no third solution

Blogging about liberty, anarchy, economics and politics

Category Archives: ponderings

No Third Solution

April 12th, 2008

People are starting to google “no third solution,” so maybe my blog is becoming more popular. My traffic doesn’t seem to show any upward trend, unfortunately… I get about 1,500 unique visits per month, according to awstats which I use in addition to Google Analytics to track that sort of thing. I have 10 subscribers via Google Reader.

Some people suggest that in order to have security, it’s necessary to concede some liberty in exchange. This is nonsense peddled either by people who want to exercise power over others, or by unthinking drones, people too stupid to really understand what liberty is, what freedom is.

If you don’t have the freedom to voluntarily choose security, you’re neither free, or secure.  When “security,” so-called, is thrust upon you by a government, recognize that it is nothing short of extortion.  Implicitly, you will always be “secure” from the government’s own violence, so long as you continue to pay your tribute.

If the agency professing to provide you with security is the same agency that skims your paycheck every week, that will freeze your bank accounts if you stop paying for their services, that will throw you in jail if you deny them, and will kill you if you try to defend yourself from its advances, what they are providing is not security in any sense of the word.  The guns of government are always pointed first at the very citizens they pretend to protect.Mises said, “The issue is always the same: the government, or the market. There is no third solution.”

Faced with a problem, one can rely on violence (the government) or free association (the market) to find a resolution. There is no third solution, and any co-mingling of the government and the market is ultimately just a bastardized market, not a free market where participants voluntarily interact to exchange value for value. The government makes and enforces rules to which most free people wouldn’t otherwise consent, imposing them generally upon a disenfranchised minority. Maybe it is one man ruling many, maybe it is a group of men ruling over others.

In any case, the cost of government is always and inevitably, freedom foregone.

What to do When you Can’t Refinance

April 8th, 2008

Some people find my blog by searching “What to do when you can’t refinance?”

My previous commentary, “What Should You Do About Your Rising Mortgage Payments?” and What is Your Obligation to Your Lender?, both of which have drawn some criticism, to which I’ve tried to reply (e.g., here).

I’m no financial advisor, but I have an idea of what to do. It depends on whether you can afford your mortgage or not.

If you can still afford your mortgage, keep making the payments. Make cutbacks elsewhere. Buy generic brand groceries. Run your heat/AC less.

If you absolutley cannot afford them (e.g., a mortgagor became unemployed) then by all means, first try to negotiate some sort of refinancing. If that doesn’t work, stop making any payments! Don’t make partial payments if this is a long-term or potentially long-term problem. This will only exacerbate your pain and suffering. You’re going to lose the house and destroy your credit, anyways. Don’t give up any more cash; you’ll need it to make a security deposit on the next apartment or house that you rent.

You should at least be able to get in to a decent apartment. But don’t splurge on this. If your bachelor lifestyle is accustomed to two bedrooms for all of your trinkets and man-toys like playstations and guitars, get a cheaper one bedroom, and economize, for christ’s sake! Then, gut it out. Work hard, weather the storm, and in a few years this trouble will all be behind you.

Then again, understanding time preference, and acting in accordance with its principles and your financial wherewithal is probably what got you into the mess, to begin with!

How Much Is A Kitchen Worth?

April 2nd, 2008

Every once in a while, I’ll catch one of those real estate/home decorating/home improvement programs on HGTV, TLC, A&E, or whatever channels you find shows like Designed to Sell. Sometimes, the “experts” repeat adages which simply don’t make any sense to me. I believe that these statements were probably true (conditionally) at one point in time, but I don’t think they hold water any longer, because they were never sustainable as a result of their reliance on continuing inflation.

In one instance, they updated a bathroom to the tune of about $5,000, at which point the designer and the real estate expert told the sellers that the renovation could add $20,000 to the price of the house.

That’s a 400% return! Does anyone else think that’s crazy?

We can clearly see that the prices paid for the renovations have been affected by competition, otherwise, the price of renovation could approach the value-add. But it doesn’t, instead the price of renovation approaches its opportunity cost. That is, competition among renovation providers has eroded the price each one is able to command. Shouldn’t competition among sellers have a similar effect? Why are home buyers seen as price-takers?

If it is true that a 400% return can be made on a bathroom remodel, then everyone with a modicum of financial wherewithal will remodel their bathrooms, and price competition among the sellers should tend to drive that return down to a normal rate of return as constrained by time preferences. There’s no reason that anyone should pay $20,000 for a bathroom they could buy themselves for $5,000!

Well, there is one reason: inflation! When buyers had access to excessively loose credit, and they believed that prices would continue to rise (at an unsustainable pace), they gladly overpaid under the assumption that someone else would overpay even more in the future!. Most of these people probably had no idea they were overpaying, to begin with!

Sure, there are factors at work that probably can’t be arbitraged away. An updated room is aesthetically more appealing than a run-down or simply outdated room. This alone should command a premium over the un-updated house. There is a certain amount of risk that the remodeler will go over budget, or run into problems along the way. Buyers would be wise to pay slightly more for the certainty of a job completed, than to bear the uncertainty of renovation on their own. There is also a price one must put on the inconvenience of living in the house during the reconstruction. We could expect buyers to pay extra for the privilege of not having to deal with this, too.

I’m not convinced that these factors can justify the batshit-insane returns that sellers are told to expect, but I’d be happy to field your thoughts on the matter.

no third solution

Blogging about liberty, anarchy, economics and politics