San Francisco, do you want to be Manhattan?

Another day, another article on S.F.’s crazy real estate market. Except it’s perfectly rational behavior: The secret is out that S.F. is an awesome place to live with plenty of very high-paying jobs, but also land is scarce and there are lots of development restrictions.

If no policies change, prices—both housing and general commodities—will continue to go up until S.F. is basically another Manhattan; if you want to live there you either must be in the upper class or able to live in a shoebox. The good news is that California is wonderful and people can live happily outside S.F. The city would just need to beef up its transportation infrastructure for an enormous commuting class, and the Bay Area will suffer the environmental implications of that.

If, however, you think there’s value in having residents from a wider range of incomes, you have to be willing to build a ton of new, and very dense, housing, including bulldozing some old areas—not every inch of the city can be treated as a historic artifact. Unfortunately plenty of lefties think that anything that’s good for rich developers must be bad for everyone else, and it just ain’t so. I highly recommend reading Matt Yglesias’s bite-sized ebook The Rent Is Too Damn High, which makes very convincing arguments that loosening development restrictions is a great idea for everyone. Lots of people want to live in S.F., and we should let them. Density is great for the economy and for decreasing the environmental impact of cars and commutes.

Renters are already living very densely packed in “single family” homes, so it’s pretty clear there would be plenty of demand for new apartments in a variety of sizes. The natural opposition to this is going to be existing owners that benefit from rising prices, but certainly a motivated majority (renters) could successfully push for expanded development. But until they realize it’s in their interest, they’ll keep complaining about a variety of things that don’t matter while being slowly forced out of the city.

Gainesville has been increasing the density of housing around the university and it seems to be pretty great to me. Until a few years ago it seemed inevitable that there would be ever increasing sprawl and student traffic, but now a lot more students can live in walking distance.

Bad Analogies Lead to Bad Policies

I was forwarded an e-mail that made a terrible analogy (my emphasis):

Here’s another way to look at the Debt Ceiling: … You come home from work and find …  your home has sewage all the way up to your ceilings.

Sewage would make a home immediately uninhabitable and actively damage the value of the home and its contents. Your first clue that this analogy is a failure is to see that the U.S. debt doesn’t do this. During deficits we’ve had great periods of growing prosperity and people from all over want to come here.

Consider also the huge debt we incurred fighting WWII. If debt were like sewage, we would’ve done more to stay out of the war, or the resulting debt would’ve led us to ruins by the 50s. Instead, high employment (fueled by deficit spending) left us with a strong economy able to quickly pay back that debt while prospering.

U.S. debt is–not coincidentally–more like a credit card. Yes, we’d prefer not to need one, and we must keeping paying on it, but besides the payment, it incurs no other short term liabilities, and no one is demanding we pay it off tomorrow, next year, or in our lifetimes. And unlike most consumers, the U.S. is known to be the most trustworthy borrower in the world, so creditors treat us well, never hitting us with surprise fees (i.e. it doesn’t have the risk associated with a consumer credit card), and in fact they’re willing to loan to us right now at almost no interest on current purchases. (We’ll come back to that.)

We know that credit is helpful during emergencies, regardless of your debt level. If sewage were flooding your home and you had only a credit card to pay with, you’d still call the plumber and charge it.

Back in the real world, a more apt metaphor for flooding in your home is our high unemployment. It is actively damaging human capital as people lose their skills, homes, and families from financial stress. And this damage is not limited to those directly affected. Being unemployed for long is known to reduce the wages you earn for the rest of your working life, which reduces the taxes you can pay, and your productivity, and this makes the country’s long term revenue & growth problems even worse.

The good news is that the waste water is receding. The bad news is that it’s receding slowly, while destroying the value of our nation’s workforce.

Even worse, irrational fears of deficits have distracted us from the real emergency. Politicians and hard money economists have convinced us to choose to accept damagingly high unemployment to avoid using the credit card, and–making the situation even more head-slappingly absurd–is that new purchases on our credit card accrue virtually no interest. We could borrow for almost nothing to help get people back to work doing real productive, useful things growing the economy, but instead we’re a madman yelling, “can’t use the credit card!”, while sewage floods in.

It’s unsurprising that this recovery is slow because it’s the only one in recent history where we’ve simultaneously slashed government spending (mainly at the state/local levels). While politicians complain about our out of control spending–mostly safety net spending that will recede after the recession–we’re fully suffering the effects of austerity, and just like the UK is finding out, it’s painful and ineffective.

I’ve been very much won over by the arguments and real evidence presented in support of Keynes. The hard money advocates have some compelling, ideologically pure arguments, but their models don’t seem to support what we see in the real world during recessions, and getting this wrong hurts millions of people, not just economists’ reputations. Krugman can be a annoyingly partisan hack, but even many right-leaning economists know he’s right on the economics and he regularly posts real data from the economy to prove it. And I’m certain most politicians secretly agree. Watch what happens when budget cuts are proposed in their area. Their argument becomes, “If we cut this (unnecessary) military project it will destroy the town.” And he’s right; government spending can be just as important as consumer spending in supporting an economy. Consumers without jobs can’t buy much and demand drives everything.

That doesn’t mean we should keep unnecessary projects, but at this time there are many useful tasks we should be hiring the unemployed to do. For many it was the jobs they were already doing before state budget cuts–like teaching and policing. This is the absolute best time to bail out state governments and to take up needed infrastructure projects that will have to be done eventually.

Very sadly, neither party will be making the race about the urgency of high unemployment, perhaps because it’s out of sight for them and the unemployed don’t fund SuperPACs. At the very least Obama has tried to pursue legislation like 2011’s American Jobs Act (killed by Republicans).

And despite all the hand-wringing about debt, neither presidential candidate is proposing serious plans to address it. Romney’s tax and growth plans are just fantasy and Obama’s don’t raise enough money to do much.

And if this post isn’t depressing enough, maybe David Frum will work for you.

“Buy American”

When economies are struggling, protectionism seems well-intentioned: By “buying American” we can go back that golden fantasy age when everything was American-made and everyone had a decent-paying job and could afford the latest luxuries. I have some examples that I hope can convince you that freer trade benefits everyone. It’s not completely intuitive; we commonly think that one person is always screwed in a deal; if it’s good for [insert foreign country], it must be bad for America. Continue reading  

Email Address Munging Still Mitigates Harvesting

At least a decade into the use of simple email munging on web pages (my own solution here) there’s a growing consensus—and it seems like common sense with the advancement of the web in general—that this surely can’t still work on modern harvesters. While trying to look up some old research I’d read about this, I came across this January 2010 post by a Project Honey Pot admin:

We’ve run tests on different munging techniques and find that they are still surprisingly effective. We have a page that has a set of differently munged addresses. The ones protected by Javascript have yet to receive a single message. Even simple things like using ASCII character encoding to hide the @ sign, or adding spaces to the addresses, is surprisingly effective at stopping harvesting.

Whether to munge or not is kind of a religious war, but I see this as pretty convincing evidence that munging isn’t obsolete just yet. Of course this or any other single prevention strategy isn’t a “solution”, but mitigation of the inevitable is still arguably worthwhile, especially for people without the luxury of having top notch admins run their mail server.

“Cartels don’t make any money on marijuana”

Opponents to CA’s Prop 19 ran pretty well with the narrative that legalizing cannabis would yield no reduction of the cartel violence in Mexico. After all, they don’t really make their money on pot; it’s all California-grown, they promised. They even were kinda sorta convincing me that might be the case.  Maybe—just somehow—they know that.

As if on schedule, the day after (mostly older) voters rejected the initiative, we find thirty tons of cartel cannabis—probably worth at least $20M—and a massive 600-yard tunnel from Tijuana to San Diego. (and today, more mass graves, of course)

But at least Prop 19 spurred a national conversation about cannabis policy like no other recent event has. Almost 3.4 million Californians voted for it (more than for Meg Whitman). In 2012, when the youth turnout will be more in force, who’s to say.

In the meantime, the proponents need to rewrite the damn thing, addressing all the B.S. non-issues that opponents dramatized. “You won’t be able to fire someone for showing up stoned!” And if you believe that, I have a border tunnel to sell you that’s never been used for cannabis trafficking.

The Hard Road Ahead

I’m starting to believe the only way out of this recession and national deficit is through tough choices that offend the ideologies of every political party:

  • higher taxes for everyone
  • spending cuts, including the military
  • bailouts for state/local safety nets that ease real human suffering, not select industries
  • finding and migrating to foreign aid measures that actually work
  • renegotiating way-above-market public pensions inked during the golden bubble years
  • forcing big banks to cramdown city/county debts that arose due to fraud
  • downsizing the massively expensive and world-leading incarceration industrial complex, perhaps by depoliticizing the CJS
  • reducing barriers to starting up new businesses, especially rent seeking at the local/state level
  • stimulating the wedding industry by ensuring the freedom of everyone to marry

Now who in Congress is up for all that?

Research Chain E-mails in 30 Seconds

A friend or family member has just forwarded you a wonderful piece of propaganda: It’s filled with inflammatory bare assertions, stirring anecdotes, and a dare to pass it on to everyone you know! And no sources.

1. Find a phrase in the message that’s a) unlikely to appear in anything else on the web, and b) contains minimal or no punctuation.

Bad: “Really important!!! Will take thirty seconds to read+-+-+Aren’t you mad!?!?”

Good: “Many citizens had no idea that members of Congress could retire with the same pay after only one term”

2. Search for the phrase without surrounding quotes.

3. Look for results on sites with names like: Snopes, Urban Legends, Politifact, Truth or Fiction, Hoax Busters, etc.

4. If you can’t find any page debunking your forward, search again with quotes around it, try another phrase, or add “hoax” or “myth” to the search. E.g. the next phrase in the e-mail with “myth” added returns the same top three results, all to myth-busting sites.

If you still can’t find anything, you have scientifically proven the forward to be 100% true! If the message confirms your preexisting beliefs, it must be true.

Reasons to Extend Unemployment Benefits

From the left, Ezra Klein: the Bush tax cuts certainly majorly increased the deficit [CBO], and it’s unfair for the GOP to demand that the unemployment extension be deficit-neutral.

Further, if tax cuts don’t need to be paid for because they generate so much taxable economic activity that they pay for themselves, then neither do unemployment checks. After all, the two work very similarly: A tax cut puts more money in your pocket. Unemployment insurance puts more money in an unemployed person’s pocket. The difference is that the unemployed person is likelier to spend that money, which will generate more taxable economic activity than if that money is saved. That’s why Mark Zandi, an adviser to John McCain’s presidential campaign, estimated (pdf) that a dollar spent extending the Bush tax cuts would generate .32 cents of taxable economic activity, while a dollar spent on unemployment benefits would generate $1.61 of taxable economic activity.

In other words, using the theory under which tax cuts pay for themselves, unemployment benefits are a lot likelier to pay for themselves. …

More reasons to extend them:

  • Ending benefits doesn’t magically create jobs
  • Among those who can’t find work, spending will drop to nothing, depressing local economies
  • Walked away from mortgages and desperately-liquidated assets will destroy tremendous amounts of long term value for short-term needs.

From the right, Megan McArdle:

…in recessions, the length of time for which people need “temporary” assistance stretches out. That means that the government has to respond with temporary benefit extensions. These aren’t just good for the people who are unemployed; it’s also good for us. Unemployment assistance is one of the “automatic fiscal stabilizers” that all but the most hard-nosed conservative economists agree help smooth the business cycle in modern industrial countries. Indeed, it’s one of the most effective forms of stimulus we have.

… [Not extending benefits would be] terrible economic policy–suddenly cutting off the taps would have nasty knock-on effects on the economy. And while it’s a lot of money, it’s one of the few government programs that pretty much unequivocally improve the net welfare of the American people. If Bunning wants to hold up something, how about finding some useless defense appropriations to complain about?

You Are Not So Smart

The Misconception: You are a rational, logical being who sees the world as it really is.

The Truth: You are as deluded as the rest of us, but that’s OK, it keeps you sane.

You Are Not So Smart is a blog devoted to self delusion and irrational thinking.

And it’s great.

The latest post is about on Subjective Validation, “a fancy way of saying you are far more vulnerable to suggestion when the subject of the conversation is you.”

The tendency to believe vague statements designed to appeal to just about anyone is called the Forer Effect, and psychologists point to this phenomenon to explain why people fall for pseudoscience like biorhythms, iridology and phrenology or mysticism like astrology, numerology and tarot cards.

The last was on Confirmation Bias, which explains the success of political echo chambers and why racism and xenophobia will always be with us; humans are wired to ignore evidence outside their preconceived beliefs.

In the last few years I’ve been taking stabs at my own confirmation bias, seeking out the best arguments and evidence from those I might be inclined to disagree with. While there are a tremendous number of pundits making baseless assertions, especially on the radio and television—mastery of confirmation bias is a winning strategy—there are just as many great writers and thinkers across the political spectrum with worthwhile arguments.

Other great posts:

  • The Just-World Fallacy – People don’t “get what they deserve”
  • Fines – The effect of removing the social cost of undesired behavior

Charter Cities seem better than foreign aid

The Atlantic has a great piece on Paul Romer and his push for “charter cities”. I agree completely with Romer that fair laws with economic liberties is the only way to support economic growth. While probably true in the old world, very few countries remain impoverished simply because of geography. Tyrants plague the people of North Korea; lawlessness, corrupt states, and trade-hostile laws impoverish many others. We should not end foreign aid where it’s needed, but charter cities sound like one of the only ways to make it uneeded.