Category Archives: Economics

Katrina evacuees and the enduring nature of poverty

Posted on by
3

dome%20evacuees.jpgIn the summer of 2005, tens of thousands of citizens from the New Orleans area relocated to Houston and other cities in the aftermath of Hurricane Katrina, most of whom never returned to their former home. A substantial number of those evacuees were poor and largely unemployed in the depressed New Orleans-area economy that existed even prior to the destruction of Katrina. Thus, the hope was that those evacuees would be able to improve their living standard by starting anew in economically vibrant areas such as Houston.
Unfortunately, that has not been the case. As this Jacob Vigdor post notes, research on the Katrina evacuees is indicating that the syndrome of poverty is extremely difficult to change:

Should governments help residents of depressed regions move towards more prosperous areas? Evidence from Katrina evacuees suggests that such efforts are likely to fail. The fortunes of long-term evacuees are almost completely unrelated to the characteristics of the cities to which they relocated. [. . .]
What can the world learn from the experiences of Hurricane Katrina evacuees? As indicated in other recent research carefully examining the impact of residential location on employment, moving a poor, undereducated citizen from a declining urban area to the middle of a vibrant economy is not likely to be a quick, cheap way to find him or her a job. While participants in a voluntary relocation programme would almost certainly be exposed to less personal trauma than Katrina evacuees, the survival instinct alone appears to be insufficient to guarantee success. Particularly in nations with social welfare systems more generous than the American model, the result of any such programme seems quite likely to increase, rather than assuage, drains on the public budget in the short-to-intermediate term.

The Absorption Nation

Posted on by
3

immigration_protest.jpgIn this TCS op-ed, Don Boudreaux points out an incongruity in the current political debate over immigration:

In the Declaration of Independence, Thomas Jefferson complained that King George III “has endeavoured to prevent the population of these States; for that purpose obstructing the Laws for Naturalization of Foreigners; refusing to pass others to encourage their migrations hither, and raising the conditions of new Appropriations of Lands.”

In a related blog post, Professor Boudreaux asks the following:

Why is it that today, the wealthiest time in our history, so many Americans fear immigration? Why do so few Americans today share Jefferson’s understanding that more free people in America mean an even more prosperous America?

Read the entire op-ed.

EZ-Tag, EZ-Increase

Posted on by
Reply

Toll_Plaza.jpgSo, according to this NY Times article about MIT economist Amy Finkelstein’s research, EZ-Tags for electronic payment of tolls along tollroads makes it easier for government to increase the tolls (Tyler Cowen provides further analysis).
Everywhere but Houston, that is.

Will Houston learn from L.A.’s mistakes?

Posted on by
Reply

Houston%20traffic3.jpgAs noted earlier here and here, the Houston metropolitan area shares many of the same characteristics of the Los Angeles metro area, albeit with far lower density of population. Although rail transit is typically inefficient in areas of relatively low density of population, that has not stopped Houston’s Metropolitan Transit Authority from spending enormous sums on inefficent light rail for Houston and proposing even more. One of the common rationalizations used by Metro for such boondoggles is that the transit lines will promote development of more densely-populated housing around the rail lines that will ultimately generate enough mass transit users to justify the enormous cost. Someday.
So, given the L.A. region’s greater density of population, has rail transit generated such housing along the rail lines there? Well, not according to this front page Los Angeles Times article entitled “Near the rails but still on the road — Research casts doubt on the region’s strategy of pushing transit-oriented residential projects to get people out of cars”:

In Los Angeles alone, billions of public and private dollars have been lavished on transit-oriented projects such as Hollywood & Vine, with more than 20,000 residential units approved within a quarter mile of transit stations between 2001 and 2005.
But there is little research to back up the rosy predictions. Among the few academic studies of the subject, one that looked at buildings in the Los Angeles area showed that transit-based development successfully weaned relatively few residents from their cars. It also found that, over time, no more people in the buildings studied were taking transit 10 years after a project opened than when it was first built.

To which USC urban economics professor Peter Gordon replies:

I could not have said it any better. Well actually, some of us did — over 30 years ago.
Yes, it is not pretty to say I-told-you-so. But the arrogant know-nothings inside LA’s beltway (including LA Times writers and including some who still hold public office) have been confused on this issue for years. Their plans have cost billions and, along the way, made traffic much worse. It was exactly the sort of fatal conceit that Hayek wrote about many years ago.
Yesterday, the same newspaper (front-page, below the fold) included “Will traffic-weary L.A. heed the toll call? … The land of the freeway is poised to become a little less free …”
What will they think of next?

Will Houston’s leaders listen? Incidents such as this do not make me optimistic that they will.

Want a season ticket? Take out a mortgage

Posted on by
Reply

Yankee%20stadium%20new.jpgConde Nast’s Megan Barnett reports on how the lion’s share of the new Yankee Stadium is apparently going to be financed. The idea is that the seats in the new Yankees Stadium will be sold in advance to investors who will own them in perpetuity. Morgan Stanley and its partner, a start-up entity called Stadium Capital Financing Group, are hoping that their structure becomes the accepted way of privately-financing sports stadiums. They have even applied for a patent regarding the concept, which seems like a stretch. Here’s how it would work:

Fans would buy seats for a designated period of time and finance them much like a mortgage. Pricing mechanisms can vary, but the most appealing option for buyers might be a 30-year loan with an annual payment equal to the current price of a season ticket. In exchange, the seat becomes real property, equivalent to, say, a condominium. The team (or university or other owner) receives the principal amount of the loan up front, to put toward construction costs.
This arrangement is different from seat licensing, which gives the holder the right to buy a season ticket for a specific seat. . . . Under [the] system, people own seats, not shares of a team.
Say, for instance, the current price of a season baseball ticket is $3,240. A 30-year loan at 6 percent interest with an annual payment of $3,240 results in a principal amount of $45,000. Even if the price of the seat doubles in the next 20 years, the seat owner still pays $3,240. Investors will have the option of making annual payments over 30 years, paying the entire amount up front, or something in between. Owners can also sell their seats at any time for market value, but rest assuredóthe team will get a cut of any profits.

At least one expert on financing stadiums, though, does not believe the financing technique will be all that earth shattering:

Roger Noll, a Stanford University economics professor who has written extensively about stadium financing, says that such an approach might make a dent in required public funding but will never replace it. Noll points out that most teams can’t afford to sacrifice future revenues in order to pay for their ball fields. “At the end of the day, stadiums are not good investments,” he says. “This isn’t going to be a revolution.”

H’mm, think this might work to defray the cost of this proposed boondoggle?

Saving for a boondoggle

Posted on by
Reply

metroraillogo062007.gifBuried in this Chronicle article about increasing tolls on the Harris County toll roads and congestion on the Westpark Tollroad is the following nugget about yet another of the Metropolitan Transit Authority’s decisions that is contrary to its purpose of improving mobility in the Houston metro area:

Six months after the four-lane Westpark Tollway opened in 2004, traffic backups began occurring in certain areas, said Peter Key, toll road authority deputy director. Congestion has worsened since then.
The toll road authority would have preferred building a six- or even eight-lane tollway, Key said. The Metropolitan Transportation Authority, which owned the land in the area, was willing to sell only enough for a four-lane tollway, he said. Metro wanted to keep the remaining land in case it builds a commuter rail line along the tollway, Key said.
Metro vice president John Sedlak said Metro has considered using the corridor for rail for several decades and may build a light rail line along parts of the corridor, from the Hillcroft Transit Center to an undetermined distance east of the West Loop.

As noted in this previous post, Metro’s bias in favor of inefficient rail lines is a costly bet for Houstonians. Those who are driving the Westpark Tollroad on a daily basis are finding out that such costs far exceed even the formidable expense of building inefficient rail lines.

Thinking about traffic snarls

Posted on by
Reply

HoustonTraffic.jpgClear Thinkers favorite — USC Urban Economics Professor Peter Gordon — is one of the participants in this Wall Street Journal Econoblog from earlier this year, in which the subject is one near and dear to most Houstonians — that is, the cost of traffic congestion, the problems that such congestion poses for urban areas and the policy options that are effective in dealing with the problems. The discussion is a very good overview of the policies and the problems involved in implementing them.

Texas’ medical licensing logjam

Posted on by
Reply

texas_doctors_comp.jpgThe number of insurance companies offering medical malpractice insurance policies has dramatically increased and malpractice insurance premiums have substantially decreased since the 2003 legislation enacting medical malpractice caps in Texas, but the med mal caps have contributed to at least one unanticipated problem:

. . . about 2,250 license applications await processing at the Texas Medical Board in Austin. The wait could be as long as a year for some of the more experienced doctors because it takes longer to review their records.
The fear is that some doctors will give up on Texas and go elsewhere instead of waiting. A $1.22 million emergency funding request was approved during the last days of Texas legislative session for the Texas Medical Board, which licenses physicians. That is on top of the $18.3 million regular biennial appropriation, said Jane McFarland, the board’s chief of staff.
The board plans to add nine new employees to its 139-member staff, seven of which will help chop away at the backlog of license applications.

More on that little boondoggle

Posted on by
1

Houston%20Dynamo.jpgCharles Kuffner has an interesting post about the John Lopez column noted earlier here that suggested that the $80 million or so in public financing for the proposed downtown soccer stadium is a political payback to the minority groups that have given certain civic leaders a pass for supporting the two more expensive downtown stadiums, Minute Maid Park ($286 million) and the Toyota Center ($250 million). Kuff goes on to observe about the location of the proposed stadium:

If it’s going to be in Houston and not Sugar Land or the Woodlands, then I think downtown is fine. It will be both more convenient and more attractive than Robertson Stadium, where I presume they’re at least drawing enough of a crowd to be viable. I just think they ought to pay for that downtown stadium themselves.

Norm Chad, as an aside to his funny column regarding the Dodgers’ stadium seats that come with free food, makes the following observation about the number of folks who are really watching MLS soccer:

Column intermission: “Beckham Fever” is contagious. This month, MLS games have attracted throngs of 7,426 in Kansas City, 7,802 in New York and 9,508 in New England. One fan in Houston even thought she sighted David Beckham, but it just turned out to be a good-looking grad student from Rice wearing a Subway sandwich board.

Come to think of it, has any civic leader bothered to ask how many folks are attending Dynamo games?

Rationalizing the latest boondoggle

Posted on by
2

Houston%20Dynamo%20stadium.gifHoustonians are currently enduring the rationalizations of a couple of boondoggles, a big one and a relatively small one. The Chronicle is always a good source for these rationalizations, such as this romantic interlude from Chron soccer writer Glenn Davis regarding the proposed downtown soccer stadium:

[A] downtown stadium will be an unparalleled vehicle for promoting soccer. Stadiums out in the hinterlands in MLS are still trying to prove them-selves as a magnet for fans.
Fans migrating to stadiums located in the inner city can become a part of a ritual.
When I was growing up in New Jersey, my father used to take me to sporting events at Madison Square Garden in the heart of New York. The ritual began as we left the house.
Take the train from the suburbs to Hoboken, N.J., then jump on the Path train (subway) under the Hudson River. As we exited the Path and scrambled up the steps to the street, a whole new world opened up.
The streets of Manhattan were alive with vendors, scalpers hawking tickets, and fans of the New York Rangers or Knicks. The air crackled with competition and excitement.
For a kid from the suburbs, this was like going into a new world. To this day, these impressions are indelible in my mind. Whether going to Madison Square Garden or to Giants Stadium to watch PelÈ and the New York Cosmos, I always felt that sense of anticipation.
[Dynamo CEO Oliver] Luck has told me his ritual with his father was taking public transportation to go to Cleveland Indians games.
Stadiums in the U.S. have in many cases become soulless, with their flight to the suburbs and attempts to woo fans more for the buildings and their amenities than why they were built in the first place.
Stadiums should be a meeting place for like individuals from all ethnic and cultural backgrounds who come together with the common bond of a sport.

I almost broke into a solo of Kumbaya over that one. At least Chronicle sportswriter John Lopez is more realistic, if not more persuasive, of the real basis for public financing of another downtown stadium:

The predominantly white fan base that follows the Astros got theirs. The largely white and black fan base of the Rockets got theirs, too.
What about Dynamo fans? What about the fan base that has been estimated at roughly 45 percent Hispanic, 45 percent white and 10 percent Asian? [. . .]
On paper, yes. It has to make sense. But in the eyes of many, it’s also about getting the same things the Astros, Rockets and Texans fans got. Acknowledgment.

Or, as Kevin Whited muses: “So, we need a new soccer stadium downtown so that Houston can be more like Manhattan, and so that fans of what is a minor-league sport in the United States won’t cry racism?”
Meanwhile, Dennis Coates, a professor of the University of Maryland Baltimore County, provides the following persuasive analysis of the lack of any economic merit to a similar initiative to build a downtown arena in Baltimore:

Studies like that done by KPMG about a new arena for Baltimore have been thoroughly discredited by independent observers. They are much like the predictions of psychics. While a psychic’s predictions of the future are rarely assessed for their accuracy, the predictions of stadium benefits have been thoroughly scrutinized by a wide array of independent researchers. There is almost no support for any of the predictions made by the stadium and arena benefit psychics when those predictions are compared to data on what actually happened. The bottom line is the feasibility studies are more a PR process than a fact finding one. I urge you to not buy into the PR as if it is objective science.

Thus, the local debate regarding another downtown stadium is off to an inauspicious start. If proponents of the stadium deal admit in campaigning for the deal that the economic benefits of the deal are questionable, but that the intangible benefits to the community override the financial risk of the deal, then most reasoned opponents of such deals would at least be satisfied with the debate of the issues. They might not be persuaded to support the deal on that basis, but at least they would have the comfort that the public’s assessment of the deal would be based upon an honest presentation of the issues. As it stands now, the presentation of the economic issues in most stadium campaigns is muddled by highly questionable assertions of direct economic benefits derived from such deals. Here’s hoping that the Chronicle will at least promote truth in advertising in regard to the debate over the downtown soccer stadium deal.