Debunking the Public and the Private

How can it be that back in 1985 Tyler Cowen debunked the definitions of public and private goods in a paper, PUBLIC GOODS DEFINITIONS AND THEIR INSTITUTIONAL CONTEXT: A CRITIQUE OF PUBLIC GOODS THEORY, written while at Harvard? That was, let’s see, thirty-seven years ago. And yet the old lighthouse is still being pulled out as an example of a public good.

He quite easily shows how every good may be excluded and hence economic goods do not sort by this idea of all of this being a public good and all of that being a private good.

As we shall later argue; “publicness” and “privateness” should not be considered per se attributes of economic goods. The purpose of this paper is to tinker with the definition of public goods and show that nearly every good can be classified as either public or private depending upon the institutional framework surrounding the good and the conditions of the good’s production.’

He goes on to show how within the shades of useage of a good. A park may start out open to all but then be taken over by a select group whether they be hoodlums or elitest. But maybe more importantly he points out that all goods are subject to resource constraints. A ballistic missile can only shield one set of citizens.

Traditional public goods such as national defense can be turned into private goods by a similar twist. Even if a nation’s entire nuclear umbrella may rightfully be considered a public good, a single anti-ballistic missile is far less public, for it can only service a limited number of individuals in a limited manner.*

I am taken aback that I am just coming across this now.

Real Estate Reporting

I feel bad for journalists who write about real estate. It must be so boring. Prices are going up. Prices are going down. Prices are going up a lot. Prices are going down a lot. In an effort to help invigorate their job, here are a few other aspects to real estate they could look into.

  1. The number of prospect buyers bidding on a property.
  2. The number of homes buyers consider beofre making a purchase.
  3. The amount of financing concessions being provided by sellers.
  4. Which party is getting priority pic on closing date.
  5. Is an inspection being performed.
  6. Amount, if any, of concessions following inspection.
  7. Which area in the local markets is performing the best.
  8. Is there a drop in activity as a certain ring suburbs- say the third tier subrubs.
  9. What type of activity versus inventory are second homes commanding.
  10. Cash versus financed buyers.
  11. Generational differences between structure preferences.
  12. Demand for townhomes versus single family versus townhome.
  13. The price spread between new construction and existing.

I could go on but I think you get the picture. There’s so much more interesting data to consider in real estate than aggregate prices across a country of 313mil people.

Predicting the Tip

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

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

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

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

Reading Bastiat

We are reading The Collected Works of Frederic Bastiat for the No Due Date book club, and it is quite a volume. The sheer size of the tome is daunting, and a translated text written a few centuries ago requires a careful read. Bastiat loves to reference which makes for a collection of footnotes (interesting to be sure) at the lower edge of every page. The pace is slow.

What makes it fun are the successive anecdotes which call out for a subtitle: The More Things Change, The More They Stay The Same. His primary objective in the first section is to point out the fallacies of protectionism. He talks of fears. The fear the rich will become richer and the poor will become poorer. The fear machines will replace workers. The fear workers will not receive their due for their labor. The fear that trade produces war, not peace.

There’s a section from chapter 22, Metaphores, where he discusses the impact of inflamatory language, in particular the use of the word ‘invasion.’

Take the word invasion itself.

A French ironmaster says: “May we be preserved from an invasion of iron from England.” An English landlord exclaims: “Let us reject the invasion of wheat from France!” And they propose that the barriers between the two peoples be raised. Barriers constitute isolation, isolation leads to hatred, ha tred to war, and war to invasion. “What does it matter?” say the two sophists, “is it not better to be exposed to the risk of invasion than to accept certain invasion?” And the people believe them and the barriers remain.

And yet, what analogy is there between an exchange and an invasion? What similarity can be established between a warship which comes to vomit shells, fire, and devastation on our towns and a merchant ship that comes to offer us the opportunity of exchanging goods for other goods freely and voluntarily?

Words that vomit misrepresentation. Too funny.

Bastiat (1801-1850) was born in Bayonne which is within ten miles of where this photo was taken.

Commissioner of Community Safety

MPR reports:

“We’ve been talking for two and half years about reimagining public safety, creating a continuum of public safety, bringing all aspects of our public safety responses together in one department, and today that has happened,” Jenkins said. “After much consternation and vitriol, we have reached that day.”

MPR

I like Andrea Jenkins, who is now President of the Minneapolis City Council. In some ways this trans woman is the most conservative amongst the group of thirteen. She has also held consistent views over the past two years.

Cedric Alexander will be the first ever Commissioner of Community Safety. Here’s where he accentuates the necessity of public participation in the work if keeping the streets safe:

“We need to move policing forward and rebuild relationships in the community,” Alexander said. “We need to redesign our approach to public safety so everyone is working together.”

Words for Wordle

There’s a fun little game to play when you need a fifteen-minute break from whatever has been eating away at your attention. It’s Wordle. The NY Times purchased the guessing game that went viral earlier this year. The player gets five guesses to solve for the word of the day. Clues are revealed by the tiles turning yellow (letter in the word yet not in right place) or green (correct letter in correct placement).

I like to go for as many correct letters as I can get in the first two attempts. Once you have three of four letters and perhaps the correct placement of at least one of them, my chance of a correct guess increases.

Some computer types with extra time on their hands tackled solving the puzzle in the least number of guesses. It turns out that the key is to pick a strong starting word. Here are some choices that should set you up for a three-try success: SLATE, SAUCE, SLICE, SHALE, TRIED, CRANE, and LEANT.

What’s your favorite Wordle strategy?

The word- nonmarket

I think it is unfortunate that economic literature adopted the phrase nonmarket valuation when using hedonic equations for securing a numerical value for public goods, or proxy thereof. The method of econometric calculation is used all over the world to secure numerical values for impacts of everything from wildfires to airplane noise to crime. You might notice that these are all goods which benefit (or detract) from the welfare of the public nearby.

Just to be clear- I’m referring to methods which involve the use of home sales values when properties are sold in an open and active market. There is no denying that the exchange of real estate for funds is a market transaction. Which is why I find it baffling that a component of a market generated price would be termed nonmarket.

Of course, buyers pay more for less airplane noise, or take a hit when a home is on a busy road. If it is a freeway instead of a through street with the occasional bus rolling by, the seller will need to take a bigger discount. Hundreds of buyers and sellers come up with these outcomes in a market. The discount of living in a flood plain or near a high-risk forest fire area or under the power line is derived by markets. The premium for the wooded lot or the view of the Rockies is determined by markets.

I think what is being drilled down on here is that the components cannot be separated from the bundles. And the features of the crime level or the subway or the quality of the schools are derived from efforts (or networks) of nearby participating neighbors. That makes these components of the total price non-fungible- they cannot be sliced off and traded.

But they are most definitely priced in a market environment. Nonmarket makes no sense.

The Lost Daughter- Movie Review

If you are an action/adventure film enthusiast I’m not sure if The Lost Daughter is right pick for your Saturday night viewing pleasure. Whereas James Bond movies open with a large landscape panning of a dramatic ski slope decent, this film meanders along an oceanside road for as long as it takes the sun to set. Whereas Bruce Willis navigates amongst hundreds of frantic bystanders taken hostage, this film has the camera angle so tight to the lead and her children that you can’t help but smell Johnson’s baby shampoo. Whereas the violence in action adventure is noisy, loud and explosive, the violence of the female sort is gut wrenchingly mean.

This is a movie about women. Women as mothers, as wives, as cheaters, as power brokers, as party goers, as needy. There are many layers to how all the players are set in motion. And of course, the femme fatale is a bushy bearded male who steals away the lead knowing she is easily baited by the public recognition he lavishes over her professional work.

On a first viewing I just want to enjoy the surface layer, with all the beautifully framed shots. But my subconscious is signaling there is more there to be seen, and to plan on a review at a later date. Though not heavy on action, there is intrigue. The movie starts slow but builds and with the help of an unreliable narrator, one discovers a need to learn more about Leda’s story.


Walking Around Money – Short Story Review

I started liking short stories when I first found Flannery O’Connor, probably because that was her preferred genre. Then I picked up The Best of American Short Stories because the volume had been edited by David Brooks- and then I was sold on short stories as a way of sampling a new author over an afternoon on the couch. The first selection in a volume called Transgressions (edited by Ed McBain) is Walking Around Money by Donald Westlake who is just one more prolific writer who was not familiar to me.

He’s a crime writer. This sixty-page caper is full of great language for his less than brilliant partners in crime. Take this description, for example.

Dortmunder and Andy Kelp and the man called Querk sat in silence (shoosh) a while, contemplating the position Querk found him self in, sitting here together on these nice wire-mesh chairs in the middle of New York in August, which of course meant it wasn’t New York at all, not the real New York, but the other New York, the August New York.

In August, the shrinks are all out of town, so the rest of the city population looks calmer, less stressed. Also, a lot of those are out of town, as well, replaced by American tourists in pastel polyester and foreign tourists in vinyl and corduroy. August among the tourists is like all at once living in a big herd of cows; slow, fat, dumb, and no idea where they’re going.

This is language I appreciate and enjoy. The plot is tight and fresh. Now that I’ve bumped into him, I’ll have to find more pages written by Mr. Westlake.

All work isn’t the same

Jobs jobs jobs. Politicians love talking about jobs. But they might consider singing a slightly varied tune as 2021 has been the year of take-this-job-and-shove-it.

The Harvard Business Review reported:

According to the U.S. Bureau of Labor Statistics, 4 million Americans quit their jobs in July 2021. Resignations peaked in April and have remained abnormally high for the last several months, with a record-breaking 10.9 million open jobs at the end of July.

The great resignation should be some sort of indication to politicians that people are rethinking JOBS. The jobs where you are hooked to an employer and you have to do what they say and then you get a deposit into your checking account every two weeks. That kind of job. The kind of job that is referenced in the recently passed Infrastructure Investment and Jobs Act.

The greatest percentage of resignations come from mid-career professionals, people who probably have a lot on their plate. They are probably juggling kids and aging parents. And yet they are chosing to quit their jobs.

I think it would be worth the effort to figure out what other work they will be doing instead of the work-for-money job they just quit. Wouldn’t that be good to know? If a voluntary workforce was being formed to address delivery of health care, wouldn’t it be useful to track these efforts and the results that follow?

Or maybe it isn’t the joint goal of better health but instead the shared goal of furthering early education. I think is would be valuable to understand how many presently unaccounted hours support young children’s advancement in learning. Then in a decade we could all understand the results. Or maybe people are leaving their jobs to be present in the neighborhood and be vigilant in the deterrence of low level crime. Counting the number of working hours devoted to this cause, and the ensuing results, could draw some conclusions as to the capacity of an area to improve public safety.

You see I don’t believe people, in the prime of their lives, are quitting jobs to sit around on an overstuffed sofa and nibble on snacks. I believe they feel they have something more valuable to do with their time and efforts and expertise. Wouldn’t we all be better served if the government helped with a structure to channel those aspirations and in turn track the outcomes?

The old structure of government taking money from one side, arguing for two years before handing it off to the other side is getting boring. Why don’t they think with a little more dynamism. Jobs don’t have to pay rolled. They can be mission based. Think of what could be accomplished with a little structure and an energized population wishing to do good.

Interesting architecture

I showed a house this week which had floor to ceiling plate glass windows, sight line views out every window onto nature, and a Wolf gas range which would make any chef perspire gently at the brow. It was also priced twice as much, quite literally, than other home of comparable size with similar lot amenities.

The name of the architect as well as the brand of each notable feature in the home was listed out prominently in the comments. And the quality of the materials and construction were evident– from the tiled heated driveway to the reflecting pool. But what exactly should one pay for artistic features?

First off, to state the obvious, there will be those who will pay nothing. They will prefer to allocate the extra expenditure to square footage, and purchase a mini mansion in lieu of designer small. Right out of the gate, the buyer pool is a subset of all buyers. But more than likely the final bid will come from a select few who follow and appreciate the particular architect. Which explains why the name is featured so prominently in the marketing materials.

One could say that their is a community of buyers who find value in purchasing a property of such a design. And since that community would be trading property amongst each other, that extra premium could be said to be non-fungible to the community. It will always exist amongst them.

Now this concept could be a hard sell if it weren’t for the recent popularity of non-fungible tokens, or NFT’s. This new fangled art is available for purchase for all those who invest in crypto currency. The value to those outside the crypto community is, well, zero. And what would happen if the crypto community disbanded, lost interest in a form of currency that requires mega wattage to mine? Then the NFT’s would be worth zero.

In the NFT example it is easier to accept the non-fungible feature as the technology makes a clean line between those who can buy, trade and value the tokens, and those who cannot. A home built by a particular architect has residual value not tied to its design features. But the premium people pay is non-fungible. It’s tied to the community who support and value the artist in question.

Apples

Fall colors are creeping across the foliage here in the North Star state. Temps are dropping into the 50’s at night. And mums are appearing in planters snuggled up to front doors. This time of year families head to apple orchards for hay rides and hot cider.

Minnesota has a long history of cultivating varieties of apples. The sweet and tangy Honeycrisp still commands an extra $1-$1.5 a pound at the grocers. But if you’re wondering how best to use your apples, the Saint Paul Farmers Market has but together a flow chart for you.

Early learners find out that A is for apple. The apple has the dubious distinction of temping Eve into dragging all the rest of us into a world of lurking temptations. An apple was Newton’s famous inspiration. Apple Records was founded by the Beatles in 1968. Rene Magritte’s famous painting places a floating green apple in front of the face of a man in a dark grey suit. Now you can access your music through Apple i-phones. An apple a day keeps the doctor away.

Religion, science, the arts, technology, public health and education. The apple is well represented in the infrastructure of our lives.

9/11- Twenty years on

Twenty years ago, a blue sky day started the same as most days. With my infant child in his car seat behind me I drove the short distance to Golden Valley Lutheran where he attended daycare. He was four months old at the time and we had just started at the daycare, so I’m sure I was pre-occupied with the drop-off routine. As we walked in, with the car seat handle crooked in one arm and Aaron’s blankie in the other, I overheard a background conversation about a personal aircraft colliding into a skyscraper.

The sun was shining bright through the windows yet the atmosphere in the building was buzzing with electricity. I didn’t think much of it except to perhaps wonder about the level of concern in the air. Next stop my office. In that ten minute drive, the situation had unfolded. My office manager already had pulled out a TV in our conference room and other agents were gather around it on office chairs. The towers were on the monitor. One was smoking. People were trying to catch up to the story. We all sat mesmerized and the speck of a plane hit the second tower.

Now there was no confusion, only horror at the clarity of what was to become of all those people set up for their workday in Manhattan.

It gets fuzzy on how exactly the day went. One of my brothers made sure to call all of us, as we live in various locations across the US and Canada, to be sure everyone was OK. My husband worked in downtown Minneapolis at the time, and the employees were evacuated out of fear of cascading attacks. For several days following the event it was as if the ashes from the east coated our neighborhood with a quiet mourning. More homes flew American flags from their front porches.

I choke up even now at what happen to those folks. Their last phone calls to their loved ones. The doom that must have settled in as one building toppled.

Two years ago, for his graduation present, I took Aaron to New York City over a long weekend. We were on the upper level of the tour bus while going through Lower Manhattan when the fire trucks were called for a bomb threat. It was chaos. The fire engins could barely move through traffic. We were transfixed. The New York tour guy was thoroughly unimpressed. What his city had experienced twenty years ago will dwarf alarming incidents for decades to come.

Matching like to like–cohort addition

Framing up the data around issues can highlight one view while smothering another. All the numbers are correct, it is the sorting and comparing which is all a kilter. Take for instance the topic of home ownership. Here are the rates by state provided by FRED. Minnesota looks great!

Now let’s look at how homeownership rates broken down by county. You will notice that the highest homeownership rates are in out-state Minnesota and the lowest rates in the counties which make up the Twin Cities metropolitan area–outlined in purple.

Also taken from FRED

Since the rural communities tend to be older, it will be no surprise that homeownership is also highest amongst the middle to late middle age population. The Millennials, until just recently, have taken lack of interest in homeownership. Whereas 77-80% of the Boomers or Silent generation live in their own home, only 43% of those under 35 years of age have chosen buy a home. Younger folks are more likely to be attracted to the metro area.

To review, the data shows that as a state we have a high homeownership rate. Overall Minnesotans are confident in their ability and desire to own real estate and pay relatively high (ranked 19th) property taxes. Homeowners trust the cities, counties, school districts and, (for a smaller portion) the state in the use of the funds to provide services. The youngest group of adults, however, are running well below this rate, but in line with the national average.

No tricks or mirrors so far.

But what about these headlines? Are they accurate? Racial inequality in Minneapolis is among the worst in the nation – The Washington Post, Homeownership gap plays a huge part in race inequities – StarTribune.com, Why Black Homeownership Lags Badly in Minneapolis – WSJ

Each article frames the data in the same way. Minnesota is a horrible place to live for African Americans as exemplified in the homeownership gap of 51%, which is the worst in the nation.

In the Minneapolis metro area, 77% of white residents own homes, compared with 25% of Black residents—a 52-percentage-point difference, larger than in any other major U.S. city, according to an analysis of census and survey data by the Minnesota State Demographic Center, a state agency.

WSJ

What’s interesting is the black population in Minnesota has increases by more than 36% in the past ten years.

Between 2010 and 2018, the fastest growing racial group in Minnesota was the Black or African American population, which grew by 36%, adding more than 96,500 people. Second fastest was the Asian population, which grew by 32%, adding 69,800 people, followed by the Hispanic or Latin(x) population, which grew by 24%, adding 59,000 people. (Black or African American and Asian race groups are that race “alone” and not Hispanic or Latin(x)).

Data by Topic: Age, Race & Ethnicity / MN State Demographic Center

So if things are so bad, why all the in-migration? Maybe there is a need to look at the numbers a little more closely. Consider the breakdown of Minnesotans by age. You will note that people of color skew strongly to Millennials or younger.

Homepage | MN Compass

So wouldn’t the proper framing be to compare Minnesota’s homeownership rates by age cohort? I don’t have access to the numbers by generation, nor the time a journalist could devote to such calculations, but it seems erroneous to ignore variance between the groups. It seems flat out wrong to calculate rates of ownerships for African Americans who simply don’t live in our state. It’s true, that even with such an adjustment, there is still a gap. The spread is in the 18% (43%-25%=18%) range instead of the noteworthy gap of 51%.

Perhaps it is useful to use the inflated figure in order to get people’s attention. I believe ownership is the answer to extending trust between citizens and all the public endeavors in a neighborhood. I’ve also devoted many hours of unpaid labor with that mission in mind. But there are negative outcomes from fooling with the numbers too.

They discredit the built up capital that hundreds of people have devoted to the cause in good faith.

The beauty of Math

The best thing about math is that it is reliable. Numbers don’t change, they don’t have nuance or inflated expectations. You can’t disappoint them. They make you think of Horton the Elephant with a little redirect, “they say what they mean and they mean what they say, numbers are faithful 100%.”

Some people find them inconvenient for that reason. They want to tell their own story and numbers get in the way. So there are all sorts of tricks to distort the numbers. Graphs that don’t start at zero, or graphics where the bars are enlarged, to imply an unsubstantiated claim. The number sits on its axis, seemingly blushing under its inflated image.

All the more reason to keep people thinking about math. I was just reviewing the statewide scores by public school district and the math scores have the greatest spread between neighborhoods. Yet I don’t think math talent divides out that way. God given gifts ignore social-economic concerns. We just don’t know how to tap that talent-yet.

But we do know a lot about mathematical relationships. There are theorems and proofs as ancient as the Greeks. Some of us who desire some concreteness in the world, find this comforting. And even if it is not your thing, the applications of their relationships have been leveraged to give us a life enhanced by science and technology.

This alone should garner respect from even those with aversions to numbers. And even when the numbers aren’t giving us the feedback we want, they will most likely represent the reality we need to hear.

Can it be more than just about coin?

Biden’s 1.9 trillion relief plan is a little too enormous for me to get my head around. The magnitude of federal numbers just makes my eyes blur over the page. There is no anchoring the size of these things to my everyday life.

But if I can’t talk about magnitude, I can talk about structure. The goal of the bill is to engage the US economy as well as shore up people’s unexpected and uncontrolled loss of income; to keep their lives right side instead of upside down (which subsequently causes an economic drag on their greater groups). And then to get them back to employment where income can be feathered back in to the economic apparatus.

I’m all in favor of transfers for the first part. They work efficiently.

But I think there is a missed opportunity in the second part. Engaging idle labor from folks who are not destitute nor in need of transfers is low hanging fruit. As explained in this post about The Crafter The Contributor and The Covid Tracker, there are high skilled individuals available to donate labor if they are enticed by the objective at hand.

There are successful national service programs like AmeriCorps and the National Guard. Would it be so hard to have a property repair civil service? Ask any builder about the shortage of construction workers. What about a write-off for plumbers and sheet-rockers and electricians who’d be willing to have an apprentice tag along to fix a faucet at the local homeless shelter, sheetrock in a storage room at the food shelf, or replace all the gym lights with LED fixtures at the community gym?

A money transfer won’t teach a trade, nor will it make a connection between a potential employer and up-coming employee.

Pop quote!

These are all matters of incremental trade-offs to find an optimal amount and kind of safety, in a world where being categorically safe is as impossible achieving 100 percent clean air or clean water. Incremental trade-offs are made all the time in individual market transactions, but it can be politically suicidal to oppose demands for more clean air, clean water or automobile safety. Therefore saying that the government can improve over the results of individual transactions in a free market is not the same as saying that it will in fact do so. Among the greatest external costs imposed in a society can be those imposed politically by legislators and officials who pay no costs whatever, while imposing billions of dollars in costs on others, in order to respond to political pressures from advocates of particular interests or ideologies.

Throw in your best guess! No cost to play and a grand prize awaits the winner. Hint. Extracted from a 2007 book where on the rear jacket cover the WSJ says, “Clear and concise…Among economists of the past thirty years, (your guess here) stands very proud indeed.”