Tuesday, April 29, 2008

Morning Reading

David Brooks has a good column on the demographic divide within the Democrat party. In short, educated voters are going for Obama while uneducated voters are going for Hillary. Can either candidate unite these groups of voters who, having relatively little hostility to each other, live in different worlds?

Really good article about current U.S. farm policy and its contradictions.

There is a great cartoon over at Econ Journal Watch. It is on the left hand side of the page. It makes a good point about externalities and property rights.

A study from the state of Washington found no evidence of illegal gas price manipulation. Add that study to the pile of others that have come to same conclusion. When will they stop?

Wednesday, April 23, 2008

Spencer Heath MacCallum

I've recently discovered the work of MacCallum. It is extremely thought provoking. His primary work focuses on the idea of "entrepreneurial communities" as an alternative to subdivisions. Examples of entrecoms or multiple tenant income property (MTIP), as he calls them, include shopping malls and hotels, where a given space is bought or leased while the common areas (walk ways, etc.) and the land itself remain under the ownership and control of a developer. As it applies to housing developments, the basic idea is that you own the house, but someone else owns the land under the house. The home owner pays land rent which then finances streets, parks, and other common areas. According to MacCallum, the entrepreneur who owns the development has much better incentives and feedback mechanisms to manage the development, including the common areas, successfully than does a home owner's association or city planner, both of which rely on democratic decision making.

MacCallum contributes a chapter to The Voluntary City. Here are portions of a great paragraph which addresses voting (very relevant during this election year) from his essay "The Case for Land Lease versus Subdivision" in that volume:

"Voting, widely held to be democratic, serves as the great legitimizer of the political process. But the fact is that like the political process itself, it is a makeshift, like a coin toss, that people fall back upon in the absence of any better alternative... Jonathon Swift supposedly quipped that 'some people have no better idea of determining right from wrong than by counting noses.' Voting is not a procedure for discovering truth or for making informed decisions. It is an agreed-upon method for people to gang up on one another without overt violence... Instead of navigating toward a win-win situation, voting is a method of breaking resistance to a course of action while ignoring the differences underlying the resistance. Its zero-sum nature is starkly dramatized in that wonderful vignette, attributed to Mencken, of two wolves and a lamb voting on the question of what to have for dinner."
Here is one article of MaCallum's and here is another. About half way through both he begins to discuss entrecoms or MTIPs.

So maybe we would be better off if we owned our homes, but not the ground under them.

Economics of College

Thomas Sowell has a great series of columns on the economics of college. He addresses whether or not college education should be taxpayer subsidized and why college costs so much. Something else he touches on is the incentives faculty face under the current set of tenure and promotion rules. I've seen how these rules can have some bad effects first hand.

Well worth a read.

Part 1. Part 2. Part 3.

Tuesday, April 22, 2008

Gas and Commodity Futures

Here is a pretty good article on gas prices. It has some flaws, but is still worth a read. Check out the article's comments for coverage of the flaws. Some of the commentators miss one of the author's points. He is not focusing on why the price of gas has gone up over the last 5 years. He is asking why, based on what the price of gas was in 1950 and considering inflation, taxes and demand, is gas not more expensive now than it actually is.

Here is an article on agricultural commodity futures market volatility. My expertise regarding commodity futures is limited. I have a couple of theories as to what could be contributing to this volatility (increased demand leading to exaggerated responses to new information or a speculative bubble in some commodities), but I have no idea if either theory has any validity.

Monday, April 14, 2008

Possibilities versus Probabilities

Referring to the proposed waste water treatment plant (see my previous post), this letter found its way to the Waco Tribune Herald:

Sludge from Lorena
The controversy over the proposed water treatment plant in Lorena [March 21, Page 1A] should not be passed over too lightly by the people who think they are not affected.
“Leftover sludge” will be pumped into holding tanks and trucked to the city of Waco’s main wastewater treatment plant for processing. That will entail tanker trucks transporting this sludge down Highway 77 through the city of Robinson to the LaSalle Avenue water treatment plant — about a 10-mile trip.
Imagine all the possibilities. Robinson citizens may want to weigh in on this proposal, too.
Anything is possible, but is it also probable? I'll assume that the worst possible outcome of tankers full of sludge driving down 77 is one overturning and spilling it (and no I did not accidentally leave the first two letters off of that word) all over the highway. That is certainly possible, but how probable is it? I'm going to go with highly improbable because very few other trucks turn over.
If you base decisions you make (or policy decisions) on what could possibly happen, you should never drive (you could possibly suffer fatal injuries in a wreck), you should never bathe or shower (you could possibly die in a fall), you should never eat chicken (you could possibly die from salmonella poisoning), you should never walk outside while the sun is out (you could possibly get skin cancer and die), etc. People constantly do all of these things, and many other risky activities, because although possible all of these outcomes are highly improbable.

Monday, April 7, 2008

NIMBY: Wastewater Plant Edition

A classic example of NIMBY: McLennan County wants to put in a waste water treatment plant; local residents don't want it near them. One side wants to facilitate development; the other wants to preserve rural amenities.

Two points:
  1. The waste water treatment plant has to go somewhere and like it or lump it, rural areas are better locations due to more open space and cheaper land.
  2. The Texas Commission on Environmental Quality (TCEQ) is not going to allow this plant to discharge any hazardous materials. As for the smell, local resident would be better off letting the plant be built and then bringing a suit if the plant creates an odor.