Welcome back to Sunday reading. This week, the US elections are over. So is the US, probably. If there’s one thing that history teaches us, it’s that countries taken over by authoritarian strongmen who are willing to subvert democratic norms and destroy public institutions to maintain power frequently don’t recover from it. Think Venezuela under Chavez or Russia under Putin.
But we’re not going to talk about that. We’re going to talk about where some big-picture economic trends are taking us.
First, Binyamin Appelbaum at the NY Times’ Upshot blog points out “a little noticed fact about trade: it’s no longer rising“:
The Walmart revolution is over. During the 1990s, global trade grew more than twice as fast as the global economy. Europe united. China became a factory town. Tariffs came down. Transportation costs plummeted. It was the Walmart Era.
But those changes have played out. Europe is fraying around the edges; low tariffs and transportation costs cannot get much lower. And China’s role in the global economy is changing. The country is making more of what it consumes, and consuming more of what it makes. In addition, China’s maturing industrial sector increasingly makes its own parts. The International Monetary Fund reported last year that the share of imported components in products “Made in China” has fallen to 35 percent from 60 percent in the 1990s.
The result: The I.M.F. study calculated that a 1 percent increase in global growth increased trade volumes by 2.5 percent in the 1990s, while in recent years, the same growth has increased trade by just 0.7 percent.
Worth watching carefully – if this trend continues, it will have big implications for many places.
Sorry Australia. We love you, but this is funny pic.twitter.com/Tj7BukIpmI
— Jocasta (@UKBizpromotion) November 4, 2016
Second, Conor Sen argues (in Bloomberg View) that so-called ‘disruptive tech’ has in fact disrupted very little: “Tech has not shaken basic economics“:
This isn’t to deny the impact technology has had this decade. Facebook and Netflix have transformed media and entertainment. Amazon continues to reshape commerce. Ad dollars continue to move from print and television to digital, particularly mobile. But for economists and academics concerned with the big drivers of the economy — employment, productivity, housing and big-ticket consumer purchases — the late 2010s are not a glimpse of the new economy. They are textbook examples of the old economy.
Sen has a point: trends in car ownership and first home purchases are, in the short run, probably best explained by sudden changes in income rather than sudden changes in preferences. Young people have done badly out of the post-GFC economy, and purchases of big expensive things tend to go down as a result. But I also think that it’s possible to under-sell some of the long term impacts of technological change. Watch this space, basically.
— My Modern Met (@mymodernmet) October 30, 2016
Third, the Niskanen Centre’s Will Wilkinson raises an interesting question for people on the libertarian/small-government end of the political spectrum: “What if we can’t make government smaller?”
“Wagner’s Law” says that as an economy’s per capita output grows larger over time, government spending consumes a larger share of that output. There’s no reason to believe Wagner’s Law is a real social-scientific law—that it captures a real relationship of strict if-this-then-that causal necessity. Which is to say, it wouldn’t be a miracle if GDP increased for a few decades, but the government’s share of GDP didn’t. Yet that never happens in countries with political systems like ours.
As Andreas Bergh, an economist at the University of Lund, puts it, “Given how rare laws are in the social sciences, the positive correlation between the public sector’s share of GDP and real GDP per capita remains an important regularity.” Peter Lindert says that “[t]he notion that income growth will raise taxes and government spending, including social spending, is the most durable black box in the whole rise-of-the-state literature.”
[…] There’s an abiding faith on the right that there must be policy levers that can be pulled to reduce political demand for government spending. The idea that it is possible to “starve the beast”—to reduce the size of government by starving the government of tax revenue—springs from this hope. But the actual effect of cutting taxes below the amount necessary to sustain current levels of government spending only underscores the unforgiving lawlikeness of Wagner’s Law. As our namesake Bill Niskanen showed, tax cuts that lead to budget shortfalls don’t lead to corresponding cuts in government spending. On the contrary, financing government spending through debt rather than taxes makes voters feel that government spending is cheaper than it really is, which makes them want even more of it.
[…] Giving up on the quixotic quest to find the magic words or the magic policy lever that would finally and decisively falsify Wagner’s Law would also lead us to distinguish more clearly between the welfare state and the regulatory state, and to focus our energy on removing regulatory barriers to economic participation, innovation, and growth. We’ll see more clearly that a small government and a limited government that reliably protects rights and promotes freedom aren’t really the same thing. And we’ll begin to recognize that sowing antagonism to the welfare state hasn’t accomplished anything very constructive. The war against the welfare state hasn’t slowed growth in welfare-state spending so much as it has made our system unusually loathed and unusually shoddy. Mostly, it has fostered a divisive, racially-tinged “makers vs. takers” narrative while encouraging opposition to reform measures that might have made our safety net fairer, more efficient, and better at minimizing the economic anxieties that drive populist political sentiments fundamentally at odds with an open society of free markets, free trade, liberal migration, and peace.
Whether you’re left, right, or centre, it’s worth considering Wilkinson’s case that our main focus should be on having a government that does things well, rather than a government of a particular size. He draws an important distinction between the ‘welfare state’, which aims to ensure that everyone has access to the things that they need to live a good life, like education, healthcare, and unemployment/disability insurance, and the ‘regulatory state’, which aims to manage and direct private economic activity. People often conflate these two things, but they’re very different in practice.
— Brayan González (@bragohe) November 11, 2016
On a separate note, Brad Plumer at Vox makes the case for more urban trees:
…urban trees do at least two important things for public health:
1) They can soak up fine particle pollution from cars, power plants, and factories — an important job, given that particulates wreak havoc on human lungs and kill some 3.2 million people worldwide each year. The precise effect varies from city to city, but generally trees do improve air quality.
2) Urban trees can also cool down neighborhoods anywhere from 0.5 degrees Celsius to 2 degrees Celsius on the hottest summer days, which is vital during deadly heat waves. (Studies have found that every additional 1 degree Celsius in a heat wave leads to a 3 percent or more increase in mortality.)
The new Nature Conservancy report sifts through all this research and lays out some global scenarios. At the high end, a massive new tree-planting campaign in the world’s 245 largest cities, costing around $3.2 billion in all, could save between 11,000 and 36,000 lives per year worldwide from lower pollution. Those trees would also prevent between 200 and 700 heat-wave deaths per year — with that number presumably going up over time as global warming unfolds.
On a similar note, Charlie Sorrel at Fastcoexist reviews some new research showing that “the well-designed city is a healthy city, all over the world“:
If you design a city to get people walking, then people will do more physical activity. A new global study has found that a well-designed neighborhood not only keeps people fit but can reduce obesity, diabetes, and heart disease.
The correlation between walkability and public health has been made before, but this study, published in the Lancet, looked at 14 cities in 10 countries, all of which had a similar design, in order to determine whether or not the cities’ layouts themselves were the reason for increased health, as opposed to different lifestyles in different countries…
The biggest design factors affecting the amount of “moderate to vigorous intensity physical activity,” including walking, were: residential density, park and public transport density, and intersection density. Parks are obvious in their effect—people take walks in parks. Residential density is important because if you live in a compact neighborhood, you can easily walk to do your errands. And public transit density is important because not only does it obviate car use, but people have to walk to their nearest station instead of their driveway.
One thing I would like to see out of this study is a clearer account of causality. The correlation is very strong, but there’s also a possibility that some people select into more walkable places because they want to walk more. However, this is unlikely to overturn the findings, given the fact that the same relationships were observed in many different contexts.
In terms of policy change, it’s also clear that we need to do things differently if we want to have healthier cities. Street trees and public parks are an easy sell, but density, mixed use, and public transport sometimes aren’t. How do we have challenging conversations about change? Laura Bernstein (The Urbanist) has some ideas: “How to talk to your NIMBY parents“:
I despise the acronym NIMBY–‘not in my backyard.’ Does it mean someone wants streets “swept” of people living outside? Does it mean someone is worried about tree canopy and parking spaces, leading to fights over the new microhousing project on their block? Does it mean someone is worried that without owner occupancy rules for “backyard cottages,” developer-run AirBnBs will take over their community? I believe that growing cities are all struggling against the selfish whims of NIMBYs. Many journalists have painted this as a generational squabble. In Seattle, that is not always the case. But I don’t think YIMBYs–‘yes in my backyard’–can fight back if we don’t know what motivates them.
I want you to talk to your NIMBY parents and I want you to listen to them.
Bernstein identifies seven practical steps you can do to have good conversations with people who have different perspectives:
- Listen more than you talk.
- Look for an organic opening.
- Ask open-ended questions.
- Celebrate your shared vision of the future.
- Connect the struggle for walkable, affordable cities to struggles your parents advocated for when they were your age.
- Be open to not winning every discussion.
- Don’t use data if there is an anecdote that tells the same story, (unless your parent is a wonky engineer and gets fired up about data).
Worth thinking about, and not just for urban planning.