Safer Oceans and More Trade Lead to Complex Tradeoffs

The following was written by Seamus Duffy as part of his work for his Microeconomics Class.

In the aftermath of World War II, the United States emerged as the only superpower with a truly massive navy. No other country on the planet possessed a navy which could claim to support maritime operations anywhere on the high seas simultaneously. In the modern day, this fact is no less true, as the United States possesses half of the world’s aircraft carriers, eleven of its twelve nuclear carriers (the only type capable of continuous operation), and the only supercarriers in the world. The remarkability of such a grand navy has allowed the United States to step in as a guarantor of global security, notably in the global shipping market. Historically, one of the major challenges of shipping goods over water from point A to point B had been the presence of political threats in between, some of which may be able to deny access to the commerce passing through. The result was the meager use of maritime transport, and the relative isolation of national economies from each other. The United States’ uniquely large naval strength, combined with its historic commitment to freedom of navigation, changed all of that. Currently, 90% of all trade passes over oceanic links, primarily because of the stability that the US Navy provides. No longer would an unstable geopolitical environment threaten the security of shipping. In doing this, the world’s economy became truly globalized.

This service to the global economy has typically been provided free of an explicit cost, and for good reason too: the ability to control the world’s oceans gave the United States unparalleled political power. The US did demand something in return during the Cold War, as the access to this system often times precluded no small amount of political and military support to the United States. The problem is that this cost of access does not reflect the economic value of such access, especially in the post-Cold War era. The result of this relatively free access to commerce is that trade among nations has exploded in the last eighty years, as the cost of that trade is no more than the cost of the ships required for said transport. It is obvious that oceanic transport has become a common resource, open to all who wish to use it. As with all common resources, however, there lies a tragedy in its overuse.

If there is a principal symptom of this overuse, it is global warming. Nearly two-thirds of all petroleum, a prominent greenhouse gas contributor, produced in the world is traded via the oceans. Global energy supply as the world knows it would not exist without the protection of the US Navy, as there would be no assurance that oil tankers could safely make it from point A to point B. More than just the supply for petroleum, though, the oceanic access provided by the United States also impacts its demand. The principal means of economic growth for developing economies, the greatest contributors to pollution and consumers of petroleum, in the past eighty years has been the presence of export-led growth. Due to their inherently cheaper labor, undeveloped nations can export consumer products to developed nations at a cost far lower than domestic producers in those developed nations. Yet, implicit to this system is maritime security; for without it, the products produced could not safely reach their end markets. Therefore, naval protection also drives demand for petroleum. The high consumption of petroleum is thus fueled by US naval protection of global commerce without charge.

If global naval protection is one of the causes of global warming, then ending global naval protection might curtail a large amount of greenhouse gas emissions. While such a policy would preclude the loss of significant political power, the US is uniquely positioned to do so economically: most of its energy is sourced domestically, and its non-maritime bilateral trade represents only 8% of GDP. The economic consequences, therefore, of ending global commerce are relatively small for the only nation that assures it.

Mutual(ly) Assured Destruction (of historic architecture)

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The following was written by Ben Bonebrake as part of his work on historical preservation in Omaha. 

Mutual of Omaha is a well-regarded corporate citizen in Omaha. As a highly respected Fortune 500 insurance company, the firm has a history of promoting Omaha both locally though sponsorships and nationally through its company name and the Mutual of Omaha Wild Kingdom on the Animal Planet channel. Mutual of Omaha’s reputation was reinforced in 2010 through a massive investment in midtown Omaha with the opening of Midtown Crossing. Yet this long-standing positive view of Mutual of Omaha was put under strain when the traditional insurance company dipped its toe in commercial real estate and planned to demolish a pair of century old buildings in the process.

 

Following the 2010 grand opening of Midtown Crossing, Mutual of Omaha believed that outside investors would continue to invest in midtown Omaha. Despite Mutual’s initial 16 acre, $365 million mixed use development adjacent to their world headquarters, the additional outside investment failed to reach expectations. Dismayed, Mutual of Omaha concluded that the fractured nature of midtown property was the reason for lackluster investment in Midtown, despite their massive Midtown Crossing stimulus. In response, Mutual of Omaha began purchasing numerous tracts of land under the name of Turner Park East LLC with the goal of acquiring a large area of land to sell to an independent developer to help further their efforts in revitalizing midtown. In early 2014, Mutual of Omaha set its sights on the Clarinda and Page Apartment Buildings for acquisition and demolition. Mutual of Omaha saw the property as a key piece in driving further development in the midtown area.

 

The Clarinda and Page Apartment buildings were both over 100 years old and were designed in the Georgian Revival style by architect William W. Welch (from Clarinda, IA which is in Page County). Built in 1909 and 1914 respectively, these two midtown apartment complexes “represent the type of luxury apartments which developed along the city’s picturesque parks and boulevard system after the turn-of-the-century,” (Omaha LHPC). Both buildings were a part of the National Register of Historic Places and designated Local Landmarks via the Landmarks Heritage Preservation Committee as of April 21, 1981. The Clarinda Building was in better shape between the two. It was home to 16 condominium units that were rapidly losing value and falling into disrepair despite renovations in 2007, partly due to the housing market crash in 2009. The Page Building was worse. In 2006, the City had declared the building as unfit for human habitation. Local preservationist groups such as Restoration Exchange Omaha argued that the building could be brought back to a habitable and marketable level.

 

In the end, this large and central project in the midtown neighborhood turned out to be too much of an incentive for Omaha city leaders. Mutual’s investment in the Midtown area, with another potential development in the hundreds of millions of dollars range, brushed aside concerns over preservation. One of the major flaws in this plan was the lack of a concrete deal in place for the property at the time of debate. Despite this, Mutual successfully argued that the buildings were not truly historically significant, despite the Local Landmark designation which should be rescinded. The City of Omaha agreed, and the buildings were removed from the register in July of 2014. Mutual demolished the buildings in mid-November of 2014.

 

Over two years later, in December of 2016, Mutual announced vague plans for the entire area east of Midtown Crossing with Minneapolis-based Ryan Cos. to be the primary developer, with a starting date goal of late 2017. In March of 2017, Mutual received some welcome corporate welfare when they announced that the project was getting a boost from the city in the form of a 400-unit parking structure (estimated $6.8-8 million cost to the city). Mutual was still hoping that Ryan Cos. would be able to break ground on the first office structure in the planned development before the end of 2017, but as of November 2018, a four full years after their demolition, there is still no progress and the property that used to be home to the Clarinda-Page Apartment buildings is still just a grass field.

 

Tearing down historical buildings for the mere promise of growth risks having neither growth nor historical buildings, which is the worst of all outcomes. While it is likely that Mutual’s proposed development will likely be built given their history and resources, Omaha citizens should demand more from their representatives. This particular demolition is evidence of irresponsible growth and a lack of planning. The only thing that has been eliminated by razing the structures are any alternative bids for their development which would preserve the history of the buildings.

Walkable Midtown in Summer

One of the delightful joys of summer is spending some time walking around Omaha. I have the great pleasure to live in the Dundee neighborhood in Omaha and have been enjoying walking around the area with my kids on a few of the more mild summer days. In the past week, I have taken the opportunity to walk down both California and Cass streets between 30th and Saddle Creek. This is about a 15-block area on both streets.

In the midtown area, there has been quite a bit of construction. People in Omaha might know that the Gifford Park area has seen a huge resurgence in the 10 years since Mutual of Omaha helped to revitalize the area with an investment called Midtown Crossing. New business and residential construction here was a major part of the increase in property values over that time. In my own four years in Omaha, I have seen the areas of Gifford Park, and the “gold coast” area on the ridge between 38th and 40th street start to rebound as owners are putting love into the gardens and exteriors of homes, some of which are over one hundred years old. On one side of this ridge, 40th street, the Joslyn Castle and St. Cecilia’s Cathedral anchor the neighborhood, the latter’s towers distinction to Omaha skyline from as far west as 72nd street. On the other side, houses take advantage of views of the downtown area looking across past the city to the Missouri river to Council Bluffs, IA beyond.

I am truly excited to see this neighborhood grow and change. It is a mix, a type of spontaneous order of projects. On one block fresh landscaping shows me that owners of one home are taking seriously the charge to care for a lovely gem of a historic home. There are plenty of mansions perched prominently to impress. There are lovely little brick apartments from duplexes all the way up to fully renovated buildings. Some homes, particularly those lower in elevation closer to 45th street and in the trough along Cass Street, about halfway between Gifford Park and the gold coast, have avoided any serious maintenance. Some sit with junk on the porch so thick as to betray the owner’s excessive hoarding problem. Some sagging roofs point to serious structural problems in the house. Some have allowed their gardens to overgrow to the point where the house is partially obscured behind plants of an eclectic variety. All of these might be the understandable reaction to falling property values and the legacy of the neighborhood from before the recent gentrification.

There is so much potential in revitalizing the area. Walking along Duchesne Academy’s soccer fields and lovely old school building on California and 38th, I imagine what it might be like by the time my girls are old enough to go to school in this neighborhood. All of this puts a lovely face on the idea of gentrification. There is no homeowner association in these neighborhoods. The demand for housing is part of a nation-wide trend for people to return to living in denser neighborhoods, but I admire the process of revitalization that I have seen. I also worry that as rents rise, some folks are being displaced. It is hard for a Creighton professor to not be overjoyed that one of the neighborhoods near campus is becoming an attractive place to live. On all sides of campus, Omaha is becoming a much more attractive place to live. A new pedestrian bridge over highway 75 has created another easy way to move through these areas, helping to address the crippling effect of the intrusion many decades ago of this highway and interstate 480 which carved out the borders of campus, isolating pedestrians from these neighborhoods.

One gets the sense walking through Omaha, either along California or along Farnum, that the city is walkable again. I have seen pictures of what this midtown area had become by the end of the 1980s as businesses and residents moved out west. I wouldn’t have wanted to walk through the city then. As I learn about the architectural past of Omaha, I am excited by the future. The various homeowners who will continue to write new stories in homes that housed our predecessors. What is going on in our town is inspiring, and I hope that some of the musings that IEI’s urban economics group does on policy in Omaha captures the spirit of this enthusiasm for our city as neighbors and as community members.

PPE Reading Group – September 26th, 2017

The PPE group engages in weekly conversations with diverse points of view in an effort to deepen our understanding of the intersection between politics, philosophy, and economics

This week in the Philosophy, Politics, and Economics reading group, we read and discussed Polycentricity, Self-Governance, and the Art & Science of Association by Peter Boettke, Jayme Lemke, and Liya Palagashvili. The article discussed the similarities and differences in the art and science of association between Elinor and Vincent Ostrom and the Austrian school of Economics. We also read and discussed Charles Tiebout’s seminal 1956 essay, A Pure Theory of Local Expenditures. On the discussion board, the conversation center around two main topics: Exit, voice, and loyalty applied to controversy surrounding the NFL and the interplay between polycentric governance and feedback.

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PPE Reading Group – September 12th, 2017

The PPE group engages in weekly conversations with diverse points of view in an effort to deepen our understanding of the intersection between politics, philosophy, and economics

This week in the Philosophy, Politics, and Economics reading group, we read and discussed Elinor Ostrom’s Collective Action and the Evolution of Social Norms. Ostrom reviewed findings on what makes groups cooperate to achieve a better outcome than if each individual worked alone. We also read and discussed Barry R. Weingast’s The Economic Role of Political Institutions: Market-Preserving Federalism and Economic Development. Weingast discussed the role of limited political institutions in developing economic growth, focusing on case studies in the United States, England, Russia, and China. On the discussion board, the conversation centered on the nature of social norms and whether or not the things that make collective action possible are lost as groups scale up. Next week, the group will be reading and discussing The Welfare State as a Fiscal Commons: Problems of Inventive Verses Problems of Cognition by Keith Jakee and Stephan Turner and “Governing the Budgetary Commons” What Can We Learn from Elinor Ostrom? by Ringa Raudla.

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PPE Reading Group – September 5th, 2017

The PPE group engages in weekly conversations with diverse points of view in an effort to deepen our understanding of the intersection between politics, philosophy, and economics

This week in the Philosophy, Politics, and Economics reading group, we read and discussed the first couple chapters of Richard Wagners, Deficits, Debts, and Democracy: Tangling with Tragedy of the Fiscal Commons. Wagner discussed causes as to why the United States has been continually running deficits since the 1960’s. On the discussion board, the conversation center around two main topics: Short term over long-term thinking and the prisoner’s dilemma of budget making. Next week, the group will be reading and discussing “Collective Action and the Evolution of Social Norms” by Elinor Ostrom and “The Economic Role of Political Institutions: Market-Preserving Federalism and Economic Development” by Barry R. Weingast.

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Continue reading PPE Reading Group – September 5th, 2017