The NYC Marathon + Housing01.03.20
Planet Money has a terrific new episode on the allocation of slots in the NYC marathon [link].
So there's roughly 50k slots and 150k applicants. More applicants than slots. How to allocate this fairly? Apparently, the NYC marathon has 4 ways you can get in:
1. lottery -- completely randomized, one entry per person
2. merit -- run below a certain time in another marathon
3. desire (money) -- they give away slots to charities who then give those away to people who raise money for those charities (~$2,500) and if you're overseas, you can buy travel packages that includes an entry into the NYC marathon
4. effort / 9 + 1 -- run 9 other marathons and volunteer at 1 other marathon (I assume in the past year)
I found this fascinating and there are lots of great reasons why this is a good system. But it got me thinking -- especially because the episode starts off talking about what economics is -- the study of the allocation of scarce resources -- and mentioned, of course, housing.
Right now, how is housing allocated? Well, nearly everywhere, housing is allocated by money (arguably a proxy for desire). In some relatively rare cases, there is a lottery component -- like in certain cities, new housing developments have to set aside a number of low-income housing units which are then allocated (I believe) on a lottery system after some screening process.
As a rule, personally -- I think markets generally work better when there are not artificial variables introduced. That being said, markets, on their own -- don't always work well. Environmental economics is probably the best example. A plant may be able to manufacture an item for X$, but maybe that plant is dumping its pollutants into the water (or into the air). They are introducing externalities into the system, the cost of which are borne by other people -- this is where government needs to step in because the system of supply/demand does not materially affect the plant's behavior.
But what if we applied how the NYC marathon allocates slots to housing? So we certainly have:
1. desire (money)
2. lottery -- relatively rarely
3. merit -- so what is merit when it comes to housing? How could someone "earn" their way into housing? Well, I think an argument could be made that people who do societal good -- let's say, broadly, teachers / firefighters / police -- not sure where to extend this; healthcare professionals? Government workers? This obviously gets tricky -- but I think if us, as a society, want to tackle housing more broadly / feel the current system is unjust -- then these are the tough questions that one needs to answer. Because I suspect the best way to enable "merit" in the housing market is actually to give housing vouchers. So if you're, say, a police officer -- the government then gives, I don't know -- some housing voucher / subsidy that can be applied anywhere. But that's funded by taxpayer dollars of course. How is this different than, say, just paying these people more? I'm not sure it is different -- but maybe it just *feels* different. It's like not all compensation is the same even though all compensation could be reduced to dollars. Like universities in expensive cities often have housing allowances. So could we have housing allowances for desirable/merit professions? (I believe this occurs in certain cities, but I'm not sure how widespread it is)
4. effort -- what would effort look like here? I would also argue that it boils down to social good on some level. Now, this sort of exists in the housing market. In large apartment complexes, often the building manager or someone who functions in that capacity will be someone who, in exchange for a free or reduced housing unit, handles tenant issues. What would be the equivalent for a city? Someone who volunteers in some sort of government or local non-profit for a number of hours? Would that then become a system where it's hours in exchange for housing vouchers? (and then would that effectively become a form of payment / employment?) Basically, what is the criteria one could use where someone could express how much they want to live in a particular neighborhood via their time and energy?
I personally think this is hard, but a really valuable one to create. One of the things I've noticed in general, but certainly in Los Angeles is there's such a wide variance in terms of, say, social good. There are lots of little things we do everyday that affect the well being of other people and we're neither incentivized or really dissuaded from doing. Let's take a simple example -- those signs that say, "Drive like you live here" or something like that. Obviously the problem is is people are driving too fast for whatever reason -- and they're trying to shame people into driving more cautiously. Cuts down on accidents, injuries, etc. But that's a good example of trying to promote better community behavior. We could certainly extend this out across the board to crime to helping those less fortunate to positive civic activities. But it sure seems like we should encourage / reward these people -- we should want these people in our neighborhood, right?
It's these two last categories of housing allocation -- merit and effort that I sure would like to see expanded. Our current system is primarily money, with a small amount of lottery, and a bunch of regulation (e.g. rent control) -- and rent control, at its core, is a tax on landlords (not the most sympathetic of a population, but still, let's call a spade a spade -- it's a tax / a taking from them to another population) -- but the rent control is applied, basically, randomly. So, basically lottery. It's the people who happened to be in a unit at a particular time, which of course, introduces all sorts of incentives into the system, many of them not good.
An expansion of government housing assistance under the merit + effort categories -- frankly, just feels more fair and better for society as a whole. As someone who studied economics, it's fascinating to me that the NYC marathon has what seems to be a very unusual and pretty innovative resource allocation system.