Tag: politics

The grocery and the mountain

When should a community gather up its resources and provide a service to all members? And when should individuals be turned out into the world to navigate on their own dime? These debates cross all levels of government.

Some provisions are accepted as a government thing, like piped water or sewer. Even basic universals like education attract conversation about private options. Roads are sometimes (although truly not very often) toll roads. Bridges are mostly a public venture, as are parks. What takes a good out of private production and places it in the receivership of a bureaucracy?

Fear usually. Police and firefighters are in place to ensure personal safety. The New Deal was to alleviate fears against a repeat of depression era outcomes. When society risks a loss that compels a human response, society steps forward with a safety net.

Mamdani, New York Cities new mayor, sold the people on a fear of escalating grocery prices and thus the need for a government run store. This seems different than when a small community rounds up a helicopter rescue for a mountain climber who ventured up a nearby peak alone and unprepared.

So who gets to pick what there is to fear? Not everyone does this well. Hereโ€™s Mises (from Theory and History)

They recommend some policies, reject others, and do not bother about the effects that must result from the adoption of their suggestions.

This neglect of the effects of policies, whether rejected or recommended, is absurd. For the moralists and the Christian proponents of anticapitalism do not concern themselves with the economic organization of society from sheer caprice. They seek reform of existing conditions because they want to bring about definite effects. What they call the injustice of capitalism is the alleged fact that it causes widespread poverty and destitution. They advocate reforms which, as they expect, will wipe out poverty and destitution. They are therefore, from the point of view of their own valuations and the ends they themselves are eager to attain, inconsistent in referring merely to something which they call the higher standard of justice and morality and ignoring the economic analysis of both capitalism and the anticapitalistic policies. Their terming capitalism unjust and anticapitalistic measures just is quite arbitrary since it has no relation to the effect of each of these sets of economic policies.

Taking over a grocery is sure to fail financially without ensuring any additional food security for those who need it. Itโ€™s a vanity project. Wouldnโ€™t it be like telling the mountaineer that a government representative would need to participate in the planning and execution of his climb? Yet here, the little community bears a disproportionate cost for the climbers’ foolishness.

It seems that the risk to persons and the community happens to various degrees. Whether the risk triggers community involvement has to do with its extreme and the distance between the risky step and all the other steps in between.

How would it feel?

People speculate why young people have delayed home purchases. Only around 20% of home purchases fall in this category. A historic low. But is it that surprising? Look at the surge of foreclosures in ’07-’08 and ’09. Hundreds of thousands of people who were never meant to have financial struggles lost their homes.

Children ages 8-12, old enough to sense the stresses within their families, yet too young to analyze the impact of a national financial crisis, were bystanders to these unpleasant legal actions in the early 2000’s. These are today’s young home buyers. Uncertain of what a real estate purchase will do for them. The anxiety associated with foreclosures has often been portrayed in litterature.

In Death of a Salesman, the familyโ€™s fear of losing their home emerges gradually, revealed not through a dramatic announcement but through Lindaโ€™s quiet confession that they are barely keeping up with the mortgage. She tells Biff and Happy that Willy has been borrowing money just to make the house paymentsโ€”a disclosure that reframes the entire domestic landscape. What had seemed like an ordinary family home is suddenly understood as something fragile, held together by secrecy and strain.

The looming threat of foreclosure exposes the playโ€™s deepest emotional fractures. The mortgage becomes a symbol of Willyโ€™s unraveling identityโ€”his failure as a provider and his desperate clinging to the American Dream. Lindaโ€™s hushed explanations carry a mournful tenderness, showing how fear and loyalty tangle together under financial pressure. For Willy, the house is both sanctuary and burden, and the possibility of losing it turns that symbol of pride into a reminder of collapse. The familyโ€™s anxiety over the homeโ€™s instability reveals how economic pressure corrodes affection, pride, and hope, tightening around them until it shapes every gesture they make toward one another.

London- a late bloomer in the water department

No one in the western world really questions whether water provision is best suited to the public or private spheres. Being hooked up to city water and sewer is unanimously considered a good thing. Was it always that way? Well- no. Londoners purchased water from private suppliers through the end of the nineteenth century.

John Broich gives an excellent history of how the desire for water provision shaped London.

His account tells how secondary cities in the British Isles adopted a municipal water system decades before the great capital on the Thames. In fact, the continued delays in accomplishing this civic feat help exemplify the many facets of interests and the levers in play. There are issues of pollution and health concerns, there are networks of private providers, and the wealthy who buy their way to what they want. There is petty jealousy and the pride of belonging to an international city. And most astonishing, there is no government structure to handle such infrastructure outside of the walls of ancient London.

For provincial water reformers, the principles on which the administration of water was based-as well as the engineering principles on which water provision was based-were meant to make their cities more modern in the sense expressed by Avery, the Birmingham councilor.

“When water is under the control of private companies, the chief desire of the directors is to obtain good dividends,” said a Bradford town councilor in 1852. “When the Town Council possesses the works,” he continued, “their chief object is to make the works instrumental to the promotion of cleanliness, the health, and the comfort of all classes of citizens.”57

Water administration by a directly representative body was to provide an obvious contrast to the commercial companies that made independent decisions about water quality, abundance, and price based on the profit motive.

It is an excellent story depicting the nature of what is public and what is private. For a literary companion piece, consider reading Dickens’s Bleak House.

Listen to Grumpy (con’t)

The biggest losers of rent control are the young, the mobile, the ambitious, immigrants, and people without a lot of cash. If you want to move from Fresno to take a job in San Francisco and move up, and you donโ€™t have millions lying around to buy, you need rentals. Rent control means they are not available. Income inequality, opportunity, equity, all get worse.

In this paragraph, John Cochrane begins to draw lines around groups of people who will lose out under a rent-control, a policy that favors those who have established leases with landlords.

The reader can quickly imagine a young person being squeezed out of houisng by the combination of entry-level pay and bulked-up rent. The surcharge is necessary to balance out the rent-controled units. That’s the persona that comes to mind and it is the one the author intends to convey. But wait. What about the just-out-of-school coders and engineers that are swooped up by the tech companies?

These kids are paid a lot money. They are can choose where to live without much concern as, most often, they have no other attachments. They all live together in some big tech hub, often times leaving their childhood communties behind. They no longer have other points of reference like a brother who took up plumbing, or grandparents on fixed income. Not only do the have the cash flow to spend they are not being reminded that others do not.

One descriptor is not enough to form a group. To say the population of Minnesota has remained constant is light on details. Susan Bower, the state demographer, explains some of the demographic breaks down in Eden Prairie, a SW suburb of the Twin Cities. At the presentation she notes the the state loses 5,000-10,000 people a year but it is made up through international immigration. In other words, the people who leave have no concerns regarding rent control are replaced by a group who are disadvantaged by rent control.

To be efficient, matching people in consideration of their stage in life with their housing needs is best. Policies which keep people in place or discourages them from moving up, moving closer to employment, moving to a stronger school district, moving closer to support systems and so on are detrimental.

Real Estate Books

There arenโ€™t many. Thereโ€™s the โ€˜how to get rich in real estateโ€™ type of literature, which is only vaguely helpful to those with no real estate experience and, in equal measure, misleading. There are books developed to help salespersons pass the required testing to obtain a real estate license. There’s material on all sorts of financial instruments used to finance property. But I’m not talking about that type of thing.

Iโ€™m talking about the manner in which real estate features in peopleโ€™s lives.

Judith Martin, a former professor of geography at the University of Minnesota, wrote Past Choices/Present Landscapes: The Impact of Urban Renewal on the Twin Cities. This project spotlights some of the effects I like to talk about. It focuses on the massive slum-clearing and subsequent redevelopment of large sections of inner-city property. In hind site Martin points out:

Much has been written about the ideas and the implementation of the urban renewal program in the United States during the 1950s and 1960s. Most of this literature views urban renewal as a program that: (1) worked to the disadvantage of people most in need of improved housing -a great deal of substandard housing was removed, but a relatively small amount of low-income housing was constructed;(2) was a boondoggle for developers-they were able to acquire land inexpensively from city authorities, and often made large profits on the projects built on this publicly acquired land; and (3) focused on
economic development issues C’let’s fix up downtown”) at the expense of housing and neighborhood concerns (Anderson 1964; Hartman 1964; Gans 1965).

Viewed in retrospect, much of this criticism is valid, but it does not tell the whole story. Critics have portrayed planners who developed and implemented urban renewal programs as heartless beasts who turned a deaf ear to the real needs of “the people.” But it is hard to see most renewal officials as greedy and profiteering, or as consciously
trying to exercise their power over helpless city residents. There are, for example, no notable cases of renewal officials growing rich working on these programs. If anything, the views of those who implemented urban renewal programs in the Twin Cities and elsewhere can be considered somewhat naive. They assumed that renewal could be
accomplished quickly, that private developers would clamor for the opportunity to build in available areas, and that the renewal process could be carried out with relatively few snags. None of these assumptions proved to be true.

Real estate is a tricky wicket. If people want to follow along, they need to, as Judith indicates, read the whole landscape and not cherry-pick a brief situation in the misty flow of time.

When asked about Polanyi’s Double Movement- Claude said:

Polanyi’s Double Movement and the Evolution of Economic Thought

The Household Foundation โ€ข Original containment: In household economies, the tension between acquisition (growth, accumulation) and protection (equitable distribution, waste prevention) operates within manageable, face-to-face relationships โ€ข Natural limits: Family/clan structures provide built-in mechanisms for both encouraging productive activity and preventing destructive excess โ€ข Embedded economics: Economic activity remains subordinated to social relationships and moral obligations

The Great Transformation: Market Economy Emergence โ€ข Dis-embedding: Economic activity becomes separated from social relationships and moral constraints โ€ข Fictitious commodities: Land, labor, and money become treated as market commodities despite not being produced for sale โ€ข Double movement emergence: Society’s protective response to market fundamentalism becomes institutionalized

Evolutionary Responses in Economic Thought

Adam Smith (1776) โ€ข Market optimism: Invisible hand suggests self-interest can serve social good โ€ข Early recognition: Acknowledged moral sentiments and social bonds as necessary counterweights โ€ข Household parallel: Like family moral economy, broader society needs ethical framework alongside market mechanisms

Karl Marx (1867) โ€ข Protective critique: Exposed capitalism’s tendency toward crisis and worker exploitation โ€ข Systemic analysis: Showed how market expansion undermines its own foundations through overproduction and underconsumption โ€ข Double movement insight: Predicted capitalism would generate its own contradictions requiring protective responses

ร‰mile Durkheim (1893) โ€ข Social solidarity: Distinguished mechanical (traditional) from organic (modern) solidarity โ€ข Integration challenge: Modern division of labor requires new forms of social cohesion โ€ข Protective institutions: Professional associations and moral regulation needed to prevent anomie

Rosa Luxemburg (1913) โ€ข Accumulation limits: Capitalism requires constant expansion into non-capitalist areas โ€ข Imperial protection: Advanced economies use state power to secure markets and resources โ€ข Global household: Imperial expansion recreates household-like extraction relationships on world scale

John Maynard Keynes (1936) โ€ข Market failure recognition: Markets alone cannot ensure full employment or stability โ€ข State intervention: Government must provide protective functions through fiscal and monetary policy โ€ข Embedded liberalism: Markets need social and political frameworks to function sustainably

Friedrich Hayek (1944) โ€ข Spontaneous order: Complex economies require market coordination beyond human planning capacity โ€ข Anti-protection warning: Government intervention threatens individual freedom and economic efficiency โ€ข Market fundamentalism: Pure market logic as protection against totalitarian planning

Contemporary Double Movement Tensions

Neoliberal Expansion (1980s-2008) โ€ข Market fundamentalism: Hayek’s vision implemented globally through deregulation and privatization โ€ข Household disruption: Traditional protective mechanisms (unions, welfare states, community institutions) weakened โ€ข Global reach: Market logic penetrates previously protected spheres (education, healthcare, environment)

Protective Responses (2008-present) โ€ข Financial crisis: Market failure triggers protective interventions (bailouts, regulation) โ€ข Populist movements: Political responses to economic dislocation and inequality โ€ข Environmental limits: Climate change forces recognition of growth’s destructive potential โ€ข Digital economy: New forms of commodification (data, attention) generate protective responses

Synthesis: The Persistent Tension

The household analogy reveals how economic thought has grappled with scaling up the balance between acquisition and protection:

โ€ข Smith to Marx: Recognition that market expansion requires moral/social counterweights โ€ข Durkheim to Keynes: Development of institutional mechanisms for social protection โ€ข Hayek’s challenge: Market efficiency versus social protection trade-offs โ€ข Contemporary crisis: Global markets outpacing protective institutions’ capacity

The enduring question: How can societies maintain the household economy’s natural balance between productive growth and protective distribution as economic relationships become increasingly complex and geographically dispersed?

Market Failure was used as the signal– but what now?

In days of yore, there was the market and the state. Two separate spheres of activity coexisted. And when private industry did not come through for the people, in the way they thought it should, market failure was the name given to assign blame. When the market failed, it was up to the state to address the lack of supply in areas such as medical care, poverty alleviation, housing, and the like.

One of economist Tyler Cowen’s first books addresses this trigger for state action in a compilation of thoughts on The Theory of Market Failure: A Critical Examination. But he isn’t convinced. He seems to say that when you look so closely at a tiny segment of a large system, you don’t see anything at all.

Consider externalities, a key signal that the market is merely pushing a problem onto some unsuspecting observer. He claims that (nearly) every single transaction has a positive or negative external effect. And, if you think about it, it’s true. We are social creatures. Although many consumptions are deeply personal, in the end, we always touch the lives of others.

The scope of the externalities/nonexcludability issue is vast. Nearly every concern of economic policy, from environmental considerations to research and development, involves externality problems. No one would claim that every instance of an externality warrants state intervention. There is no doubt, however, that the existence of externalities is one of the most powerful arguments for public sector involvement in the provision of public goods.

This isn’t the proper trigger for government intervention.

What about when the price seems too high, as in housing, or too low, as in wages? Whether a good is mediated through the private or public sector, prices still carry the most valuable form of comparative value information.

As noted earlier, the theory of public goods and externalities implies that if a good is characterized by nonrivalrous consumption, allowing additional individuals to consume it entails zero marginal cost. Demsetz’s arguments (1964; 1970) imply that this is only true in the presence of perfect information. Otherwise, allowing additional individuals to consume a good free of charge results in the abandonment of the price system in that sphere of activity. Since the publication of Hayek 1945, the role of prices in communicating information has been well known. In the provision of public goods as well as private goods, sacrificing such information may entail significant costs.

Prices are the most critical form of encapsulation of what groups of exchangers say about an exchange. We may not always conduct a thorough analysis of prices. That might be where the problem lies.

For instance, the exchange might be telling something vital about a group of people that others are simply not attuned to. People join various clubs throughout their lives. And these associations create structures of value.

The next two selections in section 2 of this volume discuss the nature of local public goods. Because such goods, by definition, can be provided to only a segment of a nation or community, determining which individuals will receive them becomes part of the economic problem. Once club or community membership becomes endogenous, many of Samuelson’s conclusions do not hold.

When people leave or join a club, when they exit or stay loyal, they impact how much of a surcharge the group of people in the club can charge.

The Tiebout model avoids the preference revelation problem; an individual’s preferences are revealed by his choice of location. It also avoids the free-rider problem; those who choose to belong to a given community are subject to the taxes or user fรฉes that finance the provision of goods. Nor is pricing inefficiency a problem. If an individual is inefficiently excluded from the use of a public good or service, he can simply move to a community where that exclusion is not practiced.

The introduction written by Tyler Cowen is comprehensive. To the engaged observer, he dispels the dichotomy between industry and the state. There’s something pluristic out there. It’s big, messy, and complicated. It dovetails into many of the things people talk about under the titular of institutions. But it has structure– once you stand back and take a look.

That’s the project of the moment: a unified theory of price.

Tolstoy, and the X side of warfare

A topic under examination that runs through War and Peace is the analysis of warfare. What were the keys to Napoleonโ€™s success? The size of the army, or the genius of the man? Or something else.

In Part 15, chapter II Tolstoys starts us we thinking in terms of individual agents.

ONE OF THE MOSt conspicuous and advantageous departures from the so-called rules of warfare is the independent action of men acting separately against men huddled together in a mass. Such independent activity is always seen in a war that assumes a national character.

The author then tells us the accepted view is that it is about counting soldiers, guns, and supplies.

Military science assumes that the relative strength of forces is identical with their numerical proportions. Military science maintains that the greater the number of soldiers, the greater their strength.

Butโ€ฆ

Military science, seeing in history an immense number of examples in which the mass of an army does not correspond with its force.

And thus Tolstoy suggests there is something else. He wants to be scientific about this thing. He calls it X.

One has but to renounce the false view that glorifies the effect of the activity of the heroes of history in warfare in order to discover this unknown quantity, x.

X is the spirit of the army, the greater or less desire to fight and to face dangers on the part of all the men composing the army, which is quite apart from the question whether they are fighting under leaders of genius or not, with cudgel or with guns that fire thirty times a minute.

It seems that what is important here is that soldiering with X is something different than soldiering in general. To fulfill a duty with X is not the same as a run-of-the-mill fulfillment of the same task. It does not quantify in the same way or lead to the same results. Labor with a purpose or a shared ambition deserves a subscript of x.

Beyond the Numbers: The Hidden Social Triggers Behind Arizonaโ€™s SB 1070

I was at a family gathering this week in Montana, and somehow the conversation landed on the 2010 immigration controversy in Phoenix. Following a period of lax immigration enforcement, the people of the Grand Canyon State rose up and said, “No more.” They passed the most restrictive immigration legislation, SB 1070. While several factors are credited for triggering the political backlash, the perception of increased crime is among the leading ones cited. Opponents of enforcement are quick to point out that, on paper, crime was steady. But does that tell the whole story?

While official statistics showed no dramatic rise in crime prior to the passage of Arizonaโ€™s SB 1070, itโ€™s a mistake to assume that public concern over disorder was baseless. The real story lies in the rise of unreported, low-level disruptions and the erosion of civic reciprocityโ€”factors that rarely appear in data but deeply affect social life.

In neighborhoods experiencing rapid demographic change, residents noticed shifts in everyday norms: unfamiliar languages, informal labor markets, overcrowded housing, or changes in how public space was used. These behaviors werenโ€™t necessarily illegal, but they violated shared expectations around cleanliness, quiet, parenting, or neighborliness. What was being felt wasnโ€™t crime in the strict senseโ€”it was a breakdown in social trust.

At the same time, public institutions like schools and emergency rooms were absorbing new burdens, often without visible new funding. To some longtime residents, this looked like one-way civic obligation: they paid in, others drew out. Whether or not that was accurate, it felt unfair, especially in the wake of the 2008 recession. That resentment built a political appetite for laws like SB 1070โ€”not just to target undocumented immigrants, but to restore boundaries between insiders and outsiders, contributors and perceived free riders.

Support for SB 1070 was less about a spike in violent crime and more about a sense of dissolving norms and a loss of control. The law functioned as a signal: that the state would step in to defend social order where federal and informal mechanisms had, in many peopleโ€™s eyes, failed.

About Buchanan, faith in people, and self-governance

Me: It sounds like he (James M Buchanan) wants to believe in self-governance, yet he doesnโ€™t have faith in the distribution of the groupings, hence โ€˜free ridingโ€™, so in the end he supports the cohesion of the state after all.

Grok:

Your observation captures a tension in James M. Buchananโ€™s work thatโ€™s worth unpacking. Youโ€™re suggesting that while Buchanan champions self-governance and individual liberty, his concern about free-riding and coordination problems leads him to rely on formal institutional structures, which might seem to endorse the cohesion of the stateโ€”potentially contradicting his critique of the organismic view. Letโ€™s explore this interpretation, addressing whether Buchananโ€™s focus on institutions implies support for state cohesion and how it aligns with his belief in self-governance. Iโ€™ll keep the response concise yet thorough, tying it to your previous questions about the organismic concept and group cooperation.

Buchananโ€™s Commitment to Self-Governance

Buchanan, a classical liberal and founder of public choice theory, strongly advocates for self-governance, meaning individuals should have maximum control over their choices and the rules governing their interactions. His rejection of the organismic conceptโ€”where collectives like โ€œthe stateโ€ or โ€œsocietyโ€ are treated as unified entities with their own goalsโ€”stems from his belief that only individuals have preferences and agency. He envisions governance as a system of voluntary agreements among individuals, not top-down control by a cohesive state. Key points:

โ€ข In The Calculus of Consent (1962, with Gordon Tullock), Buchanan proposes that political systems should emerge from unanimous or near-unanimous consent at the constitutional level, where individuals agree on rules for collective decision-making. This reflects self-governance, as the stateโ€™s authority derives from individual agreement, not an inherent collective will.

โ€ข His concept of โ€œpolitics as exchangeโ€ sees government as a mechanism for individuals to cooperate for mutual benefit (e.g., providing public goods like roads), not as a monolithic entity imposing order. This contrasts with organismic views that assume the state naturally serves a unified โ€œpublic interest.โ€

The Free-Rider Problem and Institutional Needs

Your point about Buchananโ€™s lack of faith in the โ€œdistribution of the groupingsโ€ (i.e., how individuals naturally organize) and his concern about free-riding is spot-on. Buchanan recognizes that self-governance faces challenges in large groups due to:

โ€ข Free-Riding: Individuals may benefit from collective goods (e.g., clean air, defense) without contributing, undermining cooperation. For example, someone might enjoy a community-funded park without paying taxes if contributions are voluntary.

โ€ข Coordination Problems: Diverse preferences and large group sizes make spontaneous cooperation difficult without agreed-upon rules. Informal norms work better in small, homogeneous groups but falter at scale.

To address these, Buchanan emphasizes formal institutions, particularly constitutional rules, to facilitate cooperation. In The Limits of Liberty (1975), he argues that a social contractโ€”a set of rules individuals consent toโ€”prevents free-riding and ensures fair contributions to collective goods. For instance, a tax system with constitutional legitimacy compels everyone to pay for public goods, solving the free-rider issue while respecting individual agreement to the rules.

Does this mean Buchanan lacks faith in self-governance? Not quite. He believes self-governance is possible but requires designed structures to align individual incentives with collective outcomes. His focus on constitutions is about enabling individuals to govern themselves through agreed-upon rules, not deferring to a centralized state.

Does Buchanan Support State Cohesion?

Your suggestion that Buchananโ€™s reliance on institutions implies support for the โ€œcohesion of the stateโ€ is a nuanced critique. Letโ€™s break it down:

โ€ข Not State Cohesion in the Organismic Sense: Buchanan explicitly rejects the idea of the state as a cohesive, sentient entity with its own goals (the organismic view). He sees the state as a collection of individualsโ€”politicians, voters, bureaucratsโ€”each pursuing their own interests. His work in public choice theory, especially in The Calculus of Consent, models government as a system of checks and balances to prevent it from becoming a monolithic, coercive entity. For example, he warns against a โ€œpredatory stateโ€ that exploits citizens under the guise of public interest.

โ€ข Institutions as Tools, Not State Worship: Buchananโ€™s support for formal governance is about creating minimal, consensual frameworks to enable cooperation, not endorsing a strong, centralized state. His ideal is a limited government constrained by constitutional rules that individuals have agreed to, ensuring that state actions reflect individual preferences rather than a supposed collective will. For instance, his admiration for Knut Wicksellโ€™s principle of โ€œjust taxationโ€ requires taxes to be tied to benefits and approved by near-unanimous consent, minimizing state overreach.

โ€ข Tension in Practice: Youโ€™re right that Buchananโ€™s reliance on formal institutions could, in practice, lead to a state with some degree of cohesion, as enforcing rules (e.g., tax collection) requires authority. Critics of Buchanan argue that his constitutional framework assumes a level of rational agreement thatโ€™s hard to achieve, and the resulting institutions might take on a life of their own, resembling the cohesive state he critiques. However, Buchanan would counter that this risk is mitigated by designing rules that prioritize individual liberty and limit government power.

Reconciling Self-Governance and Institutional Reliance

Buchananโ€™s position is that self-governance is not spontaneous but requires deliberate institutional design to succeed at scale. He doesnโ€™t distrust individualsโ€™ ability to cooperate but recognizes practical barriers like free-riding and coordination costs. His solution is a two-level governance framework:

1. Constitutional Level: Individuals agree on rules (e.g., voting systems, tax policies) to structure cooperation. This is self-governance in action, as the rules reflect individual consent.

2. Post-Constitutional Level: Within these rules, individuals make choices (e.g., voting, paying taxes) that produce collective outcomes. Institutions enforce these rules to prevent free-riding, but their legitimacy comes from prior agreement, not state supremacy.

This framework contrasts with the organismic view, which might assume society naturally coalesces around shared goals without needing explicit rules. Buchananโ€™s skepticism of such assumptions drives his focus on institutions, but he remains committed to individual liberty and minimal state intervention.

Addressing Your Critique

Youโ€™re correct that Buchananโ€™s concern about free-riding and group coordination could seem to undermine his faith in pure self-governance, pushing him toward formal institutions that resemble state cohesion. However, he would argue that these institutions are tools of self-governance, not endorsements of a cohesive state. The stateโ€™s role is to enforce rules individuals have chosen, not to act as an independent entity. His ideal is a decentralized system where individuals retain maximum control, but he acknowledges that some formal structure is necessary to make self-governance scalable and sustainable.

Conclusion

Buchanan believes in self-governance but sees formal institutions, particularly constitutional rules, as essential to overcome free-riding and coordination challenges in large groups. This doesnโ€™t mean he supports state cohesion in the organismic sense; rather, he advocates for a limited, consensual state that enforces individual-agreed rules to enable cooperation. His focus on institutions reflects a pragmatic solution to make self-governance work, not a retreat to statism.

Warfare commitment 200 years gone by

After reading Anna Karenina last August, our reading group decided to tackle War and Peace in 2025. It’s a behemoth. But with all the war talk, I was curious to know what percentage of the male population was tromping across Europe and how many young men were left for other pursuits closer to home. It turns out a lot- although Chat is quick to say that the data is complex to pinpoint due to inconsistent records.

Summary

โ€ข France: ~50โ€“60% of males aged 18โ€“55 served, driven by universal conscription and mass mobilization (2โ€“2.4 million from 3.6โ€“4 million).

โ€ข Russia: ~20โ€“30% served, with serf-based levies mobilizing 1โ€“1.5 million from 3.5โ€“5 million, supplemented by militias in 1812.

โ€ข Austria: ~40โ€“60% served, with 1โ€“1.5 million mobilized from 2โ€“2.6 million, using selective conscription.

โ€ข Prussia: ~40โ€“65% served, with 500,000โ€“800,000 mobilized from 1โ€“1.25 million, increasing after 1813 reforms.

โ€ข Britain: ~25โ€“40% served, with 400,000โ€“500,000 mobilized from 1.2โ€“1.5 million, relying on volunteers and naval press-ganging.

In the Context of War and Peace

The novel reflects these varying conscription rates through its portrayal of Russian serf-soldiers and officers like Andrei and Nikolai, contrasted with the French Grande Armรฉeโ€™s mass-conscripted forces. Russiaโ€™s lower percentage reflects its selective serf levies, while Franceโ€™s high rate underscores the levรฉe en masseโ€™s impact, as seen in the exhausted French troops during the 1812 retreat. The differences in mobilization rates highlight the social and military dynamics Tolstoy explores, with Russiaโ€™s feudal system and Franceโ€™s revolutionary conscription shaping their respective armies.

Note: These percentages are estimates based on historical data and demographic assumptions, as precise age-specific military participation rates are not fully documented. Variations across campaigns and years (e.g., 1812โ€“1814 being the deadliest) affect the figures.

Conscription is a type of forced labor. A citizen’s time is donated to the public good in exchange for some compensation (or at least room and board for the serfs). One can see why, in two hundred years, boots-on-the-ground warfare is unpopular. Too many human hours could be devoted to other public goods or to earning a wage in the commercial market. The opportunities to leverage capital even further should the young men choose to invest in education or learn a trade.

War also produces wounded. This can also shift the stage-of-life abilities of a young, able-bodied male. The labor costs of war are too dear.

Airport Expansion- Missoula Edition

I flew into Missoula today and the Montana Airport is wrapping up a major multi-phase expansion that reshapes regional travel and brings broader economic shifts in its wake. Here are some of the details:

The Physical Build-Out

  • Total Cost: Over $110 million for the full terminal expansion.
  • What’s New: New gates, expanded baggage claim, rental car lanes, security upgrades, and room for new routes and carriers.
  • Who’s Paying: a combo of the Feds and private interests
    • Federal: More than $50 million in grants, mostly from the Bipartisan Infrastructure Law.
    • State & Local: Matched funds from the Missoula Economic Partnership, businesses, and banksโ€”no local tax dollars used.
    • Recent Boost: A $6M federal grant (2024) will help complete the next terminal phase.

Skyward Travel Growth

  • Missoula set a passenger record in 2024: Over 1 million flyers, up nearly 12% from the year before.
  • Targeting 1.5 million by 2044 as travel demand soars.
  • Now offering more frequent flights and year-round service to Chicago, thanks to an $875k federal grant.

The Ripple Effects

๐Ÿ“š University of Montana Perks

  • Easier access = stronger recruitment, research partnerships, and conference travel.
  • Out-of-state students now find Missoula more reachable and appealing.

๐Ÿ˜๏ธ Housing Pressures

  • Expansion is fueling demand for housing, especially near the university and airport.
  • Rent hikes are real: Locals report steep increases, with โ€œaffordableโ€ now starting near $1600/month.
  • Development impact fees (passed on to buyers) may also be contributing to rising costs.

๐Ÿ’ผ Local Economy

  • Jobs during construction and in airport operations.
  • Tourism boost: More flights mean more visitors spending at hotels, restaurants, and shops.
  • Stronger air links help regional business and health access.

๐Ÿšง Challenges Ahead

  • Affordability squeeze: Residents and students are feeling the pinch from rising rents.
  • Infrastructure stress: More travelers and new residents will test city roads, utilities, and services.
  • Equity concerns: Growth must be balanced to include long-term residents and low-income communities.

Final Approach

Missoulaโ€™s airport expansion is more than a construction project โ€” itโ€™s a gateway to growth. With smart federal funding and local vision, the region is positioning itself for a more connected future. But keeping Missoula livable as it grows will take coordination on housing, transportation, and community needs. How would one go about making some projections? Estimates of impacts and time frames could be interesting to local public leaders.

Local Theater Facts

We just saw a super adaptation of Cabaret at the Guthrie Theater.

So I asked Grok for some observation about our theater community.

Yes, Minneapolis is widely recognized for its vibrant and robust theater culture, often considered one of the most significant in the United States, second only to New York City in terms of per capita theater attendance. The cityโ€™s theater scene is characterized by a mix of world-class professional theaters, diverse community and nonprofit theaters, and historic venues, supported by strong public funding and a theater-savvy audience. Below, I provide a detailed analysis of Minneapolisโ€™s theater culture, incorporating relevant insights from the provided web results and tying in governance aspects (e.g., government capacity to support cultural infrastructure) The response includes quantifiable outcomes where possible to align with your interest in measurable metrics.

Overview of Minneapolisโ€™s Theater Culture

Minneapolis, along with its Twin Cities neighbor St. Paul, boasts a thriving theater ecosystem that includes:

  • Major Professional Theaters: Iconic venues like the Guthrie Theater, Ordway Center for the Performing Arts, and Hennepin Artsโ€™ historic theaters (Orpheum, State, and Pantages) host Broadway tours, world-class productions, and original works.
  • Diverse and Inclusive Theaters: Companies like Penumbra Theatre (Black-focused), Theater Mu (Asian American), and Mixed Blood Theatre prioritize underrepresented voices, enhancing cultural richness.
  • Community and Nonprofit Theaters: Smaller venues like Jungle Theater, Theater Lattรฉ Da, and Childrenโ€™s Theatre Company cater to niche audiences, including young people and local communities.
  • Independent Movie Theaters: Venues like Riverview Theater and Parkway Theater blend cinema with live performances, adding to the cultural fabric.
  • Festivals and Events: The Minnesota Fringe Festival and events like Art-a-Whirl showcase experimental and local talent, drawing diverse audiences.

According to Amazing MN by Lee Lynch, cited in Meet Minneapolis, โ€œOn a per capita basis, the Twin Cities are second only to NYC in number of theater tickets soldโ€ (Pollstar). This highlights Minneapolisโ€™s exceptional theater attendance relative to its population of approximately 425,000 (2023 estimate). In 2022, U.S. nonprofit theaters, many concentrated in Minneapolis, had 16 million attendees, with the cityโ€™s theaters contributing significantly.

Key Features of Minneapolisโ€™s Theater Culture

  1. Major Venues and Their Impact:
    • Guthrie Theater: Located at 818 South 2nd Street, the Guthrie is a cultural landmark designed by Jean Nouvel, featuring three performance spaces and hosting everything from Shakespeare to modern masterpieces. It attracts national attention, with popular shows often selling out. Its 2025โ€“2026 season includes productions like Cabaret, noted for its โ€œexplosive and dazzlingโ€ quality. The Guthrieโ€™s economic impact includes millions in annual revenue from ticket sales and tourism.
    • Hennepin Theatre District: Comprising the Orpheum (2,579 seats), State (2,181 seats), and Pantages (900 seats), these historic theaters, built between 1916 and 1921, host Broadway tours, concerts, and comedy. The Orpheum, restored in 1993 for $10 million, premiered shows like Disneyโ€™s The Lion King. Hennepin Arts, a nonprofit, manages these venues, ensuring accessibility through open booking.
    • Ordway Center for the Performing Arts: Located in St. Paul, itโ€™s home to the Minnesota Opera and Saint Paul Chamber Orchestra, hosting Broadway tours and original productions. It contributes to the Twin Citiesโ€™ reputation as a premier arts center.
    • Childrenโ€™s Theatre Company (CTC): The nationโ€™s largest and most acclaimed theater for young audiences, CTC won the Tony Award for Best Regional Theater. It serves preschoolers to teens, premiering works like A Year with Frog and Toad.
  2. Diverse and Inclusive Theaters:
    • Penumbra Theatre: Founded in 1976, itโ€™s one of only three professional African American theaters in the U.S. with a full season, focusing on the African-American experience. It also offers educational programs and equity trainings.
    • Theater Mu: The second-largest Asian American theater organization in the U.S., Theater Mu produces works celebrating AAPI stories, such as SIXPACK, a play about Hmong volleyball culture. It fosters community through performances and student ensembles.
    • Mixed Blood Theatre: Founded in 1976, it emphasizes inclusivity, featuring disabled, trans, Somali, and Latinx artists. It aims to make theater accessible to marginalized communities.
    • Ten Thousand Things: This company brings theater to underserved audiences (e.g., homeless shelters, correctional facilities) by performing in simple settings with lights on, ensuring inclusivity.
    • Jungle Theater: Known for gender inclusivity and diverse casts, it produces new works like SIXPACK and supports local playwrights. Its 2019โ€“2020 season featured all-female directors and/or playwrights.
  3. Independent and Community Theaters:
    • Smaller venues like Theater Lattรฉ Da (Northeast Minneapolis) focus on musical theater, winning national awards for innovative productions.
    • The Parkway Theater, a 1930s art deco venue, combines films with live performances, hosting themed movie nights and comedy events. Tickets range from $9โ€“$12, making it accessible.
    • Theatre in the Round, operating since 1952, offers affordable tickets and community-driven productions.
    • The Southern Theater and Illusion Theater focus on experimental and socially driven works, often touring to schools and communities.
  4. Public Funding and Government Capacity:
    • Minnesota leads the U.S. in per capita public arts funding, spending $9.62 per person in 2024, enabling theaters to thrive in smaller population bases. Strong public funding reduces the population needed to sustain theaters, as subsidies offset operational costs.
    • The Minnesota State Arts Board provides operating support grants, funded by legislative appropriations, which Hennepin Arts and other organizations utilize to maintain historic venues and support new works.
    • Rothsteinโ€™s Impartiality Index is relevant here, as Minnesotaโ€™s equitable distribution of arts funding ensures diverse theaters (e.g., Penumbra, Theater Mu) receive support, fostering inclusivity and cultural vitality.
  5. Audience Engagement and Economic Impact:
    • Minneapolisโ€™s theater scene draws 16 million annual attendees to nonprofit theaters nationwide, with the Twin Cities contributing a significant share. The Guthrie alone generates millions in ticket sales and tourism revenue, with shows like Cabaret attracting diverse audiences.
    • The cityโ€™s theaters are known for standing ovations, reflecting a โ€œtheater-savvyโ€ audience, as noted by performer Betty Buckley at the Orpheum.
    • The economic impact includes job creation (e.g., actors, technicians, front-of-house staff) and tourism, with visitors spending on dining and lodging near venues like the Guthrie, located in the Mill District.

Quantifiable Outcomes

Drawing on your interest in quantifiable outcomes and scholars like Kaufmann, Rothstein, and Muralidharan:

  • Attendance Metrics:
    • Nonprofit theaters in the U.S. had 16 million attendees in 2022, with Minneapolisโ€™s theaters (e.g., Guthrie, CTC) contributing significantly. For example, the Guthrieโ€™s three stages host ~400,000 attendees annually across 100โ€“150 performances.
    • The Orpheumโ€™s opening week in 1921 drew 70,000 guests, and modern Broadway tours attract 2,000โ€“2,500 per show.
  • Economic Impact:
    • Minnesotaโ€™s theater market is worth $9 billion, with ~4,000 theater businesses, many in Minneapolis. This reflects Northโ€™s concept of institutional efficiency, as theaters drive economic activity through contracts and tourism.
    • The Guthrie and Hennepin Arts venues generate millions in ticket sales and local spending (e.g., $15 parking at Riverfront Ramp, dining at nearby restaurants like Fogo de Chao).
  • Public Funding Efficiency:
    • Minnesotaโ€™s $9.62 per capita arts funding (highest in the U.S.) supports theaters in populations as small as 20,000โ€“50,000, compared to 50,000โ€“100,000 elsewhere, aligning with Kaufmann and Kraayโ€™s Government Effectiveness (high scores enable cultural infrastructure).
    • Rothsteinโ€™s Impartiality Index suggests Minnesotaโ€™s equitable funding allocation (e.g., to Penumbra, Theater Mu) ensures diverse theaters thrive, with measurable outcomes like sold-out runs (e.g., Interactโ€™s Hot Funky Butt Jazz).
  • Service Delivery Metrics (Muralidharanโ€™s lens):
    • Efficient bureaucracies streamline permitting and funding, reducing operational costs for theaters. For example, the Minneapolis Community Development Agencyโ€™s purchase and restoration of the Orpheum in 1988 enabled large-scale productions, boosting attendance and revenue.

Population Base and Theater Sustainability in Minneapolis

Your earlier question about the population needed to support a theater is highly relevant here. Minneapolisโ€™s population of ~425,000, combined with the Twin Cities metro area (~3.7 million), easily supports its large theater culture. However:

  • Smaller Theaters: Community theaters like Jungle or Theatre in the Round can thrive with 5,000โ€“20,000 people in their catchment area, especially with public funding. Minnesotaโ€™s $9.62 per capita arts spending lowers this threshold compared to less-funded regions.
  • Major Theaters: The Guthrie and Orpheum require 50,000โ€“200,000 to fill their 2,000+ seats regularly, but Minneapolisโ€™s metro area and tourism (e.g., near Stone Arch Bridge, U.S. Bank Stadium) ensure viability.
  • Independent Movie Theaters: Venues like Riverview or Parkway need ~10,000โ€“20,000 in their immediate area (3โ€“5-mile radius) but benefit from Minneapolisโ€™s cultural draw and niche programming (e.g., cult classics, sing-alongs).

The cityโ€™s strong government capacity, as measured by Kaufmann and Kraayโ€™s Government Effectiveness Index, enables subsidies and infrastructure (e.g., skyway access to Orpheum and State Theaters), reducing the population needed compared to less-supported regions.

Why Minneapolis Stands Out

  • Historical Investment: Minneapolis has restored historic theaters (e.g., Orpheum, State, Pantages) since the 1980s, with public-private partnerships ensuring longevity. The Minneapolis Plan for Arts and Culture, updated regularly, formalizes support for venues like the Northeast Arts District.
  • Cultural Diversity: Theaters like Penumbra, Theater Mu, and Mixed Blood reflect Minneapolisโ€™s commitment to inclusivity, aligning with Rothsteinโ€™s emphasis on impartial governance to support marginalized communities.
  • Audience Engagement: Posts on X highlight Minneapolisโ€™s โ€œwarm, theatre-savvyโ€ audience, with standing ovations common and performers like Betty Buckley noting the cityโ€™s enthusiasm.
  • National Recognition: Minneapolis is the third-largest theater market in the U.S., behind New York and Chicago, with over 400 stages across Minnesota. The Twin Citiesโ€™ reputation as a โ€œpremier arts centerโ€ is bolstered by awards (e.g., CTCโ€™s Tony, Theater Lattรฉ Daโ€™s Drama Desk).

Challenges and Considerations

  • Competition: Streaming services and nearby venues (e.g., St. Paulโ€™s Ordway) split audiences, requiring theaters to diversify (e.g., Parkwayโ€™s live events, Guthrieโ€™s community programming).
  • Gentrification: The Warehouse Districtโ€™s rising rents in the 1980sโ€“1990s displaced some artists, though areas like Northeast Minneapolis remain vibrant arts hubs.
  • Economic Viability: Smaller theaters rely on donations and grants (e.g., Jungle Theaterโ€™s community funding model), while larger venues need consistent attendance to cover high production costs.

Conclusion

Minneapolis is undeniably known for its large and vibrant theater culture, rivaling major U.S. cities on a per capita basis. Its ecosystem of professional, community, and independent theaters, supported by venues like the Guthrie, Orpheum, and Theater Mu, draws millions annually and contributes to a $9 billion industry. The cityโ€™s high per capita arts funding ($9.62 in 2024) and efficient governance, as emphasized by scholars like Fukuyama (state capacity), Kaufmann and Kraay (Government Effectiveness), and Rothstein (impartiality), enable theaters to thrive with smaller population bases than typical (e.g., 5,000โ€“20,000 for community theaters vs. 50,000+ elsewhere). Quantifiable outcomes include 16 million annual nonprofit theater attendees, millions in economic impact, and sold-out runs for diverse productions. Minneapolisโ€™s theater-savvy audience and historic venues make it a cultural powerhouse.

Empty Houses

Some claim a housing crisis is underway, but I’m not so sure. If the pressure for homes were severe, one would expect most properties to be occupied, leaving others stranded without a place to go. Vacancy rates provide us with additional information. An article by LendingTree, 14.9 Million Homes Are Vacant in the US โ€” Here Are the States With the Highest Vacancy Rates, provides a great overview of the topic.

Vacancy rates differ significantly depending on where you look in the country. If youโ€™re looking at Maine, youโ€™ll find the highest vacancy rate in the country โ€” 21.09% (157,467 vacant homes), according to our analysis of the U.S. Census Bureau 2023 American Community Survey (ACS) with five-year estimates. Following Maine at the top is Vermont, with a 20.06% vacancy rate (67,606 vacant homes), and Alaska, with an 18.24% vacancy rate (59,745 vacant homes). 

Together, these three states account for nearly 285,000 vacant homes โ€” out of 14.9 million vacant homes nationwide.

Nationally, the vacancy rate is much lower than that of these three states, with the U.S. average sitting at 10.43% โ€” a figure that translates into nearly 15 million vacant homes. While that may sound like a lot, it may not feel like it if youโ€™re searching for a place to live. Thatโ€™s because not all of those properties are available to rent or buy. 

In addition to seasonal and vacation homes, others are classified as vacant because theyโ€™re in transition โ€” those that are rented but not occupied and sold but not occupied. Homes for migrant workers, which they occupy during crop season, are also classified as vacant.

Minnesota, as is often the case, is just average. There are 236,571 homes vacant, which, in percentage terms, is 9.39%

The article cites a list of reasons why a home could be vacant. It might be a second home or vacation property. It might be in a transition state from either a remodel or a relocation of residents. Sometimes people hang onto properties for emotional reasons, such as a family tie to the land.

But note, in any case, that there is a variation between the states. Real estate is local. National generalizations about the state of housing are often dumbed down and not particularly helpful.

Litterature Review

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

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

II. Literature Review

A. Mainstream Economic Philosophy Foundations

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

The Neoclassical Framework and Methodological Individualism

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

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

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

Public Choice Theory and Rational Actor Models

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

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

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

Transaction Cost Economics and Institutional Analysis

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

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

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

Behavioral Economics and the Modified Individual

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

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

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

B. Critical Theoretical Intersections

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

Social Capital Theory: From Group Phenomenon to Individual Asset

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

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

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

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

Embeddedness and Economic Sociology

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

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

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

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

Ecological Economics and Systems Thinking

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

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

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

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

Feminist Economics and the Critique of Separative Self

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

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

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

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

C. Syntheses and Gaps in Current Literature

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

Toward an Integrated Understanding

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

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

The Missing Ontology of the Group

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

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

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

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

After an Abstract comes the Introduction

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

A. Research Problem and Contextual Landscape

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

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

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

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

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

B. Theoretical Positioning

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

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

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

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

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

Trump- shock think

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

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

The IMF puts the hidden cost of trading goods inside the EU at the equivalent of a 45% tariff. For services the figure climbs to 110%,ย higher than Trumpโ€™s โ€œLiberation dayโ€ย tariffs on Chinese importsโ€”measures many saw as a near-embargo.

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

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

Thank Trump for that bit of awareness.

What is Public, What is Private

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

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

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

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

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

Alchian and Property Rights

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

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

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

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

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

Keeping track of Tariffs

With all this tariff talk, I’m breaking some misconceptions. For instance, I thought China was our top trading partner. I had no idea that Canada charges tariffs between provinces โ€”sounds laborious to keep track of! Nor did I realize the extent and amount of the tariffs charged worldwide.

Top Ten U.S. Trading Partners and Tariffs Charged Prior to April 1, 2025

  1. Mexico
  • Trade Context: Mexico was the U.S.โ€™s top trading partner in 2023, with total trade valued at approximately $776 billion (goods only). Under the U.S.-Mexico-Canada Agreement (USMCA), most U.S. goods entered Mexico duty-free prior to April 1, 2025.
  • Tariffs Charged: For USMCA-compliant goods, tariffs were generally 0%. For non-USMCA goods, Mexico applied MFN rates, averaging around 7% for industrial products and higher for certain agricultural goods (e.g., up to 20-25% on some items like dairy or poultry under supply management systems). Specific rates depended on the product.

2. Canada

  • Trade Context: Canada was the second-largest U.S. trading partner, accounting for 14.3% of U.S. trade in 2023. Like Mexico, it operates under the USMCA.
  • Tariffs Charged: Most U.S. goods entered Canada duty-free under USMCA prior to April 1, 2025. For non-USMCA goods, Canadaโ€™s MFN tariff averaged 4.1%, with higher rates on protected sectors like dairy (up to 200-300% on certain products due to supply management) and softwood lumber (subject to duties averaging 10-20% depending on market conditions).

3. China

  • Trade Context: China was the third-largest U.S. trading partner, with a 10.9% share of U.S. trade in 2023 and a significant trade deficit ($295.4 billion in 2024).
  • Tariffs Charged: Prior to April 1, 2025, Chinaโ€™s average MFN tariff rate was around 7.5% for U.S. goods, but retaliatory tariffs from the first Trump administrationโ€™s trade war (2018-2020) raised rates on many U.S. products to 20-25% or higher (e.g., soybeans, autos). The โ€œPhase 1โ€ trade deal in 2020 reduced some tensions, but specific rates varied widely by product.

4. Germany

  • Trade Context: Germany, as part of the EU, contributed 4.4% of U.S. trade in 2023. The EU as a whole is a major U.S. trading partner.
  • Tariffs Charged: Prior to April 1, 2025, the EU applied an average tariff of 5.1% on U.S. goods under MFN rules (no U.S.-EU free trade agreement existed). Specific rates included 10% on autos, 25% on certain steel products (retaliatory), and higher rates on agricultural goods (e.g., 15-20% on some food items).

5. Japan

  • Trade Context: Japan is a significant U.S. trading partner, with a trade deficit noted in 2024 data.
  • Tariffs Charged: Under the U.S.-Japan Trade Agreement (effective 2020), many U.S. goods entered Japan duty-free or at reduced rates prior to April 1, 2025. Japanโ€™s average MFN tariff was 4.3%, but agricultural products faced higher rates (e.g., 38.5% on beef, 15% on some fruits). The Trump administration later claimed Japan charged 46% equivalent when factoring in non-tariff barriers.

6. South Korea

  • Trade Context: A key U.S. trading partner in Asia, South Korea had a free trade agreement (KORUS FTA) with the U.S.
  • Tariffs Charged: Prior to April 1, 2025, most U.S. goods entered South Korea duty-free under KORUS FTA. The average MFN tariff was 6.2%, with higher rates on agriculture (e.g., 40% on some rice products). The Trump administration later cited a 50% equivalent rate including non-tariff barriers.

7. UK

  • Trade Context: The UK ran a trade surplus with the U.S. in 2023 ($14.5 billion per U.S. data).
  • Tariffs Charged: Post-Brexit, the UK applied an average MFN tariff of 5.7% on U.S. goods prior to April 1, 2025, with most rates mirroring the EUโ€™s (e.g., 10% on autos). No U.S.-UK free trade agreement was in place, though negotiations were ongoing.

8. India

  • Trade Context: India is an emerging U.S. trading partner with a notable trade surplus.
  • Tariffs Charged: Prior to April 1, 2025, Indiaโ€™s average MFN tariff on U.S. goods was high, around 13.8%, with significant variation (e.g., 20% on electronics, 100% on some alcoholic beverages). The Trump administration later claimed a 52% equivalent rate including non-tariff barriers.

9. Taiwan

  • Trade Context: Taiwan is a key supplier of electronics to the U.S.
  • Tariffs Charged: Prior to April 1, 2025, Taiwanโ€™s average MFN tariff was 7.1% on U.S. goods, with lower rates on industrial products and higher rates on agriculture (e.g., 15-20% on some items). The Trump administration later cited a 64% equivalent rate with non-tariff barriers.

10. Vietnam

    • Trade Context: Vietnam has grown as a U.S. trading partner, especially for consumer goods.
    • Tariffs Charged: Prior to April 1, 2025, Vietnamโ€™s average MFN tariff on U.S. goods was around 9.6%, with higher rates on specific sectors (e.g., 20-30% on some agricultural products). The Trump administration later claimed a 92% equivalent rate, halved to 46%, factoring in trade imbalances and barriers.

Notes and Context

  • Data Sources: Trade partner rankings are based on 2023/2024 data from sources like the U.S. Census Bureau and Euronews. Tariff rates reflect pre-April 1, 2025, conditions, primarily MFN rates unless a trade agreement applied.
  • Limitations: Exact tariff schedules for every product arenโ€™t fully detailed here due to variability. The listed averages are indicative, and specific rates could be higher or lower depending on the good.
  • Trumpโ€™s Reciprocal Tariffs: On April 2, 2025, President Trump announced new U.S. tariffs effective April 5 (10% baseline) and April 9 (country-specific rates), calculated as half the perceived โ€œchargeโ€ (trade deficit divided by exports, plus non-tariff barriers). Pre-April 1 tariffs from trading partners didnโ€™t directly align with these calculations, which included non-monetary factors like currency manipulation.

This list reflects the top U.S. trading partners and their general tariff policies toward U.S. goods before the significant policy shift on April 2, 2025.

Sincerely, Grok

Origins of Social Capital

In Glenn Loury’s memoir, Late Admissions, the author states that he was the first to coin the term social capital as a retained value obtained through contact with social groups and activities. It appears in the following paper.

An individual’s social origin has an obvious and important effect on the amount of resources which are ultimately invested in his development. It may thus be useful to employ a concept of โ€œsocial capital” to represent the consequences of social position in facilitating individual acquisition of (say) the standard human capital characteristics. While measurement problems abound, this idea does have the advantage of forcing the analyst to consider the extent to which individual earnings are accounted for by social forces outside the individual’s control. However, for precisely this reason such analysis is unlikely to develop within the confines of traditional neoclassical theory. A Dynamic Theory of Racial Income Differences (1976)

In the following decade, James S Coleman, a sociologist at the University of Chicago, writes the paper Social Capital in the Creation of Human Capital (1988). Here, the sense of the term is similar as there is a measurement of the efforts of a father put forth in the education of his son.

But in the 1990s, something changed. Putnam makes social capital a coffee table word in Bowling Alone (1995 article, 2000 book). Now, the term is morphing into a sense of access to networks. The thought is that business, or economic activity, is embedded in social life but clearly separate. Social life is a thing on the side. Benefits from social interactions arrive like electric pulses moving sporadically across a net of human connections.

Thanks to the book’s popularity, everyone grabbed hold of the term social capital from 2000 to 2010. It lost depth as it had become a marketing cliche. At about the same time, Nan Lin published Social Capital: A Theory of Social Structure in Action (1997), advancing the network theory of capital amongst relations.

Social Capital explains the importance of using social connections and social relations in achieving goals. Social capital, or resources accessed through such connections and relations, is critical (along with human capital, or what a person or organization actually possesses) in achieving goals for individuals, social groups, organizations, and communities. The book introduces a theory that forcefully argues and shows why “it is who you know,” as well as “what you know” that makes a difference in life and society.

Attempts are made to measure strong ties and weak ties, and distances between connections, but nothing really comes of it as a measurable model.

Was Glenn Loury thirty years too early with his concept of social capital? Did he bail on the theoretical world of economics too soon?

No Housing Crisis

Kevin Drum proposed that in a 2022 article– and I agree entirely.

The real issue here is that America doesn’t have a housing crisis.

I’m not sure why, but I find the new urbanists one of the most annoying groups in the progressive pantheon. It’s not because they’re wrong, precisely, or because they’re meanspirited, or anything like that. There’s just a disconnect from reality that seems to motivate so much of what they say and do.

Take America’s housing crisis. Here it is:

We have as much housing per household as we had in 2001. And just in case you think I’m cheating with this “household” business, here it is per person:

We have more housing per capita than we did in 2001.

Just wait and see as the market softens. Prices in some markets have already ebbed away from a peak, and the number of homes on the market is creeping up. Builders who notoriously hold on to their list prices are marking spec homes down a bit. The tight market was not due to a shortage as much as the normal pressure of people moving to changes in their lives.

But the best part of Drum’s article is how he feels about the people who try to set a national agenda on housing: the urbanists.

But this still doesn’t really explain why I find the urbanists annoying. Here’s my real beef: they are obsessed with big cities. They spend nearly all their time trying to convince us that big, crowded cities should become even bigger and more crowded. Or that suburbs should become big and crowded, just like cities. This is a fantastic waste of time. Residents of big cities don’t want to become more crowded and resident of suburbs don’t want to become more like cities. They will fight you forever on this. Absolutely forever. The game isn’t worth the candle, especially when there are so many other far more useful things we could be devoting our energy to.

So why waste time on this? The urbanists will haul out studies about economic gains, environmental impacts, mass transit, etc., but they massively oversell those benefits and completely ignore the downsides of crowding. Instead, they should be spending approximately 100% of their time promoting policies that would get people out of big cities and into smaller cities that have room to grow.

It is funny how everyone wants to talk about ‘world-class cities.’ Ho-hum cities are where it is at for understanding the baselines of success.

O-rings in Community

The O-ring model in economics offers an explanation of a production weakness.

The O-ring theory of economic development is a model of economic development put forward by Michael Kremer in 1993,[1] which proposes that tasks of production must be executed proficiently together in order for any of them to be of high value. The key feature of this model is positive assortative matching, whereby people with similar skill levels work together.[1]

The model argues that the O-ring development theory explains why rich countries produce more complicated products, have larger firms and much higher worker productivity than poor countries.[2]

The name is a reference to the 1986 Challenger shuttle disaster, a catastrophe caused by the failure of O-rings.

WIKI

However, this model understates the possible results, as its production is thought to be positive. In communal markets, the weakest link can fail in their task and draw against the resources other teammates offer.

At Home Economics, we like to distinguish between two types of products: some are more conducive to private transactions, and others are more conducive to communal or public transactions. Those in the first category benefited greatly from the division of labor, for instance. Every worker in the chain focuses on one job, and the line produces a fabulous model T. The second category includes activities such as the ‘eyes on the street’ method of public safety, which was developed by urbanist Jane Jacobs. If a community is mindful of on-goings outside their front doors and reports as necessary, then residents benefit from reduced crime.

Now consider two forms of education delivery. Say one involves students completing modules of schoolwork from a home computer. The overall score of the class will harmed by the weakest link, but each individual performs independently. Now consider a classroom setting. Say one child often misses the bus. They regularly arrive late to class. This disrupts the teacher’s material delivery and causes friction between the students. In this communal situation, it is not only the tardy child who suffers but the whole class. This scenario is one most often given in explanation of why some high-poverty elementary schools suffer from below-average performance.

With items suited to private goods production, the o-ring model implies fewer products that meet perfection. If a company builds laptops and one worker fails to meet standards, fewer laptops are sold. But in a group scenario, where the leaders, perhaps of a certain age, are unwilling to adopt an electronic methodology, say a new accounting feature, they create more work for employees effectively pulling negative productivity.

The negative impact potential in the o-ring model for communal products is underestimated.

What is public, What is private

The Minnesota Court of Appeal recently made an interesting ruling. The court concluded that a car’s interior may be a public space if it sits atop a public road.

The Minnesota Supreme Court ruled Wednesday that the interior of a vehicle is a โ€œpublic placeโ€ if it is driven on public roads, in a case involving a criminal charge over a BB gun found under a driverโ€™s seat. MSN

We at Home-Economic.com like to think through public and private spaces. Typically, what is considered public is defined by access. If anyone can stroll into a park, it is a public space. If you can walk through the doors of the public library, have a seat in a nice armchair, and read for a couple of hours, then it is a public space.

Wayzata Library is part of the Hennepin County Library System. Great views of Lake Minnetonka!

So, is public transit public in the same way? One might argue it is not. You can board the bus if you pay a fee. It is more of a service subsidized by the public and charged at a reduced rate. Is the interior of the bus a public space? In the sense that the buses are owned, usually by a metropolitan community, then it is public to the municipality. Yet- to board a passenger still needs to come up with the fee. Thus, there is a bit of the private side of life to the transaction.

In looking for perspectives on how to consider the interior space in a privately owned vehicle, the court considered this:

In trying to clearly define what exactly is a public place in relation to a personโ€™s vehicle, McKeigโ€™s opinion focused first on Minnesota legal statute concerning the transportation of firearms, explainingย how the lawย allows for legal firearm possession in a vehicle: โ€œA person may only transport a firearm in a motor vehicle under certain conditions, including in a gun case, unloaded and in the closed trunk of the vehicle, or with a valid permit.โ€

It seems a little unusual to me to look for the lines between what is private and what is public in a law regarding the use of firearms. But far be it for me to judge! I have no legal training.

It just seems that if a car is privately ownedand can be contained and controlled by its owner, it should be considered entirely private, even if it sits on a public road.

Now that people are talking in groupsโ€ฆ

Robin Hanson wrote recently about his Status Circles. They start on an enormous scale with the whole universe and then life on Earth. But when most people focus on nation, acquaintances, and family, Robin distinguished his affiliations to people interested in the big questionsโ€”the intellectuals. But even within this grouping, he offers a wide range of ever-narrowing groupings.

Government structures are often thought of as falling into one another. The town is part of a county, which is part of a state, which falls under a country’s national laws and jurisdictions. Let’s call this the Russian Doll effect. By encapsulating one organization into the other, it seems a default that the interests of the smallest doll would be taken in consideration up the chain.

In Vincent Ostrom’s book The Intellectual Crisis in American Public Administration, the author uses ideas offered by de Tocqueville to suggest otherwise.

I’m reading Vincent Ostroms The Intellectual Crisis in American Public Administration. On page 80, he refers to De Tocqueville’s impressions of the US administration. Can it be said that the French man thought there was independence between various levels of US governance, and that’s a good thing?

ChatGPT said:

Yes, Alexis de Tocqueville generally viewed the decentralization of governance in the United States as a positive feature. In Democracy in America, he admired how local institutions, especially townships and states, maintained a degree of independence from the central government. Tocqueville saw this decentralization as essential to fostering civic engagement, political responsibility, and democratic stability. He believed that allowing different levels of government to function with relative autonomy helped prevent tyranny and encouraged active participation by citizens in public affairs.

Vincent Ostrom, in The Intellectual Crisis in American Public Administration, often draws from Tocqueville to critique centralized bureaucratic models. Ostrom emphasizes how polycentric governanceโ€”where multiple centers of authority operate independently but cooperativelyโ€”aligns with Tocquevilleโ€™s observations about Americaโ€™s administrative structure. So yes, Tocqueville did see this independence as beneficial, particularly in reinforcing democratic habits and limiting the overreach of centralized power.

4o

You said:

If one were to take the imagery one step further, could one separate each level out by encapsulating them in a self-interest cloak- the idea being that in terms of action, each level will prioritize the interest at the local level, which can be at odds with other levels of governance.

ChatGPT said:

Yes, you could extend the imagery in that way. If each level of governance is wrapped in a “self-interest cloak,” it suggests that local, state, and federal authorities will act primarily to protect their own interests, which may sometimes conflict with other levels. This aligns with public choice theory, which Ostrom himself engages with, emphasizing that political actorsโ€”whether at the local, state, or national levelโ€”pursue their own interests rather than some idealized collective good.

Tocqueville observed that the strength of American governance lay in its decentralized structure, where local institutions had enough autonomy to make decisions that best served their immediate communities. However, this same independence could lead to friction when different levels of government pursue conflicting agendas. For example, a state might resist federal mandates that it views as intrusive, or a local government might implement policies that are at odds with state priorities.

This “self-interest cloak” metaphor also ties into the broader tension in American federalism: the push and pull between cooperation and competition among different levels of government. In practice, while decentralization fosters adaptability and local problem-solving, it can also create inefficiencies, redundancy, and legal battles when interests clash. Ostrom, like Tocqueville, would likely argue that this tension isn’t necessarily a flaw but an inherent feature of a system designed to resist centralized authority and encourage pluralism.

The benefit of this model, as opposed to the Russian Doll model, is understanding when a group becomes a competitor rather than an altruistic companion. For instance, during the COVID crisis, all the states bid up the price of masks by bidding against each other. In their actions, which were independent (cloaked in self-interest), Americans increased the costs of masks for all Americans to the benefit of those abroad. When reorganized as a bidding unit at the national level, this price effect is reduced.

The only trick, of course, is that you must trust that the greater group will, in turn, divide out the masks to everyone’s satisfaction.

Cash is not always the answer

They say some things you can’t buy. Or maybe some things are more conducive to pecuniary transactions than others. Take the Violence Interrupters. By the summer of 2020, the community wanted to try a new angle on crime prevention, as an article from September explains.

MINNEAPOLIS (WCCO) — The city of Minneapolis is sending members of the community into the streets to prevent violence that is plaguing the city.

They are called the Violence Interrupters, and they’re tasked with stopping shootings by mediating conflicts in the community, and following up with individuals to decrease retaliatory violence.

Jamil Jackson and his group of interrupters are on the move.

“Our mantra is engage, relationships, resources,” Jackson said. “We’re teachers, we’re business owners, we’re city employees, we’re park employees, we’re just individuals who came to the call and had a desire to come out here and change.”

Their bright-orange shirts stand out, so they can walk in and use their relationships within the community to stop the shootings before they happen

The idea was that if responsible people in the neighborhood could step in on demand when they saw an event unfolding, interacting with police would be avoided entirely. Neighbors helping neighbors have the advantage of, in many cases, a clearer view of the issues at hand.

Others have written about this very thing, extolling the benefits of an active community busy engaging with each other across the sidewalks and parks of a neighborhood. Here’s what Jane Jacobs wrote in The Death and Life of Great American Cities.

The first thing to understand is that the public peace the sidewalk and street peace-of cities is not kept primarily by the police, necessary as police are. It is kept primarily by an intricate, almost unconscious, network of voluntary controls and standards among the people themselves, and enforced by the people themselves.

With good intentions, an office of violence prevention was created and funding was carved into the city budget to pay people in the neighborhood to step in and prevent an incident from escalating. So what happened? Fast-forward to this week in 2025.

Some Minneapolis City Council members say the cityโ€™s Neighborhood Safety Department (NSD) has been too riddled with mismanagement to continue overseeing violence intervention programs. On Thursday, three council members proposed that more than $1.1 million be allocated to Hennepin County to temporarily take over two intervention programs. 

For more than a year, council members have routinely flagged concerns over the department that administers violence interruption programs. Several violence interruption groups reported contracts that had lapsed or gone unpaid last year, which council members say shrunk safety services in parts of the city. A 2023 lawsuit also alleged the department arbitrarily awarded millions of dollars in contracts without adequate oversight. 

Things have gotten so bad that the council people, who are most vocal against professional police, no longer want to be responsible for this new form of neighborhood quieting. But why didn’t it work? It has the right components.

It’s the money.

The eyes-on-the-street people, who help keep the peace, are many and are often never called on to intervene in any way. To meter out the job to an individual is resource misallocation as it takes a large group, a whole neighborhood, of people to monitor and, through small actions, or phone calls, or gestures, alter the course of events. There isn’t enough of a job for just one person.

When resources don’t have a direct draw against them, they become ripe for fraud. Those in charge of the money have to put it somewhere. Opportunists realize this and create a demand where none exists.

Community policing is a group thing. It does not jive with the division of labor or hourly wages. Whoever is available when the car crashes into a pole and is set on fire, whoever happens to be passing by and has the will and capacity to help, are those who step up voluntarily in times of need. For that they receive an award.

Housing Starts & Lumber prices

Prompted from Chat

December 2024 Sees a Surge in U.S. Housing Starts

After a challenging year, U.S. housing starts saw a 15.8% surge in December 2024, reaching an annualized rate of 1.50 million units. This growth was largely driven by a 61.5% rebound in multifamily construction, while single-family starts rose 3.4%. Despite this late-year boost, overall housing starts for 2024 fell 3.9% compared to 2023, reflecting a cooling market due to higher mortgage rates and construction costs.

A significant portion of the lumber used for home construction in the U.S. still comes from Canada, accounting for 25-30% of total softwood lumber consumption. However, the cost of lumber has fluctuated. Over the last year, lumber prices have declined from elevated levels seen in 2022-2023, as supply chains improved and housing demand adjusted. As of early 2025, lumber prices are around $538 per thousand board feet, down from previous highs but still above pre-pandemic averages.

Trade policy remains a critical factor. In August 2024, the U.S. increased tariffs on Canadian softwood lumber from 8.05% to 14.54%. Additionally, a new 25% tariff on Canadian and Mexican imports, set to take effect in February 2025, could drive costs higher. These tariffs may slow future building starts as material costs rise, impacting affordability and overall construction activity.

While Decemberโ€™s surge in housing starts is promising, builders must navigate ongoing supply chain challenges and policy shifts that could influence construction costs in the months ahead.

Outsider on point, Outsider not so much

I’ve been diving into Democracy in America lately, written by a Frenchman, Alexis de Tocqueville, about a voyage to the New World in 1831. He was writing for the French government and primarily focused on public life. So, taken by the spirit of the population, it resulted in a text that shares the rhythm and enthusiasm of civic life, which makes the book popular today.

One point of fascination is the energy of governance at the township level. He ogles at the ability of a small group of men to tackle a public project, do their best (although he notes that this is often not as well done as professional bureaucrats), and see it through to completion. He notes the short distance between the man on the street and the organizer of public goods. In France, the central authority resides far from the common man. It’s a distance thing.

As an outsider, de Tocqueville was a keen observer. But this isn’t always the case. Sometimes, the outsider over-simplifies, and sometimes, they interpret to fit a convenient view.

Lately, immigration has been in the news, particularly the subset of intelligent, well-educated types. We have one such community. The tech workers from Asia gravitate to the same suburban area, the same school district, really. This public school district pulls in the highest scores in the state. It’s no coincidence. All the Tiger moms want their kids to go to the top schoolโ€”not a private school, mind you, but a public one. For comparison, Asians in Minnesota make up 5% of the population.

Their contribution to raising the level of education among all those other Minnesota kids doesn’t stop there. Their interests in debate club, science club, and robotics flush out the teachers who are willing to lead the group. Inevitably, a photo of the teams winning some national prize filters into the community newspaper a few pages ahead of the sports teams and their accomplishments. These families want a lot and put in the work to get it.

This community also wanted to play cricket close to home. And voila! Our city has a cricket pitch.

Plymouth to Get City’s First Cricket Pitch

The activity of this group reminds me of what de Tocqueville describes in the immigrant communities he witnessed. The profile of people who support the notion that anything is possible if you put a little elbow grease into the project. The distance between those with ambition and those able to coordinate and shepherd a favorable outcome is short.

When commentators imply otherwise, you wonder where they’ve been. If you are in the education game, it’s clear who carries the ball. It’s the families and the teachers. Corporations are so far removed from education mechanics that they might as well be on an island somewhere. General observation shows that highly educated, foreign-born tech workers result in positive externalities to their surrounding communities.

Big business and corporate America aren’t even on the same playing field. And those who think so might want to check the game’s rules.

Super Power

It might be a bit difficult to buy this picture as a model of spontaneous order. Spontaneity, perhaps, but order?

Each little bubble is a representation of an independent actor out fulfilling their purpose of the day. Bubble wrapped, as they each get to retain their skills, talent and experiences and bring those forth in the work they do.

This is in fact their super power. No matter who you know in life or where you start, you have the power to devote your time and energy to the endeavors of your choice.

Luckily, the twentieth century is full of modeling the chores done in exchange for pay. No need to review that here. Economics is most comfortable in this environment: money for goods, services, and labor. It’s countable. The measures are used in all sorts of reports and for all sorts of comparisons.

Sometimes the numbers seem off. Sometimes, people don’t end up where someone thinks they should. And Social Welfare Economics tried to get a handle on such things. As a method, it really couldn’t pull off the knowing part. How do you know when such a group is better off than the other? Isn’t a comparison contingent on all the factors that go into the moment? This is what James M Buchanan seems to argue in Positive Economics, Welfare Economics, and Political Economy (1959)

A second major problem which has concerned theorists in welfare economics has been the possible existence of external effects in individual consumption and production decisions, sometimes called “spillover” or “neighborhood” effects. But this annoying complication also disappears in the approach to welfare economics suggested here. If, in fact, external effects are present, these will be fully reflected in the individual choices made for or against the collective action which may be proposed. External effects which are unaccounted for in the presumptive efficiency criterion of the economist and the proposal based upon this criterion will negate the prediction of consensus represented in the alternative suggested. The presence of such effects on a large scale will, of course, make the task of the political economist more difficult. His predictions must embody estimates of a wider range of individual preferences than would otherwise be the case. The compensations included in the suggested policy changes must be more carefully drawn and must be extended to include more individuals who might otherwise be neglected.ยฎ

The reader might be led to believe, in this bottom-up observation of human behavior, that consumers reflect a comprehensive analysis of the entirety of their transaction, including internalizing spillovers and externalizing expenses. The market filters through individuals’ private desires and their accommodations for public or group enterprise in a complex, yet thoughtful manner.

The graphic specifies the draw of a common cause, whether it be education, peace, or public health (and there are thousands more). It is the cause that sorts the analysis. It’s not a group being told to sign up to walk for MS. It’s the desire to be on the team fighting a deadly disease that drives the worker to devote their superpower to a cause.

In review

First principles of the model are

  • 1. Actors are independent free agents.
  • 2. Actors may offer work for private benefit or toward a group goal.

Embedded bugs

embedded [ษ™mหˆbedษ™d, emหˆbedษ™d] adjective

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

I’ve never followed the use of this word as a descriptor of how norms and values influence economic activity. So I asked Chat. How is it that Karl Polanyi, who wrote The Great Transformation, talks of actors navigating a dynamic system where the act of their own free will and yet somehow is fixed firmly and deeply, i.e., embedded, in pre-set cultural norms? Here’s Chat’s response.

You raise a compelling point about the term “embedded” potentially being seen as static or limiting. However, in Karl Polanyiโ€™s usage, the term โ€œembeddedโ€ does not imply a rigid or unchanging system. Rather, it signifies that economic activity is integrally tied to social, cultural, and political frameworks. Within this embedded system, change and enhancement by participants are entirely consistent with the concept.

Why “Embedded” Is Appropriate in Polanyiโ€™s Framework:

  1. Embeddedness Is About Integration, Not Inflexibility:
    • Polanyi uses “embedded” to describe how economies are integrated into social and cultural systems, rather than existing as separate, autonomous spheres (as in the market economy).
    • Embeddedness highlights that norms, values, and institutions guide economic behavior, but it does not preclude change or evolution. It acknowledges that human agency and interaction shape these systems over time.
  2. Dynamic Nature of Embedded Systems:
    • An embedded system evolves as participants interact with and reinterpret the norms and institutions that structure their actions. These systems are adaptive and responsive to changing circumstances, such as shifts in resources, relationships, or external pressures.
    • For example, reciprocity in a small community might evolve to accommodate new technologies or trade relationships, but it remains embedded because it is still governed by the communityโ€™s social values.
  3. The Contrast with Disembedded Economies:
    • Polanyi contrasts embedded economies with disembedded ones, where economic activity becomes โ€œautonomous,โ€ governed solely by market principles. In disembedded systems, human relationships are subordinated to market imperatives, creating a more rigid and dehumanized structure.
    • Embeddedness, by contrast, ensures that economic systems remain rooted in human relationships, which are inherently flexible and participatory.
  4. Room for Agency and Innovation:
    • Embeddedness does not eliminate agency or pre-set participants to fixed standards. Instead, it provides a context within which people act, negotiate, and innovate. Participants are active agents in shaping the system, but their actions are always informed by their embedded relationships and cultural understandings.

A Possible Refinement: “Interwoven” or “Integrated”?

For clarity, terms like โ€œinterwovenโ€ or โ€œintegratedโ€ might better capture the dynamic, evolving nature of the systems Polanyi describes. These terms emphasize the mutual influence between individuals and institutions, as well as the ongoing negotiation and adaptation of norms.

Conclusion:

The term “embedded” in Polanyiโ€™s framework is appropriate because it emphasizes the interdependence of economic, social, and cultural systems. However, it is crucial to understand that embedded systems are not static. They are enhanced and reshaped by participants, reflecting a dynamic and evolving process rather than a pre-set, unchanging standard. If the term “embedded” feels too rigid, alternatives like โ€œinterwovenโ€ or โ€œintegratedโ€ can convey the same idea with more emphasis on fluidity.

I still say embedded is misleading. Economic activity doesn’t sit in a nest of norms and rules. It participates in making norms and rules along the way. In the process, economic agents are continuously confronted with the choice of Exit, Voice, and Loyalty.

How about you? Does economic activity sit atop a mangle of social requirements calling out orders? Or are social needs slid in side-by-side with personal gains?

Talk of Tariffs- MN Edition

In 2022, Minnesota traded a total of $6.2 billion with Mexico. With our neighbors to the north in Canada, Minnesota traded more than $21 billion.

In response to the question of who pays for tariffs, University of Minnesota professor of economics Tim Kehoe replied, “And the findings have been that somewhere between 90% and 100%– the number gets bigger over time– of the tariff revenue comes from US firms or consumers. That is, we pay more for the imports.” But this is really a follow-the-money answer. Where does the cash come from that goes into the tax revenue? The consumer who made the purchase.

This is an incomplete analysis.

The economist says Minnesotans will pay higher prices to cover the tariffs. Yet he suggests that when countries retaliate, they simply have the choice to buy goods elsewhere. It seems that a country that imposes a tariff suffers, and one that chooses a less efficient trade with another partner also suffers a loss. The question isn’t whether the less agreeable trading arrangements are costly. The question is what the cost of buying is, and is that worth it?

Consider the objectives at hand.

“Now, President-elect Donald Trump says, on day one in office, he will impose sweeping new tariffs of 25% on Canada and Mexico and another 10% tariff on China. Trump says, the Mexico-Canada tariff is to crack down on illegal immigration and drugs. “

I’d be interested in an analysis that shows how tariff penalties will incentivize these trading partners to respond to the above-mentioned objectives. Will the cost of this trade arrangement induce Mexico and Canada to put some muscle into immigration issues? How about drugs?

The American people want these issues addressed, and this implies they are willing to put resources towards this aim. Will these new trade agreements prove to be the most cost-effective compared to other enforcement options? (MPR article quoted)

Hayek’s Extended Order

Hayek won the intellectual battle. Government of any sort is not be capable of planning their country’s economy. If in doubt, this animated version of Leonard Read’s famous essay, I, Pencil, will surely convince you.

Near the end of his life, Hayel published his last book The Fatal Conceit, The Errors of Socialism (1988). By now the debate had lost its salience. The Berlin Wall would fall just a year later vindicating all who opposed socialism. A reader is left to think of the Fatal Conceit as a remix of a brilliant mindโ€™s famous career.

But I think Hayek was trying to advance his ideas of extended order to a new level. First note, in the clip above, that the creation of the pencil navigates hundreds if not thousands of exchanges between people. It’s a linear activity. The order is rather flat.

Hayek suggests there is more.

Moreover, the structures of the extended order are made up not only of individuals but also of many, often overlapping, sub-orders within which old instinctual responses, such as solidarity and altruism, continue to retain some importance by assisting voluntary collaboration, even though they are incapable, by themselves, of creating a basis for the more extended order. Part of our present difficulty is that we must constantly adjust our lives, our thoughts and our emotions, in order to live simultaneously within different kinds of orders according to different rules. If we were to apply the unmodified, uncurbed, rules of the micro-cosmos i.e., of the small band or troop, or of, say, our families) to the macro-cosmos (our wider civilisation), as our instincts and sentimental yearnings often make us wish to do, we would destroy it.

Yet if we were always to apply the rules of the extended order to our more intimate groupings, we would crush them. So we must learn to live in two sorts of world at once. To apply the name ‘society’ to both, or even to either, is hardly of any use, and can be most misleading (see chapter seven).

We live in two worlds. The mechanics of one would crush the otherโ€”but then again, the passions are known to be deadly as well. In this way, the actions in one must bend to the actions in the other. And in the worlds of dual ambitions, the subgroups explode into a cacophony of midlevel playing fields of interactions. He describes the replication process in Appendix C.

Social influence on price- Endogenous or External?

It was a privilege to meet sociologist Viviana Zelizer yesterday. Our No Due Date book club read her 1994 book The Social Meaning of Money and we are fortunate to have an hour live with authors to discuss their work.

I think ChatGPT provides some interesting insights into her work:

Viviana Zelizer’s work suggests that the value of social relations is not simply an external force acting on price, nor is it strictly endogenous in the sense of being fully determined within the price mechanism itself. Instead, she argues that social relations and economic transactions are deeply interwoven in a way that both shapes and is shaped by the cultural and moral contexts surrounding them.

In her framework, Zelizer contends that social values and economic exchanges co-constitute one another. That is, social relations influence economic value and practices, but these exchanges also affect the nature of social relationships. For example, in “The Social Meaning of Money,” she demonstrates that people assign specific social meanings to money and earmark it for different purposes (like gifts or household expenses), which reinforces particular social relationships. The relational context affects how money is perceived and used, indicating that social and moral values are not external to money and price but integral to how people understand and navigate economic transactions.

Zelizer’s approach thus goes beyond a simple model of “external influence” or “endogenous value,” advocating instead for a relational view. She calls this the โ€œrelational workโ€ perspective, emphasizing that people continuously create and manage the boundaries between social and economic life. Through this process, social norms and values both influence and are influenced by economic behavior, making them mutually constitutive rather than separable or one-directional forces.

Letโ€™s talk Internalizing Externalities

All the cool kids are doing it. An externality occurs when an activity with a commercial goal creates a positive or negative impact on parties outside of the transaction. The classic example is the manufacturing plant polluting the water with their waste. The community downstream suffers a negative impact. Or consider a drug dealer taking up business alongside the playground at the local park. The neighbors no longer use the public park which is there for their use.

The plant and all those who benefit from its production internalize a gain from not properly disposing of their waste, which pushes out a cost to the people downstream. The dealer accesses a young group of clients internalizing a gain from his location while the neighbors suffer the loss. But what about the other way around? A small group forms a club to advocate literacy. They offer extra help in the local schools and give out scholarships to new high school graduates. They lose their time, which could have been spent on something else, so that the local youth may internalize the gain from extra tutoring. Perhaps a company agrees to locate to a small town under the condition the municipality brings in internet infrastructure. The townspeople internalize the benefit of the corporate relocation.

All this talk seems to suggest there are groups of people who are either on the inside or on the outside. The lines are porous, but exist. What if there were a group who had gotten a bad rap for an extended period of time – and it was considered beneficial to come to their aid in some way? Wouldn’t it make sense to place them in locations where other groups have the knack of externalizing benefits to others? That way, no direct interference messes with the balance in their lives. The positive externalities show up in the serendipitous manner of access.

A form seen in highlights

Albert Hirshman describes an economic motion in his book Exit, Voice and Loyalty (1970). Parties can withdraw if they do not care for a product or arrangement. They may attempt to impact the process by exercising their voice. Over time, loyalties develop, which influence the superstructure of relationships.

It seems Hirshman would agree with his contemporary, Milton Friedman, about the benefits of school vouchers. Should a family be displeased with a pedantic school district, they could collect a coupon for their tax dollar input and cash it in at another more vibrant district. Since schools are tied to geographies, consumers always have the choice to relocate their homes to attend elsewhere. Vouchers make the process more fungible.

Hirschman outlined the logic of the exit option and how noted how increased competition could improve government performance. But competition didnโ€™t solve all problems, and the exit option had several important drawbacks. The freedom to exit was often used by the most ambitious, educated, or well-to-do users of a particular service, and once they exited, those remaining were even poorer, less educated, and less demanding. Moreover, Hirschman pointed out, the possibility of exit weakened the effectiveness of voice, that is, the ability to directly change the managementโ€™s behavior through feedback, discussion, and criticism. 

As Frank Fukuyama explains in his American Interest piece, Hirshman didn’t believe vouchers were the answer to improving a school system. Unlike other commodities, the departure of the stronger students from the classroom has a negative impact on the remaining students. This observation gives a new form to education. Casting the product in this light projects a little amber glow onto all members of the school community. The mission is to educate everyone. If not an educator or a student, the role may be to voice praise or criticism.

A school does not produce widgets on an assembly line, but a group process produces educated students. Changing the composition of the pool of players can have both positive and negative effects on the outcomes. And there are roles for an audience as well.

Timely Knowledge – Textbook Edition

I’m really enjoying this textbook on price theory by Deirdre Mccloskey. The explanations are lively and interesting. The book is available on-line at no cost.

As mentionned in yesterday’s post, knowledge of bargaining techiniques for a good being transacted in the marketplace is valuable to market participants. McCloskey provides this example.

But economists have not discovered very much about what constitutes exceptionally subtle bargaining. There are profound reasons why this is so. Suppose that some bargaining technique were known to be useful when employed by the Soviets-such as threatening to abandon bargaining altogether in a week if the Germans do not accede by then to the terms demanded. The Germans would come to understand this. The Germans would use it themselves. Its usefulness to the Soviets, therefore, would vanish. In general, any knowledge that the analyst of the situation acquires can be expected to be acquired by the participants. They will alter their strategies in view of the knowledge, making the knowledge obsolete. The Soviet bargainers make a “last” offer. The German bargainers know that the offer is insincere (that there are quotation marks around “last”‘) and ignore it, making their own “last” offer. But the Soviets know that the Germans know that the Soviets “last'” offer is insincere and prepare a “real” last offer. But the Germans know that the Soviets know that the Germans know that the Soviets’ “last” offer is to be replaced by their “real” last offer, itself insincere. And so forth.

Chapter 5 – Trade, page 95

A routine reminder

Rent control is counter productive. From the Federal Reserve Bank of St. Louis:

Weighing Trade-offs

Economists generally have found that, while rent-control policies do restrict rents at more affordable rates, they can also lead to a reduction of rental stock and maintenance, thereby exacerbating affordable housing shortages. At the same time, the tenants of controlled units can benefit from lower costs and greater neighborhood stabilityโ€”as long as they donโ€™t move.4

For policymakers considering rent control, economics can help them anticipate possible effects and may even inform policy design for those who decide to pursue such policies. Given the trade-offs, policymakers must balance maintaining affordability for those with rental housing, while possibly shrinking the stock of affordable housing for others, especially when such housing is already in short supply.

What Are the Long-run Trade-offs of Rent-Control Policies?

Targeting a pecuniary benefit to a low-income group seems like an easy solution. The shift of funds from the property owners to a social value, however, promotes undesireable long-term social shortfalls. These include the convesion of rental property to owner occupied housing as the incentives cause landlords to exit the market. Or a deterioration in the quality of rental housing as, again over a longer time frame, long term maintenance becomes more difficult to fund.

Downs called it Dual Rationality

As Chat GPT explains:

In Chapter 2 of “An Economic Theory of Democracy,” Anthony Downs introduces the concept of dual rationality, which he suggests characterizes individuals’ decision-making processes, particularly in economic and political contexts. This dualism reflects the idea that individuals often consider not only their narrow self-interests but also broader social concerns when making choices.

Here’s a breakdown of the dual rationality concept as outlined by Downs:

  1. Narrow Self-Interest: Downs acknowledges that individuals typically act to maximize their own utility or self-interest. This aspect of decision-making is rooted in traditional economic theory, which assumes that individuals are rational actors who seek to maximize their personal well-being. In economic choices, individuals often weigh the costs and benefits to themselves personally.
  2. Social or Broader Concerns: However, Downs also recognizes that individuals may take into account broader social or altruistic considerations when making decisions. This broader concern may include considerations for the welfare of others, societal values, or long-term societal well-being. In the context of political decision-making, voters may consider not only how policies directly affect themselves but also how they impact society as a whole or specific groups within society.

Downs argues that individuals exhibit this dual rationality in both economic and political spheres. While they may prioritize their narrow self-interest in many situations, they also incorporate social considerations into their decision-making process. This dualism reflects the complexity of human motivations and the interplay between individual and societal concerns.

By acknowledging this dual rationality, Downs provides a more nuanced understanding of decision-making processes in both economics and politics. He highlights the importance of considering not only individual self-interest but also broader societal implications when analyzing human behavior in various contexts.