What’s Wrong with the World

"Americans have come to possess a dessicated and abstract conception of property, according to which property is no longer understood, or at best decreasingly understood, to be associated with place and its ties, or with productivity, or the stability of a family, but as a speculative instrument in which one happens to dwell."

Indeed. One of the 12 Southerners said in 'I'll Take My Stand' something to the effect that one of the great victories of American corporate capitalism (industrialism, he probably would have called it) was the convincing of the average person that stock investments and real property (i.e., land) were "property" in the same sense. While this obviously increased the attractiveness of stocks (much to the corporations' delight), it simultaneously began the erosion of the idea that "property" fundamentally means land and thus place.

"the destructive mentality that has taken root in the American consciousness, according to which the value of any thing is merely is value expressed as a quantity of money."

Yes, and of course we must note its equally destructive corollary: if a thing cannot be valued monetarily, it therefore has a lesser worth than the thing that can, perhaps even no real worth at all.

The combination of these ideas has resulted in our Walmartized and McDonaldized culture: a culture in which practically everything has been commodified.

Wow Maximos. That is worthy of a curtain-call, tip your hat to the crowd and take a bow. Wow.

Little surprise that aficionados for the Chester-Belloc Mandate would render remarkable applause; yet, where happens their final member, thebyronicman?

What is great about this post, to me, is how well Jeff has assimilated the actual concrete data from the finance crisis. The evidence of a coming unraveling of commercial real estate is very hard to deny; the evidence that overbuilding facilitated by a credit bubble is at the root of this unraveling is also quite strong on my reading.

So at the very least, Jeff has brought current data to bear on the Chesterbelloc Mandate. More likely he has done more; he has brilliantly summarized the situation in terms of empirical facts about the political economy.

When the Elite Man examined the life of the Common Man, he found much to despise. For the Common Man purchased cheap food rather than expensive food, cheap toiletries rather than expensive toiletries, cheap clothes rather than expensive clothes. The Common Man frequented cheap restaurants that produced good-tasting food rather than expensive restaurants that appealed to a refined taste. And, worst of all, the Common Man purchased cheap plastic toys for his children’s amusement and cheap Flat-Screen televisions for his own.

As he considered these things, the Elite Man concluded that the Common Man was not acting rationally or reasonably. Now, the Elite Man was rational and reasonable and he would not make these choices. Therefore, the Common Man must be influenced by evil, malign entities. The Elite Man identified these entities and named them. Globalism, Corporatism, WalMartization, and McDonaldization he called them. (He believed influences of such malignity deserved polysyllabic names, preferably four or more syllables.)

As the Elite Man came to these conclusions, he became aware of a travesty perpetrated by the Common Man. To sate his lust for cheap plastic toys and cheap Flat-Screen televisions, the Common Man was planning to erect a new marketplace within sight of a Sacred Battleground. That from the edge of the Sacred Battleground one might catch a glimpse of the crass commercial marketplace was an affront to the Elite Man’s aesthetic sensibilities that could not be borne.

An Ignorant Man suggested that the Elite Man might himself purchase the property on which the new marketplace was to be built and thus preserve the Shades who wander the Sacred Battleground from the indignity of catching a glimpse of the marketplace. But the Elite Man disparaged this suggestion. For was it not the chief task of the Government to Promote the General Welfare? And so the Elite Man decided the Government would prevent the building of this marketplace! For what better use of the Common Man’s taxes could there be than preventing him from erecting a marketplace so close to a Sacred Battlefield?

Satire so juicy, only "Trinian" could write!

I will merely say here, before I bow out:

You can cast it in terms of "the mandate for people to get richer and richer" as much as you like. You can despise it as much as you like. But the market value that a piece of property has is relevant to the investment that _real people_ have made in that property. You may despise those real people, especially if they have _anything_ to do with the businesses you despise, or if they _intend_ to have anything to do with such businesses (by selling their property to them). But they are real people nonetheless. They may be townspeople, who own the property through their representative. They may, horror of horrors, be the multiple owners of a corporation. Or they may be individuals. But they are real, nonetheless. Market value is, indeed, set on the basis of what one, hypothetically, could get if one sold the property. This is as true for my private home, which I have no intention of selling, as it is for a piece of land that someone has bought for the (apparently to Maximos and others) _ignoble_ purpose of re-selling it later at a profit. (Though why this should be ignoble is a mystery to me.) Things can thus affect the market value of my home from year to year even though I don't intend to sell. And new decisions and new prohibitions about land use can affect the market value of the properties y'all wish to preserve untouched by businesses you dislike--without, however, taking the trouble to buy them. The term "speculative" implies that we have no idea and no way of figuring out what such a market value might be, that it is a mere exaggeration or made-up thing and therefore can be ignored. Actually, land assessors exist for the purpose of making such estimations all the time. They are not so abstract and unimportant as all that, and, I emphasize again, a draconian decision radically to change and limit land-use possibilities affects them and thereby affects the investments and lives of _real people_. I realize that y'all believe that these other values--the ugliness of Wal-Mart and Barnes & Noble, for example--outweigh all such considerations. On that we will apparently never agree. But I think it is reckless and unconservative in an important sense and in a high degree simply to dismiss such concerns as mere matters of greed or of helping people to "get as rich as possible."

Notice, again, that I have not yet even brought up the possibility that development might, contrary to what y'all think, really be valuable to the community. I realize you have arguments to the contrary. Make them to the community. I remain unconvinced of their more radical versions, certainly--for example, that it is in the best interests of the town to keep things beautiful and pristine looking by avoiding altogether the horror of strip malls. But there, too, there are real people who have real needs, and I get the strong impression that what is driving this is not merely or chiefly the rather interesting argument Mike T made in the other thread to the effect that Wal-Mart represents in the long run either neutrality or a net financial loss to the community. No, the idea is supposed to be that _even if_ this were not true, the community should not be "greedy" and should accept fewer jobs, longer drives to buy what is needed--yes, clothes and other things that are _needed_ and not to be sneered at--in the name of not having something so _ugly_ around. That, I certainly do not accept.

Now I have had done. I must say that I, too, rather appreciate "Trinian's" satire.

There is much to agree with here. Such as this, which really should have been a capitalized heading, instead of smothered in the midst of other stuff:

and an economy a mere 25% of which is actually productive.

and this

We spent too much money that we didn't really have on too many things we didn't really need, purchased from too many stores that didn't need to exist - because we had evolved a variety of mechanisms to compensate for the structural adjustments of a post-industrial, globalizing economy.

But Maximos needs to separate out the failings of our version of suburbia from the failings of mankind as such and from the failings that follow ANY kind of success in prosperity - whether distinctly suburban or not, whether based on usury and ponzi schemes or simple hard work. Suburbia was not invented with, or even as the immediate predecessor to, the financial boondogle of the last economic period. It started earlier, with the railroads outside of London, in the mid 1800's, for example. Though even the Romans actually experienced a little of suburban sprawl. You can't say that suburbia as such is based on any sort of peculiarly American "throw-away" mentality. It is rooted at least as much in the urban population recognizing some of the goods of rural living, and choosing to obtain a share of those goods that they can obtain within their constraints. Are you saying that urban people have no right to want to have a yard for their kids to play in? This desire, and the suburban method of satisfying it, is notionally separate from any ills that accrue on account of our distinctly American and post-modern sorts of evils.

The question of development is, in the long-run, a vast, intergenerational collective action problem, in which what is rational for any individual actor - say, selling his property to a developer, realizing a speculative gain

Maximos, let's not talk about an admittedly speculative future of a piece of land possibly being used for future commerce, but instead talk of the re-zoning more restrictively for a piece of land where the current owner has already spent money on the initial stages of development. This is not "speculative", this is actual, real-life loss. Isn't this act of re-zoning inherently a taking?

The question of development is, in the long-run, a vast, intergenerational collective action problem ...is irrational for the community as a whole. It results in a colossal misallocation of resources,

If it were given to mankind to foresee, and therefore plan adequately for, the forces of alteration that made America circa 1950 so vastly different from that of America circa 1900, it would make some sense to ask men to regularly submit their judgment of the good to those who are capable of such planning and vision. But in reality, NOBODY has successfully achieved the sort of grasp of multidimensional interplay of economics, sociology, and politics, to be able to predict even for a 50 year period what will be the real needs of a large, diverse community for land, food, water, power, materials, and then for police, education, roads, industry, and commerce. Throw in the freedom to multiply, or the freedom to emigrate and immigrate, and you effectively eliminate any chance of success. So far as we can tell, it will NEVER be given to man to foresee the future in this fashion.

Therefore, what Maximos is suggesting is that individuals should submit their judgment for those who have been given the right to guess. I have one simple answer to such a suggestion: Communist Russia - the "planned economy". Maximos, to WHOM would you entrust the power to regulate all of land use across the country? I would trust no one person and no group.

Until mankind achieves a different condition, namely where many (if not all) men are inclined to selflessness, and most in charge of governing others (if not all) are are both holy and much wiser than men are now, there is simply NO HOPE for those who plan for the far distant future of simply 50 years hence to have the capacity to judge aright for the whole sphere of human collective, to judge which individual pieces of land OUGHT to be a big box store and which a group of small retailers, which should be a gas station, and which a restaurant, etc.

The demands of subsidiarity do not admit of centrally planned economies which regulate down to fine detail, any more than the demands of basic human freedom allow the government to designate who should marry whom. Wherever you have subsidiarity in action, therefore, you will have government limited to spheres of action which are clearly necessary to the common good, not those spheres where speculatively the government might allocate resources better than individuals making their best judgment.

I would submit, therefore, that the basic inefficiencies of the free market method of allowing development according to individual judgment (within the general constraints of zoning, which I fully accept), are fundamentals of the human condition, not something that we should expect to eradicate with better planning.

I must say that I, too, rather appreciate "Trinian's" satire.

Me thinketh that thou art "Trinian"; if so, better still.

Regardless, it was remarkably brilliant.

I thought Trinian was Thomas Friedman (the Great Mustache of Understanding); if so, he can go rot along with his zombified Common Man.

I never, never pretend to be anybody else. That's called "sock puppetry," and it's one of the no-nos of blogging. It's also entirely contrary to my personality, fwiw.

if a thing cannot be valued monetarily, it therefore has a lesser worth than the thing that can, perhaps even no real worth at all.

I think some of the issues Maximos raises are quite accurate. I also tend to think that Lydia's criticisms of some of the possible conclusions from his premises are likewise valid. I think the most important underlying principle is the one Rob G pulled out. Market value, the ability to exchange a thing for money or money's worth, is real. It's an important quality of realty, commodities, and other personalty. It is not, however, the sole measure of worth in society.

The fact is, though, that the law has been overrun for many years now by economists---economists of every sort, Marxists, Keynesians, Calebresians, etc. And their combined benighted efforts have been to strip out of the law many traditional rights and privileges to which no fiscal value can easily be assigned. Case in point: the decline of alienation of affections torts and adultery remedies. A husband has a definite right to exclusive sexual relations with his wife. The law has always struggled to define and describe that right, because it isn't really property as we understand it. Likewise, the value of intangible and subjective characteristics in property are appreciated only in narrow circumstances and to a limited degree. The result, when forced through the lens of a post-Christian judiciary, is a legal regime of private (but in some cases public) law that simply cannot conceive of the source of much of life's importance.

I am fiercely traditional. But at some point one has to make an innovation to save the rest of the tradition, and the law needs some way to accommodate these problems. Whether they would address Maximos's larger points or not, who knows. Sadly, I've heard of no prospects of suggestions that would suggest such a trend.

Market value is, indeed, set on the basis of what one, hypothetically, could get if one sold the property.

It is also set by the absolutely extraordinary interventions into the housing, mortgage, mortgage finance, securitization, and shadow banking industries undertaken by the Federal Reserve, the US Treasury, the British Treasury, the IMF, the World Bank, the European Central Bank, etc. -- a great many of which interventions have been undertaken expressly to mitigate and cushion the damage wrought by the deflation of housing and real estate values after the bursting of the credit bubble.

As a question of pristine market value, I have heard it said by people who would know that real estate needs to still fall by 25% or so in order to level out at the new equilibrium. In other words, somewhere around 25% of real estate values are, right now, propped up by the detested bailouts. The nationalization of Fannie and Freddie; the Fed's purchases of Treasury securities to hold down mortgage rates; the rescue of AIG, which sold derivatives integral to the credit and housing bubbles; the support extended by the Fed to commercial paper, which is the short-term debt market for almost everyone now; the British bailouts of their enormous banks (much bigger than ours), which were exposed to our housing market in a serious way; etc, etc.

Indeed, I'll even conjecture that it is to be doubted whether, under conditions of pristine market value, any new Walmart store anywhere is economically viable.

On the contrary, it is only because the entire structure of debt finance which makes such development possible is now backed by the US government that this sort of thing can go on at all.

Sorry, but Trinian's satire is so many ways wrong it isn't funny (it is of course telling that it is Ari who finds it so). It'd be relatively easy to dismantle, nay shred, line by line, if one had the time and inclination. I may give it a shot myself if no one else here takes it up, but it unfortunately won't be tonight.

I'll just say that this particular "Elite Man" lives in a two-bedroom suburban condo, taking care of an elderly father, on a combined income (his SS income and my salary) of about $55,000.00 a year. If Trinian still wants to consider me an "Elite Man" I have a good suggestion as to where he can insert his satire, sideways, with staples intact.

So? Come, Paul, you know that isn't your real reason anyway. You wouldn't want the Wal-Mart in visible from the battlefield whether it were viable or not. And things would get into a pretty mess if local decisions about, say, just compensation and the rights or wrongs of takings were to be shrugged off on the ground that, hey, the market is so propped up by federal meddling that somebody's irrationality is involved in what Joe actually could get for his property, so to hell with what Joe actually paid for it on the market last year; his property value needs to fall anyway. Market value isn't real market value, so we can do whatever hammering away at it we want in the name of other values. Honestly, that's just a lame excuse for saying "to hell with Joe." You wouldn't like it if somebody used that shallow excuse for the wetlands takings example I gave, even if it _did_ come shortly after the economic crash and bailouts.

When the Elite Man examined the life of the Common Man...

Satire is occasionally worth a few moments of idle chuckling, but in this instance it is merely another red herring, an attempt to deflect critique of American political economy, and the presuppositions thereof, neutering or denaturing it into another trope of cultural politics. Those supercilious elitists who believe that aesthetics are consequential, and that unlovely places are generally, in the medium-term and beyond, utterly unloved, that animals and other natural things have their own teleologies, which we should honour, as opposed to traducing in the name of brute efficiency, and that there exist standards other than those of sexual ethics! Shame on them for failing to validate the okayness of the predilections of the booboisee! Both parties practice this as a means of veiling their complicity in the economic crimes of the age, distracting their respective fractions of the mass by waving the shirts of cultural liberationism, on the one hand, or traditionalism, on the other, and attempt to assimilate the politico-economic positions of their adversaries to the cultural positions they despise. And so conservatives associate the Whole Foods shopper, or the locavore, with all sorts of cultural depravity, one general miasma of leftist awfulness; and the progressives associate the corporatists of the right with culturally 'retrograde' practices. The reality is, of course, more complex, with millions of Americans of conservative inclinations inclined against the unreflective validation of biggerbetterfastermore!, and millions of economic conservatives profiting from, or lending their approval to, the exploitation of cultural leftism as an economic racket.

And besides, anyone who has taken the positions I have has learned to endure the slings and arrows of inverted elitism, with mainstream conservatives impugning everything from the choice of a fuel-efficient vehicle to the preference for food that tastes like food, and the preference for treating animals as animals, instead of mere meat machines. Elitism is a relative term, and thus a worthless criticism.

But the market value that a piece of property has is relevant to the investment that _real people_ have made in that property.

But that's not the issue. The issue is whether this concern is of such overwhelming, all-consuming gravity that whenever this fact comes into conflict with other goods, values, and necessary objectives of political economy, it functions as the trump. And if it is always suspect to infringe upon this expectation of future gain, that is precisely what we are saying, among other things. Moreover, if that is the case, then we are effectively saying that any attempt to alter the status quo, impinging as that effort must upon the plans people have formulated on the presupposition of its continuation, are presumptively illegitimate. This, needless to say, leads to a devaluation of all of the manifest problems with the status quo, and even to outright denialism. Certainly, any adjustment to the status quo will affect real people. By the same token, efforts to preserve the status quo of indefinite development will adversely affect our children and grandchildren, owing to the calamitous misallocation of land and capital that such development represents. Then again, the philosophy of limitless growth was never about them.

Suburbia was not invented with, or even as the immediate predecessor to, the financial boondogle of the last economic period. It started earlier, with the railroads outside of London, in the mid 1800's, for example.

Who gainsays as much? My interest here is not in the history of suburbia, that original simulacrum of the rural manor, but in the function of suburbia in contemporary American political economy, particularly in light of the financial crisis and the world of constrained energy supplies looming on the horizon.

Therefore, what Maximos is suggesting is that individuals should submit their judgment for those who have been given the right to guess.

No, I'm not. No one said anything about Soviet planning until you broached the subject. Such advocacy would amount to a positive assertion concerning the future, whereas my assertions are apophatic in nature: whatever the future may hold, our present political economy of limitless development and ever-expanding sprawl is unsustainable. Whatever we purpose to do in the future, whatever we permit in that future, it cannot be the indefinite continuation of the present. We can, having acknowledged that resources are finite, and that the externalities of our present patterns of development are multiplying, say definitively that the future cannot be like the present, only more so. It is a negative judgment, and not a positive vision of the future.

Leave aside the Wilderness Battlefield. In a few years there will be big box store adjacent to it. I'm resigned to it; I'm not going to lose sleep over; and I wish the town well. They made their decision. Hopefully it all works out. Maybe they'll get more tourists and can fund a big museum, too.

The point of Jeff's post here, though, is that the pattern of suburban and ex-urban development in the America has been driven for two decades or more by a particular and very peculiar system of finance; one which depends mostly on various instruments of speculative debt, and one which, it turns out, can only be maintained, in a pinch, by the intervention of the government.

Here (in the WSJ no less!) is an excellent article examining the enormous and decades-long interventions that went into forming this bubble: http://online.wsj.com/article/SB10001424052970204409904574350432677038184.html

I'm not saying that real estate needs to fall; I'm saying that if market discipline were allowed to operate, it would fall -- and fall hard. It wouldn't fall ruinously everywhere. Some areas would be spared the devastation, and the real hardship would be concentrated in Florida, California, Arizona, Nevada, etc. But it would be a brutal collapse and loss of wealth. The collapse would produce millions upon millions of "to hell with Joe" moments -- in my estimation more such moments than we could bear. Which is why, in the end, I did not oppose the bailouts (or at least, did not oppose all of them).

Paul, if your implication is that someone like me who opposed the bailouts has no right, in consistency, to oppose direct attacks on property values motivated by entirely different concerns, attacks that would take place in any event *regardless of how those property values came about*, then I'm just astonished. Such a linkage is entirely indefensible. I suppose it's supposed to be the essence of the genius of this post that it makes such a linkage. But if the result of that linkage is that somehow we who opposed the bailout shouldn't now oppose direct government meddling--indeed, meddling by higher-level governments when local government comes to the "wrong" decision--in property use that results in an immediate devaluing of property by switcheroo, then I'm missing the genius. Honestly, that's pretty wild. I have a lot on my plate right now and can't go on at length about what a strange argument that would be. I can only hope you aren't making it.

Why is it that I suspect this self-proclaimed defender of the Common Man, harbors deep disdain for welfare mothers, public works employees, the under-employed "slackers" of the Rust Belt and every low-income family that took out an Alt-A mortgage?

Main Street, availing itself of Wall Street's grasping hand, found, for a time, that debt was easier to bear than downward mobility, or economic stasis.

Indeed. But, Wall Street's helping hand looks like a death grip;

The US banking system will lose some 1,000 institutions over the next two years, said John Kanas, whose private equity firm bought BankUnited of Florida in May.“We’ve already lost 81 this year,” Kanas told CNBC. “The numbers are climbing every day. Many of these institutions nobody’s ever heard of. They're smaller companies.”

Failed banks tend to be smaller and private, which exacerbates the problem for small business borrowers,...

“Government money has propped up the very large institutions as a result of the stimulus package,” he said. “There’s really very little lifeline available for the small institutions that are suffering.”

"Corporatists" is used in a rather uncertain manner by the author. I do not know what the intended meaning is in this case. Its true meaning is rather different (nearly opposite, really) of the way it is commonly used.

if your implication is that someone like me who opposed the bailouts has no right, in consistency, to oppose direct attacks on property values motivated by entirely different concerns

That is not my implication. I respect your view on the Wilderness Walmart; I don't share it, but I can respect it.

My point is that to treat the recent development pattern in America as a market force is, in my view, inaccurate and perilously naive. There are very strong grounds for suspicion of the commercial interest in any development deal right now, because that commercial interest (or, more properly those commercial interests, above all banks), may well represent not a market actor at all but rather an instrument of what Belloc called the servile state.

In a word, my point is that I believe your picture of the suburban development market in America does not take cognizance of the staggering revelations and transformations we've had in the last year.

One clear revelation -- Jeff refers to as the recession's "disclosure" -- has been the demonstration of the unsustainability of sprawl; and one clear transformation has been the decision by policymakers to substitute for the private capital that once financed sprawl, the public capital of the commonwealth.

"The point of Jeff's post here, though, is that the pattern of suburban and ex-urban development in the America has been driven for two decades or more by a particular and very peculiar system of finance; one which depends mostly on various instruments of speculative debt, and one which, it turns out, can only be maintained, in a pinch, by the intervention of the government."

And one finds similar patterns in other industries, agriculture/food production being a particular egregious example. I'm currently reading Gary Holthaus's book "From the Farm to the Table," and parts of it are making my head want to explode. I was interested to find out that, for instance, over the past 15 years, while food prices have continually risen, farmers' incomes have dropped at the same time as their overall productivity has increased. Any guesses as to where that "extra" $$ has gone? A gold star for you if you said "agribusiness profits"!

Why is it that I suspect this self-proclaimed defender of the Common Man, harbors deep disdain for welfare mothers, public works employees, the under-employed "slackers" of the Rust Belt and every low-income family that took out an Alt-A mortgage?

I tried assuming this deep disdain to the author to see if it scratched his point in any way. I don't see how it does. Now, he might be wrong and his satire is as Maximos says, a red herring, but he's not wrong because of pin-the-tail-on-the-author's-deep-seated-motives.

But Paul, the unsustainability claim could just as easily be made about, say, the founding of a charity or some noble enterprise as about the dreaded "urban sprawl." The truth is that the _whole_ economy has been rendered unstable by debt, overexpansion, etc. "Don't start that! It's unsustainable!" could be just as much said of a new Catholic school or a new soup kitchen as about a new strip mall. And might well be true in both cases. But it isn't the reason that anybody objects to strip malls. They would do so if strip malls were being built on the gold standard. And we all know it.

Certainly there was and is an a priori opposition to sprawl.

But I don't think it can rightly be said that the "unsustainability claim could just as easily be made about" . . . well, about almost everything in the economy. Real estate development was absolutely central to the finance crisis, in a way that charities or schools or soup kitchens simply were not. AIG was not selling credit default swaps on parochial schools. Lehman Brothers did not bundle huge masses of loans attached to soup kitchens. Structured finance and shadow banking concentrated on speculative housing and commercial real estate development, and to a lesser extent corporate debt and securitzed consumer debt. This now-discredited industry was concerned with precisely that "dessicated and abstract conception of property" Jeff speaks of, the conception by which housing and real estate came to be seen as having ever-appreciating exchange value, which could be abstracted and traded, rather than the older conception of property as being a store of value, illiquid but stable.

This whole system of finance, which was really a system of usury, gave to real estate development -- sprawl -- the illusion of sustainability in a way that it did not to other sectors of the economy. True, the damage from asset deflation inevitability spread; but the importance of sprawl to the collapse is not vitiated because the collapse ultimately radiated out to other sectors and industries.

Since it affected _investment_ and gave an illusion of indefinite good returns on investment, it would seem to me to be highly relevant to anything based on philanthropy, endowment, investment income, etc., which obviously applies to charities. You may say, rightly, that the real estate market was closer to the root of the problem, though I would point out there that this is just as true of the real estate market within cities as in "suburban sprawl." (Think ACORN, mortgages for houses in cities that people, esp. minorities, cannot afford, etc.) But if we're supposed to be talking about _reasons not to do things_ or _reasons for things to be squelched rather than encouraged_, I don't see that it much matters. Let's not pretend that the post has nothing to do with somehow _stopping_ this "unsustainable" growth in the name of other values. It spun out of the other post, Jeff obviously alludes to my objections raised in the other post, he expressly talks about everything from aesthetics to animal welfare as values that should not be "trumped" by development, and so forth. And somehow, the economic unsustainability point is supposed to support the same conclusion. I'm just pointing out that the unsustainability point really does not _specially_ support the conclusion that towns should disallow sprawl, strip malls, or whatever.

Walmart is the (cheap) "bread and circuses" distribution center that placates and consoles a society enslaved by its appetites and short-sighted ignorance that has lost its ability to distinguish between better and worse culture, between what is necessary for communities, especially the Church, to flourish under Christ and what undermines such shared life in submission to the Church's authority, and between true freedom from sin and the false freedumb for sin.

Walmart's success is not merely due to excellence by which it surpasses other Big corporations, but due to the collusion between Big Business and Big Government. Take away federal transportation subsidies and the stifling regulations and protocols necessary only for massive bureaucratic institutions devoid of local trust and humanity which strangle small businesses, and we'll see whether Walmart can continue to grow. The same goes for sprawl.

And yes, if we had let the banks fail last year, we would have seen the truth of how modern society is not a natural or efficient or beautiful outcome at all, but rests on parasitically draining the cultural inheritance of past generations and simultaneously sucking the energy, resources, and life from future generations by means of the machinery of the State, that is by force and--in our historical situation--folly, all so that the current generation in power can live sated, stupid and ugly lives.

I went to a "town hall meeting" with our Congressman last night. There is not much hope to be had in the modern polis, if ever there was. Perhaps there only has been such hope in and for the Church; we ought to, then, direct our efforts to our local churches. We do devote ourselves to them, right?

The speculation in real estate is made possible mainly by our tax code. A simple way to reform it without restricting the right of people to buy, develop and sell land that is meaningfully improved would be to change the property tax into a windfall excise tax. Instead of paying a small rate every year, it should be a large sum paid up front as a transaction cost. 10% of the value of property should be enough to not harm those who plan to actually work or reside on the property, but make speculation quite painful.

If a house that goes for $500k is taxed at a 10% rate, the mortgage would be for as much as $550k. Most homeowners around here wouldn't find that a particular burden, as for them it would be spread over the lifetime of their mortgage. Speculators would have to instantly recover that $50k in taxes in order to make a profit.

It would also be more just to tax property in this fashion, as our current system often kicks people when they're down. In fact, the current system is downright moronic and regressive in that it rewards people who lose their jobs with the threat of additional loss of home and vehicles over a relatively minor tax bill.

I'm just pointing out that the unsustainability point really does not _specially_ support the conclusion that towns should disallow sprawl, strip malls, or whatever.

No, but the unsustainability of sprawl (or at least the unsustainability of it absent the taxpayers being on the hook for its debt finance) does very much specially support the conclusion that the developers of sprawl, strip malls, etc. do not represent a market interest.

In other words, we can no longer have a view of these conflicts as "local aesthetes and nostalgists vs. the market." There is no market interest anymore. Whatever market interest there once was has been thoroughly transformed by politics and usury.

In still other words, for many decades sprawl was defended in the grounds that it reflected the natural operation of the market. What is now clear is that that was a colossal illusion.

That liberals and some traditionalists opposed sprawl on other grounds is not really germane to the fact that conservatives who defended it on the grounds that it is an example of the free market will have to adjust in light of what has been disclosed.

Also, its worth noting that the inner-city subprime mortgage crisis, while quite real, actually represents an instance of Johnny-come-lately to the show. I linked to a Wall Street Journal essay upthread which does a fine job of showing how deeply the government was embedded in the real estate development sector long before the Community Reinvestment Act was even contemplated. And on the finance side, the big behemoth bond-like instruments, confected out of formulas and tranches and structured vehicles and derivatives and the rest of it, date from the 1980s, long before subprime mortgages got popular.

Finally, the asset deflation is definitely relevant to endowments and charities. Harvard's endowment famously got housed in the exotic bond markets over the past year. I confess to having a good laugh at Harvard's expense. But these losses do make endowments as such unsustainable, much less schools and soup kitchens as such unsustainable.

So again I think your statement -- "the unsustainability claim could just as easily be made about, say, the founding of a charity or some noble enterprise as about the dreaded 'urban sprawl'" -- is not supportable.

In still other words, for many decades sprawl was defended in the grounds that it reflected the natural operation of the market. What is now clear is that that was a colossal illusion.

I think this is a confusing way of putting it, because it gives the impression that "anti-sprawl" legislation, which is, as you acknowledge, entirely motivated in other terms and would apply no matter what, can be justified against the claim that it goes against the natural movement of people, goods, and services. Yet it does. As Tony pointed out above, people have been wanting to get out of the cities for pretty much the whole history of mankind. And as I keep pointing out, anti-sprawl people are indeed against the market where it operates contrary to their aesthetic values. To my mind, the issues are far more separate than you are making them out to be. The credit bubble affects all kinds of things, so that even a new Mom & Pop store may well be unsustainable, long-time farmers are often deep in debt, small family businesses may have taken on mortgages they could not really afford, and so forth. The "market" aspect of all these enterprises has to do with people's attempts freely to exchange goods and services. It is simply confusing to say, "This is not a conflict between aesthetics and the market, because the expansion to which the aesthetes object is ultimately sustained up the food chain by unsustainable government propping up of debt." That is a false dichotomy. Pretty much the entire economy is prevented from going into a deep recession by unsustainable government propping up of debt.

I would say myself that wherever someone is taking on debt he does not have good reason to believe he can repay, he is abusing the privilege of borrowing money. To the extent that such abuse is contrary to the proper ethics of the market (and I believe it is), he is going contrary to those proper ethics. But not only did our esteemed Zippy find my objection to taking on debt one thought one could not pay back completely baffling (so maybe it isn't so unquestionable as it seems), even more relevantly, such a situation arises all over the place, unfortunately, not simply in the area of "sprawl." In the case of any given strip mall, the person who takes on the debt to build it may indeed have good reason to believe he can keep to the terms of the loan conscientiously, despite the big-picture fact that the general "boom" is sustained by the assumption of government bailouts, unsustainable credit, etc. So the question of whether some given transaction is based on an abuse of credit depends on the specifics of that transaction, and an instance of "sprawl" borrowing may not be "anti-market" in that sense, while the loan a small businessman takes out on his house and puts desperately into his small business to keep it going may be "anti-market" in that sense.

Frankly, I think all this big picture/linkage talk is darkening counsel and merely trying to remove an objection to anti-sprawl legislation which objection remains entirely pertinent.

What ever happened to:

I will merely say here, before I bow out...

Rob G:

Sorry, but Trinian's satire is so many ways wrong it isn't funny (it is of course telling that it is Ari who finds it so).

The planted axiom (at least, in your sketch) is what I happen to differ with; although, ironically, that is exactly what you should be inquiring into, as to why I actually do find such hilarity in satire as that.

Maximos:

Elitism is a relative term, and thus a worthless criticism.

As I recall, both you and Kevin posses a shared history of providing such remarkable elaborations concerning "elitism" and, furthermore, the purportedly "elite" themselves.

In fact, did you not yourself pen several articles providing subsequent explication as to the very subject?

So in your view, Lydia, all my economic arguments are just a stalking horse for unrelated (i.e., non-economic) objections to suburban sprawl?

If so, I can only say that this is a misapprehension of our dispute. The only "anti-sprawl legislation" I have endorsed anywhere is the very vague statements I made in response to your requests to clarify in the Wilderness thread. Those, as I said repeatedly, concern a situation essentially unique to real estate adjacent to major battlefield -- maybe a few hundred square miles in Virginia. That's it. I repeatedly adjured making broader statements about legislation concerning sprawl.

I generally think the remedy for this will lie in the field of finance and regulation, not anti-sprawl legislation. If we wind down shadow banking and the whole structure of usurious finance properly, sprawl will over time take care of itself (though not without some rough times during the transition). I'm reluctant to predict either (a) if it will be wound down properly or (b) what things will look like afterward.

The WSJ essay (which I gather derives from a forthcoming book which will interest me greatly) hinted at a gradual but enormous de-suburbanization of America. My friend Francis Cianfrocca has conjectured about the same thing on some of his Radio New Ledger segments. Another potential development is a reaction against ownership and toward renting.

My fear is that all this government intervention, supported by corporate propaganda, as well as the reluctance of a great many people to face the facts of what's happened, will simply re-inflate the bubble, which will burst again somewhere down the road, ushering still more socialism and further strengthening the servile state.

Elitism, as a term of contempt for those who profess to possess superior knowledge in a given cultural realm, or array of realms, is meaningless as a form of critique. As a taxonomic term, intended to discriminate between the refined and the vulgar, or connoisseurship and demotic tastes, is has value. It also has value in descriptions of political economy. But as a critique of someone who thinks that some things are better and more noble than others, it is just a petulant expression of unacknowledged nihilism. And, as I have noted previously, it is a relative term, relative to social in-groups and out-groups. Among some conservatives, driving gas-guzzling cars, eating crappy food, and drinking lousy beer are matters of pride, for they distinguish the in-group from epicene liberals; and where there is a conception of status, there is a conception of elitism. Hence, we'd all be better served by eschewing such pointless in/out-group status games, focusing instead on the substance of the matters - whether, that is, there is such a thing as the good of particular things, which they can attain or fail to attain in varying degrees. Is there, in other words, such a thing as good beer, or is it purely in the eye of the beholder? Is there such a thing as good architecture, or is it purely relative to the utilitarian objects of its users? And so forth.

Maximos:

Agreed (and much appreciated).

Although not everything can simply be surrendered to the saccharine saying of De Gustibus Non Est Disputandum; there are actually matters, as you seem to suggest, that can be rendered an objective judgment.

The Good and The True are certainly amongst these.

So in your view, Lydia, all my economic arguments are just a stalking horse for unrelated (i.e., non-economic) objections to suburban sprawl?

Not exactly. In my view, Maximos's talk about the economy is a stalking horse for his objections to suburban sprawl, which wd. remain regardless of what our economy was doing. And the same goes for his indirect allusion to the "peak oil" hypothesis. All just gravy on top, for him. In fact, this comes out in the post anyway in the title itself, as far as I'm concerned, as well as in the references to animal nature, aesthetics, etc., as alternative values, to how economic values should not be "trumps." Well, if they shouldn't be "trumps," then that wd. apply even if the economy were doing just ducky with no need for government prop-ups.

If the economy is allowed to fail without bailouts, a whole lotta things are going to go under--including a fair bit of higher education, probably a lot of private education included therein, at the high school as well as the college level. Plenty of colleges are struggling right now. Think tanks will certainly go under. Charities. Lots of stuff. Whether one regards this or that as a "problem" that has "taken care of itself" once the bubble stopped expanding depends entirely on one's other reasons for evaluating this or that positively. I don't really think the economic arguments here about the probability of de-suburbanization if the economy is not bailed out tell us whether or in what meaningful sense suburban building has been a "market" phenomenon.

Mike T's idea about a windfall excise tax is interesting. How would this be implemented? One obvious problem is that property taxes are mostly levied by local government, so the change would have to come very piecemeal. And, as always with big tax reforms, the worry would be that the statists would just say, "you like windfall excise taxes? Alright. We'll just add one on -- in addition to property taxes." So any reform would have to be predicated on the replacement of property taxes.

I don't really think the economic arguments here about the probability of de-suburbanization if the economy is not bailed out tell us whether or in what meaningful sense suburban building has been a "market" phenomenon.

IF?

Parts of the economy (specifically, those parts directly related to real estate development) have already been bailed out. It's done. And more and more we're discovering that this bailout was, so to speak, baked into the cake of the whole suburban development project from its earliest days.

In other words, to put it as bluntly as possible, it looks like suburban sprawl has been a government welfare project.

Mike T's idea about a windfall excise tax is interesting. How would this be implemented? One obvious problem is that property taxes are mostly levied by local government, so the change would have to come very piecemeal. And, as always with big tax reforms, the worry would be that the statists would just say, "you like windfall excise taxes? Alright. We'll just add one on -- in addition to property taxes." So any reform would have to be predicated on the replacement of property taxes.

I can't speak for other states, but it is my understanding that Virginia's state constitution grants the state government sweeping power to make such changes to local governments. One of the reasons we have so few local gun laws is because apparently sometime in the 70s or 80s the legislature passed a law abolishing the right of communities to regulate gun ownership rights beyond what was already on their books.

In other words, to put it as bluntly as possible, it looks like suburban sprawl has been a government welfare project.

In the only sense that I see as defensible here, you could say that about almost anything. I'm sorry, Paul, but I just plain don't buy it. I'm far more open to Albert's point concerning government regulations and how they favor larger corporations. It's a point libertarians have been making for many years, I might add.

It would make a lot more sense to say that higher education has been a government welfare project, because so many college are, in fact, state schools, the federal government makes direct low-interest and interest-deferred loans for higher ed, the federal government gives grants for higher ed, the state governments give grants for higher ed. There's a clear money trail there of plain old government handouts. But to say that because Big Finance assumed government bailout as a fallback this means that, specifically, "urban sprawl" was a government welfare project anymore than any other new endeavor, including those based on investment, that depended for its success upon continued economic solvency and/or growth, just seems to me incorrect. I don't see it at all.

You keep substituting "urban sprawl" for my "suburban sprawl" and I'm not sure why. There is a difference, and it is an important difference.

You say you don't buy it, that you don't see it at all; but I'm worried that you're not really even examining it. I've given you a long article showing "a clear money trail of plain old government handouts" in mortgage finance and real estate development. I can give you many more in addition to that if you're interested.

For one thing, real estate is everywhere, Paul, not just in the suburbs. The government has propped up the real estate fiasco recently for everybody, not specially for people building strip malls.

In my view, Maximos's talk about the economy is a stalking horse for his objections to suburban sprawl, which wd. remain regardless of what our economy was doing. And the same goes for his indirect allusion to the "peak oil" hypothesis. All just gravy on top, for him. In fact, this comes out in the post anyway in the title itself, as far as I'm concerned, as well as in the references to animal nature, aesthetics, etc., as alternative values, to how economic values should not be "trumps." Well, if they shouldn't be "trumps," then that wd. apply even if the economy were doing just ducky with no need for government prop-ups.

This is one feature of conservatism as it actually exists in America which could stand to be reduced greatly, and perhaps eliminated entirely, namely, the discursive trope which holds, in the absence of concrete evidence, that when someone is making unpalatable points about Actually-Existing America and Actually-Existing Conservatism, his saying "X" really means "Y", where "Y" is inherently disreputable as a consideration. It's not merely the refusal to take "X" seriously that has to go; it's also the notion that any and all critiques of American political economy are motivated, ultimately, by unprincipled and cynical cultural considerations, that has to go. Perhaps, just perhaps, when someone says that American political economy, as exemplified by "X", is deleterious for reasons A through M, he means precisely that, in addition to simply finding "X" aesthetically repulsive. The attempt on the part of many conservatives to deflect criticisms of political economy onto cultural matters, waving the red flags of culture before the "base" while the establishment obliterates the material conditions of middle-class flourishing, not to mention the natural environment, is cynical and shortsighted. For years, people like myself were admonished not to worry about the sorts of things that transpired on Wall Street, in the boardrooms of the great global corporations, but to focus on the cultural issues that "really mattered". Condescendingly, we were portrayed as benighted fools and rubes for not comprehending the awesomeness of our political economy, and handed a few hackneyed slogans as catechetical tools, such as, "A rising tide lifts all boats", eg., if GDP is increasing in the aggregate, everyone wins! And it wasn't so. Spectacularly not so. But even now, when we trace the calamity back to aspects of that political economy, we're told that we're only saying what we're saying because we find Wal-Mart ugly. Both/and, not either/or.

Frankly, what I believe lies behind this attitude of dismissal is what I term vulgar conservatism, and what others have termed low-church conservatism. I use 'vulgar' purely descriptively, to mean 'demotic' or 'popular'; the idea is that much of ordinary, run-of-the-mill conservatism is, yes, an aversion to change, but in the specific sense of wishing not to think too deeply about the presuppositions of our way of life, for fear that we'll be proven mistaken, and be required by reason to change, and that at some cost to a way of life that we happen to like, pre-reflectively. Socratically, even ascetically, this is merely allowing the passions of our nature to govern our reason, the reverse of the natural order. An unexamined conservatism is not worth our adherence.

where "Y" is inherently disreputable as a consideration. It's not merely the refusal to take "X" seriously that has to go; it's also the notion that any and all critiques of American political economy are motivated, ultimately, by unprincipled and cynical cultural considerations, that has to go.

Come on, Maximos, you bring up the cultural considerations in your own post. The very title is about how we have the wrong idea about property rights, and the post explains that this leads us to disregard other values. Don't ask me to waste my time going back there and finding the quotes. You know it's perfectly true. And you've brought them up time and time and time again. You don't think those aesthetic and value-laden reasons "inherently disreputable," "unprincipled," or "cynical." And to tell you the truth, even I wouldn't use those terms for them. I just would call your hatred of Wal-Mart, your ideas about the inherent value of species, your intense opposition to strip malls and sprawl, etc., etc., exaggerated and, because exaggerated, wrong-headed.

There is a manifest difference between holding that a conception of property rights is dessicated because it leads to ugliness, and solely or principally on that account and holding that it is mistaken in itself, that it is implicated in economic practices destructive and wasteful in themselves, and that it also leads to ugliness.

I realize that there is more real estate development than the suburban or ex-urban variety, Lydia. My point is that the explosion of suburban and ex-urban variety, over the better part of the last century but dramatically accelerating in the past two decades, has been the issue of (a) the transformation in high finance and (b) government interference to subsidize or support this market. These constitute novel features in American political economy. So associating suburban sprawl with usurious finance and government subsidy is just not some vast leap of intuition or fancy.

Or if you don't like the correlation over time, just look at where the crisis is concentrated geographically for pete's sake! the very places where suburban sprawl is most prominent.

Again, the fact that the economic ruin has spread does not vitiate the importance of its origins.

By the way, I just noticed that one of my earliest comments in this thread laid out for you a sketch of that "clear money trail of plain old government handouts" that you're speaking of, if you would only look for it:

"[The value of real estate] is also set by the absolutely extraordinary interventions into the housing, mortgage, mortgage finance, securitization, and shadow banking industries undertaken by the Federal Reserve, the US Treasury, the British Treasury, the IMF, the World Bank, the European Central Bank, etc. -- a great many of which interventions have been undertaken expressly to mitigate and cushion the damage wrought by the deflation of housing and real estate values after the bursting of the credit bubble."

The WSJ article that I beg you to read will take you back in time to see the other interventions.

http://online.wsj.com/article/SB10001424052970204409904574350432677038184.html

Worry not, we are moving towards something I wish were at least new but is as old as the the biggest guy in the cave who also holds the biggest club, enforced misery.

There is a slum on the Potomac, a slum occupied by a species of the vulgar incomprehensible to others. They can only be thought of in terms of some similarity to humans, some relational aspect to a minimal decency, an assumption to easily granted because too unthinking in perceptions and lethargic in effort.

The denizens of this slum have gravitated there because only there can one who otherwise would be snatching the purses of old ladies, or selling real estate in the middle of the Mojave Desert, find esteem and some respect, itself a corruption born of ignorance, sloth. and the greed that always searches for the undeserved, the unearned, the false promise founded on the wealth or effort of others, those always unidentified but always available.

These slugs, the ones who crawl through the crevices and cracks of the public buildings of the slum, who slither on the floors, these things called "public servants" who dedicate their degenerate lives to "public service", [hello Michelle and Barack], they gladly welcome the criticisms, justified or not, directed at what they can't control. If nothing else it distracts both the feeble minded and the ideologically blind and offers a target for hostility, sparing themselves and satisfying certain primal urges, the need to lash out while avoiding thought.

No Maximos, with some luck you will have less to fault in time, there will less available to fault, GDP or otherwise, though I doubt that will slow you down.
"Dessicated property", I tend to think we have seen nothing yet. For above all, what we now have in power are those throwbacks to the cave, those crude creatures now dressed and scented but with the same passion to enjoy through the misery of others.
Perversity transcends the ages.

I read it, Paul. It looks to me like it has a few crucial lacunae when it comes to the specific connection to "sprawl," not to mention his very odd racial implication that whites were specially favored (which he then has to half-retract later when it comes to the giant minority mortgage push, arguably a partial cause of the crash). In fact, that bit about sprawl and whiteness looks to me like plain liberal author bias rather than like something he backs up. But I don't have time to say more about the article now except this side comment: There's something a little bit odd about self-avowed fans of Chestertonian distributism lauding an article that calls rhetoric about the value of individual home-ownership "gauzy," heaps scorn upon it over the length of several paragraphs, and instead of suggesting that government butt out implies that maybe we should have a new set of unspecified government interventions to "encourage renting." But more another time.

The attempt on the part of many conservatives to deflect criticisms of political economy onto cultural matters, waving the red flags of culture before the "base" while the establishment obliterates the material conditions of middle-class flourishing, not to mention the natural environment, is cynical and shortsighted. For years, people like myself were admonished not to worry about the sorts of things that transpired on Wall Street, in the boardrooms of the great global corporations, but to focus on the cultural issues that "really mattered". Condescendingly, we were portrayed as benighted fools and rubes for not comprehending the awesomeness of our political economy, and handed a few hackneyed slogans as catechetical tools, such as, "A rising tide lifts all boats", eg., if GDP is increasing in the aggregate, everyone wins! And it wasn't so. Spectacularly not so. But even now, when we trace the calamity back to aspects of that political economy, we're told that we're only saying what we're saying because we find Wal-Mart ugly. Both/and, not either/or.

And isn't interesting that almost all of the evils you cite are made possible by fiat currency? Sound money is the keystone of a moral economic system. It is what protects the value of the laborer's labor, limits the expansion and use of credit and provides a hard dose of reality to the corporate raiders on Wall Street. We are paying dearly now for our use of dishonest weights and measures in our economy.

but to focus on the cultural issues that "really mattered"

Golly, I missed that highly objectionable little line until Mike T reposted the quote. Reflect on that one. Wonder what could be meant by that? No further comment.

I consider the cultural issues to be far more important than my own economic issues, too, btw. If you were to offer me as a state legislator a law that outlawed both abortion and big-box stores, I'd probably vote for it. And cultural conservatives have put their money where their mouths are on this one, compromising their fiscal conservatism time and time again in elections (when was the last time we had a real fiscal conservative in the White House?) in the name of the cultural issues. They have swallowed expansions of government programs under Bush that made them cringe (how do you say "farm bill," "Medicare drug plan"?) as fiscal conservatives in the name of their cultural commitments. Any idea that it is the anti-capitalists who have been the main ones compromising, or being asked to compromise, for the sake of cultural issues, is demonstrably false to the political history of the past umpteen years.

Well the unfortunate fact is that we left behind the option of "government butt out" a long time ago, and it ain't coming back.

I certainly share your nostalgia for that simplicity and justice which was indeed once the inheritance of this country.

What I take from that article is the facts it provides, not the recommendations it suggests. "From 1900, when the census first started gathering data on home ownership, through 1940, fewer than half of all Americans owned their own homes. Home ownership rates actually fell in three of the first four decades of the 20th century. But from that point on forward (with the exception of the 1980s, when interest rates were staggeringly high), the percentage of Americans living in owner-occupied homes marched steadily upward. Today more than two-thirds of Americans own their own homes."

My argument, in summary, is as follows:

When evaluating a dispute or debate concerning suburban development, it is naive and dangerous to imagine that the developer represents a market interest (market here being understood as functioning independent of state policy); in most cases going forward, it will be better for clarity and justice to consider it an interest of the welfare state.

It is much more reasonable to expect that whoever the developer is, his finance mechanism will derive from markets now backed by the taxpayers, the taxpayers under current circumstances being represented by politicians like Barney Frank (who chairs the Financial Services Committee).

(The independence of the Fed presents a complication here, and in my view a blessed one, but I'm not sure this is the place for discussions of Fed policy.)

it will be better for clarity and justice to consider it an interest of the welfare state.

Well, I don't think that article supports a sweeping and extremely strongly worded conclusion of that kind, especially if that sweeping conclusion is supposed to be contrasting the developer with someone else who finances his business with credit, or contrasting the developer with many other aspects of the economy. One commentator above mentioned farm subsidies. To my mind, refusing to talk about strip malls in terms of market economics is rather like refusing to talk about strawberry sales or bread sales at the local store in terms of market economics because of farm subsidies and loans. Sure, the whole economy in numerous, numerous ways has been meddled with and corrupted by government prodding and interfering. Tell us something else we didn't know. But if we're not to start calling every industry and aspect of human endeavour in the United States an aspect or interest of "the welfare state"--which hardly seems helpful for purposes of discussing and analyzing future policy--we should be more willing to look at specifics than to make such sweeping designations about this or that industry which, non-coincidentally, happens to be under special, negative scrutiny anyway for entirely other reasons by many people discussing policy.

Golly, I missed that highly objectionable little line...

Come now. After all that I have written both at this site and its predecessor, will my critics now conclude, on the basis of a throwaway line, meant in context to refer to the condescending use of social issues by the conservative and GOP establishments - where the social conservatives and evangelicals who are the base of the movement get rhetorical nods and occasional minor policy shifts in the pro-life area, and essentially nothing to address their increasingly parlous economic circumstances, something noted not only by Thomas Frank but also Ramesh Ponnuru, Ross Douthat, Reihan Salam, and David Frum - that I've renounced social conservatism. Come now.

And cultural conservatives have put their money where their mouths are on this one, compromising their fiscal conservatism time and time again in elections (when was the last time we had a real fiscal conservative in the White House?) in the name of the cultural issues. They have swallowed expansions of government programs under Bush that made them cringe (how do you say "farm bill," "Medicare drug plan"?) as fiscal conservatives in the name of their cultural commitments.

That is a political dynamic separate from the one with which I am concerned presently, not least because the wages of that one have not yet come due. No, the dynamic with which I am concerned here is the one which sees the mandarins of conservatism and the GOP invariably channel the populist discontents of the base, which ever since Ross Perot have been on the verge of boiling over on account of precisely the political economy of globalizing Wall Street Lords of Usury and its consequences (most visibly with respect to immigration), into purely cultural channels. Vote for the GOP because it's the pro-life party, and accept as the token of this commitment, the symbol of your role in the party, a Vice-Presidential candidate who looks like you in a cultural sense. Who they then proceed to subvert from within, anyway. The point is that the populist angst on the right is polymorphous, and yet the Party has laboured mightily to ensure that it gets expressed on only those issues least amenable to public resolution at this moment of our national history. Something complex, encompassing everything from cultural issues to precarious economic circumstances is reduced to tropes about 'real America', 'victory culture', and vague gesticulations about a culture of life. And whenever the base has the temerity to venture beyond the pens constructed for them, the populist schtick that is so useful when the objects of ire are 'limousine liberals' and environmentalists suddenly transmogrifies into a blanched terror of populism, a quavering horror that ordinary people might have the presumption to question their economic betters, and grounds for so doing.

I'll grant you that it is a pretty strongly-worded conclusion, Lydia, but I won't grant the pretense that one article constitutes my exclusive evidence to support it.

Here is the article to read to understand shadow banking and how reckless it proved to be: http://www.bloomberg.com/apps/news?pid=20601170&refer=special_report&sid=a0jln3.CSS6c

Here is the article to read to see how much the mathematical abstraction of property was integral to the mess we're in:
http://www.wired.com/techbiz/it/magazine/17-03/wp_quant?currentPage=all

There is plenty more where that came from.

In any case, I stand by the view that suburban sprawl is and was a "calamitous misallocation of resources" (as Jeff puts it), a calamity in part encouraged and subsidized by the state; and that it is in the interest of the Republic to check its growth and gradually wind it down.

Sound money is the keystone of a moral economic system. It is what protects the value of the laborer's labor, limits the expansion and use of credit and provides a hard dose of reality to the corporate raiders on Wall Street. We are paying dearly now for our use of dishonest weights and measures in our economy.

Mike T, I agree with this idea. But so far, I have NEVER heard anyone propose a sound monetary policy that really makes sense and really works.

Whatever method you use to measure worth, it needs to grow as the overall creation of new real wealth is created. What would you propose?

Gold standard? Nope. No way. The total real growth (or non-growth) of the economy has to do with a great many factors that simply are not reflected in the growth (or shrinkage) of the supply, and demand, for gold. Part of the demand for gold is semi-fixed, part of it is industrial, and part of it is sentimental in a way that is only tenuously related to the rest of the market. That's just the demand side. For supply, the growth of gold supply is totally rooted in development of mine production, which is greatly dependent on politics (gold mine operations are messy and problematic) concerning environmental upheavals. Few of these factors will consistently rise and fall with the overall economy. So what happens if the creation of new wealth outstrips the growth of the gold supply? A price woopsy. Bad news.

Are there any other options?

Home ownership rates actually fell in three of the first four decades of the 20th century.

That would not have anything to do with the collapse of the small family farm, and the industrialization of the working majority, would it? Naturally, people who used to farm their own 40 acres and now cannot sell their produce for enough to live on, and move to the city renting, no longer own their home. This is somehow a dynamic that is representative of a sound cultural scenario?

While I don't necessarily think that a governmental loan support in the form of tax deduction is the ideal way to address this undesirable dynamic, I think it is virtually self-evident that, all other things being equal, a culture in which people all own their homes is likely to be much more sound than a culture in which 10 percent own 90 % of the homes and rent them out. So if there is a social trend away from ownership due to the undesirable social upheaval of people moving from the farms to the city for work, it is not obviously wrong to try to come up with some social mechanism to offset that harmful social tendency.

Surely, Maximos, you don't think high rates of rentorship is actually socially desirable on its own merits, do you?

So if the trend of the early 1900's was away from home ownership, and we wanted to reverse that trend for social reasons, what tools would we have to make it work? More particularly, what non-governmental options were there? Is the government intrusion into the free market by reducing the effective loan costs more damaging to the economy and society than the damage from decreasing home ownership rates? Is there anyone who even thinks he has data to support a conclusion about this?

Tony makes an excellent point which is just one of the things I would want to stress in response to that first article Paul linked: Home mortgage interest deductions on taxes are a pretty mild way for the government to encourage home ownership. They are certainly nothing like the insanity of the sub-prime push of more recent years to encourage more minority ownership. The general idea that it's legitimate for government to encourage this or that via the tax code is hardly sufficient to render an entire industry part of the welfare state. Big families aren't an "interest of the welfare state" because you get a tax deduction for your children, especially if we're just talking about the old kind of tax deduction that can't go negative and turn into a direct handout. The entire daycare industry isn't part of the welfare state because you can deduct childcare costs on your tax return, and so forth. And I would think that Chestertonians, above all people, should be in favor of the relatively modest move whereby government encourages home ownership via tax deduction.

That whole WSJ article is anti-individual home ownership and sweeps everything, however modest or however long ago and water-under-the-bridge (the GI bill?) into this supposed (bad) dynamic whereby (drum roll) "sprawl isn't really a development of the market." Talk about lumping instead of splitting!

I'm sorry, Paul, but I really do not have time to read article after article and respond to them all in detail. I haven't even had time to say all that I think about that one article. Your conclusions have been very strongly worded here, and so far the one article I've read that you were pushing pretty strongly goes nowhere near to convincing me of any thesis that strong. As you know, I hold no brief for the government prop-ups. But I'm certainly not going to agree that because of the bailout, Fannie Mae, etc., that suburban development is merely an extension of the welfare state! For goodness' sake--if nothing else, that's a false dichotomy. We have almost nothing in the economy that is a matter of "pure capitalism"--maybe little kids' lemonade stands, before the government shuts them down, under-the-table private contracts for 15-year-olds to mow lawns, and that's about it. The alternative to pure capitalism is not "this is just a big welfare program." Obviously, we have a mixed economy, and most industries are implicated in it to one extent or another.

Moreover, as I keep pointing out, to take the fact that home real estate was at the center of the most recent crisis and to use that to zero in specifically on suburban development, including strip malls, etc., seems like substituting the part for the whole. And it's puzzling that anyone would want to do that. "Development," with all that that word means, is, as far as I can see, _much less_ a matter of "government welfare" than is, say, minority home ownership gained in recent years through pressure on banks, taking place in those supposedly "good" cities instead of in the suburbs. There's real estate and real estate buying going on everywhere. Why pick on the suburbs? Still more, since much of this had to do with _home_ buying, why pick on the strip malls?

It seems kind of unlikely that more and more complex details of the finance industry and the government's complicity therein will alter what seems to me the force of these points.

Mike T, I agree with this idea. But so far, I have NEVER heard anyone propose a sound monetary policy that really makes sense and really works.

Whatever method you use to measure worth, it needs to grow as the overall creation of new real wealth is created. What would you propose?

A currency backed by several different precious and valuable metals ranging from gold to copper.

The money supply need not "keep up" with the creation of wealth as much as you might think. The constant increases in wages are a cultural issue brought on by a belief that we are entitled to ever-increasing wages if we don't suck at our jobs and as a means of fighting inflation. A sound monetary system would have a much easier time fighting inflation, therefore the second of those two factors would be greatly mitigated.

It's also my understand that, adjusted for inflation, our economy has not grown anywhere near as much as one might think. Much of the growth is an illusion brought on by the availability of cheap credit from foreign investors and by inflation. Granted, we cannot know what things would be like if we hadn't gone off the gold standard and government at all levels had been restrained in its growth. A significant percentage of the population is employed by government, government contractors and non-profits, and none of those produce a meaningful amount of wealth (except for defense contractors who are allowed to sell to foreign states).

Lydia,

If I may, I understand where Maximos and Paul are coming from with regard to fighting sprawl. I live and work in metro DC (Fairfax County, VA to be more precise) and we are a posterchild for the need to be intelligent about sprawl. Our area is actually raising the property values in West Virginia and places like Culpepper County in Virginia which are well over 1 hour away from most of the big players in this area. The federal government is mitigating this through BRAC, but it's terrible what we're doing to some of these smaller communities and the ability of their younger people to buy houses in their own communities. I feel their pain since my wife and I are just barely able to afford a small house on a single income, 45 minutes away from my office.

Sprawl is a serious issue in some metropolitan areas. Fighting it is difficult because governments, especially the legislatures, don't operate rationally with an engineer's eye for planning ahead. There is a lot that could be done like investing in telecommunication infrastructure, public transportation (provided by for-profit companies ideally), giving tax incentives for companies to relocate in a more distributed manner and to start taxing people based on how many miles they drive every year, not how much gas they consume.

Okay, admittedly, my phrasing -- "it looks like suburban sprawl has been a government welfare project" -- was deliberately provocative. It ain't that simple. I'm am perfectly aware of the staggering complexities behind all this.

I'll take to concrete examples, presented as open questions:

(a) Would it be better to think of the commercial paper market as, indeed, a market -- or as a government program? One of the most dramatic interventions of the crisis, even though its cost seemed minimal in comparison to, say, the TARP, was the government's successful effort to prop up CP. Now it so happens that General Electric Co. is one of the really huge players in commercial paper; and it so happens that last December (I believe) the government took the extraordinary step of allowing GE to issue debt backed by the FDIC. The FDIC putting its credibility on the line to back GE corporate bonds! Unbelievable, and half-forgotten already. I still remember reading the report about this and almost falling out of my chair.

Now commercial paper is to shadow banking as individual deposits are to standard banking: both form the short-term capital lending that makes the system hum. So the FDIC's intervention (the Fed did other things as well) to support commercial paper (by means of supporting GE) suggests a transformation of that market as dramatic as what the establishment of deposit insurance did for standard banking.

(b) Is the mortgage market a market or a government program? The Federal Reserve's two major aggressive steps in mortgage finance consisted of, first, directly purchasing mortgage-backed securities, billions upon billions of them, mostly of Fannie and Freddie origin, on the open market; and second, directly purchasing Treasury securities on the open market with a eye toward the middle range of the yield curve, where mortgage rates are traditionally pegged. With these two moves the Fed clearly aimed to use its muscle to stimulate mortgage finance by creating demand and by driving down mortgage rates to facilitate purchases and re-financings.

So to go from all this to the statement that the CP and MBS are no longer markets but rather government welfare programs is, yes, a provocative oversimplification. It is designed to bring home the point about how dramatically the character of these markets has been altered, and how much real estate development is at the center of it*.

to take the fact that home real estate was at the center of the most recent crisis and to use that to zero in specifically on suburban development, including strip malls, etc., seems like substituting the part for the whole

Well, actually the specific subject Jeff mentions is commercial real estate. But both housing and commercial real estate are overbuilt. There is a serious excess of supply precisely at a time when demand is shrinking; which can only mean what we have all seen -- a ruinous deflation of related asset values.

Now consider the blunt summary of that Bloomberg report I linked to above:

The bundling of consumer loans and home mortgages into packages of securities -- a process known as securitization -- was the biggest U.S. export business of the 21st century. More than $27 trillion of these securities have been sold since 2001... That's almost twice last year's U.S. gross domestic product of $13.8 trillion.

So this is one seriously big part of the whole we're talking about here.

__________

* The relation of commercial paper to housing finance may seem rather obscure, but keep in mind my rough analogy of CP as the "deposits" for shadow banking. It was the short-term borrowing that allowed the shadow banks to finance their investments and speculations in the securitization markets.

Mike, let's add to your fine discussion the fact that the one growth industry we do have is government. DC is bound to continuing growing. It may well replace NYC as the country's banking capital. It may well replace Detroit as out auto industry center. Etc. So DC-Maryland-Northern Virginia is a really unique situation.

A currency backed by several different precious and valuable metals ranging from gold to copper.

Well, I suppose it might work. Except the details seem difficult. The need for copper skyrocketed with the development of electricity and phone wires. Likewise, the demand for copper is in the process of dropping because of fiberoptics and some ceramics. Silver demand rose with photography - but then digital cameras are making that obsolete. As our technology substitutes man-made for metal materials, metal as a value basis seems ... shortsighted. As I understand it, in real (non-inflationary) terms, the prices of several metals are now lower than they were 35 years ago.

The money supply need not "keep up" with the creation of wealth as much as you might think.

It's not so much that we need to keep the money supply as a whole up with wealth creation precisely that I worry about. It is that each component of the money supply is subject to fluctuation and variation that really has little to do with the economy as a whole. So, it would seem, that the money system would be constantly undergoing adjustments that make hash of efforts to save and plan. So, the basic question is: just what is it that an ideal monetary basis will do? And does a metals system do that?

It's also my understand that, adjusted for inflation, our economy has not grown anywhere near as much as one might think.

Yeah, I think the same. But even a 1% change per year means a heck of a lot over the life of a 30-year mortgage. (Which, by the way, points to something Maximos should have jumped on but failed to: ANY inflation rate at all, as an intentional effect of monetary policy, is essentially stealing from the lenders to give to the debtors (and the government, of course). But the effect is truly significant only with the long term loans for homes and large capital expenditures. So, who is doing the oppressing, and who is being oppressed, by a money policy that encourages an inflationary standard?) So, maybe as a fix to the monetary fiddling that has been foisted on us, we should push strongly for shorter loans across the board. No more than 15 years for homes (which would get the mortgage out of the way before college costs, for most families). Any takers? Would that work?

Sprawl is a serious issue in some metropolitan areas. Fighting it is difficult because governments, especially the legislatures, don't operate rationally with an engineer's eye for planning ahead.

I think telecommuting is going to solve this problem within 30 years. In my little office unit of 11 people, 6 are sited in places at least 200 miles away. 2 on the left coast.

Mike, I live a few miles south of you in VA. I have watched Prince William County make the same mistakes that Fairfax was the posterchild for, and I am now watching Stafford County do the exact same. It's like they can't even think about what went wrong elsewhere. (Such as expecting to initiate the process to build new infrastructure after demand is already established and depressing functionality.)

Paul, I think I agree with your point in your latest: whatever the real estate market used to be , what with mortgage interest deductions, and FHA, and VA loans, and then Freddie Mac, and Fannie Mae, and forcing banks to lend to sub-prime lendees, and finally buying up MBS, there is a case that the whole thing is a government artifice more than it is a market.

Suppose, for a moment, that we decided to be incredibly radical and get the government out of all this, and let the real estate market function on its own. Now, would that do away with Maximos's point about the meaning of ownership of property?

I don't think so. I think that the whole issue of development as building new commercial or new home buildings is a red herring for that point. If land ownership means essetially and solely that I "cannot be thrown off the land" and nothing more, then every farmer who watches government impose pesticide restrictions without sound science, and every rancher who watches his water rights being diluted, and every lumber company who is told that they have to stop cutting their own trees to save the snail darter, has NO ISSUE at all. Those aren't your property rights, buddy. Nobody is throwing you off your land, so stop kicking. They are still your trees, you can put up a hammock on them and enjoy the view.

No, ownership of property doesn't mean that I cannot be kicked off of it, and rest there. It means that I can use it . If I have a use in mind that has been accepted for decades as legitimate, and the government now comes along and says: sorry, we no longer think that what you have in mind is acceptable because we think that use isn't as good as leaving it the way it is right now, that constitutes a taking. Plain and simple.

"the dynamic with which I am concerned here is the one which sees the mandarins of conservatism and the GOP invariably channel the populist discontents of the base, which ever since Ross Perot have been on the verge of boiling over on account of precisely the political economy of globalizing Wall Street Lords of Usury and its consequences (most visibly with respect to immigration), into purely cultural channels."

Tru dat. Note the tendency for many conservative talking heads to sound like a cross between Milton Friedman and Jerry Falwell, and the fact that one will likely be slapped down sooner and harder by them for questioning the dogmata of the former.

Populism and true conservatism have many points of contact and a fair amount of overlap. Mainstream GOP conservatism, however, being largely self-serving, strives to limit discussion of this overlap to cultural matters.

Paul, I would note a number of things: First, the more radical interventions you mention are the most recent (I believe the word used is "hysterical") discussed in that WSJ article, whereas that author very cleverly lumps the incredibly heated-up government approach to mortgage lending, etc., in more recent years with everything back to past WWII under the heading of "government programs" and even implies that in the 1960's government was massively, but hiddenly, giving people their mortgages while allowing them to think they were doing it through their own hard work. This is truly bizarre, considering that they could tell if they were working hard and saving up before buying a home, whether they were getting their loan through Fannie Mae, and so forth. Second, you discuss what sure looks like a rather eye-popping government prop-up of GE, but that just supports my point about the corruption of government prop-ups throughout the economy and the fact that we still do not say that every industry thus helped out or messed with is, in what you now seem to admit was a deliberate overstatement, "a government welfare project." Third, again, real estate is everywhere, and the government pushing down of interest rates affected it everywhere. Indeed, as I keep pointing out, some of the government's most direct and most unsound interventions (making banks make shaky loans to help minority buyers) were meant to push it down in ways more likely to affect cities than suburbs. So I continue to ask, "Why pick on the suburbs?"

In response to Mike T, I'll simply point out that his suggestions involve something like the sorts of government encouragements of one lifestyle over another (taxing people on the miles they drive even if they have a fuel-efficient car, for goodness sake!) that, when done on the other side, are now being used (in the WSJ article) to point an accusing finger at the last 70 years or so of government policy for encouraging what is now viewed as a supposedly "non-market" trend to live in the suburbs! (These proposals also come oddly from a self-described committed libertarian, but perhaps I'm confusing Mike T with a different commentator.) In fact, I would say that tax breaks for mortgage interest are a lot less of a government push against human nature than punitive taxes for driving "too far" to your job! I admit to not having heard of BRAC before, so I'm playing catch-up, but what I see so far is hardly encouraging. It looks like a government job-creation program (correct me if I'm wrong) meant to try to concentrate jobs in already-more-populated areas. I even saw one site refer to it as "Building Really Awful Communities." Again, this is _far_ more easily and directly characterized as "government welfare program," with a highly specific social engineering aim no less, than high-level government speculating in the paper market which indirectly lowers interest rates on real estate generally.

In short, I find it rather wryly amusing that the alternative to general government encouragement of home ownership, which is now being characterized as bad, is fairly specific government punishment of commuting and direct funneling of government money into trying to hire people so they will populate already populated areas. This just doesn't look promising to me, and, yes, I think it's a lot less of a true and real market thing than what is called "sprawl." Still, yes, I think that.

Finally, Tony makes an excellent point when he goes back to the whole question of the conception of property in the main post. An excellent point indeed. And I will continue to maintain it, too. No, it is not a "desiccated" view of property rights to view them as having something to do with what you can _do_ with your property, what you had every reason to think when you bought it you _could_ do with it. And I would add to that list, re-selling it, which seems especially to draw Maximos's ire. I believe it is a _legitimate_ part of property rights and of the value we place on property that we expect to be able to do certain things with the property. And I think it's perfectly legitimate to look around at what is going on in the market and decide whether property purchased for re-sale is a good investment, and to make that investment, without having the whole thing then jerked back from you by government on the basis of some other "value." Let me add that I'm just as opposed on the other side to government's re-zoning some farmer's fields as commercial and then forcing him off them gradually by new, exorbitant property taxes so the town can sell the land to Wal-Mart. That, too, I view as a "switcheroo." But I continue to maintain that we should keep separate the question, "Has the government at some high level interfered in the finance market, which has inflated the right-now resale value of your property?" from the question, "Is the right-now resale value of your property a legitimate part of the conception of property rights?" Where the re-sale value came from is one thing. Whether it should be considered a legitimate interest of yours in government policy regarding takings is another thing. I would point out, in support of this point, that the two questions can concern government at entirely different levels, with the state or local government considering doing what I criticize as a devaluing of the property and the federal government engaging in monetary shenanigans that cause inflation. Of course, specific agencies of the federal government does such devaluing, too, in environmental and other contexts. But the two issues really are quite distinct, and should be kept so for clarity of thought.

In short, I find it rather wryly amusing that the alternative to general government encouragement of home ownership, which is now being characterized as bad, is fairly specific government punishment of commuting and direct funneling of government money into trying to hire people so they will populate already populated areas.

I don't know where this alternative came from, but it wasn't me. The only Mike T policy proposal I said anything about what the idea of shifting taxation from straight property taxes to some kind of excise or transactional tax. I said that was interesting but faced manifest hurdles that gave me grave doubts about it.

Nor do I have any problem with Tony's point about the usage of property as a part of the right to it. But having a right to the use of property is not the same as having a right to exchange the value of that property. Speculative land development is extremely dependent on the exotic methods invented to make it appear as though real estate was as trade-able as a security.

I might set up a hierarchy of property rights, the right to possession being nearly absolute, the right to use being very strong, but the right of liquid exchange being constrained by factors related to the nature of property itself.

So it is one thing to be free to improve your property; it is quite another to be free to convert your improvements instantly into equity wealth which is as liquid as shares in a company; and it is still another altogether to be free (as the bank holding the note) to run the mortgage on the property through a meatgrinder of mathematical abstractions and formulas, which comes out the other side as a fraction of a massive off-balance-sheet global system of finance.

In other words, the idea that the use of property must include the fractional "use" made by some Icelandic which has invested in a bundle of mortgages, including the one attached to said property, is very dubious to me.

Also, Tony has very admirably summarized my view:

"Whatever the real estate market used to be, what with mortgage interest deductions, and FHA, and VA loans, and then Freddie Mac, and Fannie Mae, and forcing banks to lend to sub-prime lendees, and finally buying up MBS, there is a case that the whole thing is a government artifice more than it is a market."

I continue to maintain that we should keep separate the question, "Has the government at some high level interfered in the finance market, which has inflated the right-now resale value of your property?" from the question, "Is the right-now resale value of your property a legitimate part of the conception of property rights?"

That's fair. My counsel would be that we reassert the old idea of property as a storehouse of value, and that we concomitantly approach much more cautiously this new-fangled notion of property as valuable according what it is worth at exchange.

How new-fangled is it, though? I'm asking this question seriously. I know that in my town it has apparently for time out of mind been the case that when the city calculates the value of your home for property tax purposes, the city is supposed to use the market value at that time. Fortunately for all the elderly people who would otherwise be run out of their homes because of exorbitant property taxes, the people passed a state constitutional amendment in the 90's that capped the rate at which the taxable value could grow as long as the house doesn't change hands to the growth in, I think it is, the Consumer's Price Index for the year. But when the home is sold, the city is permitted and in fact required to re-appraise it for starting to tax the new owner (a house warming present!) at its present market value. Market value as an indication of property value isn't something I think of as new-fangled at all but rather as pretty well-established.

I work in an area of the law where we are forced to measure property value for legal purposes. The general rule is, and has been for a great many years (back to the 30's at least), the price between a willing buyer and a willing seller, both being reasonably aware of the facts and neither being under constraint to act.

The point is, whatever we may want to ascribe to property in its having value apart from any transaction, the measure of that value is extremely difficult to encompass without reference to sale/exchange.

Which I do not think is the final say about the matter. People often have sentimental attachment to property that would never convert into selling price - and these people typically hold on to their land far longer than a non-attached person would. They have set their value differently - and that's OK.

Paul, I agree that there is a difficulty with a land-owner saying: wait a minute, your putting up a highway 1/2 mile away from my property is going to make my property less desirable, so I will not be able to sell it for as much as I would have otherwise. Part of the reason I think this is inappropriate is that this sort of thing happens all the time without government action, and nobody considers it a "taking", when done within reason. If I own a rural property, and the guy upwind of me puts up a chicken farm (with its attendant manure), my land is going to lose some of its value. But since a chicken farm is normal for rural land, I don't really have a complaint that bears acting on. Unless I offer to bear the cost of some manure containment system for my neighbor, I am stuck.

On the other hand, it is another thing entirely if a guy buys the land to put in a chicken farm on farmland, and then along comes the government and says, we know this is zoned for farm use, but we don't think a chicken farm is quite what we want this close to a park down the road, so we are changing the zoning on you. Can't you see that this is a taking?

I might agree whole heartedly that the government is RIGHT in their estimation that the chicken farm is too close to the park. In which case, I also wholeheartedly agree that the community that is saying we want to change the zoning is also the community that should be saying we should compensate the farmer for taking away the use that he thought he was buying.

How new-fangled is it, though? I'm asking this question seriously. I know that in my town it has apparently for time out of mind been the case that when the city calculates the value of your home for property tax purposes, the city is supposed to use the market value at that time. Fortunately for all the elderly people who would otherwise be run out of their homes because of exorbitant property taxes, the people passed a state constitutional amendment in the 90's that capped the rate at which the taxable value could grow as long as the house doesn't change hands to the growth in, I think it is, the Consumer's Price Index for the year. But when the home is sold, the city is permitted and in fact required to re-appraise it for starting to tax the new owner (a house warming present!) at its present market value. Market value as an indication of property value isn't something I think of as new-fangled at all but rather as pretty well-established.

That approach has been around since Prop. 13 in California (1978), which was spurred by government-created inflation. This "new-fangled" notion of property as valuable according what it is worth at exchange is several hundred years old. At least for eminent domain purposes, property was generally valued at market value except by some states (inconsistently) during the colonial era (as far as I know).

Thanks Perseus and Tony. That was what I thought. If anything is "new-fangled," it's the new limitations on the use of market value for taxation purposes--e.g., the 1978 proposal Perseus mentions and Michigan's proposal A in the mid-90's. Using market value for property value, on the other hand, is ancient stuff.

The new-fangled part is the idea of real estate property as including in its value the fact that it has been converted into securities and run through "a meatgrinder of mathematical abstractions and formulas," so that when it "comes out the other side" is it "as a fraction of a massive off-balance-sheet global system of finance." That's what's new-fangled.

As for a market value, I submit what I argued way upthread: that market value as a definite concept embracing some notion of an actual free market, is a term whose usefulness may have ended. Real estate in America is not a free market anymore; it would be closer to the truth to call it an experimental hybrid of policy and finance and market. What will come of all this is anybody's guess.

When I said that we should set aside the "notion of property as valuable according what it is worth at exchange" I did not mean a standard transaction of buyer and seller of that actual property. I meant the idea of property as the origin of a debt security, a revenue stream in global finance, which can be traded, hedged, bundled, etc. -- all in order to chase fractional differences in yield. I meant what that Bloomberg reports calls "the biggest U.S. export business of the 21st century" -- this introduction of all the liquidity and speculation of stock markets into the mortgage bond market, so that real estate property could be traded almost like digital poker chips in the High Finance capitals of the world.

I do apologize for the quite common lack of clarity in my terminology and illustrations. I've been rightly called out for it a number of times. I wish that the subject were more susceptible to summary and analogy, to the tools of explanation, but it just isn't. Anyone who has read up on this stuff with an eye toward trying to synthesize and summarize it, will quickly find his abbreviations unsatisfactory and his illustrations deeply flawed. I've spent a year at it and only made halting progress. We need a financial writer with the subtlety of an Oakeshott and the analogic genius of a Chesterton to untangle this mess.

Lydia,

In short, I find it rather wryly amusing that the alternative to general government encouragement of home ownership, which is now being characterized as bad, is fairly specific government punishment of commuting and direct funneling of government money into trying to hire people so they will populate already populated areas.

There are two factors you didn't consider here before criticizing what I said:

1) Commuting is already penalized through gas taxes, albeit less directly than just charging based on mileage. Charging based on mileage is actually more capitalist because it is closer to taxing the commuter for their use of roads than the gas tax is. A hybrid that gets 30mpg uses the road just as much as a Hummer that gets 12mpg, but is taxed less for nearly the same consumption.

2) Metro DC's largest employers are mostly federal agencies and contractors. Therefore the majority of money spent on breaking up the sprawl by encouraging workers to leave to different regions is going to be government money. Furthermore, I did not advocate the general use of public money, but rather giving tax incentives to companies to relocate to less populated areas. Lastly, my other proposals on fighting sprawl and transportation hassles were explicitly free market solutions such as providing a framework in which private companies can set up alternatives such as light rail or bus routes.

***Taxing miles driven could be handled equitably for smaller vehicles with this formula:

tax_bill = {[(vehicle_weight / 1000.00) * mileage] * per_mile_base_constant}

I don't know where this alternative came from, but it wasn't me. The only Mike T policy proposal I said anything about what the idea of shifting taxation from straight property taxes to some kind of excise or transactional tax. I said that was interesting but faced manifest hurdles that gave me grave doubts about it.

In the worst case scenario, it would take a constitutional amendment to enable the legislature to impose such a regime top-down on local governments. In Virginia, IIRC, those are handled by referendum at state elections, but it is my understanding that our legislature already has the authority to impose tax law changes on local governments.

Not surprisingly, I find just about everything in this post to be wrong-headed and where it makes factual claims (e.g. “…an economy a mere 25% of which is actually productive) these claims are obviously question begging and fantasies of the blog post author. Lydia and Tony have already pointed out the important conceptual flaws in Maxmios’ reasoning (e.g. why complain about government “subsidizing” suburbanization over the past 25 years as opposed to government subsidizing canal building in the 1700s, railroads in the 1800s, the interstate system 1900s, etc. – in other words, why stop at exurbs when taken to their logical conclusion Maximos’ arguments are really an attack on all integration and economic growth) and since I’m on vacation in bucolic Chapel Hill, North Carolina and have been driving through the scenic hills outside town with my mother-in-law’s delightfully old-fashioned hippy husband who never ceases to let loose with yet another anti-development/anti-sprawl jeremiad, my patience for engaging such arguments has already worn thin.

Instead, I think it might be useful to directly and forcefully counter the central claim of this post with a view from 10,000 feet. To do so, I’m fortunate to have the book I brought with me on this vacation: the wonderful “The Mystery of Capital” by Hernando de Soto, who is one of the leading lights of free-market reform in the third world. De Soto’s central argument for what is wrong in developing countries goes right at the heart of Maximos’ claims for de Soto believes that what really retards development in the third world is their screwed up property systems which actually obscure trillions of dollars of wealth. Here is de Soto summarizing his argument:

Imagine a country where nobody can identify who owns what, addresses cannot be easily verified, people cannot be made to pay their debts, resources cannot conveniently be turned into money, ownership cannot be divided into shares, descriptions of assets are not standardized and cannot be easily compared, and the rules that govern property vary from neighborhood to neighborhood or even from street to street. You have just put yourself into the life of a developing country or former communist nation; more precisely, you have imagined life for 80 percent of the population…This 80 percent majority is not, as Westerners often imagine, desperately impoverished. In spite of their obvious poverty, those who live under the most grossly unequal regimes possess for more than anybody has ever understood. What they posses, however, is not represented in such a way as to produce additional value. When you step out the door of the Nile Hilton, what you are leaving behind is not the high-technology world of fax machines and ice makers, televisions and antibiotics. The people of Cairo have access to all those things.

What you are really leaving behind is the world of legally enforceable transactions on property rights. Mortgages and accountable addresses to generate additional wealth are unavailable even to those people in Cairo who would probably strike you as quite rich. Outside Cairo, some of the poorest of the poor live in a district of old tombs called “the city of the dead.” But almost all of Cairo is a city of the dead – of dead capital, of assets that cannot be used to their fullest. The institutions that give life to capital—that allow one to secure the interests of third parties with work and assets—do not exist here.

He goes on to expressly make the argument that it is the Western world’s “dessicated and abstract conception of property” that allows us to finance much of our wealth and growth. Maximos is wrong precisely in his notion that property should only be considered “with place and its ties, or with productivity, or the stability of a family.” In the West it has for hundreds of years been used to finance “speculative returns”, which is really just another way of saying investment (I know Maximos will try and tell you there is some magic formula that somehow separates productive investment from non-productive investment, when there is really only varying rates of return on different forms of investment, whether you invest a dot-com start-up, pork belly futures, coal power plants, condo development, or mutual funds). Can people make bad investments? Of course they do and whether it is tulips or residential/commercial real estate, there will always be speculative bubbles. The key is not to use government policy to support the creation of such bubbles, i.e. CRA, GSEs (Fannie and Freddie) and all the other myriad ways in which the government decided that more and more people had to own their homes whether or not it was a good idea for them to be taking out risky mortgages.

I’ll close with de Soto:

...capital is not the accumulated stock of assets but the potential it holds to deploy new production. This potential is, of course, abstract. It must be processed and fixed into a tangible form before we can release it…Capital, like energy, is also a dormant value. Bringing it to life requires us to go beyond looking at our assets as they are to actively thinking about them as they could be. It requires a process for fixing an asset’s economic potential into a form that can be used to initiate additional production…In the West, this formal property system begins to process assets into capital by describing and organizing the most economically and socially useful aspects about assets, preserving this information in a recording system—as insertions in a written ledger or a blip on a computer disk—and then embodying them in a title. A set of detailed and precise legal rules governs this entire process. Formal property records and titles thus represent our shared concept of what is economically meaningful about any asset. They capture and organize all the relevant information required to conceptualize the potential value of an asset and so allow us to control it. Property is the realm where we identify and explore assets, combine them, and link them to other assets.

Any asset whose economic and social aspects are not fixed in a formal property system is extremely hard to move in the market. How can huge amounts of assets changing hands in a modern market economy be controlled, if not through a formal property process? Without such a system, any trade of an asset, say a piece of real estate, requires an enormous effort just to determine the basics of the transaction: Does the seller own the real estate and have the right to transfer it? Can he pledge it? Will the new owner be accepted as such by those who enforce property rights? What are the effective means to exclude other claimants? In developing and former communist nations, such questions are difficult to answer. For most goods, there is no place where the answers are reliably fixed. This why the sale or lease of a house may involve lengthy and cumbersome procedures of approval involving all the neighbors. This is often the only way to verify that the owner actually owns the house and there are no other claims on it. It is also why the exchange of most assets outside the West is restricted to local circles of trading partners.

…I have seen that the formal property systems of the West produce six effects that allow their citizens to generate capital.

Property Effect No. 1: Fixing the Economic Potential of Assets

Capital is born by representing in writing—in a title, a security, a contract, and in other such records—the most economically and socially useful qualities about the asset as opposed to the visually more striking aspects of the asset. This is where potential value is first described and registered. The moment you focus your attention on the title of a house, for example, and not on the house itself, you have automatically stepped from the material world into the conceptual universe where capital lives…The proof that property is pure concept comes when a house changes hands; nothing physically changes. Looking at a house will not tell you who owns it. A house that is yours today looks exactly as it did yesterday when it was mine. It looks the same whether I own it, rent it, or sell it to you. Property is not the house itself but an economic concept about the house, embodied in legal representation. This means that a formal property representation is something separate from the asset it represents.

What do formal property representations have that allows them to do additional work? Are they not just simple stand-ins for the assets? No. I repeat: A formal property representation such as a title is not a reproduction of the house, like a photograph, but a representation of our concepts about the house. Specifically, it represents the nonvisible qualities that have the potential for producing value. These are not physical qualities of the house itself but rather economically and socially meaningful qualities we humans have attributed to the house (such as the ability to use it for a variety of purposes that can be secured by liens, mortgages, easements, and other covenants).

[At the beginning of the book, de Soto reminds us that the “single most important source of funds for new businesses in the United States is a mortgage on the entrepreneur’s house.”]

In advanced nations, this formal property representation functions as the means to secure the interests of other parties and to create accountability by providing all the information, references, rules, and enforcement mechanisms required to do so. In the West, for example, most formal property can be easily used as collateral for a loan; as equity exchanged for an investment; as an address for collecting debts, rates, and taxes; as a locus point for the identification of individuals for commercial, judicial, or civic purposes; and as a liable terminal for receiving public utility services, such as energy, water, sewage, telephone, or cable services. While houses in advanced nations are acting as shelters or workplaces, their representations are leading a parallel life, carrying out a variety of additional functions to secure the interests of other parties…With legal property, the advanced nations of the West had the key to modern development; their citizens now had the means to discover, with great facility and on an ongoing basis, the most potentially productive qualities of their resources. As Aristotle discovered 2,300 years ago, what you can do with things increases infinitely when you focus your thinking on their potential. By learning to fix the economic potential of their assets through property records, Westerners created a fast track to explore the most productive aspects of their possessions. Formal property became the staircase to the conceptual realm where the economic meaning of things can be discovered and where capital is born.

Property Effect No. 2: Integrating Dispersed Information into One System

…Over decades in the nineteenth century, politicians, legislators, and judges pulled together the scattered facts and rules that had governed property throughout cities, villages, buildings, and farms and integrated them into one system. This “pulling together” of property representations, a revolutionary moment in the history of developed nations, deposited all the information and rules governing the accumulated wealth of their citizens into one knowledge base…As a result of integration, citizens in advanced nations can obtain descriptions of the economic and social qualities of any available asset without having to see the asset itself. They no longer need to travel around the country to visit each and every owner and their neighbors; the formal property system lets them know what assets are available and what opportunities exist to create surplus value. Consequently, an asset’s potential has become easier to evaluate and exchange, enhancing the production of capital.

Property Effect No. 3: Making People Accountable

By transforming people with property interests into accountable individuals, formal property created individuals from masses. People no longer needed to rely on neighborhood relationships or make local arrangements to protect their rights to assets. Freed from primitive economic activities and burdensome parochial constraints, they could explore how to generate surplus value from their own assets…People who do not pay for goods or services they have consumed can be identified, charged interest penalties, fined, embargoed, and have their credit ratings downgraded. Authorities are able to learn about legal infractions and dishonored contracts; they can suspend services, place liens against property, and withdraw some or all of the privileges of legal property.

Property Effect No. 4: Making Assets Fungible

Unlike physical assets, representations are easily combined, divided, mobilized, and used to stimulate business deals. By uncoupling the economic features of an asset from their rigid, physical state, a representation makes the asset “fungible”—able to be fashioned to suit practically any transaction…Formal property rules require assets to be described and characterized in a way that not only outlines their singularity but also points out their similarity to other assets, thus making potential combinations more obvious…Representations also enable the division of assets without touching them…Citizens of advanced nations are thus able to split most of their assets into shares, each of which can be owned by different persons, with different rights, to carry out different functions.

Property Effect No. 5: Networking People

Few seem to have noticed that the legal property system of an advanced nation is the center of a complex web of connections that equips ordinary citizens to form ties with both the government and the private sector, and so to obtain additional goods and services…Many title systems in developing nations fail to produce capital because they do not acknowledge that property can go way beyond ownership. These systems function purely as an ownership inventory of deeds and maps standing in for assets, without allowing for the additional mechanisms required to create a network where assets can lead a parallel life as capital.

Property Effect No. 6: Protecting Transactions

One important reason why the Western formal property system works like a network is that all the property records (titles, deeds, securities, and contracts that describe the economically significant aspects of assets) are continually tracked and protected as they travel through time and space…Although they are established to protect both the security of ownership and that of transactions, it is obvious that Western systems emphasize the latter.

(These proposals also come oddly from a self-described committed libertarian, but perhaps I'm confusing Mike T with a different commentator.) In fact, I would say that tax breaks for mortgage interest are a lot less of a government push against human nature than punitive taxes for driving "too far" to your job! I admit to not having heard of BRAC before, so I'm playing catch-up, but what I see so far is hardly encouraging. It looks like a government job-creation program (correct me if I'm wrong) meant to try to concentrate jobs in already-more-populated areas. I even saw one site refer to it as "Building Really Awful Communities." Again, this is _far_ more easily and directly characterized as "government welfare program," with a highly specific social engineering aim no less, than high-level government speculating in the paper market which indirectly lowers interest rates on real estate generally.

I don't know what BRAC you are referring to, but the one I am referring to is the military base realignment commission. It's doing precisely the opposite of what you said, as it is moving a lot of personnel AWAY from metropolitan DC, not toward it.

BTW, Lydia, WRT taxing driving, there are three scenarios:

1) No special taxes, thus all roads are built from general funds. This means the people who don't drive will pay for something that they don't directly use.

2) Taxing gas consumption. This is an environmentalist policy aimed at attacking as guzzlers.

3) Taxing mileage. This is a tax on road use.

The first scenario is unfair to those who don't drive. The second scenario is a blatant assault on vehicle choices. The third scenario hits anyone who lives far away from where they work, but is fairer in that it hits them up for how long they are on the road and something approximating their wear and tear on the road.

You might say that the tax cannot be fairly divided up between the states where someone drives, but as I am not particularly sympathetic to the states on tax enforceability issues (it is their job to find a way to make it work, not the private citizen's), I see no reason why the state of residence cannot collect all of the tax revenue booty for their residents' mileage.

My point about taxing commuters is simply an observation of how the tax code could be structured to achieve a particular desired result. I personally prefer a system where people are taxed in a matter that resembles a user fee for their actual use of the public resource. My civic is less efficient than a smart car, but if you drive a smart car to metro DC from Winchester, you are on the road for about 5-6 times longer everyday than I am and putting more wear on it. Therefore you should pay more taxes than me.

Jeff,

I appreciate the refresher course on De Soto, whom I've not read in some years, but the point of the post was not to denounce investment, nor any conception of property as being 'capital', in the sense of comprehending its potential uses and values, or indeed of any of the other benefactions of property rights mentioned above, but to denounce a conception of property which comprehends only, or primarily, property as capital and potential capital, and always privileges this conception in any conflict between goods. Moreover, the notion of 'speculation' employed in the post was intended to critique people who whinge that any such balancing of goods is a 'taking', because it might impinge upon the exchange-value of that property, conceived not as capital in the sense that it is somehow contributing to the stock of productive capacity, but as a mere difference between as-yet unrealized, hypothetical values.

I lucky to read your post now, full of story, top tips that you tell to me, and also I got the experience that influenced by your sentence to sentence, i want to see the other post in the future that hand written by you

I think your post is great to me, full of benefiits