Pur Autre Vie

I'm not wrong, I'm just an asshole

Tuesday, July 22, 2014

Embarrassing Moments

Had this conversation with my girlfriend:

My girlfriend:  If each menu item were assigned a different prime number, you could communicate your entire order in one number, which would be the multiple of all the items you want to order.

Me:  That system wouldn't work, because there could be more than one order that would result in the same number.

My girlfriend:  No there couldn't.  You just factor the number and you know exactly what was ordered.

Me:  But what if the number could be factored in different ways?  Like, how can the waiter tell if you wanted two "4's" or one "8"?

My girlfriend:  That's why you use prime numbers, none of the numbers is a factor of another.  Neither of your numbers is prime.

Me:  But what if one of the prime numbers is a factor of another prime number?  What will the restaurant do then?

My girlfriend:  If a number has factors other than itself and one, it's not a prime number.

By that point she was embarrassing herself so much that I had to stop the conversation.  Apparently she's never heard of the "no true Scotsman" fallacy.  In this case, she might as well have said:  "No true prime number has factors other than itself and one."  Yes, dear.  [Nodding dutifully.]  Whatever you say.  I sometimes wonder whether two people, like us, who are so different in terms of intelligence, can really be happy together.

Monday, July 21, 2014

A Fairly Simple Way to Think About Macroeconomics

I've been thinking a bit about macroeconomics.  As always, I make no claim to originality.  Just thinking things through "out loud."

Okay, so take this as a rough sketch of the economy.  There are productive resources that can be used to satisfy people's desires.  People express those desires through consumption and investment decisions, and often people can choose to consume/invest now or later.  The central bank sets short-term interest rates.  If people collectively decide to buy more economic output than can be supported by the economy's productive resources, then prices are driven up and the result is inflation.  On the other hand, if people collectively decide to buy less economic output than can be supported by the economy's productive resources, then resources are left idle.  One of those resources is labor, and when it is left idle this results in elevated unemployment.  (A quick note:  we can never achieve absolutely full employment of all resources in the economy.  Even in a wartime economy, some resources are wasted or simply can't be used at a reasonable price.  So there's a concept of using resources to the maximum degree possible without causing inflation, and this is considered full employment.  A separate project, which the central bank is not usually responsible for, involves trying to increase the amount of consumption that the economy can support at full employment.)

I've slipped in a few implicit assumptions to which we will return, but first think about what the central bank is trying to do.  It is trying to set interest rates so as to shift purchasing forward or backward in time to avoid inflation (on the one hand) or idle resources (on the other).  You can think of it almost like inventory management at a factory.  Given time periods T1, T2, ... T10, you are just trying to shift spending around from period to period to maintain a steady level of economic activity.  It's a quite dry and technical thing.  You've got essentially a supply of economic resources, and a demand for those resources, which is capable of being shifted across time.  You're just trying to line them up, chronologically, so that they are in balance as much as possible.

And the tool to shift spending across time is the interest rate.  The price of purchasing something now as opposed to later is the rate of interest, which puts an opportunity cost on spending money.  (You can spend $100 today or $100(1+x) next year, where x is the interest rate you could obtain in the market.)  Alternatively, the interest rate is a direct cost of borrowing money.  (You can spend $100 today if you promise to repay $100(1+x) next year.)  So the central bank is just trying to set the "right" price for immediate purchasing power, and that price is the same thing as the interest rate.  Again, if it sets the price too high, people will shift their spending into the future even though resources are available, and those resources will go unused in the present.  If it sets the price too low, people will shift their spending into the present even though the economy is already at full employment, and instead of increasing economic activity, people will simply bid up the price of scarce resources.  The result is inflation.

(Inflation is not a simple function of money supply.  It results from an interaction between purchasing decisions and available resources.  You might say that money only has the potential to cause inflation when it is put into motion.  By analogy, money is electrons and spending is electric power.  Power systems don't go down because of a shortage of electrons, they go down because of a shortage of power to push/pull those electrons through the system.  Likewise for money in the economy.  In fact I like this analogy very much.  The central bank is like a utility that raises and lowers electricity rates in an effort to match supply and demand of power on the grid.  It is not an exact metaphor, but it gets at the technical nature of the project.)

(One other note.  Spending is not always a straightforward function of the interest rate.  For instance, imagine that my goal is to have $x when I retire.  If the interest rate goes up, then I might be able to save less today in order to generate $x when I'm 65.  So as the interest rate rises, my spending might actually go up!  I think on balance, though, it is plausible that interest rates generally work in the more straightforward way.)

I think this is a (highly simplified) version of the model that most people use to think about these issues.  Two implications that follow:  (1) if inflation is low and steady, then by definition interest rates are not too low, and (2) the "correct" interest rate could in theory be negative, in which case the economy will not be at full employment even if the central bank lowers interest rates as low as they can go (zero).  At that point, government spending is cheap or free (from a social perspective, if not a fiscal one), because it mobilizes resources that would have been idle otherwise.  You see these themes again and again in, for instance, Krugman's writing.

Note that there is an asymmetry built into this model:  prices are assumed to adjust upwards quickly if interest rates are too low (inflation), but prices are assumed not to adjust downwards so quickly if interest rates are too low (deflation).  In theory a rapid deflation could leave prices so low that all resources are put to use.  This is more or less the anti-Keynesian position, I believe:  prices will adjust so that resources are always used at an appropriate level, and so the central bank has no business trying to achieve a particular level of economic activity.  Recessions are market outcomes and are therefore good for one reason or another.  Just let prices adjust and the market will take care of everything.  New Keynesians reply that prices aren't so flexible ("menu costs"), so resources end up going idle after all, and a whole literature has developed around this question.  But anyway price flexibility is worth thinking about.  In a sense it is the core of the debate.  I think there are other reasons, besides the New Keynesian ones, to suspect that deflation is not adequate to bring about full employment.  A topic for another time.

One thing that occurs to me is that certain products aren't really subject to inflationary pressure, at least directly.  Imagine that the central bank has set interest rates too low, and so people are spending more money than they otherwise would have.  If they buy things like refrigerators, clothes, etc., then of course they will use up existing inventories and draw resources into production, and when those resources become scarce the result will be inflation.  But if they just start streaming expensive movies/TV shows over the internet (instead of bargain movies/TV shows), then there really aren't any inventories to deplete or resources that need to be drawn into use.  It's a windfall for whoever owns the streaming rights to premium content, but no resources are being diverted from other uses.  I guess the indirect effect is that resources might be drawn into production of premium movies and TV shows, but that's not 100% clear.  It depends on market structure and exactly what TV/movies people want.

Anyway, just a thought.  Overall I think the framework is a nice, simple way of capturing the current macroeconomic debates.  I think it's also a good foundation onto which to add other concepts, which maybe I will do in the next few posts.

Sunday, July 20, 2014

How To Take Away What Is Fake In You

I was thinking about a scene from "Oki's Movie," and then I realized I own it!  So here is a transcript of the scene.  A film instructor (who is also a director) is giving advice to a student.

Film instructor:  "Your sincerity needs its own form.  The form will take you to the truth.  Telling it as it is won't get you there.  That's a big mistake.  Don't be so stubborn.  You have potential.  Dialogue is great.  The characters' emotions aren't fake.  There's a real sensibility.  But if you don't fix this, it won't stand as a feature.  Can't your understand?"

Student:  "Do you want me to be greedy?  Is that why you do it, because of greed?"

Instructor:  [laughs]  "What the hell do you know?  So I'm doing all this shit because of greed?  I'm showing you how to survive.  You can't even change this?  Turning points!  Two turning points!  That's how to take away what's fake in you, idiot!"

Student:  "I can't.  I just can't do it."

Now, I don't know how good the instructor's advice is.  Hong Sang-soo may be winking at the audience, as the first paragraph of this review suggests.  But anyway I love that line:  "That's how to take away what's fake in you, idiot!"

I think this feeds into two of my current obsessions, beer styles and process vs. substance.  But I better defer those topics to another day.

What Slips Away

I think one of the saddest things is finally abandoning a long-held dream.  The terrible finality of that knowledge, that you are never going to do it.  That it's time to cut your losses.  Admitting to yourself that you don't have what it takes.  Knowing that it would have been possible, in fact that it might be trivially easy for some people, but that you lack the willpower to do it.

Especially if you've built up some kind of narrative that you've maintained socially, and that will now only be a source of embarrassment.  So people will bring it up - weren't you going to do ________?  How is that going?  And you have to admit:  that's never going to happen.  That was all a kind of affectation, a pretense.  I wanted, so badly, to be the kind of person who does _______.  I did what I thought you are supposed to do, I shared my ambitions almost as a way of committing myself, counting on precisely this embarrassment to keep me going.  But I didn't keep going, and now I have to admit that I have seated myself too high up at the table, as in the old parable:

"When someone invites you to a wedding feast, do not take the place of honor, for a person more distinguished than you may have been invited.  If so, the host who invited both of you will come and say to you, 'Give this person your seat.'  Then, humiliated, you will have to take the least important place."

But as I said, the really sad part is admitting it to yourself.  That you took your own measure and fell short.  Clinging to unachievable dreams is pathetic in its own way, but it is also perversely admirable, like the scorned wife who refuses to go quietly.  Your self-conception is as much a part of you as your memories, and giving up a dream is like performing major surgery, a kind of amputation.

I suppose you can take some amount of comfort in the idea that it would be a big mistake to limit yourself to realistic dreams and ambitions.  Sensible, maybe, but off-putting and inhuman somehow.

Sympathy for Vronsky and a Few Thoughts on Madame Bovary

I just finished reading Madame Bovary, by Gustave Flaubert.  People seem to think that Emma Bovary is less sympathetic, somehow, than Anna Karenina.  I am not sure that's right.  It's true that Anna is shone in a sympathetic light, but I think Emma is too.  She is a victim of the grip that romance has on her impractical mind.

(This is how Jeffrey Eugenides opens The Marriage Plot, with a description of the books that Madeleine Hanna had read:

To start with, look at all the books.  There were her Edith Wharton novels, arranged not by title but date of publication; there was the complete Modern Library set of Henry James, a gift from her father on her twenty-first birthday; there were the dog-eared paperbacks assigned in her college courses, a lot of Dickens, a smidgen of Trollope, along with good helpings of Austen, George Eliot, and the redoubtable Brontë sisters.  There were a whole lot of black-and-white New Directions paperbacks, mostly poetry by people like H.D. or Denise Levertov.  There were the Colette novels she read on the sly.  There was the first edition of Couples, belonging to her mother, which Madeleine had surreptitiously dipped into back in sixth grade and which she was using now to provide textual support in her English honors thesis on the marriage plot.  There was, in short, this mid-size but still portable library representing pretty much everything Madeleine had read in college, a collection of texts, seemingly chosen at random, whose focus slowly narrowed, like a personality test, a sophisticated one you couldn't trick by anticipating the implications of its questions and finally got so lost in that your only recourse was to answer the simple truth.  And then you waited for the result, hoping for "Artistic," or "Passionate," thinking you could live with "Sensitive," secretly fearing "Narcissistic" and "Domestic," but finally being presented with an outcome that cut both ways and made you feel different depending on the day, the hour, or the guy you happened to be dating:  "Incurably Romantic."

It seems to me that Emma Bovary is very much the kind of character Eugenides had in mind, that is, a woman in the grip of a certain romantic idealization of the world that leaves her ill-equipped to make the compromises that real life forces on us.  Unfortunately I don't think Madeleine develops in that way, in fact I'm not sure she develops much at all as a character.  But anyway this idea of having been infected with incurable romanticism, this is a very Emma Bovary thing it seems to me.)

I also find this completely unfair (stop reading if you don't want to find out what happens in Anna Karenina!):

"Anna Karenina has a repellent husband, embarks on an affair with a man who ultimately betrays her love, and commits suicide."

How does Vronsky betray Anna's love?  Vronsky is not the most admirable man in Russian literature, but he treats Anna pretty well I think.  Or at least, he treats her well by his own lights.  I can't think of any way in which he betrays her.  I think one of Tolstoy's great achievements, and Flaubert's too, is that characters who should be repellent are understandable and even likeable.  (And by the way I don't find Karenin so repellent.  Unattractive, maybe, and very James-like in his fusty pedantic uselessness . . .  okay, I guess the word "repellent" is apt, but he too is understandable and almost likeable - he is being the only way he knows how to be.  It is only his misfortune that it is a disgusting way to be.)

But so I think Emma Bovary has an undeserved reputation.  The book is a tragedy because her predicament is so understandable and the logic of her destruction is so true to human life.

Friday, July 18, 2014

Beliefs, Attitudes, Pain, Optimism and Doubt

So there has been some interesting back-and-forth in the comments to my last post.  I want to broaden the point a little, although my thoughts are not focused enough to write with much precision.

Let's say that you have to decide whether to believe a proposition.  For some propositions, there may be a very clear piece of evidence that (for practical purposes) resolves the question.  For instance, you may have a scale that you regard as highly reliable in measuring weight.  Now strictly speaking, this entails a bunch of foundational beliefs about whether the gravitational constant might change dramatically at any moment, whether a demon might have substituted a less-reliable scale while you weren't looking, etc.  But let's ignore these "absurd" possibilities, just as we do in real life.  For the proposition that the coffee in a cup weighs 250 grams (plus or minus a gram), a simple measurement may constitute adequate evidence to adopt the relevant belief and take any appropriate action (in my case, I would stop pouring and drink the coffee).  We'll take this as an unproblematic case, though I have unwavering faith in the ability of philosophers to "problematize" it.

Now consider the position of an alcoholic who is faced with the proposition, "I will successfully refrain from drinking for the rest of my life."  This proposition may be very important, because if the alcoholic accepts it as a belief (or attributes a very high likelihood to it), then he will propose marriage to his girlfriend.  If, on the other hand, he does not believe it (or assigns something less than a very high likelihood to it), then he will consider himself unsuitable for marriage, and may even end his relationship so that his girlfriend can find a more suitable long-term partner.  (I'm not suggesting that's the correct approach for him to take, it just happens to be his choice in this example.)

There may be a lot of evidence available to the alcoholic, in the sense of "data that bear on the likelihood of the proposition."  But assessing that evidence is not straightforward.  Basically, the alcoholic is presented with the problem, "Am I more similar to the population that has a good chance of remaining sober, or am I more similar to the population that doesn't?"  There are infinitely many ways in which he is similar to each population, so the similarities have to be prioritized and weighted, and there is no demonstrably "right" methodology for doing so.  The alcoholic may also have to predict how his risk factors will change over time (for instance, maybe it will be easier to stay sober if he can get a job in Utah, or maybe it will be harder to stay sober if his wife becomes chronically ill).

Now I think that in this case, adopting a belief (or attributing a likelihood) is not so different from adopting an optimistic or pessimistic attitude.  This doesn't quite fit my "evidential threshold" framework, but I think it captures what I was getting at.  If we had two similarly situated men, and one decided that his likelihood of staying sober was high enough to propose marriage, while the other didn't, would it really be wrong to say that the difference is that one man has a more optimistic attitude than the other?

I suppose it would be possible to distinguish between "subjective" optimism and "objective" optimism.  In other words, imagine that an alcoholic faced with this situation makes all of his methodological choices with "no thumb on the scale."  That is, he doesn't consciously shade any of his estimates based on his attitudes.  (Query whether this is logically possible, much less realistic as a psychological matter.)  Nevertheless, it seems as though you could rank men from "pessimistic" to "optimistic" based on their conclusions, although you might want to call it a kind of objective (or non-subjective) pessimism or optimism.  But I suppose this raises the possibility that I might be using the word "attitude" to mean something like "series of modeling choices," which makes my point tautological, maybe.  Or maybe the point is that it's possible to re-cast values and attitudes in the form of modeling choices, which is sort of the other side of the coin.  (But then is there any room, anymore, for "subjective" optimism?)

Apologies for the vagueness and unsettledness.  This bears more thought, I think.

Monday, July 14, 2014

Belief and Evidence

I've been thinking about belief and evidence.  I suppose it's natural to think of confidence as varying continuously from 0 to 1, but in reality there are discrete, yes-or-no decisions that have to be made, and so the question is whether the evidence has pushed your confidence level across a threshold.

But in reality, evidence is often scarce.  And so there is the question of setting thresholds in light of scarce evidence.  And in fact some of the most important decisions will turn on beliefs that are inherently difficult to assess in terms of evidence.  So what is to be done?

I don't know.  It strikes me as being similar to the "bounded rationality" problem.  In short, the problem is that if you have scarce processing power, then you have to allocate it judiciously, but the allocation problem itself requires processing power.  But how much processing power should be allocated to the allocation of processing power?  To answer that question requires processing power.  But how much should be allocated to that problem?

To give a more down-to-earth example, imagine you are buying some kind of ingredient online.  It is available in different amounts (measured in different units) and at different prices (specified in different currencies).  If we are assuming that you are perfectly rational, then you should pick the best combination of quantity and price.  And we could simplify this by assuming that you only care about minimizing the per-unit price (so you don't care about the overall quantity).  It's a very simple calculation at that point, in that it involves no judgments.  It's arithmetic.

But it's still not simple enough.  You value your time, and you don't want to spend an undue amount of time converting all of the quantities and prices into common units.  And so there is a possibility that you will select a price quote that is strictly worse than another option, by your own lights.  (Now I want to be clear:  we are assuming that you have all of the vendors' price quotes at your fingertips.  In other words, this is a processing problem, not a search problem.  A search problem has roughly the same dynamic, though.)

And then there is the possibility that you will spend the "wrong" amount of time converting units and currencies.  If you spend too little time, you are likely to end up paying too much.  If you spend too much time, you will end up "paying" more in time than you gain in improved price.  And so the right amount of time to spend processing the data is a function of the expected gains from each calculation.

But calculating the expected gains for each calculation is itself difficult.  I suppose you could do a handful of conversions, then see what the distribution of prices and quantities is, and then use that to predict what the lowest price will be if you convert x prices.  But doing this calculation itself takes time.  You might choose to make an informal calculation - glance at the prices you've converted so far, see that they are in a tight range, and simply pick the best one.  Or see that they are all over the place, and convert a few more.  This economizes on meta-processing but it risks failing to optimize on processing itself.

Anyway enough.  This is not a new problem, there is a whole concept of "satisficing" that addresses it.  My point is just, it seems we are in a similar position when it comes to reasoning our way through decisions when the evidence is inherently limited.  We have to set thresholds uncomfortably low, or we have to abandon rational thought altogether.  And it seems to me that in fact as you set thresholds low enough, and you bring in enough informal and subjective evidence, you essentially turn a reasoning process into an emotional one.  That's not quite right.  Your beliefs become more like attitudes, more "political," the more you rely on low thresholds.  This is why deciding that you love someone is as much a choice as it is a conclusion.  Our language in this area is (maybe appropriately) fuzzy.  You determine that you love someone, or you determine to love someone.

So your beliefs end up merging seamlessly into your values and dispositions.  And so of course you are open to accusations of being "unscientific" or lacking rigor, or whatever, but that is just how life is lived on the low-evidence end of the spectrum.

You Must Change Your Life

A couple of translations of the same poem by Rainer Maria Rilke.

The first:

Torso of an Archaic Apollo
Translated by C. F. MacIntyre

Never will we know his fabulous head
where the eyes' apples slowly ripened. Yet
his torso glows: a candelabrum set
before his gaze which is pushed back and hid,

restrained and shining. Else the curving breast
could not thus blind you, nor through the soft turn
of the loins could this smile easily have passed
into the bright groins where the genitals burned.

Else stood this stone a fragment and defaced,
with lucent body from the shoulders falling,
too short, not gleaming like a lion's fell;

nor would this star have shaken the shackles off,
bursting with light, until there is no place
that does not see you. You must change your life.

From Rilke: Selected Poems (Univ. of California Press, 1957)

The second:

Archaic Torso of Apollo
Rainer Maria Rilke, 1875 - 1926

We cannot know his legendary head
with eyes like ripening fruit. And yet his torso
is still suffused with brilliance from inside,
like a lamp, in which his gaze, now turned to low,

gleams in all its power. Otherwise
the curved breast could not dazzle you so, nor could
a smile run through the placid hips and thighs
to that dark center where procreation flared.

Otherwise this stone would seem defaced
beneath the translucent cascade of the shoulders
and would not glisten like a wild beast’s fur:

would not, from all the borders of itself,
burst like a star: for here there is no place
that does not see you. You must change your life.

I much prefer the second one, though I have no idea which one is "better" as a translation.  (Someone seems to have gotten to Google Translate, which currently matches the second poem exactly for the line, "to that dark center where procreation flared," which does not seem like Google's usual clunky literal translation.)

[UPDATE:  As Sarang points out, the second translation is by Stephen Mitchell, as I could have discovered if I had scrolled down.  Some other good translations there too.  I think the process of translation (or specifically, multiple translations) actually adds quite a bit of richness to the poem, almost as though you can use parallax to work out its dimensions more precisely.]  [Or if you prefer, it's like computed tomography - like a CT scan in which multiple passes can be combined to infer something that no single scan could show.]

Here is a poem by Elisa Gabbert that refers to the poem.  Like a barbarian, I tried reading every other line (so 1, 3, 5, 7, 9, 11, 13, 15, 17, 19, 2, 4, 6, 8, 10, 12, 14, 16, 18).  If you ignore the punctuation, it kind of works, or at least it works for me.

Saturday, July 05, 2014

Urban Landowners as Utilities

I have been thinking a bit about property taxes.  This is one of those things that I'm sure already has an extensive literature, but I want to do a little thinking about it before seeing what has already been written.  (Realistically I probably won't go looking for articles on this topic, though.)

So here is the key insight.  Assuming property taxes are predictable, they should be fully factored into the purchase price of the house.  That is, the parties should discount back the stream of payments to its present value, and that should be deducted from the purchase price of the house.  If you are not a homeowner, but you want to buy a house in the future, then you should be (roughly) indifferent to changes in the property tax rate.  If property taxes go up, then when you buy a house you will have a larger tax burden, but on the other hand, the purchase price will be lower.  (It is quite possible I have this wrong, by the way.  It seems intuitively plausible, but it's not as though I've rigorously worked it through.  But let's go with it for now.)

So changing the property tax rate should operate primarily to give wealth to landowners, or to take it away from them.  This raises the possibility that you could use property taxes to capture the value created by government-funded amenities.  Imagine that you start with an "isolated state" as in von Thünen.  Then as you add amenities, you could adjust tax rates lot-by-lot so that property values remain stable relative to each other.  So for instance, let's say you add a subway stop in a neighborhood.  If previously land values were essentially flat across the neighborhood, then you could raise property taxes as a function of proximity to the subway station, so that property values remain flat after the subway station starts operating.  (You might even measure distance to the station using a Voronoi diagram—that is, you might measure walking distance as opposed to simple distance, because presumably walking distance has more bearing on land value.  [Edited to add:  specifically I am thinking of "Manhattan distance."]  But really, you might not have to think about it that hard.  Just adjust taxes lot-by-lot until land values are flat again.  And keep doing this every few years.)  A lot of the value of a subway system is reflected in increased land values, but that value mostly accrues to private landowners in the status quo.  If the city were able to capture the value of its investments in mass transit, then it might be much easier to finance mass transit.  And the landowners have no grounds to complain—the city gives with one hand and takes away with the other.  Landowners should be mostly indifferent as to the location of the subway station, because any increase in value will be taxed away.  No one is losing money because a subway station is located near to him, or far from him.  The city is just recouping the value created by its investments.

Now there is a serious problem here, which is that it may be very difficult to measure the contribution the subway station makes to land value.  In my example it seemed straightforward because we started with flat land values, so it would seem that the only factor that might elevate land values is the construction of the subway stop.  But it's not so simple.  It is probably a good idea to build especially densely near subway stations, so as to locate as many people as possible near mass transit.  But once landowners have invested in new, bigger structures near the subway station, then some of the land-value increase is attributable to their infusion of capital, and not merely to proximity to the subway station.  So you can't actually tax away all land-value increases, or you will deter the appropriate development of property near subway stations.  Ideally you would tax only the increase in value that is caused by proximity to the subway station.  (Causation is incredibly tricky to work out, though.)

One way to deal with all of this would be to treat landowners like utilities.  That is, you would permit landowners to operate their buildings for a profit, and you would allow them to profit from capital infusions (so as to develop land appropriately).  But the rate of profit would be bureaucratically determined, and all "excess profits" would accrue to the city via tax increases.  Land would be a safe, stable investment, but would not hold any potential for big speculative gains.  The city would be able to count on big revenue increases every time it enhances property values (and likewise it would suffer revenue losses every time it allows property values to fall, for instance by failing to control street crime or graffiti or whatever—in those cases, the city might be compelled to lower tax rates to hold land values steady).

I note that in New York City, rent-controlled apartments are already treated very much like utilities.  It is expected that the owners should earn roughly enough to cover their expenses, but not much more.  (My understanding is that some landlords lose money every month—that is, rent is not high enough to cover taxes and maintenance.  Imagine being put in that situation with one of your investments!)  Here is what Mayor Bill "the Blaze" de Blasio said when rents were increased by 1%:

“It’s quite striking that we’ve had a pattern in recent years of tenants being charged substantial increases while the actual costs to landlords did not increase anywhere near the same amount,” the mayor said. “So, in fact, there’s been a pattern of unfairness in the last few years.”
So it's unfair for landowners to increase the profit from their investments.  This attitude would be unthinkable in almost any other context (imagine applying the same logic to restaurant owners, or for that matter to owners of non-rent-stabilized buildings).  But one context in which this attitude makes complete sense is in the utility sector.  That's exactly how people think about utilities:  they should be able to increase rates only to the extent necessary to cover increased costs.  (Of course, the flip side is that no one expects utilities to operate at a loss over extended periods of time.  So in that respect owners of rent-stabilized buildings are treated worse than utilities.)

So de Blasio already thinks of owners of rent-stabilized buildings as utilities.  It's not such a stretch to apply the same logic to all landowners in a city (especially since most of the changes in their wealth are attributable to factors outside their control—basically you could have gotten very rich in New York City simply by purchasing land and then doing nothing).  Though of course it's worth noting that one would expect the system to operate with a fair amount of corruption, arbitrariness, and inefficiency, since it's not as though we've solved all the problems in utility-regulation (and we would be talking about millions of little utilities, each one subject to perverse incentives in terms of cost-control, information-hiding, etc.).  So I'm not actually advocating this approach, just noting it as a potential alternative to our current way of doing things.

And now I realize that I am probably just reinventing the "single tax" promoted by Henry George.  Oh well.  I never claimed to be particularly original.

[UPDATE:  You learn a lot by clicking around Wikipedia.  Check out "The Landlord's Game," which was invented by a Georgist.  Truth really is stranger and more fascinating than fiction.]

Sunday, June 29, 2014

Dave's Latest Effort: World Enough and Time

In Dave's latest effort, World Enough and Time, scientists announce the invention of a time machine.  It is a limited-purpose time machine—it can't transport people or most physical objects through time.  But it is extremely efficient at moving money forward and backward in time.

The way the machine works is that an individual who wants to spend money, but who doesn't currently have enough, can use the machine to transport money back in time from himself in the future.  There's a catch:  the time-machine can't transport the money unless the customer finds a "sponsor" who is willing to collateralize the transaction.  So for instance, someone who wants to buy a car might find a bank willing to put up an amount of cash equal to the price of the car.  The sponsor's money goes into the "collateral chamber" in the time machine, and then the money appears in the "time-travel chamber," where it has come from the future.  Over time, the customer regularly deposits money into the time-travel chamber so that it can be transported back to himself in the past.  As these payments are made, the sponsor is permitted to withdraw identical amounts of money from the collateral chamber.  The sponsor typically charges an additional "money time-travel fee," which is a percentage of the amount of money sent back through time—generally it is a function of the overall economic conditions, the trustworthiness of the time-travel customer, etc.  (If the time traveler fails to put money into the machine when required, as occasionally happens, the sponsor must remove money from the collateral chamber and deposit it into the time-travel chamber so that it can be sent back in time.)

The time machine proves hugely popular, enabling all kinds of economic activity that would otherwise be impossible.  But then a rogue group of dissident scientists and economists (!) claims that time travel isn't possible after all:  the entire setup is a trick!  Really the money is not traveling through time.  Rather, the collateral posted by the sponsor is handed over to the customer, who gradually repays it to the sponsor.  The time machine is totally extraneous, and in fact all the scientists have done is reproduce the credit market under another name.  It is all a hoax.

Congress immediately demands an investigation into whether the "collateral chamber" and the "time-travel chamber" are truly isolated from each other.  But then the author drops a bomb intended to blow the reader's mind:  it doesn't matter whether the time machine works or not!  Maybe the collateral chamber is physically walled off from the time travel chamber, maybe it isn't.  But the effect on the world is the same.  We've had time machines capable of moving money across time since the invention of credit!  All that is needed to take advantage of this futuristic technology is for the government to get out of the way and let the free market work.  Taxes and regulations can be seen as not just anti-free-market, but anti-technology and anti-future, since they effectively shut down time-travel machines.

If this sounds much more crude and on-the-nose that Dave's previous work, that's because it is.  What I've just described is the plot of a book-within-a-book written by Lawrence Strong, the hapless protagonist of World Enough and Time.  Strong (barely) makes a living churning out libertarian screeds while living in a ratty apartment in New Jersey, frustrated by what he sees as a society increasingly dominated by central planning and the slow but inexorable extinguishment of liberty.

It emerges that Strong is being taken advantage of by his publisher (which is essentially stealing his royalties), but when this comes to light and prosecutors offer to help Strong recover his money, he hesitates.  Of course Strong believes that the government should protect property rights, but on the other hand he believes market actors like the publisher should be constrained by reputational forces, not raw coercion.  His family and his girlfriend are aghast as he considers passing up his opportunity to regain his stolen money.

I won't say more about the plot, except to note that Dave, normally not virtuosic in matters of form, has crafted a book that is technically perfect, starting out broad and engaging, and then slowly narrowing to a vortex of action and recrimination.  This is an "idea" book, in a way, but the focus is squarely on the human desire to impose order and intellectual coherence on a world that rarely makes room for either.