PERFECT PRICE DISCRIMINATION? Several posts consider the future of state subsidized universities. At Inside Higher Ed, Wick Sloane wonders when the legislatures broke the old social contract under which taxpayers picked up much of the tab for in-state students. But dig deeper. Why ought there be a public subsidy for purely private benefits? Particularly when the beneficiaries are either currently well off or likely to be well off in the near future?

Our national policy is that we can’t find more money for student aid. Yet billions appear for Katrina overnight. This may be deficit spending and raises all sorts of questions to debate. It is our policy that Katrina is more important than creating a work force to sustain the nation.

This was a chief financial officer of a major university?? And he doesn't grasp fiscal stimulus? There is a more challenging point, namely, ought the national government be the insurer of last resort against acts of nature. Or, one might view the government spending as isomorphic to a liability settlement. It was, after all, the government's flood walls that gave way.

But all of those are different from workforce development, which is properly a private function. There is nobody in the academy or in government clever enough to anticipate the skill requirements of the U.S. or the world economy in five years, let alone fifty. The best we can do in the university is equip our charges with the ability to think for themselves and adopt on the fly. But those are purely private benefits, to be appropriated by graduates as employees and by their employers, and the academy ought properly harvest its share of gains from trade.

Mr Sloane's focus is on the consequence of policies that, in his view, shut out determined but poor students. Perhaps his point is that financial aid policies, including state-specific tuition subsidies, limit access to strivers. Something similar seems to be motivating James C. Garland of Miami of Ohio (that's the mid-major, not the street gang), who notes,

When states pay their universities to hold down tuition charges, they are indirectly subsidizing wealthy and poor students alike.

Regular readers of these pages know this. Higher education offers many possibilities for identifying reservation prices and selling to marginal buyers at cost, or below cost. That universities have the ability to sell at or below costs to low-income strivers but increasingly reveal a preference to offer those benefits to high-achievers irrespective of ability to pay might suggest that there are relatively few low-income strivers. So-called "need based" financial aid might be attracting students of little ability and life-management skills to match.

What would Mr Garland have the legislators do?

Finally, reallocate the freed-up subsidy dollars to scholarships for new undergraduate and graduate students. The scholarships, valid at any accredited four-year college in the state, would go primarily to middle- and low-income students, with some reserved for engineering majors, math teachers and other groups that meet state needs.

Consider the consequences of this change:

Middle- and low-income students' degree costs would significantly decrease; others would pay a larger share of their college costs.

Universities and colleges would scramble to attract scholarship-holding students. Students would choose schools that offered them the highest-quality programs, the most value and a competitive tuition. Colleges that lost market share would either improve their offerings, lower their prices or risk going out of business.

Lacking an automatic pricing advantage, formerly public colleges would raise tuition to make up their revenue shortfall, but no more than the market would allow.

I wonder if Mr Garland favors vouchers for primary school, as this is essentially what's proposed here, along with elements of industrial policy. Math teacher scholarships? What good will these be without better working conditions for math teachers? Will financial aid offices still be able to practice yield management? Given the college degree premium particularly in technical fields, there is likely to be some upside potential in tuitions. That makes the gushing praise the American Council of Trustees and Alumni weblog offers Mr Garland look less good.

Garland's is a neatly libertarian model of how to use market forces both to liberate public institutions and to regulate them. By freeing themselves of dependency on subsidies that are at once grudgingly given and never enough, colleges and universities recover the freedom to use the funds they generate as they see fit. And, by competing openly with one another in the marketplace, colleges and universities will be forced to ensure that they spend their money well and that they offer a reasonably priced product. Meanwhile, privatization becomes, ironically, the means of restoring financial accessibility to a higher education system whose skyrocketing price tags have made it increasingly exclusive and anti-democratic.

Um, if enterprises that rely on subsidies are to lose their subsidies, won't there be fewer such enterprises? If that's the case, won't the supply curve shift to the left and the equilibrium price tend to rise? Somehow, we're going to get a leftward shift in supply and sufficient fat squeezed out that on net the equilibrium price will be lower?

Perhaps, but not the way Mr Garland envisions it. First, colleges and universities have to generate the funds in the first place. State-supported universities will have to replace the subsidies, either by landing more voucher students or by raising their visibility, or drop some programs, or close. It is thus doubtful that the proposal would have the anticipated effect on competition. Furthermore, whether you want to call the third-party payment a voucher or a guaranteed loan or a subsidy, it is still a third-party payment. Students will have less incentive to shop around and administrators less incentive to cut out the expense-preference behavior. To obtain lower tuitions and greater enrollment requires both shopping around and an end to that behavior.

Reason's Neal McCluskey gets it.

Student aid, for one thing, has been plentiful for years, and has been growing faster than college costs. According to data from the College Board, while over the last decade the average, inflation-adjusted, per-pupil cost of tuition, fees, room, and board grew 32 percent at private four-year institutions, and 42 percent at public four-year schools, aid per full-time equivalent student ballooned 62 percent. Moreover, despite what student advocates try to tell us, the increase in assistance hasn't come primarily through loans. Inflation-adjusted grant aid per full-time equivalent student, which recipients never have to pay back, grew 51 percent between 1994–95 and 2004–05, from $2,965 to $4,479.

Of course, someone has had to pay for all this unappreciated generosity, and as is so often the case that someone is you, the taxpayer. Between 1994–95 and 2004–05, total inflation-adjusted student aid provided through state and federal grants and subsidized loans ballooned from $37 billion to almost $69 billion.

In those sums, plenty of money for climbing walls and dorm suites with floors reinforced for big-screen entertainment centers.

ON MY WORKBENCH. The backhead of the Andreyev is about done. I've installed dual gauge glasses and water columns as well as stoker controls and a few valves. Don't want to overdo it on the valves.


Next up: a few more valves, also the floor with two seats, the brake stand (again, it is convenient that Russian practice is similar to North American) and reverse lever.


As far as I know, the Communists found a portrait of Lenin somewhere in the cab to be a bit much!

NO TRISKADEKAPHOBIA HERE. Matt at Hit and Run has the obligatory Friday the 13th link to "why people fear Friday the 13th." Writing as someone who entered this life on a Friday the 13th, under a full moon no less, I find this fear somewhat amusing. On the other hand, the power was out for the better part of the early evening around here tonight ... could it have been Hod's mistletoe gone awry again?

DEPRESSING. John Stossel's Stupid in America on ABS's 20/20 has just ended. He's written a brief synopsis for Reason. That synopsis mentions New York's "rubber rooms," a facility for teachers insufficiently competent to teach but insufficiently incompetent to fire. Mr Stossel shows a rather complicated flowchart a principal must work through to justify firing a teacher. It's probably easier to canonize a saint. But one wonders about the emptiness of some peoples' lives ... evidently the teachers exiled to the rubber rooms are content to play cards or just hang out all day rather than find something more productive to do. The show also revealed something I was not aware of ... school choice in Belgium, complete with vouchers good in parochial schools. A market in elementary education services, hard by the headquarters of the European Union, forsooth! Mr Stossel could have done more about the manifestation of choice in the United States, namely the test-score premium that explains much of the variation in otherwise identical houses in various parts of the country.

RUNNING EXTRA. Company Mail source Blogs for Industry reviews the broadcast.

THE VALUE OF CARTELS? The economic theme for today appears to be insecurity. Two posts, from differing perspectives, appear slightly nostalgic for the days of monopoly capitalism and regulated cartels.

First, Elizabeth Warren sees "The Middle Class on the Precipice."

The only real increase in wages for a family has come from the second paycheck earned by a working mother. With both adults in the workforce full-time, the family’s combined income is $73,770—a whopping 75 percent higher than the median household income in the early 1970s. But the gain in income has an overlooked side effect: family risk has risen as well. Today’s families have budgeted to the limits of their new two-paycheck status. As a result, they have lost the parachute they once had in times of financial setback—a back-up earner (usually Mom) who could go into the workforce if the primary earner got laid off or fell sick. This “added-worker effect” could buttress the safety net offered by unemployment insurance or disability insurance to help families weather bad times. But today, a disruption to family fortunes can no longer be made up with extra income from an otherwise-stay-at-home partner.

Income risk has shifted in other ways as well. Incomes are less dependable today. Layoffs, outsourcing, and other workplace changes have trebled the odds of a significant interruption in a single generation. The shift from one income to two doubled the risks again, as both Mom and Dad face the possibility of unemployment. Of course, with two people in the workforce, the odds of income dropping to zero are lessened. But for families where every penny of both paychecks is already fully committed to mortgage, health insurance, and other payments, the loss of either paycheck can unleash a financial tailspin.

How many times do people have to be mugged by reality before they grasp the idea that choices have consequences? (Let's leave aside the dubious statistical inference that three different sources of uncertainty treble the odds, and two participants in the workforce doubles the risk of a spell of unemployment. I want to finish this post before supper.) Among my early reactions to The Two Income Trap, which gives Professor Warren and her daughter material for this continuing policy show is this.

There are also coping strategies available to families. Don't buy the McMansion in the first place. Ditto the SUV that looks like a Kenworth bobtail. Homeschool. Ditch the organized sports and let the kids organize their own recreation. Encourage the kids to work their way through college. Cut up the credit cards. Start a victory garden.

Joanne Jacobs has a similar reaction today.

We live in bigger houses, have available better treatment for more ailments, watch bigger, better TVs, listen to smaller, better iPods and drive mammoth SUVs.

But it's not those choices (conveniences becoming necessities?) that concern me today. Back to Professor Warren.

Steelworkers, airline employees, and now those in the auto industry are joining millions of families who must worry about interest rates, stock market volatility, and the harsh reality that they may outlive their retirement money.

Years ago, economic policy courses would likely have a unit on barometric price leadership. The short version of the model is an industry that prices like a monopoly without there actually being a monopoly, or, more distressingly, an illegal conspiracy (with great anecdotes about electrical equipment executives hiding out at Dirty Helen's in Milwaukee's red light district) to fix prices. In those days, the existence of such non-conspiratorial collusion provided reason to propose antitrust improvements, such as mandatory restructuring of competitive industries, or less rigorous standards of evidence that a conspiracy existed. And what industries provided canonical examples of antitrust-immune price leadership (sometimes referred to as "consciously parallel"; today "rational cooperation" is a subgame-perfect version of that story)? Everybody get steel, motor vehicles, and tobacco? The airlines in those days were regulated "in the public interest," but that "public interest" required that the public be protected from "ruinous and destructive" price competition, and Walter Folger Brown forbid that coach passengers be served a decent sandwich at lunch!

But it's not simply Professor Warren, who I have beaten up, repeatedly, for failure to grasp the Say Aggregation Principle, that is nostalgic for the concentrated industries of years ago. Harold Meyerson (!) quotes a scholar who appears positively nostalgic for "A Gentler Capitalism."

For the pervasive insecurity that is inextricably part of today's capitalism has become the dominant fact of modern life. "The fragmenting of big institutions has left many people's lives in a fragmented state: the places they work more resembling train stations than villages," writes sociologist Richard Sennett in "The Culture of the New Capitalism," a newly published collection of lectures he gave at Yale University in 2004. Throughout most of the 20th century, the insecurity endemic to capitalism was mitigated by business institutions organized, as Sennett's great predecessor Max Weber first noted, along military lines. The corporation gave the employee a place and a ladder, and in such a lifelong institution, Sennett notes, "it became possible to define what the stages of a career ought to be like, to correlate longtime service in a firm to specific steps of increased wealth."

Sennett is no apologist for the old corporate order, but it did impart a structure to people's work lives and a place to hone their crafts. The new workplace, by contrast, is a brave new world of short-term employment and relationships, where experience is not necessarily a virtue and institutional memory is sketchy at best. It may be a fine place for young workers, but "as middle age looms and children, mortgages and school fees appear, the need for structure and predictability in work grows greater." The frequent migration of executives from one firm to another, Sennett adds, imposes further costs on employees: "This managerial revolving door has meant that the steady, self-disciplined worker has lost his audience."

Those big institutions are, presumably, the giant corporations capable of practicing barometric price leadership right up to the day that some upstart displaces them. (And it is certainly the case that the automakers and Big Steel have objected, loudly, to foreign competition, and legacy air carriers have sought subsidy, and former retailing giants such as Sears and Penney have had to surrender to Wal-Mart or make common cause with Lands' End.) I think that's called creative destruction, and Russell at Cafe Hayek suggests as much. In a follow-up post, he notes that there are market tests for businesses that render their institutional memory redundant.

Imagine that—the most productive companies treat their workers well. It's unfortunate that we live in a time where that is considered surprising.

Next week, I greet the registrants in a public policy course that has a substantial competition policy component, as well as an antitrust economics course. I'm working on incorporating the tension between the security of monopoly (if in fact there is such security) and the inefficiency of monopoly into both.

I FEEL YOUR PAIN. Financial Rounds:

Classes don't start for another two weeks. But, my university makes all faculty get together for a two-day series of meetings before each semester (it's today and tomorrow).

What a massive waste of time! It's supposed to be a means of passing on and/or maintaining our school's unique culture. It actually accomplishes this end, since part of our culture seems to involve wasting time in boring, unproductive meetings.

No doubt, though, that the people who exist to measure the work rather than do the work will be able to report, to whoever cares, that the administrative fads of the moment have been communicated to all the faculty.

RULES WRITTEN IN BLOOD. John at EclectEcon suggests greater reliance on nuclear steam electricity as a way of sparing miners' lives (as well as reducing greenhouse gas and acid rain combustion byproducts?) There are several links to others thinking about the same thing.

Two observations: First, many of the electricity generating plants now use natural gas rather than coal (for those environmental reasons.) That situation came to light first in early 2001, when a severe winter in the east coincided with the teething troubles in the California power-deregulation plans. Second, many of the coal-fired plants use strip-mined coal from the Powder River basin. It has a lower heat content but less sulfur than the eastern coals. (One of these days I have to figure out EDGX and AERX and some of the other odd reporting marks on the Powder River trains rolling through DeKalb. I know who WEPX and WPSX and NORX and CEEX are. Some of these other trains are headed east of the Appalachians.) That leaves open the possibility that the deep miners of West Virginia are bringing up metallurgical coals. (What other uses are there for coal these days?)

TOPPING YET ANOTHER SEARCH STRING. This time, "Wisconsin chili recipe." I must caution readers that my recipe is of the same class of hotness as Real Chili's "Hot with beans" or Chili John's hot. Most of the recipes on the first page of links are what I understand to be close to what I call "camp chili." The basic ingredients for most Midwestern chili, spaghetti, and goulash start with 1.5 pounds of ground beef, onions, green peppers, and something with tomato. The spices and the choice of starch determine the ethnicity of the dish. (In Iowa and Minnesota, it's the choice of starch. Leave out any spice more daring than salt and a quarter-teaspoon of ordinary black pepper.)

THE DIFFICULTY OF FRAMING A POLICY STATEMENT. Steven Horwitz at Liberty and Power links to a recently released statement by the Board of Directors of the American Association of Colleges and Universities on "Academic Freedom and Educational Responsibility" The statement gets into a difficult position early.

Academic responsibility requires professors to submit their knowledge and claims to rigorous and public review by peers who are experts in the subject matter under consideration; to ground their arguments in the best available evidence; and to work together to foster the education of students.

That sounds straightforward enough, but "best available evidence" might rule out any work in literary criticism, and it certainly raises questions about what passes for "theory" in those quarters as something that merits peer review. (There is a much longer passage, under the heading "Academic Freedom and Scholarly Community," where the authors address that objection, although in such a way as to leave open the possibility of self-referential disciplines emerging. Market tests are Neglected Actors throughout that section.)

Professor Horwitz notes that hiring committees are self-referential. The possibility of a department or a discipline being captured by a faction that honors content-free research is real enough. Economics is not immune from that. As he notes,

After all, how well can an Economics department full of neoclassical economists really teach other perspectives (e.g. Austrian or Institutionalist, much less, say, Marxist)?

Marx is a minor post-Ricardian. Ronald Coase, Douglass North, and Oliver Williamson have much to say about the evolution of institutions. Hard-core Austrians who reject mathematical modelling and econometrics? That "best available evidence" line might suffice to ignore applications from such people.

Perhaps that opening paragraph is boilerplate. Perhaps the entire statement is spin. But it is not without consequence. Consider

Beyond fostering intellectual and personal development, a liberal education also enables students to develop meaning and commitments in their lives. In college they can explore different ways to relate to others, imagine alternative futures, decide on their intended careers, and consider their larger life’s work of contributing to the common good.

Building such intellectual and personal capacities is the right way to warn students of the inappropriateness and dangers of indoctrination, help them see through the distortions of propaganda, and enable them to assess judiciously the persuasiveness of powerful emotional appeals.

Is the notion of a "common good" indoctrination? Propaganda? Emotional appeal? Is that inevitably something different from pursuing a career and relating to others? What conceits are at work in that "imagine alternative futures?"

The statement is unlikely to mollify critics of the academy who see group think and phony diversity. Neither does it address the very real diversion of resources in the academy to non-academic purposes and emoluments for administrators.

THE ART OF RAILROADING. This week's feature at DoDo's Train Blogging notes that the Impressionists loved trains. Several of the paintings commenters have submitted hang, fittingly, in the Art Institute of Chicago.

The image is a different twist on art and railroading. Edward Hopper's "Nighthawks," which hangs in the same gallery as "American Gothic" (when the latter is not on tour), provided the interior arrangements for this all-night counter near the station.


The location is on the late John Armstrong's Canandaigua Southern in suburban Washington, D.C.

WHY PUBLIC CHOICE THEORY WILL NOT GO AWAY. George Will:

The national pastime is no longer baseball, it is rent-seeking -- bending public power for private advantage.

(Via InstaPundit.)

John Fund:

Many Republicans have forgotten that as government grows, its increased power to grant favors or inflict pain attracts more people who would abuse the system.

(Via Betsy's Page. See supra.)

Read and understand all. There may be a quiz later.

VERY JUNIOR HIGH. Journalist Alexandra Robbins attempted to do some ethnography among the sororities. The result is Pledged, an impromptu Book Review No. 2 using the time between clearing security in Boston and landing in Chicago to do the reading. (I was in the usual end-of-convention convex combination of juiced on caffeine and overtired that precluded either sleeping the trip away or doing some more serious work.) As is often the case in a popular investigation (and still too often in a scholarly investigation), a small sample of anecdotes (possibly combed for the most titillating outliers) do not make for robust research. Ms Robbins did have the problems of having to pretend to be younger and working around an official proscription by the Greek organizations, which she characterized as fearful of hatchet-job journalism. Given what she reported, those organizations do indeed have much to be fearful of.

I'll start with some general observations Ms Robbins makes about the ambiguous role the Greek system plays in university life.

That this kind of exclusivity is collegiately condoned makes the situation all the more intriguing: sororities themselves are cliques. Envision taking the group of girls in high school who bond and exclude and formally recognizing their belonging to one group and not to another by assigning them letters, colors, and mascots. The blondes, the super-thin, the rich, the promiscuous, and the girls who smoke marijuana are separated and recognized as distinctive, nonoverlapping groups. Once a girl is accepted into one of the groups, she can never affiliate with another. Each group is allotted [space] (decorated in their colors) from which they can observe the other groups. They are given secret rituals and an oath swearing allegiance to one another.

Such validation by the university might contribute to the "cooperation in the prolonged immaturity of our students" Mark Bauerlein of Emory deplores, as well as to the proliferation of "well-dressed dodos" Kimberly of Number 2 Pencil anticipates. That's not, however, where Ms Robbins is taking us. We will learn a little bit about the secret rituals. Many of these involve the recruiting and pledging of members and the subsequent pair-bonding of members. Much of what Ms Robbins reports gives the impression of Freemasonry without the gravitas. She makes several references to a publication called the Norman Shield of Kappa Delta (there's what the organization calls a "Norman Cross" on its arms; the elegance of the Square and Compass it hasn't) as well as to the initiation rituals of this organization, which allow members to pass through degrees. (To be fair, some critics of the Freemasons have suggested that the proliferation of degrees are a way for local lodges to make money. Keeping the house solvent matters to the young ladies Ms Robbins visits.)

The bonding and exclusion is apparently important. Pledged opens and closes with Southern Methodist's Bid Day, which gives the impression of medicine's Match Day without the gravitas, although to receive a bid from an unanticipated house, or from no house at all, is The. End. Of. The. World. to some so treated, as well as to their parents. (Southern Methodist's erstwhile Phantom Professor had several books, including Pledged, on her Summer Stack. Reviews and impressions, please.) More seriously, the exclusion continues to manifest itself as racial segregation along Southern Greek Rows where such affiliations are evidently more important to students and historically white houses serve the same function the all-Pullman Panama Limited allegedly did for the Illinois Central Railroad, of enabling the universities to comply with civil rights laws while circumventing them. (The City of New Orleans of the era was a fast all-coach train that would connect Chicago to New Orleans in 19 mostly daylight hours. Theodore White's Making of the President 1960 notes its role in the black migration to Chicago.)

The use of the term "nonoverlapping" in the same sentence with the category "promiscuous" misleads. That's the central focus of Pledged. I've sometimes suspected that Thomas Frank wrote What's the Matter with Kansas, which I've remarked on more substantively here, here, and here, in part as payback to people he thought were friends who excluded him from the Greek-system sexual cartel that dominated social life in Lawrence. Better to opt out of that cartel. If the anecdotes of Pledged are representative (small samples generally aren't) the neuroses and follies of Sex and the City and Desperate Housewives are simply party life in the rabbit culture relocated to upscale quarters. At gatherings of the national Greek organizations, speakers seek to dispel the image of the ladies as on the one hand "sorostitutes and fraterniture" and on the other hand "dramatic" and "high maintenance" but on the other hand the guys are quite happy to ply the gals with their liquor and the gals quite happy to drink it, even if it is on occasion a Mickey Finn (to use the language of a more hard-boiled era.) But the right house has to be providing the drinks and the companionship. And yes, people get hurt. Often.

Pledged tells us very little about what goes on in class (other than many are missed for house events; no doubt some are cut for hangovers.) One of the students has a fling with a professor in a course she is finishing. Apart from that, Ms Robbins misses an opportunity to rebut some spin from the national organizations about members of Greek-letter organizations having higher graduation rates. (That's easy. Even a Yale soccer player should be able to follow this, although people who should know better don't. Fraternity and sorority membership is a proxy for higher family income. Students with more family resources are more likely to finish. Well-known state universities reserve residence hall space for state residents. Well-to do parents that take advantage of lower out-of-state tuitions than prevail at the most famous private universities, such as the parents of Coasties, provide a population with lots of resources to keep those houses solvent, as well as to buy the PradaGucciChanel with designer sunglasses and Uggs the membership committee expects the newest litter of rabbits to wear.)

How are things different here? Northern Illinois does not cater to as rich a population. Although many people perceive the social life as dominated by the Greek system, our fraternity and sorority membership as a share of the student body looks more like Chicago's than like Northwestern's or Illinois-Urbana's. We also have rules. (I recognize the name of one of the student authors of this document and will vouch for that person's character.)

NEVER CLEAN OUT YOUR RESEARCH FILES COMPLETELY. Rip Track complains about railroad fuel surcharges on freight rates.

Anyone who ships by rail today is aware of the "Fuel Surcharge", a tariff that is added to all published freight rates. Several months ago when the surcharge was initiated, rates would fluctuate somewhere between 2% and 4.5% to 5%. Then everything changed. As Autumn '05 approached, the surcharge ballooned to 10%, 11%, and 12%, finally resting at an unbelievable 18.5% for BNSF Shippers for December 2005!

One problem is obvious for Rail Shippers. If you work up a competitive quotation, and base your freight component on a lower surcharge, the increases which we have recently seen blow your bid out of the water. The difference between a 4% fuel surcharge and a 12% fuel surcharge will ultimately mean a financial loss for such a project as bid. And guess what? No owner who awards a contract based on your bid will cut much slack here. All things equal, you lose!

Another problem: The 18.5% Fuel Surcharge for the BSNF was announced to shippers on the first day of November. At that time, is was an accurate reflection of fuel prices. Guess what happened? If you recall, fuel went down in price. But the BNSF, in this case, did not lower their surcharge, it remained in place.

Years ago, I participated in some research on automatic fuel cost adjustments to electricity rates. (Was it really thirty years ago this month I started working on it?) The purpose of those adjustments was to spare the utility regulators the difficulty of holding a full-blown rate hearing each time the utility's fuel bill changed. The point of the research was to identify the extent to which power companies used relatively more fuel-intensive technologies so as to be able to recover more of a cost change more rapidly. (They did, to the extent of several millions of 1972 dollars in additional costs to consumers. The inefficiencies haven't gone away. More recent researchers have proposed transferring the fuel price risk to the futures market as an alternative way of reducing the inefficiency.) But those adjustment clauses (I read them. All of them. For several different volumes of the long-lost National Electric Rate Book) required rate reductions if the utility's delivered costs of fuel fell below some baseline. Did Burlington leave something out of its tariffs that shippers completely missed?

Rip Track has a request to the railroads.

Please, Class Ones, do this. If you are a high-powered exec, you can even take credit for thinking it up. The solution? Admit that fuel prices are not going back to the levels of late 2004. Simply raise your published tariffs so that the fuel surcharge can be lowered to a much smaller and more controllable percentage.

In the regulated utilities, this arrangement would involve a partial or full hearing to change the base delivered price of fuel above or below which the fuel adjustment would take effect. For completeness, a shipper who has the opportunity to shift sufficient traffic to Union Pacific or CN to matter ought inform Burlington that an escalator clause without a base delivered price for fuel and the possibility of lower tariffs in the event of fuel prices below that base.

On the other hand, don't do that. Leave these escalator clauses in place as they are for about five years. I know exactly how to identify the deadweight losses that would result. All I have to do is cultivate some shippers who will provide me with the text of the surcharge clauses.

THAT'S NEWS TO ME. Destination: Freedom notes that there is no such thing as "free parking." No news there. The opportunity cost, however, is news.

The total subsidy for off-street parking in 2002, [UCLA professor Donald] Shoup estimated, was between $127 billion and $374 billion—somewhere between the costs of Medicare ($231 billion) and national defense ($349 billion). And research conducted under the CTS Transportation and Regional Growth Study estimated the total cost of off-street parking in the Twin Cities is 50 percent more than the cost of streets and highways.

That sounds large. Professor Shoup (more here) has a book titled The High Cost of Free Parking that might provide the support for those estimates. There are, however, complications.

Shoup envisions communities that charge market-rate prices for curb parking, use the revenue to improve neighborhoods, and remove off-street parking requirements. The cost of parking becomes unbundled from other transactions, so driving and oil consumption drop and our air is cleaner. “We pay less for the price of everything except parking,” he summarized.

Bundling and unbundling, however, have complexities. I remember inner-city department stores with proprietary parking lots. Consumers could use these at no additional charge, although drivers would have to wait for directions from a traffic controller with a high-level view of the lot. That had to be one of the more trying jobs in the store on those sub-zero days around Christmas. But the controller earned his pay those days, as those lots definitely were not engineered for peak loads, contrary to assertions elsewhere in the article and in this summary from the UCLA Institute of Transportation Studies of High Cost. Other inner-city department stores would have parking validation agreements with nearby paid lots that might be operated as a business or as a city utility. These arrangements had to emerge for a reason. What competitive advantage did stores discover in providing parking as an additional service to shoppers (one that would be easier to unbundle than, say, fitting rooms or warranties?) Why did that competitive advantage morph into the shopping centers, enclosed shopping malls, and complexes of free-standing big box stores, surrounded by ample parking we see today, to the dismay of the urban lobby? On the other hand, why have land-use planners adopted the practices of stores with ample unpaid parking as recommended practices, something that Professor Shoup criticizes?

Even though parking costs are hidden, Shoup declared, we all bear the cost of this “great planning disaster.” Parking requirements skew travel choices, distort urban form, degrade urban design, raise housing costs, impede reuse of older buildings, limit homeownership, damage the urban economy, and harm the environment.

On the other hand, couldn't the same thing be said about any other kind of requirement? Simply because free-standing shopping centers appear to be a good idea given the incentives in place after World War II does not mean such complexes will never become obsolete, exactly as many central cities have. Land-use planning that mandates perpetuation of the 1850-1950 urban forms is not per se a distortion?

SIXTY YEARS AGO. Sgt. Karlson receives an honorable discharge at Fort Meade in Maryland.


Battles: Ardennes, Rhineland, Central Europe.
Recognition: Good Conduct Medal, American Theater Ribbon, Meritorious Unit Award, Victory Ribbon, European-African-Middle Eastern Theater Ribbon.

CARNIVAL CALL. The Carnival of the Capitalists raises the bannerline at Social Customer Manifesto.

WAS THERE A MAN DISMAYED? The Live Journal 50 Book Challenge remains an active community this year. As the community organizer offers the fifty as a goal, rather than a competition, this year's efforts may or may not attain fifty by year's end. But Review No. 1 is ready, and with a Border's in the Boston airport and airport delays (in the time it takes to load a 737, a Hiawatha can get from either Chicago or Milwaukee to the State Line) a Review No. 2 is close to hand.

For the first review, H.P. Willmott's The Battle of Leyte Gulf: The Last Fleet Action. I suppose a dust jacket that refers to the work as a "careful interrogation"and an opening sentence that asserts "One is tempted to suggest that there are only two problems in the study of naval history: naval historians and naval officers" ought offer sufficient warning that academic posturing (demonstrating some other historian or some other school of thought to be inadequate) rather than analysis of the record is the author's objective. And, indeed, Mr Willmott's perspective is one of emphasizing social organization and ideas, rather than Thomas Carlyle's notion of influential individuals, as the prime mover of historical events. (He asserts, although it is beyond the scope of his book to demonstrate, that the pre-Pearl Harbor Japanese Navy exhausted itself exhausting the pre-Pearl Harbor U.S. Navy, with the new U.S. Navy launched after Pearl Harbor overwhelming what remained of that Japanese Navy, with the outcome of Leyte Gulf essentially irrelevant to the outcome of the Pacific War. Put simply, the U.S. Navy would have been able to make good any losses the Japanese might have inflicted. Had the Japanese not suffered the losses they did, their fleets would have been stranded for lack of fuel.)

The analysis of the battle itself offers little that is new, Mr Willmott's investigation of Japanese sources notwithstanding. My review of Thomas Cutler's The Battle of Leyte Gulf complained that a fictional character, rather than a Navy veteran, summarized the attitude in Task Force 38 to Admiral Halsey's handling of the fast battleships. But Mr Willmott's evaluation of the behavior of Japanese Admiral Kurita Takeo, the one striking force commander with the chance of achieving a local victory, might as well have been given by Robert Mitchum. More precisely, the naval officer, Victor Henry, played by Robert Mitchum in the television version of War and Remembrance translates and comments on a book by a fictional German general as a way of putting the fictional events in some context. The general comments on Admiral Kurita's errors in commencing to attack, then breaking off, with the opportunity to destroy some light carrier formations and menace the U.S. beachhead on Luzon. Robert Mitchum's character comments,

It took Kurita over three hours to round up his force. Air attacks slowed the process, and the buzzing planes and bursting bombs must have been driving him cuckoo. By the time he was ready to head into the gulf, it was getting on to one o'clock. His surprise was blown. He surmised -- quite correctly -- that wherever Halsey was, he was coming on fast. Ozawa was silent, and the southern force had evidently never made it into the gulf. To Kurita, the gulf had become a death trap, a hornet's nest of land-based and carrier planes, where his whole force would be sunk in the remaining daylight hours without laying a glove on MacArthur.

Mr Willmott uses more words to reach effectively the same conclusion. He does note that the combined air power of the escort carrier air wings equated to the strength of two fleet carriers, and, with U.S. bases established ashore, the planes were able to conduct shuttle bombing runs from the more distant escort carriers to the land bases and back. He also suggests that, even had the ships of the line destroyed the escort carrier forces and taken positions off the landing beaches, they would be isolated, short on fuel, and ultimately overwhelmed by the U.S. Navy units closing from points east. Unlike Admiral Halsey's theoretical fear of shuttle bombing by carrier planes staging to Japanese bases on Formosa or elsewhere on the Philippine Islands, Admiral Ozawa confronted the reality of shuttle bombing without an air umbrella.

ARLINGTON, BERKELEY, CLARENDON. Should I ever have occasion to write a manual for operating and signalling a model railroad, I might use Boston's "alphabet streets" as hypothetical station names for the dispatching examples. Quick quiz: "Number 2 has right over Number 1 Gloucester to Exeter." What's wrong?

The economics convention has concluded and I am safely home. Like King, it strikes me that the bargaining balance will favor the buyers this year, particularly for entry-level positions. (We, too, chatted with people that are likely to find work elsewhere. With the internet and Google Scholar, our chances of locating their research in the working paper or pre-publication stage is a lot easier than in the days when we had to maintain reciprocal working paper exchanges. There are a few people whose work I am going to follow up on from the office.) Unlike Phil, I am not dismayed that next year's convention will be in Chicago. (The timing, early in January, is inconvenient but understandable. Something like half the working economists live in the Northeast Corridor. At one time, there was a referendum in the American Economic Association to hold every other convention either in New York or somewhere in the Northeast Corridor, meaning Boston, New York, Philadelphia, the District, or possibly Baltimore. The actual scheduling of conventions is a bit more geographically dispersed than that.)

I did have a bit of an opportunity to explore Boston before the heavy interviewing began. The Massachusetts Bay Transportation Authority still operates the funkiest heavy-rail transit system in the world. (Moscow's is most elegant, New York's most muscular, and Chicago's most authentic.) The Authority has recently introduced farecards, which it calls "Charlie cards," to remember the legendary song, made famous by the Kingston Trio, about the man who didn't have the nickel to pay on departing outside the single fare area. (As recently as 1988, the left-side loading trackless trolleys that looped through Harvard Square were pay-to-exit outbound, pay-to-enter inbound with direct access to the paid-fare area of the Harvard heavy rail station.) I was able to sample all four heavy rail lines, and grabbed a late lunch in the South Station food court. Boston's commuter rail operation is a bit less intense than Chicago's. I'm not sure that food court, or the practice of posting different tracks for some of the suburban trains each day in the English fashion, would last long with the thundering herds of Burlington commuters headed to Clarendon Hills or Downer's Grove.

The alphabet streets are a bit of urban-grid logic amid the cattle-trail randomness of Boston's streets. As I understand it, they are built on reclaimed land where the Boston Neck was filled in. The area is easily walkable, with lots of historic churches and other sites worth a longer look. I was able to check for some records at the New England Historic Genealogical Society and stroll from my hotel to the original Cheers, properly the Bull and Finch (a play on the Capitol architect?) pub. There was a Patriots game on television, and, with the interviewing done, the Guinness tasted good with a cheeseburger and chowder.

MARKING OFF. I did mention that the Economics convention is coming up. Like Phil at Market Power, I have been entrusted with recruiting. Unlike the Modern Language types, I will not be live-blogging the conference.

TWELVE OUT. The Country Pundit gets the words right.

Any man willing to go into the bowels of the earth in search of black diamonds gets my hat tipped to him. Prayers have been answered, and thanks will be offered. I hope that the family of the deceased supervisor will be able to pull through this obviously very difficult time.

Amen.

SECOND SECTION. This morning's news is very different. The families of the twelve dead miners had their hopes raised, then dashed, on an erroneous early report.