Who cares more about affordable housing, Democrats or Republicans?

Much has been made of the census data showing that Republican-leaning "red" states grew more than Democratic-leaning "blue" states in the last ten years.   But Ed Glaeser looks closely at the numbers and concludes that it is cheap housing, caused by fewer housing restrictions, that accounts for the changes:

My interpretation of Red State growth is that Republican states have grown more quickly because building is easier in those states, primarily because of housing regulations. Republican states are less prone to restrict construction than places like California and Massachusetts, and as a result, high-quality housing is much cheaper.

There is a strange irony in this: more conservative places do a much better job in providing affordable housing for ordinary Americans than progressive states that are believed to care about affordable housing.

Top posts of 2010

1. Incentives matter -- dump your sick employees into the govt. exchange
2. How do insurers identify good drivers?
3. Vertical integration and tax avoidance
4. Pub owners support minimum alcohol laws
5. How many economists does it take to eliminate discrimination against women?
   
6. Using Behavioral Economics to motivate workers
7. Compensating risk differentials for prostitution are small
8. Job openings in China for fair-faced foreigners
9. Product Market Size and the Returns to Innovative Effort
10. Do tourists pay more than locals?

Why is free checking disappearing?

The right answer is that it was never "free." Instead you paid for your free checking with other fees generated by your banking activity. But now that Congress has seen fit to limit those fees, banks are charging for checking accounts.

This summer, Wells Fargo replaced its free-checking offering with something called "Value Checking," which requires either a monthly direct deposit of $250 or more or a minimum balance of $1,500 to avoid a $5 monthly fee.

This is another example of Merton Miller's hypothesis that most financial innovation is a reaction to changes in regulation. Remember that inefficiency creates opportunity for those creative enough to figure out how to find and consummate transactions deterred by regulation.

Does Disney Know about This?

I was able to travel to Rome over Christmas and saw this item at an open-air Christmas market. I infer that Disney's legal department which famously protects its trademarks is having some troubles in the EU.

You Know You Have Distribution Issues When ...

... even your spin-off division drops you. American Airlines is in disputes with many of its agents (Expedia, Travelocity, Orbitz) because it is competing with them directly. Now, even Sabre is planning to drop them.

Note that Southwest sells tickets through its own website exclusively already and that other carriers sell a large share direct to consumer. Were these middlemen services merely a transition period?

Nice characterization of how conservatives and liberals differ

From Greg Mankiw:

Charles L. Schultze, chief economist for former President Jimmy Carter, once proposed a simple test for telling a conservative economist from a liberal one. Ask each to fill in the blanks in this sentence with the words “long” and “short”: “Take care of the ____ run and the ____ run will take care of itself.”

Liberals, Mr. Schultze suggested, tend to worry most about short-run policy. And, indeed, starting with the stimulus package in early 2009, your economic policy has focused on the short-run problem of promoting recovery from the financial crisis and economic downturn.

But now it is time to pivot and address the long-term fiscal problem. In last year’s proposed budget, you projected a rising debt-to-G.D.P. ratio for as far as the eye can see. That is not sustainable. Conservatives believe that if the nation credibly addresses this long-term problem, such a change will bolster confidence and have positive short-run effects as well.

We need more loan sharks

In 2010, new financial regulations passed by Congress reduce the fees that banks can charge for credit cards.  This caused lenders to cut off credit to low income consumers:

Jamie Dimon of J.P. Morgan Chase reported that, "In the future, we no longer will be offering credit cards to approximately 15% of the customers to whom we currently offer them. This is mostly because we deem them too risky in light of new regulations restricting our ability to make adjustments over time as the client's risk profile changes."

Todd Zywicki predicts that these consumers will turn to other sources of credit, like loan sharks.

The least surprising event of 2010 was that, in the wake of new federal limits on how credit-card issuers can price risk and adjust interest rates, more Americans had to go to payday lenders, pawn shops and local loan sharks in order to get credit. It's simply the latest installment in the old story of regulators thinking they can wish away the unintended consequences of consumer credit regulation.

This seems like a nice example of Merton Miller's hypothesis that most financial innovation (although it is hard to think of loan sharking as an innovation) is driven by ill-conceived regulation.

In our textbook, the main theme of chapter 2 is that "inefficiency implies opportunity."  Every wealth creating transaction deterred by regulation also represents opportunity for someone resourceful enough to figure out how to circumvent the regulation.

Variable Pricing and Parking Meters

The city of Seattle is changing its policies on the prices it charges for metered parking spaces by "charging more on the busiest blocks at the busiest times, and less at times when extra spaces tend to be available." (HT: Marginal Revolution)

Why are the markets so optimistic about the US?

For the first time ever, investors are demanding a smaller premium to own U.S. corporate bonds than global company debt.

• In 2008, companies issuing debt in the U.S. paid 653 basis points more than Treasuries while corporations selling around the world paid 503 basis points more than sovereign governments offered investors in their debentures.
• But now, Bondholders demanded 166 basis points more in yield to hold U.S. investment-grade company debt instead of Treasuries at the end of 2010, compared with an average 169 basis-point spread worldwide

I suspect that the spreads say less about the differences between U.S. and foreign PRIVATE debt and more about the differences between US and foreign PUBLIC debt.

Micro economists need to understand macro, ...

if only to "feed" their forecasts.  Calculated Risk has a nice series on the big questions of 2011:

• Question #1 for 2011: House Prices 
• Question #2 for 2011: Residential Investment
• Question #3 for 2011: Delinquencies and Distressed house sales
• Question #4 for 2011: U.S. Economic Growth
• Question #5 for 2011: Employment 
• Question #6 for 2011: Unemployment Rate
• Question #7 for 2011: State and Local Governments
• Question #8 for 2011: Europe and the Euro
• Question #9 for 2011: Inflation
• Question #10 for 2011: Monetary Policy