Tuesday, August 31, 2010

"Mansion may sell for record price"

A prominent Buffalo mansion on its most prestigious street is rumored to be selling for over $1 1/2 million which would be a record in the city. This news follows on the heels of the sale of a downtown condo for $1.45 million just a week ago or so. Both sales taking place in the third poorest city in the country which continues to hemorrhage its middle class.

One might be tempted to call it another example of "luxury city" syndrome.

UPDATE: Also see -- Urban Plight: Vanishing Upward Mobility

Thursday, August 26, 2010

Free Speech

So, why is the left up in arms over letting corporations contribute to political campaigns?

For all their railing against Target spending money on speech, it’s clear that the not-ready-for-prime-time players don’t think that corporations like Target can make them do their bidding. They want the audience to know that they’re smarter and hipper than that. And they clearly believe that there are at least some like-minded individuals of a progressive political mindset who will join them in their anti-Target crusade.

But they’re worried that the unwashed masses aren’t as enlightened as they are, which is why they want corporations like Target to be banned from spending money on political speech during election season.

In other words, they subscribe to the same condescending attitude that is at the heart of all criticism of Citizens United: Most of the public is made up of idiots, and they’ll vote however corporations tell them to.

Yup. It's the arrogance, stupid.

Wednesday, August 25, 2010

Another Reason That Profits Matter

The famous St. Louis Gateway Arch provides another example of how we cannot trust government to maintain the infrastructure.

Almost 45 years into its reign atop the St. Louis skyline, the 630-foot monument is suffering from growing rust and decay. And nobody knows how extensive.

Corrosion, some of it feared aggressive, and severe discoloration of the stainless steel skin have long been present, according to engineering reports reviewed by the Post-Dispatch.

The documents and interviews with metallurgists indicate that the remedy could be as minor as an "expensive" surface cleaning or as elaborate as a full-blown restoration. One report, completed in 2006, called for a deeper study, for which the National Park Service says it only recently obtained funding.

If the arch were run as a for-profit site, you can be sure it would be in excellent condition. Businesses must maintain their capital because it produces income for them -- government, however, not so much.

Businesspeople know the value of their capital and what it contributes to their operation. Let it deteriorate and profits will fall. Politicians, though, have no such incentive.

They don't receive praise and media attention by budgeting money for routine repairs. Their incentives (getting votes) lead them to prefer funding new and highly-visible public works projects. Those can be claimed to create jobs and they attract TV cameras to ground-breaking ceremonies.

And infrastructure, even as famous as the Gateway Arch, produces no appreciable revenue for government. Politicians raise taxes when they want and the state of the public's capital has no bearing on it. As a result, even the symbol of a great city is allowed to fall into decay.

Profits signal the entrepreneur that what he's doing is working. When there are no profits to be made, no one knows or really cares much. Imagine the condition of your local hospital in a few years if government gets its hands on it.

Friday, August 20, 2010

Time Capsule

Once upon a time, not so long ago, Afghanistan was entering the modern world. What happened?

Via Chicago Boyz

Gender Workplace Disparity

When feminists complain that women make less money than men (on average), why don't they gloat that 14 times more men are killed on the job than women?

Age Power!

So, it isn't the twenty-somethings that drive innovation after all.

[…] the age at which entrepreneurs are more innovative and willing to take risks seems to be going up. According to data from the Kauffman Foundation, the highest rate of entrepreneurship in America has shifted to the 55–64 age group, with people over 55 almost twice as likely to found successful companies than those between 20 and 34. And while the entrepreneurship rate has gone up since 1996 in most other age brackets as well, it has actually declined among Americans under 35. That’s good news for one very simple reason: baby boomers are now in their prime, startup-founding years, which will unleash what Kauffman researcher Dane Stangler expects to be an entrepreneurship boom. Since new companies create the vast majority of jobs, the positive impact on a post-recession economy could be great.

I like to read that.

Wednesday, August 18, 2010

How Not To Revive California

Harold Myerson, writing in the Los Angeles Times today, lays bare the economic ignorance that dominates the media and our government. In an op-ed titled "Reviving California's economy: Meg Whitman versus Jerry Brown", he compares the economic development planks of the two gubernatorial candidates and draws the wrong conclusion.

First up, Whitman.

Both Whitman and Brown understand that loss of manufacturing is a key factor in the state's economic decline, and they have put forth economic plans to address it. But neither of their strategies does enough to restore the state to its onetime industrial preeminence.

Whitman seeks to remedy the problem through classic Republican policies: reducing taxes and regulations on businesses. Some of her targeted tax cuts make sense, like increasing the R&D tax credit and creating a tax credit for factory equipment. But the massive cuts she proposes to state services will only further the decline of California's aging infrastructure and harm a public education system that badly needs improvement.

You can tell where this is going already: any cuts to California's bloated government are probably bad. At any rate -- on to Brown.

Brown also favors tax reductions for factory equipment, and outlines other incentives to boost manufacturing. He also commits himself to major infrastructure upgrades, and he singles out the clean-energy sector as the industry the state should do most to help. Unlike Whitman's plan, his clean-energy program has a demand as well as a supply side: By mandating that 33% of the state's electricity come from renewable sources, his plan would create a larger market for the industry it seeks to boost.

Well, isn't that brilliant? Brown will stimulate both demand and supply! And he'll do it by legislating that utilities provide 1/3 of the state's power from renewable sources and by subsidising the renewable generators. To Mr. Myerson, this is pure genius -- a sort of perpetual-motion economic engine.

The end result must be a tremendous increase in electricity costs and a resultant tsunami of energy-intensive manufacturing leaving the state. The few "green" companies created by Brown's munificence (furnished by the taxpayers) will serve only to draw capital away from what few profitable unsubsidized operations that remain.

Raising costs is a very odd way, indeed, to encourage manufacturing and is a sure-fire recipe for economic ruin. It's emblematic of the sort of economic thinking that typifies the modern left and I think that, this time, Californians will recognize it for the foolishness it is.

Thursday, August 12, 2010

"Licensing Naiveté"

Would licensing mortgage application-takers have prevented the recession?

"Let's invent new vindictive forms of taxation for fun"

James Lileks:

Why not treat tenure as wealth, and tax it accordingly? Take a college professor. (Please.) Calculate how much they'll make until retirement from their permanent job. Declare it wealth. Hoover up a chunk. Write in a provision that says they'll get 47% of the amount paid (with no interest, over ten years) if they ever quit, with the remainder going to a fund to pay for college tuitions for the poor. Sit back; make popcorn; enjoy the reactions.

Heh. I like it.

Is This Really "The Roadmap to a High-Speed Recovery"?

Richard Florida is back peddling his peculiar brand of economics.

Our transition from a Fordist mass production economy, based on the assembly line, to a knowledge economy, in which the driving force is creativity and technological innovation, has been under way for some time; the evidence can be seen in the physical decline of the old manufacturing cities and the boom in high-tech centers like Silicon Valley, government boomtowns like Washington DC, and college towns from Boulder to Ann Arbor.

Florida claims that we are in "a techtonic transition" as "our industrial economy gives way to a post-industrial knowledge economy". He writes as if this were a natural and inevitable occurrence. Look at the rust-belt -- it collapsed while high-tech cities and government-supported cities boomed.

But none of that was foreordained; it was the result of governmental monetary and fiscal policy. High government spending started under LBJ combined with Nixon's closing of the gold window led to a severe drop in the value of the dollar. The resulting inflation and lack of growth led to capital starvation of the old manufacturing base in the Northeast.

What capital there was flowed to newer industries that commanded higher profits; and and the never-ending march of government spending led to state and federal capital boomtowns. Nothing unexpected (or inevitable) there.

Florida seems to have a very superficial understanding of how the economy works. His series of books on the "creative class" have inspired dozens of cities across the country to embark on expensive, urban-amenity projects designed to attract young, hip entrepreneurs. They will, he maintains, help to create the future economy just as they have in Silicon Valley.

Never, though, does he mention fixing the mundane problems of high labor costs, the regulatory burden or excessive taxation. Can highly-taxed Buffalo, for example, really compete with low-tax but liberal and hip Austin? Should the good people of Michigan pour even more of their tax dollars into arts subsidies and high-speed rail in the hope of attracting the young and ambitious -- even though they stand little chance of ever turning a profit there?

Florida ignores the question.

The creative class, if such a class even exists, isn't stupid by definition. They want to make a nice living and they're savvy enough to know where that's more likely. And where they go, good things do tend to follow, but Florida and his followers ignore cause and effect. Nice cities are a result of economic prosperity and not the cause.

Mr. Florida follows a now twenty-year tradition of declaring that we've entered a new age. Since the nineties, we've been told that the "new" economy is upon us: one based on information (and more lately, greenness) and that manufacturing is passé. But this is really nothing new at all.

The increased use of computerization and the resultant data (information!) is the logical progression of capitalist production that is constantly lengthening the production process by the introduction of new processes and steps, each designed to produce consumer goods for less cost. Now, information is no more important now than it was in the nineteenth century (perfecting the first hay bailer, for example, took copious amounts of information) -- it's just that today information is more plentiful and easy to obtain.

We don't need, as Florida suggests, a massive new policy of promoting the information economy, we need only get the government out of the business of hindering capital formation through bad monetary policy and confiscatory rates of taxation. We can take care of the rest.

The information will flow like never before and, to the surprise of many, we might even see that the rumors American industry's death have been greatly exaggerated.

Wednesday, August 11, 2010

Monday, August 9, 2010

Missouri's Anti-Obamacare Vote "Irrelevant"?

That does seem to be the predominant theme in the mainstream media. Juan Williams expressed it this way.

Discussing the issue on "Fox News Sunday," the liberal FNC contributor said, "As far as the Missouri vote, you get 70 percent inside an echo chamber of older white people, no not in St. Louis not in Kansas City, saying, 'Oh yeah, we don't like a requirement that everybody has to have healthcare even though the hospitals in Missouri say it's gonna drive up our costs.'

Those older white people will also decide November's elections. Will a Republican take-over of Congress -- should it happen -- also be deemed irrelevant?

"More Stimulus Isn't the Answer"

So say former Treasury Secretaries Rubin and O'Neill.

A “major second stimulus” might create more uncertainty and undermine confidence, he said.

Companies concerned about demand won’t expand facilities or hire new employees until sales have improved, said O’Neill, who was Treasury secretary under Republican President George W. Bush.

They're correct about not needing more "stimulus" (can you call something "stimulus" when it doesn't stimulate?), but they've still got the recovery process backwards.

Businesses rarely wait until sales increase to start expanding. They invest in growth in anticipation of new sales. In effect, they set out to create their own demand. In the current uncertain political climate, however, they are refusing to expand because they fear any new profits they earn may be taken away from them by a tax-and-regulation-happy Washington.

Until the politicians get the cause and effect straight, there's no chance that they can help create an economic recovery.

Sunday, August 8, 2010

Rent-To-Own Stores "Worry" Consumer Advocates

From the Buffalo News:

Imagine a special retail business where management can legally mark up their prices on consumer goods by almost 500 percent, and people still readily shop there for big-screen TV's.

Customers are told, several times, exactly how much it will cost them, and how long it will take to pay it off.

Their rights and responsibilities are clearly spelled out before they sign the long-term contract. And they can get out of the deal at any time. That is the business model approved for rent-to-own stores, like Rent-A-Center and Aarons, in a state law signed last weekend by Gov. David A. Paterson.

The law tightens oversight of the industry, mandates more disclosures for consumers, directs the Attorney General's Office to write regulations, and for the first time, creates a framework for setting prices in rent-to-own transactions.

But, still, consumer advocates aren't satisfied.

But consumer advocates worry it doesn't go far enough to rein in what they call predatory prices. They were disappointed because the law allows rent-to-own stores to charge as much as 4.8 times the merchant's own cost for a household good. That's even worse, they say, than the old system, and effectively legalizes what they call predatory practices.

"According to [Thomas] Jefferson, the purpose of government is to enable the people to live in safety and happiness," said Peter Dellinger, an attorney at Empire Justice Center. "This legislation accomplishes neither."

I doubt that it ever crossed Thomas Jefferson's mind that government should make people live in someone else's idea of safety and happiness. Who are these consumer "advocates" anyway who profess to know what makes other people happy?

Whether we like it or not, many poor people with no credit find a measure of happiness in the immediate gratification that comes with having a new sofa, washing machine or TV in the apartment tonight. They will eventually pay through the nose for that satisfaction, it's true, but if it's that important to them, who are we to forbid it?

For their part, the stores are charging very high prices because the costs of serving that clientele are high. Customers often stop making payments and the merchandise must be reclaimed -- that takes trucks, manpower and time. Very often (probably almost always), that merchandise is no longer saleable and will have to be scrapped. The high price must cover all that.

It doesn't take a Philadelphia lawyer to figure this stuff out, folks.

But still, the ubiquitous consumer "advocates" wail that it's unfair and insist that they know what's best for other people. They are no different from an earlier generation of "advocates" who insisted that government force banks to issue market-rate mortgages to the same creditless poor; and, of course, we all know how that turned out.

Saturday, August 7, 2010

Rail Foolishness

The Anti-Planner declares LA Rail Transit a Failure

Los Angeles’ rail transit system is now 20 years old, but the Antiplanner’s faithful ally, Tom Rubin, questions whether it should have been built at all. “The push for rail has forced transit ridership down,” says Rubin, who was the chief financial officer of L.A.’s transit agency when the rail lines were planned in the 1980s. “Had they run a lot of buses at low fares, they could have doubled the number of riders.”

Rubin is referring to the fact that in the early 1980s, when LA’s transit policy was to boost bus service by keeping fares low, transit ridership grew dramatically. In 1985, when the agency starting building rail, it raised bus fares and cut service to cover cost overruns. Transit ridership plummeted, and did not recover to its 1985 levels until after 2000.

Bus ridership bottomed out in 1995, when the NAACP sued the transit agency on behalf of a Bus Riders Union for racial discrimination by cutting bus service to minority neighborhoods while it built expensive rail lines to white neighborhoods. A 1996 court order forced the agency to restore bus service, and as the graph shows, the growth of bus service since that time has been much greater (at least through 2007) than total rail ridership.

“Rail transit advocates contend that it is premature to judge urban rail’s performance because the local systems are not fully developed and have yet to substantially benefit from being part of a broad rail network,” notes the LA Times article. It is interesting that, when a freeway opens and is heavily used, that use is considered a sign of failure because the freeway “induced demand.” But when a rail line opens and hardly anyone rides it, that is considered a sign that cities should build more rail.

That incited this comment.

[…] I don’t live in the fairy tale world where personal auto transport is unsubsidized, or where increasing highway capacity into oblivion will solve any problem in the long run. I’m also concerned with the high cost of transit, in particularly rail transit. So where does this leave me???

… conflicted as I drive on the subsidized roads, to the “user-free paid-for freeways,” back to the subsidized streets, where I park and take the subsidized bus to work.

The commenter, like all government-subsidised rail bugs, implies that government highway subsidies justify the same for rail. But even he, driving on the [supposedly] subsidized roads, has paid for his own seat and his own fuel. In other words, he's covered his operating costs -- something that no passenger rail system in the United States has yet been able to accomplish.

H.T. Newmark's Door

Friday, August 6, 2010

None Dare Call It Theft

Over at the Atlantic, Daniel Indiviglio takes on the hoary issue of gender wage inequality.

New data shows that, despite feminists' best efforts, women have still failed to reach equality in the job market -- to an extent. While women without children are holding their own against men, those who have children continue to fall behind. David Leonhardt from the New York Times explores this phenomenon, which he views as a problem. But it is really something that should concern us, or just a symptom of the choices we make as a society?

The people who worry about such things don't understand veil of money. They're in good company, of course, most of Washington D.C. doesn't, either. It's important to remember that money is just a device to make trading easier. In the end, we each trade the goods we've produced for the goods that others have produced.

Imagine a society without money where a woman bakes loaves of bread to earn her living. If she takes time off to tend to her children, she will bake fewer loaves of bread and have less to trade. The only way to bring her up to the income level of the other bakers will be to take some of the bread they've baked and give it to her. Now, some of those aggrieved bakers, let's not forget, will be women who have made the decision to forego quality time at home for a better income.

So, the issue is not one of gender inequality -- it's about who produces how much. Those who insist on income equality here are simply advocating theft from the ones who've chosen to stay on the job. They see the economy as nothing more than great pot of money that must be fought over lest capitalists take the lion's share. Now, I suppose that from the point of view of an academic or a grant-supported artist, that makes some sense.

But in the real world, we each have to generate at least as much revenue as we're paid. It's a simple concept, but how, oh how, can we ever get that point through to them?

H.T. to Althouse

Monday, August 2, 2010

Is There Hope For New York?

I don't know if Carl Paladino (or Lazio for that matter) stands a realistic chance of becoming New York's governor. After all, this is New York where it's always the Democrats' race to lose, but can the national disaffection with the Democrats' grip on power possibly take hold here?

By the results of this poll, my firm answer is -- well, maybe.

Fifty-six percent (56%) of New York voters favor repeal of the new national health care bill, according to a new Rasmussen Reports telephone survey in the state.

Forty-two percent (42%) of Likely Voters in the Empire State, however, oppose repeal of the health care bill. These figures include 41% who Strongly Favor repeal and 31% who Strongly Oppose repeal.

Support for repeal in New York is a bit more evenly divided than the national average.

As it would be, of course, but this is good news. Republicans and disaffected independents will be motivated to turn out in November. The immigrant and minority Democrats the party machine depends on here probably will not. We might just shock the nation yet and join the growing red tide.