Published on 17 Mar 2015
“Anybody that drives around Southern California can tell you the infrastructure is falling apart,” says Joel Kotkin, a fellow of urban studies at Chapman University and author of the book The New Class Conflict. “And then we’re going to give money so a bunch of corporate executives can watch a football game eight times a year? It’s absurd.”
When the Inglewood City Council voted unanimously to approve a $1.8 billion stadium plan on February 24th, hundreds of football fans in attendance cheered for the prospect of a team finally returning to the Los Angeles area.
On it’s face, the deal for the city of Inglewood is unprecedented — Rams owner Stan Kroenke has agreed to finance construction of the stadium entirely with private funds. The deal makes the stadium one of the most expensive facilities ever built and is an oddity in the sports world, where most stadiums require millions in public dollars to be constructed.
And while the city still waits to hear if it will indeed inherit an NFL team, the progress on the new privately-funded Inglewood stadium has set off a bidding war between other cities that are offering up millions in public subsidies to keep (or attract) pro-sports franchises to their area.
St. Louis has proposed a billion dollar waterfront stadium financed with $400 million in tax money to keep the Rams in Missouri. And the San Diego Chargers and Oakland Raiders have unveiled a plan to turn a former landfill in Carson, California, into a $1.7 billion stadium to keep the Rams from encroaching on their turf. While full details of the plan have yet to be released, it’s been reported that the financing would be similar to the San Francisco 49er’s deal in Santa Clara, which saw the team receive $621 million in construction loans paid for with public money.
Even the fiscally conservative Scott Walker is not immune to the stadium spending craze. The Wisconsin governor wants to allocate $220 million in public bonds to keep the Milwaukee Bucks basketball franchise in the area. Walker has dubbed the financing scheme as the “Pay Their Way” plan, but professional sports teams rarely pay their fair share when it comes to stadiums and instead use public money to generate private revenue.
Pacific Standard magazine has reported that in the last 20 years, the U.S. has opened 101 new sports facilities and stadium finance experts say that almost all of them have received public funding totaling billions of dollars. Politicians generally rationalize this expense by stating that stadiums will generate economic revenue and job opportunities for the city, but Kotkin says those promises are rarely realized.
“I think this is sort of a fanciful approach towards economic development instead of building really good jobs. And except for the construction, the jobs created by stadia are generally low wage occasional work.”
“The important thing that we’ve forgotten is ‘What is the purpose of a government?'” asks Kotkin. “Cities instead of fixing their schools, fixing their roads or fixing their sewers or fixing their water are putting money into ephemera like stadia. And in the end, what’s more important?”
March 25, 2015
Reason.tv – Sports Stadiums Are Bad Public Investments. So Why Are Cities Still Paying for Them?
March 24, 2015
Tim Worstall on the economic emancipation of women
In his Forbes column last week, Tim Worstall made the point that perhaps the biggest economic story of the last century has been the economic emancipation of women:
There’s an interesting little rumpus going on over the new book by Robert Putnam on the class divide in American lifestyles. Put very simply, the middle and upper classes seem to take marriage and child rearing seriously and the poor have a more, umm, chaotic approach. Looking at the various think pieces that have been done on this book I find myself astonished by the way that the most important salient and relevant fact is simply not being mentioned. Marriage is many things but among them is that it is an economic contract. And the terms of that contract have changed: thus it’s not even remotely surprising that behaviour has changed too.
[…]
Which brings me to that headline: that the economic emancipation of women is the most important single fact of the past century. That past really was a different place. We can argue if we want to about whether that economic emancipation is complete (the famous womens’ 77 cents to mens’ dollar, or is it a motherhood pay gap and so on) but let’s leave that for another time. What is obviously and glaringly true is that women are much freer economically than they were a century ago. Wages for women back then were distinctly lower than they were for men. And no, this wasn’t particularly discrimination: some large part of what most people were hired for was physical muscle. Men have more of this so they got paid more. There were also strong social norms: I’m not quite sure of pre-WWI America but in my native UK the only respectable jobs for an adult woman (ie, something that the bourgeois would be happy to see their daughters go into) were nursing or teaching. And as a result of this paucity of choice the wages were low in both professions (there’s a strong truth to the point that the rising wages of both teachers and nurses in recent decades are the result of their being free to work in other sectors these days).
The result of both of these things was that the wages of a female worker were not, except at the most basic, basic, level, sufficient to raise a child let alone support a family. I’m not saying that being a single parent these days is easy but it is at least possible as tens of millions of people are showing us.
Which brings us to marriage: yes, this is many things. Love, sex, companionship and so on. But it is also an economic contract (the only proof we need of this is to read some divorce settlements)
and marriage always has been an economic contract. Pretty much since humans arrived as a species it has been necessary to have two parents around in order for a child to have a reasonable chance of survival to an age where it would have its own children. This was true of hunter gatherer societies, of agricultural ones, of industrial ones, feudal and so on. It really is only in this past century, more so in the past 50 years, that it’s been possible for one person to both earn a living and raise a child or children. Yes, obviously people did do so as a result of having to do so but it wasn’t something that anyone did by choice simply because of the penury that resulted from their doing so. And yes, all of this is much more true of women than men.
March 23, 2015
Changing Times – Railroads & Canals I IT’S HISTORY
Published on 10 Mar 2015
It certainly is no big deal to have a small cruise along the canals or ride a train. But what is essential infrastructure today had to be invented out of necessity in the late 18th and early 19th century. In our new episode Brett tells you everything about canals and railways and how they changed the way we transport things.
March 22, 2015
March 19, 2015
Thirty years on, what was the impact of the Miners’ strike in Britain?
Frank Furedi points out six ways that Britain’s political scene has changed as a result of the year-long miners’ strike:
To defeat the National Union of Miners, UK prime minister Margaret Thatcher and her Conservative government had to use almost every available resource, including the mass mobilisation of the police. The Miners’ Strike became the defining event of British politics in the 1980s. And in retrospect, it’s clear that it was the last class-focused dispute of its kind.
Over the past three decades, the political climate, culture and institutions that served as the background for the Miners’ Strike have fundamentally altered. Here are six things that changed enormously in the wake of that industrial conflict.
1) The defeat of the Miners’ Strike signalled the end of the era of militant trade unions
[…]
2) The demise of the British labour movement was paralleled by the decline of the left
The Labour Party has survived the post-1985 tumult, yes, but only by reinventing itself as the party of the middle-class, public-sector professional. Thanks to the vagaries of the electoral system, Labour can still have MPs in many of its traditional working-class seats. The decline of labourism also coincided with the implosion of the Stalinist communist movement and the collapse of the Soviet Union.
[…]
3) Paradoxically, the demise of the left has not benefited the right
Thatcherism, which was very much the dominant force during the Miners’ Strike, has lost its authority. Today’s so-called Conservatives regard Thatcher as an embarrassment and self-consciously distance themselves from her legacy. So defensive is the right today that it continually protests that it is no longer a ‘toxic brand’.
There’s a deep-seated problem with how we measure the so-called “standard of living”
My family are tired of hearing me say any variation on the expression “the past is a foreign country”, but I ring the changes on that phrase because it at least frames some of the problem we have in trying to comprehend just how much life has changed even within living memory, never mind more than a couple of generations ago. At the Cato Institute, Megan McArdle tries to avoid saying exactly those words, but the sense is still very much the same:
The generation that fought the Civil War paid an incredible price: one in four soldiers never returned home, and one in thirteen of those who did were missing one or more limbs. Were they better off than their parents’ generation? What about the generation that lived through the Great Depression, many of whom graduated into World War II? Does a new refrigerator and a Chevrolet in the driveway make up for decades and lives lost to the march of history? Or for the rapid increase in crime and civic disorder that marked the postwar boom? Then again, what about African Americans, who saw massive improvements in both their personal liberty and their personal income?
We should never pooh-pooh economic progress. As P.J. O’Rourke once remarked, I have one word for people who think that we live in a degenerate era fallen from a blessed past full of bounty and ease, and that word is “dentistry.” On the other hand, we should not reduce standard of living to (appropriately inflation adjusted) GDP numbers either. Living standards are complicated, and the tools we have to measure what is happening to them are almost absurdly crude. I certainly won’t achieve a satisfying measure in this brief essay. But we can, I think, begin to sketch the major ways in which things are better and worse for this generation. Hopefully we can also zero in on what makes the current era feel so deprived, and our distribution of income so worrisome.
My grandfather worked as a grocery boy until he was 26 years old. He married my grandmother on Thanksgiving because that was the only day he could get off. Their honeymoon consisted of a weekend visiting relatives , during which they shared their nuptial bed with their host’s toddler. They came home to a room in his parents’ house—for which they paid monthly rent. Every time I hear that marriage is collapsing because the economy is so bad, I think of their story.
By the standards of today, my grandparents were living in wrenching poverty. Some of this, of course, involves technologies that didn’t exist—as a young couple in the 1930s my grandparents had less access to health care than the most neglected homeless person in modern America, simply because most of the treatments we now have had not yet been invented. That is not the whole story, however. Many of the things we now have already existed; my grandparents simply couldn’t afford them. With some exceptions, such as microwave ovens and computers, most of the modern miracles that transformed 20th century domestic life already existed in some form by 1939. But they were out of the financial reach of most people.
If America today discovered a young couple where the husband had to drop out of high school to help his father clean tons of unsold, rotted produce out of their farm’s silos, and now worked a low-wage, low-skilled job, was living in a single room with no central heating and a single bathroom to share for two families, who had no refrigerator and scrubbed their clothes by hand in a washtub, who had serious conversations in low voices over whether they should replace or mend torn clothes, who had to share a single elderly vehicle or make the eight-mile walk to town … that family would be the subject of a three-part Pulitzer prize winning series on Poverty in America.
But in their time and place, my grandparents were a boring bourgeois couple, struggling to make ends meet as everyone did, but never missing a meal or a Sunday at church. They were excited about the indoor plumbing and electricity which had just been installed on his parents’ farm, and they were not too young to marvel at their amazing good fortune in owning an automobile. In some sense they were incredibly deprived, but there are millions of people in America today who are incomparably better off materially, and yet whose lives strike us (and them) as somehow objectively more difficult.
March 17, 2015
QotD: Subjective economic value
Properly understood, all economic values are subjective. Some items have useful applications, but the relative value of those applications is itself subjective; there’s nutritional value in a pound of cauliflower, and there’s nutritional value to an ounce of Beluga caviar, and the difference in the price between the two is based on no objective criterion. Even scarcity does not explain the difference: There are more diamonds in this world than there are autographed photos of Anthony Weiner, but try giving your wife the latter for your anniversary and you’ll get a short and possibly violent lesson in the subjectivity of value. In fact, it is the subjectivity of value that makes exchange possible — if our values and preferences were perfectly aligned, we’d never trade anything for anything else, because we’d all value every item and service at precisely the same level, and there would therefore be no incentive to engage in commerce. That our preferences should be non-uniform ought not be surprising — our lives are non-uniform, too. If I operate an apple orchard, I am probably not going to buy apples from you at any price, unless perhaps they are a different sort of apple than the ones I grow. The rancher and the fisherman each assigns a different value to beef and fish than does his opposite number. Disagreement is fundamental.
The crude version of exchange — which is, unhappily, the common version — is inclined to suspect that there is an objectively correct price for a good, and that profit comes from duping somebody into paying more than the correct price for it. That error is fundamental to Marxism and other anti-capitalist philosophies, and it is implicit in such social phenomena as the anti-advertising movement, “Buy Nothing Day,” and similar political tendencies. But that bias does relatively little harm in the heads of greying Marxists, peddlers of “profit is a crime” banalities, and Occupy riff-raff. Where it is truly destructive is in the disorganized thoughts of the large majority of ordinary people with no particularly strong political commitments or economic orientation. Consider these phrases: “An honest day’s work for an honest day’s pay,” “just wages,” “fair price,” “obscene profits,” “price gouging,” “excessive executive compensation.” For any of those phrases to have any intellectual content, then there must be a price that is in some non-subjective sense the correct one. But if economic values are subjective — and they are — then “an honest day’s work for an honest day’s pay” can only mean one thing, that being the payment of an agreed-upon wage for an agreed-upon performance of labor, with “honest” referring only to the fulfillment of the agreement and saying nothing substantive about the terms of the agreement itself.
Kevin D. Williamson, “The Profit Police”, National Review, 2014-06-30.
March 16, 2015
Comparing statistics from different sources
In Forbes, Tim Worstall points out that you need to be careful in using statistics sourced from different organizations or agencies, as they don’t necessarily measure quite the same thing, despite the names being very similar:
There are certain sets of statistics put out (largely by the OECD nations like the US and so on) which we really can believe as saying exactly what is indicated upon the tin.
However, that isn’t the same as saying that we should be willing to just accept all such US or OECD statistical numbers. Take, for example and this is one that I have banged on about for many a year now, The US and other OECD measures of poverty. The standard OECD measure of who is in poverty is below 60% of median income, adjusted for housing costs and household size. This is a measure of inequality, not actual poverty. It is also after all of the things that are done to reduce poverty, benefits, redistribution and all that. The US measure is, again adjusted for household size but not for housing costs, a measure of actual poverty. It is not related to average incomes but to what was low income in the early 1960s updated for inflation. And more significantly, it is before almost all of the things done to try to alleviate poverty. The OECD poverty measure is thus a measure of how much (relative) poverty there is after the things done to reduce poverty and the US standard number is a measure of how much absolute poverty there is before attempts to reduce poverty.
There’s nothing particularly wrong with either measure. But we’ve got to be very careful in acknowledging the difference between the two before we go and do something stupid like directly compare them, US poverty rates against the poverty rates of other OECD countries. Yet we do in fact see such comparisons being made all the time.
Another such little mistake of current interest is the way that we’re continually told that US average wages haven’t risen for decades. And it’s true, in one sense, that they haven’t. But wages aren’t actually what we should be looking at: total compensation from work is. And that’s been rising reasonably nicely over that same time period. The difference is in the benefits that we get over and above our wages from going to work. That health care insurance for example. This is more a matter of manipulation in the presentation of the statistics and if you see someone bleating about “wages” be very careful to check and see whether they are talking about what is of interest, compensation, or about wages which is a sign that they’re trying to mislead.
March 13, 2015
US corporate welfare by state
Reason posted an infographic showing which corporation gets the most state support for every state in the union:
Click to enlarge
March 11, 2015
Venezuela, then and now
Kevin D. Williamson looks to the not-too-distant past to see how Venezuela got into the economic disaster they’re currently facing:
Venezuela had a good run of it for about five minutes there, at least in public-relations terms. When petroleum prices were booming, all it took was a few gallons of heating oil from Hugo Chávez to buy the extravagant praise of House members, with Representative Chaka Fattah (D., Philadelphia) issuing statements praising Venezuela’s state-run oil company “and the Venezuelan people for their benevolence.” Lest anybody feel creeped out by running political errands for a brutal and repressive caudillo, Joseph Kennedy — son of Senator Robert Kennedy — proclaimed that refusing the strongman’s patronage would be “a crime against humanity.” Kennedy was at the time the director of Citizens Energy, which had a contract to help distribute that Venezuelan heating oil — Boss Hugo was a brute, but he understood American politics.
Celebrities came to sit at his feet, with Sean Penn calling him a “champion” of the world’s poor, Oliver Stone celebrating him as “a great hero,” Antonio Banderas citing his seizure of private businesses as a model to be emulated in the rest of the world, Michael Moore praising his use of oil for political purposes, Danny Glover celebrating him as a “champion of democracy.” His successor, Nicolás Maduro, continued in the Chávez vein, and even as basics such as food and toilet paper disappeared the American Left hailed him as a hero, with Jesse Myerson, Rolling Stone’s fashionable uptown communist, calling his economic program “basically terrific.” Some of the more old-fashioned liberals at The New Republic voiced concern about Venezuela’s sham democracy, its unlimited executive authority, political repression, the hunting down of government critics, the stacking of elections and the government’s perpetrating violence inside polling places — but Myerson insisted that Venezuela’s “electoral system’s integrity puts the U.S.’s to abject shame.” Never mind that opposition leaders there are hauled off to military prison after midnight raids.
Vice President Biden, who can always be counted on to cut straight to the heart of any political question, ran into Maduro in Brazil and, noting the potentate’s thick mane, commented: “If I had your hair, I’d be president of the United States.” Tragically for the Sage of Delaware, hair transplants don’t work that way.
That is all going down the memory hole. The Obama administration has announced economic sanctions on Venezuela’s rulers and its intelligence agents, citing the “erosion of human-rights guarantees” – erosion, as though this were something new, as though Hugo Chávez hadn’t been a tyrant back when President Obama’s ally Representative Fattah was carrying his political water all over the eastern seaboard. In the New York Times’ account of Venezuela’s woes and Maduro’s misrule, there is no mention at all of the critical role the American Left played in lending legitimacy to Chavismo, of the so-called liberals and progressives who denounced legitimate protests against Maduro’s brutality as nefarious U.S.-backed coup attempts, who remained — and remain — silent on the regime’s censorship, political repression, torture, and economic incompetence. William Neuman of the Times did find an economist — a leftist economist, he assures us — who went so far as to say that certain aspects of the Chávez program “needed to be revised or even discarded to set the nation’s economy on the right track.”
China’s “Catch up” growth
In Forbes, Tim Worstall looks at last week’s announcement that China is (slightly) lowering their economic growth forecast.
On that larger scale though what people are worrying about is this. Catch up growth is easier than growth from the technological frontier. What is meant by this is that it’s a great deal easier to generate economic growth if you have an example in front of you of how to do things. To take a trivial example, if you can go and buy a mobile phone, take it apart to see how it works, it’s a lot easier to copy that technology than it is to invent it for the first time. And this is true of how you make cement, how you put up buildings, how you farm a field and so on. And at root that’s what economic growth is: becoming more efficient at doing all of these things as well as everything else. Each time you become more efficient at doing one task you free up resources to be doing something else. Thus you get both the original thing plus the new one from the same resources: this is the very definition of economic growth.
However, there’s a limit to such catch up growth. In certain areas China is right at that technological frontier (in some areas ahead of the rest of the world in fact). Which is where things become more difficult: there’s no one to copy. Therefore that invention has to happen domestically. This is obviously more difficult. But also it rather requires a certain set of institutions. The rule of law, property rights and so on. These aren’t things that China notably has (although things are very much better than they were decades ago). It’s those headwinds that need to be beaten. Bringing in these new institutions, embedding them in the society and the economy, without causing so much disruption as to slow down growth while they are done.
The standard jargon for this is “middle income trap”. To be crude about it the general feeling is that it’s pretty easy to go from dirt poor to middling income. The essence is really just to stop doing stupid things that hold economic development back. China’s done that very well even though they did start from a very low level of an immense number of very stupid things that Maoism did to hold economic growth back. The middle income trap is where the transition over to those institutions that promote technological frontier growth don’t appear (or are not imposed). And thus the stunning growth peters out.
March 10, 2015
March 5, 2015
Tax Free Savings Accounts
At Worthwhile Canadian Initiative, Livio Di Matteo talks about tax free savings accounts (TFSAs), registered retirement savings plans (RRSPs), and why some people are getting upset that some Canadians benefit more from these financial tools than others do:
A major theme running under most of these arguments goes something like this — Registered Retirement Savings Plans (RRSPs) at least leave “a legacy of tax revenue to future governments” whereas TFSAs may generate “supernormal” returns that will escape taxation and on top of it will accrue primarily to the well-off.
However, when I think of RRSPs and TFSAs, I see them both as essentially the same. They are both “tax expenditures” that are designed to encourage saving by promising some type of tax incentive. The broader debate should really be about how we want to encourage more saving and then about “tax expenditures” in general rather than how much we should allow as limits to either RRSP or TFSA contributions.
However, if we are going to argue about RRSPs and TFSAs, to my mind what differs is the timing of the break. For an RRSP, you are getting the tax incentive upfront and deferring the taxes until you withdraw the money. For a TFSA, you are making the contribution with after tax dollars and allowing the contribution to accumulate tax free — the tax benefit comes down the road as the money grows.
[…]
Young households with children who face more cash constraints might find the RRSP more attractive while older households would probably find the TFSA more attractive. All other things given, both vehicles are of greater advantage to higher rather than low income earners because higher incomes are more likely to be able to save — period. If you are going to make the argument that TFSAs are somehow favouring the wealthy or higher income earners, you need to acknowledge that the same argument applies to RRSPs.
Update, 7 March: It kinda helps when I remember to include the correct link to an article…
