Disjointed arguments about wages

A minimum wage is likely to be a topic of political banter for the foreseeable future. In Minneapolis, small businesses must pay an employee a minimum of $13.50/hr and for large organizations (more than 100 employees) the minimum is $15/hr. One tweet that went rolling by made the claim that a living wage should be enough to pay for housing. The possibility of these numbers working out is well beyond reality in a large urban area, but let’s still consider its feasibility.

Consider a household with a couple and a high school senior. If each of these individuals were meant to earn enough to pay a mortgage or rent and then they each could secure a dwelling. Does it really make sense that everyone who wants some type of employment for money is tied to a job that supports a house? Because we certainly do not have the number of units. The US Census reports that we have just over 2.5 million housing units available to us in Minnesota.

Yet the labor force in the state is quite a bit larger than that. According to the US Bureau of Labor and Statistics, as of October 2022, there are about 3,073 million workers out bringing in a paycheck. There is enough of a shortage of housing without turning another half a million people out to look for their own place.

The spectrum of wages in the private labor market represents payment for a spectrum of skills, dedication, and commitment. The well-intended people who want a living wage for folks are really talking about a certain set of individuals. Those people are ones who, through no fault of their own, are trying to support a family on just one job. This is an unfortunate situation that does deserve support. Not only for insufficient dollars but also the insufficient hours one parent can provide in other support services.

The poverty rate in Minnesota runs around 9%. People in this category will be well served by a variety of aides necessary to boost them back into a stream of the functioning community. And then in turn the rest of the community is better off. But the solution isn’t achieved by warping the system. It is done by additional aid, provided with respect and dignity, in times of need.

Power to energize collective action

There are a lot of well-spoken words in this podcast. The eloquent banter is reason enough to listen. But there’s more. The view into a variety of angles of a group within a group’s past, present, and future accomplishments are illuminated. The light shows fine variations in interpretations and perceptions.

Glenn comes in strong around the 19-minute mark. I like how he frames the issues because the template he presents could be superimposed over other groups. Feminists made claim to be the power players for all women. Some bureaucrats make the claim of saving lives through regulation. The information feedback loops are not coming from the group but from people more interested in harnessing self-aggrandizement.

And the explanation of how a citizen can be an active part of more than one collective action project, without being disloyal to either, is an important observation. One can be observant of history and yet move forward with the work of today. In fact, all the speakers are much more in tune with how to forge new paths for better outcomes than being tied down by a burdensome past.

I tried to capture an excerpt by having my phone transcribe the audio. There are a lot of gaps! But hopefully there is enough to give you a taste of their conversation.

The construction of collective goods in the welfare state or in or on behalf of defending the country against external threat people are called based upon the earth and connection to the country. We are American with meaning black Americans in the 21st-century, the descendants of those who had been enslaved and labored to become fully equal citizens there’s a story there I want my children. Among other stories, I don’t want that to be the final word. I don’t want that to be their defining will close adequate to the task at hand that we wear lightly not that we wear as a shroud that we wear with the ability to take it off and to stand outside but I don’t think yet even now in the year 2022 we can afford to give up the leverage and the power that Robert Woodson has leveraged on more than one occasion of getting people together, work on behalf of collective goals, like raising our children, maintaining order in our communities, and doing honor to the sacrifices of our ancestors.

An attempt at an excerpt using an iPhone recorder

Cicero and levels of obligation

I’m dabbling in the Selected Works of Cicero. This Roman was a gifted writer, statesman, lawyer, and orator from the first century BC. In his practical guide to how to live a good life, I like this quote:

But the field in which a man’s obligations are most liable to confusion is friendship. For if, on a friend’s behalf, you omit to do all that you properly could, that is to fail in an obligation; yet if you help him in some improper fashion, then that too is failure. However, this whole problem is governed by a short and simple rule. Apparent advantages for oneself, such as political success, wealth, sensual gratifica-tion, and so on, must never be given preference over friendship. On the other hand no man of integrity will, for the sake of a friend, act against his own country, or his honour, or his oath.

A Practical Code of Behavior: On Duties III, Cicero

In this short passage, he makes clear that the ties of friendship demand a preference for cooperative behavior versus extractive action. If you allow your friend to fail then you have failed. One is not to internalize “political success, wealth, sensual gratification” at the expense of friends. In this space of friendship, the interactions are reciprocal, carried out with loyalties over long periods of time.

However- other relations may supersede the obligation of friendship, and those are loyalties to ‘his own country, or his honour, or his oath.’ This leads us to understand that Cicero speaks of multiple public obligations. The ties to friends may compete with ties to the state or to one’s allegiance to another cause. From an inward-facing perspective, the relations are communal in nature, yet as an outward-looking collective, voila, the groups compete.

The competitive nature of private actors is understood. But when people come together with a common interest, that grouping also competes.

Forum Romanum. Somewhere in there is Cicero’s house.

It makes more sense on Platters

Yesterday in the NYT Ross Douthat makes the case for ineffective altruism. Prompted by the recent demise of, what a new follow on Twitter amusingly called the bushied hair young man, Douthat compares the utilitarian goals of the EA folks to other philanthropists in his region of the US.

Now that it seems the bushied hair young man had less than honest intentions in aligning himself with the EA movement and used their goodwill as a cover for his very selfish motives in the creation of his crypto space, it’s easy to see where some would question who the objectives of these do-givers.

Part of Bankman-Fried’s fame lay in his proselytizing for a particular theory of philanthropic moralism — effective altruism, or E.A., an ideology with special appeal in Silicon Valley that’s reshaped the landscape of getting and giving in the past several years.

People who came into a bunch of money through technology are given a seemingly analytical means of redistributing some of their good fortunes to those in need of malaria nets and clean water. And these are worthwhile philanthropic activities. But cynicism can creep in.

The global perspective implied by E.A. analysis can create a Mrs. Jellyby temptation, where “telescopic philanthropy” aimed at distant populations is easier than taking on obligations to your actual neighbors and communities. (Picture effective altruists sitting around in a San Francisco skyscraper calculating how to relieve suffering halfway around the world while the city decays beneath them.) 

Douthat talks a lot about the value of the various types of donations he uses in his article. The Harkness family were heirs to a great fortune which they distributed to three main causes in the early twentieth century. They supported the fine arts, health care, and educational institutions. Certainly, all these fields provide public goods where positive outcomes can be measured over generations.

No doubt an especially zealous analyst could trace the benefits of Harkness’s medical donations in positive “utiles” for people treated for disease over the past century. But the most visible monuments to his philanthropy are beautiful buildings, libraries, dormitories and the like, in cities and college towns across the Northeast — some connected to art for art’s sake, others connected to his interest in the proper formation of educated elites.

But then one family member is thought to be eccentric to have directed most of her good fortune to the ballet. How inefficient of her! Or was it? If this woman had devoted her life to ballet, had seen how devotion to a fine art builds confidence in young dancers, and witnessed the benefits of a community of performers, it makes perfect sense that she would direct resources to this tight-knit group. Perhaps she did not have talent or time, why wouldn’t she make use of the fact that she had money?

And perhaps it does make sense that the youthful somewhat transient super-rich from Silicon Valley would prefer to support causes in exotic destinations than the homeless they drive past on the way to work. If they acknowledge the raggedy guy on the corner, then they may feel they have to donate their time and do something for him or her. Perhaps they should join the city council. But they don’t have time for that. They don’t even have time to have their own family. So sending greenbacks across the globe is a better fit for their resources.

Who’s to say why the Harkens selected their passions. But there is probably a story there that created a need they wished to fill. If you divvy out each of these philanthropic pursuits to occur in a platter of social activity the demand and calculation of value do make sense. The resource transfer is useful to a greater public. Except for bushied hair guy. He was internalizing it all for himself.

Wrong products in wrong markets

Our book club, NoDueDate, has been reading the historical novel Red Plenty, written by Francis Spufford. With well-documented historical references (which the reader can follow in the Notes at the end) the author details how a planned economy painfully fails its participants.

The following exchange occurs at the first business lunch between Chekuskin, a middle man between business and the black market, and a business executive. He’s explaining how his services may come in handy. But the naive Stepovoi points to the Soviet’s central Plan to verify his firm’s goods are all in the pipeline.

‘You’re right, you’re quite right. Indeed they do have to give you the goods. But when, that’s the question, isn’t it? You want them now, toot sweet, because your line is waiting; but why should they care? They’ve got a whole fistful of purchase orders to fill, this time of year, and why should they care about yours? What makes you so special that they should want to serve you first, or at least, serve you soon?’
‘You do?’ said Stepovoi.
‘Correct, old son. But there’s a little more to it than that.

Red Plenty, Chapter- Favours 1964

What Chekuskin illuminates in this brief conversation is that the terms of delivery are at least as important as having access to the goods. A manufacturer is hard-pressed to meet the Plan’s production goals if not adequately supplied with the inputs necessary to run their lines. Yet the bureaucracy has little incentive to respond promptly, to bow to the producers. The power to give and take lies within their books. The firms are at their mercy.

Some goods respond well to a network of supervision. Products that can cause bodily harm, such as drugs, benefit from bureaucratic supervision to ensure their safe consumption (the degree to which is of course always under debate!). People want to know the bridges they drive their cars across won’t collapse and that the food we eat at restaurants won’t give us food poisoning. These types of goods and services interface with the public to a degree that makes a bureaucratic overlay advantageous to the enjoyment of the products.

The widgets needed in the manufacturing example given in Spufford’s story are at the opposite end of the public versus private function gradient. The fixer, Chekuskin, is successful because the products he pushes here and there are completely interchangeable. They are not enhanced by a social overlay. They are fungible. And that is why they are ideal for a capitalist pricing system. Let the price procured from a dynamic trading system of all the suppliers and all the buyers at any point in time, and the resource will gravitate to where it is needed most.

Some goods tend toward the private, and some towards the public. But when they are forced into the wrong market, corruption inevitably occurs to allow an interface with a shadow market.

Predicting the Tip

Over twenty years ago, Malcolm Gladwell became famous for elucidating tipping point scenarios. He showed us how trends become the rage, how neighborhoods fall to the criminals, and how suicides fester amongst the youth. He identifies some of the players who accelerate changes in social behavior: connectors, mavens, and salesmen. But he doesn’t come up with social indicators which would serve as signals for an up-and-coming tip.

Could there be the equivalent of a canary in a coal mine to prompt some warning? Last Wednesday the market thought FTX, the crypto giant, to be solvent. Ho hum, another day in the money. By Friday, bankruptcy proceedings eliminated large financial obligations. There’s a tip for you.

Is part of the problem that we wish not to see the signs? A neighborhood can be ignored as uninteresting, perhaps a little lower class, but fine for some. Some years go by and snarly graffiti, an assortment of tattered garbage spewing about and a gaggle of baggy clothed people around a bus stop trading something, make you turn your car around and drive right out of the area. You can’t nail down the date, but the neighborhood tipped right out of mainstream acceptable.

With so much on the line, whether billions managed by kids less than a decade into adulthood, or acres of real estate deemed unacceptable as affordable housing, you would think a set theory could ferret out some helpful indicators to warn of an impending tip.

To sleep or not to sleep-

Sleep is an important part of a healthy way of life. Yet some people find it difficult to fall into slumber. In the sixties, people turned to sleeping pills until they got hooked on them. Today people with dark-circled eyes seek help at Sleep Centers. Some are prescribed a sleep apnea machine. Does this look restful?

If you’ve raised a child you know something about bedtime. There are lots of activities involved. There’s walking to sleep, rocking to sleep, singing softly to sleep. There is equipment involved like mechanical swings. They sometimes do the trick! And accessories like a swaddle wrap that hugs the baby tight and securely. Or environmental enhancers like block-out shades which extinguish any peep of sunlight. Don’t forget noise machines.

I personally relied repitition and routine. Give the signals, and then go through with the motions. Let them play in a nice warm bath- then PJs and bed! And the routine changes over the years. When they are young it’s holding and rocking. Then it’s bedtime stories and lights out. As the years go on, the mom job is to check that the phones are put away and the homework isn’t left until the last minute.

If you think through all the efforts put towards your kid’s night sleep, how many comparable attempts are made by adults before they go hook themselves up to what looks like a medieval torture tool?

I don’t think it would be helpful to try to swaddle oneself up into a man-size cocoon, but a few weeks of yoga relaxation techniques might be worth a go. Warm baths and clean sheets can make anyone content enough to drift off into a sweet slumber. A client told me that gold is the preferred wall color for a restful night. Not sure how much it contributes, but the color seems to make me happy.

I mean how many things have people tried on their own before they run in for a professional cure to their sleepless nights?

Some #’s on Catalytic Converters

A few posts ago I used the example of a catalytic converter to distinguish between the use of an object and its function. This automotive accessory is used to remove particulates from emissions from the combustion exhaust. In 1975 it became a mandatory car feature and hence functioned as a political solution to pollution reduction.

Recently catalytic converters have been the target of local criminals who brazenly remove them from cars left out at night. Through a network exchange the stolen item is easily traded for cash. Fortunately there’s been a recent ‘takedown’ of nationwide catalytic converter theft ring included seizures in Minnesota.

The DOJ announced the successful operation on Wednesday, saying it is seeking the forfeiture of $545 million in the case, as well as the arrest and charging of 21 people from five states in connection with the scheme.

Bring me the News

The network across states allowed a teenager in the Twins Cities to swipe the apparatus, sell it to a fence who passed it along to “a trio of family members who ran an unlicensed business from their home in Sacramento, California, buying stolen catalytic converters from thieves and shipping them to an auto shop in New Jersey for processing.”

The number that I think would be interesting to know is how much the kid on the street is getting for breaking the law. What type of gain is needed for a youth to be tempted into illegal activity? All they give us is:

RXMechanic reports the scrap value of more valuable catalytic converters ranging from $300 and $1,500, with the DOJ saying that depending on the vehicle and the state, they can fetch around $1,000 on the black market.

The market price for youth conversion to criminal activity seems like a useful number. What share of that would be necessary to keep the kid on the right side of the law through some type of employment? Many argue that the lack of policing and consequences for illegal activity has also encouraged theft. But how do we know without keeping track of these numbers?

When a catalytic converter functions as unfettered cash to an urban teen, what is the buyout to preserve the innocence of youth?

Who pays to verify?

Twitter is all a fluster about the new management’s impending rule that one will have to pay to have a blue check next to their name. The blue checks have been a status symbol. To have a check means you’ve arrived at being someone recognizable. To get a check you need to get checked out, and verified that you’re not some Russian bot.

Stephen King says he is having nothing of it. The highlighted tweet has now accumulated half a million likes. The blue check fee is now floating out at $8/mo. Mr. King has not left Twitter yet. So you can see, the situation is still in flux.

But who should pay to verify? Who should be the watchdog of group action? There are government agencies such as the attorney general and the state auditor. I bring those two up in particular as it appears they will both be voted out of office next week. Is someone who received a salary for a surveillance job as good as someone who takes a private hit due to group member’s action?

Many groups self-regulate through an associational process. First off the keenest view of the situation is seen by those who stand shoulder to shoulder in the same environment. Their judgment of the legitimacy of a complaint is going to be more reliable. Their ability to get the right information to the right people is more probable.

But the most significant incentive is the maintenance of the reputation of the profession to the outside world. A degradation of stature would be internalized by each member. Thus the expense of voluntary surveillance of one’s group is borne out of the risk of loss should a ne’re-do-well drag the team into the mud.

I believe this supports Musk’s instincts to charge those who play to pay.

Why do Dems keep saying they did *everything* right?

The extent of the fraud in Feeding our Future is truly shocking. Not one state employee visited the sites which purported to be feeding thousands and thousands of underserved kids. As this reporter states, it didn’t even take a site visit to uncover fictious addresses.

The lack of interest in the missing $250 mil by a certain party is a testament to its ability to control the narrative. Otherwise, surely reasonable people would have to admit the complete disinterest in where all these funds were going is extremely suspicious.

Was it the attorney general’s responsibility to find a legal means to stop the disbursement of funds? Was it the state auditor’s responsibility to review the number? Was it the state demographers’ responsibility that the number of kids being fed far exceeds the number of kids of this grouping in the state?

Are Minnesotans going to buy the story that *all is well* in the North Star State?

Hayek said there were groups

I was recently reminded of this quote from Friedrich Hayek. He describes how our actions are ruled by two different spheres of order. The manner of our obligations to our children does not extend past the front doors of our house. An acceptable reprimand in a workplace between boss and employee may be considered uncaring in a network of friends.

Part of our present difficulty is that we must constantly adjust our lives, our thoughts and our emotions, in order to live simultaneously within different kinds of orders according to different rules. If we were to apply the unmodified, uncurbed, rules of the micro-cosmos (i.e., of the small band or troop, or of, say, our families) to the macro-cosmos (our wider civilisation), as our instincts and sentimental yearnings often make us wish to do, we would destroy it. Yet if we were always to apply the rules of the extended order to our more intimate groupings, we would crush them. So we must learn to live in two sorts of world at once. [italics original]

The Fatal Conceit (page 18)

The value we create through our network of friends or commitments to associational fellowship operates in a different sphere from the unfettered obligations of commerce.

When I went to my copy of the book I started reading from the top of the page. Before Hayek gets to acknowledging that the two spheres of activity must work together or they will crush each other, he depicts a bunch of different players other than individuals.

Moreover, the structures of the extended order are made up not only of individuals but also of many, often overlapping, sub-orders within which old instinctual responses, such as solidarity and altruism, continue to retain some importance by assisting voluntary collaboration, even though they are incapable, by themselves, of creating a basis for the more extended order.

The Fatal Conceit (page 18)

The simplistic model portrays the selfish man using the capitalist system to maximize his interest in a zero-sum game. The state watches the public good and provides products and services to that end. But Hayek suggests that economic players can be groupings established through solidarity and altruism. These are abundant and overlapping.

Think of a formal grouping that provides public services to its members, such as a teacher’s union. When the union negotiates it is acting in a competitive ego-centric way against the public. It is a private player. Yet ever member of the union shares equally in the spoils of the union’s efforts and hence obtains a public good. It is the manner of the activity defined by the boundaries of the group which makes a wage increase public or private.

This morphing of the nature of a good through action within defined boundaries presents challenges to an accurate accounting of the whole system.

Today’s walk on a windy fall day.

Why we’ll need more liberal arts people

The last twenty years have been good to tech nerds. When the floppy-looking Bill Gates came out with the personal computer many people might have thought it was a one-off success. Meanwhile, the smart money left engineering, got an MBA and a job in finance. It was the 90s and it seemed like the right thing to do.

Fast forward fifteen years and money was multiplying faster than starter yeast for Amish friendship bread in Silicon Valley. Apps, games, and whatever else they do with code were the gold that the smart techs were mining. And mining with a moral superiority that what they were bringing into existence was changing every facet of the economy. Those were glory days for math majors and engineers.

Mathematical techniques also became central in economic papers. Fancy statistics and linear regression models are used to demonstrate relationships between parties and their use of resources. Fast forward to the last five years and there’s this amazing mix of massive amounts of data, computers that can handle it in a timely manner, and mathematical tools to replicate theories.

But you don’t have people educated in the classics to help parse all the people represented in the data. Even recently I saw an analysis of real estate by zip code – zip code! I encourage you to drive the parameter of an area in your city identified by zip code. Do you see consistency in the properties which would suggest similar set? In my experience urban neighborhoods are not delineated by zip code or census track.

Going forward, the methods used to sort groups to obtain useful insights could be aided more by liberal arts majors than math majors.

Building booms have their own timeline

Local urban geographer Bill Lindeke does a nice job describing how a building boom finally came to fruition along the first light rail line in Minneapolis. When the Blue Line went in eighteen years ago, there were heightened expectations that new construction would line up along this aging railway corridor from downtown Minneapolis out to the airport. But it took time.

That was 18 years ago. And ever since, for the most part, the pace of transit-oriented development has seemed glacial. According to Metropolitan Council studies, more than 12,000 new apartments have been built along the Blue Line since its opening. But if you glance at a map, the vast majority of this construction has been downtown, or else subsidized in some way. For most interstitial stops along Hiawatha, south of downtown, there’s been very little new housing construction. Even the rosiest development booster would have to admit it’s been a slow climb.   

MinnPost

What I remember from selling single-family homes is there was an increased interest in those within a handful of blocks from a rail stop. The houses along there are modest for the most part, and the prices ran with the metro average, so younger people latched onto the opportunity for great access to downtown Minneapolis. No need to drive to work and pay exorbitant parking. No need to drive to your favorite ballgame or watering hole. Just hop on the rail line!

The premium in the sales prices of these homes could easily have been verified by anyone with an excel program. With proper splicing of access to various public amenities, regression analysis can parse down the amounts paid for all sorts of public amenities. Improved access to transit is certainly on most consumer’s minds. Still, the price push wasn’t enough for new construction.

“It really boils down to rent levels in every neighborhood,” Sweeney said. “Historically, rents in (Longfellow) were too low to justify much new construction. Few projects worked here (and so) while there were a few things built 10 years ago, you didn’t see a large boom. But area rents have grown, which allows new construction to be feasible.”

Sweeney is the developer who has put up two new apartment buildings along the Blue Line in recent years. Policymakers and pundits want to theorize about housing solutions, but people like Sweeney and the investors who support his group are the ones who have to be able to make the numbers work. A bonus for transit infrastucture is just one component of price.

Another valid issue discussed in the article is the various timeline for the pace or even appearance of new construction in older areas. The story tells of a tipping point for this neighborhood. Still to be discussed is a more thorough overview of the neighborhood components that green light building.

Live and Let Live?

Restrictions on how and what is built where is an ongoing conversation in any city planning department. Too many rules limit the number of available dwellings, pushing prices to new heights. Too few rules might infringe on the use and enjoyment neighbors are promised when they acquire their homes.

In Japan, teeny tiny apartments are being built to allow more people access to the hot areas of town. These micro apartments are smaller than a ten-by-ten-foot room which is considered a small bedroom in our neck of the woods.

With its high property prices and the world’s most populous metropolitan area, Tokyo has long been known for small accommodations. But these new apartments — known as three-tatami rooms, based on how many standard Japanese floor mats would cover the living space — are pushing the boundaries of normal living.

NTY

The article mentions that these units are not at the bottom of the market. They are stylish and new. They are attracting a younger set of renters who see themselves in a higher-end neighborhood and have yet to experience a larger apartment, and thus (perhaps) don’t feel the loss of space. It’s the match of neighborhood amenties, quality of interior finishes and price that make these small spaces work.

And they are situated near trendy locations in central Tokyo like Harajuku, Nakameguro and Shibuya, which are generally quite expensive, with luxury boutiques, cafes and restaurants. Most of the buildings are close to subway stations — the top priority for many young people.

Over two-thirds of the buildings’ residents are people in their 20s, who in Japan earn on average about $17,000 to $20,000 a year, according to government data. (Wages in Tokyo are on the higher end.) 

On the other extreme of the housing restriction stories, is the conclusion of a longtime feud between a Marin County (CA) man and local regulators. He’s being evicted, in part, for operating a creative sustainable toilet that has been in use for the past fifty years.

…, he’s built a sanctuary to showcase his ideas about environmental sustainability: the Shower Tower, the Worm Palace (crucial to his composting toilet), the Tea Cave (where he has stored more than 50,000 pounds of rare, aged tea), the Tea Pagoda (where he’s hosted tea ceremonies for friends and dignitaries for more than 40 years) and so many more.

He calls it The Last Resort and he never had permission to build any of it. “I’ve been a scofflaw all my life,” said Mr. Hoffman, 78. “I have to recognize that.”

NYT

The battle between this outsider artist and the government has been going on for more than a couple of decades. Ten years ago the NYT ran a similar piece. He has a contingent of supporters and recently had a shot at maintaining the property through a historical designation. But now his eviction seems imminent. Meanwhile, new construction in the San Fransisco Bay area is being stymied by regulation-induced high prices.

This brings up the point that in some areas of the country the use of an outhouse is completely acceptable. On large acreage properties in the wide open plains, there’s no harm done in digging a hole and erectly a one-stall shack with a bench and a door with a half moon. The value or harm of regulations that allow super-small apartments or unstructured sewage disposal is entirely dependent on the group structures and commitments of nearby neighbors.

Changing Intermediaries

There was a time when concerns about the future of communities arose when changing preferences shifted people’s activities. When the lanes were no longer booked on Thursday evenings for leagues and bowling balls were being sold at garage sales, predictions of cultural decline became fodder for those who watch such things.

But about the same time, church basements were seeing a lot less of the ladies who know how to fill the fifty-cup aluminum coffee maker. As new generations come through communities, their preferences change. The inclinations to be supportive of a community or devote time to causes or charitable endeavors do go up in smoke in some sort of generational existential crisis. They simply find new marletplaces.

The volunteer firefighter model is on its way out. Half a century ago perhaps as much as a third of the firefighters were volunteers. Becoming part of the force was a competitive process. It was a position that held prestige. The men would hang out at the station house in shifts waiting for the next deadly blaze. Now most firehouses are staffed by paid employees or transitioning to such an arrangement.

2nd St and 5th Ave Minneapolis

One could speculate that why men don’t want to pile in and hang out in the cramped quarters of an aging firehouse. But I think it is a mistake to assume the men of today lack an impulse for civic duty. They are most probably exerting efforts elsewhere in their family or work structures. Many workplaces now offer opportunities to partner with non-profits. Many non-profits offer opportunities to become involved.

Environmental Initiative is an intermediary which is driven by a desire to improve the environment.

Currently, it is estimated that 25% of passenger vehicles cause 90% of vehicle air pollution. Older cars often have outdated or broken emission controls and exhaust equipment. By partnering with garages to repair broken emissions systems, Environmental Initiative is cleaning up some of the highest polluting cars on the road while reducing barriers to reliable transportation. 

Partner garages provide low- or no-cost repairs to emission control systems. This allows car owners to reduce their car’s emissions and prioritize paying for other repairs necessary for the safety and drivability of their car.

This type of interface between people who have skilled labor, and most probably some idle time, and those who voluntarily support a cause, like pollution control, is an excellent matching game. There is an arbitrage opportunity between the former group which loses little by helping and the latter group which will be vigilant to the appropriate disbursement of reimbursements.

Have you lost that feeling?

It’s hard to extrapolate feelings out of numbers. Novelists have the luxury (and the skill) to fine-tune phrasing in a way that demonstrates how the same scene can in fact be different. Take this passage for example:

Yes, that was it-the change was there. Before the war at a luncheon party like this people would have said precisely the same things but they would have sounded different, because in those days they were accompanied by a sort of humming noise, not articulate, but musical, exciting, which changed the value of the words themselves. Could one set that humming noise to words?

Virginia Wolf- A Room of One’s Own

But when you see numbers, tabulated-out in sales figures of Rolex sales, income disparities between adjacent countries, or tallies of police arrests- you don’t feel anything. Of all the inputs that go into economic analysis- resources, labor, utilities, transport, and so on, there is no mention of an emotional quantifier.

Yet isn’t at least a portion of why people buy a Rolex due to a feeling? A luxury good makes one stand up a little straighter and beam a little brighter. A luxury good encourages others to treat you with a little more attention. A luxury good may be the ticket to gain entry into a new network of associates. There’s a swarming effect to luxury goods where people are drawn to the aura of the wealthy establishment. At least Kim Kardashian has a billion reasons to think so.

And then there is the opposite effect. The feeling of neglect and secondary status is always in the mix when economic results are released and compared to a strong neighbor. The numbers may divvy out the details of who stands where with what, but the gnawing feeling of being two steps back and half a year behind comes to the surface in casual conversation. “Oh- they are just so brash down there!” Implying, of course, a certain nobility in lower production, further justifying complacency.

Analysis of the cost of policing goes into rows and columns as easily as any set of numbers. But the emotion of seeing your middle school buddy handcuffed and walked out of school doesn’t show up in any way in the numerical representation. How many officers are needed in a community that has memories of one type of public safety is going to be different from another. The expense to leverage community participation in crime-solving is also going to vary. Like groups need to be compared to like groups.

And similarly, when solutions are presented and discussed, time and time again by people outside a community, especially those with elitist inklings, eye-rolling follows disjointed analogies.

The mayor of Minneapolis is Jacob Frey. Keith Ellison is MN’s Attorney General. Also pictured is St. Paul Mayor Melvin Carter.

Update on the housing market

As one can imagine the sharp increase in mortgage interest rates is having an effect on the housing market. For the average buyers who have between 5-20% to invest as a down payment, their monthly obligation has probably increased by about 20%. Yes- that’s a lot. Hence the decline in mortgage loan applications.

So far, however, the change has only resulted in a deceleration in the number of buyers but not in the price of housing. For the past couple of years, buyer demand has outstripped inventory causing virtually every sale to garner between three to twenty offers. This is not hyperbole. The steady jump in the cost of housing is verification of a sellers’ market.

A few months ago, a fresh listing would still attract a strong first buyer, one who perhaps even wrote an offer above the list price in an effort to pre-empt the market. As news gets out that the market is shifting, buyers are starting to slow down and finally we are seeing inventory staying on the market more than a few days. This has advantages.

For the time being the new dynamics are attracting a new set of buyers who never were interested in the rat race of competing for a home. Making a decision within hours of viewing a home, foregoing an inspection, or offering non-refundable earnest money is not for everyone. Today’s buyers have the leisure of coming back through for a second showing, of looking into possible home improvements, of lining two options up side-by-side to see which one they prefer.

I expect this will be the status quo through the holidays. Thanksgiving to Christmas is always a slower time as many people are tied up with family obligations. Come early 2023, we’ll see how the interest rate environment is impacting price.

Econ or Poli-Sci?

I recently saw this quote on Twitter: Economics is the study of human behavior under constraints. This makes sense to me if the individual and the clusters of individuals operate under maximum freedom. But the reality is that virtually all people have some sort of, or many layers of, political structures also setting constraints. Where econ stops, and where poli-sci begins is deviding line to consider.

For instance, if you were trying to figure out the choice parameters for automobiles in the Amish community you may come to the conclusion that they don’t have a preference as you cannot come up with any data. Yet the political constraint of only being allowed to drive a horse and buggy is the political constraint which explains the lack of opinion. Complete exclusions from some choices are entirely political and hence do not provide economic insights through the actor’s behaviors.

Gorgeous blooms are still to be seen at the Lyndale Rose Garden in Minneapolis

Why object to Immigration?

Ron DeSantis of Florida put immigration back on the front page of most newspapers a few weeks ago when he chartered a couple of planes to fly Venezuelan migrants to Martha’s Vineyard. Of course, he is not the first to shuffle off those in need of social services to other locals. The Governor of TX also recently bussed migrants to the home of Vice President Harris. But for decades those in need have shown up in Minneapolis having been given a one-way bus ticket from Chicago.

Immigrants have a place in America’s history and they continue to bring fresh economic energy with them when they arrive. Their work is visible across neighborhoods as roofers and painting contractors and nail technicians. Still- there’s an underselling of the work and services needed to bring new families into the American way of life. Who is going to be sure they have proper clothing for winter? Who can help set them up with services? Who can they call for advice on all those things a 20-something person would ring up their folks for reliable answers?

Even though the state provides another set of goods, there’s a certain type of capital needed to ease immigrants into their new communities. When a church sponsors a new family, the parish members fill the orders for all those material goods and services. Let’s say circulating capital is that which is needed to support the community interfaces between the new and existing polities.

Some communities claim they have no spare reserves. There are communities like Martha’s Vineyards who have reserves but not the structured intermediaries to deliver services. Then some communities welcome those in need despite lacking the circulating capital to maintain their existing community (this undoubtedly produces the most expensive outcome).

Hopefully we can come up with a better way to ease newcomers into American life than relying on the showmanship of politicians.

Yglesias Tip Toes across Platters

In the old days, or in the movies, the good and bad guys are contrasting characters in nefarious plots. Activists love the straightforward dichotomy of the winners and the losers as it facilitates their theory of choice. If you want to benefit the world, you’re with us; if you want to harm the world you’re with them. You are either on the inside or you are excludable. You are blessed or descending into the bowels of the earth.

In the most recent free newsletter from Slow and Boring, Let Joe Manchin have his pipeline, Matt Yglesias lays out economic arguments for allowing the completion of the Mountain Valley Pipeline despite the negative externalities it will generate. He tiptoes through a dizzying array of players and their platters, in the operating systems of cooperative endeavors. He concludes that there should be less focus on chum (I like that word) and more focus on the stuff that matters.

The stuff that matters appears to be the more socially favorable outcome once the pros and cons of the action are tallied up. Instead of hype, Matt wants an accounting.

Here are all the groups mentioned in roughly the order they appear: Mountain Valley Pipeline (MVP), Biden Administration, West Virginia, Virginia, Joe Manchin, green activists, Senators, democrats, Keystone XL pipeline, left writers, center-left writers, Barack Obama, Labor Unions, Rail Lines, activist organizers, protestors, Putin, Russian Oil Producers, LNP gas export facilities, the United States

There are a bunch of ways to sort these players. Elementary school math with Venn diagrams comes to mind. All the oil producers which operate on a for-profit basis, MVP and Keystone XL, and LPN export facilities form a group. Then you have the political people who are meant to act on behalf of their constituents like the two Presidents, the Senators, and Joe Manchin in particular. Clearly, there is different weighting on the impact of these decisions based on who they represent. This brings us to the states themselves, specifically West Virginia, Virginia, and a bunch of unnamed states affected by Keystone. And there are the people who advertize for the various positions, the writers (both left and center-left), and protestors. I would put the activist organizers in the same bin as the labor unions because their function isn’t to care about the issue as much as to energize those who will resist. Putin and Russian oil producers are in a group to themselves as they are not nested in any way with the others.

It is impressive to touch on so many levels of tradeoffs and draw the reader to the intended conclusion: Joe Manchin’s pipeline project will cause less environmental harm than economic good. The social externalities are less than internalized social benefits.

Not everyone can successfully call out those who oversell the need– in this case for climate caution. It is something only someone of his stature could accomplish. Since there is no numerical system of coordination, supply is determined by trusting the voices of those close to the action to describe the need. Food shelf providers give feedback on the demand for food. School counselors give feedback on the need for social services. Hospitals give feedback on the number of uninsured patients.

I’m all for calling out the beefed-up hype and manufactured objections to socially valuable industry. Hold the Chum! And give Yglesias the proper accounting he demands!

Rent Control Revised

After a voter referendum last fall, the most rigid rent control in the US went into play in May in the city of St. Paul. Four short months later, most stakeholders agree, that rent control is a deal killer for housing providers.

Want housing? Then let people who know how to provide it do their thing.

Unclear duties

Another type of duty shifting happens when regulations, or rules, are made official across a group. We all want to be able to go to the Minnesota State Fair and eat from as many of the food booths as our gastronomical ambitions allow. It would be unfortunate to find out after the fact that the mini donut vendor did not change out their frying oil promptly. Even the most non-regulatory types would agree that purchasing food without the risk of food poisoning is a good thing.

If food prep regulations were weighed out, it is clear that having the rules in place allows for more people to be freer to sample the Fresh French Fries and Sweet Martha’s Cookies and Turkey on a Stick. Having the rules in place gives people confidence in interacting not only with people they know personally, or they’ve heard of from friends, but with any food truck or pop-up vendor operating with a license. The rules push the duties of edible foods on the small vittles providers because this allows for greater freedom, not less, overall.

The Minnesota State Fair is the best in the Midwest.

This feature works really well when populations are nested one inside the other. Although there may be small differences between counties, the rules reflect what is expected at the state level. And it is fairly reliable to maintain the same consumer expectations as one crosses state lines as everyone is nested in a federal suite of rules. And although there is sometimes pushback, like when the health department wants to show up at a church basement waffle breakfast for their parishioners, the system, in general, reflects efficient coordination.

Who gets to assign the duties becomes a bit more opaque when bundles of economic activity operate separately from one another. For instance, do European consumers of garments manufactured in Bangladesh owe the workers an EU evaluation of their working conditions?

Within one’s own trading system one relies on the press and complainants to expose wrongful work practices. Then consumers can make choices with consideration of brand reputation. When markets operate at a distance, it is unclear which market has a duty to established norms.

Shifting Duties

The LA city council would like to force local hotels into giving up their unrented rooms to the homeless. Every day the hotels are to report to the city the number of vacancies they have and allow the homeless to take over the room. It seems like some dream of authoritarian control over private property for the public concerns is budding in the sunshine state.

Mind you the hotelier will be paid. But everyone knows that the complexity of homelessness is not a billable problem, it is a social problem. What is really happening here is an attempt to externalize the caregiving of a disenfranchised segment of the population onto small business people.

Where else do we see political muscle transferring duties between groups?

  1. The rent control measures in St. Paul come to mind. The risk of market fluctuations in rental prices is transferred from the lessee to the lessor, from those who do not own real estate to those who do.
  2. The student loan debt release plan transfers the private debt of past and present students to the US taxpayers.
  3. Our city adopted a new model for firefighters where all are paid and none are volunteers. The duties change direction here as the transfer is from the public to the private job market.

Fresh Sweet Corn

When sweet corn is in season we stop by our favorite farm and pick up a dozen or two. Pull into the semi-circular drive that swings past the farm buildings to the garage and an elderly farmer in overalls appears to serve you. He often had an assortment of vegetables as well. Three medium tomatoes might run you $1.50- the corn is pegged at $5/dozen.

I realize that eating corn off the cob is not done everywhere, so here’s how it goes. You shuck the coarse leaves encasing the cob, pull back and remove all the silky threads spinning through the shiny kernels and plop the cob into boiling water for eight minutes. Remove from the pot carefully, place the prongs into the tender ends, and butter up the golden and white nubby corn. This guy grows the best ‘peaches and cream’ variety. A little salt and you are in for a delight.

It used to be that every farm in the Midwest had a setup as our corn guy (pictured here). A great big red barn anchored by a massive blue silo. Now simple rectangular sheds have won over the landscape due to their lack of maintenance. Economics! The adversary to nostalgia. Although the dollar amount of subsidies that go to farmers indicates that there is in fact a price for hanging onto the past.

In the 80s and 90s immigration of the younger outstate population in the urban areas lead to a fear of the loss of the family farm. Dilapidated farm sites were pulled down and plowed under to lay in more valuable crops. A sense of abandonment rippled through the local communities. Then corporate buyers appeared to be buying up the open landscape. An era of homesteading and a farmsite on every 80 acres and gathering at the local churches and corn feeds every fall seemed to be all but gone.

As a result, a suite of subsidies has evolved over the years to help the farmers. And there have been many that have been in line with other types of backstops in the system to avoid failures and their subsequent negative impacts. I asked a farmer in one of the really good years how he felt about the subsidies. He responded that it was a little ridiculous to be on the receiving end of government aid given how well the year had gone, but, “if we let them go we’re not sure they’ll be there in the bad years.” People are fearful that the mechanics of support are not nimble enough to be able to respond in a price and practice sensitive motion.

Corporate America was not successful in becoming the majority owner of the great American breadbasket. “There is a popular myth out there that today’s modern food production system is being run by corporations or industrialized agriculture. But, the truth is that much of our food is grown and raised on farms by families. Iowa has roughly 88,000 farms and 129,000 farm operators. According to the U.S. Department of Agriculture’s 2012 Census of Agriculture, more than 97 percent of Iowa farms are owned by families.” This data may be a little old but still is true. Families still own farms, they just look a little different.

All this is to say that nostalgia does have a price. And the mythic corporate boogie man is always the fall guy for the uncertainty of change. And lastly- we’d all be better off and trust the system if a coordination of services were dependent on an enumeration of the cascading costs and benefits in the system instead of a bureaucracy.

A boy from Bayonne

Frederic Bastiat is known for a set of essays, the most recognized is entitled, What is Seen and What is Not Seen. At time of writing, the french nineteenth-century statesman and philosopher is in the latter part of his life and is inspired to record some economic thoughts in a wry and witty manner. The language is vivid and descriptive and the text takes on many forms including dialogue and LaFontaine-like fables. He playfully names his actors M. Prohibant, M. Jacques Bonhomme, and M Blockhead.

En pays basque

His objective is to open the eyes of his fellow statesmen to take into account of the entire cycle of economic impact in the system; to note what is seen but also what is unseen. Much of his inspiration comes from the waste he sees in a heavily bureaucratic tariff industry which seems to have sprung up at crossovers between countries or every city gate. This gross abuse of skimming a bit off the top of every transaction, and the bloated civil service that supports such things, is easily exposed as inefficient.

The Collected Works of Bastiat is over 500 pages, so, for as much as there is to say about the restraints of free trade, it is only a segment of the entirety. It might be the portion that free traders have used to identify the author as their own. But the boy from the Paye Basque offers so much more. In fact, it is against his professed philosophy to pluck out but one section of the analysis and not look under the cushions for the rest of the loose change.

Bastiat does not deny the core services of government “the army, the navy, law and order, public works, the university, the national debt, etc..”(pg43) He decries all abuses of taking private profits whether through commercial fraud or abuse in the public sphere (pg123) or through the church (pg123). He denounces the fraudulent taking in any sector as “Plunder!” It is not simply across the custom’s desk that he sees waste in the system.

Through the volume and variety of writing he devotes to flushing out various aspects of exchanges, he seems to want to expose much more to the systems he sees than simply the revulsion of protectionism. For instance, he talks about the different natures of work. There is work where the value is determined in the end product, not the hours spent. For that reason ‘make work’ by the government is unproductive and should be replaced by unemployment insurance (pg160). He opposes postal rates which vary by distance, which suggests that he feels postal service is a public good to be provided at a reasonable cost no matter where you are, as told in the story of the Salt, the Mail and the Customs Service.

We could talk more about how he describes the various levels of markets (not ‘your’ market, ‘our’ market he tells the paysanne!) There are markets off the rail stops, there is the vaste city market of Paris, there are the other European markets, and just bursting on the scene is the market in Algiers which is a net loss, as it is pulling taxes out of the system (184).

Bastiat has a lot to say. His text deserves a more thorough read. He is trying to locate the whole elephant and would like everyone to stop advocting for the one angle he or she is clinging to.

What would a philanthropist want to know?

How to giveaway money is a tricky business. There are lots of worthy causes. Although I have yet to face this problem, it is fun to speculate on what a philanthropist would want to know to make a giving decision. Given the potential depth of this inquiry, this is just a starting point.

To manage expectations, I think a donor would like to understand how the funds will help. One way to get a handle on this is to consider at what level the investment will carry through a system. Bed nets for instance are life-saving one individual at a time. It is a one-to-one transaction and eventually the net needs to be replaced.

Then there is support given to ongoing activities. Many people like to give to their alma matter. Some choose to provide an annual scholarship thus contributing to a well-educated society. The efforts now affect a network, and the importance of the individual agent fades as the success of the group dominates. The analysis turns to whether the food shelf is serving the group of people in need, or whether the neighborhood clinic is improving local health outcomes.

And finally, there is the most adventuresome type of giving, the dollars spent to create something new altogether. It may be a novel medical treatment or a library system.

By 1920—less than 150 years after Benjamin Franklin first donated what would become a town’s first public library collection—there were more than 3,500 public libraries in the United States. This rapid expansion of the US public library can be traced back to another American man’s donation—steel magnate Andrew Carnegie. Carnegie’s funding had built about half of these 3,500 public libraries, earning him the nickname, the “Patron Saint of Libraries.”

Carnegie Libraries

These are far more risky investments as you can’t be sure that the new drug will work or that the libraries will be maintained. But in the instance of success, the public good is significant.

Supply side problems?

Girlfriend of Daunte Wright sues Kim Potter, Brooklyn Center

The girlfriend of Daunte Wright is suing former Brooklyn Center police officer Kim Potter and the city, claiming she has suffered physical and psychological injuries as a result of the fatal incident.

According to the lawsuit filed Friday, Alayna Albrecht-Payton was sitting in the passenger seat the day Wright was shot and killed during a traffic stop.

Wright’s family previously won a lawsuit filed against the city and police department for $3.25 million, marking the largest settlement for a city outside of Minneapolis in Minnesota’s history.

MSN

Syncing Incentives

Bangladesh has quite a story to tell. When I lived there as a child fifty years ago (give or take) it was an impoverished nation with few industries. At the time jute production was the most vital employer. And even today the total area under cultivation for the fiber in Bangladesh is 559,000 hectors.

Jute production circa 1970

Since then the country’s gross domestic product has surged from $4.27B in 1960 to $416.26B in 2022. This ratcheting up of financial success is all good. But ideally, a country with poor infrastructure, health, and environmental concerns would also like to make progress in public spheres.

Syncing the incentives between those with an abundance of social capital, like foreign investors, and local enterprises enjoying early success, is the puzzle destined to produce positive synergies. Who can provide what and when, and under what circumstances would they be willing to engage such resources is the type of knowledge that would be useful.

Australian woman rediscovers the advocacy of housewives

So I can only imagine their collective horror when a few years ago, in my 30s, I shacked up with a farmer schoolteacher (a male one), had two children in quick succession and sank into a quagmire of domestic drudgery in regional NSW.

There, I joined my local branch of the Country Women’s Association (CWA), arguably the nation’s most powerful and conservative women’s group.

I hesitated to mention my new membership to my staunchly feminist mother.

But it turns out that the CWA may have more in common with women’s lib than I’d imagined.

The whole article can be found here.

News clip about the Country Women’s Association celebrating its centennial.

Undoing monopolies

About 500 nurses at the Mayo Clinic’s hospital in Mankato, Minnesota, will no longer be represented by the Minnesota Nurses Association after voting 213-181 to decertify their labor union, according to a release.

Healthcaredive.com

Monopolies are helpful when there is an imbalance of power or when large infrastructure needs to be pushed through to completion. Ideally, a period of control is released after a time so that the actors can go back to making the best individual decisions to accomplish a blend of their private and public goals. After a 70-year stint, nurses at the Mayo Clinic will return to negotiating for themselves.

The decertification process was supervised by an outside agency.

The effort to dissolve the union was driven by the National Right to Work Legal Defense Foundation, a “highly powered, well-funded outside national organization bent on undermining worker power and collective bargaining rights,” the MNA said in the release.

That Right to Work group says its goal is to provide “free legal aid to employees whose human or civil rights have been violated by compulsory unionism abuses,” according to its website.

No worries about commodification

Perhaps one reason we have yet to enumerate the benefits of work done outside the job market, in the name of family or association, is that people fear the commodification of services meant to be done in loving care. A pecuniary take on the expense of raising a child or caring for an elderly parent or time devoted to helping a loved one fight an addiction, feels crass. An overt utilitarian calculation of every moment of every life sucks the soul out of good intentions.

Try to quell those fears with this thought. The impact of an individual is of no import in group dynamics. Value at an institutional level is the sum of the work over the whole group- hence there is no individual slicing and dicing of dollars to devotion.

Let me explain. If only one parental coupling in a school district tries to initiate a PTA there will be little value in it. These types of community investments only occur when a sizeable number of (individually motivated) decide to participate. So it really doesn’t matter if it is so-and-so’s mom or the Jones or the grandparent of Tommy, Johnny, or Sue. The institution of parental support within a school will be generated after a certain number of family members show up and give of their time and expertise.

Sometimes it does not matter who the individual is as no one can predict when the need for a community response will arise. The best way to deter crime is to stop it in the moment. Call the authorities, be a witness, and pull together a watch group. The act of doing any one of these things is not priced out individually, it only matters what the capacity of the group is to voluntarily respond, as needed, to crime prevention.

Watch Clint Eastwood in Grand Torino. He did not commodify himself. His contribution was calculated at the margin, and the return was significant.

Is there a natural market size for club goods?

When people gather and cooperate in the provision of a public good that is available only to their group, it is called a club good. Compared to private goods it is more difficult to track the output of these types of goods. The former can be counted up and traded, which translates into a neat and tidy quantity-vs-price graph. Public goods, like education for example, are made available to everyone. Hence the measure of success depends on the entire team.

Although a group is made up of individuals, for the purposes of tracking achievement, the outcome is a reflection upon everyone. As my son’s baseball coach would say, there is no ‘i’ in team. Or as dictionary.com explains, some nouns are mass nouns like sunshine or water. Even though we have such a strong tendenancy to try to extract the individual as the unit of analysis, we really must account for the group when dealing in club goods.

This leads us to wonder how big the marketplace should be in the collective efforts to, in this case, educate our children. This came to mind today as I was listening to Russ Roberts interview Nassim Nicholas Taleb on a new episode posted at Econ Lib. It sounded like the author of The Black Swan likes to process his ideas for new books by talking them through with Russ on the podcast. The topic today was the optimum size of the State. Here he makes the case for smaller groups.

But, let me make a comment here, why size is central to what we’re discussing. Because people keep using names–state, nation–the size is central.

You do a lot better, I think, meeting a person a thousand times than meeting a thousand persons once. In other words, you’re in a big city like New York City, you walk out, you’re going to see everyday different people. Whereas in a village you’re going to probably encounter the same number of people, assuming you encounter them, it would be the same people. It’s like knowing it’s a friend is a person that you see a thousand times. You see one person a thousand times rather than a thousand strangers once. You see? Things don’t scale properly. There are things that work differently at a lower scale. And, what I’ve discovered while working on volatility models show that why an elephant, for example, is not a large mouse. An elephant is vastly more fragile–

Taleb

The specific details about who runs into whom are less important than the gist of what he is saying with respect to gauging size. It might be a thousand people or all of Manhattan. What I think is being framed here is a way to identify the size of a community suited to accomplish their goals. And the suggestion is that it must be small enough to allow people with common interests to bump into each other and trade the resources necessary to edge toward an outcome.

As long as all the people interested in educating the kids can come across each other, then they can combine their enthusiasm and skills to foster learning. As long as enough of the folks who depend on transportation networks can give feedback and encourage the appropriate repairs and expansions, then roads and bridges infrastucture will stay up to date. As long as all the people best able to monitor the streets for safety are able to provide feedback to law enforcement, then the compact to protect all citizens will raise to expectations. And on through the list it goes.

As long as the size of the community allows for people to easily do the work of community, then the institutions in place to provide public goods will be backstopped with the resources needed to flourish. At this point, as I understand it, you have found the right size for the school district or the precinct, or the State.

Why aren’t people studying capacity?

The last two years have seen two events where the actions of citizens have drawn worldwide attention. At the end of May two years ago the killing of George Floyd ignited protests in Minneapolis which lasted for three days. Before the National Guard was engaged to end the violence, three miles of businesses were vandalized and burned, and spotty destruction occurred elsewhere in the metro area. Everyday people who typically abide by the rules were looting and pillaging while others stepped to the side, let it happen, and even cheered it on.

What led people to normalize violent behavior in a city which has enjoyed a low crime rate?

More recently the west has been energized by the Ukrainian people’s passionate self-defense in their David and Goliath story. When the Russian military advanced on their territory experts assumed the government would fold and the people submit to a new rule. Yet the heroism of the people continues still today as they have successfully stalled the super power from further territorial gains.

In both cases, the citizens were underestimated. In one scenario the norm to preserve order and support the enforcement of rules or laws was subverted. In the other, a people found reserves of courage, commitment, and where with all to engage in military operations. Despite worldwide attention, I have seen little analysis as to how the capacity to fail to act or to act was stockpiled.

More has been written about the history of the conflict in Ukraine. Since 2014 when Russia invaded and successfully secured Crimea, the Ukrainians have had eight years to regroup. But since none of the foreign policy experts expected the strength of their patriotism, there must have been more happening on the ground to store away a united ambition to fight.

Similarly, in the years leading up to a teenage girl filming the death of a man under the knee of a police officer, it’s hard not to wonder what dynamics were put into play to allow law-abiding people to support and empathize with the subsequent action of thugs burning and looting businesses. Although the aspirations couldn’t be more different between patriotic fighting and protestors gone wild, the lack of outward signs of the build-up of such reserves is similar.

So how is it done? It seems like important information to know.

Metal Market

I was trying to get rid of a propane tank. It was taking up room in the garage and the fittings were obsolete so it was no longer something we could use. The county site referred me to Express Metals but the guy who answered the phone said they weren’t interested. Metals, he said, that’s what we take.

So I dug around some more and found five old metal open house tent signs. They are dangerous things. When you lift them in and out of your trunk there’s a fair chance you’ll slip and nick your bumper, or worse yet chip the paint. Open house signs have been made of plastic for several decades. This was my opportunity to get the ancient ones off their hanger on the garage wall and find out exactly where all the junkers drop off their aluminum cans.

The warehouse space was centrally located on one of those back streets lined with one-level commercial spaces. The sign was barely visible at the entrance alongside the chain-linked double gate that I assumed was closed and locked at night. You drive on past a row of dumpsters and a concrete building until the signage above an office door identifies where to bring your drop off.

As you enter, the first thing you see is this display of accepted items. I thought the headings were appropriately categorical.

One of the workers pointed back out toward the parking lot to a line of trolleys. I took the non-verbal communication and rolled my meek pile of metal onto the floor scale wondering about its value. A middle aged woman at the adjacent window was strong arming a large carton box of brass fittings. I had a feeling they were worth more. My ticket came up.

A hand extended into a pointed finger directing me to the scanner at the counter to the left of the metals display. The bar code instructed the cash dispenser to spit out my buck. Now you might think that’s not much. But given we had just paid a transfer station $120 to dispose of some construction debris- this at least was a benefit instead of a cost.

Let Freedom do its Thing

Today the US celebrates the birth of its constitution and its independence from British rule. It’s a family day filled with picnics and parades. There is a lot of flag waving and fireworks traditionally close the show after nightfall. By far the most patriotic of holidays, it remains a cherished long weekend despite nagging challenges to the varieties of freedom present in American lives.

In the ‘ol days, freedom was simpler. As long as your kin and kith were not ruled by outside forces then you were free. Freedom from domination by force was the primary concern until modern history, and freedom to worship if you lived in the west. Since then the demand for freedom has expanded in all directions: free to love, free to choose, free from oppression, free to marry, free to express, free to join, and free to separate. But it seems that as the quest for greater freedom picked up speed, new forms of restrictions sprouted up like dandelions in early spring.

It’s like everyone is all for freedom, as long as it coincides with their ideas, their thoughts on the way life should be. Business-oriented people cringe at the freedom of a pool boy to work through the summer and coast through the winter. But we are not optimizing productivity! Women who thrive as corporate powerhouses find housewives inconvenient. Parsimonious types can’t fathom that artists wielding away their time and resources on churning out pottery or graffitti or embellishments. And thus the debates about details, a haggling over resources, produce battles for control. Progress trickles past all the damming.

There’s a stumbling into a new power structure and a new paradigm of how networks of people with shared interests engage to produce. The model is bubbling with interconnected trading spaces. But it requires participants to allow others the freedom to navigate their choices. It requires a release of assumed dominance over the choices people make. This appears to require an unnerving amount of trust. The domain is vast.

The figuring out of this new balance within our old system is underway. People are distracted by the details. Instead of looking to the overarching structure they choose to bicker about their small corners. But the desire for maximum freedom never diminishes. And thus becomes a human project which touches us all. Happy Fourth of July!

It’s silly to rob Peter to pay Paul

Kenneth Ahrens recently wrote a paper, Robbing Peter to Pay Paul, The Redistribution of Wealth Caused by Rent Control. He was kind enough to join the Minneapolis Area Association of Realtors in a zoom call to present the material. It’s of particular interest in our market as he uses the effects of a recent ballot measure in the city of St. Paul. The paper is written in clear plain language and starts with a nice historical review of rent control in the US. It’s well worth the read. Here is the abstract.

Abstract

We use the price effects caused by the passage of rent control in St. Paul, Minnesota in 2021, to study the transfer of wealth across income groups. First, we find that rent control caused property values to fall by 6-7%, for an aggregate loss of $1.6 billion. Both owner-occupied and rental properties lost value, but the losses were larger for rental properties, and in neighborhoods with a higher concentration of rentals. Second, leveraging administrative parcel-level data, we find that the tenants who gained the most from rent control had higher incomes and were more likely to be white, while the owners who lost the most had lower incomes and were more likely to be minorities. For properties with high-income owners and low-income tenants, the transfer of wealth was close to zero. Thus, to the extent that rent control is intended to transfer wealth from high-income to low-income households, the realized impact of the law was the opposite of its intention.

Ahrens mentioned that his peers were wondering why he was working on demonstrating the problems with a policy that has been shown to have greater negative impacts than positive ones. Experiments with rent control in the 50s and the 70s are long forgotten. A new generation of problem solvers and activists are reviving old ideas despite their flaws. The focus seems to be on preserving a renter’s ability to stay in their apartment by capping rent increases. This in turn transfers wealth from the landlord to the tenant.

Although the intent might be to have a one-for-one transfer from the pocket of the property owner to the renter, Ahrens points out that it is not that straightforward. “Basic economic theory predicts that rent control causes both transfers of wealth and deadweight losses (DWL) for property owners. These losses can be divided into a direct capitalization loss and an indirect negative externality loss.” A deadweight loss might derive from postponement of maintenance and repairs due to lack of income. “The sum of these effects is observable as a decline in the market value of real estate, as the property can no longer generate a market rate flow of income and fewer repairs to the property mean a lesser quality building.”

Furthermore, the transfers benefit the wealthy and hurt the less wealthy. In their findings, the lower income owners realize the greatest decline in home values- 8.52%- than any other transfer.

Excerpt from Table VII

There have already been meetings in St. Paul to adjust the stringent rent control measures passed last November. But there is no talk of reversal. Constituents seem to feel that renters in some way are not getting a fair shake.

Maybe I can take a run at the reasoning. Renters play a role in the community as do property owners. They are not as vested as they are more mobile, yet they too can be good citizens. Perhaps they go to city hall to petition for a road safety concern, a new playground, or more observance of a problem property. Perhaps they are the bus stop mom or the football coach. Perhaps they help maintain a safe light rail system or advocate for better bike lanes. For all that personal time spent on city infrastructure, they enjoy an improved environment. Yet the homeowners enjoy greater home values. And renters face the possibility of being priced out.

Of course, homeowners do not always enjoy greater home values. I remember a period of three years following the great recession where most sellers brought a check to closing to buy out their remaining mortgage balance. Sellers also feel a pinch in their bottom line when cosmetic updates have not been done, or repairs deferred. Renters find it far less costly simply to move to a newer updated unit. Such are the differences between ownership and rentals.

Maybe there is a new framework to consider. One that takes into consideration the economic issues of civic participation yet still tallies the risks of ownership. What’s clear to me is that if economists do not come up with analytical tools that better express the motivations and incentives constituents are expressing in their political decisions, then we will continue to suffer through cascading unintended consequences of bad policy.

Economists as Coordination Consultants

In her latest book, Cogs and Monsters, Diane Coyle takes a long hard look at the discipline of economics. She offers substantial proof that many things we care about are left out of the accounting in a traditional analysis. It’s a topic she is familiar with as she wrote another book about GDP which relays a history of the measure and suggests there are some missing pieces to the analysis.

Her peers are not to be persuaded. Frustration ensues when novel ways to approach issues are shuffled under a pile of papers and surreptitiously ignored. Here is the story of the shopkeepers versus energy waste through open doors.

As you walk down a high street in the winter, you will find many stores with their doors wide open blasting out heat in the entrance. This is not a desirable state of affairs either in environmental terms or in terms of the stores’ energy bills. So why do they continue to do it? Their fear of discouraging ambling shoppers from entering their store, when every competitor’s door is open, outweighs their desire to cut the electricity bill, or reduce emissions. No shop can shut the door unless the others do so. It is a classic co-ordination
problem, and the campaign aims to co-ordinate actions, but cannot succeed until a critical mass of door closers has been reached on every high street. A regulation banning open doors would achieve the same, and more effectively because individual shops could not backslide.

In today’s parlance, there is a tension between the ability of small business owners to make a profit and an edict from the state to preserve energy. It’s Mainstreet versus the government (or the activists, or the greens). The positioning is that people in business just care about making money and don’t do enough to contribute to social problems. The counter arguement is that businesses are suppose to look after the bottom line- that is the how the system works. Due to this dichotomy, a proposal to regulate shop doors is considered authoritarian. We the lofty intellectuals have made a calculation that- you- the lowly shop keepers must sacrifice for the greater good and close your doors!

If you read Coyle’s book closely, however, she has more to say. From what I understand, the mandate to shut the shop doors is meant to ignite the coordination of a beneficial activity. Clearly, shopkeepers care about more than their businesses, just as everyone does. They may choose to make concessions for all sorts of socially beneficial reasons. Perhaps their brother-in-law is a supplier, but not the cheapest supplier. Perhaps they close on Sunday for religious reasons. At every turn, business choices are made in unison with other interests. And there is a very good chance many care about the wasted heat slipping out their front doors.

The policy to regulate the shutting of doors isn’t a heavy-handed state mandate. What it does is give the group a chance to start a new norm, one which they would be open to if they had assurances that everyone would follow through, Once underway, the theory is that shutting of the door becomes a voluntary social norm with compliance and enforcement.

To see it in that light, it is necessary to put it on display in the public goods market. The fear is that one shopkeeper closing their door bears an external expense for her commitment to a social interest. Unless there is a good chance that the majority of the group are so environmentally inclined, the efforts will inevitably be circumvented and the efforts will fail.

So here is the important part. Coyle is making a judgment in a marketplace of energy-conservation interests that not 1-out-of-10, not 5-out-of-10, but 9-out-of-10 of the Mainstreet businesses will find this a favorable action with assurances. The question should be, how is she evaluating that market? Where does she see the numbers that say this group will go along with this policy, or that group will not?

Consumers of resources are regularly making calls about how much they are willing to sacrifice for their children, their environment, their commutes, and their churches… These are all done in shades of grey and not in thumbs up or thumbs down moral decisions. To implement successful coordination policies we need to be able to read the market so that the initial assurance of participation is followed by the development of a new voluntary institution.

Altruism- San Fransisco Style

Should fulfilling social goals tend more toward the push system or the pull system? Half a century ago less advantaged people were often ashamed of their poverty and were reluctant to ask for help. In a small town community, there was a shuffling of donations so that they would appear discretely at the home of those in need. This momentum of first demonstrating a need and then delivering some supplies to the designated beneficiary was done on the pull system.

Complete definition[edit]

There are several definitions on the distinction between push and pull strategies. Liberopoulos (2013)[5] identifies three such definitions:

1. A pull system initiates production as a reaction to present demand, while a push system initiates production in anticipation of future demand.

2. In a pull system, production is triggered by actual demands for finished products, while in a push system, production is initiated independently of demands.

3. A pull system is one that explicitly limits the amount of WIP that can be in the system, while a push system has no explicit limit on the amount of WIP that can be in the system

Wiki

In today’s world, it is common to hear those who work with the poor deny the necessity for those who come to a food shelf, say, to demonstrate a need. It is thought to be disrespectful. The intermediary agencies, whether the county, the food shelf, or the Department of Ed (school lunch) are responsible for determining demand. This is a bureaucratic push system.

There are advantages and disadvantages to both. The pull system is more efficient, but some families may refuse to come forward and others feel shame. The push system is bound to attract theft. If a push system becomes elaborate over a long periode of time, then it may become its own little economy (we could call it a platter).

Nellie Bowles has an article in the Atlantic, How San Fransisco Became a Failed City, which illustrates such an economy in her hometown of San Fransisco.

On a cold, sunny day not too long ago, I went to see the city’s new Tenderloin Center for drug addicts on Market Street. It’s downtown, an open-air chain-link enclosure in what used to be a public plaza. On the sidewalks all around it, people are lying on the ground, twitching. There’s a free mobile shower, laundry, and bathroom station emblazoned with the words dignity on wheels. A young man is lying next to it, stoned, his shirt riding up, his face puffy and sunburned. Inside the enclosure, services are doled out: food, medical care, clean syringes, referrals for housing. It’s basically a safe space to shoot up. 

Not only are material services provided in abundance to any addict who shows up in this iconic American city- but advice is also spun out free of charge.

She recognized him (a homeless man) as someone who regularly slept outside in the neighborhood, and called 911. Paramedics and police arrived and began treating him, but members of a homeless advocacy group noticed and intervened. They told the man that he didn’t have to get into the ambulance, that he had the right to refuse treatment. So that’s what he did. The paramedics left; the activists left. The man sat on the sidewalk alone, still bleeding. A few months later, he died about a block away.

A whole bouquet of social service agencies has sprung into action. In some sort of warp incentive system, the services attract addicts, which in turn attract services.

Here is a list of some of the organizations that work with the city to fight overdoses and to generally make life more pleasant for the people on the street: Street Crisis Response Team,  EMS-6, Street Overdose Response Team, San Francisco Homeless Outreach Team, Street Medicine and Shelter Health, DPH Mobile Crisis Team, Street Wellness Response Team, and Compassionate Alternative Response Team. The city also funds thousands of shelter beds and many walk-in clinics.

In the 90s there were stories of social workers in Chicago giving the needy bus tickets to Minneapolis as they knew there were services available upon arrival. If there is migration of those in need to an area simply due to the known availability of welfare, then the push is pushing too hard.

Voilà- transformers

Here at Home-Economic, we want to be rid of the traditional economic analysis where a good or service is only allowed to be public or private. We want you to entertain the idea that goods and services are continuously changing their loyalties. Lighthouses are not only for the common good, and pop cans for instances don’t have to serve just the individual. Let me give you a few examples.

Even though there was political unrest in Ethiopia in the 70s we still were able to travel around the country. Once on a hot afternoon of hiking, I was surprised to hear my dad tell my brother it was OK to toss his empty pop can out the window. Back in the US the Give and Hoot and Don’t Pollute campaign was in full swing. Cranking down the window and throwing sandwich wrappers and whatnot out onto the freeway was not permitted. Littering on the dry open savannah seemed equally gauche.

Awash is a 3–4-hour drive to the east of Addis Ababa

But my dad explained that what was garbage to us was a useful tool for someone on the arid plains of the Awash Valley. Sure enough, as our car sped down the road and the can bound off the asphalt and into the red-tinted ditch, a young boy appeared. He chased down the empty can and took it with him. The can which was a consumer receptacle for my brother was transformed into a club good used to bring water to a family. An action that was a negative externality in the US created a spillover effect in Ethiopia.

Here are some other examples of easy-to-see transformations of goods and services from very private applications to public ones.

  1. An attorney is paid as such during his day job- private gain to him. He also uses his skills to save his homeowners association in a legal matter- club gain to his neighbors.
  2. Bell Labs paid their employees a salary and gained privately for their work. The extent of the technological advances spilled over and created advancements in many industries for a public win.
  3. Platforms use the internet to connect communities so they may engage in commerce for private gain, ex Uber, and AirB&B. The platform also acts as a regulator determining the acceptable forms of behavior, serving as a club good for all those who venture onto their platform.

In traditional economic analysis goods and services are stagnant. The problems assume an isolated environment where the players interact just within the realm of the examples. The relationship and nature of the products identify only in the context described. There is a depth and richness to be found if- Voilà- you see how things are transformed.

Embedded is not the right word

I think it was Karl Polanyi who coined the term embedded. In The Great Transformation, the philosopher mulls over the notion that not all worthwhile interactions are adequately represented in a transparent market setting. he drew people’s attention to the influences of family relations, obligations to a tribe, and so on. He did not deny that the allocation of resources through a market process was beneficial. He claimed that all activity is embedded in the social circumstance of the actors and in that way influenced the outcome no matter how remotely

The definition of embedded is:

  1. (of an object) fixed firmly and deeply in a surrounding mass; implanted: “a gold ring with nine embedded stones”

It’s like society and its institutions form a big glob of clay and the market trading apparatus is a shiny gold nugget glittering against the thick, slow, clay substance. The muddy substance can shift and nudge the glittery mass but embeddedness promotes the idea that each substance is separate. You’re either a part of the bling or the mud. Each exists in a realm that cannot be interconnect. Society can influence, rock, tug and tip but not breach the market.

Fast forward four score or so and people are talking differently about interactions between private market transactions and duties to the public. There are many personal stories in the newly released book Speed & Scale by John Doerr. They provide specific examples. Tensie Whelan is a journalist who was covering sustainable development issues when she made a discovery.

One big flashpoint at the time was McDonald’s practice of sourcing beef from Costa Rica. It kept U.S. hamburger prices down, but the added grazing also led to deforestation. Environmental boycotts led McDonald’s and others to stop sourcing beef from there, but that did not stop the deforestation. People turned to slash-and-burn agriculture to put food on the table. That got me interested in how we could help people pursue sustainable
livelihoods. The Rainforest Alliance was founded by Daniel Katz. He was moved
to act after reading that fifty acres of rainforests are destroyed every minute, and two dozen species become extinct each day.

Tensie Whelan- Speed & Scale

The environmentalist had successfully dissuaded McDonald’s from importing beef from Costa Rica, which, it is implied led to higher prices of US Beef. The expense of the attempt at stopping deforestation was realized in the market. Yet deforestation still occurred because the owners of the forest still needed to eat and thus put the land to that use. As a group, their action, rightly or not, created a negative externality to the world as they internalized the benefit of a harvest. Tensie Whelan’s firsthand accounting of the tradeoffs helped her understand the situation as she pursued other strategies of collaboration with the local people.

The 1990s saw considerable progress on deforestation, but it wasn’t fast enough for Tensie. It was a long, hard slog to go through the developing world farm by farm to collaborate with local growers and Indigenous peoples. Tense promised money for people to protect the rainforests instead of destroying them. She won farmers’ trust, and sign-ups rose each year. By mandating safe working conditions and fair pay, the program also caught on among farmworkers.

This time instead of forcing a corporate player to pull out of a market, the strategy was to buy out the benefit of farming the deforested areas. In effect, the rain forest is being maintained as a world club good through a buyout. The locals are made whole by internalizing the cash.

The next story comes from Laurene Powell Jobs. In this case the movement between the nugget of gold and the clay is between Silicon Valley’s semiconductor market and the health and environment of a neighboring town. The glitter of tech commerce doesn’t sit nicely atop an institutional environment, it penetrates the lives of East Palo citizens and throws cost on them in the form of their health expenses.

Thirty years ago, when I was getting my MBA at Stanford Business School, I found out that just a few miles away the city of East Palo Alto was a disposal center for Silicon Valley. A lot of semiconductor debris was dumped there, along with biomedical waste. The
city was paid for this disposal, but it was not done properly. This happens across low-income areas all over the world. There were all sorts of toxicity in the water table, with high levels of arsenic and radon. It gets transmitted into the food that’s grown there, it’s in the gardens, it’s in the drinking water. Since we fund local education through property taxes, the schools in East Palo Alto were far inferior to the ones in West Palo Alto. They don’t have a robust tax base. They couldn’t afford good roads and sewage systems. They didn’t have a grocery store. They didn’t have a bank. They didn’t have the kind of infrastructure that would yield a healthy community. In 2004, I started the Emerson Collective on the belief that all the issues we work on, all the systems that touch our lives on the planet, are interlocking.

Laurene Powell Jobs- Speed & Scale

Embedding implies a lot of nudging and cradling and massaging. But the spheres of economic activity between the private sector and public groups (or clubs) is very porous. As Whelan points out, the impulse for action is not taken away when the large corporate entity withdraws. The action is running on its own group incentives. When pollution is externalized onto a neighborhood the medical expenses can be accounted for. When companies improve standards to reduce or eliminate the pollution, they internalize the cost to cease the externality. The price of their product now includes the reduction of pollution to the nearby community.

These are dynamic interactions between two spheres of economic activity. They can be identified, accounted for and evaluated. There’s nothing embedded here.

Auctions for fun

Mackenzie Scott was in the local news last week after donating six million dollars to the local chapter of Big Brothers Big Sisters. That might be a drop in the bucket for the ex-spouse of Amazon founder Jeff Bezos. “The donation to Big Brothers Big Sisters Twin Cities is one of a number of no-strings-attached gifts Scott has made to charities and racial-equity causes. In all, Scott has donated more than $12 billion to more than 1,250 nonprofits since 2020.” But it is equal to the annual budget of this worthy non-profit.

My son’s frat, SigEp, supports the organization as well. That’s how I ended up with my family at a fundraiser on behalf of Big Brothers last fall. I used to avoid galas because I didn’t find them fun at all. After a few turns on the dance floor, I’ve learned how to enjoy fundraising auctions.

My family at a SigEp organized fundraiser for Big Brother Big Sister

First, give yourself enough time to review the offerings. As in any purchase situation, it’s good to have options. I try to find things I enjoy but often don’t purchase as other more practical uses for money always seem to take precedence. At this event, my interest was piqued by four tickets to a Wolves game at the Target Center.

The whole idea of the event is to raise money. And there is an expectation that parents will participate in the fundraising (not obligatory, of course, but expected). So, there is a demand to make some sort of expenditure. You can always buy those certificates for eateries at face value, but that’s not very fun.

Most auctions are played out through an app. Once you start bidding you gauge the number of buyers for the item based on the response time on a counter bid. If two parties (or more) are bidding up the price without your participation, it might be a good choice to look for another auction item. If only one bidder is countering your bid, stick with it. Let them hold the high bid.

At this event of about three hundred people, the cutoff for bidding on live auction items was fifteen minutes into the presentation. This made it easier. In the last minute of open bidding, the high bidder was listening to the emcee while I placed the winning bid. It was exciting! First, because I had bought something I normally would put off purchasing. Second, I could feel good about playing my role as a parent. And lastly, it was nice to support the work of Big Brothers Big Sisters.

It was a three-for-one transaction!

UBI and collectively provided goods

In a recent broadcast of Econ Talk with Russ Roberts, economist Diane Coyle (Cogs and Monsters: What Economics Is, and What It Should Be) expresses dissatisfaction with universal basic income, or UBI, as a policy solution. She reasons that the $10-$15K a year could not be used to purchase collective goods:

But what you can’t do with an Universal Basic Income is buy collective goods. And, to the extent you care about communities and improving the chances of those who are the least well off, then it’s often those collectively-provided goods that matter a good deal–the transport network, the quality of the public schools, the quality of the healthcare that you can access.

So, a lot of these classic public goods or traditionally collectively-provided goods are very important; and you can’t, with your individual $10,000 or $15,000 dollars, go and purchase those.

Econ Talk

I too feel that UBI is an unsatisfactory policy intervention.

When I was a few years past out of college, one of my classmates had used some family money to purchase a vehicle most would say was beyond her income level. I don’t remember if it was an Audi or a mid-range convertible. She admitted straight out she enjoyed how she was treated differently when she pulled up in a luxury vehicle versus a second-hand compact. She claimed she received better service. In other words, she felt a disproportionate outlay of her monthly income on a vehicle bought her into a higher level of service network.

Indeed, you can’t buy your way into, say, a network of moms who trade-off watching each other’s kids. Similarly, one of the moms can’t just decide to sell all the reciprocal arrangements she has stored away through her mom friendships. Money is mostly used for unfettered transactions, whereas chits of return favors are the currency of collective goods. But money can buy you the Lulu Lemon leggings that all the moms wear, or a membership to the gym where they work out and spend time by the pool in the summer months. Money helps get to the networks even if you can’t use it to buy your way all the way in.

My reason for disliking UBI is slightly different, yet similar. I too think that people who are not wealthy could benefit more from social structures than cash. UBI is just half a transaction. Giving people a monthly stipend does nothing to teach them how the social side of the economy works: exchanges, reciprocity, feedback, and the like. Simply transferring money to people, without having them think through and evaluate a selection of options, without experiencing the pros and cons of various relationships and outcomes, robs them of the experience of the market.

If you really want people to become wealthy, you would take the time to show them how.

Biden supports mobile homes

As part of his efforts to ease housing costs, President Biden is proposing to facilitate financing of mobile homes:

Supporting production and availability of manufactured housing. The majority of people buying new manufactured homes rely on personal property financing (chattel lending) rather than conventional mortgages. This type of financing typically costs more than traditional mortgage financing due to higher interest rates and shorter loan terms. Freddie Mac has announced that it will complete a feasibility assessment for the requirements and processes necessary to support loan purchases of personal property manufactured housing loans. If FHFA approval is obtained, Freddie Mac will purchase these kinds of loans to assist with product design and support future loan purchase capabilities. Beyond personal property financing, both Fannie Mae and Freddie Mac (the Enterprises), in their Duty to Serve Plans, also released revised purchase targets for manufactured housing loans, which will have the effect of fostering greater liquidity for manufactured housing and increasing delivery of manufactured homes. Finally, recognizing the cost and development time savings provided by manufactured housing, HUD is making it easier to finance new units and helping manufacturers update their designs to meet changing consumer demands. This includes working to increase the usability of FHA’s Title I loan program for Manufactured Housing, supporting greater securitization of Title I loans through Ginnie Mae’s platform, updating the HUD Code to allow manufacturers to modernize and expand their production lines, and helping manufacturers respond to supply chain issues.

https://www.whitehouse.gov/briefing-room/statements-releases/2022/05/16/president-biden-announces-new-actions-to-ease-the-burden-of-housing-costs/?utm_source=substack&utm_medium=email

Mobile homes are a valid housing option. And opportunities for financing are more limited than a brick and motor structure so to speak. But the other big obstacle in this form of shelter is the ownership and operation of the park- or the land upon which the homes are parked. As metro areas grow the pressure to vacate the land and use it for other purposes increases. You never see new mobile home parks enter a city, so once they are gone, that’s it for that type of property.

It seems like it would be more acceptable to neighbors to allow small scale mobile home parks, perhaps a site with half a dozen homes. I suppose the management of the site, on such a small scale, would not be profitable. This is where a city would need to confer with its non-profits to see if there’s an interest in covering what can’t be successfully achieved in the market.

Trading Laundry

Perhaps thirty years ago, I was a loan officer at a large local bank. In those days we sat behind oversized mahogany desks in the open lobby of branch buildings located all over the metro. Clients would wander in, pull up the guest chair, and have a chat about whatever type of financing they had in mind. If they were organized, they would have brought in all their tax forms and bank statements, and we would apply pen to paper and go through an application together.

I was working at a site located on an old-fashioned main street in a town that had been swallowed up by urban growth. A late middle-aged woman with an unassuming presentation sat down across from my desk with all her papers ruffling out of a manila folder. She owned the dry cleaner a few storefronts down the street. New environmental regulations were going into place addressing issues around the chemicals used in the cleaning process. She had some colorful words regarding the changes, stating that they were simply meant to put small business owners out of business.

When I did the write up for her loan (we manually underwrote loans as algorithms were still fifteen years off) I was taken aback by her barebones income. I rarely saw advertising for the brick fronted building that housed her operation. It turns out she had inherited the business from her parents and was simply hanging on, doing what had always been done before. I remember wondering at age twenty something how it could be worth being a small business owner if you weren’t in it for the money.

As it turns out, social situations are a large part of business.

I have no way of judging whether this woman enjoyed running her parents dry cleaning business. If so, then how she spent her workday was a good match despite the low income. If not, what could have been done to loosen the emotional ties which fettered her to a life of dealing with chemical solvents? Selling a small business is a little tricky as it is hard to know what they are worth. Better information and connections with other people in the business might have led to a trade. Perhaps she never investigated other business ventures or careers.

The point is, that whether it is to attain a higher level of satisfaction from one’s own life, or whether the motivation is to put a business to a higher and better use, facilitating and coordinating transactions is part of the equation.

Post Covid

I was driving past a full parking lot the other day, distantly thinking that it was odd. Pulling the thought to the forefront of another narrative running through my head, I realized it was because the lot is used by those who take our suburban commuter bus downtown. People are returning to work. After Target announced it would no longer be requiring employees to report to their downtown head office, I thought other employers would follow suit. Apparently not.

My late afternoon errand was uncomfortably delayed by the first traffic jam I’ve been boxed into in two years. Dreadful. Stuck between long lines of vehicles crawling along a freeway. No- I didn’t check the mapping app to see if there was a better route. I haven’t had to for so long that it didn’t even occur to me. Rush hour is back, and it is ugly.

As the few masks I’ve kept handy in my purse are pulverized at the bottom of my Kate Spade handbag I realize that I haven’t worn one in ages. And I’m thankful.

Land for sale?

With war being out of fashion and colonialism a relic of a bygone era- how is a country is to acquire more land?

Even on a small scale, purchasing property that is owned by multiple independent parties is a messy business. In the middle of this satellite photo, you will notice fifteen five-acre homesites which were surrounded by open land twenty years ago. Developers in the home building business can spend years negotiating with neighbors to sell in unison.

These homes also happen to be fairly substantial. This just means that their values as stand-alone parcels are strong which pushes the buyout price higher than say a dilapidated tear-down property. Over time, however, if an owner thinks it is inevitable that their home will be torn down, they refrain from improving the property. It feels like a waste of their money. When the exterior starts to look run down, the neighboring properties are also affected. And slowly, the owners succumb to the pressures of an expanding metro, get used to the idea of living elsewhere and sell out to a builder.

This story is a way of suggesting a scenario where land could be sold between countries.

  1. If the land is being used in an obsolete manner, owners over time could be persuaded to convert to a higher use.
  2. If the buyer country had more infrastructure to offer, the owners’ material situation improves with the sale. It has become fashionable to take shots at British colonialism, but no one seems to complain that the occupied countries received British passports and the privileges it bestows.
  3. Plan on the process taking time, as in generational time.
  4. As long as the land is low value and underutilized, there is most like a buyout price (speculative, of course!)

15$/hr will do?

Proponents of a 15$/hour minimum wage claim this wage will provide a worker with a livable wage. This is a little hard to swallow this as an across-the-board benchmark as standards of living change across the country. Even within Minnesota, the wage may be considered a decent amount in the outstate areas to just above starting wage in the cities. Price setting or creating artificial bounds in economic systems inevitably creates more problems than they solve.

Setting a floor based on a threshold of a plucked-from-the-air minimum standard of living assumes that each worker is supporting themselves on this one job. High school kids would receive the wage and they are supported by parents. The stay-at-home spouse of a family unit might pick up a job for a while for extra cash, not for the core flow of funds to pay the bills. These workers may not want to work to the level of getting paid a higher wage, or as teenagers, not be qualified for a higher wage. So, let’s set these two groups aside.

For the workers who need to support themselves on one job, a minimum wage could provide them with a bit more money. But there would be a loss too. Pricing is a source of information. If a full-time worker cannot command a sufficient wage in the market to meet their basic expenditures, people should be asking why– not topping off their salary and sending them out in the world. What would they need to obtain the job at a better wage, and what would it take to get it: education? a connection? flexible hours?

Say there was a pattern of a whole set of workers who were unable to secure sufficient work. And it became clear that the reason was geography, transportation, or language skills. Would it make more sense to supplement their wage with a stipend until the restricting constraint was lifted? Would it make more sense to overcome the reason for below-par wage offers so that they may be confident of higher wages in the future?

Don’t mess with the pricing system. It’s valuable information. It provides all the insights necessary to help people progress towards self-sufficiency.

Changing forms, changing agency

Steinbeck is known for writing from the vantage point of those who struggle on the edges of society. In The Grapes of Wrath, the reader travels along with a convoy of Americans fleeing the dust bowl-ridden southern states for better opportunities in California. The estimated three hundred thousand people who traveled across the country were of little means. They would simply pull over to the side of the road at the end of a day of driving and camp for the night.

In the evening a strange thing happened: the twenty families became one family, the children were the children of all. The loss of home became one loss, and the golden time in the West was one dream. And it might be that a sick child threw despair into the hearts of twenty families, of a hundred people; that a birth there in a tent kept a hundred people quiet and awestruck through the night and filled a hundred people with the birth-joy in the morning. A family which the night before had been lost and fearful might search its goods to find a present for a new baby. In the evening, sitting about the fires, the twenty were one. They grew to be units of the camps, units of the evenings and the nights.

The Grapes of Wrath, Steinbeck

This passage effortlessly describes a transformation that occurs when people share the same mission and experiences. While in route the families keep their possession to themselves and head west. Once they gather for the evening, the individuals meld into a group. This impacts how resources are shared.

The families learned what rights must be observed–the right of privacy in the tent; the right to keep the past black hidden in the heart; the right to talk and to listen; the right to refuse help or to accept, to offer help or to decline it; the right of son to court and daughter to be courted, the right of the hungry to be fed; the rights of the pregnant and the sick
to transcend all other rights.

The use of the word ‘rights’ probably has some of you cringing as it parallels the language of today’s activists. Others are about to be dismissive of this depiction as it is one of a simple commune. After all, experimentation with communal living in the 60s and 70s proved repeatedly to be a failure. But transformation into a group of one is only a temporary situation. And at times groups with similar interests are better to ban together and share resources under provisional rules.

The agency of the group becomes more important than the agency of the individual, at least while they are on the road. Every morning each family unit gathers up their few possessions and straps them onto their truck. And in the evening, they rejoin the other travelers. In this morphing of individuals, small groups, and mass immigration of the recently destitute there is a non-pecuniary tumbling of resources in order to pull everyone forward.

Consider another example of resource distribution. It is notable in its discord with traditional economic thinking and is used by clergy to offer another avenue of economic reasoning. The parable in the bible describes how a landowner chooses to compensate his workers.

Matthew 20:1-16
New International Version
The Parable of the Workers in the Vineyard
20 “For the kingdom of heaven is like(A) a landowner who went out early in the morning to hire workers for his vineyard.(B) 2 He agreed to pay them a denarius[a] for the day and sent them into his vineyard.

3 “About nine in the morning he went out and saw others standing in the marketplace doing nothing. 4 He told them, ‘You also go and work in my vineyard, and I will pay you whatever is right.’ 5 So they went.

“He went out again about noon and about three in the afternoon and did the same thing. 6 About five in the afternoon he went out and found still others standing around. He asked them, ‘Why have you been standing here all day long doing nothing?’

7 “‘Because no one has hired us,’ they answered.

“He said to them, ‘You also go and work in my vineyard.’

8 “When evening came,(C) the owner of the vineyard said to his foreman, ‘Call the workers and pay them their wages, beginning with the last ones hired and going on to the first.’

9 “The workers who were hired about five in the afternoon came and each received a denarius. 10 So when those came who were hired first, they expected to receive more. But each one of them also received a denarius. 11 When they received it, they began to grumble(D) against the landowner. 12 ‘These who were hired last worked only one hour,’ they said, ‘and you have made them equal to us who have borne the burden of the work and the heat(E) of the day.’

13 “But he answered one of them, ‘I am not being unfair to you, friend.(F) Didn’t you agree to work for a denarius? 14 Take your pay and go. I want to give the one who was hired last the same as I gave you. 15 Don’t I have the right to do what I want with my own money? Or are you envious because I am generous?’(G)

16 “So the last will be first, and the first will be last.”(H)

A current vision of the workplace challenges this story as compensation does not correspond to hours worked. Each worker is an individual and each hour worked is a unit to peg on a tally sheet. And this is often the most productive way to accomplish workplace projects.

But I think here, the message is that the landowner has a different goal in mind. He challenges those that say it isn’t fair as he lived up to the bargain he struck with them at the beginning of the day. The motivation behind the landowner continuing to hire workers until the last hour cannot be judged from their perspective. I feel the story asks you to consider the workers as a set, where each one is offered the daily wage.

Forms and agency of a communal nature have always, and will always, be a part of our economic landscape. They play an integral part in the progress made toward goals such as pollution reduction, safety, and thousands of social and cultural objectives at play in our lives. The goal is to understand their shape and impact on the process.

Being fair to your kids

There’s a lot of talk in policy discussions about fairness and how it is evaluated. One angle of the conversation that can’t be underestimated is the accounting or measure for the item at hand. There’s a propensity to measure everything in dollars. But the nature of public goods resists such restraints. Here’s an example.

Say one of your children was destined to be an engineer, and the most prestigious engineering school in your area was part of the big ten local university. The child is accepted and successfully completes a degree. Now say the second child’s career will be optimized by obtaining a liberal arts education. The top school in this regard is a private college which costs thirty percent more than the public university. The second child succeeds, as well, at completing their degree and both children are hired into their desired professions.

Does the parent owe the first child the 30% differential in tuition for the four years of private college? An argument for fairness might include an accounting of dollars spent on each child. Then child number one could make a claim for the additional funds. Some might find this manner of divvying up resources as fair.

On the other hand, both children attained the goal of a secondary education which allowed them to maximize their professional lives. In this manner, they both received the intended objective of their secondary education. In this case the fairness moves away from the money spent versus the achievement of the goal.

Note that in this story there are some assumptions made about the overarching available choices. Both chose from the surrounding area and did not compete to enter institutions farther afield at greater expense. There’s a reasonableness that the children are staying within the same zone of options. To switch to another layer of economic choices could alter the fairness consensus. Which is why this issue gets so sticky so quickly.

Differences between culture, institutions, and platters

When people talk about the culture it seems like they are referring to a product. It is something you can point to and see its shape. For instance, the term popular culture conjures up images of the latest doo-wop band or a well-viewed film series or the latest forms of dance. It is the culmination of artistic products consumed by the masses.

High culture on the other hand tips a hat to a cappella choir singing St. Mathew’s Passion accompanied by a local chamber orchestra. Or to well-dressed patrons sipping white wine at an art gallery opening. The idea of culture summons up what there is to be consumed in a city dedicated to the arts. It is the experiential outcome.

Institutions also reside in the societal space. But the term emphasizes the commitment rather than the outcome. Political institutions are those dedicated to the appropriate functioning of a political system. The institution of the family refers to the rules and norms which enhance rather than detract from family relations. There are institutions which support the armed forces, or the justice system, or k-12 education.

Since institutions are defined by their objective, they are often qualified in terms of being strong or weak. This qualification refers to how well the society in question is meeting its objectives. Whereas culture is the end product– a work culture, a drug culture– institutions are the social goals people are willing to organize around and enforce at a high level. Yet both of these terms are used in the broadest sense. There is a vagueness of how it all works beyond naming the task at hand.

The one thing we can say about both cultural goods and institutional goods is that they are both public goods, in the modern sense. If a neighborhood has a drug culture, it may roam through all its streets. If a business has a paternalistic culture, all its employees will benefit from matching pension plans or flexible family leave. We are not talking about individual agents; we are talking about individuals who are just one in a group of many.

What both terms fail to include is any type of tie-in to resource limitations. And that is where platters come in. For the purposes of analysis, one must narrow down the view. One must pick a passion and a people and account for what they have to contribute to such endeavors. And once you do this it is easier to see how the competing interests in people’s lives only allow for so much dedication to cultural activity or institutional enforcement. The platter is a slice of communal activity to be placed under a microscope and analyzed.

Activism in lieu of Church

A few weeks ago, John McWhorter appeared on a talk hosted by St. Olaf’s Institute for Freedom and Community. It was entitled Antiracism as a Religion. He’s not the only public intellectual drawing lines between the needs of the woke and the services of religious communities. But he did write a book about it, Woke Racism: How a New Religion Has Betrayed Black America.

Edmund Santurri, the moderator, a philosophy professor at the college on the hill, seemed genuinely offended that McWhorter aligned a practice imbued with a holy sacrament with secular activism. And I see his point. Although the faith aspect of religious identity is only a portion of a relationship to a church. Many people attend worship in congregations where they do not agree with the entire catechism. The church going families I know participate in the church for the wide breath of community interactions both between congregants and with the greater public.

In a recent Bloomberg column, Tyler Cowen theorizes that this natural desire to be part of shared interests is what drives many tech workers to the Woke.

Wokeism does. In fact, this semi-religious function of woke ideology may help explain what many people perceive as the preachy or religious undertones to woke discourse.

You might wonder why this shared culture is left-wing rather than right-wing. Well, given educational polarization in the U.S., and that major tech companies are usually located in blue states, it is much easier for a left-leaning common culture to evolve. But the need for common cultural norms reinforces and strengthens what may have initially been a mildly left-leaning set of impulses.

Developing such a common culture is especially important in tech companies, which rely heavily on cooperation. The profitability of a major tech company typically is based not on ownership of unique physical assets, but on the ability of its workers to turn ideas into products. So internal culture will have to be fairly strong — and may tend to strengthen forces that intensify modest ideological proclivities into more extreme belief systems…

Marginal Revolution

All of this goes to support the theory behind this site. In the same way there is a human tendency for greed, there is also a tendency for compassion.

When people are isolated in their daily lives from those who could benefit from their good works– such as in the scenario of a company full of affluent highly educated workers– they are left with services that have no destination. It is plausible to say there can even develop a sense of unease about how much has come their way when well aware of the plight of many others. When denied that weekly outlet of giving that a church could provide, the wealthy workers may seize up with guilt.

And of course, it is all good and well that people should get involved with many of the non-religious associational affiliations like professional associations and company sponsored non-profits. It is recommended! Unfortunately, these can seem mundane. So when activists come along with promises of REAL CHANGE at revolutionary tempos, it’s all very appealing.

Getting More Properties to Market

As the new listings plunge to pandemic-year levels, an obvious question is how do we get more properties to market. Where are they, and why isn’t the regular turn over in ownership providing opportunities for new buyers to acquire property?

I’d be curious to see a study about the effects of the capital gains tax on people who own less than four properties. Say an individual held onto a condo or townhome after they got married. It was fairly easy to rent, and the years roll by as one gets busy with family and life. Before you know it there is a couple hundred thousand dollars of equity tied up in the rental. Now if the owner were to sell, they would have to recapture depreciation and pay capital gains. And this is substantial.

If this tax is holding back sellers from releasing their property to market which in turn disallows wealth growth by a younger generation- perhaps it is more of a societal detriment than a source of income.

How many triggers are in this post?

It won’t take much googling to find out about the recent dust-up around Ilhan Omar’s illusion of quasi-universal American racism against Muslims. Instead of being distracted by the inflammatory nature of the post and reposting by a competitor for her seat for office, think about the mechanism she is using and how, in the past, it worked to her advantage.

First, you’ll need to know a little background information about the place where she grew up. As MPR reports, “Minnesota is home to the nation’s largest Somali population, numbering 74,000 with 46,000, or about 62 percent, estimated to be born outside the country.” But it wasn’t always that way. Omar arrived with her family in the mid-’90s. By 1999 only 3% of the state’s population was of African American heritage and 8% of minority background. In the latest census, over 20 percent of Minnesotans are considered non-white.

The average Minneapolitan is politically blue- but many people have supported immigrants from the start. Church groups sponsored and supported families coming from Asia as well as Africa. But an increase in such a great number is bound to upset some taken-for-granted norms and expectations. The remedy for this is to advocate tolerance for that which you do not know. But how can you know what you do not know?

This is where the trick comes in. If you don’t know how people on an airplane will react to Muslims praying in an airplane, then you can be led to believe the worst in people by the expert local politician. Furthermore, a Minnesotan with little exposure to being abroad may feel obliged to go along with the outrage and turn on themselves (mysteriously the same people who nurtured the immigration process to start). This I’m-going-to-tell-you-how-horrible-you-are strategy has worked in a naive crowd who could in fact find a few horrible people to point to.

Things have changed. People are remembering that there are a lot of good people out there- in fact, most people are kind and decent. Ilhan seems to have lost her touch with reading the room. It will no longer be enough to be the beautiful rebel, sword in hand a la Jean d’Arc, on a quest against any evil human monster she chooses to pursue.

Tax Day USA

Today is the day you must file your taxes in the US. Expats are also required to file no matter where they live abroad. We pay federal taxes, as well as state taxes, which are established independently. Here’s an economist’s estimate on taxes ranked by the amount paid:

If I had an opportunity to influence tax policy, I would pursue two objectives. Create a process that a high school graduate can accomplish independently of any professional services. Create a process where taxpayers experience, in some way, the cause and effect of payment and services.

The money doesn’t make it to its destination

I doubt it is a surprise to anyone that Black Lives Matters cannot account for $60 million of the $90 million they received in donations following the death of George Floyd. A recent purchase of a 6500 square foot mansion with pool, studio and many other flashy features drew attention to the organization’s finances.

The report has further fueled questions about BLM’s finances barely a year after it released the first look into its finances. The foundation said it collected over $90 million in 2020 alone and committed $21.7 million in funding to various BLM chapters and grassroots organizations. With its operating budget set at $8.4 million, more than $60 million was unaccounted for.

Black Lives Matter purchases $6 million property with donation money

The group didn’t always attract large sums of money. It started as a hashtag #Blacklivesmatters in 2013. The call to arms took hold and grew into the rally call for protests following detrimental treatment of black Americans by the police and justice system. For many years the work involved organizing protests following the deaths of Trayvon Martin, Michael Brown, and Eric Garner.

If the social product is to reset conduct toward a minority group in and around criminal activity, BLM is the marketing arm of the industry.

In 2020 social media drew world-wide attention when a teenage girl filmed the death of a black man while a police officer held a knee to his neck. The dramatic unfurling of anger, protests, outside influence, sabotage, precinct burning, national guard intervention were all branded by the Black Lives Matter hashtag. When people (consumers) wanted to respond to unfair treatment to fellow human being, as the natural human response leads them to do, they sent their resources to BLM. But this is the same as sending money to the advertisers who create TV ads (sorry I’m old!) instead of paying the company in question directly and receiving a good in return.

BLM is an activist organization, a group that wants to shed light on an issue. The $90 million went to the advertisers not to actors within the system which needs correcting. And since they are not in a position to really change anything within the police/justice schematic, the money is too easily grifted.

Minneapolis Fed Series

 

The Minneapolis Federal Reserve has started a regular zoom offering. Today’s event was part one in a rent stabilization series. Libby Starling from the Fed was the moderator. Edward Goetz, of the UMN and author of Clearing the Way, is known for favoring rent control. The two other panelists, Sophie House (NYU) and Jenny Schuetz (Brookings) offered new perspectives on the issue.

One objection stems from an efficiency issue. Creating an across-the-board rent control rule means that those who do not need a subsidy receive it anyway. Instead of targeted benefits to people in need of assistance, all renters benefit from an increased restriction. In fact, it is noted that all the rent-controlled apartments remaining in Manhattan are occupied by wealthy New Yorkers.

I like the image that a community has only so many dollars to devote to the financial support for people who can’t afford their housing. Worrying about the efficient allocation of this bundle of cash will keep the system tight and free(er) from fraud. Blanket rules mess with the market for rental housing. Targeting benefits while maintaining the natural flows in the shelter business will distribute resources based on priorities in an entire system.

Conjuring up a bag of cash marketed as subsidy housing money is one new framing. Another is to group types of consumers. The story of rental restrictions is always told as the battle between the poor and the horrible greedy landlord. These conversations seem more about taking money away from the investors (determining a *fair* appreciation) than trying to get people into the best housing situation. Mainstream buyers are not thinking about their seller’s finances when the make an offer on their home; they are thinking about the great kitchen and the short commute and the great schools for the kids.

When we’re trying to house the least advantaged, public dollars should be leveraged to put people in close proximity to the public services they need most. If they have kids, offer a subsidy to keep them in the same school district for the remainder of their children’s K-12 education. If they are a lower wage worker, see if the companies will participate in a subsidy which keeps the workers close-by. If the recipient of the subsidy is in need of regular medical care, have their stipend be tied to buildings close to significant medical facilities. Match the group of people the lowest rung of income to the neighborhoods which are best suited to notching them up and out of this social stratosphere.

There are some rotten landlords out there. And they need to be pursued for a higher level of service for any of the tenants who live in their buildings. But don’t tie up the bag of subsidy cash with buildings. This wastes social dollars and doesn’t get the intended recipients into the best match of housing supply.

More from Downs

Anthony Downs wrote Neighborhoods and Urban Development in 1981, yet this quote is as applicable today as it must have been then.

Each city’s strategy must balance two sometimes conflicting objectives. The first is encouraging renovation, since it upgrades residents environments and benefits the city government fiscally. The second is minimizing harm to low-income renters. In loose housing markets, city policies can encourage maximum revitalization, since displaced households can find alternative accommodations without suffering much harm. But tight housing markets pose a cruel policy dilemma, because revitalization may then cause severe hardship for poor displaced households. They probably cannot easily find alternative accommodations without paying much more for them–if then.

A tension exists between two groups of housing consumers, each interested in the same option: the bargain-priced property. What isn’t discussed in time. If transitions are in sync with the natural timing of residents giving up their homes, then it is a win for the city to benefit from stronger housing stock, and the poor who has moved to better circumstance.

My concern is that there is a little public commentary about helping the disadvantaged to match with neighborhoods best suited to meet their public goods needs. The conversation always seems to be about keeping people put, …in dilapidated housing.

Let’s go for the double win. We have the capacity.

Old Fashioned Theft vs Social

Most people have a pretty good grasp on theft. An object belongs to one person and someone else takes it. There’s an ownership issue and a transference of the item or cash to another without knowledge or permission. For instance, a few weeks ago the news carried a story of an employee at Yale stealing electronic equipment. She ordered equipment over and above what was needed, sold the surplus, and pocketed upwards of $40Million. That’s a lot of cash.

One can only assume that she was able to get away with the scam for that long because she was in a position of trust. The status of employees was beyond reproach and hence normal protocols of employees taking at minimum a week’s vacation were waved away. This last part is social theft. It’s distinct from material theft.

Let’s take another example. Bernie Madoff plead guilty in 2009 to running the largest Ponzi scheme in the world and was sentenced to 150 years in prison. Taking people’s money and not giving it back to them is old-fashioned theft. The social component of Madoff’s scheme was to rely on his community ties to feed his graft. Wikipedia calls it affinity fraud.

Madoff targeted wealthy American Jewish communities, using his in-group status to obtain investments from Jewish individuals and institutions. Affected Jewish charitable organizations considered victims of this affinity fraud include Hadassah, the Women’s Zionist Organization of America, the Elie Wiesel Foundation and Steven Spielberg‘s Wunderkinder Foundation. Jewish federations and hospitals lost millions of dollars, forcing some organizations to close. The Lappin Foundation, for instance, was forced to close temporarily because it had invested its funds with Madoff.[109]

When an actor internalizes a benefit received by being a member of a public group and then steals, the deceit is double.

What is public, Sidewalk clearing edition

When I started writing more extensively about the economics of neighborhoods, I thought a good place to start was by dislodging the concept of public and private from the old school delineation. This version says that certain goods are public by nature, as in the notorious lighthouse whose beams bring all boats to shore safely. And it is right for the government to administer public goods which make up the public sector.

My view is that societies determine what they (they can be the citizens in a democracy or a dictator or an elite group in an autocracy) want to be public and what they desire to remain private. I wrote about it in a little lengthier piece, Our Problem is a Problem of Design.

How people come up with what is private and what is public is interesting from a resource distribution standpoint. But it isn’t money that is usually the driver for what is public. It is personal safety. The Hennepin Avenue Bridge in Minneapolis started out as a private endeavor allowing for crossings across the mighty Mississippi in the early years of the grain mill district. But repairs and safety concerns, in the end, pushed the overpass to transition to the city. Transport, in general, seems to fair better in government hands.

Let me bring you back to the snow removal story. One would think it parallels a consumption model of, say, water delivery. The household uses so much water and is billed for it. This isn’t accurate as there are no other means of obtaining water. The city acts a monopoly supplier of the good. And it is fairly straightforward and uncontriversial to bill by consumption.

Presently many residents do clear the sidewalks fronting the road to their homes. Let’s spitball it at 75%. This is labor provided at no cost to the public out of civic mindedness. If the city chose to take on the removal of snow as a public good, they are walking away from .75 x $20mil (the cost of the program) or $15mil. Plus, it seems with a little leadership, and city council support instead of neglect, there would be a capacity for folks to voluntarily pitch-in and clear more walks.

The thing about public goods is that they must be provided to all. Once a good is publicized, then the cost for the entire community is borne out by the public. In this case, the analysis points to further civic engagement rather than adding to the already full plate of demands on the city’s budget.

The story of the snow on sidewalks

When it comes to neighborliness it’s hard to get concrete numbers. There is a general sense that pitching in and helping out is a good thing. But does it count as economic activity? Here’s a story about snow falling on sidewalks that helps demonstrate the cold hard cash of being a good neighbor.

Sidewalks are common features of residential areas allowing the public to walk along the road. People stroll for exercise; they walk their dogs; they catch a bus at the bus stop. Residents are sometimes surprised when the concrete needs to be replaced that they are responsible for (the relatively costly) expense. The long-established norm is that the owner of the building behind the walk is the caretaker of the public walk. In a winter climate, the household also must clear the sidewalk of snow. Failure to do so can be hazardous as melt and refreeze makes for icy walkways.

The city of Minneapolis has been suffering from a lack of interest by residents to tackle to forty feet runs. A March 23rd editorial opinion in the Start Tribune calls a spade a spade, “let’s acknowledge that Minneapolis has an unacceptably large population of residents who feel no particular obligation to keep their walks clear.” It was written in response to a proposal that is making its way through city hall for the city to embrace the chore. The instigating motivation is people’s safety– “An unshoveled walk gets in the way not only of walking, but also of sightless navigating, of wheelchair maneuvering and other modes of travel that most of us need not master. When walks are covered in snow, a blind woman using a white cane cannot tell the difference between a residential street and an open field. A man in a wheelchair cannot negotiate the snow and ice, and might choose to risk traveling in the street instead.”

Please be aware that there are already serious repercussions in place for the n’er-do-wells who find it difficult to put their hands on a shovel. Here’s a violation letter:

I spoke with the crew who was clearing snow one morning. The gal said they can co up to thirty front walks in a day. Let’s see, 30 x $229= $6870. Paying six employees for eight hours of work only comes to $1680. It seems like a good money maker! But maybe they have to wait until someone complains to justify going out and shoveling.

This isn’t the first time shoveling has been a news feature. In 2018 the president of the Minneapolis City Council, Lisa Bender, was sited. Two of her constituents got creative and made an instructional video.

Another factor in shovel-gate might be the proportion of renters to owners in the city which runs about 53-47%. Owners receive the violation letter, but renters are in many cases responsible for snow removal in single-family homes, duplexes, and tri-plexes. Perhaps the process would be more effective if the $229 fee was directed at the residents of a dwelling.

Some argue that folks are disabled and for that reason cannot clear their walks. The US Census reports that 8.8% of city residents fall in that category. One would think that there is a capacity amongst city residents to lend a hand and help the few who can’t fend for themselves. But instead of pursuing a culture change, the city is looking into publicizing (my word, nationalizing at the city level). As one can imagine transferring a job to a bureaucracy is a little pricey. They are anticipating $20 million in this case.

Just to review the dynamics here. Most cities count on the goodwill of neighbors to clear walkways for the public. This is unpaid labor. For cultural reasons the residents of Minneapolis resist this norm. Instead of working on converting the mindset and showing people that it can be rewarding to lend a hand to someone in need, the city is pricing out the service. This process of making public something that was handled privately is called publicizing (the opposite of privatizing). The process will not only be more expensive, but it will also forgo the capacity of citizens to participate in their community. Publicizing is a change of structure not just a form of payment. It eliminates the possibility of citizens to see how simple gestures go a long way in communal endeavors.

And the price of neighborliness- for all you economists- is $20 million.

The age of infrastructure

Actor Will Smith got a little attention at the Oscars on Sunday. And I’m not talking about the negative attention, but rather the recognition for playing the part of father and coach to Venus and Serena Williams in the movie King Richard. It’s the inspirational story of parents who make things happen for their kids. But what does that entail exactly? The trade of all the family’s extra resources and time to the sole focus of advancing, in this case, the girls’ abilities to achieve greatness on the courts.

I like to think of this as the mom job, the I’m-there-just-in-time-for-whatever-it-is-you-need job. The support worker in a family makes sure everyone gets fed and to their doctor’s appointments. After the priorities of food and health, they follow up on extracurricular interests. And if time permits, they volunteer in those organizations which advance the family’s interests. While some people are making fun of home economics majors, Hollywood is rightly pointing out the power of the position.

Infrastructure jobs are turning out to be a powerful tool in fighting wars. No longer is the tough-guy action figure the primary hero in a foreign war narrative. Now the people greeting refugees at the train station, communicating the number of beds they have available on cardboards signs, are heroes. You can be recognized for giving shelter over the internet too, through a donation to Airbnb. Patrons are booking weeks that they do not intend to use, and the hosts are return notes of gratitude.

It seems that the secret is finally out. You don’t have to be the front man to be valuable. You can be a support worker in a family or in a community and be powerful. So instead of pursuing a politic of tearing down, let’s use social infrastructure to build up. And create some cool new stuff.

*Neighborhoods and Urban Development*

Tony Downs (1930-2021), an economist known for voting patterns and transportation, wrote about real estate. I thought it would be fun to dabble in his 1981 book Neighborhoods and Urban Development to see how the material holds up some forty years later. I must also point out that he matriculated from one of our best local schools, Carleton College, located in the bucolic town of Northfield about an hour south of the Cities.

In the beginning pages of the book, the author tackles delimiting what is meant by a neighborhood. I suppose to set off balance anyone who thinks a locale is simply a set of buildings, stale structures set upon parcels of land, he claims that neighborhoods are awash with the constant motion of resources.

Three aspects of urban development are fundamental to that understanding. One is the dynamic nature of urban neighborhoods (urban includes both city and suburbs). Each neighborhood experiences constant inflows and outflows of residents, materials, and money. Consequently, neighborhood stability can be achieved only by balancing these opposite flows, rather than by stopping them.

I don’t think Downs would care for NIMBYs as they are transaction busters. Although he doesn’t call the influx of resources, and the outcome of what is done with those resources, transactions. No matter. The key concept is that groups of people are moving in and out of areas. Data describing snapshots in time provides little insight as it is the movement and progression of interactions over time that is informative.

As his second descriptor, Downs points out that there is a dual nature to neighborhoods. The first one concerns the dwelling as a place to live. This is a privately titled structure, cared for and accessible to its owner. Yet at the same time, each dwelling is linked to communal services like expressways. The activities imposed by the road system can put strains or add features to the various units of housing.

The second aspect is the dual nature of urban neighborhoods. They are not only places to live, valued for themselves, but units of urban development inextricably linked to all other city neighborhoods and to the entire metropolitan area. For example, a new expressway connecting downtown with the suburbs may cause multiple shifts of activities and people. Industrial and retail employment (including some displaced by the highway) moves to the suburbs; office employment grows mainly in the downtown area; low-income inner-city households displaced by the highway shift to neighborhoods farther out; households initially living in these neighborhoods emigrate to new suburbs. Thus a major transportation improvement affects the population and land use of dozens of neighborhoods, including many nowhere near the new highway itself.

To review, Downs describes a landscape where economic activity occurs in a dynamic manner across neighborhoods via interactions of people, resources and cash. In the process of these ongoing exchanges, there are effects to private property as well as the communal property that links them.

Note: The third aspect has to do with the split between city centers and suburbia. We seemed to have progressed past this rigid divide as metropolitan areas have grown and morphed to the point that thus rigid distinction has faded.

What was normal then, may not be now

In recent years a ton of political capital is being invested in promoting the idea that homes are too expensive and virtually out of reach for most Americans. This seems like an exaggerated position, so I went to the US Census to see if the information is corroborated with data. The Minneapolis-St. Paul Metropolitan area is a geographic area that enlarged its composition to include thirteen counties. For the purposes of this chart, I pulled just the original five-county area.

Comparing the total number of households (1,112,883) to the total number of housing units (1,170,643) leaves a generous surplus of 57,660 units. Of course, there is a need for a certain number of vacancies so people can circulate. But as long as there are vacancies it is difficult to make the argument that sellers and landlords hold a monopoly in the marketplace. As long as there are landlords with empty units then tenants impact the pricing through their choices.

US Census

Perhaps more importantly than availability is how the monthly cost of housing stacks up to monthly income. And in all three counties, the median debt-to-income ratios fall in what bank underwriters consider a comfortable range of 21-27%.

The cost of homes has indeed been on the rise. Many argue that the prices are simply regaining their position after plunging so deeply following the great recession. Perhaps the complaints that we are hearing so much about has more to do with the framing of where people think they should be able to live, rather than price.

If we go back one hundred years, families found shelter in properties similar to this one. 

According to the tax records, this home has a foundation size of 660 square feet and a total above-ground living space of 1120 square feet. For a point of reference, that footage allows for a living-dining room, kitchen, and small room on the main level and a loft bedroom or perhaps two sleeping spaces upstairs as it does have a dormer window. The lot runs right along the railroad tracks and there is an outbuilding in the back of the property where they kept chickens.

I happen to know the history of this home. It was built in 1923 with insurance money. The original structure housed my grandfather’s family of seven kids and was destroyed when lifted off its foundation by a tornado in 1919. In all, forty-four city blocks in Fergus Falls, Minnesota, were destroyed. Families lived in a state of disrepair over several years until the funds came through for construction.

By mid-century, the one-level home (we call them ramblers in Minnesota) was the dominant style of choice. Huge tracks of land were parceled out into what became known as suburbia. Some would have you believe this was the result of a conspiracy, an evil plot to spread out and consume a lot of land. But the only force in play were families’ desires to live in two- or three-bedroom dwelling with one bathroom on a parcel they could call their own. Tour the new construction homes of today and you will note the conformity to consumer demand.

Both of these types of homes are available throughout the Twin Cities. Some are expensive, some are not. It all depends on their location. The dissatisfaction in the available housing seems to be about more than the structures of the homes. People seem to want to have more choices between areas. It’s not that there is no housing, it is that they feel the housing they aspire to is too expensive.

This story is compatible with what we see in the census numbers, but it doesn’t help those who desire a higher standard of housing. The solution here is to better match households with the neighborhood amenities which benefit them the most. Because what is acceptable at different stages of life will dictate where one finds the most suitable housing. And this should make people feel there is more value in their living situation.

The outcome of all this political interest in the cost of housing can be damaging. Recently the city of St. Paul established the most restrictive rent controls in the US. The data doesn’t support it. And already there are signs of disinvestment in housing projects. Activism without a cause always leads to inefficiencies.

Power players are not just politicians

One afternoon, years ago, when I was going in to pick up my now college-bound daughter from daycare, the girls were seated at a dwarf-sized table. A leader in the group had already emerged sputtering out the rules to the game underway. I was fascinated that the quest for power showed up at such a young age.

But since then, I’ve noticed that as soon as a few folks cluster, a power player emerges from the shadows. Sometimes it is a most unlikely candidate. And it’s a good thing too as many of these jobs are not of the high-profile glamorous types.

When the PTA needs a notes taker-secretary for their meetings. The gala needs a group to go out and hit up the businesses for donations. The youth basketball association needs a tournament director. Lots of work, no pay. What you do get is to have the final say and a little bit of recognition for pulling it off.

Insecure power-seekers (PS) are not so nice. They are often self-appointed directors of social events who like to manipulate who can come and who gets left out. Often casual get-togethers serve the same function as rounds of golf for businessmen: it’s a time where some voice concerns or needs and others step in with solutions or resources.

Often PS’s are not the best at anything specific. They have instincts on how people congregate. They have skills in re-direction. The talented ones are really good at people. The untalented ones are annoying.

What I’m trying to get around to saying is that people who enjoy and work the power levers are at all levels of society. Any model built to represent the infrastructure of cooperative interactions must take this into account.

A real estate agent’s agency

In Minnesota real estate agents are required to give clients an Agency Disclosure at first substantive contact. The commerce department’s concern is that salespeople, being all friendly and personable, hide who they are really working for in the transaction. A buyer’s rep sitting in a Parade of Home’s model, for instance, is working for the builder. Their agency is to secure the best price and terms for the contractor. A buyer who walks through the door may think they are working for them.

It is important for consumers to know the structure of representation. But not only in a real estate transaction. People hide their representation all the time. Take the on-going Minneapolis teachers’ strike. The message pouring out through social media is that ‘it is for the kids.’ (Thirty thousand in total who have not been in school since last week.) Yet the head of the teacher’s union reveals her true agency is to fight the patriarchy and capitalism.

Her intentions are misrepresented. In fact, one relative calculus might show that her actions are at the expense of the kids.

She is not the only organizer whose primary sphere of action is at odds with the cause they claim to represent. John Steinbeck’s novel In Dubious Battle depicts the organizers of a strike for farm laborers as separate, even outsiders, those they claim to represent. The (communist) party members’ objective, or their agency, isn’t to the workers but to the destruction of the power players, the Fruit Growers Association.

It might seem like a fine distinction, but through their actions one can see that it is not. The organizers in Steinbeck’s novel have no compassion for laborer who get hurt, or whether, in the end, they will be better off. The leader of the strike does not care that the school children, many of whom were already behind in their learning, are once again out of school. Their only objective is to unseat the power structure.

Perhaps the commerce department should oblige these organizers to pass out agency disclosures. Because the cost of their action is costly to our communities.

When responsibility tips

Communal arrangements are mostly nested. The family unit secures the primal position. Then surrounding neighbors (I like to think of this as the size of an elementary school district) create a group, then the city/suburb, county, state and so on. Overlayed in various positions of priority are people’s associations with religious affiliations, work associations, general interest groups and passions.

For instance, at the federal level there is the US Department of Education with a primary function to “establish policy for, administer and coordinate most federal assistance to education, collect data on US schools, and to enforce federal educational laws regarding privacy and civil rights.” Then each state has their Department of Education which gives direction, collects data and funnels money to the School Districts. Despite all these layers of oversight many decisions are left to the most basic unit. The administration of Covid rules, for example, was determined at the building level of a district.

The situation in Ukraine highlights the difficulty in determining when a nested structure requires an outside intervention. In the case of war there is an impulse to violate political delineations, drawn into the foray due to an associational compact of humanitarian compassion. But rupturing the divides between units of responsibility is always controversial. It is not clear when to breach the boundaries of a marriage in the case of suspected domestic assault. It is not clear when to intervene in the administration of a failing school. It is not clear how to restructure a department of human resources which repeatedly fails to administer benefits resulting in human tragedy.

The foundational reason not to intervene is that the unit will come out of a challenge stronger for the experience. A neighborhood which comes together to reduce crime through block parties, cooperative interactions with police and the courts will develop methods for working together. Once they realize the rewards of safer streets, the recompense for their work will further encourage the efforts.

But at some point, the outer group has to call it, and step in. Unfortunately, this often does not happen. The cost/benefit logic says that if the subgroup school is performing at such a low level over a generation or more, then the outer group is taking a hit. The need to interfere is justified in order to maintain a pre-determined threshold.

In Minnesota there is a political debate at the moment regarding the timing of the National Guard’s intervention during the riots following George Floyd’s death in 2020. The mayor of Minneapolis claims he requested help early on. The Governor claims he wasn’t given authority to intervene in the city. This last argument seems to fall flat when three miles of a city in his state is set alight. At some point it is clear that the greater group is obliged to step in.

I believe there is a relative calculus for these tipping points. We just have to find them in the numbers.

Pricing a lake view

The inaccuracy of Zestimates and the failure of Zillow to make money from their i-buyer program are both reminders that real estate is difficult to price. The standard method used to appraise property is to search out similar structures in nearby neighborhoods and then make adjustments based on the variation in features. This works well when there is significant turnover in property. The market activity provides a number of ways to bracket properties into price ranges.

Things get a little more complicated when the home sits on a premium lot, in particular lakeshore lots. There’s only so much waterfront property. The surcharge for the land is further complicated by the variation in possible approaches to the water. There are steep drop-offs which offer striking elevated views, yet some people don’t wish to tone their calf muscles through stair stepper exercises. There are flat lots where the home is set back to the point of a creating a tunneled view. There are marshy shorelines and pristine-clear-water-over-sand shorelines.

More often there is not a suitable comparable of the complete package of lot and building, so you have to do a separate analysis using the nearby non-lakeshore homes and then adding a premium. Otherwise, you can further afield to a somewhat similar lake and structure and come at a price from that direction. With less data, the span over which the price may settle becomes larger.

In the end an assessment is just an estimate of what the market will bear- the price is ultimately determined between the pool of buyers and the seller.

The social side of price

I think it would be hard at this moment to refute the notion that there is a social side to price. The ongoing conflict in eastern Europe provides ongoing evidence for the incorporation of both pecuniary and communal aspects of trade in a free market economy. It is clear that a barrel of oil at x price is not simply a barrel of oil at x price.

As countries who support a liberal world order scramble to reorient their trading partners for their energy needs, Americans in particular will see themselves underwriting this institution at the gas pump. The price paid for Russian oil was too low as no thought was given to the risk of dealing with people who blow up children’s hospitals. No accounting set aside a reserve.

This isn’t the first revelation of this kind in the last few years. Covid made clear the added expense of relying on overseas markets for things like protective wear and pharmaceuticals. The cost of a drug is cheap until your foreign supplier cuts you off. Then, as the commercial goes, it’s priceless. I think it’s plain to see there is some other equilibrium. And this includes a social cost component of price.

Just to further dig into the structure of my theory, let’s get back to oil and how there came to be a dependence on an unsavory trading partner. Although the US is capable of being energy self-sufficient, there are pressures for climate activists to halt pipelines and oil drilling operations. What’s wrong with that is they are advocating to solve a public problem in the wrong public. Climate change effects the globe and the public is the human race. Hence the economic implications are also global.

To isolate one country and feel good about cutting off their production while still consuming the good, just sourcing it from another country is, an aberration of a solution. And as most people who follow these things can point out, to force an inappropriate solution, simply means you pay elsewhere.

Tragically, this exchange is paying for the tanks and the bombs and the shells which are falling in Ukraine. Let’s become better accountants.

Tipping at Windmills

I have to say I’ve never read Don Quixote but the drawing of a slender man holding a spear, sitting astride a horse, with a windmill on the horizon quickly comes to mind. A one-line plot synopsis goes something like this: “Don Quixote is a middle-aged gentleman from the region of La Mancha in central Spain. Obsessed with the chivalrous ideals touted in books he has read, he decides to take up his lance and sword to defend the helpless and destroy the wicked.”

As the self-appointed knight goes looking for a fight he runs into all sorts of ruffians and ne’er-do-wells. He brings trouble upon himself and accomplishes little on behalf of the needy. So- here’s the question. Do high morals come first and then the search for those in need? Or is it best if those in need show themselves, so that their situations can be rectified? Perhaps Cervantes was trying to tip his hand indicating cards in favor of the later not the former.

Indeed, there is a story breaking in the Twin Cities right now that indicates if supply of funds is made available with lofty intentions, the criminals show up for the taking. And take they do. The Sahan Journal reports:

Between 2018 and 2021, Feeding Our Future accessed $244 million of federal child nutrition money. The FBI alleges that little of this money actually went to feed children. In a series of search warrants, the agency lists tens of millions of dollars allegedly redirected toward personal spending, including luxury cars, expensive property, and high-end travel. 

Part of the quarter of a billion dollars went to fourteen properties including $2.8M for a Minneapolis mansion, $500K for a fourplex, $500K for an apartment in Nairobi, $2.5M for a commercial space on Lake St, $1.1M for two lake lots in Prior Lake, $575K for a home in Savage, $14K on lawn care, $87K on vehicles, $49K to travel agencies and the list goes on….

And what was it the non-profit professed to be doing in order to access those federal dollars? They claimed to feed 60,000 children in November of 2021 out of a small one-story building. Did the logistics of how all those children were descending on that location not occur to those in charge of dispersing funds?

It was just back in 2015 that a similar con was discovered involving fictitious daycare provision in the same community. The restitution at that time was reported at $4.6M but there were allegations that $100M had been funneled out of the country. Yet instead of calling out criminality, this is how the politician representing that the district responded.

State Rep. Ilhan Omar, DFL-Minneapolis, said she’s troubled by the reports of childcare fraud, but notes that the fraud investigations wouldn’t be possible without communication between DHS and the Somali community.

“Vilifying an entire community — as stories like this often do — does not serve justice or get results. Collaboration does,” said Omar in a statement responding to the Fox 9 story.

It seems to me that when administrators go looking for a cause they create a market which someone steps in and fills with a demand. Want a woke endeavor but can’t find one? – We can fix that! And sure enough. That kind of cash flow will find a pocket to line. I hope they realize Don Quixote was a bit mad.

Market Failure- Or tapping to a different tempo?

If you are too young to remember when Julia Roberts came into her own as an actress, rewatch Erin Brockovich. No one can flash a smile as well as Roberts. And the zesty character of an everyday single mom taking on corporate America in a David and Goliath story is a perfect match for Julia.

But this real-life tale is a redemption tale for markets. Wait- you don’t have to go googling the plot to confirm the intent of the story was to exemplify market failure of the classic kind. The firm (in this case the Pacific Gas & Electric Company- but there were many) in an effort to maximize profits, refused to look into claims of contaminants seeping into the neighboring soil and water. In order to keep track of things, let’s name the marketplace with the anchoring of the firm. Let’s call this traditional collection of goods, customers and firm, M1. PG&E is striving to provide goods and services to their consumers at the best prices. It’s a win for everyone in M1!

But not so fast. Erin Brockovich steps in as an activist and donates hundreds of hours of her (unpaid) labor to help determine that the residents near the plant are suffering from externalities of M1. This is where most people stop and claim that capitalism doesn’t work because M1 has not taken into consideration the surrounding community. Truth be told, they just haven’t finished watching the movie. Because it is soon readily apparent that M1 is contained in M2. And it is in M2 that Brockovich and her law firm and the community residents are going to form a common interest and push back on M1.

Here’s a good spot to encourage the reader to look back through the menu to categories explained at Home-Economic. The activity in a social sphere is governed by groups sharing a common interest, and the efforts or sacrifices they are willing to contribute towards that goal and the ongoing and updated norms which guide their behavior. The young paralegal revved up the M2 by going to the group (audience) and educating them to the claims at hand. This spurs on further efforts to make M2 more efficient by rectifying the public health concerns being externalized by M1.

As many law firms know, if claims of this nature are successfully demonstrated, the courts will order a balancing of accounts through a financial settlement. This not only pays those harmed for the externalities, it also makes it clear to other firms that being negligent will end badly. In this case it took $335 million in 2006 to bring M2 back into balance.

Note too that this process also occurs for positive externalities. For instance, a company produces widgets in M1 at a certain cost to consumers. Then there is a technology improvement in a broader market, call it M2. Once the firm has access to the public good of knowledge of a new process/technology, then product prices drop and consumers in M1 internalize the benefit through lower prices.

The question isn’t whether the market is failing. The question is what market are we in and where is the inefficiency.

Vigilance for identifying and cleaning up pollutants has a long history.

Bonus to those who move

Cities around the US are paying people to relocate to their town. Marketplace recently ran a success story out of Bemidji Minnesota. They featured two families who took the city up on the offer of $2500 to cover the move. It seems that is enough money to risk the relocation expenses. Bemidji is getting pretty far north, not to the Canadian border but definitely that direction.

I pulled the demographics just to give you an idea of the landscape and was presently surprised by two things. First- the median age is a lot lower than I would have guessed. (For a generation or more these towns were aging) And furthermore, births are exceeding deaths by almost two to one. This is quite a switch.

Bemidji has a total of 11,917 people and of those residents there are 5,547 males and 6,370 females. The median age of the male population is 25.3 and the female population is 30.8. There are approximately 585 births each year and around 304 deaths.

https://www.movingideas.org/bemidji-mn/

These two families cited the work/life balance, a change of the pace of things, as the reason for moving to a smaller community from Topeka and Phoenix. Of course, the costs across the board are lower, but the lifestyle change is another way of saying they recapture more of their time. They can use their free hours to raise more children, get involved in civic projects, or simply have more fun pursuing hobbies which enrich their lives.

Since many writers and ambitious folks chose to live in the big coastal towns there is often this assumed bias that everyone wants to live in NYC or San Fransisco or LA too, they simply can’t. The reality is that a $2500 bonus will get people to choose a much different way of life.

Borderlands

There is a space where the private market slides up next to the public goods market. This is where decisions over which products and services are best produced under an esprit de competition and which are best served through cooperative efforts are flushed out like pheasant from the wayside ditch. A Minnesota writer, Aaron Brown, wrote about this landscape in a piece entitled The troubled border between consumption and conservation. The issue on his mind is the ongoing tension between the desire for jobs from mining and the environmental impact they create.

How countries have handled these two spheres in their political choices is not what is being discussed here. This is more local than sweeping observations on governance directions towards socialism or communism or capitalist democracies. (Even though, it might be observed with a bit of irony that China has shown the agility of a communist state to profit from capitalist models. And whereas NIMY and YIMBY forces tie US cities into knots, China is using more private enterprise to build its cities.) Brown leads your focus past levels of national governance, past levels of state governance, past overlays of activism, and bring you right down into his back yard.

Bears fall limp on trampolines. Moose tangle in hammocks. Tourists lose themselves in the woods, their dying cellphones lighting a doomed path even deeper into the wilderness.

Then the helicopters come, looking for the source of the signal. They scare up the birds as their blades sweep across the marsh reeds. The metal dragons return to their dens. So it goes along the borderland.

There is a need to micro-manage your attention because this is a saga has been in the air almost as long as All My Children. And at all levels, political players will attempt to obscure the choices, to pull your support to their side. The weapon du jour is a miscasting of identity. If you value communal interest, then you must be a communist. If you voice support of one political party, then friends may find reason to exclude from their next dinner party. The activist entreats you to wear their hats, wave their banners. At all levels teams are built to harness political voice

This last round was at the national level, as two days ago the Interior Department revoked a lease for a mining project. The 2019 renewal of the lease during the previous administration was considered improper. There was no new evidence of environmental harm.

Twin Metals, in its own statement, excoriated the Biden administration and called the decision “a political action intended to stop the Twin Metals project without conducting the environmental review prescribed in law.” 

https://www.courthousenews.com/interior-department-revokes-minnesota-mine-leases/

The campaign to save the boundary water’s chair declared this a “win.” One might as well be following the sports section.

That’s why Brown needs to capture your attention, pull you away from power plays and home runs, and back to the arts. He paints the issues out in more romantic depth than the Hudson River School of American artists. He wants you to consider choices over a variety of time frames. The spaces where public and private choices intermingle have cascading impacts and generational persistence. I wish more writers lingered here longer.

The borderlands are where interesting questions are answered. Aaron Brown lays some groundwork on how to navigate the space between two competing spheres of human interest.

Monopolies in the private and in the public

There is a watershed moment in the works as a Democrat, Amy Klobuchar, and a Republican, Chuck Grassley from Iowa, are teaming up against big tech.

Over the last twenty years a lot of leeway has been given to companies who needed control of frameworks in order to build what we know now as an ecosystem on the internet. A century ago the railroads were given similar leeway as they laid down tracks from east to west across the country. But now there is an appetite to disengage the big players from their power positions and open up opportunities for smaller players to get in the mix.

Most people agree that monopolies in the private sector work against the consumer. If producers gang up and set prices, then consumers have no choice but to pay what is asked of them. When producers compete for their customers’ business, then they become lean in an effort to provide the best product at the best price. The private interest of each individual producer is isolated from the private interest of a conglomeration of producers.

In this blog I describe a transformation which takes place when a group of people acting in a public interest compete for products against other groups acting in their public interest. For instance, during the early days of the Covid N-95 masks were a hot commodity. Minnesota and Iowa and Oregon were all out in the marketplace trying to secure orders from abroad. All were attempting to pursue the public interest of safety for Americans, yet in acting as groups, they bid up the prices of the masks. The appearance was a pursuit of a public good, yet since each were interacting at the state level, the economic behavior followed the private market mechanisms.

Could the same be said for public school unions, that they appear to be a public interest whereas they are truly private? The k-12 schools are provided on behalf of a public interest in an educated citizenry. And although many teachers carry a civic spirit, everyone would expect them to look after their private interests when negotiating the terms of their employment. Certainly, there was a time where the amplification of speaking as a group, with the help of a union, was necessary.

But the teachers’ union has grown in scope and power. They not only dictate teacher contracts, but get politicians hired and have greatly influenced the opening and closing of schools during the pandemic. And in those activities, they have failed to act in the public interest of the children’s education, as they are by essence guarding the private interests of their teachers.

I think I’m not alone in categorizing the teacher’s union as a monopoly in the k-12 industry. I doubt teachers can influence or overturn membership. I doubt that all teachers stand behind their union. I know many parents don’t. If you want to break up tech, why not break up the teachers’ union? They both show monopolistic behavior over a public utility.

Why aren’t more developers building?

I listened in on a housing forum discussion today and in the chat a question appeared: “Why are developers not building more housing?” Below is a graph representing the nationwide trend. The trend follows here in Minnesota.

As you can see during the recession of 2007 the industry went from a production level of 2,200 to 500 (thousand). Or the production dropped by over 75%. And still hasn’t recovered a decade later.

The story of why can be told by thinking through what that drop between 2006-2008 meant for thousands of individuals whose assets and livelihoods were tied up in new construction. It’s common for land developers to spend several years of work, from conception to approval to shovel in the ground, before collecting earnest money checks for a new-build that takes another six months to close. The recession left thousands of projects half done with foreclosure notices piling up at the county. Development is a high risk, with a lot of upfront costs, type of business. Once you fall off that bronco, it’s hard to climb back in the saddle.

Others were bit too hard to forget that time period. Building requires all types of workers from framers to concrete contractors to plumbers, electricians, and finish carpenters to name just a few. If three quarters of the jobs closed down, then just as many workers were caught unemployed. This meant looking for jobs elsewhere. Many from the Twin Cities went up to work on the oil fields up in North Dakota. This tore families apart who were already reeling from financial pressures.

Maybe an industry could get back on top of these objections after four or five years. People forget about the past and remember what it was they liked about their previous occupation. And new construction permits have gone up mostly lead by large national builders. Undoubtedly another constraint is the annual upping of regulatory requirements. Builders have to explain these extra costs to the consumers and simultaneously know that they are often framed as greedy, profiteers. That probably gets old.

The public may not remember the wind-swept developments with foreclosure signs, but I’m sure the investors do.

Assumptions and Assurances

Quite a few years ago when I was at the Carlson School getting an MBA at night, I recall a foreign student from Sierra Leon, or thereabouts, and I shaking our heads at the chatter of our fellow classmates. They were all off on a tangent on how easy this or that would be to accomplish. The foreign student and I were ticking off the number of implicit assumptions which held our fellow students’ ideas together.

The structures which support commerce in America are taken for granted by those who have experienced nothing less. We take it for granted that our money will at the bank, for instance. (Or even that the bank will open on time as I recall the Sierra Leonian noting) Most consumers not only anticipate the ability of financial institutions to keep our funds safe, but never bother to balance their accounts, as the bankers do all of that.

When I was a loan officer sitting behind an oversized wooden desk, my clients, from across the high gloss polish, would sign their mortage papers but never read them. They listened politely as I highlighted the terms and obligations for repayment, nodded, and then put pen to paper. In exchange for the blue ink on the promissory note which detailed possible foreclosure action for non-payment, they happily received a check. And so, it goes in America.

The fluidity in the marketplace and lack of concern with lengthy legal documents can be attributed to regular assurances people hear from all those around them. Their parents have bought a home, and it all went OK. Their friends used such and such mortgage broker and despite an inconvenience over some last-minute documentation, the rate and fees were as expected.

Of course, there are situations that lead the consumer dissatisfaction as well. A while back there was that interest free financing for six months at time of purchase of furniture or a large TV. But then the credit card didn’t send the statement with the balance in time, so the consumer was charged retroactively for 180 days of interest. More often than not these gotcha gimmicks get brought to the attention of the attorney general, and even though the duped don’t get repaid, future misleading advertising is curbed.

With the little bit of work and an audience for stories of assurances, the institutions which make for reliable financial services is maintained.

Sorting: Home Price is not the same as Rental Price

It’s more expensive to live in New York City than Omaha Nebraska. If you are only going to relocate to Denver for a couple of years, you should rent instead of buy. Housing prices suffer in Baltimore due to high crime rates. These are all statements that don’t need an explanation. Living in a city full of opportunity is going to cost more than in a city a fraction of its size. The commitment to purchase a property is both financially and emotionally taxing for a short stay. And high crime rates make just about any neighborhood a tough sell.

It is easy enough for consumers to observe these strong market indicators. But if we want to start digging deeper into what market prices of housing can tell us, than we must be a more careful about sorting.

If we wish to look at housing costs in an open market environment and break the values down in order to find market preferences for attributes tied to the neighborhoods, then we must choose between either (residential) home sales data or rental data. Otherwise, the statistical outcome will fail because these are two different market transactions.

Purchasing a property is a multi-year commitment. Renting is generally a year at a time. The rule of thumb on how long a buyer should anticipate staying in their home has varied over the years. Back when I first got in the business the benchmark was seven years. Between real estate fees to move- perhaps around 7.5% of value- and the closing costs of financing, a buyer requires several years of appreciation to break even on purchasing versus renting.

But I’d argue there is more to it than this sketch of dollars and cents of the buy versus rent decision. For comparison’s sake let’s consider the actions taken by a homeowner or a renter or an Airbnb occupant. They are all enjoying shelter in the same location of a city. An individual walks by an alley and there is a body lying near the dumpsters. The Airbnb people will probably finish their stay and not mention it to anyone, although they will probably rethink their choice of lodging for the following visit. The renter may or may not call an authority like the police. If bodies in alleys become a routine occurrence they will probably move.

I think you know where I’m going with this. The homeowner is the most likely to get involved and not only notify the authorities but follow through with contact to a city council member and so on. This is work done on behalf of the neighborhood with no financial compensation. It is a job taken on as an investor in the neighborhood who aspires to live in a safe and desirable environment. The homeowner is willing to make this investment whereas the Airbnb and renter are progressively less likely.

The relatively transient nature of renting can affect price in other ways. A consumer maybe willing to pay more to be near key features, especially arts and entertainment venues. The reasoning goes that they know this is a temporary situation so why not enjoy something that they will not have access to once they have to come down to earth and purchase a property. Or they choose over-the-top structural amenities and a higher level of finishes, again not available to them once the concession of a long-term purchase stretches their resources in other directions.

The analysis of rental prices in determining the implicit prices of neighborhood amenities are valuable. But will not yield the same results as the analysis of home prices since consumers are not purchasing the same items.

But what should be worth a mind-blown emoji and seems to be greatly ignored is the reliable impact of public goods on home prices. In addition to knowing a school district is worth $xxx of a home’s value, and all those other observations at the beginning of this post, just about anyone can run a regression on a laptop. Just go into the county records, collect the price of 100 similar homes by area, plug them into Xcel columns as well as FBI crime data relevant to area and school test scores for the property. Then go to Data Analysis>Regression>Ok and generate a lovely statistically significant relationship.

The relationship of price to crime and school performance is so strong it doesn’t even need the most general of sorting. But most other things will.

The home seller’s POV

In order for all those home prices to end up on a list at the county recorder’s office, both buyers and sellers must agree on the exchange. The idea of revealed preferences tells us how the buyers are viewing, evaluating and reacting to, not only the physical characteristics and conditions of a home, but also what type of neighborhood infrastructure is in place to educate the kids, and to collect the trash, and to obtain potable water and so on. When price is equated against relevant quality indicators, a number will indicate what type of weight buyers put on each of these factors.

Now let’s think about the sellers. Sellers of course would like to secure the highest financial bid on their home. But this isn’t the only consideration. Since there is a four-to-six-week lag time between signing a purchase agreement and closing on the property, parties to the transaction consider the buyers’ level of earnestness, as it is a great disappointment should buyer’s remorse creep onto the scene. Sellers also take into account the financial viability of the buyers to be sure the lender will show up at the closing table with a suitcase full of cash.

A seller is no longer thinking about the public goods in their neighborhood because they are soon to exit the networks which rely on and participate in the production of those goods. But when they accept the money for the sale of their property, they are receiving payment for any participation they may have done over their residency. If they petitioned the city council for traffic-quieting-turn-abouts for safer streets or set up a tennis association to get people out exercising or led the kids out on a Trick-Can-Treat to gather up canned goods for the food shelf, it is at time of sale when they receive payment for their labor.

From my point of view, the equity in their home which accumulated during their ownership due to all these types of activities and investments is social capital.

Finding family more valuable

People in the prime earning years of their work careers are leaving it all behind. Some have no plan at all except to be done with what they used to do and look forward to perhaps consulting options or other opportunities. Others resigned with the intentions of helping with their grandkids as the burden of at home schooling and work and having something of a marriage was taking its toll on their kids. The numbers for the Midwest are clear, with quit rates climbing to all-time highs, as shown here by FRED.

For some the virus has made life too stressful. The uncertainty of whether your kids have a reliable place to be during work hours is a significant concern under any circumstance. The last minute need to take leave from paid employment to look after a quarantined kid creates an entry on the positive side of the on-going debate whether the family would be better off with one worker dedicated to family affairs.

Many people settle into the extended family model where grandparents or aunts and uncles show up for a childcare shift throughout the week. This also alleviates the stress of transport to and from daycare in twenty below weather sliding over ice covered roads. The anxiety of a worker when faced with being late to pick up their infant is palpable.

People are making quality of life choices. It appears that Covid has drawn people up short on past choices about paid employment versus employment which allows greater time spent building equity in family relations, or flexibility to pursue other associational interests. Once people start sharing such ideas with others, a little self-reflection can set off a chain reaction.

Labor, like any commodity, is compensated by a mix of pecuniary and social rewards. Where individuals, couples, or extended families find the balance of enough cash and enough time to keep the family support systems in play so that everyone is safe and fed and healthy. And then there’s the altruistic side of people who feel the sheer reward of adding to the public goods market whether through education or their many other talents.

Valuing persistence

Melissa Dell, an economist at Harvard, writes about persistence. One of her studies considers evidence of the effects of colonization in Indonesia. The Dutch controlled the archipelago caught between the South China Sea and Australia starting in 1610 with the establishment of the Dutch East India Company. Although the trading entity evolved, control of the territory and its resources lasted into the twentieth century.

Dell finds that the European presence left behind some societal benefits which persist to the present day. From the abstract of The Development Effects of the Extractive Colonial Economy: The Dutch Cultivation System in Java.

We examine these in the context of the Dutch Cultivation System, the integrated industrial and agricultural system for producing sugar that formed the core of the Dutch colonial enterprise in 19th century Java. We show that areas close to where the Dutch established sugar factories in the mid-19th century are today more industrialized, have better infrastructure, are more educated, and are richer than nearby counterfactual locations that would have been similarly suitable for colonial sugar factories.

Using a method of comparison between two similar geographic areas, the researchers were able to prove that the existence of factories and supporting works carried forward as a system, even after the colonizing power departed. It appears that the economic value of the factory extended beyond the daily production of the product at hand; that there is a residual benefit beyond the export produced (to the benefit of the Dutch) which remained attached to the land.

We also show, using a spatial regression discontinuity design on the catchment areas around each factory, that villages forced to grow sugar cane have more village owned land and also have more schools and substantially higher education levels, both historically and today.

Modeling this in the public/private-externalize/internalize framework would start by identifying three groups: the Dutch, the in-Indonesians and the out-Indonesians. The story of colonization which has been popular of late only involves one transaction. In this case it would be the Dutch reaping private monetary rewards from the sale of sugar to all the ports on the sailing route through the Straits of Malacca, around past Ceylon, past the Cape of Good Hope and on back to Europe. And although this is true, it leaves out a bunch of other trades.

Dell’s work indicates that the in-Indonesians (the ones who worked in the factories) ended up better educated. Their interactions with foreigners included being taught skills required of the job. Because it was to management’s benefit, time was spent to provide a public good to the locals which they then internalized. Similarly, because it was a benefit to the Dutch in a private sense, significant investment was made in transportation infrastructure, as noted here.

The analysis thus far has focused on the private sector, but public investments may also be an important channel of persistence. The historical literature emphasizes that the Dutch government constructed road and rail networks to transport sugar to ports. The Dutch made large infrastructure investments precisely because it was profitable for them due to the extraction of a surplus, and they would have been very unlikely to make these investments elsewhere in the absence of extraction

These public facilities were a public good to all the Indonesians who chose to use them. But Dell goes further in her analysis to suggest that the in-Indonesians persisted in developing infrastructure after the Europeans departure as they were simply more in-tune to the process of petitioning government for improvements. Perhaps their higher level of property ownership also motivated them to pursue a public good as they themselves would privately benefit.

To tell a story as a one-sided transaction does not do history justice. A complete accounting of all the transactions needs to be in play to evaluate whether everyone came out better off, or not.

Easier to see, when seen from abroad

Tim Taylor, an economist across town at Macalester College, was taken by poet Roya Hakakian‘s lengthy description of voluntary efforts to support associational objectives. If you were doubt whether individuals voluntarily give time and resources towards public goods, this list should set you straight. Everything that follows is taken from Tim Taylors blog the Conversable Economist:

I was also intrigued by Hakakian description of being surrounded by a nation of fund-raisers for small causes:

You used to give a coin or two to the poor of your city, or drop a banknote in the collection box at your place of worship, or help a neighbor or a friend with a loan. But these were a few small exercises at best. Here, people give regularly. Squirrels collect acorns, and Americans raise money. It is as natural as any instinct for them. Children offer lemonade on sidewalks to raise money for the kittens at the animal shelter. Girl Scouts go door-to-door selling cookies so other aspiring girls can become Scouts too, and do the same. Mothers organize bake sales to help pay for a new neighborhood playground. Teens give to the GoFundMe campaign of a filmmaker working on a documentary about the endangered aardvarks of Angola. Even Santa, the nation’s gift giver in chief, appears at the threshold of major department stores every December, ringing a bell at the side of a siren-red donation bucket. Overworked cashiers will not scan your items before listlessly asking if you would like to donate a dollar to the fight against something or other. Once a year, arsonists take a day off so firefighters can stand at intersections holding up their rubber boots, charming drivers into pitching in a few dollars. At the registers of greasy gas stations, two things are always guaranteed: the noxious smell of fuel and the cardboard quarter receptacle for St. Jude Children’s Research Hospital. In some movie theaters, films cannot start unless the ushers have walked aisle to aisle passing the empty popcorn container to collect money for whatever the star in the public service announcement
urged the viewers to donate to. Entertainers hold telethons to raise money for this disease or that. Rock bands compose songs for disaster victims and give them their proceeds. Radio broadcasts are interrupted so the hosts can make appeals for a donation, which the local attorney or dermatologist matches. Runners run, bikers bike, and comics crack jokes, all to help raise money for the needy. Politicians bombard their supporters with emails, asking them to give five, ten, twenty, or more dollars toward making a better tomorrow, when, in addition to a higher minimum wage and universal healthcare, there will also surely be more emails asking you to donate again. Corporations have charitable arms. Dignitaries ask for money to build homes for the destitute. In television commercials, celebrities, holding doe-eyed babies in their arms, urge viewers to adopt a child on another continent through a monthly contribution. Anything is possible in America, even raising a baby by subscription.

When Americans do not raise money, they raise necessities. They have book drives, blood drives, food drives, turkey drives, even car drives. If they cannot solicit you in person, they send you letters. Heaps of envelopes arrive in America’s mailboxes every week asking the
citizens to donate to one organization or another. Fundraising is a behemoth as vast as any industry. … You may be naturalized already, but unless you begin writing checks for people you have never met, living in places you would never visit, you are not a real American.

No nation so rich has ever asked for more money. They do not need the order or the permission of some authority to tell them what to raise and for what cause. They take matters into their own hands and wage campaigns to save the pandas, protect the bees, or reverse beach erosion. What is at the heart of all this fundraising is the same thing that is at the heart of all other perfectly American things—an irrepressible self.

For interested readers, here’s the full Table of Contents for this most recent issue of Capitalism and Society, with abstract and links to papers.

A premise

As a kid I really liked math because no matter the school curriculum, or country I happened to be in, the numbers were always the same. The problem sets followed a format as well. The givens were presented first off, and any other relationships, then you used theorems to generate answers– or rather one right answer. That was delightful! In customs and cultures there were never ending answers and conditions and expectations to keep track of.

In a philosophical argument, instead of givens, there are premises or premisses. Yet here, one must be ready to stand behind their validity.

premise or premiss[a] is a true or false statement that helps form the body of an argument, which logically leads to a true or false conclusion.[1] A premise makes a declarative statement about its subject matter which enables a reader to either agree or disagree with the premise in question, and in doing so understand the logical assumptions of the argument.

Wiki

This would be all well and good if language were precise. But it’s not. The project seems doomed for perpetual hair splitting. Unless of course one has some sort of authority so that everyone simply nods to their wise ruling and agrees. (yet, I’ve always been suspect to authority as too many people in lowly positions are in fact far brighter than those in lofty positions to which authority is often assumed)

For the argument I make here, at home-economic, a primary premise is that individuals have freedom to make choices. In a free and open society this seems indisputable, but then a questioning starts. What about the poor, or the homeless or children or the elderly or, for that matter, the breadwinner who feels trapped in a place of employment? Does someone living under a bridge really have choices? Yes.

And I would even take it further and say that those who are so removed from the circumstances in play, folks who stand too far back to be able to note the distinguishing characteristics of choices, these people have little to contribute to the conversation. For if one cannot or simply do not acknowledge the framework within which a particular group is living than, for lack of understanding, their interference is likely to do more harm than good.

Here’s an example given in Viviana Zelizer’s book The Social Meaning of Money at the start of Chapter 5.

IN THE NEW TALES told by social workers during the early twentieth century, money was recast as the modern “white hat” of the charity saga. Consider the life story of Mrs.  Czech, featured as the rhetorical centerpiece of an influential article published in The Survey in 1916 by Emma Winslow, home economist at the New York Charity Organization Society. Mrs. Czech was a widow who, for three years after her husband died, “was not obliged to use money in any way. “A charitable society provided her and her six children with food and clothing and paid their rent and insurance. And yet, despite such “theoretically…perfect care, the Czechs floundered. The mother “apparently … had no interest in the appearance of her home or of her children.” Nor did she care about their food. Soon, the children’s health deteriorated, their faces becoming “sallow and pasty.” At this point, the charity society decided to shift the method of relief into a weekly cash allowance, instructing Mrs. Czech “to do her own buying.” Soon housekeeping “became a delight,” the children’s health flourished, and the formerly indolent widow turned into a “remarkable… domestic economist.” And all because she now had the cash “to buy what she wanted when she wanted it.” 

In this case substituting cash for a pre-selected bundle of goods allowed an actor to benefit from choice. Please don’t misread this to say I advocate for cashing out of all social circumstances. Far from it!

The premise I am trying to highlight is freedom of choice. That optimal solutions occur when individuals are free to make choices as they filter through the various economic marketplaces of their lives.

Network Connector

We have a little suburban newspaper that shows up in the mailbox on Thursdays. It’s called the Home Town Source and runs letters to the editor about local issues, covers the city council and school board races, and devotes three spreads to high school athletics. This morning an article about a Plymouth man caught my eye. He’s a perfect example of a connector.

Students in Ghana received more than 16,000 books last week as part of a collaboration between the African Diaspora Development Institute and Books For Africa, a St. Paul-based nonprofit.

The effort was led by Plymouth resident Jote Taddese, a former Books For Africa board president and a board member of the African Diaspora Development Institute. Taddese is also director of diaspora engagement for Books For Africa and a vice president of engineering at Optum Digital, a United Health Group Company.

The common interest here is literacy, an interest that transcends geographic boundaries. And the connector not only has ties to another continent through birth, but also experienced personally the benefits of picking up a book at a young age.

“As a person who was raised in Africa and educated in the diaspora, I am a living example of when we put a book in the hands of a child, we not only help fulfill the potential of the child, but also change the impact on the lives of individuals and the global communities that child will touch,” Taddese said. “This is my life experience that always inspires me to support kids in Africa with books.”

Taddese was born and raised in Oromia, Ethiopia, and immigrated to the U.S.

Not everyone is fortunate enough to be employed by an organization whose mission parallels so nicely with their private life. And the non-profit’s accomplishments are notable.

Last year alone, BFA (Books for Africa) shipped 3.1 million books, valued at over $26.2 million, and 224 computers and e-readers containing over 650,000 digital books, to 28 African countries. More than $3.1 million was raised last year to ship these books to the people of Africa.

But this story isn’t particularly new. The living standard differences between the two continents is so significant, and the lack of basic tangible goods like books so clear, that there is little to complicate the direction of the goods and services in arriving at their destination. The books in fact are what I call idle assets, sitting amongst a community unused, available at no cost except the work to get them to their new location.

Markets become trickier when the difference between groups vary less, when resources are not idle but need to be drawn upon, when ‘need’ is voiced loudly by people other than the intended recipients. In these cases we will need to rely on benchmarks for guidance.

PADI- an associational case study

Say one wanted to figure out the impact of participating in affiliations with the professional association of diving instructors or PADI. First off we could identify three groups that are major players with the association: the dive shops, the instructors or dive masters and the divers who show up to be taken down to the ocean floor.

As I’ve attempted to sketch out each of these groups which internalize (listed inside the circle) and externalize benefits and costs in the relationship.

The divers, for instance, are willing to pay more to go on a two tank dive with a PADI shop and may adjust their travel plans or hotel selection to coordinate with the shop. But they do this because they feel they will experience a safer dive and see more sea life.

The dive masters who took us out in Kauai all had worked elsewhere including Honduras, Texas and the Caribbean. They also showed an active interest in the health and quality of the reefs in Hawaii and abroad. Just like so many outdoors men and women, they are important supporters of the environment they so enjoy, externalizing that knowledge and concern in so many ways.

Lastly the dive shops are able to charge more and internalize those profits but also must externalize the support and higher standards observed by the association.

Each of these actors are evaluating trade offs and making consumer choices in both fiscal matters as well as the degree of voluntary work or other concessions made in order to be part of the association.

A two tank dive isn’t simply $150USD. To get a grasp of the complete transaction would necessitate tracking all the components at time of exchange.

The other interesting aspect of this type of analysis is to see how externalize factors can be transferred between the groups of actors which come in touch with each other. For instance the dive masters are passionate about reef environment. As divers come through their work place there may be ways to capture idle assets to further reef preservation.

It’s about the land

I stuffed Ace in the Hole, by Annie Proulx in my knapsack purse at 3am when we had to leave for the airport to catch our flight. I wanted something I knew I would enjoy to fill the airport and flight hours on our rather lengthy itinerary to Kauai. It’s a coming of age story of a young man who sets out to establish himself by taking a job as a land scout for a corporate hog producer.

If you aren’t familiar with Annie Proulx, her writing veers to the eclectic. Embellishments are generously layered on like thick butter on a slab of freshly baked bread. I love that about her writing, which I first discovered in The Shipping News. But this book is chock-full of local characters. They parade across the pages leaving an imprint of the bit of their lives which made the panhandle what it was when Bob Dollar showed up in search of hog sites.

Luckily for me the lack of a nightstand stacked with alternative reading options kept my eyes on its pages. Not until well past page 377 does the author get down to the business at hand. Who is it exactly who owns the land? Bob Dollar sets out to meet landowners, and to get to know them before asking them to entertain the idea of selling and leaving their former neighbors with the smell and dust of a hog operation. He tries to explain to his boss how the locals feel.

“But people down there in the panhandle feel like if they own property they have some say in what happens on it and next to it.

“You will find, Bob, as you mature, that lip service to the rights of the property owner is just that-lip service. What rules the world is utility-general usefulness. What serves the greater good will prevail. You know that highway departments can take property against the owner’s’ will to widen the thoroughfare for the general good. It’s a similar situation. And if it were put to a general vote, time and again it has been shown that the public supports such moves because they benefit the greater community.”

The business man proffers the rational response. The pressures of a market of needs will push the land to be used for the greatest good. He gives the example of indemnification for a roadway– which doesn’t quite ring true. The greatest good of a private hog producer doesn’t exactly parallel with the good of a public works project. But it doesn’t matter to the corporate guy, as he simply needs to sell his young scout on the idea that he is part of the greatest good. Perspective.

And Annie Proulx does justice to the perspective of the local farmers who have lived their lives on the poor quality land. When Bob suggests to his prospect that she would be happier moving elsewhere, she tries to unwind their story for him. Their residency is not the same an apartment rental. Their tie to the land is generational. Their stay is the result of decades of work and interactions which make place a part of them and they a part of it.

“Where might that be? In a city, I suppose. We’re country people and we’ve been on this land for four generations. The city is not for us. We’ve been happy here and my husband has worked his heart out to keep this ranch in order. We can’t even run cows on it anymore. The cows can’t even stand it. Do you think it’s right that some mean hearted corporation can buy up panhandle land and force out the local people? I don’t know what we are goin a do. My husband says if he were a young man he’d set grass fires and burn them out. I do not know what we are goin a do. That state senator in Amarilla is no help at all. He’s on the side a corporate hog outfits. The corporations got the politicians sewed up in Texas, top to bottom. And down in Austin the panhandle is far away and folks think it is a worthless place any how-they think it is perfect for hogs. Tonight we will suffer with that stench.”

The author does such a great job at putting on display the complexity of land as a product that is bought and sold. One could substitute out the scenarios and the feelings would remain the same. The seniors who have enjoyed a particularly scenic piece of property are pushed out by higher taxes. The middle of the road business is pushed out by the likes of The Gap, Apple, the latest fad. Present as a lurking villain is the utilitarian need to put in new roads, to produce the food people eat, to pay taxes on the services which a greater number of people require.

The tension is always there. And Annie Proulx writes it all out in an apolitical hand with a tenderness for the history of place and a fair amount of humor.

Perspectives on Networks

Networks are often used as a paradigm for the analysis of how individuals access communal resources. A job search is an example. An advantage goes to the individual who is able to call on friends or family to get in for informational interviews, be tipped off first about the best positions, and have a ready pool of favorable references.

The old boys club is a notably resented network. Those in the club interact fluidly to fulfill their objectives. But the same can be said about the ease of interaction at so many organizational activities. Those who worship together know exactly when they will have an opportunity to bump into a fellow parishioner. And there are Rotary clubs, and Alumni Associations and boxes at the theater. All set times and dates where people gather and can be accessed.

But in this type of analysis the interaction is in one direction. An individual needs something, a job, a contract, a bid opportunity, and the individual taps into their network to see if they can fulfill this objective. The formulation is not one of a group, where part of the group is providing job leads, information, introductions so that another segment of the group can engage these resources. The perspective is from the individual extracting from the group for private purposes.

The other way to view a network is from a group perspective. When I was an exchange student in Avignon, I returned from being in town to tell my house mother a story about a vagabond I had seen. She had me describe him and when she recognized his traits she said, ‘That’s good it’s him, our town can’t handle another.’ Whether there was more good to be had from the townsfolk isn’t the point being made here. It is the thought that a group has only so much to provide, the economics of the group has resource limitations.

Networks are thought of in linear nodal models. This is a singular view of the pursuit for a private objective. From the view of the group, what’s important is the measure of how much the group can provide. It is not important which individual steps up, just that someone does.

The warmth of a fire

Since prehistoric man (and woman) sat around a fire, its flames provided warmth to those huddled around. Teepees made room for a central fire which drafted out through the culminating poles in the ceiling; medieval castles were fitted with mantels at eye level to accommodate large blazes beneath. The nostalgia of a crackling fire reaches back to those instances of communal comfort.

While the world is large and complicated some things will always fare better in collective use, while others will thrive under competitive forces.

The new era we’re entering is one which acknowledges and accounts for both circumstances and how they are blended. We are not returning to a lineage based power system, nor are we going to allow a meritocracy which blatantly ignores communal workers.

It’s time to allow for an accounting of both and an understanding of how they work in unison.

$34.4 Mil is a fair amount of cash

That’s how much was raised in Minnesota yesterday during Give to the Max Day. Here is how the Minnesota Holiday started:

In November 2009, Give to the Max Day was supposed to be a one-time only launch party for the new fundraising platform GiveMN.org with a goal of raising $500,000. At the end of the day, generous donors had given more than $14 million in just 24 hours, smashing the goal out of the water, and starting a giving holiday in Minnesota.

https://www.givemn.org/giving-events/gtmd21/totals

Gala and fund raisers are nothing new. Just ask development officers at any non-profit. And many of the techniques employed during yesterday’s day of matchmaking originated from them: a limited timeframe, matching incentives, live-counters adding up the tally to meet a goal. What is different, here, is that the platform opens up a marketplace of giving. The boundaries of where and who is trading in the assists of work in the community changed. The benefactor was no longer one cause; a theater, a shelter, a youth center. Nor were the donors just the flashy wealthy crowd at a glitzy event in a downtown venue. This market is open to all Minnesotans, who can then feel empowered by grouping with others to support their passion of choice.

People give when they see the need. Citizens agree to pay taxes as an acknowledgement of the need. But they also don’t want to be the only one giving- it is a communal activity. A formal taxation system provides assurances that others are also on board to assemble the public goods as intended. In philanthropy, a one day event provides the accounting, the final tally, which confirms success back to its audience.

One can’t help but notice the parallels to the concept of state capacity. This has been a salient term in recent years. Here is how one researcher put words to it:

The concept of state capacity—“the ability of a state to collect taxes, enforce law and order, and provide public goods”1—was developed by political scientists, economic historians, and development economists to illuminate the strong institutional contrast that parallels the economic contrast between rich and poor countries.

https://www.niskanencenter.org/state-capacity-what-is-it-how-we-lost-it-and-how-to-get-it-back/

On Give to the Max day, donors pay funds (a tax) to support their chosen community works producer, who in turn transforms the funds into their specialized public good. The enforcement of product delivery is partially enforced by laws, but mostly by the pressures of competition to be a good producer for those who depend on the services provided.

What the Give to the Max platform allows is a wider marketplace. What Give to the Max Day shows by the $34,390,470 collected yesterday from Minnesotans tall and small, urban and rural, rich or light in the wallet, is that we have a notable amount of state capacity.

Compatibility, a review

I recently switched to an iphone after years of android use. It has been fun to compare their functionality. The ease of the transition is a tribute to Apple’s focus on the user experience. There is one feature, however, that I miss. It is Google Lens. My last phone was Google Pixel and the Google Lens icon is at the lower right hand side of the screen when you open a jpg. For instance, as I sort through some old travel photos from my youth, I often want to know where a shot was taken. Check Google Lens- Presto! It matches the image to ones on Google Maps.

Fath Ali Shah

I tried all sorts of methods to store and open this image from Iran on my new phone but gave up, and went back to my Google Pixel. Tapping on the picture on my old device summoned up web results which identified the location in seconds. The 4000 BC etching is located under a fortified wall at Rey Castle, near Teheran. Subsequent postings by the collective of google map supporters offered views of the image and surrounding landscape from multiple angles.

More than likely I’ll discover how to use Google Lens on my new device. But the fact that so many features are user friendly and this one is not made me reflect on how we are at the mercy of structures easily within our reach. And how we don’t make time (partly because we may not appreciate the benefits) of structures which we have yet to discover.

During the lockdown my family and I started a daily walk routine as it is good exercise and it was one of the few activities open to us. We used aps to monitor distances and times, and struck out looking for new scenic trails. I’m not sure how many times we shook our heads in disbelief that we had only now discovered so many pleasing miles in our figurative back yard.

On a recent trip to Calgary I discovered the ease and reliability of public transit. It was forced on me by the difficulty to secure a rental car in the era of Covid. This reminded me of when I took my kids on the Great Northern Railroad from Minneapolis to Glacier National Park. The line runs from Chicago out to Seattle skirting the northern most border of the US States. It appealed to me as it gave me a break from road tripping with young children and I thought it would make an impression on them. Many of the other passengers from places like Minot, Culbertson and Wolf Point used the rail frequently. It was their preferred form of transportation.

The dominance of some IT structures has made me wonder about other patterns in my life which have steered my activities. Where else have decisions kept me from advantageous experiences? What other take-it-for-granted services are people not using optimally which would make their lives better? And how can we reveal those little connectors to better engage a just-next-door infrastructure we have yet to discover?

Humor me

Maybe you will play along with me, and entertain the spaces I want you to imagine.

The one we know well won’t be hard for you to conceptualize. The selfish one. The profit motive, cash intensive one. But there’s the second space too. It is outlined by time, energies and outlays for group things. The things we call public. So, if you can, hold these two dynamic spheres, one of initiating activities toward private profits and a second contributing to yields for the group, in your mind for a minute or two.

The first part of the story is familiar to you. It’s about how private equity firms (there are many big ones like Blackstone, Apollo and Bain) go in and buy up old or floundering businesses and rip away any remaining social ties that may cling to them. Pensions? Gone. Employment contracts? No more. A trustee companion to the surrounding community? I think no longer.

An alumni from my alma mater, Gretchen Morgenson, is a senior financial reporter with NBC and can tell you all about sphere one in her book, The Hidden Force Behind Wealth Inequality in America. In the clip below she focuses on the results of private equity firms becoming the owners and custodians of nursing homes.

The claim that the private equity firms live in the for-profit sphere, and in turn are destructive to social riches is irrefutable. But it is by design. Perhaps it serves the same purpose as the destruction of ancient Sequoia trees in a forest fire. This is part of the process. But most would agree that there are many possible points of optimization in the process of externalizing social contracts and extracting their value through dollars to shareholders.

To come at the quandary from another angle, try to imagine where the flip side of the activities of private equity firms reside. Where in the two spheres is the opposite enterprises underway? Instead of extracting dollars and putting social benefits to rest, dollars are inserted into a network of social activity to substitute for care, education, food and so on.

A place where, at every turn, a community is propped up, rather weakly I might add, by subsidies is also messing with the spheres of activity. And in such a neighborhood where 60-70-80% of the residences live below the poverty level– actors are being stripped of the possibility of engaging in mechanisms of self accomplishment and achievement.

Whether the misuse of money is in the private sphere or the public sphere, the net result is, as Gretchen postulates, a dark force behind wealth inequality.

Solving problems across the entire economic landscape is preferable. Looking for optimizations in multidimensions will provide greater insights. Sorting the industries which favor the nature of the communal or the nature of the private will point out short comings. Understanding the role of subsidy intervention and the power of group relationships will create leverage.

All of this can be stretched across a framework of public and private spheres.

Moving money & the unrealistic unrealized capital gains tax

Years ago a friend pointed out that it is easier to capture money when it is moving. As workers earn a wage, it is easier to capture a tax as funds transfer from the employer to the employee. At the time an asset is sold, it is easy to capture a tax from the dollars passing from one owner to the next. When purchases are made at a cash register it is easier to add on a sales tax. You get the picture.

And for this simple practicality, the asset tax or Biden’s wealth tax, was doomed from the get go.

There are other practical reasons that gum up the whole idea. Assets fluctuate in value over periods of time. So the years that the asset increases in value you pay a tax, but the years the asset decreases in value the government pays you back? Sounds like an accounting nightmare. Sounds like a scenario made for grift.

Maybe it’s more than just the practicality of money on the move. The severing of ownership leads to a settling of accounts, which includes an obligation to the greater group in the form of a tax. Use of assets for philanthropy, start-ups (basically business charity), endowments and so forth is a different type of supporting the greater group than the stream of funds channeled through taxes to pay for services.

The problem it seems is in the mechanism to draw the substantial assets to turn them over to political process. And maybe that a good thing.

Skin in the game: Librarian Edition

Downtown Minneapolis branch of the Hennepin County Library system

Here’s a story about skin in the game.

I was a little irritated with the library folks during the whole Covid thing. I felt the restrictions on library access carried on well past the point of other ‘returning to normal’ trends. The buildings were completely closed to traffic for over a year and when they did reopen, patrons were allowed 15 minutes to retrieve their materials and leave. Finally, in recent months the branches have been open (with masks) for people to linger.

I had swung into a branch with tall airy ceilings and well spaced furniture to review a book that had popped into one of the blogs I follow. Skimming a book can give me a pretty good indication of whether I’ll want to devote time for the full read. In this case, I simply wanted to re-shelve it but given the sensitivity to the virus, I walked it back to the entrance area and book return.

I approached the lady peeking out from behind a large pump bottle of sanitizer gel (if I never smell sanitizer again it will be too soon), rubber gloved hands folded over each other just below her sky blue mask, with seemingly nothing to do. She pointed over to the book return conveyor belt. But next time, she said, I should go ahead and shelf the book myself. The protections, it seems were just for her. Protecting the next patron from virus germs I could have left on the book, did not rise to her concern. Gels, masks, gloves were for some show, but not the one that protects the public.

In order to reveal how people really feel on an issue, calculate what they will give up, if anything, to achieve their ideal.

Understanding the Problem

I so enjoyed using the light rail in Calgary that it got me thinking about transit and what it means to a city. Ironically it is Covid that put me on the bus in the first place. The rental cars were all booked, and I have family in the city, so I wasn’t dependent on public transport. I wanted to use it to give myself a little independence. What a pleasant surprise to find it so convenient, clean and timely.

(The other companion structural hardscape I noticed were the frequent pedestrian bridges arching over the thoroughfares. They lead people to the light rail stops, of course. They also bridge neighborhoods, which is very useful for parks and trail access. But I digress, back to transit.)

It is no longer controversial to say that real estate home values increase along light rail lines. Studies are easy to come by. Here is a section from a piece posted on the Federal Reserve Bank of St. Louis’ site.

Property Values and Development

One benefit of light rail is its potential impact on nearby property values. There is much academic literature on this angle.

The research generally finds that rail transit has a positive impact on residential property values, although the impact is relatively small. One study found that property values in Portland, Ore., increased by $75 for every 100 feet closer a home is to a light-rail station, and the average home price in New York declined by about $2,300 for every 100 feet farther from the station.[1] In another study of the Portland rail system, the authors found that home prices increase as a result of being closer to a rail transit station, but the effect was only significant within 1,500 feet of the station.[2] Another study found that the typical home in San Diego sold for $272 more for every 100 meters closer to a rail station, but the distance to a rail station in Sacramento had no significant impact on residential property values.[3]

Saint Louis Fed

See the problem with the analysis? There is a pretty potpourri of measures. And the use of dollars (as opposed to percentages), as if property values in Portland are the same as New York or San Diego. The distances from the stations are in feet and meters. Then an observation is made that the effects are small– compared to what?

In math, every problem starts with definitions. You can’t very well solve for something if you haven’t determined what is at stake. We know that the public good transit exerts an externality on the private good, a home. But how does it work?

TO BE CONTINUED

What should I remodel?

Clients who have been in their homes for a while will sometimes give their realtor a call to ask which home improvements they should tackle. Maybe they would really like a new kitchen but are afraid the expenditure would not be entirely reflected in the price of the home upon resale. This is true to various degrees for all improvements. The chart below gives you an idea of how much of a return one can get on various upgrades.

Of course these prices will vary depending on where you live, but it gives you a general idea of how the market reacts to different features. Kitchens are a popular upgrade as we all spend a lot of time in this space. When clients ask, is it worth it? They must be reminded that they are purchasing a kitchen partly for themselves, for their personal use. The return they eventually get at time of sale shouldn’t be as big of a factor as their personal enjoyment of the renovated space for the time they live in the home.

It is interesting to note that some of the greatest returns are generated by exterior remodeling such as a new garage door, siding and stone veneer. This drives home the value buyers place on curb appeal- the public face of the property. With this in mind we can hope to see, over time, that neighborhoods continue to line their streets with trees, fuss with a little landscaping and keep their home facades quaint and inviting.

The illogic of free riding

Free riding, benefiting from a collective good without having incurred the costs of participating in its production.

The problem of free riding was articulated analytically in The Logic of Collective Action: Public Goods and the Theory of Groups (1965) by the American political economist Mancur Olson. Relying on an instrumental conception of rationality, according to which rational individuals make choices that they believe will bring about the outcomes they most prefer, Olson argued that there is little rational incentive for individuals to contribute to the production of a public (or common) good, given the costs they would incur, because they will benefit from the public good whether or not they contribute. 

https://www.britannica.com/topic/free-riding

Mancur Olson makes the case that collective action goes contrary to human impulses, as the desire to look after oneself will induce all parties to free ride. This collapses a system where everyone takes and no one gives. Natural impulses, Olson argues, reduce or dispel the desire for collective action.

Collective activity to advance the economic objectives of a group are abundant, so there is little need to debunk the idea that cooperation amongst all sorts of groups is natural and ongoing. In fact, when you think about it, the system is most efficient when free-riding occurs.

Take the example of our neighborhood fence. Like many suburban clusters, a wooden privacy fence was built along the busier road which abuts the perimeter homes. This both distinguishes the area and lends privacy to those properties. At the turn in off the main road there is a sign and little extra wooden feature. A small association fee is due every year for mowing along the fence, insurance and upkeep of the entrance.

At some point the fence was aging to the extent of needing repair and possible replacement. Of course the interior neighbors didn’t feel they should pay, or perhaps not pay as much, as the perimeter homes as they benefit the most. About the same time a hail storm came through, as they often do, and caused damage to roofs and siding nearby. The association manager was also an attorney and was able to make a claim through the insurance policy for a complete replacement of the fence.

It’s likely that there were several residents who would have thought to have the fence assessed. But the manager, who gave his time voluntarily, was the one who initiated the project and saw it through. The rest of the neighbors were free riding off his time, education and experience. But how would it be efficient if everyone in the neighborhood had the exact qualifications?

The neighborhood is better off if there is a variety of skills available to the group, not only the business paperwork type of skills. The neighborhood doesn’t need an attorney in every house, it is better off having a mix. It’s more advantageous have a handful of home people to see that school bus pick up and drop off goes smoothly (especially when temps are bottoming out at twenty below). Older people can be prone to watching houses to the point of being nosey– but that helps keep crime down. Then there are the lawn perfectionists who lend out turf advice and fertilizer spreaders. Others may have job contacts or buddies in media who promote the local Little League.

You see free riding is what we all do if you look at everything from the individual lens. But as a group, it is best if everyone steps up voluntarily with their own unique skill or service. That’s called weaving a tapestry of community to catch everyone and bring them along.

What smart people don’t get

When people refer to smart people they are generally talking about people who do well in school, people who go on to college, people who get professional jobs in fields like IT or legal or accounting or consulting. Those are the smart people. The ones who carried a high GPA, the ones who got into the best schools, the ones who decipher the paperwork that others can’t read. Smart people have high paying jobs with a fair amount of job security.

But aren’t smart people only really smart at book work types of things?

What smart people like to think is they are smart in ALL types of things. They are smarter than the guy who got a GED, until they have a flat on the side of the road and that guy comes to change their tire. They are smarter than the gal who had a baby in high school, until they are turning to that daycare worker for advise on the best finger foods for two year olds. They are smarter than the plumber who went to vo-tech until they can’t figure out the lack of water pressure in their pipes.

What smart people don’t get is that their self-appointed snugness creates an atmosphere of arbitrage when interacting with the less smart. What smart people don’t get is that, since they are in fact not smart in many practical things of life, those who are can take advantage of them without their knowledge. They can finesse a plugged j trap into a main drain flush. They can suggest the entire service door be replaced instead of just the rotted threshold board. They can recommend all sorts of more comprehensive solutions instead one that is simple and sufficient for the situation at hand.

What smart people need to get is that there are levels of smartness within each and every field. And thus it is to their advantage to treat with respect those who earn it within an occupation, instead of only respecting certain occupations.

Structure, Milanovic, & Capital

Chapter Nine in A Book of Abstract Algebra by Charles Pinter starts off in solid math fashion, with definitions.

Human perception, … is based on the ability to recognize the same structure in different guises. It is the faculty for discerning, in different objects, the same relationships between their parts.

The dictionary tells us that two things are “isomorphic” if they have the same structure. The notion of isomorphism of having the same structure is central to every branch of mathematics and permeates all of abstract reasoning. It is an expression of the simple fact that objects may be different in substance but identical in form.

There are lots of cool things that happen when objects, whether tangible in the material world or fabricated through logical thought, share a structure. Properties that apply to one, apply in the same way to another. The natural numbers are a system of 1, 2, 3 which will always multiply add and divide in a like manner, whether they are counting buffalo, beans or bananas.

A professor of economics at Harvard, Branko Milanovic, identifies capitalism as the sole surviving economic system in his book aptly titled, Capitalism Alone. The structure in this case is an economic one: ‘referring to production organised for profit using wage labour and mostly privately owned capital.’ He proposes that the creation of value through production and trade occurs in this manner across the world.

The West, and the US in particular, is the cradle of capitalism, home to Ayn Rand. But now that China in particular has shown how a communist country can harness this economic system, the different categorization of structures needs to be flushed out. Milanovic offers Liberal Meritocratic Capitalism for the West and Political Capitalism as representative of the Chinese system. The Economist summed it up:

Milanovic outlines a taxonomy of capitalisms and traces their evolution from classical capitalism before 1914, through the social-democratic capitalism of the mid-20th century, to ‘liberal meritocratic capitalism’ in much of the rich world, in particular America. He contrasts this with the ‘political capitalism’ found in many emerging countries, with China as the exemplar. These two capitalistic forms now dominate the global landscape. Their co-evolution will shape world history for decades to come.―The Economist

The idea is that the pursuit of value through private trade is the core structure, and yet it can be pushed around and molded by political actors from liberal democracies such as the US, to social democracies in northern Europe, to authoritarian countries in the East. But in its original state, capitalism produces private capital. All the other efforts in society to provide public services, or safeguard the poor, or educate the young are done somewhere else- but not in the economy.

Here lies the weakness in this argument. It is well established that all sorts of social structures provide value to individuals and communities, and these too are economic in nature. There are resources, and labor and transactions. There is capital. It seems necessary to incorporate all fields of economics into one structure rather than push off the inconvenient ones on politics.

What I propose is that at the core of capitalism is capital, but not just private capital. At the core of capitalism is capital which is often in blended ownership of private and public interests. There is capital which is much more private and unfettered by social concerns, like currency, stocks and bonds. But even these instruments are in part valued by their country of origin. The legacy of their political backing influences value.

And then there is capital which is moderately blended by public and private interests. The buy local movement in produce of today, or the buy USA textiles and Ford or Chevy of yesteryear. If you pay extra for these items, than that premium is to support the public interest of a local sub-group. But the mixing doesn’t stop in commodities. Utilities are mostly blended between public and private. Capital, it seems, has a complex nature.

On the seriously social end of the spectrum there are goods that society resists assigning any monetary or liquid value, such as human kidneys. The trading in this case depends on a string of interlocking transactions between group members who all share the similar ambition of gifting an organ to a friend or relative. But a trade still occurs, the capital has a social dimension and the outcome results in tangible value.

What determines the sliding scale of private to public divisions depends on the political management of the country and the multitude of social arrangements present where the economic transactions occur. But the structure of capitalism, which dictates the rules of how the system works, contains private and public capital, not private alone.

Maggie O’Farrell’s Hamnet

Taking full advantage of the long weekend here in the US, I read my softback copy of Maggie O’Farrell’s new book lakeside. It’s easy to find praise for this fictional story of Shakespeare’s domestic life in Stratford-upon-Avon, so I won’t dwell on the wonderful prose and endlessly interesting historical references.

Since this is a blog about home economics, I can’t help but key into the detailed transactions which are laid out in the book. Specifically the family relationships and obligations which landed Shakespeare in London. For without the The Globe to provide the stage, and the city to provide the audience, it is hard to say how the bard’s career would have evolved.

As a lad of eighteen, Will marries a woman eight years his senior. She has a dowry and a faithful brother to support her wishes. He comes from an established merchant family that has some financial struggles. They are both odd ducks-

Will’s mother Mary is required to make room for her daughter-in-law, to take her into her household and help with the care of the grandchildren. And it is Mary who objects the loudest at the plan for Will to set up an extension of the family glove business in London.

…At which Mary could say three things: Agnes is no girl. She is a woman who enticed a much younger boy, our boy, into marriage for the worst possible reason. And: You forgive her too much, and only because of that dowry of hers. Don’t think I don’t see this. And: I am also from the country, brought up on a farm, but do I run about the place in the night and bring wild animals into the house? No, I do not. Some of us, she will sniff to her husband, know how to conduct ourselves.

“It would help matters,” her son is saying, airily, insistently, “help all of us, to expand Father’s business like this. It’s an inspired idea of his. God knows things in this town have become difficult enough for him. If I were to take the trade to London, I am certain I might be able to “

Before even realizing that her patience has slipped out from under her, like ice from under her feet, she is up, she is standing, she is gripping her son by the arm, she is shaking it, she is saying to him, “This whole scheme is nothing but foolishness. I have no idea what put this notion into your father’s head. When have you ever shown the slightest interest in his business? When have you proved yourself worthy of this kind of responsibility? London, indeed!

The plan had been instigated by Agnes’ faithful brother. There is some outstanding obligation between the families which allows him to influence the father, to allow for Will’s departure. It is the extraction of a chit which he plays on behalf of his sister.

What if William Shakespeare, thought to be the greatest dramatist in the English language, had not made it to London? What if his life had been denied matrimony and fatherhood? What if one of the players in the economic distribution of inheritance and obligations to marriage and family had set an imbalance in the transactions?

What Maggie O’Farrell accomplishes is a flushing out of the possible infrastructures which may have contributed to a brilliant man reaching a pinnacle of performance.

What rent control won’t do

This fall both the cities of Minneapolis and St. Paul will have questions around rent control on their ballots. The latter’s proposal is the most straightforward. It asks voters for the right to cap annual rent increases at 3% with no exceptions (an exception might be to increase rent at a higher rate after a major renovation to the property, for example). This, I’m told, would be the most restrictive rent control measure in the country.

Minneapolis’ proposal beats around the bush a little bit as the ballot question simply asks to allow the Minneapolis City Council to investigate rent control stabilization. Many people feel that should this request pass, then the city council would simply move forward on any initiatives they felt appropriate without further input from constituents. (There’s that Minnesotan passive aggressiveness again.)

The movement seems to find momentum from the social justice warriors. We’re going to protect the citizens from the capitalists!

There’s no interest in considering price signals as a way of communicating resource allocation, or a neighborhood’s strengths and weaknesses. And maybe more importantly the relative power of the public goods in each little nook of the city. Clearly there’s no interest in comparing prices and using those relative differences to match prospective renters to the areas which would offer the greatest capacity at meeting their short comings.

The only issue at stake here is whether the stabilization controls rent increases. Because this is thought to be economically beneficial to the renter.

Capping rents however does not make a landlord keep a property in good repair; it does not prohibit them from collecting rent and not pay their mortgage. Rent stabilization does not make a landlord vigilant about the heating and cooling system, nor replacing aging appliances. It doesn’t stop them from hedging on the required time notice for entering the unit, nor being adept at keeping the noise down in the building.

Capping rents does not make the bad landlords more responsive in any way.

But most importantly, rent stabilization does not transfer any wealth to renters in times of steep real estate appreciation. When prices are climbing as they have in recent years, it does not alleviate the feeling that some folks are being left behind.

Helping transition renters to owners, showing them the ropes on caring for and managing their own home, does put them in a position of gaining wealth. And that’s the goal good-willed people should be setting their sites on. Not arbitrary price fixing.

A supply chain for progress

Why do men like metal and women like fabric? I’m not sure. So when I had children I tried be a gender neutral toy provider. Despite my efforts, my son liked anything with wheels and my daughter clung to her blankies and dolls.

In the last few years I’ve had two experiences where access to a machine was a game changer. Advice from a trusted advisor to purchase a Lenovo Yoga opened up a whole new level of work and writing. The mobility of internet ala hotspot made any park bench my office. It changed the timing of how I interacted with clients. I became more efficient as there was less remembering and follow up.

The impact was multifold and multilayered.

Why hadn’t I done it sooner– or why don’t women in general do more machinery? When I was young I remember an incident when we were stuck in some foreign outback. The details are foggy, but there was the necessity to clear the road of scree. I had gloves and was digging in when a male adult asked for them. He could do it better! He wanted my tool and assumed he’d secure them. (He didn’t.)

Perhaps it is a silly story. But weren’t women’s sports disregarded for years as boring? Aren’t the beginners at anything shrugged offed as irrelevant and uninteresting?

Machines also need maintenance. There maybe tricks to getting it started, like the lawn mower in the spring with old gas in its tank. If you have a friend to call, the fix can be easy; a couple pushes to the primer. If you don’t, you may give up on the machine and decide it’s easier use the old push blade mower that spins and slices a choppy lawn.

Two buddies who enjoy each other’s company can trade off helping each other with their projects while learning new tricks. A solo attempt can lead to discouragement, and abandonment of the machine that seems too much trouble. The ongoing supply chain of support and knowledge, success and overcoming setbacks is what facilitates progress.

A roto tiller is a great help in the garden. One can create a bed all along a wooded edge by spending an hour watching a gas powered blade turn the dark brown clumps into finely grained soil. But one needs a truck to fetch the instrument from the hardware store, and perhaps some muscle to load and unload it.

The point is, that it is about more than just the machine. It is a process. To an inexperienced farmer a tractor is of limited use. As soon as it requires maintenance, parts or a good kick to the tires, it becomes a burden instead of a boon. There isn’t a product result that will solve a systems problem.

Finding a way to quantify the meaning of different pieces of the supply chain is a way to see the gaps, discover better matches between groups with capacity and groups with potential.

Food deserts, and other not so silly sayings

The term food deserts is about as silly as affordable housing; both try to capture the notion of a thing instead of the understanding of a system.

A food desert is an area that has limited access to affordable and nutritious food, in contrast with an area with higher access to supermarkets or vegetable shops with fresh foods, which is called a food oasis.

The idea goes something like this. People who live in high poverty areas, which often- if not always- are high crime areas, have fewer choices in grocery shopping. Hence it is the obstacle of getting to a supermarket which causes a poor diet and resulting health problems such as obesity. The policy solution thus is to bring a product, fresh fruits and vegetables, to the neighborhoods. Problem solved!

In time of yore, or my grandmother’s generation, farm families across rural Minnesota spent the winter without access to fresh food. It isn’t until June that early lettuce comes in and can be eaten from the garden. Most vegetables are harvested July through early September. Of course strawberries are plentiful in late June, but the apple tree branches don’t bend with fruit until fall.

Tomatoes are still canned (the process of storing produce in a jar with an airtight lid for use through the winter) by many today who enjoy the fruits from their gardens for things like salsa and pasta sauce. And cabbage is converted in some mysterious process to sour kraut. The Red Wing Stoneware Company produced crock pots of various sizes for winter storage in cool cellars.

The point is that many people across the world find ways to store the makings of a balanced diet for consumption through out the year. Eating from a healthy menu depends on a process of accumulating, storing, preparing and eating. Home economics, as it was taught in school a half a century ago, was designed to address this topic.

One of the classroom experiences was to make simple meals like a hamburger goulash. A pound of ground beef, elbow macaroni noodles, a can of tomato soup are its readily available ingredients which are easy to store. You can even purchase such items at many convenience stores.

Now, it seems, we don’t want to teach lifelong skills. Problems are deemed to be the lack of a product, a purchase, a consumable good. And if the government simply puts that good in the hands of the poor, then all will be solved. Or not.

How does that verse go?  “Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime.” Mathew 4:19.

Architect/Builder in Kenya says:

Here are some comments from an architect/builder, Sacrinos. (@dnahinga), in Kenya regarding the obstacles to building housing for the average Kenyan. Interesting throughout, especially the land use comments:

The pricing model in Kenya's Construction Sector/Real Estate is Colonial and Punitive.

It is akin to trophy pricing. All clients become as pricey as elephant tusks.

Let us reason together.

Short Thread 1/n.

After the Colonists grabbed Land and the Means, they quickly put up roadblocks to Home Ownership.

One being approvals for Self Expression

A house is the most express image of the Builder. Thus his native language

It was no longer possible to just build

2. Now if you have lost acres of communal and individual land, it is virtually impossible to Express your wealth as a fraction of the same Assets you lost.

You do not have the wherewithal.

So, it is a scorched earth where everyone must rebuild their wealth from scratch.

3. As the First Gatekeepers would have it, it's professional #misconduct to charge unprescribed fees.

A board has all powers to make laws, "for the scale of fees to be charged by architects and quantity surveyors for advice, services, and work done."
AQS Cap 525 (f)

Walk with me.

This is the formal housing cost structure in Kenyas #RealEstate.

So, the Colonists became the Levites in the sector. Basically taking a tithe from everyone that wishes to Build or be Adviced to Build.

What is the market effect? Facebook and Quacks* step in.

These powers need to be returned to the Free Market Mechanism.

This does not in any way encourage anti-competition but allows for competence, supply and demand to calibrate the lowest and highest prices people are willing to pay.

Intellectual Assets do not need Price Fixing.

Price Fixing of Intellectual Assets makes the Consultants unable to offer their services to the people below a Certain Wealth Threshold.

It also ensures and guarantees a thriving Black Market for Unprofessional Services.

It stifles growth in the Sector. We need to ReThink it

The current Top Down Board Sanctioned Pricing Model assumes all people who want to build have all the money.

All the Consultant has to do is to check a schedule and prescribe a % Fee.

It treats housing as a Noun and not a Verb.

Unfortunately, the next generation of Home Owners are:

1. Struggling with Savings.
2. Have practically little to no Assets to extract a %.
3. Can successfully build incrementally.
4. All the insider knowledge is NOT with the Gatekeepers. How will you stop people from building?

Reality Check.

Colonial Natives are now Digital Natives.

We innovate or die.

It is time to let the market mechanism allow for creation of an efficient, profitable way to serve the less affluent so we can stop looking forward to building towers only.

Set Architecture Free!

Dear Architect, Engineer, QS et al.,

Q. Have you lost clients because you tried to charge prescribed fees?

Dear Client. Have you lost a Professional because the prescribed fees was Impossible?

Let us see.🙏🏿🏡🏘🔨

If the 1933 Pricing Model was followed, Real Estate consultants would be controlling between 5% to 10% of all value created from their Consultancy Work.

Hypothetically, every 11nth Client would make the Consultant wealthier than any of the previous 10.

Project Value being K.

Originally tweeted by Sacrinos. (@dnahinga) on August 19, 2021.

Paul Erdos~ couch surfing problem solver

Paul Erdos was of my grandmother’s generation, born in the same year, 1913, yet half a world away in Budapest, Austria-Hungary. His genius revealed itself early on. “By the time he was 20, he had found a proof for Chebyshev’s theorem.[14] In 1934, at the age of 21, he was awarded a doctorate in mathematics.”

Erdős published around 1,500 mathematical papers during his lifetime, a figure that remains unsurpassed.[6] He firmly believed mathematics to be a social activity, living an itinerant lifestyle with the sole purpose of writing mathematical papers with other mathematicians. Erdős’s prolific output with co-authors prompted the creation of the Erdős number, the number of steps in the shortest path between a mathematician and Erdős in terms of co-authorships.

https://en.wikipedia.org/wiki/Paul_Erd%C5%91s

Paul Erdos committed his life almost exclusively to the mathematics community. For his own reasons he chose not to have a family of his own. Although allowed to travel at will to his country of birth, he chose not to settle there, (until his death as he buried next to his parents “in grave 17A-6-29 at Kozma Street Cemetery in Budapest.”)

… Paul Erdős, became perhaps the most notorious mathematician of the 20th century. Erdős spent nearly his entire life crashing on other mathematicians’ couches and subsisting on the small sums he received for giving talks at universities around the world. He also had a fondness for devising math problems and offering bounties to anyone who could solve them.

https://www.quantamagazine.org/cash-for-math-the-erdos-prizes-live-on-20170605/

So dedicated to his pursuit of mathematics, he used cash prizes to lure others into joining him in its unraveling. By providing a private incentive he wished to enrich the public he enjoyed so much. His prizes still survive today.

Erdős continued that tradition. Over the course of his lifetime he offered rewards for hundreds of problems that he himself dreamed up. Amounts ranged from $25 into the thousands, depending on how challenging he thought the problem was. Today Graham controls a small fund left by Erdős, who died in 1996, for the purpose of making good on those bounties.

In 1974 Erdős paid off his first major sum: $1,000 to the Hungarian mathematician Endre Szemerédi for a problem Erdős had posed some years earlier. Szemerédi tackled the problem because “he said he could certainly use the money,” said Graham. Decades later Szemerédi would win the Abel Prize, commonly regarded as the Nobel of mathematics, for work that stemmed primarily from his solution to this Erdős problem.

https://www.quantamagazine.org/cash-for-math-the-erdos-prizes-live-on-20170605/

For most people, their primary or first degree community is their immediate family; those housed under the same roof. This mathematician cared not for real estate. His community thrived on the images of abstract notions brought down to earth in formulaic representation, sketched out on paper.

Stories with Family Trees

A millennial in our family is a natural story teller. He captures the room, and doesn’t disappoint. The yarn maybe local or from abroad, it may include self-ridicule and human foibles, but it will always tease out laughter from the crowd. There are the words of course, but the delivery is timed, the pauses on point, the gestures and facial animation delightful.

He’s not one of those center-of-attention people either. The ones who propel themselves forward on a wave of egocentricity. So I was a little surprised when he started ribbing his dad over his style of narration. “It’s just that you and R always dive deep into the whole relations thing. This person was related to that, then they were divorced, and those two are second cousins to this that and WHATEVER.”

“Get to the story,” the middle aged man lamented. What’s the purpose of all these relations?

His father and uncle would mull, hesitate and then correct themselves as they identified each individual, who happened into their story, by clan. And quite often there was an off-shooting telling of why they lived on this farm and no longer lived on that one, or who they were married to way back when.

This wasn’t Christmas after all, so why replicate Matthew, Chapter 1?

For people like his uncle, who had lived his entire life in a community, knowing the relations is part of the story. It fills in an understanding that otherwise leaves questions unanswered. It tallies up and equals out exchanges that only make sense against a backdrop of community history.

The urban youth has no sense of such lingering ties, except perhaps in his own immediate family. But to live in a small town is to carry a ledger of chits and repayments.

Cherishing free speech

As a young adult I couldn’t figure out why my other liberal arts college friends rejected Wal-Mart for the more upscale Target for their basic shopping needs. Prices were better at the first (at least back then) and after living abroad where open air markets and shops with expired grocery items were common, lights, electricity and working refrigeration seemed luxury enough.

I was standing in line for the cash register one evening, after a long day at work, when it became clear. A few customers back in line, a mom taunted her toddler’s bad behavior with something intended to be discipline. Predictably, a wail spewed forth from the chunky cherub who was probably as tired as the rest of us. (It isn’t necessarily the big red carts which roll noiselessly over polished floors that make the bullseye more pleasant.)

Or, most of us have been at a social gathering where a couple simply can not contain the anguish currently residing between them. One throws an upper cut in the form of a small quip. The other gives an eye roll or swallows a guffaw. Their negative energy swills around the party on commentary and off the cuff remarks.

When I was at college we never framed each other up by political orientation. Well– almost never. There were a few jokes at the expense of the president of the Young Republicans (very ardent!). And the sandal wearing, longhaired hippy whose clothes billowed out marijuana odors might have been the butt of a joke or two. But nothing remotely similar to the angst experience on campus prior to Covid.

A mom is free to reprimand her child in public, but I’m not sure it is as productive as waiting until they get back to a quiet one-on-one setting. A couple is free to duke it out at a social gathering, but will find themselves alone with their problems once at home. Students can sign petitions, and march and jeer at the opposing parties. And here, I am sure they are ruining part of the experience that is called college.

All the hoopla around advocating for one’s political opinions has not proven to be all that productive either. If the taking of a knee, the shouting through a bull horn, the waiving of a flag is not advancing the cause, then it’s only being profitable to the petitioner. It’s really a privatization of a public concern.

Freedom of speech is precious and should be cherished. An audience can be receptive to the grifters who use it provocatively, or we can gently suggest a more appropriate place for personal conversations.

Are homes infrastructure?

WASHINGTON (July 15, 2021) – A top official from the U.S. Department of Housing and Urban Development joined policy experts from the National Association of Realtors® on Thursday to discuss solutions for the nation’s historic housing supply shortage. The virtual policy forum went in depth on research commissioned by NAR and authored by the Rosen Consulting Group, which found that the U.S. is in the midst of an “underbuilding gap” of around 6 million housing units dating back to 2001. The report, Housing is Critical Infrastructure, has taken center stage in national conversations on housing policy, particularly after President Joe Biden last week reiterated his administration’s focus on housing as part of its broader infrastructure push.

https://www.nar.realtor/newsroom/once-in-a-generation-housing-inventory-crisis-in-focus-at-realtor-policy-forum

There is definitely a shortage of homes. Are they infrastructure? By definition infrastructure is a good which is shared by many– and for this reason it is inclined to be a public good. Bridges could all be fee based private goods with a toll booth taking up collection at either end. But they are provided in an open public manner because their nature lends itself to public consumption.

Homes lend themselves to private consumption. Every effort toward public housing has failed. Which leads us to pursue homes in a private goods market. The role of the public is to assist those who find themselves in need, by supplementing their ability to obtain housing in the neighborhoods which provide the greatest access to amenities which match their needs. Hopefully, with the long term goal of self sufficiency.

As far as the public’s role in fanning the coals on housing production, that is done by rolling back restrictions and costs involved in the home building process. The mumbled language of infrastructure and rehabbing unit dances around the two actions which would improve the lives of those without adequate shelter.

Hedonic approach vs user frequency, which is better?

The paper, Recreational and Resource Economic Values for the Peconic Estuary System, by James J. Opalueh, Thomas Grigalunas, Jerry Diamantides, Marisa Mazzotta, and Robert Johnston was written in 1999 as a study of the value of the Peconic Estuary system on the eastern end of Long Island. They used four methods to estimate value, but let’s compare just the first two: the hedonic pricing method using home values as the dependent variable, and a travel cost study. Here’s their introduction:

I.B. 1. Introduction and Overview


No single method can capture the value of the variety of services provided by the natural assets of the PES. Recognizing the many uses of PES natural resources, we designed and implemented a suite of four non-market valuation studies in order to provide estimates of the value of particular services:


(1) A Property Value study examines the contribution of environmental amenities to the market price of property. Using the Town of Southold as a case study, the Property Value study was designed to measure values of amenities to residents living in the immediate vicinity.


(2) A Travel Cost study uses original survey results to estimate outdoor recreational uses in the PES and the economic value that users have for four, key PES outdoor recreation activities: swimming, boating, fishing, and bird and wildlife viewing. This study also examines the impact that (A) water quality has on the number of trips and the value of swimming and (B) the effect of the catch rate on recreational fishing, important recreational uses of the estuary and activities much affected by water quality and resource abundance.

page 11.

Now this report looks at a fairly significant natural amenity, but isn’t the idea that residents place value on any public open space going to be subject to the same analysis? Whether a park with playground equipment, a lake with a swimming beach or a ravine with hiking trails; all these open spaces are valued both by homeowners who live in close proximity as well as others who come just for a visit.

The first approach the authors use to estimate a value of the public amenity is to calculate the portion of the home sale prices which can be attributed to the proximity of the natural resource. The idea behind the process is, if you could have exactly the same home, how would the value of the home change as it moved away (or toward) the public amenity.

We apply economic methods using the property value (or “hedonic” method) to a database comprised of all Southold real estate transactions in 1996 and GIS parcel coverage data for the town. Briefly, the analysis estimates correlations between property values and levels of valued environmental attributes, including open space.

page 27

Here is a further explanation on how the regression model works:

The Property Value technique is based on the assumption that a relationship exists between the market value of a property, and the characteristics of the property. The Property Value method uses a statistical technique called “multiple regression” to assess the impact of each characteristic on the market value of the property. The technique simultaneously compares a large number of properties with different prices and different levels of each characteristic. The method establishes which characteristics are associated with higher values, which are associated with lower values, and which have no significant impact on values. The model also estimates the dollar magnitude of these impacts–that is, it estimates how large an impact is likely to be caused by a specific level of a specific characteristic. Using this technique, the impact of different environmental amenities on nearby property values can be estimated.4 The technical details of the property value model (or hedonic technique) are presented in Appendix A.

page 16

Please read further through their paper for the statistical details, but what I would like to focus on is the equity, or capital, which is captured in each home due to its association with a public amenity. Buyers and sellers in a well functioning marketplace are bidding on the homes and thus determining what the market will bare for this infrastructure (not sure why it is considered a non-market approach). There is a premium in the offer price for greater access, hence they are pricing out the desirability of the public good.

In addition to what the authors derive as dollar figures for the market value retained by residential properties, they also note that there is value to people who use the estuary from a distance. This value is derived by a second process in step two. It is done by estimating number of visits, or trips made to use the open space. In a sense it is a user fee estimation.

I think they go awry by shifting from a capital perspective to a user perspective. We pay our water bills on a user based system but that does not represent the value of having the pipes in place to pump fresh water to all residents. And certainly metro user fees do not equate with the cost of installing mass transit. Analyzing visits more appropriately syncs with management issues such as how many lifeguards to have on duty, how often the trash bins need to be emptied and so on.

I offer a platter perspective for the inclusion of the value to the greater public who use the estuary. The residents adjacent to the estuary, who enjoy a view over an open space and a walking trail out their back yard, enjoy one level of access. The group of people who live in the local town have another relationship. And people who visit from across the county may derive yet another coefficient in front of the data which represents access to natural amenities within their reach.

At each level exists in an eco system- or platter– and a data set representative of the value of these public goods.

Home buying and hedonic regressions

Here’s a fun game you can play if you are presently in the market for a home. One could consider a variety of home characteristics, but if you are in the market for a school district, the pricing lines should be very crisp. And you must be in the market for your own family. Speculating on what others will do just isn’t the same.

If you are not familiar with hedonic regressions, it is a mathematical process where given a set of data, which is subjected to an equation built with defining characteristics, the numbers reveal the various levels of importance of each feature. If we are looking at housing prices, the coefficient in front of the school district data will tell how much of the home price was dedicated to that selection.

But you don’t have to be a math geek with access to a bunch of data to come up with a result! I’d say any buyer who is seriously evaluating this choice can shoot from the hip (after looking, bidding and seeing the values the properties commanded at close). Ideally you want to be considering two school districts which both contain similar homes to choose from within their school boundaries– say a 90’s built two story with four bedrooms up and a nice yard for the kids.

Even non-number types of buyers will be able to discern the differences when their money is in play, or their abilities to access other ideal features. School districts can swing a home value price as much as 15%, so on a home of $450K, a $67K difference. That’s noticeable. And consistent opinions about districts, which affect a great number of buyers, filter out in the numbers.

Buyers do not need regression models to calculate the price of other features. The distance to job centers, for instance, or the premium for a prestigious neighborhood. People will pay to be closer to work in order to spend less time in the car. They will also pay for neighborhoods with corner restaurants, quaint historical business crossroads and neighbors with recognizable names. The numbers here are large enough so that no pointy pencil needs to scratch out a calculation.

But there are hundreds of neighborhood features which are priced out in the offer on a home. And many of these could be better understood with the help of a little math.

Carbon Credits for Me, more work for Thee

The title Minnesota Farmers: Cashing in on the carbon bank, fighting climate change? says a lot about the direction this article takes. Farmers in the Mankato area are taking advantage of a new Biden initiative towards climate change.

President Joe Biden said he wants American farmers to be the first in the world with net-zero greenhouse gas emissions. How they might achieve that goal is still unclear — but one idea getting a lot of attention involves paying farmers to store carbon in the soil.

It’s called carbon banking, and some see it as one way to reduce the level of carbon dioxide in the atmosphere. While the concept has been around for decades, it’s still finding a foothold in ag-heavy states like Minnesota.

The mechanics of this deal goes something like this. When farmers extend the extra effort to bury carbon in the soil, they get paid for their work from corporations. In exchange for the dollars given to the farmers, the corporation receives a credit which allows them to pollute. Net result: the farmers don’t pollute but the corporations do.

Lilliston agrees that the work and money farmers like A.J. Krusemark invest to store carbon will have long-term benefits for the environment. But he argues that all that work won’t do much to help mitigate climate change if big companies are then allowed to buy those carbon credits to offset their own pollution.

This arrangement probably won’t last for long as the farmers are going above and beyond their compensated efforts, while the corporate credit purchasers are not. One group is working toward a mission, one is buying their way out of the mission. The incentive signals are all wrong. Furthermore, the groups are poorly delineated. We all have an interest in global climate change, but voluntary cooperative efforts seem to work better when the players are closer and can see progress.

Skeptics of carbon banking practices say that, in order for it to have real climate impact, the carbon storage must come in tandem with reductions in greenhouse gas emissions — not as a replacement for that pollution.

Avian Objections

“There’s Wilson’s warbler, and Swainson’s warbler, and Kirtland’s warbler,” lists Kenn Kaufman, author of several birding field guides.

“You’ve got Nuttall’s woodpecker, and Cassin’s vireo, Cassin’s auklet, and then there’s Botteri’s sparrow, and Bachman’s sparrow,” he says.

Monuments and Teams have changed names as America reckons with racism.

Of all the names listed above there is one which is objectional to inclusive activists. Can you pick it out? Can anyone pick it out, regardless of their background? You’ll have to read the article to find out which one symbolizes oppression. In my mind, if no one can select the offender, than no offense has been done.

This whole renaming thing comes across as people on a mission (not the right kind of mission) to create a story where they get to play the knight in shining armour. A search for misdeeds. Uncover and disclose them! Then become the agent who sets the whole thing straight.

Some may say, ‘What’s the harm in it?’ If changing names makes just one person more comfortable than it is a win. Yet, there are only so many hours to devote to things. NPR can only run so many stories. There are only so many resources available to rectifying a wrong. If you gear everyone up to work on the ones which produce little results, than disappointment is all that will follow.

And anger–eventually.

If activists engage people in work that makes no contribution to the mission, than aren’t they involved in some sort of taking? Those hours of work can only be spent once. You can change a bird’s name or perhaps they could be spent being a big brother-big sister, working a job fair, teaching English as a second language classes, finding someone a place to live. Changing the name of the Wilson Warbler to the little warbler with a cap wouldn’t be something I’d tweet about.

Can houses be made anew?

Speculating on innovation in housing is harder than you would think. I’m not sure if we take the basics elements of the structures as givens, or if they are fundamentally difficult to innovate. Here’s a new listing I have coming on the market at the end of the month– what could we do better?

The single family home on a plot of its own is still the most preferred housing option outside of the densely populated mega cities. According to statista, “as of September 2020, there were 213.3 million single-family dwelling units in the United States and only 38 million multifamily units.”

This one is above average in square footage, and about double the median priced property in the metro, but it still has the same structure as most single family homes: lot, dwelling, garage. The city provided infrastructure for utilities determines the type of mechanicals which service the property. In this part of the country natural gas is the established solution for heating and electricity runs the lights and air conditioning.

One innovation which is more visible around town than ever before is solar panels. One can see them glistening on more and more roof tops. But the breakeven point for installation is still out about 7-9 years, which makes it a difficult purchase. There are no heating solutions more friendly than natural gas on the horizon. The only other efficiencies toward energy conservation can be achieved through additional insulation and careful review of appliances.

Perhaps innovation will be more about how we use the space within homes rather than the structure itself. More complexity to household formation, particularly in the mixing of generations, could bring down the square footage per person ratio, leading to less utility consumption. Using the space in a single family home as a home office will keep cars off the roads.

Innovation in the near future may well be about usage and not structure.