Elana Schor reports on efforts to fund the next transportation bill and notes that the latest craze is a move to tax oil futures and (perhaps) all stock transactions. This strategy is gaining ground because oil markets and traders are very unpopular and (still worse) geographically concentrated, whereas users of transportation infrastructure tend to enjoy the support of most Americans and are spread across many Congressional districts.

There’s no reason that a transport funding mechanism has to involve transportation. Money is fungible, and to a certain extent we should simply be focused on raising revenues in the places where it’s least costly to do so and spending revenue where it does the most good. And certainly there are some economists out there arguing that a financial transactions tax would prevent some negative market behavior while raising revenue (although they tend to argue that the revenue should then be used to capitalize insurance funds or cover other bail-out costs).

Paul Krugman writes:

For various reasons I’ve been doing a lot of walking around the past few days, in both Princeton and New York, visiting areas I haven’t looked at for several months. And I’m not sure what to make of it, but casual observation suggests a stronger recovery than anything I see in published numbers. Lots of small-scale construction — home remodeling, tear-downs replacing old houses. Many new businesses and restaurants filling storefronts that were vacant a couple of months ago.

What if for one year — just one year — we allocated as much money for infrastructure as we did for defense?

What if? Well, this year, that would mean devoting $680 billion to investments in infrastructure. That’s more than $200 billion more than Oberstar’s entire proposed transportation reauthorization bill, which was itself a large increase over the previous transportation law. There’s probably no way we could spend all that money at once, but it would nicely capitalize an infrastructure bank, and the promise of a steady flow of funds would get states thinking about real, long-term investments.

Irresponsible behavior by banks led them to the brink of collapse -- a collapse which would have sent the global economy into a terrifying period of decline -- and so the government stepped in to prevent bank failures (after learning a lesson from the dreadful experiment with Lehman (LEHMQ.PK)). But these interventions have put banks in a situation where they stand to gain enormously from taking large and dangerous financial bets.

This was like declaring in an airport terminal one's hope that man may someday enjoy heavier-than-air powered flight, but most of the heads in the audience nodded in agreement.

Scott Sumner begins a post by quoting this from Paul Krugman:

The chapter opens with the “global cooling” story — the claim that 30 years ago there was a scientific consensus that the planet was cooling, comparable to the current consensus that it’s warming.

To return for a moment to the discussion of structural versus cyclical factors in business cycles, let me draw attention to a few interesting posts on the topic, from Steve Waldman, Charles Davi, Tyler Cowen, and James Hamilton. I think these guys present some plausible scenarios about the way a downturn might unfold, and I think the focus on information changes as a driver of behavior is very smart. But a key question for me is the extent to which structural factors drive unemployment in a recession, and relatedly, the extent to which “hydraulic macro” policies can reduce the pain of recession by alleviating the cyclical pain in a downturn.

Along those lines, I think James Hamilton has a key insight here:

One of the things about politics is that solutions always seem easier to implement and more promising before they stand a real chance of being implemented. People who have for one reason or another fallen in love with the idea of a carbon tax watch the difficulty Congress is having negotiating a passable climate bill and ask why we don’t just pass a carbon tax. It would be so easy! It’s just a tax! Pass it, price carbon, and bada bing, you’re done.

But of course, a carbon tax looks like a clean, simple option at the moment because no one is invested in securing protections or advantages for themselves because a carbon tax isn’t on the table. The moment it looked as though Congress might actually consider and pass a carbon tax, every single interest that has pushed for free carbon credits or other assistance would take on the carbon tax, demanding exemptions or offsetting subsidies of some kind, and generally producing the exact same kind of mess for a carbon tax bill that we have now with a cap-and-trade bill.

Via Mark Thoma, new research from Jan Brueckner and Bob Helsley:

Jan presented the paper at the first annual UCLA-UCI-USC real estate research day. The finding was straightforward but still interesting: if congestion for commuting to the suburbs is not priced at marginal cost, the urban center will be maintained at less than the social optimum, so the housing stock in the center will deteriorate below the social optimum.

I have to say, I was a little surprised to read Tyler’s take on my post addressing Arnold Kling’s “recalculation” theory of business cycles. He seems to suggest that the post is high in emotional content. I was not feeling particularly emotional when I wrote it. Rather, I was perplexed by what I thought was an idea that made no sense. I still think this. Tyler says that phrases I use, like “make no sense” or “is a little nuts,” indicate I haven’t thought hard about the issue. I find that a little odd (can I say this?). I don’t know why someone would try to divine my understanding of the question from phrases like that, rather than focusing on the content of the arguments that accompany them.

I feel as though Tyler deals with the points I actually make as superficially as he says I engage with Arnold’s. He seems to try and score rhetorical points by criticizing my summary of the recalculation theory as “full of strawmen.” It’s brief, but I don’t think it’s unfair.

We’re roundtabling at Free Exchange today, so here’s an economics post. Arnold Kling has been developing his own macro theory, which is a fun thing to do. He’s now applying his theory to stimulus, writing:

From the Recalculation perspective, the economy needs to shift resources out of some sectors and into others. The government is either (a) permanently shifting resources from the private sector to government or (b) temporarily shifting resources from the private sector to government. If it is doing (a), then we are not facing mere temporary deficits but permanent increases in government spending, and eventually we will have to figure out how to pay for them. If it is doing (b), then the Recalculation problem isn’t really being solved. Instead, at best the government is redistributing the pain from the reallocation process out of the present and into the future. People who otherwise would be unemployed can find temporary work on government projects, but when those projects expire they will go back to being unemployed. This is what makes the fiscal exit strategy so problematic.

Rosenthal attributes much of this difference to behavioral factors relating, it seems, to Europeans' unique tolerance of inconvenience. She writes:

Last week, the Bureau of Economic Analysis released updated figures for gross metropolitan product, and I’ve been playing around with the numbers a bit. One thing that stands out: most metropolitan areas enjoyed substantial output growth between 2001 and 2008, but there were major divergences in the performance of output per capita.

Consider this: the Washington (25%) and Phoenix (29%) metropolitan areas saw similar output growth over the 2001 to 2008 period. But Washington’s output per capita rose during that time by 15.2%, while Phoenix saw output per capita growth of just 2.8%. Houston and Dallas enjoyed output growth over that time frame of 22% and 24%, respectively, while New York and Los Angeles grew by 21% and 20%. But New York and Los Angeles had per capita growth of 18% and 17%, respectively, while Houston and Dallas had per capita growth of 3.6% and 5.1% during that time. Raleigh and Atlanta actually saw declining output per capita from 2001 to 2008, of -3.7% and -6.0% (although to be fair to the hometown, output per capita in the Durham-Chapel Hill metro rose by 26%, so the Triangle as a whole did pretty well).

Liberal bloggers appear to have gotten results, and Tyler Cowen has recently been blogging on metropolitan development. On the whole, his posts are pretty interesting reads, though urbanist readers won’t find much new there. Tyler has also generated some nice responses, including a couple from Mike Konczal.

At the heart of many of Tyler’s posts are questions about what drove the growth of the suburbs. This is a question that really must be framed appropriately to make sense.

I don’t know what’s more perplexing to me: that Bryan Caplan seemed to think that labeling the four bullet points in this post, “A few of the leading anti-suburban policies,” would strengthen his argument that government may be anti-suburban on net, or that Tyler Cowen linked to the piece, suggesting he felt it was worth reading. Caplan’s leading anti-suburban policies are:

1. Regulations against developing empty land. In many parts of the country, it is difficult to get permission to actually build anything. Places like the Bay Area are notorious. But even in my own neighborhood in “pro-growth” Fairfax, there is a vacant 1-acre lot. It would be worth half a million dollars, but the authorities won’t give the owner permission to install a septic tank, and won’t attach it to the public sewer at any price.

In part this is because the program looks like a big success, and certainly congressional leaders and the White House have not been bashful about touting it as such. The original $1 billion allocation for the program was exhausted within days, and as sales data for August begins to emerge it is clear that car sales experienced a banner month.

I’ve been enjoying Tim Lee’s posts discussing the introduction and impact of a disruptive technology. Let me quote some (a lot) of what he’s been writing:

The key characteristic of a disruptive technology is that at its introduction, it is markedly inferior to the then-dominant technology, as judged by the existing base of customers. A classic example is the microcomputer. When the first microcomputers were released in the late 1970s by Apple, Commodore, and others, they were inferior in almost every respect to the minicomputers and mainframes that then dominated the computer market. People bought microcomputers for one of two reasons: they couldn’t afford a minicomputer, or they had an application where the microcomputer’s unique advantages (i.e. smaller size) were a particular advantage.

Next, we statistically test whether trade and offshoring has forced workers out of the manufacturing sector. We find that there has been a big movement of workers out of sectors with a lot of import competition. We also look for the impact of offshoring on US manufacturing employment, finding small effects on employment that depend on the location of offshore activities. A 10 percentage point increase in offshoring to low-wage countries reduces employment in manufacturing by 0.2% while offshoring to high-wage countries increases employment in manufacturing by 0.8%.

The popularity of the term “green shoots” shows the kind of social epidemic underlying our changing thinking. The phrase was propelled in Britain by Shriti Vadera, the business minister, in January, and mutated into a more contagious form after Ben Bernanke, the Federal Reserve chairman, used it on “60 Minutes” on March 15.

The reason American presidents are so willing to reappoint Fed chairmen from the opposite party is closely linked to one of the things a president seeks: The confidence of financial markets that the Fed will pursue non-inflationary policies.