Thursday Nov 20, 2008

In Need of an Economic Strategy

Michael Porter, the business strategy guru from Harvard, writes about "Why America Needs an Economic Strategy".

His essay deserves a careful read by business and political leaders in the U.S.

Saturday May 12, 2007

Security Consequences of Urban Planning


Modern urban planning in the U.S., as it has been conceived and implemented in the urban sprawl since WWII, poses serious security concerns that arise from its economic vulnerabilities. The vulnerabilities are both explicit, in terms of direct transaction costs such as transportation to work, and more implicit, in terms of aggregate and individual worker productivity. Thus, did The Economist ("In a Jam," May 5, 2007, p. 38) describe the situation in the area where I live:

[The] Bay Area is not set up like a European metropolis. Most suburbanites have quite a drive just to get to an underground station, and must then win a vicious struggle for parking to make it onto a train.

The description fits well with my family's experience here.

In major American cities, workers have to drive long distances (of the order of 80 - 200 km / day) from home to work and back, and a significant increase in gas prices, without a similar increase in better communications technologies (that allow people to reduce trips to work to compensate for other losses) or a similar increase in energy efficiency of automobiles (at the same unit price) can cause perturbations towards lower growth rates.

Lack of adequate and efficient public transportation is not limited to major cities. One in eight who live in the U.S. live in California, just as I do. The state by itself has consistently accounted for one of the top 10 largest GDPs in the world for multiple decades, and it drives the U.S. economy with its vast consumption, tax base, farming and real estate, not to mention high technology. And yet, there are no super fast trains connecting any of its major metropolitan areas together: Los Angeles, Orange County, San Francisco Bay Area, Sacramento Valley, etc.

The economic inflexibility of urban sprawl leads not only to higher overall transaction costs throughout the economy but also to instabilities in various sectors. For example, The Wall Street Journal recently reported that 51 leading retail store chains have reported a collective 2.3% decline in same-store sales. Michael Niemira, chief economist of the New York-based International Council of Shopping Centers says this is the weakest showing since he began tracking the closely watched industry measure of performance in 1970. People have blamed this on a soft housing market, bad wheather in March, a fast Easter or fuel prices. Fuel prices and a soft housing market seem to be the most likely explanations for why this drop has been as large as it has been. While the real estate industry benefits from generally cheap gas prices (which lead to better possibilities for greater urban sprawl) and may be willing to go to war for it (observe how the representatives of American economic power offered almost universal support, in 2002-2003, for aggression against and occupation of Iraq), the spending for war might come back to bite the real-estate and other industries in the form of rampant deficits and inflation, higher interest rates, higher fuel prices and general asset attrition. One would expect that the economic elites and political leaders of a super power to comprehend that peace, justice, stability and truly open commerce (of course, not in commerce of aggressive war machinary) remain the solid base and the best guarantors of mutual understanding and development, economic vitality and growth. However, "stability" is often confused with the extension of imperial rule. In the meantime, a rampant political jargon and an infected moral language equates mass aggression with liberation, injustice with natural rights, murder with "collatoral damange," etc. Such infection of moral language, publicly spread, will always fog people's minds and provide a kind of self-belief among the elites to perpetuate the rule of what becomes a militaristic economy unashamedly pursuing its ends until it exhausts all resources at its disposal (and reaches its own end) at a huge toll in human life and well-being.

Friday Feb 23, 2007

How Overregulation Breeds Corruption

Overregulation can breed corruption because it can categorize vast groups of otherwise normal people as criminal.

Here is how professor of law Lawrence Lessig has argued this case in his Free Culture: How Big Media Uses Technology and the Law to Lock Down Culture and Control Creativity:

Overregulation stifles creativity. It smothers innovation. It gives dinosaurs a veto over the future. It wastes the extraordinary opportunity for a democratic creativity that digital technology enables.

In addition to these important harms, there is one more that was important to our forebears,but seems forgotten today. Overregulation corrupts citizens and weakens the rule of law.

... We regulate automobiles to the point where the vast majority of Americans violate the law every day. We run such a complex tax system that a majority of cash businesses regularly cheat. We pride ourselves on our “free society,” but an endless array of ordinary behavior is regulated within our society. And as a result, a huge proportion of Americans regularly violate at least some law.

This state of affairs is not without consequence. It is a particularly salient issue for teachers like me, whose job it is to teach law students about the importance of “ethics.” As my colleague Charlie Nesson told a class at Stanford, each year law schools admit thousands of students who have illegally downloaded music, illegally consumed alcohol and sometimes drugs, illegally worked without paying taxes, illegally driven cars. These are kids for whom behaving illegally is increasingly the norm. And then we, as law professors, are supposed to teach them how to behave ethically—how to say no to bribes, or keep client funds separate, or honor a demand to disclose a document that will mean that your case is over. Generations of Americans—more significantly in some parts of America than in others, but still, everywhere in America today—can’t live their lives both normally and legally, since “normally” entails a certain degree of illegality.

The response to this general illegality is either to enforce the law more severely or to change the law. We, as a society,have to learn how to make that choice more rationally. Whether a law makes sense depends, in part, at least, upon whether the costs of the law, both intended and collateral, outweigh the benefits. If the costs, intended and collateral, do outweigh the benefits, then the law ought to be changed.

Alternatively, if the costs of the existing system are much greater than the costs of an alternative, then we have a good reason to consider the alternative.

... The rule of law depends upon people obeying the law. The more often, and more repeatedly, we as citizens experience violating the law, the less we respect the law. Obviously, in most cases, the important issue is the law, not respect for the law. I don’t care whether the rapist respects the law or not; I want to catch and incarcerate the rapist. But I do care whether my students respect the law. And I do care if the rules of law sow increasing disrespect because of the extreme of regulation they impose. Twenty million Americans have come of age since the Internet introduced this different idea of “sharing.” We need to be able to call these twenty million Americans “citizens,” not “felons.”

Sunday Nov 12, 2006

Koppel on Social Change

People in their 30s and 40s may still remember Ted Koppel from "the hostage crisis." He made a career out of reporting it. Now, for the Discovery Channel, he has filed a new video documentary on Iran, speaking to a number of individuals and opinion makers. While still rooted in the common biases of the Western and American discourse on Iran, it provides a platform for a potentially better understanding of the immense transformations that have followed the Islamic Revolution of 1979 by virtue of interviews conducted with a relatively broad range of Iranians. (Most of those interviewed, either appear to know little about those biases or, out of sheer politeness, let Koppel get away with them. A good training in journalism would make it clear to anyone that every question can come loaded with assumptions. However, one needs a good sense and training as a politician to respond or to unload and disclose the assumptions.)

Friday Nov 10, 2006

A Persian Blogger Comes of Age

 The Power of the Press

If you know Persian, occasional viewing of Hossein Derakhshan's Persian weblog might benefit you. He also has an English weblog and a photoblog worth a visit for a cultural study if nothing else. The Washington Post carries another regular blog of his.

Derakhshan's recent piece analyzing current politics of Iran might be a good lesson for those Persian speakers who have a tendency to provide knee-jerk analysis of the Iranian history of the last 30 years. The title is a bit odd but clear "چرا با براندازی حتی نرم هم مخالفم" ("Why I'm opposed to regime change of even the soft variety"). I've not included the link to this particular entry of his but you can search for it on his Persian blog if you're interested. If you don't know Persian, you can turn to his Washinton Post blog, mentioned above, for a taste of his writings.

Athough Derakhshan takes the job of the journalist somewhat seriously and does quite a bit to expose double-standards everywhere he can see it, his failing (if any) seems to be related to an exaggerated view of the role of the journalist in modern society up to a purist theoretical limit beyond any dreamed up by common Western journalists in Europe or North America. One may also detect an exaggeration with respect to the actual (as opposed to either the theoretical or the subservient) capability of a journalist to transform society, which in practice tends to remain limited because of subtle realities of human life that stand beyond and above opinions of one sort or another. To his advantage and credit, Derakhshan insists on remaining at least self-consistent unlike some of his peers who go as far as advocating false concepts such as judicious double-standards.

In his "History of American Journalism classes," professor Thomas C. Leonard of UC Berkeley used to ask whether journalists, under the Fourth Estate, had perhaps evolved into a new type of priesthood (The Power of the Press: The Birth of American Political Reporting), and Kierkegaard would have hated that very aspect of modern times, The Present Age, and Ayn Rand tried to capture it all in her Fountainhead. This perspective, focusing on the leveling effect of the journalistic approach to understanding our moral place in the world, while full of modern rings, goes back all the way to Socrates and his dislike of the rhetoricians of the courts who could make anything sound right or good. Hence, his repose into dialogs

Who is right? The confusion continues, and perhaps, the disintegration of authentic communities of moral practice tend to give rise to priestly elites who busy themselves with "useful" justifications (of torture under "rules," e.g., by Alan Dershowitz: here, here, here; here and here) instead of advocating well-established and crystal-clear moral concepts having to do with human beings and their due integrity and honor, and also, to journalists who play the missing priests--to use professor Leonard's reluctantly-drawn  but apt analogy.




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