take note of the fact that there was no copyright law anywhere in the world until England’s 1709 Statute of Anne, almost 100 years after Shakespeare’s death.

Some other things to consider: Shakespeare’s storylines? Largely ripped off from other authors. Merchant of Venice, etc. would all be illegal today. Shakespeare-derived works? West Side Story would be illegal had today’s standards been around in the Bard’s time. Think of the children? Is it a good thing or a bad thing that a kid today can download a copy of “Julius Caesar” for free? Would the world be a better or a worse place if every high school performance of Macbeth required you to pay royalties to Shakespeare’s heirs? The public domain is an excellent thing. The Bard put it to good use in constructing his works, and artists in subsequent centuries have put the public domain status of Shakespeare’s material to good use themselves. But thanks to endless retroactive copyright extensions, nothing new will ever enter the public domain. It’s a problem.

The Happiness Manifesto

I made Nic Marks’ “The Happiness Manifesto” my second-ever Kindle single. I’m basically in agreement with what he has to say, but like with most writing on this subject the problem is that the most insightful point comes in the form of quoting a Bobby Kennedy speech that’s over 40 years old:

Too much and for too long, we seemed to have surrendered personal excellence and community values in the mere accumulation of material things. Our Gross National Product, now, is over $800 billion dollars a year, but that Gross National Product – if we judge the United States of America by that – that Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman’s rifle and Speck’s knife, and the television programs which glorify violence in order to sell toys to our children. Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.

Over the long run, I’d say the quality of our children’s education does feed back into GNP/GDP in a pretty clear way. But besides that quibble, this is dead on. What’s less clear is how far we’ve advanced from this point to thinking up smart policy implications. The problem with underplaying the importance of growth in rich countries is actually well indicated by this quotation from Marks who says we ought to:

Create good work … Create a well-being economy based on good work, good work in the right quantities. Unemployment has terrible effects on the well-being of the unemployed, and job insecurity affects everyone. Work can profoundly affect our well-being by providing us with purpose, challenge, and opportunities for social relationships; it is a meaningful part of our identity. Some people have little or no work; they need support to help find more work. Others overwork and need to be encouraged to reclaim their time for other purposes that would bring them more happiness. Governments should systematically promote well-being at work, highlighting best practice and helping to redistribute work throughout the economy more evenly.

The problem is that as long as technology continues to improve, then some workers will find themselves able to produce more goods and services than is currently the case. This will lead to some job losses. If it also leads to economic growth, then it will also lead to job creation and over time you have no increase in unemployment but you do have an increase in material living standards. Absent growth, however, technological improvement will only lead to idleness. Even if work-sharing can be made to work as a solution (and I think there are real limits to this strategy) you really are going to start running low on work. The right solution to this is to organize society along the lines of a utopian commune where people engage in hobbyist production and possessions flow “from each according to his ability to each according to his means.” But nobody’s been able to make small voluntary communes stable and efforts to use coercion to organize large-scale non-market on an enduring basis have not exactly had utopian results.

I think this is an issue worth taking seriously. Owen and Fourier were on to something. But nobody’s really worked it out. For now capitalism + social insurance + quality public services + macroeconomic stabilization seems to be about the best we can do.