I put some of my worries about market urbanism being overrated by its proponents in an earlier post, and I thought I would clarify a bit.  I fully agree that we should deregulate building in major cities such as San Francisco, and just as importantly (or more so) stop rising cities such as Atlanta or Houston from going down that same route.  That said, I’m still not happy with how market urbanists handle the distributional implications of their proposals.  Let’s try putting the argument in terms of tax incidence.

If urban land currently reaps monopoly rents, a new tax on building largely will fall on the value of land.  Both Ricardo and Henry George understood that.

Similarly — and here is the important point — the gains from removing taxes/restrictions on building largely will be captured by landowners for exactly the same reason.  More stuff will be built, urban output will expand, land still will be the scarce factor, and by the end of the process rents still will be high.

In other words, if we deregulate building, landowners will capture a big chunk of the benefits.  I’m fine with that, it is a Pareto improvement and I am not a capuchin monkey.  But as I read market urbanists, many are more prone to talk about making various major cities affordable again as part of a broader reformicon program.  I’m not convinced that will happen, or if so the case has not yet been made.

Just think of urban space as “a license to produce in a high MP of labor area.”  As long as the city is not hitting diminishing returns, issuing more licenses probably will not lower their marginal value and thus will not lower rents.

Maybe — maybe, maybe, maybe — if you remove so many building restrictions, land won’t be the scarce factor any more and the gains from the tax reduction will be distributed in many directions.  Alternatively, you may have a less simple model of tax incidence than the “first order effect” I laid out above (try this pdf too).  Great, let’s try to figure that out, but then building restrictions may not much raise rents!…let’s be consistent.

In any case, I think the above is the basic dilemma facing market urbanists.  It can do much to enhance efficiency and productivity, with attendant trickle-down benefits, yet without much solving the distributional problem in any direct way, as it is sometimes advertised as doing.

landowners

By the way, have I mentioned that I love landowners?  My school, George Mason University, is a significant landowner.  So were the people who built up the northern Virginia area, such as Til Hazel.  Great stuff, great efforts, great people.  Landowners, love ’em or leave ’em.

p.s. I also love trickle-down benefits.  Most benefits are trickle-down benefits.

That is the new book by John S. Strong, which I recommend highly.  It won’t charm you or interest you in the subject if you don’t already care, but the already-motivated can learn a great deal from it.

I find most books on Buddhism frustrating.  One you know the basics, they just feed you the same blah blah blah, running your mind in empty circles.  But perhaps Buddhism is like macroeconomics — you can’t understand it until you know what people argue about, and that is what John S. Strong clues us in on.  Here is one typical summary passage:

We have, in this chapter, sought to explore various iterations of the Middle Way, a notion which the Buddha sets forth at the start of his First Sermon.  In order to unravel the many implications of this principle and its applicability to other Buddhist doctrines (something the Buddha did not do in his sermon), I have presented several of its expressions and sought to set them within the context of various philosophical and religious movements that may have been around at the time of the Buddha.  Thus, early Buddhists can be seen as finding their way between karma-deniers and karmic absolutists; and as combining views of saṃsāra both as a real material trap and as an illusory trap; and as shying away from the extremes of affirmation of an Absolute Self and denial of personal continuity.  The Middle Way, however, is not the only thing set forth in the First Sermon as we have it, a text which is mostly devoted to the doctrine of the Four Truths, to which we shall now turn.

Another good way to read about Buddhism is to look at up through p.59 in Nicholas Ostler’s Passwords to Paradise: How Languages Have Re-Invented World Religions.  It covers the differential historical spread of Buddhism through the languages of Pali, Gandhari, Sanskrit, and Chinese.  Ostler himself claims to have a working knowledge of eighteen different languages.

Here is a Berkeley class on Buddhist economics.

The business models of German financial institutions depend critically on the presence of positive nominal interest rates. The International Monetary Fund noted in its latest Financial Stability Report that the pre-tax profits of German and Portuguese banks are most affected by negative rates.

German life insurers are also vulnerable. They have to guarantee a minimum rate of return, which is now 1.25 per cent a year. This is hard to do when the yield of the 10-year German government bond is only 0.13 per cent. Germany and Sweden are the two EU countries where life insurers face the biggest gap between market rates and guaranteed rates. To achieve the promised returns, the insurers have to take on more risk, for example by buying corporate bonds or tranches of complex financial products. If, or rather when, the next financial crisis arrives and triggers a change in the valuation of these assets, we may find that sections of the German financial sector are insolvent.

Of the German banks, the Sparkassen and the mutual savings banks are most affected. They are classic savings and loans outlets in that they lend locally and fund themselves through savings. Credit demand is more or less fixed. So when savings exceed loans, as they now do in Germany, the banks deposit their surplus with the ECB at negative rates — known as “penalty rates” in Germany. They cannot offset the losses by cutting interest rates on savings accounts because of the zero lower bound. Savers would switch from accounts to cash in safe deposit boxes.

That is from the always superb Wolfgang Münchnau at the FT.  Regulatory and federalistic issues are another and underdiscussed reason why the eurozone is not an optimal currency area.

Monday assorted links

by on April 18, 2016 at 11:30 am in Uncategorized | Permalink

There is a new paper by Kristin L. Leimgruber, Alexandra G. Rosati, and Laurie R. Santos, here is the abstract:

Punishment of non-cooperators is important for the maintenance of large-scale cooperation in humans, but relatively little is known about the relationship between punishment and cooperation across phylogeny. The current study examined second-party punishment behavior in a nonhuman primate species known for its cooperative tendencies—the brown capuchin monkey (Cebus apella). We found that capuchins consistently punished a conspecific partner who gained possession of a food resource, regardless of whether the unequal distribution of this resource was intentional on the part of the partner. A non-social comparison confirmed that punishment behavior was not due to frustration, nor did punishment stem from increased emotional arousal. Instead, punishment behavior in capuchins appears to be decidedly social in nature, as monkeys only pursued punitive actions when such actions directly decreased the welfare of a recently endowed conspecific. This pattern of results is consistent with two features central to human cooperation: spite and inequity aversion, suggesting that the evolutionary origins of some human-like punitive tendencies may extend even deeper than previously thought.

For the pointer I thank the excellent Kevin Lewis.

My favorite (readily available) American chocolate bar is the dark Chocolove XoXoX, but recently they changed it.  The packaging went from very dark to to gold, and the flavor is now a little sweeter and less nutty.  The cocoa content is higher, but somehow it doesn’t quite shine through as strongly.  It still might be the best on the American market, but now I wonder, because it is modestly worse than before.

I no longer find the old bars in supermarkets, and an Amazon order of the old bars brought a shipment of the new bars instead.  But when I go to bookstores which sell chocolate, their supply turns over not so quickly, and so some of them still carry versions of the old bar.  For now.

I have five copies of the old bar left in the cupboard, and no guarantee for when I might replace them.

Chocolove Xoxox Premium Chocolate Bar - Dark Chocolate - Strong - 3.2 oz Bars - Case of 12 - Kosher - 70% Cocoa

My intuition is to eat them next in sequence, rather than postpone the exhaustion of their supply.  Eventually I will engage in an optimal forgetting of their very fine taste, and it is best that happens sooner rather than later.  To cite George Constantinides, that would be an optimal smoothing of habit-forming consumption.

An alternative philosophy is to consume them later in life, as late as spoilage costs will allow, so as to spread out aesthetic peaks over time.

Yet another alternative is give them away to latter-day customers who only have known the slightly inferior bar, and thus wreck their lives for sport.

Carvalho, Ferrero, and Nechio have a new paper (pdf) on this question.  Here is one interesting sentence:

An increase in longevity or expectations thereof puts downward pressure on the real interest
rate, as agents build up their savings in anticipation of a longer retirement period.

Here is another:

We calibrate a tractable life-cycle model to capture salient features of the demographic transition in developed economies, and find that its overall effect is a reduction of the equilibrium interest rate by at least one and a half percentage between 1990 and 2014.

Sunday assorted links

by on April 17, 2016 at 12:59 pm in Uncategorized | Permalink

1. John Lanchester short essay on Bitcoin.

2. Paul Krugman on the return of elasticity pessimism; I would stress more whether the supply chain for the exports is internal to the single nation or spread across many nations (currencies).

3. In Manitoba you can vote “none of the above.”

4. The actual Chinese economic growth figures, released quietly and late.

5. The Nicholas Berggruen think tank (NYT).

I am not predicting this scenario, but it is useful to think through which paths might restore the growth gains to the American middle class.  From my column in The Upshot, here is the section on China:

Much of the competition for American manufacturing has come from China, and recent research has shown that China’s economic impact in the United States has been bigger than many economists initially thought, and in some ways, it has been more painful. China’s manufacturing has held down American middle-class wages, while soaring Chinese demand for commodities has pushed up resource prices. Of course, cheap Chinese imports have made American paychecks go further, but that is no consolation for people who have lost their jobs or suffered lower wages as a consequence.

Better times may be ahead, though. Higher wages in China — and other emerging nations — are now limiting the competitive advantage of those economies. And perhaps more important for Americans, as China reaches technological maturity, it is likely to shower innovations on consumers, creating a net gain for people in the United States.

China is already the major producer of solar panels and electric cars, for example. It is likely to contribute important innovations in consumer drones and driverless cars and in many other fields: The Chinese government is pouring immense resources into biotechnology, including new gene editing techniques. When it comes to mobile apps, messaging and electronic payments, China is arguably ahead of America. Imagine a future in which Chinese innovations benefit Americans just as the United States benefited Europe and vice versa.

This would mean more competition from China, of course, and lost jobs in some fields, but to simply focus on the negatives would be shortsighted. The reality is that innovators do not capture all or even most of the benefits they bring to the world. Once an idea emerges, its benefits begin to expand, and those benefits will surely spread to the United States.

I believe China will become much more innovative even if Chinese growth goes through continuing turmoil; keep in mind the United States was remarkably innovative in the 1930s throughout the Great Depression.

The column also considers skill-based technical change, and how it might turn more toward less skilled workers, and also…religion and Mormons.

Cao Fei, Chinese artist

by on April 17, 2016 at 12:18 am in Uncategorized | Permalink

CaoFei

That one is called “The Birth of RMB City.”  Here is an article on RMB City in Second Life.  Here are more images.  Here is a NYT article about her work, some call her the most important Chinese artist born after the Cultural Revolution.  Here is the artist’s home page.

…one piece of the agency has found a potentially powerful new tool to flatten the spikes and cut the number of proposals: It can simply eliminate deadlines.

This week, at an NSF geosciences advisory committee meeting, Assistant Director for Geosciences Roger Wakimoto revealed the preliminary results from a pilot program that got rid of grant proposal deadlines in favor of an anytime submission. The numbers were staggering. Across four grant programs, proposals dropped by 59% after deadlines were eliminated.

Here is the story, via the excellent Otis Reid.

So long, good Samaritans.

In the first study of its kind, Cornell sociologists have found that people who have a medical emergency in a public place can’t necessarily rely on the kindness of strangers. Only 2.5 percent of people, or 1 in 39, got help from strangers before emergency medical personnel arrived, in research published April 14 in the American Journal of Public Health.

For African-Americans, these dismal findings only get worse. African-Americans were less than half as likely as Caucasians to get help from a bystander, regardless of the type of symptoms or illness they were suffering – only 1.8 percent, or fewer than 1 in 55 African-Americans, received assistance. For Caucasians, the corresponding number was 4.2 percent, or 1 in 24.

People in lower-income and densely populated counties were also less likely to get help, the researchers said. Conversely, those in less-densely populated counties with average socioeconomic levels were most likely to get assistance.

Here is more, via Charles Klingman.

Saturday assorted links

by on April 16, 2016 at 12:54 pm in Uncategorized | Permalink

More Lead, More Crime

by on April 16, 2016 at 7:28 am in Economics, Medicine | Permalink

In the second half of the nineteenth century, many American cities built water systems using lead or iron service pipes. Municipal water systems generated significant public health improvements, but these improvements may have been partially offset by the damaging effects of lead exposure through lead water pipes. We study the effect of cities’ use of lead pipes on homicide between 1921 and 1936. Lead water pipes exposed entire city populations to much higher doses of lead than have previously been studied in relation to crime. Our estimates suggest that cities’ use of lead service pipes considerably increased city-level homicide rates.

That’s from Feigenbaum and Muller in Lead Exposure and Violent Crime in the Early Twentieth Century. Lead, it ain’t just about Flint.

Singapore, 5 May 2015 – The Graciousness Index has continued to move up, from 53 in 2013 to 55 in 2014, and to 61 in 2015. This year’s rise is led by a growing sense of positive perceptions about kindness and graciousness in Singapore, with respondents rating both themselves and others higher when it comes to being considerate, courteous and showing appreciation.

The Graciousness Index is an annual study commissioned by the Singapore Kindness Movement to track experience and perceptions of kindness and graciousness in Singapore, as well as study attitudes towards various pertinent community issues. Over a six-week period from December 2014 to February 2015, a demographically representative sample of 1,850 respondents was asked to share their experiences and perceptions of graciousness in Singapore.

There was a marked increase in optimism, with 44% of respondents indicating that graciousness in Singapore had improved, compared to just 28% last year. 84% rated their own gracious behaviour as either good or excellent, and 69% felt the same about overall Singapore society. They also felt that Singapore was improving across the graciousness pillars of being considerate, being courteous and showing appreciation to others.

Dr. William Wan, General Secretary of the Singapore Kindness Movement, believes that this is a promising sign. “The increase in positive perceptions and overall sense of improvement is encouraging. If we as a nation continue this positive trend, then kindness and graciousness can become part of our norms and national identity.”

That which cannot be measured…

Here is the link, via James Crabtree.