Tuesday, February 21, 2017

The Rising Price Of Cars In A Pedestrian Wasteland And The Complexity Of Measuring Well-Being

This week I am visiting family in one of those places in the United States where you really have to have a car to get around -- not because it's like rural farmland or anything, but just because everything is sprawly and spread out and there isn't much in the way of pubic transport.

I am fortunate enough to be able to rent a car (and to be able to know how to drive, for that matter), but when I'm here I often think about how the landscape illustrates something important about how economic quality of life is something that transcends simple measures like "how much money you have."

Because to have a job, a family, or even a life at all here, you pretty much have to have access to a car. And "access to a car," while it sounds like something sort of straightforward is actually one of those things that is complicated and very contextual.

It's complicated and contextual, I think, because cars are one of those things where there's a minimum buy-in price -- and it's a price that is relative to the context. It's amazing how expensive cars have become, and how the effect of that has trickled down so that buying used cars is expensive and fixing cars is expensive.

As is often pointed out, cars have gotten expensive for reasons: modern cars are typically way safer than cars of the past, and they are more energy efficient, and they have more features and so on and so forth. So it's not just inflation, and it's not that cars just happened to get expensive. It's that cars got better. But cars got better in a kind of March of the Penguins kind of way -- that is, they got better all at the same time -- options to buy a cheap, less safe, less good car just disappear as time goes on.

If you look at the landscape in terms of how much money people have, it might look like they're doing pretty well. People who own these cars, after all, own something that not only costs a lot, but also has a lot of value. They own something that is genuinely worth something.

But if you look at the landscape in terms of how much people are able to do the things they need to do, it might look very different. A family with two adults and two grown children and one car, for example, owns something of great value -- and yet that family would be seriously constrained with respect to doing things. It would be hard to more than one of them to work, and maybe impossible for two of them to work, and even if they drive each other around and pick each other up, it'd be impossible for them to do all kinds of other things.

Obviously they don't have the scaling-down option that people often, unthinkingly, associate with constrained economic circumstances. It's easy to think that in a modern consumer economy that offers a lot of choices and options, people can sort of ratchet down their quality of life to fit their economic situation. If you can't afford beef, at least you can have pasta. If you can't afford Nikes, at least you can get some knock-offs at T. J. Maxx.

But with somethings, and especially electronics and appliances and large scale items, this isn't always the case. Sometimes they all improve at the same time, and if you can't afford the expensive version, you're just screwed.

For example, years ago my mother needed a new TV. A few months before, I had noticed the price of TV's falling dramatically, and I thought: no problem. I'd seen a medium-sized tube TV for sale for like 75 dollars. But when we went out shopping, there were no tube TVs. Now all TVs were flat screen, and the cheapest medium-sized one was like 250 dollars. If you're the person whose TV budged was 75 dollars -- well, you just got screwed, TV-wise.

And it's the same thing with cars. Once they all improve, the old ones go away. Sure -- you can buy a used car. But even fixing a car has become astronomically expensive. What you can't do is go back to the old fashioned car that someone could fix in their garage with cast off parts and a manual.

If you live in a place where cars are a necessity, this is a big, big, deal.

I guess the moral of the story is that when you're evaluating how people are doing, you can't just count money. Of course, that's long been known, and a related idea forms the cornerstone of the "capabilities approach": that you have to look not only at what people have but also at what they are enabled to do. I think that's right, but I also think the parable of the rising costs of cars shows that you don't need to take on board any fancy theoretical apparatus to see that measuring well-being is actually very complicated.

Tuesday, February 14, 2017

Economics Policies Have Losers and Winners. Why Don't Experts Talk About It?

Often, economic policies are justified by appeal to the fact that they will increase overall economic growth. And sometimes, resistance to those policies is framed as ignorance or lack of understanding about how economies work.

For example, in discussions of free trade and globalization, it is said in their favor that in certain contexts they are a kind of win-win: economic activity goes up, so things are just better overall.

Of course, as has been long understood, there's a problem: things being "better overall" is compatible with some people being made worse off -- perhaps even dramatically worse off. If a change in policy creates winners and losers, then as long as the winners gain more than the losers lose, this is making things "better overall."

Just as a simple example, policies that facilitate free trade might allow a commodity to be produced in a different country at lower cost. Shareholders of the company making the commodity might be made better off, and consumers who want to buy it might be made better off, while workers who used to produce that commodity at home will be made worse off -- because they will lose their jobs.

So, sometimes there are winners and losers. In a society committed to democracy, justice, and respect for persons, how is it OK to just create winners at the loser's expense?

You wouldn't know it to read the news, but this is something people have actually given quite a bit of thought to, and there are a couple of potential answers.

One answer is that they way things are should be evaluated not for being "best overall" but rather for being what's called "Pareto optimal": this means that no one could be made better off without making someone else worse off. "Pareto improvements" make some people better off without making anyone else worse off. One way to think about "Pareto improvements" is that since they are changes that make someone better off without making anyone worse off, they are changes that everyone would consent to -- at least in the abstract.

Personally, I'm skeptical about this idea of abstract consent. If you're a member of a historically oppressed and marginalized group, and a policy could create improvements for people in the dominant group and no improvements for people in your group, why would you consent in the abstract? I wouldn't.

But what's more directly relevant here is that insisting that a change make a Pareto improvement is a high bar and a restrictive criterion. In essence, Pareto improvements create winners with no losers. How many economic policies or changes in society are going to do that? (Freakonomics blog says: "Extremely few"). Our imaginary example wouldn't qualify, because the workers are losing out and being made worse off.

A less restrictive criterion is "Kaldor-Hicks" efficiency, with the corresponding notion of a Kaldor-Hicks improvement. A change is an improvement in this sense "if those that are made better off could hypothetically compensate those that are made worse off (thus leading to a Pareto-improving outcome)."

Now, maybe we're getting somewhere. In our imaginary example, the change would be a Kaldor-Hicks improvement if the amount by which the winners would gain would be greater than the amount by which the losers would lose. If the winners' gains were used to compensate the losers, they'd still have gains left over, and then, bracketing the problem of historical injustice, we are at least approaching the idea of the change being a "win-win" and something that could be an improvement for everyone. There would effectively be no losers after all.

And here, finally, we arrive at the question of this post. Why do you never hear about this idea of compensation? Never mind the fact that it never happens in practice -- why does no one ever even talk about it? When's the last time you heard a policy-maker, public intellectual, or economist quoted in the news talking about how policies like free trade and changes like increased globalization are OK because, although they create winners and losers, the winners could compensate the losers so everyone is made better off?

The answer is never. I'd never heard of this criterion until I started studying philosophy of economics. So, what's up with that?

Is it: 1) that, appearances to the contrary, the criterion has nothing to do with "compensation," and is just a nice-sounding way to say that the benefits exceed the costs? So "it is justifiable for society as a whole to make some worse off if this means a greater gain for others"? So it's OK that losers lose out, and who cares?

If this is it, I think we're back at square one. Suppose a policy change will add massive wealth to the rich and take resources away from the poorest people. What if the wealth of the rich is ill-gotten gains in the first place. Does the fact that the massiveness of the wealth is massive enough make this change OK? I don't think so, and I expect a lot of other people don't think so either.

Is it 2): that policy-makers and people talking about these things know and believe in the abstract about the compensation idea, but think that talking about it publicly is gauche or dangerous? Remember how Mitt Romney said it was OK to talk about inequality, but only in "quiet rooms"?

If this is it, I take it the problems are obvious. In a democracy, you can't expect experts to work out policy solutions in quiet rooms behind closed doors and expect people to put up with it. As people are making increasingly clear, they will not put up with it.

Is it 3): that, ultra-cynically, there's a hope that the losers will just somehow die off, and leave the winners winning with all their gains intact? It might sound extreme. But if you're living in one of the areas of the US decimated by opiate addiction, job loss, and no health care, it might seem completely plausible.

Anyway, I expect that if you talk to people about these matters, most people don't know or care about abstractions involving optimality and cost-benefit-analysis, they just think that people who work hard should be able to live a decent life, and things like that. There are also people who are committed to free trade on other grounds -- absolute liberty rights, or something. My question is not about these people, but rather about the public experts who tow the party line about overall economic growth and who are immersed in this sort of thinking.

The next time such an expert is interviewed by a reporter about trade policies and economic growth, wouldn't it be great if they stopped and said, "You know, the really important thing about economic growth is that for a policy to be a good one, the winners have to compensate the losers, and so we need clear mechanisms to make that happen"?

Tuesday, February 7, 2017

Mysteries Of The Toronto Bus Terminal: WTF?

As we've had occasion to discuss in this space before, I take the bus. Since I live in Toronto, this means I spend a certain amount of time in the Toronto bus terminal, downtown at Bay and Dundas. Since I often take an early morning bus, much of that time is spent in the predawn light and corresponding predawn mood one tends to get into on dark mornings, when you look around and wonder: what is this grim world, and how did it get to be this way?

I moved to Toronto in 2005, and the bus terminal seemed to me a fairly typical urban bus station -- except for the absurdity that you have to line up for the bus outside, while even a crowded city like New York manages a heated indoor line-up system. You could see how the building used to be cool, and even elegant: right in the middle, a now-blocked off double staircase leads to a second floor with stained glass decoration and so on. And you could see how over time, cheap additions and fixes had made it crappy-looking.

Still, it was a completely serviceable bus terminal. A set of kindly and knowledgable middle-aged people worked the ticket counters, and I always appreciated that they all sold tickets for both Greyhound and Coach Canada, reducing overall line-up times. There was a weird, dark bar in the bottom floor -- not a place I'd ever considered going, given nearby attractive alternatives, but you know -- it was always nice to know that if you got stranded by a snowstorm, at least you'd have TV and drinks. The station is attached by underground pathway -- with shops and coffee -- to the subway, and there were up escalators from coffee to bus in the morning and down escalators from bus to subway at night.

Bizarrely, the first step in the decline of the bus station was Greyhound's introduction of a "facility fee" that you had to pay whenever you bought a ticket at the counter instead of online. At first it was a dollar, and I thought to myself, "Good, this place could use some improvement." One set of doors was blocked off, and the other two were made automatic and more accessible, which seemed like a step forward.

But from then on it's been a descent into utter dysfunction. The automatic doors stopped working soon after, and never really got fixed. The reasonable waiting area was divided into a normal waiting area (now small and cramped) and a special waiting area (for certain special buses). You'd think the bus station would be the last place you'd have to deal with the insane drive toward the "first-classification" of society -- but you'd be wrong!

The "facility fee" was increased -- to two dollars. And then the set of kindly and knowledgable middle-aged people disappeared overnight, replaced with young, untrained people who don't know the rules for using flex-packs, and, of course, now the Greyhound and Coach Canada lines are separate. Since Coach Canada attracts like one-tenth the customers, this means the Greyhound lines are twice as long while the Coach Canada ticket sellers are just sitting there.

Years and years ago -- I can't even tell you how many, it's been such a long time -- the up escalator broke. For years, I thought, "Why don't they at least flip the down escalator to up, so people can get their bags up to the bus?" And for years, I thought, "how is it even possible that an escalator can just stay broken for such a long time"? Then, about a year ago, the down escalator broke as well. They're both still broken. And, of course, the bar in the bottom floor is now gone and boarded up.

This is the biggest city in a rich modern country. And we can't keep the bus terminal functioning? WTF? What are the forces in question? Is it public-private squabbling over who should pay? Is it Greyhound dysfunction? Is it the city that doesn't want to pay? Toronto just built this super glam terminus for the Union Pearson express, they whole of Union Station is getting a make over -- and we can't keep the bus terminal functioning?

I've heard it darkly suggested that the city doesn't want a bus terminal at Bay and Dundas -- preferring instead a transit hub somewhere way out of the way. If you take the bus like I do, you'll know why that is a sinister, offensive, and elitist idea. It's one thing to hop on a bus downtown. It's a whole other thing entirely to take public transit out to some insane "transit hub," wait on some freezing platform in the middle of nowhere, just to get on another bus to get to where you're going. The fact that it's prime real estate is what makes it a good location for a bus terminal.

If there are these kinds of forces in play, it's hard not to suspect that they have something to do with the fact that poor people tend to take the bus, and with the way that homeless people tend to gather around the station to ask for money from people. It's another step on the steady march of disenfranchising poor people by getting them out of the way so the elite, professional, and managerial classes don't have to deal with them. Horrible.

The city is constantly wringing its hands about how to get people to drive less and take public transit more. Just today a major plan was announced in response to the massive increase in drive times expected to happen in the next decade or so, because of all the traffic.

And in the face of all this, we can't fix a couple of escalators? It's insane.