Tag Archives: economics

Local Governments Fight for Businesses


I wanted to quickly post this article from my hometown of Buffalo, as an example of some of the dealings that smaller cities and municipalities are often pushed to make.

It’s somewhat of an arms race – local governments are pressured to make sure that they are doing something for the local economy, so are often in the position of offering incentives to businesses to expand, grow, or relocate into a particular city’s limits. Tax rebates, grants, and other financial incentives have become very common for cities or counties to offer businesses. And why wouldn’t they? Take a rust belt city government such as Buffalo, fighting not only for every marginal job and bit of economic growth but also for an identity and a sense that things are improving. It only makes sense that they do everything they can to encourage expansion.

However, given that cities do this, businesses have their pick. After doing the analysis of what they need, what market is best, and what they can afford, a business can threaten and cajole to get as much out of those governments as possible and sell their expansion to the highest bidder, while pocketing as much as they can along the way.

It’s more than sad that this manifests itself as Delaware North basically threatening to leave Buffalo unless they can get as much money out of the taxpayer as possible. That cannot lead to good or optimal economic decision making or allocation of resources – someone has to lose. “Revenue dollars won’t justify construction of the building” – so don’t build it. A parking ramp won’t bring in enough revenue, then likewise. “Being based in a hub city” or a better talent pool would improve the company – great. Sadly, Boston may be a better home for Delaware North. However, what should we be willing to give up to see them stay?

A city does not build a competitive or sustainable advantage one financing deal at a time. It does nothing to tackle the actual problems that prevent a city such as Buffalo from growing organically.

This phenomenon is also common with sports stadiums, which often “need” gigantic financing packages from governments, despite the fact that sports franchises (and organizations like the NFL) make quite a lot of money themselves.

This is a cursory muse on the topic, but just wanted to cite the very blatant example.

Overdue Article Review

I have been under reading during the past few weeks, and have thus been quite behind on categorizing and picking out the noteworthy articles that I have seen. This will be a potentially longer edition, as I have a long Pocket backlog to get through.

Laws Are Not Enough – An interesting read about some of the differences between the accounts of the NSA surveillance issues. Most of the defense is around the legal safeguards that are in place, but the potential for abuse exists as long as there are not actual barriers to those actions that are legally impermissible. Police are restricted legally from doing a whole host of things that end up occurring fairly regularly. It would be best if the all seeing eye had some physical limits to its use.

The FBI Can Remotely Activate the Mic on my Android Phone – And speaking of the NSA, it looks plike my love of Android may leave me more vulnerable than the average person. Ouch!

NSA revelations could hurt collaboration with ‘betrayed’ hackers – In recent years, the NSA and other government agencies / organizations that deal with cyber issues have relied on the hacker community for help with spotting vulnerabilities, helping find solutions, and as a talent pool. As it become more clear that their overall philosophies are at odds, does it make it more difficult for these organizations to function? Hackers raised on the internet are more than anti-establishment; freedom is a virtue the internet has always cherished and enabled since its early days.

The suburbs are dead – I have never liked the suburbs, seeing them as homogenous bubbles where folks don’t really get to see much of society. Fascinating how that view is shifting and may no longer be true. Also, turning entire malls into apartment communities sounds like an intriguing idea, and is very cool.

Made in the USA – Manufacturing is often touted as a potential future driver of American growth, but I think that this hope is misplaced. While it is important to make stuff, it isn’t going to bring back jobs in the manner that folks in power seem to promise. Manufacturing is either going to add low wage jobs such as the assembly of the new Moto X profiled in this article (looks like an awesome phone), or add higher wage engineering jobs that require a deeper education (and fewer in number than the GM line workers of the past). There seems to be such nostalgia for the labor security that came with big union shops like auto, but the old contract cannot be competitive anymore (and was subsidized by tariffs and other costs on the consumer). We need to figure out how to make a new social contract that can create this economic security, but manufacturing jobs are not going to be it.

Twitter’s free speech problem – I tend to like Twitter’s stance on a lot of these issues. From being the most direct in not cooperating with the Feds on PRISM, to its sanctity ideal of free speech (nice shout out to JSM in the article), it holds many ideals that I tend to agree with. What is frightening here is the tone of the article, as well as the growing importance of internet companies on the front lines of establishing and protecting rights. The article seems to suggest that Twitter needs to be the one to monitor and moderate such “abuses”, but who is to decide that? If someone threatens you over the phone, do we assume that it is the place of the phone company to screen and stop that activity? We have a system of laws to deal with this, and while the internet certainly makes the process more difficult, it should not put Twitter or any other company in the role of judge, jury, prosecutor, and defense. Twitter understands that it is a vehicle for speech, and is wary of getting involved in these issues, and I think that is right (so many examples of this, ISPs being asked to punish for copyright violations for instance). The real problem here is the incredibly slow manner in which our legal code has changed with the times.

Administration overturns ban on some iPad, iPhones – This week, the administration vetoed an import ban on several iProducts that violated parents from a significant rival. While patent law is certainly in need of repair, don’t we need a real revisiting of the whole of patent law? This action is arbitrary at best. Will the Feds do the same if Apple is successful in lobbying for a ban on Samsung phones? Picking winners and losers…

The $4 million teacher – Fascinating look into the private teaching market that has developed in Korea. Definitely pros and cons of their way of doing things – students go to school practically twice a day, but the system encourages outstanding teaching. Our teachers and schools seem to be incapable of attempting much softer innovations (the constant battleground over charter schools), much less something as radical as described in this article.

Big fish, little fish, and the SEC – What I fail to understand about the recent SEC proceedings is why Tourre has taken the fall for the abuses of the industry. There were probably hundreds if not thousands of such transactions throughout the Street in the years leading up to the crash. While this does not absolve his actions, it is sad to see such spotty and seemingly arbitrary enforcement of the law.

The payday playbook: how high cost lenders fight to stay legal – I reserve a special distain and outrage  for businesses that only survive and profit by taking advantage of those that do not know any better. Herbalife, Rent a Center, payday lenders – all argue that they perform vital services for those in need but instead render little service and make people’s lives worse. I consider these businesses unethical if not criminal. The tactics described in this article to keep the petitioners off the ballot is simply disgusting. More people need to be aware of this.

Why Americans all believe they are ‘middle class’ – The most used phrase in politics right now, the ‘middle class’ has interesting roots and usage in a society that tends to avoid class distinctions. Everyone thinks they are middle class today, and this shapes our policy, votes, and how our country ends up.

Google flip-flops on network neutrality – This article makes me very disappointed in Google. Net neutrality is an important idea, and I hope it gets enshrined in the future. The internet is a utility: the modern age electricity changing how we do work and how we live. Like electricity, it should not be overly monitored. Last time I checked, I was not prevented from plugging in a specific type of coffee maker within my own home. Plugging in a server is no different. Of course, if I ran a nuclear reactor in my apartment and overloaded the network, I could understand their involvement. Google, do something similar.

Man shot by Austin cop – Why does this continue to occur? “Not following police policy” gets people killed. And usually, these things fade into the background without leading to any changes.

Germany’s clean energy plan backfired – I bring up the example of Germany a lot in discussions on clean energy and how it can and cannot be supported. Largely, it is a zero sum game. Someone has to bear the costs, and whether through government or business, it ends up at the taxpayer or the consumer (of course, unless the environment itself bears the cost). In that kind of an environment, it is important to consider how those burdens will be distributed before crafting policy. Removing nuclear energy seemed like a good idea, but is it really if it brings coal plants back online and raises emissions? Either cheap coal returns, or electricity prices go up. Too often, our governments do not seem to have an honest conversation about where the costs will go, and we end up making sub-par policy as a result.

Decline of homeownership – Homeownership has declined for a number of reasons, and this article examines a few. Joblessness especially among younger Americans, mobility, and the breaking of the homes-always-go-up-in-value fallacy have all contributed. There are a number of changes taking place in this generation that may lead to a very different consumer of the future. Ownership of hard assets like homes is simply less attractive for a mobile person, and they tend not to be particularly good investments. One of my favorite statistics, slightly unrelated, is the rate at which 18 year olds have drivers licenses – in the 70s, it was close to 90%, while today it is below 70%. Will the young ever own homes of their own?

Why privilege is so hard to give up – I could write a whole essay on this, and perhaps in the future I will. I categorically reject the premise of the article. “Privilege” is such a misnomer here. What we are talking about here is injustice. Folks being pulled over for driving while black, women subjected to a glass ceiling, whatever example you want to give, this is an example not of someone taking advantage of “privilege” but of some being subjected to forces that are wrong. Why would someone define this issue thus way? Why would we seek to “abandon” privilege and “give up” status that shoukd be free and open to everyone? Let us treat this issue as it should be treated, and alleviate these injustices where they exist. The privileged should not be pulled down, instead those without privilege should be brought up. Even if this writer were correct on privilege, the prescription is impossible. One cannot simply “give up” something that occurs simply because of who they are. Let’s set aside the fact that the author “schools” others on the “facts” of this social science. No wonder the author has people disagree with the arguments – as they are veiled in language that comes off as offensive. I had such a negative reaction to this article. I’d invite a debate on it.

That’s all for now. This has been a hodgepodge of articles. At some point, I will do this regularly enough to focus posts on specific themes and issues. As I get up to speed, we will get there.

Articles for June 22nd – Big Data and Elections and Access

It’s been a few weeks since I compiled a list of the articles that I have been reading – hoping to make a little headway against the backlog with this post.

A number of the articles that have been floating around have to do with data – how we use it, control it, and what we should do about it. I think we have all known how much data there is on each and every one of us out there, but all of the recent developments have been illuminating in who has access to it and what they can use it for.

http://www.nytimes.com/2013/06/23/magazine/the-obama-campaigns-digital-masterminds-cash-in.html?pagewanted=1&_r=0&adxnnlx=1371921826-rm%2051XvsMALZSwKnEKfgYg – The NYTimes posted a long article this week on some of the ways that recently victorious political campaigns have used data to their advantage, and it’s a great read. Frankly, its surprising that with so much at stake this didn’t happen a lot sooner. When the votes were counted, I wonder how much these analytics capabilities specifically were worth. In some sense, it is sad that the quality of the organization and activities of the campaign can have such important effects on the outcome relative to the messaging and policies that are actually being proposed. Marketing seems to trump the policy dimension. Additionally, with so much of the data coming from external sources (Facebook agreed that its terms of service were not being violated, but how much power could it have had to make the decision either way?), could we conceivably have data that was given to one campaign and not the other? This is what is so troubling about the NSA’s data collection or the IRS asking for donor lists – especially with the endemic lack of transparency, how can we be sure that the data is not used in an unfair or illegal manner?

https://www.eff.org/deeplinks/2013/05/update-email-privacy-law-must-go-further – One of the biggest legislative holes that we have is in email. Our law has not caught up to the realities of what email communication is, how personal it is, and how it needs to be protected. Phone calls, physical mail, and other communication has strict standards for access, and a default that prevents its use without probable cause. We need to update our laws for email privacy. The EFF is passionate about this and has a lot of good information on it.

http://www.theatlantic.com/international/archive/2013/06/prism-is-bad-for-american-soft-power/277015/ – Even as our power begins to fade, the US still sets the tone for governmental engagement around the world, and historically (again, people love to argue about this) we have largely pursued an agenda of freedom and openness around the globe. How can we be the ‘city on a hill’ with regards to freedom when we so blatantly disregard those tenants within our own borders? How can we be a good example for those countries around the world which are coming into power and maintain more oppressive stances to their citizens than we do? We do not want to set the precedent for the coming century by weakening the freedom of the individual.

http://www.theatlantic.com/politics/archive/2013/06/the-irrationality-of-giving-up-this-much-liberty-to-fight-terror/276695/ – Terrorism is sensational – unexpected, unpredictable, fear inspiring, and often theatrical in character. The same reasons that psychologically cause us to fear airplanes more than automobiles causes us to be irrational about the dangers of terrorism, and too apt to surrender our freedoms to protect ourselves.

http://www.theatlanticwire.com/national/2013/06/majority-senate-skipped-classified-prism-briefing/66273/ – Good to know the Senate cares so much.

Switching gears, there have also been a number of articles dealing with another one of the issues of our time. How can we deal with free markets as well as income inequality? What are the main causes of income inequality and how to we rectify them? I would like to study this a bit more, but wanted to pass along a few articles that I’ve seen dealing with the topic in recent days.

http://www.theatlantic.com/business/archive/2013/06/rip-american-dream-why-its-so-hard-for-the-poor-to-get-ahead-today/276943/ – Education is always cited as the answer that can help equalize the opportunity available to folks despite the situations that they were born into. However, as is pretty clear, income is predictive of income between generations, and it has gotten worse. Much of it is the result of  poorer students not having the information, or present means, to apply to colleges.

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/05/11/thinking-utopian-how-about-a-universal-basic-income/ – Interesting look into a possible policy to lower income inequality. A universal basic income is one method to do this, as is a high minimum wage, welfare/social security and other safety net programs, the earned income tax credit and other tax policies. Which is the most effective way to distribute dollars, flatten the Gini coefficient, and not preclude folks from taking risks and being productive? This is an interesting economic as well as philosophical question – one I will hopefully dive in to in later posts when I can explore some Rawls and Nozick.

http://www.theatlantic.com/politics/archive/2013/06/forget-what-government-i-should-i-do-what-can-it-do/276546/ – We do spend too much time focusing on the left-to-right dimension of government, and not the better-to-worse (effectiveness) dimension, holding the scope of activities constant. I read a statistic recently of how the VA still uses paper forms, so thousands of cases are not handled before the former service members dies. Technology could be an easy way to automate and streamline a number of the activities of government.

Overdo Short Number of Articles from the Weeks Preceding May 14th

http://www.slate.com/articles/technology/technology/2013/04/boston_bomber_photos_the_marathon_bombing_shows_that_we_need_more_security.html – I think that this is one of the most important arguments that can come out of the Boston terrorist attack.

A few weeks have passed, and little has amounted to calls for more surveillance. Good for us in my opinion – when we rush to judgment, rarely do we make good and measured decisions on what is truly right.

Terrorism as a form of warfare does not leave us many options that are not in them selves constraining. As the Patriot Act and other actions in the wake of 9/11 demonstrated, there is a sliding scale between individual freedom and the security that can actually prevent events like this from occurring. In order to become more safe, we must sacrifice the freedom (more importantly the privacy) that we also consider very important.

Interestingly enough, this meshes well with the story that I wanted to cover on drone spying. A few weeks ago, Eric Schmidt of Google warned on the proliferation of drones, and how it threatens privacy, among other concerns. http://www.guardian.co.uk/technology/2013/apr/21/drones-google-eric-schmidt. Technology today allows us to be constantly aware and chronicle that which happens in the public sphere. Police cars can track and store every license plate that they pass as they patrol around a city, creating a database of where each car has been. Drones could see every inch of the country every second of the day, putting more of the world into storage at near real time. Google and its streetview have been the trailblazers in this regard – interesting to see Eric Schmidt speak out.

Already, the internet and its connectedness are offering us new ways to interact with our world. A quick search for the drone article above led me to http://www.diydrones.com/, a site devoted primarily to amateur drone instructions and ideas. Within the last month, a fully plastic 3d printable gun was created. It is crude and nearly disposable, but designs will get better over time. One wonders how we have any chance to control gun violence, while simultaneously leaving these new areas of innovation untouched.

A few other articles that I wanted to point out:

http://www.theatlantic.com/magazine/archive/2005/01/lost-in-the-meritocracy/303672/ – Rather incredible long read. Not sure I have a lot to say about it, but is an amazing critique of some of the pressures in higher education, and the balancing of life with “achievement”, whatever that actually is.

http://www.thedailybeast.com/articles/2013/05/14/america-s-new-oligarchs-fwd-us-and-silicon-valley-s-shady-1-percenters.html – An article that I don’t necessarily fully agree with, but certainly expresses some of the changing landscape of business, and how that is affecting most of us. As we do more with less labor, and only the educated seem to be able to truly contribute, where does that leave us? Bertrand Russell’s In Praise of Idleness comes to mind. http://www.zpub.com/notes/idle.html

http://www.theatlantic.com/technology/archive/2013/05/green-lifestyle-choices-dont-change-the-systems-that-make-fossil-fuels-attractive/275575/ – I disagree with the main premise of this article that a carbon tax is a good or required thing, but acknowledge that it might be a more effective tool if replacing carbon is the goal.

http://nymag.com/daily/intelligencer/2013/05/why-left-and-right-economics-cant-just-agree.html?mid=google&google_editors_picks=true – Speaking of “many economists believe”, as the previous article on green energy does, this article speaks to the fact that economists have been heavily politicized. You can find any research on any topic that serves any purpose, all of it claiming a great deal of confidence that supposes that it is qualified on which to base important policy. Great.

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/04/17/student-debt-is-dragging-down-the-u-s-economy/ http://www.washingtonpost.com/blogs/wonkblog/wp/2013/03/30/will-self-driving-cars-solve-all-our-energy-problems-or-create-new-ones/ – Two good recommended thought pieces on economics and policy.

I’ve been neglectful, so I wanted to get a few thoughts down on digital paper.

Weekend Article Review

Every few days, I would like to use this blog as a sounding board and repository for some of the best articles that I have seen, to both save for my own knowledge as well as spread them to those that are interested. Here are some from the previous few days –

http://blogs.hbr.org/fox/2013/04/why-president-kagame-runs-rwanda.html – President Kagame of Rwanda and Michael Porter explain another way to look at the progress of a developing nation, and how this way of thinking is helping Rwanda today.

http://www.economist.com/news/science-and-technology/21575729-hunt-missing-85-matter-universe-closing-its – Some progress on locating the matter that keeps our galaxies together.

http://www.minyanville.com/trading-and-investing/currencies/articles/Facebook-Amazon-Apple-bitcoins-bitcoin-currency/4/4/2013/id/49061 – Another in depth look into Bitcoin, the digital currency that has continued its meteoric rise over the past few weeks.

http://www.slate.com/articles/health_and_science/the_efficient_planet/2013/03/high_speed_trains_in_the_united_states_is_alfred_twu_s_fantasy_map_too_fantastical.single.html – This article was in my backlog, but I am always interested in the media’s take on high speed rail. I would like to see more development of the corridors where HSR really makes sense, and less time wasted on trying to plop down HSR where it is not needed as a purely stimulus effort.

http://sashadichter.wordpress.com/2013/04/02/attaining-excellence/ – This one was passed along to me, and is a nice motivational read.

http://www.slate.com/articles/life/culturebox/2013/04/there_are_no_academic_jobs_and_getting_a_ph_d_will_make_you_into_a_horrible.single.html#pagebreak_anchor_2 – For any one of us considering grad school, a sobering look into the difficult job market for PhD grads.

NASA Spending Under the Sequester

News broke this week that NASA is having to alter its behavior in response to the sequester—

Well, it looks like it’s finally happened: the U.S. sequester – a “series of across-the-board cuts to government agencies totaling $1.2 trillion over 10 years” (CNN) — has finally hit NASA… right where it hurts, too: in public outreach and STEM programs.

In an internal memo issued on the evening of Friday, March 22, the Administration notes that “effective immediately, all education and public outreach activities should be suspended, pending further review. In terms of scope, this includes all public engagement and outreach events, programs, activities, and products developed and implemented by Headquarters, Mission Directorates, and Centers across the Agency, including all education and public outreach efforts conducted by programs and projects.”

Read more: http://www.universetoday.com/100949/sequester-cancels-nasa-outreach/#ixzz2ObHVnM7B

In total, the cuts equal approximately $1.2B off of NASA’s $17.8B in planned spending, or about a 7% decrease. Not only will the cuts slash outreach, they will also threaten on-going modernization efforts and technology research. Basically, it will slow both NASA’s core operations as well as its ability to inspire study in the math and sciences, something that we are currently struggling with as a nation (I wonder how many people are engineers today because of the Apollo program or the space shuttle program…).

While a 7% haircut may adversely affect agency operations for the current year, it is worth placing this in the longer term context of the erosion of finance support for NASA since the mid-90s, and really, since the end of the Apollo program. Sequester related cuts are miniscule in comparison to the stagnation of spending in real dollars for the past few decades. NASA will have to make adjustments to its plans, but its activities already pale in scope and magnitude compared with some of the projects that it has taken on in the past.

For historical comparison, I have looked at NASA spending since its inception in 1958 as compared to the overall level of Federal spending. While it is to be expected that spending would be lower than at the height of our stretch towards the moon, it is striking how spending has decreased from 1% of the Federal budget throughout the 80s and 90s, to nearly 0.4% today. Federal priorities have clearly shifted elsewhere, and in my opinion, to our detriment.

Of all the economic markets that the Federal government invests in, subsidizes, and stimulates with other regulatory tools, spending on space exploration is no longer a focus. However, the unique mix of extreme long-term nature of returns, high levels of risk, and distributed economic and social benefits provide a more obvious probable cause for spending on NASA than on almost any other market; the case for government intervention is comparatively strong. 

For every $1 spent on NASA, typically about $2.1 is added to the economy in revenues, a high multiplier compared to other economy jump-starting spending – for instance, tax cuts typically have a spending multiplier of 1.0 to 1.3. Additionally, many of these dollars go to high tech and infant industries; some of the many beneficiaries during the Apollo program were the semiconductor and computer industries. I wrote a long paper long ago on some more of these issues – but my point is, even a typically free market aficionado can see some of the enormous benefits of the funding of space program in the public sphere, and the relative inability of the private market to fill the void left by the loss of public spending. 

If NASA spending were held at the historical 1% level, we would be spending more than double on NASA this year ($38B). In the most (perhaps recklessly) optimistic scenario, with budget allocation equal to the 1966 peak, NASA would be nearly $170B of spending today. In either event, the American people would be achieving much more than we are today, and pushing more of the boundaries of our exploration.

I am hopeful of changes to this policy at some point in the future, although I doubt we will raise spending in the near term. In our current political reality, it will take some strong form of catalyst to push us against the current inertia.

In later posts, I want to dig into some of the specifics of the benefits of NASA spending and why it is a good endpoint for Federal funds.

I have included the budget numbers below for those curious to see how the budget of NASA has unfolded over the years.