Beating the Luftwaffe and saving cities from themselves
«I would rather have questions that can’t be answered than answers that can’t be questioned» – Richard Feynman
«I would rather have questions that can’t be answered than answers that can’t be questioned» – Richard Feynman
World War 2 was won by a Hungarian math nerd.
Things were getting scary so the Allies tried hard to find new ways to defeat the Luftwaffe. One idea was to improve the armor of their aircraft. They called on a group of scientists to look at the damage of planes that had returned and come up with a better way to reinforce the fuselage.
Abraham Wald, a hungarian mathematician, took a different route from his colleagues. He argued that despite the heavy damage they were looking at, still the aircraft were able to return safely to base. The areas with less damage were, according to Wald the ones that needed extra armor, since it was likely that those planes that sustained fire there did not return and thus were not assessed to decide on reinforcements.
He was right.
That type of reasoning is known as “Survivor Bias”. We’ve been unconsciously using it to explain cities and create public policy, with disastrous results.
The rich gentrify. They exclude. They buy their way out of trouble. They build complex structures to avoid paying taxes. They exploit the worker and hoard value they don’t create to grow their fortunes.
And so goes the myth. But, as it turns out, they also tend to contribute to the economic engine in ways that we sometimes overlook.
New York City’s wealthiest neighborhoods have lost over a third of their residents since COVID started. Add the fear of violent riots and looting have magnified a complicated trend of decreasing numbers of new leases in wealthier areas compared to last year.
The city doesn’t seem to mind. Everyone’s too busy celebrating the opening of streets for pedestrians and the better use of streets for outdoor dining.
The joyous mood and renewed interaction notwithstanding, the reality of how the city plans to pay for all the changes from street redesign to cash assistance to small businesses and other initiatives is not very clear. Moving companies and real estate agents signal a trend of high net worth individuals moving away from the city. As of 2016 (and unlikely to have changed much) the revenue structure of the city relies on the top 1% taxpayers for 43.5% of its budget.
If the top 100 taxpayers decided to move away, the local budget would take a dip of $60 million. 23% of the city budget comes from taxes of only 3500 high net worth individuals. That is fucking thin ice. We need to realize how top-heavy that structure is and how dangerous it is to rely on such a tiny demographic for funding. If not for anything else, because they are the first who can afford to move wherever they want to. And we want them to stay.
These people don’t just write a check to the local revenue service and hoard the rest to swim in like Scrooge McDuck. They also invest. They open, invest in and patronize businesses that hire people and create jobs for their suppliers.
Although sometimes they may be stingy with tips, they dine out and go to clubs. Rich people purchase front row tickets to concerts and recitals, the Opera and Broadway, which offer jobs to thousands of workers. They hire assistants, accountants, lawyers, drivers, personal trainers, hairdressers and cleaning crews to do things for them and usually retain the services of interior designers, contractors, decorators, real estate agents and party planners.
They give expensive gifts, too. With enough rich people to buy gifts made by highly skilled and also highly paid artisans and sold by happy salespeople who get nice checks each time they close, it is feasible to open small specialty businesses. On top of all that splurge, people who make over $200k a year pay up in taxes almost 2/3 of the city’s budget.
For almost a century we have been systematically creating public policy and regulatory frameworks to redistribute wealth. Each year we sink more money into too few and too small victories. We have built into central planning the moral imperative of taxing the rich as a sure way to fund the rest. And we have elected politicians who have promised to do just that.
Which they have, to very little avail. So maybe it’s time to ditch the survivor bias.