Minutes vs Stress

The Texas Transportation Institute says that the place I live now, Los Angeles, and that I lived just before LA, Washington, have the worst traffic in the country (they actually rank one and two), where worst is defined as average minutes spent in bad traffic per day.  

Today was a bad day in LA--it rained, and people just don't know how to deal with that here.  But for some reason, I found commuting by car in DC to be far more frustrating.  In both cities, the distance between my home and office was about the same.  As it happens, I hated driving in DC so much that I took Metro to work nearly every day, and the total Metro commute was about 50 minutes one way (including walking).  On the other hand, the walk from my house to the Bethesda Metro station and from Dupont Circle to my office in Foggy Bottom was quite pleasant.

But back to the point--somehow driving in LA seems far less stressful to me than driving in Washington.  Maybe it's just that the radio stations are better....

Read Yves Smith

Yves Smith was ahead of the Times and the Journal (and so far as I can tell, everyone else) on the foreclosure mess.  I learn a lot from her about what is happening with mortgage backed securities, and I teach students about them for a living.

Slides from Presentation to White House Conference on Rental Housing

I wish I could give credit where it is due

I was in Madison a few weeks ago, working on the second edition of my book with Steve Malpezzi.  We took an hour out one afternoon to gossip about Nobels with Don Nichols, Dan Bromley, Werner deBondt and Bob Krainer.  One of these gentlemen forecast Peter Diamond as this year's winner, but I can't remember who.  Such prescience....

Greg Mankiw forgets about the income effect

Professor Mankiw says he can afford higher taxes.  For that I give him credit.  But he also says that higher income taxes might keep him from writing his New York Times column.   He then implies that higher taxes will generally keep people from working.

This is the substitution effect--because leisure becomes relatively cheaper, people consume more of it.  But higher taxes also reduce after-tax income (obviously), so in order to maintain living standards, one might decide to work more in the face of higher taxes.  This is called the income effect.  I can speak for my household--our after-tax income is more than sufficient for our "needs," but if we were taxed more, we might have to work more to satisfy these "needs."

It is an empirical question as to whether within certain ranges of tax rates, raising taxes increases or reduces effort.  Theory gives us an ambiguous answer.  (h/t Mark Thoma).

If NJ Governor Christie wanted to run New Jersey like a business...

...he would not have vetoed the construction of a new rail tunnel from NJ to NY.  It is hard to imagine that this is not a positive NPV opportunity.

A little data exercise on housing affordability

I just had two graduate students here at USC--Sarah Mawhorter and Ray Calnan--find 25th percentile gross rent and 25th percentile income for renters for the 50 largest MSAs in the United States using 2008 American Community Survey Data. If "affordable" means that every household has the opportunity to spend less than 30 percent of gross income on rent, not a single one of the 50 largest MSAs is affordable for renters at the 25th percentile. The least affordable is Miami, where 25th percentile rent-to-25th percentile income is in excess of 50 percent; the most affordable is Kansas City.