Mar 08,2013

UP Links 08 March 2013

+ Kari Kohn

Technological progress makes face-to-face contact more, not less, important. A complicated world needs personal interactions, and the cities that enable those interactions, to promote innovation.
…Hundreds of studies have documented how globalization and new technologies have increased returns in skill and education. My own work finds that while newcomers to cities don’t earn higher wages immediately, they experience faster wage growth, year by year, as they acquire skills.Similarly, the Bloom study of the Chinese call-center workers also found that stay-at-home workers were less likely to be promoted, holding productivity constant, perhaps because they were less likely to acquire the knowledge that comes from being in the office. As ideas become more complicated, they are easier to lose in translation.Thirty years ago the cyberseers predicted that new technology would make face-to-face contact, and the cities that facilitate that interaction, obsolete. The technoprophets were just as wrong as the geniuses who thought telephones would halt urban growth.

Amtrak Reform Suggestion to Devolve Down

As Adie Tomer, one of the report’s co-authors, explained to me by phone, the best way to think of Amtrak is that it’s essentially two different train systems rolled into one. One system is quite successful, the other isn’t.

First, there are Amtrak’s shorter passenger routes that run less than 400 miles and tend to connect major cities. Think of the Acela Express in the Northeast, or the Pacific Surfliner between San Diego and Los Angeles. These 26 routes carry four-fifths of Amtrak’s passengers, or 25.8 million riders per year. And they’re growing rapidly. Taken as a whole, these shorter routes are profitable to operate — mainly because the two big routes in the Northeast Corridor earn enough to cover losses elsewhere.

Then there are Amtrak’s 15 long-haul routes over 750 miles. Many of these were originally put in place to placate members of Congress all over the country, and they span dozens of states. This includes the California Zephyr route, which runs from Chicago to California and gets just 376,000 riders a year. All told, these routes lost $597.3 million in 2012.

So what can be done? The Brookings report argues that Congress should arrange a deal with the states for these 15 longer money-losing Amtrak routes. If a route is losing money, then the states along its path should negotiate how best to provide financial support and fill the hole. (Under the Brookings plan, they’d be allowed to use federal transportation funds.) If the states can’t or won’t chip in, then the routes get pared back.

As it happens, this sort of arrangement is already in place for Amtrak’s 26 short-haul routes — Congress set it up back in 2008. States have already been supporting these shorter routes, and this fall, they’ll have to increase their share. That’s expected to reduce Amtrak’s operating losses by a further $180 million. The Brookings report essentially argues that Congress should set up a similar deal for longer routes — a complicated but doable task.

Incumbents vs. Startups

A key part of Christensen’s theory is that the incumbent players in a particular industry routinely fail to make the necessary changes to the way they do things, even when they can see the disruption occurring all around them. In almost every case, they see the disruptors as not worthy of their attention because they are operating at the low end of the market, and either don’t see that as important or are too committed to their existing business models.

South Korean Reforms in Seoul to Improve Land Values

South Korean policymakers, anticipating the challenges, strengthened institutions for valuing and pricing land, trained a cadre of appraisers to ensure transparency in the valuation process, and publicly disseminated land-value information.