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Monday, January 30, 2006


Denver Transit

Matthew Kahn:
"Highways are durable goods. Many highways were built in the 1950s. Out near denver the amount of driving has soared since then and now the roads are clogged. This article below provides details about a public policy fight over whether road expansion is 'good public policy'. The article does not mention road pricing as a means of solving congestion problems. The article slightly naively keeps talking about mass transit investments as a means of getting people off of the roads. In 1970, 5% of Denver's workers commuted by public transit and in the year 2000, 5% of Denver's workers commuted by public transit. Clearly, this is car country and even if you build light rail people will continue to take their cars. The Denver CBD is not enough of an employment hub.

People who oppose the road expansion must either be concerned about 'scale' effects or they are worried about 'composition' effects meaning what types of people are likely to be moving to their communities. "
Note the reference to road pricing. If using the highway carries no price per use, then the quantity (or number of uses/users) demanded will be at the horizontal intercept of the demand curve. When congestion occurs a "price" is paid by each user in terms of delayed travel time.

Expanding the road's capacity can surely reduce congestion, at least for a time. But, without pricing per use, we can expect congestion to increase over time, once again.

Assuming no pricing per use, if a road's capacity is expanded, are there others effects we can expect to see over time?

Friday, January 27, 2006



Robert Bruegmann is interviewed by USNews:
"Sprawl is a loaded word. How do you define it?

I try to define the word in the most objective way possible, as relatively low-density settlement without any overarching master planning."
Is this a good definition? Do you agree that this definition is the most objective definition we can find?

I think the entire interview is worth reading.

Wednesday, January 25, 2006


Starbucks Economics

Starbucks EconomicsSolving the mystery of the elusive "short" cappuccino.
By Tim Harford http://www.slate.com/id/2133754/

Here's a little secret that Starbucks doesn't want you to know: They will serve you a better, stronger cappuccino if you want one, and they will charge you less for it. Ask for it in any Starbucks and the barista will comply without batting an eye. The puzzle is to work out why.
The drink in question is the elusive "short cappuccino"—at 8 ounces, a third smaller than the smallest size on the official menu, the "tall," and dwarfed by what Starbucks calls the "customer-preferred" size, the "Venti," which weighs in at 20 ounces and more than 200 calories before you add the sugar.
The short cappuccino has the same amount of espresso as the 12-ounce tall, meaning a bolder coffee taste, and also a better one. The World Barista Championship rules, for example, define a traditional cappuccino as a "five- to six-ounce beverage." This is also the size of cappuccino served by many continental cafés. Within reason, the shorter the cappuccino, the better.
The problem with large cappuccinos is that it's impossible to make the fine-bubbled milk froth ("microfoam," in the lingo) in large quantities, no matter how skilled the barista. A 20-ounce cappuccino is an oxymoron. Having sampled the short cappuccino in a number of Starbucks across the world, I can confirm that it is a better drink than the buckets of warm milk—topped with a veneer of froth—that the coffee chain advertises on its menus.
This secret cappuccino is cheaper, too—at my local Starbucks, $2.35 instead of $2.65. But why does this cheaper, better drink—along with its sisters, the short latte and the short coffee—languish unadvertised? The official line from Starbucks is that there is no room on the menu board, although this doesn't explain why the short cappuccino is also unmentioned on the comprehensive Starbucks Web site, nor why the baristas will serve you in a whisper rather than the usual practice of singing your order to the heavens.
Economics has the answer: This is the Starbucks way of sidestepping a painful dilemma over how high to set prices. Price too low and the margins disappear; too high and the customers do. Any business that is able to charge one price to price-sensitive customers and a higher price to the rest will avoid some of that awkward trade-off.
It's not hard to identify the price-blind customers in Starbucks. They're the ones buying enough latte to bathe Cleopatra. The major costs of staff time, space in the queue, and packaging are similar for any size of drink. So, larger drinks carry a substantially higher markup, according to Brian McManus, an assistant professor at the Olin School of Business who has studied the coffee market.
The difficulty is that if some of your products are cheap, you may lose money from customers who would willingly have paid more. So, businesses try to discourage their more lavish customers from trading down by making their cheap products look or sound unattractive, or, in the case of Starbucks, making the cheap product invisible. The British supermarket Tesco has a "value" line of products with infamously ugly packaging, not because good designers are unavailable but because the supermarket wants to scare away customers who would willingly spend more. "The bottom end of any market tends to get distorted," says McManus. "The more market power firms have, the less attractive they make the cheaper products."
That observation is important. A firm in a perfectly competitive market would suffer if it sabotaged its cheapest products because rivals would jump at the opportunity to steal alienated customers. Starbucks, with its coffee supremacy, can afford this kind of price discrimination, thanks to loyal, or just plain lazy, customers.
The practice is hundreds of years old. The French economist Emile Dupuit wrote about the early days of the railways, when third-class carriages were built without roofs, even though roofs were cheap: "What the company is trying to do is prevent the passengers who can pay the second-class fare from traveling third class; it hits the poor, not because it wants to hurt them, but to frighten the rich."
The modern equivalent is the airport departure lounge. Airports could create nicer spaces, but that would frustrate the ability of airlines to charge substantial premiums for club-class departure lounges.
Starbucks' gambit is much simpler and more audacious: Offer the cheaper product but make sure that it is available only to those customers who face the uncertainty and embarrassment of having to request it specifically. Fortunately, the tactic is easily circumvented: If you'd like a better coffee for less, just ask.

Monday, January 23, 2006


Why Do Houses Cost So Much?

Randall O'Toole:
"If this happens, you can blame urban planners for creating the bubbles. Throughout the United States and much of the rest of the developed world, home prices are rising fastest where planners have imposed rules aimed at slowing or controlling growth. Planners call this growth management, of which smart growth is a recent variation. By preventing homebuilders from meeting the local demand for housing, growth management leads to sharply increased housing prices. This in turn attracts speculators who have shied away from the stock market. As a result, housing prices in many areas have risen far above the true value of the homes."

Is this a plausible analysis?

Thursday, January 19, 2006


The Eternally Sprawling City

Virginia Postrel:
"Most of the problems people attribute to L.A.'s sprawl--notably traffic and long travel times--are actually caused by its density. The same is true in New York, however defined. Forget driving to New Jersey or Connecticut. It can take 45 minutes to travel the roughly five miles from the Upper West Side to Greenwich Village, even if you take the subway. When you pack a lot of people close together, the place tends to get crowded. That's great for culture and commerce, but it ratchets up social stress and makes getting places harder."
What do you think? If people spread themselves out across the landscape, do the highways end up more congested or less congested?"


The War Against Suburbia

Joel Kotkin has a commentary on the war against suburbia in the Wall Street Journal [subscription required]:
"Suburbia, the preferred way of life across the advanced capitalist world, is under an unprecedented attack -- one that seeks to replace single-family residences and shopping centers with an 'anti-sprawl' model beloved of planners and environmental activists. The latest battleground is Los Angeles, which gave birth to the suburban metropolis. Many in the political, planning and media elites are itching to use the regulatory process to turn L.A. from a sprawling collection of low-rise communities into a dense, multistory metropolis on the order of New York or Chicago. Mayor Antonio Villaraigosa has outlined this vision, and it does not conform to the way that most Angelenos prefer to live: 'This old concept that all of us are going to live in a three-bedroom home, you know this 2,500 square feet, with a big frontyard and a big backyard -- well, that's an old concept.'"
Do you think it is an old concept? Kotkin refers to the idea as an "imposed vision." He points out that there is now a substantial effort to use public monies to expand underused train systems, build downtown condos, convention centers, and even sports stadia. He says there is a widespread prejudice in planning deparments of our universities and in our city bureaucracies against suburbs and single family neighborhoods. He writes:
"Acolytes of such worldviews in our City Halls are now working overtime to find ways to snuff out "sprawl" in favor of high-density living. Portland's "urban growth boundary" and the "smart growth" policies promoted by former Maryland Governor Parris Glendening, for example, epitomize the preference of planners to cram populations into ever denser, expensive housing by choking off new land to development. More recently, this notion even has spread to areas where single family homes and suburbs are de rigueur. Planners in Albuquerque have suggested banning backyards -- despised as wasteful and "anti-social" by new urbanists and environmentalists, although it is near-impossible to find a family that doesn't want one. Even the mayor of Boise, Idaho, advocates tilting city development away from private homes, which now dominate the market, toward apartments."

Kotkin suggests that perhaps the best known anti-sprawl government policy was the urban growth boundary in Portland. He believes the result was not the "new urbanist nirvana" envisioned by the proponents, but rather the result has been higher land prices within the boundary and people and businesses have been moving away from Portland in the direction of the communities across the Columbia river in Washington state. He cites that 95% of the regional population increase has taken place outside the city limits.

Perhaps people like living with suburban sprawl? If Kotkin is right about Portand, then people seem to have chosen to live farther away rather than live in the more densely populated "planned" areas within the urban growth boundary. Kotkin also refers to recent polls that say "roughly 51% of Americans . . . prefer to live in the suburbs, while only 13% opt for life in a dense urban place."

Kotkin's conclusion:
"It is time politicians recognized how their constituents actually want to live. If not, they will only hurt their communities, and force aspiring middle-class families to migrate ever further out to the periphery for the privacy, personal space and ownership that constitutes the basis of their common dreams."

Tuesday, January 10, 2006



With the new hearings and likely appointment of Alito to the supreme court, people are again remembering Robert Bork, a Reagan nominee of 1987, whose failed political campaign sunk his chances before the explosive hearings even got underway. With the new occurrence of the 24 hour 'news' media, the supreme court nominees can gain more public attention. When I consider democracy in general terms, it seems reasonable to assume a well informed populace would constitute a stronger society. However, with the current state of affairs, featuring a sharp rise in partisan politics (a device actively fed by a citizenry that believes in the enormous over simplifications contained therein) is the attention being paid to the supreme court nominees a positive trait for our democracy to posses, or simply the way in which the lifetime positions of the justices will be undermined by the fact that they will essentially need to be elected or confirmed in the court of public opinion?

Saturday, January 07, 2006


technology amendment

With the recent debate surrounding Presidential powers to monitor the telecommunications of suspected citizens, as well as the discovery of the NSA, a highly secret department of the government, it seems that our Constitutional Liberties are again unsafe. If we adhere to the protective state point of view, and believe that the Constitution protects or right to privacy, then could a new Amendment be added which would in some way protect our virtual privacy? People currently fear, justifiably so, the threat of identity theft. The amount of information available to those who know how to get and exploit it, greatly enhances ability of cyber criminals to gain access to any conceivable amount of private information; an unpleasant thought. However, while it is true that most people are likely to have their identity stolen in their lifetime, this definition can be broad and the odds of a catastrophic theft of personal information is actually quite low. If we imagine a war-time government, with vast funding, legislative capabilities, and access to the cutting edge of personal surveillance, it is not at all inconceivable to picture our federal government unabashedly mining our private information for potentially misguided reasons of 'security'. Can this amount and level of sensitive information be scrutinized, without any limits on those investigating? Clearly, if ever there were a contemporary reason to adjust the constitution, it would be to protect the new individual rights found within the realms of technology.

Wednesday, January 04, 2006


Rent Seekers

Today, several law makers 'returned' or donated money received from one of the most influential lobbyists in Washington, after he plead guilty to fraud. Though this story is catching a great deal of media attention for its similarity and complex ties to the recently embattled Senator Delay scandal, one cannot help but laugh at the 'shocked' reaction from the Hill. Is not rent seeking simply a part of our social system of government? After recently reading Ayn Rand's Anthem, I began to wonder what the alternative to this situation would be. Clearly rent-seeking does have a significant negative impact on our rights (Kelo), however, the condition of an honest government would by necessity imply a strong dogma that would compel those running the government to turn away from corrupt activities. However, in the government that oversees the largest and wealthiest economy in the world, such a devotion could only be preserved on the highest scale of fanaticism, which is clearly an undesirable motivator for any government. If the above is true, then is the best we can hope for some middle ground in which we incentivize our politicians with the culturally understood promise of mass bribery yet view the culmination of that understanding with disdain when it offends our notions of propriety?

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