Recently in Urban Economics Category

Site of the Day

If Truck and Barter had a regular site of the day post, this would be it for today. I especially like the tour of Acapulco's big box retailers.

Via OC Register's Orange Punch

Municipal Wireless Catching On?


The second part in Wired's 4-Part feature on Wireless techfocuses on the growth of city-wide wireless networks.

Unusual for Wired, this article is largely superficial and unenlightening, rehashing the arguments into a bland "wireless for EVERYbody!!!" vs. The Curmudgeons Who Always Say Bad Things sort of debate. The author clearly comes out on the side of those who see muni-wireless as a an unalloyed good, fulfilling the basic rights of people everywhere to be able to surf porn at their local coffee-houses on sleek hip-top portables:

That may be true, but many cities also see municipal Wi-Fi as a larger social program. For them, it's a chance to bridge the elusive "digital divide" -- the gulf between those with access to broadband services and those who either can't afford it or simply can't access it from their impoverished part of town.

Philadelphia's Neff said that the city disqualified many vendors early because they didn't share her social goals. "Some just saw it as building a network and missed the social aspects," she said.

Of course, it might have helped to ask if the digital divide is, indeed, due to a lack of connectivity. The image this raises is one of home-after-home in poor neighborhoods staring blankly at a computer screen, letting life slip by for the want of a faster download speed. It may be anecdotal in scope, but after having been part of the founding of a tech-education program in Chicago, I can assure you that the needs go much deeper than finding a decent hot-spot.

And instead of just quoting the one person saying "the economics are crazy", it might have been of some value for the article to delve into why. Just one quick problem: the usage has to be at damn-near optimal levels for the network built. If the usage is too low, the city wasted money on something that isn't useful. If it's too high, the network is overburdened, and you will either have people not using it and paying twice for service (once through taxes and once on a crontract). Of course, the city could try to keep updating it, but it's still tax money that will have to be funneled into upgrading the network at nearly the same pace that demand for bandwidth grows, lest it get outpaced and abandoned by most users. I'd be willing to put hard money down saying that any government's process for reviewing and approving potential upgrades would be slower than a private company's.

My favorite bit from the article, however, is this:

In September, Federal Trade Commission member Jon Leibowitz endorsed (.pdf) the concept of municipal broadband networks, comparing them to public schools and libraries. [Link in original.]

And, as we all know, the public school system -- especially for poor areas of major cities -- is always a favorable comparison.

Fascinating New Paper

From the NBER emails on new working papers I found reference to a new paper by Echenique and Fryer: "On The Measurement of Segregation."

ABSTRACT: This paper develops a measure of segregation based on two premises: (1) a measure of segregation should disaggregate to the level of individuals, and (2) an individual is more segregated the more segregated are the agents with whom she interacts. Developing three desirable axioms that any segregation measure should satisfy, we prove that one and only one segregation index satisfies our three axioms, and the two aims mentioned above; which we coin the Spectral Segregation Index. We apply the index to two well-studied social phenomena: residential and school segregation. We calculate the extent of residential segregation across major US cities using data from the 2000 US Census. The correlation between the Spectral index and the commonly-used dissimilarity index is .42. Using detailed data on friendship networks, available in the National Longitudinal Study of Adolescent Health, we calculate the prevalence of within-school racial segregation. The results suggests that the percent of minority students within a school, commonly used as a substitute for a measure of in-school segregation, is a poor proxy for social interactions.

A previous copy of the paper can be found here in PDF.

The whole thing is packed with fascinating ideas stemming in part from the model's disaggregation from the city level to the individual. Particularly fascinating was the ability of the new model (the SSI) to distinguish well between "mechanical" and "behavioral" segregation (that is, the amount of segregation one would expect based on the actual distribution of races versus the purposeful segregation evinced through choice of separatign oneself from a non-similar race) that illustrates a number of compelling such as:

Interestingly, one learns from Table 7 [a table describing "the SSI of the most segregated connected components by size of the component."] that blacks are more segregated than any other racial group, but the most segregated Hispanics are more segregated than the most segregated Blacks. Table 8 provides the top 15 most segregated blocks in America. A Hispanic block in San Antonio is the most segregated block, followed by a Black block in Lafayette, LA and an Asian block in Los Angeles

From the sections on school segregation:

Many researchers assume the relationship [between the percentage of minority students in a school and the level of segregation for each minority student in that school] is linear (see, for example, Orfield 1983). This seems to be true for Whites, Asians, and to a lesser extent Hispanics. For Blacks, however, the relationship between percent own-race in a school and own-race segregation is highly non-linear. As the percentage of black students increases from zero to twenty-five percent, black segregation rises sharply. Above twenty-five percent, Blacks are near complete segregation.

More thoughts on giving...

| 3 Comments | 1 TrackBack

Sorry I'm converting this into a second post Kevin... I ended up typing fifty times more than I had intended to in my comment reply :-)

Kevin made a comment in my previous post that got me thinking:

"Isn't that a classic question economists have of charity? If you give, is it for your utility directly, or for the recipient's?
If for yourself, you might donate the whole amount even with doubling, because you just care to give.
But if you care for solely for the recipient's welfare, you'll give half with doubling, so the recipient winds up exactly where you wanted him....
This is poor economic analysis... and I doubt many people cut donations because of explicit matching contributions... but I'm just trying to get the general flavor of the argument..."

That definitely is the reasoning that needs analysis - and my take is it ends up being a very interesting game.

Assuming that you are a social 'charity' planner that wants to ultimately maximise the recipient's welfare... the only way that the recipient's welfare is maximised is by maximising the utility of the donor. (I assume that this would be a crude Nash equilibrium.)

The problem is compounded from the donor's side in one important way - the heterogeneity of the donor group. Utility for people in the 'passenger class' may be unconstrained at heart - but ends up being restricted by our budgets - i.e. our ability to give (poor students and their wallets... sigh). However, lets make an (unfair) assumption that this group has one additional characteristic - the budget constraint motivates them to derive maximum utility from the end value contributed - leading us to assume that if a matching fund exists, they may (inequality) be prompted to give less than what they intended to.

Assume that the 'upper class' donor's budget constraint isn't binding. Lets make another (unfair) assumption that the 'upper class' wants a more 'premium' way to donate -i.e. by being part of an endowment fund or to have their names lined up in a plaque. Now if they find that their status isn't upto the mark - then this psychological constraint may kick in and they may not give as much as they would have.

For purposes of simplicity (though this is probably a stupid assumption to make), lets say that the inefficiencies created by the two assumptions we have made for each class of people is unidentifiable. It could be one of four situations - a) matching fund causes more passengers to give less - b) absence of matching funds causes the elite to give less - c) there is an equal loss between the two - d) there is no loss. This then leads to a problem of how to design an optimal contract.

Kevin's point, that people wouldn't cut their giving because of the existence of a matching fund, is subject to doubt. A possible (and important) consideration is cultural differences. Many communities (many many Indian communities) are extremely frugal by nature. It is not to say that they have a bad heart - it is only to say that they seek to reach the original maximum utility they sought to derive and not be attracted to the lucre of a better maximum and the impact it will have on their wallet. This also applies to people who have a lot less to give. Many may have scraped through all kinds of cookie jars to come up with whatever they could, and this could imply that they have a few bowls of soup less over the weeks to come so that others may share the forgone bowls of soup. With the matching fund - they may give less. I was at the Albany temple when they made the announcement and I overheard atleast a handful of people arguing the matching fund when asked to improve on the value of their check.

So thats my take on things - I know there are many many many loopholes in this argument's design, but it's an attempt. :-)

More thoughts?


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