Great Galbraith Quote

"In a well-run and well-regulated community, with a sound school system, good recreational activities and a good police force - in short, a community where public services have kept pace with private production [emphasis mine] - the diversionary forces operating on the modern juvenile may do no great damage. Television and the violent mores of Hollywood must contend with the intellectual discipline of the school. The social, athletic, dramatic and like attractions of the school also claim attention of the child. These, together with the other recreational oppurtunities of the community, minimize the tendency to delinquency. Experiments with violence and immorality are checked by an effective law enforcement system before they become epidemic."

-The Affluent Society, pg. 191.

The Costs of Fixing Potholes

Every now and then, I check back on Seattle and Washington state politics, if only because it helps keep me connecting to my old stomping grounds and because it provides a refreshing change of pace from the usual Washington swamp politics that roll around.

Perfect example. Anyone who remotely follows Congress knows that every couple years they pass a "public-works" bill for highway, roads, etc. funding for the subsequent five years or so. Anyone who reads up on these bills can sum them up in one simple adjective: "behemoth."

One of my favorite adjectives, btw, kind of like how Elle Driver likes "gargantuan." However, unlike the cycloptic foe in Kill Bill, I am creative enough to find enough instances to use said adjective...like describing the massive scope and cost of federal public-works bills. These gargantuan (ha! Using Elle's adjective too) reams of legislation generally exist in the realm of some $250 billion over five years and are so stuffed with pork that it makes even the most lazy Jew flinch.

So what does all this have to do with Seattle politics, you ask? (Or don't - either way, I'm going to say anyway)

Just as there's too much spending in Washington, D.C. on projects that shouldn't get it (we all remember the legendary "bridge to nowhere" of Ted Stevens lore), there's not nearly enough in Washington state for re-building the SR 520 bridge. Just to contrast the "bridge to nowhere" with the SR 520, the longest floating bridge in the world. It carries commuters across Lake Washington, from the semi-affluent East Side (think Redmond, WA, where Microsoft is based) to downtown. On the East Side of Lake Washington, the SR 520 also connects with the I-405, one of the two main arteries that carry people up and down the West Coast (the other, naturally, being the I-5...which is like the I-95 on the East Coast).

So you could say that the SR 520 is relatively important.

Unfortunately, it's also falling apart. Washington state - to my knowledge - hasn't built a new highway in three decades and it hasn't revamped any of its existing ones. The SR 520 bridge alone is over four decades old. The damn thing could fall apart during a windstorm or an earthquake (by the WA-DOT's own admission)...both of which Washington is dreadfully overdue for. So you can understand that when I found out that Washington state is dreadfully underfunding the rebuilding of the SR 520 bridge, you could say that I became a little upset.

Not surprised, mind you. After all, this isn't exactly the first time that it's happened. The Washington state legislature is notorious for its lack of forethought...which is one of the reasons that Seattle has some of the worst traffic in the nation. The Reason Foundation put out a very interesting study regarding the future needs infrastructure-wise of commuters by 2030. They estimate that traffic in Seattle by 2030 (ceteris paribus) will be worse than Los Angeles is now.

Anyone who's heard of what traffic's like in Los Angeles now probably just felt a shiver run down their back. Anyone who's actually driven in Los Angeles before probably began shaking visibly.

What's causing all these problems, anyway? I don't agree with the Reason Foundation's claim that we simply need more roads - though it would certainly help. Actually, according to a study that the Federal Highway Administration put out in 2005 found that bottlenecks and traffic incidents (i.e. accidents) accounted for nearly two-thirds of all sources of congestion from 1993-2003. Take a look at the pie chart:

Bottlenecks and traffic incidents (particularly) can both be solved by smarter city planning...not necessarily more roads, but a more organized means to direct traffic. Personally, I think those highway signs that give up-to-the-minute info regarding traffic times across various freeways are awfully helpful. They definitely help in Southern California, that's for sure. It'd be tougher in Washington state, since there simply aren't that many freeways to choose from, but anything that gives commuters a leg up in traffic can only help congestion problem.

As for bad weather...well...we all know that won't be changing in Seattle anytime soon. But in any case, the same study also has a spiffy little index (about 3/5ths down the page) about commuting times in Seattle. The graph at the bottom of the page, Figure 3.17, Potentially Congested Highways by 2020, should be a chilling look into the future:

So do we need more and more roads? Yes, we do. As cities get larger and larger, as suburbs sprawl and sprawl, and as "exurbs" fill up from people who can't afford the suburbs, we do need more roads to accomodate them. This does mean that cities, states, and the national government are going to have to spend more money to build and upkeep those roads.

But more than that, it means we have to think smarter about how we get from one place to another. That means smarter city planning to avoid bottlenecks...and yes, it does mean vastly expanded public transportation.

Before any of that can get done, though, governments should start by fixing the 520.

The Economics of a Healthy Diet

Disclaimer: I only have 45 minutes to write this before class, so you won't have to endure a long, enduring rant.

The economics of obesity are staggering. The North American Association for the Study of Obesity (NASSO) tags the deaths in the USA alone due to obesity and obesity-related factors ("diabetes, high blood pressure, high blood cholesterol, heart disease, cancer, gallbladder disease, liver disease, lung diseases, arthritis, sleep disorders, and premature death") at a freakish 300,000 per year. That's over half as many deaths per year as from cancer (550,270, just in case you were counting). If that isn't a chilling statistic, I don't know what is. Am I going to go out on a limb and say that all 300,000 of those were preventable? Of course not. I know how easy it is to gain weight, especially when you're working full-time with a long commute each day. You feel exhausted from sitting at a desk all day and the least thing you want to worry about is what you're eating or spending another 30-40 minutes exercising. In a span of four months, I gained twenty pounds...and I can guarantee most of it wasn't muscle.

Still though...300,000 deaths per year? That's atrocious.

Now, the libertarian in me wags my finger at the statistician in me, reminding me that people have the right to cram whatever they want down their throats and it's hardly my responsibility to tell people what they can and cannot eat or how they should spend their day. It's the same reason that I don't mind that people smoke (so long as they blow their smoke upwards and not, y'know, in my face). In fact, eating is even less dangerous to my health: while I could receive some damage from second-hand smoke, I certainly can't pay any penalty for someone else eating a 10 oz. rare steak, along with some french fries and chug it all down with two or three cans of Coke...right?

(*coughs* We're going to ignore the fact that I've done that before, provided that you replace Coke with that of the diet variety...)

Well, I certainly could be paying a price. Two, in fact. The first is the indirect one - that people who eat unhealthy diets are more likely to become obese and contract obesity-related disorders and diseases like the ones mentioned above. When these disorders kick in, they put a significant (and mostly preventable) strain on the medical profession, much of which is already strained to the limit by less-preventable troubles (think cancer, old age, or fatal accidents). Seeing as how there aren't many private hospitals out there that most people can afford, this puts an even greater strain on the public health system. Since cities, states, and the federal government can never seem to find enough money for hospitals, that keeps the supply of them (along with their necessary components...doctors, nurses, etc.) stagnant...or falling, in some cases.

When you have an already-stretched supply straining under the weight of baby boomers that are getting older, you have trouble (and no, I'm not blaming baby boomers for this particular problem...well...okay, maybe just a little). Now add a few million more Americans whose belts are already at the breaking point coming into the ER because they collapsed from exhaustion while trying to climb a flight of stairs and hit their head on the railing...well, that's worse.

Another scary stat: roughly $100 billion a year goes to treating obesity-related health problems. Again: stagnant supply, rapidly rising demand...bingo! Higher costs. Prices rise for everyone, including those who aren't quaffing from the deep-fried cholesterol spring. So I have to deal with higher prices on that end, thank you very much. Not to mention it means I have to make an appointment for something as routine as a physical over three months in advance.

There's another problem, too. I'm not just a consumer; I'm a taxpayer. Even though the United States doesn't have universal health care, I still pay payroll taxes for Medicare and Medicaid (health-care assistance from the government to the elderly and the poor, respectively). When their premiums go up along with everyone else's due to the obesity pandemic (epidemic is a serious understatement), my tax burden upon them increases by taking away funds that otherwise would be spent on other programs. At the very least it would keep the deficit from rising that much more.

Am I suggesting that fat people shouldn't get health care? Again, of course not. Everyone could help out in helping people live more active, healthy lives. Companies could just as easily hire in-house physicians to do complete physical workups on their employees to help spot obesity problems early, when they're not nearly as much of a financial strain on anyone's health care costs. Not to mention that in-house physcians could become a huge asset to any employee: instead of having to wait three months for an appointment (like me), employees could just go see their company physician, who can give them tips to live a healthier lifestyle. It's in the company's best interest to have healthy employees: with better help comes more energy, fewer health liabilities...which all add up to more productive workers. Companies don't need to become nanny-corporations for the sake of the country...but because it helps the bottom line.

This proposal is slightly more ambitious than the CDC's, which suggests more modest interventions and such instead of longer-term solutions. Even theirs puts the cost of such interventions at less than a dollar per employee. By any measure, that's a whole ton cheaper than the cost a company has to pay in fatter health-care costs for their employee's health insurance.

Does this proposal invade the personal rights or responsibilities of individuals to eat what they want, when they want, without having a doctor pester them about their weight? I don't exactly consider "the right to be free from pestering" a constitutional right, so that's a bit moot...seriously, though. Would this lead to some sort of battle to hire only the healtiest workers, leaving the more overweight among us jobless? The idea that employers would hire people based not on what they know but on their pants size seems a little silly by any stretch of the imagination. Even in the ludicrous world in which that did happen, companies would try to hire healthier employees anyway, in order to minimize the potential health care cost to the company's bottom line.

Are companies the only entities who have a vested interest in keeping healthy? Noppers. We all have our own responsibilities to ourselves, our families, our firms, and our country.

We're all going to die sometime, true. In fact, the vast, vast majority of us can't choose the way in which we will eventually expire. But at least we won't have to worry about the indignity of our next of kin having to request an "XL" coffin for us when we do.

Neat Graphs

Just to show that we're not totally immune from price changes at the pump...(click on the images for a larger version).



Another series of graphs, showing that this particular oil shock isn't like the ones of the '70s...



And just for kicks, one more showing that our economy is becoming increasingly productive with the oil that we do have:

FOMC

The Federal Open Market Committee (FOMC), otherwise known as the Federal Reserve, a.k.a. Bernanke and Co., declined to raise interest rates today. They're still at 5.25%.

Boo.

And we have a winner!

The top spot for "most cowardly" politicians now goes to two members of the Seattle City Council, David Della and Nick Licata, for their proposal to put the Alaskan Way Viaduct tunnel replacement plan to the voters. This top spot has been stolen away from the state of California's legislature, who I'm sure will find some way to reclaim the spot soon.

I think I know David Della, actually. I remember growing up down the street from a "Mr. Della." I used to hang out with his son, Brett. Of course, seeing as how Della isn't exactly a unique name, I could be completely wrong.

In any case, I think putting this proposal to voters is a stupid idea. Why do we bother voting for politicians anyway at this point? I mean, if every single proposal is going to end up going to the voters anyway because of City Council members who can't make a decision by themselves to save their lives, or lawsuits by "citizen activists," or whoever, why even bother paying the salaries of politicians?

Agree to the proposal or work to defeat it...but for heaven's sake, quit making the entire business of running the government to a vote! We elect politicians for a reason!

The Case for "Soft Paternalism" (At Least for Saving)

Back in early April, The Economist had this article about the rise of what they call "soft paternalism." The idea behind "soft paternalism" is that the state uses rewards and incentives to moderate or temper behavior instead of punishments and criminal sanctions. The Economist is of the opinion that "soft paternalism" is much more dangerous than "hard paternalism" because it's so much more subtle and psychologically manipulative.

I disagree. I don't know what economists that they're consulting, but the alternative reading that I've done on the subject suggests the complete opposite in the newest and most popular form of soft paternalism - automatic enrollment in 401(k)'s. At the moment, you have to fill out a small mountain of paperwork to enroll in a 401(k) program and the prospect of voluntarily stuffing money into a savings account you won't see for years (or decades) is rather depressing, especially if you noticed a particularly spiffy tie (guys) or a hot pair of shoes (girls) on the way to work.

Ugh. What a comment. I am becoming too Swamp-esque. Anyway, moving on.

So the incentives for putting money into a 401(k) savings account ain't too spectacular, at least in the short run. In the long run, they're spectacular, because you'll probably get a better return on your investments (unless you put all your money into an Enron or Worldcom and don't diversify) than you could probably get anywhere else. Not to mention that you'll be helping the gargantuan current-account deficit by allowing companies/the government to borrow money from domestic sources rather than mucking about in China for investors.

For those of you who are patriotic and have no earthly idea what I'm talking about, think of it this way. Companies and governments (especially governments) borrow money when they don't have enough of it themselves. To, say, buy a new office building (if you're a company) or go to war and are too timid cowardly to raise taxes (if you're a government). Now, companies or governments can borrow money from domestic investors or foreign ones. If they have to go abroad, all that money that they have to pay in interest payments gets sucked out of the economy and becomes part of the current-account deficit that you've probably all heard of. Just for reference, our current-account deficit is just a shade over $800 billion, or nearly 7% of GDP.

Think of the current-account deficit like this. Companies and governments can only borrow as much money is being saved by banks or individuals. Say there's $100 that can be borrowed in the U.S. from domestic sources and the combined total of corporate and government borrowing is $120. Companies and governments (especially governments) aren't going to halt their spending plans just because they can't borrow from Americans - they'll look offshore if they have to. That $20 that is borrowed from foreign sources is our current-account deficit.

Companies (and particularly governments) would much prefer to borrow from domestic sources, because then they don't have to go through the bothersome process of converting their currency (and paying the fee that comes from massive transactions on this scale) to finance the buying; governments would much rather keep their bucks in the national fold.

Now that my kinda-sorta-tangential explanation is over, I can get back to why automatic saving in 401(k)'s kicks ass. When you put your money in a 401(k), it doesn't just sit there in a black box and mysteriously accumulate. No sir - that money is working hard, and not just for you. 401(k)'s put money in stocks, bonds, etc. The borrowers of that money - be it the government to buy votes expand entitlement programs for the elderly or companies through the purchase of stock - will use those funds to finance their operations. And they'll be doing it by raising money from domestic sources - namely, you, the chap (or chapette) whose employer had the foresight to automatically enroll you in a 401(k). They win (they get the cash), you win (you get a return on your investment better than the 0.15% that your checking account is giving you), and the American people win (lower current-account deficit, more money circulating about here at home).

So why does the government need to step in anyway? If more people knew about this, then clearly they'd enroll, because it's in their long-run self-interest.

Eh heh...and here we come across one of the biggest problems of capitalism. Theoretically, of course, it is in everyone's long-run self-interest to save more money for emergencies or retirement. But given that the national savings rate has been consistently negative for a while now (sure, it doesn't include capital gains, but even controlling for that there's no way it's at the relatively safe concensus of 10% of earnings) it's clear that it's going to take a bit of an extra push to get people to save their money for the future. Most people just don't always actively think about their long-run self-interest; that is, expend the extra effort/restraint needed to do so. Automatic enrollment can provide that push.

Since when is it the government's job to make sure that people save money, anyway? Why reward laziness by having the government nanny people around? This is the question that The Economist asks.

Here's my answer - sure, it's not the government's job to have a safety net that breeds a culture of laziness and complacency. I would never suggest something like that. However, in this respect, it is warranted. Not because of some abstract idea of government as eternal protector, but because the government has an interest in keeping as many people off its poverty rolls as it can. Surely no one begrudges the government the right to try and make everyone better off so that it doesn't have as many dependents clamoring for government handouts?

By protecting employers who start an automatic enrollment plan (with the voluntary opt-out), the government boost participation in these programs. By helping the individual make one choice, the government gives a more affluent person (in the long run as their savings build) many more choices when they retire instead of existing on subsistence government handouts.