Assorted links

by on February 11, 2014 at 11:08 am in Uncategorized | Permalink

1. After the food court closes.

2. Thursday night, a dialogue between me and Megan McArdle about her new book.

3. How to build truly cheap housing for the poor.

4. Rafael Yglesias on…a bunch of stuff, including Woody Allen.  And how will authors (but not Rafael) respond to the demand for binge reading?

5. The weight of rain.

6. There is no Japanese great stagnation.  And buy shares in a football player.

Willitts February 11, 2014 at 11:34 am

3. Kickbacks, inefficiency, and warped incentives due to government – who would have guessed?

5. Anyone who has had to carry a gallon of water 12 miles on a rucksack already drenched in rainwater wouldn’t be surprised about how heavy rain is.

BTW, a gallon of water weighs more than 8.5 pounds including the container.

AndrewL February 11, 2014 at 12:17 pm

Well, if you started with your container empty (assuming it’s a 6″ Diam Bucket. And it’s raining 1inch/hr) You could open up your ruck at the start of the hike, and by the time you finish, you’d have your gallon. (just about).

Foobarista February 11, 2014 at 12:17 pm

3: Yup – who’d have thought that government rules mandating above-market labor costs, payouts to lawyers, and miscellaneous bureaucracy would make “affordable housing” not possible to build?

Money quote:

“What is wrong with the system is there is a fixation on addressing multiple social issues on the backs of poor people,” he says.

If you eliminate the word “poor”, you’ve captured the fundamental problem with government doing much of anything inexpensively.

CMOT February 11, 2014 at 1:11 pm

I Mostly agree but if you may another small change I think you’ve have it exactly:

“What is wrong with the system is there is a fixation on addressing multiple social issues on the backs of poor people,” he says.

should read

“What is wrong with the system is there is a fixation on addressing multiple RENTIERS on the backs of poor people,” he says.

mulp February 11, 2014 at 1:15 pm

Right, the last thing you want to do to help the working poor survive is pay them middle class wages because only the middle class would be able to afford the housing built by middle class workers. The solution to improving the lot of low wage workers so they can get into the middle class is to pay them working poor wages to build housing for the working poor.

Now if that housing is built in Tyler’s neighborhood, two houses down, then the kids of those working poor will get the benefits of services for the upper middle class. But if the working poor housing is restricted to the working poor areas with the poorly funded schools of the working poor, how are the working poor going to get into the middle class? Drive down wages of the middle class to low wage levels so the working poor of today become the middle class of 2020?

Willitts February 11, 2014 at 2:36 pm

Working poor…grumble grumble…affordable housing…grumble grumble…put food on the table…grumble grumble…make ends meet…grumble grumble…top 1%…grumble grumble..living wage…grumble grumble……….

I see now! It’s so simple. All we have to do to solve for low wages is to raise their wages, then EVERYBODY could be middle class!

And to improve education, all we have to do is raise everybody’s grades. Then everyone will be an honor student!

Anti- ummm February 11, 2014 at 3:03 pm

The rich have won. The white flag is raised. Now can you please figure out how to make life better for the stagnant masses? And no, shiny gadgets and Nest thermostats don’t count. Figure out how to make a system where most can thrive or get squashed when the whole thing comes crashing down.

Alexei Sadeski February 11, 2014 at 8:18 pm

Anti-ummm,

You really don’t think most Americans are “thriving”?

Willitts February 11, 2014 at 8:59 pm

There’s no such thing as masses, just a group of individuals. They are responsible for figuring out how to help themselves. It isnt my job and not the government’s job to find them jobs. Your collectivist mindset is insulting to humanity.

anon February 12, 2014 at 4:38 pm

“Your collectivist mindset is insulting to humanity.”

Geez – you’re a real di_k

Jane the Actuary February 11, 2014 at 12:01 pm

Re #3 — I was expecting a discussion of scaling back expectations and creating studio apartments, dorm-style shared common areas, etc., as well as an abandonment of the requirements the children of opposite sexes cannot share rooms and maximum numbers of children who can share rooms in any case. I admit that I wasn’t cynical enough to expect the mountains of regulatorly requirements, “green” add-on costs, etc., that the article details.

Jane the Actuary February 11, 2014 at 12:38 pm

I looked it up: no more than 2 individuals per bedroom, with the living room “counting” as a bedroom, is the HUD standard for Section 8 vouchers, and presumably for other types of “affordable housing” programs as well. Reasonable? or not so much?

Foobarista February 11, 2014 at 12:45 pm

If you’re talking about a small apt building, 2 people per bedroom + 2 in the living room would be pretty cramped, and allowing more would cause all manner of other problems (parking, kitchens and bathrooms, safe evacuation capacity, simple weight of the occupants & their stuff, etc). Bedrooms in these places would rarely be much bigger than 150 square feet or so, with an open common area of about 400 square feet.

mulp February 11, 2014 at 1:23 pm

Why is there a need for parking? Won’t the market provide public transit that provides all the needs for the working poor who can’t afford cars at prices the working poor can afford? How expensive can it be to provide on demand transportation at all hours of the day and night as required by the working poor who need to take the jobs cleaning at all hours of the night, the store clerk jobs overnight, the stocking of shelves in the WalMarts over night from 11pm to 3am?

Odd how getting the government out of people moving has led to increased poverty because the working poor are increasingly isolated and unable to get to good jobs for lack of transit. Wasn’t the market supposed to be superior to the government?

Alexei Sadeski February 11, 2014 at 8:21 pm

Yes, the market WOULD provide cheap and convenient transportation for the poor… but doing so is illegal.

Still, sometimes, the market finds a way: http://en.wikipedia.org/wiki/Dollar_van

Willitts February 11, 2014 at 2:40 pm

And no children of different sexes may share a room. So the mother of a heterosexual boy, heterosexual girls, homosexual boy and homosexual girl will have a five bedroom townhome.

And the homes must have solar panels and be built with labor at prevailing wages from minority and women owned businesses, funded by Fannie Mae, Freddie Mac, or an FHLB.

Alexei Sadeski February 11, 2014 at 9:56 pm

I can’t tell which part is a joke and which part is serious.

Rahul February 11, 2014 at 12:50 pm

Is the “children of opposite sexes cannot share rooms” part a convention or a hard legal requirement in the US?

Z February 11, 2014 at 1:15 pm

In Appalachia, brothers and sisters sleep together all the time, but they are usually married first.

Willitts February 11, 2014 at 9:00 pm

Guffaw

Rahul February 11, 2014 at 11:35 pm

OTOH, in Utah they are probably married but have to claim they are brother & sisters?

Sean February 11, 2014 at 12:21 pm

3. There’s a disparity between the issues that the proponents and opponents of the housing model are raising. Certainly, eliminating green costs, extra outlets, etc can be done without impacting safe livability. On the other hand, quality of materials is an issue which, opponents raise, but which article does not investigate well enough. I am not doubting that the units are well built (as well-built as any post-War structure….), but it would have been good to see some more detail on the developers’ assurances in this regard.

The use of LED lighting seems like a good indication that builders are willing to put up money in development which will save tenants in the long run.

The arguments on why the 60 year low rent requirement incentivizes owners to build well seem valid, but I would have liked to see more detail on what metrics the rent is being measured against. General inflation? Average cost of housing in Portland? The price of tea in China?

J1 February 11, 2014 at 12:28 pm

#3. If there’s one term I’m completely sick of hearing, it’s “nonprofit”. Either an organization is effective or it isn’t; whether profit is involved is irrelevant.

Willitts February 11, 2014 at 2:42 pm

I agree, but how effective can you be if you are paying the chief executive more money than they could ever get working in the private sector.

Nonprofits aren’t.

J1 February 11, 2014 at 3:57 pm

Pretty effective.

“the 130 apartments cost $253,000 each to build”

The first organization profiled could pay the CEO, shareholders, senior management or whoever $13 million for this project and still be doing the job for 2/3 the cost of the public sector. If a competitor, “nonprofit” or otherwise, undercuts them, they’ll have to find a way to lower prices. I hate to be a broken record on this one, but I get really, really sick of the pompous sanctimony of the whole “nonprofit” concept. Either you do the job effectively for lower cost or you don’t. I want the best quality for the lowest cost, not higher cost and/or lower quality to accommodate some idiotic objection to people making money.

Willitts February 11, 2014 at 9:03 pm

The government is a lousy benchmark to measure the effectiveness of a venture.

The tax advantage and lack of regulation of nonprofits also makes a comparison with private firms more difficult. Im not disagreeing with your major point.

J1 February 13, 2014 at 5:50 pm

I think we’re talking past each other here. As near as I can tell, you’re talking about the (in your view low) probability of the for-profit being more cost-effective. I don’t have an opinion about that. My point is that whether an entity is non-profit or for-profit is irrelevant, as only cost effectiveness matters, and that being non-profit confers no moral legitimacy or otherwise superior consideration.

Whether truly non-profit entities do, or even can exist is a different question neither of us has addressed…

farmer February 11, 2014 at 12:33 pm

No one wants “low cost housing”. It ruins property values and attracts riffraff. That it is impossible to build is a *feature* not a bug

Axa February 11, 2014 at 12:37 pm

Parking a trailer home counts as building?

rayward February 11, 2014 at 12:34 pm

2. Well, yes, moral hazard. And it’s true we remember our failures more than our successes. The linked notice of the event mentions that McArdle identifies the Detroit bailout as evidence that some failures are productive and others are disastrous. Did Detroit miss the upside of failure because Detroit was spared the downside? Would that lesson apply to the banks? She may cover that in her book, but I’m confident Cowens will ask her. I look forward to her answer.

Derek February 11, 2014 at 1:15 pm

Moral hazard is only one. More important is the feedback. Failure says change directions, your assumptions are wrong. Smart people recognize failure early; they respond to feedback and correct before the losses get too big.

Big failures are necessary when ideas too good to be true but very compelling get tried. Iraq will color all foreign policy debates for a generation. Obamacare will hopefully scare the living daylights out of the electorate and stear them clear of grandiose schemes out of the mouths of smooth talkers.

2008 was partly the result of failure denied. Wall street failed at their most basic function, pricing risk. Since then the policy direction has been to hide risk and price fix. A potemkin banking system. A bad mistake. The only redeeming quality of free markets is the brutal exposure of bad ideas.

rayward February 11, 2014 at 1:43 pm

Smart people, very smart people, can’t always see failure coming. In 2009, Larry Summers’ explanation for the economic failure (i.e., the economic crisis) was success: the success of the economics profession in overcoming the Phillips Curve dilemma, such success causing them to miss the inflation (i.e., the bubbles) that was building right in front of them.

Iraq was about good intentions, removing a Sunni minority dictator in a Shiite majority nation following a Sunni terrorist attack on the US, gone awry. The lesson not learned from the failure is that it’s okay to remove a troublesome and brutal dictator but then get the hell out and let the local people resolve their differences, even if the resolution includes civil war; the lesson learned is that offending a client state, especially a Sunni client state with lots of oil, can have serious consequences.

Robert Shiller attributes the failure to adequately assess risk to the failure to appreciate the existence of fat tails. The lesson not learned from the financial collapse is that it was (and is) as predictable as, well, history.

derek February 11, 2014 at 2:10 pm

The smart people who didn’t see it coming tell us that smart people could not see it coming.

Willitts February 11, 2014 at 2:44 pm

Maybe we ought to re-examine the basis for calling them smart.

rayward February 12, 2014 at 8:53 am

“We’re too afraid of being taken advantage of. But it helps no one to fixate on mythical villains. And when politics get involved, that is often what we most like to do.” Paul Krugman? No, Megan McArdle in Bloomberg View today, her bottom line comment after recommending job training, a WPA-type works program, a payroll tax holiday for new hires, and moving vouchers to address long-term unemployment. Shocking! Has McArdle gone over to the other side?

ohwilleke February 11, 2014 at 12:45 pm

It is very hard from #3 to tell what is driving the lower cost. A reduction of $5,000 in regulatory costs is mentioned, and there is mention of a waiver of building code provisions, but it isn’t at all clear which ones. A gap of $125,000 per unit is not adequately explained. Is it a difference between having to pay prevailing wage on government projects and not on private ones? Is it a matter of lower quality materials? If there are building code provisions which are expensive and onerous to comply with, which ones are they? The discussion of financing costs suggests that by agreeing to 20 years of limited rents rather than 60 years, that this was not an important distinction. The only waiver of building code provision I can think of which would plausibly produce those kinds of savings would be one allowing about two or three times as many units per acre, perhaps waiving open space and parking requirements and allowing for taller apartment buildings (perhaps four to eight stories instead of three).

Also, Portland is a highly atypical case. The vast majority of the U.S. has unsubsidized apartments for rents and construction costs on the order of the $600+ per month and $70,000 per unit mentioned in the article. What makes Portland expensive is high land cost mostly due to a development boundary downzoning areas at distances from the downtown where first ring suburbs would be located in most metro areas. This makes for high density, but by limiting supply also makes for high cost.

As a toy model example, suppose that construction itself costs $50,000 per unit in the private case and $65,000 per unit in the public case. If the land in the private case is $20,000 per unit and the land in the public case is $130,000 per unit, the difference is reconciled. But, this would require about 7.5 times as much density in the private case as in the public one.

An alternative to true higher density might be a change that allows the private units to be constructed on dirt that lacks development value entirely or has very low development value – perhaps areas downzoned due to proximity to an airport, or industrial area, or outside the development boundary.

Construction shouldn’t be terribly expensive relative to the rest of the country in Portland, but land cost definitely is. So, the question is how to make the dirt cost per unit cheaper.

Clearly, we don’t have the whole story here.

In my neck of the woods, another major cost of new apartment buildings involves water tap fees that can approach $30,000 per unit in some arid, rapidly growing exurban areas, and one of the ways that apartment complex developers lower their costs is by xeriscaping and otherwise instituting water use conscious designs, but presumably that kind of thing isn’t an issue in wet Portland.

Tyler Fan February 11, 2014 at 12:55 pm

I’m curious as to what Tyler has ever failed at.

prior_approval February 11, 2014 at 1:29 pm

He failed as a Rothbardian, likely the most profitable failure of his life.

As a matter of fact, he is still following that path – do note the very recent equilibrium post.

Marian Kechlibar February 11, 2014 at 12:59 pm

Re: weight of rain. See the following article, answering the important question “What if a rainstorm dropped all of its water in a single giant drop?”: http://what-if.xkcd.com/12/

I was amused and perplexed at the same time.

Willitts February 11, 2014 at 3:07 pm

Thank you for the fascinating read.

The effects of one large drop are pretty predictable; falling several hundred feet into a body of water is similar to falling onto concrete. I doubt though that the surface tension of the large drop would be strong enough to prevent a break-up sooner. I would expect the drop to immediately flatten in one dimension or the other until it successively ruptured into two drops.

I had not anticipated the effect of grass being set on fire, however brief.

It is more amazing to me that all the water in our oceans was deposited on Earth by meteors a few drops at a time over billions of years.

Alexei Sadeski February 11, 2014 at 1:17 pm

#3: “What is wrong with the system is there is a fixation on addressing multiple social issues on the backs of poor people,” he says.

Bravo/

Thomas Sewell February 11, 2014 at 3:31 pm

RE: #3, it’s the minimum wage/labor regulations debate, but written into affordable housing instead.

The goal is apparently that we apparently have to make sure that homeless are only allowed to rent housing they can’t afford.

Roger Sweeny February 11, 2014 at 1:20 pm

Cynical model:

Young people go to college and learn that 1) affordable housing, union wages, open space requirements, zoning, and government regulations of all sorts are good things, 2) all these good things go together and to complain that they have costs is to show oneself ungenerous and uncaring, 3) besides, to the extent that there are costs, they should be paid by society or the rich, and 4) college graduates deserve to have good, well-paying jobs.

So many of those college graduates get relatively good jobs working for governments and non-profits, pushing up the costs of all sorts of good things and feeling like they are making the world a better place.

Max Factor February 11, 2014 at 2:24 pm

Well if the private sector provided good jobs then we wouldn’t see so many disenfranchised youngsters moving into the government and non-profit sectors. But the provate sector is shedding the good jobs and replacing them with McService gigs (“our parents had careers, we had jobs, our children have gigs”). Young people are stupid but they aren’t naive. They watched their parents get smacked down by globalization, free trade, free markets, EB5 and the Great Recession and they want to move into labor friendly enclaves like government and non-profits. Who wants to slave away for a corporation for 60 hours per week when the organization openly admits that it has zero loyalty to the workers?

The private sector is no longer in the business of creating good jobs. Their goal is to maximize shareholder profit while the economists solemnly clap their hands. In a slowing economy you increase profits by killing jobs. And then we wonder why youngsters want to work for start-ups or the government.

Willitts February 11, 2014 at 9:11 pm

The private sector was NEVER in the business of creating jobs.

Breaking news: the public sector isnt in the business of making jobs either.

(Not That) Bill O'Reilly February 11, 2014 at 2:16 pm

Re: #1

I remember going to that food court all the time in high school. White Flint had already become something of a run down shithole by then (the nearby Montgomery Mall had a much more impressive array of stores and eateries, and even Wheaton Plaza had been recently renovated and expanded), but it had a Smoothie King! Happy to see Montgomery County trying to build more walkable mini-communities like Silver Spring, Rockville Town Center, and now this White Flint project though.

AD February 11, 2014 at 3:06 pm

#3. “the lack of low-rent living spaces is driving many working poor into the ranks of homelessness.”

Does anyone have the hard numbers to back this up? I agree that housing prices are inflated by government intervention, but is the increased price really pushing workers into homelessness? I suspect the bigger result is working people living in cramped housing, in rough neighborhoods, and/or further away from the city center.

Finch February 11, 2014 at 3:18 pm

It’s possible the homeless numbers referenced count people living in heavily subsidized housing as homeless. It’s just not plausible that working poor homeless exist in large numbers and people just never encounter them (here I means real homeless, i.e., people living outside). Real homeless seem almost entirely made up of people with serious mental illness or drug problems, i.e., the kind of person who would successfully dodge the various available interventions designed to help them. Massachusetts, for example, has significant “homeless” populations living in state-funded motel rooms. It’s not a house in the burbs, but it’s significantly different from what most people visualize when they say “homeless.” So it would presumably be more accurate to say that the lack of one form of subsidized housing drives people to another less desirable form of subsidized housing.

Real homelessness is another place where the reluctance to involuntarily institutionalize crazy people causes a lot of harm.

Marie February 11, 2014 at 4:17 pm

I wonder also if living with a friend or relative would be classes as homeless.

rluser February 11, 2014 at 7:54 pm
Marie February 12, 2014 at 10:37 am

Very interesting. This seems to sum up their categories.

“The 2013 count identified 2,869 people who were “literally homeless” – sleeping in an emergency shelter or unsheltered – on the night of January 30, 2013. This number includes 1,895 people who were unsheltered (sleeping outside, in a vehicle, or abandoned building) and 974 people who were sleeping in an emergency shelter. An additional 1,572 people were sleeping in transitional housing on the night of the count. Among those who were literally homeless on the night of the count, there were 474 individuals in families with children (including 253 children), 2,361 individual adults over age 18, and 34 unaccompanied youth under age 18.

The count did not capture comprehensive information on households who were doubled up, but an analysis of available data suggests that there may be four times as many people in that situation as are on the streets or in shelters. The count also documented 4,832 people who received rent assistance or permanent supportive housing on the night of the count who would most likely have been homeless without
that support. “

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Floccina February 14, 2014 at 9:25 am

3. How to build truly cheap housing for the poor.
It seems to me that local governments have incentives to not allow the building of cheap housing for the poor.

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