Welcome to week 316! The articles below caught my attention this week. What are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********). Article titles preceded by [SR] require a subscription to be read in their entirety, although complete articles may be found by an Internet title search.
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(2 May 2018): “America’s Last-Ditch Climate Strategy of Retreat Isn’t Going So Well” Bloomberg.com
——–The village of Sidney, New York flooded in 2006 and 2011. After the second flood, its mayor, Andrew Matviak, recognized that “we can’t operate the way we’ve operated before and say it’s not going to happen again.” What they have tried to do is engage what is known as “managed retreat” from flood exposure. This contrasts with what has been “the guiding philosophy behind attempts to protect U.S. homes and cities against the effect of climate change . . . to build more defenses. Houses can be perched on stilts, surrounded by barriers, buttressed with stormproof windows and roofs.” With managed retreat the approach is to move out of harm’s way. In Sidney the idea was to move impacted homes and neighborhoods out of the current flood plane and to higher ground, paying residents for the flood-damaged homes they had. But this has proven hard to do with a set of hard-to-navigate state and federal agencies to deal with.
********I appreciated the contrast between defense in the face of climate change and managed retreat. Given the very long time lags involved in action and result regarding climate, one or both of these approaches to “managing” climate change will likely be adopted. Of course, in some places defense is not really an option due to natural forces. In other places, so Sidney’s case seems, managed retreat is strongly affected by the invisible foot, i.e., legal and political forces. By the way, there is another option regarding climate change: do nothing. This seems to be the approach of Greenland, which is welcoming climate change as a way to make its environs more accessible to tourists and miners. There is a brief article to this effect in The Economist.
(2 May 2018): “Why farmers only get 7.8 cents of every dollar Americans spend on food” The Washington Post
——–“For every dollar consumers spend on food, only 7.8 cents goes to farmers—a record low that reflects shifts in how Americans eat, according to the Department of Agriculture. Where once consumers cooked most of their meals at home, they’re now buying just as many at cafes and restaurants. And while shoppers were once content to husk their own corn and slice their own apples, they now buy those foods—and thousands of others—pre-husked, pre-sliced and otherwise processed. . . . While falling share doesn’t hurt farmers, necessarily, it does expose the long-term, macro trends that shape the supply and cost of food.”
********What I found especially interesting in this article is the bar graph titled “Where your grocery money actually goes” that shows the composition of “every dollar spent on food.” Leading the way in terms of the share of each food dollar are Food services (36.3 cents) and Food processing (15.2 cents), followed by Retail trade (12.4 cents) and Wholesale trade (9.1 cents). What I would really like to see is a so-called “Percentage stacked area chart” for the share of each food dollar over time. One really can’t begin to tell a story with only one datum.
(4 May 2018): “Can Markets Make Us Equal?” Bloomberg.com
——–“Proposed solutions for inequality are depressingly familiar. . . . Doesn’t anybody have anything new to offer? Actually, yes: One big new idea is to unleash the awesome power of markets and push them into parts of life where they have never operated before. . . . Taking markets more seriously is the thrust of a surprising book, Radical Markets: Uprooting Capitalism and Democracy for a Just Society . . . It’s be Eric Posner, a University of Chicago Law School professor, and Glen Weyl, an economist and principal researcher at Microsoft Corp. They’re smart and iconoclastic, and their book bursts with ideas like kernels of corn on a hot stove.”
********This post is a review, by Peter McCoy, of Radical Markets. As the reviewer notes, some of the ideas in the book are impossible, offensive, or both. But that seems not to concern the Posner and Weyl. For example, the authors suggest that people be allowed to “decide how much they want to pay in property taxes by setting their own valuations for their property. Every kind of property, not just real estate.” Read the article to see how this would work. Suffice it to say that this book seems to have some unusual ideas that are sure to stretch one’s mind.
********For an earlier opinion piece by the authors, which appeared in The New York Times, see “The Real Villain Behind Our New Gilded Age.” In contrast to the review by McCoy, Posner and Weyl focus primarily on the role of market (monopoly) power in current times. As such they hark back to the regulatory responses to the great monopolies of the late 19th century, in particular “Standard Oil, the sugar trust, [and] the financial and railroad interests” that used “their power to corrupt the economy and politics.” As they say, “Today, market power takes new forms, but the solution is the same: antimonopoly laws and laws protecting workers, but updated for the problems of the 21st century.” Posner and Weyl also have some things to say about the current state of academic economics. Read them in “How Economists Became So Timid” The Chronicle of Higher Education.
********Eric Posner is the son of Richard Posner, who was recently recognized as a Distinguished Fellow of the American Economic Association. According to the citation, “Richard Posner is the most significant pioneer in the economic analysis of law.” From 1981 to 2017 he was a federal circuit court judge. Posner wrote prolifically throughout his career. “His treatise/textbook Economic Analysis of Law, published in 1973 and now in its ninth edition (2014), has provided generations of law students, economics students, and lawyers who had not studied economics, the frameworks and methods for applying economic analysis to all major legal domains.”
(4 May 2018): [SR] “Why Not All Tolls Rise to Nearly $50” The Wall Street Journal
——–“States are increasingly turning to a free-market solution for highway congestion, putting in demand-based tolls that rise in price as traffic builds.” Although the goal is to differentiate between those willing to pay for more speed and those who aren’t, there is a hitch. “Some places like Los Angeles and Miami have put caps on tolls to spare drivers potential sticker shock. Such price limits make jams more likely in express lanes, eroding their efficacy and prompting driver complaints. Without a cap, tolls on a 9-mile stretch in Virginia have almost hit $50.”
********Evidently there are “now more than 30 such [demand-based toll] roadways in the U.S., most with a cap, and 13 others where tolls vary by time of day.” Nobel laureate William Vickrey (1914-1996) is the originator of what is now called “congestion pricing.” The Tri-State Transportation Campaign has a 12-page summary of the congestion pricing experiences of London, Singapore, and Stockholm. All this will sound familiar to those who have followed the news about the “surge pricing” of Uber and others.
(4 May 2018): “A healthy re-examination of free trade’s benefits and shocks” The Economist
——–“Economists have long argued that free trade makes everyone richer. But lately that view has come under attack.” As a result, economists are now “asking themselves some tough questions. Is free trade always a good thing? Do the losers from free trade need to be compensated? To explore the basics of free trade, The Economist spoke to John Van Reenen an economist at MIT.” According to Van Reenen, free trade as “four big benefits” and some “well-known downsides.”
********Van Reenen provides brief and clear discussions of the benefits and downsides of free trade, which he defines as “allowing good[s] and services to move as freely as possible across different countries.” One of the things that stood out for me in the article is Van Reenen’s discussion of what a country can do to “compensate those people who do lose out” from free trade. The absence of a meaningful social safety net in the U.S. means that compensating losers from trade is more challenging than in some European countries.
(9 May 2018): “When All Else Fails, Tax Incentives Probably Will, Too” The New York Times
——–The state of Wisconsin has offered $3 billion to Foxconn to bring a $10 billion television plant to Racine and New Jersey has offered $5 billion to Amazon to bring its second headquarters to Newark. “Giveaways like these are often a waste of public money. Research on a program of corporate tax breaks in Texas found that 85 to 90 percent of the projects benefiting from such incentives would have gone forward without them. Even when tax breaks work and spawn new jobs, local residents gain little if anything.”
*******Eduardo Porter, the columnist who wrote this article, goes on to ask, “So why does everybody do it?” I.e., why do states (and regions) pursue policies that, on the face to things, deliver few if any (net) benefits to the people politicians represent? Porter explores many facets of these questions, and while doing so he provides links to a variety of resources that can be easily consulted for those who wish to learn more. Certainly, one aspect of this is the time horizons of most politicians tend to be relatively short while the time horizons for most economically evolutionary projects tend to be long. This is a familiar story, except that instead of talking about corporate management tied to short-run financial results, we are confronted with politicians tied to short-run political results. Real development, economic or other, takes time.
May you have a good week! Bruce