Thought All My Great Reasons for Leaving, Now I Can't Think of Any

I had written a rather long post about the long-term effect of the coronavirus on New York City. But in light of the absolutely horrific present reality, I decided now is not the time for that kind of speculation, so I'll just link to this thoughtful piece by Amanda Mull in the Atlantic and this classic blog post about the demographics of New York City, and quote Mull:

The middle- and high-income people who could leave the city this year can be divided into two basic groups. First, there are the panic-movers, who hadn’t previously considered leaving before the pandemic hit. In one private Facebook group for panic-movers that I snooped around in for several weeks, the few thousand members looked for advice on how to persuade their New York–loving spouses to leave or asked for recommendations of small towns that are, somehow, very similar to the country’s biggest, densest city.

The second group of movers makes for less exciting trend stories: people who are taking part in normal attrition, of which New York City has plenty—tens of thousands of its residents move away every year. The city is expensive and cramped, and lots of people plan their exit to coincide with the predictable needs of their family or career, or just because they want something different. The pandemic may have accelerated these movers’ timelines by a few months or a year, but the decision to leave was already made.

Like Mull, I suspect the second group is significantly larger than the first.

The Car Crowding Paradox

If you don't like cars, where should you live?

This sounds like a trick question. Most cities in the U.S. are heavily car-dependent, and the exceptions are well-known: New York, Washington, Boston, Chicago, and so forth.

But it really depends on what you dislike about cars. I'm too lazy to check, but I'm sure there are more cars per capita in a city like Dallas than in New York City. And that makes sense, as it's expensive to own a car in New York City and relatively easy to get around by foot or by mass transit.

But (again being too lazy to check) I imagine there are a lot more cars per square mile in New York City than in Dallas. To walk down a sidewalk or bike down a bike lane in New York is to be surrounded by a sea of cars doing all of the things that cars do: making lots of noise, expelling lots of poisonous gases, and threatening to injure or kill you at the whim of the drivers. Of course there are places in Dallas that are like that, but there are also lots of places where despite the prevalence of cars per capita they are not nearly so daunting in terms of subjective experience. (If Dallas is a poor example in this regard, you can imagine leafy suburbs in Westchester or whatever.)

Now I want to be clear, this is a function of New York City being very dense, which is mostly a good thing. There is something perverse about alleviating the negative effects of cars by spreading a city out to the point that everyone needs a car. But the fact remains that in a lot of ways New Yorkers are more exposed to the negative effects of cars than most other U.S. residents are. And actually, Manhattanites are generally more exposed to cars than residents of the outer boroughs. (The contrast between my normal residence in Brooklyn and my current, temporary residence in midtown Manhattan is striking. Again, this must mostly be a function of density, although I also suspect Manhattan gets more people who are simply driving through.)

By the way, this is perhaps an underrated reason that people oppose development near where they live. Development usually means more neighbors, and more neighbors means more cars on the streets (again, even if cars per capita go down). Those cars are a nuisance and it's understandable that people would react negatively to putting more of them on the streets nearby.

From my perspective the solution is pretty obvious. New York should make it safer and more pleasant to get around by foot, by bike, or by transit, and should make it more expensive and more difficult to get around by car. There should be no free street parking and no mandatory parking lots for new development.

But in the meantime, if you don't like cars, probably the most affordable way to avoid their negative effects is to buy a car and move to a sprawled-out, car-dependent city.

Coronavirus: Eradication and Herd Immunity

Just a quick post about what a government can and can't control in fighting the virus.

First imagine a country that has complete control of its borders (perhaps it is an island) and would not suffer greatly from cutting off international travel. This country does not have to face any external constraints. If it has the domestic capacity to eliminate the virus quickly, it can do so without reinfection from outside.

However, domestic capacity is not a given. Governments vary in perceived legitimacy and constitutional powers, and populations vary in cohesion and compliance. More on this later.

Now consider a country that relies, to a significant degree, on international travelers, or that doesn't fully control its borders. This country can perhaps crush the curve in the first instance, but it may face new outbreaks if its neighbors/visitors come from countries that choose not to eliminate the virus.

This may change the calculation on whether to take the "Swedish" approach or the one adopted in much of east Asia (but not Japan). The great downside of the "Swedish" approach is that it means accepting a large number of deaths that may otherwise be preventable. But the upside is that it achieves "herd immunity" relatively quickly and therefore inoculates the society against further outbreaks. A country that faces constant reintroduction of the virus from external sources may find the Swedish approach relatively palatable, whereas a country that does not may prefer to eliminate the virus.

Similar logic applies if you have an internal source of infection that cannot be addressed. This might be true for any of a number of reasons, some of which I already mentioned. In the U.S., political power is fragmented and some states have already dropped their efforts at mandatory social distancing. (In one case, Wisconsin, the government wanted to continue the restrictions but the state's courts ruled them illegal.) In that context, it seems to be a daunting political/legal challenge to eradicate the virus.

It is also less attractive a goal than it might be in a place like Taiwan or Korea. A major advantage of eliminating the virus is that ordinary behavior becomes feasible again. Sweden is paying a heavy economic price for its approach, in that its economy is hobbled by the voluntary social distancing that its population has adopted. The big east Asian economies (again, barring Japan) are doing a lot less social distancing now that the virus is mostly eliminated. But as Korea's recent experience shows, this makes countries vulnerable to new outbreaks, and if those outbreaks happen often enough, it no longer makes sense to abandon social distancing, and one of the major advantages of the eradication model is lost.

Another way of thinking about this is that the desirable outcomes are fairly bimodal. If a society truly gets rid of the virus and keeps it out, then it can enjoy normal behavior. If a society truly gains herd immunity, then likewise. In between is a vast gray area that is not nearly as variegated as commentary would seem to suggest, because at any moment an outbreak can come.

Fried Rice Illustrated

Enver Hoxha says it's fried rice time! Enver Hoxha says it's fried rice time!

First let's gather our ingredients.

Now we heat up some oil in a large pan.

Time to fry the onions! [Turns out I can't upload a video of the frying onions. Trust me, the sound and smell were intoxicating.]

Look how nice and brown they are!

Time to add the peppers!

When those have cooked a bit, we add the rice.

Time for the eggs.

Hollow out a little home for them.

In they go.

Don't forget the garlic.

Ketchup.

This is also when I added the chili paste. The rice is looking pinker now.

Cheese is optional.

The final result was disappointing, and I had to add Cholula to make it tasty.

Every good boy deserves a treat for making a home-cooked meal.

But the cider was not actually very good.

Cat Bonds for Everything

This is the galaxy brain version of my previous post.

Imagine that the government gives a small tax break to people who obtain income from "conforming leases," "conforming mortgages," and so forth. What is a conforming lease? A conforming lease is a lease that has a special clause whereby the government can impose a rent holiday for up to 3 months (or whatever) in specified circumstances.

So if you're a landlord, what you do is either sign a conforming lease and obtain a conforming mortgage, or you pay a little extra tax and get non-conforming leases and mortgages. And if you're a mortgage lender, you either buy conforming mortgages and issue conforming notes (saving a little on taxes) or you buy non-conforming mortgages and issue non-conforming notes. You get the idea.

Then when necessary, the government triggers its rights under the conforming contracts. Say a hurricane hits Miami. The government might immediately give tenants a 3-month break on rent (in addition to whatever other break they might be entitled to under Florida law). Likewise, their landlords get a 3-month break on their mortgages. And whoever holds the mortgages gets a 3-month break on its debt.

There may be logistical difficulties in tracing the contracts up the chain. Suddenly it matters to me, as a noteholder under a conforming bond indenture, whether my notes are secured by Florida mortgages or Texas mortgages. But that's the risk I take. The landlord certifies to the government that its certified lease been triggered, and then it doesn't have to pay its certified mortgage. The mortgage holder certifies to the government that x% of its certified mortgages have been triggered, and then it only has to pay (100 - x)% of its bond payment. The government can audit all of this.

Of course in a situation like the present pandemic, all conforming leases everywhere in the country would be triggered at once. Then in turn, pretty much every conforming mortgage would be triggered. The result would be a lot of missed payments on conforming bonds. You would have to have rules about who could hold those bonds and in what concentration. (E.g. a money market mutual fund obviously wouldn't be allowed to invest more than a tiny fraction of its assets in conforming bonds.) But basically you would have a pre-arranged system for allocating losses in catastrophic situations.

By the way, all of this has been done at small scale. This is what a catastrophe bond is. But catastrophe bonds are narrowly tailored instruments and can't be used to protect, for instance, ordinary tenants.

You could bootstrap off of this. The Treasury could issue bonds that actually pay extra when a catastrophe is called on conforming contracts. States would hold the bonds and would get an automatic infusion of cash when a catastrophe hits. There could be a whole formal system to invoke the bonds (like a declaration of emergency) and other legal arrangements (not just conforming contracts) could use an invocation of the system as a triggering mechanism.

This is not a perfect solution of course. It would be difficult to trigger the conforming leases and mortgages in a particularly targeted way. (For instance, some homeowners and renters might not be affected by the catastrophe at all, while others would need more than 3 months of relief.) But it would give the government a tool to help people at relatively little cost, effectively allocating the risk of catastrophe to investors compensated to bear it. (Ultimately I would expect conforming notes to be held by investors who either lay the risk off to insurance companies or simply accept the risk in exchange for a higher yield. Recall that this is somewhat subsidized by the tax treatment of conforming contracts.)

[Update: I guess you'd have to consider making all residential mortgages conforming, otherwise a lot of poor people will end up in non-conforming leases, defeating the purpose. Commercial leases, I don't know, I can see it both ways.]

Coordinated Business Rescue

My previous post is superficially about Daylight Saving Time, but the bigger point is that there are times when universal, off-the-shelf solutions are better than millions of individual negotiations.

Consider our present economic situation. The basic problem is that a lot of people and businesses have suddenly lost income. This has been somewhat offset by government action, but not entirely. There are still large losses to be borne by the private sector, and the question is who will bear them.

To see what I mean, consider a restaurant that has lost most or all of its revenue as a result of the pandemic. The restaurant must still pay rent to its landlord. The landlord, in turn, must still make payments on its mortgage. The holder of the mortgage might have financed it by issuing notes (that is, bonds sold to investors), which must be paid. In each case, there is a legally binding agreement to pay a specified amount of money on a periodic basis. And in each case, the payment of those amounts may depend on receiving a corresponding payment. All along this chain, there are losses to be borne, and the question is how they should be allocated. In the worst-case scenario, the restaurant goes out of business completely because it can't afford the rent. The landlord then has no revenue to pay the mortgage, so the mortgage holder forecloses. But the building isn't worth much with no paying tenant (plus there are a lot of other properties being foreclosed on, so there's a glut and prices plummet). So ultimately the mortgage holder's own creditors, the noteholders, don't get paid in full. The bonds are downgraded, and now you've got a full-blown financial crisis brewing.

This can be avoided, but someone has to bear the cost, and who will it be? The answer, in the absence of a governmental mandate, is that it is a matter of individual negotiation. The tenant can go to the landlord and ask for a break on the rent. The landlord can agree, or it can stand on its legal rights and evict the tenant. Likewise, the landlord can ask the mortgage holder for a break, and again, the mortgage holder can agree or it can stand on its legal rights and foreclose on the property. Finally, the mortgage holder can ask its noteholders for some kind of consensual arrangement, which may be harder or easier to accomplish depending on the terms in the indenture.

It's important to note that standing on your legal rights in this scenario may be very stupid. Sure, the contract says what it says, but it may be better to get 80% of the usual rent rather than 0%. But negotiations are tricky things because it's often difficult to know whether your counterparty is telling the truth, is willing to be rational, etc. For instance, perhaps the restaurant is doing good delivery business and only needs a small, temporary rent reduction to make it through (or doesn't need a break at all). The restaurant owner might still claim that business is way down and that a major rent concession is necessary. The landlord prefers to have a paying tenant and doesn't want to risk driving the restaurant out of business, but doesn't want to give up more rent than it has to. And so on up the chain. A tremendous amount of lawyer time will have to be paid for, and the least sophisticated and poorest parties will tend to bear the brunt of these bare-knuckle negotiations.

Now consider how the government might intervene. The government could do something like this: pay 50% of the rent for any qualifying commercial tenant, on the condition that the landlord waives at least another 25% of the rent. This means that any business that can survive while paying 1/4 the normal rent should make it. Meanwhile it shores up landlords by protecting them from catastrophic losses. A landlord should be able to make ends meet with 75% of the usual rent.

If you're still worried about landlords, though, you could do the same thing at the next level, but less generously. You could pay 5% of all commercial mortgage payments, contingent on the mortgage holder deferring another 5% until the end of the mortgage. The landlord is getting 75% of the usual rent but is also getting a 10% break on the mortgage, so it is only being squeezed a little.

At that point, the mortgage holder should be able to pay its notes without incident. Or if not, it is certainly better than the widespread defaults that would otherwise likely occur. This means that the noteholders, who buy notes (rather than stocks) precisely because they don't want to bear a lot of risk, should get their expected payments, or close to it, and everything downstream from them should function normally.

Now this is far from a perfect solution. (This is also, to be clear, just an illustrative example, the numbers may be unrealistic.) Some tenants who don't need much of a break (e.g. pizza delivery places that never had any significant dine-in business) will get unneeded rent relief, while other tenants who need a bigger break might not get it. (However, note that nothing precludes the landlord from giving extra concessions. The 25% rent reduction is simply the minimum required to get the guaranteed government money.)

But it sure makes things simple! When you go to your landlord, you don't have to haggle over whether you need a 25% break or a 40% break or a 10% break on the rent. You simply get a 25% break as of right (unless your landlord wants to turn down the guaranteed 50% rent payment from the government, which would be a pretty foolhardy thing to do). And likewise at the next level. It's an off-the-rack solution that won't fit everyone perfectly, but it pretty much eliminates the cost and unfairness of doing individual negotiations. And crucially it spreads out the losses in such a way that they are absorbed before they snowball and start spreading to other sectors (for instance, this scheme protects the financial system, and it should help prevent property tax receipts from plummeting).

Now this would be, of course, hugely expensive. But when you consider all of the costs that are avoided, on a net basis it is probably not a terrible deal.

And I want to emphasize the point about fairness. A lot of times there is help available but you have to know to ask for it. That is, one restaurant owner will know to bring a bottle of bourbon when he asks for a break on the rent, and another restaurant owner won't even know to ask. When the landlord threatens legal action, a certain kind of restaurant owner will simply laugh ("What are you going to do, evict me and just let it sit empty, earning you nothing?") while another restaurant owner may be cowed. A uniform system of loss-sharing, generously subsidized with federal dollars, may be the best approach.

Daylight Saving Time

Twice a year my Twitter feed is full of people complaining about Daylight Saving Time. Actually, most of them don't object to DST, they object to Standard Time. They would prefer (they believe) for DST to be adopted on a year-round basis so that clocks never need to be changed.

I think this is wrong because it implies a sunrise after 8 a.m. in much of the country, meaning that school children would be walking to school, or waiting for the bus, in the dark. Year-round DST proponents respond in one of two ways:

1. Some of them bite the bullet and say that whatever deaths are caused by DST are worth it because sunset is later, and they are more likely to be awake at sunset than at sunrise.

2. Some of them propose shifting school hours so that children are still able to walk to school when it's light out.

The first answer is superficially less reasonable, but in a way I think it's much more reasonable than the second. Take a minute to think about how the second argument works. The idea is that institutions will simply shift their hours during the winter to take account of reduced sunlight in the morning hours. Schools, for instance, will start an hour later. In turn, employers will start an hour later to allow parents to drop children off at school. Stores, taking account of people's daily routines and the needs of their own employees, will shift their hours later by an hour.

Pretty soon you are back where you started, except that the costs of the annual shift are greatly increased. Imagine that your school switches to winter hours a week later than your employer. What are you going to do during that week? And think about shopping, or going to museums, or whatever. Having to remember when each institution switches to winter hours is needlessly burdensome.

I think that kind of world is attractive only to extreme libertarians. Most people don't want the freedom to decide when winter hours will go into effect. They wouldn't enjoy the costs of coordinating that kind of thing without government intervention.

Maybe the government should simply specify when winter hours go into effect, rather than making it legally mandatory. But of course business hours are generally not legally mandatory anyway, so a business could always offset the switch to Standard Time by shifting its hours in the opposite direction. Now you're just quibbling about who should have to change their clocks vs. their hours.

Anyway long story short, either you think the coordination would happen even without government intervention, or you don't. If you don't think it would happen, then you have to address the costs of morning darkness, but you can perhaps make your case. If you think coordination would happen anyway, then it seems very silly to oppose by far the lowest cost way to implement it.

Political Mirages

In the Democratic presidential primary of 2008, Obama pursued a strategy of accumulating as many delegates as possible. Clinton racked up some highly visible victories and (according to Wikipedia) came extremely close in the popular vote, but Obama had the delegates and so he got the nomination.

Along the way, Clinton enjoyed considerable strength with white working class voters. I have a vivid memory of Clinton drinking whiskey with voters in a sign of her common touch. Why was Clinton popular with these voters? You can come up with any number of explanations. An arguably sexist one is that they had fond memories of her husband's presidency. Perhaps they were, consciously or unconsciously, uncomfortable with voting for a black man. Or, most favorably to Clinton, maybe she just struck a chord with them. They admired her intelligence and toughness.

In truth it was probably a mix of these and other reasons. But the lesson that the Clinton camp took from it was that she was good at winning white working class votes, particularly in Appalachia and the midwest. You know what's coming, so I want to emphasize that this wasn't necessarily wrong in 2008. Had Clinton won the nomination, quite possibly these same voters would have supported her again in the fall (particularly against mega-wealthy perma-hawk John McCain).

But of course it was the last time she could run as the 2008-vintage Clinton. By the time she needed those votes again, a lot of water had passed under the bridge, and while she ran up big margins with a lot of constituencies, Sanders enjoyed a surge of rural white voters—the very voters who were supposed to be Clinton's particular strength. Clinton shrugged it off and ran up big margins with blacks, Latinos, and others, ultimately crushing Sanders by a far larger margin than Obama's in 2008. But in November her weakness with white working class voters, particularly in Appalachia and the midwest, doomed her to an excruciating narrow loss. Her strength had been a mirage.

In 2016, Sanders drew the same implication from his strength with white rural voters that Clinton had in 2008: they like me, they really like me. And again, I don't think this was necessarily wrong at the time. Sanders has cultivated an image as an outsider, a truth-teller, and it's understandable that he might appeal to people disenchanted with politics as usual. But as in 2008, there are other possible explanations. In addition to his image as an outsider, Sanders has built a reputation for despising the Democratic Party establishment. Moreover, Clinton was the presumptive nominee and was likelier to win the general election than Sanders. Accordingly, voters interested in boosting Trump's chances could (in certain states) vote in the Democratic primary to weaken Clinton and usher in a Trump presidency. Others might simply have detested Clinton. Those voters often pulled the lever for Sanders.

It is understandable that in 2020 Sanders assumed that these voters were a stable part of his coalition and that all he needed to do was expand his appeal to Latinos and blacks, notable sources of weakness in 2016. On top of that, if white, conservative, Trump-leaning voters are a durable part of the coalition for socialism, then its political prospects are quite good, not just in primaries but in general elections. It is understandable that Sanders would conclude that socialism is a winning platform.

But when Sanders looked for his rural and/or conservative white supporters to turn out again in 2020, they were gone. Their votes were contingent on a set of circumstances that no longer pertained. Socialism is not, in fact, popular with white, conservative, Trump-leaning voters. Its (relative) success in the 2016 primaries was a mirage.

It is understandable that first Clinton and then Sanders believed in their mirages. In a democracy political power flows from popular support, and confessing that some of that support is illusory is a near-suicidal act. You have to assume that your voters are loyal or you might as well pack it in. But parties do not have the luxury of chasing mirages. When Sanders failed to replicate his 2016 success, the party acted with uncharacteristic discipline and effectiveness to prevent him from using a "minority of a minority" to drag the party into likely electoral defeat in the fall. Sanders and his supporters can complain that moderates uniting their vote behind a single candidate deprives him of a chance at winning the nomination with weak support, but the truth is that he is failing to turn out the voters that could have built a winning coalition: the young people who still aren't showing up to vote and the rural white voters who were probably always a mirage.

The Outrage Cycle and DoorDash

One consequence of the rise of social media is the outrage cycle, in which (usually) brief but intense pressure is brought on someone due to a perceived outrage. Of course putting pressure on companies is not new at all—the word Boycott comes from Irish workers' refusal to harvest crops of absentee landlords—but social media makes pressure easier to apply and also changes the dynamics of the process. In particular, social media makes it more likely for pressure to be brought where the alleged harm can be succinctly stated in a black-and-white way. This is not necessarily bad but it can have perverse effects.

One potential example is the pressure put on DoorDash to stop guaranteeing that its delivery workers would receive tips. The basic idea is that a delivery worker earns a certain amount per delivery, perhaps a function of distance traveled or perhaps not. But the worker also earns tips from the customers. These tips are more variable than the compensation paid by the company—one customer might tip generously, another might not tip at all.

DoorDash got in trouble because it made an arrangement with its employees where if a customer tipped poorly, the delivery worker would receive a compensatory payment from DoorDash. So for instance if a customer tipped less than $3, perhaps DoorDash would pay the worker an extra $3 for the delivery.  Whereas if a customer tipped $5, DoorDash would simply pay the ordinary fee.

This was characterized on Twitter as DoorDash "stealing" tips from the workers. And this is true in a way. If you characterize the guaranteed minimum tip as part of the flat per-delivery compensation, then DoorDash is "stealing" the amount of any tip up to that amount of money. In other words, if I tip $5, perhaps DoorDash is really "keeping" $3 of it and the worker only gets $2. That is outrageous!

The logical implication of this is that it would be less outrageous not to guarantee a minimum tip. So in terms of social media outrage, consider the following two compensation formulas:

Formula A: The worker gets $5 per delivery plus $1 per mile traveled and gets to keep tips.

Formula B: The worker gets $5 per delivery plus $1 per mile traveled and gets to keep tips, and the company guarantees a tip of at least $3 (that is, to the extent a tip is lower than $3, the company makes up the difference).

According to Twitter, Formula A is good and the company should not be boycotted. (Formula A may be unfair, but it would be hard to explain why it is unfair in 280 characters.) Formula B is bad because it amounts to theft. You don't even need 280 characters to point that out, you could do it in 100.

But if you were a delivery worker, which formula would you rather use? Or to put it another way, if the company gives its workers the option of using Formula A or Formula B, which do you think they would typically choose?

Now in fairness these are not the real formulas used by DoorDash, and I don't think it ever gave its employees the right to choose different formulas. But there were indications that workers actually preferred DoorDash's compensation system to the systems used by its competitors, and some of those workers expressed anxiety when DoorDash stopped "stealing" their tips (i.e. ended its minimum tip guarantee). Also, bear in mind there is a third party here I haven't mentioned: the customer. It's possible that (A) customers felt aggrieved by the "tip guarantee"/"tip theft" model, even if workers preferred it, and (B) customers would tip less generously if they learned about the "tip guarantee"/"tip theft" (and of course they were learning about it through social media).

So I'm not necessarily claiming that what happened to DoorDash was bad for workers. But in general in the modern media environment you're better off being less generous to your employees, in a way that cannot provoke outrage in  280 characters, rather than being more generous in a way that can provoke outrage in 280 characters. The lesson here is not to be one of these assholes who retweets outrageous things without doing some research/thinking on the nature of the outrage.