Why a Housing Shortage Exists Despite More Houses Per Person

by  Alex Tabarrok in

When I post about the skyrocketing price of housing and the need to build, commentators (include some of the most astute commentators on MR), will sometimes object by pointing to the increasing and historically high number of houses per capita. They question how this aligns with rising prices and wave vaguely towards factors like monopoly pricing, hedge funds, Airbnb, vacancies and so forth, implying that more construction isn’t the solution. The real explanation for rising prices amid greater homes per capita is actually quite simple, fewer kids. Kevin Erdmann has an excellent post on this going through the numbers in detail. I will illustrate with a stylized example.

Suppose we have 100 homes and 100 families, each with 2 parents and 2 kids. Thus, there are 100 homes, 400 people and 0.25 homes per capita.  Now the kids grow up, get married, and want homes of their own but they have fewer kids of their own, none for simplicity. Imagine that supply increases substantially, say to 150 homes. The number of homes per capita goes up to 150/400 (.375), an all time high! Supply-side skeptics are right about the numbers, wrong about the meaning. The reality is that the demand for homes has increased to 200 but supply has increased to just 150 leading to soaring prices.

Now what do we do about this? One response is to blame people’s choices–immigrants are buying all the houses, hedge funds are buying all the houses, tourists are renting all the houses, everyone should want less and conserve more! Going down this path will tear the country apart. The other response is the American way, in the words of Bryan Caplan’s excellent new book, build, baby, build!

Here’s Kevin:

We are already 15 years into a cultural and economic battle that is so important, it turned the direction of adults per house upward for, likely, the first time since the start of the industrial revolution. Fifteen years in, by that measure, we have reversed economic progress by nearly 40 years. There is so much ground we have to make up. And, also, the reactionary position will have to continue to dig deeper and get worse – rounding up immigrants, blaming the homeless, stoking fear and distrust of financial institutions. I’m sorry if I’m sounding too shrill. It all happens in slow motion around us, so we adapt to the new normal. But the tent encampments in all the urban parks are a long way from what should be considered normal. We are already deeply into a cultural battle. And you can see that it is a cultural battle, because it is difficult to simply establish a plurality of support to admit obvious things.

If this continues, it will destroy the fabric of mutual trust that has managed to miraculously hold this country together for 250 years. The challenge is to open the eyes of enough victims of these policy choices that 50%+1 of the country can address it on the empirical level rather than the aesthetic level, and to stop this devolution before it gets worse.

Hat tip: Naveen.

What I am nostalgic about

by  Tyler Cowen in

With a group of friends I was having a chat about the merits of the current vs. past America.  Battle of the Ancients and Moderns!  I generally favor current times, but not unconditionally.  So I promised them a list of what I missed from the past.  To be clear, these are personal judgments, not claims about net social value.  I’ll also offer comments on features from the past that many miss, but I do not.  Here goes:

1. Visiting Borders in its heyday.  Nowadays I have to go to London to have comparable experiences.

2. That you could just show up at various venues, pay modest prices, and see incredible performers.  For instance I saw Horowitz and also McCartney at his peak.  Leo Kottke at his peak.  Pierre Boulez.  Many more.  Such experiences are hardly gone, but in terms of cultural resonance the earlier times were much better.  How did I fail to go see Miles Davis!?

Similarly, you could just go see Milton Friedman, Kenneth Arrow, Derek Parfit, and many other famous figures.  No current economist or philosopher is comparable in this regard.

2b. Note that in some areas, such as NBA basketball, there are more “must see” players today than in any earlier era.  Or say tech titans.  So I am not favoring the nostalgic perspective per se, but for music, economics, and philosophy the nostalgic perspective on live performance is correct.

3. There were more and better museum art exhibits to see before 9/11.  Much of that has to do with insurance rates and the ease of international agreements.

4. Good seafood was cheap and readily available.

5. Reading the Far Eastern Economic Review in its heyday.

6. Awaiting the arrival of a new issue of the Journal of Political Economy, knowing it would have exciting new ideas.

7. Many, many locations were better to travel to and visit.  Amsterdam is one obvious example.  But by no means is this true for all places, India for instance is better to visit today than before.

8. Hollywood movies used to be better, though global cinema overall is doing fine.

9. Very recently there are too many parts of the world you really just can’t visit, Iran and Russia most notably.

10. Mainstream media was much better, noting I nonetheless would rather have the internet.  Still, I miss the quality of cultural reviews, local news, and several other features of normal newspapers.

11. San Francisco of the 1980s and Miami Beach of the 1990s.

12. So many intellectuals could afford to live in New York City, and indeed Manhattan.  The city was overall more interesting, though worse to live in or to have to deal with.

13. Parking was much easier, even in Manhattan.  I used to just get parking spots, even in the Village or Midtown.  Now I would never bother to look.

14. The emphasis on personal freedom in American popular culture of the 1970s and 1980s.

15. Paperback editions of the classics were so often far superior in earlier times.  Nowadays most of them look and feel like crap.

A few things I have no nostalgia for:

1. I feel America today is overall a higher-trust society, admittedly with the picture being somewhat complex.  American cities certainly are much safer, and most of them look much better.

2. I prefer current airport procedures to those before 9/11.

3. Young people are overall smarter, and arguably more moral.

4. Just seeing white (and sometimes black) people everywhere, except a few cities on the coasts.

5. The seafood issue aside, food in America is obviously much much better.

6. I can’t think of anything in the category of “how people interacted with each other” that I preferred in earlier times.

7. I don’t miss having more snow, quite the contrary.

8. Medical and dental care are far superior, obviously.

What else should be on these lists?

Response from Devin Pope, on religious attendance

by  Tyler Cowen in

All of this is from Devin Pope, in response to Lyman Stone (and myself).  Here was my original post on the paper, concerning the degree of religious attendance.  I won’t double indent, but here is Devin and Devin alone:

“I’m super grateful for Lyman’s willingness to engage with my recent research on measuring religious worship attendance using cellphone data. Lyman and I have been able to go back and forth a bit on Twitter/X, but I thought it might be useful to send a review of this to you Tyler.

For starters, I appreciate that Lyman and I agree on a lot of stuff about the paper. He has been very kind by sharing that he agrees that many parts of my paper are interesting and “very cool work”. Where we disagree is about whether the cellphone data can provide a useful estimate for population-wide estimates of worship attendance. Specifically, Lyman’s concerns are that due to people leaving their cellphones at home when they go to church and due to questionable cellphone coverage that might exist within church buildings, the results could be super biased. He sums up his critiques well with the following: “Exactly how big these effects are is anyone’s guess. But I really think you should consider just saying, `This isn’t a valid way of estimating aggregate religious behavior. But it’s a great way to look at some unique patterns of behavior among the religious!’ Don’t make a bold claim with a bunch of caveats, just make the claim you actually have really great data for!” This a very reasonable critique and I’m grateful for him making it.

My first response to Lyman’s concerns is: we agree! I try to be super careful in how the paper is written to discuss these exact concerns that Lyman raises. Even the last line of the abstract indicates, “While cellphone data has limitations, this paper provides a unique way of understanding worship attendance and its correlates.”

Here is where we differ though… To my knowledge, there have been just 2 approaches used to estimate the number of Americans who go to worship services weekly (say, 75% of the time): Surveys that ask people “do you go to religious services weekly?” and my paper using cell phone data. It is a very hard question to answer. Time-use surveys, counting cars in parking lots, and other methods don’t allow for estimating the number of people who are frequent religious attenders because of their repeated cross-sectional designs.

There are definitely limitations with the cellphone data (I’ve had about 100 people tell me that I’m not doing a good job tracking Orthodox Jews!). I know that these issues exist. But survey data has its own issues. Social desirability bias and other issues could lead to widely incorrect estimates of the number of people who frequently attend services (and surveys are going to have a hard time sampling Orthodox Jews too!). Given the difficulty of measuring some of these questions, I think that a new method – even with limitations – is useful.

At the end of the day, one has to think hard about the degree of bias of various methods and think about how much weight to put on each. The degree of bias is also where Lyman and I disagree. In my paper, I document that the cell phone data do not do a great job of predicting the number of people who go to NBA basketball games and the number of people who go to AMC theaters. I both undercount overall attendance and don’t predict differences across NBA stadiums well at all.

The reason why Lyman is able to complain about those results so vociferously is because I’m trying to be super honest and include those results in the paper! And I don’t try to hide them. On page 2 of the paper I note: “Not all data checks are perfect. For example, I undercount the number of people who go to an AMC theater or attend NBA basketball games and provide a discussion of these mispredictions.”

There are many other data checks that look really quite good. For example, here is a Table from the paper that compares cellphone visits as predicted by the cellphone data with actual visits using data from various companies:

 

The cellphone predictions in the above table tend to do a decent job predicting many population-wide estimates of attendance to a variety of locations. The one large miss is AMC theaters where we undercount attendance by 30%. Now about half of that undercount is because the data are missing a chunk of AMC theaters (this is not due to a cellphone pinging issue, but due to a data construction issue). But even if one were to make that correction, we undercount theater attendance by 15%.

Lyman argues that one should be especially worried about undercounting worship attendance due to people leaving their phones at home. I agree that this is a huge concern that is specific to religious worship and doesn’t apply in the same way for trips to Walmart. I run and report results from a Prolific Survey (N=5k) that finds that 87% of people who attend worship regularly indicate that they “always” or “almost always” take their phone to services with them. So definitely some people are leaving their phones at home, but this survey can help guide our thinking about how large that bias might be. Are Prolific participants representative of the US as a whole? Certainly not. There is additional bias that one should think about in that regard.

Overall, my view is that estimating population-wide estimates for how many people attend religious services weekly is super hard and cellphone data has limitations. My view is that other methods (surveys) also have substantial limitations. I do not think the cellphone data limitations are as large as Lyman thinks they are and stand by the last line of the abstract that once again states, “While cellphone data has limitations, this paper provides a unique way of understanding worship attendance and its correlates.”

All of that was Devin Pope!

U.S.A. fact of the day

by  Tyler Cowen in

Latin American immigrants are starting businesses at more than twice the rate of the U.S. population as a whole.

The jump in Latino entrepreneurship has driven up the overall share of new businesses owned by immigrants, who accounted for 36% of launches last year compared with 25% in 2019, according to a new analysis of Census Bureau data. New-business creation by white and native-born Americans has slowed in the past two years, following a broad surge early in the pandemic.

Here is more from the WSJ.

Thursday assorted links

by  Tyler Cowen

1. Interview with Ulrike Malmendier, a regional thinker in the best sense of the term.

2. “Paying Off People’s Medical Debt Has Little Impact on Their Lives, Study Finds.” (NYT)  Model that.

3. Another look at suicide rates.

4. Should you have privacy rights to your brainwaves? (NYT)  And should you have the right to sell or give away those rights?

5. C. Thi Nguyen on Value Capture, an interesting philosophy paper about overreliance on metrics and external evaluations.

6. Alas, Robert Hessen has passed away, RIP.

7. Productivity problems and sometimes even declines in African agriculture.

8. The Milei incomes policy for health care?

Do protests matter?

by  Tyler Cowen in

Only rarely:

Recent social movements stand out by their spontaneous nature and lack of stable leadership, raising doubts on their ability to generate political change. This article provides systematic evidence on the effects of protests on public opinion and political attitudes. Drawing on a database covering the quasi-universe of protests held in the United States, we identify 14 social movements that took place from 2017 to 2022, covering topics related to environmental protection, gender equality, gun control, immigration, national and international politics, and racial issues. We use Twitter data, Google search volumes, and high-frequency surveys to track the evolution of online interest, policy views, and vote intentions before and after the outset of each movement. Combining national-level event studies with difference-in-differences designs exploiting variation in local protest intensity, we find that protests generate substantial internet activity but have limited effects on political attitudes. Except for the Black Lives Matter protests following the death of George Floyd, which shifted views on racial discrimination and increased votes for the Democrats, we estimate precise null effects of protests on public opinion and electoral behavior.

That is from a new NBER working paper by Amory Gethin and Vincent Pons.

My excellent Conversation with Peter Thiel

by  Tyler Cowen in

Here is the audio, video, and transcript, along with almost thirty minutes of audience questions, filmed in Miami.  Here is the episode summary:

Tyler and Peter Thiel dive deep into the complexities of political theology, including why it’s a concept we still need today, why Peter’s against Calvinism (and rationalism), whether the Old Testament should lead us to be woke, why Carl Schmitt is enjoying a resurgence, whether we’re entering a new age of millenarian thought, the one existential risk Peter thinks we’re overlooking, why everyone just muddling through leads to disaster, the role of the katechon, the political vision in Shakespeare, how AI will affect the influence of wordcels, Straussian messages in the Bible, what worries Peter about Miami, and more.

Here is an excerpt:

COWEN: Let’s say you’re trying to track the probability that the Western world and its allies somehow muddle through, and just keep on muddling through. What variable or variables do you look at to try to track or estimate that? What do you watch?

THIEL: Well, I don’t think it’s a really empirical question. If you could convince me that it was empirical, and you’d say, “These are the variables we should pay attention to” — if I agreed with that frame, you’ve already won half the argument. It’d be like variables . . . Well, the sun has risen and set every day, so it’ll probably keep doing that, so we shouldn’t worry. Or the planet has always muddled through, so Greta’s wrong, and we shouldn’t really pay attention to her. I’m sympathetic to not paying attention to her, but I don’t think this is a great argument.

Of course, if we think about the globalization project of the post–Cold War period where, in some sense, globalization just happens, there’s going to be more movement of goods and people and ideas and money, and we’re going to become this more peaceful, better-integrated world. You don’t need to sweat the details. We’re just going to muddle through.

Then, in my telling, there were a lot of things around that story that went very haywire. One simple version is, the US-China thing hasn’t quite worked the way Fukuyama and all these people envisioned it back in 1989. I think one could have figured this out much earlier if we had not been told, “You’re just going to muddle through.” The alarm bells would’ve gone off much sooner.

Maybe globalization is leading towards a neoliberal paradise. Maybe it’s leading to the totalitarian state of the Antichrist. Let’s say it’s not a very empirical argument, but if someone like you didn’t ask questions about muddling through, I’d be so much — like an optimistic boomer libertarian like you stop asking questions about muddling through, I’d be so much more assured, so much more hopeful.

COWEN: Are you saying it’s ultimately a metaphysical question rather than an empirical question?

THIEL: I don’t think it’s metaphysical, but it’s somewhat analytic.

COWEN: And moral, even. You’re laying down some duty by talking about muddling through.

THIEL: Well, it does tie into all these bigger questions. I don’t think that if we had a one-world state, this would automatically be for the best. I’m not sure that if we do a classical liberal or libertarian intuition on this, it would be maybe the absolute power that a one-world state would corrupt absolutely. I don’t think the libertarians were critical enough of it the last 20 or 30 years, so there was some way they didn’t believe their own theories. They didn’t connect things enough. I don’t know if I’d say that’s a moral failure, but there was some failure of the imagination.

COWEN: This multi-pronged skepticism about muddling through — would you say that’s your actual real political theology if we got into the bottom of this now?

THIEL: Whenever people think you can just muddle through, you’re probably set up for some kind of disaster. That’s fair. It’s not as positive as an agenda, but I always think . . .

One of my chapters in the Zero to One book was, “You are not a lottery ticket.” The basic advice is, if you’re an investor and you can just think, “Okay, I’m just muddling through as an investor here. I have no idea what to invest in. There are all these people. I can’t pay attention to any of them. I’m just going to write checks to everyone, make them go away. I’m just going to set up a desk somewhere here on South Beach, and I’m going to give a check to everyone who comes up to the desk, or not everybody. It’s just some writing lottery tickets.”

That’s just a formula for losing all your money. The place where I react so violently to the muddling through — again, we’re just not thinking. It can be Calvinist. It can be rationalist. It’s anti-intellectual. It’s not thinking about things.

Interesting throughout, definitely recommended.  You may recall that the very first CWT episode (2015!) was with Peter, that is here.

Economic growth sentences to ponder, Argentina fact of the day

by  Tyler Cowen in

Wednesday assorted links

by  Tyler Cowen

1. Lyman Stone criticizes the Pope paper on church attendance.  Good criticisms, see also the points by Sure and others in the comment section.  This paper doesn’t seem to hold up?  I’ll gladly publish a response by the author, otherwise a withdrawal might be in order?

2. Good critique of the AGI concept.  And AI regulation is unsafe, by Max T.

3. Ruxandra on the anti-cavities thing.

4. Mass shootings are down considerably.

5. First chat between humans and whales?

6. Open access version of Ran Spiegler’s The Curious Culture of Economic Theory.

7. 14 years ago, Thomas Schelling session on Iran and nuclear weapons.  Let’s hope this does not very soon become more relevant.

Why is the Biden Administration Against Fee Transparency in Education?

by  Alex Tabarrok in

President Biden has made a big deal of simplifying fees:

The FTC is proposing a rule that…would ban businesses from charging hidden and misleading fees and require them to show the full price up front. The rule would also require companies disclose up front whether fees are refundable. This would mean no more surprise resort fees at check out or unexpected service fees to buy a live event ticket.

Like everyone, I dislike these kinds of fees, although I don’t think they are a good subject for legislation. But I would certainly not prevent firms from offering a simple, up-front fee. And yet that is exactly what the Biden administration is doing in higher education.

So called Inclusive Access programs let colleges package textbooks with tuition and other fees. Students get one bill and access to textbooks on the first day of college. It’s convenient, no more hunting for textbooks or sticker shock. In addition, inclusive access programs give colleges bargaining power when negotiating prices.

Strangely, the Biden administration’s Department of Education wants to ban colleges from offering inclusive access programs. Thus, the Dept. of Education is arguing that simplified pricing is bad for consumers at the same time as the FTC is arguing that simplified pricing is good for consumers. What makes this contradiction even more baffling is that Inclusive Access was a program promoted in 2015 by the Obama-Biden Administration!

Proponents of the ban argue that letting students negotiate their own purchases lets them better tailor the outcome. Maybe, but that’s the same argument for letting airlines unbundle seat choice and baggage allowances. Hard to have it both ways. Pricing is complex.

Tyler and I are textbook authors so you might wonder where our interests lie. I actually have no idea. It’s complicated. I suspect inclusive access leads to a more winner-take-all market on textbooks. Modern Principles is a winner, thus on those grounds I would favor. More generally, however, I would get the FTC and the Dept. of Education out of pricing decisions and let colleges and firms negotiate. Pricing decisions are more complicated and contextual than simplified bans or regulations.

Barcelona escalates its role in the war against tourism

by  Tyler Cowen

…residents of La Salut neighbourhood in Barcelona are celebrating a move to wipe themselves off the map.

For years, residents had complained that they could not get home because the number 116 bus was always crammed with tourists visiting Antoni Gaudí’s Park Güell. The park is the city’s second most popular attraction after the Sagrada Familia basilica.

Now they have the bus to themselves after the city council arranged to have the route removed from Google and Apple maps.

“We laughed at the idea at first,” said César Sánchez, a local activist. “But we’re amazed that the measure has been so effective.”

Here is the full story, via Konstantin.

The Ludwig von Mises comeback

by  Tyler Cowen in

That is the subject of my latest Bloomberg column.  Here is one excerpt:

The Austrian economist Ludwig von Mises is having a moment, especially in Latin America. Argentine President Javier Milei admires Mises, and he has adopted some Misesian ideas, such as the notion that “the middle of the road leads to socialism.” Milei used to be an academic economist and knows the ideas of Mises well.

More colorfully, on Saturday the Brazilian UFC fighter Renato Moicano delivered an on-camera polemic (warning: audio in link NSFW) in praise of Mises and defending free speech and private property. His impromptu lecture pointed listeners to Mises and what he called the six lessons of the Austrian School of Economics, as well as his forthcoming podcast. Those lessons — as well as a G-rated version of Moicano’s economics lecture, and a Mises-inspired speech on business-cycle theory by President Nayib Bukele of El Salvador — are available on the website of the (US-based) Mises Institute.

And this:

Meanwhile, among free-market types, the vibes have shifted in a way that has boosted the influence of Mises. For a comparison, the ideas of Friedrich A. Hayek were ascendant in classical liberal circles during the 1990s, in part because Hayek had won a Nobel Prize. Hayek’s writing style was also more gentle, while Mises was uncompromising. As Hayek said about Mises’s book on socialism, published in 1922: “At first we all felt he was frightfully exaggerating and even offensive in tone.”

Milton Friedman was another great economic thinker of the 20th century, and he was renowned for always smiling and never losing his temper at his intellectual opponents. Friedman wrote a book called Capitalism and Freedom. Hayek’s was called The Constitution of Liberty. Mises, meanwhile, was producing books with titles such as Omnipotent Government and The Anti-Capitalist Mentality. He was the one of that troika who allied himself with Ayn Rand.

Today, however, many of Mises’s proclamations no longer sound as outdated as they might have a few decades ago. In his treatise Human Action, he was fond of stressing “Man Acts” as a fundamental principle of economic and social analysis. Whatever that might have meant at the time, these days I would not be surprised to find a comparable phrase in a Jordan Peterson book. Indeed, Peterson recently expressed his admiration for Moicano’s endorsement of Mises.

Finally:

As for Latin America, Mises may be just the kind of market-oriented thinker the region needs. Polemics do sometimes cut through the obfuscations of political discourse. Friedman and Hayek’s generosity toward their opponents is perhaps not the best strategy for the notoriously brutal politics of Latin America. And some of Mises’s more impolite notions — such as the idea that economic policy can simply become worse and worse over time — seem to be proving out in countries such as Brazil, which has been mostly stagnant for a long time now.

Worth a ponder.

Does the NYT not recognize child abuse?

by  Tyler Cowen in

“I have one partner now with three kids. He is transmasc, and he’s radical about the way he raises them. They’re radically home-schooled. They’re 17 and nonbinary, 6 and 5. They know everything in age-appropriate ways. They’ve seen their mommy undergo the transmasc experience, seen their mom become who they really are.”

5 and 6!  Here is their latest polyamory story, the tone of the story, including the treatment of the children, seems to be entirely normal or possibly positive?  (I have nothing against polyamory per se.)  Is no one at the NYT made uncomfortable by this?  Is it permissible to speak up internally on such issues?  Or not?  The stronger left-wing take would be that this is one of the better arguments for public education, namely that parent-dominated cults can truly harm children, most of all when they control their education.