In this last one, he specifically talks about things like price gouging (starting with the grocery industry) and apartment rent controls. Each is worth a full read when you have the time, but here I'll leave you all with a few city building-related thoughts.
In this last one, he specifically talks about things like price gouging (starting with the grocery industry) and apartment rent controls. Each is worth a full read when you have the time, but here I'll leave you all with a few city building-related thoughts.
Marks describes economics as the study of choice. And within these choices, there are many complicated moving pieces and second-order consequences. Take, for example, rent control in New York City. What rent control does is stop the free market from being able to freely set rents. The result:
A person in favor of this arrangement would argue that it maintains affordability and diversity. What it means in purely economic terms is that some people who couldn’t afford to live in New York City if rents were set by free-market forces are able to live there if they’re lucky enough to secure an apartment with regulated rent. But other people who would like to live in New York City and can afford higher rents can’t do so because there are no apartments for them. And lastly, landlords that have apartments that are somehow unregulated can command higher rents than would be the case if additions to the supply of apartments weren’t being discouraged. It’s a matter of personal philosophy whether this is good or bad. But clearly, the laws of economics and the actions of free markets aren’t at work in New York City. Someone in government is making the decisions.
Much like inclusionary zoning in the case of new housing, the tradeoffs with regulated rents are that you get (1) less overall housing supply and (2) more expensive prices for the people that can pay market rents.
You could argue, as Marks suggests, that these are acceptable outcomes; but regardless of your opinion, there are real consequences to this policy decision. There's no such thing as a "free lunch" in economics, and consequently there's no such thing as no-cost affordable housing. The question is: Who pays?
Going back to the topic of traffic congestion from yesterday's post, Toronto's general reluctance to implement any form of road or congestion pricing is also an economic choice. We have priced our roads so cheaply that demand is always going to outstrip supply. And this is expected. What we are experiencing today is a natural market outcome.
Targeting bike lanes as part of the problem is meant to counter this by increasing road supply. Less bike lanes means more space for cars, right? But the second-order consequence of this choice is that you push people off their bikes (which take up less road space) and into cars (which take up more road space). So demand is also likely to increase.
The stark reality of solving traffic congestion is that it will require greater change. It will mean fewer people driving, more people taking transit and biking, and the people who do continue to drive will have to pay more for it.
Of course, this is not what any politician wants to talk about. As Marks says: "In the world of politics, there can be limitless benefits and something for everyone. But in economics, there are only tradeoffs." The tradeoff we have decided to make is cheap roads in exchange for crippling traffic congestion.
One simple definition of risk is that it's the "possibility of loss or injury." And that's generally how most of us think about it -- it's a bad thing that needs to be managed, minimized, and sometimes avoided all together.
While true, this recent memo by Howard Marks is a good reminder that risk is also indispensable. Or, put differently, there's risk in not taking enough risk. This is true in business and finance, but it's also true -- as Howard argues -- in chess, in sports, and in many other aspects of life:
The paradox of risk-taking is inescapable. You have to take it to be successful in competitive, high-aspiration arenas. But taking it doesn’t mean you’ll be successful; that’s why they call it risk.
By definition, it means that you will be wrong sometimes. Because if you couldn't possibly be wrong, then it wouldn't be a risk. It would be a known. And known things exist in our world in a very different way than uncertain things. Superior performance, as a gross generalization, demands uncertainty.
You shouldn’t expect to make money without bearing risk, but you shouldn’t expect to make money just for taking risk. You have to sacrifice certainty, but it has to be done skillfully and intelligently, and with emotion under control.
Marks describes economics as the study of choice. And within these choices, there are many complicated moving pieces and second-order consequences. Take, for example, rent control in New York City. What rent control does is stop the free market from being able to freely set rents. The result:
A person in favor of this arrangement would argue that it maintains affordability and diversity. What it means in purely economic terms is that some people who couldn’t afford to live in New York City if rents were set by free-market forces are able to live there if they’re lucky enough to secure an apartment with regulated rent. But other people who would like to live in New York City and can afford higher rents can’t do so because there are no apartments for them. And lastly, landlords that have apartments that are somehow unregulated can command higher rents than would be the case if additions to the supply of apartments weren’t being discouraged. It’s a matter of personal philosophy whether this is good or bad. But clearly, the laws of economics and the actions of free markets aren’t at work in New York City. Someone in government is making the decisions.
Much like inclusionary zoning in the case of new housing, the tradeoffs with regulated rents are that you get (1) less overall housing supply and (2) more expensive prices for the people that can pay market rents.
You could argue, as Marks suggests, that these are acceptable outcomes; but regardless of your opinion, there are real consequences to this policy decision. There's no such thing as a "free lunch" in economics, and consequently there's no such thing as no-cost affordable housing. The question is: Who pays?
Going back to the topic of traffic congestion from yesterday's post, Toronto's general reluctance to implement any form of road or congestion pricing is also an economic choice. We have priced our roads so cheaply that demand is always going to outstrip supply. And this is expected. What we are experiencing today is a natural market outcome.
Targeting bike lanes as part of the problem is meant to counter this by increasing road supply. Less bike lanes means more space for cars, right? But the second-order consequence of this choice is that you push people off their bikes (which take up less road space) and into cars (which take up more road space). So demand is also likely to increase.
The stark reality of solving traffic congestion is that it will require greater change. It will mean fewer people driving, more people taking transit and biking, and the people who do continue to drive will have to pay more for it.
Of course, this is not what any politician wants to talk about. As Marks says: "In the world of politics, there can be limitless benefits and something for everyone. But in economics, there are only tradeoffs." The tradeoff we have decided to make is cheap roads in exchange for crippling traffic congestion.
One simple definition of risk is that it's the "possibility of loss or injury." And that's generally how most of us think about it -- it's a bad thing that needs to be managed, minimized, and sometimes avoided all together.
While true, this recent memo by Howard Marks is a good reminder that risk is also indispensable. Or, put differently, there's risk in not taking enough risk. This is true in business and finance, but it's also true -- as Howard argues -- in chess, in sports, and in many other aspects of life:
The paradox of risk-taking is inescapable. You have to take it to be successful in competitive, high-aspiration arenas. But taking it doesn’t mean you’ll be successful; that’s why they call it risk.
By definition, it means that you will be wrong sometimes. Because if you couldn't possibly be wrong, then it wouldn't be a risk. It would be a known. And known things exist in our world in a very different way than uncertain things. Superior performance, as a gross generalization, demands uncertainty.
You shouldn’t expect to make money without bearing risk, but you shouldn’t expect to make money just for taking risk. You have to sacrifice certainty, but it has to be done skillfully and intelligently, and with emotion under control.
