Tuesday, April 28, 2009

Where is the Pie?

Before asking where it is, we may first need to ask, "what is the pie?" Turns out both questions are a bit slippery. The pie may signify the total resources available in a specified area (the Earth, the United States, California, San Francisco, the Western Addition, Divisadero Street, the 500 block of Divisadero, etc.) or perhaps the pie merely signifies the monetary value attributed to a certain economy (ie. the GDP) or market (ever hear someone lament the Dow's shrinkage?). The pie is not easily definable, but how we think about the pie (see below Economies of Scale: oranges) affects what it is.

There is a feeling among many that we must increase the pie. To some people this means increasing consumer spending. Consumers spend more thereby fueling production, increasing the value of the stock market, etc. All is good.* We must wonder though: as the pie increases, as GDP rises, and the Dow reaches new heights, are people actually becoming more resourceful? Are we finding new ways to maximize the value of our limited natural and human resources or are we merely imagining fictitious values? And just where is the pie anyway?

Does the pie live somewhere on Wall Street or in Washington, D.C.? If all of the major banks are healthy and AIG survives its self-fulfilling scare and the mega-corporations of the world begin to give and receive money again, will the pie suddenly regrow before our eyes? Or is the pie more personal than that: does the pie represent our individual opportunities for success or our access to food and jobs, credit and health care?

It is all sort of dizzying to think about, especially for the good old common man, waking in the morning to head to the factory/store/office and picking up a slice of pie on the 1st and 15th. If the Dow is up, says he, my employer is happy and I keep my job, so I am happy. If the Dow is down, woe is me. And he is right! His prospects for financial survival are so heavily intertwined with world markets and macro-financing trends that some remote pie-measurement system (the Dow) does seem important. The pie is centralized. It matters little what potential the good old common man (or the common family/the common community/the common city) actually has, if he is always waiting on the holders of the pie to make a move.

Although the resources of the world (people, land, oil, minerals) are decentralized, our conception of the pie--and the monetary units that represent its worth--are quite centralized. When we think about the pie, we are more likely to think about the stock market than the physical places that we inhabit and the natural resources surrounding us.

Does this matter? you may ask. I would argue yes: mos' definitely. If we invest the bulk of our resources in centralized "markets" with only indirect connections to the particular places in which we live, then we are in effect choosing not to invest in the real, tangible places in which we live, work and play (remember the pseudo-footnote re: opportunity costs). Although many people invest a great deal of money in their home, how many invest locally aside from that? We may "invest" as consumers, but the mindset of the consumer is a passive one. If urban areas are to thrive, investment must come back home.

*Unless of course, consumers could be more resourceful in another role. Each decision involves a shadow of the decision unmade, often referred to as opportunity cost. Thanks to Kendall Dix (http://kendix.blogspot.com) for this ingenious footnoting method.

Tuesday, April 14, 2009

Economies of Scale (oranges)

We use the term "economies of scale" to extol the benefits of large corporations. If I want to be an orange salesman, it is theoretically better for me to be able to buy and sell many oranges, especially if selling oranges requires special knowledge or equipment. If it costs $10,000 dollars to buy one orange picking machine, then only people that grow and sell lots of oranges will be able to afford it. If you can buy two machines for $18,000 or three for $25,000, etc., then it makes economic sense that the work of orange selling should remain with those who can afford many groves and many machines. Ditto if you pay labor to pick your oranges. If you only have one picker, you've got to treat him well. After all, this guy knows a little something about the orange business and you develop a close relationship with him since he's you're only picker. Throw a few of his friends in there and the costs per picker drop. After all, these pickers may not know as much about the art of orange picking and as their numbers increase they become more expendable. You can pay them less and devote less attention to each. If one drops by the wayside, it is no matter. 1 of 100 is only 1%, 1 of a 1000 only 0.1%.

If the economic logic is followed, then oranges should be picked by those with the money for large monotonous groves and expensive machines and access to cheap, fungible labor. This helps us all. The pie is bigger. We have specialized orange production, so now oranges are cheaper for everyone and everyone who is not growing oranges can spend their time specializing in some other task. In short, the term "economies of scale" indicates that economies improve when the scale is greater.

We must ask ourselves, however, which economies are we measuring? What scale matters?

If the foremost goal of humanity is indeed to increase the mythical pie of economy, then by all means, we should scale until we can scale no more. Bigger government, bigger business, bigger banks. The more we take advantage of economies of scale, the better off all will be.

But is that true? If the mythical pie is increased does this necessarily mean all are better off? And how do we measure this anyway? By mean income? Median income? Access to health care? Average life span? Happiness surveys?

Realities are dependent on the scale in which we conceive them. If we are constantly focused on the so-called greater good of growth growth growth and economies of scale, we lose sight of the economies on the ground level--the economic relationships between and among people. That is what we are after all: people.

Try looking at the world from a bird's-eye view. Or a nation or a state, even a city. Can you see much about the way people really live? The waking and the sleeping, the eating and the relieving, the enthusiastic desire to improve life or the apathy of hopelessness. The human being must be our greatest untapped resource. We have spent so long with our heads in the sky or comparing numbers on a spreadsheet that we have lost sight of this. Perhaps it is time to readjust our scale and decide just what it is we mean to measure. Time to break the soil and plant our own orange trees.

Wednesday, April 8, 2009

Transit Woes by the Bay

Although the San Francisco City Charter boasts a voter-approved "Transit-First Policy" (see Section 8A.115), the future of Muni service is uncertain thanks to a reported $128.9 million deficit. The SFMTA budget for FY09-10 is set to be submitted to the Mayor's Office and the Board of Supervisors on May 1, yet the first public hearing to air the proposed deficit-solutions occurred yesterday at City Hall. The proposed solutions include lay-offs of Muni workers, increased fares, parking meter increases, and (you guessed it) service reductions. For more detailed descriptions of the proposals, go here.

Finding a solution to Muni's problems is no easy task. Some believe the Mayor is to blame. Others point to an increase in work orders from other city agencies. Commenters at yesterday's hearing railed against Muni's "bloated management" and "overpaid staff" (to much applause from the crowd), called for stricter fare enforcement, and generally protested the proposed service cuts. Although the MTA appears to be viewing this problem as a pure numbers game, the effect of reduced public transportation services will have an impact on the lives of San Franciscans that is hard to quantify.

As one who is relatively new to the SFMTA's budget problems, I cannot speak to the allegations of mismanagement or overpayment of Muni workers. I do believe, however, that SFMTA's budget problems cannot be fixed with the current myopic proposals to reduce service while simultaneously increasing fares. If the City of San Francisco is serious about its dedication to public transit, then it's time the City took action. The biggest threat to Muni is not the money that is lost by not charging 50c for transfers, but the hordes of drivers in private automobiles that crowd the city streets (especially during rush hour) and don't use Muni. At this point though, it's hard to place all the blame on the drivers. The streets are congested, the buses move slowly, and many crosstown trips require at least one transfer in addition to a good hour of travel time. Rather than just looking for ways to make the budget in 2010, Muni needs someone with the guts to look to 2020 or 2030, to seriously consider the mechanisms for increasing Muni ridership and discouraging automobile usage. Parking meter increases may be a step in the right direction, but a more focused tax on vehicle miles traveled in the City would be better. Ultimately, the SFMTA should focus on making Muni more attractive to potential riders. They could start with proposals to speed up service and make Muni a more realistic option for trips that do not neatly fit along a north/south or east/west route. More than money, the SFMTA needs strong leaders and a steady vision for the future that is not disrupted each time there is a momentary budget crisis.