This link was just sent to me a member of the George Mason University faculty. Notice that it’s not just an option: it’s a requirement for those starting at GMU in the fall of 2024. (1 COMMENTS)

This will be the last time I bring up this article from Nathan Robinson, I promise! But it presented a lot of opportunities to point out confusions and misunderstandings, and I’m loath to let such a good opportunity pass.  A reliable indicator that someone has badly misunderstood an argument is when they claim their opponents “totally fail to understand” something that is actually incredibly obvious and fully understood by all parties. (“Evolution says life has been evolving to become more complex over time, but evolutionists totally fail to understand this violates the second law of thermodynamics, which says things become more disorderly over time!”) Robinson falls into this rut pretty reliably, and often declares that the views of free market advocates fail to account for things that are in fact widely understood and fully accounted for by pretty much every free market advocate in the history of ever.  On this occasion, what he claims free market advocates fail to understand is that people’s choices are often limited by their circumstances, particularly by poverty. “Free market capitalists totally fail to understand” this, Robinson claims, which means they “can make arguments (as made by the organization DeVos is a board member of) that child labor is a good thing, because they see the choice to go to work as freely made, failing to see how people’s level of economic despair can cause them to make ‘choices’ that they very much do not want to make.” Thus, says Robinson, “If my choice is to send my child down a mine or have my family starve to death, then I will send my child down a mine. But I still don’t want to send my child down a f****** mine.”  In other words, Robinson is claiming that free-market advocates fail to understand the concept of choice under constraint. This is immediately and obviously absurd to anyone outside of Robinson’s particular echo-chamber, and claims like this all but assure Robinson’s arguments will never be taken seriously by anyone outside that echo-chamber. Of course free-market economists understand that the choices people make are structured by the constraints they face – choice under constraint and the limits imposed by resource scarcity are at the very core of free market economics. As Peter Boettke succinctly said, “Simply put, constraints matter. Human action always takes place against given constraints…Scarcity, choice and the necessity of trade-offs is at the core of the first lesson of economics.” Robinson says “choice does not occur in a vacuum” and that “it’s necessary to understand how choices are structured” as if he thinks this is some devastating rebuttal at the core of free-market thinking, but in doing so he only reveals that he lacks even a minimal understanding of what, and how, free-market economists actually think.    I’ll try to clarify the issue regarding child labor. Suppose there are three states of the world, described below: Best: Your family prospers, without the children needing to work Bad: Your family avoids starvation, because your children work Catastrophic: You and your family starve to death   Robinson and free-market economists would both agree these situations are ranked from best to worst. But Robinson claims that free-market economists “totally fail to understand” that people in the Bad scenario are only making that choice to avoid the Catastrophic scenario, and would actually prefer to be in the Best scenario. But, nothing about opposing bans on child labor rests on a failure to recognize this. What free-market advocates instead say, as I have put elsewhere, is that “Other people are generally better than you are at knowing their own circumstances, preferences, and what would be in their own best interests.” If someone makes a choice putting them in the Bad state, free market economists don’t take that as proof that the Bad scenario is their true, unconstrained preferences in some grand and abstract sense. Instead, it indicates they face a choice between Bad and Catastrophic. This isn’t good, but taking the Bad choice away from them doesn’t result in them moving up from Bad to Best – it just pushes them down from Bad to Catastrophic.  Where free-market economists also differ from socialists like Robinson is how to move more people out of the Bad and into the Best scenario. Socialists tend to see the solution as laws banning people from making the Bad choice along with pushes towards using redistribution to achieve income equality. Market oriented economists see the solution as depending on economic growth, and thus tend to emphasize policies that maximize that growth.  For 99% of the time humanity has existed, Bad was the best anyone could hope for, with Catastrophic being extremely common. It’s only in very recent history that people have begun moving en masse from Bad to Best. This change didn’t occur because existing resources suddenly started getting shared more equally. In the precapitalistic era of, say, the year 1500, only a tiny number of people were in the Best scenario – royalty, nobility, and the extremely wealthy. If someone could go back to that time, and wave a magic wand that took the combined wealth of all those privileged few and equally redistributed it among the population, the end result would still be that everyone was living in back-breaking poverty and desperately clinging to the Bad to avoid the Catastrophic. It wouldn’t have lifted the whole population or even a subset up from Bad to Best. There simply wasn’t enough wealth for that to happen.  If some king or lord in 1500 passed a law banning child labor, that too wouldn’t have moved anyone from Bad to Best. Such a law would have been either evaded, to avoid the Catastrophic, or if sufficiently enforced made Catastrophic the new norm. Growth, not equalization, is what lifts civilizations up from poverty and makes child labor a thing of the past. In Living Together, David Schmidtz said of famine what could easily be said of child labor and the many other persistent hardships of humanity’s long history: What has enabled billions of people to work their way out of the pits of famine? Adam Smith inquired into the nature and causes of the wealth of nations. Smith set aside the egocentric question “what does morality ask of me?” and instead asked what was making the world so prosperous…Some institutions are created with good intentions. Other institutions help. Truly good intentions implies wanting to know the difference – wanting to know not which institutions are well-intentioned but which institutions help. Similarly, those with truly good intentions set aside theatrical displays of moralistic hand wringing over their fears and worries about purity of intentions, and ask instead what made societies wealthy enough to no longer depend on child labor. It wasn’t equality. Nor was it simply a matter of simply banning the practice. Child labor restrictions of course do exist in the wealthy nations of the world, but they came about after those societies already achieved the economic growth that made child labor all but unnecessary in the first place. The real driving force was, and is, economic growth. Focusing on that answer doesn’t permit one to engage in the kind of unserious moral showboating Robinson likes to engage in – to preach to those in your echo chamber how people who disagree with your views only do so because they “totally fail to understand” what is actually obvious and fully understood. But it has the virtue of being true.  (0 COMMENTS)

One effect of making alcohol illegal was that it became more potent. For a given “kick,” it was more efficient to use, say, vodka or rye, than beer or wine. Bootleggers could ship x amount of “kick” in a tinier space and with lower weight. Many of us, therefore, were not surprised when weed, being illegal, became increasingly potent. Why increasingly rather than more potent all at once? Because technology takes time. It took time to develop more potent weed. A side effect of increasingly potent weed is an increasing incidence of psychosis. Julie Wernau, in “More Teens Who Use Marijuana Are Suffering From Psychosis,” Wall Street Journal, January 10, 2024, discusses the issue in some detail. But wouldn’t one of the implications of making weed legal be that it should be less potent? Yes. But that’s in a world where weed is legal the way many other things are legal. We are not in that world. Instead, legalization has been accompanied by extensive regulation and high taxation. As a result, illegal weed still dominates. Economists Robin Goldstein and Daniel Sumner wrote about the issue in Can Legal Weed Win? Their answer, briefly, is no. I laid out their main argument in “Why Regulation Will Likely Keep Illegal Weed Dominant,” Regulation, Fall 2023. Here is a key passage from my review: Recreational weed in California was legalized in 2016 with the voter-passed Proposition 64. The good news out of Prop. 64 was that many people who would have been busted for weed would not be. We shouldn’t underestimate that increase in freedom. But the rest of the news was bad. Legal producers faced the usual regulation imposed on any business by Sacramento. On top of that, Prop. 64 singled out weed producers and distributors with additional regulation. Business owners who wanted to obey the law had to get licenses and pay special taxes on weed. The state government set a “cultivation tax” at $9.65 per ounce and an excise tax of 27 percent of the wholesale price. Goldstein and Sumner estimate that the net effect of those taxes and local-government taxes is a tax rate of 35 to 50 percent of the retail price of legal weed. There were other regulations. Starting in 2018, it became illegal to sell weed after 10 p.m. Also, write the authors, not just in California but everywhere in North America, weed retailers are prohibited from also selling alcohol and tobacco. They note that two popular methods of consuming weed are illegal: One is the blunt, a hollowed-out cigar that is filled with weed; the other is the spliff, a hand-rolled joint that combines weed and tobacco. Although the authors don’t say this explicitly, it seems as if the authors of Prop. 64 and regulators in other states asked, what are the most popular ways to use weed so that we can ban those ways? It shouldn’t be surprising, then, that illegal weed still dominates and that it has retained its high potency. There’s an interesting “tell” about the importance of illegality in the graphic from the Wall Street Journal, reproduced above. The first graph is titled “Average percentage of THC in cannabis seized by the Drug Enforcement Administration.” Notice that in the 2020s, the DEA is still seizing weed. That’s not a typical event in a truly legal market. (1 COMMENTS)

How should a generation balance its own consumption needs against the desire to save for future generations? At first glance, the simplest approach seems to be that each generation should maximize its own wellbeing. This means consuming as much as desired and then leaving the next generation to figure out its own path. This view has been defended by prominent economists who favor respecting the autonomy of each generation’s preferences. However, the question becomes more intriguing when we consider the welfare of all generations collectively. What would maximizing total welfare across all time look like? To answer this question, let’s imagine a hypothetical scenario involving two groups: the current and a future generation. Pretend these groups are able to trade with one another without any constraints, including those imposed by time. For the sake of simplicity, let’s also assume that when the current generation invests, the returns benefit the future generation at the prevailing interest rate. If the current generation chooses to consume most of its income, leaving little for the future, the future generation might offer incentives to the current one to save more. For instance, if investing $1 today yields $5 at some point in the future, the future generation could compensate the current one, say $2, for every $1 shifted from consumption to investment. This results in a clear Pareto improvement, whereby both generations benefit without either being made worse off. Trading would only cease under these conditions once the return on capital investment, adjusted for factors like depreciation and risk, equals zero. So long as there’s a positive return, the future generation has an incentive to encourage the present one to consume less and save more. In the real world, time complicates intergenerational trades. Future generations can’t pay the present one to save more because they aren’t around to trade with us, nor can they tell us what their priorities and preferences will be. Nevertheless, the optimal strategy remains roughly the same: invest until the rate of return dwindles to zero. This ensures maximum wealth across all generations. Even if the current generation doesn’t benefit directly from such investments—say it sacrifices its own wellbeing for the sake of the future—the overall gain across generations justifies the strategy since the future generation gains by more than the current generation loses. (This is true by virtue of the positive real interest rate transforming every dollar of investment into more than a dollar of consumption.) When one party gains by more than another loses, economists call this a Kaldor-Hicks improvement. Now, let’s consider the choice between investing in physical capital in the market or in a clean environment. Some forms of natural capital, like forest land or fisheries, produce benefits that are traded in markets. However, many benefits of natural capital, like ecological diversity, occur outside market activities. Typically, physical capital offers higher returns than natural capital whose benefits aren’t priced in markets. The returns from physical capital can be reinvested, leading to compound growth, while the unpriced returns from natural capital are simply consumed period after period since these don’t result in financial income that can be reinvested in a bank. Therefore, the ideal strategy would seem to be to invest in physical capital until those opportunities are exhausted, then turn to natural capital, and finally to consume any remaining resources as desired. To maximize welfare across all generations, therefore, the current generation should focus on consuming at a subsistence level and investing the rest of society’s resources in capital whose returns are market-priced, before moving on to non-market capital. This approach is valid so long as the real interest rate on each remains positive. While this might seem demanding on the current generation, it underscores the inevitable trade-offs we face each time we choose to consume rather than invest. Moreover, in a laissez-faire economy, a wealth-maximizing allocation of resources will almost never be achieved. Generations typically prioritize their own welfare over that of future generations. Furthermore, due to the universal trait of positive time preference, a positive interest rate is the normal state of affairs in most markets. Thus, the optimal level of investment from an intergenerational perspective is seldom reached, leading to a kind of intergenerational market failure. Many economists are perfectly fine with this result. They prioritize the current generation’s welfare for ethical reasons or prefer environmental sustainability over wealth maximization. However, when economists present evidence to decision makers, it is critical that they objectively analyze and portray real-world trade-offs without personal biases clouding their analysis. The tough trade-offs society faces, especially in intergenerational contexts, require straight talk, not obfuscation. The debate over how much to consume versus save is not just an economic issue, but a moral one as well. It invites us to ponder our obligations to future generations and the kind of legacy we want to leave behind. As students of economic science, we should face these topics honestly and objectively, letting the proverbial chips fall where they may. This is not to say we owe a debt to the future and must sacrifice our own wellbeing for that of our descendants. However, if we decide to prioritize our own welfare over theirs, we should at least be honest about it and have good reasons for doing so.   James Broughel is a Senior Fellow at the Competitive Enterprise Institute with a focus on innovation and dynamism.  (0 COMMENTS)

Imagine that you have a company pension plan that invested in a set of ultra-low cost stock and bond index funds.  Then someone suggested that the company should change the plan by hiring a manager to try to select stocks and bonds that would beat the market.  Each year that stock picker would be paid a commission equal to 1.5% of your retirement assets.  How would you feel about that decision?  I don’t know about you, but I’d be pretty unhappy. Now imagine that the US already had an NGDP futures targeting regime in place—something similar to the “guardrails approach” that I advocated in chapter 5 of my new book.  Market forces nudged policymakers until the policy instruments were set at a level consistent with 4% expected nominal GDP growth, including reversion to trend after a deviation.  Then someone suggested getting rid of the program, and hiring Jay Powell to set the Fed’s policy instruments at a level that he thought was appropriate.  How would you feel about that decision? One problem with my thought experiment is that we tend to have status quo bias.  Right now, the US has a discretionary policy regime.  In my thought experiment, we start with a rules based regime that uses market forces, and moves to a discretionary regime.  There are good reasons to be cautious when abandoning a system and adopting a new approach.  (Think about examples such as “Chesterton’s Fence”.) If we currently had my preferred system in place, I don’t believe we would blow it up and move to a discretionary regime.  But how can we overcome status quo bias and get to this sort of regime?  That’s not obvious. In my view, the best option is to move gradually to a market-oriented rules-based regime.  Thus the central bank might begin by creating a NGDP futures market and taking a short position on contracts linked to 6% NGDP growth and a long position on contracts linked to 2% NGDP growth.  If that went well, the following year the range could be reduced to 5.9% and 2.1%.  Each year, the guardrails would get a bit closer together.  Through trial and error, you could eventually determine what sort of band is optimal. PS.  I know nothing about highway engineering, but I assume that something similar must have occurred with actual roadside guardrails.  If the guardrail is set 20 feet from the edge of the road, it’s too far away to do much good.  If it’s set one foot from the edge of the road, then even a momentary lapse in concentration from a driver could cause a costly scraping of paint from the passenger side of the car.  Most guardrails that I’ve seen are about 6 feet from the edge of the road. (0 COMMENTS)

In the current issue of Regulation (Winter 2023-2024), I review the book of Phil Gramm, Robert Ekelund, and John Early, The Myth of American Equality, which I strongly recommend. My expectation for what is a double review (see pp. 53-57 in the pdf version of Regulation‘s review section) was that I would not find this book interesting. But an expectation is at best a hypothesis, to be refuted or confirmed. I explained: As I prepared to read these two books, I had different expectations. I thought Branko Milanovic’s Capitalism, Alone would contain some interesting defenses of capitalism, while The Myth of American Inequality by Phil Gramm, Robert Ekelund, and John Early would offer an easy and perhaps banal defense of existing inequality. After all, what should I expect from a politician like the ex‐​senator Gramm, even if he pursued some good policy ideas during and after Ronald Reagan’s presidency (when the Texan switched to the Republican side of the Senate aisle)? To my surprise, I found Milanovic’s ideas rather banal and too uncritical of the zeitgeist of our times. Gramm et al., on the contrary, present deep and interesting statistical and economic analyses of the trumpeted inequality of American society. More background on the authors of The Myth of American Inequality (you get no prize if you catch the annoying typo in the review): The authors are three economists: Gramm, who at the beginning of his career taught economics at Texas A&M University; Ekelund, a professor emeritus at Auburn University who passed away as I was putting the finishing touches on this review; and Early, a mathematical economist and consultant who, interestingly, was once a legislative assistant of the late Democratic senator George McGovern. The Myth of American Inequality provides strong evidence that the trumpeted official statistics (1) much exaggerate the growth of inequality in market income (income before taxes and transfers) in the half-century between 1967 and 2017; and (2) show a growth of income inequality after taxes and transfers that did not occur–not totally surprising since the welfare state exploded over that period. The authors prove their claims mainly with other official statistics that are not biased like some reports from the Census Bureau and the Bureau of Labor Statistics are. It is difficult to summarize the book in a short post and I encourage you to read at least my review. If you are a “chiffrophile” (a neologism meaning “number lover,” used and probably invented by economist Angus Maddison to characterize himself) or are interested in the issue of inequality, you will want to read the book. Let me just give a few examples of the surprises waiting for you, as quoted from my review: We observe that real wages increased not by 8.7 percent … but by 74 percent during that period [1967-2017]. And the real median household income nearly doubled, instead of increasing by the reported 33.5 percent. Real earned incomes increased all over the distribution ladder. If we recalculate the poverty rate by adding all the transfer payments (net of taxes) and using a proper price index, it falls to 1.1 percent in 2017 compared to the official rate of 12.3 percent. A perverse consequence of the massive transfers to bottom‐​quintile households has been to incentivize these people to decouple from the labor force. In 1967, in that quintile, those who had a job represented 68 percent of able‐​bodied, working‐​age individuals not studying full‐​time. In 2017, after 50 years of War on Poverty programs, only 36 percent worked. (0 COMMENTS)

[ANNUAL LISTENER SURVEY: https://www.surveymonkey.com/r/ZGY3G9W. Vote for your 2023 favorites!] Did nations get rich on the backs of other nations? Did the West get rich from imperialism? Noah Smith says no. But why not? If you can steal stuff, isn’t that better than having to make it yourself? Listen as Noah Smith and EconTalk’s Russ Roberts discuss […] The post Can a Nation Plunder Its Way to Wealth (with Noah Smith) appeared first on Econlib.

Here are some highlights from my reading for the week. Jacob Grier, “It’s Not a Cigarette. It’s Not a Vape. And It’s Big in Japan,” Reason, January 9, 2024. Grier is one of my favorite authors on tobacco. It’s not because I like tobacco; I dislike it intensely. Excerpt: The first time I saw an IQOS, the innovative tobacco product on which Philip Morris International is betting billions of dollars to replace cigarettes, was at a wedding in 2016. A friend had excitedly pulled me outside to try this new device that had enabled him to finally kick his smoking habit. Not quite a cigarette because it didn’t ignite, not quite a vape because it used actual tobacco, supposedly less toxic than conventional cigarettes but satisfying enough to compete with them, it seemed that this heated tobacco might be the future of nicotine. Neither the device nor the specially treated tobacco was yet available in the U.S., so my friend sourced his supply via discreet shipments from a connection in Europe. Seven years later, despite its availability in more than 60 other countries, the technology is still on hold in the United States. First regulation by the Food and Drug Administration slowed its arrival, then the rollout of IQOS was cut short by a patent dispute with R. J. Reynolds that culminated in a ban on imports. 2. Severin Borenstein, “Our Carbon Footprint,” Energy Institute Blog, January 8, 2024. A numerate analysis by one of the leading economists who worries way more than I do about carbon footprints. Excerpt: This year, I did some calculations about our household’s GHG footprint. I got to thinking about the subject while writing a paper on “energy hogs”, which I discussed in two blog posts in August. After analyzing our utility bills, odometer readings, and air travel, what I found made me rethink the best steps to reduce our contributions to climate change. (I considered using one of the many online carbon calculators, but they are so opaque and embed so many simplifying assumptions that I decided to do some calculations myself.) 3. Elizabeth Nolan Brown, “The Big Flaws In That Study Suggesting That China Manipulates TikTok Topics,” Reason, January 8, 2024. Excerpt: Take, for instance, the finding that there were vastly more Instagram hashtags related to Tibet or the Dalai Lama than there were on TikTok (37.7 on Instagram for every one on TikTok). The NCRI reads this as evidence that TikTok hid posts related to these subjects. But Instagram had seven additional years to rack up posts related to Tibet. And those were years in which Western interest in Tibet was generally higher than in more recent years. (“A quick peek at Google trends data show that public discourse about Tibet in the US has been in a general decline throughout the 2000s and 2010s, albeit punctuated by exponential spikes…in April 2008 and December 2016,” noted Matzko.) It’s only natural that there would be many more Tibet-related posts on Instagram than on the more recently-launched TikTok. 4. Romina Boccia and Dominik Lett, “Curbing Federal Emergency Spending,” Policy Analysis No. 966, Cato Institute, January 9, 2024 Amazing excerpt: Congress has designated $12 trillion in spending for emergencies over the past 30 years. Poorly designed emergency spending rules allow Congress to routinely designate non‐​emergency line items as emergencies, increasing wasteful and excessive spending. High deficits, an escalating federal debt, and the insolvency of major entitlement programs mean that Congress is facing several budgetary challenges that will only grow in importance. It’s time for Congress to rein in emergency spending and its abuse. This paper provides the first comprehensive estimates of emergency spending, with data going back to 1992. According to our estimates, Congress designated 8 percent of federal budget authority as emergency spending during that time. Emergency spending is roughly equal to the amount that Congress has spent on Medicaid and veterans’ programs combined. 5. Gary Leff, “Exposed: The Fierce Battle Over Cockpit Privacy–Unveiling Pilot Union Resistance to Key Safety Reforms,” View From the Wing,” January 8, 2024. Excerpt: Last January an American Airlines crew headed to London taxied on the wrong runway as a Delta 737 began its take off roll. This was nearly a disaster of epic proportions, as the American jet crossed right in front of Delta, and the Delta plane hit the brakes. The Delta flight stopped less than 1000 feet from where it would have intersected with American’s plane. The transatlantic 777 didn’t follow air traffic control instructions. The incident wasn’t immediately reported to the airline. The pilots decided to continue flying to London, despite being almost certainly shaken by what had (almost) happened. And we’ll never really know what was going on in the cockpit, because the pilots continued flying and the voice recording was written over. In fact there is speculation that the pilots decided to continue to London so that the recording of what happened would be written over. Leff goes on to examine ways that the pilots’ union represents special interest lobbying as concern for public safety. (0 COMMENTS)

I recently wrote about a few claims made by the socialist writer Nathaniel Robinson regarding profits and competition in schooling. He argued that a profit and loss system would give schools incentives to provide as little education as possible and that competition would, at best, be useless to fix this. Aside from the problems I discussed in my previous post, there are a few other opportunities presented by this piece worth unpacking. Much of what Robinson fears about privately run schools seems to be derived from this claim: In a public school system, all money is spent on the schools. In a for-profit school system, at least some portion of that money is directed instead toward the pockets of shareholders (if it wasn’t, the for-profit schools couldn’t continue to exist). Robinson made it clear in that article that he and his fellow thinkers see “profit” as a “dirty word.” And this would certainly seem to reflect that – if a private school is making a profit, then in his mind, it just means shareholders are pocketing money that should be spent on education. Public schools don’t have shareholders pocketing money, and therefore, no profits are draining away resources from children. To put it in simplified and numerical terms, suppose a public school receives $1000 per student. And suppose a voucher system is implemented that allows parents to use that $1000 on a school of their own choosing, rather than whatever their zip code dictates. That school might only spend $800 on education and distribute $200 to shareholders. Thus, the private school will provide an inferior service to the public school. In this mindset, “profit” seems to be little more than a form of embezzlement – illicitly taking money for personal gain at the expense of the well-being of the organization. But why think that? This is classic zero-sum thinking. It’s not as if there is some fixed quantity of “education” that simply exists out there in the ether, and that if one system spends more money than another, the one spending more necessarily produces more or better education. To say that an organization’s profit comes at the expense of the customer only makes sense if there is some preexisting pie in a fixed and static state – and if a slice called “profit” comes out of the pie, there must necessarily be less pie for “education” (or for any other good or service you might think of). This might make sense if you see wealth as zero-sum. In a static, zero-sum world, shareholder profit would come at the expense of customers. But if you abandon zero-sum thinking and instead come to see wealth as not a fixed pie, but as something that is produced by an ongoing and dynamic process, you can easily see the folly of this reasoning. The idea that one organization can produce more or better output than another while requiring less money or fewer resources to do so is not some paradox or contradiction. The fact that a private organization is operating profitably while a state-run organization makes no profit provides exactly zero reasons to believe the state-run organization will provide better services than a profitably run organization does.   (0 COMMENTS)

Bloomberg has an interesting article discussing two types of Chinese new cities: In 1979, Deng Xiaoping drew a circle on the map around China’s southern coast and created Shenzhen, an experiment in capitalism, according to a popular ode to the former leader. Nearly four decades later, Xi Jinping unveiled his own ambition for an era-defining city, this time perched on the outskirts of Beijing. Xiongan was billed as a gleaming, high-tech metropolis that would serve as a release valve for the crowded Chinese capital — “a model city in the history of human development.” Thus far, the Shenzhen experiment has been far more successful.  Over the past 40 years, Shenzhen has gone from being a mostly rural area with a few factories making cheap labor-intensive export goods, to become a bustling city of 17.5 million, considered China’s Silicon Valley.  In contrast, Xiongan has gotten off to a slow start: When Bloomberg visited on a weekday this month, a highway into the city was almost empty. In the city center, few shops and restaurants were open on streets lined with brand-new government headquarters, office buildings, residential compounds and hotels. The other important difference is that Shenzhen grew organically on land right across the border from Hong Kong, as firms rushed in to take advantage of a “special economic zone” that allowed private enterprise that was still restricted in much of the rest of mainland China.  Xiongan is also in a great location (right next to Beijing), but is a centrally planned project: Unlike Deng’s laissez-faire approach that led to Shenzhen’s disorderly but colossal growth, Xi has opted for meticulous planning to help his city avoid problems dogging other areas. The city is being selective about which industries it welcomes, encouraging companies working in information technology, biomedical and new energy sectors and eliminating what it calls traditional industries. That’s unlike Shenzhen’s free-wheeling approach that attracted millions of migrant laborers and entrepreneurs. A museum dedicated to the city’s development touts how it has been centrally planned. Jane Jacobs would not have been a fan of Xiongan: Big cities’ appeal often lies in their organic street life, said Covell Meyskens, an academic who has written about government planning in China. “Planned smart cities are supposed to be the place of the future,” he added, but without those human trappings “nobody wants to live there.” South Korea’s Songdo has similar problems: The authorities of South Korea decided to build a fantastic city of the future on the shores of the Yellow Sea. The country’s government has signed a cooperation agreement with major investors and construction companies to create a project for a huge seaside city called Songdo. More than $ 40 billion was spent on the construction of the world’s first “smart” city, but now Songdo looks more like an abandoned settlement than a busy metropolis. Futuristic Songdo was supposed to be the first “smart” city on the planet, which was planned to be created from scratch. It should be noted that some Chinese “ghost cities” did eventually fill up with new residents, as hundreds of millions of people moved from the countryside to the city.  Nonetheless, there is reason to worry about over-investment in Chinese real estate.  Throughout East Asia, birth rates are plunging to very low levels.  In addition, younger people in that region increasingly prefer to live in the very largest and most sophisticated cities—to an even greater extent than in the US or Europe.  China’s government might eventually be able to populate Xiongan if they move enough government offices there from nearby Beijing, but many of China’s second and third tier cities face the prospect of extensive overbuilding.   PS.  Hundreds of years ago, there was a continual flow of people from rural to urban areas, to repopulate cities decimated by plagues.  In the next few decades, there’ll be a continual flow of people from the higher fertility rural areas to repopulate cities decimated by ultra-low birthrates: Of all of South Korea’s major cities, Seoul has the lowest birthrate of 0.59. (0 COMMENTS)