Pope Francis Strafes Libertarian Economics
Pope Francis' latest apostolic exhortation covers a number of topics, but really lights into libertarian economics. There's a lot of stuff about Jesus in his thinking that I can't really sign on to but here's a great point about media priorities and the declining marginal value of income:
How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points? This is a case of exclusion. Can we continue to stand by when food is thrown away while people are starving? This is a case of inequality. Today everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless. As a consequence, masses of people find themselves excluded and marginalized: without work, without possibilities, without any means of escape.
But importantly, he follows up with a specific invocation of the need for state action rather than simple trust in the beneficence of the powerful:
In this context, some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system.
And, again, not a call for charity or goodwill toward the poor but specifically for economic regulation and democratic supervision of the capitalist system:
While the earnings of a minority are growing exponentially, so too is the gap separating the majority from the prosperity enjoyed by those happy few. This imbalance is the result of ideologies which defend the absolute autonomy of the marketplace and financial speculation. Consequently, they reject the right of states, charged with vigilance for the common good, to exercise any form of control. A new tyranny is thus born, invisible and often virtual, which unilaterally and relentlessly imposes its own laws and rules.
And on externalities:
In this system, which tends to devour everything which stands in the way of increased profits, whatever is fragile, like the environment, is defenseless before the interests of a deified market, which become the only rule.
Again, a call for political change:
A financial reform open to such ethical considerations would require a vigorous change of approach on the part of political leaders. I urge them to face this challenge with determination and an eye to the future, while not ignoring, of course, the specifics of each case. Money must serve, not rule! The Pope loves everyone, rich and poor alike, but he is obliged in the name of Christ to remind all that the rich must help, respect and promote the poor.
I've heard a number of conservative Catholic commentators remark numerous times that it's silly for left-wing people to be highlighting Pope Francis' thoughts on economic policy because all this stuff has been Catholic doctrine for a long time. I think this misses the point. Obviously a new pope isn't going to make up a new religious doctrine from scratch. But when you have a corpus of thinking and tradition that spans centuries, it makes a great deal of difference what you emphasize.
I remember very clearly having been an intern in Chuck Schumer's office and attending with the senator, some of his staff, and a wide swathe of New York City political elites an event at St Patrick's Cathedral to celebrate the posthumous award of the Congressional Gold Medal to Archbishop John O'Connor. His successor, Archbishop Egan, delivered an address that went on at length about O'Connor's charitable work, but on a public policy level addressed almost exclusively the Church's support for banning abortion, for discriminating against gay and lesbian couples, and for school vouchers. That was a choice he made about what he thought it was important for people to hear about. Pope Francis is making a different kind of choice.
I Was a Victim of the Fake "Knockout Game" Trend
True story. A couple of years back, I was walking home at night on North Capitol Street here in Washington, D.C., when two dudes randomly assaulted me before running away without stealing anything. At the time, I didn't think it was all that strange—I've lived in urban areas all my life, and plenty of people I know have been victims of anonymous street crime. The good news is that urban crime rates have been trending downward since I've been about 9 years old, so we're making important progress in this regard.
The weird thing was that after I blogged briefly about this, a number of conservative bloggers, particularly those of a racist bent, decided that this wasn't just one of many random acts of criminality that occur in the big city. No! It was an instance of "Knockout King," which I suppose was the 2011 version of 2013's more robust Knockout Game white racial panic.
But to be clear about something—insofar as there's supposedly a "game" here where the contestant tries to knock someone out with one punch, that absolutely isn't what happened. I was knocked down, but definitely not out, and then after that I got kicked a bunch of times. If you're familiar with the phrase "don't kick a man while he's down," take note—it really hurts quite a bit to be kicked while you're down. In fact, this substantial deviation from the "rules" of the "game" is a lot of what made getting violently assaulted for no reason such a physically unpleasant experience. But for whatever reason, simply noting that aggravated assaults occur at a pace of more than one per minute nationwide didn't quite seem good enough. Rather than remarking on man's cruelty to man as a general phenomenon, it's more alarming to devise this specific pseudofactual narrative. In other news, at summer camp one time, some boys decided it would be funny to zip this one kid up in his duffle bag and then pretend we were going to toss the bag into the lake. I went along with the "prank." Another time I participated in a prank that really was a prank, and in retaliation, some of the victims decided that instead of counterpranking they would knock this one kid down and sort of roll him down a steep hill.
And so it goes—at an expensive summer camp, "boys will be boys." On the streets of Washington, boys will be part of a trend piece.
At any rate, violent crime is a terrible thing. I moved to town in 2003, and there were 248 murders that year. Last year, there were just 88 despite population growth. A safer city is a much more pleasant place to live. Beyond the lives saved, it has broad benefits for peace of mind and people's economic and social development. It's very unfortunate that we've already had 98 murders this year (12 of them from the Navy Yard shooter), though it's heartening that we're still below the 108 murders from 2011 or the 132 the year before that. People shouldn't minimize these concerns about urban violence, but it accomplishes nothing in terms of tackling them to concoct weird trends and games out of thin air.
The Crucial Need for Full Employment
Back in 2003, Jared Bernstein and Dean Baker published a book called The Benefits of Full Employment that I really think is one of the great underrated public policy books of our time. They are out this week with a sequel called Getting Back to Full Employment that's also great.
The best part of the new book is largely an updating of the old one, so if you haven't read either, I would start with the new book and go back to the old one if you want more backfill. The point in both cases is to take a look at the myths and realities of the 1990s economy. They show that the full employment era of the late-1990s really delivered on the promise of equitable and broadly shared growth. It is true that there was a stock-market bubble, but it is also true that most people didn't own much in the way of stock and nonetheless shared in prosperity. Wages rose for working people. And in some ways even more incredibly, jobs became available for people who weren't previously working. With wages on the rise, employers were suddenly willing to invest in training or in taking risks on the "unemployable."
And they show that while of course the economy is a complicated place, this happy era of full employment was largely driven by a single factor—as the unemployment rate hit about 6 percent, conventional wisdom starting braying about the need for tighter money to head off incipient inflation, and Alan Greenspan ignored the conventional wisdom. Some other good things were happening in American public policy at the time, but none of them would have produced this wage growth and growth in job availability if Greenspan had deliberately kept unemployment high as an anti-inflation tactic.
This makes it a little disappointing that when they get to their prescriptions for bringing us back to the nirvana of full employment, the Federal Reserve falls a bit out of focus.
Their main prescriptions for obtaining full employment are currency depreciation to boost net exports and taking advantage of low borrowing costs to engage in fiscal stimulus. The former is pretty clearly a monetary operation. And Bernstein and Baker even say that pursuing their favored course would be slightly inflationary, it's just that the slightly inflationary consequences would be a price well worth paying for the benefits of full employment. But if you can assume a central bank willing to undertake a slightly inflationary monetary policy for the sake of obtaining full employment, then the exchange rate impacts become just one of a suite of ways in which monetary stimulus can create jobs. On the stimulus front, it's a back-door issue. For fiscal policy to work, you have to assume that creating jobs and closing the output gap won't simply lead the Fed to implement its "exit strategy" quicker and slow things back down.
Neither of these prescriptions are wrong, nor are the monetary assumptions behind them crazy, but I think it's important to confront the Federal Reserve's role head-on, as the Fed is the institution with primary responsibility for full employment. The Fed "moves last," reacting to anything Congress does on the budget or trade fronts. That quibble aside, these are two excellent books. The rhetoric of job creation and good jobs plays a huge role in American politics, but the specific concept of full employment and the important distributive consequences of the rigor with which it's pursued don't play nearly as big a role as their should in progressive advocacy. Willingness to risk moderate amounts of inflation for the sake of working-class job and income growth is a crucial prerequisite for broad-based prosperity, but few people in politics talk about it at all.
Watch Robyn Meet a Robyn-Inspired Robot
Robyn is Swedish and has made a number of robot-themed songs, so she's a natural tie-in for the Robot Project being run out of Sweden's Royal Institute of Technology. Here's Robyn talking about KTH's Robyn-inspired robot.
The lucky thing about being a celebrity, I guess, is that you actually get to meet your robot replacement. When Slate writers are phased out in favor of #slatepitching alogorithms, I think we'll just be shown the door unceremoniously.
When Social Media Goes Awry
Upworthy-style headlines aimed at exploiting reader curiosity are all the rage these days, but I'd say this is a case study in how you can't just mechanistically apply any old strategy to any old situation:
He pinned her to the floor and molested her, then he asked a question that's still seared on her mind http://t.co/LUwgi0YLTn-- Washington Post (@washingtonpost) November 25, 2013
Now the world awaits the inevitable apology with bated breath.
Lakers Sign Kobe Bryant to Insane $48.5 Million Deal
Every few years the National Basketball Association's owners gather collectively around the bargaining table and squeeze the players' union for givebacks and concessions. They drive a hard bargain, and they do it effectively. The owners are all rich guys, and the ferocity with which they screw their workforce makes you believe that being a rich guy involves some level of knowledge of how to get money.
And then as individuals they sign absurd agreements with players in which it seems like they've forgotten absolutely everything there is to know about negotiations. The latest example is the Los Angeles Lakers agreeing to pay Kobe Bryant $23.5 million next year and $25 million the year after that.
Have I mentioned that Kobe is 35? Or that he's currently not playing with a ruptured Achilles?
Under this deal, Bryant will continue to be the highest paid player in the NBA. But at this point in his career, nobody thinks he's the best player in the NBA. Or the second-best. Or the third-best. Nor does anyone believe his place on the rankings list will rise over the next two years. But most egregiously of all, the thing you see with these deals is that the Lakers weren't bidding against anyone. Who else was going to sign Kobe to a two-year, $48 million contract in his late 30s?
Particularly odd is that precisely because the owners drive such a hard bargain with the players union, these kinds of bad contracts are a huge burden on a team. The Lakers are an economic juggernaut when they put a winning basketball team on the court and could easily afford to sentimentally overspend on an iconic player like Bryant. Except, that is, for the small matter of the salary cap and the luxury tax. Under the rules of the CBA, spending on Bryant crowds out spending on other players, and overpaying your iconic star only guarantees that there won't be money left over to build a team around him.
Uber, GM, and Toyota Team Up on Car Finance
Uber announced a new initiative Monday in partnership with GM and Toyota to help would-be buyers of Uber vehicles to get discounted loans to buy cars. The basic logic is that a loan to purchase a new Uber car should be seen as a less risky loan than a conventional auto loan, since the vehicle comes with an income stream attached to it.
The idea is basically that Uber itself will certify what it calls "driver-partners" in select cities (they're starting with San Francisco, Dallas, Chicago, New York, Philadelphia, and Boston) who want to buy GM or Toyota cars and will get them eligible for lower interest loans. Uber's publicity push for this new program does not involve telling people which banks, if any, are part of this arrangement or any hard numbers, so it's difficult to say for sure what this amounts to.
The business logic, however, is fairly persuasive. For Uber to work, there need to be a lot of available cars on the road. As the service grows in popularity, you could achieve that goal by raising prices, which will both tamp down demand and tempt more drivers onto the road. But while higher prices also grow Uber's short-term revenue, for longer-term growth it makes more sense to try to find ways to keep prices relatively low. That means identifying as many supply bottlenecks as possible and moving to eliminate them—with the price of the underlying hardware a perfectly reasonable bottleneck to target.
This is also an interesting demonstration of the dilemmas of the modern day "weightless" financialized American company.
One possible application for Uber's routing technology and customer service would have been for Uber to own a fleet of cars and employ an army of drivers. If that were the business model, that growth in Uber revenue would finance growth in fleet size, and you wouldn't have this problem. But in part for regulatory reasons and in part for financial reasons, Uber wants to minimize the amount of capital goods that it owns. The vision is for Uber to be a high-margin, effortlessly scalable business that sits at the center of a web of low-margin, capital-intensive car driving enterprises. But ultimately Uber is tied to the fate of the people who actually own the vehicles. Uber's funders may not want to directly invest in a vast fleet of automobiles, but unless someone invests in the fleet, the business won't grow.
Can't Talk San Francisco House Prices Without Talking Zoning
Another day, another frustrating article about rising housing prices in the Bay Area that doesn't mention the supply-side at all.
But think about this: The high-tech economy is booming. That means affluent skilled workers want to move to the Bay Area to participate in the high-tech economy. It also means a small but not entirely trivial fraction of those affluent skilled workers are getting stinking rich off initial public offerings and such. So naturally the prices that people are willing to pay for housing are skyrocketing.
Under any policy paradigm, that really ought to make the price of a single-family detached house with a sizable yard soar, since land is objectively scarce. But the only reason that scarcity of land should lead to scarcity of houses is zoning. The city of San Francisco itself bears some blame for this—many low-rise districts of the city could and should be redeveloped as denser high-rise areas. I'm often accused of wanting every city to turn itself into my native Manhattan, but San Francisco has about half the population density of Brooklyn and could easily accommodate hundreds of thousands of new housing units without Manhattanization.
But the even more egregious issues are in the suburban areas stretching south of San Francisco down the Peninsula. These areas in San Mateo and Santa Clara counties serve as suburbs of San Francisco and San Jose but also as important business hubs in their own right. Demand for this Silicon Valley land is extremely high. The reasonable thing to do would be to use the land intensively—some more apartment buildings, some more rowhouse neighborhoods, some more detached houses on slightly smaller plots—but Valley politics have been relentlessly hostile to real-estate development. The shortage of both houses and commercial office space that results from this dynamic is a substantial driver of economic problems in the Bay Area—but to an extent also throughout the country. The supercharged growth in the high-tech sector ought to be creating massive spillovers of prosperity, in just the way that the rise of the auto industry drove the entire broader economy of Michigan in its day. Instead, it's mostly creating windfall profits for a relatively small number of people and cost-of-living spirals for others.
War With Iran Would Be Costly
As people continue to debate the merits of the preliminary deal to halt Iranian nuclear weapons research (I agree with Fred Kaplan as usual), let me note something I wrote back in March 2012—a war with Iran could be an economic disaster.
The economic policy and foreign policy streams don't normally cross in this way, but if you try to just bracket all the international relations issues and imagine what would follow from a "large and sudden disruption of Gulf oil supplies" (imagine a freak typhoon or whatever), you'll see that you're looking at something fairly disastrous. I am a strong proponent of targeting higher gasoline prices via a higher gasoline tax, but the idea would be to phase the new policy in over time so that as people buy new vehicles they shift to less oil-intensive transportation options. In the event of a sudden disruption of oil supplies leading to suddenly higher prices, there's a limited amount people can do to reduce the quantity of gasoline they consume.
That means two things will happen. One is that people will have to reduce the quantity of everything else that they consume (fewer meals out, fewer Black Friday apparel purchases, delay replacing that coffee table you hate), and the other is that the prices of many consumer goods will rise due to increased transportation costs.
In other words, people will lose jobs, while at the same time central banks will face increased pressure for tighter money.
How bad would the damage be? It's very difficult to say. The consequences of launching a war would be unpredictable. But we can say for sure what the direction of the change would be. A military strike would definitely disrupt supplies of a key commodity and definitive have a negative impact on the labor market. Much less clear is what the impact of a war would be on Iran's nuclear program. On the one hand, you could blow up some stuff that's used in the nuclear program. On the other hand, getting bombed by a great power is exactly the kind of thing that's likely to persuade a government and a population that a go-for-broke effort to obtain a nuclear deterrent makes sense as national policy.
Since the deal's been announced, I've heard a number of skeptics proclaim that the problem with it is basically that you can't trust the Iranians. Well if you can't trust the Iranians, you can't make any deal with them. That means either an Iranian nuclear weapon or a war, which means you need to give serious thought to what that war might mean for the world.
A Truck for Women, and of Course It's Pink
Truck driving is one of the least gender-integrated professions around, since in the environment of evolutionary adaptiveness, men needed to use large diesel-powered vehicles to haul the corpses of their slain prey while women gathered nuts and took care of children. Nevertheless, the good people at Mitsubishi Fuso (which, despite the name, is currently a division of the German company Daimler, which makes Mercedes Benz, and not a division of Mitsubishi) think they can make a new generation of trucks designed to appeal to a new generation of lady truck drivers.
Naturally, the truck is pink.
It debuted over the weekend at the 43rd Tokyo Motor Show and is merely a concept model at this point. The vehicle is a derivative of the Canter light duty truck (known as "FE" in North America until recently) outfitted with a hybrid engine. The special lady version is known as the "Canna." Fuso claims it was developed "by a project team consisting of 9 women core members," and along with the pink polka-dotted exterior, "the interior incorporates more 'cute' and 'comfort' elements in its inner panel and seat covers targeted at women drivers."
In my experience the "appeal to women by making it pink" marketing strategy is rarely well-received. Indeed, if you look at the market for sedans, wagons, SUVs, and other vehicles commonly owned by women, you find that pink is not an especially popular choice of color regardless of gender, so I'm skeptical that a lack of pink exterior paint jobs really explains the weak appeal of light-duty trucks to women.