NIMBY zoning is killing us

From The Studies Show:

How much is [restrictive zoning] costing the US economy as a whole? A famous paper (Hsieh and Moretti, 2019) estimates the US economy would be almost 3.7% larger if only San Francisco, San Jose, and New York City had zoning laws that were less restrictive1. Amazingly, 40 percent of Manhattan buildings standing today would now be illegal to build, hinting at the vast extent of our zoning problems.

So why aren’t zoning laws less restrictive? Existing homeowners have no incentive to increase housing stock. In fact, they benefit from exclusionary zoning laws that increase the value of their real estate. But while existing homeowners profit, everyone else loses.

The United States, long a country famed for internal migration, has in recent decades had the lowest rate of migration since record keeping began in 1948. Fewer people are moving—which means they aren’t following jobs to the most productive areas of the country. Staying put in dying towns or unproductive regions has big consequences. While mortality has dropped across the developed world, middle-class American whites, many of them stuck in moribund rural areas, have been dying at accelerated rates.

Russian ruble is falling, but no one is buying its exports

 From MarginalRevolution:

...I also strongly disagree with those who say that cheaper ruble is “good” for exporters and the budget. Exporters have yet to make good use of devaluing ruble – which they can’t do, because Russia is under all sorts of embargoes, and China and other Global South countries are not opening their markets to most Russian goods.

...China is only buying our most basic commodities at heavy discounts, while keeping its market closed for other Russian goods. There’s no investment or technology coming into Russia from China and other Global South countries. Everything is dependent on state subsidies – but the government’s financial reserves are running thin.

Along with their low fertility rate, 1.52 (source), and it appears that Russia's future prospects are dim.

Advice to the New FTC Leadership

Here is the most important part (link): 

 II. Promote Innovation 

Since 2010, the U.S. economy has grown at a real rate of 1.74% per capita. At this rate, per capita income doubles every 40 years.4 When our kids turn 40, they will earn twice as much as we did.

Public policy—especially antitrust policy—should recognize that innovation drives growth, much of which comes from Big Tech and startups. Big Tech has provided consumers with more everyday value than any other small group of firms in history. And most startups “exit” via acquisition, not by going public. If the FTC prevents these exits due to concerns about lost potential competition, funding becomes harder to come by, which deters startups. The FTC should recognize these innovation incentives when setting enforcement priorities.

Here is press on the new Antitrust chief on "Taking on Big Tech and Beyond"

Slater will inherit a docket packed with blockbuster cases that aim to challenge the dominance of some of the world’s largest companies. These cases, many initiated during Trump’s first term, focus on allegations of monopolistic practices that harm consumers and stifle innovation.

Trump emphasized that Slater’s leadership will prioritize fair and vigorous enforcement of competition laws. “She will ensure that our competition laws are enforced, both vigorously and FAIRLY, with clear rules that facilitate, rather than stifle, the ingenuity of our greatest companies,” he stated.

The decision to place Slater in charge signals a continuation of the administration’s efforts to curb corporate concentration and promote competition across key sectors of the economy. With both Trump and Vance championing a tough stance on monopolistic practices, Slater’s tenure is expected to mark a pivotal chapter in the U.S. government’s approach to antitrust enforcement.

More on Business Dynamism

Over at the Geek Way, Andrew McAfee has created a startling visualization related to entrepreneurship in the US and EU. The Draghi Report on EU competitiveness is generating a small buzz among economists. One startling claim is that

there is no EU company with a market capitalisation over EUR 100 billion that has been set up from scratch in the last fifty years, while all six US companies with a valuation above EUR 1 trillion have been created in this period.

But the visualization makes the contrast even more stark. US entrepreneurs have has dominated.

 

US institutions have made it the primary source for innovation. Coste and Coatanlem suggest a cause has to do with greater labor market regulation inflating the costs of failure in the EU. Other causes?

Business Dynamism

Visual Capitalist has a nice graphic that indicates the level of dynamism across industries in the US economy. An industry is not competitive if no firms ever fail.

 

Returns to Master's degrees

 Economist:

Responding to Professional Disruption

In Chapter 24 on "The Luddites," The Industrial Revolution Podcast recounts an episode when entrepreneur John Bell began producing textiles that drove out local small-scale competitors and putting many workers out of work. In 1799, Bell received a letter, reading:

“I send you this to inform you that we – the cloth workers of Trowbridge, Bradford, Chippinham, and Melkshom – are almost (or the greatest part of us) out of work and we are fully convinced that the greatest of the cause is your dressing work by machinery. And we are determined, if you follow this practice any longer, that we will keep some people to watch you about with loaded blunderbuss or pistols, and will certainly blow your brains out. It is no use to destroy the factories but put you damned villains to death.”

Contrast this with the demise of the retail video rental business in this century. The dramatic drop in employment rivals the most precipitous job loss in any industry. Where was the hue and cry? Where the death threats? Where the Luddite armies sabotaging the competition?

First, is the historical, sociological explanation. Job loss due to industrialization had never been seen before. The disruption of ancient jobs, norms, and entire ways of subsisting within a generation was new and frightening. Today, we are used to hearing of yet another radical disruption in some industry, e.g., music streaming, EVs, ebooks, big data, cloud computing, and AI. This has become regularized. Workers expect their profession to look much different at the end of their career than at the beginning.

Second though, is a not unrelated economic explanation. What were the options available to an out-of-work textile worker in 1799 versus the options of a displaced Blockbuster clerk exactly two centuries later? Textiles were among the first industries to benefit from mechanization. Textile workers had left the farm and now saw few other options in the cities. Blockbuster was able to hire clerks because clerking was so similar to clerking of other retail products. These workers took these jobs because the skills were transferable. They had outside opportunities. The supply curve for textile workers was steep meaning that a drop in worker demand would seriously lower wages. The supply curve for Blockbuster clerks was flat meaning that a drop in demand for video rental clerks would hardly affect the wages of the displaced workers.

Does inequality make us rich?

Economist:

America ranks as the most unequal big rich-world country (see chart). Combined with lower average incomes elsewhere, the pay of America’s top workers looks astonishing to European eyes. For comparison, it takes the equivalent of a mere $250,000 or so to enter the top 1% of two-person households in Britain.

It would be natural to conclude that high inequality is merely the flipside of America’s wealth. That is probably true to an extent. Yet America has grown more redistributive over the period examined by this special report, expanding the earned-income tax credit, a wage top-up for low earners, in the 1990s, and subsidies for health insurance in the 2010s. And it is not clear that tolerance for inequality is powering its economic outperformance over the past decade.

How the Trump Whale made money betting on prediction markets

WSJ:

Polymarket’s remarkable liquidity explains Théo, the Polymarket whale [who made $85 million]. Théo behaved as one would expect of a smart trader: Once he had conviction, he sized the trade aggressively. He built his positions discreetly, with a variety of wallets and with small-sized buys, to avoid causing a run-up in price. This is exactly the opposite of what one would expect if, as much of the media and BlueAnon claimed, he was throwing away dozens of millions to influence the election.

More important, Théo did his own research. Rather than rely on polls, he theorized that there was a strong “shy Trumper” effect. That is, he believed that Trump supporters were both less likely to talk to pollsters and less likely to tell pollsters that they would vote for the former president. As he told The Wall Street Journal in an email, he commissioned his own surveys in which respondents were asked who they thought their neighbors would vote for. The results “were mind blowing to the favor of Trump!”

Not only did Théo bet that Trump would win the Electoral College. He also bet that Trump would win the popular vote—an outcome that was the minority position even on Polymarket—and that Trump would sweep six of seven swing states, including the “blue wall” of Michigan, Pennsylvania and Wisconsin.

Standardization and Specialization

I am a couple dozen episodes in on Dave Broker's Industrial Revolutions Podcast and cam across this tidbit from chapter 14.

But what Whitworth was most famous for was something called British Standard Whitworth – BSW.

Up until this point, different machine tool makers used different designs for their tools. For the end users – really, anyone involved in industry by this point – it was maddening. If you had a steam engine made by Company X, for example, and one of the screws was damaged, it could only be replaced with a screw provided by Company X or the vendor for Company X. Otherwise the screw wouldn’t fit.

Along with Clement, Roberts, and other Maudslay alumni, Whitworth was a strong proponent for standardization such parts – nuts, bolts, and screws. So, in 1841, he sat down and wrote up what he thought should be the standards. Screw threads should be set at a 55 degree angle with very specific depths and radii. By the 1870s, as the railroads became increasingly frustrated with the different systems being used, they said, “yeah, Whitworth was right.” By the 1890s, everyone was using BSW.

With BSW standardization, a steam engine maker need not produce all of the screws, rivets, fasteners, and other minor parts. Outsourcing these components allowed him to focus on improving the steam engine and the component makers to improve production. Economies of scale in, say, screw manufacturing unleashed by dis-integration would drive costs down dramatically.

I recommend the podcast to fellow history buffs and I am sure I will mine it for future blog posts.