Afternoon at the Treasury
Yesterday, Tyler, myself and a handful of other economics bloggers had a chance to discuss the economy with Treasury Secretary Geithner and other treasury officials. Here are a few random notes.
There was deep skepticism about the financial industry and about reform from some of the bloggers. More let’s say “radical” approaches such as Treasury taking an equity stake in underwater homes or giving everyone a guaranteed income were brought up. I was surprised to find myself on the side of the more conservative Treasury officials who cogently argued that such reforms were neither politically viable nor likely to work. Treasury gave a good argument that reform had been deep and meaningful.
A few good lines from a senior treasury official as I recall the gist:
- “Markets believe we can borrow. The public doesn’t. We need both to move forward on the fiscal front."
- “Businesses are investing in a way that shows more confidence than they are talking.” (graph here, see the last year or so AT)
There was a recognition that the Fed could do “dramatic” things but a sense that the theory here was uncertain and untested.
The best question of the day came from Tyler. The discussion was on the financial reform bill and how it changed the incentives of players in the financial industry by creating more risk for them. Tyler interrupted with “What I really want to know is how your incentives have been changed! What is to say that next time the decision will not be made to again bailout the bondholders?”
As Tyler said after an earlier visit, Geithner is smart and deep. Geithner took questions on any topic. Bear in mind that taking questions from people like Mike Konczal, Tyler, or Interfluidity is not like taking questions from the press. Geithner quickly identified the heart of every question and responded in a way that showed a command of both theory and fact. We went way over scheduled time. He seemed to be having fun.
*Packing for Mars*
Dust is the lunar astronaut’s nemesis. With no water or wind to smooth them, the tiny, hard moon rock particles remain sharp. They scratched faceplates and camera lenses during Apollo, destroyed bearings, clogged equipment joints. Dusting on the moon is a fool’s errand. Unlike on the Earth, where the planet’s magnetic field wards off charged particles of solar wind, these particles bombard the moon’s surface and impart an electrostatic charge. Moon dust clings like dryer socks. Astronauts who stepped from the Lunar Module in gleaming white marshamllow suits returned a few hours later looking like miners. The Apollo 12 suits and long johns became so filthy that at one point, astronaut Jim Lovell told me, the crew “took off all their underwear and they were naked for half the way home.”
That is from Mary Roach’s new book, subtitled The Curious Science of Life in the Void.
Further German predictions about 2010
Everard Hustler, writing in 1910, predicted that in 2010 tuberculosis patients will conquer the disease by receiving shots of radium and by inhaling streams of radioactive air, with pipes running to their mouths and cloths tied tightly around their heads, and covering their eyes (the accompanying illustration is a good one), to make sure none of the radioactive air escapes.
He also predicted that a hostile nation could destroy the Berlin Rathaus using a beam of radium energy, shot from…a hovering zeppelin.
Radium: good to inject, good to inhale, bad to shoot at a tower from a zeppelin.
That sounds odd, but radiation as a method of medicine starts in the 1920s and it uses the element of radium. Modern chemotherapy does not arise until 1940, with the use of mustard gas. Chemotherapy to attack tuberculosis starts in 1944.
Still, E.H. was not as perceptive as the guy who predicted the iPhone.
Do minimum parking requirements matter?
W. Bowman Cutter, Sofia F. Franco, and Autumn DeWoody have a new paper titled "Do Minimum Parking Requirements Force Developers to Provide More Parking than Privately Optimal?" The abstract is this:
Minimum parking requirements are the norm for urban and suburban development in the United States (Davidson and Dolnick (2002)). The justification for parking space requirements is that overflow parking will occupy nearby street or off-street parking. Shoup (1999) and Willson (1995) provides cases where there is reason to believe that parking space requirements have forced parcel developers to place more parking than they would in the absence of parking requirements. If the effect of parking minimums is to significantly increase the land area devoted to parking, then the increase in impervious surfaces would likely cause water quality degradation, increased flooding, and decreased groundwater recharge. However, to our knowledge the existing literature does not test the effect of parking minimums on the amount of lot space devoted to parking beyond a few case studies. This paper tests the hypothesis that parking space requirements cause an oversupply of parking by examining the implicit marginal value of land allocated to parking spaces. This is an indirect test of the effects of parking requirements that is similar to Glaeser and Gyourko (2003). A simple theoretical model shows that the marginal value of additional parking to the sale price should be equal to the cost of land plus the cost of parking construction. We estimate the marginal values of parking and lot area with spatial methods using a large data set from the Los Angeles area non-residential property sales and find that for most of the property types the marginal value of parking is significantly below that of the parcel area. This evidence supports the contention that minimum parking requirements significantly increase the amount of parcel area devoted to parking.
The paper is here. Here is a related paper, or here.
Is this a parody, set up to bait MR?
Park officials in China have found a way to stop people from hogging their benches for too long – by fitting steel spikes on a coin-operated timer.
If visitors at the Yantai Park in Shangdong province, eastern China, linger too long without feeding the meter, dozens of sharp spikes shoot through the seat.
The spikes are too short to cause any serious harm – but long enough to prevent people from sitting on them comfortably.
Park bosses got the idea from an art installation in Germany where sculptor Fabian Brunsing created a similar bench as a protest against the commercialisation of modern life.
"He thought he was exaggerating. He didn't foresee that a very practical country like China might actually use them for real," said one critic.
The article is here and I thank both Brendan and Jonathan for the pointer. How should I have titled this post?
Sentences to ponder
Gabriel Josipovici, a research professor at the University of Sussex, is disenchanted with the absence of disenchantment with the world.
Assorted links
1. Blog on free market urbanism.
2. Banks and the Irish economy.
3. Monetary policy uncertainty has gone up, and here.
4. A good exposition of the autism brain scan results; see also the comments.
5. Oddly, the U.S. still partakes in sovereignty disputes in the Caribbean.
Assorted Links
1. Jazz is (was?) the best word to play in Hangman.
2. 3-D print your own designs.
3. Cool incentives.
4. Steve Eisman, who called the subprime debacle, on the (nominally) private-education scam (pdf, another link here). (Of course, some public education isn't much better it's just harder to short.)
Robert Sloss predicted the iPhone in 1910
Well, more or less. Or is it an iPad? In 1910 Stoss published an essay called "The Wireless Century," intending to predict the world of 2010. In this world everyone carries around a "wireless telegraph" which:
1. Serves as a telephone, the whole world over.
2. Either rings or vibrates in your pocket.
3. Can transmit any musical recording or performance with perfect clarity.
4. Can allow people to send each other photographs, across the entire world.
5. Can allow people to see the images of paintings, museums, etc. in distant locales.
6. No one will ever be alone again.
7. Can serve as a means of payment, connecting people to their bank accounts and enabling payments (Japan is ahead of us here).
8. Can connect people to all newspapers, although Sloss predicted that people would prefer that the device read the paper aloud to them (not so much the case).
9. Can transmit documents to "thin tubes of ink," which will then print those documents in distant locales.
10. People will have a better sense of the poor, and of suffering, because they will have witnessed it through their device (not obviously true, at least not yet).
11. People will vote using their devices and this will empower democracy (nope).
12. Judicial testimonies will be performed over such devices, often from great distances.
13. People will order perfectly-fitting fashions from Paris; this guy should be in the Apps business.
14. Married couples will be much closer, and distance relationships will be closer and better.
15. Military targeting and military orders will become extremely precise.
The essay is reprinted in the Arthur Brehmer book Die Welt in 100 Jahren. The book is interesting throughout; a bunch of the other writers thought in 2010 we would be fighting wars with large zeppelins.
Kling on free parking
Arnold isn't convinced:
If we abolished free parking, would parking spaces be scarcer? Keep in mind that if the price of parking went up, this would cause movement along the supply curve as well as along the demand curve. Maybe the total number of parking places would decline (it depends on elasticities), but the one result you can predict with certainty is that the number of unused parking places would go up. Is that necessarily welfare-improving?
The key is not to "abolish" free parking, but to a) abolish minimum parking requirements, and b) put prices or higher prices on congested municipal-owned parking spaces. Both a) and b) will lower the demand for parking and a) will lower the supply of parking, so why should the number of unused parking spaces necessarily go up? If you treat something as an appropriately scarce resource, it should be used more effectively.
There are plenty of DC restaurants which don't have their own parking lots, but they use paid valet parking and find ingenious ways to store cars more effectively. The parking fee means that some people walk there or use the Metro, rather than driving and parking. No one finds this arrangement especially objectionable and while valet parking is at a discount to market still it is priced. At lunch time valet parking is less likely but still people pay to park, usually in nearby lots. No one would suggest that these restaurants be forced to put in minimum parking. Nor would anyone suggest that mandated minimums would be neutral with respect to parking efficiency.
I'm simply asking for the same switch in reverse, namely to do away with minimum parking requirements. Very likely, such a change will have a bigger impact on future developments than on past developments (it can be hard to reconfigure a parking lot), although some malls might sell off or rent their now-liberated parking spots to other commercial ventures.
Pricing parking on busy residential streets is just common sense S&D and the price should vary with peak times.
Most of all, I am calling for "parking recalculation," so I am surprised Arnold is skeptical. Maybe he thinks the recalculation won't bring much change (the Wal-Mart in North Dakota may never charge for parking), but in fact we find a wide variety of parking pricing practices around the world and even around the U.S., as laws and institutions and real net prices vary.
You could argue that politics already pushes us to somewhat efficient outcomes for policy, as indeed NYC does usually (though not always) treat parking spaces as more scarce than does Fargo, North Dakota. Still, there is an obvious chain for political failure. Development decisions are very often made on a one-by-one, sequential basis. Other merchants, or nearby homeowners, fear parking overflow and they lobby as if this private cost were actually a social cost. At each step of development, lots of parties are pushing for minimum parking requirements. Some "once-and-for-all" parking policy decisions could limit this political incentive.
Another simple public choice story is this: minimum parking limits the supply of land and boosts the returns to local homeowners. It raises retail prices but many of the store's customers are from out of town, so that is a vote-winning strategy at the local level, namely scarcer land and higher prices for stores.
People who drive cars also have disproportionately more political power than people who do not, especially in most suburban areas.
Most of the time, legal quantity minimums have real effects on markets and they are not set efficiently at the political level.
Addendum: Here is Arnold's response to Robin, here is Robin on Arnold. And yet more from Arnold. And here is an O'Toole comment; for one thing there is free parking in Manhattan, but for another…I never claimed there was.
From the comments: "A note of clarification about free parking in Manhattan. By law meters are prohibited on residential streets. Only on commercial streets and corners are meters allowed. Residential parking permits are also prohibited by the state. This means that in many parts of the island (mostly above 59th street though also in certain areas of lower Manhattan) there is "free" parking at the curb. In these neighborhoods there is substantial cruising for parking. In addition, all of Manhattan was subject to minimum parking requirements until 1982, and now areas north of Central Park (roughly) are subject to minimum parking requirements, as are the other boroughs."
Assorted links
1. Ape typologies.
2. A critical take on my Jane St. NBA answer; I stand unbudged, or perhaps even more convinced of my original view, with apologies to Chris Paul.
3. The world's biggest airline?
Topics I haven’t blogged so far
I fully support letting the NYC mosque proceed for reasons well articulated by Sullivan, Krugman, Yglesias, Josh Barro and others; if nothing else, this episode shows "politics isn't about policy" but rather about the relative status of different societal groups. We should think more seriously about how we might give Islam, and Muslims, higher status in the United States and elsewhere.
Should we favor a Korean reunification tax?
The flood in Pakistan is worse than many people realize, possibly affecting over twenty million people.
Here are some stunning photos; I thank Farhan for the pointer.
The economics of free parking
Here is my latest NYT column, for the ideas I am indebted to pointers from Daniel Klein, Matt Yglesias, and of course Donald Shoup.
Here is the bottom line:
If developers were allowed to face directly the high land costs of providing so much parking, the number of spaces would be a result of a careful economic calculation rather than a matter of satisfying a legal requirement. Parking would be scarcer, and more likely to have a price – or a higher one than it does now – and people would be more careful about when and where they drove.
The subsidies are largely invisible to drivers who park their cars – and thus free or cheap parking spaces feel like natural outcomes of the market, or perhaps even an entitlement. Yet the law is allocating this land rather than letting market prices adjudicate whether we need more parking, and whether that parking should be free. We end up overusing land for cars – and overusing cars too. You don’t have to hate sprawl, or automobiles, to want to stop subsidizing that way of life.
Here are a few quotations from the article:
“Minimum parking requirements act like a fertility drug for cars.”
And:
As Professor Shoup puts it: “Who pays for free parking? Everyone but the motorist.”
And:
If we don’t give away cars, why give away parking spaces?
What are the biggest problems with the idea? First, the danger of spillover parking means that a lot of parking has to be properly priced all at once. If the local K-Mart has a smaller lot, you don't want the customers flooding a neighborhood street and simply shifting the problem. The proper correction requires a coordinated pricing and enforcement effort, not only to succeed, but also to be sufficiently popular with homeowners. Fortunately, most of the coordination can be done at the level of the individual town or city.
Second, we don't yet know how many more spaces would be priced in the absence of legal minimum parking requirements, and how many fewer car trips there would be, especially if we are holding the quantity and quality of mass transit constant. The employer still may wish to subsidize appearance at the workplace. Alternatively, "parking fees as lump sum tax" is fine by me and it bears an odd but pleasant connection to Georgist ideas. Another possibility is that a lot of parking is shifted to satellite lots, combined with small buses or shuttles; Tysons Corner Mall already does this at Christmas or consider any number of airports. That still would improve land use (and welfare), but it remains an open question how much congestion and emissions would get better.
Mark Thoma discusses some distributional issues. I would note that less land for parking should lower other real estate and retail prices, even if more poor people end up taking the bus. And the very poorest Americans often don't have cars at all.
Australia fact of the day
Which country's stock market has been the best performer in the world — not just over the past year or decade, but over the last 110 years?
It's Australia, which stands above all others in its combination of higher returns and lower volatility.
While they speak our language, and we have some common origins, they have hitched their wagon to the dynamic growth of Asia. And it's paid off, as Australia has had the best performing stock market in the world from 1900 to 2009.
Australia posted 7.5% after-inflation returns per year during that time, with a standard deviation of 18.2%, according to a study from Credit Suisse. Those returns are the highest and the volatility the second lowest of the 19 major markets the researchers studied.
During that time, U.S. stocks made a 6.2% return, with a standard deviation of 20.4%. That means investors would have made more money in Australian stocks with less volatility than in the U.S. or any other major market over that long stretch.
The full story is here and hat tip goes to Ann Jessica Lien on Twitter.
Question: does this mean that Australia is really good, economically speaking, or simply not thought very much of by others?
The worst Americans of all time?
Status games, why not? At least the purpose is upfront and the weather is nice. Here is a list from right-wing bloggers and here is a list from Bainbridge, both in one link with Bainbridge's comments.
It's bizarre that Jimmy Carter comes out as the all-time worst from the right-wing bloggers and I don't have to tell you who is number two. It's also hard for me to see how Bainbridge ends up with Paris Hilton and Michael Moore in his list of the worst and he seems to acknowledge this oddity toward the end of his post.
The most plausible picks are, I think, any number of political figures behind slavery and its continuation (it's debatable who is truly focal here), Woodrow Wilson, the Rosenbergs, and any number of assassins, domestic terrorists, and serial killers.
Who am I forgetting? Are there focal figures who held back public health advances? Led slaughters against Native Americans? What else?
Who is the worst Canadian of all time?
Hat tip goes to Andrew Sullivan.