Attributions of causality

The case for supporting a rich transportation infrastructure to and from St. Louis or Cleveland isn’t (just) that we wish those communities well like some distant acquaintance. It is because we wish to build and support a vibrant and cohesive nation. The fate of American places is not a private concern of other people. Their struggles are our struggles. Their catastrophes are a cancer on our body politic.

..  he has proposed spreading the Federal government around, which would among other things help blur and heal the divide between “Washington” (an idea more than a place) and the increasing fraction of the country which feels alienated from it. There is a burgeoning industry among pundits for proposals like this, break up the liberal city, spread out the universities, pay a UBI, etc. And that is unironically great. Hopefully we will do some of these things.

.. building transportation infrastructure provides and encourages economic development within far-flung communities, reducing the geographic disparities that now threaten the viability of the United States as an integrated polity. But transportation infrastructure also very directly binds distant parts of the polity together, and reduces the likelihood that dangerous disparity will develop or endure. If Cincinnati has abundant and cheap air transportation capacity that will remain whether it is fully utilized or not, firms in New York and DC and San Francisco will start thinking about how they can take advantage of the lower costs of those regions in a context of virtual geographic proximity.

.. When decisions about transportation capacity are left to private markets, a winner-take-all dynamic takes hold that is understandable and reasonable from a business perspective, but is contrary to the national interest. Private entrepreneurs cannot overcome this. Even if an airline were to “adopt” an underserved city, providing transportation at a loss in hopes that a business renaissance later justifies it, firms will be discouraged from moving in by the ever present risk that the service will disappear or the terms will worsen. Only a commitment at a policy level to abundant and inexpensive transportation can eliminate this risk.

.. It’s a cliché that the government builds “bridges to nowhere” that the private sector never would build. That’s true. And it’s a credit to the public sector. Bridges to nowhere are what turn nowheres into somewheres. We need many, many more bridges to nowhere.

.. the fact that air travel managed by the main domestic carriers in the United States is uniquely awful, and there is no evidence that US travelers are any more price conscious than consumers in other countries. No frills, discount air travel is popular in Europe as well, and it is sometimes awful, but it is on the whole much cheaper than “discount” air travel within the US. Mainstream carriers almost everywhere else in the developed world are notably less awful than the big American carriers, and often just as cheap.

.. Aggregate outcomes are not in general or even usually interpretable as an aggregation of individual preferences. When we learn about the Prisoners’ Dilemma, we don’t interpret the fact that both players rat as evidence that, really, they both just wanted to go to jail for a long time. After all, that is their revealed preference, right? No. We understand that the arrangement that would obtain if they could cooperatively regulate one another’s behavior is in fact the outcome that they would prefer. As isolated individuals, they simply have no capacity to express this preference.

.. No matter how much we pay for extra leg room, we may end up next to the screaming kid.

.. Our “media center” may be malfuctioning even while our neighbors watch an endless series of bad action films, and ultimately there is nothing we can do but nag the flight attendant about it. The wifi may be decent, or it may be crap, however much we pay for it.

.. On an individual level, it is perfectly rational to discount a highly uncertain return in amenity value relative to what one would pay for a reliably enjoyable flight.


Trade-offs between inequality, productivity, and employment

In economically polarized societies, this dynamic breaks down. The very wealthy don’t employ everybody, because the marginal consumption value of a new hire falls below the insurance value of retaining wealth.

.. Idle unemployment is a problem in societies that are highly productive but very unequal. Here basic goods (food, clothing) can be produced efficiently by the wealthy via capital-intensive production processes. The poor do not employ one another, because the necessities they require are produced and sold so cheaply by the rich.

.. The rich produce and “get richer”, but often they don’t much feel richer. They feel like they are running in place, competing desperately to provide all the world’s goods and services in order to match their neighbors’ hoard of financial claims. However many claims they collectively earn, individually they remain locked in a zero-sum competition among peers that leaves most of them forever insecure.

.. In relatively equal, technologically advanced societies, people create plenty of demand for one another’s services. But when productivity and inequality are combined, we get a highly productive elite that cannot provide adequate employment, and a mass of people who preserve more value by remaining idle and cutting consumption than by attempting low-productivity work. (See “rentism” in Peter Frase’s amazing Four Futures.)

..  We had a kind of Wile E. Coyote moment in 2008, when, collectively, we could no longer deny that much of the debt the “middle class” was generating to fund purchases was, um, iffy. So long as the middle class could borrow, the “masses” could simultaneously pay high-productivity insiders for efficiently produced core goods and pay one another for yoga classes. If you didn’t look at incomes or balance sheets, but only at consumption, we appeared to have a growing middle class economy.

.. As polities, we have to trade-off extra consumption by the poor against a loss of insurance for the rich.

.. If we want to maximize total output, we have to compress the wealth distribution. If inequality continues to grow (and we don’t reinvent some means of fudging unpayable claims), both real output and employment will continue to fall as the poor can serve one another only inefficiently, and the rich won’t deploy their capital to efficiently produce for nothing

.. Why did World War II, one of the most destructive events in the history of world, engender an era of near-full employment and broad-based prosperity, both in the US where capital and infrastructure were mostly preserved, and in Europe where resources were obliterated?

.. I think an underrated factor is the degree to which the war “reset” the inequalities that had developed over prior decades. Suddenly nearly everyone was poor in much of Europe. In the US, income inequality declined during the war. Military pay and the GI Bill and rationing and war bonds helped shore up the broad public’s balance sheet, reducing indebtedness and overall wealth dispersion.

.. The financial effect of the war, in terms of the distribution of claims in the US, was not very different from what would occur under Keen’s jubilee.

.. Although in a narrow sense, the very wealthy lost some insurance against zero-sum scarcities, the post-war boom made such scarcities less likely. It’s not clear, on net (in the US), that even the very wealthy were “losers”. A priori, it would have been difficult to persuade wealthy people that a loss of relative advantage would be made up after the war by a gain in absolute circumstance for everyone. There is no guarantee, if we tried the jubilee without the gigantic war, that a rising tide would lift even shrinking yachts. But it might very well.