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Monday assorted links

by on April 25, 2016 at 1:56 pm in Uncategorized | Permalink

Sunday assorted links

by on April 24, 2016 at 12:10 pm in Uncategorized | Permalink

Saturday assorted links

by on April 23, 2016 at 12:30 pm in Uncategorized | Permalink

Larry Summers says it is worth a rethink:

Former Harvard University President Lawrence Summers suggested that the school consider curbing annual payouts from its world-record $37.6 billion endowment to reflect the likelihood of lower investment returns.

Real, or inflation-adjusted, short-term interest rates have been falling steadily since 1999 and are effectively projected by financial markets to be around zero percent in the long-run, Summers said in a presentation Friday to a National Bureau of Economic Research meeting in Cambridge, Massachusetts, where Harvard is based.

“If it makes sense for Harvard University to pay out 5 percent of its endowment in 1999 when the real interest rate was 4 percent, it’s really quite unlikely that it makes sense to pay out 5 percent of its endowment in 2016 when the real interest rate is zero,” said Summers, a former U.S. Treasury secretary who is now a professor at Harvard.

I’ve never had a good handle on what you might call “the welfare economics of endowments,” in part because I don’t think economists have a good theory of endowments period.

One normative view is that if g > r, funds should simply accumulate in the endowment, more or less indefinitely, to further maximize societal wealth.  The g > r condition might hold for Harvard, though it is hard to measure what the school’s borrowing rate consists of.  Arguably new money at the margin comes from donations rather than from loans or bond issues.

A second view is that inequality is bad, and institutions tend to become sluggish and excessively bureaucratic in the longer run.  Perhaps every now and then they should be required to “start afresh”; a’ la Jefferson: “every now and then higher education must be refreshed…” etc.  That would suggest a higher payout rate.  You will note that the law mandates a payout rate of five to six percent for charitable foundations; Harvard isn’t a foundation, but analogous factors might apply.

A third view is to note that income inequality has gone up, and that means higher returns from investing in Harvard students, even if overall rates of return in the economy are low.  We know that the variance of corporate returns is much higher than it used to be, and many of those successful corporations stem from Harvard, MIT, and Stanford, among other top schools.  That would suggest spending more money today, because the Harvard endowment may not always be so valuable in terms of the uses to which it can be put.  Low rates of return on (most) investments are more reason to follow this advice and keep on spending, not less reason.  Can you imagine a better investment these days than Harvard human capital?  You will note that in this view “keeping Harvard at the top,” while a goal, is not the number one consideration.

There is something to be said for all of these perspectives, but mine is closest to number three.  In any case the question deserves closer consideration than I see it receiving.

Here is the one file, print it all out version, just revised.  Here is the blog version, which is easier to follow in bits and pieces, looks nicer, works better (thanks to the estimable Chug), and accepts comments.  Here are the links on Twitter.

The old trends were good hamburgers and pizza.  Those haven’t gone away, but the new area trends are Yemeni, Filipino, and more more more Chinese of many different kinds.  Good Mexican is on the way, finally.  Vietnamese and El Salvadoran are fine but stagnant.  Persian is growing, Ethiopian is robust, and will more African be next?  The biggest growth in quality and interest has come in DC (!), not the suburbs, at least this time around.  In Virginia, Chantilly has made the largest gains.

The good news, at least from a culinary point of view, is that the gentrification of northern Virginia — northern and central Arlington excepted — is proceeding at a much slower rate than people might have expected say ten years ago.

Friday assorted links

by on April 22, 2016 at 11:20 am in Uncategorized | Permalink

Prince, R.I.P.

by on April 21, 2016 at 8:17 pm in Music, Uncategorized | Permalink

As all or most of you know by now, Prince has passed away.  I don’t listen to him nearly as much as I did in the eighties, but songs such as “When Doves Cry,” “Dirty Mind,” “Glam Slam,” “Starfish and Coffee,” and (most of all) the acoustic, CD-single version of “Seven” still stick in my mind, among others.  I think his “dirty little secret,” if you will forgive the pun, is that once you get past the first album he wasn’t much of a true Dionysian, but rather a playful polyglot who assumed various poses.  Most of all I was impressed by his urge to create, and how strong and how internal that drive seems to have been.

Thursday assorted links

by on April 21, 2016 at 1:45 pm in Uncategorized | Permalink

united-charities-building-287-park-avenue-south-777x959The NYTimes ran a full page ad yesterday congratulating NY real estate broker Mark Weiss for winning the Real Estate Board of New York’s Most Ingenious Deal of the Year Award. I was curious, so I did some research and found some information about one of Weiss’s most succesful deals.

A Chinese developer bought 287 Park Avenue South, a nine-story building built in 1893, in order to convert it to a mix of condos and retail. But a problem arose:

The 1893 landmarked building straddled two zoning districts, which left one half of the property overbuilt….trying to expand the building at 287 Park Avenue South would be like struggling in quicksand: additional FAR purchased would essentially be sucked up bringing the overbuilt part of the property into compliance.

That’s what prompted listing broker Geoffrey Newman and his Newmark Grubb Knight Frank colleague Mark Weiss to MacGyver a solution that earned the brokers a nomination for the Real Estate Board of New York’s “Ingenious Deal” award.

Here’s what they did:

By removing several floors from the interior part of the building that was overdeveloped, Newman realized, a buyer could bring the entire building into compliance, freeing the way to add bonus square footage from inclusionary housing certificates the NGKF team identified in the area.

“The idea was, that by removing 4,000 square feet we were able to add 27,000 square feet onto the building,” he told The Real Deal. “That was really the basis of what differentiated our approach to other ways of selling the building.”

The idea was indeed ingenious but you will also note that all of the ingenuity was devoted to evade the zoning and the price of evasion was high. In order to work around the zoning law, 4,000 square feet of very valuable New York real estate had to be destroyed. (Not to mention all the hours of ingenuity and legal effort that was used up devising and implementing the deal).

When thinking about why it’s so expensive to build in many American cities just remember that the deal of the year is when you build 31,000 square feet of space and only have to destroy 4,000 square feet of space to do it.

Wednesday assorted links

by on April 20, 2016 at 11:24 am in Uncategorized | Permalink

Last week, the U.S. Department of Agriculture (USDA) confirmed that it will not regulate the cultivation and sale of a white-button mushroom created using CRISPR

In this case, no foreign organism’s genetic material was introduced into the food, and that makes all the difference. If Yang had tackled mushroom browning by adding bits of genetic code from another organism, it would have been subject to USDA scrutiny as other non-browning produce has been. Until recently, genetic modification required the insertion of foreign viruses or bacteria, but CRISPR is more advanced than that. Because of that loophole, it’s not under the USDA’s jurisdiction. The EPA only regulates GMOs designed for pest control, and the FDA considers all GMOs to be safe. That leaves this non-browning mushroom cleared for take-off.

Scientists are excited. Anti-GMO advocates are disturbed. The public will probably continue to be more confused than anything else.

Here is the Rachel Feltman piece.  For the pointer I thank Cleveland Cavaliers fan Philip Wallach.

Tuesday assorted links

by on April 19, 2016 at 12:38 pm in Uncategorized | Permalink

I put some of my worries about market urbanism being overrated by its proponents in an earlier post, and I thought I would clarify a bit.  I fully agree that we should deregulate building in major cities such as San Francisco, and just as importantly (or more so) stop rising cities such as Atlanta or Houston from going down that same route.  That said, I’m still not happy with how market urbanists handle the distributional implications of their proposals.  Let’s try putting the argument in terms of tax incidence.

If urban land currently reaps monopoly rents, a new tax on building largely will fall on the value of land.  Both Ricardo and Henry George understood that.

Similarly — and here is the important point — the gains from removing taxes/restrictions on building largely will be captured by landowners for exactly the same reason.  More stuff will be built, urban output will expand, land still will be the scarce factor, and by the end of the process rents still will be high.

In other words, if we deregulate building, landowners will capture a big chunk of the benefits.  I’m fine with that, it is a Pareto improvement and I am not a capuchin monkey.  But as I read market urbanists, many are more prone to talk about making various major cities affordable again as part of a broader reformicon program.  I’m not convinced that will happen, or if so the case has not yet been made.

Just think of urban space as “a license to produce in a high MP of labor area.”  As long as the city is not hitting diminishing returns, issuing more licenses probably will not lower their marginal value and thus will not lower rents.

Maybe — maybe, maybe, maybe — if you remove so many building restrictions, land won’t be the scarce factor any more and the gains from the tax reduction will be distributed in many directions.  Alternatively, you may have a less simple model of tax incidence than the “first order effect” I laid out above (try this pdf too).  Great, let’s try to figure that out, but then building restrictions may not much raise rents!…let’s be consistent.

In any case, I think the above is the basic dilemma facing market urbanists.  It can do much to enhance efficiency and productivity, with attendant trickle-down benefits, yet without much solving the distributional problem in any direct way, as it is sometimes advertised as doing.

landowners

By the way, have I mentioned that I love landowners?  My school, George Mason University, is a significant landowner.  So were the people who built up the northern Virginia area, such as Til Hazel.  Great stuff, great efforts, great people.  Landowners, love ’em or leave ’em.

p.s. I also love trickle-down benefits.  Most benefits are trickle-down benefits.

Monday assorted links

by on April 18, 2016 at 11:30 am in Uncategorized | Permalink

My favorite (readily available) American chocolate bar is the dark Chocolove XoXoX, but recently they changed it.  The packaging went from very dark to to gold, and the flavor is now a little sweeter and less nutty.  The cocoa content is higher, but somehow it doesn’t quite shine through as strongly.  It still might be the best on the American market, but now I wonder, because it is modestly worse than before.

I no longer find the old bars in supermarkets, and an Amazon order of the old bars brought a shipment of the new bars instead.  But when I go to bookstores which sell chocolate, their supply turns over not so quickly, and so some of them still carry versions of the old bar.  For now.

I have five copies of the old bar left in the cupboard, and no guarantee for when I might replace them.

Chocolove Xoxox Premium Chocolate Bar - Dark Chocolate - Strong - 3.2 oz Bars - Case of 12 - Kosher - 70% Cocoa

My intuition is to eat them next in sequence, rather than postpone the exhaustion of their supply.  Eventually I will engage in an optimal forgetting of their very fine taste, and it is best that happens sooner rather than later.  To cite George Constantinides, that would be an optimal smoothing of habit-forming consumption.

An alternative philosophy is to consume them later in life, as late as spoilage costs will allow, so as to spread out aesthetic peaks over time.

Yet another alternative is give them away to latter-day customers who only have known the slightly inferior bar, and thus wreck their lives for sport.