The final installment of the Oswald-Green debate on home-owning in The Economist

It is here.

The Oswald-Green Debate in the Economist: Rebuttals

Andrew says:

If high levels of home-ownership impair the efficiency of the labour market, then the costs are potentially huge. It is the job of economists to point that out.

I say:

Does home-ownership gum up labour markets? A number of papers sought to test Mr Oswald's conjecture and my takeaway is that the impact of tenure on labour markets is marginal.

[Note: as an American, I never myself would write "labour," so The Economist changed spellings to conform to their style].

Ed Glaeser weighs in

He advocates neutrality:

The government should neither encourage nor discourage home-ownership. Significant public interventions require evidence of significant market failure, and confidence that the costs of state action will be less than the costs of those market failures. These conditions are not met in the housing sector, whether we are contemplating pro or anti home-ownership policies. 

The case for home-ownership often begins with the view that home-owners are better citizens, who create social benefits by investing more in their communities and their governments. My work with Denise DiPasquale does find that home-owners are more likely to work to solve local problems, to vote and to know the names of local leaders. These effects reflect both home-owners' stake in their community and their tendency to live in one place longer. 

If Apple is so cool...

...why doesn't their new map ap give public transit directions?

Andrew Oswald and I debate the merits of homeownership in The Economist

Ryan Avent moderates:

The view of home-ownership as a pillar of economic and social welfare is deeply ingrained across much of the rich world. It seems natural to think a household that owns its home is invested in society in a way a renting family never could be. It is bound to be richer, thanks to the ability to accumulate equity. Its members are sure to take a greater interest in the health of their neighbourhood and the quality of local institutions, if only to help protect the value of their property. And because of that interest in property value, home-owners may be more politically active, to help secure sound and stable governance....

Andrew Oswald defends discouraging ownership:

Home-ownership has reached inefficiently high levels; it has become a distorting totem; modern generations have been brainwashed to believe there is something wrong with them if they rent. We do not want developing countries to mimic the West's post-war obsession with owner-occupation.

There are five reasons to discourage home-ownership. Let's call them: look at the data; efficiency of the labour market; macroeconomic stabilisation; sensible lifetime budgeting; entrepreneurial supply; the common sense of diversity...

I argue against discouraging homeownership:

The motion "Should home-ownership be discouraged?" takes a novel formulation. Generally, the question policymakers ask is whether home-ownership should be encouraged, which suggests that there are social benefits to owning a home. In this case, the affirmative position is that home-ownership should be discouraged. This implies that having people own their homes is socially costly. Thus, my task is to show that home-owning is not socially costly.

I can think of three potentially legitimate arguments for why home-owning might be socially costly; I do not think that any of them are straw men, but I also think that none of them is convincing.

Are ballots more democratic than markets?

I really don't know.  But Parris Glendening made an interesting point at a conference I participated in at GW last week: that in Los Angeles, people decided to tax themselves (via Measure R) to build a light rail system.  So while such systems fail to pass the cost-benefit test, and often worsen the bus service that low income riders rely on, they do, in the case of LA, reflect the will of the people.

I am guessing most people don't read the works of John Kain before they vote; they also don't read IEEE journals before buying PCs.  Los Angeles is implementing measure R in the manner described when it was on the ballot, which makes it very different from the high-speed rail initiative.  I think I need to make my peace with light rail in LA (although I sure wish the Expo line worked better).

Why doesn't cheap RAM hurt SAS?

I don't use SAS anymore because I can now fit large datasets in RAM using Stata.  But SAS sales are doing well.  I wonder why?

How life really has gotten better for researchers

The first non-thesis project I worked on as an assistant professor used the 1 in 1000 Public Use Microdata Sample of the US Census.  My recollection is that the sample had about 63,000 observations; I had to spin a tape to read data into a big iron VMS machine using SAS, and it took about 10 hours to do so.  The year was 1990.

Yesterday, I read five year ACS household data into my Macbook Pro using Stata.  It is broken into four files with about 1.5 million observations each.  Each file took about 2 minutes to read. This is really, really nice.

  

Chris Leinberger reels off a nice line

I was on a panel with him at GW on Tuesday, and he said something like, "when people think of New York, they think people live like Woody Allen Jerry Seinfeld, when in fact most people live like Tony Soprano."

My favorite National League team is the Dodgers....

...and my favorite American League team is whatever team has Billy Beane as its general manager--which is still the Oakland As.

The As have the same won-lost record as the Yankees with 1/4 the payroll.  That is the kind of austerity I can get behind, because it is austerity based on statistics.  But what is remarkable is that after Michael Lewis' Moneyball ( a terrific book) and Bennett Miller's Moneyball ( the highly enjoyable movie version of the book), what Beane is doing is no secret, and yet most other teams have not been able to figure it out, showing that information inefficiencies can stick around for a long time.

The Red Sox were able to combine money with moneyball for awhile to banish to curse of Ruth, but, well, not reason to dwell on others' misery.

(BTW, even though I have only lived in LA for four years, I have been a Dodger fan for much longer, because my wife, a native Angelino, grew up in a Dodger household.  Giving up the Cubs was not a hard thing to do).

On Labor Day, it is worth revisiting Lipsey and Lancaster (1956)

From The General Theory of Second Best, by R. G. Lipsey and Kelvin Lancaster, The Review of Economic Studies, Vol. 24, No. 1 (1956 - 1957), pp. 11-32

It is well known that the attainment of a Paretian optimum requires the simultaneous fulfillment of all the optimum conditions. The general theorem for the second best optimum states that if there is introduced into a general equilibrium system a constraint which prevents the attainment of one of the Paretian conditions, the other Paretian conditions, although still attainable, are, in general, no longer desirable. In other words, given that one of the Paretian optimum conditions cannot be fulfilled, then an optimum situation can be achieved only by departing from all the other Paretian conditions. The optimum situation finally attained may be termed a second best optimum because it is achieved subject to a constraint which, by definition, prevents the attainment of a Paretian optimum.

Everyone who takes Econ 1 (or its equivalent) learns this; it doesn't seem to me that people remember it very well.

A question for Joel Kotkin: What happened to choice?

Joel Kotkin, who often correctly defends auto-oriented suburbs as reflections of many people's preferences, has written that he opposes a new zoning code for Hollywood that would allow for it to become denser.

The code does nothing to force developers to build 50 story apartment buildings, it simply allows developers to build 50 story apartment buildings.  Hollywood is, as he notes, a bit scruffy, but it is also adjacent to  some very expensive real estate, with the Hollywood Hills to the north, Hancock Park to the south and West Hollywood to the west.  It also features two subway stops on a subway line that has pretty decent ridership.  It is entirely possible that market forces would lead developers to increase its density, were they allowed to do so.  These market forces also reflect preferences.