Why Are Economists Giving Piketty the Cold Shoulder? (2017) • Hacker News Board

Re: Why Are Economists Giving Piketty the Cold Shoulder? (2017)

#121

Post by Mirioron » Sun, Mar 31, 2019, 8:43 PM UTC

ericd wrote: post #117

mcguire wrote: post #31

Earlier quoted context omitted.

I have some problems with that same quote. The "disproportionate price appreciation of housing and the land it sits on" seems to me to be primarily a factor only in some (maybe most) large cities; outside those cities, price appreciation, perhaps excessive price appreciation, has occurred, but it's nothing like that in those few cities. My feeling is that, sure, the effect of real estate prices are large in real term…

No, high rents in SF aren’t the fault of Venture Capital, except to the extent that VC has helped the economy boom in SF. That’s one factor, but the core problem is that we can’t build enough inventory to match demand to live in the city, largely due to artificial restrictions.

>That’s one factor, but the core problem is that we can’t build enough inventory to match demand to live in the city, largely due to artificial restrictions.

Even if you don't consider zoning laws, could we build enough supply to satisfy demand? People want to live in the city, but many are unwilling to live in (small) apartments. Many even want houses, but obviously the density of that type of housing is too low to satisfy demand. The city would sprawl. The outskirts would be far from where people want to live.

Re: Why Are Economists Giving Piketty the Cold Shoulder? (2017)

#122

Post by burlesona » Sun, Mar 31, 2019, 9:08 PM UTC

Mirioron wrote: post #121

ericd wrote: post #117

Earlier quoted context omitted.

No, high rents in SF aren’t the fault of Venture Capital, except to the extent that VC has helped the economy boom in SF. That’s one factor, but the core problem is that we can’t build enough inventory to match demand to live in the city, largely due to artificial restrictions.

> That’s one factor, but the core problem is that we can’t build enough inventory to match demand to live in the city, largely due to artificial restrictions. Even if you don't consider zoning laws, could we build enough supply to satisfy demand? People want to live in the city, but many are unwilling to live in (small) apartments. Many even want houses, but obviously the density of that type of housing is too low to…

The "city" is already sprawling, and the outskirts are already far from where people want to live. A lot of my coworkers commute in from places like Fremont, an hour away from the city in good conditions and who knows how long if BART or the Bay Bridge gets backed up.

Meanwhile, I understand your point that "many people are unwilling to live in small apartments" but those people are by default not part of the demand in San Francisco itself - they're part of the demand in Gilroy and Freemont, perhaps, but not San Francisco.

But "not being willing to live in small apartments" is not the same thing as not being willing to live in medium/large townhomes / row houses, which can accommodate vastly more people than live in most of the suburban expanse of the Bay Area. Just to make a dumbly over-simplified point, you could theoretically convert every ranch house in the bay area to two victorian townhomes and that would add room for more than a million new people, which I'm sure would make some dent in demand.

Likewise, most of San Francisco's land area is occupied by 1 and 2 story buildings (Sunset, Richmond, Excelsior, etc.). Just going to an average of 3 stories would add a hundred thousand or more new homes.

Regardless, while you may be right that demand is MUCH greater than supply and we'd need to add a million homes to make a dent, that's not a valid reason to do nothing.

If we're not going to build more housing here, why not limit employment growth here and create some pretty major programs to move jobs OUT of the city and take some of the housing pressure with it. There's nothing stopping us building a big new city at moderate density between San Francisco and Sacramento, for example, and if the whole corridor was linked by reliable, fast transit service then it doesn't need to be a traffic nightmare either.

TLDR; defeatism doesn't help, the economics here aren't THAT complicated we just don't seem to have the political will to do anything about it.

Re: Why Are Economists Giving Piketty the Cold Shoulder? (2017)

#123

Post by burlesona » Sun, Mar 31, 2019, 9:31 PM UTC

mcguire wrote: post #110

burlesona wrote: post #44

Earlier quoted context omitted.

I agree that real estate appreciation is an effect rather than a cause. What I'm suggesting is: if Rognlie is correct, the root cause of real estate appreciation may also be the root cause of rising inequality. I'll try to explain, giving a US-centric narrative because that's the one I know best, but similar parallel things have happened around the world. - - - - - Mass urbanization started in the 1800s and accelerat…

I see your point about a push-back against urbanization (I live in the Tennessee valley), although there are a lot of confounding factors. Concentrations of population do make most infrastructure more cost-effective, particularly in for-profit terms. On the other hand, there are a lot of reasons other than anti-urbanization for rural electrification, roads, and bridges. For one thing, there was (and is, in, say, Chin…

I agree with your first three paragraphs to some extent. However the tricky part is that not all rural areas are equally productive, and they don't all require the same amount of investment. Some of the rural investment in the US is highly productive and results in great return via agriculture and/or resource extraction as you point out.

But consider as just one example how much the population working in agriculture has decreased over time - much of that was going to happen whether roads and bridges and power lines were subsidized to go out there or not. When this is private investment, it's fine. If it fails, some company goes bankrupt, life goes on. Unwinding money-losing public infrastructure is much, much harder.

The last paragraph, that renters aren't politically invested, I think depends a LOT on the ability of people to become owners in the first place. Ownership is more the effect of someone who has a certain amount of wealth and stability in their life (thus the resources and desire to own), rather than something that CAUSES wealth and stability in your life.

So as for the idea that "the country was founded on the idea of the homeowner," I understand, but I think we have to be careful not to think that it somehow makes an owner morally superior to a renter. That just leads to discrimination against people who probably would love to own but don't have the resources, and thus don't need the deck further stacked against them.

Re: Why Are Economists Giving Piketty the Cold Shoulder? (2017)

#124

Post by luckydata » Sun, Mar 31, 2019, 9:50 PM UTC

geezerjay wrote: post #115

luckydata wrote: post #75

Earlier quoted context omitted.

They are not idiots, just highly motivated political operators using papers full of mistakes to make a point. That's the part that should have gotten them fired but since you agree with their goals then you don't take issue with that.

> They are not idiots, just highly motivated political operators using papers full of mistakes to make a point. That's a repeat of the old tired strawman that tries to avoid discussing the facts and the data by depicting any academic who authors an inconvenient paper as being a political agent involved in some widespread anti-socialist conspiracy. Meanwhile, let's not forget that the people attacking the Roggof&Reinh…

Oh my, where do I start. Alright, let's go in order.

re:Strawman - So you're trying to tell me that the Chicago School of Economics doesn't have a right leaning bent and inspires itself in the work of the Austrian economics. Yeah, you could say that but it's bullshit.

re: high indebtness. people criticizing RR are doing it because the paper is bad. Plus, as Paul Krugman correctly notes, high level of debt could be a result of economic slowdown and not the cause (best example is Japan).

see more: https://www.nytimes.com/2013/04/19/opinion/krugman-the-excel...

Sorry that reality doesn't agree with your views.

Re: Why Are Economists Giving Piketty the Cold Shoulder? (2017)

#125

Post by webmaven » Sun, Mar 31, 2019, 9:57 PM UTC

mcguire wrote: post #37

" In the book, Piketty relies on a paper by Loukas Karabarbounis and Brent Neiman that estimated a high marginal elasticity of substitution given two sets of facts: capital has gained national income at the expense of labor, and the price of capital inputs to production has been falling. The authors interpret the latter as the cause of the former, and again within the confines of neoclassical production theory, the o…

> the extracted payments are personal information---which is not captured in any economic theory I've ever seen---and the moat blocking competitive pressure is the combined result of network effects (bigger databases win) and extensive financial capitalization.

You might take a look at Carl Shapiro and Hal Varian's 1999 boom Information Rules:

https://books.google.com/books?id=z0hQ12PrERMC&printsec=fron...

As well as their (along with Joseph Farrell) 2004 book The Economics of Information:

https://books.google.com/books?id=-dcLAQAAQBAJ&printsec=fron...

It is perhaps surprising that Varian in particular (Google's Chief Economist) hasn't had more to say about data as a raw material in the years since those books came out.

BTW, your "extracted payments are personal information" formulation may be part of your problem in finding relevant economic theories. At least in part, what is being extracted is actually a capitulation to being locked-in to a system that continuously extracts information. So looking into the economic theories of technology vendor lock-in, as well as the perverse economics of information security may provide some insight.

Re: Why Are Economists Giving Piketty the Cold Shoulder? (2017)

#126

Post by ericd » Sun, Mar 31, 2019, 10:06 PM UTC

Mirioron wrote: post #121

ericd wrote: post #117

Earlier quoted context omitted.

No, high rents in SF aren’t the fault of Venture Capital, except to the extent that VC has helped the economy boom in SF. That’s one factor, but the core problem is that we can’t build enough inventory to match demand to live in the city, largely due to artificial restrictions.

> That’s one factor, but the core problem is that we can’t build enough inventory to match demand to live in the city, largely due to artificial restrictions. Even if you don't consider zoning laws, could we build enough supply to satisfy demand? People want to live in the city, but many are unwilling to live in (small) apartments. Many even want houses, but obviously the density of that type of housing is too low to…

Most people in the middle of the city won’t get their dream home, there can only be so many penthouses. But at least they’d be able to afford to live there, and not be shut out of the economic opportunities that cities provide.

And as another commenter mentioned, the current density of SF is incredibly low. One and two story buildings cover much of the area. Even if it just looked like Paris (wall to wall 5 story buildings), SF could house many times the number of people it currently does.

Zoning rules and NIMBYism are the main reasons for the housing crisis.

Re: Why Are Economists Giving Piketty the Cold Shoulder? (2017)

#127

Post by epistasis » Sun, Mar 31, 2019, 10:27 PM UTC

mcguire wrote: post #43

TheTrotters wrote: post #36

Earlier quoted context omitted.

But then you have to ask yourself why this surge in demand for real estate in urban areas hasn't been met by a corresponding surge in supply? Why aren't developers building new apartment complexes as fast as they can to cash in? The answer is primary that regulation by local governments prevents them from doing that thereby keeping real estate prices high.

In the United States, anyway, local governments' regulation is largely driven by noisy or wealthy local residents. In most places, regulation is a minor hurdle for a decent real estate investor, all of whom regard single-family and small multi-family dwellings as a slobber-inducing opportunity when demand is high. (The high rents you can get from a quadplex are pretty small compared to the rents from a 10-story apart…

> In most places, regulation is a minor hurdle for a decent real estate investor, all of whom regard single-family and small multi-family dwellings as a slobber-inducing opportunity when demand is high.

But you're conflating the two types of places: most places aren't "high" demand, and those that do have super inflated costs also have processes by which developers are regularly stopped. California in particular has this problem.

In fact reading your post really made it clear to me the dichotomy between places that welcome new people and have governments that try to serve the people (by letting developers build), and places that try to enrich current residents by blocking out newcomers and thereby forcing demand to be far higher than supply.

Re: Why Are Economists Giving Piketty the Cold Shoulder? (2017)

#128

Post by ericd » Sun, Mar 31, 2019, 10:35 PM UTC

burlesona wrote: post #46

AnthonyMouse wrote: post #41

Earlier quoted context omitted.

> The "disproportionate price appreciation of housing and the land it sits on" seems to me to be primarily a factor only in some (maybe most) large cities; outside those cities, price appreciation, perhaps excessive price appreciation, has occurred, but it's nothing like that in those few cities. But those cities are where "the 1%" live or own property, so they're the beneficiaries of the price inflation, which is pr…

The hyper-inflation fix is the only "solution" I've heard in serious discussions on this mess. It's sort of insane, but when you dig into it, it maybe the least bad choice as far as bringing a healthy equilibrium back to the economy without economically devastating huge chunks of the population.

Pretty sure hyperinflation is never a good solution. You can also just let people lose money on their investment. That has the benefit of not wrecking the currency.

Re: Why Are Economists Giving Piketty the Cold Shoulder? (2017)

#129

Post by brmgb » Sun, Mar 31, 2019, 11:33 PM UTC

snowwrestler wrote: post #82

coldtea wrote: post #3

Because, "It is difficult to get a man to understand something, when his salary depends upon his not understanding it!". Economists' careers as receivers of grants, policy advisors, members of prestigious think tanks and organizations, and pundits, depends on being good at promoting whatever aligns with the elite's interests. The scientific parts of economics are merely applied math (including game theory), and quite…

Telling scientists to stick to physics and chemistry for "real science" seems like telling rock climbers to stick to ladders for "real climbing." It's possible to produce useful predictions with small errors when you define very simple systems, which is what the foundational scientific topics have done. Of course it took centuries of hard work to do even that. Physicists and chemists and biologists and economists all…

> It seems kind of short-sighted to me to say that the people who are trying to build those aren't doing "real science." I don't understand the theory there... that they haven't figured it all out yet, so it's not worth doing?

It's not about heuristics. It's about experimental validation. Both physicists and chemists take great pain in actually rigorously confronting their theories to reality. Biologists try. Most economists don't.

It doesn't mean there is no value in economic models and theories. It does however mean it's not a science.

Re: Why Are Economists Giving Piketty the Cold Shoulder? (2017)

#130

Post by Mirioron » Sun, Mar 31, 2019, 11:44 PM UTC

ericd wrote: post #126

Mirioron wrote: post #121

Earlier quoted context omitted.

> That’s one factor, but the core problem is that we can’t build enough inventory to match demand to live in the city, largely due to artificial restrictions. Even if you don't consider zoning laws, could we build enough supply to satisfy demand? People want to live in the city, but many are unwilling to live in (small) apartments. Many even want houses, but obviously the density of that type of housing is too low to…

Most people in the middle of the city won’t get their dream home, there can only be so many penthouses. But at least they’d be able to afford to live there, and not be shut out of the economic opportunities that cities provide. And as another commenter mentioned, the current density of SF is incredibly low. One and two story buildings cover much of the area. Even if it just looked like Paris (wall to wall 5 story bui…

Sure, but that's what you think. We can't really tell that people would be fine en masse living in Soviet style apartment blocks for example. I look at average apartment sizes in the US and they're pretty big when compared to Eastern Europe.

Building permits and zoning laws definitely cause a lot of problems, but the trend of housing being unaffordable for young people in cities seems to be happening everywhere. I think there are other problems at play as well, and one of them is simply housing density vs job density. Jobs are often more densely packed than housing and this will drive up prices.