solve for equilibrium

Let them sell the Norman Rockwells

The Berkshire Museum, yes.  They were going to sell 40 paintings at Sotheby’s, including two very special Norman Rockwells, but at the last minute a court decision halted the sale, claiming (with only thin justification) that the sale would violate the museum’s trusts.  That is the setting of my latest Bloomberg column, here is one bit:

The sad truth is that the people running the Berkshire Museum just don’t care that much about American art any more, at least not from an institutional point of view. Given that reality, it’s actually better if they are not entrusted with important artworks.

The court’s decision now means it will be hard to pull off the sale with fully clear rights to the titles, although the court’s judgment will be re-examined in December. Both the uncertainty and the surrounding negative publicity will scare off buyers and may spoil the market for a long time to come.

There is much more at the link.  The argument against selling, of course, is that in a world of frequent sales all museums will find it hard to make credibly binding commitments to their donors, who often do not want their donated works recycled in the marketplace.  But the equilibrium of zero selling is one that will destroy a great deal of value in the art world.  Note that this problem will become increasingly relevant as the clock ticks and the number and inappropriateness of past museum commitments piles up.  If nothing else, sooner or later insolvency sets in.  Rust never sleeps.  And so on.

Should churches really own all that land in the downturns of major American cities?

Could the Republican tax plan lead to bipartisan results?

That is the topic of my latest Bloomberg column, here is one bit:

If the bill succeeds in limiting these deductions, a logic is set in motion for future tax reforms. Let’s say the Republicans eliminate tax deductions for new mortgages above $500,000. That would become a sign that the homeowner and real-estate lobbies are not as strong as we might have thought. The next time tax reform comes around, legislators will consider lowering the value of the deduction further yet. After all, the anti-deduction forces won before and, in the new battle, those who expect to have future mortgages above $500,000 don’t have a stake anymore.

In other words, any squeezed deduction will remain a vulnerable target for more squeezing, or even elimination, over successive reforms.

And then:

The exact treatment in the House plan seems to be in flux, but the top rates from President Barack Obama’s tax reform are likely to stick in some manner. There even seems to be a rateof 45.6 percent on some earners, in the range of $1.2 million to $1.6 million a year. That is a far cry from Jeb Bush’s call in the Republican presidential primaries for a 28 percent top marginal rate, in the tradition of President Ronald Reagan. Some well-off Californians could possibly face a total marginal rate, all taxes considered, of over 62 percent.

You will recall that the Republican Party had in the past pressed strongly for reductions in the capital-gains rates, but that isn’t on the agenda now. Take that as a sign that Obama’s boost to those rates will stick.

If you solve for the equilibrium over time, maybe maybe you will get:

If we look at the Republican plan as a whole, it appears to be a recipe for a future tax code with many fewer deductions, lower corporate rates, higher income tax rates for the wealthy and a continuing inheritance tax. I’m not saying that the exact mix will or should make everyone perfectly happy, but is this not what a bipartisan tax reform compromise might look like?

My fear, of course, is that those deductions will not survive the next stage of the process.  Stay tuned…

Does the President have authority to grant clemency for a state conviction?

Here is the government’s own answer:

No.  The President’s clemency power is conferred by Article II, Section 2, Clause 1 of the Constitution of the United States, which provides:  “The President . . . shall have Power to grant Reprieves and Pardons for Offenses against the United States, except in Cases of Impeachment.”  Thus, the President’s authority to grant clemency is limited to federal offenses and offenses prosecuted by the United States Attorney for the District of Columbia in the name of the United States in the D.C. Superior Court.  An offense that violates a state law is not an offense against the United States.  A person who wishes to seek a pardon or a commutation of sentence for a state offense should contact the authorities of the state in which the conviction occurred.  Such state authorities are typically the Governor or a state board of pardons and/or paroles, if the state government has created such a board.

Solve for the equilibrium!

I thank J. for a relevant pointer.

The fiscal future of the West, the culture that is inheritance

Heaven forbid that people of means should pay for their own health care, what a sensible idea this was:

Last week, she [Theresa May] came up with a flawed but constructive answer to the crisis of funding in social care. The elderly would finance their care out of their own estate upon death. The upper limit on their contribution would go but they could keep £100,000 for their children. In the mixed metaphors that proliferate in politics, a floor would replace a cap.

The idea turned old age into a high-stakes game of chance — die suddenly and your estate would go untouched, contract dementia and it would shrivel over time — but it confronted voters with the principle that things must be paid for and challenged the Conservative cult of inheritance. Mrs May made it central to her election manifesto. Her self-image as a firm leader hinged on her fidelity to this brave, contentious idea.

A few days of popular disquiet and the cap is back.

That is from Janan Ganesh at the FT.  Solve for the fiscal equilibrium!

What if they can clone your voice?

It’s a Canadian company that specializes in speech synthesis software. They’ve developed software they claim can copy anyone’s voice and make it say anything.

The founders tell me if they can get a high-quality recording of you speaking for just one minute, their software can replicate your voice with very high accuracy.

If they get a recording of you speaking for five minutes, they say it would be difficult to tell the difference between your voice and their computer-generated mimic. That’s where the name Lyrebird comes from: a lyrebird is an Australian bird that’s noted for its mimicry.

Here is the story, as they say solve for the equilibrium…

Confidential business conversations over the telephone might dwindle, and perhaps we will have Peter Cushing and Humphrey Bogart movies for a long time to come.  What else?

For the pointer I thank Michelle Dawson.

The State Department plays “Telefon”

Senior state department officials who would normally be called to the White House for their views on key policy issues, are not being asked their opinion. They have resorted to asking foreign diplomats, who now have better access to President Trump’s immediate circle of advisers, what new decisions are imminent.

…“My nagging suspicion is that the White House is very happy to have a vacuum in the under-secretary and assistant secretary levels, not only at state but across government agencies, because it relieves them of even feeling an obligation to consult with experts before they take a new direction.”

Here is the article, solve for the equilibrium…

Why is there dynamic surge pricing *for rides*?

“Surge Pricing Solves the Wild Goose Chase” is the title of the new paper by Juan Camillo Castillo and E. Glen Weyl, here is the abstract:

Why is dynamic pricing more prevalent in ride-hailing apps than movies and restaurants? Arnott (1996) observed that an over-burdened taxi dispatch system may be forced to send cars on a wild goose chase to pick up distant customers when few taxis are free. These chases occupy taxis and reduce earnings, effectively removing cars from the road and exacerbating the problem. While Arnott dismissed this outcome as a Pareto-dominated equilibrium, we show that when prices are too low relative to demand it is the unique equilibrium of a system that uses a first-dispatch protocol (as many ride-hailing services have committed to). This effect dominates more traditional price theoretic considerations and implies that welfare and profits fall dramatically as price falls below a certain threshold and then decline only gradually move in price above this point. A platform forced to charge uniform prices over time will therefore have to set very high prices to avoid catastrophic chases. Dynamic “surge pricing” can avoid these high prices while maintaining system functioning when demand is high. We show that pooling can complicate and exacerbate these problems.

Perhaps it is an analogy to suggest movie theaters might use more surge pricing if a low valuation buyer took up the seat for several showings of the movie rather than just one.

Bot wars

In particular, Yasseri and co focus on whether bots disagree with one another. One way to measure this on Wikipedia is by reverts—edits that change an article back to the way it was before a previous change.

Over a 10-year period, humans reverted each other about three times on average. But bots were much more active. “Over the 10-year period, bots on English Wikipedia reverted another bot on average 105 times,” say Yasseri and co.

And this:

Bots and humans differ significantly in their revert habits. The most likely time for a human to make a revert is either within two minutes after a change has been made, after 24 hours, or after a year. That’s clearly related to the rhythms of human lifestyles.

Robots, of course, do not follow these rhythms: rather, they have a characteristic average response time of one month.  “This difference is likely because, first, bots systematically crawl articles and, second, bots are restricted as to how often they can make edits,” say Yasseri and co.

Nevertheless, bots can end up in significant disputes with each other, and behave just as unpredictably and inefficiently as humans.

Many of the bots seem to be designed to make varyin- language versions of the same Wikipedia pages consistent with each other, yet the bots do not always agree.  Solve for the equilibrium, as they say…

Here is the article, via Michelle Dawson.

Faroe islands fact of the day

A lot of the women go away to study and don’t come back:

There are already 2,000 more men than women on the Faroes – which has a total population of just under 50,000 – and some of those men have taken matters into their own hands by importing wives and companions from the Philippines and Thailand.

Filipinos and Thais make up two of the largest groups of foreigners on the Faroe Islands . There are now 200 Thais and Filipinos – mostly women – spread out over the islands.

In the tiny hamlet of Klaksvík located in the northern part of the islands, there are already 15 women from Asia.

Bjarni Ziska Dahl, who married his Filipino wife in 2010, said that the foreign women could well be the answer to the issues facing the Faros.

“We must recognise that there is a problem, and welcome these strangers with dignity,” Dahl told DR Nyheder. “We need these people.”

Both Dahl and his wife Che said that they have a lot in common: island life, a dedication to family and a longing for simplicity. Dahl said that Asian woman are often willing to take jobs that Faroese women will not do.

Here is the full report, one Faorese woman does not like having to say hello to everyone she meets in the street there.  And this is not just a news story, the married and younger Asian women were one of the first things I noticed getting on the plane to Faroe.  (They looked not unhappy by the way.  The other thing I noticed right away was how many disparate groups on the flight seemed to know each other.  And that you have to be careful not to assume that people who look somewhat alike are brothers, or sisters, or parents and children.)

You might consider this a metaphor for some broader social trends around the world, albeit in this case unusually concentrated along the dimensions of geography and nation/territory.  Some women just don’t want to hang out with the guys — even the best guys — who are selling to a market of 50,000 people.  Other women are happy to move into that situation.  Solve for the equilibrium.

Is there negative rent in Puerto Rico?

Welcome to public housing in Puerto Rico, a realm of high intentions and low outcomes. The island has America’s second-largest public housing system, after New York’s. Roughly 125,000 people inhabit 54,000 apartments, paying rent according to a federal formula: Rent, plus utilities, must be no more than 30 percent of a household’s adjusted income.

Paychecks here are small, and the tenants’ rents are never enough to cover the system’s costs. So Washington subsidizes the rest, currently to the tune of $254 million a year.

It isn’t the housing that’s making Ms. Ramos want to leave. It’s the crime and a culture of cheating.

“Negative rent!” she exclaims. “It doesn’t exist in other parts of the world, but in Puerto Rico, sí!”

Public housing experts say “negative rent” is theoretically possible; Ms. Ramos says she sees it all around her. She pays to live in the projects, but other people have found ways to be paid.

That is from Mary Williams Walsh at the NYT.  And here is some more detail on negative rent:

Federal Housing and Urban Development records say that 36 percent of the families in Puerto Rico’s housing projects have incomes of zero. By law, tenants with no income must pay $25 a month. This turns into “negative rent” when their electric bills are factored in.

That’s because Washington gives public housing tenants a “utility allowance,” which is normally deducted from their rent. But if someone is paying just $25 a month, for example, and gets a utility allowance of $65 a month, they’ll end up with a “negative rent” of $40. It’s paid in cash.

Some people pocket the money and stiff the Electric Power Authority, a government monopoly with a bad track record for bill collections. The Power Authority is responsible for $9 billion of the government’s $72 billion debt. It could use the money.

Ms. Ramos suspects that if rates go up, Washington will send bigger utility allowances — and people living on “negative rent” will get more money.

Solve for the equilibrium, as they say…

That was then, this is now

From 2012:

The Republican Party will continue to lose presidential elections if it comes across as mean-spirited and unwelcoming toward people of color, Donald Trump tells Newsmax.

Whether intended or not, comments and policies of Mitt Romney and other Republican candidates during this election were seen by Hispanics and Asians as hostile to them, Trump says.

“Republicans didn’t have anything going for them with respect to Latinos and with respect to Asians,” the billionaire developer says.

“The Democrats didn’t have a policy for dealing with illegal immigrants, but what they did have going for them is they weren’t mean-spirited about it,” Trump says. “They didn’t know what the policy was, but what they were is they were kind.”

Romney’s solution of “self deportation” for illegal aliens made no sense and suggested that Republicans do not care about Hispanics in general, Trump says.

“He had a crazy policy of self deportation which was maniacal,” Trump says. “It sounded as bad as it was, and he lost all of the Latino vote,” Trump notes. “He lost the Asian vote. He lost everybody who is inspired to come into this country.”

The GOP has to develop a comprehensive policy “to take care of this incredible problem that we have with respect to immigration, with respect to people wanting to be wonderful productive citizens of this country,” Trump says.

Here is the link, via Rebecca Berg and Robin Grier.  Does this get filed under “Model this” or “Solve for the Equilibrium”?  Or perhaps both?

Cherokee Gothic channels Tyrone on Brexit

Discombobulated by my anti-Brexit post, apparently Kevin has been receiving secret messages for some time now, he writes:

People, I just received the following Linkedin message from Tyrone which I reproduce here verbatim (apparently Tyler’s been really cracking down on poor Tyrone):

It’s a good thing Tyler wasn’t an influential blogger back in the 1770s. We’d all still be British subjects.

In 2016 he’s blogging Brexit and unsurprisingly, he’s again come out against change.

The end result he concedes would be good but the path rocky and “the path is everything”.

This from a man who believes the social rate of discount should be zero!

(and, just to hammer on this, if the discount rate is zero, the path is the opposite of everything)

Tyler’s against Scottish Independence, Catalan Independence, Brexit. I somehow feel like he’s even against Grexit (the path! the path!).

Apparently, change is bad.

People, I’m here to tell you Brexit is a no-brainer. The EU is a utility killing machine exponentially ratcheting up dumb regulations while ignoring or actively worsening the real problems that the group suffers. When I solve for the equilibrium I see a place where everything is either mandatory or banned.

Consider refugees as an example of idiotic EU policy.  Now that Kenya and Niger have seen that the EU is paying for poor countries to house refugees, they have quite rationally closed their existing camps and put out a call for bids. Niger has opened by asking for a cool billion or so to keep refugees off Europe’s beaches.

The UK’s per capita income is currently about 2/3 that of the US. They and most EU countries have been falling further and further behind the wealth frontier in the last decades.  The EU hasn’t exactly been a huge success story for them. In the long run, they will do much better on their own (better policies, closer relation to their former settler colonies, less regulatory crushing) and since the social discount rate really should be zero, the path, while perhaps rocky, is temporary while the new equilibrium is rosy and permanent.

Tyrone out.

This is Tyler again…Tyrone sent me his own message on LinkedIn, and he reminded me of this old Tyler  post from 2006, “Would I have supported the American Revolution?“:

These modal questions are tricky.  Which “Tyler” is doing the choosing?  (If I were an elephant, would pink be my favorite color?  Living in 1773, have I at least still read Jonathan Swift?  Would a modern teenage Thomas Jefferson have a crush on Veronica Mars?)

But think about it, wasn’t it more than a wee bit whacky?  “Let’s cut free of the British Empire, the most successful society the world had seen to date, and go it alone against the French, the Spanish, and the Indians.” [TC: they all seemed more formidable at the time than subsequently]

Taxes weren’t that high, especially by modern standards.  The British got rid of slavery before we did.  Might I have concluded the revolution was a bunch of rent-seekers trying to capture the governmental surplus for themselves?

Tyrone, of course, wishes we had sold off the entire North American British empire to the Spanish crown

Kenya fact of the day

There are about 300,000 Quakers in the world, and over one-third of them live in Kenya…

While you’re at it, solve for the equilibrium:

While the amount of constituents there is growing by the day, numbers in the West (the United Kingdom and United States, in particular) have nosedived in recent years, some 25 percent from 1972 to 2002, according to the Friends World Committee for Consultation.

More broadly:

The Pew Research Center estimates that there will be two and a half times more Christians in Africa than Europe by 2050. Currently, the numbers are about equal.

Here is the article, via Rachel Strohm.