Yale’s 367-year-old water bond still pays interest (2015) | Hacker News Reader

Yale’s 367-year-old water bond still pays interest (2015)

news.yale.edu

Similar fun fact: Harvard is immune to eminent domain, because the original constitution of Massachusetts ensured that all of Harvard's then-existing rights would remain in effect "forever", and apparently that includes a dusty old letter from King George or something stating that Harvard cannot be subject to eminent domain. Harvard has used this to reroute a subway tunnel that would otherwise have run under Harvard Yard. So the next time you're on the red line and wondering why the train slows to a crawl as it passes that sharp turn around the Harvard stop, now you know.

This is as far as the facts go, and only lore is left. Here, however, is how the story goes. When, in 1974, the Massachusetts Bay Transportation Authority sought to extend the Red Line beyond Harvard Square, the state began plans to dig underneath Harvard Yard. They got so far as to build a platform approximately underneath Wigglesworth Hall. In fact, you may see the ghost station when you ride the T, on the right side of the train as it slows down and nears the platform at Harvard station. However, Harvard would not tolerate the thought of a tunnel below its sacred grounds, disturbing the scholarly peace and quiet of the Yard. Allegedly, Harvard hired a team of lawyers who took the MBTA to court. According to lore, they presented before the judge a glass encased letter granting Harvard exemption from eminent domain signed by General George Washington.

As for the veracity of the story, I have not found substantive proof other than repeated versions of the story told in forums. However, it is true that Harvard inexplicably convinced the MBTA to build around the Yard despite an astronomical increase in the cost of construction.

https://www.thecrimson.com/column/the-snollygoster/article/2...

I lived in Wigglesworth last year. I swear this isn't true because I woke up damn near everynight from the rumbling below my room.

That’s the tunnel along Mass Ave, which Wigglesworth runs parallel to, rather than going through the yard itself.

Lol. Harvard hiring lawyers. Thats like hogwarts bringing in consultant wizards.

Or Death Eaters, as they prefer to be called.

The wizards or the lawyers?

Harvard has three kinds of law people. First, it has its own lawyers. They're fine, but they're mostly not the court kind of lawyers. Second, it has law students. Those aren't lawyers, so you don't want them either. Third, it has law professors, who are generally well known or renowned for past deeds or theoretical legal philosophy, but mostly they're either out of practice, never practiced, or they've got insane (for example, Alan Dershowitz is a professor there). You don't want any of those folks nearby when courtroom stuff needs to happen.

Hogwarts has a similar problem, now that I think about it. Hugely powerful wizards defending a school from a tiny number of adversaries, they've got all the time in the world to prepare, and yet they're terrible at it. They build a huge multilayered vault that's bypassed by three unprepared kids. They should've brought in professionals.

Don't forget #4: The littany of legal resources in the Harvard Alma Mater Alumni Network who became practicing courtroom lawyers

> who became practicing courtroom lawyers

And judges. And politicians. And bureaucrats. And wealthy political donors.

They’ve got an army of influence at every layer of society.

I always hear this talk of condescension towards academics in favor of professionals but I don't get it. I've spent more than a decade in professional settings and """professionals""" screw up their jobs quite often and don't even experience everything there is to experience in their entire industry, so I don't get the sense of ascendancy.

Professionals screw up their jobs more than academics for the same reason that professional baseball players strike out more than couch surfers: they’re actually playing the game

You don't know that--it's possible (and in my experience this is the more likely cause) that they are not thinking enough on the abstract to recognize patterns across situations, which is why they keep making the same mistakes.

The best professionals I've ever worked with don't even bother making this artificial distinction between professional practice and the academe, and instead continue to educate themselves even as they get farther in their careers. Professionals who are incapable of elevating their practice into theory are just as devoid of knowledge as academics who don't put their theory into practice. We need to stop glorifying this notion of "pure" professionals just as people are skeptical of "pure" academics--otherwise this is just letting anti-intellectualism creep in on HN.

There is no ant—intellectualism here. Academics simply are not professionals. You can’t suddenly become good at something you don’t practice because you are a master at theory and being an academic doesn’t allow the time to practice.

This. It's one thing to know the theory of digging trenches, it's another to successfully fight from them.

Sorry if my joke came across as anti-intellectual. I think "law professor" and "lawyer" are really different jobs, though, in the same way a doctor does a different job from a PhD in medicine. Sure, those "head of research" MD-PhD folks running research labs are technically doctors, but you don't want them to be your doctor simply for the reason that they haven't actually seen any patients in a long time.

Industry and academia are totally different environments. I don’t see any indication that people in industry “screw up their jobs” more than academics. How do you even define “screw up” and “more?”

The academic’s job is to understand the state of the art well enough to improve on it, implementing a standard solution is below bare minimum.

In industry the goal is to get near enough an approximation to the state of the art such that the thing they are working on doesn’t provide the company a noticeable disadvantage vs the competition, and then move on to something else.

In this description, who is building what you call "state of the art"?

It's extremely common for many scientists (nuclear physicists, neuroscientists, biochemists, etc.) to spend a few years in the industry and either teach for a while or publish a paper on the side and then come back to full-time work when they feel like it again. This obsession on drawing a hard line between the two is utter nonsense and reeks of classic HN techbro simple-mindedness. You would easily make the mistake of dismissing a professional in the middle of an academic stint as someone who has no experience at all, just to feed your sense of self-superiority.

Err, did you mean to respond to a different post? I was pointing out that the jobs (not the people) are fundamentally different. As a result, denigrating academics for not “playing the game” makes no sense. They are “playing” a different “game.”

It is like complaining that Wayne Gretzky sucked at getting points — compare his scores to, like, any vaguely offense-focused basketball player!

There is a good reason for spherical cow in vacuum to exist as a concept.

I have seen brilliant people pass through CS with flying colors and they enter their first job and don't know how to debug something.

Think of it that way - a material science professor will know everything there is about welding. And yet probably for a complex weld you will call a welder. Tricks of the trade matter.

The whole point of the academy is that you can abstract a bit the whole messiness of the world so you can focus on the grander things.

It's because academics are spectacularly incompetent compared to professionals.

They have no actual practice doing anything. But worse, they think they know what they're doing.

Honestly, be thankful you've never worked with an academic, they're honestly the worst work experience you will ever have, arrogant, utterly incompetent and can waste huge amounts of your time by saying intellectually appealing things to management that are a practical disaster.

To be fair, my interpretation is that the multilayered security system was actually designed to be bypassed by precisely those 3 children, and the curriculum was designed to give them exactly the knowledge they'd need.

Now I wonder what an elite wizard special forces would be like.

Aurors?

Would make for a great TV show...

If you went far enough in the direction of professionalized warfare in the Harry Potter universe, I have a sneaking suspicion it would turn pretty stupid. People with enchanted sniper rifles and invisibility cloaks playing “don’t move first” or something boring like that.

You can definitely get pretty creative and interesting—for example, transmuting a pile of primed hand grenades into a handful of confetti and then tossing it over your enemy right before the spell wears off. That said, you're right, it's highly likely that boring strategies would dominate. However, the Harry Potter magic system is so fast and loose that you can always make up some new spell to cancel out whatever OP strategy; the author has almost unlimited leeway.

All wizards seem limited by the speed of sound. They hear/see spells coming and react by waving arms and saying things. Bullets are faster than wands. Only Jedi have the prescience to react prior to the bullet being fired.

Do they need to react though? Surely there's some sort of kinetic barrier spell they could use. Just checked and there's protego, a shield charm that blocks other spells and physical objects. A high mobility special forces wizard squad would have one person responsible for casting protego while all the others use avada kedavra on everything that moves. They could also use some sort of explosive spell to destroy cover, walls, obstacles and fortifications. All while shrugging off bullets, shrapnel and pretty much anything muggles could throw at them short of a nuclear missile.

We only really see up to, basically, the wizard version of a detective in Harry Potter. Maybe some of the aurors are like SWAT team members?

In general the wizard society imagined seems to actively reject the idea of professionalizing things and work more as a collection of hobbyists so I suspect “professional soldier wizards” don’t even exist in universe, and there’s no Wizard Raytheon to really optimize Wizard Radar. So it is hard to speculate about what it would look like.

That does not sound accurate. The 'ghost' station described is an original, pre-extension station. When the line was extended beyond Harvard Sq., they moved the station just up the street around a sharp bend.[1] Very MBTA. I respect the journalistic source, but it seems exceedingly unlikely anyone ever tried to cut off the existing station and run it through Harvard Yard, much less got so far as to construct a ghost station.

[1] https://en.m.wikipedia.org/wiki/Harvard_station

The part about "Harvard is immune to eminent domain" is definitely apocryphal.

I'm quite positive the United States doesn't give legal credence to "dusty old letters from King George".

Depends on the judges involved.

Has nothing to do with judges, and the fact the US adopted English common law and evolved it's judiciary from there.

In theory sure, in practice the legal system is run by people who somewhat regularly make technically incorrect decisions.

To be a little pedantic, individual states maintained systems based on English common law, rather than the US as a whole adopting it. There’s famously no such thing as Federal common law.

This matters in Louisiana, which has a civil and not a common law system, dating from the French period.

Actually, it's entirely possible. I have friends out in California who still have Spanish land grants that predate the US and California statehood. They have successfully prosecuted their rights (eg water) again & again.

For example, see the section about the Treaty of Guadalupe Hidalgo on this wiki page:

https://en.m.wikipedia.org/wiki/Ranchos_of_California

See also Dartmouth College v. Woodward argued for Dartmouth by none other but Daniel Webster.

Among other things Supreme court chief justice "Marshall concluded that Dartmouth’s [royal] charter constituted a contract and that New Hampshire had violated this contract in attempting to replace the original trustees." https://www.mtsu.edu/first-amendment/article/729/dartmouth-c...

Yes, generally the laws in effect before a colony or territory became a US state remained the same after they became US states. Contracts signed before statehood remained valid after. Property deeds remained valid. The criminal laws remained in effect. And so on, at least until amended by the new state legislature. Doing anything else would just be chaos, really. Louisiana is another example; its legal system has a distinctly French character to this day.

The treaty has not been fully followed, even according to the US government.

https://www.gao.gov/products/gao-04-59

Here in NM, a significant number the original Spanish land grants were ignored and replaced by new grants to (generally) Anglo owners. Fortunately, some of them were sufficiently cogniscent of the paradox of colonialism overriding colonialism that the new grantees re-issued (smaller) grants back to the owners under Spanish or Mexican law.

Ironically, there were also some Spanish land grants that took so long to process, Mexico had already declared independence from Spain before the legal process was complete, and this left a number of them in a strange form of legal limbo at the time of the treaty.

The US did not reboot jurisprudence when it was established. We imported English common law.

> We imported English common law.

In most places... which is your first point.

One of the science fiction authors that I've read has run in to this - https://en.wikipedia.org/wiki/George_Alec_Effinger

> Throughout his life, Effinger suffered from health problems. These resulted in enormous medical bills which he was unable to pay, resulting in a declaration of bankruptcy. Because Louisiana's system of law descends from the Napoleonic Code rather than English Common Law, the possibility existed that copyrights to Effinger's works and characters might revert to his creditors, in this case the hospital. However, no representative of the hospital showed up at the bankruptcy hearing, and Effinger regained the rights to all his intellectual property.

There is something that seems at best underexplained in that narrative (which the Wikipedia article sources to the introduction to one of his works), since bankruptcy is handled by uniform federal laws, with state laws governing some exemptions, but copyrights not being generally exempt in most states (and the common law states not differing systematically from Louisiana on this point.)

There's a fair bit around that that gets very deep into the "it's not simple".

https://www.louisiana.gov/about-louisiana/

> Early French and Spanish settlers influenced the legal system in Louisiana. Despite popular belief, it is incorrect to say that the Louisiana Civil Code is, or stems from, the Napoleonic Code. Although the developing Napoleonic Code influenced Louisiana law, the Napoleonic Code was not enacted until 1804, one year after the Louisiana Purchase. A main source of Louisiana jurisprudence may in fact be Spanish. The resulting system of "civil law" in the Louisiana does differ from the "common-law" systems in the other 49 states.

https://en.wikipedia.org/wiki/Law_of_Louisiana

> Law in the state of Louisiana is based on a more diverse set of sources than the laws of the other 49 states of the United States. Private law—that is, substantive law between private sector parties, principally contracts and torts—has a civil law character, based on French and Spanish codes and ultimately Roman law, with some common law influences.

https://www.lawinfo.com/resources/bankruptcy/louisiana/

> Federal bankruptcy laws changed in October of 2005 when the Bankruptcy Abuse Prevention and Consumer Protection Act took effect six months after President Bush signed it into law. This new law requires consumers who file bankruptcy to receive credit counseling in the six months prior to their filing for debt relief. It also mandated their completion of a financial management instructional course.

(interesting - the laws changed in 2005 - which may have been something sufficiently different... and he died three years before that law was changed)

https://www.bloomlegal.com/blog/what-is-unique-about-louisia...

> The most notable difference in procedure comes in the sphere of trust and estates law, real estate law, and inheritance. In Louisiana, we call this Succession and Donations, where it’s Trust and Estates in the rest of the country. Much of the legality surrounding the way land and property is passed down is unique to Louisiana.

https://www.nola.com/news/article_efcb7e79-99e1-53df-8e74-6b...

> So, Louisiana and the rest of the United States reached a compromise: Louisiana could continue to follow its civil law practices for private law, which governs interactions between individuals like marriage and succession, and Louisiana would have to use common law akin to the rest of the United States for public law, like when a person goes to criminal court and is prosecuted by the state.

(bankruptcy and property would fall under the civil law at the time)

Someone else mentioned the story they heard was from George Washington, which would carry more weight I suppose. But it also implies it’s all a game of telephone.

> which would carry more weight I suppose.

That would carry less weight - George Washington never had monarchical or dictatorial powers to grant such an exemption.

In some cases, we do. I worked for a farmer who won an eminent domain action on the basis of a Dutch deed covenant. There’s a lot of crusty old law that protected the rights of landowners and others whose title predates the state or nation. In my boss’s case, his title predated both the state and country.

It worked in negative ways too. The Dutch setup a feudal system, but the state limited the ability of the landowner to collect rent in the 19th century. (Baltimore has a system like this too) In this case, the landlords abandoned the title, but many homeowners were in a legal limbo where they didn’t have a clean title.

https://en.m.wikipedia.org/wiki/Dartmouth_College_v._Woodwar...

Different Ivy League school, but established a precedent that states must respect preexisting charters.

Perhaps they do respect the constitution of Massachusetts?

Whether or not that particular claim is apocryphal or not, it's well established case law that dusty old royal charters from King George III very much have legal credence.

It definitely does: https://www.oyez.org/cases/1789-1850/14us304

Not at all uncommon. Allow me to direct you to Article XIII of the Minnesota Constitution, which states:

Sec. 3. University of Minnesota. All the rights, immunities, franchises and endowments heretofore granted or conferred upon the University of Minnesota are perpetuated unto the university.

https://www.revisor.mn.gov/constitution/#article_13

Pretty sure all that means was that the land grant of the territorial legislature would still be in effect after the ratification of the Constitution (1851 vs 1857.)

Interestingly enough, Section 4 immediately following invests the state with eminent domain power.

Untrue. The University of Minnesota has broad powers to manage its own affairs without interference from the State and local government.

This excellent article by the legal research team describes the scope of the University's powers and cites key legal cases that have helped define it. https://www.house.leg.state.mn.us/hrd/pubs/ss/clssumca.pdf

My father was a real estate appraiser for the New York State Department of Transportation whose job was to appraise land taken under eminent domain.

There are plenty of parcels of land whose title is literally a pre-Revolution Crown Grant. That matters not a whit with respect to eminent domain. (OK - maybe not plenty but at least two.)

The US absolutely respects agreements prior to land becoming territory of the United States. Of course, it all depends on the agreement, so I have no idea if the Harvard story is correct.

But a good example are the ranchos in California. They were land grants by the Mexican government when it was Mexican territory. When the US acquired California after the Mexican-American war, the agreement was all such land grants were deemed valid going forward.

https://en.wikipedia.org/wiki/Ranchos_of_California

> The US absolutely respects agreements prior to land becoming territory of the United States

The Treaty of Guadalupe Hidalgo has not been fully followed, even according to the US government.

https://www.gao.gov/products/gao-04-59

Those claims are about how the original land grants were respected, not if they were respected. That may sound like mincing words, but it's an important distinction.

From the GAO abstract:

> identifies and assesses concerns regarding acreage transferred voluntarily or involuntarily after the confirmation procedures were completed

"Involuntary transfer" is not what most people would describe as "respecting existing land grants".

Read the details, it's because proof of land grants wasn't exactly perfect. Lots of claims but sometimes no concrete proof. The article calls out instances of fraud.

I wouldn't say a few exceptions where challenges were faced mean the US didn't respect land grants. The paper itself says the vast majority has no issues.

Are you sure about that? I did some research, and Harvard's rights are indeed written into Massachusetts' constitution:

https://malegislature.gov/Laws/Constitution#chapterVSectionI

Chapter V, Section I, Article I:

> it is declared, that the President and Fellows of Harvard College,in their corporate capacity, and their successors in that capacity, their officers and servants, shall have, hold, use, exercise and enjoy, all the powers, authorities, rights, liberties, privileges, immunities and franchises, which they now have or are entitled to have, hold, use, exercise and enjoy: and the same are hereby ratified and confirmed unto them, the said president and fellows of Harvard College, and to their successors, and to their officers and servants, respectively, forever.

Chapter V, Section I, Article II:

> And whereas there have been at sundry times, by divers persons, gifts, grants, devises of houses, lands, tenements, goods, chattels, legacies and conveyances, heretofore made, either to Harvard College in Cambridge, in New England, or to the president and fellows of Harvard College, or to the said college, by some other description, under several charters successively: it is declared, that all the said gifts, grants, devises, legacies and conveyances, are hereby forever confirmed unto the president and fellows of Harvard College, and to their successors in the capacity aforesaid, according to the true intent and meaning of the donor or donors, grantor or grantors, devisor or devisors.

I'm skeptical. I looked at google maps, and I allow that it may not be perfectly accurate, but the line appears to follow surface roads in the area which allows for cheap and easy (relatively) cut and cover tunnels. Further, if the line already existed to Harvard Square, there is no reasonable alignment that would take an extension under Harvard yard. The line turns because the road turns and that is the direction they wanted to go. They also had to deal with the pre-existing station and tracks. It was probably determined to be the best option as trains would already be stopping at the station, anyway.

Yeah, it seems to basically follow Mass Ave from Harvard to Porter which makes perfect sense. (There's some one-way funkiness on the surface street--Boston/Cambridge, what can you say?) But given that the Hardware Square station existed at the time of the Red Line extension, I'm not sure why you would go under Harvard Yard. I'm willing to believe that Harvard Square station could have been located differently in a way that didn't require such a dogleg approaching Harvard Yard but that decision happened a very long time ago.

I always heard that this was so you could park your car in Harvard yard.

The walkways there _are_ paved in easy-to-level asphalt rather than, you know, cobblestones

Multiple urban legends reported as fact. Massachusetts Bay Colony lost its royal charter anyway for hanging Quakers.

Edit: wiki reference added in following comment

That fact about Harvard sounds like multiple urban legends. For one thing Harvard began in the 1630s, yet in 1684 the King dissolved Massachusetts Bay Colony's 1628 royal charter because of their bad behavior (hanging of Friends). Anything about eminent domain would have had to be put in a 1691 new charter:

https://en.m.wikipedia.org/wiki/Massachusetts_Charter

>dusty old letter from King George

Wow. That's crazy. Is there a picture of it somewhere? Or is it locked in a deep vault somewhere in Harvard

Also covered by the fantastic Tom Scott:

https://youtu.be/cfSIC8jwbQs

The world is so much nicer with people like Tom Scott, Technology Connections, CGP Grey, and Smarter Every Day.

> CGP Grey

He produced a grand total of 3 explainer videos this year, and maybe 5 last year. He’s got an entire production team, and has a podcast on which he brags about his productivity system. Tom Scott makes 2+ videos per week, while Alec from Technology Connections has produced 17 videos this year, many of them long and deep dives.

Somewhat similarly, I recently became a Special Depositor at new mutual bank that's in organization (Walden Mutual). This involved sending them a few thousand dollars, which will be part of their pool of capital for making loans. I cannot withdraw the principal, although I should be able to sell ownership of the deposit to someone else, and of course I would also be considered a (subordinated) creditor if they fold. In exchange, as soon as they are profitable (in a few years) they will be paying dividends at a pretty good rate, indefinitely. The rate is not guaranteed, though.

This feels like a good idea to me because this bank is in the business of making local agricultural loans, and the founders are aligned with my values -- this is an institution that I want to have exist. But also I think they're well positioned to make these loans, so it should be a good investment. Mutual banks also tend to be long-lived, so this is an investment that should continue to pay dividends for many decades.

It will either continue to pay dividends for almost perpetuity or fold in the next few years.

It's not nearly as old, but the University of Cincinnati has a "Tanners' Lab" facility, because somebody gave them a bunch of money for it when leather tanning was still super-high-tech, and the money hasn't run out. I believe their recent work is stuff like Harley-Davidson contracting with them to stress-test jackets.

Isn't any kind of fabric production still pretty high tech? It feels a little dismissive to call it super high tech in the past tense.

Leather is not a fabric.

But it's sure in the textile industry if you look at leather jacket manufacturing

Yale’s 367-year-old water bond still pays interest (2015) - https://news.ycombinator.com/item?id=26556938 - March 2021 (127 comments)

Yale to Be Paid Interest on Dutch Water Authority Bond from 1648 - https://news.ycombinator.com/item?id=10226291 - Sept 2015 (120 comments)

Should have (2015) in the title, but I absolutely love stories like this. Even wilder is the detail at the end: they recorded interest payments on the original goat skin until 1944.

The article says, "In the 17th century, people sometimes issued perpetual debt." True, but not just in the 17th century; consols have been issued into the mid 20th century, mainly for war (from the Napoleonic wars up to WWII).

The article also mentions, parenthetically, "The interest rate was reduced to 3.5% and then 2.5% during the 17th century." Does anyone know if this was specific or if some law alterered interest rates?

The bond is older than Yale itself (though FWIW there are plenty of schools still operating that are older than this bond).

> ...there are plenty of schools still operating that are older than this bond

At the time of the Aztecs, the University of Oxford was already an ancient institution older than the USA is today.

> FWIW there are plenty of schools still operating that are older than this bond

There are, or at least recently were, 62 such schools. Indeed, besides the Catholic Church, the Lutheran Church, and the Parliaments of Iceland and the Isle of Man, every organization in the western world that's been continuously operating since 1530 is a university[1]. I believe this is why it's critically important that universities remain focused on their timeless mission rather than chasing secular fads. The Buxton index, described in the below link, is an incredibly important concept.

[1] https://www.cs.utexas.edu/users/EWD/transcriptions/EWD11xx/E...

> My third remark introduces you to the Buxton Index, so named after its inventor, Professor John Buxton, at the time at Warwick University. The Buxton Index of an entity, i.e. person or organization, is defined as the length of the period, measured in years, over which the entity makes its plans. For the little grocery shop around the corner it is about 1/2,for the true Christian it is infinity, and for most other entities it is in between: about 4 for the average politician who aims at his re-election, slightly more for most industries, but much less for the managers who have to write quarterly reports. The Buxton Index is an important concept because close co-operation between entities with very different Buxton Indices invariably fails and leads to moral complaints about the partner. The party with the smaller Buxton Index is accused of being superficial and short-sighted, while the party with the larger Buxton Index is accused of neglect of duty, of backing out of its responsibility, of freewheeling, etc.. In addition, each party accuses the other one of being stupid. The great advantage of the Buxton Index is that, as a simple numerical notion, it is morally neutral and lifts the difference above the plane of moral concerns. The Buxton Index is important to bear in mind when considering academic/industrial co-operation.

Not just universities; there are also extant high schools going back at least to the sixth century.

I don't know if that interest rate was specific. But there is a family in Missouri that receives a couple of percent of the NBA's television deal revenues annually to this day despite never owning a basketball team that played an NBA game.

https://en.m.wikipedia.org/wiki/1975–76_Spirits_of_St._Louis...

> The Spirits were not included in the ABA-NBA merger, but the Silna brothers nonetheless managed to turn it into one of the greatest deals in the history of professional sports. In June 1976 the ABA owners agreed, in return for the Spirits of St. Louis ceasing operations, to pay the St. Louis owners $2.2 million in cash up front in addition to a 1/7 share of the four remaining teams' television revenues in perpetuity. As the NBA's popularity exploded in 1980s and 1990s, the league's television rights were sold to CBS and then NBC, and additional deals were struck with the TNT and TBS cable networks; league television revenue soared into the hundreds of millions of dollars.

I wish governments issued perpetual bonds. It would make thinking about finance much easier if you could directly convert a stock to a flow and vice-versa.

The UK had some outstanding until recently, but I don't think there are any left https://www.gov.uk/government/news/chancellor-to-repay-the-n...

My understanding is that all British consols were callable; the government had the option to force redemption of the bond at a fixed price. This means that they're a slightly more complicated product than the direct stock-for-flow exchange that I'm imagining.

A perpetual bond with no inflation adjustment only really makes sense in a zero inflation environment.

The mathematical Net Present Value is $20000 for a perpetual cash flow income of $1000 every year with 5% inflation. (convergent infinite geometric series).

In most cases any income further than some decades away should be valued at near zero - stocks due to market risk - even government bonds are not risk free.

The future is volatile.

It "makes sense" to the same degree a 30 year non-callable bond makes sense--which is a long time but, in the US, 30-year fixed mortgages are obviously quite common.

You can directly compare the net president value at issuance of a a 30 year loan at 6% that repays it’s principal vs a infinite loan that doesn’t assuming say 2% inflation rate.

However when you realize managing loans isn’t free and neither 2% inflation nor perpetual repayment is guaranteed; getting the principal back starts to look even better.

How do you value a perpetual bond in an inflationary environment?

A 3% return in perpetuity isn't very valuable when inflation > 3%.

Well, you can have inflation linked bonds, but usually the issuer is in some way involved in setting determining the inflation index...

> It would make thinking about finance much easier if you could directly convert a stock to a flow and vice-versa.

Can you explain this please?

Because I can't really see how converting stock to flow and more specifically flow to stock makes thinking abut finance easier.

But the idea seems interesting, what am I missing?

This makes me wonder: Did Dutch financiers in 1648 grasp the concepts of net present value and convergence of infinite series? Or was the price of perpetuities simply set by market demand?

I wander at what point in time the value of the document as a historical artefact outweighed its value due to the bond it represents?

It raises some interesting questions about the legitimacy of perpetual interest payments and bonds. I expect that exactly why the academic has gone through this process though, it creates an interesting point of discussion.

Its value as a historical artifact already outweighs its financial value.

Per the Tom Scott video mentioned in another comment, obtaining the interest is mostly for ceremonial and amusement value.

> Its value as a historical artifact already outweighs its financial value.

I read your parent as asking how many years after it's creation that became the case

Ah, good point!

Perhaps its historical uniqueness is tied to its active status as a valuable bond? They cannot be separated?

Got to love all the commenters who implicitly or explicitly assume that the bond is one that Yale issued, as opposed to possesses.

The article is quite poorly written in this respect. They could have explained up front that it is a "bearer's bond" - that whoever holds the physical document can collect the interest, and then gone on to note that it it was now held by Yale as part of a museum collection. Instead, the bearer part is delayed till the end.

History is cool, but this is gross rentier behavior. Perpetual bonds should be banned. Perpetual ownership comes next.

Doesn't matter if the other side enters into the transaction willingly, imo.

I mostly agree, but a 367 year old contract kinda stresses the concept of "other side" and "willingly". I may be missing some subtleties of how dutch water boards work, but they seem to be a sort of quasi-governmental organization that receives tax-payer funds. so in some sense, the people of the netherlands are bound to an american private university by a contract that far predates the birth of any living citizen's great-grandparents. in this case, the interest amounts to only a symbolic amount, but imo it would be pretty unfair if it were a more significant yearly payment. no one alive today consented to the contract.

Nobody alive today consented to a monarchy and we also have plenty of those around. One still in the Netherlands.

It’s more of an argument against monarchy than for perpetual bonds.

but people do consent to the monarchy?

mind you, the netherlands is a constitutional monarchy in which the king is legally bound by the constitution. Changing the constitution to just absolve the monarchy is a possibility. One that just hasn't happened yet, because the monarchy in the netherlands is quite popular.

Also, in the past two decades, the monarch had to resign some roles he still played in goverment. (like appointing the "informateur" and "formateur" during the formation of a new cabinet.) This all happens without his approval, because he doesn't have the power to draft and implement laws. That is done by both chambers of goverment.

It's not perpetual--it's 100 years--but check out Listerine royalties.

https://thehustle.co/the-people-making-millions-off-listerin...

Anyone can sign any piece of paper. The question is whether the state should spend effort on the enforcement of said contract.

Liber(al,atarian) "Freedom of contract" is easily refuted child-philosophy. Society not choosing to spend communal resources enforcing your stupid contract is not an abridgement of individual rights.

That is the starting point, then we can get into "contracts made under duress" with the understanding that its not incumbent on society to judge the situation perfectly every time, because ultimately society is extending a favor not a right to the contractees.

I think the water board can spare ten bucks for interest out of their €130M budget.

It is still a waste of administrative labor.

It has value in terms of being an example of how old these institutions are, not to mention how trustworthy and with lasting power they are.

Administrative effort + 10 bucks is _nothing_ compared to that.

Avoiding default is not a waste.

Paying all and any debts makes it much easier to raise new bonds for future construction and maintenance. News articles like this are like the ultimate letter of credit.

The legitimate/legal solution would be to buy back the bond and cancel it. But I guess everyone allows to continue because it's a cool piece of history.

You mean stocks should be banned?

Conceptyally they are kind of the same thing.

conceptually they are different. stocks are equity and bonds are debt.

If you dig into finance theory they're not as different as you might think. And it gets even fuzzier when you consider instruments like convertible bonds.

if they weren't different then why would the bond need to be converted from one to the other?

I wrote they weren't as different as you might think in terms of who has claims on the company etc. At the practical level there are obviously differences between different classes of stock, callable vs. not callable bonds, convertible bonds etc. I'm just saying that equity vs. debt is not binary.

Stocks are equity that (at least in theory) allows you to have perpetual dividends.

Of course most companies fail in longer time frame, also modern stocks are kind of a modern concept, but there are some really old companies here and there. Most dont pay dividends but conceptually they could.

Also in 100 years people will probably still drink wine/beer, eat salt or will want to go to some respected restaurant or a traditional hotel near a japanese wellspring.

https://en.wikipedia.org/wiki/List_of_oldest_companies

There's a huge difference though in that the bond comes with a fixed payments while the stock's dividends can be varied or eliminated entirely depending on what management thinks is prudent.

The bond creates an obligation to pay to a third party. The stock creates no obligation and the management/owners of the company can decide that it is worthwhile to pay the owners a dividend.

If I lend you $100,000 to open a restaurant and the restaurant is barely scraping by, you still owe the money. If I invest $100,000 in your restaurant, I have an ownership stake in the restaurant, but if there aren't any profits there won't be money coming my way. Yes, if the restaurant completely fails, maybe I'll lose the lent money, but I will get paid before owners. Likewise, if the restaurant is making $10,000/year before my loan is paid and it's a 10% interest loan, I get to take that $10,000/year interest owed me.

Stock is just giving someone a claim to a percentage of the business. Bonds are giving someone a claim to a certain amount of money. There's a huge difference. Bonds need to be paid even if the business is doing poorly (unless you want the business to declare bankruptcy). Stock doesn't need to be paid, but of course the stockholders get to share in the success of the company if it happens while bondholders don't.

There are convertible bonds where someone will give you money at a lower interest rate in exchange for the ability to convert the bond's value into equity if the company does well. For example, instead of a loan at 10%, I offer you a loan at 3%. Your stock is currently $20/share. If the stock hits $50/share or higher, I can convert the bond's value into stock at $50/share. I loan you $100,000 and the stock hits $100/share and so I convert that $100,000 bond into 2,000 shares which is worth $200,000. As the lender, it's low risk - I might lose some interest if the company doesn't do well, but it's still a bond; if the company does really great, I can share in the gains (though not as much gains as if I'd just invested the money since the price was $50/share instead of the $20/share I'd have paid had I just bought the stock). As a borrower, it means not having to worry about servicing debt at high interest rates (which can really hurt the company) and if the company is doing so well that the stock is soaring that much, the slight bit of watering down of investors isn't really important.

But that's a tangent. Stocks and bonds are really different in terms of the obligation. Bonds/debt can destroy your company if you end up having to use all your revenue servicing that debt. Issuing stock doesn't come with that risk for the company.

Thank you for a nice explanation.

Thing is that nobody will sell you a perpetual bond (especially one indexed by inflation), while you can buy "perpetual" stocks.

Some companies pledge to pay dividends every year (what of course can be changed when they have a bad year as you explained).

But realistically you wont get a perpetual bond, especially a safe one easily because noone is insane enough to offer it. While you can get stocks.

Conceptually some elecricity company can pledge to pay dividends every year and probably will do, since their business is not going anywhere soon.

Few months ago somoene here posted a discussion about royalties that kind of work similar to a perpetual bond https://news.ycombinator.com/item?id=31112411 but again it is a very rare thing...

Best proxy for a perpetual bond are stocks, for me conceptually it is very close, since perpetual bonds are not offered by anyone.

Double post, but stocks also create an obligation (to pay out the equity). Diferent thing is that it is paid last, after all other obligations + it happens relatively rarely.

Conceptually it is a debt to owners.

Yes, they should be. Bonds-only is a great system.

There is far too much inertia/permenance in development currently. Lot's of empiracle research like https://cepr.org/voxeu/columns/missionaries-human-capital-tr... on this.

This is a design flaw. We should design economic systems that have less permanent state to remedy this.

So who should own the means od production? Vladimir Lenin?

Things don't need to be owned!

Which do you like better --- worker-controlled coops or state/everyone-controlled companies? I am fine with either or an interpolation between them.

This isn't some hippy-dippy thing, there would be a robust and healthy bond market to capitalize these institutions.

A perpetual bond has a finite present value. It's no more or less exploitative than a bond with finitely many payments and the same present value.

And, given a finite present value, I'm pretty sure Yale has the money to buy it back if they want to...

Yale gets the money; the dutch pay. The dutch would love to terminate the load and do a balloon payment, but yale (correctly) thinks that a 'live' bearer bond is more valuable in their collection, so every 20 years or so they travel with the bond to the Netherlends to collect the (at this time nominal) payments.

Yale holds the bond and is being paid ~$30 per year. Apparently someone has to bring it to Amsterdam every couple of decades to collect the payments and keep the bond alive. They are losing money - I guess Yale has enough to do it just for fun, I mean, for the historical interest (pun intended).

Not just to Amsterdam, Stichtse Rijn is further south (around Utrecht).

It includes the area where the 16th century rich people from Amsterdam would build their out of town mansions. Traveling there by boat, on a water system that has been managed for over 900 years. So this 367 years is old, but the organisation paying has existed in some form for more than twice that.

If someone gifted me the bond, I’d happily pay many multiples of the interest payments in airfare to go collect, and I have far less money than Yale.

It’d be fun story and a cool bit of financial history, and keeping it “alive” is definitely worth a few grand every 10 years or so.

It is fun cool history. I would have fun doing the trip with the document, not going to lie.

But this ritual is also Proganda for capitalism. I don't mean that in a conspiracy way --- no one at Yale was like "yeah let's do this it makes finance looks good", but it clearly reflects someone having positive associations about this and the history of finance.

It's kind of like how keeping around powerless monarchs is harmless in one sense, but a cosplay to uphold a classist society in another.

I would not try to go for records with the longevity of either, I would abolish the monarchy and force all perpetual bond holders to sell them back to the issuers.

> A perpetual bond has a finite present value.

You are onotologically correct but epistemologically confused.

In the first order, bonds are just contacts that are fungible enough to trade.

In the second order, we have markets for them which arrange prices.

In the third order, based on the practice of those markets and theorizing about them, we can up with temporal discounting and thus a way to assign finite present value.

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> It's no more or less exploitative than a bond with finitely many payments and the same present value.

And where was it said that the exploitation of the bond was solely a function of its present value?

My complaint is not with present value. I am aware of these things. My complaint is with the nature of the contact in a way that is not captured by present value.

As another commenter pointed out upthread, there are actual cases of perpetual ownership (Harvard being the example), though they're equally as rare as this 367 year old bond.

I believe you can set up "dynasty trusts" in some US states today that basically live forever:

https://trustandwill.com/learn/dynasty-trust

Going back to the Dartmouth College case:

In the opinion for the Court, Chief Justice John Marshall wrote that by establishing a corporation, Eleazar Wheelock had created “an artificial being, invisible, intangible, and existing only in contemplation of the law.”

He explained that “by these means, a perpetual succession of individuals are capable of acting for the promotion of the particular object, like one immortal being.”

(Also, by the way, corporate personhood is nothing new.)

Banning Perpetual ownership just reduces everyone to being a surf with leased land and possessions.

I have very little interest in a return to a feudalism where higher authority owns the product of my labor

1. It's spelled "Serf"

2. Serfs were indefinitely tied to the land. Heritable Fiefs were also indefinite.

In general you are exactly backwards, indefinitely arrangements are a holdover from Feudalism. Getting away from them is getting further from Feudalism.

All humans are indefinitely tied to land and property. They need it to live. The question is simply if they ever have a chance of owning it themselves. You propose taking that away.

That's nuts.

The only problem with renting is landlords --- someone else owning. Look up LVT. If it's "rent all the way down" --- the land rent is ultimately disbursed back to the people, then there is no issue.

Why would I want my land rent distributed back to other people opposed to owning the land outright? Why would I want other people to be able to raise my rent until they squeeze out every dollar I make?

They can't squeeze you without squeezing themselves.

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