DC’s Metro as infrastructure

Popular naratives to describe the problems of the DC metro system:

1. Epitomizes America’s failure to invest enough in infrastructure.

2. Results from unwieldy government structure.

My view:

Metro is an example of over-investment and malinvestment in infrastructure.

Metro’s problem is less one of poor governance than one of lack of economic viability. The demand curve is too far below the cost curve.

What is new is that more of the people who live in DC and are inclined to do without a car are white and affluent rather than black and poor. I do not see why this strengthens the moral case for non-riders to subsidize riders, although I can see how it will strengthen the political ability to advocate for subsidies.

Book Review

Over at www.econlib.org, I have written a review of Thomas Leonard’s book on the early progressive economists. My essay is called Dismal Race “scientists.”

I am on econtalk this week

At www.econtalk.org discussing with Russ Roberts my forthcoming book. There is a lot in the book that we do not get around to discussing. That is because there is a lot in the book, in my view. It will be available in a couple of months.

Libertarians and Mass Shootings

I think that any way that you cut it, mass shootings will make people more statist. I have been saying for quite some time that this is not a libertarian moment, primarily because of concerns with terrorism.

The San Bernadino shooting is going to strengthen support for the anti-libertarians on both left and right. On the left, there will be more calls for gun control. On the right, there will be more calls for tightening immigration policy.

My reaction to the initial reports that said that there were three shooters was to think Charles Manson. That is, a psychopath with enough charisma to draw in some other people. As of this morning, that still would be my guess. A Charles Manson who happens to be Arab-American.

Of course, I have plenty of opportunity to be wrong. [update: one argument that goes against my view here.] But if my guess turns out to be right, then I do not think that this undermines the libertarian position in favor of admitting Syrian refugees or against intervening in the Middle East.

On the other hand, if my guess is correct, then I do think that this undermines the libertarian opposition to gun control. I believe that people who want guns for self defense do not need weapons that can fire many bullets rapidly. It should not take more than a couple of shots to ward off an intruder. There are a lot of proposals for gun control that serve only to take away liberty and do nothing to prevent mass shootings. But I can imagine proposals that would do a little bit to prevent mass shootings and do very little to take away liberty.

Off Topic: Don’t Take Up Swimming

I took it up in early October. About a month ago, I developed a bad cough, and which I just took to be “cough due to cold.” I curtailed many activities, including swimming. The other day, I felt better enough to try swimming again. Yesterday, not long after my swim I had a horrible runny nose, and I became suspicious. So, I did some Internet searching, and it turns out that breathing a lot of chlorinated air is not good for you. Or at least not for me.

Jonathan Haidt on Academic Monoculture

On the field of social psychology, he writes,

The lack of political diversity is not a threat to the validity of specific studies in many and perhaps most areas of research in social psychology. The lack of diversity causes problems for the scientific process primarily in areas related to the political concerns of the Left – areas such as race, gender, stereotyping, environmentalism, power, and inequality – as well as in areas where conservatives themselves are studied, such as in moral and political psychology.

As you know, I am concerned about a monoculture in economics, particularly in macroeconomics. I believe that the dynamics behind this monoculture are somewhat different than the ones that underly the alleged monoculture in social psychology. I think that macroeconomics came to be dominated by just a few professors who were so successful in placing their students that they came to dominate the entire ecosystem.

Is This True of Progressive Education?

Peter Berkowitz writes,

Progressives also abandon the idea of liberal education. Rather than transmitting the basics of the humanities and sciences, teaching the principles of freedom, and cultivating the capacity of students to think for themselves, progressivism supposes that the purpose of education is to mold students who think and act like progressives. They embrace the pedagogical creed of John Dewey, who held that “education is a regulation of the process of coming to share in the social consciousness”; that “every teacher” is properly “a social servant set apart for the maintenance of proper social order and the securing of the right social growth”; and that in instilling a democratic faith, the true teacher serves as “the prophet of the true God and the usherer in of the true kingdom of God.”

I think that the goal should be for students to know how to learn and how to search for truth. Am I so out of step with the times?

Solow vs. Solow

Robert Solow writes,

The custom is to think of value added in a corporation (or in the economy as a whole) as just the sum of the return to labor and the return to capital. But that is not quite right. There is a third component which I will call “monopoly rent” or, better still, just “rent.” It is not a return earned by capital or labor, but rather a return to the special position of the firm. . .The division of rent among the stakeholders of a firm is something to be bargained over, formally or informally.

Pointer from Mark Thoma. If this is true, and I believe it is, then the marginal product of a worker cannot be reliably measured, nor can it be proxied by a measure of the wage rate. That makes some of Solow’s early empirical work, and much that followed in its wake, somewhat problematic.

Recall what I wrote.

Separately, each worker’s contribution to the process is not marketable. It is the final product that can be sold. In a sense, there is a “production externality,” in that the finished product is worth something, even though the individual worker’s output is worth nothing by itself. The task of Coasian bargaining among the workers to come up with a way to allocate this externality is onerous, so it is handled by a manager in the context of a firm.

Also, see my post on the Alchian-Demsetz theory of the firm.

Questionable Journalism Regarding Maury Obstfeld

The WSJ blog writes:

Mr. Obstfeld said in 2012 that, should Berlin agree to backstop the debt of European countries, the eurozone as a whole would be better off if the bailout was unconditional, rather than requiring labor market reforms and budget controls. If Germany failed to bailout out weak southern eurozone members, he believed it would hurt Germany’s economy more than an unconditional bailout.

…The currency union requires stronger integration to overcome its vulnerabilities, Mr. Obstfeld wrote in a study of the lessons from the euro crisis. That means member governments would have to sacrifice far more of their economic sovereignty than they currently allow.

I believe that he said something along the lines of the second paragraph. The first paragraph sounds too extreme for any mainstream economist. I have made a few attempts to find a citation, but without success. Note that the first paragraph also strikes me as somewhat inconsistent with the second paragraph, because the latter seems to imply that he would expect bailed-out countries to have to give up some sovereignty.

In any event, Maury is a nice guy who subscribes to a technocratic view of the world that is quite different from mine. There is a group of economists, heavily represented at the International Monetary Fund, who will tell you that the world’s economic problems are caused by “global financial imbalances” (some countries save too much, others save too little) and that more management by the IMF is the solution. I, on the other hand, am among those economists who think that the IMF logically should have been abolished in 1971, when President Nixon ended the regime of fixed exchange rates.

It is easy to understand why the IMF did not consider me for chief economist.