Author Archives: Eric Fruits

About Eric Fruits

Dr. Eric Fruits is an economics expert, finance expert, and statistics expert. He has produced numerous research studies involving economic analysis, financial modeling, and statistical analysis. As an expert witness, he has provided expert testimony in state court, federal court, and an international court. This blog is an informal look at a wide range of issues in economics, finance, and statistics. Some posts are based on original research, some may be copy-and-pasted from other sources, and others may be some combination of the two. Information, conclusions, and opinions in posts are usually based on casual or informal review of issues and data. Any conclusions or opinions are those of the author’s and do not reflect the views of any individual or organization.

Op-ed: Development myths drive streetcar

The following op-ed was published in the Portland Tribune.

For much of human history, mass transit has had the utilitarian goal of quickly moving people from place to place. Even Portland’s early streetcars were designed with speed in mind.

Advertisements touted how quickly people could get around by streetcar. One ad from 1920 boasted that University Park in North Portland was only 20 minutes from downtown by streetcar. That works out to a speed of more than 15 miles an hour.

Times have changed. Modern streetcars have become the pleasure boats of public transit: flashy, expensive and slow.

Today, Portland’s streetcars quietly glide through the streetscape at a leisurely pace. Portland’s new Central Loop covers 3.3 miles in about an hour and a half. At 2.5 miles an hour, that’s slower than most people walk.

If streetcars don’t improve transit times, then what do streetcars do?

Many ascribe the development of Portland’s heralded Pearl District to the streetcar. In truth the streetcar was more of an afterthought. The Pearl’s success began with a few pioneering developments that took advantage of historic building tax abatements to convert warehouses into condos. The success of these pioneering developments attracted other investments and more developments.

After these successes, an urban renewal area was created and the streetcar came along a few years after the birth of the urban renewal area. Development made the streetcar possible, not the other way around.

It’s impossible to find a clear-cut example of where streetcars are the single factor driving development. It’s impossible because streetcars are always just one part of a complex development package. The packages can include roadway improvements, tax abatements, rezoning and environmental cleanup. There is no way to determine whether a streetcar system is just one of many factors that boost development potential or is a vital linchpin without which development would be impossible.

Supporters argue that streetcars and other rail projects provide a magic key that unlocks zoning and uses of an area. They point to the “condotopia” that grew out of the banks of the Willamette River in Portland’s South Waterfront urban renewal area, now served by a streetcar and an aerial tram.

As early as the mid-1990s, however, private developers had their eyes on Portland’s South Waterfront. Yet, every single effort was shot down or stifled by the city’s planning process. One development didn’t follow a city commissioner’s vision for an ideal street pattern. Another development would have exceeded the city’s maximum allowable building height at the time (35 feet, or about three stories).

Even so, Portland’s planning class continues to argue that the aerial tram and streetcar have magically unlocked the ability to build waterfront skyscrapers.

In reality, there is nothing magical about streetcars and trams. City commissioners held — and still hold — the keys to unlock an area’s development potential. If rail and tram expenditures had been invested in roadway improvements, the South Waterfront would be celebrating its 15th anniversary of redevelopment instead of suffering round after round of fire sale condo auctions.

It remains to be seen whether the streetcar’s Central Loop can breathe life into Portland’s Central Eastside, Convention Center and Lloyd District. Large-scale rezoning to unlock development potential doesn’t need a streetcar. Investments in roadway improvements best serve the way the people actually travel, rather than the way we wish they would travel.

A streetcar by itself does nothing without these other key improvements.

Eric Fruits joins the staff of Nathan Associates

I am excited to announce that as of November 1, 2012, I am now with the economics firm of Nathan Associates Inc. I see this as an exciting win-win opportunity for both Nathan Associates and me.

In joining Nathan, I can better provide clients with top-notch staffing to manage even the most complex cases. At the same time, Nathan is small and flexible enough to take on smaller projects.  For more information about what I do as an expert in economics, finance, and statistics, please visit my page at Nathan Associates.

In joining Nathan Associates, I am winding down operations of Economics International Corp. However, I am repositioning this blog as a personal blog focused on items of economic interest to me.  That means that you shouldn’t take anything I write in this blog as an expert opinion or as representing the views of anyone but myself as the author.  As a personal blog, please keep in mind the following:

  • This blog is an informal look at a wide range of issues in economics, finance, and statistics.
  • Some posts are based on original research, some may be copy-and-pasted from other sources, and others may be some combination of the two.
  • Information, conclusions, and opinions in posts are not expert opinions. Blog posts largely are based on casual or informal review of issues and data.
  • Any conclusions or opinions are those of the author’s and do not reflect the views of any other individual or organization.

I hope to be a bit more active in posting to this blog and I also hope that you will keep reading it and sharing it with others.

FreaKKKonomics: Levitt and Fryer peek under the hood of the Ku Klux Klan and save economics

I thought I had finally accepted that economics has turned into a world in which each article tries to one-up the last article with bad puns and migraine-inducing abstracts.*

Then comes along Roland G. Fryer, Jr. and Steven D. Levitt (of Freakonomics fame) to pull me in with a catchy title (complete with bad pun) and a compelling abstract to their latest article in the Quarterly Journal of Economics, “Hatred and Profits: Under the Hood of the Ku Klux Klan.”

Oh, look, abstract that doesn’t make a mystery of the authors’ findings, while still making me want to read the entire article:

Rather than a terrorist organization, the 1920s Klan is best described as social organization with a wildly successful multi-level marketing structure fueled by an army of highly-incentivized sales agents selling hatred, religious intolerance, and fraternity in a time and place where there was tremendous demand.

It’s enough to restore faith in economics.

*Like this life-sucking first sentence from some big-name economists: “We consider the robustness of extensive form mechanisms to deviations from common knowledge about the state of nature, which we refer to as information perturbations.“

The downside of a personalized Internet: The Filter Bubble

Ever since I became a heavy user of Google Reader, I find that I spend almost my entire day logged into my Google account. That has some upsides, like it remembers my most recent searches. Even better, I’ve trained Google to not show me any hits from MyLife.com or eHow.com or Yahoo! Answers.

It has a big downside, though … Sometimes I feel Google’s results are are missing some crucial hits. I have increasingly turned to DuckDuckGo to supplement Google’s search results. (I have to admit, I’m hooked on DuckDuckGo’s “sort by date” results to get newer pages.)

Turns out, I’m not alone.

Internet activist, Eli Pariser says that the personalization of the web puts us in a Filter Bubble in which, yes, we get the information we are seeking, but we get only the information we are seeking.

At first sight, it does appear that the more personalised our search results, the better right? For instance, by tracking our locations, Google can give us weather forecasts for our parts of the world. It can also curate a list of videos that may potentially interest us by monitoring what we watch on YouTube. But as Internet activist, Eli Pariser, details in The Filter Bubble, a personalised Internet casts a looming shadow as well.

In The Filter Bubble, Pariser discusses a number of reasons why personalisation of the web is not necessarily a good thing. And they all stem from one central theme which he takes considerable time to convene: personalisation creates a filter bubble around us that pampers us and only shows us what we want to see, effectively un-democratising the Internet for each one of us. For example, if you are a conservative, you will get results tailored to your conservative views. If you are a climate change denier, you will not be linked to articles which explain the consequences of global warming.

 

Like father, like son: The Keynesian apparatus

One of John Maynard Keynes’ more famous quotes is his description of economics as “an apparatus of the mind.”

While the statement is frequently repeated, it is rarely cited.  In my hunt for where the quote came from, I stumbled across a book by Keynes’ father, John Neville Keynes. Published in 1897, the elder Keynes writes:

[E]conomics is of necessity a science of cause and effect. The economist cannot help endeavoring to trace the effects to their causes, and to assign to causes their effects. But the detection of causal connexion needs the assistance of some apparatus of reasoning, inductive or deductive or a combination of these. Mere reflective observation cannot possibly give the requisite insight.

Twenty five years later, John Maynard Keynes, provides his famous description of economics in the first words of an introduction to Hubert Henderson’s Supply and Demand:

The Theory of Economics does not furnish a body of settled conclusions immediately applicable to policy. It is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor to draw correct conclusions. It is not difficult in the sense in which mathematical and scientific techniques are difficult; but the fact that its modes of expression are much less precise than these, renders decidedly difficult the task of conveying it correctly to the minds of learners.

 

Urban legends: Bus fares as lottery tickets

Years ago I heard a story about a city in a “third world” country that solved fare dodging in its mass transit system by having each bus ticket serve double duty as a lottery ticket.  According to the story, riders wanted to pay bus fare in order to get a chance at winning the lottery. At the same time, bus drivers were interested in selling tickets because they got a piece of the action if they sold a winning ticket.

I’ve heard the story (and told the story) for many years, but it had an urban legend feel because no one could identify the “third world” city.

Today, I found the urban legend is true and the city is Curitiba, which is not so third world, and is known as the Sustainability Capital of the World (sorry, Portland, Austin, Chicago, and Madison). The mayor who put the plan in place was Jamie Lerner, who was profiled by Frontline:

Jamie Lerner stands as something of a hero among his fellow Curitibanos. The chief architect of the Curitiba Master Plan, he was appointed mayor during Brazil’s military dictatorship in 1971. When the nation returned to democracy, he was elected to another term. During his 12 years in office, Lerner devised many of Curitiba’s innovative, inexpensive solutions to city problems. For instance, in the early days of the public transit system, to increase its funding and encourage ridership, he made a special city lottery, valuing bus fare as lottery tickets. To combat Curitiba’s growing litter problem, he created more incentives for recycling, including exchanging bottles, cans and other recyclables for food. Lerner believed in implementing plans swiftly — in just 72 hours, he converted the city’s downtown into Brazil’s first pedestrian mall.

Blackhawk Down meets High Noon: Why juries need to hear from expert witnesses instead of relying on Westerns

What happens when the rules of evidence demands the use of an expert witness, but the Plaintiff refuses to engage one?

The easy answer is that it looks like the Plaintiff loses.

But it also results in outrageousness bordering on hilarity when the Plaintiff argues than an expert is unnecessary because jurors should know all they need to know from watching Westerns.

From Federal Evidence Review:

The plaintiff’s main bone of contention with the trial judge was that the plaintiff did not think he needed to present an expert witness to testify as to the standard of care owed by the defendant Air Service. But the D.C. Circuit, while expressing an admiration of the plaintiff’s military career and services, noted an important gap in his legal judgment. It disagreed noted that the applicable standard of care could be derived by lay jurors, for example, based on films:

“every juror will have seen” such films as High Noon. Perhaps. But even if they have, we are puzzled about what they could have learned from those films that would have been helpful to Burke’s case. After all, Marshal Kane (Gary Cooper) did not helicopter to his confrontation with the Miller gang. Nor did he carry, as Burke did, a 9-mm. pistol and AK-47 assault rifle. No, Kane walked to the fateful encounter protected only by two revolvers and a tin star. Moreover, he did so notwithstanding that the meeting could hardly have been regarded as an ambush: as the film’s title makes clear, each side knew precisely what time the showdown would take place.

Burke, __ F.3d at __.

The lessons the circuit drew from the movies was neither clear nor obvious. The circuit seemed boggled by the plaintiff’s arguments:

Burke insists — in all seriousness — that lay jurors could have intuited the proper standard of care from their knowledge of old Westerns. “Afghanistan,” he explains, “is comparable to the old ‘Wild West’ — lawmen, builders, farmers, ranchers, schoolteachers, entering savage areas subject to armed marauders and trying to establish peace, civilization and the rule of law.” Because “[e]very juror will have seen Gunsmoke or High Noon or the  Outlaw Josey Wales or Lonesome Dove,” every juror will know the proper standard of care.

We do not understand what relevant standard of care jurors could have gleaned from these Westerns, let alone how it could have benefited Burke. As to the first point, it seems plain that films in which the heroes rode horses and carried six-shooters can tell the jury little about whether helicopters should be equipped with satellite radios and bulletproof blast mats, or whether security personnel should be equipped with body armor.

Read the entire article at Federal Evidence Review.

The tediousness of treasure hunting: Are secrets buried in SEC filings?

Morningstar’s nifty blog, Footnoted, has a post that begins with a gentle jibe at the mainstream media’s reporting of “When-Did-Romney-Leave-Bain?” fuss.  What I find much more interesting is the post’s reminder that SEC filings contain many “secrets” (or juicy tidbits) just waiting to be dug up:

Now, these may not be secrets in the true meaning of the word. And they’re certainly not classified. But with over 650,000 filings made to the SEC in 2011 that just don’t get much or any attention, it’s a bit of a stretch to say there’s no secrets just because the filings are public. Companies know this, or they wouldn’t do things like file a lengthy 10-Q (as Hewlett-Packard did at 5:19 pm on a Friday afternoon last month). Or file an annual report that was over 2,200 pages.

 

Fad watch: From coast-to-coast small is the new big housing

Coming up next on HGTV … “Buying the Box” — Where home buyers shop for the smallest living space possible.

In Portland, folks live in a house the size of dining room and in New York, the mayor is pushing apartments no bigger than a few refrigerator boxes taped together.

OPB’s Think Out Loud radio show interviews the Portland owner of a “house” that is 128 square feet and was built on a 16′ x 8′ trailer. It has a stove that uses alcohol as fuel, a free-standing electric-oil heater, and a simple plumbing set-up. The tenants share wireless internet with the land owners. They don’t have a refrigerator or a shower.

New York mayor, Michael Bloomberg, apparently likes the idea. The week he announced a competition for architects to submit designs for apartments measuring just 275 to 300 square feet to address the shortage of homes suitable and affordable for the city’s growing population of one- and two-person households. While the apartments would be twice the size of the Portland house-on-a-trailer, there’s a good chance the New Yorkers would get fridge and a shower.

The big question: Is this just a curious new fad, or has the housing market taken such a big turn that tiny houses are the new McMansions?

Def Leppard teaches economics: Using “complete forgeries” to get around bad contracts

What can a recording artist do if a record company owns the back catalog of work, but won’t pay what the artist thinks is a fair royalty for digital downloads?

If you’re Def Leppard, you re-record your old songs yourself and sell the digital versions online, rendering the record company’s catalog virtually worthless.

Def Leppard lead singer, Joe Elliott, explains in Billboard:

Our contract is such that they can’t do anything with our music without our permission, not a thing. So we just sent them a letter saying, “No matter what you want, you are going to get ‘no’ as an answer, so don’t ask.” That’s the way we’ve left it. We’ll just replace our back catalog with brand new, exact same versions of what we did.

Billboard reports that the 2012 re-recording of “Pour Some Sugar On Me” has sold 21,000 downloads in the U.S. according to Nielsen SoundScan. The “Rock of Ages” redux has sold 5,000.