How to Regulate Comcast and Verizon FIOS

Brock Cusick writes,

Require utility companies to lease space on their rights-of-way to at least four ISPs, at cost.

Call it infrastructure neutrality, or open leasing. This proposal should independently provide most of the benefits in changing the Internet companies’ status to “telecommunications service,” as mere competition between local firms will discourage them from withholding any service or level of service offered by their local competitors. This competition would thus provide the consumer protections that voters are looking for, while allowing Internet companies to remain more lightly regulated (and thus more innovative) “information services.”

This sounds like a terrific idea to me. Competition is not a perfect regulator, but it is a better regulator than the FCC.

Edifice Complexes

1. Here is my alma mater, Swarthmore. Trust me, they do not need this building. There are already hundreds of square feet of physical plant per student there.

2. Here is the University of Maryland.

Cole Field House would be reborn under a $155 million plan to convert the 59-year-old former basketball arena at the University of Maryland into an indoor football practice facility and “innovation” lab to help the school recruit athletes and others who are would-be entrepreneurs.

No doubt the funds for this were donated by someone with a deep love of education.

Are People Really Moving Back to Cities?

Joel Kotkin writes,

The last decennial census showed, if anything, that suburban growth accounted for something close to 90 percent of all metropolitan population increases, a number considerably higher than in the ’90s. Although core cities (urban areas within two miles of downtown) did gain more than 250,000 net residents during the first decade of the new century, surrounding inner ring suburbs actually lost 272,000 residents across the country. In contrast, areas 10 to 20 miles away from city hall gained roughly 15 million net residents.

I had the opportunity to discuss urban economics with Phil Longman the other night. He had many interesting points.

1. The distribution of income both within metro areas and across metro areas is much wider than it was in the 1970s. In the 1970s, Manhattan was not so much richer than Staten Island. New York was not so much richer than Detroit.

2. Some cities are now “colonial economies” in the sense that they are dominated by businesses owned elsewhere, with few local-owned businesses. He cited St. Louis as an example. When I grew up there, we had McDonnell-Douglas and Monsanto. Now even Anheuser-Busch is not locally owned.

3. So many venture capitalists are in San Francisco that it’s not clear that San Jose is still the capital of Silicon Valley.

4. Whatever happened to the death of distance? It seems that people will pay up to live in cities.

Of course, my theory is that cities are dominated by the New Commanding Heights of universities and hospitals. This brings in highly-paid professionals. So cities that were blue-collar in 1950 and became ghetto by 1980 are becoming yuppie now.

Kotkin’s finding of growth in outer-ring suburbs is really counter to the anecdotal picture of people being attracted by the new urbanism. I think it might be best to think about location choices in the aggregate as driven by supply elasticity. Take it as given that development in cities and close-in suburbs is restricted. If the overall trend is to move away from small towns and rural areas, then the increased demand shows up in P in the city and the close-in suburbs, while the Q shows up in the last place the pundit class would expect it–the distant suburbs.

Martin Baily Interviews Robert Solow

Solow says,

The French automobile industry, much to my surprise, turned out to be more capital intensive than the American automobile industry. So it was not that either. The MGI studies instead traced these differences in productivity to organizational differences, to the way tasks were allocated within a firm or a division—essentially, to failures in managerial decisions.

I would note that if this is the case, then it is possible that high executive pay reflects a productivity differential. Of course, if French auto executives are paid as much as American executives, that would spoil my argument.

Solow has a different take:

An interesting conclusion to me was that international trade serves a purpose beyond exploiting comparative advantage. It exposes high-level managers in various countries to a little fright. And fright turns out to be an important motivation.

Pointer from Timothy Taylor. The whole interview is interesting.

Other Growth Suggestions

1. Philip K. Howard has several complaints about the legal environment in the United States.

My favorite failure is civil service — designed to be “the merit system,” it instead makes it illegal to judge anyone based on merit.

He writes,

Law should be radically simplified into goals and governing principles, like the Constitution, and leave to accountable humans the responsibility to achieve those goals fairly and sensibly.

I received a lot of pushback on my last post on principles-based regulation. But I still think that it is a promising idea, and evidently so does Howard.

2. Jonathan Rauch argues that apprenticeships are a neglected way to improve human capital. Of course, affluent kids already have a very broad apprenticeship program. Except to maintain class distinctions, their program is called internships.

3. Peter Van Doren writes,

The literature is not very supportive of claims that simple changes in policy would improve productivity and real incomes. For every common argument about a simple policy change that would increase the productivity of land, labor, capital, and everything else that matters I have found compelling contrary or at least complicating evidence.


Posts on this topic by other writers are coming.

Tyler Cowen, Neocon

He writes,

Without the current and past American security umbrella, for instance, I believe much of Asia would be a far less free place than it is today, starting but not ending with Taiwan and South Korea.

I give Tyler credit for raising this issue in a forum least likely to be sympathetic to it. This is Brink Lindsey’s growth forum hosted by Cato, where Brink is inviting contributions from the liberaltarian crowd.

I have to say that when looking at places like Russia, Hungary, or the Middle East, my appreciation for the civilization vs. barbarism axis tends to increase. On my list of books to sample (not necessarily read the whole thing) is Bret Stephens’ latest, where he argues that the U.S. should act as the world’s policeman. I wonder whether he explains how the U.S. could do that without also becoming the world’s social worker.

UPDATE: Here is how Stephens starts out:

Where do you fall on the spectrum between internationalists and neoisolationists? Ask yourself the following questions:

Does the United States have a vital interest in the outcome of the civil war in Syria, or in Israel’s relationship with the Palestinians, or in Saudi Arabia’s contest with Iran?

Should Americans take sides between China and Japan over which of them exercises sovereignty over the uninhabited Senkaku Islands? Similarly, should we care whether Ukraine or Russia controls Crimea?

Is America more secure or less secure for deploying military forces in hot spots such as the Persian Gulf and the South China Sea?

My views on these issues are mixed. On the Middle East, I see the Syrian civil war as barbarism vs. barbarism. Similarly, the contest between Saudi Arabia and Iran. On Israel and the Palestinians, I understand that many people explain the Palestianians’ barbaric behavior as being caused by oppression, but I see it more the other way around. They could end oppression by being less barbaric. And I believe that the U.S. ought to support civilization in that contest.

On the second issue, my memories of the Vietnam era are salient enough to make me wary of pushing conflict on the basis of domino theory. Uninhabited islands strike me as dominoes that can be allowed to fall. Note that Stephens in effect equates Crimea to uninhabited islands, which suggests that it, too, is a domino that should be allowed to fall. I do not think that caving in there means that next thing you know Putin will be at the gates of Paris.

I think we are more secure for deploying military forces in the Persian Gulf and the South China Sea. If you press me, I will tell you that I believe that the U.S. navy and air support are the true world government, and without world government we would have major war.

If you think that pacifism and non-interventionism are ways of preventing major war, you have company. But my concern is that those policies only work if there is someone else doing the work of the world’s policeman. Being Swiss seems fine now, but if the U.S. had not intervened in World War II, it might not have been so peachy. And ultimately not so peachy for the U.S., either.

UPDATE: I wrote the foregoing before yesterday’s massacre in Jerusalem. If I have my geography right, the attack took place far inside the 1967 borders. It is an area where young observant American Jews go to study. The sight of Palestinians celebrating cold-blooded murder is something that I cannot put out of my mind. Even the Germans did not celebrate when they murdered Jews.

Dean Baker on Drug Research

He writes,

It is not difficult to envision alternative mechanisms to pay for the research currently being incentivized with patent monopolies. Several economists have proposed a patent buyout system, where the government would buy out patents and place them in the public domain. A simpler method, however, would be to have direct public funding. The government already spends more than $30 billion a year to finance biomedical research through the National Institutes of Health (NIH). It would probably be necessary to increase this amount by $50-$60 billion a year in order to replace the funding currently supported through patent monopolies.

This additional funding could probably best be channeled through a mechanism other than NIH, with private companies bidding for major contracts to support research in a variety of areas. By having a relatively limited number of prime contractors, who could then contract out as they please, we would avoid having a situation of the government micromanaging research. The contracts could then be renewed and/or expanded, depending on the company’s track record. The conditions of getting the funding would be both that all patents are placed in the public domain and also that all research findings are made publicly available on the Internet as soon as practical.

I agree that we should think outside of the patent box when it comes to medical research. In fact, in my essay for the growth forum, I also chose to propose an alternative to the patent system.

The Most Anti-Pigouvian Tax

James Hamilton writes,

Professor Shoven noted that the current structure of Social Security in some cases amounts to a pure tax on those who work for more than 35 years in order to transfer those funds to individuals who retire early. He suggested that one change we should consider would be to recognize the status of “paid-up workers.” The idea is that if you’ve already put in 40 or more years of paying into Social Security, at that point your personal Social Security bill would be declared to be paid in full, and neither you nor your employer would be asked to make any more Social Security contributions for as long as you continue working. This would create more incentive for older citizens to keep on working and for employers to want to hire them.

Does this apply to young workers any less than it applies to workers over 65? Let’s face it, the payroll tax is a tax on market work. In my opinion, there is no reason to discourage market work. Off hand, I would say that the payroll tax is the most anti-Pigouvian tax that we have. That is, it taxes something we want to encourage, when Pigou argued that we should tax things that we want to discourage.

Mission-Driven vs. Philanthropic

Peter Thiel says,

mission-oriented companies are often defined by a unique mission that maybe others don’t think is important, whereas a lot of the social entrepreneurship efforts gravitate towards things where you have many copycats doing relatively similar things.

From an interview with Ezra Klein. Pointer from Tyler Cowen.

One of the main recommendations of the Colander-Kupers book is to expand what they call the “for-benefit” sector. By that, they mean corporations that seek both profits and social benefits. To be fair, they tout this more as an alternative to government programs than as an alternative to profit-maximizing firms. As you know, I have been given to ranting against non-profits, on more than one occasion.

Technical and Communications Skills

Catherine Weinberger writes,

while math scores, sports, leadership roles, and college education are all associated with higher earnings over the entire 1979-1999 period, the time trend in the earnings premium was strongest among those individuals who participated in sports or leadership activities during high school and had higher levels of cognitive skills. Supporting evidence based on Census and CPS data matched with the Autor, Levy and Murnane (2003) job-task measures provides an independent observation also suggesting that the labor market increasingly favors workers with strong endowments of both cognitive and social skills. These findings, coupled with evidence of growing employment, suggest increasing complementarity between cognitive and social skills among young workers.

Pointer from Tyler Cowen, who sees the findings in an average-is-over context. Indeed, if cognitive skills and social skills are both somewhat scarce and imperfectly correlated, increasing complementarity would lead to greater inequality.

I would always tell my AP Statistics students that they were learning technical communications skills. I would say that communicators without technical skills end up as baristas. Those with technical skills but poor communication skills will end up as Dilbert, working for a boss who appears to be an idiot.