Welcome back to Sunday reading – the second-to-last edition of the year! Two weeks hence I will be tramping rather than reading and writing things on the internet.
To start things off, here’s a great video on the history of land ownership that nicely illustrates the contentious history of any given place. It’s something I think of occasionally in Auckland: the city’s Maori name, Tamaki Makaurau, alludes to its history as a battleground between iwi from Northland and the Waikato.
This, of course, did not cease when Europeans arrived. In The Spinoff, historian Vincent O’Malley tells the story of how “the great war for New Zealand broke out less than 50km from Queen St“. It’s a sad story of suspicion and greed undermining what could have been a sustained, mutually beneficial partnership between the growing city of Auckland and the Waikato iwi:
Tainui and other iwi developed a thriving economy based on feeding the settlers of Auckland. By the 1850s flour mills were dotted across the Waikato landscape and produce was being exported as far as the goldfields of California and Victoria. Māori were New Zealand’s leading export earners and key contributors to government coffers. Tainui were at the forefront of these developments and most observers in the early 1850s would have found it almost inconceivable that less than a decade later they would stand accused of plotting the imminent massacre of Auckland’s residents.
Those allegations were not only entirely unfounded but also illogical. Destroying the key outlet for their produce would have been suicidal for Tainui. Their wealth and therefore power depended to a large degree on Auckland’s ongoing wellbeing. But how had it even come to pass that they might be accused of such a thing?
For one thing, as settler numbers grew their reliance upon Māori lessened (at the same time that demand for Māori land increased). Lurking Victorian assumptions of racial superiority over ‘native’ peoples began to come to the fore. Great rangatira complained of being racially abused whenever they visited Pākehā townships like Auckland, in contrast to the great hospitality that even lowly Europeans continued to receive from Māori. In 1858 Europeans in New Zealand outnumbered Māori for the first time. And while Pākehā were happy for Māori to feed and defend them, they were not prepared to share the governance of the colony with the chiefs. In 1852 a new constitution for the colony established a parliament (and provincial assemblies) from which Māori were effectively excluded because the right to vote was based on European forms of land tenure.
The Kīngitanga (King movement) was one of the ways in which Māori responded. Despite initial reluctance, in 1858 an elderly Te Wherowhero (now called Pōtatau Te Wherowhero) was raised up as the first king. Some Europeans welcomed this development, seeing it as a positive reform that would improve social order and governance within Māori communities. Others chose to brand it as a challenge to the Crown’s authority. That was a difficult position to sustain given that Queen Victoria was described as “a fence for us all…Maoris and Pakehas” by Wiremu Tamihana (known as the ‘kingmaker’ by Europeans for his role in anointing the new king). Nevertheless, that the Kīngitanga could not be allowed to stand became official Crown policy, paving the way for the invasion of its Waikato heartland in July 1863.
The New Zealand Wars in the 1860s were one of the most significant things to happen to the country. They set our course for the next century – abrogation of the Treaty of Waitangi, massive expansion of European settlement, and a shift in economic and political power from Maori to European settlers.
Yet Pakeha seldom talk about them. For instance, an ancestor of mine was a Land Court judge at Helensville from 1858 to 1875 – a pretty momentous time and place. But my family has passed down very little knowledge of that time. That may just be our lackadaisical approach to oral history, but I get the sense that the country as a whole prefers to ignore the New Zealand Wars. Why is that?
One theory I’ve got is that humans are just intrinsically bad at remembering that things used to be different. I had that thought when reading Tamsin Rutter’s article in the Guardian about Ghent (Belgium)’s successful car-free city centre. A policy that was wildly unpopular prior to introduction is now wildly popular:
One morning in 1997, Frank Beke, the mayor of Ghent, woke up to find he’d been sent a bullet in the post. For the next few weeks Beke wore a bulletproof jacket, while police stood guard outside his house and accompanied him everywhere he went. “I was very anxious for my family,” he says. “I was protected by police but my wife and my children weren’t.”
The culprit was eventually found and arrested – a man who owned a shoe shop in the Belgian city’s medieval centre. His motive? Beke’s plans to pedestrianise the area around his shop.
“It was a rather radical plan to ban all cars from an area of about 35 hectares,” recalls Beke. “With every decision you take, there can be some opposition – but I never expected a bullet, of course.”
There were protests outside Ghent’s city hall: businesses were afraid they’d lose their customers, elderly residents were concerned about being cut off from their children. But Beke stood his ground, and although a few businesses that relied on car access had to move, today the city centre is thriving.
His successor, Daniël Termont, says that if he were now to reintroduce cars into the city centre, he’d be the one wearing a bulletproof jacket. In all, 72% of Ghentians are in favour of Termont’s new plans to expand the pedestrian zone by 15 hectares (a further 17% are neutral).
Change can initially be disconcerting, but once it’s happened people usually get accustomed to it. This can have both positive and negative consequences. For instance, in Foreign Affairs Andrea Kendall-Taylor and Erica Frantz explain how creeping erosion of democratic norms is now a greater threat than coups and revolutions: “How Democracies Fall Apart“:
Post–Cold War populists such as Chávez, Putin, and Erdogan took a slow and steady approach to dismantling democracy. These leaders first come to power through democratic elections and subsequently harness widespread discontent to gradually undermine institutional constraints on their rule, marginalize the opposition, and erode civil society. The playbook is consistent and straightforward: deliberately install loyalists in key positions of power (particularly in the judiciary and security services) and neutralize the media by buying it, legislating against it, and enforcing censorship. This strategy makes it hard to discern when the break with democracy actually occurs, and its insidiousness poses one of the most significant threats to democracy in the twenty-first century.
The steady dismantling of democratic norms and practices by democratically elected leaders, what we call “authoritarianization,” marks a significant change in the way that democracies have historically fallen apart. Data on authoritarian regimes show that until recently, coups have been the primary threats to democracy. From 1946 to 1999, 64 percent of democracies failed because of such insurgencies. In the last decade, however, populist-fueled authoritarianization has been on the rise, accounting for 40 percent of all democratic failures between 2000 and 2010 and matching coups in frequency. If current trends persist, populist-fueled authoritarianization will soon become the most common pathway to autocracy.
Even more disheartening, the slow and gradual nature of populist-fueled democratic backsliding is difficult to counter. Because it is subtle and incremental, there is no single moment that triggers widespread resistance or creates a focal point around which an opposition can coalesce. And in cases in which vocal critics do emerge, populist leaders can easily frame them as “fifth columnists,” “agents of the establishment,” or other provocateurs seeking to destabilize the system. Piecemeal democratic erosion, therefore, typically provokes only fragmented resistance.
As I’ve written before, democracy is important. It’s the best way to ensure that we get a better society over time, and one that remains open and equitable both economically, socially, and culturally. But it needs to be actively safeguarded and improved, rather than taken for granted.
And now for something completely different. London School of Economics scholar Cheng Keat Tang asks: “Do we value the London congestion charge?” He takes a look at the effects of the toll cordon around the London city centre on several metrics:
Effects of the London Congestion Charge
Is the charge effective? My research show that indeed it is. Relying on traffic data at a road level, I find that vehicular flow fell by 6% to 9% after the CC is first introduced in 2003, and 4% to 6% when the WEZ is implemented in 2007. Subsequent hikes, other than the initial increase in charge in 2005 (from £5.00 to £8.00), has a less discernible impact on traffic. This is understandable as marginal increases in the charge are less likely to dissuade drivers from commuting into the zone than its introduction. Commuters are now required to pay £11.50 to drive into the cordoned area when the CC is up. With less driving in the CCZ, air quality has also improved, according to others’ research. The implementation of the CC was associated with a 12 per cent reduction in air pollutants as such PM10 (Particulate Matter) and NO (Nitrogen Oxide) in the zone (Beevers et al. 2005). Roads are also much safer with a decline in accident and casualty counts (Green et al, 2016). The success of the original congestion charge led to the subsequent extension of the congestion charge zone to central west London (WEZ) in 2007 that covers Kensington and Chelsea borough – one of the most expensive and sought after estates in London.
How much do residents value these benefits?
So do homeowners pay for these benefits? To examine this, I restrict the analysis to properties very close to the congestion charge boundary (within 1 kilometre) to exploit the sharp discontinuity in traffic flow induced by the charge between roads just inside the zone and roads just outside (as drivers are deterred from driving into Central London). This ensures that properties in and out of the charged zone are almost similar other than being affected by the charge (or receiving the benefits from improved traffic conditions).
Comparing house price changes before and after the CC is implemented, my findings show that homeowners do pay for these benefits. When the WEZ was implemented, house prices rose by 4 per cent (about £30,000) relative to comparable transactions outside the zone. However, similar price increases did not occur in the original CCZ when it was introduced in 2003.
Another fascinating recent piece of data on transport markets comes courtesy of the Financial Times. Apparently Uber is making significant losses:
— Justin Wolfers (@JustinWolfers) December 1, 2016
For context, cost recovery on Auckland’s public transport network was 48.8% in October 2016 – and Auckland Transport isn’t trying to run the public transport network to make a profit, but instead to achieve other social and economic goals.
Alex Wilhelm (Mattermark) provides further context on the numbers, concluding that:
Self-driving cars aren’t going to drop into the market in time for Uber to improve its operational results before its IPO. In fact, its investments in that area could make its IPO-time results worse by forcing the company to tabulate long-term investments into R&D as short-term cash and stock costs.
Such is the life of a public company.
Uber loses more money than I would have thought, and it has done so at a faster clip than I expected for longer than I anticipated. That said, its growth is impressive. Incredibly so, really.
Here’s the question you need to answer: If Uber’s China exit lowers its operating costs, will investors cheer more the improvement of its margin results, or will they instead worry about reduced potential top line growth?
For what it’s worth, I’m skeptical about the idea that Uber can sustainably increase prices on users even if it does ‘monopolise’ the taxi market. Its strategy seems to depend upon breaking down barriers to entry in the taxi market – ie bypassing or eliminating systems where there are a limited number of permits to operate a cab in a city. If it succeeds in doing so, it will in turn face competition when it tries to increase fares. So the end game is unclear.
On the other hand, one thing that is increasingly clear is that protected cycle lanes save lives. In CityLab, David Dudley reports:
The transformative virtues of protected bike lanes have been the focus of much research lately. A 2014 study from Portland State University determined that segregated bike paths are not only demonstrably safer for riders, they have the power to lure lapsed riders back aboard their bikes. And in a new paper in the American Journal of Public Health, “Safer Cycling Through Improved Infrastructure,” the authors John Pucher and Ralph Buehler demonstrate that those cities that have invested heavily in fully protected bike paths over the last decade or so have reaped the biggest safety improvements and ridership boosts. “It is not simply a matter of expanding bicycle infrastructure,” the authors write. “The specific type of bicycle infrastructure matters. Several studies show the crucial importance of physical separation of cycling facilities from motor vehicle traffic on heavily traveled roads.”
To show how that effect works nationwide, the study authors compared accident statistics and ridership rates from 10 American cities that are “at the vanguard of building physically separated cycling facilities,” says Pucher, a professor emeritus of urban planning at Rutgers University’s Bloustein School of Planning and Public Policy. In Portland, Oregon, the rate of severe injuries or fatalities per 100,000 trips dropped 72 percent from 2000 to 2015, as the city’s bike network grew by 53 percent and the number of bicycle trips taken by Portlanders climbed a whopping 391 percent. In Minneapolis, the bikeway network grew 113 percent and trips climbed 203 percent while injuries and fatalities dropped 79 percent. Other cities with big safety improvements include New York City (with a 72 percent drop), Chicago (60 percent), Seattle (53 percent), and Washington, D.C. (50 percent). “In all 10 of the cities,” Pucher notes, “the combined number of fatalities and serious injuries … fell sharply compared to the number of daily bike commuters reported by the U.S. Census Bureau in its annual American Community Survey.”
To close, an important comment on the state of economics and policy analysis from Noah Smith: “An econ theory, falsified“:
[Consider] the “Econ 101” theory of the labor market. This is a model we all know very well – it has one labor supply curve and one labor demand curve, one undifferentiated type of labor and one single wage.
OK, so what are some empirical things we know about labor markets? Here are two stylized facts that, while not completely uncontroversial, are pretty one-sided in the literature:
1. A surge of immigration does not have a big immediate negative impact on wages.
2. Modest minimum wage hikes do not have a big immediate negative impact on employment.
[…] The first fact alone does not falsify the Econ 101 theory of labor markets. It could be the case that short-run labor demand is simply very elastic… Since labor demand is elastic, the supply shift from a bunch of immigrants showing up in the labor market doesn’t have a big effect on wages in this picture.
BUT, this is impossible to reconcile with the second stylized fact. If labor demand is very elastic, minimum wage should have big noticeable negative effects on employment … By the same token, if you try to explain the second stylized fact by making both labor supply and demand very inelastic, then you contradict the first stylized fact. You just can’t explain both of these facts at the same time with this theory. It cannot be done.
So the Econ 101 theory of labor supply and labor demand has been falsified. It’s just not a useful theory for explaining labor markets in the short term (the long term might be a different story). It’s not a good approximation. It doesn’t give good qualitative intuition. And it’s especially bad for explaining the market for low-wage labor, which is the market that most of the aforementioned studies concentrate on.
What is a better theory of the labor market? Maybe general equilibrium (which might say that immigration creates its own demand). Maybe a model with imperfect competition (which might say that minimum wage reduces monopsony power). Maybe search and matching theory (which might say that frictions make all short-term effects pretty small). Maybe a theory with very heterogeneous types of labor. Maybe something else.
Assignment for the summer holidays: Consider what it would mean if your simple theory of the world didn’t hold true?