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.

Lighthouses- are they public? And why not-

It was a few years ago now that I introduce these structural ideas of capitalism as a system subjected to simultaneous influences of public and private interests at every transaction. My first approach was to make the argument that pure public goods really don’t exist. The classic example of the lighthouse, which provides a seemingly non-excludable benefit by beaming its bright lights across the water, can be taken private. As can virtually all goods.

More evidence that public goods, as classically defined, falls apart under scrutiny is fully unpacked here in Our Problem is a Problem of Design. (Wow, written some four years ago. Where does the time go?)

But the lighthouse, along with any other good, can have degrees of public and private holds on their value. And so it isn’t the nature of the good which determines it’s ownership, but the way that it is used by individuals or groups of individuals. The division of capitalism as the system of private interests and politics as the system of public interests isn’t the correct demarcation.

The division is that capitalism is a comprehensive economic system of public and private interests, where the actors simultaneously evaluate their private and their group (public) interests at time of transaction. The mechanism in each sphere is different but the end choice is a blend of the two. The division puts politics in a separate arena which handles the style and substance of governance.

Relative reality and does it matter?

If you follow my blog you know that my childhood was spent abroad as part of a US diplomatic family. My parents were partial to third world countries, and living conditions often involved political upheaval. When we would return to Midwestern America for home leave or between postings, I found myself fielding questions about what had made it into the newspapers.

They were curious about the violence and warfare printed in bold across the masthead. They were curious about the loss of life due to famine or flooding. In their minds the reality of our domestic surroundings landed squarely between goulash and appalling.

What they couldn’t key into, and quickly lost interest in any efforts of expanded explanation, is that the headlines were just a snippet of life occurring all those miles away. There were still shop keepers opening their storefronts, kids going to school, bureaucracies slowly cranking out their workloads. The airplanes flew out of the airports, cars took people to their appointments. You just couldn’t go anywhere, you had to stay away from the trouble.

People in the Midwest knew one thing about the places where we lived and they simply chose not to make a complex ecosystem of the foreign community part of their reality. This is us here in the US. Over there, across the world, they are shooting at each other. And before you judge my fair family members too harshly, don’t we all do that all the time?

For instance, do you remember the first time you met an individual with a substantial disability, like being in a wheel chair? Wasn’t the disability so all consuming that you couldn’t move it out of your focal view and enter the context of the person’s daily activities? Aren’t there areas in the city you live in right now that are inaccessible to you whether it be because they are too wealthy or too poor? The lives the people who live in those spots are out of the scope of your reality and it is hard to fill in the missing pieces.

The reason I bring it up is to emphasize that even though other people live in systems out of our normal patterns of activity doesn’t mean that our interests will never overlap. In fact there are probably many circumstances in which crossing paths could be mutually beneficial.

The point is to not get so distracted by one feature as to shut out entire groups of people from the reality of our lives. Because for as interesting as we all think we are, we are actually more ordinary than we’d care to admit.

Negative numbers

Historically, efforts towards social amelioration fall into a category of charity or gift giving. It’s optional. It’s nice. Thus devoting time or resources to such things can only provide positive results.

So if your ambitions are to save a life, there is no possible negative outcome from your action. Whether your efforts are to curb climate change or to shelter the homeless or to raise funds for education, the number system only allows for a net positive social conclusion.

Living with the Corona virus has debunked such primitive thinking. The cautious trepidation at drug approval, intended to save lives, has most probably taken lives. The closing of schools intended to save lives, may have led to the rise in teens carjacking and in turn their tragic deaths when their joy ride collided with a street light.

Perhaps in the time before Covid it was more difficult to think abstractly about the positive as well as the negative outcomes. Perhaps it was too intangible to think that activism towards one cause, say gay rights, in fact squeezed out activism for addressing abuses in the criminal apprehension and persecution for petty drug crimes.

What the virus has done is lay bare at our feet the reality that it is not just in business matters that resources are limited, outcomes are interconnected, and well intended efforts can produce negative outcomes.

Negative numbers were not always accepted by mathematicians.

Thus, “modern” algebra is not so very modern, after all! To what extent is it abstract? Well, abstraction is all relative; one person’s abstraction is another person’s bread and butter. The abstract tendency in mathematics is a little like the situation of changing moral codes, or changing tastes in music: What shocks one generation becomes the norm in the next. This has been true throughout the history of mathematics.

For example, 1000 years ago negative numbers were considered to be an outrageous idea. After all, it was said, numbers are for counting: we may have one orange, or two oranges, or no oranges at all; but how can we have minus an orange? The logisticians, or professional calculators, of those days used negative numbers as an aid in their computations; they considered these numbers to be a useful fiction, for if you believe in them then every linear equation ax + b =0 has a solution (namely x = -b/a, provided a 0). Even the great Diophantus once described the solution of 4x + 6 = 2 as an absurd number. The idea of a system of numeration which included negative numbers was far too abstract for many of the learned heads of the tenth century!

A Book of Abstract Algebra, Charles C. Pinter

Although rationally it is accepted that there are tradeoffs in these choices between social interests, we don’t act like we know there are tradeoffs. We don’t do analysis like there are tradeoffs. We don’t approve funding like there are tradeoffs. There simply doesn’t appear to be an acceptance of the abstract concept that the allocations of time and resources function as an economy and not a charity.

Was Rome’s expansion due to an understanding of platters?

My most underrated source of interesting books come from estate sales. You never know what you might come across, which is part of the fun of it. But you can be sure to see books that are not on the front tables at the bookstores. And you can actually stand there as long as you want sifting through them creating two piles: ‘maybe’ and ‘definitely.’

It’s a treat to come across a collection of philosophy books. Partly because people’s shelves often hold various genres of novels, but fewer homes house books on thoughts. I brought home a bundle a few weekends ago which included a Cornell University Press soft cover on the expansion of Rome. Chester G. Starr Jr notes:

If we are to understand the significance of Roman history and the reasons for the expansion of Rome, it is worth stop ping a moment to investigate this Roman character, as revealed in traditions and in religious beliefs. The traditions, which were preserved mainly in the family and so passed from father to son for generations, were often tied intimately with landmarks about the city; points such as the Tarpeian Rock, the Lake of Curtius, the Sister’s Beam, and others each had its tale pointing some patriotic virtue. Together, these traditions reveal a patriotic people who were above all else obedient to established, legal authority–the family, the state, and the gods.

The Emergence of Rome, As Ruler of the Western World by Chester G Start, Jr

When writers use the word tradition in this setting I really think they are referring to the work of the family, which ends up being in large part the work of women. The guys are off leading, soldiering or earning money. The women are maintaining the traditions. But note how clearly the groupings by mutual objectives are stated: family, state and gods.

Did the Romans understand better than anyone in their day that each of these obligations created an economic ecosystem or platter? That the mission of Rome could be an overarching ambition which left the families and their local cities free to pursue their priorities?

It appears that the Romans expanded across territories with a clear deal on the wind. Give us a few of your good men and you will be protected under the umbrella of the Empire. Other than that, we won’t tax you and you are free to go about your business.

As they advanced, the Romans opened up roads along strategic routes and established colonies of Roman and Latin families as permanent garrisons at key points. Land hunger certainly must not be discounted as a reason for the expansion of Rome; it has been estimated that conquered states on the average lost one-third of their land for the benefit of Roman settlers. Otherwise the defeated were not unduly penalized. They yielded control of their foreign affairs, they entered a permanent alliance with Rome by which they agreed to furnish a set number of men to the Roman army, but they paid no taxes and retained autonomy in their local affairs.

Furthermore the Roman infrastructure of roads, bridges and aquafers benefited the general public. The Romans understood how to give in public goods so that could gain what their warring faction desired, an army of the most physically able. A balance of exchange was struck between the multiple groupings of the public and the private.

Circus Maximus, Rome

In full disclosure of the Bees

The real estate market has been moving so fast and furious lately that some buyers are opting to waive the right to have an inspection on the home. This way the seller knows the negotiations are done once the papers are signed. A couple out in Pennsylvania also forewent an inspection when they came across a hard to find parcel in their preferred school district.

Weaver bought the 1872 farmhouse in Skippack, about 30 miles northwest of Philadelphia, in December and told CNN the seller’s disclosure mentioned there were bees in the wall. But since the couple bought the home in the winter, she said the bees didn’t seem to pose much of a threat at the time of purchase.

“On the seller’s disclosure it said ‘bees in wall’ and that was it and I think because one, we didn’t see them and two, we were just so floored that we actually found land in the (school) district that was within our price range that I didn’t really ask any questions about those bees. I didn’t think it would be that big of an issue. It didn’t even cross my mind but when spring arrived that’s when we started to see them.”

https://www.cnn.com/2021/08/02/us/pennsylvania-honeybee-removal-trnd/index.html

The seller is obliged to disclose. If you are in doubt whether to mention the bat you found on your front stoop, write it down. It can’t hurt. The buyer is obliged to investigate any concerns prior to writing their offer, or during an inspection contingency. It is better for everyone to know what is exchanging hands.

In this case the package included 450,000 bees which had created a home for themselves within the wall framing over a thirty-five year period. It’s not uncommon to see a bee around the ridges of clapboard siding or hovering at the soffits, selecting a site for a hive. Perhaps that is what came to mind for these buyers. (Although it is hard to see how they missed the honey dripping down the wallpaper inside.)

In any event we need the bees! And it is great they were able to find a professional who knew what to do.

Over the span of a week, Lattanzi removed each and every tile on the portion of the home the bees occupied, treading carefully to not harm the bees and find the queen, which he found Friday.

I like to plants flowers to promote the bee population. They seem to like my tea roses the best.

Public good pricing by personality

Public goods affect the price of housing– but not always in the same way. Here’s a list of the good and its special influence.

Most mercurial: crime. Public safety is a clear deal breaker for consumers. If residents fear for their personal safety, they will move. News of this nature travels fast. And the result is that people react quickly with an inverse correlation to price.

The master delineated: school districts. The influence of public goods can hang loosely around an area, such as the effects of being near an arts district. But the opposite is true when it comes to school districts. The home is either in or out. The selection of schools makes for bold dividers in the search for homes.

Uniformly utilitarian: transportation infrastructure. Commuting distance to work and distance from family and/or support groups is very much a part of the home selection process. So time to and from major employment hubs effects pricing, as well as marketability in a downturn markets. But people are not passionate about transportation, it doesn’t bring forth a feeling of any sort. It is simply a useful fact of daily life.

The most hidden: status. People don’t like to admit it’s part of the deal. It is communicated in hushed tones that so and so politician raised his family one street over, three houses up. The name of a famous writer who own the book store in the quaint brick store front across from the park and elementary school slips into the conversation. Status is made known in an understated yet clearly revealed parlance.

The most emotional: historical districts.

Most long lasting: parks. Once parks are made part of the city grid they are there to be enjoyed for generations. Nature in its wisdom is seasonally consistent with it lessons of growth and beauty, change and renewal.

Which real estate technology companies will survive?

The following infographic compares total venture funding in Real Estate Technology to the number of companies in each category.  Which Real Estate Technology categories do you think have the most traction and potential for growth? At Venture Scanner, we are currently tracking over 642 Real Estate Technology companies in 9 categories across 46 countries, with a total of $9.5 Billion in funding. To see the full list of 642 Real Estate Technology companies, contact us using the form on http://www.venturescanner.com.

Venture Scanner

Since Zillow and Trulia became part of the real estate experience over a decade ago there has been an onslaught of technology companies attempting to disrupt the business.

Yet realtors and clients are, for the most part, going through the same processes in a move as they did in generations past. Was technology more about how information is delivered than about a new means of moving (in the purchase and sale of real estate)? Is technology providing a means of communicating and marketing instead of fundamentally changing the real estate transaction?

Maybe more on point is which of these technology companies will survive by providing a superior service and which will go to the wayside.

Markets and Emotions

Cloudy day on Lake Minnetonka

The old school way of thinking about markets was that anything traded with money was a rational exchange. Any trades involving domestic issues- family, health and well being and so on- were emotional. The world of men was based on pecuniary calculation. The world women was based on the heart. Thankfully such views are considered old fashioned.

Markets are the culmination of thousands of choices, but sometimes the people behind them are reacting with emotion. Take the corn and soybean market this spring as reported in Successful Farming:

The corn and soybean markets have had a tumultuous last three months. A significant rally in both was followed by a sell-off, then a recovery to challenge highs and then, another sell-off.

Each of these moves has been more than the markets have rallied or dropped in over five years. Corn futures peaked on May 7, rallying more than $1 in three weeks. Dry conditions affected the second crop corn in Brazil, otherwise known as safrinha crop. This was on top of a rally of more than $1 since fall. Just as quickly, December futures lost $1.38 on good U.S. planting progress. They then rallied sharply for the second time, with futures peaking at $1.28, as dry weather in the U.S. became a growing concern.

Farmers have the option to pre-sell their crop through the spring and summer. And often this is done in segments, so it is not a one and done decision. Needless to say, following worldwide ag conditions and gleaning insights into pricing can be stressful.

All this volatility can become exhausting, leading one to believe there is no real way to figure out markets and, therefore, perhaps the best thing to do is nothing.  While understandable, this can be an expensive perspective.

When December corn futures rallied and traded above $5.50, it was a price that hadn’t been seen in seven years. When prices peaked at $6.38, this was even better, and farmers who did not sell at $5.50 were happy. Yet, in a very short time, prices dropped from $6.38 to $5.00.

For over a year and a half, the strong sellers’ market in housing has forced buyers to bid on homes in multiple offers. The listing price is set, but there is no way to know what other parties are bidding. In addition to offer price, closing date and terms come into play. Through the experience of making an offer, and failing to secure the winning bid, buyers learn what it takes to be successful.

What never gets dull is watching how the bulk of the buyers will bid within a relatively small variance. Independ of each other, without knowing more than a list price, out of eight bids on a house, five are likely to be within 2% of each other. It’s the bid from the buyer who has had enough, who has looked enough, or who wants it bad enough, which will reach high and secure the home.

The emotion for the farmers and home buyers is over fleeting opportunities, one for annual income and the other for the place they plan to live out their lives. But emotion doesn’t mean markets aren’t working. Emotion is just another feature. Just like the sentiment that goes into owning a Crist Craft, like the one in the photo, to splice through the waves on Lake Minnetonka.

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.

Walking in the trees

Walking is not only good exercise but is a way to touch nature. Ho Hum you say– but not so fast. Even on a well trodden path around Fish Lake Regional Park you can play the “identify the tree game.” Disclose your guess. Take a photo of the leaf. Then have google lens look it over, and “voila!” You have a winner.

The two on the left are the Norway Maple and below the Red Maple. In the middle, coming at the tips of wonderfully craggy branches, are the Red Oak and the Gambel Oak. And to the right top is the American Elm– really hard to find the elms as they were taken down by Dutch Elm Disease And below the White Poplar, which look to have canopies of coins jingling in the sky when the trees grow enormously tall.

Still not impressed? Nature shows us how to sort. How to see things that are similar and things that are slightly different. And then we have to give them names so we can talk about them. This is useful.

Then you can see how other things have properties in common, and see their differences. Take 1. Midwest men laid off after jobs went abroad, 2. Renters resisting gentrification 3. Proponents of environmental reviews. All three are (were) caught (fear being caught) out by the greater group accepting an exchange that will leave their situation worse off.

When America agreed to trade away manufacturing jobs, workers were left unemployed and unable to regroup. When a deteriorating neighborhood gleans the interests of redevelopment, those without the foothold of ownership face higher monthly expenses. When a mine in Northern Minnesota opens, the fear is that it will pollute and damage the environment.

In the first case the damage was done and the fallout was deemed to be larger than first anticipated. The thought was that workers would be able to adjust, take on new employment, and carry out their lives. Note to self: cash derived from private employment is only one aspect of a job, other social aspects include status, stage of life, relationship to others in family.

In the second case, renters are organizing to stop improvements and redevelopments in their area as they feel they will not benefit in any way. They feel that they will loose by either having to move to another area within their price range or face higher rents justified by the neighborhood improvements. Given the lack of understanding of the complete package of social implications and costs in 1., there must be a better calculation for the compensating factors for renters while still proceeding with neighborhood rejuvenation goals in 2.

Environmental reviews appear to have become a political way to slow down a project to the point where investors simply move on. The best way to discourage business– just keep requesting more stuff. If the community has standards, as all of them do, then enforce the standards and be done. It’s up to the business to take the risk. They will be the ones shutting down if they can’t.

All three scenarios involve transactions between public groups and private interests at multiple levels. Each scenario describes a little piece of a very large system. The conflicts and aggravating conversations around such issues stem in part from a lack of enumeration of the various tradeoffs at play. Striving for a proper sorting of what is public and what is private will contribute to being able to count it all out.

The Wire– a review

If you prefer drama to comedy I can recommend the HBO series The Wire. The first of five seasons came out in 2002 when the TV in our house was featuring Barney and Dora the Explorer. A crime drama portraying the grisly conflict between law enforcement and the (mostly drug) criminals wasn’t in the cards.

The story lines hold their own with intrigue and surprise, along with character development. Every season probes a new scheme, a new crew of gangsters, while bringing along the established cast and story threads from past seasons. From Wikipedia:

Set and produced in Baltimore, MarylandThe Wire introduces a different institution of the city and its relationship to law enforcement in each season, while retaining characters and advancing storylines from previous seasons. The five subjects are, in chronological order: the illegal drug trade, the seaport system, the city government and bureaucracy, education and schools, and the print news medium. Simon chose to set the show in Baltimore because of his familiarity with the city.[4]

What holds up so well is the consistency of the norms, whether they are those which the criminals obey or the ones the mainstream players abide. Each side has heroes and crooks, has chivalry and villainy. Each side has bad luck and good fortune. Each side has weakness and substance abuse. A few try to pass from one side to the next.

The Wire is lauded for its literary themes, its uncommonly accurate exploration of society and politics, and its realistic portrayal of urban life. Although during its original run, the series received only average ratings and never won any major television awards, it is now widely regarded as one of the greatest television shows of all time.

The Wire – Wikipedia

You will also realize how far technology has come in the last twenty years. The primary tool used to capture the drug dealers is “by getting up on their phone,” or getting court authority to tap phones. When the first season opens these are pay phones on the corners of the gritty streets of Baltimore.

As long as you can tolerate a little violence, it’s well worth a watch.

Steinbeck the economist

When I picked up Steinbeck’s In Dubious Battle it was to ensure a certain caliber of writing. Only good luck would have it that farm workers, activists and landowners struggling over resources was the subject matter. Steinbeck sets up the social and economic dynamics of which I speak. Now I’m only a couple dozen pages into The Winter of our Discontent (1961), and I’m realizing that this is his thing. Take this passage where the protagonist Ethan is trying to describe to the Mr. Baker, the banker, his frame of reference around investing his wife’s money.

Ethan started an angry retort- Course you don’t under stand; you’ve never had it-and then he swept a small circle of gum wrappers and cigarette butts into a pyramid and moved the pyramid toward the gutter. “Men don’t get knocked out, or I mean they can fight back against big things. What kills them is erosion; they get nudged into failure. They get slowly scared. I’m scared. Long Island Lighting Company might turn off the lights. My wife needs clothes. My children-shoes and fun. And suppose they can’t get an education? And the monthly bills and the doctor and teeth and a tonsillectomy, and beyond that suppose I get sick and can’t sweep this goddam sidewalk? Course you don’t understand. It’s slow. It rots out your guts. I can’t think beyond next month’s payment on the refrigerator. I hate my job and I’m scared I’ll lose it. How could you understand that?”

“How about Mary’s mother?”

“I told you. She sits on it. She’ll die sitting on it.”

“I didn’t know. I thought Mary came from a poor family. But I know when you’re sick you need medicine or maybe an operation or maybe a shock. Our people were daring men. You know it. They didn’t let themselves get nibbled to death. And now times are changing. There are opportunities our ancestors never dreamed of. And they’re being picked up by foreigners. Foreigners are taking us over. Wake up Ethan “

The banker is trying to talk Ethan into being a risk taker, an investor. Ethan doesn’t have the stomach for it anymore. He lost ownership of the family grocery store, and it was more than a pecuniary loss. He lost social standing, he lost piece of mind, he lost dreams of his children’s future, and most dear to him, he feels he has lost his wife’s admiration. The slow process of exchanges that led to his financial demise was ‘the erosion’ that killed his spirit.

As history will have it, this played out during the more recent great recession, when everyday people were taken up short by the reality that they were going to loose their house through foreclosure. The evidence was there for anyone showing foreclosed properties to witness.

For the most part bank owned homes are in rough shape. An extended period of tough financial times results in missing cabinet hardware, water stains where a leak was left to drip, flooring worn right through to the subfloor. Foreclosures were a mixed bag in 2010. Frequently the properties were neat as a pin. Vacuum marks still tracked in the carpet. Appliances were clean and left intact. Sellers maintained pride in their home until they had to leave the keys on the counter and lock the door behind them.

But the strain of the situation, the erosion of spirit, kept people out of homeownership well past the three to five year waiting period as required by credit considerations. It’s a pretty safe bet that not only were their ambitions of ownership curtailed but also those of their siblings and people in their close circles. People who supported them emotionally through the process. The homeownership rate for Millennials is only 43%, well below any other cohort. And I don’t believe it is all about student debt.

But back to The Winter of our Discontent. The banker wants an investor and looks first to a man who comes from a family with experience. He makes an assumption that his best candidate comes from the pool of past business buddies. I’ll have to keep reading to find out how it all shakes out for Ethan and Mr. Baker.

But what I think we should take away from all this is that the emotional draw or drawback from participating in transactions whether for a house, or a police force or a business venture is much more dear and lingering than we acknowledge. And it cannot be ignored. The compensating factors to pull people back into those markets are perhaps partly pecuniary, but mostly something else. The need for a new entrepreneurial spirit may be harder to incentivize in the old pool and easier to energize in a new one.

What we need is to be better accountants of all the social implications of our pecuniary endeavors.

People who doubt markets

For as much as the US is associated with markets you would think that its citizens would have a pretty good feel for what they entail. But most Americans are removed from the mechanics of haggling in their daily lives as most of their consumer purchases are priced and on the shelves of the shops (virtual or in person) of their liking.

Americans actually don’t like to bargain that much. They simply don’t have that much experience. Even at markets that resemble the one pictured above, prices are honored. Every five years or so, in order to purchase a car, there maybe some uncomfortable bartering. Still many will doubt whether they got a good deal. And no one likes to feel they’ve been played the fool.

It’s a shame too, because it leaves a portion of the population disassociated from the moving impersonal parts of large groups of buyers and sellers weighing options and landing on agreeable arrangements. Traders know what it is. Auctioneers. But if anything a whole gaggle average people associate markets with the negative outcomes in some market transactions.

And since they dismiss markets as a mechanism, one that shuffles through a bunch of decisions made by their peers as they weigh options, they feel they best route is to pick arbitrary numbers and set floors. You can hear it in the rationalizing for rent control or minimum wage. We’ll fix the market!

They’re not fixing anything. They are interfering with a market. Which of course will resonate elsewhere in the system, resulting in the ever tiresome and now cliché– unintended consequence.

Here are a few non-fungible things

With Non-Fungible Tokens (NFT) -digital artwork- making headlines in the art world by commanding sales of $69 million, I thought it would be interesting to ferret out other non-fungible things. Remember the NFT works of art are not retractable from the crypto space as their unique identifiers are encoded in blockchain.

Take the the Crown Jewels of England, protected safely in the Tower of London. Wikipedia says the owner of the collection of a bejeweled crown, two sceptres, an elegant orb and a ring is Elizabeth II. But can she sell them? Perhaps technically she could– but not really. They are not tradeable, hence non-fungible. So if they cannot not be exchanged for cash, does it follow that they are not worth cash?

Take another example closer to home. Say you are dividing out the belongings from your parents home and one of the possessions is grandma’s Limoge china, a place setting for twelve with serving dishes. Your brother says it’s quite valuable, so you can have it and he will take the mutual fund account. The thing is, you wouldn’t sell grandma’s china because it is part of your family history. In this sense it is not worth cash, and hence is non-fungible.

What about activities instead of objects. Say you have two people and one eats three square meals a day while the other stuffs down the occasional bar food between beer and cigarettes. By late middle age the former exercises regularly and is feeling good. The later is sporting the wrinkles of someone twenty years his senior and the voice of two packs a day. The results of choices on how to treat one’s body is non-fungible. A health condition, whether good or bad, can not be separated, traded or sold off.

You would think currency is the ultimate fungible product. It floats around through computer screens with the ease of electricity. But consider this example. You’re on a beach vacation and you offer to pay the knickknack vendor in USD or in their local currency. She opts for US cash. If you can offer both in equal value, why should that be? The strength US currency, and hence the fact that it is widely accepted as a form of payment, is non-fungible. And makes it more desirable. Even currency has portions of its value assigned to non-fungible qualities.

Have any examples of your own? Leave them in the comments!

Deals to be had

The condo market continues to have growing inventory in this fast hectic market. (Or maybe part of the market is hectic because condos are being ignored.)

Either way, this won’t last forever folks! The extra inventory allows for better selection and better pricing. But in that funny way markets work, this opportunity will be taken for granted until it’s gone. Then there will be regrets.

First Laura now Seuss

Parents beware- Watch out for children’s books! First Laura Ingles Wilder’s memoires of life on the prairies of Minnesota and Wisconsin were warping young minds with an inaccurate portrayal of a free and self-reliant frontier. Now the linguistically entertaining word-strings penned by Ted Geisel are riddled with caustic racism.

Today’s price on Amazon for a copy of On Beyond Zebra is $650. What accounts for the 38 fold price increase? (Barnes and Noble still has the ‘out of stock’ hardcover listed at 16.99.) Cutting off supply seems like the traditional way to look at it. Stopping the presses from printing such offensive material indicates a future scarcity. This isn’t the first book to become dated so as to be dismissed by the publishers. Most of these tomes are simply forgotten, found for a few dollars on a table at a church sale.

In this case, the books are being withdrawn them from the market by those who hold their copyrights. On Beyond Zebra, however, is a relatively unknown Dr. Suess book. There are other discontinued books for sale by famous authors. Zane Grey’s The Vanishing America can be had for $3.79. Cass Timberlaine by Sinclair Lewis is posted at $5.39. And Pebble in the Sky by Isaac Asimov is $3 even. (So much to read–so little time)

The extra $633 dollars is the result of a social or community change. The premium for this copy, on this day in March, is a social component arrived at through the market pricing system we know as Amazon.

Yikes! No homes to sell

Northstar MLS

As you can see from the graph, the inventory of homes for sale in the Twin Cities had been fairly consistent until people emerged from the Covid lockdown and started buying last June. Now we are down 31.4% over last year. Buyers are buying but not enough sellers are bringing their homes to the market.

I speculate that some sellers are waiting until herd immunity as they are not comfortable interacting with the public. Some are being sold off market to Millennial children who are just now starting family formation. And some are being protected by stays which keep people in homes until after the crisis.

NFT’s at Christie’s

The NFT’s (non-fungible tokens) are making news in the art world as auction house “Christie’s Will Become the First Auction House to Offer Non-Fungible Token Art.”

Last December, an artist who goes by the name “Beeple” made headlines when he set a new record for the most valuable artwork auctioned off Nifty Gateway, a marketplace for limited-edition digital items. Beeple sold 20 artworks for a total of over $3.5 million, catching the attention of those who might not previously have known about the existence of NFTs, or Non-Fungible Tokens. While just a few years ago blockchain-based art might have been considered niche, a recent development proves this is no longer the case: on Tuesday, Christie’s announced an upcoming auction featuring thousands of images created by Beeple that have been compiled into a single composition.

The actual art looks very much like regular art. And are trading amongst buyers and sellers at a nice clip. Bitcoin.com reports that in a week last August there were 14,654 sales and $1.2 million in weekly trade volume. This piece by Trevor Jones commanded a nice price.

So what about the NFT- or the non-fungible token notation.

Crypto art relies on non-fungible tokens, or NFTs, which are usually issued with an Ethereum token, ERC-721. This ensures verifiable digital scarcity; each artwork is a uniquely distinguishable digital asset—no two are the same. 

Crypto Art Sales on Ethereum Reach a Record $80 Million – Decrypt

At first glance it seems to be a certification of sorts, a blockchain version of an identifier to keep track of the art work’s provenance. An authentication certificate more than anything else. In the artworld the story of where a piece was produced and who has owned it since, is an integral part of preserving its authenticity. The token is attached to the piece and hence is non-fungible.

But something is missing from this conceptualization. Fungible has the quality of being able to be exchanged with other goods. The auction activity indicates a product that is very tradeable. Since these NFT’s are bought and sold freely, there seems to be a contradiction. Zoup at non-fungible.com tackles some of the issues.

zoup: I had several passionate debates during Meetups around the definition of non-fungibility. And I must confess… most of these debates turned out to be sterile but, they helped me understand something important: the definition of non-fungibility is everything but obvious.

Zoup explains that bitcoins are fungible in the same way that nickels, dimes, quarters are easily exchanged. A precious coin, however, is something different. To a collector a nickel that was mistruck during production can have significant value. To a collector the deformed nickel is non-fungible. And it is in this way the non-fungible tokens make digit art unique. Hence zoup comes to this conclusion:

It is therefore the use value that defines the fungible or non-fungible character of the asset. And not its technical characteristics. The main use of an asset and the perception that one can have of it define fundamentally if the asset is fungible or not.

Why most definitions of “non-fungible” are incorrect. – NonFungible.com

It is here that I propose a clarification needs to be made. The quality of being fungible, by definition, indicates an attachment to a group, as it is the group which determines its use.

Let’s try to disprove the idea and see what happens. The mistruck nickel is non-fungible when held within the collector group, it is precious, it has a unique story. To a kid who wants a coke on a hot day, the nickel is simply five pennies towards his purchase. He pops the coins into the slot on the side of the machine without another thought. He is using the coin as a fungible asset.

The quality of non-fungibility is attached to transactions that exist within groups. NFT’s find value in the crypt-investors sphere, but I doubt you would find much interest at the local VFW. Outside of this very specific group of people who understand the crypto space, the value goes to zero. I’ve written about fungible versus non-fungible transactions. I claim that when non-fungible assets are held within a group, they are a public good. All investors share equally in the assurance that the tokens represent a unique asset.

When a group assigns a use to an object- a park bench, for example, is open to the public in a park- then the bench is a non-fungible asset (it can’t be rented out or traded by any one individual) that is held by the group. When the crypto people decide to use tokens as identifiers, they’ve created a certification process that legitimizes an artwork by the community. And that is non-fungible.

I’ve said it before. It’s all about the group.

Noah is building an ark

A handful of years ago a new term showed up in housing forums and real estate continuing ed classes. NOAH. The acronym stands for naturally occurring affordable housing. The Greater Minnesota Housing Fund explains:

The majority of affordable rental housing in the United States can be found in modest apartment buildings in every city and suburb.

These units are home to every stripe of renter and receive no federal or state subsidy at all. These Class B and Class C rental units comprise the bulk of affordable housing in the country today, but there is nothing to guarantee that they will stay that way.

Nationwide, this affordable rental housing is at risk. In prime real estate markets, this “naturally occurring affordable housing’ (NOAH) is often operated under poor management or in disrepair. Speculators are eager to snap up these developments, upgrade a few amenities, and convert these once-affordable homes to higher-market rents. This loss of affordability threatens the stability of individuals and families who are displaced, and even entire communities.

It was like a frosty burst of January air through an open front door. A much needed break from endless harping on ‘building’ more affordable housing. New construction is the most expensive form of housing and how it is in a community’s best interest pay top dollar for very few units is anxiety rising for any spendthrift.

It is equally refreshing to read that a real estate investor in Charlotte, Mark Ethridge, is building on the concept of NOAH. Here’s how he got started:

Ethridge had watched for years as properties like this were snatched up by big money investors who’d quickly renovate them, jack up the rents and then sell them off for a quick profit. With an estimated 120 people moving to the city every day and an economy on the rise, growth in Charlotte had put these kinds of apartment complexes in the sights of housing investors who saw them not as affordably priced homes for lower income residents but as undervalued assets.

Ethridge has attracted a bunch of like minded people to run up a $58 million fund for the purpose of providing housing at below market rates. The difference here is that his investors will receive annual returns on their investments, just at a reduced rate.

Bowles insists this is not philanthropy, and giving the fund a for-profit structure was a way to bring the discipline needed to ensure it would work for the long run. “We are capitalists,” he says. “We believe in capitalism. But if it’s going to survive, we have to make it work for more people. A lot more people.”

The city is still involved with help on the financing end of things and in return there is a twenty year deed restriction placed on the title of the property to ensure 80-100 percent of the units are rented to residents at the low end of the income scale.

Ethridge calls the effort “social impact capital,” and he says the Housing Impact Fund’s investors recognize that their investment can be both beneficial to society and profitable. “The nice thing about buying existing properties, unlike new construction, they cash flow the day you buy them,” Ethridge says. “So we will pay quarterly returns to our investors and we expect that cash flow to be relatively consistent.”

Common Currency

Humans have been sorting, measuring and trading for over 5000 years.

Standardized by shape and weight: 5,000 years ago, people used rings, bangles and axe blades as an early form of money.

The concept of fair or equal trade shows up 2500 years before ancient Greeks lean-in to put words to the consistencies of human existence. It was important enough for folks to hone skills to gauge the weight of a trading token.

The Dutch researchers examined more than 5,000 bars, axe blades, and rings from the period of 2150-1700 BC. The examined objects came from different archaeological sites, including in what is today South Germany, Austria, the Czech Republic, as well as North Germany and southern Scandinavia. They found not only single objects, but whole collections (hoards) of several hundred pieces.

It appears that in addition to having found the benefits of doux commerce, man of the Bronze Age was familiar with greed and hoarding. There are some constants in the world.

Pardon me, Yes? or No?

Have you ever noticed that there are yes jobs and no jobs? Attorneys are likely to say, “No, that’s too risky.” What would we do if all entrepreneurs listened to their accountants when they called up to say, “No, we can’t afford that!” Then there are processing types of jobs who like to say, “No, that’s not included in your policy.” Luckily there are visionaries that say, “Yes, let’s build a skyscraper!” And keep saying yes to all the naysayers as they wade through setbacks and plan approvals. And there are journalists that say, “Yes, we can meet the deadline for that story!” Then there are the killjoys, “No, no, no drag racing is not allowed, even if everyone is home on Covid lockdown.” But seriously, do you think Elon Musk says yes or no?

When you read something like this:

Online registration launched at noon but was disrupted within an hour as the website was overwhelmed with a peak of 10,000 hits per second. The site closed to new registrants at 2 p.m. in order to serve people stuck in a waiting queue, but in the end connected more than 5,000 people with vaccine appointments this Thursday through Saturday.

Seniors surge to Minnesota site to register for COVID vaccine – StarTribune.com

It feels like the vaccine distribution got assigned to the risk monitor, process types instead of the we-can-meet-that-deadline types. Give the right job to the right people.

Efficient to the X degree

In a Bloomberg article yesterday, Laura Millan Lombrana encouraged governments attending the United Nations climate talks to push oil and gas companies to fix methane leaks. Due to new satellite technology, which helps identify the location of the seepage, there is an economic efficiency argument to such action.

Methane emissions need to fall 70% over the next decade, a decline equivalent to eliminating CO₂ emissions from all cars and trucks across Asia, according to the report. Fixing methane leaks would be cost-effective for energy companies because the captured methane can be sold as natural gas. The cost of repairs and maintenance needed to capture methane can often be paid for by the value of the additional gas brought to the market. 

The new information (as to where the pipes are leaking) is one driver for action, but there is also the notion that the low emissions benchmark, set in the Covid year, offers up a new goal. This combination of information and technology coupled with motivation, made me think of Harvey Lieberman’s concept of “X”-Efficiency. He was a professor at Harvard and is best known for coining this concept. Here’s how he describes it in Allocative Efficiency vs. “X”-Efficiency.

Our primary concern is with the broader issue of allocative efficiency versus an initially undefined type of efficiency that we shall refer to as “X-efficiency.” The magnitude and nature of this type of efficiency is examined in Sections II and III. Although a major element of “X- efficiency” is motivation, it is not the only element, and hence the terms “motivation efficiency” or “incentive efficiency” have not been employed.

He identifies the possibility of meeting a higher efficiency with new motivations, usually in combination with other factors. In the Bloomberg article, the sense of urgency around climate change motivates fixing the methane leaks.

The level of unit cost depends in some measure on the degree of X-efficiency, which in turn depends on the degree of competitive pressure, as well as on other motivational factors. The responses to such pressures, whether in the nature of effort, search, the utilization of new information, is a significant part of the residual in economic growth.

It’s hard to know for sure, but it sure seems like Leibenstein’s “X”-Efficiency refers to the efficiency attained in the blending of the public and private spheres.

Dual Sphere Commerce

For as long as I can remember, my mom tackled an extensive Christmas mailing with mimeographed updates of our family’s progress printed on colored paper. My job was to fold and insert these single-spaced typed communications into elegant cards purchased from UNICEF.

The greeting cards provided a means for people to support the United Nations International Children’s Emergency Fund while purchasing a commodity. Girl Scout cookies blend this genre of multi-function purchase. And some large retailers, like Target, will donate a percent of the purchases to the school of the customers’ choice, distributing funds to public good providers in much the same way.

When a UNICEF ad appeared as I scrolled through my Facebook feed, I clicked to see what they were up to. Holiday cards are still a mainstay with 18 categories to filter through and hundreds of choices from there. But that’s not all. The site has an extensive offering gifts, jewelry, and so on.

They’ve stepped up their offerings but also their accounting of how much the purchaser will contribute towards the benefit of desperate children. For just shy of a hundred dollars the buyer receives a hand crafted ring, and prevents 54 children from contracting measles. In addition to laying out the the tally of how many lives will receive a health benefit, the site allows the buyer to meet the artist. These brief bio’s can further connect buyer and seller through other shared interests.

UNICEF is creating an Amazon of dual sphere commerce.

The Art of Mianzi

Americans might benefit from a greater understanding of the Chinese custom of saving face, or Mianzi.

The Chinese concept of “face” (aka 面子 or miànzi) refers to a cultural understanding of respect, honor and social standing. Actions or words that are disrespectful may cause somebody to “lose face” while gifts, awards and other respect-giving actions may “give face”.

For good or for bad, Americans’ preoccupation with being right and transparency, seems to have folks battling-it-out on every single issue. Calling people out in public. Pursuing them until they are fired. Demanding video to confirm or deny what did, or did not, happen.

There is more at risk than your own embarrassment when you act to loose face, those near you are affected as well. So they act accordingly.

Raising your voice with someone in public is strictly frowned upon. Causing a scene makes bystanders lose face through embarrassment suffered on your behalf. They may actually scurry away from the scene to save face! Even if you win whatever argument, you’ll lose as a whole.

Don’t misunderstand my allegiance to the individualism and pursuit of the truth facilitated by our democratic system. It’s just with a public health crisis impacting our economic activity, I’m wondering if there is something to learn from those who start all solutions from the communal vantage point. If, by allowing some people, or groups of people, a little slack in making the wrong decisions, we will move more quickly to plan B, C or D? By letting people save face we skip that time delay of digging-in to hold onto poorly conceived territory.

I sure don’t grasp the fine tuned logistics of Manzi. But the Chinese have a whole social capital structure in Guanxi-based corporate social capital tied into their business dealings. There is an understanding and acceptance that social transactions are a component of economic outcomes.

Allowing people to be wrong at times without a public airing seems to be a way to keep the whole machine purring gently. Can’t we just let some arguments die without an investigation? After all that’s how we live our lives. You’ll strike out as a parent if you berate your kid when he’s up to bat, and your marriage will be stinkier than the garbage that your husband forgot to pull to the curb if you make a scene out in front of the neighbors. We evaluate which battles to fight all the time.

Maybe saving face has a place on this side of the Pacific.

2020 is a Wrap!

This afternoon, as a lingering glow alights the World Trade Center and the lights go on at the Empire State Building, as the glimmers extinguish off the Hudson River, and the sun’s rays slide down New Jersey, Pennsylvania, Ohio, across the prairies, and silhouette the mountains of the West until finally slipping off the coast of California, Oregon and Washington, as the rays sink past Hawaii and into the Pacific, we say goodbye to 2020 with a wave. And a wish that we could give it a good kick in the petuti.

But this year allowed me to start this blog and I am very thankful for that. Readers have shown up in the hundreds, well over my expectations. I have relished every like and comment. Thanks so much for visiting.

The most popular article hands down was Is it so simple? A response to Nathaniel Rachman’s article in Persuasion allowed me to unabashedly promote the view that drives me to write this blog. These last three months have been devoted to laying some ground rules to how things work. There’s really no point to continue, if folks don’t see the definitions clearly of the economic nature of public and private transactions.

Since this is an economic philosophy I need to get around to tying it to material values, and I will get to such an accounting in due course. I could bring in the numbers, and show how they are assigned to forms of capital. But should people not accept the actors and the types of activity they do, all will be explained away, talked over. There will be references to cloaking and embedding and behavior.

For people to see the hard cash, they will have to see that private individuals employ time and resources to public endeavors everyday throughout; that governments are riddled with private transactions everyday throughout; that businesses develop goodwill on their balance sheets and accommodate labor demands everyday throughout; that associations are motivated by private ambitions while supporting the group’s goals everyday throughout. Until there is an acknowledgment of this type of dual structure–there is no point to assigning slices of material wealth to each and every activity.

Economics is not just represented with dollars. There are two natures to transactions. The value does show up in capital and dollars, most obviously when being externalized or internalize. Although-that moment is but a snapshot in time, a frozen price point, that could be simultaneously the result of the in-hand trade as well as the tapped capacity accumulated over generations. Hence the necessity to understand time.

For a generation, those who control the public purse have developed a party line, with nationwide control of talking points. They’ve developed an activist type of one issue dominance, with the devastating inability to see subtle trade-offs. They’ve basically obliterated the concept of varying degrees of importance. Covid has made this glaringly obvious.

So happily ring in the New Year! And ring out the old ways, while keeping an open mind to the new.

Gifts and Gratitude

Credit due to an unknown source

There are a lot of exhausted moms out there on Christmas day. What accounts for the value they find in gift giving? To bring joy and a little material well being to your kids is within the realm of comprehension. But what about all those other gifts?

Business people see something in the cards with lots of scrolls that go out to clients, thanking them this time of year. Showing gratitude is over and above any monetary payment, even if there is a business angle to the effort to nurture their contacts.

Figuring out who makes the list is an accounting of sorts. Your very best customers may get a holiday wreath along with the message of good cheer. Teachers may receive gift cards to Caribou Coffee, whereas uncles and aunts step up to Pendleton socks and scented candles, but your secret santa pick warrants an outright custom purchase.

A gift is, by definition, something that is given with no expectation of return. Yet thankfulness is often a notion in the gift giving tradition. It’s a recognition that there is somebody out there thinking about you. Being thankful affords you a moment of recognition for all those loose and untimed interactions that structure a more pleasant life, including perhaps the $15-and-under gift put before you.

Instead of rolling your eyes when you pull back the tissue paper hiding the token of appreciation in the little gift bag, consider what type of gratitude is wrapped up in it. The gesture asks you to take the time to think and remember when that cousin picked you up after hours from the bars, or Aunt Bee was at home on that below zero day when you were locked out of your home, or how the mailman put your package in a shelter spot on the front porch.

Appreciation allows you to gauge different levels of merit. A fine tuning of need, something that seems to be sorely lacking in some of our large institutions. Gratitude is an important player in the ballgame of human interactions, right up there with empathy or greed. It is one to cultivate.

For Christians today is a day of thankfulness for the birth of Christ, the Savior. The lessons of gratitude and thankfulness are carried out through gift giving. All the others who are simply setting up a tree with presents all around are still listing out their sets of priorities. In this way they benefit from this lesson, believer or non-believer. That’s something to be thankful for.

To all of you–Merry Christmas and good night!

Time and Transactions

This picture may remind you of the children’s book by Virginia Lee Burton, The Little House. A home starts out on a country road and is gradually engulfed by the big city, before it is moved back out to a quiet hill in the country. Over time the land use around the home had changed, so the story puts the house back where it belongs.

Some folks decided Burton’s book was a critique of urban sprawl, despite her objections. She countered that the book, which won a Caldecott Medal in 1943, was designed to illustrate the passage of time. Over time things change. It doesn’t have to be good or bad that change happens at difference tempos. It simply is.

Here’s the satellite view of the 50’s built shoe repair shop, encircled by apartments built in early 2000’s.

Over time the land use around this shoe repair shop had changed as well. The whole city block was ready for something new, but not the shoe repairman. His transaction time table did not match with the everyone else’s. He must have been a hold out as the builder/developer I’m sure would have preferred to bulldoze the whole section and not have to build around the storefront.

The inside of the shop shows all the signs of a long time resident: layers of leather chaps tacked to the walls, boots stacked up on shelving, a bit of dust everywhere. Here’s a small business owner approaching the tail end of his career. Selling his shop would have been retiring, and he clearly he wasn’t ready to retire. The rest of the block might have been working on a commerce time frame, but the cobbler was working on a career time frame.

The parties must have worked out a compromise as the shop still sits on what looks to someday be parking. Someday– when the time is right.

Elite-speak

I don’t remember exactly when I heard a local politician say “a budget is a moral document” but it didn’t sit right. The idea that this numerical tabulation of where funds will be spent is weighing out society’s good and evil in an oversized mechanical balance, seems a little dramatic. Sure, I understand the innuendo. If we spend on fossil fuels we’re buying environmental destruction, if we spend on the military we are just short of killing people, if we fail to spend on public health, lives are still on our hands.

And it’s not that I disagree with the concept that a portion of every price of every good or service spells out an allotment to a whole host of social goals.

As I was driving to the grocery store, my mind exploring the idea of how our family budget was a moral document, I questioned to what degree I was obligated to investigate each product we consume. At every purchase do I question the employment practices, the energy consumption, the sourcing of their suppliers; do I backtrack each and every effort that went into my consumer goods?

It seems a little impractical. More importantly, I have enough faith in the people (the butcher, the baker, the cabinet maker ) as to their choices, or rather the statistical probability that their actions fall within a range of our communal norms.

What’s off about the “budget is a moral document” phrase is that it is elite-speak. There’s a whole mount Everest of activity that is represented in a Federal Budget (or even a municipal budget). Yet the people who control this one document are considered to hold our morality in their grasp. I say have a little more faith in the rest of us.

Hillbilly Elegy

Like many Americans on Thanksgiving, we laid a rollicking fire in the hearth and watched a movie on an absurdly large TV. The feature film was Hillbilly Elegy, a Ron Howard film based on a true story. There is so much material here that is relevant to this blog: groups, public and private transactions, the externalities and the weighing of choices. The threads run fast and thick in this tale strung through several generations. I could fill a month of posts dissecting it all, but instead I’ll stick to just one scene.

JD Vance, the story’s author and lead character, has a tumultuous relationship with his mother played by Amy Adams (who did an excellent job as usual). The middle schooler asks to live with his widowed grandmother, Mamaw. The matriarch quickly starts to clip away at his juvenile delinquent friends and his poor school performance. But it isn’t the yelling nor the screaming nor the fist throwing that changes JD Vance’s perspective on his life and his future. It isn’t a hoo-ha in a shop over an expensive calculator or a potential run-in with the law.

The turning point for this youth, who eventually works his way to Yale Law School, occurs when he overhears a quite negotiation between his Mamah and the Meals-on-Wheels volunteer. JD listens as Mamaw makes a case to the volunteer for extra help in the care of her grandson. This plying of goodwill results in a handful of grapes, a pear and a snack size bag of chips. She brings the bounty back to their dinner table, slices a small chicken breast in two and tosses the chips his direction.

If you know anything at all about teenage boys, you know their stomachs are always begging for a refill. When the calculation of their predicament was tallied up in terms he understood, terms that made common and physical sense to him, the youth engaged. JD’s subsequent actions worked toward the goals that had been laid out for him, but only now he intrinsically understood.

The point is that everyone has to come to terms with their own trade offs and choices. No matter how much others (out of genuine concern or some protectorate fantasies) want to step-in and speak for another person, or another group; to make claims about what people need and all the should’s in the world that they should have; they simply can’t. To make productive choices, people have to understand the alternatives on their own terms.

Apparently the film is getting negative reviews (here and here) by many substantial outlets. I like what Amy Adams has to say in response:

Everybody has a voice and can use it how they choose to use it.

Maybe the open minded need to listen a little more closely.

Brass and Tin Pots

My son is an engineering student, but for his liberal arts requirement he is taking a course on Imperialism. The course work tells the tale of western European economies growing so that they ventured past their countries boundaries to extract resources from Africa and Indo China and the Caribbean. The model describes a dominant group taking hold of a subservient group to help themselves to resources for commercial gains. Extraction isn’t just for the history books. Consider this fictitious story.

Let’s say there is a fairly large association for a trade group. It has a sizable staff and a fair number of members volunteers. There is also a multi-decade volunteer–let’s call him/her Jo Johnson– who through time and understanding has proven agile in eliminating dissenting voices and bullying staff. There are also dues, and committees, and boards, and political action.

The associational group has clout in a community due to its size and ability to organize. It also has some resources to pledge toward those seeking local office. Jo Johnson’s influence at the association serves to direct funds to candidates who, in turn, respond with business referrals. This action of using a group resource and trading for a private commercial gain describes a process of internalizing a public asset into a private, fungible transaction.

Now some may say–this shouldn’t be so! There are ethics to think about.

But– this judgement, this evaluation of the trades in play, is best evaluated by members of the group–not outsiders. Some members maybe thrilled that Jo Johnson is able to devote countless hours wage-free to the association, and thus, any extracting done is small compensation. The members of the group may feel the clout of the group is maximized in this very fashion, giving each member the best possible slice of the overall pie.

It is really all about transparency. If members knowingly make the decision to defer to Jo, then all is right in the world. If decisions have been made for them because Jo Johnson has become so skilled at shaking loose the opposition by throwing up all sorts of meeting delays and rescheduling (it is a volunteer activity after all), and has the power to develop allegiances by promising titles like a board position (a dusty old king of sorts selling titles), then the peasants should revolt.

The process of extracting value from a group and in doing so moving a resource from a public sphere to a private transaction occurs all the time, in many different scenarios. It is a trade. Whether a trade is in equilibrium requires, not moral judgement, but transparency and an ability to evaluate the options at hand.

Judging tin pots from afar is a risky business.

Money & Safety

On Friday the Minneapolis City council voted 7-6 to fund hiring outside police from the Hennepin County Sheriff’s department to assist with the crippling crime increases within the city. This pecuniary decision to support the MPD is the first since the defund announcement in June. The discussion between the council members and Chief Medaria Arradondo was tense. You can find a recording of the full meeting here.

Fortunately, reporter Mark Vancleave with the Star Tribune, reduce the two hour meeting down to a 9min video clip of highlights:

The council members come at the discussion for approving the funds from a variety of viewpoints. The strongest defund voices place all the work of street safety at the policeman’s door. Money is raised through taxes, salaries are paid to cops, crime statistics measures their performance. The deterioration in safety is all on the police so there is no economic reason to purchase more of a failing service.

The mid-road view is best expressed by Lisa Goodman. She provides several examples of her constituents being assaulted and carjacked and being afraid to leave their homes. She mentions some of the extenuating circumstances following George Floyd’s death including the riots and the retirement of a large segment of the force. In her view, they are purchasing more police power for better response times and general police work.

The wholistic view of policing is voiced by Andrea Jenkins (8min). She maintains that the community must engage with the police force. That the community is also involved in the work to maintain order and safe streets. She is probably the only one who could have voiced this view when put at odds with the defunders.

This view isn’t new. Back in the 1960’s Jane Jacob’s spoke to eyes on the street. Although it is accepted informally that community participation makes a difference, there is no accounting for this type of work. National night out, block watch groups and such are one of those ‘oh isn’t that neighborly’ things that people do. Not a hard cash-in-your-hand transaction.

If public safety was accounted for not only by city budgets to pay officers, precincts, detectives and administrators, as well as by public participation, prevalence of criminal elements, then we would have a universal accounting of the forces that contribute to safety. We would not only want to considered the time people put into surveillance but also the losses people incur when they go back on their group and turn in a criminal.

Instead, some council members are accused of being disingenuous for trying to deny this very real system. They deny it in order to advance another objective which lays beyond their power. But whilst they hijack one economic process in order to engender a social outcome elsewhere, Minneapolitans are getting shot.

Is it Public or is it Private-Corporate Addition

I’ve been working my way through a list which claims that economic goods fall into four categories– private, club, common and purely public– in order to debunk a misconception on how we sort economic activity. Web oriented services such as Wikipedia, NetFlix and website design hold a variety of placements in the groupings. I think it is safe to say that all three of these goods are private, since, according to a UN report more than half the world’s population is without internet service. Any good provided via the web is private to only the wealthy half of the world.

A resorting mindset is needed in order to tackle vision centered around corporate responsibilities to stakeholders, such as those described in a recent article on the American Purpose by Robert Madsen and Curtis J. Milhaupt:  The Expansion of Corporate Responsibility.

Increasingly, advocates of reform argue that businesses should be concerned about their “stakeholders”—not just shareholders but also workers, suppliers, customers, and society at large. The new movement, which is often termed “ESG” (Environmental, Social and Governance issues), is not limited to progressives and liberals, but has made substantial inroads in the commercial and financial community as well. After decades of espousing shareholder capitalism, for instance, in 2019 the Business Roundtable declared a “fundamental commitment to all of our stakeholders” in order to better reflect the way corporations can and should operate today.”

Stakeholders capitalism, “ESG” or benefit corporations are all a grappling to give this movement a name. What is it that corporations, which are intentionally private organizations, accomplish towards larger societal goals? Madsen and Milhaupt point out that corporate America has a history of such ventures, though most of us do not need convincing that capitalism works favorably upon social concerns. Even the most fervently socially-minded agree.

Yet the authors go onto express trepidation over who sets the agenda and whether expectations can be met.

Although hopes are high for what corporations and institutional investors can achieve through greater emphasis on stakeholder needs as opposed to narrower shareholder benefit, few of the ESG reformists have bothered to define what the movement’s precise goals should be. This matters because in the absence of a concrete agenda people tend to assume more than is possible, and the inexorable failure to meet those expectations generates dissatisfaction and the possibility of political backlash.

Here’s the thing– there is an entire marketplace of social concerns out there to choose from. No matter what the corporate entity decides to take on, the important step is to collect the data and account for it.

*Decide to devote its social ambitions to rectify labor inequity? Account for the extra training and support and follow the employees long-term gains.

*Decide to devote their legal staff to ironing out the thorny wrinkles in cross-country trade and all the implications of contract defaults? Account for time logged while on the company dollar, and the losses taken when the contracts fall through. Track how establishing standards allowed smaller firms to enter the market with confidence.

*Decide to use the idle time of their tradespeople and send them to a financially strapped public schools to tighten up all those leaky faucets? Account for the hours spent and estimate the savings in city water running down the drain.

The opportunities are everywhere and the beauty of the system is not to be hampered by a particular agenda, but to attack the issues which are most readily facilitated by the business and the people who make it up. To find the passion which galvanizes the employees to give of their time and expertise.

But-this is important- we can’t know how it all shakes out until it shows up in a tabulation somewhere. The trick is that the mechanics are different for social activities versus the mechanics of for profit transactions. That doesn’t mean they can’t be held to account. Already things like ‘good will’ show up on balance sheets. Think of the possibility of two colors of ink on the net income statement; one for profit and one public profit. The former total is by far the lion’s share, as by definition corporations exist to produce financial gain. Yet knowing the later, being able to track, tally, and compare it, will be empowering.

Tracking will also play into Milton Friedman’s emphasis on transparency. Through open disclosure, reports identify the social goals tackled and the benefits of eventual outcomes. It also provides signals where possible excesses, corruptions and silly virtue signaling are occurring, if not out and out fraud.

The task at hand is to identify what counts as work towards a public objective. And see how assets are used, stored and accounted for. To identify this concept of capacity and give it a number. Where do the tradeoffs get revealed so individuals will make choices with their time and energy? How could they be engaged by benefiting from a personal social objective while participating with fellow employees? The angles are multifold.

So I say– do not hold expectations in check. Run with them, write them down and see how they all add up.

This would never happen in MN

I’m not tuned-in to how new construction is done in China, but I can say why this would never happen in Minnesota. Clients are on a time-line. They would not proceed with a purchase agreement until a somewhat (within 30 days or less) firm closing and occupancy date was clearly possible. The project would have to be far enough through the city approval process to be assured of no delays. With the hint of a builder’s lack of ability to retain tradespeople, buyers will shift to a builder that has deep enough pockets to hang onto good workers.

In a very hot market, buyers will put down money to hold lots or condo units pre-construction. This dollar amount is a small fraction of the total cost of the unit. If the developer went bust, those funds could be at risk. Only in the relatively small number of custom built single-family homes do clients risk a construction loan, where the builder receives disbursements from the bank over the six month period it takes to build a home. But the timing would never put the buyer on the hook for the full amount of the mortgage.

7 Billion for a Transportation Revolution

That’s the election news from Austin, Texas. A pretty hefty purchase for a metro of 2.2 million people. More on the deets from the local Patch:

The project came in two separate parts for voters, Proposition A and Proposition B — both of which gained support from the majority of registered voters. The former, which passed with 59 percent of the vote, calls for an 8.75-cent increase per $100 valuation to the city’s property tax rate, resulting in around a 4 percent increase to the total bill, toward a high-capacity transit system known as Project Connect. Prop B, which passed with 68 percent of the vote, provides for $460 million in debt issuance toward transportation improvements —sidewalks, bikeways, urban trails, safety projects and the like.

This wasn’t the first run at a rail transportation package in the capital of Texas. It wasn’t for lack of need. The urban’s center’s population growth for the decade ending in 2018 was 37%. Yet two prior funding attempts had failed. This time things were different.

“There were three main arguments that were made,” says Austin mayor Steve Adler. “One was congestion. One was climate change. One was mobility equity in our city.”

This time the city was all in. The focus was not only on light rail to improve commute times and to connect various parts of the city, goals which appeal to those who could better use the hour from a daily commute, and to those who prioritize emission reduction. But the plan also provides for “transportation infrastructure including sidewalks, transportation-related bikeways, urban trails, transportation safety projects (Vision Zero), safe routes to school and substandard streets.”

Let’s count the public objectives: transit, health, environment, access to jobs, recreation, safety. And lest you think they forgot about housing:

The plan, funded by an increase in property taxes, also includes $300 million to help make sure that as transportation improves in some neighborhoods and housing values rise, residents aren’t displaced from their homes due to gentrification. They’ll do this by offering rent subsidies, building more affordable housing, and giving financial assistance to home buyers. 

Austin’s business success and hence population boom has put it in the enviable position of having a need for all these public projects as well as the financial ability to fund them, which they have tied directly to the assessed values of real estate.

But what about cities that just need one of those amenities, or even just a leg of light rail, or upgrades to a suite of bridges, or replacement of a water treatment facility? What are the standard pricing mechanisms and what are they tied back to in such a way that is financially acceptable to all those who support the improvement? What are the combinations that upsell a project and close the deal, such as this one in Austin?

Minnesota passed a 1.87 billion bonding at the fifth special session held in 2020. Two years of touring and evaluating worthy projects, and still the delays and posturing and addon’s. The beauty of a standardized pricing mechanism is that the crazy haggling is reduced to more amenable swings. And more importantly people don’t feel the hazy disbelief that I did when I walked away from a souk off the central square in Marrakesh after paying $20 for two sad sticks of incense.

Rain drops

‘At least the weather has been nice’ has been a passing phrase in 2020; a Minnesota nice way of putting a positive spin on a dreadful year. The stretch of sunny 60 degree days in our forecast has me deciding which outdoor tasks I can still accomplish. Some readers may not appreciate these temps, but just a few weeks ago an early storm wrapped the landscape in a four inch blanket of white, catching the Autumn Blaze Maples startled with all their leaves yet to drop.

The proper order of things is for the leaves to turn their brilliant oranges and golds and reds, then drop, then get raked up before the snow flies. It’s not the end of the world if the leaves don’t get raked up but blow around in the back yard until snow covers the landscape for a good chunk of the calendar. Come spring, however, when the thaw comes out of the ground, you’ll contend with a soggy mess. There’s the possibility that south winds will dry them out over the course of March, April and May. But the grass will emerge yellow and thin.

Having a patchy pelouse doesn’t make your home inhabitable. It doesn’t come under the must-respond-immediately-and-fix like a furnace when twenty below temps are testing your weather stripping. Heat is essential in a Minnesota winter. Water drips are up there with heat. As water on the loose tends to leave unsightly stains and make things moldy. There are things that you can’t do without and there are things that do damage if you pay them no mind.

A whole host of chores nag at you even though only a few are desperate. Take cleaning the gutters, for example. With an Indian Summer rolling in I get a second chance to get out the ladder and use rubber gloved hands to dig out the leafy debris. Otherwise a stream of snow melt off the roof will overflow, dripping persistently right next to the foundation. A few years of neglect does little damage, but eventually water digs its passage, and seeps through the foundation. Decades go by and the whole foundation wall starts to bow due to the water drops hitting like bullets into the soil and down against the walls. Something as simple as not cleaning the gutters can cause the foundation to collapse.

Community work shares this housework feature, that there are different levels of need that pull one into service. There are those tasks that need immediate attention and receive it. You can’t very well drive by an abandoned crying child at the side of the road. That’s a pull over no-matter-where-you-are-supposed-to-be and help moment.

Then there are those itty bitty items that get pushed aside like the intersections that really need a stop sign. Busy people have yet to get down to city hall and insist on better measures. When a tragedy rustles neighbors into action, there’s a lot of head shaking as to how that risk hadn’t been better assessed.

Assessing long term risks and drawing them all the way back to the present day, into the everyday lives of busy moms and dads, takes the memories of grandmas and grandpas. A shared knowledge of what eventually could happen if you put off the small maintenance items is vital. Only tackling the immediate emergencies, and burning all other time on cosmetics will pull you up short. At the worst time (inevitably) you discover that all the mechanics in your house need replacing, and the foundation is about to blow. Communities are like houses.

It takes decades to run down a house to the point of it being a tear-down. At any juncture, owners can jump in with enough willpower and enough resources to set it straight again. The better path is for people to evaluate all the long term risks, and use this knowledge to divvy up the present day work. Estimating the relative value and effort necessary to maintain and build-on what is already in place. It’s better when several generations supervise and assess the risks and rewards of the work which needs attention.

Redlining’s Reappearance

The Milwaukee Journal Sentinel reports:

A popular online real estate brokerage service has engaged in racially discriminatory practices akin to modern-day redlining in Milwaukee and other cities across the country, according to a new federal lawsuit.

Redfin is a Seattle based company which entices, sellers in particular, with discounted fees.

In Milwaukee, Redfin was about eight times more likely to offer no service at all in extremely non-white ZIP codes and did not offer its “best available service” for homes in extremely non-white ZIP codes, an investigation by the local fair housing council found.

And concluding with this:

“This is a practice of racial segregation which diminishes access to wealth, access to quality of life opportunities for African Americans,” said William Tisdale, president and chief executive of the Milwaukee Fair Housing Council.

Counting Intentions

If you could count intentions, package them up and gift them, the residents who had their homes rebuilt by Brad Pitt’s Make It Right Foundation, following the devastation unleashed by Hurricane Katrina, would be wealthy. Instead, the 109 property owners of the Lower Ninth Ward of New Orleans are taking legal action against the Hollywood superstar for “unfair trade practices, deception, fraud and negligence.”

Just a little earlier this month, another home in the development was demolished. As Federal courts pull apart the issues, it will be interesting to see how judges view the dynamics and assign responsibility. On the one hand you have the wealthy part-time philanthropist, full-time mega-movie-star, versus a group of mortgage paying homeowners, but then throw in architects with a penchant for environmental activism, builders, suppliers and the crime scene quickly gets muddied. The setting has changed from what Oprah.com describes here in 2010:

Leggett-Barnes and her family are some of the first homeowners in what will become a 150-house community constructed by the nonprofit Make It Right foundation, established by Brad Pitt in 2007 to build environmentally sound residences for low- and middle-income families. “We’re cracking the code on affordable green homes,” says Pitt, who envisions the Lower Ninth neighborhood as “a ‘proof-of-concept’ for low-income green building nationally, maybe even worldwide.”

The plan started with everyone on the same page. The recently homeless needed to return to plots of land, which for some, had been in their families for a couple of generations. Brad Pitt pledged 5 million dollars to take the edge off costs and provide the seed money for what ends up being a 27 million dollar project (that’s $247K per house). But then a new public objective starts to emerge, one driven by an environmental passion. Oprah.com notes:

A Make It Right house is eco-friendly from top to bottom, using at least 70 percent less energy than a conventional house of the same size. “We don’t just want to make homes ‘less bad’ for the environment,” Pitt says. “We want them instead to have an environmental benefit.” Thanks to their ventilation systems and solar technology, Make It Right houses emulate trees, purifying the air rather than polluting it and harnessing the sun’s rays to produce more energy than they consume. The homes are available exclusively to people who lived in the Lower Ninth before Katrina, and Make It Right guides families through the financing process.

It wouldn’t be the first time two objectives were tackled simultaneously: Help families rebuild their homes and make the structures energy efficient. Both admirable. But don’t miss that last sentence, ‘help them through the financing process.’ And just like that we’re off the philanthropy playing field and into the private market game. In this venue the owners are expecting to purchase from a developer, not an actor-philanthropist-activist. They sign for a mortgage. The most common number for the debt was around $150K, bringing the final cost per house to somewhere around $397K.

Just for comparison here is a listing for a new construction home in New Orleans posted on Realtor.com today.

Even at $397K (not including lot cost) one might say the extra money was well spent on energy conservation measures and intended health benefits. One might say that, if the properties hadn’t started deteriorating within a few short years.

By 2015, as most construction concluded, the project had cost almost $27 million. But complaints about the construction and materials used in the homes had already emerged.

These transactions had a philanthropic and environmental and private market component to them. The additional inflow of funds to cover the environmental objectives came in, but the new owners of these properties do not appear to have engaged as critical consumers for the core product. They didn’t check into the materials or the mechanicals or the plans. Just talk to a builder rep if you question whether consumers who build with them hover (daily) to ensure they are receiving what was written up in their purchase agreement. Perhaps due to the power of stardom, or the actual dollars being spent on their behalf, the home-buyers seem to have stepped aside and allowed others to do their bidding. Until as the New Orleans Advocate reports:

In September 2018, homeowners Jennifer Decuir and Lloyd Francis sued Make It Right for what they alleged was deficient construction that caused mold, poor air quality, structural failures, electrical malfunctions, plumbing mishaps, rotting wood and faulty heating, ventilation and cooling.

The dynamics of philanthropy allows for an individual (or group) with extra funds to choose a public need and steer their resources accordingly. The recipients are asked only to consider reciprocating at some future date, should they find themselves in a similar situation. If the courts place the blame on Brad Pitt will that inhibit the flow of goods and services from the wealthy to those in need for fear of liability? Were the end consumers not responsible in a buyer-beware type of way to check out what they were buying? From what the articles (USA Today, NPR), they had owned and maintained homes in the past.

There’s plenty of blame to go around. The architect John C Williams collected $4 million in fees. There were permits and inspectors and building codes. And maybe some blame should end up at the lenders’ door for not questioning the innovative, but untested systems, going into the project. In the end they are on the hook for the paper if a homeowner walks and abandons their property. But mostly, in the for-profit market, the relationship between the developer-builder and the home buyers establish the acceptable combination of durability, green components and price.

The problem wasn’t a lack of intentions. The problem was that the philanthropist-activists bypassed the marketplace and all the small interactions that make it up. The fatal flaw was the thought that with enough money, and passion, all the feedback and tussles between consumers, and inspectors, and building code committees, and brokers, and city planners, and developers, and real estate agents, and electricians,…that all those players interacting in a market setting, just doesn’t matter.

The market continues to shuffled through the consumer choices when judging the environmental impact of products. Standards are set by producers of furnaces and A/C units; power companies offer home energy audits and neighbor consumption comparison; neighbors talk to each other; contractors share incentives; all in the effort to advance a public goal of energy savings. But at each step that goal must be incorporated into the overall integrity of the purchase at hand, or homes will fall apart just like those in the Lower Ninth Ward.

Praise for Brad Pitt remains high, and the contention remains that his intentions were and are completely genuine. It looks, however, as if he will pay dearly for moving toward an ambition without vetting it through the market system. This story shows us that it is not enough to imagine a better world, and poof! It will happen. Progress takes the engagement of all players, giving feedback through action and pricing. Progress depends on markets.

Money and Power

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 vignette, taken from The Social Meaning of Money by Viviana A. Zelizer, a family finds themselves in need of assistance. They have lost their wage earner and hence their source of funds. Instead of replacing the funds, however, the charitable organization replaces the mom’s job by doing all the choosing and purchasing for her. They in effect removed her from the trade necessary to complete her social objective to care for her family.

Even with the best intentions, the desire to release individuals or groups from the work attached to their role in the production of their public objective, causes market failure. And it is by far the most prevalent and damaging market failure in the social sphere.

Market Structure

An exchange between women on the streets of Lisbon some forty-five years ago seems straightforward enough. Very free market! But there is more to the story than the image of one women clutching a porte-monnaie and another wrapping the fresh catch of the day. More than likely these two have known each other for years, perhaps the families have known each other for generations. Over those many interactions standards have been set, expectations established and met, and even some pricing adjusted if one had run into hard times. The social component of this exchange is in that picture too.

When I was a girl, I used to love the chaos of open markets like the Addis Mercato. The mish mash of it all. The skill of barter. My parents always ask for local advise before heading out in order to know the going ‘foreigner’ rate of things. That way we’d at least have some idea of an appropriate price to pay. A market brings together buyers and sellers who agree to an exchange. In this setting it is money in trade over a rickety wood stall for some durable good.

With Covid on everyone’s mind, it was recently asked: “What is the nature of a marketplace for a vaccine?” When it comes to health and saving lives we always get a little squeamish about accounting for things, for seemingly putting dollars to lives. But even if only in a hazy subconscious way, people still make these choices which involve resources.

Who is at the piazza for vaccines? The buyer is the worldwide citizenry, starting with the most susceptible and to those who have the greatest chance of being a spreader, to everyone else. Who benefits from the trade? Everyone. Who is the seller? Here’s the tricky part. The sellers are a collaboration of the scientific facilities who research and develop, the drug manufactures and some type of government agency.

If you question whether these are linked by an overlay, try to separate them. The researchers have knowledge but need funding. The pharmaceuticals can produce with knowledge, but can’t afford the researchers. The government representing the will (in theory) of the people and can use their money to pay the researchers, but is denied the ability to be a producer as history has shown that this is best left to the pharmaceuticals. But something is different in the mechanism of the interaction between these three. They are operating in a separate economic sphere.

So we’re stuck with all of them. Mother Nature has done a great job of providing the researchers the need they usually have to demonstrate. Hence, the funding process has gone well. Now the two other collaborators are weighing their investments, risks, and tradeoffs. The formal representatives of the people know the profits to the people from a fast turn around on a vaccine is high. There is a large and immediate benefit from scaled-up vaccine production.

Something is different for the pharmaceuticals. For although they share the umbrella objective of providing lifesaving Covid-19 vaccines, their stand alone sphere of economic activity is one that operates in the realm of the profit motive with assurances of property rights. Remember that, at least in the US, they do business in the private market sphere by design. Their incentives and risks are no longer in step with the two public sphere entities.

At these juncture points, where the two systems meet, it can be uncomfortable. At these seams, resources can by hijacked, which makes people warry. And this is true through the ever cascading layers of economic behavior within a system. Which explains the necessity to pull the players apart and figure out which stage is hosting their production.

If the women of Lisbon could figure it out, I’m sure we can too.

Follow the money

For those who follow the blog you know that I’ve been harping on the distinction between public and private, club and common goods, here, here and here. In my view goods are not sorted in this manner. A hammer is a hammer. If it is used to fix my deck it is in service to me privately, if it is used build a Habitat for Humanity house it is providing a public service to house the unsheltered.

The reason it is necessary to resort this understanding is because it is how we can see corruption. Corruption is not just up to politicians. A system can be corrupt and individuals, small groups and so on. When a set of rules are put into play, but then through cloaking and shading people (or groups of people) pursue other objectives, there is corruption.

Take the case of Embrace, a domestic violence shelter, that’s been in the news. The local police in Barron’s County Wisconsin objected to the posting of BLM posters around their building. And felt this posting calling out police violence, discredited their service. As a result public funding for the shelter was revoked. Here are the Huffington Post, Wisconsin Public Radio and the Washington Post articles.

Embrace states their core mission

To end violence, inspire hope and provide unwavering support to all people affected by domestic and sexual violence by engaging our community in safety, equality and partnership.

Now remember domestic violence persists when the normal social catches fail. When there are no close family members to pull their daughter, son or elderly parent out of an abusive situation. When there are no neighbors who notice excessive bruising and quietly offer the victim a way out. Domestic violence requires a formal force intervention because no other means of social exchange has worked or been available. And from what I understand, these types of calls are frequent and precarious for the police.

Given the necessity of the police to intervene in order to get the abused to their doorstep, you would think the shelter would consider this public agency as a core part of their workplan. As to why the shelter declined to remove their signs, Katie Bement the shelter’s executive director told the Huff Post:

“We were approaching it from an accessibility standpoint,” she told HuffPost over Zoom on Thursday. “We needed to show that we’re safe for those communities of color.”

Yet Barron county’s black population is .14% (a fifteenth of 1 percent) of all residents. I’m not sure how many of those 62 people would be drive by the shelter first before making a call for help or finding them on-line. I don’t have the statistics from police response rates or the shelter’s service records, but I suspect the demographics of those receiving aid lines up with the 97%.

As much as the shelter would like to merge the work they do in Barron County with the objectives of BLM the demographics seems to deny them this reality. The group they provide services to are overwhelmingly, if not completely unaffected by the concerns of BLM. In fact the two missions are at odds with one another as the later has diminished the abilities of police to provide security nationwide. Which is undoubtedly why the county pulled funding.

Now back to corruption.

Within a day of the Huffington post article being run, a GoFundMe page was set up for the shelter. Before dinnertime they had surpassed their $25K goal. As of this morning (screen shot included) the page is reporting a kitty of over $69K. Would the shelter have been able to raise this funding without the BLM story behind it? By accepting these donations has the shelter’s mission changed?

If you publish one set of objectives yet acquire funding for another, it seems that you are at odds with your group. It’s not that groups can’t change their rules or objectives, its just that you have to be clear about them so people know what they how their resources are being invested.

A public of Two

When I was young 50th wedding anniversaries were common. The local golf course was the venue for gatherings and cake, and for testimonials from friends and relatives. Stories about the young couple’s meeting and courtship, and then marriage and the crazy baby years, were spun out over the white table clothed tables. Maybe there were even stories of difficult times and persistence. In today’s world an announcement about an anniversary surpassing the 30 year mark is commented upon, oddly with: WOW! Congratulations!!

This most basic public of two, (as the property they share is available to them both and actions of one effect the health, wealth and well-being of the other) continues to be threatened by a considerable risk of dissolution. “About 90% of people in Western cultures marry by age 50. In the United States, about 50% of married couples divorce, the sixth-highest divorce rate in the world. Subsequent marriages have an even higher divorce rate: 60% of second marriages end in divorce and 73% of all third marriages end in divorce.”

You would think the benefits of a longer life would be an incentive for all those folks to stick together. The CDC reports: “Previous studies have found that married persons have lower mortality rates than unmarried persons, attributable to either selectivity in entering marriage (i.e., healthier people are more likely to marry) or health-protective effects of marriage, or a combination of the two (1,2). ” Even in the COVID numbers we find “strong and stable families seem to be more resistant to the pandemic.”

Things only get worse as people age and live alone which leads to a crisis of loneliness. In Minnesota the total number of housing units is 2,477,753. With the total population at 5,639,632 the average number per household ends up at 2.49. So everytime you can think of a household made up of more than two people, there is someone living alone. The estimates I saw came in at 20-23% of the population. That’s a lot of singles.

So what gives when the advantages of coupling are out there for all to see. I’m starting a list:

  • With both parties in the work force, the short term transactional nature of business sub-plants the long term ambitions of a social contract.
  • Fear of being duped -don’t take it.
  • The transactional measure of giving ‘enough’ should be replaced by the social measure of giving their best effort.
  • Lack of celebrations that recognize couples in front of an audience.
  • No standards for friends and family to support or constructively comment.
  • Avoid failing at marriage by not getting married.

The data proves that marriage is good for us. So why folks don’t invest a little more work in staying together is odd to me.

Is it Public or Is it Private?

Marginal Revolution University is an incredible source of economic knowledge. In addition to the course work there are videos and games. Here’s one designed to help distinguish between public goods, private good, common goods and club goods. At the end of the game there is a cheat sheet of how to classify these goods and services.

Pure Private Goods/Services (excludable, rival)
● Haircut
● Pizza
● Website design
● Table service at a restaurant
● Snuggie
● House


Club Goods/Services (excludable, non­rival)
● Netflix
● Amusement park
● Uncongested toll roads (highway)
● The movies
● YMCA membership


Common Goods (non­excludable, rival)
● Busy city street
● Hospital E.R.
● Tuna in the ocean
● The meadow where your sheep graze
● Wildlife
● Forests


Pure Public Goods/Services (non­excludable, non­rival)
● Wikipedia
● National defense
● Uncongested city street
● City fireworks
● Air to breathe
● Google
● Asteroid defense

To understand the economic arrangement I talk about in this blog, these categories have to be rearranged. I ask people to consider that there are two natures to every product: public and private. The nature is dependent upon who, or which group, has access to the goods.

Let me give you an example. A haircut seems like a pretty straightforward private good. The exchange is between two individuals where the customer clearly owns the hair. But what if the haircut was given to disadvantaged kids in an elementary school by a barber who was providing the service as a gesture of community involvement?

The purpose of the activity is to enhance a child’s self esteem and in doing so increase their productivity at school. The barbers work for free so no money is exchanged to make this a private transaction. There are no production reports, nor does this get measured as a part of GDP. This service is done as a public service not a private transaction. Mind you not just anyone can get the free haircut. Only the kids at the elementary school in question. Everyone else must pay. So the public nature has to be attached to that grouping: it is a public good for the elementary school kids.

This is the reason a haircut cannot be classified exclusively as a private service. In due time, I will sort through this whole list of goods and services to convert you to the new classifications of public and private! In due time.

Who is NOAH anyway?

It was three to four years ago when the acronym NOAH (naturally occurring affordable housing) started appearing in presentations and in print. The sale of a 698-unit apartment complex in Richfield, a modest first tier suburb adjacent to South Minneapolis, and the subsequent fallout from tenants having to relocate in light of the new owners’ ambitions to rehab the ailing structure, brought this situation into focus. The term emerged from the realization that there can be a time when both landlords and tenants benefit by rents low.

Analysts talk about housing like it is a static product. How many units are for rent, with how many bedrooms, and how many square feet. People talk about housing as if the most interesting thing about it is its physical parameters. But properties change over time. What is brand-new, mechanically up-to-date today, becomes tired and dated in the course of a dozen years. People change over time too. A single adult transitions into married life and a family changing their housing needs.

Housing structures have a cycle. New means no repairs but new also means (relative to comparable used properties) the most expensive. As properties age they can become dated and repairs can start to be overlooked. Usually used properties are supporting some mix of these two: the roof is new but the furnace midcycle; the counters are granite but the appliances from a decade gone-by.

Wear and tear and maintenance can also vary depending on the tenants. A drive around any large University campus will show off some student housing that is a little worse for wear. And some landlords are better than others at keeping up on property demands. It can be that the owners are at a later stage of their investment and are happy enough to keep doing repairs instead of replacements, and ignoring the dated carpet runners in the hallways. As long as their renters are happy with stable rent, all parties allow the property to age.

Keep in mind the economics of the lower rent. The owner, by letting improvements slide and just getting by on minimal repairs, has in effect allowed the building to decrease in value. The lower rent is a transfer of building value to the renters. The decreased building value in the open market attracts an investor who is then motivated to do the renovations. And with this the new investor attracts renters who can pay for them.

This most probably describes the evolution of the large apartment complex in Richfield. Other expenses can also impact an owner’s decision to sell.

Dickens sees NOAH threatened across the region, and said landlords get no choice when property values — and thus taxes — rise. Maintenance costs and upkeep also climb, with costs typically passed to tenants.

Is it not beneficial to the community or the renters for a building to deteriorate to the point of condemnation. So the process of an investor rehabbing an aging building in and of itself is a good thing. The reality is that structures depreciate over time, and repairs can only be ignored for so long. NOAH wasn’t a discovery of something new, it just revealed a situation in the open market where both the provider of the housing and the residents found an agreeable equilibrium. For a time.

The biggest takeaway from the acronym is that there is no secret money tree that will appear and save the most vulnerable from their housing burden. NOAH occurs as a situation where an investor tolerates some devaluing of property which is then reflected in lower rent to tenants. But it cannot be sustained without the building becoming a teardown. In the end, when people can’t afford their housing expense, some other group will have to cover the difference.

Fungible is more Fun

What does it mean for a transaction to be fungible, or non-fungible? Here’s the dictionary’s definition for the word when googled;

fun·gi·ble/ˈfənjəbəl/Learn to pronounce adjective LAW adjective: fungible

(of goods contracted for without an individual specimen being specified) able to replace or be replaced by another identical item; mutually interchangeable.”it is by no means the worlds only fungible commodity”

Wikipedia talks about fungibilty in this way:

In economicsfungibility is the property of a good or a commodity whose individual units are essentially interchangeable, and each of its parts is indistinguishable from another part.[1][2]

For example, gold is fungible since one kilogram of pure gold is equivalent to any other kilogram of pure gold, whether in the form of coins, ingots, or in other states. Other fungible commodities include sweet crude oil, company shares, bonds, other precious metals, and currencies. Fungibility refers only to the equivalence and indistinguishability of each unit of a commodity with other units of the same commodity, and not to the exchange of one commodity for another.

In the sense of a transaction being fungible or non-fungible I offer the following understanding. If you buy your gas at a Holiday station, whether it is on the corner leaving your neighborhood, or the one near your place of work or the one half way to your vacation destination, the transaction is the same. One purchases a indistinguishable commodity which is paid for with some form of currency of consistent value. The transaction starts and ends in a matter of minutes. It is fungible.

Now consider a different type of transaction, one that happens in a neighborhood. Every morning nine to ten kids gather at a bus stop to catch a yellow bus to the local elementary school. School starts at 9am and ends at 3pm. Most kids stay for after school programming so their parents have a chance to get home and pick them up before heading home to pull something together for dinner.

Now say it is mid January in a northern climate, and a mega storm develops predicting twelve inches of snowfall. The schools close at noon before buses full of children slide into the ditch and the roads are gridlocked as the snowplows can’t keep up with the descending flakes. Afterschool programming is cancelled leaving working parents in a bind.

One of the parents, call her Amanda R, works third shift at the hospital, and has the means to contact everyone as the families went through Baby-and-Me classes together at the community center. She lets them know she’ll be at the bus stop to collect the first-through-six-graders and let them hang out at her house. “Drive safe!” emphasises the text.

If the families would have taken personal time from work to the tune of four hours each, that would have amounted to thirty-two work hours. (With an average wage in Minnesota at $58K/yr, that comes to $892). Amanda R doesn’t expect payment for her offer. She knows that over the course of their elementary school experience there will be a track and field day, and the third grade band concert (which only a parent can appreciate) and the fifth grade science fair and the list goes on. There will be plenty of opportunities for parents to stand in for each other.

The work Amanda R did to allow parents to stay at their jobs while keeping their kids safe from harm was a non-fungible transaction. She won’t receive any immediate payment or exchange for her time. She can’t trade those hours with another neighbor down the block. What she’s betting is that she will receive assistance many times throughout her kids’ school experience.

Certainly it might be more fun to work for cash and spend it on concert tickets or new clothes or a trip. But the beauty of non-fungible transactions is that they are held within the group and often engaged when the stakes are high.

Here’s the deal 101

Our local NBC news outlet recently ran a story about an elderly couple receiving help from neighbors after being criticized for not keeping up the exterior paint on their home. It totaled $67,000 worth of help. There is no name given to this transfer of money. When a private party helps themselves to $67,000 from their employer it is called embezzlement. When a politician helps themselves to $67,000 from their campaign fund it is called corruption.

The old school explanation for this activity is to denote it as a form of charity. But is it really a gift? Neighborliness is a term that shows up on surveys. But what does that mean? I see this exchange between the neighbors of Gloucester is the most basic transaction in a economy of groups. Let’s pull it apart.

It all started with an anonymous note left for the couple which read, “Please Paint Me! 😦 Eye sore – Your Neighbors. Thanks.” Although clearly written by one individual, the message is presented as a community concern. Signed, your neighbors. You’ve probably heard this type of chatter before. A house on a main road is dilapidated, or decorated with eccentric siding. Comments like, ‘I really wish someone would do something about that place.’ Or, ‘Some people are bringing down the neighborhood!’ So although one neighbor wrote the note, thoughts of this nature were undoubtedly mulled over by many a passerby.

A personal residence is deemed the bastion of private property, and property rights are a keystone feature of our economic system. But the note indicates that there is a hazy area not reflected in the legal deed, filed in the county records, which spells out the owners names. The area residents feel they have a right to demand that the exterior meet their expectations. This is not a novel idea. In fact cities even have ordinances which address the exteriors of properties regarding thresholds for debris removal and grass mowing.

The couples’ daughter took to social media to voice her response to the note. She points out that her parents had lived in community for the past 50 years. And that during this long history they had maintained their home, and hence contributed many years of service towards an acceptable streetscape. “My family for many years took care and maintained this house as best they could…” 

The reason for the disrepair could happen to anyone, it was an act of nature. The article reports that “Marilyn, 72, developed multiple sclerosis about 30 years ago and is mostly confined to her bed, and Jimmy, 71, recently recovered from a quadruple bypass…” Health concerns take time and resources away from the couples ability to comply with the norms of the neighborhood.

Once the word got out about the need, once demand for goods and services was established, a voluntary response from the community resulted in a $67,000 balance in a GoFundMe account. Currency is very liquid, yet these funds are not fungible. As the report confirms the money is “to be used for new siding on their home, new windows, roof and stairs.”

There is no reporting of free riding or extortion, even though funds are seemingly extracted from a greater group to a private party. Nor is this activity portrayed in a religious or moral sense. The voluntary transfer of resources to improve the exterior of the home is held together by a communal objective, one that the recipients contributed to over. This transparent and voluntary activity is the most basic transaction in economy of groups.

“People look out for each other in Gloucester,” he said. “If somebody needs some help, we just get together and do it. It’s all just very heartwarming.” What I hear him saying is that Gloucester is a town with a free an open economy. And yes, that is heartwarming.