The distribution of pricing

 I think this piece  by Felix Salmon is excellent for understanding the oft-obscured distributional effects of the various 'pricing' solutions that are frequently proposed to problems of public policy.

The problem here is traffic, which pretty much everyone hates.

The solution? Dynamic pricing! In San Francisco!

" the central idea is brilliant, and should be adopted everywhere: reduce traffic congestion by pricing parking according to demand — including pricing garages lower than street parking — so that there’s nearly always at least one free parking space on every block. No more crawling around interminably looking for a spot! Congestion should drop immediately, since a huge proportion of city traffic is people looking for somewhere to park."

All of this is certainly true. Parking is only rarely and indirectly priced according to demand. That is, it is priced according to demand at garages (when these haven't secured friendly zoning and bylaws to engage in rent seeking) and pretty much nowhere else. The San Francisco system will only change on a monthly basis, and is limited in how much of an increase can occur in a given period. And this will almost certainly reduce traffic.

But of course the cost of reducing traffic is not evenly shared. Salmon will no longer have to struggle through the interminable struggle for a spot, but only because I will no longer be able to afford it. Granted, those of us who are the targets of this policy are currently paying less than the market deal for parking.[1] Myself, and the rest of the driving world, are probably getting a sweet deal. But given the relative inelasticity of parking supply, in many urban areas this will mean that many people who currently rely on finding reasonably proximate parking will be out of luck.

If you work in a popular shopping, tourist, or entertainment district, you are likely to be shit out of luck. Hope you don't mind walking twenty minutes on top of your commute. And for what? So that those who can afford to pay the market price, a price set by the combination of large demand and quasi-fixed supply, will no longer have to deal with the interminable frustration.

Is it a bad idea? Within limits probably not. The current system of prices in-connected to demand is clearly a mess. But whenever someone tells you that the solution is a better pricing mechanism one should always pause to think about the distributional consequences of the policy proposal. In this case, it will effectively be putting the need for working people to find parking reasonably close to where they work against the consumption patterns of the wealthy. I wonder which will be priced out.

[1] Is it fair to say the targets of this policy? I think so. It only makes sense as a congestion reduction policy if it will get those who don't want to or cannot pay the price off the streets. Certainly this will effect middle class consumption, and will probably be a net positive. But it will also price out working people who will find yet another  obstacle in their way.

What else is like...

...the effect of the economy on election results. That is, there is a pretty broad consensus in the political science literature that the "fundamentals" determine electoral outcomes, at least in the US where our long election periods allow for campaign effects to wash out, leaving variables such as economic growth, unemployment, and party identification as the principal determinants of election results. But rarely are subsequently perceived consequential elections described in terms of the  economic growth of the previous administration (although there are exceptions, such as 1932).

What we get is the structure/agency disconnect, in which prominent and even dominant narratives (history trumps political science in discourse)  stress agency, but statistical analysis suggests that agency is much less important than the structural determinants. Popular perception, amongst practitioners and non-practitioners of the dark arts of politics alike, are in serious tension with the statistical evidence.

Question of the day: in what other domains does this general trend hold, in which there is a pretty strong consensus by people who study the field that everyone who actually does this for a living (i.e., the Obama advisors who believe a "choice" option rather than a "referendum" option will save the democrats come September)  is mistaken?

Gramsci and Reich

"One of the last things learned is the Duty of every Government to concur in & approve measures which they could not if they would hinder-in this way things are stopped from going to Extremes." Rufus King, 1821

This strikes me as both a fundamental and under-appreciated maxim of statemanship as well as a sad rationalization of someone who has already lost the war of position (Gramsci) and seen the goalposts successfully moved by the other side. On which, see Robert Reich's defense/critique of Obama.

"The real choice is between achieving what’s possible within the limits of politics as given, or changing that politics to extend those limits and thereby more assuredly achieve intended goals. The latter course is riskier but its consequences can be more enduring and its mandate more powerful, as both Lyndon Johnson and Ronald Reagan demonstrated."

The fundamentals of the recovery are sound....

That seems to be the message from the administration going into the midterm elections.

In an op-ed piece today, featuring the dreadfully tone-deaf title, "Welcome to the Recovery", Treasury Secretary Tim Geithner presents the good news....The public is unlikely to be fooled.... Americans are all too well aware of the extent of joblessness, and forecasts put a return to full employment around mid-decade. Banks and businesses have repaired their balance sheets—and  are too concerned about the state of recovery to do much new investment. 

I find this to be nearly as tone deaf as John McCain's claim in September 2008 that the "fundamentals of the economy are sound." McCain was rightly and widely criticized for this claim (although the fact that the fundamentals of the economy were indeed not sound is probably what led to the Republican defeat). It was so utterly tone-deaf that he spent considerable time trying to walk it back (remember his subsequent clarification that the fundamental of the economy is the American worker. You wanna talk smack on the American worker?). If the decision to go this route, the lie-to-the-American-citizen's-face path, is the best electoral strategy they've got, then they're in big trouble. If this, however, reflects the genuine belief of the administration, then it's us who are in trouble. This brings us to Brad DeLong's frequently asked question: "Why aren't there irresistible political demands for more government action to steer us toward a better economic recovery --or at least to hedge against a double-dip in what seems likely to be called not a “recession” but a “depression” when historians get around to writing about it?"


His theories are: 

1. "widening wealth inequality and an upgrading of the class position of reporters and pundits, who are no longer ink-stained wretches immersed in mainstream America;
2. the collapse of union power, which ensures that nobody who sees real workers on a daily basis sits at the table when the deals are made;
3. increasing job security for the powerful in Washington, aided by the growth of the lobbying apparatus that envelops the mixed-economy government;
4. the collapse of professional integrity among the Washington press corps, which no longer dares to call balls and strikes as it sees them, preferring to say only that the Democrats say it was a strike and the Republicans say it was a ball, and that opinions on the shape of the earth differ."

If you asked me a year or two ago, I would have probably said that the 2nd--the decline of the unions--was most important, followed by the 3rd. Increasingly, however, I believe that the first is an incredibly important factor, although I would not limit this to reporters and pundits but rather broaden it to include much of the professional Washington establishment class. For many, especially those with significant investments (other than real estate), the recovery is already well under-way.