Red tape and house prices
Steven Landsburg’s latest Slate column is based on work by Ed Glaeser and Joe Gyourko.
Instead of the traditional formula "housing price equals land price + construction costs + reasonable profit," we seem to be seeing something more like "housing price equals land price + constructions costs plus reasonable profit + mystery component." And, most interestingly, the mystery component varies a lot from city to city.
The mystery component turns out to be zoning rules, and proxied quite well by the length of time it takes to get a permit. In September, the World Bank’s Doing Business project will be publishing data on the cost of building inspections in 150 countries; it already has data on the cost of firing workers, starting a business, going through the courts, and more.
Marginal Revolution is on Wikipedia
It’s not a bad start either. The rest of us should get over there and give MShonle a hand.
A critic on Critical Mass
I recently finished Philip Ball’s Critical Mass.
The bad news: it’s twice as long as it needs to be and his criticisms
of economics are rather odd (no, ability to forecast share prices is not the
test of the subject’s validity). The good news: it’s packed full of fun
stuff about the relevance of various physical and agent-based modelling
techniques to the social sciences. Even better, you can read Ball’s own
summary and find out whether you like it.
Thomas Schelling was there first again with
his chessboard model of racial segregation. The bottom line: racial
preferences which would seem to accommodate mixed neighbourhoods turn
out to lead to extreme segregation, as shown in (b) below.
Robert Axtell, one of the founders of the Sugarscape agent-based modelling system, predicts that within a few years we will be able to run models with billions of agents, rather than Schelling’s 50 or so. Artificial worlds beckon.
We shall see how many funerals…
Let us take out of the Hospitals, out of the Camps, or from elsewhere, 200, or 500 poor People, that have Fevers, Pleurisies, etc. Let us divide them in Halfes, let us cast lots, that one half of them may fall to my share and the other to yours; I will cure them without bloodletting and sensible evacuation; but do you do as ye know (for neither do I tye you up to the boasting, or of Phlebotomy, or the abstinence from a solutive Medicine) we shall see how many Funerals both of us shall have: But let the reward of the contention or wager, be 300 Florens, deposited on both sides: Here your business is decided.
That was Jean Baptiste van Helmont in the 17th century. It took three hundred years for randomized trials to become widespread in the medical profession. Now the MIT Poverty Action Lab, among others, is advocating their use in evaluating the effectiveness of development projects (and other policy interventions). Since many projects are rolled out gradually, rolling them out with some randomization generates very good data without much extra effort required.
Peru Facts of the Day
It’s easy to rent a motorcycle in Peru, unlike in the United States where liability fears have made this almost impossible. On the other hand, I would not want to drive a car let alone a motorcycle in Peru. These two facts may well be related – I will let you work out the model.
It would have suited my biases to report that the only Che Guevara T-shirts I have seen were on tourists. But while this may be true in the cities it is not true in the countryside where it is easy to spot El Comandante. Guevara spoke to the people and they are still listening.
My tour guide, an Andean, had nothing good to say about the Spanish. Combine this with the last fact and we see that Peru continues to be deeply divided along racial lines, regardless of how much one hears about mestizo.
More on yuan revaluation
…we do not know accurately the size of China’s surplus because, in an attempt to circumvent exchange controls, there is over-invoicing of exports and under-invoicing of imports – part of speculative flows. The large import content of China’s exports, particularly to America, mean that China’s competitiveness will be little affected. Economists disagree about whether the import content for exports to America is 70 per cent or 80 per cent but, whatever the number, it means that the effective appreciation was almost certainly under 1 per cent. In the case of a larger revaluation, Chinese companies would probably respond to the loss of competitiveness by cutting margins, reducing further the effect of the revaluation. This revaluation – even if followed by further moderate ones – is likely only to slow the rising tide of China’s exports slightly.
But whether this, or a succession of revaluations, eliminates China’s trade surplus will have little effect on the more important problem of global trade imbalances, and particularly on the US trade deficit. Much of China’s recent gains in textile sales, for instance, after the end of quotas last December, came at the expense of other developing countries. America will once again be buying from them, and so total imports will be little changed.
Wise words, although I disagree with Stiglitz’s pessimism about U.S. living standards (see the link) and the apparent claim that China does not much need the U.S..
What is government anyway? A parable from Singapore
Yes Singapore has developed rapidly through the use of market incentives, but there is much government planning here as well. Every food stall gets a letter grade for its cleanliness, which must be displayed prominently. More significantly, land planning has been extensive, and yes the government decides where the food stalls (and just about everything else) will go.
But why do we call this government? Let us say that way back when, former Prime Minister Lee Kuan Yew had homesteaded the territory of Singapore in proper Lockean fashion. He then wrote a contract welcoming people (all subsequent migrants, but not everyone) to live there, provided they agree to various rules and regulations, including of course Singaporean land planning, not to mention the ban on oral sex. This would then count as "the market," presumably.
Should we then think that such planning is more (or perhaps less) efficient, because it is now "the market" instead of "government"? But why should our evaluation depend on the murky details of past history? What is really the difference between market and government anyway? Can we in any case think of Singapore as a very well planned corporation, albeit with some uptight morals at times?
When we do public choice theory, is it really the government we are criticizing? Or is our true target something like "excessively large land parcels," regardless of their historical origin?
Using cartoons to promote reform
From my inventive colleagues at the World Bank: using cartoons to promote economic reform. Follow the stories of people such as Bosnian entrepreneur Max as they struggle through red tape (my favorite example: an ‘atomic shelter fee’).
Comics can be so effective in spreading information because they use drama and
humor to educate without being overly didactic or preachy. Unlike brochures,
they have a long shelf-life. People rarely throw out comics – they either save
them or give them to a friend.
Comics are also cheap to produce and can be placed as advertisements in newspapers. The disadvantages? They’re very hard to edit by committee, which may explain why the big institutions have been slow to pick them up. That said, you can order your Federal Reserve comics here.
Peruvian Food
You can eat pizza in Cusco but why would you? Neverthless, many people must since the places are everywhere – lcd dining. The local speciality is cuy (click on the link if you do not know what it is. But do not tell my children what Daddy has been eating!) Roasted cuy is an old tradition – recall the discussion of syncretism and subterfuge and check out this Cusconian painting of the last supper (scroll down to the third picture for a good view.)
You can get western cuy in town but I wanted the real thing so I asked the hotel guide where the locals go. After some argument (si, si, yo no quiero cuy touristico, yo quiero muy bien cuy tipico) she relented and got me a taxi for the next day.
We traveled well out of Cusco, past the shanty towns and out into the countryside where cows roam next to the highway and the occasional llama can be seen on the mountains. After about 40 minutes we arrived at a downtrodden pueblo. I thought this was it but we then headed out on a dirt road finally pulling into an alley/driveway behind a house. Just like in the movies a fat goose and a skinny dog (you work it out!) moved slowly out of the way as we pulled up to a terrace behind the house. The restaurant, if you can call it that, wasn’t much to look at but opposite were the mountains.
Two Andean mamas right out of the tourist book seated us and began to stoke a large earthenware stove with wood. The cuy was roasted and served with excellent Andean potatoes as well as macaroni and cheese (!).
The cuy: good. The view: great. The experience: priceless.
What’s on my MP3 Player?
If all goes well today I shall climb Putucusi, the mountain next to Machu Picchu. I intend to time the ascent in order to summit with the climax of Dvorak’s New World Symphony. Those of you who know the piece will recognize the megalomania, oh well at least I can’t be accused of lacking self-awareness.
Also on my IRiver MP3 Player:
Rush: Moving Pictures.
Fleming and John: Way We Are.
Miles Davis: Birth of the Cool.
Van Morrision: Inarticulate Speech of the Heart.
Testing for life on Titan
If there is life on Titan, we might know soon.
Gustav de Molinari on-line
Alas, my location prevents me from reading these recently-translated essays. But Gustav de Molinari (Belgium) was one of the best and most forceful classical liberals of the nineteenth century. He is also known for inventing the idea of libertarian anarchism, although I believe he repudiated it later in his life. The links include a biography.
Thomas Friedman has a really, really bad idea
Wouldn’t you think that if you were president, after you had read the umpteenth story about premier U.S. companies, such as Intel and Apple, building their newest factories, and even research facilities, in China, India, or Ireland, that you would summon the country’s top business leaders to Washington [and] ask them just one question: "What do we have to go so you will keep your best jobs here? Make me a list and I will not rest until I get it enacted."
That is from his Op-Ed "Learning from Lance," here is the link. Wasn’t something like this tried in the 1930s? For purposes of contrast, read the ever-sensible Daniel Drezner on the same topic.
Rankings of economics blogs
All these measures are a bit mind-boggling, but Craig Newmark considers the relevant data in detail. I don’t mind how BlogPulse measures popularity, but I’ve long believed that blog writers should not spend much (if any) time checking their stats. Of course I didn’t go looking for these rankings, I just happened to see them on Craig’s blog…although I did read the post in full…
Mispriced Bandwidth
A correspondent writes:
The Moche site is down again. In situations like these, it’s always struck me that the business model of the host–in this case Yahoo! GeoCities–is insane. If the demand exceeds the bandwidth that their customer has paid for, they should provide an option for visitors to make a donation via PayPal or some such that will restore access to the site. They might make a lot of money doing this–they might even split it with their customers whose sites attract the traffice. If the fee is priced correctly, visitors wouldn’t think twice about paying–obviously we want to see the site or we wouldn’t have followed the link in the first place.
This is an excellent idea. With bandwidth so cheap I would add that there ought to be an option to pay for bandwidth for others as well as oneself. I would have paid for our readers to enjoy the sex pots! I would tell you the correspondent’s name by the way except that this person is at work and doesn’t want it known that s/he uses the boss´s time to peruse "erotic crockery"!