Dan Drezner blogs on the report of the inspector general for the Iraq Reconstruction effort here.
The report is here.
The lead to the report highlights the shortfall in the number of projects that are being done. Our great aspirations in summer 2003 are sadly trimmed in the gray October of 2005.
Dan cites the criticism of the planning for the effort. I'd like to focus on another area, one that liberals often ignore. It's true, as was cited in a Post article on Katrina reconstruction, that doing stuff for people is lots worse than having people do stuff for themselves. It's a lesson I've seen over and over, whether in the results of much foreign aid from the 1950's on or in a bureaucracy, whether building things or building software.
Why--take an example of rebuilding the Kabul/Kandahar highway in Afghanistan. Very worthwhile, successfully completed, not controversial. But. Highways require maintenance, maintenance requires money, money requires either continuing foreign aid or a functioning tax system. Maintenance also requires equipment and contractors. To the extent that the reconstruction meant developing a base of Afghani expertise and contractors, the highway can be maintained. But reports from Afghanistan don't show the development of an effective bureaucracy that can assess and collect taxes (not even a government that can do a tax law that is complied with).
Similar logic applies in Iraq, whether it's hospitals or schools. Unfortunately, maintenance is not a "sexy" subject. Politicians and political scientists put their time and thought into the policy decisions, but fail to recognize that for a long term achievement you need the supporting web of bureaucracy and resources. Even the inspector general is likely to be focussed on the building, not the maintenance.
Monday, October 31, 2005
Social Learning
Sebastian Mallaby in the Post writes a column, Do Seniors Need Saving?, that raises many questions. The theme is that with globalization and longer lives, and the decline of pensions (see NYT magazine) people should be saving more now, but instead they're saving less.
He addresses a liberal strawman--that the "hidden persuaders" of the 1950's are making people spend more and save less:
But another way to look at this is as an arms race between consumers and commerce, with each side searching for advantage. Advertising has been around for centuries, getting more sophisticated all the time. Consumers have been around for a while, also getting more sophisticated all the time. Unfortunately Mr. Mallaby is a whippersnapper, with no personal memory of the 40's and 50's. There's more and more choice of products, more and more personalized advertising, more and more product placement. For example, I don't remember any vending machines in my high school, nor do I remember Disney doing a lot of product tie-ins when Cinderella was released.
My bottom line: in a race between people who have a direct and immediate financial incentive [to sell] and those whose incentive [to save by not consuming]is more diffuse and more delayed, I'd place my bets on the first.
Postscript: Thomas Schelling, whom I seem to cite repeatedly these days, did work on the idea of two people in one skin--the one who craves immediate gratification versus the one who plans and saves. Rereading that work would be interesting.
He addresses a liberal strawman--that the "hidden persuaders" of the 1950's are making people spend more and save less:
"But people managed to save back in the 1950s, so they could also save today. Indeed, the hidden persuaders are surely less insidious now than they were then: People have gotten better at zoning out their messages."I think it's true that societies learn. Supposedly that's the case for crack: people, particularly young people, in the inner cities saw the ravages of the crack epidemic of the 1980's and decided not to use it. A similar explanation may have been offered for the decline in teenage pregnancies, crime, etc.
But another way to look at this is as an arms race between consumers and commerce, with each side searching for advantage. Advertising has been around for centuries, getting more sophisticated all the time. Consumers have been around for a while, also getting more sophisticated all the time. Unfortunately Mr. Mallaby is a whippersnapper, with no personal memory of the 40's and 50's. There's more and more choice of products, more and more personalized advertising, more and more product placement. For example, I don't remember any vending machines in my high school, nor do I remember Disney doing a lot of product tie-ins when Cinderella was released.
My bottom line: in a race between people who have a direct and immediate financial incentive [to sell] and those whose incentive [to save by not consuming]is more diffuse and more delayed, I'd place my bets on the first.
Postscript: Thomas Schelling, whom I seem to cite repeatedly these days, did work on the idea of two people in one skin--the one who craves immediate gratification versus the one who plans and saves. Rereading that work would be interesting.
Saturday, October 29, 2005
Where Is the Economic Man
Economists use the concept of the "economic man", who is a rational seeker of maximum utility.
An exchange with a reader here about real estate prices reminds me of some other articles that challenge this. One was an article in the NYTimes about medical savings accounts. The idea is that of economic man--allow a person to tax shelter money to be used for medical expenses. People will use their money more wisely than if their medical expenses are covered by insurance. It's win/win: better health at a lower cost. The problem is, speaking as someone who each year for the last 30+ has had the chance to change insurance plans, people don't necessarily maximize utility. I just keep renewing my plan; it's much easier than spending the time to compare plans each year. (In that sense, I am maximizing utility.)
Similarly, Henry Blodgett in Slate looked at the investment strategy of Ben Bernanke, Greenspan's replacement as head of the Federal Reserve. Turns out he's not a rational economic man either, at least by academic standards.
The problem is, not that people aren't rational, but people are more multiudinous (see Walt Whitman) than economics, or the law, or other disciplines admit.
An exchange with a reader here about real estate prices reminds me of some other articles that challenge this. One was an article in the NYTimes about medical savings accounts. The idea is that of economic man--allow a person to tax shelter money to be used for medical expenses. People will use their money more wisely than if their medical expenses are covered by insurance. It's win/win: better health at a lower cost. The problem is, speaking as someone who each year for the last 30+ has had the chance to change insurance plans, people don't necessarily maximize utility. I just keep renewing my plan; it's much easier than spending the time to compare plans each year. (In that sense, I am maximizing utility.)
Similarly, Henry Blodgett in Slate looked at the investment strategy of Ben Bernanke, Greenspan's replacement as head of the Federal Reserve. Turns out he's not a rational economic man either, at least by academic standards.
The problem is, not that people aren't rational, but people are more multiudinous (see Walt Whitman) than economics, or the law, or other disciplines admit.
We See Only With Our Eyes
Today the NYTimes Editorial Page includes two pieces commenting on the indictment of Scooter Libbery that prove the point of my title--that we see only with the aid of our background and experience:
- Robert Ray, successor to Ken Starr, uses Fitzgerald to say that regular prosecutors can do the job of investigating an administration's wrongdoings.
- Lanny Davis, attorney and spin doctor for Clinton, shows sympathy for the Bush people, remembering that he never worried about the classification status of the information he used to spin the story. He says both sides are using double standards and worrying about motives instead of facts. He also sees them as falling into the same trap of covering up and spinning, as opposed to admission.
Friday, October 28, 2005
In Praise of Freecycle
I wonder if the economists in the government are taking freecycle into account? Freecycle, for those who don't know, is a no-cost classified ad concept implemented in Yahoo groups. For example, I'm in the Reston/Herndon freecycle group, so I get an e-mail digest containing "Offers" and "Wanted" postings. The Offers are of things still possibly usable but unwanted. For example, I just posted a series of offers, including an old (14 year old) PC and some homemade furniture. To my surprise, I've some interest from people.
Economically, the point is that freecycle (and craigslist.com, which operates slightly differently) lubricates the reallocation of assets, of "productive" stuff. By extending the useful life of products, it increases their value without requiring resources to produce. It's one of the rare instances where you can get something for nothing, or nearly nothing (since you do invest the time needed to coordinate the pickup).
Economically, the point is that freecycle (and craigslist.com, which operates slightly differently) lubricates the reallocation of assets, of "productive" stuff. By extending the useful life of products, it increases their value without requiring resources to produce. It's one of the rare instances where you can get something for nothing, or nearly nothing (since you do invest the time needed to coordinate the pickup).
Real Estate Bubble Ends?
I think it does. Yesterday I saw by the "for sale" sign in my townhouse cluster that they'd reduced the price on the house. Houses in the cluster have been selling for steadily climbing values since the millennium. Seems to me we started at about $100K, the most recent houses have been selling for $300+, and this house was priced for about $390K originally. It's in an area near the toll road in Reston--it's sort of on the fringe in an area with lots of townhouses and condos.
I've lived here for almost 30 years, buying back in a previous bubble in the 70's when land values and housing prices were taking off, before the crash that came with Reagan (a "crash" for ag land and office buildings, a leveling for houses). Back then the townhouses were good first homes, though there was a development of real small single family houses (like 800 sq. ft) that went for about $10K less. Over the years we've had problems with crime, lack of maintenance, renters, etc. (They seem to be over for the moment, although as people crowd multiple families into a single house and MS-13 becomes present, they may reemerge.) Prices took 25 years to double, which isn't a good return on investment, but now they've increased 200 percent more in 5 years.
It's sad--who can buy a house at $300K, much less the 900K for single family houses? It used to be a house was 2 1/2 times your gross. Today I think they're using a higher multiple, perhaps because basic living costs (food, etc.) take a smaller share of one's income. But still, a teacher who earns $50K has no hope. But with no kids I've only an academic interest in the health of the schools, but I've a greater interest in coffee. The local Safeway has big problems in hiring people for their Starbucks. Many of their clerks have worked there for a good while, so they're ensconced somewhere they can maybe afford. But Starbucks is new, takes a significant number of employees to staff, and the turnover has been tremendou. It's worrisome, because my coffee is essential to my health and sanity.
I've lived here for almost 30 years, buying back in a previous bubble in the 70's when land values and housing prices were taking off, before the crash that came with Reagan (a "crash" for ag land and office buildings, a leveling for houses). Back then the townhouses were good first homes, though there was a development of real small single family houses (like 800 sq. ft) that went for about $10K less. Over the years we've had problems with crime, lack of maintenance, renters, etc. (They seem to be over for the moment, although as people crowd multiple families into a single house and MS-13 becomes present, they may reemerge.) Prices took 25 years to double, which isn't a good return on investment, but now they've increased 200 percent more in 5 years.
It's sad--who can buy a house at $300K, much less the 900K for single family houses? It used to be a house was 2 1/2 times your gross. Today I think they're using a higher multiple, perhaps because basic living costs (food, etc.) take a smaller share of one's income. But still, a teacher who earns $50K has no hope. But with no kids I've only an academic interest in the health of the schools, but I've a greater interest in coffee. The local Safeway has big problems in hiring people for their Starbucks. Many of their clerks have worked there for a good while, so they're ensconced somewhere they can maybe afford. But Starbucks is new, takes a significant number of employees to staff, and the turnover has been tremendou. It's worrisome, because my coffee is essential to my health and sanity.
Wednesday, October 26, 2005
Ebbs and Flows--the Tide of Creative Destruction
The NY Times today has an article mostly on the scattering of the New Orleans labor force. However, it notes that some have migrated to New Orleans:
One of my platitudes is that there are always tradeoffs, and it's true here. The farming way of life has changed/been destroyed in many areas, but the loss here is focussed and more visible. But, as in the case of the closing of some military bases, the new may seem better on balance than the old.
Its Work Force Scattered, New Orleans Wrestles With Job Crisis - New York Times: "Large numbers of workers who lived in New Orleans are now scattered throughout Louisiana or neighboring states, unable to return to flood-damaged houses and leaving hundreds of businesses unable to reopen or operating below capacity. Many are out of contact, or have settled elsewhere to enroll their children in schools.
Some positions are being filled by people from other states looking for new job opportunities in construction or, as in the case of the Five O'Clock Grille, service jobs."
One of my platitudes is that there are always tradeoffs, and it's true here. The farming way of life has changed/been destroyed in many areas, but the loss here is focussed and more visible. But, as in the case of the closing of some military bases, the new may seem better on balance than the old.
Gift That Keeps on Giving, or George Will Misleads
What is the gift that keeps on giving? For social commentators, otherwise known as the chattering class (thanks G. Will), it's the concept of the social ladder. Why? Because it works for both left and right and it's so vague you can make anything of it, as George Will does here
"America's economy is so dynamic that in any five-year period, approximately 45 percent of Americans move from one income quintile to another. Twenty percent move up from the bottom quintile in any 12-month period, and 40 to 50 percent move up over 10 to 20 years."
What are the ambiguities? Let me count the ways:
"America's economy is so dynamic that in any five-year period, approximately 45 percent of Americans move from one income quintile to another. Twenty percent move up from the bottom quintile in any 12-month period, and 40 to 50 percent move up over 10 to 20 years."
What are the ambiguities? Let me count the ways:
- The distinction between "income" and "wealth/assets"--the former is more variable, due to bonuses, separation pay, lottery winnings, commissions, etc. while the latter is more stable and usually more socially significant. (I've seen reports of research that says when you compare black and whites of equal family wealth, differences in test scores evaporate.)
- Using quintiles, or deciles (or whatever) means that every move up is matched by a move down which is why I say it works for both left and right. Mr. Will here uses "up"; in her recent book, Bait and Switch, Barbara Ehrenreich focuses on the "down".
- The difference between individuals and society. The modal individual in our society has an income curve that starts low, based on entry level pay in his or her occupation, then rises to a peak, then falls, rapidly or gradually depending on retirement benefits, etc. If you could visualize society over time, it's rather like seeing a school of fish: some leaping into the air, some in the water, some unseen below the surface, lots of activity and churning.
Learning by Doing--Military and FEMA
One of this blog's themes is learning. Here's another example, from today's Times:
Simple but a product of learning. My point here is that you need the bureaucracy to incorporate such lessons. As long as the Guard in Florida is called out regularly, they'll have the institutional memory of how best to organize water/ice deliveries (assuming people have cars and gas). But if there's a gap of years, it will be lost because, I strongly suspect, there's no bureaucracy in place to capture "lessons learned" and put them into circulation and no training mechanism in place to spread experience to other places.
Millions Are Still Without Power and in Need of Basic Supplies - New York Times: "Across the state in Naples, just north of where the hurricane made landfall early Monday, ice and water distribution appeared to be going more smoothly. At one station, members of several National Guard units were operating with assembly line precision. By 9 a.m., hundreds of cars, from Mercedes Benzes to jalopies, had lined up on a road leading into the parking lot of Barron Collier High School.
A National Guardsman in camouflage fatigues waved cars forward, and as each rolled up to a squad of soldiers, one sang out, 'Pop the trunk.' Other soldiers stepped forward with cartons of bottled water and plastic bags of ice, putting them in the car, tapping the trunk shut and motioning the driver on. Each delivery was over in seconds.
'We've done this so much over the last two or three years that we're getting pretty good at it,' said Sgt. First Class Tim Harper of the 265th Air Defense Artillery of Sarasota."
Simple but a product of learning. My point here is that you need the bureaucracy to incorporate such lessons. As long as the Guard in Florida is called out regularly, they'll have the institutional memory of how best to organize water/ice deliveries (assuming people have cars and gas). But if there's a gap of years, it will be lost because, I strongly suspect, there's no bureaucracy in place to capture "lessons learned" and put them into circulation and no training mechanism in place to spread experience to other places.
Tuesday, October 25, 2005
In Defense of Bureaucracy
Though Secretary Powell's former Chief of Staff, Mr. Wilkerson, is receiving press attention for his speech at the New America Foundation which attacks the administration's foreign policy, I'd like to focus on his defense of bureaucracy, as follows:
"but fundamental decisions about foreign policy should not be made in secret.
It's true that human nature, and bureaucrats are mostly human, says that participation in a decision means energy in execution (assuming the decision went mostly your way). But a good leader is more than just the head of a bureaucracy. IMHO the leader needs to respect the abilities and needs of the bureaucrats, but know how to maneuver them. In other words, it's the "foist" in the above quote that is key, not the lack of participation. If you don't participate, it's easy to feel unenthusiastic, but a good leader can get acceptance. (Of course, it helps if the decision is right.) If I remember correctly, Lincoln's Cabinet opposed the Emancipation Proclamation and the Marshall Plan didn't come from the bureaucracy. In fact, they had to develop a new bureaucracy for it, which is a lesson in itself.
Perhaps the best metaphor is a lion tamer with lions? Once the bureaucrats smell weakness, they can turn on you, witness the media over the last couple weeks.
"but fundamental decisions about foreign policy should not be made in secret.
Let me tell you the practical reason – and here I’m jumping over really into both realms, the practical reasons why that’s true. You have probably all read books on leadership: “The Seven Habits of Successful People,” or whatever. If you as a member of the bureaucracy do not participate in a decision, you are not going to carry that decision out with the alacrity, the efficiency and the effectiveness you would if you have participated. When you cut the bureaucracy out of your decisions and then foist your decisions, more or less out of the blue, on that bureaucracy, you can’t expect that bureaucracy to carry your decision out very well. And furthermore, if you’re not prepared to stop the feuding elements in that bureaucracy as they carry out your decision, you’re courting disaster."It's certainly true that things go more smoothly if the bureaucracy has weighed the various policy options, sent them up to policymakers, and gets a decision back. That's the way the textbook says it should be done. But smoothness in decisionmaking and execution is not the end-all and be-all of policymaking.
It's true that human nature, and bureaucrats are mostly human, says that participation in a decision means energy in execution (assuming the decision went mostly your way). But a good leader is more than just the head of a bureaucracy. IMHO the leader needs to respect the abilities and needs of the bureaucrats, but know how to maneuver them. In other words, it's the "foist" in the above quote that is key, not the lack of participation. If you don't participate, it's easy to feel unenthusiastic, but a good leader can get acceptance. (Of course, it helps if the decision is right.) If I remember correctly, Lincoln's Cabinet opposed the Emancipation Proclamation and the Marshall Plan didn't come from the bureaucracy. In fact, they had to develop a new bureaucracy for it, which is a lesson in itself.
Perhaps the best metaphor is a lion tamer with lions? Once the bureaucrats smell weakness, they can turn on you, witness the media over the last couple weeks.
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