Freedom, Justice, and Economics

Renters would seem to be a natural constituency of the Labour Party in the UK. Why doesn’t Labour relax rules that limit construction, rules that primarily benefit owners? More or less, I conjecture the answer is that a huge share of rental housing is government-owned “social housing.” Despite substantial recent privatization of social housing, 18% percent of the UK population continues to live in these units, while only 12% of the population lives in private rental housing. I tend to support policies that promote universal access to affordable housing, but supporting growth of the private rental sector should be part of this strategy.  Right now Labour captures renters’ votes by bolstering social housing instead.

Kiva.org is a fascinating organization:  it allows individual members of the public to provide credit to microenterprises of their choice around the world.  (Disclosure:  My wife and I received a gift of a $200 Kiva credit, which we lent out.)  The candidate microenterprises are listed by local microfinance institutions (MFI’s) that are Kiva partners.  The local MFI’s actually receive the funds, disburse the loan, and collect repayments.  Kiva loans earn no interest for the lender but do entail risk:  the individuals who chose to lend to a given microentrepreneur don’t receive their money back if that microentrepreneur defaults.

Kiva has many characteristics of a charity.  Resources are transferred to needy individuals in developing countries.  Lenders are motivated by the prospect of using their resources to do good.  Lenders accept the possibility of defaults, and accept that they will earn no interest on their loans.

In addition, Kiva has characteristics of a financial intermediary, like a bank.  Most banks, however, pool the deposits they receive and then make loans out of that common pool of funds.  In fact, this is what is typically meant by the term “financial intermediation”:  by undertaking this pooling, an institution mediates between borrowers and lenders, and shares default risks among all of the people who lend to it.

Standard economic models would imply that Kiva is inefficient:  lenders via Kiva could, it seems, have their risks pooled.  Since Kiva does not do this, the lenders must be compensated for the risk they continue to bear, driving down the amount they’re willing to lend and driving up the interest rate they require as compensation.

Despite these indications of inefficiency, I see two reasons the current arrangement might not be completely baffling.  First, when I was in Gujarat in April, I met a Kiva representative who said that Indian financial sector regulations– which substantially circumscribe opportunities for foreign entities to operate in India– effectively kept Kiva out, too.  I suspect that a variety of other regulations also act as constraints.  Presumably under the current structure Kiva is not considered a US depository institution, for example, avoiding tomes of requirements.

Second, it could be the case that individual lenders enjoy the connection to individual borrowers; and/or that individual borrowers are more intrinsically motivated to work hard at their enterprises, in order to repay, when they know individual lenders have placed faith in them. This reason would be more fundamental to the Kiva approach; to the extent financial sector rules liberalize (or, perhaps, differ across country borders) and allow intermediated microlending from Western creditors to LDC borrowers, we may learn whether the intrinsic aspects are operative.

All in all, I’m not concerned about Kiva’s strategy:  It’s much more important to give LDC borrowers access to world capital markets in any form than it is to protect developed-country lenders from risk.  That said, it would make more sense if mainstream Western financial institutions could provide debt or equity to Kiva, diversifying lenders’ portfolios.

All trip long, the famous Swiss meticulousness did not disappoint.

• Most chalets were of the traditional style, with shutters, overhanging roofs, and a prominent gable or two; flower gardens exploded autumn’s pretense with color.
• I could set my watch by the trains, the buses, and the local shops’ opening hours.
• By homes, small cow sheds, and stopping points along major trails, wood was invariably stacked, cross-hatched, covered with corrugated iron, awaiting its chance to warm a hearth.
• Bergweg signposts, white-red-white, stood proudly along mountain trails, ready to remain visible in feet of snow to come.
• As the train from Gstaad descends into Zweisimmen, it makes a hairpin turn in a tunnel.  My wife thinks the engineers were drinking one day and challenged each other to pull off the u-ee.  If so, such gambling is common:  from Gstaad to Montreux we were treated to additional 180’s on buried tracks.

All this impressiveness noted, toward the end of our hike from Lenk to Lauenen, we passed a small old man in a stocking cap fighting to saw a 2×4 by hand.  The place was no idyll for the poor, and a century had somehow passed him by.

What we didn’t do in Gstaad:

• Attend country music night– the 19th annual

What we did do:

• Croqueted all over the lawn;
• Emptied the vinegar cellar;
• Loyally patronized the celebrated local bakery and milkery;
• Summitted the Wispile, when Oldenhorn et al wore fresh, early season snow;
• Racing forth, rather than the new town slogan (“Come up — slow down”), favored the old: “Gstaad, my love.”

In writing about Thornton Wilder’s Bridge of San Luis Rey, I can do no better than to try to emulate its directness. The book begins by describing the plunge of five people to their deaths when the renowned bridge of the book’s title collapses. The individuals’ lives are shaped by asymmetric, non-romantic love, powerful enough to confuse speech and thought. The Marquesa de Montemayor obsesses about her daughter, Dona Clara, sending monthly letters to her in Spain. Esteban becomes adrift when his twin brother Manuel dies of an infected wound. Uncle Pio’s genuine, fatherly generosity toward the Perichole eventually earns a share of her general mistrust.

The collapse of the bridge is a pure tragedy, as Brother Juniper concludes in a frame, because the Marquesa, Esteban, and Uncle Pio undertake freeing self-transformations immediately before. (The Marquesa’s servant Pepita and the Perichole’s son Jaime, the other two casualties, also face new hope.) Their deaths–and Brother Juniper’s at the stake–take on meaning in the realizations of those, still living, who they had loved.

Kingsley Amis’s Roger Micheldene is a poor English cousin to Ignatius Reilly. Though both are supremely bloated on themselves, Roger is more self-aware (perhaps, older, owing to more time away from overprotective maternal influence), and unapologetically lacking in the consolation of philosophy. Some might appreciate One Fat Englishman for its charms, but for humor I’d say skip it in favor of rereads of Wodehouse, and for singular, hysterical experience John Kennedy Toole’s Confederacy of Dunces is supreme.

Nestled among Alpine foothills, the village of Gstaad has gorgeous, classically Swiss views. From our (southern) side of the village, the Eggli rises in the right foreground and the Wispile in the left, and our view extends along the valley toward Gsteig. On a slightly clearer day, the Oldenhorn would be visible beyond, perhaps along with Les Diablerets. Sturdy old wooden chalets, with meticulous ornamentation and red tile roofs, dot the verdant hills, with bright shutters and overflowing flowerboxes glossing their upper stories.

The Promenade of the village, just the other side of the River Saane, is far too posh to be kitschy. To the life-size, bronze and steel animal sculptures that are ubiquitous here, I far prefer the real things, which played me a cowbell symphony on my run this morning. Tasty fresh vegetables are hard to come by– presumably because everyone here is wise enough to save their stomachs for local bread and cheese.  (Every town justly takes pride in its own smelly mountains.)

On an equally happy side note, our entry point to the region yesterday was Spiez, from where we saw dozens of sailboats rightly gliding in the unseasonably warm, Indian summer afternoon, outward into the blue.

“I’ll tell you now, quiet. In a bitter night, a mustard night that was last night, a good thought came and the dark was sweetened when the day sat down. And this thought went from evening star to the late dipper on the edge of the first light–that our betters spoke of. So I invite myself.” –Samuel Hamilton

I support the fundamental principle of “one person, one vote,” and I interpret the common voting age of 18 in most democracies as contravention of this principle. To sustain the principle, the voting age must be zero: newborn babies (assuming they have citizenship) ought to emerge into the cares and wonders of the world with the right to a vote.

This proposal is far more radical than some recent discussion about incrementally reducing the voting age. It deliberately ignores questions of “competence” and “maturity” that are sometimes bandied when mulling criteria for franchisement.

Of course, we can’t have two-year olds bounding into voting booths alone and scribbling all over their ballots, just saying “no” to all the candidates. Rather, to make this work, the trick would be to assume that kids’ guardians will share in the exercise of this right to a vote initially; and to devise rules governing when and how kids could exercise it with additional levels of autonomy.

To my mind, having parents exercise the right on their kids’ behalf would be just fine: who better to look after the kids’ interests? Why shouldn’t those interests be looked after at the ballot box?

The rules would explain what assistance could be offered, how, and when, with the intent of preventing uncertainty or open conflict between child and guardian about whether to vote and who to vote for.

Note that many practical rules already exist regarding voting assistance for the elderly and disabled. I would favor modifying those rules, too, to ensure that their right to a vote is never rescinded, but see them as a possible source.

I’ve obviously set aside, for the purposes of this discussion, the question of whether people should bother to vote at all.

Roy Baumeister’s talk at the American Psychological Association’s annual meeting provocatively argues the following. Historically, cultures that have matched men’s higher variance in reproductive outcomes with higher-variance occupations for men have been more likely to succeed.

The article is loosely argued, poorly referenced,… and probably, in its central claims, with more than a grain of truth. It certainly has no shortage of interesting fact and anecdote. Three observations:

1. Heterogeneity among men and among women may be at least as large as the differences between the genders. To the extent that’s true, it remains a puzzle why cultures would have so sharply delineated gender roles.
2. One clear implication of Baumeister’s theory is that strong cultural advocacy of lifelong monogamy– which promotes gender equality in reproductive outcomes– ought to be paired with cultural advocacy of occupational equality.
3. Things have changed. In the last century or so, particularly in the West, women have had historic achievements in every sphere. Baumeister doesn’t attempt to explain why.