On the dawn of your 8th decade…

by Sandy Ikeda

Back in the early 1980s I took Industrial Organization (two semesters) with Mario in which I got a decent grounding (and not a bad grade) in Chicago-style I.O. and antitrust, which unlike Chicago-style pizza is not too messy or excessively deep.  This has served me well in analyzing some economic problems and policies, such as why people tend to be more productive in coffeehouses than at home.  I also took a semester of Economic Analysis of Law with him – something, something, transactions costs, something….  In each of those courses, Mario’s approach was to present a well-prepared lecture followed by questions and discussion, using somewhat of a Socratic style.  If not always eloquent, they were engaging and insightful.

COSMOS + TAXIS Issue on Jane Jacobs

by Sandy Ikeda

Jane Jacobs’ writings span several disciplines—including ethics and most especially economics—but she is best known for her contributions to and her critique of urban planning, design, and policy. Many of those whom she influenced in academia, policy, and activism took the occasion of her one-hundredth birthday in 2016 to celebrate those contributions through lectures, biographies, and various events and publications.

The current issue of COSMOS + TAXIS is offered in that same spirit. I am especially pleased that it includes the contributions of a diversity of scholars—with backgrounds in economics, urban policy, urban planning, geography, architectural history, and engineering—with a diversity of insights expressed from the perspectives of epistemology, intellectual history, spatial analysis, urban history, private cities, mercantilism, and of course spontaneous order; and ranging in approach from the theoretical to the historical to the applied. Indeed, we learn from Jacobs that from the diversity of the living city springs experiment, creativity, and surprise; and that pertains equally to the realm of living ideas. Read these pages and be surprised!

Radical Ignorance in the Financial Crisis

by Sandy Ikeda

Jeffrey Friedman and Wladimir Kraus have a new book out, Engineering the Financial Crisis, (Univ. Penn Press) that grew out of research that first appeared in Critical Review back in 2009 on the “Causes of the Crisis.”  Friedman’s lead article in that issue did an excellent job of providing a detailed but readable description of the institutional setting of the crisis and an account of the complex events, domestic and international, that led to it.  I’ve only skimmed the book, but it appears offer a similar kind of useful description and analysis of these and many other events surrounding the crisis.

What distinguishes this book, and what may be of particular interest to readers of this blog, is it’s explicitly Austrian perspective on the role of ignorance, in the private but especially the public sector, as the analytical starting point of the crisis.

The meta-mistake that economists make in ignoring ignorance (or in reducing it to “rational” or deliberate ignorance or to “asymmetric information,” where one party does know the truth) is suggestive, we think, of the problems that modern democracy faces:  If economists are our most important advisers, but their worldviews have no place for genuine human error, we are in deep trouble (151).

A rationalist constructivist hubris led public authorities to create a “hybrid capitalism” that incited entrepreneurs to ever riskier investments, the consequences of which no one could foresee though they perhaps might have imagined.  The book’s title Engineering the Financial Crisis captures that idea well.

“Unintended consequences of ‘Smart Growth'”

by Sandy Ikeda

That’s the title of a video interview I did with the Mackinac Center that was posted on their website a few days ago. I did it last summer and it runs about twelve minutes.

It’s very hard to do justice to either the SG side or my critique in such a condensed interview, though I think it gets the main points across fairly well. Still, here’s a couple of things.

Pigou is the new Keynes

by Sandy Ikeda

A full-page article in today’s Wall Street Jounal begins:

At the Heavenly Models home for deceased economists, an award is being presented to the resident whose work best explains financial crises, global warming, and other pressing issues of today.

The winner, according to author John Cassidy, is A.C. Pigou, the new flavor of the day.

The article implies that Pigou was the first to articulate the concepts of externalities and market failure.  I’m not sure that’s right, though I haven’t gotten around to reading The Economics of Welfare, but I believe we do have to credit him with the Pigou tax.  So in some ways he’s been almost as dangerous as his “smarter colleague,” although I’ve always felt sympathy for someone who was so much in Keynes’s shadow.

The article also has a sidebar quoting Mises (as well as Friedman, Kindleberger, and of course Keynes) apparently calling last year’s economic crisis.

Don Boudreaux’s WSJ article on “insider trading”

by Sandy Ikeda

Congratulations to Don Boudreaux for his article debunking insider-trading regulations, “Learning to love insider trading,” which covers the entire front page of the Weekend Journal section of this morning’s paper.

Prohibitions on insider trading prevent the market from adjusting as quickly as possible to changes in the demand for, and supply of, corporate assets. The result is prices that lie. And when prices lie, market participants are misled into behaving in ways that harm not only themselves but also the economy writ large.

With last week’s arrest of Galleon hedge-fund founder Raj Rajaratnam, insider trading has been very much in the news.  And now Don has done an excellent job of using and extending arguments originating with Henry Manne to help us understand just what is and isn’t at stake.

“Causes of the Crisis Blog”

by Sandy Ikeda

Following up on its recent issue on the financial crisis, Critical Review has started a blog with contributors to that issue doing the posting.  So far they have “disputed the theory that bankers’ bonuses, irrational exuberance, or capitalism caused the crisis. And four posts have debated the role of economic theory in failing to understand the crisis.”

Contributors listed under the fold.

Look who’s bashing macroeconomics

by Sandy Ikeda

“We think of experiments of particle physics and space explorers as being extraordinarily expensive, and so they are.  But the costs are as nothing compared with the incomprehensibly huge resources that banks, industries, governments and the international institutions like the World Bank, the International Monetary Fund, and the United Nations have poured into tests of macro-economic theory.  Never has a science, or supposed science, been so generously indulged.  And never have experiments left in their wakes more wreckage, unpleasant surprises, blasted hopes and confusion, to the point that the question seriously arises whether the wreckage is reparable; if it is, certainly not with more of the same.”

(Answer is under the fold.)

Critical Review Explores The Causes Of The Financial Crisis

by Sandy Ikeda

The most recent issue of Critical Review on the Causes of the Financial Crisis includes contributions from John B. Taylor, Daron Acemoglu, Steven Gjerstad and Vernon L. Smith, Lawrence J. White, and Joseph E. Stiglitz to name just few.

I’ve not yet read the entire issue, but did have the opportunity to read an earlier draft of the introductory essay by CR’s editor, Jeff Friedman, entitled “A crisis of politics, not economics, complexity, ignorance, and policy failure.” While the title reveals where Friedman stands on the origins of the crisis, his emphasis on “ignorance” in particular reflects his appreciation of the role of what Kirzner has termed “sheer ignorance” in creating the unintended consequences that drive the dynamics of interventionism.  (He cites Hayek, Selgin, and myself, alas there is no reference to Kirzner.)  He points out the effect of policies not only on the existing structure of regulations, but also the impact on future, unknowable interventions

I also found that his article does an excellent job of clarifying a number of points for me, including the nature of tranches and CDOs, which to the uninitiated (like me) seem highly arcane, and shedding light on the subtle but crucial roles of the Basel I and II agreements in the crisis. It’s a very useful essay, telling what can be seen as an Austrian-based story of the financial crisis.

Delirious New York: A reaction, not a review

by Sandy Ikeda

I started reading Rem Koolhaas’s insightful but seemingly endless Delirious New York a couple of years ago and just finished it this morning. Why so long? Well, it’s partly because I don’t read so fast, but mostly because it’s maddeningly obscure, both its structure and prose.

Although it has a lot of interesting and important things to say about the “culture of congestion,” RK’s writing is as self-indulgent as his architecture.  Architecture should not be art, non-fiction should not be (mostly) non-sense.

Got time? Track crime (and other stuff)

by Sandy Ikeda

A while ago on another blog I wrote about a website called “Everyblock.com” that reports on everything from neighborhood “restaurant inspections and building violations to missed connections posted on Craigslist and news mentions” in about a dozen major US cities.

FYI, here are two similar and handy sites, which have an emphasis on tracking crime trends block by block:

Crimemapping.com
Crimereports.com

(Thanks to Mario for the WSJ article about these last two.)

OK, it’s “later” now

by Sandy Ikeda

MSNBC reports that “Evidence mounts that recession may be ending”. At the same time, in the Wall Street Journal:

[T]he central bank has been buying mortgage-backed securities and Treasurys. Through programs announced since last fall, it has bought more than $460 billion of mortgage-backed securities and more than $125 billion of Treasury bonds. But the winds turned against the Fed in recent days, as investors worry the government’s approach could lead to inflation.

Time to start crossing that bridge already?

Earthquake, shmearthquake

by Sandy Ikeda

“To Protect an Ancient City, China Moves to Raze It” The city is Kashgar, “the best-preserved example of a traditional Islamic city to be found anywhere in central Asia….”

Local authorities claim that by pre-emptively demolishing 85% of it they will be protecting its citizens from the kind of catastrophe that befell Chengdu last year. As Robert Moses was fond of saying:  “If the ends don’t justify the means, what does?”

An Austrian spin on baseball?

by Sandy Ikeda

Phil Hughes, the Yankees’ up-and-coming ace, may be throwing batters curves but not the kind they think.

Here we present an illusion that suggests that the perception of a “break” in the curveball’s path may be related to physiological differences between foveal and peripheral vision. We contend that the visual periphery frequently reports a perceptual combination of features (a process we refer to as “feature blur”) because it lacks the neural machinery necessary to maintain separate representations of multiple features.

Note:  The spin the pitcher puts on the baseball still deflects it — it’s the sharp change of direction that’s the illusion.  See the award-winning demonstration at Illusion Sciences.

Strategy and statistics play more important roles in the game of baseball than in most other sports, and perhaps that’s why it’s popular among economists.  However, with such a central element of the game now revealed to be purely subjective, depending entirely on the batter’s perception of his particular circumstances of time and place, one could argue that it’s really the quintessential “Austrian” sport.

Rising in Phoenix: Entrepreneurial responses to housing and health-care problems

by Sandy Ikeda

The New York Times, in “Amid Housing Bust, Phoenix Begins a New Frenzy”, reports that “Real estate got just about everyone into trouble in Phoenix, and the thinking seems to be that real estate is going to get everyone out.”

If the property looks promising, Mr. Jarvis puts in a bid on behalf of any of his dozens of clients eager to become landlords. When he wins, he offers to let the family stay in the house and rent for much less than their mortgage payment.

Phoenix is also where “supermarket health clinics”and urgent-care centers for the uninsured have proliferated.  Some have been able to adjust quickly to a souring economy.

Health clinics located inside grocery stores typically offer less-comprehensive medical service than urgent-care centers such as NextCare and Maricopa Urgent Care…  NextCare, which has 17 clinics in the Phoenix area, has responded to the downturn with a series of moves aimed at reaching more patients.

Read more about it in this story from AZCentral.

Airports: Coase, but no cigar

by Sandy Ikeda

A year ago the Bush administration proposed auctioning landing slots at Kennedy, LaGuardia, and Newark airports in the New York region. Yesterday the Obama administration canceled these plans. From the NYT article:

“In proposing to rescind the auctions, the department noted that the rule making was highly controversial and that most of those filing comments opposed the slot auctions,” the Transportation Department said in a statement. “The Department also noted that circumstances have changed since the rules were issued, including changes in the economy.”

Among those opposed were the airlines themselves.

In Vauban, no car AND no double-hyphen

by Sandy Ikeda

In Germany, they’re banning cars in the “green” village of Vauban, where you may still be permitted to pay $40,000 for a parking space in the outskirts but only if you also buy a home. Meanwhile, the other day Germany’s Constitutional Court again upheld a ban on double-hyphenated names. So will Frieda Rosemarie Thalheim-Kunz-Hallstein simply become, in the time-honored German way, Frieda Rosemarie Thalheimkunzhallstein?

Want to know your echinus from your abacus?

by Sandy Ikeda

As a result of taking “Creative Cities in History” at NYU I’ve a renewed interest in architecture. I picked up Achitecture: Elements, Materials, Form by Francesca Prina and have found it very useful as a source of basic vocabulary and concepts.

I can now tell a capital from an entablature, a column from a pillar, and a model from a rendering, each of which is treated in its own, short chapter. The text is concise accompanied by many photos with brief captions that, except for an occasional misdirected arrow, helpfully illustrate and explain.

Rothbard on sprawl and discrimination

by Sandy Ikeda

Over at Market Urbanism they’re discussing Murray Rothbard’s analysis in For a New Liberty (1973) of how local public-school financing created incentives (1) for urban populations to move to the suburbs and (2) for suburbs to discriminate against low-income (re black) families via zoning and building regulations.

So add public schools to the list of other, sprawl-encouraging factors in the US such as federal subsidies for roads and infrastructure and, of course, the decades-long policy of promoting single- over multi-family housing. Oh, and let’s not forget the indirect but lasting impact of the Great Depression on the demise of downtowns (something Jane Jacobs argues in her last book).

This story from last year documents the continuing appeal of suburban and “micropolitan” lifestyles to most Americans.

Jack Kemp, RIP

by Sandy Ikeda

I was a student at Hillsdale College when the Congressman from New York gave a speech there, probably in 1976 or 77.  I remember little about the speech itself — probably touting tax cuts and supply-side economics — except that at one point he held up a copy of Human Action and praised its author, Ludwig von Mises. I was thrilled!  His NYT obit is here.

Two interesting models of urban redevelopment

by Sandy Ikeda

From the New York Times, “An Effort to Save Flint, Mich., by Shrinking It”:

Instead of waiting for houses to become abandoned and then pulling them down, local leaders are talking about demolishing entire blocks and even whole neighborhoods. The population would be condensed into a few viable areas. So would stores and services. A city built to manufacture cars would be returned in large measure to the forest primeval.

After Katrina, some urbanists urged New Orleans authorities to adopt something like this policy of “planed shrinkage,” but largely for political reasons it was summarily rejected.

Given New Orleans’s cultural heritage, perhaps they might also find Cleveland’s approach useful, as reported in The Wall Street Journal, “Artists v. Blight”:

Best line of the day

by Sandy Ikeda

“Before there was eBay, there was Manhattan.”
— Francis Morrone

“No one deserves their pay”

by Sandy Ikeda

Megan McArdle, blogging about the issue of “fair pay” on Wall Street, in the context of the recent bailouts, makes the following provocative statement:

No one deserves their pay, so I can hardly be angry at the folks on Wall Street for taking what they could get… Trying to make as much money as an employer will legally give you, and making mistakes, are neither legal nor moral offenses. Why isn’t it enough to say, no, thank you, I’d rather not pay you that much money? Why is it also necessary to hate them?

Right.

Gombrich and Hayek

by Sandy Ikeda

Many of you have read or at least know of E.H. Gombrich’s The Story of Art, a book that any serious student of art history should have in his library (along with the authoritative but somewhat-less-user-friendly History of Art by H.W. Janson). It’s the best-selling book on art in the world, having gone through some sixteen editions.

Now, this semester (in my dotage) I’ve been attending an adult-education class at NYU called “Creative Cities in History,” taught by the excellent architectural historian, and my former colleague at The New York Sun (where he was the architectural critic and I was a mere blogger), Francis Morrone. Francis has encyclopedic knowledge of the art and architecture of New York City, as well as of most of the other great cities in Western history. Needless to say, I’ve learned a great deal from this marvelous course.

Recently, Francis told me another thing I didn’t know: Gombrich and F.A. Hayek were close personal friends.

TARP, TALF, TIP, et al.

by Sandy Ikeda

I came across this “handy guide” to the bail-out acronym soup.  The list appears to be current, at least up to April 13th but, sure as the sun rises in the east, it will grow longer. Stay tuned.