Bacon's Rebellion

Democracy Thrives in Sunlight

WRONG SIZE HOUSE, WRONG LOCATION

—

by

James A. Bacon
in

On 31 October CNNMoney.com reported that First American CoreLogic had found 7.5-million home mortgages already “underwater” and another 2.1-million that were on the brink. The International Herald Tribune story cited in EMR’s post “WaPo and IHT Housing and Mortgage Coverage,” 29 October on this Blog pegged the potential for underwater mortgages by 2010 at 19-million.

The CoreLogic report provides underwater numbers by state:

An astounding 49.8% of all mortgages in Nevada are underwater – talk about gambling…

An equally astounding 4.1 million underwater mortgages are in the top five states. These states include Florida and California, two jurisdictions that are often mentioned as leaders in the propagation of dysfunctional settlement patterns at Regional scale.

The two states with the lowest percentage of underwater mortgages were New York and Hawaii.

In New York State (4.4% of mortgages underwater) one factor may reflect Rockefeller administration concern for settlement patterns forty years ago – we did not call it that at the time but that is what was a primary concern as it had been in 1926. Modest rates of Regional growth over the past 40 years in most New Urban Regions that fall all or part with in New York State also helps. Hyper growth yields hyper dysfunction. (Connecticut, New Jersey and Pennsylvania which also have territory in the New York New Urban Region are also in the bottom 10 of underwater mortgages). Another factor is aggressive pursuit of mortgage, insurance and other venues for Enterprise fraud by New York State.

In the number two state, Hawaii (5.6% of mortgages underwater), the settlement patterns are nearly as useful as those of Western Europe for demonstrating the principles of intelligent settlement patterns. This is in spite of real estate churn and flux due to Asian investing. (If they could just get a robust shared-vehicle system up and running in the Oahu New Urban Region…)

EMR uses the terminology “Wrong Size House, Wrong Location” as shorthand for the Affordable and Accessible Housing Crisis and the root cause of the mortgage meltdown. So far it has been ‘Wrong Location’ more than ‘Wrong Size House’ that has shown up in the foreclosure data.

The reason appears to be that a reluctance on the part of mortgagors to foreclose on Big houses in poor locations. The reason may be that in the current market they can not be resold. There are buyers for less expensive dwellings. Frequently the notice of foreclosure sale is followed by a notice of a resale for about the same price – some even higher than the foreclosure price.

That fact indicates special impacts on Households with low Institutional Capacity. Foreclosures of cheap houses in poor locations appear to have an especially big impact on minority homeowners. In the Subregional press, Hispanic surnames are much more frequent in foreclosure notices than in the population in general. Antidotal evidence suggests flight from the inhospitable environment created by Prince William County resulted in imprudent debts.

Prince William’s target may have started out to be ‘illegals’ but the impact appears not to be confined to illegals by any stretch.

Of the 25 counties with the highest rates of increase in Hispanics from 2000 to 2007 in the entire US of A six are in the Virginia portion of the National Capital Subregion. Three are adjacent to Prince William County and two others are not far away.

EMR has stated that those components of urban settlement where SYNERGY has identified high percentages of foreclosure are orphan subdivisions in dysfunctional locations vis a vis Jobs / Services / Amenity.

The pictures used to illustrate MainStream Media coverage of the mortgage meltdown look like poster children for settlement pattern dysfunction but that is not a statistically valid guide.

State-wide and municipal / Planning District data can misleadingly mask what is happening in the organic components of a New Urban Region.

Here is an exercise for those who have any doubt about the Wrong Location part of the Wrong Size House / Wrong Location paradigm:

Locate Cluster-scale, Neighborhood-scale and Village-scale urban agglomerations with high percentages of foreclosures. Then determine, based on Google Maps or other resources, if these places are in components of urban settlement that have any chance of becoming contributors to the evolution of Balanced Communities.

EMR

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49 responses to “WRONG SIZE HOUSE, WRONG LOCATION”

  1. Ray Hyde Avatar
    Ray Hyde

    Why does it matter if a home mortgage is underwater?

    Lots of things we buy turn out to be not worth what we paid.

    RH

  2. Groveton Avatar
    Groveton

    “The reason appears to be that a reluctance on the part of mortgagors to foreclose on Big houses in poor locations.”.

    I’ll try again. Big houses – regadless of what EMR thinks of their location – cost more than small houses. The people who buy bigger houses tend to have higher incomes and more assets. Statistically speaking. Since most states are “one recourse” states the lender has a choice. The lender can foreclose and take back the house. Or sue and demand that the mortgage be paid by selling the house and other assets. For example, if Bill Gates were “upside down” on his mortgage he could stop paying. The lender could foreclose and take back the house. Then the lender would sell the house and recover whatever they could. Or, the lender could sue Bill Gates over the mortgage. Then, the lender could force payment from all of Mr. Gates’ assets – not just the house.

    More wealthy people – who living big houses – don’t walk away as quickly as less wealthy people. Most of them have other assets that would be at risk. And lenders don’t foreclose. The lenders don’t want the house – they want their loan paid. And they are much better advised to follow the alternate path of suing the borrower.

    Dysfunctional human settlement patterns may make a big difference in society. However, that issue is far from the only issue at play here.

  3. Ray Hyde Avatar
    Ray Hyde

    “Then determine,….., if these places are in components of urban settlement that have any chance of becoming contributors to the evolution of Balanced Communities.”

    Any chance of becoming contributors, using what resources?

    Surely, any place that we decide should be a blanced community we can make a balanced community, using the magic of central planning and plenty of other people’s money.

    RH

  4. Ray Hyde Avatar
    Ray Hyde

    “Hispanic surnames are much more frequent in foreclosure notices than in the population in general. Antidotal evidence suggests flight from the inhospitable environment created by Prince William County resulted in imprudent debts. “

    Another case where there is a lot more at play than EMR’s oversimplified and scattershot “analysis” suggests.

    RH

  5. Ray Hyde Avatar
    Ray Hyde

    You think there is any connection between the high rate of foreclosures in California and Florida to the fact that citizens in those states pay a much higher proortion of their income for electricity?

    RH

  6. Larry G Avatar
    Larry G

    re: “….More wealthy people – who living big houses – don’t walk away as quickly as less wealthy people. Most of them have other assets that would be at risk. And lenders don’t foreclose. The lenders don’t want the house – they want their loan paid. And they are much better advised to follow the alternate path of suing the borrower.”

    EMR will, no doubt, be distressed to hear this… it’ll knock another 18-wheeler size hole in his world… and he’ll have to add yet another item to his “further review” article….

    besides.. Groveton.. who are you to try to bring some logic to this discussion?

    If you are not careful – the wizard is going to come out from behind the curtain and sock you.

  7. E M Risse Avatar
    E M Risse

    Groveton:

    You are right, of course, about recourse and so is Larry in re folks having other assests…

    The bigger issue is that what ever banks do if they are forced to value their assents, the value of the mortgage hits their bottom line.

    Those suits cost money and time — only the lawyers win.

    The point I was making is that the values of those Big Houses in bad locations have gone down, way down, but that does not show up in foreclosure data and the fact that it does not is used as an excuse to discount the importance of human settlement patterns.

    If anyone has any doubts about the validity of Regional Metrics and The New Urban Region Conceptual Framework — or the impact of human settlement patterns — see today’s WaPo Business section.

    If you can draw scaled circles on a map you can understand, if you cannot, flap away.

    EMR has never said human settlment patthern was the “only” thing in play, SYNERGY has just not found any one factor that — if understood — has more impact on economic prosperity, social stability and environmental sustainability.

    One other thing note for Groveton:

    According to WaPo those industrious Chineese you observed on a recent visit are scrambling.

    When the US of A cannot afford to buy stuff, even burning up Natural Capital is not enough to maintain an unsustainable trajectory.

    EMR

  8. Anonymous Avatar
    Anonymous

    “The point I was making is that the values of those Big Houses in bad locations have gone down, way down,…”

    What about big houses in good locations? Haven’t they gone down, as well? Big, expensive houses will go down more – because they have more downside, and less competition for ownership than smaller, more affordable homes?

    What happens when a big home goes down in value more than its neighboring smaller home? It becomes, relatively a better value for the money.

    The fact that big homes have gone down more than lesser homes doesn’t change the vlaue equation – except for those that bought “at the wrong time”.

    Even if your mortgage is upside down, you still have a home that, at the new current prices, is a better value than the neighboring home, that hasn’t reduced in value as much. If you bought susbsequent to the downturn, so much the better.

    By focusing on a single fact (large homes have gone way down) EMR is missing the overall picture. there is a lot more going on than where and how we live.

    RH

  9. Anonymous Avatar
    Anonymous

    Ray Hyde, the king of non sequiturs.

  10. Ray Hyde Avatar
    Ray Hyde

    A non sequitur is something that does not follow logically or has no relevance to the proceeding. For example, in this context,”Ray Hyde, the king of non sequiturs.” has no relevance.

    EMR stated that the value of big houses (in the wrong locations) had gone down, way down. We all know that location and value are key issues when it comes to price.

    I’m merely asking a question: if a big home goes down in value more than its neighboring smaller homw, then wouldn’t that mean that it is now a better value than the neighboring one which has declined less?

    At least that question has some relevance to the prevous discussion which EMR’s attempted anonymous insult does not.

    RH

  11. Anonymous Avatar
    Anonymous

    “At least that question has some relevance to the prevous discussion which EMR’s attempted anonymous insult does not.”

    Anon 1:44 is not EMR, Anon 1:44 just called me and he is sure EMR does not even know who he is.

    Anon 1:44 is, however, right about the non sequitur.

    Big House values, and smaller house values, have gone down less – or not at all – in quality locations as the data clearly shows.

    Get a grip Hyde. The issue is location.

    Anything else is non sequitor.

  12. Ray Hyde Avatar
    Ray Hyde

    OK. An anonymous insult is still an insult. An anonymnoun non sequitur is still a non sequitur. Even a wrong opinion with a name behind it carries more weight.

    The question remains. Consider two neighboring houses. Whether the location is good or bad, the larger house has declined in value more. Given that situation, is the larger hous NOW a better value?

    Seems like a pretty simple question, and location is not the issue, in this case, because we are talking about neihboring houses.

    Or is it simply that you do not think any large house is appropriate?

    Maybe Ihave a house with a garage big enough to play basketball in. I can play basketball half the night without disturbing the neighbors. It saves a hundred trips to the basketball court every year. Is that a waste?

    EMR’s insistence that ONLY location matters is just silly. The market considers lots of thoer factors, even if EMR doesn;t approve.

    RH

  13. Darrell -- Chesapeake Avatar
    Darrell — Chesapeake

    “Given that situation, is the larger house NOW a better value? “

    That depends, as I found out today. You could have a neighbor like mine. Seems they didn’t like the idea that they bought the house for a price based upon an appraisers report, which in hind sight was way overpriced. When they walked, they took all the appliances, hard wood floors, the granite, and anything else they could get. A realtor did a walkthrough and one of my RE neighbors tagged along, reporting back to the rest of us.

    Now when that house goes on the block, imagine what that will do for all the other houses around here. Condition doesn’t show up in sales reports.

    Oh yeah, USPS is laying off 40,000. Stand by for more agencies to start cutting back.

  14. Anonymous Avatar
    Anonymous

    As we recall from his work in Loudoun County Dr. Risse’s insight into loacation variables was based on “same house, same builder, different location.”

    Hyde’s hypothetical is just what Anon 1:44 suggests, a non sequitor intended to confuse and distract.

  15. Anonymous Avatar
    Anonymous

    “When they walked, they took all the appliances, hard wood floors, the granite, and anything else they could get.”

    That is exactly what happened to the only dwelling over $700,000 that we have see forclosed here.

    Now if that house was within walking distance of METRO, it would not have lost any, or not nearly as much value and Darrell would not suffer the consequences of locational dysfunction.

  16. Darrell -- Chesapeake Avatar
    Darrell — Chesapeake

    Sorry but I’m not buying that. I looked at several homes/condos for sale withing walking distance of at least two Metro stations. Asking price of 600k+. I found similar foreclosures, even in the same building, going for 429k or lower. I guess in EMR’s world a 33 percent markdown is not losing value.

  17. Anonymous Avatar
    Anonymous

    "… Asking price of 600k+. I found similar foreclosures, even in the same building, going for 429k or lower."

    Same size and condition unit?

    Which stations?

    How many in this condition?

    How much has value of F & F, AIG, GM, et al gone down?

  18. Larry G Avatar
    Larry G

    If there was any real correlation to what is claimed, it would seem not a difficult exercise for EMR to go pick one or two zip codes that he considered to have right-sized houses in the right locations and then to compare the “underwater” mortgages rate between the “right” places and some representative wrong-size/wrong-locations

    surely there must be some right-size/right-location places that can be demonstrated to have much lower “underwater” mortgages.

  19. Groveton Avatar
    Groveton

    If EMR’s point is that the foreclosure data are incomplete – I agree wholeheartedly. As has been noted, more expensive homes are more rarely foreclosed (in an official foreclosure action). However, lawsuits are filed which do not affect the foreclosure statistics. Moreover, foreclosure is an episodic symptom of a problem. A person who over-borrowed may be paying more and more of her disposable income for the mortgage. And that person may feel less and less financially secure as her main asset, her house, declines in value. Rational people caught in that situation will cut back on other purchases. While this might be good for stemming overconsumption, it put tremendous pressure on the American consumer-based economy. As the consumer spending slowdown accelerates, people are laid off (see USPS announcement) and they have yet less money to spend on anything – including the mortgage. So, our fictitious homeowner might have been on the slippery slope to foreclosure for a couple of years. The statistics that measure foreclosures fail to measure the growth of people on the slippery slope as well as non-foreclosure actions.

    The bottom line is that the problem is clearly bigger than even the depressing foreclosure numbers.

  20. Ray Hyde Avatar
    Ray Hyde

    The question is not intended to confuse and distract. I have no dowbt that similar houses, same builder, different locations will appreciate/depreciate differently.

    My question is about what consists of a wrong size house, given that location is NOT a differentiator. The title is after all “Wrong size house, wrong location.” Those are two different variables. Both relevant to the discussion. And therefore the question is not a non sequitur.

    Darrells story is a real horror show. Funny thing is that removing that stuff has almost no value. People who are in the house reclamation business will tell you that, depending on the tiping fees at the dump, you generally cannot afford to recycle building materials if you have to move them more than about thirty miles before re-use.

    How do you even get a hardwood floor up, without destroying it? Particularly since most of it is not hardwood floor at all, but an enginnered laminated material with hardwood veneer on top. I can tell you if you plan on taking one of my flooors up, you had better plan on taking the house with it: I use glue.

    In my Alexandria neighborhood there are a number of homes that have been supersized, alongside older and smaller homes. All in equally nice locations, and all with large lots. You can have an 800,000 home next to a 350,000 home. The larger home has farther to fall and seems likely to go down more. If this has happened, which one is now a better deal? Which one has more upside?

    RH

  21. Ray Hyde Avatar
    Ray Hyde

    The Value of Foreclosed Property: House Prices, Foreclosure Laws, and Appraisals

    Abstract

    "There are many factors that impact the value of foreclosed property. The simple fact that the property is foreclosed indicates that it will be sold at a substantial discount relative to similar properties. Loans that foreclose early in their life have the largest discounts. This discount is mitigated somewhat if the state allows deficiency judgments by lenders against borrowers. In contrast, the discount is larger if the property is being sold in a state that requires foreclosures to proceed through the judicial system. Lastly, there is indirect evidence that appraisals are more accurate for low down payment loans, leading to smaller discounts at foreclosure."

    Anthony Pennington-Cross
    Office of Federal Housing Enterprise & Oversight

    FYI

    RH

  22. Ray Hyde Avatar
    Ray Hyde

    From the same paper:

    “While much of the variation may be the result of heterogeneity in the real estate itself, other factors beyond the location and attributes of the property may also affect its value.”

    RH

  23. Larry G Avatar
    Larry G

    all other things that might be variables… still… if there are places that have the right sized homes in the right locations – there ought to be some statistics to back up the assertion.

    Folks can quibble about other factors … but the essence of the original premise – right sized in the right locations – ought to have some basis in fact.

    Otherwise, it’s not even a thesis because even a thesis provides some evidence sufficient to convince.

    i.e. there ought to be zip codes that are defined as the “right location” and within that zip – a preponderance of the homes are “right sized”.

    otherwise.., we are into heavy blather…and little more…IMHO

  24. Groveton Avatar
    Groveton

    OK Guys:

    Give me the facts. What nakes a right location? I drive about 8 miles each way to/from work. I don’t drive during the workday. Let’s say that I work in my hometown 250 days / year (I don’t but let’s make this easy). That 16 miles per day @ 250 days / year = 4,000 miles of commuting per year. Let’s say my car gets 20 mpg. That’s 200 gallons of gas per year for commuting. That seems pretty reasonable to me. But it entirely hinges on where I work. If I changed jobs and started working on Capitol Hill – it would look more like this:

    28 miles per day each way
    56 miles a day in total
    14,000 miles per year
    700 gallons of gas

    And that doesn’t even consider time spent in transit. In the former model, I spend about 25 minutes, door-to-door each way. If I worked on the hill I’d spend about 1:15 door-to-door each way. Changing jobs would cost me almost 450 more hours in commute time.

    Could I drive to a metro, park and then take the metro to the Capitol? Sure. It would take longer and (depending on parking in DC) cost a bit less perhaps.

    But, from a commuting perspective, the question of whether my house in in the right location seems to depend a lot on whether my job is in the right location.

    No?

  25. Larry G Avatar
    Larry G

    re: …”..Give me the facts. What nakes a right location?”

    careful there Groveton – you’re getting dangerously close to directly challenging EMR….

    you’ll know when you get there because you will be informed that you “refuse to learn” and are using stawmen arguments.

    but yes.. I can be somewhat persuaded by the “wrong size” conundrum … though we’re always going to have Castles and McMansions for those that can afford them.

    But the “wrong place” is a tougher deal….

    Say.. a guy lives in a bedroom community like Spotsylvania – and he also lives just a few miles from where he works….

    but the guy who lives next door to him.. works 50 miles away in NoVa.

    and let’s say.. just for the sake of argument that BOTH houses are pretty much the same… in size.. and value.. and that they are the “right size”.

    Does that make one of them in the “wrong place” and the other one not?

    It is things like this that I keep hoping EMR will weigh in on with some explanations.. rather than reverting back to that Alice in Wonderland persona and riddles…

  26. Anonymous Avatar
    Anonymous

    Groveton — As I understand the rules, if you take a job on the Hill, you should sell your house and move somewhere nearer your place of employment — preferably Washington, D.C., but possibly Maryland or Arlington.

    But what about your kids’ schooling? What if they like current schools or just got the lead in the new school musical? What if someone were also to offer your spouse an incredbile opportunity in Reston or Herndon? Does right place living require divorce rather than commuting? What if you built the house of your dreams and plan to retire there in 12 years? Suppose you are active in your local swim club, Little League, or even harbor ambitions to challenge Margi Vanderhye for state delegate in 2009. What then?

    This topic is plain silly. Let’s see EMR’s study or reference to one that correlates location to underwater mortgages or even forclosures.

    TMT

  27. Ray Hyde Avatar
    Ray Hyde

    “But, from a commuting perspective, the question of whether my house in in the right location seems to depend a lot on whether my job is in the right location.”

    🙂

    “you will be informed that you “refuse to learn” and are using stawmen arguments.”

    :-), 🙂

    “Does that make one of them in the “wrong place” and the other one not?”

    :-), :-), 🙂

    “This topic is plain silly. Let’s see EMR’s study or reference to one that correlates location to underwater mortgages or even forclosures.”

    :-), :-), :-), 🙂

    And to think, EMR once said I was almost alone in my thinking.

    ——————————–

    “As I understand the rules, if you take a job on the Hill, you should sell your house and move somewhere nearer your place of employment -“

    The rules? Whose making these rules? Obviously some economic moron. It could easily cost me five or then years of commuting costs, just to change houses, assuminf that there even exists anything comparable.

    What we do know is that, despite EMR’s disaproval or misunderstanding of the reasoning, most people DO MAKE rational economic tradeoffs concerning where they work and how much it costs to travel. EMR will argue that the costs are not fully and fairly allocated, but then neither are the costs for his famous shared vehicle systems, either.

    there is a lot more to this than size and location, so get over it.

    RH

  28. Larry G Avatar
    Larry G

    another issue I've not hear EMR's view of is electrical power.

    There is absolutely no question that functional settlement patterns need a LOT of electricity.

    Can a settlement pattern be truly functional is it's electrical needs are not generated within the clear edge?

    Can a settlement pattern be truly sustainable if much of the power it uses is generated by burning coal?

    Wouldn't a truly functional and sustainable settlement pattern produce ALL of it's power needs within it's clear edge and with non-polluting wind & solar as much as feasible?

    EMR makes a big deal about the evil of importing food… and goods… you know.. the idea that you can get anything you want at Walmart…

    but what about the evil of importing electricity to power your multi-passenger vehicles?

  29. Anonymous Avatar
    Anonymous

    “Can a settlement pattern be truly sustainable if much of the power it uses is generated by burning coal?”

    Sustainable for how many centuries?

    RH

  30. Larry G Avatar
    Larry G

    self-sustainable….

    that seems to be the premise with respect to food and economics… that the goal is to have as much of it “in region” as possible… you know… right-sized homes in the right location and food security by not having it imported from far away places where it may not be grown securely.

    Two of the biggest needs for people to be sustainable are food and energy.

    What I get out of EMRs thoughts is that the more that a region inside of a clear edge is self-sufficient and self-sustaining…the better.

    We all know that one of the biggest ways that urban areas “dodge” the impacts of pollution is by “exporting” outside of the region…. thus having the area inside the region “cleaner and healthier” as a result.

    In other words – dilution is the solution to pollution but go dilute it somewhere else,..

    if it is air pollution send it to West Va. If it is water pollution,., send it downriver to the Chesapeake Bay.

  31. Anonymous Avatar
    Anonymous

    Well, the premise is wrong, then.

    There is no reason to go through extraordinary measures to grow or produce something in one place if you can bring it in cheaper.

    RH

  32. Larry G Avatar
    Larry G

    Actually.. I’ve heard two different things.

    Initially.. it was stated that food and fiber would be grown in “Urban Support Regions” then of late.. the concept of Food Security has been brought into the discussion.

    It’s never been clear to me if there is one urban support region per new urban region or whether there are numerous one depending on one they produce – and how far away they might be.

    For instance, where would a new urban region get it’s bananas?

    Would we classify the banana-growing regions of the world as urban support regions?

    or do we just do without bananas if they are too far away and require long-distance transport?

    The same goes for electricity.

    should it be generated INSIDE of the clear edge?

    or outside?

    and if outside of the clear edge – how far away is acceptable?

    If electricity should be generated INSIDE of the clear edge and it causes widespread health problems because of it’s proximity .. would tighter emission standards be required (which would make it more expensive) or would green, non-polluting power be required (which would also be more expensive)?

    Clean water..

    Are we giving each New Urban Region a waiver on pollution by little it build huge impervious surfaces ..which then flush into rivers and bays causing great harm?

    Should the New Urban sustainability model mean that there is no net discharge of pollution outside of the clear edge?

  33. Anonymous Avatar
    Anonymous

    It is all just math. If you think food security has a value and you are willing to pay the price, so be it.

    You can probably grow bananas in Wisconsin, but if it takes more energy to heat the greanhouse than it takes to ship the banana’s from Honduras, then what is the point? The market won’t support Wisconsin greenhouses.

    Electricity should be generated inside or outside, wherever it causes the least cost.

    If you are going to insist on catching and treating every drop of water that runs off of or through an urban areas, then that area would be paying its full locational costs with respect to the water variable.

    Probably you would find out that this factor alone would make urban areas, as we know them, impractical and uneconomic. A sprawling conglomerate with huge areas of natural filter woul look cheap by comparison – even after you factor in additional transportation costs.

    Outside the clear edge is naturally going to be a source for energy and a sink for pollution for the urban area: it really canot be any other way. But what this means is that the areas outside the clear edge are providing valuable environmental services, without which he urban areas cannot exist.

    They should be paid for these services, and paid fairly. (See “Would you rather people think the environment is free?”
    http://www.env-econ.net/2008/11/would-you-rathe.html)

    Such payents are going to make a big hole in what EMR supposes is the “efficiency” of urban areas. As I recall it, his plan is to make the clear edge clear by devalueing land outside it to the point no one would want to own it, on the one hand, and by taxing anyone with the audacity to try at the 10X level.

    But all of this business about full locational costs really means fair locational costs, and fair means that no one gets to take advantage of another or cause damage to anothers property or person. So we are really talking about distribution of wealth, considering all externalities, which determines how well you live and, often, how soon you die.

    Unless you think one person is worth more than another, different locational costs don’t make much sense. Spending more to support a person in one place than another mplies you think they are worth more, which would be a fundamental vilation of the most basic property rights: the right to yourself.

    To see how this works consider “Does this sound like a high cost to you?”
    http://www.env-econ.net/2008/11/does-this-sound.html. If you have a choice of saving lives at $24,000 per life or saving lives at $557,000 per life, how can you justify the higher cost option without fundamentally taking someone elses property, which implies different locational costs?

    RH

  34. Larry G Avatar
    Larry G

    Using your logic – the folks outside the clear edge would be violating the property right of the folks inside if they insisted on no exported pollution.

    right?

    So.. according to you..the folks inside the clear edge have the right to pollute outside of the clear edge -right?

    or I could set up a power plant just to the west of a new urban region and it would be my right to do so even if the pollution drifted into the new urban region and polluted their air.

    right?

  35. Ray Hyde Avatar
    Ray Hyde

    “the folks outside the clear edge would be violating the property right of the folks inside if they insisted on no exported pollution.”

    Yes, they would be imposing a cost on the folks inside that is greater than the cost of pollution damage they could expect from their own property.

    “the folks inside the clear edge have the right to pollute outside of the clear edge -right?”

    The folks inside the clear edge have an obligation to pay for the damages they impose. Which is to say that they are buying disposal services from the folks outside. As it stands now they just dump pollution and demand clean water without paying anything.

    It doesn’t matter where you put your power plant. You are burning air and turning it into CO2. If the air belongs to everyone, then everyone is contributing to your bottom line, whether or not they buy power from you. But if you had to pay for use of the environment, then some of your money would be returned to agencies that provide services to all.

    If the air belongs to everyone, then anyone is free to set a price for the use of their share. People who desire clean air will demand a high price, but people who are starving might rather suffer dirty air and sell cheap.

    RH

  36. Ray Hyde Avatar
    Ray Hyde

    It all boils down to property rights, starting with the most essential ones: you either own yourself, or you don’t.

  37. E M Risse Avatar
    E M Risse

    “If you can draw scaled circles on a map you can understand, if you cannot, flap away.”

    And flap many of you did.

    I have been on the road and will be tomorrow too.

    I will get back to Groveton ASAP and others who are not just flapping and “when are you going to stop beating your mother”ing.

    EMR

  38. Larry G Avatar
    Larry G

    re: “buying clean air and water”

    Interesting concept.

    So.. everyone who is a property owner has the right to pollute as much as they deemed necessary for their own well being.. and others.. the only recourse they have if they want clean air and water is to pay the polluters not to pollute?

    If I got this wrong…how about re-stating it in one succinct sentence or paragraph.. but not a 500-word tome…if possible.

    so we all not only have the right to pollute but we also have the right to determine what stuff we can pollute with and how much of it … and it’s up others to pay us not to…

  39. Ray Hyde Avatar
    Ray Hyde

    go read the citation I gave.

    “the only recourse they have if they want clean air and water is to pay the polluters not to pollute?”

    No, you have it exactly backwards.

    Look, we all like to beleive that we all “own” the environment. We all “own” the fish, and yet we are accustomed to paying people to go harvet them and bring the fish to us. Without that, the fish have no value to anyone.

    If we all own the environment, then we all own it equally, and it has a value, that varies over time. In Alasaka, they have allocated a share of the fish to fishermen, rather that allocating a total catch. now each fisherman can bring his share to market, whenever it will bring the most money. Previously, it was a race to get all you can before the season closes. withthe result that too much fish hit the market too soon, depressing prices for everyone.

    So, if we all own an equal share of the environment, then it is up to us what we do with it. A polluter has no right to use more than his share, so if he wants to use more air, wether for combustion or for a dump site, then he needs to buy it from someone.

    People who want clean air, won’t sell their share. But, if no one sells, then the price of electricity will go way up, along with the price the power company is offering to buy air for. Eventually, people will need to sell air in order to pay for electricity, and then the market for pollution and combustion is established.

    Those who wish to complain about pollution and combustion will have no standing, because pollution and combustion will be paid for at market rates.

    Now we have the concept of charging people for pollution, as in a carbon tax, but that misses out entirely on the concept that we all own the environment, and we all participate in the trade-offs on how it is used whether we like it or not. Someone else decides what the carbon tax will be, but we don;t get any of it: in fact, we wind up paying it!

    So, carbon is only part of the combustion equation. The poawer company is burning their coal, they paid for it. But they are burning it using our air, which they have not paid for.

    Here is the kicker. If I live in an urban area, I’ve got so much air in my account. If I use it all up, then I need to go buy some more, just like any other polluter or user.

    But If I’m Ray Hyde, I live on a farm which I pay substantial extra taxes to support, and the farm creates 200 tons of oxygen every year, for which he does not get paid. In fact, the farm produces as much or more oxygen every year as it does farm product! I ought to be able to sell my surplus, and I can sell it either to an urban dweller or a power company, whoever is offering more in the market. As it stands now, I pay extra tax, endure extra land restrictions, (because we need to “save our farms and environment”) and I have to give away half of my product.

    But, if urban dwellers had to buy air, then the urban dwellers would be paying his full locational costs, whether he buys air from me or power from the power company.

    But because we are wrongly focusing only on the polluters, we are missing the point with regard to property rights, and probably paying too much for pollution control.

    This may sound strange, but it is exactly what happens in New Zealand and some other countries where farmers are paid directly for “environmental services” in addition to their regular farm production.

    RH

  40. Ray Hyde Avatar
    Ray Hyde

    “From the Columbus Dispatch, falling leaves are now an environmental problem.

    Before you rake those leaves into the street for city workers to pick up, think about fish.

    That’s right, fish.

    When leaves pile in the street, rain can carry them into storm drains and ultimately into rivers and streams. Too many leaves in waterways causes algae to bloom, which in turn soaks up oxygen that fish need.

    It’s enough of a problem that the Ohio Environmental Protection Agency is asking residents to keep leaves on their lawns.”

    So, just like the air, I’ve got plenty of capacity to compost a few extra leaves where they won’t get in the waterways any time soon. All someone needs to do is pay me to make their problem go away. Of course the composting process uses up some oxygen, which I would not then be able to sell.

    So there would be a trade off between the cost of not killing fish with leaves and the price of air.

    RH

  41. Ray Hyde Avatar
    Ray Hyde

    EMR? On the road? Will wonders never cease.

    RH

  42. Anonymous Avatar
    Anonymous

    “…the gap between lofty targets and the nuts-and-bolts reality of boosting the use of renewable energy isn’t getting any smaller. Take California, where politicians led by Gov. Arnold Schwarzenegger support a plan for the state to get 33% of its electricity from renewable energy.

    The California Public Utility Commission set out to determine just what that means: “It is now clear that 33% renewable energy is an important part of California’s clean energy future. As a result, the state must start asking the question how will the state achieve 33% renewable energy by 2020?”

    The short answer? Changing the energy mix even in a single state is no cakewalk: “Serving 33% of California’s energy needs with renewable sources will require an infrastructure build-out on a scale and timeline perhaps unparalleled anywhere in the world,” the CPUC said in its latest progress report to the state legislature. Not cheap, either—utility regulators estimate it will cost at least $60 billion between 2010 and 2020 to meet the goal.”

    RH

  43. Larry G Avatar
    Larry G

    “cheap” is a very relative term.

    Electricity right now would cost about 1/2 if we did not require pollution restrictions.

    So… we could be more productive, create more stuff, even allow families to keep more of their income to buy stuff like health care….

    If we did not have pollution restrictions – we could add more lanes of roadway in our urban areas – possibly build our way out of congestion.

    If we could use the most powerful of the pesticides, we could wipe out most pests – and dramatically increase our food supply.

    It would be a heck of a lot cheaper if we did not have to build all these storm water facilities or remove most of the stuff we currently remove from sewage…

    We could save hundreds of dollars per car if we did not have to outfit them with catalytic converters or burn unleaded fuel.

    Has anything I’ve said been wrong?

    Isn’t it true that we could make a lot of things a lot cheaper than they are right now?

  44. Anonymous Avatar
    Anonymous

    “Electricity right now would cost about 1/2 if we did not require pollution restrictions.”

    Electricity DOES cost about half. The other half is spent to buy clean air, not electricity. Teh cost of electricity is ALWYAS going to be the cheapest price to produce it. If we are spending more than that, then it is NOT for electricity, but for some other good we wish to buy (or have paid for for us).

    —————————-

    “If we did not have pollution restrictions – we could add more lanes of roadway in our urban areas – possibly build our way out of congestion.”

    Yes, we could buy more roadways with the money we save on pollution elimination. If we actually built our way out of congestion we might even save on pollution. We could require all cars to shut off when they are not moving, as hybrids do, and that would reduce congestion without doing anything for congestion.

    We might mow down a bunch of houses to build the new roads and reduce demand and pollution at the same time we increase capacity. If we mow down enough homes, may be we won’t need a huge new power line to bring in the power.

    Everything is a trade off, but no one is devoting the intellectual or supercomputing power we need to begin to understand what the best possible solutions are.

    —————————-

    We could save hundreds of dollars per car if we did not have to outfit them with catalytic converters or burn unleaded fuel.

    Yes, but you would have adverse health effects, most likely.

    Yes we could do a lot of things cheaper, but we don’t know how to anwer the question of whether the adverse health effects would cost more or less than what we spend on “prevention”. We cannot yet even get a concensus on how to go about trying to find out.

    That’s because too many people refuse to understand even the simplest things about property rights, and what they mean. Even if I claim and manage to enforce the idea that my property rights to clean air are absolute: that no one has any right to degrade “my air property”, guess what?

    I still can’t enforce that right without giving up something else. It really isn’t a “right” as I claim but something that I necessarily have to trade for.

    I’f I’m trading for something that means it has a price, and it can be bought and sold. Which is exactly what we ARE DOING in the examples you just described.

    My NLLY position is that we MIGHT NOT be doing this the best way possible. And if we advocate doing it any way other than the best way possible, then we are violating someones property rights AND we are polluting more than we need to.

    In short, we are not living as well as we might – including all the costs of pollution and ill health we can think of. What is crazy about all this is, that in order to live LESS well than we might, we are stealing from our neighbors.

    RH

  45. Larry G Avatar
    Larry G

    ….”…And if we advocate doing it any way other than the best way possible, then we are violating someones property rights AND we are polluting more than we need to.”

    how would we know…agree.. on the best way possible?

    is the way we are currently doing it not the best way possible?

    Are we doing too much or not enough?

    EMR thinks we are not doing enough..that we are consuming stuff ..for cheaper than it should really cost…

    and that if it cost what it should – then people would be incentivized to want more functional settlement patterns.

    right?

  46. Larry G Avatar
    Larry G

    so… the “best way possible” means some set of property rights are preserved…. right?

    what happens when we find out new stuff that changes “the best way possible” and we needed heavier restrictions?

    Does that mean then that we are justified in taking away property rights if the data proves it?

  47. Anonymous Avatar
    Anonymous

    “how would we know…agree.. on the best way possible?

    is the way we are currently doing it not the best way possible?

    Are we doing too much or not enough?”

    We need much better accounting and much better transparency.

    Here is an example. The state of NC took over a historic fishing pier that was damaged by a hurricane. The state will spend something like $15 million to resore it.

    An independent economist figured out the net present value of all the trips to the region that the pier will generate for the next 20 years, all the fish that will be caught, rents, meals purchased, etc.

    The answer comes out to between $6 and $9 million.

    Even if the economist’s range is wrong by 50%, the state has been sold a bill of goods, that will ever pay back what it costs.

    It is an outright raid on the pocketbooks (property rights) of NC citizens. It means that some other project that might have had a positive return will not be done, and those that might have enjoyed a real benefit (with payback to the state) will have their porperty rights subjugated in favor of a few that will benefit at the state’s expense.

    All that is necessary is to understand what is at stake and make the rules of the game (selling your view of things) and make it as objective and transparent as possible. Anyone who wants to see the economists calculations can do so, and submit a rebuttal.

    As it stands now we simply allow all kinds of subjective and political decisions.

    It isn’t easy and but it isn’t rocket science: we CAN make good estimates of costs and benefits. However ther is no point in spending $50 millin to make an estimate of $100 million. Like anything else, you have to make a trade off of the costs vs benefits!.

    But as the example shows, even an estimate with a wide range of variation is better than a guess.

    RH

  48. Larry G Avatar
    Larry G

    One thing that we know for sure – you could get 3 different economists to evaluate and you’d likely get 3 different answers – all of them “objective”.

    doing a cost/benefit on a pier is small potatoes compared to say…trying to do a cost benefit on DDT when one of the “costs” is the loss of multiple species of birds like Eagles, and Blue Herons.

    or… Kepone renders the fish downstream not safe to eat….

    or… mercury from coal plants affects the IQ and learning ability of newborns….

    Can you put a dollar amount that everyone would agree to such that..for instance, we’d all agree that the beneficial uses of DDT is “worth” not having eagles around anymore?

    Or that it is “ok” if kids are born with 10 points less IQ that otherwise?

    or that it’s “ok” for folks who depend on catching fish for part of their food – to eat kepone-contaminated fish?

    I don’t think any level of transparency and accountability would give you the information that you need to make the decision.

    For your plan to work – you’d have to have someone – a KING – overrule the various different conflicting analyses – and arbitrarily rule that, for instance, it’s too bad we lose the eagles, but we are better off economically without them.

    How do you know… what the ultimate impact of NOT having eagles would be – until after the fact?

    It’s simply not something you can predict much less with any degree of accuracy or certainty.

    You can have accountability and transparency out the wazoo and you still won’t know the answer.

    But you think that if we don’t know – then it is acceptable to have the “right to pollute” …until someone can “prove” that the cost/benefit …IS unacceptable but THEN – you can’t take away their right without compensating them.

    So.. my question… why would you ever grant the the right in the first place under open ended conditions where.. even if proof is ultimately established that the costs far exceed the benefits – it’s “too late” and the cost-benefit…in effect, is no longer in effect because a “right” to pollute, once granted – is grandfathered no matter how bad the cost-benefit might ultimately turn out to be.

    I don’t think accountability and transparency has much to do with this at all.

  49. Ray Hyde Avatar
    Ray Hyde

    “Can you put a dollar amount that everyone would agree to ….”

    Nope, there will always be people who are unreasonable or claim that something has an infinite price.

    “Or that it is “ok” if kids are born with 10 points less IQ that otherwise?” Nope it is not OK. Now supose you have X dollars. you have two choce on how to spend it.

    One way prevents 100 kids from having an IQ deficiency of 10 points and the other prevents 100 kids from having an IQ deficiency of twenty points. But the parents of the first set of kids claim their IQ is woth twice as much.

    That is stupidity.

    But what happens if you reduce the IQ defficcy of the second group by only ten points, now you have 200 kids with deficiency, when you might have had only a hundred.

    What if the choice is between a hundred kids with 10 point deficiency and 200 kids with tenpoint deficiency, meaning you can save either group for the same money?

    Whatever you wind up doing, the result is that you have just placed a price on what you think is unpriceable.

    We do this every day, in every thing we do we take risks in exchange for the chance of some benefit.

    But no one has collected a comprehensive catalog of thee activities, along with information on how often they pay off. We do it for other kinds of gambling: we know craps pay off better than roulette.

    People who are unreasonable or irrational will refuse to shop in that catalog. They are willing to take their own risks on their own basis. But that is a lot different from saying that everyone else MUST pay for the risks a few nitwits insist are proper.

    Despite the fact that there will be differences and speads of costs, some information is better than none. You don;t even need perfect information to make good decisions.

    “The only way to assess the various criteria is to express them numerically as far as possible. Without the numbers it is all just a matter of words spiced with emotion, and it is never possible to reach an objective decision. These numbers seldom have the precision of scientific measurements, and some of them are inherently imprecise but it is better to have approximate numbers rather than no numbers at all. It is important to distinguish between precise measurements, reasonable estimates, guesses, commercial or political propaganda, and speculations. The speculations can be plausible and in accord with known scientific laws, or in contradiction to such laws.”

    And all the handwaving in the world about values won’t change that.

    RH

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