Asymmetrical Information

From the desk of Jane Galt:

Update on tomorrow's blogger party

The venue has been changed to K Lounge, 30 W 52nd St. I'll be there after another great event, a debate on the Future of Politics. Hope to see some of my readers at either event.

From the desk of Jane Galt:

Guzzling gas

One of my favourite professors from the University of Chicago has a terrific article on Slate about why it's so hard to get Americans to change their gas consumption:

Think about the choice between the hybrid and gasoline versions of the Toyota Highlander SUV. At the moment, the hybrid costs about $9,000 more. Optimistically it could double your gas mileage from 17 to 34 miles per gallon (if you only drove in the city, say). A family driving the average of 12,000 miles per year would use about 29 fewer gallons per month with the hybrid. Even if the hurricane drove the price of gas to $5 a gallon for three months, the hybrid would only save them about $441 total over that time. The savings just don't add up in the short or medium run. For the average family to justify the hybrid at its current price based on fuel savings, gas prices would have to stay at $5 per gallon for several years. Or, if prices stay where they are, the savings would eventually add up if you kept driving your hybrid for a few decades.

With time horizons like this, it's no wonder that few people change their behavior when gas prices spike temporarily. Even the oil crisis of 1979, the biggest ever, did not have much lasting impact on America's intensive use of energy. Within five years, prices had fallen dramatically and people took off their Jimmy Carter cardigans and went back to their energy-happy ways. One of the oldest lessons economists have for thinking about what changes consumer demand is that moral exhortation doesn't change people's behavior. Prices do. Except that for a commodity like gasoline, even prices don't do an impressive job.

From the desk of Jane Galt:

Is Bush drinking again?

Mark Kleiman is worried. He asks a good question: why is it that the press does not report the pretty heavy alchoholism of well-known political figures? My guess would be libel; alchoholism is in the eye of the beholder.

From the desk of Jane Galt:

Fight discrimination the hard way

Bryan Caplan practices what he preaches:

In a recent post, I said:

If you really want to improve your group's image, telling other groups to stop stereotyping won't work. The stereotype is based on the underlying distribution of fact. It is far more realistic to turn your complaining inward, and pressure the bad apples in your group to stop pulling down the average.

I'll admit that this sounds a bit harsh (maybe more than a bit). But before you write me off for my insensitivity, let me say that I follow my own advice. I'm a libertarian economist, and as a libertarian economist I face an array of negative stereotypes from mainstream economists, which in turn lead to statistical discrimination. Here are a few of the stereotypes:

1. Libertarian economists can't do math.

2. Libertarian economists are just ideologues.

3. Libertarian economists don't understand market failure arguments.

4. Libertarian economists are insufferable jerks.

There are roughly two ways I could try to defuse this problem:

1. Preach to mainstream economists: "Stop stereotyping us!" and pretend like there is no truth to these generalizations.

2. Preach to other libertarian economists: "Let's improve our image by improving ourselves."

I've been trying to do the latter for about a decade. For example, I wrote my essay "Why I Am Not an Austrian Economist" because I think that libertarian economists are disproportionately ideologues who don't understand market failure arguments. There's no use pretending it isn't so. (For another paper I've written against mistaken views common in libertaran circles, see here; see also my debate with Pete Boettke).

Telling mainstream economists "The stereotype is false because some libertarian economists don't fit it - look at Milton Friedman!" is scarcely better than naked denial. Obviously, every stereotype has exceptions; stereotypes are useful because they are better than nothing, not because they are infallible.

From the desk of Mindles H. Dreck:

They don't make rich people like they used to

Did Nina Munk look at the table accompanying her article yesterday? Ms. Munk asserts:

A few days ago, I read through the newest Forbes 400 list of the richest people in America, hoping to find many names I'd never heard of. They're not there. Through no fault of its own, the list no longer reflects a dynamic and elastic economy; instead, it reflects a growing concentration of wealth and economic power.

The exhibit contrasts the Forbes 400 of 1985 with those of 2005. Some notable stats::

1. 255 with self-made fortunes vs. 165 in 1985
   
2. 90 fewer "inherited at least some wealth"
   
3. 25 immigrants vs. 1985's 14
   
4. 4 more (129) have no college degree
   
5. 25 with a Harvard or Yale Degree, down from 37
   

The number of women on the list has decreased, but in other respects it takes some jaundiced glasses not to read this table as evidence of mobility in this very elite sample.

To be fair, Ms. Munk's observations are pegged to a shorter timescale than the table:

It's hard to say when the Forbes 400 list started to stagnate, but 1999 may have been a turning point.

I had to look elsewhere to discover that there were 33 new members this year, for a turnover of 8.25% in one year, and that Google's founders were shaking up the list. Instead of providing stagnation statistics, however, Munk simply marks her ennui with the astounding observation that the richest people in the U.S. are, apparently, filthy rich. It's all so...dreary and repetitive!

That was the year when Bill Gates's estimated net worth hit $100 billion. So quickly had his fortune grown that over the previous 12 months, according to Forbes's calculations, Mr. Gates had made himself another $1 billion every eight days.

Mr. Gates, who has held the No. 1 position on the list continuously since 1994, is an extreme example of accumulated and self-generating wealth, but he's part of a trend. Twenty years ago, there were 14 American billionaires on the Forbes 400. Today, the list includes 374 (known) billionaires. In 1985, the combined wealth of the Forbes 400 was $238 billion, adjusted for inflation. Today, the 400 richest people in America are together worth $1.13 trillion. To put that number in perspective, $1.13 trillion is more than the gross domestic product of Canada. And it is more than the G.D.P. of Switzerland, Poland, Norway and Greece - combined.

The median household income of Americans has been stuck at around $44,000 for five years now. The poverty rate is up. Members of the Forbes 400, meanwhile, are richer than Croesus, and every hour they are getting richer.

Lawrence J. Ellison, founder of Oracle, whose net worth has swollen to $17 billion from $4.2 billion in the last 10 years, is profiled in the latest issue of Vanity Fair alongside his new $300 million, 454-foot yacht. ("It's really only the size of a very large house," he remarked off-handedly.) In Manhattan, where the disparity between rich and poor is now greater than in any other part of the country, Rupert Murdoch (net worth: $6.7 billion) has bought the penthouse at 834 Fifth Avenue for $44 million, all cash. The hedge fund manager Steven Cohen (net worth: $2.5 billion) recently paid $52 million for a drip painting by Jackson Pollock.

Let me go on record to say that I am all in favor of these folks spending their money. Apparently it is lost on many that consumption is a pretty good way to create mobility. That boat was worth a few hundred jobs when it was built and probably provides 20-30 as long as it's afloat. There's a reason they say shirt sleeves to shirt sleeves in three generations. I'd like to sell these guys something large and spectacular myself.

The strangest point in the article is Munk's favorable contrasting of 1982 with the present:

The first edition of the Forbes 400, dated Sept. 13, 1982, included mainline families like the Rockefellers, the Mellons and the du Ponts. But they found themselves together with self-made men, some of whom were not terribly at ease in a ballroom: William R. Hewlett, who had started Hewlett-Packard in a one-car garage with his classmate David Packard and was then worth $1.3 billion; Robert C. Guccione, the founder of Penthouse magazine, then worth $400 million; Saul P. Steinberg, a corporate raider who had accumulated a $260 million fortune; An Wang, originally of Shanghai, who had started Wang Labs with $15,000 in 1951 and was worth around $400 million in 1982; Meyer Lansky, a mobster whose estimated net worth that year was $200 million; and Laurence A. Tisch, who built a fortune then valued at $600 million by assembling a huge conglomerate, the Loews Corporation. (Note: all net worth figures are in 2005 dollars.) All you needed to join the Forbes 400 list was money.

Remember the good old days of 'new' wealth like Rockefeller, Mellon and Dupont (who probably racked up 100 years at the top between them) and self-made men like Lansky, Guccione and Steinberg? Wasn't that the Golden Age! By the way, that last bit just might still be true. Or did Forbes add a requirement that you be a boring and consistently successful nerd?

The remainder of the article is about #258, who made his fortune in cheap cigarettes. Basta with these insufferable internet, software and financial pioneers!

UPDATE: Commenter 'Hey' points out the author's background:

Her father is a man named Peter Munk. He is Canadian (he emigrated from Hungary to Canada) and has been in a number of businesses since the 50s. His current business is a small little thing called Barrick Gold. Family net worth is estimated around C$350 million, though he didn't make the Canadian Business 100 this year.

I'd like to earn a fortune like the fortune earned by dear old dad!

From the desk of Jane Galt:

Why don't we have single sex bathrooms?

I've always wondered. Overlawyered has some thoughts.

From the desk of Jane Galt:

The barbarity of boxing

From Mark Kleiman's blog.

From the desk of Jane Galt:

The perils of economic education

From the Wall Street Journal.

From the desk of Jane Galt:

A few good budget cuts

Hee!

Jessep: You want a budget cuts?

Kaffee: I think I'm entitled to them.

Jessep: You want them?

Kaffee: I want budget cuts!

Jessep: You can't handle budget cuts! Son, we live in a world that needs quasi-public goods. And those needs have to be funded by men in Congress. Who's gonna do it? You? You, Lt. Weinberg? I have a greater responsibility than you can possibly fathom. You weep for small government and you curse the ballooning deficit. You have that luxury. You have the luxury of not knowing what I know: that big government, while tragic, probably enriched some lives. And my existence, while grotesque and incomprehensible to you, enriches lives...You don't want the truth. Because deep down, in places you don't talk about at parties, you want big government. You need big government.

From the desk of Jane Galt:

How do you shrink a city?

Steve Teles, guestblogging at Mark Kleiman's place, has some suggestions.

From the desk of Jane Galt:

Boy, he shure do talk purty

This sounds really interesting. I just wish I understood more than every third word:

Some of the most interesting anti-aging genes that have turned up in roundworms and flies have to do with insulin (and insulin-related growth factor, IGF) signaling. This team of researchers thought that the Klotho protein might fall into the same category, and they were right: the protein seems to lower insulin sensitivity by affecting signaling through the insulin and IGF receptors.

Here’s where my drug-discovery radar started pinging. These receptors are part of a family that carries their own kinase along to phosphorylate themselves, and that’s a key even in their signaling cascade. This new work noted that Klotho suppressed autophosphorylation of the receptors, and that makes sense, considering the downstream effects. It’s very interesting to note that compounds that affect the IGF receptor kinase are already being developed. They’re potential anticancer agents, and a number of companies seem to be working on them.

From the desk of Jane Galt:

Whither aviation?

Why can't the airlines seem to get it together?

Three reasons, seemingly. First, the labour model is terrible. They are saddled with pensions promises they made back when the industry was heavily regulated and airlines were basically allowed to operate on a cost-plus basis. They have multiple, militant unions, none of whom have any incentive to leave any value on the table at negotiating time because they justifiably fear that anything they leave at the negotiating table will simply be claimed by another union. And the unions, plagued by loss aversion, will generally not give up enough in downturns to make the airline profitable unless they are ordered to by a bankruptcy judge.

Second of all, the business model is terrible. Airlines have a very high fixed cost, which is the cost of flying even if you don't carry any passengers, and a very low marginal cost, which is the cost of carrying each additional passenger. The temptation for airlines to sell empty "extra" seats at a very low price is extremely high. But every time one airline does this, it makes it that much harder for competitors to operate at a profit. Because so many of the costs are fixed, companies seem to enter a competitive death spiral, where everyone is desperately trying to dig themselves out of the hole as best they can by selling their product below cost. Also, the "hub-and-spoke" model, which makes it easy to get connecting flights, is much less profitable than the point-to-point model competitors use, cherry-picking only the most lucrative routes. And the airlines are hugely vulnerable to swings in the price of fuel.

Third, the legal model sucks. Easy bankruptcy is a very fine thing for the economy as a whole, but for industries like airlines, which because of the high-fixed/low-marginal cost thing already tend to be plagued by overcapacity, it's a disaster. Creditors would almost always rather keep the hulk running in the hopes of getting some cash out down the road than liquidate, especially because most of an airline's major assets, like planes, tend to be secured, leaving precious little for hungry debtees. So they rehabilitate the business with radically reduced debt and labour obligations. But this doesn't remove the excess capacity that makes it hard for anyone to make a profit; in fact, it makes the rehabilitated business more competitive, which pushes other companies into bankruptcy.

Is there hope? Transportation seems to be an iffy business; railroads as an industry never made a dime for their owners. Certainly, if I were an airline employee, I'd be looking into acquiring some new skills.

From the desk of Jane Galt:

That's just not right

One more reason to hate junk mailers.

From the desk of Jane Galt:

Blogariffic

Is there anything as much fun as a blog party? Answer: Hell, no! There's going to be one on Friday, September 30th, and I heartily urge you to go. What, you say, you haven't got a blog? Blog readers are welcome, and I always enjoy meeting my lurkers. Be there or be square.

Madame X
94 West Houston Street, New York, NY

From the desk of Jane Galt:

That must sting

Ouch.

(I am now starting the countdown until the first person appears in my comments to wail that the New York Times public editor, like the other New York Times public editor, is just a biased conservative hack who hates Krugman for Speaking Truth to Power).

From the desk of Jane Galt:

Finally, someone asks a Supreme Court nominee the important questions

1. If you knew to an absolute moral certainty that you could capture and consume a live infant without being caught, how many do you suppose you could eat in a weekend?
2. Have you ever been spanked erotically by someone who was not your current legal spouse? Just yes or no, please.
3. Nominee, do you regard these slacks as accentuating my basket in an un-senatorial fashion?
4. Describe in single words, only the good things that come into your mind about...your mother.
5. Kindly rise, and sing the 1979 hit, The Pina Colada Song, also known as Escape.

From this blog.

From the desk of Jane Galt:

Structural unemployment

Some of my readers have written in asking for a slightly fuller explanation of structural unemployment.

Did you ever watch Little House on the Prairie? I looooooved Little House on the Prairie. I love my parents and all, but let's be frank: I wanted the Ingalls family to adopt me. To be honest, I dreamed about it.

If you did watch the show, you may remember that every so often Charles (the father of the Ingalls family) had to go off and work as a freight hauler, or on a railroad gang, because the crops had failed.

Anyway, what struck me recently--and I have no idea why this just struck me, because it's fairly obvious--was that this used to be fairly common. A farm worker is also perfectly capable of sweeping cinders in a factory, or digging ditches at a construction site, or hauling sacks of flour from Point A to Point B.

As our economy has mechanized, of course, the relative demand for skilled labour has gone up, and the relative demand for unskilled labour has gone down. We all know that; it's why we're sitting in front of that nice shiny computer instead of walking behind a mule like Grandpa did.

Skill implies specificity. Some skills are general, like reading, but many more are very specific; knowing how to run a metal lathe doesn't teach you very much about perming hair or setting a broken bone.

What that means is that when the industrial composition of our economy changes, because machines can do some jobs better than people (word processors instead of secretaries), because other countries can do some things better than we can (Chinese-manufactured electronics), or simply because some markets got overcrowded (telecoms and web retailers), it takes a lot longer for employment to adjust than it used to, because workers' skills are very specific to their old industries or jobs. This sort of unemployment is known as "structural unemployment", as opposed to "cyclical unemployment", which happens when companies lay off workers they expect to rehire in the future as a result of temporary downturns in demand.

This has been, to my mind, the most convincing explanation offered so far as to why job creation has lagged in the current recovery. This is not quite a new phenomenon--remember the "jobless recovery" in the early Clinton years?--but as an explanation, it is resisted fiercely by those opposed to Bush, who would like to write off our nation's lacklustre job creation to the ineptness of the current administration.

But it dovetails well with something else we know, which is that the returns to skilled labour have been increasing sharply since the 1970's, while the returns to unskilled labour have fallen dramatically. Since unskilled or semiskilled labour is probably the easiest to move around (except for jobs pretty far up the professional tier--investment bankers moving into CFO jobs and so forth), the decline in demand for unskilled labour over the past thirty years or so has probably resulted in a labour market that is simply more rigid in times of change.

From the desk of Jane Galt:

Where's Jane?

Sorry, my personal life has gotten a little hairy lately, sucking up most of my available free time and energy. But I'm hoping to be back soon. Meanwhile, read this story about why people didn't evacuate NOLA (answer: most of them either hadn't the resources, or didn't know they were supposed to), and how few (43%) are currently planning to go back. But don't put too much faith in that number; I've no doubt that many of those (44%) planning to relocate will return home when they find job and housing markets saturated in cities crowded with refugees, and others who are planning to return will instead relocate when they find friends, families and employers scattered to the winds.

From the desk of Jane Galt:

I'm looking for a few good books . . .

I spend a lot of time telling y'all what you should read. But how about you tell me? What books took your breath away, kept you up all night reading more, came back again and again to your thoughts? If they're that good, I want to read them.

From the desk of Jane Galt:

Blame Enron

Corporate crooks didn't just steal your money; they also stole your jobs.

The research is, as Mr Cowen notes, preliminary. Nonetheless, it makes a good case that the extremely tight labour markets of the late 1990's were an anomalous phenomenon, based on loose money and unrealistic expectations of the future. It also supports the theory that one of the reasons for lingering unemployment in the current recovery is that job losses in this recession were structural rather than cyclical--which is to say that your whole industry became a permanently less attractive place to work, rather than suffering a temporary downturn in demand that ends when the recession does.

From the desk of Jane Galt:

Finally, some good news

Initial search finds far fewer bodies than expected.

From the desk of Jane Galt:

He was always on time and had a starched white shirt

Okay, here's what I don't understand. When I was having my background investigated for a job with the State Department, I had people I hadn't supplied as references (or indeed, seen for five or ten years) calling up to ask "Hey, Jane, why are you being investigated by the Feds? Are you in trouble?"

So how come when a guy gets appointed to head FEMA, the background check, which I think is performed by the FBI, doesn't include calling his former employer to check if he's padding his resume?

From the desk of Jane Galt:

The poor really are different

The post below is complicated, for some conservatives, by the fact that if the poor acted like the middle class, they wouldn't have problems like no credit or savings.

If poor people did just four things, the poverty rate would be a fraction of what it currently is. Those four things are:

1) Finish high school
2) Get married before having children
3) Have no more than two children
4) Work full time

These are things that 99% of middle class people take as due course. In addition, there's some pretty good evidence that many people who are poor have personality problems that substantially contribute to their poverty.

For example, people with a GED do not experience significant earnings improvement over people who have not graduated from high school. In this credential-mad world, this simply should not be. And it is true even though people with a GED are apparently substantially more intelligent than people without a GED.

How can this be? Even if the GED were totally worthless, available evidence seems to indicate that intelligence carries a premium in the labour market.

The best explanation seems to be that people with a GED (as a group) are smart people with poor impulse control. What intelligence giveth, a tendency to make bad decisions taketh away. Anyone who has spent any time mentoring or working with poor families is familar with the maddening sensation of watching someone you care about make a devastating decision that no middle class person in their right mind would ever assent to.

So I think that conservatives are right that many of the poor dig themselves in deeper. But conservatives tend to take a moralistic stance towards poverty that radically underestimates how much cultural context determines our ability to make good decisions.

Sure, I go to work every day, pay my bills on time, don't run a credit card balance and don't have kids out of wedlock because I am planning for my future. But I also do these things because my parents spent twenty or so years drumming a fear of debt, unemployment, and illegitimacy into my head. And if I announce to my friends that I've just decided not to go to work because it's a drag, they will look at me funny--and if I do it repeatedly, they may well shun me as a loser. If I can't get a house because I've screwed up my credit, middle class society will look upon me with pity, which is painful to endure. If I have a baby with no father in sight, my grandmother will cry, my mother will yell, and my colleagues will act a little odd at the sight of my swelling belly.

In other words, middle class culture is such that bad long-term decision making also has painful short-term consequences. This does not, obviously, stop many middle class people from becoming addicted to drugs, flagrantly screwing up at work, having children they can't take care of, and so forth. But on the margin, it prevents a lot of people from taking steps that might lead to bankruptcy and deprivation. We like to think that it's just us being the intrinsically worthy humans that we are, but honestly, how many of my nice middle class readers had the courage to drop out of high school and steal cars for a living?

I'm not really kidding. I mean, I don't know about the rest of you, but when I was eighteen, if my peer group had taken up swallowing razor blades I would have been happily killed myself trying to set a world record. And if they had thought school was for losers and the cool thing to do was to hang out all day listening to music and running dime bags for the local narcotics emporium, I would have been right there with them. Lucky for me, my peer group thought that the most important thing in the entire world was to get an ivy league diploma, so I went to Penn and ended up shilling for drug companies on my blog.

Maybe you were different. But think back to the times--and you know there were times--when trying to win the approval of your peers convinced you to do things that were stupid, wrong, or both. Remember what it felt like to be sixteen and skinny and maybe not as charming and self confident as others around you, and ask yourself if you'd really be able to withstand their derision in order to go to college--especially if you didn't even know anyone who'd ever been to college, or have any but the haziest idea of what one might do when one got out. Try to imagine deciding to get a BA when doing so means cutting yourself off from the only world you know and launching yourself into a scary new place where everyone's wealthier, better educated, and more assured than you are.

Or take a minute right now and try to imagine how your friends would react if you announced that you'd decided to quit work, have a baby, and go on welfare. They'd make you feel like an outsider, wouldn't they? And isn't that at least part of the reason that you don't step outside of any of the behavioural boundaries that the middle class has set for itself?

Bad peer groups, like good ones, create their own equilibrium. Doing things that prevent you from attaining material success outside the group can become an important sign off loyalty to the group, which of course just makes it harder to break out of a group, even if it is destined for prison and/or poverty. I think it is fine, even necessary, to recognize that these groups have value systems which make it very difficult for individual members to get a foothold on the economic ladder. But I think conservatives need to be a lot more humble about how easily they would break out of such groups if that is where they had happened to be born.

That leaves us in a rather awkward place, because while I don't agree with conservatives that the poor are somehow worse people than we are, I also don't agree with liberals that money is the answer. Money buys material goods, which are not really the biggest problem that most poor people in America have. And I don't know how you go about providing the things they're missing: the robust social networks, the educational and occupational opportunity, the ability to construct a long-term life instead of one that is lived day-to-day. I think that we should remove the barriers, like poor schools, that block achievement from without, but I don't know what to do about the equally powerful barriers that block it from within.

But I also don't think that the answer is to use those barriers as an excuse to wash our hands of the matter.

From the desk of Jane Galt:

Perish the poor

For all that I cringed in reading the self-satisfied proclamation that the Katrina disaster is the inevitable result of American's political sins, I do think that the catastrophe has a lot to do with poverty. But as I said in my previous post, I think that the interaction of the poverty with the hurricane to produce a social disaster is extremely complicated.

The problem of the poor is that the poor have more than one problem. In America, in these days, people who don't have more than one problem usually don't end up being poor. The poor lack education; they lack robust networks of family and friends to weather them through a crisis; they lack resources to draw on in emergencies, and yes, conservatives, they lack middle-class behaviours that could help pull them out of the underclass. We saw all of those things operating in New Orleans.

The poor, because they were uneducated, did not understand as readily as the middle-class that fled that this time, it was really a good idea to evacuate, even though the last seven times you evacuated nothing happened.

The poor lived on the lower ground, where flooding was worse, because housing that tends to flood is cheaper than housing that stays dry.

The poor did not know anyone with a boat they could call when the water started to rise.

The poor did not have any far-flung family, spread around the country by the modern educational and professional employment system, to stay with outside of New Orleans. Many of the refugees have reported that this is the first time they've left the city.

The poor did not have any money to stay in a motel, because it was the end of the month (government checks come on the first of the month) and the pay period (which generally spans two weeks), and few poor people have savings.

The poor were less likely to have cars, or know people with access to cars. They are less likely to be connected with churches or other social organisations that could have functioned to make sure they got out.

The poor do not listen to news as frequently, or as intently, as the middle class, meaning that they had a much hazier idea of what was going on, even if they had had the education to understand what a Class Five hurricane was.

The poor were angry about the divide between them and the middle class, particularly since the middle class is mostly white, and the underclass is mostly poor. When the refugee relief efforts broke down, the belief that they were being targeted because they were black seems to have led to violent and anti-social behavior.

Those with behaviour problems and anti-social personalities tend to be poor. (This is not to say that poor people all have behaviour problems: all rabbis are jewish, but that doesn't mean that all, or even a majority, of jewish people are rabbis). When the middle-class fled the city, the concentration of the dangerous among the population rose precipitously.

The poor had nowhere to put their pets (they were not allowed in the Superdome), leading many to stay with their animals rather than abandon them. Middle class people who went to motels or friends didn't have this problem.

The poor are vastly less responsive to public education efforts than the middle class (I've seen few good theories as to why). This meant that they didn't take evacuation warnings seriously.

The poor have a harder time missing days of work than those on salary; undoubtedly, some were worried about losing time if they evacuated.

The poor tend to be more passive than the middle class. That not only prevented evacuation; it probably prevented some possible self-rescues.

The poor tend to have less rich social networks, which meant fewer people looking for those who were trapped; that's the repeated lesson of heat waves in America.

The poor lack access to credit. Without credit it is hard to get a motel room; it is also hard to comply with an emergency evacuation order if it's the end of the month and you're out of cash.

The poor are the ones who mostly make up gangs, who are organized, have guns, and take very little effort to turn into a marauding mob. This is only a tiny fraction of the population, but a tiny fraction is enough to terrorize the rest.

As you can see, few of these are directly reparable by the government in any sort of reasonable time frame, and I'm not sure a lot of them are reparable at all; as far as I know, people on the dole in Europe live from check to check too. Other things, like gangs, are something the government has been fighting for some time.

But the government could have rectified this by building an evacuation plan that included:

1) Shelter for all the people without means to stay in hotels, not a small fraction of them

2) Provision for pets

3) A serious, door-to-door evacuation effort

4) Transportation to shelters from NOLA

Why didn't New Orleans do this? Some combination of cost, ignorance, and the wishful belief that something that hasn't happened yet won't happen tomorrow, I expect.

But what about Bush? I hear you cry. Look, the Bush administration undoubtedly screwed up in many ways, but as far as I can tell, none of their preventive failures would have made much difference. The majority of people are expected to have drowned because they were trapped in their attics in the relatively early hours of the flood--when there simply wouldn't have been any way for even a crackerjack FEMA effort to have rescued the majority of the dead. Once the levee broke, those people were mostly doomed. And responsibility for evacuation rests with the local government.

Now, perhaps it shouldn't. Perhaps the Feds should do that job. But those are big questions of federalism--and I think that Mickey Kaus is right that this disaster has shown one of the major weaknesses of federalist government, though I also agree with a colleague that there's simply no other way to organize a country as big as the US. And given the fact that the administration was apparently prevented from deploying some troops because of jurisdictional clashes with the Louisiana governor after Katrina struck, it seems unlikely that the administration would have managed to secure such powers before the disaster that showed how badly it was needed.

But I also think there's a wishful tone to the belief among many liberals that this all could have been prevented had only a Democrat been in charge. Exhibit one for this is the mendacious charge that Bush somehow cut funding to levee building efforts that would have prevented this. Exhibit two is the more plausible assertion that FEMA was better under Clinton. But I'm not quite sure how we know it was better. We had one major disaster under Clinton, Northridge, in which local services remained intact, communications were fine, and most of the rescues seem to have been performed by private citizens at the site. What we may have just learned is that when it's needed, as it was in 1992 and 2005, FEMA doesn't do a very good job. And if that's so, there are deep systemic problems having to do with the bureaucratic and legislative structure of the US government that will not be changed by changing the party affiliation of the five guys at the top of the pyramid. Yet no one's really looking at changing the system that broke down--only at changing out some of the cogs in the machine.

From the desk of Jane Galt:

I know I'm going overboard, but

The smug tone of this post really chaps my ass--not least because it's wrong about so many things other than its fundamental misunderstanding of American geography.

For example, this passage:

The abundance � of food, cars, roads, tv stations, just about everything a European could imagine, and then some � is probably unprecedented historically, and limited geographically to America. Growing up comfortably middle class in Ireland in the early 1980s, I found it almost unbelievable that T.V. Americans seemed to drink orange joice every day when we had it just for Christmas, went shopping just for fun and could afford to keep their enormous fridges constantly full. (T.V. Americans were forever hanging up the phone without saying goodbye, slamming car doors, and divorcing each other at the drop of a hat, but that�s another day�s incredulity.)

In my own fuzzy-logic way, I�d presumed that the cheapness of every day goods in the US was mostly because of the flexibility of the economy, i.e. the ability of employers to pay low wages, fire at will, offer few benefits, and generally pass on costs like environmental protection or maternity benefits. A few weeks in California cured me. Sure, labour �flexibility� helps. But the cheap price of petrol is more important than I�d ever imagined. As newspapers and coffee breaks filled with doomsday scenarios of paying $6 dollars a gallon for gas, I sat down one day and did the sums.

That�s what we pay in Ireland. Today. Most of the extra cost goes in taxes, and the cost of that affects every imagineable part of life. Paying more for oil makes everything more expensive � getting food to the shops, from there home, cooking it, and cleaning up afterwards. It means more people rely on public transport, creating a policy feedback loop of greater government spending and making more citizens using shared resources every day of their lives. It means we don�t run central heating or (if we had ever needed it) air conditioning all or most the time, and probably just put on another jumper when it�s cold. It means we advertise cars based on their fuel consumption and we don�t have �all you can eat� restaurant buffets. Teenagers don�t have their own jobs and cars, and rely on their parents, the bus or shanks mare to get around. They get it off in parks instead of cars. Not that many people drive to the gym. Until recently, not many people needed to go to the gym either.

Others on CT understand far better than I do the economic significance of America�s globally unique strategy of running a vast economy on cheap, cheap oil. And yet others can discuss how this dependence makes America less and less secure. (And how Amerca�s efforts to secure its own oil supply has made the world less and less secure for the rest of us.) It�s been a simple but revealing insight for me; the myth that America�s economic engine purrs along fuelled by of the virtues of its rather brutal labour market is only partly true. US work places may be dominated by the masochistic ideology of living to work, but the secret of success is simple. America lives or dies on cheap oil.

Yes, more Americans have cars than peoeple abroad. But the idea that Ireland's poverty in the 1980s was a result of expensive oil, rather than a thousand years of colonial dependance, its economic dependance on its former colonial master during the period when said empire had entered a period of rapid economic senescence, a debilitating regulatory and taxation scheme, and the resulting outmigration of many of its best and brightest . . . well, words fail me. Before committing to this position, Maria should have stopped and asked herself how, if cheap oil is the sine qua non of purchasing power, Ireland's GDP has gotten so close to America's on a PPP (purchasing power parity) basis while still producing gas prices high enough to cram the entire population into gas-sipping econoboxes. (I say this as someone who loved the little Renault Megane she drove around Ireland for a week--and whee! wasn't it fun to teach myself to drive manual in a country that is roughly 100% hills.) She might also have noted that the number of passenger cars per capita in Ireland was 217 in 1980, 227 in 1990, and 342 in 1999, which would seem to link ownership of passenger cars to per-capita GDP much more strongly than to the price of gas. This makes sense; while gas is indeed pricey in Ireland, the car we rented went five days of heavy driving on a single tank of gas.

In one way, we are much less vulnerable to high oil prices than Europe, because when oil prices get high, a lot of our oil gets cost-effective to extract, giving a boost to part of our economy, and reducing the volume (though not necessarily the dollar value) of our imports from abroad. When high oil prices hit Ireland, on the other hand, the only option they have is to go out looking for peat to burn.

Nor did we ever really have orange juice every day because we have cheap oil; orange juice was a daily treat for at least middle-class Americans before WWII. We have orange juice every day because we have orange trees in our country, a transportation network that can deliver it without crossing an ocean, and a population rich enough to buy it. The Irish population, on the other hand, didn't have those thinks, so they had milk instead.

But that's quibbling. The main thing I wanted to say is that while there is deadweight loss to the economy from taxing fuel (indeed, the deadweight loss is what the fuel tax is pretty much designed to produce), it is not equal to the entire value of the tax. Much of the fuel tax revenues can be used to offset other taxes, which boosts consumer income. There is a resulting shift in behaviour (people drive smaller cars), but not necessarily a big shift in purchasing power. Orange juice was a luxury item mainly because Ireland was very poor, not because fuel taxes made it too expensive to transport.

A more reasonable reading of history would suggest that government policy decisions after the British pulled out kept Ireland poor despite a very high investment in human capital, and that when those decisions were reversed (in the 1980s in Britain, and in the 1990's in Ireland), the Anglo-Irish economy boomed. Since those policy changes made the Irish and British economies more like the American one, it would seem to me that the "Myth" she claims to have abandoned was in fact more true than the one that she has installed in its place.

Then there's this:

And then you see what�s happening in New Orleans. Where a natural disaster has shone the light on what�s ugly and usually hidden in American life; the inherent and unconsidered racism, the casual brutality, the values that prize property above people. You see people being blamed for being poor. You see black people penned in like animals and made to live in their own filth. You see in America people dying of thirst. Of thirst. You see people pushed beyond civility, beyond reason, beyond any imaginable breaking point, to be met with gun fire and the self-serving response �there, do you see how these people really are? It�s the war of all against all down there.� You wonder what the Christian right might have to say, and fear it�s not �whatever you do to the least of my brothers, you do to me�, but rather; �devil take the hindmost�. Which he clearly did.

There is a war of all against all in America. But it�s not limited to Mississippi and Louisianna. The myths that have held the poor in check are now exposed. The callous disregard of this administration for the poorest and weakest Americans is now on display for the world to see.

In some ways, we�re not surprised to see this selfishness and wickedness exposed. After all, what did you think has been going on in Iraq for the past couple of years? Or what do any of us think is going on in Niger, in Sudan, or in any of the nameless places of boundless human suffering that we just aren�t interested in hearing about? The main difference in NOLA is that it�s harder to control the reporters, and the people suffering speak English and they expect to be heard.

This is one of those jaw-dropping, cheek-slapping, "did they really say that?" statements that make me wonder if I'm living on the same planet as the people whose blogs I read. Comparing New Orleans to Darfur? Why not the Gulag? Or the Holocaust?

I am second to none in my horror of what happened in Katrina, and I too was shocked that such a thing could happen in America. But to compare inept emergency management to a deliberate campaign of raping and killing members of an ethnic minority reveals a moral imagination so beggared as to be useless. And to imply that it happened because George Bush hates black people and cares more about Wal-Mart's stock of televisions than he does about the occupants of the 9th Ward is simply grotesque. There have been colossal screw-ups from the level of the police department all the way up to the head of the Department of Homeland Security, and some of those are Bush's fault for appointing the people he did. But to suggest that this is part of some sort of campaign against the poor, organized or otherwise, is ridiculous. The worst you can say about George Bush's poverty policy is that it is unambitious; despite liberal rhetoric, he done very little at all in the realm of poverty policy, for good or ill.

Many, perhaps even most, of those who died or were stranded amidst the floodwaters suffered because they were poor. But their poverty interacted with the disaster in a complicated, nuanced kind of way--the sort of way that we're constantly being told that left-wing intellectuals are better at understanding than those redneck slobs on the right--not in a simple, "the government doesn't care what happens to the poorer and darker skinned" sort of way. Despite what you may believe about us, when Americans hear that there are thousands and thousands of dead bodies trapped in the attics where they drowned, Americans care enough to scare the bejeesus out of our elected officials, even if the skin on those bodies happens to have more melanin than average.

The (black) mayor of New Orleans did not botch the evacuation plans because he just didn't care whether folks in the 9th ward drowned, nor did the governor of Louisiana and the Feds waste time on a jurisdictional pissing match because they figured that rescuing poor people just wasn't that important. No one was worried about the looters because Americans "prize property above people"; they were worried about the looting because the looters had started to do things like steal hospital generators that were powering the area's sole satellite uplink. If you canvassed the entire country, you would find precious few who think that goods from Target, or even a private home, are more worth protecting than human lives.

Whatever the Bush administration should have done with the levees with the benefit of perfect hindsight, my understanding of the system is that even had Bush entered office day one with strengthening the levees his highest priority, the vagaries of engineering and modern bureaucratic controls means that they wouldn't have even broken ground on the improvements yet. Moreover, it is simply ludicrous to say that Bush's decisions about Army Corps of Engineers funding were made with regard to the income or race of the people who lived in New Orleans. Once again, this is a big country; we don't just have the one city. If Bush, the HHS secretary, or the head of FEMA, even knew that the topology of New Orleans put the poor at greatest risk I would be mightily surprised, as my acquaintances who lived in New Orleans for extended periods of time did not realize that until the flood came. The people who should have known that--Lousiana's (Democratic) congressional delegation--probably didn't think about it either, at least if their decision to grab money from levee improvements for pork-barrel projects can be understood.

And to make gratuitous cracks at the Christian right, when so many of their churches have been the first in line to shelter refugees despite the fact that we all know they hate black people, is just gross ignorance. A few conservatives may have said "There, do you see how these people behave?", but many more of them have opened their wallets and their homes to strangers in need of shelter. That one could even imply such a thing, when the previous record for charity giving before Katrina was held by Americans pouring out donations for the brown-skinned victims of the pacific tsunami . . . well, I'm too much of a lady to respond.

I don't know what sort of poor decision-making process led New Orlean's mayor to draw up an evacuation plan that acknowleged that 100,000 people would fail to evacuate, and leave it at that. But I can be pretty certain that it was a run-of-the-mill decision error of the sort that even the enlightened citizens of Europe might make, such as improperly assessing the risk of a low-probability event, and not a callous calculation that the lives of the poor were irrelevant. Smug Europeans would be well to investigate this possibility, for it is all too easy to look at disasters elsewhere and sigh gratefully that it can't happen here, only to find much too late that it can and did.

From the desk of Jane Galt:

Myth "busting"

Hurricane Katrina seems to have triggered a lot of deep revelations to everyone. Perhaps unsurprisingly, these deep revelations consisted of . . . reaffirming exactly what they had previously believed. A certain stripe of conservative has learned that poor people are animals who can't be trusted to behave. Passionate Democrats have learned that the main responsibility for disaster planning rests with President Bush, who should be impeached. And European leftists have apparently learned, to their vast dismay, that America is a cruel and gluttonous place, building our so-called economy on cheap oil and the shattered lives of workingmen, whom we kill when they become inconvenient.

As everyone knows, I had hoped that people's attempts to use Katrina to prove that they were right all along would wait until the victims were laid to rest. This suggestion has been roundly ignored by all those who feel that their accusations will have more punch if they are made in the face of the nation's shock and horror.

Still, it would be hoped that the message of "Hey, America, you really suck weasels!!!" could have waited a few weeks. We'll still be here, still hosing up Mustela nivalis, after the dust has settled; plenty of time to chastise us for our horrid, selfish ways then. But apparently, our need to recognize that compared to Europe, we're a bunch of racist rednecks with the moral sensibilities of your average sea louse and the competence of Michael Moore performing "Dance of the Sugarplum Fairy" with ankle-weights and a neck brace, was just to urgent to let it go unsaid any longer.

You know, you would think that a large group of people who have all read Guns, Germs and Steel, and taken its message that "geography matters" to heart, would pay just a leetle bit of attention to it when they start chastising America for not being more like Europe.

Item One: The area that was devastated by the hurricane is approximately the size of Great Britain. Tell me again how the EU would have gotten everything under control in a matter of hours had 90% of England, Scotland, and Wales been flattened by an Atlantic storm that also knocked out electricity to Ireland and France.

Item Two: Americans live in a less favourable climate than do Europeans. While I was in London, I was mystified by the number of people who told me "I can't stand it when it gets over 70 degrees fahrenheit!" (well, they said it in celsius, but you get the idea). Having lived through a heat wave in London, I understand it a little better: 78 is kinda brutal if no one has air conditioning. Of course, the reason no one has air conditioning is that it rarely gets above 70. The average temperature in Dublin ranges from 4.8 degrees celsius in January to 15 degrees celsius in July. The average temperature in New York, where I live, which is pretty temperate for America--it doesn't have extremes of either heat or cold--is -1 degrees celsius in January, 25 degrees celsius in July. In other words, while they have a temperature range of about ten degrees, we have a temperature range of about twenty-six degrees. And that's not even a rugged area like Minneapolis (-11 degrees celsius to 24 degrees), Chicago (-6 to 24 degrees), or Kansas City (-5.5 to 24.5).

What does that mean? We use more energy to heat our homes in the winter, and unlike most Europeans, we have to air-condition our homes in the summer. Comparable figures for other major European cities:

London
Paris2.6 to 18.7
Rome7.1 to 24.1
Toronto-6.2 to 20.7
Barcelona9.1 to 24.2
Frankfurt.2 to 19
Stockholm-3.5 to 17.2
Moscow -10.3 to 18.5

As you can see from that list, only in the extreme north do winter temperatures drop below those of temperate New York city, and in those countries; only in Moscow and Toronto have a range bigger than New York. But even in those cities, there is no need to both heat and air condition. This matters, not only because it takes more energy to get your home hot/cold than to keep it there, but because houses can be built to maximize air flow, or maximize heat retention, but not both. That is how Romans get away with not having air conditioning (leaving the city for two months every summer also helps), and New Yorkers can't. And to have someone in Ireland--Ireland!--lecturing us on our energy consumption is just a bit rich. Put me directly in the path of the gulf stream and I won't use all that wasteful energy heating my house either.

Item Three It is a big country, and that means that we don't have the population densities necessary to support rich public transportation networks. Yes, there have also been development choices made, many of which I don't approve of (the interstate highway system, to start with). But Europe hasn't chosen high-density development because of some virtuous public-policy decisions; it has chosen high-density development because Europe, with population densities many times that of the US, doesn't have the land for low-density development. European planners have failed pretty much as miserably as American ones at getting their citizens to choose public transportation over cars.

Moreover, the lesson from America so far is that it is impossible to grow cities with the population densities necessary for successful mass transit from scratch. The only cities where mass transit is successful are the ones that grew around mass transit, notably New York and Chicago, and even in those cities, space constraints (the lake in Chicago, the small size of Manhattan) made a sizeable contribution to supporting the necessary density. Europe has public transportation not because it made the tough moral choices about land-use, but because its cities were largely built up before the car was invented, and because during the fifties, when productivity boosts were putting mass-produced automobiles in the hands of American workers for the first time, Europe's workers were busy recovering from the nasty war they decided to hold in the forties.

As an addendum, I'd like to point out that one of the main problems afflicting those who could not evacuate from New Orleans was that they didn't have a car because New Orleans is one of those old-fashioned walkable cities. (And no, you couldn't evacuate by public transit either . . . especially not if they had to evacuate to France to get out of the path of a hurricane).

Item Four America has a lot more varied terrain, which makes one-size-fits all regulation very tough. Even though most SUV's are undoubtedly driven by chairborne warriors who think it makes them look cool while they haul groceries from the Shoprite, regulators have trouble making a rule that won't force the folks who live in the Wyoming mountains to haul logs up the hillside in a Nissan four-cylinder econobox.

Item Five Y'all don't have storms like we have storms. The Dutch have made much of their fantastic flood preparedness compared to us. Might I suggest that if they were threatened by floods every couple of months, 95% of which did basically no damage, it might be a wee bit different? One of the biggest problems with evacuating New Orleans was simply that residents had been evacuated many times before in recent years, and returned to find their homes untouched.

Item Five Y'all apparently don't even need the "natural" part to produce the disaster. A heat wave that wouldn't even make a New Yorker reach across the sofa to turn up the fan killed as many people in France as the worst-case scenario for American losses to Katrina. They were apparently not saved by Europe's admirably high fuel prices, its finer moral sensibilities about the poor, its stronger committment to taking care of its citizens, or [COUGH] its enlightened attitudes on matters of race and ethnicity.

I say all this as someone who thinks that America's fuel taxes should be higher, its committment to undoing the legecy of slavery stronger, its educational system reformed in any number of ways to equalize the opportunities of the poor with the rich. I say it as someone who thinks that many of those who died in New Orleans did so because they were poor, and lacked the resources to go elsewhere. I say this as someone who is ashamed that America couldn't do better by its citizens.

But I also say this as someone who is sickened by the smug response of some Europeans to this tragedy: their gladness that it has taken Bush down a peg, their overweening belief that this somehow happened because Americans just aren't as nice or as smart as Europeans are. Of course, Europeans have no way of knowing how they'd do in such a disaster, because they have no storms like Katrina, no earthquakes like Northridge, no rivers like the Mississippi . . . but somehow that doesn't seem to stop some of them from being sure that the ability of their police to stop 40 or so football yobs from rioting translates perfectly into an ability to handle the displacement of 500,000 people when even the police have no water, food, gas for their cars or power for their radios.

Overall, these sorts of comments seem to come from a simply overwhelming ignorance of what America is about. I mean, Europeans say they know a lot about us, but you don't learn what America is like by watching our sitcoms any more than I can claim to have truly understood Ireland because I've watched Father Ted--or taken the odd week in Dublin to drink at the Stag's Head and visit the Book of Kells. I have no idea whether the author has lived in America, or even travelled here extensively, but I'd be rather surprised to find that she has. When most people visit a place, even one so terrible as America, they generally find their stereotypes replaced with a more sophisticated and nuanced understanding of its realities. Yet the author is attempting to debunk "myths" about America by saying that it is exactly the cartoonish redneck nightmare of the European left's imagination. The goal of myth-busting, particularly among academics, is not supposed to be replacing them with new myths of your own devising.

From the desk of Jane Galt:

I'm being interviewed on this radio station right now about the economic effects of Katrina. The interview will last until 5:00.

From the desk of Jane Galt:

Help the homeless

Alex Tabarrok is trying to get the blogosphere behind emergency Section 8 vouchers for Katrina's poorest victims, an idea that sounds pretty good to me. Section 8 vouchers, while certainly not perfect, have been a big improvement over the failed government housing projects they replaced, and there is enough slack in rental markets around the country to put all of Katrina's victims in a warm, secure abode. I reproduce the entire post below.

Ed Olsen at the University of Virginia, one of the country's leading researchers on housing, sent me the following proposal to immediately expand HUD's Section 8 Housing Choice Voucher Program. It's a brilliant proposal that needs attention at the highest levels of government. Pass it on.

Alex

HOUSING THE POOREST HURRICANE VICTIMS By Edgar O. Olsen

What the people displaced by Hurricane Katrina need most now is housing. Hundreds of thousands of families are now living in temporary housing and shelters, sometimes little more than tents, throughout the south central region. These families cannot wait for new housing to be built.

Fortunately, new construction is not necessary to solve the immediate problem. Enormous numbers of vacant units in the region are available for immediate occupancy by families with the ability to pay rent � and a simple expansion of HUD�s largest housing program would provide even the poorest families with the means to rent these units.

The rental vacancy rate in the United States is at a historically high level. For all metropolitan areas as a group, it is over 10 percent. The largest metropolitan areas in the south central region have some of the highest vacancy rates � 15.6 percent in Houston, 14.4 percent in San Antonio, 12.8 percent in Dallas, 12.2 percent in Memphis, 13.1 percent in Birmingham and 18.5 percent in Atlanta. Vacancy rates for smaller metropolitan areas and non-metropolitan areas are also at historically high levels. In short, many rental units in the south central region and throughout the country are available for immediate occupancy by people with the ability to pay the rent.

Fortunately, no new federal program is required to match families suddenly needing housing with an existing stock of vacant apartments. The United States government already operates a program that would enable low-income families to pay the rent for these units. The Section 8 Housing Choice Voucher Program currently serves about two million families throughout the country. It enables participants to occupy privately owned units renting for up to, and somewhat above, the local median rent. Enormous numbers of vacant units could be occupied immediately by families with these housing vouchers.

Congress could show its bi-partisan resolve to respond to this emergency housing crisis by acting promptly to authorize a sufficient number of additional Section 8 vouchers to serve the poorest hurricane victims.

Since many victims have had to travel quite a distance to obtain temporary shelter and many will have to move further from New Orleans to obtain permanent housing within a reasonable time, these vouchers should be available to any public housing agency in the country to serve families displaced by the hurricane. To avoid delays in getting assistance to these families, the vouchers should be allocated to housing agencies on a first-come-first-served basis and any low-income family whose previous address was in the most affected areas should be deemed eligible. We should not take the time to determine the condition of the family�s previous unit before granting a voucher.

Getting the poorest displaced families into permanent housing is an urgent challenge. It requires bi-partisan support for Congress to act promptly, quick action by HUD to generate simple procedures for administering these special vouchers, and housing agencies in areas of heavy demand to add temporary staff to handle the influx of applications for assistance. Even with the best efforts of all parties, the proposed solution will not get all the low-income families displaced by Hurricane Katrina into permanent housing tomorrow. However, it will be much faster than building new housing for them. And it will show them that the federal government cares about their plight and is working to do what it can to help.

From the desk of Jane Galt:

Brilliant

Dickie Scruggs thinks that insurance companies should be forced to pay for flood damage, even though the policies they wrote--and homeowners voluntarily bought--specifically excludes it, for the very good reason that if you live in a flood plain, buying flood insurance is prohibitively expensive for most people. But why should people, or taxpayers, be forced to pay for damage when you can go after a big, bad corporation? No thought as to how likely insurance companies will be to stay in the state of Mississippi after the government makes it clear that it thinks of them less as service providers than as a big piggy bank from which free money can be drawn at will.

From the desk of Jane Galt:

Envy in equilibrium

Earlier, Bryan Caplan wrote an intriguing post about envy in tribal cultures, and how it prevents economic development. Now, he's followed up with a post discussing why this would be an equilibrium:

Put yourself into an envious tribal environment. Anyone who is more successful than anyone else has to share his bounty or lose friends and status. Suppose you accept my argument that this system is highly inefficient. What can you do about it? Not much.

You could stop bugging your most successful neighbors for hand-outs. But that just leaves more for the other beggers. Even if you stealthily returned your hand-out to its original owner, there would only be a miniscule effect on the overall rate of the envy tax. After all, the envy tax is the sum of ALL the begging, and you're just one person.

You could refuse to share your bounty. But then you'll quickly be a hated pariah, and maybe your envious neighbors will "accidentally" stick you full of arrows during the next hunt.

You could preach against the envy tax. But that's probably the surest way of all to become a pariah. You may as well denounce motherhood.

Finally, you could leave the tribe and find another one with a lower envy tax. I'm sure I'd want to do just that if I were in a primitive tribe. Paraphrasing Cartman, "Screw you guys, I'm leaving home!"

Big problem #1: Your tribesmen might kill you for this affront. The chief might demand your head for disloyalty.

Big problem #2: Productive people who want a lower envy tax are only one segment of tribe-leavers. The other segment is jerks and criminals exiled by their own tribe. When you go looking for a new tribe, they're going to be worried. You can say "They didn't exile me, I left!" but that's what they all say. It's a Stone Age adverse selection problem.

OK, so a high envy tax is an equilibrium. But why does this equilibrium tend to emerge over and over? Again, individual self-interest. You see that your neighbor is doing well. Maybe if you beg he'll share; and maybe if you give him the evil eye when he turns you down, he'll think twice about saying no the next time. It's worth a try!

If a lot of people think this way, of course, the tribe gets a high envy tax, poverty, and stagnation. But the selfishly optimal strategy even in a poor, backwards society is to keep begging. The size of the pie stays small, but at least you'll get your piece.

Mr Caplan doesn't ask quite the question I want to see answered, which is why doesn't this equilibrium emerge every single time? How did we manage to break out of it? As William Easterly says, those looking at the developing world and crying "Why are they so poor"?" are asking the wrong question. Poverty is the natural state of man; the real question is "why are we so rich?" When we know the answer to that question, we won't have to ask the other one.

From the desk of Jane Galt:

About those pound cakes . . .

Well, we've had a fair number of takers on the pound cake offer--though I notice that not all of you who cited our blog at the Truth Laid Bear have mailed in for your pound cake. Remember, I need your address to send it to you, so just logging in at the Bear's is insufficient.

For all you crafty types out there--where do I buy tins to mail the pound cakes in? I assume that there must be somewhere that sells them, but I'm not sure where. I have access to a car to reach suburban malls, if there are suitable stores out in the great wild beyond the Hudson.

From the desk of Jane Galt:

Debate this evening

For anyone who's interested, I'm participating in the following debate:

A JinxMagazine.com debate:

Are Chain Stores and Big Box Retailers Hurting New York City?

Yes: Becky Ellis (Burning Man participant)
No: Megan McArdle (JaneGalt.net, The Economist)

Moderator: Michel "The Brain" Evanchik
Host: Todd Seavey

Wednesday, Sept. 7 at 8pm
Lolita Bar (northeast corner of Broome and Allen on Manhattan's Lower
East Side)
Free admission, cash bar

From the desk of Jane Galt:

Signing off

I know that everyone's thoughts are with the victims of Katrina, but that's literally all I've thought about all week, since I've been writing about it. By the time the boyfriend arrived home from Vancouver on Thursday night, I was on the verge of tears; I'd been doing nothing but squat in my apartment, watching television and writing about the wreckage for days.

Journalists are too prone to think that the importance of the events they cover rubs off on their own lives, and I'm not trying to imply that I'm somehow better, or deeper, because I'm sad. I'm sad because that's the normal reaction to stark human tragedy, and as terrible as it is to read and write about the events in New Orleans, it is incomprehensibly worse to be one of the frightened people crowding the tarmac as the filthy waters swill about their feet, not knowing where or when, or even if, help is coming.

These people need our help. They need it now, and they will need it three months from now, when America's attention has turned elsewhere. They will need temporary shelter, and permanent housing filled with furniture and housewares that few of them can probably afford. They will need clothes and schools and jobs and churches . . . in short, they will need to do in days or weeks what most of us do over a period of years, which is weave together a life and a home. We cannot replace their lost loved ones, or their precious family mementos, but we can give them stuff.

Please, dig deep. I've given money to the red cross, and money to this effort, which I blogged about earlier. Being a journalist, I'm afraid I can't afford matching funds, nor do I have anything nifty to offer like the folks at Crooked Timber have. But I'll offer this: for every hundred dollars you donate to a recognized charity (or the Lake Providence effort), I will mail you a homemade pound cake. I'm a pretty good baker. If you donate $250, I will write a blog post about anything you like*. It's on the honor system; just use the NZ Bear registry, or email me.

I'm off to go camping now. I feel a little weird going off into the woods when my country is suffering so much, but the holiday has been planned for months, and to be honest, I'm looking forward to being away from the television news for a few days. I hope everyone has a good Labor Day weekend, particularly anyone who's involved in the rescue efforts down there.

*Except my personal life. I know, I know, but you wouldn't believe some of the emails I get.

From the desk of Mindles H. Dreck:

Peer pressure

Blogger contributions for flood aid can be logged here. Certainly we can all give a few days' pay.

I gave to Mercy Corps, but I suggest you find the charity that works for you.

But just do it now. The earlier they have the money, the faster they can add resources. It's going to be a beautiful weekend here in the Northeast. I wanted to enjoy it knowing I did something.

I tell you what. I'll donate up to another $1,000 to match further contributions referencing this blog as logged on Truth Laid Bear. On your honor - you actually made the donation, and you made it after reading this. Send me an email (dreck-at-janegalt.net).

UPDATE: Thanks Amber, Mark Garbowski and Dr. Ann Sherman for donating.

In addition to a significant donation, David Walser is hosting a party to make Hygiene Kits (I had some trouble with that link, try going to providentliving.org and follow 'caring for others', 'humanitarian services', 'make humanitarian kits'. As he points out:

Since we have a desire to give of our time and effort in addition to our cash, we are going to host a party at our house to assemble hygiene kits. Here's a link that
describes the purpose of the kits:

http://www.providentliving.org/content/display/0,11666,3471-1-1607-1,00.
html.

Obviously, the kits might not be ready in time to be of much help for those displaced by hurricane Katrina. If not, they will be available when the next disaster comes. (Our neighborhood assembled a few thousand kits in response to the tsunami disaster. The need created by the tsunami had exhausted the supply of kits. The kits made in response to the tsunami have been used in the disasters that followed. That may be the case with any kits we assemble now.)

I only mention this because my sense is that there are many who longing to do something more than give cash.

Good idea.

ANOTHER LARGE DONATION from reader "Hank". Well done. I see there have been a few donations without an email to me - 'fling93', technofunk, Jeff Boulier, Sean Davis. I think they are going for the pound cake (see next post). Jane and I will have to sort that out.

I really couldn't decide what blog to credit, as so many of them are pushing this. I thought it was Hewitt that recommended Mercy Corps (and credited his blog with my donation), but I see I was wrong. Oops.

From the desk of Jane Galt:

Constructive criticism

This, on the other hand, is the sort of criticism I like to see:

There is no electric power in New Orleans and I assume most of southern Louisiana. There are huge power outages in southern Mississippi as well. With no power, mass communications to the people are significantly degraded. Televisions don’t work, there are huge gaps in cell phone coverage and batteries for radios are dying out.

The American military has decades of practice in mass communications to people with no delectrical power or other means to receive information. US forces have been dropping leaflets to enemy soldiers since World War I and did so with great effect in the Iraq war in 2003.

From the desk of Jane Galt:

Blogging for dollars

A friend sends this in:

Hi bloggers I know. I'm working on one small piece of this
incalculable relief effort, and I'm wondering if you can help. This
weekend I'll be in Lake Providence, Louisiana, which according to the
1990 census was actually the poorest town in America. It's right on
the river, just south of the Arkansas border, in one of the poorest
regions in America.

Lake Providence is six hours away from New Orleans, but already
dealing with a flood of evacuees (Refugees? Are we allowed to have
refugees in America?) that it doesn't really have the resources to
handle. This is the case in many small towns in Northeastern
Louisiana; the only Red Cross shelter is in Monroe, and families have
simply stopped where they ran out of gas or money and asked for
help. A hundred people are in Providence Church; this is not because
the town set aside the church as a refuge, but because people found a
church, stopped and asked if they could stay.

There is no Red Cross or FEMA money in Lake Providence or Tallulah or
Delhi or any of the other small towns taking in people; they are just
saying "Yes, stay here," and trying to come up with the resources to
help. Most immediately, the locals are trying to find money to move
evacuees to Monroe, but medium-term, many families are likely to
settle right where they are. They'll need clothes and school
supplies. And everything.

I've set up a site that explains this, and shows how to donate --
http://www.lakeprovidencehelp.com -- and I'll be taking pictures and
writing about what's going on when I'm there this weekend. This is
very much an exercise in trust; I'm administering a PayPal account
that will draw down to Providence Church. If there is a surplus of
money, it will go first to other towns in the area; if there's a
whole lot of money, it will go to other regions that are similarly
ill-equipped to provide for refugees. I'll be as transparent as I
can the website about what's coming in and where it's going.

I know there's a lot going on, and a lot of different ways to help,
but this is one small way to do a very specific and needed good
thing. I'm happy to answer any questions, and I'd be pleased if you
could pass the link on to your communities.

I can personally vouch that he's a man of high moral integrity, and knows a worthy cause when he sees one. If you haven't committed your donation dollars elsewhere, please think about helping out.

From the desk of Jane Galt:

In praise of price gouging

I should have known it was coming. This morning on the news, the anchor was talking to a man who had written a book on oil, yet seemed singularly uninformed about oil economics or even basic oil information (he claimed that prices had spiked "seven or eight dollars" before the storm hit, information which is true but not useful since, AFAIK, most of that spike happened before Katrina was even a gleam in the weather forecaster's eye. Then the two of them got themselves into a nice lather about gasoline price gouging.

Well, let me stand up for price-gougers everywhere. Thank you, brothers, for helping out in an emergency.

"Helping out?" you cry. "Do you realize how much I paid for gas this morning?" Why, yes, I do, and thank you too for doing your part to make sure that gasoline goes where it's needed most.

But let me explain.

Katrina has taken out the LOOP (Louisiana Offshore Oil Port), which ships about 1 million barrels per day (bpd) of oil to the mainland. (It's not permanently damaged, but it's not operating). It's shuttered 9 refineries in the Gulf Coast, and 20 more are operating at reduced capacity because of supply shortfalls. That means that more than 10% of the nation's refining capacity has been taken offline. A similar amount of America's crude oil production has been shut down, and it is yet unknown how much damage has been done to drilling rigs and the underwater pipes that carry oil to refiners.

The refining problems are particularly difficult because refineries have already been going flat out to keep up with summer driving demand. The upshot is, there is no longer enough gasoline to go around at the prices that were prevailing before Katrina got hit. Refiners are already rationing supplies to some wholesalers.

If you cap the price (as some people are making noises about), rationing will take the form of queuing: people will have to wait in long lines for gasoline. This sounds just fine to some activists and academics, apparently ones with a lot of time on their hands. The rest of us, who do not think it would be fun to live in the Soviet Union, recognize that, painful as it may be, prices are in general a better way to allocate scarce resources than lines.

But it hurts! I hear you moan. "What about my Labor Day driving?" Let me translate. What you're really saying when you say "I don't want to pay more for gas" is "I don't want to either use less gas, or use less of anything else". But as a society, we have to use less gas. You, or someone else, is going to have to consume less of the stuff, because we have less than we used to. If you don't want to be one of the people using less gas, then you have to be one of the people using less of everything else. Thus will the market pretty efficiently strip out driving by those who value it least.

Or to put it another way, "Yes, of course it hurts. If it didn't hurt, no one would stop driving."

But high prices don't just make people want to drive less; they make people want to supply more. European refiners are already talking about shipping gasoline here, though I don't know how it will get here before the temporary easing of air quality standards ends on September 15th (many US regions and even cities have special requirements for gasoline additives--this is one of the things that makes our refining infrastructure so inefficient). Even if that doesn't work, with local air quality standards relaxed, prices can act to push gasoline around the country to where it's needed most--like to the areas devastated by Katrina where people need gasoline, diesel and kerosene to help them get back on their feet. Prices of everything rise after a disaster, and a good thing too, since that encourages people and material to flood into the damaged area, where they're needed most. When well-meaning politicians impose "anti-gouging" laws, they slow the flow of resources to repair the damage.

So let's all do our part by grinning and bearing higher oil prices, and remembering to be nice to our friendly neighbourhood price gougers. But you don't need to thank them; after all, they're just doing their job.

From the desk of Jane Galt:

If Bush had met with Cindy Sheehan, this never would have happened

I find myself wishing that all those who just couldn't wait to get up on their political hobbyhorse and ride to glory over the corpses of Katrina's victims would take a minute to sit down in a quiet, soothing place with a refreshing beverage, take off their shoes and socks, wiggle their toes a little, and then carefully cram those socks into their mouths before anything else escapes.

This is not the time. No matter how fervently you believe that this could all have been avoided if only everyone had listened to you about [global warming/the election of George Bush/wetlands preservation/the coming vengeance of the Lord on sinners everywhere], this is not an appropriate time to mention that fact. There will be many, many days in the future for you to tell everyone how right you were. Those days should happen after all the desperate refugees have been resettled, after the Coast Guard has plucked the last stranded person from the roof of their flooded home, after the dead have been buried and mourned. Have a little human decency.

And if appeals to human decency don't work, how about the knowlege that such behaviour doesn't attract anyone to your cause? Rather the reverse, in fact; as I saw it pungently described elsehwere, it mostly makes the people around you want to whack you upside the head with the "shut-the-hell-up" stick. You catch more flies with honey than with showboating behaviour that outrages every fibre of their being.

From the desk of Jane Galt:

Credit catastrophe

One million with ruined credit? That number is surely too high; most people will make their payments. Nonetheless, it's reasonable to assume that there will be many whose credit suffers from Hurricane Katrina--people who forget payments because their house is underwater, people who lose everything and can't afford to meet their debts. It seems logical that creditors and credit agencies would have some system set up for dealing with natural disasters like this, but who knows?

Something Jack Shafer has had the guts to point out is that the people being affected by the hurricane are almost invariably black and poor. I've no doubt there are some closet racists out there telling themselves "look at all those black people looting" as they watch the mayhem on television; I doubt any of them are telling themselves "look at all those black people left for days without food, water, or power in 90 degree heat because they were too poor to evacuate". I myself was thinking "Why the hell didn't all these people leave when they were told?" The answer, Jack Shafer points out, is that it's not so easy when you're poor:

To be sure, some reporters sidled up to the race and class issue. I heard them ask the storm's New Orleans victims why they hadn't left town when the evacuation call came. Many said they were broke�"I live from paycheck to paycheck," explained one woman. Others said they didn't own a car with which to escape and that they hadn't understood the importance of evacuation.

But I don't recall any reporter exploring the class issue directly by getting a paycheck-to-paycheck victim to explain that he couldn't risk leaving because if he lost his furniture and appliances, his pots and pans, his bedding and clothes, to Katrina or looters, he'd have no way to replace them. No insurance, no stable, large extended family that could lend him cash to get back on his feet, no middle-class job to return to after the storm.

It is, of course, no more tragic when a poor person dies than a rich one; the ratio of one life, one death is the dreadful arithmetic we all face alike. But it is more tragic when someone dies because they have nowhere to go, than when only their own bullheaded stupidity is to blame.