Month: March 2011

The Great Real Estate Recalculation

We will need to rethink where bookstores should go: not always in the higher-rent suburban locations, where Borders outlets were placed, but rather in out of the way fringes.  Book lovers will have to drive for longer periods of time to do their browsing, or use Amazon.

Buildings should become taller, more densely packed in, and there is a chance of vertical farming

Best Buy stores are too large.  The NoVa landscape is already starting to be littered with empty big boxes.  What will be put in them?  How many current "stores" should evolve into "petting zoos" designed to complement the company's web sales operations?

Some parts of the suburbs should become quite empty, while some roads should become much wider and better maintained, accompanied by congestion pricing of course.

I've already stopped using Tysons Corner Shopping Mall, mostly because the combined activities of parking and walking take too long and involve too many hassles.  The mall no longer offers convenient access to its nodes.

The dinky homes in Pimmit Hills, Falls Church will be replaced with much larger and newer boxes.

In so many sectors of the economy, Manhattan has become obsolete as a shopping center, replaced by the web.

Self-driving cars have the potential to fit many more cars on the road.  Traffic will become less costly, as cars evolve into portable offices.

It is not hard to imagine how The Great Real Estate Recalculation should proceed.  But it will take decades to occur, and there is a chance that we get only the "hollowing out" side of the story.  In the meantime, land economics will rise in importance as a field of economics, whether or not the profession realizes it.

Assorted links

David Autor and the polarization of labor market outcomes

I was just going to write a post about David Autor as the "weighted average of most important yet most neglected economist for the blogosphere," or something like that.  Yet Paul Krugman just did essentially that.  In my view it is one of Krugman's best posts.

This may sound strange, but to think through these issues I spend some time playing chess against a computer, and also allied with a computer.  It beats me, but I learn a lot from the experience and I'll be reporting on that.  

By the way, there is quite a bit from Autor which Krugman didn't cover, you can pursue the material here on Autor's home page, start with the May 2010 CAP paper as the most accessible introduction.

Democracy in Deficit

Here is my New York Times column, which most of all explains what a prophetic thinker James Buchanan has turned out to be (and I thank Brad DeLong for reminding me of this, though he may not agree with my argument).  This excerpt is not the main point, but it hints at how Austrian business cycle theory and Keynesian theories of fiscal illusion might be integrated:

The illusion is this: A government bond represents both a current asset and a future liability, yet for most people, those future tax payments feel less concrete and less real than the dollars they’re holding in a money market account.

The field of behavioral economics analyzes imperfections in market decision-making, but the biggest practical problems often involve our inaccurate perceptions of what the public sector is up to and how much it will affect us.

In this case, the sorry truth is that our savings aren’t worth as much as many of us think, and a rude awakening is coming. One way or another, some of our savings will be taxed away to make good on governmental commitments, like future Medicare benefits, which we currently are framing as personal free lunches.

In terms of driving sectoral shifts, and mismatching AD shocks to what the data call for, there is this:

Yes, some laudable cost controls on Medicare are embedded in the new health care law, but they’re not enough. Most likely, we will end up making other spending cuts that won’t solve our fiscal problems – and in areas that could instead benefit from Keynesian employment stimulus. These kinds of knee-jerk, poorly reasoned decisions are what happens when fiscal illusion reigns.

I also borrow Alex's point that we have not developed a workable Keynesian politics.

What to do?  Time is no longer on the side of good.  I suggest that we confront the nation's fiscal difficulties as soon as possible.  That means both tax hikes and spending cuts, though I prefer to concentrate on the latter.  Nonetheless it is naive to think spending cuts can do the job alone, and insisting on no tax hikes drives us faster along the path of fiscal ruin.  The time for the Grand Bargain is now, it will only get harder:

Limiting Medicare and Social Security spending involves re-indexing benefits, adjusting eligibility ages, shifting the growth rates of costs and making other changes that have their full fiscal impact only over the longer run.

Here is a relevant post from Matt Yglesias.  Here is an Andrew Sullivan post on debt as a moral issue.  Here is a Jonah Lehrer post on how behavioral considerations, in particular loss aversion, make public sector debt harder to limit.

Assorted links

More on GaddafiGate

His resignation came as a US consultancy admitted mishandling a multimillion dollar contract with Libya to sanitise Gaddafi's reputation in the west. Monitor Group, based in Cambridge, Massachusetts, organised for academics and policymakers from the US and UK to travel to Tripoli to meet the Libyan despot between 2006 and 2008, as part of a $3m (£1.8m) contract.

In a related development, the director of LSE has resigned, there is more here.  Hat tip goes to Kieran Healy.

Galton’s Bayesian Machine

Stephen Stigler has a cool piece on a machine that Francis Galton built in 1877 that calculated a posterior distribution from a prior and a likelihood function. Galton's originality continues to astound.

Here is Stigler:

StigFigure1 The machine is reproduced in Figure 1 from the original publication. It depicts the fundamental calculation of Bayesian inference: the determination of a posterior distribution from a prior distribution and a likelihood function. Look carefully at the picture–notice it shows the upper portion as three-dimensional, with a glass front and a depth of about four inches. There are cardboard dividers to keep the beads from settling into a flat pattern, and the drawing exaggerates the smoothness of the heap from left to right, something like a normal curve. We could think of the top layer as showing the prior distribution p(θ) as a population of beads representing, say, potential values for θ, from low (left) to high (right)….

…the beads fall to the next lower level. On that second level, you can see what is intended to be a vertical screen, or wall, that is close to the glass front at both the left and the right, but recedes to the rear in the middle.

…The way the machine works its magic is that those beads to the front of the screen are retained as shown; those falling behind are rejected and discarded. (You might think of this stage as doing rejection sampling from the upper stage.)

…The final stage turns this into a standard histogram: The second support platform is removed by pulling to the right on its knob, and the beads fall to a slanted platform immediately below, rolling then to the lowest level, where the depth is again uniform–about one inch deep from the glass in front. This simply rescales the retained beads… the magic of the machine is that this lowest level is proportional to the posterior distribution!

Hat tip: The Endeavour.

Gas station tacos

R&R Tacqueria, 7894 Washington Blvd. (Rt.1); 410-799-0001, Elkridge, Maryland, 13 minutes north of the 495/95 intersection, look for the Shell sign.

This tacqueria is in a gas station, with two small counters and three chairs to sit on.  It is the best huarache I have eaten, ever, including in Mexico.  It is the best chile relleno I've had in the United States, ever.  They serve among the best Mexican soups I have had, ever, and I have been to Mexico almost twenty times.  I recommend the tacos al pastor as well.  At first Yana and Natasha were skeptics ("Sometimes you exaggerate about food") but now they are converts and the takeaways have vanished.  They even sell Mexican Coca-Cola and by the way the place is quite clean and nice, albeit cramped.

The highly intelligent proprietor is a former cargo pilot from Mexico City and speaks excellent English.  The restaurant is called R&R after the names of his two sons. 

For over twenty years I have sought such a place in the Washington, D.C. area and now I have one.  For over twenty years people have been asking me how can they scratch this itch and now I have an answer.  (The version of this post to appear on tylercowensethnicdiningguide.com will have photos of the food.)

Via Jodi Ettenberg, The Wall Street Journal reports on gas station tacos.

This guy is serious about competing, or the culture that is Philadelphia

"I've been at this for 47 years, and I've never seen mice used as a criminal tool"…

How so?

The owner of a suburban Philadelphia pizza shop was arraigned on Tuesday on charges he schemed to plant live mice in competing pizza parlours in hope of putting them out of business.

Nickolas Galiatsatos, owner of Nina's Bella Pizzeria in Upper Darby, Pennsylvania, is accused of putting bags of mice at nearby competitors on Monday afternoon, according to Upper Darby Police Superintendent Michael Chitwood.

The owner of Verona Pizza watched Galiatsatos go into his restroom carrying a bag but emerge empty-handed, and alerted two patrol officers who were in the restaurant, Chitwood said.

The officers found a bag of mice and footprints on a toilet seat, suggesting someone had been trying to reach the ceiling tiles, he said.

For the pointer I thank Daniel Lippman.

Bleeding heart libertarians

That is the name of a new and excellent blog.  The writers include Andrew Jason Cohen, Daniel Shapiro, Jacob T. Levy, James Stacey Taylor, Jason Brennan, and Matt Zwolinski.  They are all worth reading.  Jason Brennan is perhaps not so well known in the blogosphere, but he is already one of the most important classical liberal thinkers in the world and you will be hearing more from him soon.  Here is his post on neoclassical liberalism.

Assorted links

1. Do female members of Congress work harder than the men?

2. Via Craig Newmark, data on the Duke economics Ph.d. students.

3. "The goal is free."

4. Centralized institutions and sudden change, a new paper.

5. A new Peter Chang sighting.

6. The Economist reviews TGS.  (I am pleased that TGS made the NYT bestseller list for eBooks last week at #14; thanks to all of you who bought it and recommended it!)