The Daily Parker

Politics, Weather, Photography, and the Dog

Cost disease

I've meant to write about this for a while. Economist William Baumol died on May 4th. Among other things he worked on, what interested me most in the Economist's obituary of him was his work on cost disease. From the Economist:

Mr Baumol will be remembered best for his cost disease. Its origin was unlikely: a commission to help those promoting the arts understand the financial struggles that cultural organisations faced. A report co-written with William Bowen closed with a simple but striking observation. Workers in the arts compete in the same national labour market as those in factories. As rising productivity in manufacturing lifts the wages of factory workers, arts organisations must pay their staff more to keep them from quitting to make widgets. But rising wages in the arts are not matched, as in manufacturing, by corresponding productivity growth: performing a piece by Schubert took the same time and the same number of musicians in the 20th century as it did in the 19th. Thus rising costs and stagnant productivity create increasing pressure over time to raise ticket prices, or take in more donations, or produce less art. The analysis bore relevance outside the arts, he quickly realised. Technological progress in some industries implies that in services with relatively low rates of productivity growth—like health care, education and government—swelling costs will outstrip growth in productivity. Costlier public services are a necessary side-effect of long-run growth.

Trouble results, Mr Baumol pointed out, when rising spending creates political pressure for cutbacks, leading to needless deterioration in the quality of services. Whereas cost-saving efficiencies are both possible and welcome, budget cuts premised on the notion that the share of spending on, say, education should remain flat hinder rather than help the economy. Indeed, if stagnant services complement an economy’s high-flying sectors (plying tech firms with educated workers, for example), then rising employment in stagnant areas raises rather than lowers overall productivity growth.

I'm still digesting the theory, and trying to come up with a way to make it meaningful in the arts organizations I support.

Kansas abandons an "experiment"

The Kansas legislature overrode governor Sam Brownback's veto of their roll-back of his 2012 tax increase package, because even Republicans in Kansas have a limit to ideological myopia:

Lawmakers voted to override Brownback’s veto of a tax plan estimated to bring the state more than $1.2 billion over a two-year span.

Lawmakers marshaled together a coalition of moderate Republicans, conservatives and Democrats to overcome the governor’s opposition to seeing his landmark tax cuts, which have in large part come to define his tenure in Topeka, fundamentally come to an end.

A handful of other conservative Republicans in the statehouse continued to decry the new spending being pushed by lawmakers and said the House and Senate are doing the opposite of what the people of Kansas want them to do. They also said the tax increase is the largest in state history.

“What we’re doing is fleecing our constituents,” said Sen. Ty Masterson, an Andover Republican.

Paul Krugman cheers (a little) and points out how this shows the current Republican platform to be completely cynical:

For there was an idea, a theory, behind the Kansas tax cuts: the claim that cutting taxes on the wealthy would produce explosive economic growth. It was a foolish theory, belied by decades of experience: remember the economic collapse that was supposed to follow the Clinton tax hikes, or the boom that was supposed to follow the Bush tax cuts? And it was a theory that always survived mainly because of the Upton Sinclair principle that it’s difficult to get a man to understand something when his salary depends on his not understanding it.

But still, it was a theory, and eventually the theory’s failure was too much even for Republican legislators.

Now consider the AHCA, aka Trumpcare. What’s the theory of the case behind this legislation?

You might have expected some kind of appeal to the magic of the market, some claim that radical deregulation will produce wonderful results. It would have been silly, but at least would have shown some respect for the basic idea of analyzing policies and evaluating them by results.

But what we’re getting instead is a raw exercise of political power: the GOP is trying to take away health care from millions and hand the savings to the wealthy simply because it can, without even a fig leaf of intellectual justification.

The point is that what we’re seeing now is so bad, so cynical, that it makes the Kansas experiment looks like a model of idealism and honesty by comparison.

If Kansas Republicans can look at three years of evidence and admit they were wrong, maybe so can national Republicans? Maybe. But probably not before November 2018.

Post-revival Chicago

The U.S. Census Bureau yesterday released new estimates showing that Chicago's population declined slightly last year. The deeper numbers are more troubling:

According to Alden Loury, director of research and evaluation at the Metropolitan Planning Council, while the degree of black flight from the city has slowed some this decade, it's still averaging about 12,000 a year, based on data from the American Community Survey, also issued by the Census Bureau. Blacks leaving Cook County tended to move either to northwest Indiana or farther out in the metro area, or to Atlanta, Minneapolis-St. Paul, Dallas-Fort Worth, Indianapolis or Milwaukee, in that order of popularity of destinations.

The same data show the population of whites, Latinos and people of Asian heritage growing, he said.

Loury's conclusion: "The numbers show Chicago has an issue. . . .Areas around the Loop and the central area are doing well, but overall, the city as a whole is not doing well."

Chicago Mayor Rahm Emanuel and Illinois Governor Bruce Rauner blame each other for the declines.

Citylab, analyzing a Times Op-Ed by Jed Kolko, adds color:

A more finely grained geographic analysis shows that the closer you get to the city center in most metros, the stronger has been the performance. While it’s true that the more outlying parts of some cities are losing population, their cores are becoming increasingly vibrant. As we’ve noted, that notion of critical mass at the neighborhood level is one of the defining characteristics of urban growth.

[And] there’s a baseline issue here. City growth has decelerated from the past year or two. But city growth this decade looks far different than it did a decade ago. While Kolko’s FiveThirtyEight.com post just shows the change in city and suburb growth rates over the past few years (and emphasizes the one-year change between 2015 and 2016), his longer blog post on his own website shows the change in population by type of county since 2001. Taking this longer view, it’s apparent that growth rates in suburbs have declined sharply since the last decade, while growth rates in urban counties were up.

We're still not candidates for The Atlantic's latest (really cool) photo collection of "A World Without People," thankfully.

A cautionary tale

The New York Times yesterday published a chilling description of how Venezuela's democracy sputtered and died:

Venezuela, by the numbers, resembles a country hit by civil war.

Its economy, once Latin America’s richest, is estimated to have shrunk by 10 percent in 2016, more than Syria’s. Its inflation that year has been estimated as high as 720 percent, nearly double that of second-ranked South Sudan, rendering its currency nearly worthless.

In a country with the world’s largest proven oil reserves, food has grown so scarce that three in four citizens reported involuntary weight loss, averaging 19 pounds in a year.

Venezuela’s crisis came through a series of steps whose progression is clear in retrospect, and some of which initially proved popular.

The entire article is worth reading. Not that it could happen here, right? No, of course not.

Evidence of things unseen

Some stories from today:

And, hey! It's Friday afternoon already.

Even on a day off

Welcome to February, in which I hope to increase my pathetic blogging rate (currently 1.23 per day for the last 12 months). Of course, even taking a day off to catch up on things doesn't seem to be helping, because I have all of these articles to read:

So, a lot to read. And still almost no time to read it.

Things I queued up to read on my last day in the office this year

From the Intertubes:

I'll also have some blog entries in January. December seems to have been pretty light.

Two tales of bad Republican policies hurting ordinary people

First, from Crain's, an exploration of the ghost town inside Naperville, Ill., where millions of dollars evaporated when the housing bubble burst in 2008:

At the height of the building boom, Novack estimates, there were 88 homebuilders working in Naperville. "Everyone was building homes then," he says. "It was the best business to be in." The bust took that figure down to "maybe a dozen," Novack says, though in recent years it's grown back to around 30. Homebuilding has been in a trough throughout the region, not only in Naperville. Builders sold 25,105 new homes in the Chicago area in 2006, according to Schaumburg-based industry tracker Tracy Cross & Associates, and in 2015 sold less than 15 percent of that.

If only Alan Greenspan had taken an economic view instead of an ideological one in the mid-2000s and put the brakes on runaway lending. Oh, and if we'd had financial oversight. But Republicans believe in everyone making it on their own: i.e., the richest making it on their own by not having to deal with the protections we put in place in the 1930s and 1940s, the last time this happened.

Meanwhile, in New Jersey, the incoming Christie administration moved money around the state budget to cut taxes, and he cancelled an enormous Hudson River tunnel project ostensibly to protect the state from cost overruns. The effects of his policies (which are consistent with Republican ideology) were calamitous for public transport. The New York Times explains in detail the effects on New Jersey Transit in particular:

Under the administration of Gov. Chris Christie, a Republican, the state subsidy for the railroad has plunged by more than 90 percent. Gaping holes in the agency’s past two budgets were filled by fare increases and service reductions or other cuts. And plans for a new tunnel under the Hudson River — one of the most ambitious infrastructure projects in the country — were torpedoed by Mr. Christie, who pushed for some of the money to be diverted to road-building projects. 

The result can be felt by commuters daily. So far this year, the railroad has racked up at least 125 major train delays, about one every two days. Its record for punctuality is declining, and its trains are breaking down more often — evidence that maintenance is suffering.

Midway through Mr. Christie’s first year as governor, New Jersey Transit was spending about $1.35 billion on projects to maintain and improve service. By the middle of last year, that figure had fallen by more than half, to about $600 million.

Again, Republican low-tax, low-service policies benefit the rich (who don't care about public services but do care about taxes) at the expense of everyone else (who pay much less in taxes to begin with but do care about public services).

With 26 days until the election, maybe we should pay attention to down-ballot races and their consequences. You want to make America great again? Quit electing people who don't care about you.

More reading this evening

I'm a little disappointed with the Cubs' 6-5 loss to the Giants last night, but they get another crack at them tonight. I'll probably watch—while writing software. Meanwhile, here are some articles I wish I'd had more time to read:

Go Cubs, and back to work.

Yeah, I called this one

It turns out, no one wants to buy ugly big houses in the far suburbs. This apparently comes as a shock to their owners:

The McMansion style, built between 2001 and 2007 and averaging 3,000 to 5,000 square feet, lacks the appeal with today's buyers compared to old vintage homes or large freshly built homes.

The realization is especially hard on homeowners trying to sell because when they bought the giant homes in the early 2000s, they thought of them as great investments, Feinstein said.

Then, the idea was that bigger was better because prices presumably would keep going up.

Now, housing analysts say the day of the McMansion has come and gone. An analysis just completed by Trulia shows that the amount buyers are willing to pay for McMansions over other homes has fallen 26 percent in just four years. As homes in general have been regaining value, McMansions have been losing appeal in comparison to others as the giants of the pre-crash years have aged.

No kidding. And no sympathy from me. Fools, money, etc.