Gaming the Physical–Political Interface

Last week, I saved $300 by extending an Airbnb stay by two nights. I was confused at first, but when I looked at the receipt details, I saw that the savings came from a tax adjustment.

This counterintuitive situation points to the divide between the physical world and political structures. The difference between these two domains is simple, but it fundamentally shapes how I think about policy. Good policies address problems by removing contributing political obstacles and by encouraging physical solutions.

The physical world, or natural world, is the world we live in and interact with. I think we have an intuitive understanding of what is and isn’t physical. Things we can touch are physical. Apartments, like the Airbnb I’m staying in, are physical. Things we can’t touch (or observe with the aid of a physical tool) aren’t.

This simple concept of physicality separates physics, or natural philosophy, from every other branch of philosophy.

In everyday language, the word politics refers only to our governments and government-related affairs. In philosophy, however, politics refers broadly to all groups and structures of people.

This understanding of politics comes from classical philosophy. In Book III of Plato’s Laws, the Athenian stranger (who leads the dialogue in Laws) explains how the few shepherds who survived “the famous deluge,” which destroyed every “excellent [political] invention,” still had political structures:

And were not such states composed of men who had been dispersed in single habitations and families by the poverty which attended the devastations; and did not the eldest then rule among them, because with them government originated in the authority of a father and a mother, whom, like a flock of birds, they followed, forming one troop under the patriarchal rule and sovereignty of their parents, which of all sovereignties is the most just?

In this passage, the Athenian claims that the family is a political structure led “by the authority of a father and a mother.” Similarly, businesses and friend groups are political structures that can be thought of in terms of government and authority. Companies are like small monarchies with CEO–kings passing royal decree email memos, and friend groups resemble democracies with friend–citizens voting on how to spend time together.

The physical and political realms have just one point of overlap: people. Political structures shape people’s behavior, including people’s interactions with the physical world. The more powerful a political structure is, the more influence its policies have over people’s behavior.

Earlier in this post, I wrote that good policies address problems by removing contributing political obstacles and by encouraging physical solutions. Consider, for example, a city with a housing shortage. There are enough homes for everyone in this city, but some landlords aren’t renting out their extra homes because the city always sides with tenants in disputes. The city could remove a political obstacle contributing to the housing shortage by protecting landlords’ interests in disputes more often. The city could encourage people to pursue a physical solution to the shortage by issuing loans to aspiring affordable housing builders. Although they focus on different domains, both of these policies address the original problem.

Not all problems, however, have both political and physical solutions. In Poverty and Famines: An Essay on Entitlement and Deprivation, economist Amartya Sen argues that starvation and famine are primarily political problems, not physical problems. Starvation, he writes, “is a function of entitlements and not of food availability as such.” In other words, famines tend to be caused by poor distribution of food ownership, not by low food supply. This means that famines would persist even if food production in those areas increased.

Addressing a problem with policy requires understanding the problem’s causes. If famine is entirely a political problem as Sen claims, then new fertilizer technology won’t help solve it. If, on the other hand, there’s not enough food supply for everyone, then no amount of redistribution could ever eliminate famine. These are all relatively simple examples. There’s a lot more to say about the dynamics of policy, incentives, and behavior that I don’t have room for here.

How does all of this relate to me saving money by extending my Airbnb stay? The state of Massachusetts and the city of Boston have room occupancy excise taxes which apply to “hotels, motels, bed and breakfast establishments, and lodging houses” as well as “short-term rentals of property for 31 days or less.” When I lengthened my stay from 30 days to 32 days, these taxes no longer applied to me.

Presumably, these taxes were passed as a political measure to address a problem: the high cost of living in Boston. Tourists visiting Boston drive up housing costs by occupying housing that could otherwise be used by Boston residents. Room occupancy excise taxes make housing more expensive for tourists than for long-term residents, giving landlords an incentive to rent to long-term residents instead of tourists.

The tax’s sharp 31-day cutoff, however, unintentionally incentivizes another behavior: people in short-term rentals for close to 31 days (like me) can save money by extending their stays slightly, contributing to the original problem of scarce housing. I don’t know how to best address Boston’s high cost of living, but I think understanding the political–physical divide is an important prerequisite to any good policy decision. Plus, I’m never mad about saving a few dollars.

Thanks to Theo Amendola, Nathan Tang, Jakob Diepenbrock, and Hannah Wagen for helpful feedback on this piece.