People Irrationally Pick Deadly Commuting

Commuting is the most dangerous thing that most people do every day.  But the biggest risks are not just having a wreck.  Annie Lowrey has a great article about the effects of commuting on health and well being at Slate. 

This week, researchers at Umea University in Sweden released a startling finding: Couples in which one partner commutes for longer than 45 minutes are 40 percent likelier to divorce.  ...People with long transit times suffer from disproportionate pain, stress, obesity, and dissatisfaction. The joy of living in a big, exurban house, or that extra income left over from your cheap rent? It is almost certainly not worth it. First, the research proves the most obvious point: We dislike commuting itself, finding it unpleasant and stressful. In 2006, Nobel laureate Daniel Kahneman and Princeton economist Alan Krueger surveyed 900 Texan women, asking them how much they enjoyed a number of common activities. Having sex came in first. Socializing after work came second. Commuting came in dead last.... A survey conducted last year for the Gallup-Healthways Well-Being Index, for instance,found that 40 percent of employees who spend more than 90 minutes getting home from work "experienced worry for much of the previous day." That number falls to 28 percent for those with "negligible" commutes of 10 minutes or less. Workers with very long commutes feel less rested and experience less "enjoyment," as well. ...Robert Putnam, the famed Harvard political scientist and author of Bowling Alone, names long commuting times as one of the most robust predictors of social isolation. He posits that every 10 minutes spent commuting results in 10 percent fewer "social connections." Those social connections tend to make us feel happy and fulfilled....The Gallup survey, for instance, found that one in three workers with a 90-minute daily commute has recurrent neck or back problems.... According to research from Thomas James Christian of Brown University, each minute you commute is associated with "a 0.0257 minute exercise time reduction, a 0.0387 minute food preparation time reduction, and a 0.2205 minute sleep time reduction."  ...According to research from Thomas James Christian of Brown University, each minute you commute is associated with "a 0.0257 minute exercise time reduction, a 0.0387 minute food preparation time reduction, and a 0.2205 minute sleep time reduction."  ...Researchers at the University of California–Los Angeles, and Cal State–Long Beach, for instance, looked at the relationship between obesity and a number of lifestyle factors, such as physical activity. Vehicle-miles traveled had a stronger correlation with obesity than any other factor. ...[The] average one-way commuting time has steadily crept up over the course of the past five decades, and now sits at 24 minutes (although we routinely under-report the time it really takes us to get to work).... How much would we need to be compensated to make up for the hellish experience of a long commute? ...Bruno Frey and Alois Stutzer, actually went about quantifying it, in a now famous 2004 paper entitled "Stress That Doesn't Pay: The Commuting Paradox." They found that for an extra hour of commuting time, you would need to be compensated with a massive 40 percent increase in salary to make it worthwhile.... Given the choice between that cramped apartment and the big house, we focus on the tangible gains offered by the latter. We can see that extra bedroom. We want that extra bathtub. But we do not often use them. And we forget that additional time in the car is a constant, persistent, daily burden—if a relatively invisible one.

Estimating Tax Elasticity and Peak of Laffer Curve

Rich people had an inelastic labor supply in the 1920s and 1930s. James Kwak:

Christina and David Romer’s new paper, “The Incentive Effects of Marginal Tax Rates: Evidence from the Interwar Era,” is available as an NBER working paper
...They find an elasticity of taxable income with respect to changes in the after-tax income share of 0.19.  ...To put this in perspective, an elasticity of 0.19 implies that tax revenues would be maximized with a tax rate of 84 percent; that is, you could raise taxes up to 84 percent before people’s reduced incentives to make money would compensate for the higher tax rates.
Second, remember that this is a study of the super-rich: not the top 1%, but the top 0.05%. These are the people whom one would expect to have the highest income elasticity, precisely because they don’t need the marginal dollar. Elasticities tend to be lower for ordinary people because they need to cover their expenses.
Finally, the left-hand-side variable for the main regression is reported taxable income. Taxable income can change both because people are earning less income and because they are engaging in tax strategies to reduce their taxable income. As Emmanuel Saez, Joel Slemrod, and Seth H. Giertz conclude in “The Elasticity of Taxable Income with Respect to Marginal Tax Rates: A Critical Review” (pp. 49–50):

while there is compelling U.S. evidence of strong behavioral responses to taxation at the upper end of the distribution around the main tax reform episodes since 1980, in all cases those responses fall in the first two tiers of the Slemrod (1990, 1995) hierarchy—timing and avoidance. In contrast, there is no compelling evidence to date of real economic responses to tax rates (the bottom tier in Slemrod’s hierarchy) at the top of the income distribution.

In other words, ...U.S. history shows that when you raise taxes on the rich, they don’t stop trying to make money: they just pay their lawyers and accountants more to avoid paying taxes. The solution to that is a simpler tax code with fewer exclusions and deductions.

 

Land Tax

Financial Times:

“Roads are made, streets are made . . electric light turns night into day. . . To not one of those improvements does the land monopolist. . . contribute, and yet by every one of them the value of his land is enhanced. . . ”
Who do you think said this? Karl Marx? Paul Krugman? ...The correct answer is Winston Churchill... He was speaking in support of the controversial Lloyd George Budget of 1909 – the one that was thrown out by the House of Lords and led to the Parliament Act that permanently clipped the powers of that House.
The most disputed part of that Budget was not the income tax or social security measures, which captured historians’ attention, but the proposal for a land tax... Back in 1909 preparations for such a tax duly went ahead, including the necessary survey of land ownership. The work was suspended by the war and never resumed. Meanwhile Lloyd George had been thrown out of office and Churchill defected to the Conservatives.
Half measures to capture the “development value of land” were attempted by the 1945 Labour government but abandoned...
Yet, far from being an outrageous Bolshevik idea, the case for a land tax is one of the oldest and least disputed propositions in economic thought. The underlying theory was developed at the beginning of the 19th century by the highly respectable David Ricardo. Many chancellors have said that they would jump at a tax that had no disincentive effects on work or enterprise but had a strong redistributive element. The problem was that the amount of preliminary work required would take more than one parliament and any credit for the measure would redound to their successors.
A land tax is one of those subjects – basic income is another – which divides commentators into a great majority who never mention it, and a minority who talk of nothing else. The result is to give supporters a cranky appearance...
The basic point is that the supply of land, with rare exceptions such as reclamation in the Netherlands, is fixed. But because of its scarcity owners can command an income over and above the normal return to the enterprises placed upon it. Gross UK trading profits of non-financial and non-oil corporations are running at over £200bn per year or about 20 per cent of gross domestic output. Some part of this – we do not know how much – is not true profit but the return on land.
There is one way in which the supply of usable land can increase. That is when land, previously off limits, is newly released by local [zoning] authorities for development. The consequent increase in value, say some land tax campaigners, is created by “the community”, which is entitled to a share... But ...the case for a land tax is valid even for land which always was available for development or which remains in agricultural use.
The Mirrlees review of the tax system..., accepted the case for a land tax, but worried that it was difficult to distinguish between the value of the land and that of buildings placed upon it. The difficulty is exaggerated. Property developers ...have no worries on the issue. After all if two buildings with very similar characteristics sell at very different prices, the difference can be reasonably attributed to land values. The Mirrlees review recommended that a land tax should be used to replace business [tax].
... Land taxes of a modest kind exist in several countries, but do not yield nearly enough to replace all other taxes, as envisaged by the 19th-century reformer Henry George. ...Doubtless some of the tabloids would present a land tax as a threat to the ordinary homeowner with a modest garden. We need to prepare for this in advance. Just as income tax is only levied above a threshold, there would have to be similar thresholds for a tax on land. If politicians really want to think about the unthinkable, as they sometimes claim, here is a place to start.

debt-financed kindergarten

Should primary education be financed the same way that we finance college?  College finance is nowhere near a privatized free-market because the government guarantees and subsidizes the loans, but compared to the socialism of kindergarten, college is much more free-market.  Do some NPV calculations to try to assess the value of K-12 education.  And do some calculations to see what the debt burden would be for kids graduating from high school with a debt-financed education.

Taxes on the Wealthy and Growth

Do taxes on the wealthy reduce economic growth?  That is the typical Republican talking point (via Michael Linden) 

Speaker John Boehner (R-OH): “What some are suggesting is that we take this money from people who would invest in our economy and create jobs and give it to the government. The fact is you can't tax the very people that we expect to invest in the economy and create jobs.”
Former Massachusetts Gov. Mitt Romney: “With over 20 million people who are unemployed or who have stopped looking for work, the last thing we should be doing is raising taxes on job-creators, entrepreneurs, and small business owners across America.”
John Boehner, again: “A tax hike would wreak havoc not only on our economy’s ability to create private-sector jobs, but also on our ability to tackle the national debt.”

 Perhaps they are right, but the historical record seems to indicate that other factors are more important:

 What about the impact of elite's tax rates on economic growth?  Most Republicans believe that cutting taxes on the wealthy will boost growth (via Michael Linden)  :

Speaker John Boehner: "We've seen over the last 30 years that lower marginal tax rates have led to a growing economy, more employment and more people paying taxes.”
Sen. Jim DeMint: "But we also need to just cut the top marginal rate for individuals and corporations so that we're more competitive and companies can look way out in the future and know they'll have a competitive tax rate.”
Club for Growth: “To stimulate GDP growth, a tax cut has to cut the marginal tax rates upon which the decision makers in the economy base their decisions to work and, above all, to invest.”

Again, the effects cannot be the most important thing:

“The High Cost of Free Parking.”

Tyler Cowen:

IN our society, cars receive considerable attention and study... But we haven’t devoted nearly enough thought to how cars are usually deployed — namely, by sitting in parking spaces.
Is this a serious economic issue? In fact, it’s a classic tale of how subsidies, use restrictions, and price controls can steer an economy in wrong directions. Car owners may not want to hear this, but we have way too much free parking.
Higher charges for parking spaces would limit our trips by car. That would cut emissions, alleviate congestion and, as a side effect, improve land use. Donald C. Shoup, professor of urban planning at the University of California, Los Angeles, has made this idea a cause, as presented in his 733-page book, “The High Cost of Free Parking.” 

That's right, a 733-page $60 book solely about parking policy!  There are two problems:
1. Governments force store owners, and real estate developers to build more parking than they want to build.  Businesspeople should be able to estimate the supply and demand for parking better than bureaucrats. This causes surplus parking and wasted resources.
2.  Governments provide Soviet-style parking at great taxpayer expense (or via expensive regulations) and price it too low which causes parking shortages and wasted resources looking for cheap, subsidized parking. 

The subsidies are largely invisible to drivers who park their cars — and thus free or cheap parking spaces feel like natural outcomes of the market, or perhaps even an entitlement. Yet the law is allocating this land rather than letting market prices adjudicate whether we need more parking, and whether that parking should be free. We end up overusing land for cars — and overusing cars too. You don’t have to hate sprawl, or automobiles, to want to stop subsidizing that way of life.
As Professor Shoup wrote, “Minimum parking requirements act like a fertility drug for cars.”
Under a more sensible policy, a parking space that is currently free could cost at least $100 a month — and maybe much more — in many American cities and suburbs. At the bottom end of that estimate, if a commuter drives to work 20 days a month, current parking policy offers a subsidy of $5 a day — which is more than the gas and wear-and-tear costs of many round-trip commutes. In essence, the parking subsidy outweighs many of the other costs of driving, including the gasoline tax.
In densely populated cities like New York, people are accustomed to paying high prices for parking, which has helped to encourage a relatively efficient, high-density use of space. Yet even New York is reluctant to enact the full social cost of the automobile into policy. Proposals to impose congestion fees have failed politically, and on-street parking is priced artificially low.
Manhattan streets are full of cars cruising around, looking for cheaper on-street parking, rather than pulling into a lot. The waste includes drivers’ lost time and the costs of running those engines. ...
Many parking spaces are extremely valuable, even if that’s not reflected in current market prices. In fact, Professor Shoup estimates that many American parking spaces have a higher economic value than the cars sitting in them. For instance, after including construction and land costs, he measures the value of a Los Angeles parking space at over $31,000 — much more than the worth of many cars, especially when considering their rapid depreciation. If we don’t give away cars, why give away parking spaces?
Yet 99 percent of all automobile trips in the United States end in a free parking space, rather than a parking space with a market price. In his book, Professor Shoup estimated that the value of the free-parking subsidy to cars was at least $127 billion in 2002, and possibly much more. ...As Professor Shoup puts it: “Who pays for free parking? Everyone but the motorist.”

 LA Times talks about how LA's fabulous Disney Concert Hall set its busy concert schedule:

Anyone scanning Disney Hall’s debut calendar in the fall of 2003 would have noticed the size of that first season’s schedule, 128 shows in all. That’s a weighty number for a new hall—one might have assumed it was chosen by venue management wanting the gravitas of a world-class chamber’s arrival or perhaps seeking a broad spectrum of music that could reflect the diverse city. Those guesses would have been wrong. Disney Hall had been built atop Parcel K, a county-owned square of land... Yet before an auditorium could be raised on K, a six-floor subterranean garage capable of holding 2,188 cars needed to be sunk below it at a cost of $110 million—money raised from county bonds. Parking spaces can be amazingly expensive to fabricate. In aboveground structures they cost as much as $40,000 apiece. Belowground, all that excavating and shoring may run a developer $140,000 per space. The debt on Disney Hall’s garage would have to be paid off for decades to come, and as it turned out, a minimum schedule of 128 annual shows would be enough to cover the bill. The figure “128” was even written into the L.A. Philharmonic’s lease. In 2003, Esa-Pekka Salonen opened Frank Gehry’s masterpiece to a packed house with Mahler’s Resurrection, and in the years since, concertgoers—who lay out $9 to enter the garage—have steadily funded performances that exist to cover the true price of their parking.  ...“L.A.,” says Shoup, “required 50 times more parking under Disney Hall than San Francisco would allow at their own hall.” Downtown already had an oversupply of garages and lots where music fans could leave their cars. “After a concert in San Francisco,” says Shoup, “the streets are full of people walking to their cars, eating in restaurants, stopping into bars and bookstores. In L.A.? The bar next door at Patina is a ghost town.” Receipts that should have gone to the philharmonic’s endowment instead are funding enough parking for nearly every ticket holder to park a car every night downtown. 

What environmental reasons justify sacrifice?

I can only think of four fundamental environmental rationales off hand.  Email or leave a comment if you think of more.  

1. Global warming 
1. This really just duplicates the following reasons, but is potentially so important that it deserves its own category.
2. Reduce resource extraction to preserve nonrenewables for future generations? 
3. Reduce toxic pollution (poisons by ingestion or breathing)? 
4. Wellbeing of other species?