Weekly Top 5 Papers – September 18, 2018

1. Liberal Radicalism: Formal Rules for a Society Neutral Among Communities by Vitalik Buterin (Ethereum Foundation), Zoë Hitzig (Harvard University – Department of Economics), and E. Glen Weyl (Microsoft Research New York City)

I see this paper as a set of proposals and a set of invitations.

First and foremost it is a proposal for funding public goods in a way that solves the so-called “free-rider” problem and yet maintains the benefits of decentralized decision-making. We propose a new funding mechanism for public goods, grounded in economic theory, which we call the Liberal Radical (LR) mechanism. Under LR, the funding received for a given public good is the square of the sum of the square roots of the contributions to that good. The paper contains several concrete proposals illustrating how the LR mechanism would work in real-world settings––software development, campaign finance, urban projects, and news media finance––and we outline how LR could change those systems for the better. More broadly, we propose a political philosophy based in LR that might help liberal democracies smooth out the enduring (and heightening) tensions between capitalism and democracy. This broader discussion is timely, as we see the rise of authoritarian populist alternatives to liberal democracy––on both the left and right––as a manifestation of these heightening tensions.

But, the paper is also a collection of invitations. We aimed to appeal to a wide range of readers––economists, political scientists, cryptographers, lawyers, philosophers, urban planners, computer scientists, politicians, artists, designers––in order to invite inclusive collaboration around our ideas, and to invite others in far-reaching communities to put forward their own innovative solutions to local, national, and global problems. We do not think that our proposals are perfect at this stage. In fact, there’s a lot of work left to do. And as such, the paper is an invitation to collaborate, innovate, and iterate on our proposals. It is through comprehensive, wide-ranging collaboration that we will refine our proposals into plans, and eventually animate our plans in a way that changes our social, political and technological systems for the better.  – Zoë Hitzig


2. Psychopathy by U.S. State by Ryan Murphy (Southern Methodist University (SMU))


3. ‘A Diamond is Forever’ and Other Fairy Tales: The Relationship between Wedding Expenses and Marriage Duration by Andrew Francis-Tan (National University of Singapore (NUS) – Lee Kuan Yew School of Public Policy), and Hugo M. Mialon (Emory University – Department of Economics)


4. Racial Rent Differences in U.S. Housing Markets by Dirk W. Early (Southwestern University), Paul E. Carrillo (Department of Economics and Business George Washington University), and Edgar O. Olsen (Department of Economics University of Virginia – Department of Economics)

Racial discrimination is an important area of public policy, and some of the most important civil rights legislation dealt specifically with housing discrimination. Individual preferences for living near or dealing with people of other races have led to high levels of residential segregation and a variety of racially discriminatory acts by landlords and realtors. Although both have declined since the passage of the 1968 Fair Housing Act, they still affect market outcomes. One potentially important outcome of these preferences is differences in the prices that blacks and whites pay for similar housing in the same neighborhood. Recent studies have established convincingly that blacks pay slightly higher sales prices for identical units in the same neighborhood. Understanding racial rent differences is arguably even more importance since nearly 60 percent of black households are renters. Previous evidence for renters is very old and not nearly as reliable.

Our paper fills this gap. It exploits an unusually rich data set to estimate racial differences in the rents paid for identical housing in the same neighborhood and to show how they vary with neighborhood racial composition. Our results indicate that households led by blacks pay more for identical housing in identical neighborhoods than their white counterparts and that this rent gap increases with the fraction of the neighborhood white. In neighborhoods where whites are less than 30 percent of residents, the premium is between 0.5 and 1 percent. It rises to about 3 percent in neighborhoods where whites are more than 60 percent of all residents. Since blacks live disproportionately in neighborhoods with few whites, most blacks pay a small premium. It is not clear whether these modest differences in rents are due to enforcement of the Fair Housing Act or weak racial preferences. We know much more about the extent of discrimination than the causes of the racial differences in rents, and we know even less about the effectiveness of government policies intended to address housing discrimination. The latter should be a high priority for future research. – Edgar Olsen


5. A Brief Introduction to the Basics of Game Theory by Matthew O. Jackson (Stanford University – Department of Economics)


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