Month: May 2025

Who should go to the U?

Noah thinks it’s students from foreign countries.

But when 9 out of 10 spots in a phd program are taken by foreign students from an adversarial point of origin across the seas, they are not subsidizing local students they are squeezing them out.

It is difficult to support the idea that local taxation pays for local kids to get educated when all the openings are reserved kids from abroad. (Oh and then there was the scandal that they had been fudging their test scores)

Where is the balance? I’m not sure, but that’s the issue.

Methods- it’s always been there

This is an excerpt from my working paper which examines how contemporary economic realities challenge conventional price formation models. Traditional price theory, rooted in neoclassical equilibrium models, struggles to explain modern markets characterized by digital platforms, behavioral anomalies, and network effects. Rather than viewing prices solely as equilibrium outcomes, this section explores price as an information system and coordination mechanism shaped by institutional contexts and evolutionary market processes, proposing alternative approaches that better capture the dynamic nature of pricing in today’s economy.

III. Methodological Framework

A. Philosophical Methodology

This research engages with the critical realist tradition in economic philosophy (Lawson, 1997; Fleetwood, 2017) while incorporating elements of pragmatist inquiry (Dewey, 1938; Hodgson, 2004) to examine how social outcomes are intrinsically embedded within price mechanisms. By adopting this philosophical stance, the investigation transcends the positivists’ limitations that have dominated mainstream economic methodology and artificially separated social dimensions from market valuation processes.

Methodological Rationale and Research Design

The methodology employs a dual approach combining narrative explication and formal econometric analysis—a mixed-methods design that aligns with what Downward and Mearman (2007) term “critical triangulation.” This approach recognizes that economic phenomena exist in open systems characterized by complex causality that cannot be adequately captured through purely deductive or inductive methods alone.

Narrative methodologies in economics have been increasingly recognized for their capacity to reveal dimensions of economic reasoning that formal models often obscure (McCloskey, 1990; Morgan, 2012). As Akerlof and Snower (2016, p. 23) argue, “Narrative economics provides a framework for understanding how stories that may have little grounding in reality nevertheless influence economic behavior.” This research employs narrative not merely as illustration but as a methodological tool to uncover how social dimensions are intrinsically incorporated into economic decision-making rather than treated as external considerations.

The research design progresses through three methodological stages:

  1. Narrative case analysis of micro-level economic decisions where social costs and benefits are endogenously incorporated into price mechanisms
  2. Systematic examination of market-level pricing phenomena that demonstrate social valuation integration
  3. Econometric analysis using hedonic pricing models to formalize and quantify the incorporation of purported “externalities” within price

This triangulated approach provides methodological robustness by examining the phenomenon across multiple scales and through complementary epistemological lenses.

Market Integration of Health and Productivity Benefits

Consider the small business owner contemplating providing flu vaccinations for all employees at a cost of $50 per person. This case exemplifies what Hodgson (2013) identifies as the “reconstitutive downward causation” between institutional structures and individual agency. Conventional economic framing, following Williamson’s (1979) transaction cost analysis, might characterize this as either addressing an externality or reducing monitoring costs. However, this framework artificially separates the transaction into discrete “economic” and “social” components.

Following Sen’s (1977) critique of the rational fool construct, we can observe that the business owner engages in a multi-dimensional calculation that already incorporates social costs and benefits into their decision-making process. The owner calculates that seasonal influenza typically results in X hours of lost labor annually, representing not only direct wage costs but also diminished productivity, potential transmission to other employees, and compromised service to customers.

This integration happens not through external regulatory mandates but through what Davis (2003, p. 974) terms the “socially embedded individual” making decisions that intrinsically incorporate both private and social dimensions. The methodological significance of this observation lies in recognizing that the rational economic actor has not abandoned self-interest but rather operates with what Etzioni (1988) terms “I & We” paradigm that transcends artificial boundaries between private and social benefits.

Consumer Valuation of Production Standards

The organic food market provides another methodologically significant case. When consumers willingly pay premium prices for organic products, conventional economics often characterizes this through what Vatn and Bromley (1997) identify as the “commodification of externalities.” However, this methodological framing imposes an artificial separation that does not reflect the actual valuation process.

Following Callon’s (1998) analysis of market devices and Zelizer’s (2012) work on valuation practices, we can recognize that consumers paying a surcharge for organic certification are expressing a valuation that inherently includes both private benefits and social benefits. The price differential between conventional and organic products represents what Anderson and Holcombe (2013) term “integrated social valuation”—a comprehensive valuation where social dimensions are not external to the market but constitute an intrinsic component of the value proposition itself.

Methodologically, this challenges the ontological separation between “market values” and “social values” that has dominated economic analysis since Pigou’s (1920) formulation of externality theory. The organic certification standard operates as what Star and Griesemer (1989) identify as a “boundary object” that allows coordination between different social worlds without requiring consensus about precise meanings—a methodological perspective that permits more nuanced understanding of how social values become embedded in price mechanisms.

Natural Integration of Health, Environmental, and Safety Considerations

These examples illustrate a methodological approach to understanding markets not as fundamentally incomplete systems requiring external correction but as complex valuation mechanisms capable of incorporating multiple dimensions of value. This approach aligns with MacIntyre’s (1984) critique of compartmentalization in modern social thought and Polanyi’s (1944/2001) concept of embeddedness, challenging the philosophical premise that social costs and benefits exist outside market mechanisms.

This methodological perspective diverges from both neoclassical approaches that treat social factors as externalities and from heterodox approaches that reject market valuation altogether. Instead, it aligns with recent developments in socio-economics (Etzioni, 2003; Hodgson, 2019) that recognize the inherent integration of social and economic dimensions in human decision-making.

Formal Analytical Approach: Hedonic Pricing Models

The narrative understanding outlined above finds formal analytical complement in hedonic pricing models, following Rosen’s (1974) foundational work. This methodological approach decomposes price into its constituent value components without imposing artificial separations between “economic” and “social” factors.

Anderson’s recent study, “Wind Turbines, Shadow Flicker, and Real Estate Values” (2024), provides empirical evidence of how economic actors endogenously incorporate what conventional economics would term “externalities” directly into price mechanisms. The methodological significance of this approach lies in its capacity to quantify valuation components without presuming their ontological separation.

This research employs the hedonic pricing methodology with particular attention to what Heckman and Singer (2017) identify as “causal pluralism”—recognizing that price adjustments for social factors represent not market failures but rather evidence of markets’ capacity to incorporate complex, multi-dimensional valuations. Following Mäki’s (2009) discussion of models as isolations and surrogate systems, the hedonic approach allows us to isolate and examine specific components of valuation while recognizing their inherent integration within actual market processes.

Methodological Limitations and Reflexivity

This methodological approach is not without limitations. The narrative cases, while illustrative, cannot capture the full range of market behaviors, and there remains the potential for selection bias in the cases examined. The hedonic pricing models, while powerful, rely on assumptions about market efficiency and information availability that may not fully hold in practice (Bartik & Smith, 1987; Kuminoff et al., 2010).

Additionally, as Bourdieu (1990) emphasizes, researcher reflexivity must acknowledge that the conceptual frameworks we employ shape the phenomena we observe. The methodological challenge lies in distinguishing between artificially imposed conceptual separations and meaningful analytical distinctions—a challenge this research addresses through methodological triangulation and critical engagement with underlying philosophical assumptions.

In summary, this research employs a methodologically pluralist approach that combines narrative explication and formal hedonic pricing analysis within a critical realist philosophical framework. This approach enables a reconstruction of our understanding of how price mechanisms already incorporate social dimensions of value, challenging the artificial separation between private and social components that has dominated economic thought.

Litterature Review

This is an excerpt from my working paper which examines how contemporary economic realities challenge conventional price formation models. Traditional price theory, rooted in neoclassical equilibrium models, struggles to explain modern markets characterized by digital platforms, behavioral anomalies, and network effects. Rather than viewing prices solely as equilibrium outcomes, this section explores price as an information system and coordination mechanism shaped by institutional contexts and evolutionary market processes, proposing alternative approaches that better capture the dynamic nature of pricing in today’s economy.

I think this section needs some more work. But here’s what we have so far:

II. Literature Review

A. Mainstream Economic Philosophy Foundations

The philosophical foundations of mainstream economic theory have been constructed upon a series of conceptual separations that artificially divide the economic from the social, the private from the public, and the individual from the collective. This review traces these separations through key philosophical traditions in economic thought, examining how they have shaped our understanding of price mechanisms and market functioning.

The Neoclassical Framework and Methodological Individualism

The neoclassical paradigm, beginning with Marshall (1890/1920) and formalized by Samuelson (1947), established methodological individualism as the dominant analytical approach to economic phenomena. This philosophical stance treats social aggregates as reducible to the actions of autonomous utility-maximizing individuals whose preferences are taken as given. As Arrow (1994, p. 1) acknowledges, “It is a touchstone of accepted economics that all explanations must run in terms of the actions and reactions of individuals.”

This methodological commitment has profound implications for price theory. Within the neoclassical framework, prices emerge from the aggregation of individual utility functions, with social dimensions treated as externalities—phenomena that exist outside the core market mechanism. Pigou’s (1920) seminal work on welfare economics formalized this separation, positioning social costs as divergences between private and social valuations that require correction through policy interventions. This philosophical framing fundamentally shapes how economists conceptualize market processes, treating the social as external to rather than constitutive of economic valuation.

Interestingly, even as neoclassical economics rigorously applies methodological individualism, it implicitly relies on group concepts without adequately defining them. Markets, firms, industries—these collective entities serve as the backdrop for individual decisions, yet their constitutive nature remains undertheorized. It is as if economic theory performs an elaborate mimetic gesture, tracing the outlines of social structures while focusing exclusively on the individuals within them, like a mime whose white-gloved hands demarcate invisible boundaries that audiences must imagine rather than observe directly.

Public Choice Theory and Rational Actor Models

The public choice tradition, exemplified by Buchanan and Tullock (1962), extends methodological individualism into the realm of political decision-making. By applying rational actor models to public policy, this approach treats political processes as aggregations of individual utility calculations rather than expressions of collective values. As Buchanan (1984, p. 13) argues, “There is no organic entity called ‘society’ that exists independently of the individuals who compose it.”

This philosophical stance reinforces the separation between economic and social dimensions by treating political processes themselves as markets—mechanisms for aggregating individual preferences rather than constructing collective meanings. While providing valuable insights into institutional incentives, this approach systematically marginalizes the embedded nature of economic decision-making within social contexts.

Again, the public choice tradition alludes to groups—voters, interest groups, bureaucracies—while consistently reducing them to collections of utility-maximizing individuals. The collective dimensions that give these groups meaning and coherence are acknowledged as backdrop but rarely examined as constitutive elements of the analysis itself. The mime continues to trace invisible boundaries without substantiating the spaces they enclose.

Transaction Cost Economics and Institutional Analysis

Williamson’s (1975, 1985) transaction cost economics represents a significant extension of economic analysis into institutional structures, examining how organizations emerge to reduce the costs of market exchange. While acknowledging that economic activities occur within institutional contexts, this approach maintains the philosophical separation between economic and social dimensions by treating institutions primarily as efficiency-enhancing mechanisms rather than socially embedded practices.

As Williamson (1985, p. 18) argues, “Transaction cost economics attempts to explain how trading partners choose, from the set of feasible institutional alternatives, the arrangement that protects their relationship-specific investments at the least cost.” This framing maintains the priority of efficiency considerations while treating social dimensions as constraints rather than constitutive elements of economic organization.

Despite its focus on organizations and institutions, transaction cost economics continues to treat these collective entities as instrumental arrangements serving individual interests rather than examining how they constitute economic actors themselves. The group remains an instrumental backdrop—a cost-minimizing solution to coordination problems—rather than a constitutive dimension of economic reality. The mime’s gestures outline organizational boundaries without examining how these boundaries shape the identities and preferences of those within them.

Behavioral Economics and the Modified Individual

Behavioral economics, pioneered by Kahneman and Tversky (1979) and expanded by Thaler (1991) and others, challenges the rational actor model by identifying systematic deviations from utility maximization. While this approach introduces psychological complexity into economic analysis, it maintains the philosophical separation between economic and social dimensions by treating these deviations as cognitive biases rather than expressions of social embeddedness.

As Thaler and Sunstein (2008, p. 6) argue in their influential work on nudge theory, “The false assumption is that almost all people, almost all of the time, make choices that are in their best interest or at the very least are better than the choices that would be made by someone else.” This framing maintains the philosophical commitment to individual choice while acknowledging limitations in cognitive processing, without fundamentally challenging the separation between economic and social dimensions.

Here too, the social dimension appears as an influence on individual decision-making rather than a constitutive element of economic action. Groups function as reference points that bias individual judgments rather than fields of practice that constitute economic meaning. The mime continues to gesture at social influences without substantiating the collaborative production of economic reality that these influences represent.

B. Critical Theoretical Intersections

Against these mainstream approaches, several critical traditions have challenged the separation between economic and social dimensions, offering theoretical resources for reconceptualizing price mechanisms as inherently incorporating both private and social valuations.

Social Capital Theory: From Group Phenomenon to Individual Asset

Loury’s (1976) groundbreaking paper, “A Dynamic Theory of Racial Income Differences,” introduced social capital as a group-contained phenomenon that shaped economic opportunities. This original conception recognized the embedded nature of economic action within social contexts, particularly in explaining persistent racial disparities. As Loury (1976, p. 176) argued, “The social context within which individual maturation occurs strongly conditions what otherwise equally capable individuals can achieve.”

However, as the concept evolved through Coleman (1988), Putnam (1993), and Lin (2001), it increasingly shifted toward what might be termed an “instrumental network” approach—treating social capital as a resource that individuals could access and deploy strategically rather than a field of relationships in which they were embedded. Coleman (1988, p. S98) exemplifies this shift in defining social capital as “a variety of entities with two elements in common: They all consist of some aspect of social structures, and they facilitate certain actions of actors—whether persons or corporate actors—within the structure.”

This conceptual migration represents a critical juncture in economic philosophy, where a potentially transformative concept that recognized the inherent embeddedness of economic action was gradually reframed to fit within methodological individualism. The group-level phenomenon that Loury identified became increasingly individualized—a network resource rather than a constitutive field of practice.

Notably, throughout this evolution, the central concept of “the group” remains persistently undefined. Social capital theorists allude to communities, networks, and associations without developing a rigorous philosophical account of what constitutes a group beyond the aggregation of connected individuals. The mime traces ever more elaborate networks of connection without substantiating what makes these networks constitutive rather than merely instrumental.

Embeddedness and Economic Sociology

Granovetter’s (1985) influential paper, “Economic Action and Social Structure: The Problem of Embeddedness,” directly challenged the separation between economic and social dimensions by arguing that economic actions are “embedded in concrete, ongoing systems of social relations.” This perspective reframed economic behavior as inherently social rather than merely influenced by social factors.

As Granovetter (1985, p. 487) argues, “Actors do not behave or decide as atoms outside a social context, nor do they adhere slavishly to a script written for them by the particular intersection of social categories that they happen to occupy.” This recognition that economic action is constitutively social rather than merely constrained by social factors represents a fundamental philosophical challenge to the separation paradigm.

Similarly, Zelizer’s (2012) work on “relational work” examines how economic transactions constitute social relationships rather than merely reflecting them. As she argues, “Economic transactions connect persons and establish meaning-laden relationships.” This perspective challenges the philosophical separation between economic and social dimensions by recognizing their mutual constitution.

Yet even within economic sociology, there remains a tendency to allude to social structures without developing a rich philosophical account of their ontological status. The mime gestures toward “concrete, ongoing systems of social relations” without fully substantiating how these systems exist beyond the interactions of individuals within them.

Ecological Economics and Systems Thinking

Ecological economics, developed by Georgescu-Roegen (1971), Daly (1977), and others, challenges the separation between economic and ecological systems by positioning the economy as a subsystem of broader biophysical processes. This approach recognizes the inherent embeddedness of economic activities within ecological contexts, challenging the artificial boundaries that conventional economics draws around market processes.

As Daly (1990, p. 1) argues, “The economy is a subsystem of the finite biosphere that supports it.” This simple yet profound observation challenges the philosophical foundations of mainstream economics by recognizing that economic activities are intrinsically rather than accidentally connected to their ecological contexts.

More recently, Raworth’s (2017) “doughnut economics” has extended this systems thinking approach, arguing for a reconceptualization of economic theory that recognizes social and ecological dimensions as constitutive boundaries of economic activity rather than external constraints. As she argues, economic theory must be “embedded in society and in nature, and that’s inherently connective.”

However, even these systemic approaches often maintain a distinction between “the economy” and its social and ecological contexts, preserving a conceptual separation even while arguing for integration. The mime traces the connections between systems while maintaining their distinct identities, without fully examining how these identities themselves are mutually constituted.

Feminist Economics and the Critique of Separative Self

Feminist economic philosophy has provided some of the most profound challenges to the separation paradigm through its critique of the “separative self” that underpins mainstream economic theory. Nelson (2006), Folbre (1994), and others have questioned the philosophical assumptions about autonomy and independence that shape conventional economic analysis.

As Nelson (2006, p. 30) argues, “The image of economic man as self-interested, autonomous, and rational creates a distorted view of economic life. Most economic decisions and actions are undertaken by people who are deeply connected to others.” This critique challenges not merely the assumptions of rational choice theory but the deeper philosophical conception of the economic actor as fundamentally separate from social contexts.

Folbre’s (1994) work on care economics further demonstrates how economic decisions inherently incorporate social dimensions, particularly in domains traditionally excluded from economic analysis. As she argues, “The invisible hand is all thumbs when it comes to care.” This observation highlights how conventional economic frameworks systematically marginalize activities where social dimensions are most evident.

Yet even these critical perspectives often maintain a focus on individuals—albeit connected and caring ones—without fully developing an alternative ontology of the social. The mime gestures toward connection and care without fully substantiating the collective dimensions these concepts imply.

C. Syntheses and Gaps in Current Literature

The literature reveals both promising directions for reconceptualizing the relationship between economic and social dimensions and persistent gaps that the current research aims to address.

Toward an Integrated Understanding

Several theoretical developments suggest potential pathways toward a more integrated understanding of price mechanisms. Lawson’s (2007) critical realist approach challenges the ontological assumptions of mainstream economics, arguing for a recognition of economic phenomena as emerging from “structured interrelationships in practices and positions.” This philosophical stance aligns with the current research’s emphasis on the inherently social nature of price mechanisms.

Similarly, Hodgson’s (2019) recent work on institutional economics provides theoretical resources for understanding how social institutions constitute economic behaviors rather than merely constraining them. As he argues, “Institutions not only constrain options, they establish the very criteria by which people discover their preferences.” This insight suggests how social dimensions might be understood as intrinsic to rather than separate from price mechanisms.

The Missing Ontology of the Group

Despite these promising directions, a significant gap remains in the philosophical understanding of how social dimensions operate within price mechanisms. Across divergent theoretical traditions—from neoclassical economics to critical alternatives—there persists a tendency to allude to groups without developing a rich philosophical account of their ontological status.

This mimetic quality of economic theory—gesturing toward social structures while focusing primarily on individuals within them—represents a critical limitation in current approaches. Like a mime whose white-gloved hands trace invisible boundaries, economic theory repeatedly outlines social dimensions without substantiating them philosophically. Markets, firms, communities, networks—these collective entities appear throughout economic literature without rigorous examination of their constitutive nature.

The present research aims to address this gap by developing a philosophical framework that recognizes price mechanisms as inherently social institutions rather than merely technical devices. By reconnecting with Loury’s original insight that social capital represents a group-contained phenomenon, this research seeks to recover and extend a more integrated understanding of how social dimensions operate not around but within price mechanisms themselves.

As the subsequent sections will demonstrate, this reconceptualization has profound implications for how we understand market processes, offering a more coherent theoretical account and opening new possibilities for addressing complex socioeconomic challenges through a more sophisticated understanding of how prices already incorporate both private and social dimensions of value.

After an Abstract comes the Introduction

This is an excerpt from my paper which examines how contemporary economic realities challenge conventional price formation models. Traditional price theory, rooted in neoclassical equilibrium models, struggles to explain modern markets characterized by digital platforms, behavioral anomalies, and network effects. Rather than viewing prices solely as equilibrium outcomes, this section explores price as an information system and coordination mechanism shaped by institutional contexts and evolutionary market processes, proposing alternative approaches that better capture the dynamic nature of pricing in today’s economy.

A. Research Problem and Contextual Landscape

Contemporary economic theory has constructed an artificial divide between private and social valuations that fundamentally mischaracterizes the nature of price mechanisms. The prevailing paradigm treats externalities and social costs as phenomena that exist outside market pricing structures—anomalies that require correction through policy interventions. This perspective has led to theoretical frameworks that fail to recognize how price already incorporates social dimensions of value.

This paper challenges this dominant position by advancing the thesis that price inherently accounts for social costs and benefits, functioning as Price = Value Private + Social. The conventional framing treats social costs as separate from private market transactions, focusing exclusively on externalities and spillovers as market failures requiring intervention. However, this approach overlooks crucial evidence that market participants routinely anticipate and internalize social dimensions in their valuation processes.

Several critical shortcomings emerge from the current theoretical framework. First, mainstream economics acknowledges that stock prices anticipate political actions and regulatory changes, yet fails to systematically incorporate this anticipatory social pricing into its core models. Second, empirical evidence demonstrates consumers’ willingness to pay emotional surcharges for products with perceived social benefits, yet this phenomenon remains marginalized in standard economic analysis. Third, economists typically wait for social costs to manifest as measurable externalities before acknowledging their existence, rather than recognizing their presence within the price mechanism itself.

This theoretical blind spot can be traced to a pivotal shift in economic philosophy that occurred following Glenn Loury’s groundbreaking 1976 paper, “A Dynamic Theory of Racial Income Differences,” which introduced the concept of social capital as a group-contained phenomenon. The subsequent evolution of social capital theory—through James Coleman, Robert Putnam, Nan Lin, and Mark Granovetter—gradually reframed social elements as external to market mechanisms rather than intrinsic to them. This conceptual migration has created artificial boundaries between private and social valuations that distort our understanding of how markets function.

By examining this historical trajectory and proposing a reconceptualization of price theory that acknowledges the inherent social dimensions of value, this research aims to resolve theoretical inconsistencies in contemporary economic philosophy and develop a more coherent understanding of market dynamics. The implications extend beyond theoretical discourse, offering potential pathways to address pressing socioeconomic challenges through a more sophisticated understanding of how social costs and benefits are already embedded within price mechanisms.

B. Theoretical Positioning

The philosophical underpinnings of twentieth-century economic analysis were largely constructed upon a reductive conception of human behavior—the rational actor paradigm, which posited economic agents as autonomous individuals pursuing narrowly defined self-interest. This framework, most prominently championed by neoclassical economists, created theoretical models that excluded the complex social dimensions inherent in economic exchange. By privileging methodological individualism, mainstream economics systematically marginalized the communal aspects of human decision-making and the social embeddedness of market interactions.

The 1970s marked a critical turning point with scholars like Kenneth Arrow, Gary Becker, and others beginning to interrogate this limited conception by examining economic trades within previously neglected domains such as family structures and racial dynamics. This represented an important, though incomplete, expansion of economic thought. While these analyses acknowledged that social factors could influence economic decisions, they still fundamentally positioned these factors as external constraints or modifications to an essentially self-interested calculus.

This paper advances a more radical philosophical proposition: economic actors do not merely respond to social factors as external influences but fundamentally incorporate communal objectives alongside personal gain when allocating their labor and resources. This perspective challenges the artificial separation between individual and collective interests that has dominated economic philosophy. Rather than viewing social considerations as secondary modifications to self-interested behavior, this research argues that economic actors integrate multiple value dimensions—personal, familial, communal, and societal—into their decision-making processes simultaneously and intrinsically.

This theoretical reframing has profound implications for how we understand price mechanisms. When economic actors integrate communal objectives into their decision calculus, the resulting prices already embed both private and social valuations. Market exchanges thus represent complex negotiations of value that transcend the narrow confines of individualistic utility maximization. By recognizing this inherent integration, we can begin to develop more sophisticated theoretical tools that accurately capture the multidimensional nature of economic exchange.

The proposed philosophical framework does not reject the insights gained from examining self-interested behavior, but rather situates such behavior within a more comprehensive understanding of human action that acknowledges our fundamental social embeddedness. This perspective builds upon but substantially extends the work begun by Arrow and others, offering a philosophical foundation for reconceptualizing how social dimensions operate not merely around but within economic decision-making and price formation.

Writing with Claude

This is an excerpt from my paper which examines how contemporary economic realities challenge conventional price formation models. Traditional price theory, rooted in neoclassical equilibrium models, struggles to explain modern markets characterized by digital platforms, behavioral anomalies, and network effects. Rather than viewing prices solely as equilibrium outcomes, this section explores price as an information system and coordination mechanism shaped by institutional contexts and evolutionary market processes, proposing alternative approaches that better capture the dynamic nature of pricing in today’s economy.

I primed Claude with my ideas on price and here’s the abstract we came up with.

Abstract

This paper challenges the conventional economic paradigm that artificially separates private and social valuations in price mechanisms. Through a critical examination of mainstream economic philosophy and its historical evolution, I argue that market participants routinely incorporate social dimensions directly into their valuations, functioning as Price = Value Private + Social. The research traces how economic theory shifted from Glenn Loury’s original conceptualization of social capital as a group-contained phenomenon toward increasingly individualistic interpretations that marginalized the embedded nature of economic decisions. Drawing on critical realist philosophy and integrating insights from economic sociology, feminist economics, and ecological economics, I develop a theoretical framework that reconceptualizes price as a social institution intrinsically incorporating both private and social dimensions rather than requiring external correction for “externalities.” Through comparative analysis with conventional frameworks and empirical investigation using hedonic pricing models, the paper demonstrates how this integrated understanding resolves theoretical inconsistencies in contemporary economics while offering more coherent approaches to complex socioeconomic challenges. The implications extend beyond theoretical discourse to policy design, suggesting a fundamental shift from external correction to institutional design that recognizes the inherently social nature of market valuation.

Trump- shock think

Trump is irritating, bombastic, and a general pain in the patuti to all spectrums of political ideology– but you must admit that his unconventional methods get people looking at issues from new angles. Who would have thought that those on the left would become free traders? They oppose Trump’s tariffs meant to protect the American worker (or let’s avoid reading too much into the mind of the art of the deal maker).

And there’s more to see of the unseen. Writers are unveiling things like ‘hidden costs.’ In this super article by Luis Garicano, The Myth of the Single Market, the author proposes that national customs have always charged an override on goods and services that move across European borders.

The IMF puts the hidden cost of trading goods inside the EU at the equivalent of a 45% tariff. For services the figure climbs to 110%, higher than Trump’s “Liberation day” tariffs on Chinese imports—measures many saw as a near-embargo.

We advocate for the idea that social costs are part of the price at Home-Economic. They are hidden only in the sense that they are not talked about. It’s not polite to say to someone that they paid a luxury/status surcharge for their watch because they want to show off, even if Veblen said it was so a hundred years ago. People don’t want to think about whether they selected a bigger house at the expense of a longer commute, which takes their time away from their children. These trades in social commitments are sheltered from the glaring eyes of sharpened pencils and numerical analysis.

But that doesn’t mean they aren’t there. Social costs and surpluses have always been a part of price. Tariffs are just the name for the formalized process of collecting and directing them.

Thank Trump for that bit of awareness.

Grok writes a Puppy Poem

Ode to Pepe (Jean Pierre)

Oh Pepe, my Jean Pierre, with fur so wild and free,

A shaggy heart of gold, you bring such joy to me.

Your eyes, they gleam with mischief, your spirit pure and bright,

A faithful friend, a bounding soul, my beacon in the light.

With a ball in sight, you leap, a furry streak of glee,

Across the wooden floors, you chase so merrily.

Your tail a wagging metronome, your bark a song of play,

You fetch with such devotion, brightening every day.

Affection in your nuzzle, your warmth against my side,

A loyal companion, in you I can confide.

Through morning walks at sunrise, or evenings calm and still,

Your love, dear Pepe, is a gift, a void you’ll always fill.

Oh Jean Pierre, my Pepe, with your toy held oh so tight,

You dance through life with fervor, a canine pure delight.

Forever will I cherish each moment that we share,

My ball-fetching, faithful friend, my Pepe, Jean Pierre.

Sowell- name maker

Thomas Sowell’s terms surrogate decision-maker and hypothetical individuals seem a bit wry.

In Rawls, the locus of discretion is the surrogate decision-maker “society” which can choose the trade-off collectively and arrange results in accordance with principles of justice these principles being derived in explicitly rationalistic terms. While the principles of justice are logically derived from the presumed preferences of hypothetical individuals, “in the original position” of the yet unborn, deciding what kind of world they would like to inhabit, the locus of discretion in applying these principles is “society” or a collective “we” — that is, surrogate decision-makers.

From A Conflict of Vision (2007).

Capture!

I thought the US Census was a factual thing. It is meant to report data, not succumb to opinion. This headline, however, which is being used nationwide as a rally call against housing markets, is a product of capture.

The census people want us to believe that nearly half of renters are in financial straits.

How did they get this number, and why does it seem high when you look around in your life and don’t see that half of the people you know or come into contact with are shouldering the pressure of a cost-burdened housing expense? The threshold used to determine financial distress occurs when a household spends more than 30 percent of its income on housing expenses. It is said that this is an industry norm– meaning lenders of all stripes rely on this benchmark when determining creditworthiness.

That’s not to say that lenders do not approve borrowers with a higher debt-to-income level. They do. In fact, they will lend up to 50% in situational circumstances. Note that up to these levels, the financial institution is still anticipating that the loan will be repaid. Delinquencies are not the objective in the lending business. (Here’s a post on debt-to-income ratios from a few days ago.)

But that’s not what this headline implies. According to the census, 30-50% of the population is ‘burdened.’ Perhaps one could let that go to semantics. Only the ratio calculated in this case differs from the industry norm. This ratio includes utilities as a monthly expense, where the industry standard does not. So, how does the added cost of heating bills, electricity, water, and possibly internet (I’m not sure what the American Community Survey includes) adjust the threshold and push a larger share of the population over the 30% threshold?

The first thing to know is how a debt-to-income ratio is calculated. Take an average rental cost of $1300 a month. The monthly income amount for a 30% debt-to-income ratio is $4333/mo. If you add $139 in utility costs, everyone adjusts up 3%. An added monthly cost of $200 (say the respondent includes all their streaming options), then the debt-to-income ratio rounds up another cohort by 5%. It’s safe to say that the census is no longer using an industry standard by calculating ratios with additional monthly obligations.

Is the renter who likes streaming services cost-burdened or simply choosing an entertainment option? Is the renter who elects to pay a larger portion for rent to live on a metro line, forgo the cost of a car payment, and net out a lower monthly expense as a result, cost-burdened? Is the renter who selects a living option close enough to an ex-spouse to share custody and not pay child support cost burdened or cost savvy?

People arrange their monthly budgets all the time with savings and benefits that may not be readily apparent to the outside world. That’s the beauty of choice. As long as a market is loose enough for people to navigate to their best circumstances, they arrive at a combination that works in their best interest, reflecting all facets of their lives.

College students will undoubtedly pay more for rent than their income would seem to allow. That’s the reality of their stage of life. Seniors also fall into a different category of consumer than working adults. Many could be at a stage where their monthly living expenses may include food and care, while their monthly income may just be one source in their retirement plan for covering expenses at the end of life. Are these students octogenarians, cost-burdened, or simply living their lives as planned?

Affordability is a subjective measure. I question the Census’s objectives in publishing opinions on affordability in the housing markets. What’s next? Will we be told we can’t afford to take a vacation or to take the summer off to be with our kids? Or should the Census return to the way it was– a fact provider?

Understanding DTI’s

A debt-to-income (DTI) ratio is a financial metric that compares a person’s monthly debt payments to their gross monthly income, expressed as a percentage. It’s calculated by dividing total recurring debt (e.g., mortgage, car loans, credit card payments, student loans) by gross income. For example, if someone earns $5,000 monthly and has $1,500 in debt payments, their DTI is 30% ($1,500 ÷ $5,000). In the real estate industry, DTI is a critical tool for assessing a borrower’s ability to afford a mortgage, helping lenders evaluate loan repayment risk.

In real estate, lenders use two DTI ratios: the front-end DTI, which includes housing-related costs (principal, interest, taxes, insurance, or PITI), and the back-end DTI, which includes all debts. Conventional loans, backed by Fannie Mae or Freddie Mac, typically prefer a front-end DTI of 28% and a back-end DTI of 36%, though up to 45–50% may be allowed with strong credit or reserves. FHA loans allow 31%/43%, and VA loans often cap at 41% total DTI. Lenders rely on DTI to ensure borrowers can manage mortgage payments alongside other obligations, reducing default risk. A lower DTI signals better financial health, often leading to loan approval or favorable terms.

However, there’s leeway in how DTI reflects the true burden of payments on consumers. DTI is a standardized metric that doesn’t account for individual circumstances, such as high living costs, variable income, or discretionary spending. For instance, a 36% DTI may feel manageable for a high earner but burdensome for a low-income household with tight budgets. Utilities, often excluded from conventional DTI calculations, can significantly impact affordability, as seen in the ACS’s 30% housing cost burden metric, which includes utilities. Lenders may show flexibility by approving higher DTIs with compensating factors like substantial savings, excellent credit, or stable employment. Manual underwriting can also consider nuanced financial situations, offering more leeway than automated systems.

For consumers, DTI’s rigidity can misrepresent their financial reality. A single parent with childcare costs or someone in a high-cost area may struggle despite a “healthy” DTI. Conversely, frugal borrowers with high DTIs may handle payments comfortably. While DTI is a vital lending tool, its application requires context to truly understand the consumer’s payment burden.

What is Public, What is Private

Yesterday’s post with Grok, a rather long one for this humble site, was necessary to explore Thomas Sowell’s conceptualization of constrained and unconstrained framing versus the one present at this site of What is Public and What is Private. You can find the articles related to the distinction of how people behave when working on behalf of a cooperative effort versus a private one by searching Public in the search bar on the home page.

Sowell distinguishes between two visions that thinkers use to approach society’s well-being. He names them: the constrained and the unconstrained. Yet he leaves room for all parties to acknowledge the existence of both. One might think that a perspective may have resulted from the moment and the writer’s disposition. More importantly, the admission of both allows one to consider the possibility of a gradation of importance. Still, Grok disputes whether Sowell’s account can handle a melding of the two.

However, its success hinges on overcoming the visions’ deep philosophical divide, which Sowell sees as nearly irreconcilable. The unconstrained vision’s North Star role risks dominating if not rigorously checked, as its moral urgency can overshadow constrained pragmatism. Conversely, overemphasizing private solutions might neglect systemic issues only public action can address. A robust institutional framework—perhaps decentralized governance with empirical feedback—would be crucial to balance these impulses.

But if one considered examples, for instance, if an actor had spent their forty-year adult career on Wall Street. Their window onto the world looks out predominantly over private affairs. The constraints and trade-off model make sense to them. That doesn’t mean they feel constrained in pursuing their passions. They would likely do anything for a child or their spouse’s health. Constraints be gone. In less dramatic circumstances, they may support the opera with no trade intended except in the pleasure of attending a performance.

Humans are complex. It’s not unreasonable to think they can act with dual motives. Bernie Sanders was recently criticised for flying in a private jet. Ayn Rand collected from the public purse. Abstract reasoning is fun, but life plays out in a mix of the public and the private.

Ask Grok a question— get a very thorough response

In his book A Conflict of Vision, Thomas Sowell makes a very interesting distinction between thinkers who see desirable social outcomes derived through a system and those who foremost desire a pursuit of ideals. So I asked Grok if there was a compromise for these two characters, seemingly at odds.

Question: If you think of the system as operating by impulses of the private and the public, could their be a melding of the two if one group appeared more prominently when a private solution bore more weight (the constrained) and whether the solution would be better solved with a public solution in which the unconstrained vision acts as a better North Star?

Grok:

Your question proposes a dynamic interplay between the constrained and unconstrained visions, as articulated by Thomas Sowell in A Conflict of Visions, by mapping them onto private (constrained) and public (unconstrained) impulses within a system. You ask whether these impulses could meld, with the constrained vision taking prominence when private solutions are more effective and the unconstrained vision serving as a guiding “North Star” for public solutions when they are better suited. This is an innovative synthesis, and while Sowell’s framework does not explicitly propose such a melding, it provides a foundation to explore this possibility. Below, I’ll analyze how this could work, the conditions for a successful melding, and the challenges, while addressing the private-public dynamic and the roles of the two visions.

Recap of Sowell’s Visions

  • Constrained Vision: Assumes human nature is limited and flawed, favoring private, decentralized solutions like markets and traditions that align with incentives and evolved wisdom. It prioritizes processes and trade-offs over idealized outcomes.
  • Unconstrained Vision: Assumes human nature is malleable and perfectible through reason, favoring public, deliberate interventions (e.g., government policies) to achieve moral goals like justice or equality. It prioritizes outcomes and rational planning.

Your proposal aligns the constrained vision with private impulses (e.g., individual initiative, markets) and the unconstrained vision with public impulses (e.g., collective action, government), suggesting a system where each vision dominates when its corresponding solution—private or public—is more effective.

Feasibility of a Melding

A melding of the constrained and unconstrained visions, with private solutions (constrained) taking precedence when they bear more weight and public solutions (unconstrained) guiding when better suited, is theoretically possible but requires careful design to balance the visions’ differing assumptions and goals. Here’s how this could work:

  1. Dynamic Allocation Based on Problem Type:
  • Private Solutions (Constrained Vision): The constrained vision excels in contexts where decentralized, incentive-driven mechanisms are effective, such as economic innovation, consumer choice, or local problem-solving. For example:
    • Markets efficiently allocate resources (e.g., supply chains for goods) by harnessing individual self-interest, aligning with the constrained vision’s trust in spontaneous order.
    • Private charity or community organizations can address localized needs (e.g., food banks) without bureaucratic overhead.
    • In these cases, the system would prioritize private impulses, with the constrained vision’s skepticism of centralized control ensuring minimal public interference.
  • Public Solutions (Unconstrained Vision as North Star): The unconstrained vision is better suited for problems requiring collective action, long-term planning, or moral imperatives that markets cannot address, such as:
    • Public goods like infrastructure or national defense, where private incentives fail (e.g., free-rider problems).
    • Systemic inequalities (e.g., access to education or healthcare) that require coordinated reforms to achieve justice, a core unconstrained goal.
    • In these cases, the unconstrained vision’s focus on rational design and moral outcomes would guide public solutions, acting as a “North Star” to set ambitious goals (e.g., universal literacy) while tempered by constrained insights on feasibility.
  1. Hybrid Mechanisms:
  • A melded system could use hybrid mechanisms that blend private and public impulses, allowing the visions to complement each other:
    • Market-Based Public Policies: Policies like carbon pricing or voucher systems (e.g., school choice) combine constrained reliance on markets with unconstrained goals of environmental protection or equity.
    • Public-Private Partnerships: Infrastructure projects often involve private efficiency and public oversight, balancing constrained pragmatism with unconstrained ambition.
    • Incremental Reforms with Visionary Goals: The unconstrained vision could set long-term objectives (e.g., reducing poverty), while constrained processes (e.g., pilot programs, A/B testing) ensure practical implementation.
  • Example: The Earned Income Tax Credit (EITC) incentivizes work (constrained) while redistributing wealth to reduce poverty (unconstrained), showing how private incentives can serve public goals.
  1. Decision Rules for Prominence:
  • The system would need criteria to determine when private or public solutions “bear more weight”:
    • Empirical Evidence: Use data to assess effectiveness (e.g., cost-benefit analysis, outcome metrics). Constrained visionaries would favor this, but unconstrained visionaries could agree if it advances their goals.
    • Subsidiarity: Prioritize private/local solutions unless public intervention is demonstrably necessary, aligning with constrained skepticism of centralized power.
    • Moral Urgency: Allow the unconstrained vision to dominate when issues involve universal rights or systemic injustice (e.g., civil rights legislation), as these align with its moral North Star.
  • Example: In healthcare, private solutions (e.g., competitive insurance markets) might dominate for routine care, but public solutions (e.g., universal coverage for catastrophic illnesses) could take precedence to ensure equity.
  1. Role of the Unconstrained Vision as a North Star:
  • The unconstrained vision’s strength is its ability to articulate aspirational goals (e.g., equality, sustainability) that inspire collective action. As a North Star, it provides direction for public solutions, ensuring they aim high rather than settling for status quo.
  • However, to avoid the unconstrained vision’s pitfalls (e.g., overreach, unintended consequences), it must be checked by constrained principles:
    • Feasibility Checks: Public plans should incorporate constrained insights on human incentives and knowledge limits (e.g., avoiding overly complex regulations).
    • Iterative Implementation: Large-scale public goals (e.g., climate action) should be pursued incrementally, with feedback loops to adjust plans, reflecting constrained pragmatism.
  • Example: The unconstrained vision might set a goal of carbon neutrality by 2050, but constrained mechanisms (e.g., market-based emissions trading) would guide implementation to maximize efficiency.

Conditions for Successful Melding

For this melding to work, several conditions must be met:

  1. Mutual Respect: Both sides must acknowledge the other’s strengths. Constrained visionaries must value the unconstrained vision’s moral clarity, while unconstrained visionaries must respect the constrained vision’s realism.
  2. Shared Metrics: Agreement on measurable outcomes (e.g., poverty rates, GDP growth, health outcomes) allows both visions to evaluate solutions objectively, bridging their philosophical divide.
  3. Institutional Flexibility: The system must allow experimentation (e.g., federalism, pilot programs) so private and public solutions can be tested and scaled based on results.
  4. Pragmatic Leadership: Leaders must navigate ideological divides, framing solutions to appeal to both visions (e.g., presenting market reforms as tools for social justice).
  5. Avoiding Ideological Purity: Both sides must resist dogmatic adherence to their vision, accepting hybrid approaches that may not fully align with their ideals.

Challenges to Melding

Sowell’s framework highlights why melding the visions is difficult:

  1. Fundamental Incompatibilities:
  • The constrained vision sees human nature as fixed and flawed, distrusting grand public plans, while the unconstrained vision believes in human perfectibility through collective action. These assumptions clash, making agreement on when public or private solutions are “better” contentious.
  • Example: Constrained visionaries might view public healthcare as inefficient, while unconstrained visionaries see it as a moral necessity, leading to stalemate.
  1. Distrust of Motives:
  • Constrained visionaries may suspect public solutions mask power grabs, while unconstrained visionaries may view private solutions as perpetuating inequality. This distrust complicates cooperation.
  • Example: Debates over welfare often pit constrained concerns about dependency against unconstrained demands for social justice.
  1. Unintended Consequences:
  • Unconstrained public solutions risk overreach (e.g., bureaucratic inefficiencies), while constrained private solutions may fail to address systemic issues (e.g., market failures in healthcare). Balancing these risks requires constant vigilance.
  • Example: A public education reform might aim for equity but create bloated bureaucracies, alienating constrained visionaries.
  1. Polarization:
  • Sowell notes that ideological divides are deepened by emotional commitment to one’s vision. In polarized climates, each side may prioritize winning over compromising, undermining the melding process.
  • Example: Political rhetoric framing markets as “greedy” or government as “tyrannical” entrenches division.
  1. Defining “Better” Solutions:
  • Deciding when a private or public solution “bears more weight” is subjective. Constrained visionaries prioritize efficiency and liberty, while unconstrained visionaries emphasize justice and equality, leading to disagreements over criteria.
  • Example: In environmental policy, constrained visionaries might favor private innovation (e.g., green tech), while unconstrained visionaries push for public regulation (e.g., emissions caps), with no clear metric for “better.”

Sowell’s Perspective on Melding

Sowell does not explicitly propose a system like the one you describe, as A Conflict of Visions focuses on explaining ideological divides rather than resolving them. However, his emphasis on trade-offs, processes, and intellectual humility supports the idea of a dynamic interplay:

  • Trade-Offs: Sowell’s constrained leanings suggest that any melding would prioritize private solutions unless public intervention is clearly justified, aligning with your proposal’s conditional prominence.
  • Processes: He favors systemic processes (e.g., markets, rule of law) that allow experimentation, which could support a system where private and public impulses compete and coexist based on effectiveness.
  • Humility: Sowell’s call for understanding opposing visions implies that a melded system would require both sides to temper their ambitions—constrained visionaries embracing some public goals, unconstrained visionaries accepting private mechanisms.

Your proposal extends Sowell’s ideas by envisioning a system where the unconstrained vision’s moral aspirations guide public solutions without dominating private ones, a balance Sowell might endorse if constrained principles (e.g., incentives, limits) remain central.

Connection to Godwin and Condorcet

Since you previously asked about William Godwin and Condorcet, their unconstrained visions are relevant:

  • Godwin and Condorcet: Both exemplify the unconstrained vision, advocating rational, public solutions to perfect society (e.g., Godwin’s anarchism, Condorcet’s voting reforms). In your system, their ideas could serve as a North Star for public interventions, such as universal education or democratic reforms, but would need constrained checks (e.g., market-based delivery, incremental trials) to avoid utopian overreach.
  • Melding Example: Condorcet’s voting methods could guide public electoral reform (unconstrained), but private civic organizations might implement voter education (constrained), balancing idealism with practicality.

Practical Example of the Melded System

Consider climate change as a case study:

  • Private Impulse (Constrained): When private solutions bear more weight, the system prioritizes market innovations like renewable energy startups or carbon offset markets. The constrained vision ensures these are driven by profit motives and competition, avoiding regulatory overreach.
  • Public Impulse (Unconstrained as North Star): When public solutions are needed (e.g., global emissions agreements), the unconstrained vision sets ambitious goals (e.g., net-zero by 2050), guiding international cooperation and public investments in green infrastructure.
  • Melding: A carbon pricing system combines private incentives (firms reduce emissions to cut costs) with public goals (reducing global warming), with iterative adjustments based on outcomes. The constrained vision ensures efficiency, while the unconstrained vision keeps the moral imperative in view.

Critical Reflection

Your proposed system is a creative extension of Sowell’s framework, aligning private and public impulses with the visions’ strengths. It could work by leveraging the constrained vision’s realism for private solutions and the unconstrained vision’s idealism for public ones, creating a flexible, outcome-driven system. However, its success hinges on overcoming the visions’ deep philosophical divide, which Sowell sees as nearly irreconcilable. The unconstrained vision’s North Star role risks dominating if not rigorously checked, as its moral urgency can overshadow constrained pragmatism. Conversely, overemphasizing private solutions might neglect systemic issues only public action can address. A robust institutional framework—perhaps decentralized governance with empirical feedback—would be crucial to balance these impulses.

Conclusion

A melding of the constrained and unconstrained visions, with private solutions (constrained) prominent when they bear more weight and public solutions (unconstrained) guided by a moral North Star, is feasible within Sowell’s framework but requires careful implementation. By using empirical criteria, hybrid mechanisms, and flexible processes, the system could harness the strengths of both visions: the constrained vision’s efficiency and realism for private impulses, and the unconstrained vision’s moral clarity for public ones. Challenges include ideological distrust, differing priorities, and the risk of one vision overshadowing the other. Sowell’s emphasis on trade-offs and understanding supports this approach, though he would likely caution against overly optimistic synthesis given the visions’ fundamental tensions.

Something interesting about St Augustine

Saint Augustine, born in 354 CE in Thagaste (modern-day Algeria), is one of the most influential Christian theologians and philosophers. An interesting fact about him is that before his conversion to Christianity at age 31, he lived a hedonistic lifestyle, indulging in pleasures and fathering a child out of wedlock. His mother, Monica, a devout Christian, prayed relentlessly for his conversion. Augustine’s dramatic shift came after a profound spiritual experience in a garden, where he heard a child’s voice urging him to “take up and read,” leading him to a Bible passage that transformed his life. His works, like Confessions—one of the first autobiographies—and City of God, shaped Western thought, blending Christian doctrine with classical philosophy, particularly Platonism.

Maximum Progress on Jane Jacobs

I greatly enjoyed this post at Maximum Progress (by Max Tabarrok): Jane Jacobs Can Fix American Cities, Even Though She Helped Break Them. Many people associate Jane Jacobs with the urban resistance– shouting down the developers to keep the neighborhood intact. Becoming the spry young woman who takes on influential players at city hall became a goal in and of itself. But Max points out that this is a mere sliver of what Jacobs offers on ideas.

In fact, a careful reading of “The Death and Life of Great American Cities” reveals that Jacobs didn’t advocate for preservation and obstruction (at least, not in the book itself)—she advocated for market urbanism and organic development. The solution to our urban problems isn’t a middle path between Moses and Jacobs, but rather a return to Jacobs’ actual ideas, not the distorted version that became embedded in planning practice.

Jacobs wants the planners out of the neighborhood business, unless they are there to encourage and support organic growth.

In “Death and Life” Jacobs argues that urban planners should plan less. They should stop drafting grand visions and bulldozing neighborhoods to rebuild them in their image. “Public policy can do relatively little that is positive to get working uses woven in where they are absent and needed in cities, except to permit and indirectly encourage them.” When discussing a successful commercial district in Nashville she notes that “Nobody could have planned this growth. Nobody has encouraged it.”

Or this. Let everyone go about their lives and find their way. The actors are best at decision making.

In Jacobs’ view, planners should merely set favorable conditions for decentralized, unplanned, and incremental development. Lay out the street grid if you must (though with smaller blocks than Manhattan) and bring the infrastructure to where it’s needed but otherwise refrain from regulating private land use. Let all the uses of the city mingle together and fill each street with eyes and activity at all times of the day. Jacobs is like Hayek (1945) or The Fatal Conceit applied to urbanism. “The curious task of economics [and Jacobsian urban planning] is to demonstrate to men how little they really know about what they imagine they can design.”

I think there is a little more that the planners can do in their supporting role. That is to keep track of things. Jane Jacobs’ city encourages a mixing of people in their public lives near their homes. But some mixes of shopkeepers, and moms, and office workers and renters blend better than others. What are the civic jobs that various cohorts do? For lively streets in friendly neighborhoods, what are the pre conditions and the on-going maintenance that each member brings to Jane Jacobs dance of colorful city life?

Danger in Averages

Say there is a neighborhood of 200 homes. It’s an average neighborhood with an average sales price in the $320K range. There’s a slight variance in price for condition, but the homes were built as a development and are otherwise fairly consistent in size and amenities. Approximately seven percent of the homes sell every year, or fourteen homes, and it is from that activity that researchers and government types pull their average prices.

Now, say there is a significant demand for new construction in this older neighborhood, and a contractor is willing to risk purchasing a handful of dilapidated buildings to develop a new subdivision of fourteen homesites. People who can afford the price of new construction, which in this case pencils in around a million, can overcome the objection of living in a modest neighborhood in return for all the latest interior amenities and the centrality the neighborhood offers.

Of the seven percent of homes that sell the following year, three are $1,000K homes, and eleven are $320K homes. Now, the average home sales price for this neighborhood jumps to $465K! People panic.

Yet the bulk of the neighborhood has not changed at all. It is still primarily a modest neighborhood priced within reach of an average buyer. For this reason, real estate analysis needs to be local and always with the perspective of what groups are involved.

Tariff Textiles for Babies

One way a mom can afford to manage a household and children is to have a part-time job close to home. Income is part of the benefit of work, and there is also something to be said about independence and the direction it provides. For those who like to sew, working piecework out of a home craft room could be an ideal setup. The repetitive process of pinning and stitching precut fabric can be edged in throughout the day: the twenty minutes a mom gets before the bus drops the kids back from school or the hour after they are down for the night.

So many other parts of everyday life have also changed since garment workers populated big US cities. It is now easy and affordable to ship items like a box full of sewing supplies. Living conditions for most Americans have improved with more space and fewer occupants in a home. This frees up the workspace for a home studio. Being an independent contractor is pretty commonplace. Crafting sites like Etsy already attract vendors of homemade goods.

Now, what if an entrepreneurial spirit wanted to start a clothing line? It seems like it would make perfect sense to ship off pieces of their designs to independent seamstresses. This would save on overhead and fixed costs. The contractors work at their own pace, which is measured by the number of items returned. The designer would focus on quality, design, and distribution.

Consumers seem a little tired of the mass-produced, inexpensive clothing from abroad. Maybe a (temporary?) tariff could protect a fledgling industry, one that could support a lifestyle conducive to moms with babies.

Alchian and Property Rights

In a paper entitled Property Rights Paradigm, Armen Alchian suggests ownership is more intertwined than one might think.

There is some ambiguity in the notion of state or private ownership of a resource, because the bundle of property rights associated with a resource is divisible. There can and does exist much confusion about whether a resource or “property” is state or privately owned.
Some rights to some uses of the resource may be state owned and others privately owned. While it is true that the degree of private control is increased when additional rights of use become privately owned, it is somewhat arbitrary to pass judgment on when the conversion to private control can be said to change the ownership of the bundle of rights from public to private. The classification of owners can be carried beyond the important state and private dichotomy. Corporate, school, and church owners of property are also of interest. The structure of rights can have important consequences for the allocation of resources, some of which we now illustrate.

Think of the home you own. The deed at the county recorder’s office says you own it. But the utility company may access the property if it needs to do a repair. The city workers can drive a skid steer into your lot, dig a big hole to check the city water connection, without checking whether you have a graduation party planned for the weekend. Of course, the county can tax you for local services, and if you fail to pay, they can take your property.

So you own your home more in unison with the public than you might have thought.

What about going the other way? Do people pay more for property if it has better access to taxation-supported services? It makes sense that they would. Public groups may have formal or informal claims against your home. There’s a good chance these were sought after when they decided to move. A portion of the price acts as a place maker for value– or in other words, the market prices institutions, too.

More money, better conditions

That’s the conclusion of a recent article by the Minneapolis Federal Reserve research team.

In a recent paper co-written with researchers from the University of Wisconsin-Madison and the University of Illinois-Chicago and initially published by the Minneapolis Fed, we measured the evolution of housing quality for low-income households over the past several decades across the United States. We found broad and generally large increases in housing quality and smaller but still important increases in living space.

So, it’s not surprising that the data show fewer low-income people living in squalor.

I like this part too. It’s a great example of how headlines can suggest misleading information. Although gross rents have increase, they have hit people’s monthly budgets at a much lower increase.

As housing quality and quantity are getting better, how much more are households paying for it? According to the AHS, for below-median-income Twin Cities area residents, real monthly spending on housing increased by 32 percent from 1998 to 2021, from $1,008 to $1,333. Around half of below-median-income Twin Cities households remain housing-cost-burdened (spending 30 percent or more of their income on housing) and a quarter remain severely housing-cost-burdened (spending 50 percent or more of their income on housing). For many families that spend a large fraction of their income on housing, findings about general housing improvements may be tough to appreciate.

However, our analysis indicates that greater housing spending reflects not only higher housing prices but also Twin Cities area residents’ ability to afford housing that is larger and nicer. Overall, the average housing budget share only increased by 4 percentage points from 1998 to 2021, from 36 percent to 40 percent of income, which indicates that most of the growth in spending on housing is driven by higher incomes, better quality, and more spacious homes, as opposed to needing to allocate a greater share of income for the same, unimproved housing.

Some combination of private money, public efforts, and community involvement is improving living standards for those with lower incomes. And it’s not clear at all that the burden is falling on the most vulnerable.