Can This Possibly Be True?

Via Matthew Yglesias, it seems that Casey Mulligan is not sure there was even a housing bubble. As part of her argument, however, she says something that sounds very wrong:

Now that the bubble is behind us, people today should be no more willing to pay to own a house than they were in the late 1990s. (It’s true that population has grown since the 1990s, but population growth is nothing new and should not by itself increase real housing prices. Don’t forget that greater population also means more people available to do construction work.)

The cost to build a house is essentially land, materials, and labour. Increasing population means less land per person, so (all else being equal) the price of land will increase. I imagine that over the last decade the price of raw materials has increased. Even if the labour costs are constant (and in Vancouver, at least, they have soared), the price of the house should still increase.

On this shaky foundation, Mulligan builds a very unconvincing argument. She shows the following inflation-adjusted housing price graph, normalized so that 1994-1997 is 100:

She argues that, according to bubble theorists, there was a 3-4% "over-build" of houses during the bubble, so there must be a 3-4% drop in prices from the pre-bubble level. This estimate is shown in the blue line. She concludes:

But another interpretation is that a large fraction of the housing price boom was justified by fundamentals (and next week I’ll consider some of the specific fundamentals that may have permanently increased housing demand in the 2000s). If so, we are probably asking too much of the Federal Reserve and other regulators to accurately disentangle bubbles from fundamentals the next time that asset prices rise.

So what sort of a "large fraction" are we talking about? In February, 2000, the index was around 105. Today, it's around 111. Assuming that Mulligan is right and that housing is now properly priced, this 6 points of growth can be attributed to fundamentals. However, at the peak in 2006-7, the index reached 130. Assuming 6 points of this was fundamentals, that still leaves 19 points of bubble. The "large fraction" is therefore 6/25, or 24%.

Please note that this is assuming everything that Mulligan says is true. I would argue that it is not. Mulligan does not even mention the role of the $8,000 home buying tax credit in boosting demand for housing. In the Northeast, the most expensive housing market in the US, the median selling price last month was $249,800. The home buying tax credit represents 3.2% of the cost of buying the house. Neglecting this from your analysis is negligent.

Megan McArdle misinforms her readers

Megan McArdle has a new article in The Atlantic about how "the freeloaders" are ruining music. You see, the revenues from album sales have been falling for the past 10 years. McArdle attributes this mainly to 2 factors: illegal downloading, and a high baseline in the 80s and 90s, as people replaced their collections with CDs. She doesn't mention the boy-band boom that caused a massive surge in CD sales at the end of the 90s. And then she hits upon the reason why her thesis is fatally flawed: the concert industry.

The concert industry is indeed booming despite the downturn. And people who admit to downloading music illegally may actually spend more money on recorded music than people who don’t. One assumes they plump up concert revenues as well.

She then argues that this is wrong:

Moreover, spending less on recorded music doesn’t necessarily mean you spend more on shows; the savings could just as easily go toward beer. And even avid music lovers in urban areas can see only a few shows a week. To raise revenue, you have to get new customers in the door or raise ticket prices.

This is classic McArdle. Argue from Econ 101 first principles, while ignoring the real-life data that might invalidate some of the assumptions in your model. Like the data, here and here, showing revenue from concerts and album sales. Essentially, concert revenue has risen at about the same rate that album revenue has decreased. And this is actually a very good thing for musicians, as they see a far greater percentage of concert revenue than they see from album sales.

Helicopter parents

Jonathan Klick at CATO Unbound says that:

Apparently a number of firms report that entry-level candidates are now bringing their parents to job interviews and letting mom negotiate their benefits for them.

This sounded hilarious, so of course I had to check out the links. Firstly, Klick gets the links backwards. The article at the first link says that "parents of new hires are calling employers to negotiate salary and benefits." That's kind of creepy. But in the article at the second link, the "bringing their parents to job interviews" seems much more normal, once you read what actually happened.

"Last year I had a parent sit in the lobby and wait the entire four hours during the job interview," says Audrey Abron, an executive recruiter for Belk Department Stores in Charlotte, N.C. "The girl introduced us to her mother, and there was no embarrassment. She felt it was acceptable behavior. What do you say? Some things should be understood." Things like, you don't bring your mommy or daddy to a job interview.

To me, though, this just sounds like the kid got a ride with their mom, and her mom waited in the lobby. It's a bit weird that she would wait in the lobby, rather than go to a coffee shop to wait, but it's not like the parent was in the interview room with their kid.

But what really piqued my interest was that the second article included the line "as the labor market tightens". Tightening labour market? That doesn't sound right. It turns out that Klick, to back up his contention that "entry-level candidates are now bringing their parents to job interviews and letting mom negotiate their benefits for them" [emphasis mine], has relied on articles from 2006 and 2007. In his last paragraph, Klick says:

But, as Thaler suggests, if this turn has proved to be a bad one, we can simply reverse course to fix things in 20 years or so.

The fact that he's relying on stories that are about 3 years old to bolster his case suggests to me that it may take less than 20 years to "fix things".

Defending David Petraeus

There seems to be a big dust-up on the right that maybe Petraeus holds "Arabist, anti-Israeli attitudes." For example, Diana West thinks that Petraeus "blames the Israeli-Palestinian conflict for the existence of Hezbollah". The evidence she cites is:

... this Petraeus quotation from last summer as reported by the Lebanese Daily Star via Pajamas Media: “Hezbollah’s justifications for existence will become void,” Petraeus said, “if the Palestinian cause is resolved.”

I think it's pretty clear that Petraeus is not saying that Hezbollah was caused by the Israeli-Palestinian conflict, or that the end of the Israeli-Palestinian conflict will cause the end of Hezbollah. I think it is obvious that Petraeus is saying that, were the Israeli-Palestinian conflict to end, the justifications Hezbollah gives for their ongoing violence will no longer be valid. Hezbollah will undoubtedly come up with new justifications for its existence (no organisation shuts itself down voluntarily), but these new justifications will be much weaker, and command much less support in the Arab world, than the current justifications.

Andrew Sullivan's selective attention

Andrew Sullivan says:

The gay left is horrified, rather than encouraged, by the Tory party's big steps to include gay people in its party and policies.

This is after he quotes Anastasia Beaumont-Bott, the founder of LGBTory, saying, "I'd go as far to say that I'll vote Labour at this general election." I don't follow British politics, but it seems like this is a member of the gay Right that does not believe that the Tory party is taking "big steps to include gay people in its party and policies".

In the post, Sullivan also extracts at length from this post by Johann Hari (of 533 words in Hari's post, Sullivan reprints 214, or 40.1%). Unfortunately, he does not quote the last 63 words of Hari's post:

This is a tragedy primarily for the large number of naturally right-wing gay people who want to vote Conservative.

It will be a great day for Britain when gay people can choose any party on the political spectrum, knowing it won't support prejudice and bigotry against them. David Cameron told us that day had come. His actions, alas, show that it has not.

To Andrew, this is someone who "is horrified, rather than encouraged, by the Tory party's big steps to include gay people in its party and policies." To me, this sounds like someone who does not believe that the Tories are taking "big steps", but still wishes that they were.

Economic assistance

Steve Rothman doesn't think that the U.S. offers economic aid to Israel:

Israel will receive $3 billion, in military aid only. There is no economic aid to Israel, other than loan guarantees that continue to be repaid in full and on time.

Firstly, dollars are fungible, so $3 billion in military aid is $3 billion which Israel does not have to spend, freeing them to spend it on whatever they want. It is a $3 billion transfer of wealth from America to Israel. Semantically, it may not be "economic aid", but in practice it is.

Secondly, loan guarantees are economic aid. To say "there is no economic aid to Israel", followed by a clause describing the economic aid that is provided to Israel, is an intentional attempt to mislead the reader.

The impossibility of defending Benedict

Rod Dreher, while specifically "not trying to let the Vatican off the hook", remarks that:

OK, look. There are over 400,000 Catholic priests on the planet. Do you know how many priests are on the staff of the Congregation for the Doctrine of the Faith, which has oversight in these matters? Something like 40.

If only there were some way for the Vatican to increase the number of priests serving on the Congregation for the Doctrine of the Faith. Unfortunately, it is impossible.

Serious question: how is the Vatican, with its extremely limited resources, supposed to handle this problem? Again, I'm not trying to excuse Vatican inaction, but I don't see how Rome is going to get a handle on this at the level of monitoring particular priests.

I always thought that the Vatican had vast wealth, not "limited resources", but I'll ignore that for now. Dreher is setting up a straw man argument: that people are outraged at the inability of the Vatican to "get a handle on this at the level of monitoring particular priests". What people are outraged about is that, upon hearing that one of its priests may have raped a child, the Vatican response was "the priest should simply be monitored". THAT is where the outrage lies. But to Dreher, the problem is that:

How Benedict fixes this, God only knows. He theoretically has the power to order wholesale reforms. In truth, it's far, far more complicated (what's he going to do if bishops refuse to obey him, send in the Swiss Guards?). The quandary he's in is that he's got responsibility for all of this stuff, without the practical means to police it effectively. It is an administrative nightmare.

It must suck being at the top, and yet not having any power. I bet he wishes he was still Cardinal Ratzinger, head of the Congregation for the Doctrine of the Faith. From Deborah Caldwell:

[Ratzinger has] been the driving force behind the Vatican's crackdowns on liberation theology, religious pluralism, challenges to traditional moral teachings on issues such as homosexuality, and dissent on women's ordination.

And how did he do that?

Ratzinger maintained strict discipline on church doctrine, excommunicating and silencing dissenters.

Too bad that he lost those disciplinary powers once he became Pope. It could have brought comfort to a whole lot of raped children.

Funny quote for the day

Mary C. Gordon, on the nuns who came out in favour of health care reform:

Some say we owe the passage of health care to these brave women

Some say that Mary C. Gordon is full of it.

Craig Shirley and Donald Devine have an article in the Washington Post claiming that "Karl Rove is no conservative". While I agree with most of what they said, they do gloss over some important points. Describing the rise of the conservative movement in the second half of the 20th century, they say:

Modern American conservatism has roots in the ideas of philosopher John Locke, the founding fathers and the notion that humans' natural state is freedom. This thinking later fused into a modern political movement with Buckley, who also championed the idea that that liberty is God-given, thus broadening the movement's appeal to social conservatives. Over time, American conservatism evolved into a well-defined political movement that is anti-status quo, opposed to excessive government, populist and pro-individual.

Of course, what they neglect to say is that this support from social conservatives came at the cost of supporting policies that are distinctly anti-individual and pro-excessive government, such as drug prohibition and anti-homosexuality.

Later, they make the laughable assertion that "the party's problems are complicated by its good manners".

Republicans do not wish to upbraid Bush and Rove for leading the GOP and conservatism astray. People such as Glenn Beck and Mark Levin who have even mildly criticized the spending and excesses wrought by Republicans have been churlishly attacked by defenders of the era.

In case you are unsure, Merriam-Webster defines churlish as "of, resembling, or characteristic of a churl: vulgar". So you see, Republicans want to denounce the un-conservative legacy of Bush and Rove. Unfortunately, other Republicans will "churlishly" attack them if they do so. And so they say nothing. To my eye, that looks more like intellectual cowardice than "good manners".

Extreme TNC Bait

Andrew Sullivan has a post up about Teabonics with the title "TNC Bait". He links to a great slideshow demonstrating the mastery of Engrish displayed by the tea partiers. One of the pictures really caught my eye:

The sign reads: "OBAMA HAS A CRISIS OF COMPETNCE". CompeTNCe? Spooky.

Weapons of Mass Destruction

I remember when the term "WMD" referred to nuclear, biological and chemical weapons. Apparently, regular explosives are now WMD's:

The indictment continues: "According to the plan, the Hutaree would attack law enforcement vehicles during the funeral procession with Improvised Explosive Devices with Explosively Formed Projectiles, which, according to the indictment, constitute weapons of mass destruction."

Bad heuristics

It sounds like James Joyner is in need of better heuristics:

I haven’t followed the Becker controversy enough to have a strong opinion, although if the entire opposition party and two members of the president’s own party think an appointment for something that’s supposed to be an impartial review board is too biased to be trustworthy, they likely have a point.

How can someone have lived through the past year of politics and still believe that united Republican opposition, with the support of Blanche Lincoln and Ben Nelson, actually means anything about the policy being discussed?

Things that will always be true

According to a Discover magazine blog:

A new study predicts that future women will be a tad shorter, heavier, and more fertile—that is, if the women who are currently most successful at producing children are any indication.

The shorter and heavier part are interesting. But the "more fertile" part? They look at the women who are "currently most successful at producing children", and find that... they have more children.

Small Business

Commenting on Obama's State of the Union address, Andrew Sullivan says:

9.26 pm. I loves me a Democrat who gets the vital importance of small business.

And at 9:26 PM, on his old colleague Matthew Yglesias' blog, commenter Josh G. writes:

Oh, god, not this fetishization of “small business” again.

Heh.

The 10% Rule

I have written before about how approximately 10% of respondents will answer poll questions inconsistently. According to this study by Public Policy Polling (pdf), 11% of liberals believe that ACORN stole the election for Obama. Mindboggling. Of course, 48% of conservatives believe that.

Horrible statistics

Via Andrew Sullivan, Michael Fitzgerald has an article in the Boston Globe with the sub-heading "the curious economic effects of religion". This sub-heading alone is very misleading. While there are many interesting correlations, there is nothing that proves that religion causes these "curious economic effects". It is possible (I would even say probable) that there is another factor that is influencing both the economic effects and religiosity.

The two collected data from 59 countries where a majority of the population followed one of the four major religions, Christianity, Islam, Hinduism, or Buddhism. They ran this data - which covered slices of years from 1981 to 2000, measuring things like levels of belief in God, afterlife beliefs, and worship attendance - through statistical models. Their results show a strong correlation between economic growth and certain shifts in beliefs, though only in developing countries. Most strikingly, if belief in hell jumps up sharply while actual church attendance stays flat, it correlates with economic growth. Belief in heaven also has a similar effect, though less pronounced. Mere belief in God has no effect one way or the other. Meanwhile, if church attendance actually rises, it slows growth in developing economies.

I assume that it is the author of the article (and not the researchers) who has confused correlation with causation. Their results show a "strong correlation between economic growth and certain shifts in beliefs". However, the article then says that "if church attendance actually rises, it slows growth in developing economies". It should say that "if church attendance actually rises, it correlates with a slowing of growth in developing economies".

However, the researchers do not escape blame entirely. In the next paragraph:

McCleary says this makes sense from a strictly economic standpoint - as economies develop and people can earn more money, their time becomes more valuable. For economic growth, she says, “What you want is to have people have their children grow up in a faith, but then they should become productive members of society. They shouldn’t be spending all their time in religious services.”

For Christians (the only one of the four religions studied with which I am very familiar), this seems wildly implausible. An hour every Sunday spent in church causes the GDP growth for the entire country to slow?

Anti-urban bias

David Brooks has a new column about John Thune, a cookie-cutter Republican. According to Brooks, Thune "is down-the-line conservative on social, economic and foreign policy matters". What makes him so remarkable?

The first thing everybody knows about him is that he is tall (6 feet 4 inches), tanned (in a prairie, sun-chapped sort of way) and handsome (John McCain jokes that if he had Thune’s face he’d be president right now). If you wanted a Republican with the same general body type and athletic grace as Barack Obama, you’d pick Thune.

The gist of the column is that Thune is handsome, "unfailingly genial, modest and nice", so he would be a good face for the conservative policies that the country rejected in 2008.

What I found interesting about the article was how it revealed a little bit about Brooks.

His populism is not angry. He doesn’t rail against the malefactors of wealth. But it’s there, a celebration of the small and local over the big and urban.

The opposite of small is big. And the opposite of local is urban. Because nobody lives in urban areas. According to Wikipedia, 70% of the American population lives in urban areas. 30% of these people (21% of the total population) live in city centers, and the other 70% (49% of the total population) live in the suburbs.

Bias again

Matthew Continetti has an interesting post up in the Weekly Standard saying that Palin can be the new standard-bearer for American populism, following in the tradition of Jackson, Bryan, and Reagan. The piece is poorly argued from start to finish, but his arguments on the financial system are scarily weak.

For the banks, a complicated and technocratic regulatory scheme isn't necessary. A few simple rules that separate the solvent banks from the insolvent would suffice.

And what happens when a bank becomes insolvent, a la Lehman? He doesn't really say, although earlier in the piece he says:

Held to the standards of the marketplace, companies like GM, Chrysler, AIG, GMAC, and Citi probably would disappear. They'd be bought and sold, carved up into little pieces, and the overpaid CEOs who made bad bets would lose their jobs.

So I imagine that he thinks that if Citi were to become insolvent (or admit that it is insolvent, depending on your point of view), it would simply be broken into little pieces and sold off. There would be no major systemic collapse, because... well, Continetti isn't very clear why not. I suppose that if your biases tell you that government intervention makes things worse, then all problems can be fixed by less government intervention. Even if almost anyone who has studied the financial system disagrees with you.

Up is the new Down

Have you heard about the two big wins for conservatives in NY-23? Let RedState's Dear Leader Erick Erickson explain:

The race has now been called for Democrat Bill Owens.

This is a huge win for conservatives.

“Whaaaa. . . ?” you say.

There are two big victories at work in New York’s 23rd Congressional District.

First, the GOP now must recognize it will either lose without conservatives or will win with conservatives.

[snip]

Secondly, and just as importantly, there has all of a sudden been a huge movement among some activists to go the third party route. We see in NY-23 that this is not possible as third parties are not viable.

Third parties lack funding and ability for a host of reasons. Conservatives are going to have to work from within the GOP. The GOP had better pay attention.

The first point is debatable. The second is right, and is completely not a "huge win for conservatives". It is a victory for the GOP. A "win for conservatives" would have been if Hoffman had won and shown that a conservative third party is viable.

Bias

Everyone knows where Megan McArdle stands politically, but it's still funny whenever someone puts their bias on full display.

Either Hoffman will lose, in which case the strategy of policing the party will lose some of its appeal, or he will win, in which case Blue Dog democrats and Republicans in squishy states will probably tack right--a critical win during the health care debate.

Now, try re-writing it slightly...

Either Hoffman will win, in which case the strategy of policing the party will gain some more appeal, or he will win, in which case Blue Dog democrats and Republicans in squishy states will probably tack left--a critical win during the health care debate.

These sentences both rely on the same basic idea: a Hoffman win pushes the country to the right, and a Hoffman loss pushes the country to the left. And yet the two sentences sound so different.