Friday, June 25, 2010

Pittsburgh Laughs Last

I guess I need to get around reading this book from 2007.  But it's the title of this post from the Mises economics blog that caught my attention: Pittsburgh Laughs Last. The book it is talking about: The Cinder Buggy, a fable in iron and steel, which I take is fiction.  So I am guessing it's somewhere in the nexus of Ayn Rand meets Valley of Decision?  Yet I don't quite get the tone of blog post in itself.  It seems to be holding up Pittsburgh as an example of what success Libertarianism can bring.  I do realize that must not be what it wants to imply, but it is saying Pittsburgh is this positive example of transformation.  So I guess it's one more voice out there trying to take credit for all the success raining down on us. Gone are the days when everyone was more focused on blaming everyone else for the state of the region.  Good thing we all work together so well which is part of the secret sauce.


Blogger DavidG said...

As someone formerly from the 'burgh and who now lives in sunny southern California, the author seems to be giving alot of credit to market forces and making the analogy to the current housing downturn. I believe what he is saying is the market at the end decides what the market wants, and once the government stops interfering with the housing market, the market will correct to where it needs to go (from what I can see, it's going south again, at least here on the west coast). However, to somehow use Pittsburgh as an example of true markets functioning as they do, I think is not correct.

I believe that the cooperation of the major universities, the city government (for the most part) cleaning up their balance sheet (though forced), charities focusing on specific areas and projects, and alot of people simply beginning to see the light and have a positive outlook certainly had something to do with Pittsburgh diversifying itself as it has since the collapse of steel. Though this diversification has led to lower unemployment and better opportunities, it has not backed that up by bringing in a flood of new residents.

The people in charge in and around Pittsburgh certainly would not consider themselves to be Libertarian in any sense, and had they left things up to the market, it is interesting to think what the city and area would look like today. I don't know if it would be a better or worse place, but definitely different. (No Libertarian in their right mind would have had taxpayers build those stadiums, so who knows, we may have lost all our sports franchises).

Anyway, love the blog and look forward to more of your posts.

Friday, June 25, 2010 6:24:00 PM  
Blogger Unknown said...

Yeah, I don't think so. The reason Pittsburgh has done so well in the current crisis is its reliance on two sectors buoyed by enormous government subsidies.

In fact, Pittsburgh is probably as far away from a "libertarian city" as you can get: the aforementioned eds and meds, conservative cultural values, strong pro-union sentiment, and a dire paucity of wealthy people (contrast what a 1 million dollar home looks like in sf vs pgh). Oh, also, the PNC TARP thing, too.

Friday, June 25, 2010 10:43:00 PM  
Blogger C. Briem said...

Yet none of that is mentioned in the blog of Ludwig von Mises Institute??? Does not get more Libertarian than that. I've reread it to see if they were being facetious, but it sure seems like they are holding up Pittsburgh as a paragon of... something? This is just one part of the post:

In this case, Pittsburgh is the winner. There is really no sign of recession in Pittsburgh. It is a beautiful, bustling city with surprisingly clean air, low unemployment, and happy people everywhere. There are construction projects on every corner, students pouring in and out of universities, technology companies starting and building, and new people moving in just to enjoy the amenities. Its low prices are not a bane but a key attraction.

If it's being facetious it's pretty meta and I don't think most readers will take it as such. I do wonder where the 'construction projects on every corner' comes from... but still.

I think I'm getting the point though. NB helps me with that when he mentioned the "PNC Tarp thing". PNC wasn't saved by TARP right? It got TARP almost as a precondition set to acquire NatCity which is an odd circumstance, but not the implied case that govt assistance saved PNC in any real way.

Mr. Mises may have a deep point. In Pittsburgh, the market did rule and the mills did shut. Dorothy Six is gone. Yet here we are. Contrast that with all the recent subsidies that kept whole sectors afloat such as the financial industry in NY and other industries elsewhere. Ours may be the most market driven transormation a region has ever seen in terms of just how drastic it was... Lots of other transformations of course, but many driven by disasters natural and man-made and other circumstances beyond the simple truth for us that the local competitiveness of steel moved away.

Even when you think of eds and meds.. I think you could even make a case that their local growth has come as they have operated more as private sector businesses than they ever did in the past. I'll ponder that before I ramble any more.

Saturday, June 26, 2010 12:36:00 AM  
Blogger C. Briem said...

and thanks DavidG

Saturday, June 26, 2010 12:36:00 AM  
Anonymous MH said...

I do wonder where the 'construction projects on every corner' comes from.

Probably wandered downtown. Or tried to drive the Parkway East to the Turnpike.

Saturday, June 26, 2010 12:45:00 AM  
Anonymous BrianTH said...

Of course private corporations were behind the local overreliance on the steel industry and the subsequent bust. And Pittsburgh's current relatively favorable economic dynamic is really just a product of it being 25 years behind most northeast cities in terms of its economic track (note to self: watch out for a huge Pittsburgh housing bubble circa 2030).

To channel Coase, when transaction costs are sufficiently high, large net externalities can arise, meaning the relevant market exchanges can lead to suboptimal results. And one of the biggest sources of high transaction costs is simply time: people in the future have a hard time paying people in the past to avoid bad future outcomes. So 1980s Pittsburgh probably would have liked to pay late-19th/early-20th Century Pittsburgh to invest in a more diversified economy. But that is a tough deal to arrange.

Libertarianism doesn't really have an answer to this problem, and certainly Pittsburgh's full economic history only confirms that it is in fact a problem. And that is even before getting to the fact that we are hardly a libertarianish place even now.

Saturday, June 26, 2010 8:20:00 AM  
Anonymous DBR96A said...

I think Pittsburgh's economy has been 25 years ahead of the times, as opposed to 25 years behind. Pittsburgh already had its economic check, and now the rest of the country is having theirs.

Poor Cleveland and Detroit got hammered twice, though, but I think that's largely because both cities developed a false sense of security when the domestic auto industry rebounded during the 1990's. (In that respect, Pittsburgh's lack of exposure to the auto industry turned out to be a blessing in disguise.)

Saturday, June 26, 2010 2:36:00 PM  
Blogger DavidG said...

Pittsburgh for too long relied on one industry and all talent in the region clung to that, instead of thinking about other ways to make money. It was only after the mills closed that people began to look into other areas to diversify and invest. It's not that we were 25 years behind or ahead, but the simple fact was our time was coming, regardless, not because we were a one horse town, but because unions were so unbending in their resolve to "protect" their brothers. So is the same with Detroit and other rust belt cities. I believe unions share more than 50% of the blame for steel production and car production in the US declining, but however, management stupidity, arrogance, and lack of focus surely contributed as much (remember this is only my opinion).

In the end though, steel production in the US is viable, maybe without the man power that they needed 50 years ago. Pittsburgh was and is still a viable region for steel production, however, management did not reinvest at the time, unions did not give in, legacy costs got too high, and foreign producers dumped into the US. Pittsburgh did not need to go through the massive unemployment and redistribution of it's workforce had management and unions worked together, been realistic on labor, salaries, and benefits, and shared the same goal of being the best in the industry at the best price.

Monday, June 28, 2010 11:25:00 AM  

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