Month: September 2017

Better forecasting of hurricanes lowers cost

…We also find evidence supporting short-term adaptation effects prior to a hurricane landfall. Our results show that the 67 percent improvement in hurricane forecasts over the past 60 years is associated with damages being 16-63 percent lower than they otherwise would have been. Accounting for outlying observations narrows this range to 16-24 percent.

That is from an Oxford working paper by Andrew Martinez.

French cities are Roman sites rather than by the sea

Here is the amazing fact: today, 16 of France’s 20 largest cities are located on or near a Roman town, while only 2 of Britain’s 20 largest are. This difference existed even back in the Middle Ages. So who cares? Well, Britain’s cities in the middle ages are two and a half times more likely to have coastal access than France’s cities, so that in 1700, when sea trade was hugely important, 56% of urban French lived in towns with sea access while 87% of urban Brits did. This is even though, in both countries, cities with sea access grew faster and huge sums of money were put into building artificial canals. Even at a very local level, the France/Britain distinction holds: when Roman cities were within 25km of the ocean or a navigable river, they tended not to move in France, while in Britain they tended to reappear nearer to the water. The fundamental factor for the shift in both places was that developments in shipbuilding in the early middle ages made the sea much more suitable for trade and military transport than the famous Roman Roads which previously played that role.

These days, the French model is looking somewhat better, as Toulouse has held its ground more readily than has Liverpool.

That is from A Fine Theorem, discussing a recent paper by Guy Michaels and Ferdinand Rauch.

James Buchanan on school vouchers

And then, [James] Buchanan offers a brief comment on his views on education and school vouchers. Critically, he voices reservations about the introduction of vouchers. Why? Because, as he writes, he is concerned “somehow, to avoid the evils of race-class-cultural segregation that an unregulated voucher scheme might introduce.” Buchanan then goes on to express support for introducing competition in the provision of education, but notes that this should be done in a way that serves “at the same time, to secure the potential benefits of commonly shared experiences, including exposure to other races, classes, and cultures.” In short, though brief, Buchanan’s letter eloquently expresses a vision of education that champions the value of diversity, explicitly condemns “the evils of race-class-cultural segregation,” and notes his reservations about school vouchers if they threaten these values.

That is from Georg Vanberg, and this is fully consistent with the twenty or so years I had of frank conversations with the man.  Here is the letter itself (pdf).

Saturday assorted links

The steamship and global trade

The formal title of this important paper is “The Wind of Change: Maritime Technology , Trade , and Economic Development.”  One of the major findings is that if you consider 1850-1905, using conservative estimates, the introduction of the faster and more reliable steam ships was responsible for least half of the world trade boom during those years.

That was just published in the AER by Luigi Pascali.  Here is the abstract:

The 1870–1913 period marked the birth of the first era of trade globalization. How did this tremendous increase in trade affect economic development? This work isolates a causality channel by exploiting the fact that the introduction of the steamship in the shipping industry produced an asymmetric change in trade distances among countries. Before this invention, trade routes depended on wind patterns. The steamship reduced shipping costs and time in a disproportionate manner across countries and trade routes. Using this source of variation and novel data on shipping, trade, and development, I find that (i) the adoption of the steamship had a major impact on patterns of trade worldwide; (ii) only a small number of countries, characterized by more inclusive institutions, benefited from trade integration; and (iii) globalization was the major driver of the economic divergence between the rich and the poor portions of the world in the years 1850–1900.

Here are ungated copies.

The new world of monopoly? What about flying?

I frequently see airlines cited as an example where the American economy is obviously more monopolistic.  By some metrics, yes, but what about the final deal?:

For more than three years, the average one-way fare between Detroit and Philadelphia never dipped below $308, and sometimes moved higher, topping $385 at one point.

But then, early in 2016, fares suddenly started to fall, according to data from the Bureau of Transportation Statistics. By the end of the year, the average one-way ticket between the two cities stood at just $183.

What changed? The primary factor was Spirit Airlines [a budget carrier].

…Even as a wave of mergers has cut the number of major carriers to four and significantly reduced competition, lower-cost airlines continue to play a role in moderating ticket costs.

…The cost of a round-trip domestic ticket averaged more than $490 in the first half of the year, up slightly compared with 2016, according to Airlines Reporting Corporation, a company that settles flight transactions between a number of carriers and booking services like Expedia.

The jostling, however, has left airline investors skittish. As the publicly traded airlines in July reported earnings for the second quarter, shareholders sold off their shares, worried about the fight over fares and capacity increases.

That is from Micah Maidenberg at the NYT.  In other words, the market still has a fair amount of contestability.

Or consider some more aggregated data.  As for output restrictions, here is the DOT series on aggregate miles flown.  No doubt, there are problems around the time of 9/11 and also the Great Recession, with 2008-2012 being a period of slight quantity contraction.  But in 1985 there were 275,864 [million] total miles flown, in 2006 it was 588,471, and 641, 905 in 2015.  I’ll ask again: if there is so much extra monopoly, where are the output restrictions?

Or look at the price index.  Overall prices are down considerably since 2008, and from about 2000 to 2016 they run from about 250 (eyeballing) to about 270, noting 1998-2010 saw a huge run-up in oil prices.  Since 2005, the U.S. went from having nine major airlines to four.

Maybe you’re upset about quality, but baggage lost each year — one of the easier quality variables to measure — is going down steadily.

Is this perfect competition?  No, of course not.  Is this ideal performance?  No.  Will looking at concentration ratios help you understand the industry very well?  Even more no.  And this is one of the worst cases of changing concentration ratios I can find.  Tomorrow, shall we do booksellers?  Or do I not even need to bother?

Friday assorted links

1. Entertainment spending is up, and food stamp expenditures are down, both bullish indicators.

2. Where do all those books come from in restaurant libraries?

3. In the Philippines, in response to typhoons, they lower wages and hours but not employment.  A different implicit contract perhaps?

4. Why Major League Baseball dirt comes from Slippery Rock, Pennsylvania.

5. Nissan protects its newly manufactured cars with (noisy) hail cannons.

6. “”This was not the first translation of “Moby-Dick” in Macedonian. There was one edition published in the 1980s, translated from Serbo-Croatian, which did not produce a lasting impact.

The main problem of translating a book from 1851 about sailing and whaling was that the Macedonian language lacked maritime terminology. Most of the ethnic Macedonian population had been landlocked during the last centuries, having little contact with the sea in general and sailing in particular. In order to overcome this, Čemerski had to re-construct the vocabulary by first discovering the origins of the English terms, and then trace their equivalents in Macedonian or other Slavic languages.”  Link here.

Houston Flooding and Zoning and Development

A lot of nonsense has been written about the causes of flooding in Houston. Anti-immigration people blame immigration. Anti-development people blame development. Anti-Trump people blame Republicans.

The truth, however, is that Houston has flooded regularly since it was founded. Moreover, unlike Katrina, the flood systems have mostly worked as they are supposed to–diverting water to the highways, for example. The problem has been that there is just a lot of water.

In a superb post, Phil Magness has the details. From here on in this is Magness. I won’t indent.


We’ve seen a flurry of commentators in the past few days attributing Houston’s flooding to a litany of pet political causes. Aside from the normal carping about “climate change”… several pundits and journalists have opportunistically seized upon Houston’s famously lax zoning and land use regulations to blame Harvey’s destruction on “sprawl” and call for “SmartGrowth” policies that restrict and heavily regulate future construction in the city.

According to this argument, Harvey’s floods are a byproduct of unrestricted suburban development in the north and west of the city at the expense of prairies that would supposedly absorb rainwater at sufficient rates to prevent natural disasters and that supposedly served this purpose “naturally” in the past.

There are multiple problems with this line of argument that suggest it is rooted in naked political opportunism rather than actual concern for Houston’s flooding problems.

First, as we’ve established in the preceding history lesson, flooding has been a regular feature of Houston’s landscape since the beginning of recorded history in the region. And catastrophic flooding – including multiple storms in the 19th century and the well-documented flood of December 1935 – predates any of the “sprawl” that has provoked these armchair urban designers’ ire.

Second, the flooding we saw in Harvey is largely a result of creeks and bayous backlogging and spilling over their banks as more water rushes in from upstream. While parking lot and roadway runoff from “sprawl” certainly makes its way into these streams, it is hardly the source of the problem. The slow-moving and windy Brazos river reached record levels as a result of Harvey and spilled over its banks, despite being nowhere near the city’s “sprawl.” The mostly-rural prairie along Interstate 10 to the extreme west of the city recorded some of the worst flooding in terms of water volume due to the Brazos overflow, although fortunately property damage here will be much lower due to being rural.

Third, the very notion that Houston is a giant concrete-laden water retention pond is itself a pernicious myth peddled by unscrupulous urban planning activists and media outlets. In total acres, Houston has more parkland and green space than any other large city in America and ranks third overall to San Diego in park acreage per capita.*

But even more telling is a 2011 study by the Houston-Galveston Area Council that actually measured the ratio of impervious-to-pervious land cover within the city limits (basically the amount of water-blocking concrete vs. water-absorbing green land). The study used an index scale to measure water-absorption land uses. A low score (defined as less than 2.0 on the scale) indicates a high presence of green relative to concrete. A high score (defined as greater than 5.0) indicates high concrete and low levels of greenery and other water-absorbing cover. The result are in the map below, showing the city limits. Gray corresponds to high levels of pervious surfaces (or greenery). Black corresponds to high impervious surface use (basically either concrete or lakes that collect runoff). As the map shows, over 90% of the land in the city limits is gray, indicating more greenery and higher water absorption. Although they did not measure unincorporated Harris County, it also tends to be substantially less dense than the city itself.

Does this mean that impervious land uses are not a problem and do not contribute to floods in any way? No. But to cite them as a principle cause of the destruction witnessed in Harvey is purely a political move aimed at generating support for a long list of intrusive regulatory policies.

Houston’s flood problems are a distinctive feature of its topography and geography, and they long predate any “sprawl.” While steps have been taken over the years to mitigate them and reduce the severity of flooding, a rare but catastrophic event will unavoidably overwhelm even the most sophisticated flood control systems. Harvey was one such event – certainly the highest floodwater event to hit Houston in over 80 years, and possibly the worst deluge in its recorded history. But it is entirely consistent with almost 2 centuries of recorded historical patterns. In the grander scheme of causes for Harvey’s flooding, “sprawl” does not even meaningfully register.

Read the whole thing for more historical background.

*  Earlier version said second which was a typo as source reports third; other sources can differ depending on year and what exactly is counted.

What ever happened to “Feminist economics”?

I suspect most of you have followed (to varying degrees) the recent controversies over gender hostility in economics.  What I find striking is that hardly anyone has mentioned the movement known as “Feminist economics.”  And yes that is a formal thing, here is Wikipedia on “Feminist economics”:

Feminist economics is the critical study of economics including its methodology, epistemology, history and empirical research, attempting to overcome androcentric (male and patriarchal) biases. It focuses on topics of particular relevance to women, such as care work or occupational segregation (exclusion of women and minorities from certain fields); deficiencies of economic models, such as disregarding intra-household bargaining; new forms of data collection and measurement such as the Gender Empowerment Measure (GEM), and more gender-aware theories such as the capabilities approach.[1] Feminist economics ultimately seeks to produce a more gender inclusive economics.

There is much more to a very long, thoughtful, and well-documented entry, and feminist economics has been a recognized field or subfield since at least the early 1990s.  There is an entire refereed journal called…Feminist Economics.  There is a significant International Association for Feminist Economics.

Obviously “feminist economics” is a diverse area, but frequently I have seen the claim made that the very nature of economics keeps out women.  It is claimed there is too much emphasis on male modes of production, and sometimes also “male ways of thinking,” and thus economics must itself first reform before it has any chance at achieving gender parity.  There is also a common tendency to criticize Becker’s and other neoclassical theories of the family for reflecting so many implicit, underlying “male” assumptions about how families work or are supposed to work.

So yes, there is plenty awareness of overt discrimination, but writers coming from this approach see a lot of the problems as quite structural, and embedded in how economics is done.  It’s not only the attitudes of some of the male jerks.

Now you may or may not agree, or also you might feel uncomfortable with some of the levels of generalization you find in talk of “male ways of [xxxx].”  Still, many of those in Feminist economics see the structural point as very important.

It is striking to me that most of the major contributors to Feminist economics are women.  And from what I can tell, virtually all of you are ignoring them, even though we have been debating their main issue for weeks now, and they have been at this for decades.

Perhaps you are unaware of them.  The only very recent coverage I have seen is this Edwin Hadas piece, but still it doesn’t mention “Feminist economics” by name.  Here is a short, good Economist piece by S.K. (Soumaya Keynes?)  from March 2016.

The biases run deeper than you think, and they’re not just about gender discrimination.  We’ve set up a profession with super-high entry barriers for clearing the “this deserves my attention” hurdle (“top journals,” “top schools,” you can go on down the list), and then we’re befuddled when there is so much other collateral damage along the way.

Flooded Cities

That is the title of a recent research paper (pdf) by Adriana Kocornik-Mina, Thomas K.J. McDermott, Guy Michaels, and Ferdinand Rauch.  Here is the abstract:

Does economic activity relocate away from areas that are at high risk of recurring shocks? We examine this question in the context of floods, which are among the costliest and most common natural disasters. Over the past thirty years, floods worldwide killed more than 500,000 people and displaced over 650,000,000 people. This paper analyzes the effect of large scale floods, which displaced at least 100,000 people each, in over 1,800 cities in 40 countries, from 2003-2008. We conduct our analysis using spatially detailed inundation maps and night lights data spanning the globe’s urban areas. We find that low elevation areas are about 3-4 times more likely to be hit by large floods than other areas, and yet they concentrate more economic activity per square kilometer. When cities are hit by large floods, the low elevation areas also sustain more damage, but like the rest of the flooded cities they recover rapidly, and economic activity does not move to safer areas. Only in more recently populated urban areas, flooded areas show a larger and more persistent decline in economic activity. Our findings have important policy implications for aid, development and urban planning in a world with rapid urbanization and rising sea levels.

One possible implication of these strong results is that, better pricing of flood insurance, which I favor, still probably won’t get most population centers out of those low-lying, relatively vulnerable areas.