Krugman’s Blog, 3/15/13

There were five posts yesterday.  The first was “Everyday Externalities:”

Via Mark Thoma, a new paper in Vox on the effects of increased rail service, making clever use of natural experiments created by changes in German ownership and regulation. The results aren’t that surprising — more frequent rail service sharply reduces pollution and other costs associated with driving — but it’s good to have this kind of solid work to back our intuition.

And can I say that this is a subject that really deserves a lot more attention? Mea culpa; I haven’t written much for a while on these issues, focusing mainly on the economic crisis, which is for the moment on the front burner. But we know, as surely as we know anything in economics, that there are huge market failures here — that every time an individual chooses to drive during rush hour, he or she is imposing huge costs on other drivers, people who breathe the air, and more.

Ideally, the right answer is to get the incentives right, and charge large fees for driving in congestion. Short of that, there are huge second-best payoffs to mass transit; if you did the accounting properly, Amtrak’s northeast corridor service (which makes money even without taking this into account) is a huge social boon, and projects like the Hudson rail tunnel should be total no-brainers.

And the thing is that these are externalities that everyone can see. You can deny global warming (and may you be punished in the afterlife for doing so — this kind of denial for petty personal or political reasons is an almost inconceivable sin). But can anyone deny that more drivers means more traffic congestion?

Well, maybe I’m understating the power of denial. But still, this is a totally obvious case for government intervention that’s staring us in the face every time we hit the road.

The second post of the day was “Delusions at the European Commission:”

I see that Vox has posted a self-justifying piece on fiscal austerity from the European Commission, declaring that the Commission is pursuing a “delicate balance”. Actually, that’s kind of awesome: how does that “delicate balance” feel in countries with 15, 20, 25 percent unemployment?

And in general, it’s quite a spectacle to see officials patting themselves on the back over an economic strategy that, let’s not forget, has tipped Europe back into recession, and keeps pushing overall euro area unemployment to new highs.

For me, however, the real “tell” is this sentence:

In Germany, the fiscal stance is now broadly neutral, hence consistent with the call for a differentiated fiscal stance according to the budgetary space.

Translation: Germany isn’t imposing Greek-level austerity, which proves that we’re flexible!

Here’s the key point: Europe as a whole is pursuing a remarkable degree of fiscal austerity that is totally inappropriate in a still-depressed economy. Here’s the cyclically adjusted primary balance from the IMF:

That’s a LOT of fiscal tightening; it would be hard to offset even if the ECB were going all out with quantitative easing, whereas the reality is that it won’t even cut interest rates.

Now, much of that tightening comes from countries that have no choice about imposing at least some austerity. But the Commission should be urging those countries not suffering from a debt crisis to be engaged in offsetting expansion — not giving Germany a thumbs up when it has in fact been moving in the the wrong direction. And the Commission should be pointing out just how bad an idea it is for France to be engaged in fiscal tightening because its economy is weaker than expected, which is exactly the reverse of prudent macro policy.

Instead, they’re engaged in self-justification, covering over the horror of the European situation with a blanket of soothing words.

The next post was “Other People’s Children:”

Matthew Yglesias beats me to a point I was planning to make. Sen. Rob Portman has made headlines by declaring his support for gay marriage after learning that his own son is gay, and apparently we’re supposed to praise him for his new enlightenment. But while enlightenment is good, wouldn’t it have been a lot more praiseworthy if he had shown some flexibility on the issue before he knew that his own family would benefit?

I’ve noticed this thing quite a lot in American life lately — this sort of cramped vision of altruism in which it’s considered perfectly acceptable to support only those causes that are directly good for you and yours. We even have a tendency to view it as “inauthentic” when people support policies that aren’t in their self-interest — when a rich man supports higher taxes on the rich, he’s somehow seen as strange, and probably a hypocrite.

Needless to say, this is all wrong. Political virtue consists in standing for what’s right, even — or indeed especially — when it doesn’t redound to your own benefit. Someone should ask Portman why he didn’t take a stand for, you know, other people’s children.

Because he’s a Republican and their whole ethos is “IGMFY,” that’s why.  The fourth post of the day was “Conservatives and Sewers:”

I see that some commenters on my traffic externalities post are speculating what Republicans would say about sewers if they didn’t already exist. Well, we don’t know about Republicans, but we do know what The Economist said, in 1848, about proposals for a London sewer system:

Suffering and evil are nature’s admonitions; they cannot be got rid of; and the impatient efforts of benevolence to banish them from the world by legislation, before benevolence has learned their object and their end, have always been more productive of evil than good.

Sewers are socialism!

It wasn’t until the Great Stink made the Houses of Parliament uninhabitable that the sewer system was created.

The final post of the day was “Friday Night Music: Lucius:”

I keep finding NPR’s Tiny Desk Concerts a great place to find new music. I didn’t really expect to like this group — didn’t sound at all like my kind of thing — but they’re something special, and their songs keep rattling around in my head:

Lucius: NPR Music Tiny Desk Concert.

About these ads

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


Follow

Get every new post delivered to your Inbox.

Join 161 other followers

%d bloggers like this: