I’ve got to be careful how I talk about this due to NDA’s, but I’ve got first hand experience integrating AI into production lines in boring parts of the economy. I tend to think the role of AI is under appreciated in fueling future growth. But I don’t think it will be because of chatGPT models. There are a lot of more fundamental parts of the economy with highly technical aspects that will drive growth. Some hypothetical examples:
1) AI-driven alleviation of administrative burden (e.g. automated reading of forms, automated ID verification, etc.)
2) Signal processing, where AI can make a best guess of missing parts of a spectral signal to keep transmission humming
3) Micro-grid software, where AI can apportion energy use and estimate power output from power plants. As EVs are adopted, they can also estimate which portions of an existing grid should be prioritized for upgrades.
4) Manufacturing decision making, which shrinks the gap between problem presentation and solution for in-line processes.
None of these have the appeal of say, asking your computer to turn a family photo into a Picasso painting or having chatGPT adopt Tolstoy’s War and Peace for the wizarding world. But they are more likely to leave an impact. What’s more, the advances in consumer AI tend to outpace the use of highly technical AI. So as cool as chatGPT is, it vastly exceeds the AI applications in industry today. As such, I don’t think the current generation of AI techniques is baked in yet, and the current generation is moving fast.
20% growth is a huge overshoot for AI predictions. Ideas are useful, but we can see growth rates where the ideas are already there and just need to be implemented. This is what the developing world does; they copy existing models which is how they get such fast growth--textiles; steel; cars; electronics; etc. but maybe 9%, not 20%.
“I wish the people who complain about these things would imagine what their ideal situation for housing prices would look like.”
Probably they want everything to stay exactly the same forever. That’s the common human instinct which then turns into unspoken assumptions by journalists. It’s not very sensible!
> housing prices are fine actually (for millennials-)
Did he say that? It seems to me he said that millenials' wealth (or lack thereof) appears to be about the same as it has been for previous generations.
This appears, to me, to be a separate question from whether millenials' wealth (or lack thereof) is "fine" or "optimal" or "as good as it possibly could be", or any number of descriptors of quality or value.
I think it is disingenuous to paint YIMBYs as some movement that only just started talking about this stuff. We might not have had the acronym, but I promise you that we've been bitching about NIMBYism since the 80s.
I didn't say anything about when Yimbyism started.
I was pointint out the oddity of being super pro YIMBY (which we should be), but then playing "Well, actually, your housing/wealth is fine" to a key part of the YIMBY coalition.
It would be like trying to build a support for expanded health insurance and then writing a post saying, "Well, actually, 65% of people have good health insurance through their employer so that group complaining is mistaken".
I think this bleeds into the "noble lie" thing. We should not really care about whether millenials are fine vis-a-vis YIMBYism, because YIMBYism is about solving NIMBYism, not Millenial financial health.
You should make the case that everyone would be better off by doing YIMBY things. "Everyone", by definition, includes people that are doing quite well. YIMBYism is basically just saying "if people want to build things, we should let them". The "things" in question could be affordable housing, or an ADU, or a big purple fence, or a duplex, or skyscraper, or whatever, and depending on the "thing" in question, it may or may not benefit Millenials, but there's a core belief that if we do YIMBYism everywhere, eliminating the deadweight loss will make everyone better off.
In fact, I think it is pretty critical NOT to frame YIMBYism as a way to help Millenials or Gen Z or any other section. That's really just a surefire way to turn it into a partisan issue where you cannot get anything done.
I am not saying that it should be framed as a way to help millennials specifically.
I am saying that framing it as "Welcome to the YIMBYism fundraiser. As we all know, YIMBYISM will help everyone, even you Steve. I say that because you are always whining about needing help and you are wrong, Steve! You are doing great! YIMBYism is good for everyone but it is critically important for me to point out that you, Steve, don't actually need the help and are a whiner. Watch as I prove it with Statistics.
Steve, why are you leaving the fundraiser?
You should be mature enough to accept my logic, even as I go out of my way to invalidate your feelings of precarity. "
This framing is counterproductive.
This is the tension I am talking about. I am not saying that people should lie and push a "millennials are doing terrible" even if they don't believe it. I am saying that this isn't a belief worth challenging. You don't build coalitions by starting with "Let me show you why your feelings are invalid"
Why do you think a post about how millenials are doing is a post about YIMBYism?
Can a person not have several orthogonal opinions? Can we not simultaneously believe that Millenials are (on average) fine, that housing regulations make everyone worse off then they could be, and maybe Steve in particular ain't doing so great?
1) China/Asian Coalitions: Chinese growth was driven by three items...all of which are in strategic decline:
a) Deficits: Extreme Deficit spending on the investments. (RE being the biggest, but not unique). Without market discipline, there are all sorts of capital misallocations.
b) Exports: Export driven by largely low-value manufacturing with the availability of cheap and highly scaled labor. Over time, it was no longer cheap and with demographics, no longer scalable. These are shifting rapidly from China to other locations and robotics is shifting the value of cheap labor in any case.
c) CCP: To maintain control, CCP has created conditions to kill internal and external partnerships.
Overall, it is unlikely that China will remain the world's manufacturing hub for long. BTW... Mexico just passed China as the biggest trading partner for US.
2) AI: AI is a misnomer ... there is no real intelligence there. However, there are significant additional capabilities which will add quite a bit of productivity in nearly all industrial sectors. The biggest impact is likely to be in the "physically" connected robotics (think Agriculture, Industrial, Transportation, etc). White collar work will also be impacted...especially the non-create mundane... low-level programming. I would not be surprised if medical delivery (as opposed to medical research) will also be impacted in an economic sense.
3) Regulation: This is a huge issue. The nature of the issue is finding the right impedance match between necessary regulation and market innovation. Fixing this is of benefit to all... on a policy level finding metrics/models to measure regulation impact, volatility, renewal rates is an important area to study.
BTW, Juhasz, Lane, and Rodrik recently have an excellent paper on the new industrial policy https://www.nber.org/papers/w31538. You may want to make use of it in your discussion on this topic.
Hey Noah, do you have thoughts about the millenial Argentinian presidential hopeful Javier Milei? He is leading the race at the moment and says he wants to eliminate their central bank. I think he joking said he wanted to burn down the building in which the bank resides. I have a feeling you could do a great analysis of his economic ideas (and his haircut).
Here's a bloomberg video of him (briefly) describing his desire to use the US dollar and eliminate the bank:
The underlying problem is that democracy works too well and humans are too easily distracted by the low-hanging fruit of the highest standard of living the world has ever seen and expect everything to go their way, everyday and in every way.
It took hyperinflation to bring Hitler into power and then the depression to allow him to con the German people into giving him total power, but all Trump needed was his ability to make people feel like victims when conditions changed and they had to move and maybe settle for a somewhat less Bountiful standard of living.
I think you addressed that when you quoted someone as saying the millennials might have been expecting to be able to live in a large apartment in New York City when less than 100 years ago, my father grew up in a two room house, kitchen and bedroom, and there were seven kids. I spent Summers in that house and they still had their workhorses, now retired, replaced by a small tractor. We are going to have ups and downs, maybe a lot of them given climate change and the fact that the autocrats are making one more effort to be modern-day Tamerlanes.
l am more concerned that we same to have forgotten that that low-hanging fruit grows on the tree of Liberty and that needs to be watered and fertilized and paid attention to. As the saying goes "Eternal vigilance is the price of Liberty."
As for China's future I would like to see you and Peter Zeihan thrash out your conflicting visions of China's future. He thinks China also forgets that their success is due to us giving them a chance to develop their economy without having their exports hijacked on the high seas and forgetting that if they start a fight with us that's not going to apply anymore.
Regarding this non-stop exponential growth didn't someone in here make a statement that if something can't go on forever then it will stop sometime? Well, what form is all that growth going to take? What do humans need that would create demand for what? I know, that things will appear that we seem to think we need and I've been reading science fiction since 1955 so I know there is a lot of room for that growth but if there's only a few humans necessary to that growth, then who is going to consume it.
One last thing. I'm a big fan of AOC and I hope she is spending a lot of time at Nancy's knee learning how politics work.
Matt Yglesias on his Slow Boring Substack made this case. His argument was that you can still live the 1950s lifestyle, as long as couples are okay only owning one car, rarely going out to eat(maybe 3-4 times a year), only going on vacation within a 200 mile radius(no more domestic or international flights!), and living in a modestly sized house, which will probably have to be in a less desirable area, I think he mentioned living in Cleveland instead of NYC,because of zoning laws artificially restricting housing supply. It turns out though that many people don't want to live an eccentric lifestyle like that, even though they probably could.
With respect to progressives being open to deregulation why is it that I *never* hear about deadweight loss due to housing restrictions *except on Slow Boring*. Seems like a really important thing to tell people that density might be irritating in some cases but we’ll probably be wealthier for it. Too jargon-y and abstract for us, the hoi polloi?
I think the term itself does, but the concepts do not.
Another thing Matt talks about a fair bit is that many laws seem to stem from well meaning lawmakers who (incorrectly) believe that they can waive a magic wand and make everything better for everyone. Examples:
- bedroom windows are nice. Why don't we make a law mandating that all bedrooms should have a window?
- big houses are nice. Let's make a law that houses have to be at least [minimum] square feet so everyone can have a nice big house!
- It's nice to have sunlight. Let's make a law that buildings can only be [x feet] high so that no one's sunlight is blocked by any tall buildings
- it's nice to be able to park your car! Let's mandate that new buildings create [x] parking spots so no one has to search too long for parking!
- etc etc
And I think a majority of people really do think it is that easy, and that none of these types of laws have unintended consequences, or at least, they believe the consequences are minor and that's just what you have to pay to get the outcome you want (lots of parking, more sunlight, etc). I think teaching people about the extremes of the unintended consequences (the deadweight loss) is really important.
How is that chart of homeownership rates supportive of the idea that millenials are doing fine?
It shows that, from 2000 - 2010, almost 50% of 25-34 year olds owned a home. Then, from 2010 - 2020, that dropped below 40%.
That is a pretty dramatic drop. Assuming that a lot of that homeownership is not people "buying a home" but just "Relatives dying and getting a home," the rate of newly bought homes was lower.
Well it tends to go up and down. in 2000-2010 we had a housing bubble, wherein we let people buy a lot of homes they couldn't possibly afford. That just wasn't sustainable. Young people are as likely to be homeowners as they were in the late 90s, and that was a very good economic time.
Looking at the chart, the line has only just crossed the 45% mark in 2020.
So if that batch is 25-34, the millenials in it are only those 27 or older. (1996 and earlier) For the older millenials, those born in 1981 to 1990, they never got to see a good housing market.
It says that "Comparing the current average one-bedroom rent in Manhattan ($4,395) to that in Brooklyn ($3,600) and Queens ($2,721) makes it clear that prices have something to do with popularity. Looking at the two top neighborhoods in the study, we find that Astoria’s average one-bedroom now goes for $2,773, up a meager 2 percent over a year. The Upper East Side's average is $3,600, up 5 percent over a year."
If rent had grown at inflation, then a one bedroom would rent for about 1,400$ today.
As you can see, that's not the case. Less people in the 1990's probably wanted to own homes because it was cheaper to rent. That is the context that seems missing here. I would love to see you address it.
Why did you decide to leave rental prices out of the analysis?
Good question. The simple answer is: I didn't. Rent is included in the cost of living that is used to adjust real income, and Millennials now have substantially higher real income than Boomers or Gen Xers did at the same age.
As for rent in the most desirable locations, that's a different story. Yes, it's very expensive to live in the beating heart of a trendy cool city!!
The evidence presented is two charts; homeownership and debt levels as well as some links to other authors.
I asked, "What about rent and older milennials?"
The answer is "Rent is included in real income"
Where in point #2 is the word "income"'?
Who's measure of "real income" are you using and how do they adjust for rental cost?
This is a handwave of a handwave. Its not a defense to say, "I didn't mention rent or real income in my explanation of why millennials are actually doing well."
This is probably just my ignorance and I would love to see the following paragraphs with the correct numbers.
I have a feeling that, in the 90's, there was a basket of goods called "shelter". This included things like owning a house, renting an apartment, living long term in a motel etc. People spent around 25% of their monthly income on shelter. At the time, owning a house was on the expensive end of that shelter spectrum.
In the 2020's, that same basket of goods exists, but now owning a house is at the cheaper end relative to the others, not because owning a house got cheaper, but because renting became more expensive. People spend 35% to 50% of their income on shelter.
I would be curious to see what the real numbers are for the paragraphs above. Homeownership rates, divorced from the costs of other forms of shelter over time, are unconvincing.
Is this worse than before though? I'd argue with deindustrialization, life anywhere but a thriving city has gotten less attractive, so it is worse when you can't do it
It’s interesting with AOC. Her sunscreen PSA is good and very needed and if this leads to real legislation honestly good on her. There will be so many less cases of skin cancer for what’s ultimately a cost less fix. Talk about low hanging fruit.
I say interesting because it’s very clear she’s changed some of her views since coming to Congress. Mostly for the better. Most important is housing. She’s clearly become more of a YIMBY and honestly good on her. Remember the kerfuffle over the Amazon HQ in Queens (talk about in retrospect an overrated story)? I’m curious what she would say about it now.
Gives me a lot more confidence she’s got the chops to really move up the food chain politically.
I said this on John Ganz's Substack about AOC: She is very good at the kayfabe* aspects of politics, probably the best in Washington right now.
There's AOC, the social media darling/lightning rod who evokes visceral reactions from supporters and foes alike. Then there's Rep. Alexandria Ocasio-Cortez, who does the boring aspects of her elected duties in line of what her constituents and her House colleagues expect of her. They are two different personas of the same person.
She's very media and context savvy. She knows timing a message, reading the room to get the right reaction, and tailoring her delivery to press the buttons of her foes to force errors out of them.
*-Kayfabe is the word used to describe the spectacle of pro wrestling, because it is neither real (everyone on either side of the ring ropes knows it is predetermined) nor is it fake (wrestlers are athletes and injuries and pain are very much real). Kayfabe overlaps the two, because pro wrestling must maintain the illusion of sport: competition, rivalries, stakes and violence.
On millenials doing well, the figures you cite are misleading.
- yes they can afford homes, but too often have to move away from friends and family to do so
- unlike in the past, to afford a home poeple have to move to worse cities with fewer oportunities, fewer amenities, worse dating markets
- too many have to rely on family gifts to get a home. Even if the number of home owners remains the similar, this is a sign that society is becoming less meritocratic
- higher costs and rents are not felt by everyone yet. Millenials renting in good cities, who are on rent control, can't move. If they move, they are priced out of the city.
- since the prices for homes are so crazy in good cities now, even if you manage to get a home in one, the likelihood of experiencing the same sort of wealth building via owneship as previous generations got is low, leading to more sense that this generation doesn't have it as good as the previous one did
- not all millenials are equally screwed. Older millenials (and ones that got a decent paying job) before pandemic might have gotten in on some ok deals. The ones that did not are more screwed going forward
It seems to me, Rex, as though you're defining Millennials in terms of generation members who have grown up in our largest, most expensive cities. It's true that very high COL in those places disadvantages individuals of many kinds, including young people with hourly jobs or earning early-career white collar salaries. Those people may indeed need to move away to less expensive areas and make their peace with what they may perceive as reduced opportunities in certain cultural areas they value.
But there are many millions more Millennials who have grown up in smaller cities, exurbs, and rural areas, and while they may find it more difficult to move to NYC or SF than previous generations (which may not actually be the case; earlier migrants were often arriving from under-resourced rural backgrounds), the crunch issue is how easy it is for them to achieve their economic and cultural goals in places more like those they grew up in. They may not view, say, Cincinnati, Minneapolis, or Greenville as "worse" cities, and the amenities and "dating markets" there may fit them well.
Past generations included those that found they too could no longer remain in their family location or live as their predecessors did, but in those eras the dislocation concerned the dwindling of rural opportunities or the rusting of mid-size urban industrial centers. Migrants in those cases not only had to leave their home locations, they were carrying extra burdens of moving to higher-cost job centers, competing on the basis of less education, and on the whole having a poorer parental generation to give them a boost on down payments, etc. (the fact that large numbers of Millennials *can* rely on family gifts is a sign of advantage, not disadvantage).
I personally think Millennials are disadvantaged because they are reaching maturity in a country that is, in my Boomer eyes, fractured socially, politically and, perhaps, due to some pathologies of online life, psychologically. But previous generations had to deal with universal male drafts in wartime, overt racial discrimination, the perception of imminent nuclear war, multiple years of double-digit inflation, and so on. I don't want to provoke a pissing match about which generation faced the toughest socio-political environment, but on economic measures I think it's very significant that the narrative of the Millennial's specific economic disadvantage has been undercut in a positive way by recent trends. If that playing field is relatively level I'm sure Millennials will do as well as earlier generations have been in coping with other challenges (which is a low bar; maybe they can raise it).
Thanks for the thoughtful response Robert. Cards on the table, my experience is actually having grown up in Toronto, Canada, so not exactly the same situation as USA. I think things are considerably worse here in terms of the cost of for people who either don't have family giving them large gifts, or who haven't bought a place some years ago. Similar story to NYC and SF I think, though unlike Canada, I think USA has many good cities besides those. In Canada, if you aren't going to live in Toronto or Vancouver, you're looking at a fairly significant cut in amenities, culture, etc.
Things have always been challenging, but I do think this is different. Toronto, NYC, etc. I think were always pricy (Toronto less so historically), but still places where a middle class family could make their way. These days, a family making a middle class income can barely squeak by, if they can at all, when it comes to home ownership. And the offensive thing is that the reason that home ownership became unaffordable for so many is not some law of physics -- we _could_ have had a lot more density in the city, but choices were made to prevent this. Now we have this situation where home owners are pit against non-owners, because home-owners have so much equity invested in their home, and any prospect of supply catching up (or outpacing) demand is threatening to them. Sure there's other considerations, but I think none of them outweigh the benefit of someone having a roof over their head. Want a good investment? Want a low density neighborhood right in a large city? Of course you do (who wouldn't, if you could get it?), but society prioritizing those needs over the needs of people who actually need a place to live is, I think, a huge moral failing of our society. There's many other things people can invest in, and if people want a low density way of life, they should be able to have that -- outside of the largest cities in their country. The growth of nations depends on this, and I think if this isn't resolved, there is going to be growing intergenerational strife.
With regard to family gifts being advantages, they certainly are -- to those who can get them, but the flipside is they're disadvantages for those who can't. Again, this tilts the situation back into a more feudal system where what you can have access to is dictated not by your skill but by who your parents are. Since America and Canada are founded by people who were trying to get away from that sort of a system, I think the resurgence of this dynamic is an antithesis to their very mission.
Who's to say Millennials are entitled to any of these things?? I think the expectations are so out of whack. In the 1920s, 60% of Americans lived on farms, and the only entertainment were books, radio shows if your family had the money to buy a radio, traveling fairs/circuses, or community events. I say this as a Millennial, but not everyone can live in LA or NYC, and the gatekeeping is defined largely by wealth, to live in Manhattan requires you to either work in a field(banking, finance, law) that makes a disproportionate salary relative to the average salary of Americans, or work a punishing number of hours(60,70,80) or both. A mid sized city like Cincinnati still has more than enough stuff to do, and you don't have to pay NYC rent prices to do it. It's unfortunate that we've had decades of housing restrictions that makes it more likely that people have to move, but those are the cards that everyone's been dealt.
The economy has grown. Things are supposed to get better, instead they're getting worse for young people. That's reason enough to be upset.
The idea that some city should be just for bankers is bonkers. And it isn't just Manhattan. Brooklyn and the like are all prohibitively expensive. Our parents were able to afford them on regular salaries, we can't. Things are worse. And the lawmakers made it this bad by allowing prices to get so high, and by making it so hard to add supply by restricting density
Couple of things here- Do we have too many jobs that pay too little, to afford basic needs like food and shelter?? ABSOLUTELY, the federal minimum wage is still $7.25/hr! Even working full time, thats $290 a WEEK, before taxes. Raising wages for everyone would help people get off food stamps, and other welfare programs that we all pay for.
When it comes to cities with high COL, they all have these problems. San Francisco is even worse than NYC when it comes to housing, but NYC has the finance industry, which has been it's bread and butter in terms of raising tax revenue ever since the NYC financial crisis of the 70s. The outer boroughs are not that far from Manhattan, and as crime has decreased from it's peak in NYC in the 70s n 80s, the outer boroughs and the amenities that have grown there have become a more attractive option. I think it's worth noting that in 1977 or 1985, no upper class professional wanted to live in Long Island City or Astoria, and most professionals wanted to live on the Upper West Side or Upper East Side, where crime was less of a concern but gentrification means things have changed. This means that a nurse or sanitation worker is now competing against an investment banker or lawyer who makes $400,000 annually. For them, 3,000 or 4,000 for an apartment is nothing. The city has no incentive to change this, because they NEED these people, more than they need a cashier. The plain hard truth imo is if you want cities with high level cultural amenities you're gonna pay a pretty penny for it, because it's a luxury good. I agree with you that it sucks that people have to move away to have the kind of life that they want and leave their friends n family behind, but sometimes it's worth it if you can cut back on the daily grind that's so prevalent here. America has always had geographic mobility(Dust Bowl, 49ers, Great Migration, Oregon Trail, immigration, Settlement of the American West) but the rise of mortgages and the home ownership society has tied people down in a way that's anomalous in American history.
I think they're worse than what Boomers and GenX people had to deal with, particularly in Canada. And after all, shouldn't society be improving instead of getting worse? I want a better way of life, not a worse one than people of the past expected.
On size/economic growth. The US did not grow spectacularly in spite of its size: its size is one of the reasons why we've grown so much. The US internal market is HUGE, which helps build economies of scale and provides 'safe' room to grow without needing to learn a whole different set of regulations and rules. Companies can compete in a big market and will then have advantages overseas. China's big market should help it grow too! There's a reason why the EU decided to create a common market: size matters and helps scale.
On Millennials. I have a friend. She's a communist. She constantly bitches about how she has 'negative' net worth and her life is screwed. She has a great job, with several weeks vacation, owns her own house (and has collected rent for years from roommates), has several pets and can enjoy riding her motorcycle most weekends.
In short she has a great life. That debt has not stopped her from enjoying it. The idea that Millennials are screwed was always dubious.
I would add that this “de-risking” exercise is really taking its toll. Family who regularly visit Vietnam have noted that the number of foreign business people have accelerated their presence -- particularly Japanese, Korean, and Europeans. FDI numbers for Chinese investments have been tanking. Ironically investors cite the risk of war and losing their investment. If there is war in the South China Sea, I wouldn’t think investing Vietnam is considered a flight to safety. One would be thinking Mexico and parts of South America.
But an interesting point in the power of the US Presidency; Biden shakes his finger and capitalists flee and Apple moves to India. All of this pain occurs in a little bit more than 6 months. Xi can only envy and marvel. I would agree that there is less Adam Smith and more Alexander Hamilton influencing things here.
No criticism of Biden, but I don’t think his finger wag was particularly powerful. At most, it caused many business leaders to act on what they already knew needed to be done. Plans on the 3-5 year track got moved to the 1-2 year timeframe. And it started before the pandemic. An American friend of mine whose lived in China for more than 30 years, is in the business of supplying printing and packaging for things like shoes and small appliances. In 2019, he was already spending one week a month in Vietnam, because that’s where his business was going. When the pandemic broke out, he stayed in Vietnam, and after a year, his family was able to join him there. They still own their big house in China, but are staying in Vietnam, probably until he retires. (At which point he and his wife will probably leave Asia entirely.)
I’ve got to be careful how I talk about this due to NDA’s, but I’ve got first hand experience integrating AI into production lines in boring parts of the economy. I tend to think the role of AI is under appreciated in fueling future growth. But I don’t think it will be because of chatGPT models. There are a lot of more fundamental parts of the economy with highly technical aspects that will drive growth. Some hypothetical examples:
1) AI-driven alleviation of administrative burden (e.g. automated reading of forms, automated ID verification, etc.)
2) Signal processing, where AI can make a best guess of missing parts of a spectral signal to keep transmission humming
3) Micro-grid software, where AI can apportion energy use and estimate power output from power plants. As EVs are adopted, they can also estimate which portions of an existing grid should be prioritized for upgrades.
4) Manufacturing decision making, which shrinks the gap between problem presentation and solution for in-line processes.
None of these have the appeal of say, asking your computer to turn a family photo into a Picasso painting or having chatGPT adopt Tolstoy’s War and Peace for the wizarding world. But they are more likely to leave an impact. What’s more, the advances in consumer AI tend to outpace the use of highly technical AI. So as cool as chatGPT is, it vastly exceeds the AI applications in industry today. As such, I don’t think the current generation of AI techniques is baked in yet, and the current generation is moving fast.
That's awesome. Wish you weren't under NDA so you could write a guest post!
20% growth is a huge overshoot for AI predictions. Ideas are useful, but we can see growth rates where the ideas are already there and just need to be implemented. This is what the developing world does; they copy existing models which is how they get such fast growth--textiles; steel; cars; electronics; etc. but maybe 9%, not 20%.
“I wish the people who complain about these things would imagine what their ideal situation for housing prices would look like.”
Probably they want everything to stay exactly the same forever. That’s the common human instinct which then turns into unspoken assumptions by journalists. It’s not very sensible!
It would look like what the YIMBYs want. Or what Noah writes about in Japan.
Supporting the YIMBY idea while saying "housing prices are fine actually (for millennials-)" is very strange.
> housing prices are fine actually (for millennials-)
Did he say that? It seems to me he said that millenials' wealth (or lack thereof) appears to be about the same as it has been for previous generations.
This appears, to me, to be a separate question from whether millenials' wealth (or lack thereof) is "fine" or "optimal" or "as good as it possibly could be", or any number of descriptors of quality or value.
I think it is disingenuous to paint YIMBYs as some movement that only just started talking about this stuff. We might not have had the acronym, but I promise you that we've been bitching about NIMBYism since the 80s.
I didn't say anything about when Yimbyism started.
I was pointint out the oddity of being super pro YIMBY (which we should be), but then playing "Well, actually, your housing/wealth is fine" to a key part of the YIMBY coalition.
It would be like trying to build a support for expanded health insurance and then writing a post saying, "Well, actually, 65% of people have good health insurance through their employer so that group complaining is mistaken".
The stated goal and the "well actually" conflict.
I think this bleeds into the "noble lie" thing. We should not really care about whether millenials are fine vis-a-vis YIMBYism, because YIMBYism is about solving NIMBYism, not Millenial financial health.
You should make the case that everyone would be better off by doing YIMBY things. "Everyone", by definition, includes people that are doing quite well. YIMBYism is basically just saying "if people want to build things, we should let them". The "things" in question could be affordable housing, or an ADU, or a big purple fence, or a duplex, or skyscraper, or whatever, and depending on the "thing" in question, it may or may not benefit Millenials, but there's a core belief that if we do YIMBYism everywhere, eliminating the deadweight loss will make everyone better off.
In fact, I think it is pretty critical NOT to frame YIMBYism as a way to help Millenials or Gen Z or any other section. That's really just a surefire way to turn it into a partisan issue where you cannot get anything done.
I am not saying that it should be framed as a way to help millennials specifically.
I am saying that framing it as "Welcome to the YIMBYism fundraiser. As we all know, YIMBYISM will help everyone, even you Steve. I say that because you are always whining about needing help and you are wrong, Steve! You are doing great! YIMBYism is good for everyone but it is critically important for me to point out that you, Steve, don't actually need the help and are a whiner. Watch as I prove it with Statistics.
Steve, why are you leaving the fundraiser?
You should be mature enough to accept my logic, even as I go out of my way to invalidate your feelings of precarity. "
This framing is counterproductive.
This is the tension I am talking about. I am not saying that people should lie and push a "millennials are doing terrible" even if they don't believe it. I am saying that this isn't a belief worth challenging. You don't build coalitions by starting with "Let me show you why your feelings are invalid"
But... why are you picking on Steve?
Why do you think a post about how millenials are doing is a post about YIMBYism?
Can a person not have several orthogonal opinions? Can we not simultaneously believe that Millenials are (on average) fine, that housing regulations make everyone worse off then they could be, and maybe Steve in particular ain't doing so great?
Or are we only allowed one thought at a time?
This is spot-on. A job is a scholarship. They pay you to learn:
https://twitter.com/Noahpinion/status/1689737886370091009?utm_source=substack&utm_medium=email
On the five points...
1) China/Asian Coalitions: Chinese growth was driven by three items...all of which are in strategic decline:
a) Deficits: Extreme Deficit spending on the investments. (RE being the biggest, but not unique). Without market discipline, there are all sorts of capital misallocations.
b) Exports: Export driven by largely low-value manufacturing with the availability of cheap and highly scaled labor. Over time, it was no longer cheap and with demographics, no longer scalable. These are shifting rapidly from China to other locations and robotics is shifting the value of cheap labor in any case.
c) CCP: To maintain control, CCP has created conditions to kill internal and external partnerships.
Overall, it is unlikely that China will remain the world's manufacturing hub for long. BTW... Mexico just passed China as the biggest trading partner for US.
2) AI: AI is a misnomer ... there is no real intelligence there. However, there are significant additional capabilities which will add quite a bit of productivity in nearly all industrial sectors. The biggest impact is likely to be in the "physically" connected robotics (think Agriculture, Industrial, Transportation, etc). White collar work will also be impacted...especially the non-create mundane... low-level programming. I would not be surprised if medical delivery (as opposed to medical research) will also be impacted in an economic sense.
3) Regulation: This is a huge issue. The nature of the issue is finding the right impedance match between necessary regulation and market innovation. Fixing this is of benefit to all... on a policy level finding metrics/models to measure regulation impact, volatility, renewal rates is an important area to study.
Cost benefit analysis of regulation is the right metric.
A good post. I agree with all your points.
BTW, Juhasz, Lane, and Rodrik recently have an excellent paper on the new industrial policy https://www.nber.org/papers/w31538. You may want to make use of it in your discussion on this topic.
Thank you! As a matter of fact, that's what I'm writing about next!!
https://www.nytimes.com/2023/08/14/opinion/columnists/economists-disinflation-interest-rates.html?campaign_id=9&emc=edit_nn_20230817&instance_id=100252&nl=the-morning®i_id=96376757&segment_id=142236&te=1&user_id=bf65a32244bbe02dcf4565a7c11740dc
I'll get to this with a full post soon!!
Hey Noah, do you have thoughts about the millenial Argentinian presidential hopeful Javier Milei? He is leading the race at the moment and says he wants to eliminate their central bank. I think he joking said he wanted to burn down the building in which the bank resides. I have a feeling you could do a great analysis of his economic ideas (and his haircut).
Here's a bloomberg video of him (briefly) describing his desire to use the US dollar and eliminate the bank:
https://www.youtube.com/watch?v=MMds87zy5MQ&ab_channel=BloombergTelevision
I'll answer this in my next roundup.
So much hate for us Aussies on the pod!
Just takin' the piss, man! 😉
The underlying problem is that democracy works too well and humans are too easily distracted by the low-hanging fruit of the highest standard of living the world has ever seen and expect everything to go their way, everyday and in every way.
It took hyperinflation to bring Hitler into power and then the depression to allow him to con the German people into giving him total power, but all Trump needed was his ability to make people feel like victims when conditions changed and they had to move and maybe settle for a somewhat less Bountiful standard of living.
I think you addressed that when you quoted someone as saying the millennials might have been expecting to be able to live in a large apartment in New York City when less than 100 years ago, my father grew up in a two room house, kitchen and bedroom, and there were seven kids. I spent Summers in that house and they still had their workhorses, now retired, replaced by a small tractor. We are going to have ups and downs, maybe a lot of them given climate change and the fact that the autocrats are making one more effort to be modern-day Tamerlanes.
l am more concerned that we same to have forgotten that that low-hanging fruit grows on the tree of Liberty and that needs to be watered and fertilized and paid attention to. As the saying goes "Eternal vigilance is the price of Liberty."
As for China's future I would like to see you and Peter Zeihan thrash out your conflicting visions of China's future. He thinks China also forgets that their success is due to us giving them a chance to develop their economy without having their exports hijacked on the high seas and forgetting that if they start a fight with us that's not going to apply anymore.
Regarding this non-stop exponential growth didn't someone in here make a statement that if something can't go on forever then it will stop sometime? Well, what form is all that growth going to take? What do humans need that would create demand for what? I know, that things will appear that we seem to think we need and I've been reading science fiction since 1955 so I know there is a lot of room for that growth but if there's only a few humans necessary to that growth, then who is going to consume it.
One last thing. I'm a big fan of AOC and I hope she is spending a lot of time at Nancy's knee learning how politics work.
Matt Yglesias on his Slow Boring Substack made this case. His argument was that you can still live the 1950s lifestyle, as long as couples are okay only owning one car, rarely going out to eat(maybe 3-4 times a year), only going on vacation within a 200 mile radius(no more domestic or international flights!), and living in a modestly sized house, which will probably have to be in a less desirable area, I think he mentioned living in Cleveland instead of NYC,because of zoning laws artificially restricting housing supply. It turns out though that many people don't want to live an eccentric lifestyle like that, even though they probably could.
With respect to progressives being open to deregulation why is it that I *never* hear about deadweight loss due to housing restrictions *except on Slow Boring*. Seems like a really important thing to tell people that density might be irritating in some cases but we’ll probably be wealthier for it. Too jargon-y and abstract for us, the hoi polloi?
Well, I think deadweight loss tends to make people's eyes glaze over. But it's real!
I think the term itself does, but the concepts do not.
Another thing Matt talks about a fair bit is that many laws seem to stem from well meaning lawmakers who (incorrectly) believe that they can waive a magic wand and make everything better for everyone. Examples:
- bedroom windows are nice. Why don't we make a law mandating that all bedrooms should have a window?
- big houses are nice. Let's make a law that houses have to be at least [minimum] square feet so everyone can have a nice big house!
- It's nice to have sunlight. Let's make a law that buildings can only be [x feet] high so that no one's sunlight is blocked by any tall buildings
- it's nice to be able to park your car! Let's mandate that new buildings create [x] parking spots so no one has to search too long for parking!
- etc etc
And I think a majority of people really do think it is that easy, and that none of these types of laws have unintended consequences, or at least, they believe the consequences are minor and that's just what you have to pay to get the outcome you want (lots of parking, more sunlight, etc). I think teaching people about the extremes of the unintended consequences (the deadweight loss) is really important.
What about deadweight loss of environmental regulation instead of taxing CO2 emissions??
Indeed. Although smart regulation design can help offset costs https://www.sciencedirect.com/science/article/abs/pii/S0301421521002895
The op-ed version https://www.theglobeandmail.com/opinion/article-divisive-carbon-prices-are-much-ado-about-nothing/
How is that chart of homeownership rates supportive of the idea that millenials are doing fine?
It shows that, from 2000 - 2010, almost 50% of 25-34 year olds owned a home. Then, from 2010 - 2020, that dropped below 40%.
That is a pretty dramatic drop. Assuming that a lot of that homeownership is not people "buying a home" but just "Relatives dying and getting a home," the rate of newly bought homes was lower.
Well it tends to go up and down. in 2000-2010 we had a housing bubble, wherein we let people buy a lot of homes they couldn't possibly afford. That just wasn't sustainable. Young people are as likely to be homeowners as they were in the late 90s, and that was a very good economic time.
Looking at the chart, the line has only just crossed the 45% mark in 2020.
So if that batch is 25-34, the millenials in it are only those 27 or older. (1996 and earlier) For the older millenials, those born in 1981 to 1990, they never got to see a good housing market.
Also, add in the fact that rent was much cheaper in the 1990's. (Not just inflation adjusted, but relative to total consumption). For example, this article from the NYtimes says that a one bedroom cost 697$ in 1995. (https://www.nytimes.com/1995/06/04/realestate/l-calculating-manhattan-rents-086304.html)
Looking at a similar article now, https://www.nytimes.com/2023/06/22/realestate/nyc-apartments-rent.html#:~:text=Comparing%20the%20current%20average%20one,something%20to%20do%20with%20popularity.
It says that "Comparing the current average one-bedroom rent in Manhattan ($4,395) to that in Brooklyn ($3,600) and Queens ($2,721) makes it clear that prices have something to do with popularity. Looking at the two top neighborhoods in the study, we find that Astoria’s average one-bedroom now goes for $2,773, up a meager 2 percent over a year. The Upper East Side's average is $3,600, up 5 percent over a year."
If rent had grown at inflation, then a one bedroom would rent for about 1,400$ today.
As you can see, that's not the case. Less people in the 1990's probably wanted to own homes because it was cheaper to rent. That is the context that seems missing here. I would love to see you address it.
Why did you decide to leave rental prices out of the analysis?
Good question. The simple answer is: I didn't. Rent is included in the cost of living that is used to adjust real income, and Millennials now have substantially higher real income than Boomers or Gen Xers did at the same age.
As for rent in the most desirable locations, that's a different story. Yes, it's very expensive to live in the beating heart of a trendy cool city!!
I am very confused by this response.
The thesis is "millenials are doing fine."
The evidence presented is two charts; homeownership and debt levels as well as some links to other authors.
I asked, "What about rent and older milennials?"
The answer is "Rent is included in real income"
Where in point #2 is the word "income"'?
Who's measure of "real income" are you using and how do they adjust for rental cost?
This is a handwave of a handwave. Its not a defense to say, "I didn't mention rent or real income in my explanation of why millennials are actually doing well."
This is probably just my ignorance and I would love to see the following paragraphs with the correct numbers.
I have a feeling that, in the 90's, there was a basket of goods called "shelter". This included things like owning a house, renting an apartment, living long term in a motel etc. People spent around 25% of their monthly income on shelter. At the time, owning a house was on the expensive end of that shelter spectrum.
In the 2020's, that same basket of goods exists, but now owning a house is at the cheaper end relative to the others, not because owning a house got cheaper, but because renting became more expensive. People spend 35% to 50% of their income on shelter.
I would be curious to see what the real numbers are for the paragraphs above. Homeownership rates, divorced from the costs of other forms of shelter over time, are unconvincing.
"Rent is included in the cost of living that is used to adjust real income"
He didn't waive away your question. He answered it. You just didn't like the answer.
When did he talk about income in his answer?
Is this worse than before though? I'd argue with deindustrialization, life anywhere but a thriving city has gotten less attractive, so it is worse when you can't do it
It’s interesting with AOC. Her sunscreen PSA is good and very needed and if this leads to real legislation honestly good on her. There will be so many less cases of skin cancer for what’s ultimately a cost less fix. Talk about low hanging fruit.
I say interesting because it’s very clear she’s changed some of her views since coming to Congress. Mostly for the better. Most important is housing. She’s clearly become more of a YIMBY and honestly good on her. Remember the kerfuffle over the Amazon HQ in Queens (talk about in retrospect an overrated story)? I’m curious what she would say about it now.
Gives me a lot more confidence she’s got the chops to really move up the food chain politically.
I said this on John Ganz's Substack about AOC: She is very good at the kayfabe* aspects of politics, probably the best in Washington right now.
There's AOC, the social media darling/lightning rod who evokes visceral reactions from supporters and foes alike. Then there's Rep. Alexandria Ocasio-Cortez, who does the boring aspects of her elected duties in line of what her constituents and her House colleagues expect of her. They are two different personas of the same person.
She's very media and context savvy. She knows timing a message, reading the room to get the right reaction, and tailoring her delivery to press the buttons of her foes to force errors out of them.
*-Kayfabe is the word used to describe the spectacle of pro wrestling, because it is neither real (everyone on either side of the ring ropes knows it is predetermined) nor is it fake (wrestlers are athletes and injuries and pain are very much real). Kayfabe overlaps the two, because pro wrestling must maintain the illusion of sport: competition, rivalries, stakes and violence.
On millenials doing well, the figures you cite are misleading.
- yes they can afford homes, but too often have to move away from friends and family to do so
- unlike in the past, to afford a home poeple have to move to worse cities with fewer oportunities, fewer amenities, worse dating markets
- too many have to rely on family gifts to get a home. Even if the number of home owners remains the similar, this is a sign that society is becoming less meritocratic
- higher costs and rents are not felt by everyone yet. Millenials renting in good cities, who are on rent control, can't move. If they move, they are priced out of the city.
- since the prices for homes are so crazy in good cities now, even if you manage to get a home in one, the likelihood of experiencing the same sort of wealth building via owneship as previous generations got is low, leading to more sense that this generation doesn't have it as good as the previous one did
- not all millenials are equally screwed. Older millenials (and ones that got a decent paying job) before pandemic might have gotten in on some ok deals. The ones that did not are more screwed going forward
It seems to me, Rex, as though you're defining Millennials in terms of generation members who have grown up in our largest, most expensive cities. It's true that very high COL in those places disadvantages individuals of many kinds, including young people with hourly jobs or earning early-career white collar salaries. Those people may indeed need to move away to less expensive areas and make their peace with what they may perceive as reduced opportunities in certain cultural areas they value.
But there are many millions more Millennials who have grown up in smaller cities, exurbs, and rural areas, and while they may find it more difficult to move to NYC or SF than previous generations (which may not actually be the case; earlier migrants were often arriving from under-resourced rural backgrounds), the crunch issue is how easy it is for them to achieve their economic and cultural goals in places more like those they grew up in. They may not view, say, Cincinnati, Minneapolis, or Greenville as "worse" cities, and the amenities and "dating markets" there may fit them well.
Past generations included those that found they too could no longer remain in their family location or live as their predecessors did, but in those eras the dislocation concerned the dwindling of rural opportunities or the rusting of mid-size urban industrial centers. Migrants in those cases not only had to leave their home locations, they were carrying extra burdens of moving to higher-cost job centers, competing on the basis of less education, and on the whole having a poorer parental generation to give them a boost on down payments, etc. (the fact that large numbers of Millennials *can* rely on family gifts is a sign of advantage, not disadvantage).
I personally think Millennials are disadvantaged because they are reaching maturity in a country that is, in my Boomer eyes, fractured socially, politically and, perhaps, due to some pathologies of online life, psychologically. But previous generations had to deal with universal male drafts in wartime, overt racial discrimination, the perception of imminent nuclear war, multiple years of double-digit inflation, and so on. I don't want to provoke a pissing match about which generation faced the toughest socio-political environment, but on economic measures I think it's very significant that the narrative of the Millennial's specific economic disadvantage has been undercut in a positive way by recent trends. If that playing field is relatively level I'm sure Millennials will do as well as earlier generations have been in coping with other challenges (which is a low bar; maybe they can raise it).
Thanks for the thoughtful response Robert. Cards on the table, my experience is actually having grown up in Toronto, Canada, so not exactly the same situation as USA. I think things are considerably worse here in terms of the cost of for people who either don't have family giving them large gifts, or who haven't bought a place some years ago. Similar story to NYC and SF I think, though unlike Canada, I think USA has many good cities besides those. In Canada, if you aren't going to live in Toronto or Vancouver, you're looking at a fairly significant cut in amenities, culture, etc.
Things have always been challenging, but I do think this is different. Toronto, NYC, etc. I think were always pricy (Toronto less so historically), but still places where a middle class family could make their way. These days, a family making a middle class income can barely squeak by, if they can at all, when it comes to home ownership. And the offensive thing is that the reason that home ownership became unaffordable for so many is not some law of physics -- we _could_ have had a lot more density in the city, but choices were made to prevent this. Now we have this situation where home owners are pit against non-owners, because home-owners have so much equity invested in their home, and any prospect of supply catching up (or outpacing) demand is threatening to them. Sure there's other considerations, but I think none of them outweigh the benefit of someone having a roof over their head. Want a good investment? Want a low density neighborhood right in a large city? Of course you do (who wouldn't, if you could get it?), but society prioritizing those needs over the needs of people who actually need a place to live is, I think, a huge moral failing of our society. There's many other things people can invest in, and if people want a low density way of life, they should be able to have that -- outside of the largest cities in their country. The growth of nations depends on this, and I think if this isn't resolved, there is going to be growing intergenerational strife.
With regard to family gifts being advantages, they certainly are -- to those who can get them, but the flipside is they're disadvantages for those who can't. Again, this tilts the situation back into a more feudal system where what you can have access to is dictated not by your skill but by who your parents are. Since America and Canada are founded by people who were trying to get away from that sort of a system, I think the resurgence of this dynamic is an antithesis to their very mission.
Who's to say Millennials are entitled to any of these things?? I think the expectations are so out of whack. In the 1920s, 60% of Americans lived on farms, and the only entertainment were books, radio shows if your family had the money to buy a radio, traveling fairs/circuses, or community events. I say this as a Millennial, but not everyone can live in LA or NYC, and the gatekeeping is defined largely by wealth, to live in Manhattan requires you to either work in a field(banking, finance, law) that makes a disproportionate salary relative to the average salary of Americans, or work a punishing number of hours(60,70,80) or both. A mid sized city like Cincinnati still has more than enough stuff to do, and you don't have to pay NYC rent prices to do it. It's unfortunate that we've had decades of housing restrictions that makes it more likely that people have to move, but those are the cards that everyone's been dealt.
The economy has grown. Things are supposed to get better, instead they're getting worse for young people. That's reason enough to be upset.
The idea that some city should be just for bankers is bonkers. And it isn't just Manhattan. Brooklyn and the like are all prohibitively expensive. Our parents were able to afford them on regular salaries, we can't. Things are worse. And the lawmakers made it this bad by allowing prices to get so high, and by making it so hard to add supply by restricting density
Couple of things here- Do we have too many jobs that pay too little, to afford basic needs like food and shelter?? ABSOLUTELY, the federal minimum wage is still $7.25/hr! Even working full time, thats $290 a WEEK, before taxes. Raising wages for everyone would help people get off food stamps, and other welfare programs that we all pay for.
When it comes to cities with high COL, they all have these problems. San Francisco is even worse than NYC when it comes to housing, but NYC has the finance industry, which has been it's bread and butter in terms of raising tax revenue ever since the NYC financial crisis of the 70s. The outer boroughs are not that far from Manhattan, and as crime has decreased from it's peak in NYC in the 70s n 80s, the outer boroughs and the amenities that have grown there have become a more attractive option. I think it's worth noting that in 1977 or 1985, no upper class professional wanted to live in Long Island City or Astoria, and most professionals wanted to live on the Upper West Side or Upper East Side, where crime was less of a concern but gentrification means things have changed. This means that a nurse or sanitation worker is now competing against an investment banker or lawyer who makes $400,000 annually. For them, 3,000 or 4,000 for an apartment is nothing. The city has no incentive to change this, because they NEED these people, more than they need a cashier. The plain hard truth imo is if you want cities with high level cultural amenities you're gonna pay a pretty penny for it, because it's a luxury good. I agree with you that it sucks that people have to move away to have the kind of life that they want and leave their friends n family behind, but sometimes it's worth it if you can cut back on the daily grind that's so prevalent here. America has always had geographic mobility(Dust Bowl, 49ers, Great Migration, Oregon Trail, immigration, Settlement of the American West) but the rise of mortgages and the home ownership society has tied people down in a way that's anomalous in American history.
Do you think these are uniquely new problems not faced by other generations?
I think they're worse than what Boomers and GenX people had to deal with, particularly in Canada. And after all, shouldn't society be improving instead of getting worse? I want a better way of life, not a worse one than people of the past expected.
On size/economic growth. The US did not grow spectacularly in spite of its size: its size is one of the reasons why we've grown so much. The US internal market is HUGE, which helps build economies of scale and provides 'safe' room to grow without needing to learn a whole different set of regulations and rules. Companies can compete in a big market and will then have advantages overseas. China's big market should help it grow too! There's a reason why the EU decided to create a common market: size matters and helps scale.
On Millennials. I have a friend. She's a communist. She constantly bitches about how she has 'negative' net worth and her life is screwed. She has a great job, with several weeks vacation, owns her own house (and has collected rent for years from roommates), has several pets and can enjoy riding her motorcycle most weekends.
In short she has a great life. That debt has not stopped her from enjoying it. The idea that Millennials are screwed was always dubious.
One weakness of the newer Asian coalitions you discuss is they are a bit hamstrung by their trade dependence on China.
It's the #1 source for imports and exports for every country in the region. Even Japan and South Korea.
It is hard to be bellicose with your biggest trading partner. You have to walk a fine line.
I would add that this “de-risking” exercise is really taking its toll. Family who regularly visit Vietnam have noted that the number of foreign business people have accelerated their presence -- particularly Japanese, Korean, and Europeans. FDI numbers for Chinese investments have been tanking. Ironically investors cite the risk of war and losing their investment. If there is war in the South China Sea, I wouldn’t think investing Vietnam is considered a flight to safety. One would be thinking Mexico and parts of South America.
But an interesting point in the power of the US Presidency; Biden shakes his finger and capitalists flee and Apple moves to India. All of this pain occurs in a little bit more than 6 months. Xi can only envy and marvel. I would agree that there is less Adam Smith and more Alexander Hamilton influencing things here.
No criticism of Biden, but I don’t think his finger wag was particularly powerful. At most, it caused many business leaders to act on what they already knew needed to be done. Plans on the 3-5 year track got moved to the 1-2 year timeframe. And it started before the pandemic. An American friend of mine whose lived in China for more than 30 years, is in the business of supplying printing and packaging for things like shoes and small appliances. In 2019, he was already spending one week a month in Vietnam, because that’s where his business was going. When the pandemic broke out, he stayed in Vietnam, and after a year, his family was able to join him there. They still own their big house in China, but are staying in Vietnam, probably until he retires. (At which point he and his wife will probably leave Asia entirely.)