Friday, November 7, 2014

Ideology and Investment -

For once, a post that agrees with Paul Krugman. He makes an argument I have advanced on this blog and I agree with his general premise that now is the ideal time for some infrastructure spending.

See: Ideology and Investment -
There’s an obvious policy response to this situation: public investment. We have huge infrastructure needs, especially in water and transportation, and the federal government can borrow incredibly cheaply — in fact, interest rates on inflation-protected bonds have been negative much of the time (they’re currently just 0.4 percent). So borrowing to build roads, repair sewers and more seems like a no-brainer. .
I've posted an identical call for (sane and limited) infrastructure spending. We have billions of dollars in deferred maintenance that must be done. Now is the ideal time, with low bond rates and an anemic economy.

I'm not calling for or supporting reckless spendthrift approaches to investment. I don't like waste (high speed rail in California) and I hate the poor spending record of government. But, if there is oversight and we address those project in need, we could help repair a crumbling infrastructure.

If I can agree with Krugman on this, and many of our past leaders from both major parties used low-interest bonds to build American infrastructure, what is the problem with Congress?

I do disagree with Krugman that this is an entirely Republican issue. People have lost faith in government's ability to execute well. The GOP contributed to this lack of faith with their own spending insanity, so I don't trust them to be good stewards of the budget. But, maybe a new national transportation bill would be a good start to demonstrate we can and will repair roads and bridges within sounds budgeting practices. Maybe.

Friday, October 17, 2014

Economics isn't about what is fair...

Yesterday, I reminded my undergraduate economics students that modern economics, with its quantitative bias, is not about what is "fair" in life. While we can use economics to identify what isn't "fair" and how to better allocate resources, at its core economics is the study of efficiently allocating scarce resources. Math is not moral; it is an amoral aspect of economics that should be informed by philosophical inquiries.

For example, quantitative economics can answer when a person is "unproductive" and "inefficient" within the system. But, economics does not answer if it is moral to reallocate resources from the unproductive to either the currently or potentially productive members of a community. Raw numbers tell us the money spent on extending the last year or two of life might be best spent on educating the young. But is that the right way to approach problems?

Economic models do not tell us if stock market gains driven by low interest rates and stock buybacks funded by lower borrowing costs are morally right. What the models do tell us is that those with stocks do benefit from low interest rates more than those without equity holdings. The judgment of "fairness" is beyond the scope of economic models — fairness is philosophical and, inherently, political.

I'd argue that economics often leads us to the "worst" choices when we apply only mathematics and statistics in a manner that seeks to optimize capital and resource efficiencies. Instead, we must ask much larger questions about what we want, what we consider utility for ourselves and others.

With my biases of culture and experience, I'm a believer in markets, with their bubbles and flaws and asymmetrical transfers of knowledge. Central planning is "efficient" in theory… and lousy in practice.

Statistics alone can tell me what I "should" do to maximize whatever it is I want to maximize, but most of us want to make "inefficient" choices that conflict with what we consider our core values from time to time.

Eugene Fama has argued that markets are efficient over time. The trends are what we study, not the day-by-day, minute-by-minute human transactions. Days are unpredictable, but years or decades tend to follow trend lines. That is because all those unreasonable, irrational, emotional choices we make average out over time.

Markets, free and open, let me decide if I want to "waste" money on my pets, my cars, my games, my lawn. Markets let me decide to eat expensive meals I don't "need" and buy clothes (like ties) that serve no logical purpose. I've long theorized an economist could prove that the production and wearing of ties costs the global economy, diverting resources better allocated to other needs. But, I don't want to be told that I can't buy nice silk ties.

The math of behavioral economics studies we have done to predict what we will do. It doesn't tell us what we should do. The math of macro monetary economics doesn't tell us what interest rates should be, only what they will likely be in specific circumstances. Models are information. What we do with that information is much different question.

If you want to allocate a resource "fairly" you have to make a moral choice, a judgment, of what is fair and why. Mathematics cannot do that for you.

Friday, October 10, 2014

Inflation that Isn't... Why?

Where's the inflation? Where's the run-up in bond rates?

Despite high debt, unsustainable long-term social spending, unfunded pension liabilities, and numerous other fiscal challenges, the U.S. bond market is strong and interest rates remain low.

Companies are facing increasing energy costs, unstable global situations, falling unemployment, rising minimum wages in larger cities, and a regulatory landscape that has shifted.

The Tea Party and the Occupy movements aren't exactly in the mood to reform corporate taxes, and the politicians reliant on both extremes aren't going to collaborate to improve the business climate in any meaningful way. (Yes, there are areas of agreement among most economists, across the political and theoretical spectrum, that good policy isn't good politics.)

If business costs and risks are rising, prices should be rising. With all levels of government fiscally unsound (and ungovernable), bond vigilantes should be circling. In theory, inflation should be creeping up with so many unfavorable variables. Yet, inflation is meaningless.

I discussed this situation with an economist from an investment firm, certainly no Keynesian, and I've also explored these questions with academic colleagues.

From my colleagues in business and academia, I've assembled a list of many theories on why there's neither bond inflation nor extreme consumer inflation.

Mild inflation is considered "good" in many ways by economists. Inflation devalues current debts, for example. This helps people and governments assume debt for socially beneficial investments. Governments selling bonds at a low interest rate to build roads that current receipts might not cover is something economists (generally) agree is sound policy. Inflation devalues the debt, making repayment a lower percentage of tax receipts. But, high inflation and rising bond rates make government invest risky, and debt repayment can ruin a government.

People want their houses, land, bank accounts, and wages to increase in perceived value. We could argue how real such increases are, and over the psychological value of inflation, but economists generally concur that our current global economies, two to four percent inflation is manageable.

And now, the theories on why there's minimal inflation:

1. Slack in the labor market. Yes, unemployment has fallen and 200,000 or so jobs have been created each month for almost two years, but underemployment and workforce participation rates indicate significant slack. Although skilled labor is tight, and wages are rising in places like North Dakota, overall there's little pressure to hire more people and pay higher wages.

2. Automation is working… in place of people. With emerging market factories opting for machines and software over once-cheap employees, the machines are rising. This allows companies to replace people or to avoid hiring new people. Some economists argue that since there are no mass layoffs, automation isn't hurting the economy. This is the same mistake made when considering higher wages: hiring deferred hurts economic growth, but it also reduces inflationary pressure.

Understand that automation and optimization are unavoidable. In nations with aging, shrinking populations, automation might be a great thing — allowing fewer young people to provide for their elders. But, automation that displaces workers or assumes roles of people never hired goes back to item 1.

3. Best of the worst economies. The United States and its various governments are among the best risks for investors. We're a safe haven in a world experiencing turmoil. This keeps U.S. bond rates low. Even a handful of large municipal bankruptcies didn't affect the muni bond market. If you want a safe, tax-free investment, bonds remain okay. Not great, but okay.

4. Generally benignly neglectful government. Our political system is in disarray, with gridlock at all levels. Yes, this creates some uncertainty, but not as much as some claim. As the business economist told me, no government action is at least predictable. Real uncertainty would be if we couldn't predict which party would have clear majorities in the House and Senate. Instead, we know that no majority will control the Senate, Republicans will control the House, and the President Obama has two more year. In other words… nothing significant is changing for at least two years and, barring a major electoral wave in 2016, gridlock is the norm.

Stability means companies have some certainty in the United States. Like being the best of the indebted economies, we're among the best of the worst governments. Not a point of pride, but it helps control inflation and bond vigilantes.

5. Domestic energy production. Energy, especially oil prices, affects inflation across product and service categories. How much domestic energy production, and increased energy efficiency, are counteracting other pressures is unclear, but these are helping control producer prices.

6. Frugal consumers, extravagant consumers. The consumer market is bifurcated, with the low-end consumers struggling. These consumers are keeping cars longer, buying fewer durable goods, and doing their best on flat or even declining salaries. These consumers, however, are masked by the steady consumption of the high-end consumers. Walmart shoppers become Dollar Store shoppers; Kroger gives way to Aldi. People are adjusting to lingering effects of the Great Recession… and that offsets inflationary pressures.

The economy grows, thanks to the high-end consumers. It grows slowly, though.

7. Weak housing market. The single-family, owner-occupied, mid-range housing market is weak. Housing demand being soft reduces inflationary pressures. Studies now show some people migrating from the pricier cities to lower-cost metro areas. House prices are rising, steadily, but demand limps along.

Other Theories

There are lots of theories on what happened and what's happening in the United States economy. Models failed to predict the Great Recession, and models haven't accurately predicted a recovery. Things are a mess, and might be a mess for many years to come.

I've read academic papers and institutional reports suggesting quantitative easing by the Federal Reserve, though potentially increasing inflation by devaluing the dollar, was absorbed by the equities market. The rich got richer, without any corresponding inflation. The access liquidity raised stock prices.

There is a theory that inflation is understated by the Consumer and Producer Price Indices. Prices of volatile food and energy being removed, and purchasing patterns changing among low-end consumers, leads to low official inflation rates, while the inflation in our daily lives is significant.

Whatever is happening, there will be consequences for fiscal mismanagement and political inaction. I doubt there will be hyper or even extreme inflation unless investors find a better place than the United States for their money.

The odds of that are pretty slim. Thankfully.

Friday, October 3, 2014

Even in the richest 3%, there's a growing wealth gap

The "one percent" of income earners, and even the one-tenth of top one percent, might be the only segment in the United States that has caught up to pre-recession income and growth levels. Though I never support wealth redistribution, clearly the opportunity curve is… broken. If the middle and upper-middle class cannot advance, it's unlikely the economy can move forward for all citizens.
Even in the richest 3%, there's a growing wealth gap

Robert Frank | @robtfrank
Friday, 5 Sep 2014 | 3:13 PM ET

America's millionaire population hasn't grown significantly in 10 years, according to new government data, suggesting that not everyone at the top is benefiting from the recovery.

The latest Surveys of Consumer Finance from the Federal Reserve paints the familiar picture of widening income inequality in America. The wealthiest 3 percent of households control 54.4 percent of the nation's wealth, up from 51.8 percent in 2009.

But the gains are highly concentrated at the top of the top 3 percent. And as a whole, American millionaire households—those with a total net worth of $1 million or more—have not fared as well, either in the recession or the recovery.
According to the new Federal Reserve data, there were 11.53 million millionaire households in the U.S. in 2013, down from 11.98 million in 2010 and below the 11.65 million millionaire households in 2004. (The numbers are inflation adjusted).

In other words, it's been a lost decade for America's millionaire population.

Even in percentage terms, the millionaire population is the lowest in a decade. Only 9.4 percent of American households had $1 million or more in assets in 2013, down from a peak of 10.4 percent in 2004 and even below the levels in 2001.
How would a classical liberal address these data? I can only write for myself, but clearly the market is distorted to favor financial sectors and investors instead of active entrepreneurship and risk taking. We penalize earning an income, while we allow investors more favorable tax rates.

We must encourage job creation, job expansion, education, and innovation. Our system, over-regulated and over-taxed at the points that could and should advance economic growth, needs to stop favoring some over others, at all income and wealth levels.

Government policies that are inequitable contribute to the slow pace of economic recovery. Everyone should be seeing opportunities increase, but that's not the case.

A colleague reminded me that the bond market is overwhelmingly the domain of the wealthy. And the bond market, especially government bonds, is rigged with all manner of tax incentives to encourage lending of money to governments. The wealthy do "invest" in government, and reap the benefits of these investments in the form of interest paid to them from the taxes of the middle and upper-middle classes.

We have to ask if it is fair to tax any income at a lower rate than other forms of income.

There are other reasons the extremely wealthy are doing better, including:
  • Quantitative easing that has helped push equities higher, benefiting the investment class.
  • Recovering real estate values, with a massive influx of cash purchases of properties.
  • Structural changes in the employment market, favoring special skills. 
We should ask ourselves if government policies are exacerbating the recovery and the inequity of opportunity. I believe the answer to that is yes, which is why I wouldn't look to good solutions from political leaders.

Friday, September 26, 2014

Money and Speech

I'm really tired of the canard that money suddenly has an outsized influence in politics. Plenty of studies show that money follows likely winners, but doesn't determine the winners of elections. More importantly, this September 7, 2014 column by Senators Tom Udall of New Mexico and Bernie Sanders of Vermont ignores the most basic of all questions…
In 2010, the Supreme Court issued a disastrous 5-4 opinion striking down major parts of a 2002 campaign-finance reform law in Citizens United v. Federal Election Commission. This case and subsequent rulings, including McCutcheon v. FEC, have led to the explosion of outside money in elections through so-called super PACs. In the 2012 election, we quickly saw the results — 32 major super PAC donors combined to give more money than the millions of ordinary Americans who donated less than $200 each to Barack Obama or Mitt Romney. More than 60 percent of all super PAC funds came from just 159 donors, each of whom gave more than $1 million.

Even more worrisome is the explosion of "dark money" — dollars spent by groups that do not have to disclose their funding sources. The 2012 election saw almost $300 million in dark money spending, and the 2014 election could potentially see as much as $1 billion.

No single issue is more important to the needs of average Americans. If we cannot control billionaires' power to buy elections, the people elected to office will be responsive to the needs of the rich and powerful, rather than the needs of everyone else.

When the Supreme Court says, for purposes of the First Amendment, that corporations are people, that writing checks from the company's bank account is constitutionally protected speech and that attempts to impose reasonable restrictions on campaign ads are unconstitutional, our democracy is in grave danger.
And my question is…

Who owns "the press" that has Constitutionally protected speech? Yep, corporations own most of the major media outlets from which people get their political news. These might be for-profit conglomerates or non-profit activist corporations, but they are some legal form of "entity" with Constitutional protections.

It would be a huge, huge mistake to change the Constitution in any way that allows politicians or their appointees the power to regulate communication. Former U.S. solicitor general Ted Olson's response in the Wall Street Journal is dead-on: Democrats are trying to rewrite the First Amendment in a way that would apply to newspapers, websites, pamphlets, and other expressions of ideas.
The Obama administration conceded during oral argument that the law would permit the government to ban the publication of political books or pamphlets. Pamphlets and books ignited the revolution that created this country and the Bill of Rights. In pushing to overturn the court's decision, Mr. Reid and his Democratic colleagues apparently wish they had the power to stop books, pamphlets—as well as broadcasting—that threaten their hold on their government jobs.

Incidentally, President Obama's complaint in his 2010 State of the Union address that Citizens United "reversed a century of law" was false. The court preserved the architecture of the campaign-finance laws but overturned an anomalous 1990 decision in Austin v. Michigan Chamber of Commerce (and its progeny) that would have permitted statutory limits on corporate speech to help level, or equalize, the playing field in election campaigns. Even the Obama administration was unwilling to defendAustin's rationale in briefs to the court, presumably because it would warrant all manner of government thumbs on the scale regarding election rhetoric, possibly even imposing handicaps to balance the advantage of incumbency.
Throughout the history of the United States people and groups have used printing presses to promote political agendas. There is a reason some newspapers were the "Times Democrat" or the "Republican Journal" a century ago. Most papers dropped the "Democrat" or "Republican" labels from their nameplates (mastheads) after World War II, as there was an emphasis on seeming neutral. But, we can still determine the biases of most media outlets without the labeling.

It's no secret that families bought newspapers to promote their views. The names of politically engaged publishers are legend: Hearst, Pulitzer, Ochs, Chandler, and Graham. Today, new names are emerging, like Bezos, Murdoch, and Zell.

Many magazines were founded not to make money, but to promote political ideals. If rich people want to promote their views, they will find a way.

Media ownership should include some social responsibility, but I don't want anyone dictating or trying to monitor the perceived biases of various media outlets, even those with significant foreign ownership. Most major publishers are international, after all.

That foreign investors (Carlos Slim) can own controlling shares in major media like the New York Times doesn't seem to worry progressives. But, they are quite worried about companies of any sort promoting their collective views.

Our founders used relatively expensive printing presses to encourage resistance, and eventual revolution. Today, I can use a free website, like Blogger, to promote my views. If I'm lucky, a few people read these ideas and engage in debate.

Friday, September 12, 2014

Voting (or Not) and Rhetoric of Engagement

Eligible citizens in the United States don't vote. A majority of 18 to 25-year-old voters have little faith in government and no desire to serve in public office.

Personally, I don't blame them. I was engaged until about 2006. My disengagement is as much a statement as my direct participation was. Too often, though, partisans can't understand that not being engaged is a rhetorical choice.

What if a person truly believes that both major parties are horrible for the United States and the world? The notion of voting for the "lesser of two evils" still requires voting for evil.

A pacifist I know explained it this way: She cannot, for any reason, vote for any president or party that is likely to take any military action. This is a deep religious conviction. How would she express this conviction? Voting for a minor party doesn't change the outcome, and no major media outlets cover those candidates.

I deeply object to policies of the two major parties. I cannot endorse the lesser of two evils, either. It's just too dispiriting. And many third parties are not on the ballots in every state or congressional district.

For my friend and me, my engagement is limited to doing things in our communities and speaking about our ideals. But voting? Until "None of the Above" is on all ballots, that's a problem.

My theory is that many, many citizens are choosing not to vote, and that is a rhetorical argument against the major parties and our electoral system. Not voting sends a loud, clear message that people feel powerless.
Everyone Says Turnout is Key, Why Does it Keep Going Down?
Washington Post
Dan Balz, Chief correspondent
July 26, 2014

Taken together, just 15 percent of the voting-age population cast ballots — or 18.2 million people out of 122.8 million eligible. Turnout was 17 percentage points lower than the most recent high-water mark of 32 percent in 1966. Democrats were down 14.5 points from their 1970 high, or 20.9 percent of eligible citizens, and Republicans were down five points from their 1966 high of 13 percent.
Democrats have said that making voting easier and more convenient will lead to greater participation, but there's no data to support that claim. In fact, Oregon and California, two states with the easiest access to voting, have horrendously low voting rates. Oregon votes by mail, and California lets you vote by mail or at the polls.
Four of the 25 states that have held primaries so far allow same-day registration. All saw turnout decline between 2010 and 2014. Oregon, which uses mail ballots, saw record-low turnout. California, where two-thirds of voters mail in their ballots, saw the lowest turnout ever.

The results in states that allow in-person early voting or no-excuse absentee voting were no more encouraging. Eight states that have held primaries this year employ both procedures. Two saw turnout increase; six had record lows.
I have tried to be involved in local elections. I was in the past, but today I find it nearly impossible to learn much about local elections. I fear politicians want to make it difficult to be engaged outside the two parties. Our system rewards the partisans in the two major parties, but not people wanting to make a statement against the status quo.

A colleague asked me about state politics this week and was surprised to learn that I knew little about my new state. I had to admit, I didn't understand the political machinations of our previous state, county, or city, either.

My wife and I were born and raised in California. I understand the political structures of cities, school districts, counties, and states. I knew the system well, with several friends working in government and a few holding office. The system is actually rather simple, and recent changes make it even easier to grasp. I still know the names of current mayors, supervisors, and state office holders.

California has non-partisan, open primaries. And this new approach did nothing to reduce partisanship because regions are so purely red or blue in the state that even non-partisan redistricting can't make the cities or rural areas more competitive.

At least I understood California elections. I voted, even though there were seldom any competitive races. The city council and county board often had unopposed candidates, indicating that not only is there a lack of interest in voting… there's a lack of interest in running for office!

But the political complexities of other states leave me entirely disinterested in the politics. Parties remain entrenched, with regional and state conventions. Party loyalists rise to power, dragging along debts to other party supporters. I don't like the endless campaigns, either.

Our township is within a borough is within a county. The school district has minimal geographical coherence. There's a sanitation board, for a district that doesn't adhere to other boundaries, either. There should be cities and counties, period. There is no need for so many elected groups in a small region.

I don't want to belong to a party. I don't want to register my beliefs or ideals (or lie about them) to vote in primaries, either.

People say you have to vote to have a view. Excuse me? I couldn't find out anything about local candidates. I tried. I even went to the county seat to look for voting guides. There was nothing of value online or in print. Some spoke to party meetings, but you have to belong. Few local races feature debates.

I was told if I wanted to learn more, that the two parties had large rallies in the main county park. Yes, because rallies are good for learning. No, rallies remind me why I dislike parties and groups of like-minded people in large numbers.

At the state level, I haven't formed any strong opinions beyond disliking every political leader I have heard speak. Voting for people I find equally banal is depressing. A vote for anyone outside the two parties is a waste, while I loathe the parties equally. Their candidates are disgusting.

In my dream world, candidate would have profiles online, including how they might vote on major issues. I'd vote from home, in private, and be left alone. No commercials, no yard signs, no annoyances that lack substance. Address the issues, and let me vote.

How can we revise our system? If voting by mail isn't working, if week-long voting isn't working, then clearly the problem rests with the candidates and parties. Give people something to vote for instead of arguments about lesser evils.

A city political leader I know said I should support his party since I agree with them 40 percent of the time. His argument was that agreeing on a plurality of issues should be sufficient. No. If I disagree with your party's positions on 60 percent of major issues (to me) and 80 percent of positions of the other party… that's not giving me much of a reason to vote for anyone.

"We're less disgusting than those really horrible people in that other political party." Yeah, that's a selling point. No thank you.

Friday, August 22, 2014

If voter turnout is key, why is it so low? - Pittsburgh Post-Gazette

No matter what states try, election participation is falling. This doesn't correspond to voter ID laws, narrow voting windows, or anything else. States with vote-by-mail (Oregon) and at-will absentee voting (California) also have abysmal voting rates.
If voter turnout is key, why is it so low? - Pittsburgh Post-Gazette: Taken together, just 15 percent of the voting-age population cast ballots -- or 18.2 million people out of 122.8 million eligible. Turnout was 17 percentage points lower than the most recent high-water mark of 32 percent in 1966. Democrats were down 14.5 points from their 1970 high, or 20.9 percent of eligible citizens, and Republicans were down 5 points from their 1966 high of 13 percent.
Why? Because most of us know… our votes don't really count. States and districts are increasingly polarized. States are not gerrymandered, so we can't blame redistricting for partisanship in the United States Senate. When did California last have a Republican senator? If I'm voting in California for any one other than a Democrat, at the state-wide level, I'm likely not having much influence. And if I'm voting for a third-party, I definitely have no influence.
California now uses what is known as a blanket primary. Candidates from all parties are on the same ballot and the top two finishers, regardless of party, move on to the general election. The main goal is to reward candidates who can appeal as much to the center of the electorate as to the wings. 
It's too soon to draw any firm conclusions from the California experiment as to whether it produces more moderate candidates, but there have been no dramatic changes so far, while turnout has been dismal.
I'd support a single, nation-wide, open primary, ideally the first Tuesday of June. It would make the election a national event. But, that's not likely to make voting any more meaningful to many of us living in highly partisan districts or states.

Friday, August 15, 2014

Where Do the Smartest People Move? - CityLab

Readers know that I find Richard Florida's insistence that cities are in almost all ways "better" than suburbs and rural regions simplistic at best. His analyses depend on his (and similar scholars') definitions of what is "best" for humans and what variables don't matter as much. What we weight as important in such analyses reflects biases. Florida seldom acknowledges that cities mask social problems (income inequality, mental stress, concentration of power) and drive away some hypersensitive, great minds. Cities are inhospitable to those who need reflective space.

Imagine my pleasant surprise when The Atlantic ran a story reflecting the experiences and observations of my wife and me. The smartest people we know leave cities for more relaxed lives in the country (or exurbs).
Where Do the Smartest People Move? - CityLab: The most interesting finding here (below, far right) is that once income was taken into account, people who moved from the city center to rural areas actually showed a slight jump in cognitive ability over those who stayed. 
For good measure, Jokela ran a second analysis that incorporated additional follow-up surveys and found very similar trends. 
It doesn't surprise me that cognitive ability improves as you leave the city. Or, are those with higher abilities compelled to leave the city? Either way, a slight but significant different in cognitive ability corresponds to leaving crowded urban cores.
So how do we explain these relationships? Well, the inward moves make intuitive sense, as smart young people often seek education and higher-paying jobs, both of which tend to be found in cities. The move outward from city to suburb is likely a result of many educated Americans leaving the city for the suburbs to raise a family—especially in the 1980s, at the height of the survey. 
Consider where colleges and universities are: cities (generally). My wife attended a rural campus for her undergraduate degrees, but I went to school in Los Angeles. We both completed graduate degrees in Minneapolis — and I couldn't wait to leave the city behind once we were done.

Many of our friends did the same. They pursued their educations and built careers in or near urban cores. But, once established, they moved outside the cities, even if the move required commuting into the urban core. We live a little more than an hour from where I teach, but I'd never want to live in the city. That's not happening, for any amount of money.
As for the intelligence shifts from cities to rural areas, found once socioeconomic status was factored in, Jokela has no good explanation. "I assume this is a very special group of people," he says—perhaps converted city residents returning to their country roots.
The problematic phrase "no good explanation" reveals how biased, how blinded by their urban identities, the authors and editors of The Atlantic must be. It's easy to understand why the country is better: it is more relaxing and more productive for some of us. Not every personality flourishes in the city, and that includes many gifted and talented individuals.

I can only visit the same museums so many times. I drive into the city for concerts, the conservatories, and other events. I work at a major university. There's nothing that the city offers that requires I be there every day, all day. How many people really, truly care about the culture of the city?  Sorry, but bars and restaurants alone aren't justification for calling cities "better" than suburbs, either. When I was younger, those things mattered, but I haven't been "clubbing" in decades and have no desire to try it again.

I'd suggest a great many people would be more productive if they weren't surrounded by the sights, sounds, and smells of cities. Others need the city, and that's fine, but at least recognize cities aren't for all people.

Friday, August 8, 2014

Red State, Blue City: How the Urban-Rural Divide Is Splitting America - The Atlantic

This is an older article in The Atlantic, but it goes to something I discuss in my courses when we explore demographic research. Looking at "red state-blue state" dichotomies ignores that the real divide is Rural vs. Urban and that this has little to do with how many scholars and reporters have argued about "liberal vs. conservative" and other political issues with maps.

Red State, Blue City: How the Urban-Rural Divide Is Splitting America - The Atlantic
The new political divide is a stark division between cities and what remains of the countryside. Not just some cities and some rural areas, either -- virtually every major city (100,000-plus population) in the United States of America has a different outlook from the less populous areas that are closest to it. The difference is no longer about where people live, it's about how people live: in spread-out, open, low-density privacy -- or amid rough-and-tumble, in-your-face population density and diverse communities that enforce a lower-common denominator of tolerance among inhabitants.
Consider the following claims often made on the Internet, especially via social media like Facebook or Twitter:

1. Red States have more poor counties, so "Red" policies must be to blame.
No, rural counties fit these descriptions, and they did 50 years ago, 100 years ago, and even back to the Civil War. It makes little difference what the political leadership of a state might be: rural counties lack economic diversity.

2. Red States are ignorant.
Yes, rural areas and the states they represent have lower median educational attainments. Again, that distorts the rural/urban divide more than it reveals any truth. More universities are in the oldest and largest urban centers. There are exceptions to this, thanks to the Land Grant universities, but most leading research institutions are in metropolitan areas.

The "City Lab" of The Atlantic recently noted a study that people with the highest IQ scores (yes, another debate) drift towards cities as young adults, and then retreat to the suburbs or exurbs. In other words, cities are where learning is most available.

This is a chicken-and-egg problem for states. How do you attract an intellectual class without cities and large universities? I'm not sure you can, no matter your political persuasion. Universities draw cutting-edge employers, which leads to families with higher incomes and higher educational attainment. Online education and other innovations won't change this.

3. Red States resent the government, while relying on it.
Look at a map of federally controlled lands. National parks, wilderness areas, military bases, and so on. What you find is that these lands aren't in the Northeast. The West is where we have such spaces, inherently lowering population densities in some regions.

Is it really "dependent" of Texas or Nevada to have military bases and personnel in large numbers? It is really "dependent" to have an Interstate pass through a state, used to transport goods nationally? These are complex debates, certainly, but states without control of massive sections of their land have already given something significant to their fellow citizens.

4. Blue States offer more opportunity for mobility.
Actually, the class divisions in New York or San Francisco exceed the inequality of most rural areas. If you look at median incomes, or averages, then cities look great. But, one in 25 New Yorkers is a millionaire, living in a city with extreme poverty and homelessness. Cities mask poverty, because they have wealthy enclaves.

Random Thoughts…
The gap is so stark that some of America's bluest cities are located in its reddest states. Every one of Texas' major cities -- Austin, Dallas, Houston, and San Antonio -- voted Democratic in 2012, the second consecutive presidential election in which they've done so. Other red-state cities that tipped blue include Atlanta, Indianapolis, New Orleans, Birmingham, Tucson, Little Rock, and Charleston, S.C. -- ironically, the site of the first battle of the Civil War. In states like Nevada, the only blue districts are often also the only cities, like Reno and Las Vegas.
When we assume "Republican" or "Democratic" or "Libertarian" ideals have shaped the economies of states, counties, or cities, we're ignoring the fact that leadership changes, over and over again. Yet, the same cities and counties at the bottom of the United States in a variety of metrics today were at the bottom in 1950, 1900, 1850, and 1800. Mississippi was never "great" and probably never will be, no matter the political leadership. Likewise, New York might remain "great" thanks to the elites that live there and attract other elites.

Can a city or state change? Certainly. Look to Chicago or Detroit for cities that declined in a century or less. Or, Dallas and San Francisco reveal an opposite trend. But, generally regions seem to be locked into their geographies and histories.

I don't believe a "conservative" or "libertarian" could easily save most rural areas or cities in decline. Nor do I believe, by any stretch, that "liberal" or "progressive" policies would catapult Louisiana, Arkansas, or Mississippi into the top ten states by any major metric of quality of life: educational attainment, average salary (adjusted, off-course), innovation, productivity.

Why do we insist on Red and Blue maps at the state level, when the real maps are nothing more than population density? Rural vs. urban is the major divide between Americans.

Friday, August 1, 2014

Prepare for Opportunity

My wife and I are fortunate, and we are hard working.

Which of these traits should be first? I cannot answer with certainty.

We moved to our current home in 2011 for what seemed like a perfect job. It wasn't. Yet, I was "lucky" because we ended up in a region with several great universities, a wonderful performing arts community, and many other benefits. These institutions, however, require that you be prepared to take advantage of their existence.

I worked hard for my doctorate, and my wife worked hard for her master's degree. We prepared ourselves for opportunities, when they might appear.

Only a few years ago, we had nothing. We lost everything and I received the earned income tax credit (EITC), which I still believe was odd, since I didn't request it. I read a study that claimed in simulations, with everyone starting equal, the successful outside the simulation end up successful in the game. The theory is, that some people just rise to the top, even if they have to start from scratch.

Now, a dozen years after hitting bottom, I'm teaching at one of those elite universities and we're doing quite well. We are "successful" by every measure that matters, including the non-financial measures that should matter most in life. We have good friends — which mattered most when we had the least — and we have each other. But, that emotional safety net is also why we are financially stable.

When people tell me that can't get ahead in life, I ask some simple questions:

Did you…
Maximize the education that was freely provided?
Use public and private institutions to improve yourself?
Locate mentors and accept their guidance?
Nurture friendships and social connections?
Avoid giving up and developing bad habits when things were tough?
Keep your mind and body active?

No, life isn't fair, but you have to be ready for new opportunities. Plan ahead and make good personal choices. You can't sit around, be lazy, and then later be envious of the person who graduated high school with honors, went to a university to study science, and became a high-tech entrepreneur.

Get over the envy. Prepare and improve yourself for a better life.