Maybe pigs can fly

If I am forced to bet on who is correct in an argument, and all that I know is that Paul Krugman is on one side of it, and Robert Samuelson is on the other, I will pick Krugman. I am guessing that the net expected value of an even money $1 bet would be something like $0.95.

I also happen to like trains. For the semester I commuted from Washington to Philadelphia, I was very grateful that I had Amtrak, for driving up I-95 several times a week would have been stressful. When I lived in Washington, Metro allowed me to keep my car at home on all but the rarest occasions. When I go to Atlanta, I use MARTA to get to downtown from the airport; when I go to San Francisco, I take BART, etc. I even try to take transit one day a week to get to work here in LA, because I feel that I should (although it takes a lot more time than driving).

All that said, I think Samuelson is correct that high-speed rail in the United States would a be wasteful expenditure. He makes the argument that because the US is less dense the Europe and Asia, rail makes less sense for intercity travel. I am sympathetic to this argument, as I have made it myself. Krugman replies that the Northeastern United States has density similar to Europe, and that Samuelson's comparison is therefore spurious. I noted this as well.

Krugman's argument has two problems. First, Obama's high speed rail plan includes several places outside of the Northeast, including the South, Texas, Chicago-St. Louis-Kansas City, where densities are considerably lower than in Europe, let along Asia. Second, even in the Northeast, cities are considerably less dense than in Europe. The graph below is from Alain Bertaud.



An advantage rail has over air in Europe is that large numbers of people live close to rail stations, while airports are generally on urban peripheries (lots more people live near the Gare de Lyon than Charles de Gaulle airport). No matter where a rail station is placed in an American city, it will be far from a lot of people, at which point the speed of an airplane overtakes the speed of a high-speed train, in terms of determining total trip length.

Finally, even taking external costs into account, air costs much less than rail in a place as dense as California. Let's turn it over to David Levinson, David Gillen, Adib Kanafani and Jean-Michel Mathieu from UC-Berkeley [correction--the paper was posted in a UC-Berkeley series. Levinson is from the University of Minnesota]:

The Full Cost of Intercity Transportation Page ES-1 This study evaluates
the full cost of three modes of intercity transportation: air, highway, and high
speed rail. The evaluation is done within the context of the California Corridor,
connecting the Los Angeles Basin and the San Francisco Bay Area. The purpose
of evaluating full cost is to compare the economic implications of investment in,
or expansion of, any of these three modes. The scope of the analysis is full
transportation cost. Full transportation costs includes external, or social cost,
in addition to the internal costs of construction, operation and maintenance. In
this study we include estimates of four types of external, social costs: accidents,
congestion, noise, and air pollution. The 677 kilometer corridor for which these
estimates are computed represents one of the alignments of a proposed high
speed rail system between Los Angeles and San Francisco. The methodology
used is to construct cost functions that relate costs to levels of output, as measured by passenger-kms. or vehicle-kms.

Different types of costs are estimated as permitted by available data. These include short run costs, in which the physical capacity is held fixed; and long run functions in which capacity is allowed to expand to meet higher levels of demand. Average and marginal costs are computed for highway and for air transportation. But given the absence of high speed rail systems in California only average costs are estimated. The highway and air cost models are developed from basic principles and are estimated
with actual data and system design characteristics observed in the California
corridor. Rail costs are estimated with models that have been adapted from
estimates for the French high speed rail system, the TGV, using available data
for their estimation. Based on the results summarized in Chapter 7 and shown
in Table 7.1, we find that the full cost of air transportation for the California
Corridor ($0.1315 per passenger-kilometer traveled (pkt)) is significantly less
costly than the other two modes. The full cost of high speed rail and highway
transportation cost approximately the same; rail costs $0.2350/pkt and highway
costs $0.2302/pkt. The internal, or private, monetary costs comprising
infrastructure, carrier, and vehicle operating costs are clearly highest for rail
($0.19/pkt), followed by air ($0.11/pkt) and then highway ($0.10/pkt). And as
is to be expected, user time costs are highest for the slowest mode, the highway
system, followed by rail and then air. Adding user travel time costs to the
monetary costs results in the total internal system costs per passenger-km. of
$0.124 for air; $0.233 for rail; and $0.198 for highway.

In other words, if we disregard external costs then we find that high speed rail is nearly twice as costly as air and that the highway is not far behind. However, if we look at social costs alone – congestion, air pollution, noise, and accidents – we find that high speed rail is clearly less costly than the other modes. In this research the only measurable social cost of high speed rail is that of noise, which at $0.002/pkt, is
significantly lower than that of air at $0.0043/pkt and highway at $0.0045/pkt.
Highway transportation, on the other hand, has a relatively high cost in terms
of air pollution and accidents, two externalities which are virtually absent in
high speed rail. In this study, we consider that the pollution resulting from the
electric power generation used to drive a train is to be allocated to the energy,
and not the transportation sector. Thus, any pollution externality associated
with high speed rail should be already internalized in a higher price for electricity.

Similarly, a 100% safe system, such as high speed rail, implies higher capital
costs due to construction of grade separations, more intelligent systems, etc...
Hence, the avoidance of accidents by high speed trains is not “free”. Therefore,
high speed rail, while more costly than highway transportation in terms of internal
costs, primarily due to its high capital cost, is significantly less costly than
highway in terms of social costs. This comparison is illustrated in the following
figure, where full costs are broken down into three categories: internal, travel
time, and external.

Note that the full cost of rail (.23/pkt) is considerably more than air (.13/pkt) even though any pollution created by trains is attributed to the power plant that provides the electricity, rather than the train itself.

A couple of other points. I have yet to meet a transportation economist (and I talk to a fair number) who is thrilled by high-speed rail as a technology. John Kain was among the most rigorous and influential transportation economist of the past 50 years, and he was very skeptical about rail. I also think that we yet again have evidence that we don't come even close to internalizing the social costs of automobiles, but I see no political will for really reducing our dependence on the auto, in part because most people love their cars (this is hardly unique to America). High speed rail also seems to me to be a way to redistribute income from lower income Americans to higher income Americans, because lower-income Americans will choose Southwest Airlines (which will be cheaper) when they need to travel from one city to another.

Finally, I see that when Ed Glaeser expressed skepticism about high speed rail, he was accused of being a "hack," so I guess I will join his company. But while Paul Krugman is indeed much smarter than Robert Samuelson, I would have a very hard time choosing (not that I would want to) between Glaeser and Krugman.

How the world likely views arguments among academics

I am guessing that, to the extent that it cares, the broader world sees the current argument between Richard Posner, on one side, and Paul Krugman, Brad Delong, Mark Thoma and Menzie Chinn, on the other, as some sort of esoteric pissing contest. This is because all of these people are very smart and write very well.

The problem is that Posner is just plain wrong--I mean, he gets his arithmetic wrong in so many ways, it is breathtaking. For instance, he doesn't understand the difference between a quarterly growth rate and a quarterly annualized growth rate. This does not particularly surprise me--very good lawyers are often not good at math. One of my dearest friends is a brilliant lawyer (and political analyst), and he couldn't calculate a present value if his life depended on it. He was also amazed that one had to strip the casing off of speaker wire before one hooked up a stereo. The other thing about lawyers is they are not particularly good at admitting when they are wrong--their entire training teaches them not to do so (although the friend I just mentioned is endearingly modest).

In the current context, this is a problem, because Posner is hurling ad hominems [h/t to William Adelman for correcting the spelling] while not knowing what he is talking about.

Tonight on CBS

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Naive question

When the economy settles down, why not return to the Clinton tax code? The economy did well, we had fiscal surplus, etc. Raising taxes on the top 5% is fine with me, but I don't think it is enough.

Just asking.

My all time favorite billboard

Mark Thoma has a post this morning on a silly billboard he saw while driving across Nevada.

The best billboard I ever saw was in northern Minnesota. I was driving down US 2, coming up on Grand Rapids, and saw a sign that read

Stop at the [restaurant name that I can't remember]

Why pay Duluth Prices?

It worked for me. I had the walleye pike dinner. It was something like $8 including the all you can eat salad bar. It was good, too.

The Problem with Condos

One interesting aspect of today's Existing Home Sales report is that while the inventory of single family homes is decreasing, the inventory of condos is increasing. This is consistent with past weak housing markets--the detached market tends to come back before the attached market.

One of the reasons for this may be that detached houses are in more desirable locations, and so when prices fall, people who could not afford houses in the single-family market before a price drop can do so afterward. But incomes are falling along with house prices now, so I am not sure that is the explanation.

Rather, it may be that people prefer detached houses because they afford a degree of control not present in the condo market. If you own your own house, and think it is time to repave the driveway, you can just do it. But when you are in a condo, you need to get your condo board to approve capital expenses-even when they are necessary. I have been at condo board meetings where people protested spending money to deal with curable depreciation (i.e., make capital expenses whose value is greater than cost). And so the entire complex deteriorates.

Dan Immergluck responds to Thomas Sugrue

In the Comments Section of the Wall Street Journal

I want to begin by pointing out that I respect Dr. Sugrue's work greatly and use it in my teaching.

However, I am afraid this piece is seriously misleading. While there is no doubt that federal policy -- especially the FHA, Fannie Mae and Freddie Mac , and the home interest deduction - led to overall increasing homeownership rates during the 20th century, the article provides much too much credence to the conservative canard that such programs (and policies like the Community Reinvesment Act) led to the mortgage and foreclosure crisis. These programs were generally consistent with stable, risk-limited homeownership for more than 60 years with relatively limited systemic problems. In fact the problems that did exist were usually in the form of discrimination and redlining (partly evidenced by Dr. Sugrue's Origins of the Urban Crisis book).

But the problems since the middle 1990s - including the current foreclosure crisis - were caused principally by deregulation that began in the 1980s and more recently. These led directly to high risk securitization and subprime lending typically through unregulated channels. Also, critically, there is ample evidence that loans encouraged (NOT compelled) by the Community Reinvestment Act (of 1977 NOT 1976) were NOT subprime loans and performed much better than subprime loans (see recent piece in the American Prospect by Ellen Seidman for a review of this evidence). Fannie Mae and Freddie Mac were major investors in subprime secruties (and should not have been allowed to be), but a relatively small fraction of their own lending activities were high risk and this activity lagged the major boom in high risk lending from 2003-2006.

Finally, comparisons to Europe are oversimplified and misleading. Most European countries have heavily subsdidized or social housing sectors where rental or cooperative forms of housing are state-supported. In the U.S., rental housing subsidy is extremely limited. Pulling back on homeownership subsidies ACCOMPANIED BY corresponding support for rental or coopeative housing would make sense BUT FOR two problems. One, it is very unlikely that Congress would provide such support. And two, local governments routinely zone out or limit rental or non-ownership housing making it difficult to provide in reality. These problems would need to be addressed to shift housing support to rental or cooperative housing. Otherwise, housing costs will rise, and those with modest incomes will be hurt most.

It is critical to get these issues right

It is also worth noting that for low income people, rental housing is more heavily subsidized than owner housing. I don't have a problem with this per se, but it hardly suggests that government resources have been poured into making low income people homeowners. Indeed, Fannie and Freddie's record for funding underserved borrowers was not particularly good, and the mortgage interest deduction is of little value to low income households, because they usually don't itemize, and even if they do, the marginal benefit of the deduction is quite small.

Finally, let's not be so eager to bash homeownership. Security of ternure does provide stability that can lead to good outcomes for families and neighborhoods. Even in the presence of controls, kids of owners do better than kids of renters, and owners are more likely to be civically engaged, almost certainly because they are equity holders in their communities. Amortizing mortgages, moreover, give people a default mechanism for saving. Richard Thaler has shown that such defaults are crucial for getting people to actually put away money and accumulate wealth. This might suggest that interest-only and option-ARM loans should be put to rest, but that is a separate issue from tenure per se.

Real Time With Bill Maher - Dana Gould reports on health care protests and Remote Area Medical

Whence came unstable housing finance?

Over the weekend, Thomas Sugrue, a highly regarded history professor at Penn, wrote a piece in the Wall Street Journal that implied that we over-subsidize homeownership, and that government programs have produced instability in the housing market. I am not sure either is true.

With respect to homeownership, for those at the margin of owning, net subsidies may flow more to rental than owner housing. Section 8 vouchers support renting, not owning, and the mortgage interest deduction provides no benefit to those who don't itemize--i.e., low income households. It is well established that Fannie and Freddie do no better, and perhaps worse, than the private when it comes to providing first time homebuyer with mortgages. The government does encourage overconsumption of housing for high income households, but that is a different matter.

As for stability, well, as Professor Sugrue correctly points out, it was the housing market of the 1920s, which was financed in the absence of any public sector support, that helped produce the Great Depression. And the preponderance of unstable mortgages originated in this decade were originated by purely private players.

The problem with professors becoming presidents

A lot of what our job is about is understanding the point of view of others, even when we disagree with them. A lot of our job is explaining to students a wide variety of viewpoints, and allowing them to choose from among them.

I don't think FDR worried so much about the point of view of others--Doris Kearns Goodwin said he "gloried in his enemies."

FDR also largely got what he wanted.

Alle Menschen Mussen Sterben

It is disgraceful that opponents of health care reform are exploiting people's fear of the inevitable to undermine a really good idea: Medicare funding of end-of-life consultations.

We all will ultimately die, and I, for one, would like to do so as painlessly, and with as much dignity, as possible. Once I am irreversibly ill, I want neither ventilators nor feeding tubes to keep me alive, and I know enough to say so in an advance directive. Others should know they have the ability to say so too. For those who want the tubes, that is their business.

As for those who argue that government health care will incentivize euthanasia, well, the incentives are of course already there, because all seniors have government insurance.

In general, I detest ad homonym, and hope that I have pretty much kept it out of this blog. But Sarah Palin is just plain evil.

Lisa Schweitzer explains (one reason) why I love LA

She writes:

Last night we went to Dodgers stadium to watch the Dodgers, who lost to Atlanta. Now my friend Casey is a fan of the Braves, having grown up in Atlanta and all, and he is by far one of the most genial, gracious, and decent men I have ever met. However, this woman behind us was a Braves fan, and she was obnoxious. Fine, cheer on your team, but not if God gave you a voice that sounds like a constipated muppet. She was entertaining visitors from out of town, so she was explaining her views on living in Los Angeles. At one point, she said in a loud voice, “LA is ****hole. I can’t imagine staying here because it’s just so…Mexican.”

Hellloooooooo racism!

Now there are million things that I would change about Los Angeles. The rats. The air. The hockey team. We need Trader Joe’s south of the 10 and east of the Harbor. But I wouldn’t change a thing about the people who live here. Not a thing. If I could move wealth around, I would, because I have always been a pinko, but Los Angeles is real cosmopolitanism. We fail at it again and again, but it’s not like we’re a metro area with a few little safe ethnic enclaves mixed in a reassuring way so we can give lip service to cosmopolitanism. It’s a place where people of color outnumber white people but where power is still inverted. LA burns, regularly, both physically and ideologically, and because it burns it requires us to take a hard look at ourselves and how we treat each other. It is a significant place because of these realities.

I, for one, like having my dogs blessed by priests with all my Mexican, south, and central American neighbors and their dogs, some dressed in little sombreros. I like the beautiful girls clacking up Broadway in their heels, all of whom look like they just got done filming something for Univision. I like the handsome old gentlemen in cowboy hats and ostrich-skin cowboy boots who try, with courtly grace, to give me their seat on the subway. I like the little old ladies that sell coconuts and tamales on the street corners.

I can only hope that she will, in fact, go away and grace somewhere else with her retch-inspiring presence. I generally don’t tell people how wonderful Los Angeles/North Mexico City is because I’d rather that people just stay away and indulge whatever biases they have based on whatever Mike Davis book they’ve skimmed or tv show they watch. There are enough people here already; I’m never going to be able to afford a house as it is, and the water situation–egads. But you shouldn’t stay away because it is “too Mexican.” That’s one of the best things about this place, along with it being “too Black” and “too Thai” and “too Korean” and “too Ethiopian” and “too Indian” and “too gay.” Suckitup if you don’t like the Other because the Other is in your face here–and should be.

I must pronounce more clearly

My kids are home from college for a little while. They both took their first econ classes last year.

One kid asks: can't production possibility frontiers have small regions that are not convex?

Answer: sure, but the relevant points would be the convex hull of the PPF.

Kid: how can a hole be convex?

Does Marginal Analysis Work for Health Care Policy?

In the debate over my post yesterday on physician qualifications, David Barker says:

We should continue to license doctors until we reach the point where the marginal benefit of additional medical care (assuming a negative relationship between quantity and quality) equals the benefit of no additional care at all.

But I am guessing there are some pretty big threshold effects--that there might be large discontinuities as one maps qualifications to outcomes. You really don't want a cardiologist who keeps just missing veins and you don't want an internist who can't quite get the drug interactions right (just as you don't want a 747 pilot who just misses the runway 1 percent of the time).

I think one of the ways economic analysis gets us into trouble is when we rely on continuousness in production and utility functions. Even worse is when we linearize around points--and that perform large comparative statics experiments based on that linearization.

Why don't we have cool trains all over the country like France and Japan?

The simple answer is density. Out of 192 countries, the US ranks 142 in population density, with 1/11 the density of Japan and a bit more than 1/4 the density of France. Germany and the UK are around 8 times denser. Our densest states, New Jersey and Rhode Island, are slightly denser than all of Japan--this explains why the Northeast Corridor is a reasonable place for rail.



The list below is inhabitants per square [mile] (source CIA Fact book). Thanks to Paul Romer for the correction.

1 Monaco 41,970.77
2 Singapore 16,540.43
3 Malta 3,266.17
4 Maldives 3,013.88
5 Bahrain 2,680.74
6 Bangladesh 2,595.74
7 Vatican City 2,090.91
8 Barbados 1,678.39
9 Nauru 1,609.49
10 Mauritius 1,562.37
11 Korea (South) 1,273.50
12 Philippines 758.50
12 San Marino 1,226.21
13 Tuvalu 1,159.52
14 Netherlands 1,023.34
15 Lebanon 952.82
16 Belgium 879.83
17 Japan 873.42
18 India 851.04
19 Marshall Islands 845.25
20 Rwanda 830.04
21 El Salvador 825.36
22 Comoros 801.11
23 Sri Lanka 792.07
24 Israel 782.72
25 St. Vincent & the Grenadines 782.32
26 Philippines 758.50
27 Haiti 758.01
28 Saint Lucia 699.21
29 Grenada 673.85
30 Vietnam 656.50
31 Jamaica 643.74
32 United Kingdom (UK) 639.42
33 Germany 597.99
34 Burundi 592.88
35 Trinidad & Tobago 549.82
36 Liechtenstein 545.84
37 Pakistan 523.26
38 Nepal 509.10
39 Italy 499.57
40 Korea (North) 492.30
41 Sao Tome & Principe 484.88
42 Dominican Republic 475.69
43 Switzerland 469.79
44 Luxembourg 469.32
45 Seychelles 462.16
46 Antigua & Barbuda 401.77
47 Micronesia 398.83
48 Andorra 390.44
49 Tonga 389.19
50 Saint Kitts & Nevis 386.61
51 Gambia 365.19
52 Nigeria 361.04
53 China 352.54
54 Guatemala 348.58
55 Moldova 340.97
56 Kuwait 339.46
57 Czech Republic 336.32
58 Thailand 329.77
59 Kiribati 329.26
60 Indonesia 326.51
61 Denmark 326.49
62 Albania 321.01
63 Poland 320.02
64 Uganda 299.22
65 Portugal 296.20
66 Slovakia 288.00
67 France 287.19
68 Hungary 278.59
69 Serbia & Montenegro 274.04
70 Cape Verde 268.57
71 Malawi 265.80
72 Cuba 265.09
73 Armenia 259.25
74 Togo 259.14
75 Syria 258.03
76 Slovenia 256.93
77 Austria 252.79
78 Romania 243.51
79 Dominica 237.12
80 Azerbaijan 236.63
81 Turkey 231.00
82 Ghana 227.46
83 Cyprus 218.43
84 Sierra Leone 217.25
85 Greece 209.42
86 Macedonia 209.11
87 Spain 206.99
88 Croatia 205.94
89 Bosnia & Herzegovina 203.92
90 Costa Rica 203.56
91 Ukraine 203.46
92 Egypt 200.45
93 Qatar 195.46
94 Cambodia 194.67
95 Morocco 189.81
96 Malaysia 188.14
97 East Timor 179.64
98 Swaziland 175.11
99 Bulgaria 173.98
100 Georgia 173.44
101 Benin 171.56
102 Ethopia 167.87
103 Brunei 167.16
104 Myanmar 163.80
105 Jordan 161.62
106 Honduras 161.17
107 Tunisia 159.49
108 Lesotho 159.30
109 Samoa 155.98
110 Uzbekistan 155.44
111 Iraq 154.51
112 Kenya 150.38
113 Ireland 147.99
114 Senegal 146.89
115 Lithuania 142.87
116 Mexico 139.45
117 Cote d'Ivoire 138.94
118 Burkina Faso 131.53
119 Tajikstan 129.65
120 Belarus 128.51
121 Fiji 126.65
122 Bhutan 123.01
123 Ecuador 122.06
124 Afghanistan 119.72
125 Palau 114.80
126 Nicaragua 109.31
127 Iran 106.90
128 Yemen 101.68
129 Guinea-Bissau 101.53
130 Tanzania 100.76
131 Panama 100.66
132 Guinea 99.74
133 Colombia 97.68
134 Eritrea 97.38
135 South Africa 94.15
136 Latvia 91.84
137 Cameroon 89.23
138 Zimbabwe 84.53
139 Liberia 80.98
140 United Arab Emirates 80.10
141 Madagascar 79.59
142 United States of America 79.55
143 Estonia 76.33
144 Venezuela 72.06
145 Laos 68.00
146 Kyrgyzstan 67.15
147 Congo (Dem. Rep. of ) 66.35
148 Mozambique 62.70
149 Brazil 56.63
150 Peru 56.28
151 Bahamas 56.07
152 Chile 54.68
153 Djibouti 53.68
154 Sweden 51.81
155 Uruguay 50.21
156 Equatorial Guinea 49.48
157 Solomon Islands 48.98
158 Vanuatu 43.69
159 Sudan 41.54
160 Paraguay 40.42
161 Finland 40.14
162 New Zealand 38.90
163 Zambia 38.76
164 Argentina 37.01
165 Norway 36.69
166 Oman 36.59
167 Algeria 35.38
168 Saudi Arabia 34.90
169 Somalia 34.90
170 Belize 31.52
171 Papua New Guinea 31.03
172 Turkmenistan 26.28
173 Mali 25.67
174 Niger 23.85
175 Angola 23.25
176 Congo (Rep.) 23.02
177 Russia 21.75
178 Bolivia 20.88
179 Chad 19.82
180 Central African Republic 15.80
181 Kazakhstan 14.47
182 Gabon 13.44
183 Guyana 9.00
184 Canada 9.00
185 Libya 8.00
186 Mauritania 8.00
187 Australia 7.00
188 Botswana 7.00
189 Iceland 7.00
190 Suriname 7.00
191 Namibia 6.00
192 Mongolia 5.00

How do they do it?

One of the things about my job that I really like is that I get to do public radio talk shows from time to time. I will never ceased to be amazed at how good the hosts of these programs are.

Kojo NNamdi at WAMU, Tom Clarke at WERN, Larry Mantel and Patt Morrison at KPCC and Kerri Miller at Minnesota Public Radio all ask good questions, and know how to run programs on controversial issues in a civil atmosphere. This is an exceedingly rare combination of talents; I wish they could find there way beyond the left side of the FM dial.

John Hempton on Fannie and Freddie's losses

I think he gets it right:

It is in the non-traditional guarantee business that Fannie Mae and Freddie Mac have reported the huge losses which leave them in such a precarious position. Some of those losses (particularly the losses on the hedging book caused by the conservatorship) will reverse. Some (end credit losses on junky subprime mortgage securities) will not.

That said – none of these loss categories is likely to expand in the future. If the GSEs wind up being a toxic mess for the government it won’t be on the losses already incurred – it will be on future losses.

All that butter...

...and all those Martinis, and yet Julia and Paul Child lived happily into their nineties. If only I could be sure that theirs was a median outcome.

What would be Manhattan be like without subways? (h/t Chris Bradford)

From frumination [Click on link to see cool map].

What's Capacity got to do with my City?

Recently given an advance copy of the official 2008 subway passenger counts, I found myself wondering -- what would it take in terms of auto facilities to replace the morning rush hour carrying capacity of the NYC subway?

This is an important question because the cost (be it financial, environmental, etc) of building, operating, and maintaining a transportation facility is generally determined by the maximum capacity it is expected to provide. To avoid ruining any surprises, all calculations here are derived from the publicly available 2007 Hub Bound Report, and implemented in this spreadsheet. The "hub" here is Manhattan below 60th Street -- New York City's official CBD.

Just to get warmed up, chew on this -- from 8:00AM to 8:59 AM on an average Fall day in 2007 the NYC Subway carried 388,802 passengers into the CBD on 370 trains over 22 tracks. In other words, a train carrying 1,050 people crossed into the CBD every 6 seconds. Breathtaking if you ask me.

Over this same period, the average number of passengers in a vehicle crossing any of the East River crossings was 1.20. This means that, lacking the subway, we would need to move 324,000 additional vehicles into the CBD (never mind where they would all park).

What does it take to move that many additional vehicles? Well, it depends. Different auto facilities in the city appear to have different capacities (as expressed in vehicles per hour per lane):
Facility Inbound Lanes Max Hourly Inbound Traffic Veh/Lane/Hr Lanes Needed
Queens Midtown Tunnel 2 3,882 1,941 167
FDR Drive 3 5,425 1,808 179
Brooklyn Battery Tunnel 2 3,017 1,509 215
Brooklyn Bridge 3 4,262 1,421 228
West Side Highway 4 4,825 1,206 269
2nd Ave 6 4,739 790 410
5th Avenue 5 1,712 342 946

At best, it would take 167 inbound lanes, or 84 copies of the Queens Midtown Tunnel, to carry what the NYC Subway carries over 22 inbound tracks through 12 tunnels and 2 (partial) bridges. At worst, 200 new copies of 5th Avenue. Somewhere in the middle would be 67 West Side Highways or 76 Brooklyn Bridges. And this neglects the Long Island Railroad, Metro North, NJ Transit, and PATH systems entirely.

Of course, at 325 square feet per parking space, all these cars would need over 3.8 square miles of space to park, about 3 times the size of Central Park. At that point, who would want to go to Manhattan anyway?

I would be curious about a similar analysis of Washington, D.C. would look like. Cost-benefit studies of DC Metro generally show that it is not worthwhile, but I always thought that DC would be a miserable place to live without it.

What is the optimal cartel for health care?

Many years ago, I was walking down the street with Pete Colwell, a professor for many years at Illinois and a delightful guy. He said that he looked forward to the day when doctors would peddle their wares on the street--he imagined ads that went something like, "I'll take your pulse for $5!"

Needless to say, Pete is a libertarian, and as such, resents the barriers to entry for becoming a physician. The conversation came to me this morning, because I asked my wife, who has been teaching at the USC Keck Medical School for about eight months now, how the medical students there were. Her answer: "they are very good. After all, they are medical students!"

And so it is that medical students in all US medical schools are very good--because it is hard to get into medical school. When I was the MBA Dean at GW, I did some research on admissions standards at various types of professional schools, and I found that for medical schools, they are extraordinarily rigorous. The typical med student went to a selective college and earned a 3.7 GPA in a science. To say this is rationing would be an understatement.

But is it a bad idea? Like most economists, I have an instinctive aversion to barriers to entry. But when a friend, a family member, or I see a doctor, I have to know that she is really good. The barriers to entry to becoming a physician may indeed be too high (maybe a 3.5 in the sciences should be good enough). But as consumers of health care, we are not in a position to make judgments about competence. I also really don't think we want to glean information about physicians via much larger variations in mortality and morbidity than we currently observe.

Will the Homeownership Rate fall to 63.5 Percent by 2020?

Arthur Nelson is quoted in yesterday's USA Today as saying the ownership rate will drop one-half percentage point per year until it reaches 63.5 percent. His foundation for this forecast is a paper he was good enough to send me--I would link to it but I can't find it on the Web.

It is certainly possible that the ownership rate would fall to its lowest level since 1985, but I am afraid I don't find Professor Nelson's argument to be convincing, because his paper contains no model. Rather, he puts together some survey results and short-term trends, expresses his long-held disdain for suburbs, and argues that 57 percent of housing units added to the stock between now and 2020 will be rental units. This would be a sea change, as there has not been a single year since 1973 where less than half of units built were single-family, and in many years, the single-family share exceeds 70 percent.

An appropriate model of tenure choice would statistically model the relationship between tenure choice and a variety of characteristics, including age, marital status, presence of children, race, residency status, education, income and the relative cost of owning versus renting. Here is what we know based on the econometric literature on tenure choice (none of which Nelson cites): old people are more likely to be homeowners; married couples are more likely to be homeowners, permanent residents are more likely to be homeowners, white people are more likely to be homeowners (even after controlling for other characteristics), and homeownership rises in income and education. We also know that when owning is a good deal relative to renting, people are more likely to buy.

So a paper that purports to forecast owning needs: (1) a well specified model; and (2) forecasts of variables that predict owning, including income and relative costs. I don't know what either income or relative costs are going to look like in 15 years, and neither does Professor Nelson.

BTW, FWIW, I will take the over on 63.5 percent.

Dave Donaldson, the railroads of the British Raj, and infrastucture policy

He tests six propositions:

1. Inter-district price differences are equal to trade costs (in special cases): That is, if a com-
modity can be made in only one district (the ‘origin’) but is consumed in other districts (‘des-
tinations’), then that commodity’s origin-destination price difference is equal to its origin-
destination trade cost. I use this result to infer trade costs (which researchers never fully
observe) by exploiting widely-traded commodities that could only be made in one district.
Using inter-district price differentials, along with a graph theory algorithm embedded in a
non-linear least squares routine, I estimate the trade cost parameters governing traders’ en-
dogenous route decisions on a network of roads, rivers, coasts and railroads. This is a novel
method for inferring trade costs in networked settings. My resulting parameter estimates
reveal that railroads significantly reduced the cost of trading in India.

2. Bilateral trade flows take the ‘gravity equation’ form: That is, holding constant exporter- and
importer-specific effects, bilateral trade costs reduce bilateral trade flows. I find that railroad-
driven reductions in trade costs (estimated in Step 1) increase bilateral trade flows, and show
that the parameters estimated from the gravity equation identify my model.

3. Railroads reduce the responsiveness of prices to local productivity shocks: That is, a district’s
prices are less responsive to its own productivity shocks when it is connected to the railroad
network; however, a district’s prices are more responsive to any other district’s productivity
shocks when these two districts are connected by a railroad line. I find empirical support
for both of these predictions. Specifically, in a novel test for market integration, I find
that railroads caused a dramatic reduction in the responsiveness of prices to local rainfall
shocks, reducing responsiveness to almost zero (even when focusing purely on rainfall vari-
ation across crops, within a district and year). This implies that railroads brought India’s
district economies close to the small open economy limit where local conditions have no effect
on local prices. I also find that a district’s rainfall shocks affect prices in neighboring districts
to which it is connected by the railroad network (to a weak but statistically significant extent).

4. Railroads increase real income levels: That is, when a district is connected to the railroad
network its real income rises; however, improvements in the railroad network that by-pass
a district reduce the district’s real income (a negative spillover effect). Empirically, I find
that own-railroad access raises real income by 18 percent, but a neighbor’s access reduces
real income by 4 percent. However, these are reduced-form estimates that could be due to a
number of mechanisms. A key goal of Step 6 is to assess how much of the reduced-form effect of
railroads can be attributed to gains from trade due to the trade cost reductions found in Step 1.

5. Railroads decrease real income volatility: When a district is connected to the railroad network,
its real income is less responsive to stochastic productivity shocks in the district (which reduces
volatility). Empirically, I find that railroads reduced the responsiveness of real agricultural
income to local rainfall, which suggests a second welfare benefit of transportation infrastruc-
ture (in addition to that found in Step 4) that has not, to my knowledge, been demonstrated
empirically before. However, as with the results in Step 4, a number of mechanisms could
underpin this reduced-form result.

6. There exists a sufficient statistic for the welfare gains from railroads: That is, despite the com-
plexity of the model’s general equilibrium relationships, the impact of the railroad network on
welfare in a district is captured by one variable: the share of that district’s expenditure that
it sources from itself. A prediction similar to this appears in a wide range of trade models
but has not, to my knowledge, been tested before.3 I test this prediction by regressing real
income on this sufficient statistic (as calculated using the model estimated in Steps 1 and 2)
alongside the regressors from Steps 4 and 5 (which capture the reduced-form impact of rail-
roads).4 When I do this, the reduced-form coefficients on railroad access estimated in Steps
4 and 5 fall to a level that is close to zero. This finding provides support for prediction 6 of
the model and suggests that decreased trade costs account for virtually all of the real income
impacts of the Indian railroad network.

Beyond his findings, he uses clever empirical strategy to show that his results are not spurious. In particular, he tests his propositions for areas where railroads were planned put not executed, and finds that they do not get the perceived benefits of the railroads.

While the impact of infrastructure development in the US now would be less spectacular than railroad development in the Indian Raj, Donaldson's paper still has important implications, particularly about the development of freight transport systems and intermodal transportation. The paper is also a terrific read.

Would Brahms have gotten tenure?

The post below made me think about this question, because Brahms would only publish stuff that he thought was good. A lot of his work--which was doubtless superior by anyone else's standards--wound up in the ash can. We in academia like to say we care more about quality than quantity, but I am not sure whether this is really true.

Why not play the Brahms Serenades?

I am coming up on a year of residing in Los Angeles, and I believe I have determined by favorite thing about it: concerts at the Hollywood Bowl. Last night, the LA Phil played three Brahms pieces, and played them well. The oboe solo played by Ariana Ghenz at the beginning of the second movement of the Violin Concerto was especially lovely.

At the beginning of the concert, Leonard Statkin spoke. His appearance surprised me--I have always thought of him as a young conductor (he was when he began making recordings when I was in High School), and now he looks 65 because, well, he is 65. But he made an obvious yet generally unremarked upon point: Brahms only wrote 13 orchestral works in his life: four symphonies, four concertos, two overtures, the Haydn Variations, and two serenades. He also noted that the serenades are rarely played.

This is a shame, because the Brahms serenades are absolutely glorious pieces. The opening movement of the First is as fresh and joyful as anything written in the second half of the 19th century, and the Second is clever (in part because of its strange instrumentation) and tuneful. Haitink has done wonderful recordings of both: the first with the Concertgebouw and the second with the London Symphony.

Brahms didn't leave us with much (he burned a lot of stuff that didn't meet his own standards), but what he left was choice. We should hear at all on a regular basis.

An Admission (Officer's) Essay

USC has become a selective school, and so when parents find out that I teach here, they ask me the trick for getting their kids in. I tell them, "have your kid take hard classes and get good grades."

Anyway, such questions remind me of the following:

Kid comes into an admissions office, says, “I’ve got an act for you.” Admissions guy says, “What kind of act?” Kid says, “A family act.” “OK, how does it go?” Kid says, “High-school junior spends $4,000 on a Princeton Review class and SAT scores go up 120 points—now he figures he doesn’t have to go to Nos. 10–15 on the U.S. News list but can get into 1–10, so the mother takes a second job to pay off the Princeton Review and buys the Platinum Package from an independent college counselor for $30,000 so Junior can be advised about when to help his fellow man and how best to package the experience, and when to take power naps. Father, meanwhile, talks to the accountant, finds out that even a home-equity loan won’t bring enough cash to get the kid into the right summer program to help repair castles in Carcassonne as a community-service project, without which Junior won’t get into colleges 1–10, to say nothing of having the money to send the boy to Tibet to practice spinning prayer wheels as proof of his spirituality and concern for diversity and international harmony, and besides there is the tuition for sophomore daughter’s harp camp in Maine. So he decides to sell the car, which means mom and dad have to use the Metra to get the younger brother to his 2 a.m. hockey practice, which he’ll need if he wants to use the athletic hook to get into an Ivy or at least a Little Three, a trip that takes one parent away from Junior’s homework—the family has a pact that at least one parent will write at least one draft of each required paper due senior year, and Junior has carefully chosen the “most challenging” senior coursework—AP stats as his math, AP psych as his science, History of the Vietnam War as the social science, Literature of the Vietnam War as the English elective, and Reading a Balance Sheet as preparation for his college internship, which he means to be the culmination of his liberal-arts education.

Parents are working so many extra hours and spending so much time on the Metra train on the way to hockey practice that sister is ignored and stops practicing the harp, thereby settling for a future without a prestigious college education, hence, perdition, has herself heavily tattooed, drops out of the Key Club, joins a heavy-metal harp band, and spits venomously whenever Junior pulls out his SAT word list and adds another entry to his online collection of homonyms. Metra goes on strike, little brother can’t get to hockey practice, is kicked off the team, begins to think of a future at the community college or emigration to Germany where he can join an apprentice program for tool and die makers, and Mom and Dad begin to feel strains in the marriage but vow to stay together to see Junior through the second round of the SAT IIs, because they know that with support, and coaching, he will be able to get an 800 on the writing exam unless he is tempted to be either original or imaginative, which would result in a lower score and his having to settle for, heaven forbid, a state university, which means no job at Goldman Sachs, so why bother to go to college at all?

Father finds that he begins to daydream of the time when he carried Junior’s egg on his toes beneath a flap of his own skin during the long Antarctic winter and vows that the boy will never go to college in a windy and frigid Midwestern city where, if the egg drops, cracks will reveal the icicles that had been his not-yet fledgling son, and in his identification with the fragile frosty egg decides that we will only apply to Duke, Emory, UVA, and, of course, Dartmouth if we can get in—damn the cold, they are rated 7th in U.S. News. All the while, the mother swims under the ice eating enough chum to regurgitate meals for her newly hatched chick to make him strong enough for cross-country practice, which should look pretty good on the application despite the fact that his little webbed feet limit his speed, and he finds that flopping on his belly to slide along the ice doesn’t really improve his time. Family meets and decides to prune away younger brother and sister to help foster the blossom that they wish Junior actually had turned out to be, they sell the home and move to Kazakhstan, hoping that geographical diversity might work the trick at any, please, just any, top-ten college or university, and they are last seen deciding to which school they will apply Early Decision.”

The admissions guy looks at him and says, “Wow! That’s quite an act—what do you call it?”

“The Meritocrats.”

Mark Thoma on Moving and Economic Development

Around 18 months ago he wrote:

…I struggle with this one a little bit. Should we, as official policy, expect people to move when things get bad - to leave their family and friends, to move away from the place they grew up and put their kids into new schools - or should government try to find a way to attract new business and provide enough jobs for residents? The latter strategy isn't always feasible, sometimes changes are permanent and nothing can be done about that, and attracting business is difficult in any case. When it isn't feasible, when change that is out of their control forces people to uproot and relocate, shouldn't we do what we can to help with the transition?

But I'm not sure what role the government should play in these cases. The difficulty that comes from leaving a place where you've lived a long time isn't just from home ownership, though that certainly contributes, so simply promoting more renting or even making it easier to sell a home won't fully resolve this "stickiness". If we want to encourage faster adjustment, then to help ease the transition I'd certainly be in favor of generous tax advantages for middle and lower income households who are willing to relocate if we can structure the policies to avoid the distortions that tax breaks for relocating create (e.g., we don't want people moving just to get tax breaks).

But tax breaks aren't the only possibility. Many families won't even move across town while their kids are in school because even if they are willing to provide transportation, the kids cannot stay at the same school due to residency requirements. Reexaming rules such as these could help promote labor market flexibility without costing taxpayers much. The point is that we can do a lot more than we do now to facilitate the transition for families willing to relocate for economic reasons and hopefully, when the administration changes after the next election, domestic issues such as these will receive much more attention than they have in recent years.

The problem of Flint (and East St. Louis, and the Mississippi Delta...)

Yesterday, I watched four or five holes where Tiger Woods methodically held onto his lead in the Buick Open (I missed his daring miss and masterful up and down on the 13th). The coverage was elegiac, because this will probably be the last year for a PGA event that is either sponsored by Buick or held near Flint.

I found myself carried along by the mood, because Flint has so little now, and the place the tournament might be moving--the Greenbriar--is a place of plenty (although to be fair, it is in West Virginia). When not rooting for my own teams, I tend to root for those from places like Buffalo, Pittsburgh and Cleveland: places that have fallen on hard times and were once great centers of making things.

One wants to figure out policies that would help these places, but no one knows what they are. We do know that people-centered policies--such as access to education and health care--help people improve their lot in life. But I know of no example of a place-based economic development program that has been broadly successful. When neighborhood vitalization is attempted in one part of a metropolitan area, it usually simply chases problems to another part of the area. A series of works by Tim Bartik and Helen Ladd shows that place based economic development programs create very few jobs and are very expensive. So the solution to the problems of economically depressed regions would seem to be to educate the kids and train the adults so they can move to economically robust places. This is a view I have long taken myself. When I visited the Mississippi Delta some years ago in the course of doing a project for the Ford Foundation, I was shocked at the amount and level of poverty one could still see within the United States, and I wanted to tell every adult to move their kid to Atlanta or Nashville, where opportunities are much greater.

But people feel a passion for their places. The intensity of these feelings have struck me twice in the past month. When I visited Cleveland around a month ago, it was clear that people cared deeply about that struggling city. When I watched the Buick Open yesterday, there was something special about how much the gallery appreciated that Tiger would play in their tournament. While economists prefer for the best of reasons to be bloodless when thinking about urban policy, people have deep ties to family and friends in their communities, and these ties are important--often more important to them than economic opportunity. And so I struggle with the policy implication--should we require people to leave their nearest and dearest in order to have a decent job?

Perhaps there is no alternative. Certainly, schemes for economic revitalization have not generally been successful. But that doesn't mean we should stop searching for something that might be.

Two verities of real estate investment

Over the past few days, I have been in San Francisco, and have had the privilege of meeting with four real estate executives whom I am trying to interest in participating with the Lusk Center in one way or another. They are all doing remarkably well, all things considered, and some of the things they said to me explain why. Two things stand out:

(1) When investing in real estate, underwrite the real estate without consideration for financing. Unless the deal earns an acceptable unlevered internal rate of return, don't do the deal.

(2) If a deal depends on a going-out (i.e. exit) cap rate that is lower than the going-in (i.e., purchase) cap rate, don't do the deal.

The Truth About Amsterdam, RE: Bill O'Reilly loves Amsterdam

Amsterdam has a great orchestra, too.

Michael Lacour-Little says it's all about the refinances

He points me to:

Why are so many homeowners underwater on their mortgages?

In crafting programs to prevent foreclosures, policymakers have assumed that the primary reason homeowners owe more on their home than it is worth is that they bought at the top of the market. In other words, they’ve lost equity primarily through forces beyond their control.

A new study challenges this premise and finds that excessive borrowing may have played as great a role.

Michael LaCour-Little, a finance professor at California State University at Fullerton, looked at 4,000 foreclosures in Southern California from 2006-08. He found that, at least in Southern California, borrowers who defaulted on their mortgages didn’t purchase their homes at the top of the market. Instead, the average acquisition was made in 2002 and many homes lost to foreclosure were bought in the 1990s. More than half of all borrowers who lost their homes had already refinanced at least once, and four out of five had a second mortgage.


The original loan-to-value ratio for these borrowers stood at a reasonable 84%, but second and third liens left homeowners with a combined loan-to-value ratio of about 150% by the time of the foreclosure sale date.

Borrowers, meanwhile, took out around $2 billion in equity from their homes, or nearly eight times the $262 million that they put into their homes. Lenders lost around four times as much as borrowers, seeing $1 billion in losses.

“[W]hile house price declines were important in explaining the incidence of negative equity, its magnitude was more strongly influenced by increased debt usage,” writes Mr. LaCour-Little. “Hence, borrower behavior, rather than housing market forces, is the predominant factor affecting outcomes.”

If other housing markets across the country offer similar findings, then the study argues that current “policies aimed at protecting homeowners from foreclosure are misguided” because lenders, and not borrowers, have born the lion’s share of economic losses.

Borrowers that bought homes without ever putting any or little equity in their homes could have seen huge returns on investment simply by extracting cash through refinancing. “Why such borrowers should enjoy any special government benefits such as waiver of the income taxation on debt forgiveness or subsidized loan modifications to reduce their borrowing costs is at best unclear,” the authors write.

Michael is a co-author of mine (and was a student at Wisconsin while I taught there), and has a gift for slicing up mortgage data. On the policy question, we might think about treating the half who did not refinance differently, as they were drowned by the flood.

An Interview with Kenneth Arrow, Part One - Conor Clarke

An Interview with Kenneth Arrow, Part One - Conor Clarke

Shared via AddThis

Stanley Fish and Chris Rock make the same point

Fish writes about Henry Louis Gates' time at Duke:

I flashed back 20 years or so to the time when Gates arrived in Durham, N.C., to take up the position I had offered him in my capacity as chairman of the English department of Duke University. One of the first things Gates did was buy the grandest house in town (owned previously by a movie director) and renovate it. During the renovation workers would often take Gates for a servant and ask to be pointed to the house’s owner. The drivers of delivery trucks made the same mistake.

The message was unmistakable: What was a black man doing living in a place like this?

At the university (which in a past not distant at all did not admit African-Americans ), Gates’s reception was in some ways no different. Doubts were expressed in letters written by senior professors about his scholarly credentials, which were vastly superior to those of his detractors. (He was already a recipient of a MacArthur fellowship, the so called “genius award.”) There were wild speculations (again in print) about his salary, which in fact was quite respectable but not inordinate; when a list of the highest-paid members of the Duke faculty was published, he was nowhere on it.

The unkindest cut of all was delivered by some members of the black faculty who had made their peace with Duke traditions and did not want an over-visible newcomer and upstart to trouble waters that had long been still. (The great historian John Hope Franklin was an exception.) When an offer came from Harvard, there wasn’t much I could do. Gates accepted it, and when he left he was pursued by false reports about his tenure at what he had come to call “the plantation.” (I became aware of his feelings when he and I and his father watched the N.C.A.A. championship game between Duke and U.N.L.V. at my house; they were rooting for U.N.L.V.)

And now Chris Rock:

I will give you an example of how race affects my life. I live in a place called Alpine, New Jersey. Live in Alpine, New Jersey, right? My house costs millions of dollars. [some whistles and cheers from the audience] Don't hate the player, hate the game. In my neighborhood, there are four black people. Hundreds of houses, four black people. Who are these black people? Well, there's me, Mary J. Blige, Jay-Z and Eddie Murphy. Only black people in the whole neighborhood. So let's break it down, let's break it down: me, I'm a decent comedian. I'm a'ight. [applause] Mary J. Blige, one of the greatest R&B singers to ever walk the Earth. Jay-Z, one of the greatest rappers to ever live. Eddie Murphy, one of the funniest actors to ever, ever do it. Do you know what the white man who lives next door to me does for a living? He's a f**king dentist! He ain't the best dentist in the world...he ain't going to the dental hall of fame...he don't get plaques for getting rid of plaque. He's just a yank-your-tooth-out dentist. See, the black man gotta fly to get to somethin' the white man can walk to.

I have a question for Senator Grassley

Does he really believe that all the white guys he has voted for "set aside [their] personal preferences and prejudices?"

Featured on today's USC Home Page

A story on Dr. Patricia Harris, who makes house calls.

I was on Bloomberg TV today

I have to admit it is fun. The clip is at http://tinyurl.com/GreenHousing.

Program Note

I will be on KPCC's Airtalk with Larry Mantle at 10:05 today.

Manuel Adelino, Kristopher Gerardi, and Paul S. Willen are skeptical...

...that the paucity of loan modifications is a function of securitization.

There is widespread concern that an inefficiently low number of mortgages have been modified during the current crisis, and that this has led to excessive foreclosure levels, leaving both families and investors worse off. We use a large dataset that accounts for approximately 60 percent of mortgages in the United States originated between 2005 and 2007, to shed more light on the determinants of mortgage modification, with a special focus on the claim that delinquent loans have different probabilities of renegotiation depending on whether they are securitized by private institutions or held in a servicer’s portfolio. By comparing the relative frequency of renegotiation between private-label and portfolio mortgages, we
are able to shed light on the question of whether institutional frictions in the secondary mortgage market are inhibiting the modification process from taking place.

Our first finding is that renegotiation in mortgage markets during this period was indeed rare. In our full sample of data, approximately 3 percent of the seriously delinquent borrowers received a concessionary modification in the year following their first serious delinquency, while fewer than 8 percent received any type of modification. These numbers are extremely low, considering that foreclosure proceedings were initiated on approximately half of the loans in the sample and completed for almost 30 percent of the sample. Our second finding is that a comparison of renegotiation rates for private-label loans and portfolio loans, while
controlling for observable characteristics of loans and borrowers, yields economically small, and for the most part, statistically insignificant differences. This finding holds for a battery of robustness tests we consider, including various definitions of modification, numerous subsamples of the data, including subsamples for which we believe unobserved heterogeneity to be less of an issue, and consideration of potential differences along the intensive margin of renegotiation.

Since we conclude that contract frictions in securitization trusts are not a significant problem, we attempt to reconcile the conventional wisdom held by market commentators, that modifications are a win-win proposition from the standpoint of both borrowers and lenders, with the extraordinarily low levels of renegotiation that we find in the data. We argue that the data are not inconsistent with a situation in which, on average, lenders expect to recover more from foreclosure than from a modified loan. At face value, this assertion may seem implausible, since there are many estimates that suggest the average loss given foreclosure is much greater than the loss in value of a modified loan. However, we point out that renegotiation exposes lenders to two types of risks that are often overlooked by
market observers and that can dramatically increase its cost. The first is “self-cure risk,” which refers to the situation in which a lender renegotiates with a delinquent borrower who does not need assistance. This group of borrowers is non-trivial according to our data, as we find that approximately 30 percent of seriously delinquent borrowers “cure” in our data without receiving a modification. The second cost comes from borrowers who default again after receiving a loan modification. We refer to this group as “redefaulters,” and our results show that a large fraction (between 30 and 45 percent) of borrowers who receive modifications, end up back in serious delinquency within six months. For this group, the
lender has simply postponed foreclosure, and, if the housing market continues to decline, the lender will recover even less in foreclosure in the future.

We believe that our analysis has some important implications for policy. First, “safe harbor provisions,” which are designed to shelter servicers from investor lawsuits, are unlikely to have a material impact on the number of modifications and thus will not significantly decrease foreclosures. Second, and more generally, if the presence of self-cure risk and redefault risk do make renegotiation less appealing to investors, the number of easily “preventable” foreclosures may be far smaller than many commentators believe.

Ideally, a lender would like to know whether a borrower will either (1) self-cure; (2) be cured by a loan modification that has no reduction in balance; (3) be cured by a loan modification that has a balance reduction or (4) is beyond help. If anyone can figure out how to write a contract that induces the borrower to reveal their type, they will have the solution to the crisis. The closest I can think of is one that allows borrowers to short-sell their houses (a la Hancock and Passmore) with reference to some sort of price index, so as to prevent gaming of the sales process.

Praise be to the NYT On Language Column (h/t Patricia Harris)

A brief history of singular pronouns:

One tweeter asked plaintively, “Can we just accept that ‘they’ can be used as singular?” But another wrote, “I HATE it when people make improper use of plural pronouns for gender neutrality!” Several suggested writing around the problem (“Sometimes I try to alternate he and she, but bleh”). One tweet seemed to sum up the general attitude: “Damn you, English language!”

Traditionalists, of course, find nothing wrong with using he to refer to an anybody or an everybody, male or female. After all, hasn’t he been used for both sexes since time immemorial? Well, no, as a matter of fact, it hasn’t. It’s a relatively recent usage, as these things go. And it wasn’t cooked up by a male sexist grammarian, either.

If any single person is responsible for this male-centric usage, it’s Anne Fisher, an 18th-century British schoolmistress and the first woman to write an English grammar book, according to the sociohistorical linguist Ingrid Tieken-Boon van Ostade. Fisher’s popular guide, “A New Grammar” (1745), ran to more than 30 editions, making it one of the most successful grammars of its time. More important, it’s believed to be the first to say that the pronoun he should apply to both sexes.

The idea that he, him and his should go both ways caught on and was widely adopted. But how, you might ask, did people refer to an anybody before then? This will surprise a few purists, but for centuries the universal pronoun was they. Writers as far back as Chaucer used it for singular and plural, masculine and feminine. Nobody seemed to mind that they, them and their were officially plural. As Merriam-Webster’s Dictionary of English Usage explains, writers were comfortable using they with an indefinite pronoun like everybody because it suggested a sexless plural.

If it is good enough for Chaucer it is good enough for me. I will from now on use "they" as my gender neutral singular pronoun.

Have Existing Home Sales Started to Rise?

NAR reported that Existing Home Sales rose 3.6 percent in June. In response to this, MSNBC notes:

"The turnaround in the housing market appears finally to be here and indeed may be gaining some speed," wrote Joel Naroff, president of Naroff Economic Advisors Inc.

Stocks jumped on the news, with the Dow Jones industrial average rising above 9,000 for the first time since early January.

The NAR numbers suggest that sales have stopped falling, and this is doubtless a good thing. But the numbers really don't support the idea that sales are rising--yet.

The reason is that the NAR Existing Home Sales number is a seasonally adjusted annualized number. This is a correct method for reporting (or at least I have reasons to think it is correct, as I am partly responsible for the development of the Existing Home Sales Methodology). But a seasonal adjustment is a statistical measure, and as such cannot be known with precision. June is a month that requires lots of adjustment, because June sales are always higher than sales in the average month. I am guessing that 3.6 percent is inside the 95 percent confidence interval of seasonally adjusted sales, so the best interpretation of the NAR release is that sales were flat or better in June.

The really good news in the report is the fact that the share of sales that are non-distressed sales is rising.

Two ideas for appraisal reform

Lawrence Yun of NAR is complaining that appraisals are preventing legitimate real estate transactions from occurring. Because of the way appraisers sometimes choose comparables, I have some sympathy for this view. And as I noted in an earlier post, Rhonda Porter says the Home Value Code of Conduct is nothing more than a way to line the pockets of Appraisal Management Companies. I have some sympathy for this view as well.

But we should not go back to the days when appraisers were basically paid to stay out of the way of the consummation of a deal. So let me suggest two proposals:

(1) Appraisers should not be allowed to see the offer price of a house. This is the only way their valuation will be truly independent.

(2) Appraisers should use valuation techniques that allow them to report a standard deviation of their estimate. Subdivision tract houses will have small standard deviations; architect designed villas will have large standard deviations.

We could then move to a pricing rule where Mortgage Insurance will be required if (1) the LTV based on appraised value is greater than 80 percent or (2) there is a greater than five percent chance that the true value of the house implies an LTV of 95 percent.

Step (1) would be easy to implement, and I think would help a lot. Step (2) will require lots of training (and perhaps different parameters from those that I am suggesting).

We need to stop kidding ourselves that we can measure house prices precisely. We need to start measuring the level of imprecision.

Rethinking California's Revenue Structure

California Assembly Speaker Karen Bass, who has no particular allergies to progressive taxes, cites an astonishing statistic about California Income Taxes: that 144,000 Californians (out of 38 million) pay half the state's income taxes. As I will discuss below, this does not necessarily imply that California taxes are, overall, too progressive, but it does mean that state income tax revenue is too undiversified. When such a small share of the population makes up such a large share of the revenue base, the fiscal conditions of the state will swing wildly with the fortunes of a few. This is what we have been witnessing here in California.

On the other hand, California has a very high sales tax as well, and everyone pays it. The best evidence I know suggests that the sales tax is regressive over the short term, but is more or less proportional over the life cycle. There is no question that the size of California's sales tax dampens the overall progressiveness of state revenue collections.

Finally, there is the property tax, which is completely detached from the ability to pay it, because of Proposition 13. Within a condominium complex, one can find two identical units that pay extraordinarily different levels of property taxes (sometimes by a factor of 10 to 1), because taxes are based on the price a property owner pays at the time of acquisition.

For California to have stable fiscal conditions going forward, it will need to broaden its income tax base and equalize its property tax base. I am not holding my breath.

The Joy of Great Cities

Last night, at the invitation of friends of ours, my wife and I went to a concert of the Pasadena Pops at Descanso Gardens. I wasn't quite sure what to expect: I am always suspicious of "pops" concerts (I love the Rolling Stones, but really don't want to hear Satisfaction played by a 100 piece orchestra) and community orchestras vary tremendously in terms of quality and spirit. I can enjoy music that is less than perfectly polished, but I find indifference difficult to take.

The punchline, of course, is that the concert was a gas. In the first place, the band has a conductor named Rachael Worby, who introduces the pieces with charm and who, more importantly, knows how to make an orchestra sparkle. Her beat and cues were so clear that even the most obtuse player would know what she wants. Second, the program, featuring Saint Saens, Gershwin, and Chansons sung by Karen Akers, was delightful.

But the really extraordinary thing was the caliber of the playing; one does not expect such precision in rhythm and tuning from an orchestra in a city of 150,000 people. But of course, the orchestra is drawing on a population of musicians who are drawn to Los Angeles because of opportunity, but also because they can find lots of other good musicians. I went to the Pasadena Symphony Web Site, and alas could not find a list of the players. My suspicion is that a number of the players are studio musicians (or people hoping to become studio musicians). And so it is throughout the region. One can go to free student recitals around LA, and hear music, from Palestrina to Riley, performed well.

I suspect that this is an example of agglomeration at its best (I can only suspect because I know of no formal test), and is a reason why the Londons, Parises, New Yorks and Los Angeleses of the world retain their special places for long periods of time.

Why the consequences of past discrimination persist over generations

I just read President Obama's most recent speech on race. It is another extraordinary speech--his ability to be at once sophisticated and accessible never ceases to amaze me.

To oversimplify, the speech has two themes: that individuals, whether discriminated against or not, must take control of their owns lives as best they can, but that the legacy of Jim Crowe will not go away quickly--that there are structural conditions in society that to place impediments in the paths of success for minority children.

The point reminded me of an award winning thesis by Kate Antonovics I read while I was at Wisconsin. One of the papers she generated from the thesis has the following summary:

Thus, initially disadvantaged groups may become trapped even though there is always a
unique within-generation equilibrium. That is, in contrast to standard models of statistical discrimination, repeated coordination failures are not needed to generate persistent discrimination.

Rather, statistical discrimination changes the transmission of earnings across generations by leading parents’ investment behavior to depend upon the distribution of income in the parents’ racial group. Thus, statistical discrimination and racial inequality are self-reinforcing, and multiple equilibria can arise.

When parents have limited resources to invest in their children, it becomes harder for children to migrate to a higher income class than their parents. In a world that was truly characterized by equal opportuntiy, children's fortures would be independent of their parents. We should at least strive to move to the point where children's fortunes are independent of their parents' race.

John Y. Campbell, Stefano Giglio, and Parag Pathak estimate that Foreclosed houses sell at a 28 percent discount

The results imply two problems with thinking about house prices through the lens of the Case-Shiller Index.

In Southern California, somewhere in the neighborhood of 40 percent of sales are distressed sales. If lenders make decisions that are based on Case-Shiller, they will underestimate the value of transactions that are taking place in the absence of distress. Appraisers seem to be taking a Case-Shiller view of the world right now, and so deals are getting undone. There is reason to believe that when buyers are willing to place 20 percent down on a house, they actually believe the house is worth the offer price.

On the other hand, let's say we move to a world where only, say, 20 percent of sales are distressed. This will produced an observed increase in the index Case-Shiller Index of 6 to 7 percent--even if nothing is really changing about underlying house prices. This could lead markets to become too optimistic too quickly.

The rigors of the USC Masters in Real Estate Development Program

A student of ours emails:

I just wanted you to know that this assignment got me out of a traffic ticket this morning.

La Cienega was shutdown to due an accident and I was trapped. So, I made a u-turn which included driving over a curbed median. A motorcycle cop pulled me over and gave me a lecture about how this isn't Texas (I have texas plates) and "cowboy driving" is not acceptable....whatever that means. So I told him that I had to get to campus for the mid- term and I had a limited amount of time to complete the homework assignment. I pulled out assignment #3 to make my story credible and he took it with him when he went back to his motorcycle.

When he came back he told me that it seemed like the assignment was going to be enough punishment and he let me go.

We have a new Census Director!

Robert Groves was confirmed. The vote to invoke cloture was 78-15. Why did this take so long? Why is the Senate so.....Senatorial?

Jan Hatzius has a Great Sense of Humor

His GDP forecast for 2009 goes four places right of the decimal point. (it is - 2.8753%).

Peter Wallison calls Consumer Protection Elitist

He writes:

Traditionally, consumer protection in the United States has focused on disclosure. It has always been assumed that with adequate disclosure all consumers -- of whatever level of sophistication -- could make rational decisions about the products and services they are offered. No more. If the administration's plan is adopted, many consumers will be told that they cannot have particular products or services because they are not sophisticated, educated or perhaps intelligent enough to understand what they have been offered.

Conservatives have always argued that liberals are elitists who do not respect ordinary Americans; this legislation seems to prove it. For example, the administration's plan would allow the educated and sophisticated elites to have access to whatever financial services they want but limit the range of products available to ordinary Americans.

This unprecedented result comes about because, under the proposed legislation, every provider of a financial service (a term that includes organizations as varied as banks, check-cashing services, leasing companies and payment services) is required to offer a "standard" product or service -- to be defined and approved by the proposed agency -- that will be simple and entail "lower risks" for consumers. These standard products are called "plain vanilla" in the white paper that the administration circulated in advance of the legislation.

Such protection is actually not unprecedented. For example, people must be deemed to be "accredited investors" or (for more complicated products) "qualified purchasers" in order to invest in certain types of hedge funds. And stock brokers have an obligation to make sure their clients' investments are "suitable."

But beyond the issue of precedence, there is a broader issue of safety. We reasonably forbid or require a variety of actions in the interest of safety. We require people to wear seatbelts. Be don't allow people to buy certain type of narcotics over the counter. Perhaps Mr. Wallison thinks such protections are a bad idea too, in which case he is consistent, if not also ridiculous. Mortgages can be dangerous products. Let's turn it over to Richard Thaler:

Fast forward to 2008, and the world of mortgage shopping had become a much more complicated place. Borrowers were quoted low initial “teaser” rates that would jump later to some higher level, depending on market interest rates at the time, and there were prepayment penalties for paying off the loans early. For such mortgages, an A.P.R. was no longer an adequate measure of the loan’s cost.

How can we help people make sense of all this?

One extreme approach would be to ban complex mortgages entirely: we could just go back to the world of uniform fixed-rate mortgages. But the cost of simplicity is an end to innovation. Shopping for televisions was easier in the 1970s, when we did not have to decide between plasma and L.C.D. technology — but who wants to go back to those hulking old TV sets?

A better approach is to strive for maintaining diverse options but helping consumers make smart choices and avoid the most common pitfalls.

For mortgages, the specific plan proposed by the administration appears to be strongly influenced by Michael S. Barr, an assistant Treasury secretary. Mr. Barr is a former law professor at the University of Michigan who wrote an important article sketching out these ideas with Sendhil Mullainathan, an economist at Harvard, and Eldar Shafir, a professor of psychology and public affairs at Princeton. As the administration plan describes it, lenders could be required to offer some mortgages they call “plain vanilla,” with uniform terms. There might be one vanilla 30-year, fixed-rate mortgage and one five-year, adjustable-rate mortgage. The features of these plain mortgages would be uniform, much as in a standard lease used in most rental agreements.

Lenders would also be free to offer other exotic mortgages — perhaps called “rocky road” mortgages? — along with the vanilla variety, but these offerings would receive more intense scrutiny from regulators.

I am not sure what is so elitist about this, other than the fact that those who are hostile to regulations tend to like to use elitist as an epithet for their opponents. So I guess I have two questions for Mr. Wallison:

(1) If I gave him an HP12C calculator, assumptions about an interest rate path, and the terms of an option-ARM mortgage, would he be able to tell me the payment on that mortgage in, say, month 62? Perhaps he could, but I don't know too many lawyers (and he is a lawyer) who could do that calculation. If highly education lawyers are generally flummoxed by this calculation, it is hard to see how ordinary Americans could understand it. The point is not to disparage ordinary Americans, but to emphasize a fact--most of us do not have the equipment to make informed judgments about complex financial products.

(2) I am curious how often Mr. Wallison hangs out with those who are not elite. Does he socialize with, say, median income people? With people whose eduction is at the median (i.e., high school graduates?). Perhaps he does, in which case he is entitled to refer to "the elite" as an other. But I have my doubts.

President Obama, please be bolder

Both Brad Delong and Mark Thoma have it right today, when they suggest the need for another round of stimulus--with particular aim at helping states--right now.

But President Obama needs to be bolder when it comes to solving the mortgage mess too. Last March I wrote:

Details of the Obama plane to help mortgage borrowers were released this morning. The order in which the mods will happen: interest rate reduction, term extension, principal reduction.

This is backward. Suppose a $100,000 loan has a 7 percent coupon, and its rate is modified down to 4 percent. The payment drops from $665 per month to $477 per month. This helps, but leaves the borrower underwater, making it difficult for her to sell if she needs to move to a new job.

But a $477 payment, at 7 percent annual interest, has a present value of $71,759. So if the interest rate remained the same and the loan balance was written down by 28 percent, the payment would be the same as an interest rate write-down to 4 percent, but the borrower would have her head above water. If she later sells for more than $72K + selling costs, she can split the proceeds with the lender, who would now basically be a shared equity owner.

I think the people in the Obama Administration are very smart. Why aren't they doing this?

The President's rescue program has not taken off. The redefault rate on modified mortgages is high--because they don't solve the negative equity problem. I am not alone in thinking some wort of debt-for-equity modification would make sense. John Quigley has supported such an idea. The Milkin Institute has supported the idea. I was on a radio program with Ken Rosen last week, and I am pretty sure he supported the idea.

Moliere saw 345 years ahead of his time.

Two quotes from Tartuffe:

Although I am a pious man, I am not the less a man.

and

To create a public scandal is what's wicked;
To sin in private is not a sin.

To which I should add a quote attributed to Jean Baptiste Alphonse Karr -

"plus ça change, plus c'est la même chose"

(p.s., I don't speak French, but this is how it appears, and I think we can all figure it out.)

Home news from the USC Lusk Center for Real Estate

My colleague and friend Raphael Bostic was today confirmed as Assistant Secretary for Policy Development and Research at the Department of Housing and Urban Development. This is a good thing for the country, but we shall miss him while he is gone.

We will also be joined by a new colleague, Jenny Schuetz, late of NYU and CCNY. She does wonderful work on (among other things) land use regulation and the impacts of various policy interventions on neighborhood outcomes. We are very excited that she will be joining us in August.

Lisa Schweitzer on Cities and the Stimulus

From her blog:

One of my fantastic students from Virginia Tech, Eric Howard, posted this piece from today’s New York Times on Facebook. The NYT author argues that:

Two-thirds of the country lives in large metropolitan areas, home to the nation’s worst traffic jams and some of its oldest roads and bridges. But cities and their surrounding regions are getting far less than two-thirds of federal transportation stimulus money.

The reporter goes on to quote outrage from mayors. They also get information from one of my favorite experts, Rob Puentes at Brookings. As usual, Rob has a very good point here: this package isn’t just about business as usual revenue allocation–which has always had a strong rural bias due to the structure of the Federal representative system (as Owen D. Gutfreund points out). This rural strength made way more sense 150 years ago than it does now.

So, of course all of these smart people are right in that cities aren’t treated very well in the stimulus, as they aren’t treated very well in Federal politics in general.
However, we have to ask ourselves: would it really be sensible to hand out this money on a per capita basis either? The main argument for cities and against suburbs and small towns is an economy of scale argument. Those arguments underpin the “costs of sprawl” research. Urbanization and density of human settlement lower the cost of providing infrastructure because of all the sharing we city folk do: the same sidewalk can serve thousands per day instead of a handful of people per day, as in a low-density settlement.

Thus, cities should somewhat expect to receive less per person than other places. The key point is just how much less per person should we expect urban infrastructure to cost, given all this sharing. The problem with sharing, of course, is that sharing leads to congestion after a certain point in population growth, thereby raising costs for everybody and requiring either dispersal of population or additional infrastructure.
While planning and planners are hard-wired to think in terms of increasing density, building duplicate systems (ie increasing capacity) in congested areas is only one means of cost sharing: the other, more macro-scale approach is to direct more growth to areas with excess capacity or price congested facilities and shift more of the revenue generation burden back onto users instead of looking for Federal funds.
This latter approach is, I think, where we are ultimately heading with infrastructure finance in the new urban world. Do we have compelling arguments for why the Federal government should be involved in urban infrastructure if all they going to do is return revenues to source (the per capita/population distribution argument). Anti-federalists can and do make strong arguments for local funding of intracity systems, like metro rail systems, while Federal dollars should go to intercity and interstate projects.

So while the NYT and urban mayors are probably right in that this distribution of funding is skewed, they haven’t really told us what the right distribution would look like, other than to say that cities are important and they need more money. Of course they are and they do, but it isn’t as though some of the poorest places in this country aren’t places like the Central Valley rather than places like Los Angeles, and it’s not as though Boston doesn’t depend on connectivity between rural Florida and Boston for all parts of the freight and US food system.

Debra Johnson points us to the relative dearth of recent household formations.

She has a nice graph:







The graph illustrates an important change; after a secular decline in average household size in the US (from about 3.5 people per households after World War II to around 2.6 now), households are getting (slightly) larger. This matters for housing demand, of course, because households are the source of such demand (recent event have taught us that not a whole lot of people can afford to own more than one home). It is important to note that this change happened before the current economic calamity.

She does have some good news, though: age induced household formations should be rising over the next three years. The question is whether there will be sufficient numbers of jobs for young adults to leave the family nest on schedule.

Why some columnists make my head want to explode

Ross Douthat:

In this sense, she really is the perfect foil for Barack Obama. Our president represents the meritocratic ideal — that anyone, from any background, can grow up to attend Columbia and Harvard Law School and become a great American success story. But Sarah Palin represents the democratic ideal — that anyone can grow up to be a great success story without graduating from Columbia and Harvard.

But the point about Palin is not that she didn't go to Columbia and Harvard. She graduated from her state's flagship school, and I personally am very fond of such places. The point is that she went to five different colleges before graduating. Two, ok, but at three you start to wonder. But doesn't the fact that she went to five tell us something about her ability to follow through--to finish something? Hasn't her past behavior been a pretty good predictor of current behavior, and therefore likely of future behavior?

Program Note

I will be on KPCC at 2 today.

Krugman on Franken

To reinforce the point that funny people are often smart:

David Broder has a column this morning calling for bipartisanship. I know, you’re shocked. But what struck me was this bit about Al Franken:

Franken, the loud-mouthed former comedian, will be the 60th member of the Senate Democratic caucus …

Two points.

First, implicit in this characterization of Franken is the notion of the Senate as a decorous gentlemen’s club. I doubt that club ever existed in reality; but in any case, these days the World’s Greatest Deliberative Body is, not to put too fine a point on it, chock full o’ nuts. James Inhofe: I rest my case.

Second, Al Franken’s dirty secret is that … he’s a big policy wonk.

I used to go on Franken’s radio show, all ready to be jocular — and what he wanted to talk about was the arithmetic of Social Security, or the structure of Medicare Part D.

In fact, the only elected official I know who’s wonkier than Al Franken is Rush Holt, my congressman — and he used to be the assistant director of Princeton’s plasma physics lab. (The campaign’s bumper stickers read, “My Congressman IS a rocket scientist.”)

So what will Franken do to the level of Senate discourse? He’ll raise it.

Franken writes quite well. The only times he really bothers me is when he loses his sense of humor and becomes sanctimonious. For instance, he loves to point out that while many in the family values crowd are serial adulterers and divorcees (a point that is certainly worth some emphasis), he is a devoted husband and father. I think that is great Al, but let someone else say so.

William Adelman deserves props for pointing out that Krugman can actually be quite funny himself.

Anne-Sophie Mutter's Top Ten Record List

It is a nice list. I think Previn is her husband, which may explain why he is on it three times. But the Bruckner, Ella, Korngold are all wonderful, and the La Boheme is a guilty pleasure of mine. My mind tells me it is schmalz--but I love it anyway.


Anton Bruckner

Symphonies
Berliner Philharmoniker
Herbert von Karajan
DGG

Ella Fitzgerald

The Complete Ella Fitzgerald Song Books
Verve

Erich Korngold

The Sea Hawk
The Private Lives of Elizabeth and Essex
Captain Blood
The Prince and the Pauper
London Symphony Orchestra
André Previn
DGG

Wolfgang Amadeus Mozart

Concerto for Piano and Orchestra no. 21 in C major, K 467
Clara Haskil

André Previn

A Streetcar Named Desire
(Complete)
Fleming · Futral · Gilfry · Griffey · Forst · Lord · Gayer · San Francisco Opera Orchestra
André Previn
DGG

André Previn

Honey and Rue
Text by Toni Morrison
Kathleen Battle
Orchestra of St. Luke's
André Previn
DGG

André Previn

Live at the Jazz Standard
With David Fink
Decca

Giacomo Puccini

La Bohème
Mirella Freni, Luciano Pavarotti
Berliner Philharmoniker
Herbert von Karajan
DGG

Josef Strauss

Delirien Walzer, Sphärenklänge, Kaiserwalzer
Wiener Philharmoniker
Herbert von Karajan
Decca

Sergey Rachmaninov

Piano Concertos No.1 in F sharp minor, Op.1 and No. 2 in C minor, Op. 18
Krystian Zimerman
Boston Symphony Orchestra
Seiji Ozawa
DGG

Can't help but blog a bit about Health Care

I have not commented on health care because it is not my area of expertise. But my wife is a primary care physician, is head of the Geriatrics Section at Keck Medical School, and was a Health Policy Fellow at the Department of Health and Human Services, so I learn a lot through osmosis and by reading various stuff she puts in front of me.

The most recent thing she put in front of me was from the New England Journal of Medicine. The following reported quote from a Parke-Davis executive really made the hair on the back of my neck stand up:

...We can't wait for physicians to ask, we need to get out there and tell them up front. Dinner programs, CME programs, consultantships all work great but don't forget the one-on-one. That's where we need to be, holding their hand and whispering in their ear, Neurontin for pain, Neurontin for monotherapy, Neurontin for bipolar, Neurontin for everything. I don't want to see a single patient coming off Neurontin before they've been up to at least 4800 mg/day. I don't want to hear that safety crap either...

Economics is supposed to respect evidence; to me, economists who oppose even thinking about a public option (or single-payer option) show no respect for evidence. Medical outcomes in this country are, at best, the equal of any other in the world, but we spend twice as anyone else to get care that is no better than many others'. Spare me stories of queues for elective surgery; when we spend 75 percent more per person than Canada and 2.5 times more per person than Japan on health care, we should get better outcomes. The sort of corruption documented above is at least one reason why we don't.

What's wrong with being funny?

A Minnesota Republican today said something to the effect that Norm Coleman should not run for governor of Minnesota, because he could not even beat Al Franken--i.e., a comedian.

Some of the smartest and wisest people in history, though, have also been very funny. Shakespeare was funny. Benjamin Franklin was funny. Mark Twain was funny. Will Rogers was funny. Jon Stewart is funny. My wife is funny. And I would take any one of them over the vast majority of current Senators. Of the Senate's many problems, one near the top of the list is how seriously Senators take themselves; how utterly bereft of humor they are (and this is a bipartisan affliction). I hope very much that Franken takes his job seriously, and I think he will. But I also hope he stays funny.

[Update: I somehow forgot to mention that Abe Lincoln was very funny. Enough said.]

My Brother and John Norquist are happy

After many years of population decline, the city of Milwaukee has seen a (small) increase in population since the beginning of the decade.

Some other old central cities (not metropolitan areas) where population has increased: New York, San Francisco, Boston, Washington DC, Denver (not so old, but a city with tight municipal boundaries), Atlanta (see Denver), St. Louis (!!) and Newark.

Continuing to lose: Detroit (of course), Chicago (a little--but still surprising in light of what a great city it is), Philadelphia, Memphis, Baltimore, Cleveland, Pittsburgh, Buffalo (which may in 50 years pass Green Bay as having the smallest population of any NFL city), and Birmingham.

San Antonio has had remarkable growth, and is now the country's 7th largest city.