Neologist's Fresh Coinage

Get them while they're still hard

humantropy |(h)yoō'məntrəpē|
noun Psychology

• A dismal outlook on the state of human condition and the expectation for further entropic degradation ultimately leading to chaos in all human relationships.

• The state marked by which one is suspicious of all others, and lives in a fearful, Orwellian-type world identified with statements to the like of: "the free market doesn't work because people are greedy and if you base a society on unbridled greed, health and happiness will not be the outcome"
  

• The condition onset by disciples of the Aneristic Principle, whom suffering this illusion cannot appreciate the erisian lessons of discordianism, and will therefore be fearful from any activity not strictly regulated in the illusory cosmos enforced under government fiat.

ORIGIN human: late Middle English humaine, from Old French humain(e), from Latin humanus, from homo ‘man, human being.’
+ entropy: mid 19th cent.: from en- 2 [inside] + Greek tropē ‘transformation.’

USAGE: A victim of the pernicious humantropy meme suspects and distrusts everyone around him in society, leaving the victim with no true friends, and many questionable alliances.


sorostitute |sōräs'təˌt(y)oōt|
noun

• An addled beneficiary of mercantilism and political rent extraction, who whores his celebrite and prestige upon the admiration of his perceived wisdom to the social cause du jour, but usually to denounce economic capitalism.

ORIGIN soros: mid 19th cent.: modern Latin, from Greek sōros ‘heap’ describing the hoard of multibillionaire stock and commodities speculator George Soros
+ prostitute: mid 16th cent.(as a verb): from Latin prostitut- ‘exposed publicly, offered for sale,’ from the verb prostituere, from pro- ‘before’ + statuere ‘set up, place.’

USAGE: George Soros, Ted Turner, Donald Trump and Warren Buffet are often times the darling sorostitutes of the muckrakering media, used solely to lend credence to their anti-capitalistic stance with the prestige and support of those whom gained most from anything but a capitalistic system.

Naive Muckrakers

In response to this "Worst. Landlord. Ever." post on Gothamist and its accompanying article in the NY Daily News, I felt compelled to write this little diatribe to sooth my temper. And so I begin:

Hmm... it sounds like to me that overzealous government regulation is the problem in both these stories, not evil landlords. Allow me to explain.

In the first story, Mr. Landau was denied the full usage of his property because of government fiat, and thus to flirt those inane rules, he had to make use of unlicensed workers who care not about obtaining permits. Licensed plumbers have their livelihood on the line, so they won't touch it, or not before being heavily bribed/paid.

Had government minded its own business in regard to determining the optimal occupancy of said housing, Mr. Landau could have hired the services of either plumber, and the prices would have been more equitable between the licensed and unlicensed. This does not completely absolve Mr. Landau of his guilt, however the government must own up to its fair share for creating the situation in the first place.

In the second story, just for starters, Gothamist left out the statement of Mr. Kosman's lawyer who said that his client was overwhelmed from trying to repair a building where tenants aren't paying rent.

Again, due to moronic rent control/stabilization laws, landlords have no incentive to make repairs or to upkeep their buildings. In fact, the incentive system here has been turned upside-down.

Just imagine you own a building, in which no one pays market rents, is it in your best interest to spend as much as you can on maintaining it, and keeping your tenants happy -- or as I correctly suspect, you the landlord will not go out of your way, and will only perform the bare legal minimum required since you would rather have the tenants vacate, so that you may eventually obtain market rents.

Thought so.

Again, I'm not looking to praise either of these landlords for their ignoble activities; I'm just trying to point out that its only because of excessive government regulations which lead up to situations such as this. Had the market place been freer, landlords would be forced to compete on quality product.

Kelo is but the tip of the proverbial iceberg*

Now that my conspecifics (to borrow Vache Folle's endearing term for the unenlightened resident statists who control society) have been somewhat startled out of their quiescent stupor when it comes to all things "state", perhaps they will be more receptive to hear about, and hence be virulently opposed to an even less savory pronouncement as summed in this Yahoo! headline:

"Treasury Department Claims Power to Seize Gold, Silver--and Everything Else, GATA Says" (thanks to the mises.org blog for the heads-up)

Not that anti-statists of all stripes should be shocked to learn this; it's simply par for the statist course that in fact this law has been on the book for ages. As BKmarcus once sagely quipped:

What social contracts, implied consent, legal positivism (and probably most other statist positions) are masking is the statists' real core belief: eminent domain -- the State owns everything.

Linked beneath the Yahoo! article is a rather timid message from Chris Powell, the Secretary/Treasurer of GATA, in which he prostrates before the almighty state and kindly asks that the saintly congressmen repeal this bad piece of law.

Speaking of Kelo, did you hear that the city of New London, Conn. has sunk to a new low? They are now demanding tens of thousands in back rent from each of the victims of home theft. But hey, if my conspecifics are okay with the state owning the ultimate title to everything including life, set aside property, why should they be so alarmed?

I guess part and parcel of being anarchist-minded is the frustration of viewing societal conflicts without the detriment of horse-blinders, and I guess the truth really does hurt you. I humbly submit that I unfortunately agree with a rather angry sentiment expressed on a Catallarchy post which I suppose makes me more of a bolshe- than a menshe-libertarian. Not that it's a such a bad thing-- Vin Suprynowicz's Black Arrow makes this fantasy quite enticing.


* Coincidence or similarities of name are just that.

The Attack of the Killer Wal*Mart

From the I'm-not-suprised-to-hear-this-b.s. department

You can't make this shi... er, crap up.
According to this NY Post article (reg required, or use bugmenot to obtain one):

"In the latest move to scare away Wal-Mart, the City Council is on the verge of passing a law that will make ensure that all city grocers and some other companies pay for the health insurance of their employees.

"We believe there are about 12,000 individuals who will end up getting insurance," said the bill's prime sponsor Christine Quinn (D-Manhattan).

She said lawmakers also had their eyes on mega-stores like Wal-Mart, as well as grocers, that don't often provide insurance.

"If we were ever unlucky enough to have a Wal-Mart, they would be required to provide insurance," she said, adding that that however wasn't the genesis of the bill."

Somebody, please cue the scene of Godzilla physically destroying small businesses and setting financial ruin to hundreds of families.

The Insult of Hedonic Adjustments

On the subject of "Hedonic adjustments", the Austrian economists treatment usually revolves around the inherent fraud that these downward adjustments reflect upon the government's index of price-inflation. Not that I've read every single dissertation of course, but of late I have come across a few Mises and LewRockwell articles or blog posts, and especially by Messrs. Karlsson and Mueller.

One of the first points usually raised is that the Bureau of Labor Statistics engages in disingenuous behavior when conveniently choosing to emphasize the lower core index and leaving out the more volatile goods, or their inclusion when it will be more favorable to do so.

More importantly, the method of how the index is compiled is discussed. Mueller's article titled "The Illusion of Hedonics" clearly demonstrates that the calculation required for hedonic adjustments is impossible, and thus any attempt is really no better than anyone's guess. Karlsson writes "Because the state for this reason has a self-interest in underestimating inflation, it is clear that one should be sceptical [sic] towards the official numbers" and by example decries the housing price being calculated upon an "home owners equivalent rent", which therefore results that the index does not represent the higher cost of home ownership.

However, it seems to me that no one in particular takes issue with the implementation of hedonics being used to offset price inflation; it is but in the sloppy, inaccurate and especially political application of the adjustments in which they denounce it. So to borrow a cliche, if the Angel Gabriel came down and gave us the exact and objective index numbers, I'd suspect that these economists would be warmer to its use.

For example look at what Mueller states-

"However, how many technical improvements are being offered every day and there is no market for them?"

and later

"The consumer himself will judge to his best knowledge and preferences whether he likes the product or not. With respect to its price, he will decide to buy or to abstain."

On the corresponding Mises blog, Karlsson states-

"Regarding hedonics, it is not in principle wrong to take that into account as a better product could be seen as equivalent to more products."

Of course they are certainly correct to point out that the BLS most likely overstates the benefit that the consumer derives from the improvements, and thus the price inflation is potentially understated.

It is on this very point I wish to lay yet another criticism of the hedonic adjustment, based not from the consumers' point of view, but rather from that of the entrepreneur. The popularly maligned entrepreneur is the victim of unrealized theft when the BLS applies hedonic adjustments to the money prices of his improved consumer goods.

I do not claim to fully understand the methodology of the BLS prestidigitators, but I hope my forthcoming fabricated example will address my concern adequately.

Suppose the average 23" TV sells for $100 in 2003. Now we find that in 2004, the average 23" TV now includes a digital comb filter, and other improvements not found in the average 2003 model, but yet now is priced at $110. The BLS will now say that improvements X, Y and Z of the average TV in 2004 are worth some figure above the $100 in 2003, and therefore will wash the 10% price increase with the hedonic adjustment, and claim that the price inflation was significantly lower, neutral or even negative!

What I see happening here is that some entrepreneur went forward on spending his time, money, energy and ingenuity in order to offer the consumer more competitive bang for his TV buck. This probably involved the coordination of the many factors encountered in such areas as the R&D phase, market research and preparing marketing materials, the manufacturing process, labor relations, vendor negotiations, consumer advertising, etc.

Due to efficiencies the entrepreneur discovers and implements in these processes, his cost for producing a 2003-level model might be significantly lower than in the previous year, yet because one of the lower-order goods, suppose the plastic housing, now doubled in price due to general price inflation, he might only be able to deliver the final good at $95 MSRP versus the $90 which would have been possible sans price inflation.

Likewise, the 2004 model with many improvements, the entrepreneur was planning on delivering it for $100 MSRP, yet also due to price inflation, the market price is established at $110 for the average 2004 TV set.

In both cases, when offering either the old or newer technologies, the entrepreneur worked to bring better value to consumers. In both cases, price inflation ate away the consumers' potential savings, which would have appeared as lower market prices for either TV set. Savings that the entrepreneur would have brought them with his toils.

But all this is virtually transparent to the consumer. All they see is general price increases in the new items, and slight decreases in the older items. They don't realize that the newer technology could have been selling for a lower market price than the old technology used to.

This is why I find it fraudulent when the BLS compiles an index which utilizes the black-magic of hedonics to make price inflation less of a bitter pill. The BLS's adjustments does not recognize that entrepreneurs did the most to counter the Fed's counterfeiting efforts, and instead they attribute the increases to the improvements through questionable measures and call it a day.

The BLS thus hides the price inflation with the efforts of the entrepreneur. I like to think of this as theft, but in the least it is definitely an insult.

Brownstoner Remarks

Note: These remarks were made in response to this post on Brownstoner.com.

The blame for this latest housing craze, and its ugly results lays partially at the door of the Fed which is responsible for this "cheap" money phase and it's accompanying disasters.

The masters at the Fed are all Keynesians, and in order to forestall a much-needed minor recession to correct the reckless spending of the dotcom era, they pump the system with more money (by way of lowering the rates and by purchasing treasury notes) in order to boost even more consumer and government spending- which was the root cause of the recession in the first place!

So instead of letting the market ride out the brutal, but usually short term recession (which in fact is a healthy function of the market, since it weeds out the less-efficient investments which were unsound business proposals) the Fed policies delay the less minor recession, and in its place they add an unhealthy housing boom which was partially encouraged because when interest rates are so low:

A) it's actually pointless to hold onto savings which don't generate enough bank interest to offset the price inflation, so you might as well spend it today and worry about it tomorrow (ask anyone who took and ARM or interest-only loan how they plan on paying for it tomorrow)

B) it lowers the barrier of entry for developers to build projects, so that any Joe Sixpack who is not experienced now can join the "everyone is a developer" crowd.

The results of inexperienced developers flooding the market with "cheap" money leads to first-time projects which don't really make sense when the rates are higher. You've got architects whom are overwhelmed with the sheer volume of new projects, so that they can't really dedicate their time and energy to designing the best structures. Or maybe the developers don't really care much about aesthetics, because it doesn't make a difference when consumers are spending everything but their last 2 cents.

Reducing Men Into Beasts

Often whilst discussing the topic of [government-] free-markets regulated by the market participants alone, the interlocutor will make the claim that only bedlam and chaos would arise from the lack of government oversight of all market transactions.


I believe that this Pavlov's-dogmatic† assertion is conditioned into the layman two-fold; first by what passes for American History education in our schools, and second, by years of living within the framework of a regulating state.

It's the second point I would like to explore further.

I want to ask the reader to take a moment and imagine living on an remote island along with a small group of others, but with no communication to the outside world. Assuming that there is no elected leader, and everyone gets along, what percentage of any given sample of that population would you say are dishonest, or have no remorse over causing financial or bodily harm to others?

Now imagine that you lived on the island, and you found the lost property of another person, would you return it even if they would never be the wiser?

I know that I would. Call me naive, but I believe that most of the population are born naturally honest and overall good people. I'm willing though to admit that I can't speak for everyone, and that there exists a minute number of individuals who are born polar to natural law.

It was just a few years ago when I read Alan Greenspan's essay titled "The Assault on Integrity" featured in Ayn Rand's "Capitalism: The Unknown Ideal" which brought this humanistic insight to my attention, and which has been churning in the back of my mind ever since. (It's actually a very powerful piece, Greenspan's present day integrity not withstanding ;-) You may read this by clicking here: "The Assault on Integrity" and select the first link to page 118.)

In the essay, Greenspan explains:

"The hallmark of collectivists is their deep-rooted distrust of freedom and of the free-market processes; but it is their advocacy of so-called "consumer protection" that exposes the nature of their basic premises with particular clarity.

By preferring force and fear to incentive and reward as a means of human motivation, they confess their view of man as a mindless brute functioning on the range of the moment, whose actual self-interest lies in "flying-by-night" and making "quick-kills". They confess their ignorance of the role of intelligence in the production process, of the wide intellectual context and long-range vision required to maintain a modern industry. They confess their inability to grasp the crucial importance of the moral values which are the motive power of capitalism.

Capitalism is based on self-interest and self-esteem; it holds integrity and trustworthiness as cardinal virtues and makes them pay off in the marketplace, thus demanding that men survive by means of virtue, not of vices. It is this superlatively moral system that the welfare statists propose to improve upon by means of preventive law, snooping bureaucrats, and the chronic goad of fear."

The essay straightforwardly demonstrates that this pessimistic view of humanity (i.e. claims such that "chaos will prevail absent of government regulation") and its accompanying regulatory implementation only begets further discordant tendencies in the realm of human relationships, nicely summed up in the common expressions- "dog-eat-dog world" and "watch your back".

The most valuable asset to an individual or business is their integrity, or good will. This seemingly trifle point is a big deal when the market is unhampered by regulations. As a motivating agent, it is by far the greatest incentive for people and businesses to provide the highest level of service and product. Regulations and punitive damages when instituted by third-parties, are too poor a substitute for the purpose of keeping businesses honest.

In fact, it lowers the bar for all competitors who produce, say for example, breakfast cereals. If the regulation stipulates that the advertised weight can be off by 5%, every business no longer has to compete on selling you the advertised weight, since the regulation set the bar to some minimum standard, the different producers can now "collude" to not give a private guarantee staked on their reputation, that their product is exactly what they claimed it to be. In essence, regulations reverse the incentive model with punitive disincentives, and hence encourage businesses to get away with as much as they legally can.

All this is of course is not without the help of the beguiled consumers, who innocently believe that only further government scrutiny and fear of punishment will keep the companies straight, and so they no longer rely on the reputation and integrity that good will would have provided sans regulations.

The layman thus loses his or her innocence, and always seeks to get ahead, perhaps even unethically, since if he or she doesn't, other unscrupulous individuals (just like himself) will ride roughshod over them.

This is why I laugh when people conditionally regard anarchism as chaos; a better definition of chaos cannot be found than in the replacement of integrity with government regulation, and unfortunately this humantropy™ self-perpetuates us into a snarling pack of nervous dogs‡.


†I lay stake to this pun
‡This one too.

Brilliantly Insane!

Those two words is all I have to say about Robert Shea's/Anton Wilson's "Illuminatus! Trilogy".



Oh, and Atlanta Hope's "Telemachus Sneezed" spoof of Ayn Rand's "Atlas Shrugged" was so warm-soda-squirting-from-my-nose-funny that I almost choked after reading that passage. (If you want to see it for yourself, click the book above, and search for the text "Taffy Rhinestone" to quickly skip to that passage, or if you have the book, open up to page 538, and start from the last paragraph.)

Many thanks for the tip!

Hail Eris!
All Hail Discordia!

*Upon later rumination, I would submit that the Illuminatus! Trilogy is composed one-part of Kurt Vonnegut's "Slaughterhouse Five" time-slipping, and two-parts Robert A. Heinlein's psychedelically-twisted "Stranger in a Strange Land" and individualist/anarchist "The Moon Is a Harsh Mistress". Yes, Joseph Heller's "Catch 22" predates Vonnegut, but Vonnegut's prose doesn't both annoy and amuse the reader, something I would say makes it a better fit.

A Placebo Named "Empirical Studies"

Steven E. Landsburg, author of the amusing piece "(Thats) What I Like About Scrooge", confirms what I've been extemporizing here on this blog regarding the deletrious effect of the governance-thru-economic-ignorance when it comes to the state of the housing market.

In his latest article titled "Is Housing Too Expensive? Blame the Government", ponders the effect that all forms of housing governance- zoning regulations, landmark & community boards, building deparments, the permit process, rent regulations, et al. and how two economists (Edward Glaeser of Harvard and Joe Gyourko of the University of Pennsylvania) came around to realize that "That is, zoning and other restrictions put a brake on competitive forces and keep housing prices up". (The link goes to their study)

I don't really think that their study is neccesary, regardless of the "hard" and "scientific" credibility that is psychologically attached to empirical data by intellectuals and policy makers. I find it blatently obvious that externally-imposed regulations of the market in both long and even short-term, tends to either increase the costs, decrease the supply or both. To prove their conclusions, they devised a sliding scale from 1-5 which rates only the factor of average time lost in the stages of regulation compliance with the local government, and using that as a very rough estimate of what that locality's housing cost will be in comparison to governments with stricter or more lenient regulations.

What is of interest to me is that perhaps people will now realize that there are consequences of varying economic impact in their meddling with the housing market, and it can be demonstrated with the help of the empirical data's placebo effect.

TANSTAAFL*

*Unless it's about affordable housing in NYC and you can't complete a sentence because your'e a blithering... what? Nevermind.

In regard to the state of housing in NYC, the policy wonks at http://housinghereandnow.org/index.html have declared:

Here’s what our elected officials can do TODAY to BUILD IT, FIX IT, SAVE IT:

Keep the Promise — use Battery Park City money to build and preserve affordable housing.

Guarantee housing for low- and moderate-income people in neighborhoods being rezoned.

Win back New York City’s right to determine our own rent laws

Provide permanent housing for homeless people living with AIDS

Support legislation to strengthen tenants rights to a healthy home through better inspections and tougher penalties.

Now would anyone* hold me to it if I didn't deconstruct every one of those bulletin points? Hey, BKmarcus did that too (not that I pretend to be his intellectual equal.)

*Yes, all three of you.

shameless promotion

For the 2, maybe 3 readers of this humble blog, I'd like to refer you to my latest other blog. Don't worry about my blogging fidelity, I'm still here to rant on anarcho-capitalism, books, and tech. I only need the other blog to vent my frustration over a certain matter which I can't seem to get rectified.

The other blog is here: http://antimarketeer.blogspot.com but don't let the URL fool you; the blog is titled:

"I hate the Newsday Marketeer"

Over there, I will follow up with my efforts to stop a local advertisement publisher from littering their crap on my private property. For the meantime I posted a mission statement detailing why I am against this practice from a legal and ethical standpoint.

Have a look-see, even if the words "Newsday Marketeer" don't mean anything to you.

Placing Aesthetic Desires Before Individual Needs

Those who advocate ridiculous zoning laws shall suffer the consequence of their folly.

If only people were bright to enough to grasp that over-zealous development would most likely not occur in the absence of zoning regulations.

Ever heard of the law of supply and demand?

So did developers, who are doing all they can to alleviate the current housing shortage, in stark contrast to those who have a NIMBY approach, or more like "Let them (the houseless) eat cake".

Developers and speculators can only make money when the supply is inadequate to the demand schedule. If the demand schedule cannot be met (when the average person can't/won't pay for the currently supplied good), it means that housing is expensive overall, and the longer the situation is not rectified, housing costs can only increase, which virtually guarantees the future housing output to be priced exclusively to the upper classes.

But you ask, surely the developers will have to lower their prices, in order to sell, right? Yes, its true that developers will have to finagle their way in order to sell somewhat-affordable housing, but that usually means the consequences of using cheaper materials, shoddy construction techniques and overall corner-cutting. Some developers will go as far as playing the legal-minefield, as does my friend (or is it acquaintance?) H.R. But most of all, you cannot then count on them to then build costly "contributing" buildings.

But the pity is that you, the neighborhoods are the victims of your own folly. By artificially limiting the density and heights of neighborhoods, you do nothing but drive prices higher and away from the demand schedule required for affordable goods. The current housing, and the newly available housing will stay out of the affordable realm.

If you thought just a little outside the box you would realize that developers can't make money when there is an oversupply of a good. They won't be incentivized to overbid on properties when they can't make their and their partner's required returns.

The elimination of zoning restrictions will maximize the housing supply to the optimal, and affordable level, while bringing up the standard of living to everyone.

But of course, the "central planners" out there who think they know best for all of us, end up doing more damage to the average wage earner than these "evil" "hasidic" developers, who in their zeal to make a living (what a horrendous crime!!), are helping alleviate the housing shortage and helping to keep lower housing costs.

And So The Truth Comes Out...

Whoever said that the government only lies? Sometimes they accidently manage to tell the truth too.

On the website of the New York State Department of Motor Vehicles, you will find a special notice for owners of vehicles which have the old "Liberty" plates.

NYS DMV - Vehicle Registration - Important Information About Your Vehicle Plates
If you have Liberty plates on your vehicle, you must replace the Liberty plates with Empire State plates .

You cannot use the Liberty plates on any vehicle in NYS:

• The Empire State plates have replaced the Liberty plates.
• You can get a traffic ticket if you drive or park a vehicle that has Liberty plates instead of Empire State plates.

Liberty replaced with Empire, where have we heard this before?

Many thanks to the NY State Department of Motor Vehicles for this great service of raising the
public's awareness, however unintended.

NYC's Housing Woes

And how to eliminate them.

By last counts, I read that some 750,000 people are seeking housing in NYC's market. Some of those will rent a basement, others a classy/posh/hip long-term rental unit. Greenback-endowed snobs will buy a coop in the snazzy new Astor Place (~$9k in maintenance fees, - forget about the mortgage!), and still others will drop $15+ million for a townhouse to hobnob with the elites on the WASPy Upper East Side.

What do all these people have in common? They are all negatively affected by the arcane, asinine, and the totally arbitrary zoning regulations which govern and actively stifle the ability of profiteers (read: developers) to provide housing at all income levels.

You see, we have a major problem in NYC, and it's price. The reason for the price? Supply and demand of course. The demand simply cannot be met in a satisfactory fashion for the bulk of the homeseekers in NYC. Surely, you realize that if a developer paid market price, for example $250 per buildable square foot, after his costs of demolition, construction (hard & soft), contingencies, financing fees, interest, legal, marketing, et al, he will have to sell it for at least $800-1,000 per square foot.*

Where does this leave affordable housing? Nowhere. All the developer did was alleviate demand by increasing supply of units that 90% of NY'ers can't even dream to afford. Not that there is anything wrong with that; any potential developer would have probably done the same, since that's where you have to be if you want the project to be profitable.

Does this mean that developers hate the poor and middle-class, and only want to sell expensive units to rich people? Hell no!

It would be silly to ignore the largest market of potential buyers. All you need is the right product at the right price. Developers should be fighting tooth-and-nail to build the most affordable housing of the highest quality standards to gain these customers, no? So why aren't they-- because the land is too damn expensive to build more affordable housing.

Sure, if you've got nothing better to do than stir a hornet's nest, go ahead and try building a Mitchell-Llama project, get yourself a modest tax-abatement, and prepare for the headache of dealing with 2,000 tenants in a rent-stabilized/controlled project, sit thru 400 community board meetings with hippies and self-appointed "contextual"-development utopians/authoritarians, who insist on how you build, where, when, and what amenities you have to offer to whom, renovate these 16 adjacent tenement buildings, and fix the local subway access while you are at it. By the time you are done with these board meetings, you have your hands tied behind your back, forcing you to give in so you can get your little concession: helping low-income people buy or rent affordable housing.

Well that's if you haven't defaulted on you 18-month construction loan, while visiting and revisiting the Landmarks Department for the 30th time. You might have already simply hung yourself from the ceiling fan, too.

The proper solution for all this is a re-instatement of property rights, to the hundredth degree. Have a disagreement with the hipster neighbors who hate your proposed glass curtain facade? Tell them to go f-k themselves at a nightclub on the LES. Same with those statist pigs who insist on "contextual" development. Tell them to go tear down their home immediately and replace it with the forest/farmland/cornfield which existed prior to their homes development.

Property rights mean that a developer can build as much or as little, as expensive or as frugal, etc as he desires. Want to put a skyscraper? Go ahead! A farmhouse? Sure thing. A strip mall? All yours. An apartment tower? Why not?

All of a sudden, something incredible will happen. That $250 per buildable square foot will be over-priced! If every property all of a sudden becomes capable of building to the-skys-the-limit, the amount of buildable square footage which was once in short supply becomes abundant, and hence, cheap, cheap, cheap!

Does that mean that unsustainable development will occur? The answer is no. A rational developer will know that there is no incentive to outbid others on what is no longer in limited supply; square footage becomes almost a commodity, and will probably constitute a minute fraction of their total project cost, as opposed to today.

More importantly, there will be no more incentive to only produce expensive units. The developers would probably than choose to compete on producing the market-determined amount of affordable units needed to supply the demand of the lower and middle classes. Developers would hence be cautious, not producing more units than needed, and therefore will limit themselves on the amount of projects and units they complete annually.

The fierce bidding wars will probably be a thing of the past. There is even a good deal for the hippies in this scenario; the profit margin for developers might dip low enough for them to ignore sensitive, battleground markets, such as the Village and the Lower East Side.

It will be good news for rich people too, unless they resent the idea that a significant portion of the middle class will now have access to comparable units of their own, at far lower prices.

This whole thought experiment ends here; because property owners are enjoying the lazy status quo. The current high prices, serve their needs. Selling a couple of high-priced condos per year is certainly much easier than building 5,000 affordable units in the same time frame. The elimination of zoning regulations will mean the lowering of their property's value, as the scarcity disappears and supply dramatically increases. They will fight to keep a lower-standard of property rights, even though one would think that they should want the right to determine what they want to do with their property, instead of groveling before the building department and other bureaucrats to beg permission to develop a project.

I know that this article may read like a missive from Nigerian scam artist, but its only because my writing skills are average, and secondly because it's way past my bedtime. Please feel free to comment on this thought experiment, and where you think the housing market would lead if all zoning laws were repealed.




*Land value should never exceed 25%-30% of the total development costs. Cost to build in NYC grew an average of 300% in 2004, leading to many a default. Of course this also means that it's an excellent time to be in the bridge-lending/mezzanine business, as yesterday's developments come today begging at the door for much-needed funds. The $800-1,000 per square foot of course is based on net, or sellable/rentable square footage, not including the gross square footage you had to build but have a loss factor of common areas, elevators, hallways, etc, which sometimes reaches an 18% ratio (considered high) or as low as 12% (considered incredible). Also, the price quoted will be an average blend; you expect the less desirable units to sell for $600-750 per square foot, while the penthouse, and better units to come in at the $1,200-1,500 range.

Free Market 1, Government 0*

The Mises daily article post on a fiction called "Market Failure" inspired this post about auto and auto parts theft which used to plague my hometown of Brooklyn.

I remember growing up in a different world. One of our daily morning rituals was to look outside to see if our family car was still there. I'm not making this up. Not that we were paranoid or anything, but over the last 25 years we had about 8 vehicles stolen from my family. There was also a number of times when our car's grills, bumpers, headlights, hubcaps, emblems, etc. disappeared.

I honestly cannot recall a specific time when the police found our vehicle and had it restored to us. I mean, to think that we support a bloated, wasteful government with our hard-earned monies and it can't even provide the basic duties which supposedly justify its very existence.

But thanks again to the free market, these problems were virtually eliminated in the most recent years. After all, it's in the insurance companies interest that you remain a good customer of theirs (despite state mandated liability insurance), and that they fight auto theft and auto parts theft in order that their bottom line is profitable. Auto manufactures of the hottest stolen vehicles adopted their products to make them less desirable to steal. Something also tells me that police are not as motivated to make sure your car isn't stolen.

What the insurance industry did was brilliant. They analyzed the problem, and came up with a counter-intuitive solution. It started with the thieves stole parts or the entire cars to sell to chop-shops which distributed the stolen materials. The black-market industry for "hot" goods, which were then sold at discount rates to auto parts dealers and unscrupulous auto repair shops. The victim of a stolen hubcap or bumper would then choose to replace the part either with an expensive factory-authorized parts, or the cheaper original sourced from the black-market channel. The insurance industry would then recompense the victim, but at the same time would raise its premiums for all their customers.

The insurance industry figured how to disrupt this vicious circle. They issued policies that only recompensed customers when they purchase the more expensive factory-sourced parts. This policy is counter-intuitive; why would they insist that customers spend even more money on replacement costs?

What they expected and did occur is that the black market for stolen goods began to shrink. After all, which consumer had an incentive to buy cheaper goods of dubious origin, when the insurance company only paid you for buying the more expensive goods? The unscrupulous dealers and repair shops had no more need to buy cheaper goods, thereby lowering the demand for them. When the demand died, so did the widespread theft, as there was no one to sell the parts to.

Who wins? Everyone but the thieves. The consumer is less plagued by auto theft and pays lower premiums. The insurance companies save the cost of all the replacement parts they didn't have to pay for, a lesson itself on Bastiat's law.

Auto and part theft has been mitigated in other numerous ways by the free market. For instance, it was in the interest of Honda to make damageable Xenon headlights in their Acura line, another counter-intuitive policy which made it pointless for thieves to try to steal the headlights, which would break if pried out, and therefore be unsellable.

Insurance companies offer consumers lower premiums if the car is equipped with LoJack, or any GPS locating system, making thieves shy from expensive cars which can be easily found, and at the same time it encourages the auto manufacturers to add the feature to the mid- and lower tiers of cars for the mass populace which demands the feature which would lower their premiums and the insurance companies costs.

Hence, we are left with the perfect example of how the free market did its job of protecting consumers, while the government and its police force were shown to be nothing but glorified, and literally overpaid coffee and donut consumers. (I say overpaid because their performance and effectiveness is not commensurate to their salaries.)

Which kind of says that government justification for existence on the pretense of securing property rights is complete bunk.


*In reality, the free market score approaches infinity, while government hovers in the negative territory, always imposing harm on consumers, their wealth, and their communities.