Monthly Archives: March 2016

Fixing the DC Metrorail System

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Thomas A.Firey writes,

Proof of the system’s failure is reflected in the fares Metrorail customers pay. Currently, fares cover less than half of the system’s operating and maintenance expenses—and little to no capital costs. WMATA officials, fearing public backlash, have no interest in raising fares to recover more of the cost. Put simply, Metrorail’s own users judge the system to not be worth its cost.

He offers this shocking solution:

Public officials would better serve both Metrorail customers and the broader public by terminating the rail system and shifting attention to bus transit and the road system.

I think it is fair to say that the idea of terminating the DC Metro rail system is inconceivable to most people, no matter how much its costs exceed its consumer value.

Rail-based transit systems are a symbol of the central planning mindset. They are rigid, impersonal, and in most cases economically unsustainable.

The Republican Crack-up

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Joel Kotkin writes,

GOP libertarians want more social freedoms; social conservatives want less. Neocons hunger for war, while most other Republicans, both libertarian and constitutionalist conservatives, reject Bushian interventionism. The rising populist wave now inundating the party and driving the Trump juggernaut both detests, and is detested by, the party’s media, corporate and intellectual establishment.

Apart from the uncharitable “hunger for war” phrase, this seems right. But political trends have a short half-lives nowadays. While I think that the Republican Party will be decimated this fall, I don’t believe that a progressive triumph will prove stable.

The Gatekeeping Function in Research

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Ronald Bailey writes,

The current peer review process serves as both gatekeeper and evaluator. Post-publication review would separate these functions by letting the author decide when to publish. “Making publication trivial would foster a stronger recognition that study results are tentative and counter the prevalent and often wrong view that whatever is published is true,” Nosek explains. Another big benefit, as Nosek and his colleagues argued in 2012, is that “the priorities in the peer review process would shift from assessing whether the manuscript should be published to whether the ideas should be taken seriously and how they can be improved.” This change would also remove a major barrier to publishing replications, since novelty-seeking journal editors would no longer serve as naysaying gatekeepers. Ultimately, Nosek would like the OSF to evolve into something like a gigantic open-source version of arXive for all scientific research.

Think of letting blogs can do the job of editors and peer reviewers.

My Essay on Cultural Intelligence

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Published in National Affairs. An excerpt:

Economists and scholars of public policy are not the only ones conducting this research; students of human behavior are also finding support for Burke and Hayek’s theses — that the knowledge embedded in social norms and practices is vast compared to the knowledge of even the brightest, most educated individuals. As individuals, we cannot figure out very much by ourselves, but we learn a remarkable amount from others. In short, some social scientists in recent years have been building (or rebuilding) a powerful case for cultural intelligence.

You can read it as an argument for a libertarian/conservative alliance rather than for a liberaltarian alliance. Please comment specifically on the essay itself, and only after reading the whole piece.

Why Did Saint Louis Decline?

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Brian S. Feldman writes,

The Wheeler-Rayburn Act of 1935 prohibited electricity, gas, and water utilities from speculating in unregulated businesses with ratepayers’ money and ensured that companies like Union Electric would remain locally headquartered and focused. The Robinson-Patman Act of 1936 protected small retailers by prohibiting manufacturers from giving larger discounts to chain stores, and the Miller-Tydings Act of 1937 did the same by permitting manufacturers to set a minimum price at which their goods could be sold. These laws safeguarded local-area retailers like Central Hardware and Bettendorf-Rapp supermarkets, as well as neighborhood pharmacies, bakeries, restaurants, clothing stores, and grocers—including those servicing the city’s predominant minority and African-American communities

These sorts of restrictions on competition were repealed in the 1980s, and subsequently many local St.Louis businesses were bought out or were driven out of business.

Pointer from Tyler Cowen. My remarks:

1. I thought that Phil Longman was planning to write this article.

2. As a St. Louisan, I remembered all the advertising slogans in the article. It never occurred to me that “I’m a meat man, and a meat man knows, the finest meats m’am are, Mayrose.” The one slogan that they author forgot to include is “Earn 4-1/14 on each dollar you own, at Community Federal Savings and Loan.”

3. The fact that some St. Louis businesses are no longer headquartered in St. Louis or no longer are in business is not some grand tragedy. It is part of what happens in a dynamic economy.

4. Why did the St. Louis advertising and PR industries lose their prominence? I doubt that public policy was the main factor.

Liberty, Conformity, and Academic Diversity

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Miles Kimball writes,

John Stuart Mill argued that protecting civil liberty is not enough; social liberty must also be protected. It is possible to force most people into conformity with prevailing opinion by criticism, disapproving glances, and mockery of nonconformity.

Pointer from Tyler Cowen.

I am afraid that this is the price that we pay for living in society. Any cohesive society will reward cooperators and punish defectors. Social sanctions are going to be part of that.

To put this another way, I would argue that conformity is usually good and nonconformity is often bad. Yes, we want our society to accept some nonconformity. However, I believe that those who profess to want to live in a society with a much higher tolerance for nonconformity are probably kidding themselves. Note that in the 1960s how quickly the expressions of non-conformity (long hair, etc.) came to be themselves enforced by standards of conformity.

In another interesting paragraph, Kimball writes,

As an academic, I notice how powerfully the opinion of other economists–whether right or wrong–operates in controlling the behavior and the research priorities of the typical academic. It is hard to think of many people who could be more safe from harsh practical consequences for a dissenting opinion than tenured professors, yet most still meekly follow the opinion of the crowd within their discipline. Is this the way it should be? Is this the way to best advance science? I don’t think so. Surely, a bit greater variance in expressed opinion would be more productive of scientific progress than the degree of conformity that prevails within most scientific disciplines, including economics.

My comments.

1. Do you remember what Paul Romer said?

The only way I can see to protect scientific discourse is to limit entry into the discussions of science.

2. If you are looking for an optimum degree of tolerance for divergent ideas, I do not think you will find it at either 0 percent of 100 percent. I do think that right now in economics, the tolerance for divergent ideas is too low. However, it is better than it was 30 years ago.

Eliminate the Middleman

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In a Russ Roberts podcast, Marina Krokovsky says,

I mean, if we really stop to think about what we do and the role that we play in our own social network, we are all middlemen.

Listen to the whole thing. By the way, there is a nice profile of Russ Roberts at a site called priceonomics. Recommended

Some pundits predicted that the Internet would eliminate middlemen, instead linking producers and consumers directly. I think that this is a misleading way to think about things.

In The Book of Arnold (which will appear this fall I hope), I point out that very few people engage in producing goods and services directly for consumers. Patterns of specialization and trade are highly complex, and nearly all of us are involved in intermediate and support roles.

What we mean by eliminating the middleman is a re-arrangement of the patterns of specialization and trade. When a pattern of specialization and trade involving physical books becomes less sustainable, Borders Books goes out of business. Other processes for connecting authors with consumers use different patterns of specialization and trade.

I think that what ought to be eliminated is the concept of “middleman.” I do not believe that it is a useful concept. It is misguided to think of economic activity as “production,” “consumption,” and “other.” (Note, however, that standard economic textbooks do nothing to discourage this way of thinking.) Instead, it is better to think in terms of the Austrian concept of roundabout production, the Smithian concept of division of labor, and the Schumpeterian concept of creative destruction. Put those together, and you have PSST.

The Early American Economic Association

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Bernard A. Weisberger and Marshall I. Steinberg quote from a draft of the founding document of the American Economic Association

We regard the state as an educational and ethical agency whose positive aid is an indispensable condition of human progress. While we recognize the necessity of individual initiative in industrial life, we hold that the doctrine of laissez-faire is unsafe in politics and unsound in morals; and that it suggests an inadequate explanation of the relations between the state and the citizens.

We do not accept the final statements which characterized the political economy of a past generation. . . . We hold that the conflict of labor and capital has brought to the front a vast number of social problems whose solution is impossible without the united efforts of Church, state, and science.

They note that in the final version, the phrase “the doctrine of laissez-faire is unsafe in politics and unsound in morals” was removed. Their narrative (interesting throughout) laments the decline of left-wing radicalism in the AEA since the early days.

Thomas C. Leonard’s Illiberal Reformers covers the same ground, from a much less sympathetic perspective. About that book, the authors write,

Leonard argues that these views are central to, and thus taint, his [AEA founder Richard Ely] scholarship and those of his academic disciples. But Ely’s views were by no means unique among many intellectuals of his time, including those, like Godkin, who were his staunchest opponents, and those views certainly don’t invalidate the rest of his thinking. Above all, he considered himself an advocate for workers against exploitation by economic elites. Certainly, the set of people for whom he advocated is much narrower than would be the case among self-described progressives today. In those days, just as now, the interests of workers in developed countries were often pitted against those even more unfortunate than themselves, and consequently, many workers and their advocates supported what were in effect restrictions on labor supply in order to reduce their competition. The chief target of Ely’s scholarship and advocacy was the hegemony of free-market economics, against which he offered a vision of contending interests vying for shares of the pie, a contest in which bargaining power determined all.

I am only a little way into Leonard’s book, and I may only skim it. He uses the phrase “reform as vocation” to describe Ely’s cohort. That is, they professionalized the role of the progressive policy advocate. The economist became the scientific expert, based in academia, properly credentialed, who would be called on by political leaders for advice to better engineer the economic system.

From Weisberger and Steinberg’s point of view, the reformers are genuine, while their opponents are merely tools of the existing order. They certainly would fail an ideological Turing test. My guess is that Leonard would fail also, although not nearly as badly.

Overblown, you say?

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Timothy Taylor writes,

I’ll add my obligatory reminder here that just because past concerns about automation replacing workers have turned out to be overblown certainly doesn’t prove that current concerns will also prove out to be overblown. But it is an historical fact that for the last two centuries, automation and technology has played a dramatic role in reshaping jobs, and also helped to lower the average work-week, without leading to a jobless dystopia.

He quotes from a speech warning of technological displacement of workers that was given in 1927 by then Secretary of Labor James J. Davis.

Taylor writes as if the dire prediction proved false. And yet, within 5 years, unemployment hit 25 percent. Those dots connect in the PSST story, but too many economists are fixated on Keynesian AD.

Organizational Evolution

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Rainer Kattel and Errki Karo write,

we can argue that the history of innovative public sector organizations starts from a Weber Type I organization that is dynamic, innovates often in policies and regulations, and resides outside of typical government operations, and then moves then to a Weber Type II organization that is professional, and centrally governed with substantial funding and policy means.

Pointer from Alberto Mingardi. The entire post is interesting.

I think that it is natural for organizations, particularly in business, to take more risks early in their life cycle. When you are just starting out, the upside of a gamble is more important than downside. When you are established, the reverse holds. Within an organization, a major purpose of bureaucratic rules and habits is to tamp down on risk taking. For the most part, this is a good thing.