16 July 2017

Red State, Blue State, Old Jobs, New Jobs

Edward Glaeser's Triumph of the City [2011], opens with some statistics that illustrate the remarkable contrast between big city productivity and smaller city or even rural productivity.

About half the US population "crowd together in the 3 percent of the country that is urban." "Workers in metropolitan areas with big cities earn 30 percent more than workers who aren't in metropolitan areas." And the bigger the city, the more this effect is exaggerated. "Americans who live in metropolitan areas with more than a million residents are, on average, more than 50 percent more productive than Americans who live in smaller metropolitan areas. These relationships are the same even when we take into account the education, experience, and industry of workers. They're even the same if we take individual workers' IQs into account." {emphasis added]
"On average, as the share of a country's population that is urban rises by 10 percent, the country's per capita output increases by 30 percent. Per capita incomes are almost four times higher in those countries where a majority of people in cities than in those countries where a majority of people live in rural areas."

GDP is measured by exchange. Big networks make it easier for people to easily exchange goods, services, and ideas. If you live in a rural area, two miles from your nearest neighbor, it is much harder to exchange anything than it is if you live in a densely populated area where a million neighbors are within a mile. Bit city networks are rich and complex; rural networks are sparse.
City of the Future, Lev Rudnev, 1927

There is so much to this but one comes from openness to innovation. Cities are like diversified portfolios. If you own 50 different stocks, you just accept that one (or two or four or ten) will shrink in value as markets shift; your entire portfolio may well do better in disruptive, tumultuous markets because the one (or two or four or ten) stocks that thrive through this change could create wealth that is worth multiples of what you lost in the bad stocks. The investor who owns one or two stocks sees big change as a threat because if one or two of her stocks collapse in value, the whole portfolio does. There is so much going on in a city that its people can more easily adapt to innovation and disruption. You get laid off from one failed startup and you go to work at another. In a rural area, if you get laid off from a company you may literally need to move out of state. And as a people become more open to innovation and disruption, they create more value over time than people who try to conserve what they have and protect themselves from change.

As an economic model, cities just work better than rural areas. To the extent that the country moves in the direction of what works best for rural areas, it will generally move in the wrong direction for economic progress.

12 July 2017

Things That Seem Fictional Even Now

Trump's candidacy and administration has been bizarre. If you were to make up any of the following for a novel or screenplay about politics, it would likely be rejected as too incredible.

Jared Kushner, Trump's son-in-law, who has been given authority over more domains of the executive branch than possibly anyone in the last century, owns 666 Fifth Avenue, NY.

Trump appointed Rick Perry - who as a candidate for GOP president wanted to eliminate three agencies, one of which he could not remember - to head up the agency (Energy) that he could not remember.

Within hours of the release of a report endorsed by 17 national security agencies that reported on Russia's interfering with the election to help Trump, Russia dumped private emails from Clinton's account. (Also in that same small time period was the release of Trump's notorious "grab 'em by the pussy" tape in which he talked about how when you're a celebrity women let you do anything.)

Trump's first wife Ivanka testified during their divorce trial that Trump slept with a book of Hitler's speeches by his bed.


10 July 2017

What Made - and Still Makes - Western Civilization Great


INSTITUTIONS AS TOOLS OR SACRED OBJECTS
The battle between social conservatives and progressives

In last week’s speech in Poland, Trump warned about a threat to Western Civilization. He mentioned “history” six times and spoke of          “the bonds of history, culture, and memory,” and “the bonds of culture, faith, and tradition.” Speaking for the right, Trump is proudly pointing to the West as having a superior tradition worth fighting for.
Douglas Murray, author of The Strange Death of Europe: Immigration, Identity, Islam, argues that the Left in Europe is essentially embarrassed to argue that their culture is really better than any other and authorities have actually looked away number of atrocities, including honor killings (families killing their own sisters and daughters because of their shame at who they’ve married) because it might seem racist to prosecute these as crimes.
So we have the Right arguing for tradition and the Left arguing for cultural relativism. The one would head backwards and the other would stand around awkwardly, apologizing for seeming to suggest that their ways are any better than that of any other people.
What seems to be missing is the appreciation for history without treating historical institutions as sacred or a culture as synonymous with race or nationalism (which it is not).
The West was seemingly the first to do something that set it apart and set it on the road to progress. This is worth defending.

INSTITUTIONS AS SACRED OBJECTS OR SIMPLY TOOLS
How we think about institutions defines our communities. Three ways to characterize the great institutions of the West like church, state, and bank are:

      Sacred objects that must be preserved: this the attitude of the social conservative
2.      Obsolete objects that must be eradicated: this the attitude of the radical
3.      Simply tools that everyone should have access to: this is the attitude of the progressive


The debate in the West today is between social conservatives and progressives. The radicals who in past generations argued to outlaw religion (as the French Revolutionaries and Soviets did), financial markets (as communists throughout the world did last century) and even the nation-state (as anarchists have) are largely ignored in today’s political debates. Institutions separate us from the other primates and the real argument is not over whether we should have them but how we should treat them.
The most defining revolutions of the West were led by progressives and transformed these institutions:

1.      Church - the battle between Protestants and Catholics that gave us freedom of religion between about 1300 and 1700
2.      Nation-state – the battle between royalists and revolutionaries that gave us democracy between about 1700 and 1900
3.      Bank - the democratization of financial markets that gave us the American dream between about 1900 and 2000


Each revolution turned a dominant institution ruled by elites into a tool used by the average person. These were not one-time events. For instance, democracy was a revolution but it took centuries more to extend it from white, property owning Protestant men to even 18-year-old minority women. Early forms of religious freedom just gave you a choice between Catholic, Calvinist and Lutheran, not the thousands of denominations and religions (including atheism) available today. Like economic progress, this social progress isn’t something that happens one year and then stops; it is on-going and progress is as dependent on social change as it is on technological change.
Social conservatives are more likely to wonder about the intentions of founding fathers. If you see institutions as tools, though, the idea of protecting them from change is about as odd as insisting that Rudolf Diesel or Henry Ford never intended for us to drive cars with cup holders or GPS. Even if true it’s irrelevant to those of us alive now.
It’s difficult to understand how visceral is the reaction to Trump without understanding how differently social conservatives and progressives think about our major institutions.

FREEDOM OF RELIGION
First amendment:
Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

As it turns out, freedom of religion, free speech, a free press and political activism are all intertwined. Our founding fathers had genius enough to see that and packaged them into the same amendment. All have to do with freedom of thought but started with freedom of religion.
In 1302, Pope Boniface issued a bull that asserted his lordship over all of Christendom. By 1648 the Treaty of Westphalia essentially took away the pope’s power to dictate religion to a ruler and the ruler’s power to dictate religion to the people. The battle for freedom of religion played out between roughly 1300 and 1700 and gave us terrible atrocities like the Spanish Inquisition and the Thirty Years War that killed about ten percent of Europe’s population before reaching a resolution.
Had freedom of religion merely brought peace, that would have been enough. There is more, though. Once you’re free to choose your beliefs, you might just choose to base those beliefs on scientific evidence rather than religious revelation. As it turns out, freedom of religion allows scientific thinking to flourish.
In the early 1600s, the Church put Galileo under house arrest; by the late 1600s, England made Newton the Master of the Mint. Freedom of religion enabled the rise of science.
Progressives see in Trump’s travel ban targeted at Muslims not just a challenge to freedom of religion, which is reason enough to be upset. They see it as an attack on freedom of thought. Trump “knows” that Islam is the wrong religion and that climate change is not real and that he’s being attacked by “fake news.” Social conservatives see Trump as protecting their true and sacred religion; progressives see him as attacking freedom of thought.


DEMOCRACY
The next big revolution played out between about 1700 and 1900. At its beginning monarchs had absolute power and by its end those monarchs were either constrained by law or had been removed. The nation-state had become a tool for the average person and not just the elites. Rule of law and a representative government are foundational to democracy and both continue to evolve.
Newton defined laws that could apply universally to any object, from planet to moon to apple. His friend John Locke argued for laws that would apply universally to any person, from aristocrat to merchant to laborer. Laws that governed the natural world and should govern the social world were a focus of the Enlightenment thinkers who inspired democratic revolutions.
When Trump asks the head of the FBI not to investigate his National Security Adviser, this is a challenge to the rule of law, taking us back to the old system of personal privilege. When he leads a task force to investigate voter fraud (that all studies suggest is nonexistent), he is actually moving to make voting more restrictive. (Although he does seem rather sanguine about foreign interference, even if he’s trying to block Americans without photo ID.)
The invention of the car was dramatic but no one with a choice between a Tesla and a Model T would choose to drive the T. Like the car, democracy continues to evolve. If 1776 was the moment Americans “invented” modern democracy it is worth remembering that voting rights continue to expand to include more people over time. It took 200 years before the 18 year olds we sent to war could vote.
The real question is, who should be able to define the policies that define the community they live in? Put differently, is the government a tool for anyone to use or is it reserved for just a few? Progressives and social conservatives have very different answers to this.

THE AMERICAN DREAM
The most recent of our great institutions to be made a tool of the masses and not just the elites is the bank (or, more broadly, financial markets that include credit and investment markets). This access has helped people to become more affluent and more able to define their own lifestyle.
The levels of consumption that enable individuals to pursue the American dream would not be possible without modern capital markets. Warren Buffet argues that his upper-middle class neighbors in Nebraska live better than John D. Rockefeller did roughly a century ago. The cars, smart phones, TVs, and polio vaccines the average American now has rely on vast amounts of capital. The billions it takes to produce and purchase this vast array of goods would boggle the mind of any adult living in 1900, even John D. Rockefeller.
Access to financial markets gives the individual access to the American dream and the credit card and 401(k) account might be the simplest symbols of this broadening of access. Keynesian economics is another element of this revolution.
One of Keynes most overlooked insights into capital markets was this: capital markets could reach equilibrium before labor markets did. In other words, it was possible for capitalists to stop investing before a community reached full employment. If capital markets were just tools for elites, communities would have to accept this; if they were to be tools for the masses, communities would have to adopt policies that changed this. Keynes gave us options for this.
Unemployment during the Great Depression hit 25%; during the Great Recession, it peaked at 10%. One big reason for the differences in severity was the application of Keynesian stimulus; Bernanke did all he could to prop up credit markets to encourage investment and consumption. Like church and state before it, the bank has been made a tool for the average person. Interest rates were used to maximize employment, not returns to capital.
Social conservatives don’t like the Federal Reserve or its charter to subject financial markets to larger goals like employment. Again, as with church and state, they feel that what we’ve inherited is sacred and should not be changed. For them, Keynesian is a bad word. The battle between social conservatives and progressives over banking regulations and Federal Reserve policy often seems obscure but there is a reason that bank is the first part of bankrupt. The consequences of getting this policy wrong are severe.

INSTITUTIONS AS TOOLS
For centuries, progress has followed from letting more people have access to these great institutions, using them as tools for their own benefit. Life got better when our founding fathers extended the use of government from just aristocrats to landed gentry; it got better again when it was extended to women in the early 20th century and to minorities in the late 20th century. There is no evidence that progress now lies in the opposite direction, in restricting rather than broadening access to freedom of religion, democracy, and the American dream. The more that people have been able to use church, state and bank as tools for their own lives, the better the world has become.


05 July 2017

The Bill of Rights and the Difference Between Modern Republicans and Democrats

The first two amendments to the constitution regard freedom of speech and the right to bear arms. All you may need to know about the modern Republican and Democratic parties might be summarized in these simple stats: 31% more Republicans than Democrats think the US has gone too far in expanding freedom of the press and 32% more Democrats than Republicans think the government should ban high-capacity magazines. Republicans are threatened by free speech and Democrats are threatened by automatic weapons.

Here are the differences between Republicans and Democrats in regards to gun policy:



Here are the differences between Republicans and Democrats in regards to freedom of the press. 42% of Republicans think that freedom of the press has gone too far.


This is a wildly incoherent thought, one that is fueled by Trump's incessant attacks on #fakenews. So much about this is bizarre (how would you even regulate speech or "the press" in this modern world?) but perhaps the weirdest thing is that this isn't about the genuinely fake news of folks like Alex Jones who Donald Trump has praised (and who recently had a guest on claiming that NASA is shipping children up to Mars where they are forced to work as slaves) but instead about the real news of folks like the New York Times and Washington Post who continually reveal that Trump tells the truth only about 25% of the time. What convinces Republicans that the press has gone too far is not actual fake news but instead good reporting that reveals Trump's disinterest in facts or evidence.

Democrats think that guns are dangerous and should be better regulated. Republicans think that ideas are dangerous and should be better regulated.


First amendment:
Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

Second amendment:
A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.

01 July 2017

Policy, Politics, and Personalities

Donald Trump has shown no interest in healthcare policy in the midst of the most important debate on the topic in a decade but he has obsessed over a feud with two TV personalities. If it seems odd that a president would ignore fundamental issues in a signature promise of Republicans (repeal and replace Obamacare) but tweet incessantly about a couple that maybe 1% of Americans watch regularly, you are forgetting something. It was his mastery in getting ratings - not his mastery of policy - that got him elected. Trump didn't come to national attention as a policy maker or politician; he gained fame as a reality TV star. He has no interest in policy matters or debates but does obsess over other TV stars.

I've gradually come to accept that my own fascination with policy sets me apart from many (most?) voters who instead find politics - who is more popular and why - more interesting. Politics is one step removed from policy but now, Trump has taken us one step further away: we've moved from politics to personality.

It's easy to think that he's got an interest in politics because he ran. I don't think that's it. I think he's interested in Fox News and the way that various personalities get higher or lower ratings. He knows how to drive ratings and is happy to tweet the most outrageous things to distract the world from politics or policy. Winning the presidency shows the ultimate ratings mastery.

He would glaze over in a conversation between Thomas Jefferson, Abraham Lincoln and FDR as they discussed government and society and would at best contribute little platitudes that sound like they were lifted from a 7th grader's essay. By contrast, he would light up in a discussion between Roger Ailes (who made Fox popular), Chuck Lorre (Big Bang Theory, and other popular TV shows), and Rush Limbaugh as they discussed ratings and would be able to contribute incredibly insightful suggestions about how to raise ratings.

Trump has no interest in policy beyond what it does for his ratings. He promised not to touch Medicare and is now pushing a bill that would slash it in part because he's a liar and in part because he just doesn't care; promising to protect Medicare meant higher ratings during the election; now pushing for a GOP bill that cuts Medicare means higher ratings during his presidency.

Cerebral discussions don't drive high ratings. Visceral arguments do. Trump puts the id in ideology.

He's off to a G20 summit where world leaders will discuss big and important issues. As they obsess over the environment or economy he will obsess over which world leaders insulted him and which ones flattered him. As it turns out, the instincts that give you the ability to raise ratings overlap with the instincts that keep you popular in middle school. It's not just that Trump's intellect is woefully underdeveloped; his stunted emotional development makes him can't miss twitter.

Policy under Trump is atrocious. Politics is in shambles. You would think that all of that would matter but it doesn't. What matters is personality and Trump's keeps the nation riveted.