Archive for August, 2011

Perry has received a lot of negative press lately. Yesterday, a piece in Politico asked a simple question: Is Rick Perry Dumb?  There was no definitive answer in the article, although there was a Perry quote that I found a bit endearing: “My brain is like a chicken pot pie.”

Today the Washington Post has two pieces that seem to arrive at rather different reasons to oppose Perry.  Ruth Marcus provides a quick review of some of the “terrifying” statements in Perry’s most recent book, Fed Up.

Some of the revelations are startling(…even shocking). For example:

  • Perry would like to repeal the 16th amendment, thereby ending the income tax
  • Perry opposes the 17th amendment because the direct election of senators was a “blow to the ability of states to exert influence on the federal government”
  • Perry views the New Deal and the Great Society as (you may want to sit down when you read this) episodes of dramatic expansion in the role of the state. “From housing to public television, from the environment to art, from education to medical care, from public transportation to food, and beyond, Washington took greater control of powers that were conspicuously missing from Article 1 of the Constitution,”

Much of this is standard fare for those who embrace some form of libertarianism (for more on this topic, see Perry Bacon’s piece from this weekend).

Is Perry a libertarian? There are a few ways to address this. Previous postings on Pileus and press coverage of crony capitalism in Texas would suggest that there have been some rather expedient departures from libertarian principles. However, we need not embrace the empirical record in Texas. All we have to do is consider Perry’s faith.

Thus, in another piece in today’s WaPo, Dana Milbank dismisses the characterization of Perry as a libertarian. In his words:

Yes, Perry is passionately anti-government, or at least anti-this-government. But the man who suddenly tops the Republican presidential polls is no libertarian. Rick Perry is a theocrat.

Evidence: Perry opposes “the radical homosexual movement,” rejects evolution and embraces a literalist position regarding scripture and salvation. In Perry’s words: “The truth of Christ’s death, resurrection, and power over sin is absolute. . . . What we believe about it does not determine its truthfulness.”

But the term “theocrat” suggests that Perry hopes to establish a theocracy and use the power of the state to impose God’s law. I don’t see much evidence of this in Perry. If anything—and here Marcus has it right—he seeks to embrace the core provisions of the original (and “terrifying”) constitution, thereby dramatically reducing the role of the federal government to that envisioned under Article 1.

Let us assume that Perry’s religious statements reflect his personal piety rather than an opportunistic appeal to evangelical voters. Is it possible for one like Perry to simultaneously promote a conservative biblical faith and argue that the constitution should place hard limits on state authority?

Not according to some of his critics. For them, it seems faith = theocracy, unless it is the gooey faith of the largely secularized mainstream church that either ignores or severely discounts the hard words of the gospels.

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I want to piggy-back here on Mark’s great post on urban planning and the poor. I’ve been playing around with some state-level data on local land-use regulations and cost of living. The last decade in the U.S. has been one of very slow productivity growth. As a result, fast-growing states tend to be those with low growth in cost of living. This explains not just states like Texas but North Dakota as well (and at the other end, California). Take a look at the list of states with highest annualized real personal income growth over 2000 to 2007 (the deflator, a state cost of living index, comes from the newest, 2009 Berry et al. data, which explains why the series ends at 2007):

1. Louisiana – 2.8%
2. Wyoming – 2.8%
3. North Dakota – 2.6%
4. South Dakota – 2.1%
5. Oklahoma – 1.9%
6. Arkansas – 1.8%
7. Mississippi – 1.5%
8. Nebraska – 1.5%
9. Montana – 1.5%
10. Kansas – 1.4%

Surprised? These are hardly “knowledge economies.” In some cases, mining or energy accounts for strong growth, and indeed in multiple regression mining share of GDP in 2000 does strongly explain subsequent real personal income growth (per capita or total). And in Louisiana’s case Hurricane Katrina chased away a lot of low-income people. But part of the story is elastic housing supply leading to low growth in house prices during the 2000-2007 bubble. A better measure of state economic success is arguably total rather than per capita income growth, which rewards states that attract people. Here are those numbers:

1. Wyoming – 3.6%
2. Nevada – 3.1%
3. Florida – 3.0%
4. South Dakota – 2.8%
5. Arizona – 2.8%
6. Arkansas – 2.6%
7. Texas – 2.6%
8. North Dakota – 2.6%
9. Oklahoma – 2.5%
10. Louisiana – 2.5%

Again, these states have in common slow growth in housing prices during the bubble. And what explains slow growth in housing prices? Land-use regulation. I use the Gyourko et al. land-use regulation variable to predict both cost of living in 2000 and growth in cost of living over 2000-2007. It is an extremely strong predictor of both (statistical significance>99.99%). When net 2000-2007 in-migration (% of 2000 population) is regressed on both 2000 cost of living and the land-use regulation index along with controls (economic and personal freedom, 2000 accommodations GDP per capita), both are highly statistically significant and negative. When total personal income growth is regressed on migration, controls, and the land-use regulation index, land-use regulation is insignificant while migration is highly significant and positive. No surprise there – land-use regulation doesn’t reduce total factor productivity, but it does discourage labor inflows.

So here’s the big story of growth in those states that have experienced it in the last decade: lack of land-use regulation –> slow growth in cost of living –> more in-migration –> more income growth. Highly regulated states like California (-0.4% annual growth), Oregon (0.1%), Massachusetts (0.1%), and New Jersey (0.3%) could learn something. If we are entering a “great stagnation,” we may have to squeeze increases in living standards out of lower prices rather than innovation for a while.

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English poet John Milton (1608-1674) with some thoughts on the English Revolution that might be helpful for those contemplating or participating in the Arab Spring?

That a nation should be so valorous and courageous to win their liberty in the field, and when they have won it, should be so heartless and unwise in their counsels, as not to know how to use it, value it, what to do with it, or with themselves; but after ten or twelve years’ prosperous war and contestation with tyranny, basely and besottedly to run their necks again into the yoke which they have broken . . .

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This proposal in the UK to tax “fatties” highlights once again how once government gets deeply involved in funding health care, the pressures to control people’s lifestyles become significant. This is the same argument we hear from supporters of sky-high cigarette taxes, smoking bans, seat-belt and helmet laws, ad nauseam. “We all pay for it.” If only we didn’t.

More on the public health scam.

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AFL-CIO President Richard Trumka is threatening to refocus union funds to promote unionization rather than the election of Democrats. Having been disappointed on card check and dismayed by the administration’s post-2010 shift to deficits over job creation, Trumka is questioning whether the AFL-CIO will participate in the Democratic National Convention (to be held in North Carolina, a right-to-work state). Much, it seems, will depend on Obama’s job package. As the WSJ reports:

“This is going to be a moment in history when our members are going to judge him,” said Mr. Trumka. The consequence of a weak effort, he said, will be poor voter turnout among union members in 2012.

After defining the political agenda for a generation, the New Deal coalition has frayed. Is the defection of labor the last gasp for the party FDR built? I have my doubts, for at least two reasons:

First, while the AFL-CIO has had a rather elevated role in the Democratic Party (as the WSJ piece reports, at the 2008 convention “a quarter of the more than 4,000 convention delegates were active or retired union members”), unionization rates have fallen dramatically over the course of the past several decades. In 2010, the unionization rate was 11.9 percent (according to the Bureau of Labor Statistics), compared with 20.1 percent for 1983. More importantly, this number is inflated by the high level of unionization among public sector workers (36.2  percent) relative to private sector workers (6.9 percent). To state things plainly, the unions simply do not carry the political weight they once did.

Second, while Trumpka’s should be dissatisfied with the Obama administration’s failure to carry through on its pro-labor promises—and even more significant union defeats in several of the states–he has also announced that the AFL-CIO is going to create a Super PAC with “funds that will be collected from various unions along with outside donors. The money will be used…to deliver votes for union-backed candidates next year.”  If past union giving is any guide, the vast majority of this money will go to Democratic candidates.

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Many government interventions in markets though they are often justified in terms of the ‘public interest’ work to the disproportionate benefit of organised interests – often the rich or relatively rich – and at the expense of the unorganised and often relatively poor.

One area of public policy where this pattern is particularly evident is that of urban planning. In the United States, as Jane Jacobs showed so powerfully, the subsidised construction of luxury hotels, civic centres and highways has often paid precious little attention to the fate of the people and small businesses that have been ‘relocated’ to make way for politically high profile ‘regeneration’ schemes. The principal beneficiaries have often been large scale property interests who secure access to land on terms that would not have been available in a free market. In the United Kingdom meanwhile, large scale ‘slum clearance’ programmes in the post war era saw hundreds of thousands of low income people ‘relocated’ to high rise blocks – a process which often destroyed local community support networks but secured jobs for thousands of middle class local government housing managers and for large construction contractors which built what turned out to be some of the worst urban housing projects anywhere in the developed world.

As well as crimes against the poor in the name of urban renewal, urban planning has often prevented low income people from accessing housing in suburban and semi-rural areas where new and better paying jobs have been created. The primary culprit here has been restrictive zoning regulation – and in the British context the creation of development free ‘green belts’ around major towns and cities (now imitated by some US cities such as Portland). The effect of these controls has been to restrict the supply of land for housing forcing up the price well above free market levels. The major beneficiaries are of course existing home-owners in areas of high housing demand who benefit from increased property values and who use land use regulation to keep out ‘less desirable’ residents. In the UK specifically many analysts have pointed to a ‘drawbridge effect’ where the middle classes move out of the cities to rural and suburban areas and then promptly demand tougher regulation to ‘keep out’ the less well-heeled and the new building that would be needed to house them. Similar processes operate in the US where ‘large lot’ zoning ordinances that mandate minimum lot sizes of several acres in many states have been used to maintain neighbourhood exclusivity.

These predominantly middle class motivations are reinforced by the gains that flow to corporate housing developers who use urban planning regulation to reduce competition. Corporate developers favour a system which provides permission to develop their own land while affording opportunity to restrict access to land for their competitors. Smaller firms in particular tend to be squeezed out of the market owing to their relative inability to afford the expenses and legal fees needed to lobby effectively to secure development rights through the political process. The effects of this phenomenon have become particularly pronounced in the UK where the ‘self-build’ sector has been almost entirely eradicated. Individuals who might want to build their own homes or contract with a small developer often can’t afford the expense of going through the planning process themselves and must rely instead on the corporate sector.

Of course, to point out the pernicious effects of urban planning controls, is not to suggest that there is a case against all such controls. If we want to protect open spaces and other environmental assets then land use regulation has a role to play – but much of this can be provided privately and need not operate in a zero-sum manner. Homebuyers who value open space protection and other environmental controls, for example, may purchase developments with restrictive covenants or contract into private communities which impose land use restrictions on plots within their domains in order to maintain neighbourhood integrity. In these cases middle class homebuyers have to compete directly in the market with those who value land in alternative uses (land without housing controls) and are faced with the cost (via higher prices) of the level of regulation they demand.

All the evidence suggests that the demand for environmental protection is closely related to income. The rich and the middle classes have a stronger preference for land use controls than the poor. What state enforced, as opposed to private urban planning enables them to do, however, is to secure access to environmental quality ‘on the cheap’ and to do so at the direct expense of lower income groups. When those on middle and higher incomes have to pay directly for the right to regulate land via private contracts then they will tend to demand less of the relevant regulation overall. By contrast, under a state-directed system, middle class groups wanting more restrictive controls can simply lobby the political authorities for ever more restrictions on other peoples’ property. Because they do not face the full opportunity cost (higher prices and fewer homes for those on low incomes) of the policies they support, an excessive amount of regulation is demanded.

The effects of urban planning referred to in this post have been documented by academic analysts on both the ‘left’ and the ‘right’.* Virtually all of the studies conducted in the UK, USA and in many other countries confirm that government-led urban planning redistributes income and opportunity away from the poor and towards the middle class and the rich. The big question that needs to be asked is why, in light of this evidence, so many British ‘socialists’ and American ‘liberals’ who profess to be concerned about ‘social injustice’ continue to support it.

*‘Left of centre’ analyses of these effects include Logan and Molotch (1987) Urban Fortunes, University of California Press. Pahl (1975) Whose City? Penguin. (1975) Hall, P. et al (1973) The Containment of Urban England, London: Allen and Unwin. My own earlier work analysed these effects from a public choice perspective – see Pennington (2000) Planning and the Political Market: Public Choice and the Politics of Government Failure, London: Athlone/Continuum.

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At least, that’s what Conor Friedersdorf at The Atlantic claims. He reviews criticisms of Paul from Matt Yglesias and Adam Serwer, which basically boil down to: he’s pro-life; he favors enforcing immigration laws; he’s a bit kooky about the importance of the Fed. Friedersdorf then puts the boot in:

Wow. They make Ron Paul sound pretty bad. But they’re planning to vote for a guy who is even worse on civil liberties! That’s what gets me about these posts. I am all for critiquing Ron Paul. The newsletters to which he foolishly lent his name were awful. It is indeed wrongheaded that he wants to return to the gold standard. And if America were on the cusp of protecting the civil rights of black people for the first time, I’d campaign against Paul, despite being quite sympathetic to his stance on other issues. Do you know why? It’s because I care about actual liberty enhancing outcomes, whereas both Yglesias and Serwer are evaluating Paul’s candidacy in a way that is curiously removed from the issues that confront us or what would plausibly happen if he won.

As a libertarian who’s somewhat ambivalent about Paul because of issues like trade, immigration, earmarks, and DOMA, not to mention the racist newsletters, I have to say: Right on. If Paul ends up having a truly non-negligible shot at the nomination, I’ll probably vote for him. Otherwise, I’ll go with the guy who lacks these hangups: Gary Johnson.

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