Tag: competition

NAR settles- Are Realtors thrown under the bus?

Nope.

There have been several interesting if not colorful headlines in the news
since NAR settled a lawsuit last Friday. The issue under dispute is whether the
posting of the payout commission to the selling broker (the agent who
represents the buyer) is a key point of collusion amongst Realtors to set fees.  For historical reasons, the commission is based on a contract with sellers at the
time of listing, so there is a need to advertise that amount reliably. Hence,
it’s posted on an industry-supervised service.

Some people appear to believe that the agreement to not post the payout on
the multiple listing service, so that all professionals in the industry may see
what it is openly and transparently, is the same as eliminating half of the
work the profession currently carries and half of the commission. If we say it
isn’t so, and they agree not to publish it where it has always been published,
then poof! it’s gone.

Here are some things to keep in mind. The profession of bringing parties to
the table in a real estate transaction has existed in its present form for more
than one hundred years. It has always been an open process that accommodates
parties who wish to represent themselves. There is a very low bar to entry into
the profession as there is a small educational commitment and a few thousand
dollars in fees. There have always been people of all stripes coming into the
profession and trying new models of doing business. There have been menu
systems, where clients just pay for pieces of the work to be done. There have
been low-fee models. There has been full access to list a home on MLS and post
your fee for the selling broker. The real estate business is an open, low-entry
profession in which an entrepreneur can jump in and offer any type of
combination of features for any type of pricing structure to the public.

And people have. Over and over again.

The tech companies were sure they had hit a gold mine and built out a
network of information services nationwide. The clients loved it and told all
their realtor friends in and around 2010 that they were soon to go the way of
travel agents. While we sat in their homes holding them open to the public on a
Sunday afternoon, they nodded away at their future vision. While we spent
entire Saturday afternoons running them through half a dozen homes, they told
us they were going to order up their home over the internet and do all the
paperwork electronically.

But a dozen years later more people use Realtors than at any other time in
the last twenty years.

What’s interesting is a lot of people who don’t believe that there is a
market (that impersonal churning of groups of buyers and sellers who
voluntarily make choices) for real estate services, are pro-market. It’s hard
to understand how these critics believe in all other markets but not in paying
a fee for representation in one of the largest purchases the average individual
makes.

There is no collusion. There is no monopoly. There are no barriers to entry.
The market has continually supported the real estate profession all on its own,
despite persistent attempts to challenge it. For that reason, I have no reason
to believe that this will stop simply because a payout needs to be posted in a
new spot.

Cooperation, Altruism and Moral Judgement

People often conflate cooperation with doing good or what is right. The thought goes that is everyone just gets along and cooperates, than it’s a win for everyone. And getting along is exactly what those nice churchy people do when they reach out into the community with a helping hand to those in need. Out of a sense of duty to our fellow person, an altruist will act to augment the welfare of others.

And this is true. But there are other examples of cooperation that have not a thing to do with do-gooders in their Sunday best.

We’ve been reading David Skarbek’s book The Puzzle of Prison Order. It’s a thoughtful book of comparative analysis. By looking at various prisons, both their physical structures and their management structures, the author elucidates the emergence of a variety of levels of self-governence throughout the convict community. In South America, prisoners maybe responsible for virtually all necessities behind their wardens’ wall. While in Norway the prisoner to guard ratio is virtually one-on-one creating little need for the captive take on any duties.

From the case studies it is clear that where few services are provided, prisoners organize to allocate housing, maintain safety standards, and supplement the meager amount of food provided to them.

In San Pedro prison, governance emerges in the political realm (in the form of housing associations), in the commercial realm (markets and exchange with the outside world), and in civil society (as with the parents association).

Whereas in Bolivia the time invested by the inmates is extensive, in a small Californian prison for the gay and trans population only one position was necessary to be the intermediary between the prison population and the guards. A House Mouse takes on the duties of go between with the prison staff. Skarbek’s examination of the various spontaneous arrangement throws light on the various levels of investments demanded of the convicts. Depending on the need for governance, individuals rise to the occasion and donate their labor hours to the endeavor (one might say the socially necessary amount of labor hours, but that’s for another post).

But wait. It’s easy to forget that these are criminals who have been removed from civil society. Their emerging cooperation is forced upon them as a result of immoral behavior against their countrymen and women. They are not do-gooders. They are not altruists- at least not to the outside. Altruism delivered through self-organization is to noone’s benefit but them and theirs. And the moral behavior is dictated by their own set of rules.

Cooperation is a descriptor for a type of societal action. It’s the act of foregoing a bit of freedom to be apart of a group. Cooperation is a technique to attain an aim for an ingroup while withholding it from an outgroup. Cooperation has no moral compass. Resulting outcomes can either be good or bad depending on which wall surrounds you.

It is not equivalent to altruism. Altruism is a gift for which no duty or repayment is required.