The End of Wallets?

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Joshua Gans writes,

the main reason I carry a wallet is not because of convenience per se but because it previously represented the way by which I would be identified. Possession was my credo. Having cash identified that I had done something legitimate to acquire that cash and a right to acquire more goods and services with them. Having a card allowed my bank to verify that I had those rights. Now, I could do the same with just a phone. Moreover, the retailer wouldn’t need to do anything other that see an acknowledgment that the ‘black box’ had accepted my credentials.

Imagine a world in which you use biometric ID to authenticate yourself to your phone or watch. In principle, then, you do not need any other forms of identification to enter your work building, purchase something, confirm your identity to authorities, and so on.

Note that I would like the Multi-purpose Savings Accounts (my current name for my negative income tax proposal) to incorporate this sort of technology to the extent possible.

Some questions:

1. What would this do to illegal immigration? Would there be a way to give someone a phony social security number or other ID?

2. Would the potential to use technology to prevent voter fraud be permitted to be used?

3. How dystopian is it for people not to be able to hide their identities?

4. As commenters here have pointed out, your “biometric ID” ultimately is represented as a string of bits. What sort of security system would you need to address this?

5. Do you think people would be able to get along without digital ID, or even be permitted to do without?

Feel free to ask your own question.

Steve Teles Hearts the Koch Brothers

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He writes,

It may be impossible to organize a broad, deeply mobilized grassroots coalition against upward-redistributing rent seeking. But in most cases, equaling the manpower and resources of the rent-seekers isn’t necessary — just making sure that there is someone on the other side can make a big difference. Perhaps perversely, it may be that the only answer to the problem is for the wealthy themselves to bankroll organizations that would change the political calculus that makes acceding to the demands of rent-seekers logical for politicians.

Which is what the Koch brothers do. And I could also give a shout-out to the Tea Party members of Congress, who are much more reliably hostile to wealthy interest groups than are either the Democrats or the Republican establishment.

Knowing Teles, I don’t think that he had the Koch brothers or the Tea Party in mind as solutions to the problem of crony capitalism. But I they do fit his model.

Teles is a contributor to the Cato growth forum. Another contributor, Derek Khanna, writes

One could imagine a benefit to having emerging companies pay less in taxes to help foster creative destruction; instead, U.S. policy is the opposite. Big companies have enough loopholes and lobbyists to ensure that they rarely pay the actual corporate income tax rate. The only companies that pay our full corporate income tax rate, the highest corporate tax rate in the entire world, are new companies.

Both Teles and Khanna cite patent and copyright policy as skewed in favor of special interests.

Family Structure and Income Inequality

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Aparna Mathur writes,

Recently, some papers have suggested that assortative mating has a role to play in household income inequality. Empirically, it has been found that the proportion of couples who share the same level of schooling has been growing over the past few decades. This has been accompanied by a rise in household income inequality. A paper by economists at the Federal Reserve Bank found that changing family structure accounted for 52 percent of the increase in the 50-10 ratio (50th percentile to 10th percentile) and 49 percent of the increase in the 95-5 ratio. Research by Harvard economists, Chetty et al. concludes that the single strongest correlate of upward economic mobility across geographic regions of America is the fraction of children living in single-parent families.

A Great Time to Rent

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Nick Timiraos writes,

Multifamily construction is now higher than it was during the peak in the previous housing cycle, reached in 2006. But back then, far more of these units were being built as condominiums, not as rentals.

Policy makers see young people reluctant to buy homes, and they respond in the usual way, by proposing government-subsidized lenient mortgage credit. Meanwhile, entrepreneurs respond by building more apartments.

How the Fed Became a Giant Hedge Fund

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Jeffrey Rogers Hummel tells the story.

Phase Two of Bernanke’s policies transformed the Federal Reserve from a central bank confined primarily to managing the money supply into an institution that is now a giant government intermediary borrowing massive sums in order to allocate credit. In that respect, the Fed has become similar to Fannie or Freddie, with the important distinction that the Fed has greater discretion in subsidizing a wider variety of assets.

Problems with Spectrum Property Rights

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Dale Hatfield and Phil Weiser write,

For a band like that traditionally used for AM broadcasting, it seems impractical, if not impossible, to provide licenses with anything close to certainty in terms of interference protection…a station in an adjacent–or more remote–geographic area could seek damages or injunctive relief based on a series of natural conditions that happen only infrequently…the realities of radio wave propagation in this region of the spectrum simply do not lend themselves to clear and enforceable boundaries for the geographic are dimension of the spectrum resource.

The authors do point out that the properties of the PCS band (the frequency range used by cell phones) are less problematic for a property-rights regime. Moreover,

the commonality of interest among cellular and PCS providers reflects a shared understanding that there is a mutual threat of interference and a mutual benefit to cooperation…Consequently, even though the reality of the spectrum property right is “muddy,” the affected parties are still able to agree on mutually beneficial accomodations.

How to Regulate Comcast and Verizon FIOS

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Brock Cusick writes,

Require utility companies to lease space on their rights-of-way to at least four ISPs, at cost.

Call it infrastructure neutrality, or open leasing. This proposal should independently provide most of the benefits in changing the Internet companies’ status to “telecommunications service,” as mere competition between local firms will discourage them from withholding any service or level of service offered by their local competitors. This competition would thus provide the consumer protections that voters are looking for, while allowing Internet companies to remain more lightly regulated (and thus more innovative) “information services.”

This sounds like a terrific idea to me. Competition is not a perfect regulator, but it is a better regulator than the FCC.

Edifice Complexes

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1. Here is my alma mater, Swarthmore. Trust me, they do not need this building. There are already hundreds of square feet of physical plant per student there.

2. Here is the University of Maryland.

Cole Field House would be reborn under a $155 million plan to convert the 59-year-old former basketball arena at the University of Maryland into an indoor football practice facility and “innovation” lab to help the school recruit athletes and others who are would-be entrepreneurs.

No doubt the funds for this were donated by someone with a deep love of education.

Are People Really Moving Back to Cities?

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Joel Kotkin writes,

The last decennial census showed, if anything, that suburban growth accounted for something close to 90 percent of all metropolitan population increases, a number considerably higher than in the ’90s. Although core cities (urban areas within two miles of downtown) did gain more than 250,000 net residents during the first decade of the new century, surrounding inner ring suburbs actually lost 272,000 residents across the country. In contrast, areas 10 to 20 miles away from city hall gained roughly 15 million net residents.

I had the opportunity to discuss urban economics with Phil Longman the other night. He had many interesting points.

1. The distribution of income both within metro areas and across metro areas is much wider than it was in the 1970s. In the 1970s, Manhattan was not so much richer than Staten Island. New York was not so much richer than Detroit.

2. Some cities are now “colonial economies” in the sense that they are dominated by businesses owned elsewhere, with few local-owned businesses. He cited St. Louis as an example. When I grew up there, we had McDonnell-Douglas and Monsanto. Now even Anheuser-Busch is not locally owned.

3. So many venture capitalists are in San Francisco that it’s not clear that San Jose is still the capital of Silicon Valley.

4. Whatever happened to the death of distance? It seems that people will pay up to live in cities.

Of course, my theory is that cities are dominated by the New Commanding Heights of universities and hospitals. This brings in highly-paid professionals. So cities that were blue-collar in 1950 and became ghetto by 1980 are becoming yuppie now.

Kotkin’s finding of growth in outer-ring suburbs is really counter to the anecdotal picture of people being attracted by the new urbanism. I think it might be best to think about location choices in the aggregate as driven by supply elasticity. Take it as given that development in cities and close-in suburbs is restricted. If the overall trend is to move away from small towns and rural areas, then the increased demand shows up in P in the city and the close-in suburbs, while the Q shows up in the last place the pundit class would expect it–the distant suburbs.