Post #248: The collapse of the bezzle

I’ve been trying to come up with the right metaphor for what occurred at last Thursday’s meeting of the Board of Architectural Review (Post #245).  I’m an economist, and, at the risk of being a little strained, let me introduce one of my favorite economic concepts:  the bezzle.

The bezzle.  In his book “The Great Crash 1929”, economist JK Galbraith defined the bezzle as the “inventory of undiscovered embezzlement”.  At any one time, it’s the total amount of money in the US economy that has been stolen, but for which the theft has not yet come to light.  (Galbraith’s main point was that the size of the bezzle moves in tandem with the business cycle.  When times get tough (as in the post-1929 period), frauds are uncovered and the bezzle shrinks.)

Galbraith pointed out that the bezzle creates a temporary increase in the total sense of well-being. Both the thief and the victim think that they own the money.  The bezzle allows a sort of double-counting:  thief is pleased to know they’ve stolen it, and the victim is pleased to think that they still own it.  The total perceived well-being exceeds the actual well-being.

When the embezzlement is discovered, that temporary excess sense of well-being collapses. The embezzler’s status is unchanged, but the victim realizes they’ve been had.  Or the embezzler goes to jail, and the victim is made whole.  Either way, there’s some misery involved.

And so, the collapse of the bezzle is the best metaphor I can give for last Thursday’s BAR meeting.  The BAR thought that the Marco Polo site was slated to be filled with a stylish, unique, turn-of-the-century Georgetown stone/brick/wrought-iron building.  Which would have been quite expensive to build.  While, simultaneously, the builders thought that the Marco Polo site was going to be filled with a run-of-the-mill standard-NoVA-sprawl unadorned building.  What I called the “Chicago back-alley” building.  A building that would be much cheaper to build.

The difference in cost between those two buildings is our bezzle.  It’s an amount of money or value that both parties to the transaction thought that they owned.  Until last Thursday, both the BAR and the Builder were happy about the building.  Only, they weren’t talking about the same building.

And that’s why the builders showed up, bricks in hand, last Thursday.  The new owners of the Marco Polo development thought this was a clean, done deal.  From their standpoint, the goal of last Thursday’s meeting was to get on with the formality of having the BAR approve the materials to be used, so that they could start construction.  And, instead, what they got was the BAR’s discovery of the bezzle.  Which is this case is the gulf between the “Georgetown” building that the BAR passed, and the “Chicago alley” building that the builder planned to build.

The collapse of the bezzle is never fun.  One of the two parties here is going to end up being aggrieved by the results.  I can’t even begin to guess how this will be resolved.  But it’s a pretty good guess that it’s going to be unpleasant for somebody.

DISCLAIMER:  I’m not saying that anybody embezzled anything.  Again, this is a metaphor for what happened.  I am saying that there is a big difference between what the Town thought it was getting and what the builder thought they were building.  That difference allowed both parties some undeserved happiness.  And that excess happiness evaporated last Thursday.