Coyote Blog

Before you read any further, look at the houses here.  Here is an example:

They look like normal, everyday Midwestern houses, right?  I mean, some are kind of small but several look pretty nice and all of them are in good shape with well-kept lawns, etc.

So what do these houses have in common?  They have all been condemned as "blighted" by Norwood, Ohio.  They have been seized from their owners by the city government and now, thanks to the Supreme Court's disastrous Kelo decision, they will be torn down.

OK, what's the real reason?  The real reason is that Norwood, Ohio wants a Crate & Barrel store where these houses are.  They think the Crate & Barrel is a better use of the land, and they are pretty sure that C&B will pay them more taxes than these homeowners, so they are taking people's homes and giving the land to the developer.  More here and here on this story, and Cato has a whole bunch of articles on abuse of the Constitution's takings clause here.  And you can find my Kelo articles here, here, and here.

Today, the Supreme Court ruled 5-4 in the Kelo Decision that local officials can seize nearly anyone's private property and hand it over to their favorite developer:

The Supreme Court on Thursday ruled that
local governments may seize people's homes and businesses -- even
against their will -- for private economic dvelopment.

It
was a decision fraught with huge implications for a country with many
areas, particularly the rapidly growing urban and suburban areas,
facing countervailing pressures of development and property ownership
rights.

The 5-4 ruling represented a defeat for some Connecticut
residents whose homes are slated for destruction to make room for an
office complex. They argued that cities have no right to take their
land except for projects with a clear public use, such as roads or
schools, or to revitalize blighted areas.

As a result, cities
have wide power to bulldoze residences for projects such as shopping
malls and hotel complexes to generate tax revenue.

This is a really, really bad decision.  Most of my thoughts on this subject are here.  The Economist, quoted in that post, framed the issue well:

Put simply, cities cannot take someone's house just because they think
they can make better use of it. Otherwise, argues Scott Bullock, Mrs
Kelo's lawyer, you end up destroying private property rights
altogether. For if the sole yardstick is economic benefit, any house
can be replaced at any time by a business or shop (because they usually
produce more tax revenues). Moreover, if city governments can seize
private property by claiming a public benefit which they themselves
determine, where do they stop? If they decide it is in the public
interest to encourage locally-owned shops, what would prevent them
compulsorily closing megastores, or vice versa? This is central
planning.

Sandra O'Connor echoed these thoughts in her dissent, and made the obvious point: This is not about condemning land for the public good.  This, in effect, will be about condemning land for the benefit of those with the most political pull:

Justice Sandra Day O'Connor, who has been a key swing vote on many
cases before the court, issued a stinging dissent. She argued that
cities should not have unlimited authority to uproot families, even if
they are provided compensation, simply to accommodate wealthy
developers....

"Any
property may now be taken for the benefit of another private party, but
the fallout from this decision will not be random," O'Connor wrote.
"The beneficiaries are likely to be those citizens with
disproportionate influence and power in the political process,
including large corporations and development firms."

While Bush, sometimes rightly, gets bashed by the Left for trying to create a corporate state, it is in fact the left side of the Supreme Court that has struck the strongest blow now in that direction.  This decision in a stroke gives local authorities nearly unlimited ability to engage in Soviet-style planning of their local economy.

Find much more at SCOTUSblog here and here.

Update: Professor Bainbridge feels my pain.  Glenn Reynolds has updates here and here.  Reason's Hit and Run opines:

the majority opinion says, quoting an earlier decision, the "Court
long ago rejected any literal requirement that condemned property be
put into use for the ... public." Which is to say, they've rejected the
notion that "public use" means anything more stringent than:
"legislators want to do this." The Court's view is that any "public
purpose" will do, and such purposes apparently include increased tax
revenue. The straightforward implication is that any taking of
a private residence to hand it over to a business, or just from a poor
person to a wealthy person, will be a taking in service of a public
purpose: As a general rule, the rich pay more taxes than the poor, and
businesses pay more taxes than households.

Arguing with Signposts has a huge roundup here.  And I would love to all get behind this idea from Right Thinking:

Here's a thought: How about the GOP-controlled Congress puts the flag
desecration amendment on the back burner and gets to work on an
amendment limiting the power of the state to seize private property
from citizens?

The Left seems split on the decision.  Half are thrilled by the subjugation of property rights to government whim, while the other half are appalled that "public use" has come to be defined as maximizing property values.  It is a strange place we are in when we have lefties like Kos actively supporting a decision that allows government to take land from citizens so long as a wealthier resident replaces a poorer resident on the land, or so long as a commercial enterprise replaces a non-commercial one.

UPDATE:  Strata-Sphere has a roundup of some of the wacky things that local governments are doing with their newly-confirmed Kelo powers.

I have been a marketer for almost 20 years, and one of the classic mistakes in marketing is to rely too much on your own experience and preferences.  Its often easy to fall into the trap of saying "everyone I know would like that" or vice versa, only to find that "everyone you know" are not necessarily representative of the market as a whole.

When I was a consultant at McKinsey & Co., we often asked people we were interviewing questions like "what is the market size for window glass in Mexico".  The key to successfully completing the exercise was to break the problem down into cascading assumptions, each of which could theoretically be researched and checked.  For example, with the window glass problem, a good answer might be:

The glass market is probably made up of housing, commercial buildings, automotive, and other.  Take the housing market.  Assume 80% of the market is new construction.  Assume the population of Mexico is 50 million, and there are 5 people per home, so there are 10 million homes, and lets assume the housing stock is increased by 5 % a year and that each home has 100 square feet of glass..  etc etc.

It was kind of fun to see if they get to the right answer, but the whole point was to see how they could break down and analytical problem.  The reason I bring up this whole episode was sometimes we would ask our recruits, typically Ivy Leaguers, to come up with the market size for annual snow ski sales.  So they would work through the logic that there are 300 million people in the US and x% ski and these people replace their skis on average every 5 years, etc.  However, it always made me laugh that these folks would be guaranteed to miss the number way, way high.  Why?  Because in coming up with the percentage of people that ski, they would look around the room and say, well 80% of my friends ski and so lets assume 30 or 40 or even more percent of Americans snow ski.  In fact, I have not looked up the number lately, but the actual percentage of Americans that ski is something less than 5%.  Recruits intuition was fooled because, at least in terms of skiing, they were surrounded by an anomalous population.

All of this is a long, long, overly long intro into an interesting set of facts around browser share between IE and Firefox.  A while back I wrote that, from my traffic logs for this site, Firefox appears to be killing IE.  In fact, since I posted this, Firefox has gained even more share on this site:

Now, to the issue of this post, one might suspect that my traffic might not be representative of the whole market.  I would argue that blog readers probably are heavier Internet users, more Internet-savvy on average, and therefore more likely to have investigated browser alternatives beyond the one pre-loaded on their PC.  It turns out that I have a way to test this.  I have another group of sites for my business, including sites for Forest Service Campgrounds, Lake Havasu Jetski Rentals, and Campground Jobs.  The readers of these sites tend to be older on average and less computer proficient.  The browser market share at these sites looks like this:

Wow, that is a huge difference.  Take it from me, its unusual to find a market segmentation that dramatic.  It makes me wonder about all of the talk about blogs replacing the MSM.  How much are we breathing our own exhaust?

Postscript: This is an age-old problem and takes many forms in many businesses.  For example, thousands of farmers have bankrupted themselves in the commodities futures markets making bets on worldwide crop prices based on their local weather and harvest expectations.

Disclosure: Yes, I did take the opportunity to shamelessly Google bomb my own sites.  Sorry.  I don't do it very often, maintaining a pretty solid firewall between my business and blog.

The other day, I wrote fairly tongue-in-cheek about dentists, their investment choices, and the housing "bubble".  In that article I linked to several much weightier analyses, if you are interested in the topic.  The Commons Blog has chimed in today with an interesting point about "smart growth" policies (which I have derided in many other posts):

But few reporters have bothered to ask why some markets have a bubble while
other fast-growing markets do not. The usual answer is that the bubbles are on
the coast because everyone is moving there, but many fast-growing regions in the
West and South do not appear to have a bubble.

The answer appears to be that "smart growth" and other growth-management
policies restrict housing supply. Since housing is an inelastic good, a small
restriction on supply leads to rapid increases in prices. This brings
speculators into the market -- and a large percentage of homes today are being
purchased with no-down-payment, interest-only loans by people who don't plan to
live in the homes; in other words, speculators.

A list of regions that are suffering bubbles reveals that a very high
percentage have implemented some form of growth management such as urban-growth
boundaries, greenbelts, or restrictions on building permits.

More on smart growth and housing bubbles here.  More smart growth resources via Cato.

I don't have access to the right kind of data to decide whether there is a housing bubble in the US, though a lot of people are writing about it. 

In the Phoenix / Scottsdale area, housing values have really starting going up, up, up in the last 18 months, though whether this is just a catch-up to other desirable metropolitan areas (Phoenix real estate has been pretty sluggish for years, and way cheaper than other resort-type destinations) or a true bubble, I can't tell.  Certainly speculation activity is way up, with a lot of homes being bought and renovated by investors, but again, I could argue that Scottsdale was behind other suburban markets in the whole tear-down thing. 

So, to date, I have been unconvinced about the housing bubble, at least as it applied to our community.  After all, demographics over the next 20-30 years are only going to support Scottsdale area real estate. 

However, over the weekend I had a disturbing experience:   At a social function, I heard a dentist enthusiastically telling a doctor that he needs to be buying condos and raw land.  The dentist claimed to be flipping raw land parcels for 100% in less than 6 months. 

For those who don't know, this is a big flashing red light.  When doctors and dentists start trying to sell you on a particular type of investment, run away like they have the plague.  At Harvard Business School, I had a great investment management class with a professor who has schooled many of the best in the business.  If an investment we were analyzing turned out to be a real dog, he would ask us "who do you sell this to?" and the class would shout "doctors!"  And, if the investment was really, really bad, to the point of being insane, the class would instead shout "dentists!"  Marginal Revolution has another potential bubble indicator.  Angry Bear has a lengthy analysis.

Postscript: By the way, just so you doctors and dentists won't feel like I am picking on you, we small business owners are considered to be almost as bad, which is I why I get so many boiler room calls.

Update:  OK, in one of those great moments in timing, my wife just called me to say that one of the moms at school was trying to get other moms to invest with her in some condos, and should we join in?  Eeeek!

Today, Kevin Drum quotes Obsidian Wings as saying:

The men in my family of my father's generation returned home after serving
their country and got jobs in the local steel mills, as had their fathers and
their grandfathers. In exchange for their brawn, sweat, and expertise, the steel
mills promised these men certain benefits. In exchange for Social Security taxes
withheld from their already modest paychecks, the government promised these men
certain benefits as well.

....These were church-attending, flag-waving, football-loving, honest family
men. They are rightfully proud of providing homes and educations for their
children and instilling the sorts of values and manners that serve them well as
adults. And if I have to move heaven and earth, now that they've retired, the
Republican party is NOT going to redefine them as welfare
recipients.

First, I agree, whether I like the program or not, that people who contributed for years and were promised certain benefits should receive them.  The benefits the average retiree gets today were certainly paid for - in fact, over-paid-for given the implied rate of return they got for their forced "savings".  So I won't argue that these retirees are getting financial welfare.

BUT, I would argue that they are getting intellectual welfare.  Advocates for keeping forced savings programs like Social Security in place as-is by necesity argue that the average American is too stupid, too short-sighted, and/or too lazy to save for retirement without the government forcing them.  Basically the argument is that we are smarter than you, and we are going to take control of aspects of your life that we think we can manage better than you can.  You are too stupid to save for retirement, too stupid to stop eating fatty foods, too stupid to wear a seat belt, and/or too stupid to accept employment on the right terms -- so we will take control of these decisions for you, whether you like it or not.  For lack of a better word, I call this intellectual welfare. 

By the way, this is as good an answer as any to Mr. Drum's earlier question why liberals don't push the privacy issue harder.  He opines:

Whenever I talk about the underlying principles that should guide liberals, as
I did a couple of days ago, one of the ideas that always pops up is privacy
rights. In fact, it comes up so often that it strikes me that we're missing a
bet by not making a bigger deal out of it.

I am all for a general and strong privacy right.  I would love to see it Constitutionally enshrined.  But liberals (like conservatives, but I am answering Drum's question) don't want it.  They want to allow women to choose abortions, but not choose breast implants.  They want the government to allow marijuana use but squelch fatty foods.  They don't want police checking for terrorists but do want them checking for people not wearing their seat belts.  They want freedom of speech, until it criticizes groups to whom they are sympathetic.  They want to allow topless dancers but regulate the hell out of how much they make.  Liberals, in sum, are at least as bad about wanting to control private, non-coerced individual decision-making as conservatives -- they just want to control other aspects of our lives than do conservatives. 

A true privacy right would allow us complete freedom over who we sleep with, what we do with our bodies, where we work, and what we pay for goods.  And, not incidentally, how we choose to invest for our retirement.  Both parties want the government to control parts of our lives, so don't expect either conservatices or liberals to be pushing the privacy issue very hard.

Update:  William Mellor of the Institute of Justice has some thoughts related to this topic in The American Lawyer:

Without realizing it, liberals and conservatives are
working from opposite ends of the political spectrum, under opposing
rationales, to reach the same end: expanded government power...

The Framers envisioned a system in which individuals enjoyed
rights equally, and the rights they enjoyed were treated with equal
respect under the Constitution. But in 1938 the U.S. Supreme Court's
ruling in United States v. Carolene Products Co. (upholding a
Congressional ban on interstate shipment of milk that contained added
fat or oil) created an artificial dichotomy under the Constitution.
Some rights, notably free speech, were elevated to a preferred tier and
now rightly receive vigorous constitutional protection. Rights demoted
to the second tier, specifically economic liberty and property rights,
wrongly receive far less protection....

Liberals, however, tend to reject the notion that the courts
have any role in seriously protecting economic liberty or property
rights. This is remarkable in light of the fact that many liberals
strongly advocate court protection for various rights-such as welfare
or abortion-whose constitutional pedigree is far more questionable than
rights to private property and economic liberties.

Before you read any further, look at the houses here.  Here is an example:

They look like normal, everyday Midwestern houses, right?  I mean, some are kind of small but several look pretty nice and all of them are in good shape with well-kept lawns, etc.

So what do these houses have in common?  They have all been condemned as "blighted" by Norwood, Ohio.  They have been seized by the city government and will be torn down.

OK, what's the real reason?  The real reason is that Norwood, Ohio wants a Crate & Barrel store where these houses are.  They think the Crate & Barrel is a better use of the land, and they are pretty sure that C&B will pay them more taxes than these homeowners, so they are taking people's homes and giving the land to the developer.  More here and here on this story, and Cato has a whole bunch of articles on abuse of the Constitution's takings clause here.  We have had our own local ongoing takings debate in nearby Mesa, Arizona.

This kind of garbage happens far, far too often.  If the developer wants the land, he can buy it.  If people won't sell, he can go somewhere else.  Simple.

Update:  Here is a pretty bizare intrusion of local government on your home here, too.  Hope they don't find out house.

I wrote here and here about the cost that licensing can impose on consumers, often with little measurable benefit.  It's worth repeating this Milton Friedman quote:

The justification offered is always the same: to protect the consumer. However, the reason is demonstrated by observing who lobbies at the state legislature for the imposition or strengthening of licensure. The lobbyists are invariably representatives of the occupation in question rather than of the customers. True enough, plumbers presumably know better than anyone else what their customers need to be protected against. However, it is hard to regard altruistic concern for their customers as the primary motive behind their determined efforts to get legal power to decide who may be a plumber.

In this same vein, Reason has an article on the Oklahoma case where the state's requirement that casket sellers be licensed morticians was challenged legally:

Memorial Concepts Online sells an oak coffin for about $2,000, compared to an average of around $4,000 at funeral homes in Oklahoma, where the company is based. By separating the purchase of caskets from the purchase of funeral services, Memorial Concepts can offer substantial savings, not to mention a shopping environment free of hovering morticians. But in Oklahoma, which allows caskets to be sold only by licensed funeral directors, such competition is illegal.