Category Archives: Web Article Review

the GOP’s “Growth and Opportunity Project”

After their 2012 election loss, the Republican Party made some surprisingly candid admissions and drew some surprisingly logical conclusions. I could almost begin to support a party that focused on sound, evidenced-based policies to create accelerated economic growth and true equal opportunity, while preserving a minimal but effective safety net for people who need it through no fault of their own.

We are the Party of private-sector economic growth because that is the best way to create jobs and opportunity. That is the best way to help people earn an income, achieve success and take care of their families.

But if we are going to grow as a Party, our policies and actions must take into account that the middle class has struggled mightily and that far too many of our citizens live in poverty. To people who are flat on their back, unemployed or disabled and in need of help, they do not care if the help comes from the private sector or the government — they just want help.

Our job as Republicans is to champion private growth so people will not turn to the government in the first place. But we must make sure that the government works for those truly in need, helping them so they can quickly get back on their feet. We should be driven by reform, eliminating, and fixing what is broken, while making sure the government’s safety net is a trampoline, not a trap.

Too bad their primary voters resoundingly rejected these reasonable ideas in favor of bigotry, science denial, and downright childishness. I doubt I will so much as glance in their direction again, even though I get frustrated with the subserviance to big business, warmongering and relatively narrow range of policies in consideration by the Democrats.

Elon Musk’s new spaceship

Here’s a video from Space X on their vision for a ship that can go to Mars and back as soon as 2025:

According to KurzweilAI:

In a talk on Tuesday at the International Astronautical Congress in Guadalajara, Mexico, SpaceX CEO Elon Musk laid out engineering details to establish a permanent, self-sustaining civilization of a million people on Mars, with an initial flight as soon as 2024.

SpaceX is designing a massive reusable Interplanetary Transport System spacecraft with cabins. The trip would initially cost $500,000 per person, with a long-term goal of 100 passengers per trip.

Musk plans to make humanity a “multiplanetary species” to ensure survival in case of a calamity like an asteroid strike. “This is really about minimizing existential risk and having a tremendous sense of adventure,” he said.

Obama on housing

The Obama administration has come out with a “housing development toolkit“. I think they have this about right. Of course, the federal government has very little control over local land use. Maybe some local politicians will take the trouble to try to understand this stuff and support policies that help people and the economy rather than policies that just kind of sound good but are ultimately counterproductive.

Over the past three decades, local barriers to housing development have intensified, particularly in the high-growth metropolitan areas increasingly fueling the national economy. The accumulation of such barriers – including zoning, other land use regulations, and lengthy development approval processes – has reduced the ability of many housing markets to respond to growing demand. The growing severity of undersupplied housing markets is jeopardizing housing affordability for working families, increasing income inequality by reducing less-skilled workers’ access to high-wage labor markets, and stifling GDP growth by driving labor migration away from the most productive regions. By modernizing their approaches to housing development regulation, states and localities can restrain unchecked housing cost growth, protect homeowners, and strengthen their economies.

Locally-constructed barriers to new housing development include beneficial environmental protections, but also laws plainly designed to exclude multifamily or affordable housing. Local policies acting as barriers to housing supply include land use restrictions that make developable land much more costly than it is inherently, zoning restrictions, off-street parking requirements, arbitrary or antiquated preservation regulations, residential conversion restrictions, and unnecessarily slow permitting processes. The accumulation of these barriers has reduced the ability of many housing markets to respond to growing demand.

This toolkit highlights actions that states and local jurisdictions have taken to promote healthy, responsive, affordable, high-opportunity housing markets, including:

  • Establishing by-right development
  • Taxing vacant land or donate it to non-profit developers
  • Streamlining or shortening permitting processes and timelines
  • Eliminate off-street parking requirements
  • Allowing accessory dwelling units
  • Establishing density bonuses
  • Enacting high-density and multifamily zoning
  • Employing inclusionary zoning
  • Establishing development tax or value capture incentives
  • Using property tax abatements

ending welfare as we knew it

Washington Monthly has an interesting post on Bill Clinton’s welfare reforms. I admit, even though I lived through it I didn’t know much more than the sound bite version. The fuller version is that while he did allow Congress to drastically scale back welfare as it was known at the time, which was cash assistance to poor families with relatively few strings attached, he drastically scaled up the earned income tax credit, which ended up helping more people. The article ends by making an interesting case that the debate has actually shifted somewhat to the left since the 1990s, and there is actually somewhat of a bipartisan consensus that more is needed to fight poverty and help the poor develop job skills. At the same time, the poverty rate among children and minority children in particular is still shameful.

 

What did happen is that Clinton seized on one element of the conservative welfare reform agenda – work – and used it as leverage to create the broadest expansion of federal spending on poverty reduction since the New Deal. Welfare recipients should work, Clinton agreed, and the 1996 legislation set both a five-year time limit on benefits and imposed, for the first time ever, a requirement that recipients work to receive aid.

But Clinton also argued government’s obligation to “make work pay.” “No one who works full time and has children in the home should live in poverty,” said Clinton in 1996. It was a bargain that would win over the public, which soon shed its appetite for punishing the poor that conservatives had done their best to encourage. It also enabled Clinton to push through his ambitious agenda of new programs aimed at helping the working poor.

Clinton’s biggest win was the expansion of the EITC, which was framed as a precondition to passing welfare reform and which Congress passed in 1993. Today, the EITC is the federal government’s largest anti-poverty program, delivering $63 billion in benefits a year to nearly 28 million families. This makes it nearly four times the size of the federal block grants under Temporary Assistance to Needy Families (TANF) – the successor to AFDC. Researchers credit the EITC for dramatically increasing workforce participation for lower-income women (more so than the reform of AFDC). According to the Center on Budget and Policy Priorities, the EITC lifted 9.4 million people in working households out of poverty in 2013.

and the Nobel Prize in Economics actually went to…

The Royal Swedish Academy of Sciences has decided to award the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2016 to

Oliver Hart
Harvard University, Cambridge, MA, USA

and

Bengt Holmström
Massachusetts Institute of Technology, Cambridge, MA, USA

“for their contributions to contract theory”

Society’s many contractual relationships include those between shareholders and top executive management, an insurance company and car owners, or a public authority and its suppliers. As such relationships typically entail conflicts of interest, contracts must be properly designed to ensure that the parties take mutually beneficial decisions. This year’s laureates have developed contract theory, a comprehensive framework for analysing many diverse issues in contractual design, like performance-based pay for top executives, deductibles and co-pays in insurance, and the privatisation of public-sector activities.

In the late 1970s, Bengt Holmström demonstrated how a principal (e.g., a company’s shareholders) should design an optimal contract for an agent (the company’s CEO), whose action is partly unobserved by the principal. Holmström’s informativeness principle stated precisely how this contract should link the agent’s pay to performance-relevant information. Using the basic principal-agent model, he showed how the optimal contract carefully weighs risks against incentives. In later work, Holmström generalised these results to more realistic settings, namely: when employees are not only rewarded with pay, but also with potential promotion; when agents expend effort on many tasks, while principals observe only some dimensions of performance; and when individual members of a team can free-ride on the efforts of others.

In the mid-1980s, Oliver Hart made fundamental contributions to a new branch of contract theory that deals with the important case of incomplete contracts. Because it is impossible for a contract to specify every eventuality, this branch of the theory spells out optimal allocations of control rights: which party to the contract should be entitled to make decisions in which circumstances? Hart’s findings on incomplete contracts have shed new light on the ownership and control of businesses and have had a vast impact on several fields of economics, as well as political science and law. His research provides us with new theoretical tools for studying questions such as which kinds of companies should merge, the proper mix of debt and equity financing, and when institutions such as schools or prisons ought to be privately or publicly owned.

The Economics Nobel Isn’t Really A Nobel

The Economics Nobel Isn’t Really A Nobel according to Maggie Koerth-Baker at FiveThirtyEight.com.

But, technically, there is no Nobel Prize in economics.2 Instead, there is the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel. It was first awarded in 1969 and is named not after a person, but after the central bank of Sweden — the Sveriges Riksbank — which funds it. The Nobel Foundation doesn’t pay out the award or choose the winner (though the winner is chosen in accordance with the same principles used by the Nobel Foundation), but it does list the prize on its website along with the Nobels, tracks winners the same as Nobel laureates, and even promotes the prize alongside its own. Members of the Nobel family have spoken out against the award.

So why does it exist? Notre Dame historian Philip Mirowski has found evidence that the economics award grew out of Swedish domestic politics. According to Mirowski, in the 1960s, the Bank of Sweden was trying to free itself from government oversight and become independent. One way to do that was to frame economics as purely scientific, rather than political — in which case, government interference could only hurt the bank. Having a Nobel Prize boosted economics’ scientific street cred. And Mirowski isn’t the only academic who is skeptical of whether there should be a Nobel-associated economics prize. Friedrich von Hayek, who won the award in 1974, used his Nobel Banquet speech to critique the prize.3 “The Nobel Prize confers on an individual an authority which in economics no man ought to possess,” Hayek said. He worried that the prize would influence journalists, the public and politicians to accept certain theories as gospel — and enshrine them in law — without understanding that those ideas have a different level of uncertainty than, say, gravity or the mechanics of a human knee.

Obama on Mars

Obama continues to write op-eds at a furious pace.

We have set a clear goal vital to the next chapter of America’s story in space: sending humans to Mars by the 2030s and returning them safely to Earth, with the ultimate ambition to one day remain there for an extended time. Getting to Mars will require continued cooperation between government and private innovators, and we’re already well on our way. Within the next two years, private companies will for the first time send astronauts to the International Space Station…

The next step is to reach beyond the bounds of Earth’s orbit. I’m excited to announce that we are working with our commercial partners to build new habitats that can sustain and transport astronauts on long-duration missions in deep space. These missions will teach us how humans can live far from Earth — something we’ll need for the long journey to Mars.

leading implementation of complex programs

This is just something I have wanted to write down a few thoughts on for awhile. My field is engineering and planning, and I have been involved in a number of programs that are complex technically, financially, and on the people side. I’ve seen some things done well, I’ve seen some things done badly, and I’ve done a few things well and learned a few lessons the hard way myself. So here are my thoughts:

  1. Organize the entire program around achieving a vision and set of goals which everyone understands. Create a crystal clear vision and set of goal statements for the program. Make sure these are thoroughly understood by all senior and mid-level decision makers – communicate, market, train, drill, test – whatever it takes to make sure they get it. Then, set specific objectives for individual functional units within the organization, and for all individual staff members, that advance these goals, all these goals and only these goals. Make each objective SMART – specific, measurable, achievable, realistic, and time bound. Then track every individual’s and every unit’s progress towards meeting the objectives, and hold individuals and managers accountable for meeting their objectives.
  2. Make sure the knowledge level of the entire staff is up-to-date with industry standards and best practices, then encourage system thinking, creativity and innovation to advance the leading edge. Create a formal training and continuing education program for staff. Create a psychological “safe space” for discussion of ideas that are outside the typical daily functions of the organization. Organize talks, discussion groups, and other events. Bring ideas and speakers in from outside the organization. Encourage and reward staff to spend time reading and attending events outside the organization, then bringing back ideas and communicating them to colleagues. Be on guard for the development of group think, and actively encourage and reward the sharing of ideas that are new to the organization.
  3. Focus on communication of system behavior, risk, and other complex information. Continuously improve staff knowledge of communication approaches, strategies, and tools by weaving these into the training and innovation program. Bring in specialized staff with communication and visualization skills. Set up a specific job role, group or committee whose job it is to oversee communication approaches in all aspects of the organization.

Paul Romer and the Nobel Prize

I write this the night before the 2016 Nobel prize in economics is scheduled to be awarded. By the time this posts it will have been awarded, so keep that in mind if what I say below seems outdated the second it posts.

City Observatory says Paul Romer deserves to win the Nobel Prize in economics.

In our view, the academy might want to closely consider giving the award to Paul Romer, recently appointed to be the chief economist for the World Bank, for two reasons.

First, in a series of papers published a couple of decades ago, Romer was responsible for some of the key breakthroughs in what is called “New Growth Theory,” which re-writes the mechanics of long-term economic growth in a fundamental and optimistic way. We described the key insights from of these theories a couple of months ago at City Observatory. Romer’s long been short-listed for the prize on account of this work, awaiting it seems, only sufficient quantities of gray hair to take his turn.

Second, in the past few weeks, Romer has turned the economic world on its head with a scathing critique of deep flaws in the past two decades of macroeconomic theorizing. In a paper entitled, “The Trouble with Macroeconomics,” Romer indicts the state of macroeconomics, and its growing detachment from the real world.

I happen to like Paul Romer. I saw him speak in person a few years ago and thought he was impressive. His message that human knowledge and creativity drives long-term improvements in the quality of our lives is a hopeful one in a world where we can’t just keep extracting, consuming, and dumping more and more forever.