You are a free subscriber to Me and the Money Printer. To upgrade to paid and receive the daily Capital Wave Report - which features our Red-Green market signals, subscribe here. The Nobel Prizes Say She’s Wrong (And the Week in Review)Six decades of economic science vs. one housing activist’s slogans
Dear Fellow Traveler: I don’t do much, if any, political commentary here. Me and The Money Printer is about mechanics, liquidity, and the plumbing of markets… and how to take advantage of those elements at the right times… But every once in a while, someone says something so confidently wrong about economics that I feel obligated to respond. Especially when I spent two graduate courses studying German energy and housing policy. You sit through that much Ordnungspolitik, and you earn the right to be annoyed. So here we are… a day after we got more fun bucks to buy Mortgage-Backed Securities (MBS) in an effort to make housing more affordable (spoiler: it will make housing more expensive). Anyway… allow me to introduce New York Mayor Zohran Mamdani’s Tenants' Rights Director, Cea Weaver, who runs Housing Justice for All in New York. She’s got a simple worldview…
She argues that private property is a weapon of white supremacy… that such property is theft, and communal housing is the solution to the city’s exploding housing costs. It’s a clean message. It fits on a dorm room poster. Of course, she has no comment on her mother’s large private home in Nashville, Tennessee, or the Mamdani family’s private compound in Uganda, though. Let me focus here… Economists have shown for 70 years that Weaver’s arguments don’t hold up. Multiple Nobel Prizes have been awarded for proving her wrong. I’m not going to moralize this or make this personal. I have a Buffalo Bills game to watch - that’s where I’ll be emotional… I’m just going to show you what the academic record says… The Foundation: Samuelson (1954)This is research from the Eisenhower administration era… Paul Samuelson won the 1970 Nobel Prize for clarifying the different types of goods in economics. For as much theory as Democratic Socialists toss out at the world, this stuff is grounded in pure logic. He noted that private goods are rival and excludable. “Rival” means only one person can use the thing at a time. If I eat the apple, you can’t eat the same apple. “Excludable” means you can keep others from using it. If I own the apple, I can say, “No, you can’t have this.” It sounds overly simplistic. But we didn’t have these basic frameworks of thinking and the associated academic logic for 3,000 years. I ask you to appreciate that we built a logical academic framework for thinking about private property, even though the fundamental concept (right) was technically outlined in the Ten Commandments. People still didn’t get it… This was a new way of approaching a multi-millennium problem. Housing is considered a rival good because two people can’t live in the same unit at the same time in the way each one wants. Again, it sounds overly logical, but you are fortunate enough to have lived within this framework… One family in an apartment means another family can’t use that same apartment. Sounds simple, but when you factor in military quartering, French army billeting (where homes were turned into open barracks), Cottier housing in Ireland in the 1700s where multiple families lived under the same roof, indentured servitude standards, and European overcrowding for centuries, you will see the logic of private property and the stability that it provides. Housing is excludable because the owner (or tenant with a lease) can decide who gets in and who doesn’t. Locks, leases, keys, and property rights allow you to exclude others. If I’m using the apartment, you can’t use it. And I can lock the door. Public goods are non-rival and non-excludable. National defense protects everyone simultaneously. You can’t exclude people from being defended. Housing is not a public good. Europe proved this for 500 years… And the USSR only needed a little more than half a century to prove this. It is rival and excludable. It cannot be managed as a communal good without creating perverse incentives. Perverse incentives are simple things like… people using more space than they need because it’s free… Or people ignore repairs because the cost is shared, but the benefits are not. Or conflicts over who gets what part of the unit… or people squatting indefinitely. Or… people refusing to invest in the long-term because they could be displaced by someone else at any moment (someone else comes in and starts using the space) This is the mathematical foundation. From there, the historical, academic scaffolding builds. If you don’t understand this distinction between rival and non-rival goods, you cannot and should not design housing policy. This is Week One Syllabus stuff. The Warning: Hardin (1968)Here’s what I studied before I moved into financial economics and monetary policy. Yes, I was seriously about writing my Johns Hopkins thesis on the impact of collective management on energy and agricultural systems. It basically doesn’t work. Garrett Hardin’s “Tragedy of the Commons” has to be the single most-cited article in environmental economics. And typically… it’s a bunch of people trying to prove this guy wrong, even though he “defeats all man.”
Hardin proved what every society has learned through experience. When you eliminate property rights in a rival good, you guarantee overuse, underinvestment, deterioration, conflict, and, ultimately, collapse. Now… I can hear some uber-left voice coming out of the clouds trying to refute what I just said. They’d argue:
NO, you muppet. READ THE DAMN THING. Those commons only survived because they imitated private property… boundaries, enforcement, exclusion, and consequences… Hallmarks of private property… Those elements didn’t disprove Hardin. They validated him. I know that I’m speaking in academic code for a moment… but seriously… AGHHH!!! Now, common property in urban housing is the textbook case of a commons problem. The reason is that everyone has an incentive to take as much as they can and no incentive to maintain anything. When there is conflict, problems are settled by force, connections, politics, favoritism, or squatting… Simply put… the loudest and most participants aggressive win. That’s basic game theory expectations… What does Cea Weaver advocate for in New York housing? Exactly the model Hardin warned about. Hardin wrote this analysis in 1968. At that time, the Beatles were still together. Why Property Rights Exist: Demsetz (1967)At its core, this is an argument about private versus public goods. Property rights don’t exist because people are greedy. They exist because private ownership makes rival goods more efficiently used, maintained, and allocated than any communal system can. Harold Demsetz showed that property rights evolve spontaneously because they reduce waste, conflict, ambiguity, free riding, and deterioration of shared assets. When a system moves away from private property, all the ignored costs come due at once. Communal housing doesn’t prevent exploitation. It guarantees it. Demsetz’s point is that communal housing tends to fall apart and drift back to private ownership. We had decades of failed public housing programs across this nation, and plenty of communes that drifted back into private hands in Europe for decades. Weaver wants to triple down because she’s convinced she can solve the problems that cities around the globe consistently give up on… That’s some Superman logic. The reality is that this is not an ideological issue. As always, the world operates on incentives. And incentives don’t care about a slogan on a dorm room poster. The Transaction Cost Problem: Coase (1960)Ronald Coase won the Nobel in 1991 for showing that efficient outcomes require defined property rights, lower transaction costs, and individual bargaining power. He did the research… three decades prior. As we know, communal ownership destroys all three of these requirements for efficient outcomes. Of course, Weaver doesn’t care, because this is really about intangible things like “justice and fairness” - which are terms defined by… her. Communal ownership creates blurry responsibility, heavy coordination costs, weak enforcement, free-riding, and constant fights over who gets to use “the thing.” The best part about this research is that (like me) Coase is not politically affiliated with anything. Coase had no political agenda linked to his research. He simply showed why Weaver’s system cannot work beyond very small groups. Like, say, a family. Or a polyamorous bowling team. The Governance Trap: Buchanan (1986)James Buchanan won the Nobel Prize for developing public choice theory. And this was important at a time when the Soviet Union was collapsing. Buchanan showed that communal governance quickly turns into rent-seeking, gridlock, lots of shouting with no responsibility, and control by well-connected insiders. And that last part really matters. In practice, these systems produce a local power broker… not quite a warlord, but close enough for city politics. The more communal the resource is, the worse the politics around it become. Especially in cities. And urban housing is the most painful example. This is why “community-controlled housing” experiments collapse. They don’t produce fairness. They produce “micro-patronage”networks with no aligned incentives. People try to escape landlords, only to end up with something worse… A condo board with unlimited power and no profit motive. The Most Misquoted Scholar in America: Ostrom (2009)This is where my academic work was going to align… Elinor Ostrom. She had just won the Nobel Prize when I entered the Johns Hopkins School of Government. The irony is that Ostrom is constantly cited by left-wing housing advocates who’ve clearly never read her. People like Weaver cite her all the time… when the bulk of the research wasn’t on housing… It was on fisheries and forest management. Completely different things… Ostrom did publish on urban governance, policing, and local public goods, but none of the research was tied to communal housing as a property rights system. And her research isn’t clearly linked to anything that modern housing activists imply. Simply put: Ostrom did not argue for the abolition of private property. She argued that common asset management only works when it mimics private property by establishing clear membership boundaries, enforceable rules, monitoring, sanctions, market-like use rights, governance layers, and local decision authority. In other words, Ostrom showed that ‘pure’ communalism fails unless it behaves like private ownership. And yet, people seriously think she wanted to abolish private property. The Kill Shot…de Soto (2000)I want to put Weaver’s theories to bed… Wrap them up in a blanket, kiss them on the head, and then never talk about this again. I want these arguments gone… So, I’m going to go past the theory that is above. And I’m going to introduce you to Hernando de Soto. This is the person who gave us hardcore, anthropological fieldwork. If you read a book about this dry stuff, read The Mystery of Capital. This is probably the single most important study of property rights in the developing world. De Soto traveled through Peru, Egypt, the Philippines, Haiti, and dozens of African nations to answer a simple question…
His answer once kept me up at night. In most of the world, people live in informal or communal housing systems that have no enforceable title. “Enforceable title” is a HUGE thing in Western markets. This is why, rightfully so, title search and deed management is such an expensive, yet vital part of property ownership. When you don’t have formal property rights, you can’t use your home as collateral for a loan (so you have no leverage). You can’t sell it efficiently because your sellers can be confused by the rights and remain uncertain on who owns what... You can’t legally improve it (because, by default, it may not be yours). You can’t defend it in court. You can’t convert it into capital. Some places have property rights and did so two thousand years ago, while some places still don’t enable the practice. This is why you see the most incredible architecture from 2,000 years ago in certain parts of the world, and in other places today, homes are dilapidated tin-roof shacks. Property rights fuel accountability and sustainability. Communities pour labor and savings into homes that cannot appreciate, cannot be leveraged, and cannot be protected. Then the politicians can’t figure out why domestic investment collapses or why maintenance stalls. The very concept of long-term improvements becomes irrational. Slums stay slums because the system traps people in a broken status quo that punishes anyone who tries to get ahead. De Soto showed that without formal property rights, assets decay, investment collapses, and poverty becomes self-perpetuating… a doom loop. Those problems are a hallmark of communism and “socialism” without private property rights. And for the love of all that is sacred… Scandinavia isn’t socialist. It’s a high tax, safety net based system with the freest economies in the world and extremely pro-private property regimes. Anyone saying that Scandinavia is a model needs to cut regulations then. Informal, collective, or quasi-communal systems are not liberating. They are the chains that keep people from entering the modern economy. This is the part housing activists never acknowledge. Communal ownership doesn’t unlock prosperity. It never will. This Is All…The economic discipline spent 70 years establishing:
The Nobel committee has validated every step of this for decades. Weaver is advocating a model that the economic discipline left behind before she was born. It’s not revolutionary. It’s not progressive. It’s just old. We need more adults in the room. People who have read the literature. People who understand that policy is about tradeoffs, not slogans. People who actually know the difference between a hip roof versus a gable roof… what it’s like to tar a roof with blond hair on a 90-degree day, or the chemical construct of a brick. People who know that the word “communal” does not magically solve incentive problems. These aren’t people I’d usually worry about… because they’re typically found in faculty lounges or disrupting college student government meetings over oil production… But now they’re running the most important city in the world… and they actually think they’re entitled to do with other people’s property whatever they feel is appropriate. You want cheaper housing? Build more housing. Reform zoning. Buying Mortgaged Backed Securities isn’t a solution. That drives housing prices up. Instead, reduce permitting friction. Speed up approvals. Let supply meet demand. I know that’s boring, and doesn’t fit on a poster. But it works. I promise… Now, let’s get to the week in review… This week, I went back to basics. I dug into the concepts of liquidity, momentum, insider buying, public policy, and who benefits. This was for you… Please read them all, if you are serious about making money and protecting your wealth… Monday, January 5 Money Printer 101: What Do You Mean By LiquidityTuesday, January 6 Money Printer 102: What Do You Mean by Momentum?Wednesday, January 7 Money Printer 103: What Do You Mean By “Insider Buying?”Thursday, January 8 Money Printer 104: What Do You Mean By “Policy Accommodation?”Friday, January 9 Money Printer 105: What Do You Mean by the Cantillon Effect?—- All right, all… Stay positive, Garrett Baldwin About Me and the Money Printer Me and the Money Printer is a daily publication covering the financial markets through three critical equations. We track liquidity (money in the financial system), momentum (where money is moving in the system), and insider buying (where Smart Money at companies is moving their money). Combining these elements with a deep understanding of central banking and how the global system works has allowed us to navigate financial cycles and boost our probability of success as investors and traders. This insight is based on roughly 17 years of intensive academic work at four universities, extensive collaboration with market experts, and the joy of trial and error in research. You can take a free look at our worldview and thesis right here. Disclaimer Nothing in this email should be considered personalized financial advice. While we may answer your general customer questions, we are not licensed under securities laws to guide your investment situation. Do not consider any communication between you and Florida Republic employees as financial advice. The communication in this letter is for information and educational purposes unless otherwise strictly worded as a recommendation. Model portfolios are tracked to showcase a variety of academic, fundamental, and technical tools, and insight is provided to help readers gain knowledge and experience. Readers should not trade if they cannot handle a loss and should not trade more than they can afford to lose. There are large amounts of risk in the equity markets. Consider consulting with a professional before making decisions with your money.
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