What does it look like to build more housing?
…we examine how housing provision has evolved for the largest four metropolitan statistical areas (MSAs) in California and Texas. Despite differences in their topographies and regulatory environments, we find several common dynamics. As these MSAs grow, we see that fewer new net units are built at the periphery and a smaller share of the new units are built as single-family detached houses. As a greater share of new net units are built in infill locations, more units are built using higher-density—and more costly—multifamily housing construction techniques. Interestingly, we see these housing supply patterns in both “pro-growth” MSAs and “highly regulated” MSAs. Among all of our sample MSAs, we also find a declining share of Census tracts that participate in accommodating growth. Our results are consistent with the existence of a convex housing supply curve. We believe that this secular trend will pose genuine challenges to many urban housing policies aimed at improving affordability.
That is from a newly published paper by Anthony W. Orlando and Christian L. Redfearn. Via the excellent Kevin Lewis.
Sunday assorted links
Hedging Star Wars and Close Encounters
An old story but new to me. Lucas and Spielberg swapped 2.5% net points on Star Wars and Close Encounters. Pretty smart bet for both of them.
Spielberg tells the story:
George came back from Star Wars a nervous wreck. He didn’t feel Star Wars came up to the vision he initially had. He felt he had just made this little kids’ movie. He came to Mobile, Alabama where I was shooting Close Encounters on this humongous set and hung out with me for a couple of days.
He said, ‘Oh my God, your movie is going to be so much more successful than Star Wars. This is gonna be the biggest hit of all time.’ He said, ‘You want to trade some points? I’ll tell you what, I’ll give you two and a half per cent of Star Wars if you give me two and a half per cent of Close Encounters.’
I said, Sure, I’ll gamble with that, great. And I think I came out on top of that bet. I did a lot better than George!
Both movies were wildly profitable. Close Encounters made so much money and rescued Columbia from bankruptcy. It was the most money I ever made on a movie before, but Close Encounters was a meagre success story. Star Wars was a phenomenon and I was the happy beneficiary of a couple of net points from that movie which I am still seeing money on today!
Blame California?
This paper reexamines the role of social policy in the doubling of divorce rates. We demonstrate that the short-run rise in divorce rates formerly attributed to unilateral divorce solely depends on the state of California. California receives considerable weight in national analyses and adopted several policies simultaneously. When we examine the independent effects of these social policies, we find that legal abortion leads to a clear and immediate rise in divorce rates. However, legal abortion’s impact also hinges on California and may be contaminated by concurrently adopted policies. We then demonstrate that California’s influence extends to the broader unilateral divorce literature. We conclude by describing best practices to confront the challenges of simultaneous policy adoption.
That is from a recent paper by Lauren Hoehn-Velasco, Jacob Penglase, Michael Pesko, and Hasan Shahid. Via tekl.
What Went Wrong with Federal Student Loans?
At a time when the returns to college and graduate school are at historic highs, why do so many students struggle with their student loans? The increase in aggregate student debt and the struggles of today’s student loan borrowers can be traced to changes in federal policies intended to broaden access to federal aid and educational opportunities, and which increased enrollment and borrowing in higher-risk circumstances. Starting in the late 1990s, policymakers weakened regulations that had constrained institutions from enrolling aid-dependent students. This led to rising enrollment of relatively disadvantaged students, but primarily at poor-performing, low-value institutions whose students systematically failed to complete a degree, struggled to repay their loans, defaulted at high rates, and foundered in the job market. As these new borrowers experienced similarly poor outcomes, their loans piled up, loan performance deteriorated, and with it the finances of the federal program. The crisis illustrates the important role that educational institutions play in access to postsecondary education and student outcomes, and difficulty of using broadly-available loans to subsidize investments in education when there is so much heterogeneity in outcomes across institutions and programs and in the ability to repay of students.
That is from a new NBER working paper by Adam Looney and Constantine Yannellis.
Okie-dokie, canonized teen blogger edition
An early-aughts blog is probably not where you’d expect to find the next Mother Teresa, but that is where Carlo Acutis — soon to become the first millennial saint in the Catholic Church — made a name for himself documenting miracles.
The Holy See said Thursday that Pope Francis has recognized a second miracle linked to Acutis, paving the way for his canonization — the final step in a process that can sometimes take decades. It will place the online evangelizer — who died in 2006 of leukemia at age 15 — among thousands of saints recognized by the church…
Born in London in 1991, Acutis has drawn a following for his piety and meticulous research on miracles, which he publicized online. One Catholic publication dubbed him “God’s Influencer,” while another site described him as a teen with a “strong faith and a weakness for Nutella.” Vatican News wrote that he loved soccer, video games and was a “natural jokester.”
Here is the full story.
Saturday assorted links
The decline in Native American wealth
I had not realized how negative were the effects of the 1887 Dawes Act, which broke up many Native American reservations. Before 1912:
There was a nontrivial number of relatively wealthy superintendencies, which runs counter to the common perception of uniform poverty during this period. In 1912, the wealthiest superintendency had total per capital wealth levels above $600,000 in 2019 real terms, while total per capital wealth was just $90 in the least wealthy superintendency…
Our results suggest that, on average, Indigenous Peoples in the early twentieth century had substantial levels of wealth per capita, although there was wide diversity in wealth levels. Between 1912 and 1927, wealth per capita declined by nearly 50 percent.
Per capita indigenous wealth had been above white wealth at the beginning of the period.
Here is the AER version of the piece, by Donn. L. Feir, Maggie E.C. Jones, and Angela Redish, ungated here.
How carbon-emitting is AI?
Our findings reveal that AI systems emit between 130 and 1500 times less CO2e per page of text generated compared to human writers, while AI illustration systems emit between 310 and 2900 times less CO2e per image than their human counterparts.
That is from a recent Nature paper by Tomlinson, Black, Patterson, and Torrance on the carbon-friendliness of AI. On one hand this is reassuring, though of course it should be noted that the carbon-emitting potential of AI largely comes from the additional economic activity (and querying activity) it may enable. So perhaps we can think of this as another example of Jevon’s Law, namely that the energy-saving technology in the longer run also increases the demand for energy, thus taking back some or all of the initially earned conservation.
Via Jim Pethokoukis.
Friday assorted links
2. Interview on Cape Verdean culture. And here is Mayra Andrade.
3. John Luttig on closed vs. open source AI.
4. New phone apps turn books into 15-minute versions (New Yorker).
5. Is the number of academic jobs for economists falling in the U.S.?
6. “The observations suggest some of earliest “monster” black holes grew from massive cosmic seeds.”
7. “MK’s platform is a mix of Zuma’s sense of personal victimhood, Zulu nationalism, opposition to constitutional rule, nationalising strategic industries, ending South Africa’s green energy policies, the creation of a new upper house for indigenous kings and queens (a decolonial House of Lords), as well as the expropriation of all land without compensation by the state and for it to be under the custody of traditional leaders.” Link here.
The Sea Change on Crypto-Regulation
In the last few weeks there has been a sea change in crypto regulation:
1. Bitcoin spot ETFs were approved–reluctantly, after a 3-judge Federal Appeals court ruled unanimously that the SEC had acted arbitrarily and capriciously–but nevertheless opening Bitcoin holdings to institutional investors. Case in point, The State of Wisconsin bought Bitcoin ETFs for its pension fund.
2. In a very unusual move, SAB 121, was overturned by the House and then, even more surprisingly, overturned by the Senate including the votes of many Democrats. SAB 121 is an SEC staff accounting bulletin (not law but guidance) that said to banks if you hold crypto for your customers, i.e. a custody service, you must account for it on your balance sheet. This guidance does not apply to custody of any other asset. Essentially, SAB 121 made it prohibitive for banks to offer custody services for crypto because that service would then impact all kinds of risk and asset regulations on the bank. Aside from singling out crypto, the SEC is not a regulator of banks so this seemed like a regulatory overreach.
President Biden said he will veto but that is no longer certain. It wasn’t just crypto lobbying against SAB 121 but traditional banks. The banks point to the approval of Bitcoin ETFs saying, quite logically, why can’t we custody these ETFs the way we do every other ETF? Senate Majority leader Chuck Schumer, D-N.Y., sometimes called Wall Street’s man in Washington, voted in favor of nullifying SAB 121. Schumer can read the room.
3. The House voted to ban the Fed from establishing a Central Bank Digital Currency (CBDC).
4. The House approved a wide-ranging bill to (finally!) establish regulations for digital assets markets. The vote was 279-136 in favor with many Democrats crossing party lines to support it.
5. After saying nothing for months, usually a bad sign, the SEC approved Ethereum spot ETFs. On the surface, this might have seemed logically inevitable given the approval of Bitcoin spot ETFs but many people thought the SEC would do everything it could to find daylight between Bitcoin and ETH. Instead, it tacitly acknowledged that ETH is a commodity and not a security.
Why is this happening? I see three main factors at play. First, crypto is becoming integrated with traditional finance. As the big banks get involved, the politics around crypto are shifting. Second, crypto is becoming normalized. Ironically, the prosecution of Sam Bankman-Fried, Changpeng Zhao and manipulators like Avraham Eisenberg may have convinced some U.S. regulators that crypto doesn’t have to be destroyed, it can be tamed. Nakamoto might not be pleased but realistically this was the only option to move forward. Eventually, everyone wants to pay their mortgage. Third, Trump’s strong endorsement of crypto has alarmed the Biden administration. Most political issues are firmly divided along party lines, but crypto remains an open issue. With millions of crypto owners in the United States, a significant number are highly motivated to vote their wallets. Biden doesn’t want to give the crypto issue to Trump.
None of this means we are entering crypto Nirvana but as far as regulation is concerned a lot has changed in just a matter of weeks.
Full Disclosure: I am an advisor to several firms in the crypto space including MultiversX, Bluechip and 0L.
Can they reconstitute Philosphy & Public Affairs?
Here is a recent announcement of note:
We are unanimously resigning from our editorial roles at Philosophy & Public Affairs, published by Wiley, and launching a new diamond open-access journal published by Open Library of Humanities (OLH). All of us will play the same editorial roles in the new journal and will retain the aim of publishing the best philosophical work touching on matters of public importance.
Do read the whole text, but you can imagine how the arguments run. Lots of big names are behind this, including Sen, Scheffler, Srinivasan, Waldron, and others. I am rooting for them, but can this succeed?
How sticky are reputations anyway? Nine months from now, what percentage of people on a university-wide tenure committee will know about this change? Three years from now?
Or consider the new journal itself. Without the long history of famous articles behind it, might it, with the same set of editors, have a lower reputation? Talk about mood affiliation!
Or might the existence of a “naming squabble” itself lower the reputations of both the old journal and the new venture? “Well, if they can’t get along, both outlets will have trouble managing their future reputations…”
Or might some of the highly prestigious editors, over time, be more willing to leave than would have been the case under the old moniker? Perhaps the newly reconstituted board will not be able to get along with itself, not without the final backstop of “the company” (Wiley) to enforce a core on all the bargaining.
If I am in the second year of my tenure clock in a philosophy department, and I have a great paper, do I send it to the new journal? In its old manifestation it was a top top outlet, but is it still? What risks am I running? Or do I send it to the thing still named Philosophy & Public Affairs, which presumably still has some very good new editors.
I will be watching.
Has Argentina given up on dollarization?
That is the topic of my latest Bloomberg column. Here is the opening bit:
The good news is that President Javier Milei seems to be backing away from plans to dollarize the Argentine economy. That is also the bad news.
Don’t get me wrong: Dollarization would be great — if the country had a spare $30 billion to back each peso with dollars. But Argentina doesn’t have that extra money ready at hand, and so the Milei regime is looking for some form of dollarization that can both work and be worthy of the name.
In a recent speech, Milei seemed to suggest that formal dollarization — as seen in El Salvador, Panama and Ecuador — isn’t going to happen. His remarks are somewhat confused, so it might be helpful to review different types of dollarization and what they mean.
And the main argument:
A third path is currency competition, a concept Milei mentions early in his remarks. In this scenario, which seems to be Milei’s primary new plan, the dollar and the peso would circulate side by side and compete with each other. As the economy grew, the use of the dollar would increase, while the peso would fade away.
This plan satisfies Milei’s desire for a broadly libertarian solution, but it doesn’t stabilize the value of the peso. It is already the case that both currencies, plus a lot of crypto, circulate in Argentina. And dollars have been subject to a lot of regulations and non-market, fixed exchange rates in the past. It might be good to remove many of those restrictions, as Milei has, but such deregulation will not itself lower the rate of inflation. In fact, if the peso is going to fade away, it will lose all the more value upfront, as markets come to expect its eventual euthanasia.
In reality, this scenario resembles the Zimbabwe path too closely for comfort. Until Argentina’s fiscal problems are solved, peso inflation must continue, if only to service the national debt. In fact, to the extent currency holders can shift into dollar holdings more easily, inflation may even accelerate. The base of peso holdings to be taxed by inflationary seigniorage would grow ever narrower, necessitating an ever-higher inflation tax to keep the government in business.
In sum:
There is no way around it: If a government has fiscal difficulties, a stable currency — whether it be the peso or the dollar — costs a lot of money. As tempted as he might be, Milei cannot afford to ignore this fact.
Recommended.
That was then, this is now, NBA edition
Then, from summer of 2023: “The Boston Celtics just set an NBA record by agreeing to a five-year, $304 million contract with two-time All-Star Jaylen Brown…the odds are the deal will be seen as a good one — maybe even a bargain. The economics of the National Basketball Association have been shifting toward more and more money.”
That was by me, for Bloomberg, and at the time that claim received a lot of pushback.
Now: “With a potential $7B annual media rights deal looming, NBA players could make up to $95M a year on supermax contracts in the future.”
Here is a further look at those numbers. Did I mention that the Celtics are in the Eastern Finals and are the current favorite to win the title?
*GOAT* is now a free audiobook
Here is the link to consuming various forms of GOAT, including the free audiobook, available through several forms of download. The voice is excellent, can you guess how it was done? My wife and sister thought it was me.
To access it and sample, the YouTube link perhaps is easiest:
I heartily thank OpenAI for their assistance in this matter.