I'll use all the GD water I want, thanks!

It was only a matter of time, but the city of Indy has finally formally asked thousands of residential water users in the city to conserve their use and not water their lawns etc.... Just north of us, in the city of Noblesville, there is an enforceable mandate in place banning the use of water for such uses and is punishable by a fine.

It's true we are going through a heck of a dry spell, but I don't see what all the fuss is about. First of all, I pay for my water and I'm going to use it. The water company's failure to plan or add capacity is not my problem, and it is not business of the government sticking it's nose in my business.

Secondly, if people are willing and able to pay for water, then let them. The market won't let the well run dry - it'll just make water expensive. If you think about it, water from your faucet is not really a necessity in the short-run. You need a bath? Jump in the river once a week. You worried about dishes? Use paper plates temporarily. You want clean clothes? Have your drycleaners send them out of state. You thirsty? Buy bottled water.

Now you might say to me, "But I shouldn't have to go to those extremes." My response is, every use of water that you aren't using for thirst (in the short-run) is just a frill, a non-necessity - a need to fulfill a personal aesthetic (to smell good, to have cleaner clothes, etc - all frills) . And thirst (and even some frills) can easily be taken care of by the market with bottled waters from areas that are not experiencing drought.

Having a nicely manicured lawn is also a frill - but it is not necessarily a lesser or greater frill. It's relative importance to overall cleanliness etc is in the eye of the beholder. And how dare the government try to make us choose cleanliness over household aesthetic. If they want to conserve water and be fair about it - they just need to turn off the spigot altogether.

Otherwise, keep your nose out of my business.

I just can't keep my opinion to myself (blame Mankiw)

Mankiw today says the following in response to a report regarding social welfare / utility:


"They believe:
1. Tax policy should be set to maximize a social welfare function.
2. The social welfare function has strong aversion to inequality.
3. The tax-setting social planner must take into account that taxes are distortionary, but elasticities are small enough that the distortions are not much of a problem until tax rates reach much higher levels than we have today.

Note that points 1 and 2 are about political philosophy rather than economics. Economists can have opinions about these matters, but our opinions are not much better or worse by virtue of our training than those of anyone else. One can even reject the whole idea of a social welfare function. ..."

I read that, then shook my head in shamed dissapointment at this expression of how closed-minded Econ is and has been for years. My response:

I don't buy your logic Prof. Mankiw.

First of all points 1 and 2 are not at all about a 'political philosophy' - it's about common sense (the field of psychology also has a good deal to say about this). The fact that comprisons of interpersonal utiltiy is not wholly possible in the real world doesn't mean that these differences don't exist - it just means we aren't sophisticated enough yet to measure it well.

So we fall back to what we can measure well, despite the fact that pareto efficiency has severe drawbacks (precisely because it ignores equality).

I also disagree that we as economists should continue to shrug this stuff off as 'outside our realm.' That's very closed minded thinking and it's the kind of thing we econ nerds get bashed for. Econ at its core is just the study of behavior under constraints and scarcity. It's time we start advocating a more mulidisciplinary approach to economics and stop falling back on useful yet severely limited metrics.

Differing views from differing blogs

The Mises Institute says that government is worthless:

"There is no such thing as public investment, only public consumption. This conclusion follows immediately once we clearly recognize the distinctive character of government's economic position within a division-of-labor economic system."

Brad DeLong longs for Econ professors that tout the governments ability to enhance economic welfare:

"Instead of carrying around an Austrian model in their heads in which we assume total selfishness, zero transactions costs, and conclude that transfer payments are suspect, they’d be hearing about Possible efficiency gains due to taxes and transfers"

I'll let you decide which argument makes the most sense.

left-wing politics blog dishonest

But did I mention it was a politics blog? They are almost always dishonest. I met the author on Saturday of this particular offender who writes the "Taking Down Words" blog - an Indiana politics blog. I'm sure she's a wonderful person, but it's obvious she has no intention of citing things without spinning it to her left-leaning will.

She cites an economist who cites the BEA's recent release of GDP per State, which shows Indiana continuing to trail by a good margin the US average growth rate: "Indiana's GDP grew on average by 4.5% from 1997 to 2006 while the nation advanced by 5.3%. In 2006 the difference was greater: 5.3% for Indiana and 6.3% for the U.S."

That's misleading on a number of levels.

First off, I would've preferred she cite the chain-weighted real GDP measure. With that measure, Indiana's real GDP grew about 2.2% between 1997 and 2006, while the US grew at 3.0%. Ok, the point is taken that Indiana is going through a bad time. The problem is she uses that stat to then say:

"But...but...but...the Guv says we're on a hot streak. He wouldn't fib to us just to cover up for the fact that he has no long-term economic development strategy, would he?"

That's where the political hackery comes in. This can all easily be dismissed when you look at the rest (growth in real State GDP) of the midwest which between 1997 and 2006 grew as follows:

Michigan - 0.7%
Illinois - 2.0%
Ohio - 1.4%
Kentucky - 1.3%
Wisconcin - 2.3%
Indiana - 2.2%

As you can see, with exception of perhaps Wisconcin, Indiana has fared the best relative to its (similar) neighbors' economies. This jives with what most economists have said - that Indiana has had a much softer landing than many of the midwestern / great lakes states. The point is that, of course Indiana is trailing US trends - Indiana is still heavily domestic manufacturing (which have obviously been declining as foregin competition and service sectors are picking up). So, while the usefullness or lack thereof of the governor's policies may not be evident for years, Indiana is doing better to cut its losses than many of its neighbors.

Regardless, throwing political stones is not a solution, and does nothing indeed to point out any problem (if there even is one, in the long-run). Indiana will adjust - and the data shows that it is adjusting relatively well - albeit painfully.

Mankiw silent on Democrats support for carbon tax

Yesterday at the Democratic debate moderated (poorly) by CNN's Wolf Blitzer, two of the eight candidates (Chris Dodd, Mike Gravel) on stage verbally and publically anounced their support of carbon taxes to the world. I must say that I was a bit surprised by this - especially since the question posed by Wolf was something like, "What would you do to cut gas prices," and both candidates replied that they wouldn't necessarily cut them, and in fact, they support raising them.

But what's more interesting is the fact the Greg Mankiw, who usually jumps at the chance to 'announce' that a prominent figure supports carbon taxes, has made no mention of this yet on his blog. It's early, and maybe he will. Granted, Mankiw already posted a blog that Dodd supports a carbon tax, but I would've thought that such a public display of his ideology might prompt a response.

A Heartwarming Story

Polish man enters coma during communism, exits it under a democracy.

One way I could support a 'modest' gas tax hike....

There was a recent study published that over 90% of Indianapolis residents want a Rapid Transit System, and they want it now. The majority (61%!!!) would be willing to pay higher gas taxes to help fund such a project, in addition to transit fares, tolls, etc.

I myself would support a modest STATE tax hike in addition other tax revenue sources - an modest increase in gas tax, while having a minimal effect of the environment, would nonetheless have some positive effect. Also, it may actually help serve to shift even more individuals from car to transit driving - thereby increasing indirectly the revenue from the transit useage (assuming full capacity would not have already been met).

Indeed a gas tax might initially at least be met with falling overall gas prices as the transit system may cut the demand. Funny how high gas prices spur the need for a transit system, and the transit system then changes the gas prices.

Rapid Transit would certainly reduce the congestion in Indianapolis and help poorer individuals who simply can't afford a lot of car travel, especially given Indianapolis's lack of population density. Not to mention, gas taxes are great revenue generators, so if the purpose is to help fund the expense of the RTS, that would be an ideal source of such funds.

So while i definately don't support federal gas tax hikes, and especially not on the order of what some economists want, I DO generally think gas taxes can be used by localities with specific needs - provided a large number of the population supports it (and is therefore politically feasable).