TSMC Arizona back on track, drawing arrows on graphs, the downsides of inclusionary zoning, why people hate inflation, and interesting ideas about market power
You write that "well-meaning regulations can end up accidentally stacking the economic deck in favor of megacorporations" but this idea has been around for a long time, so why continue to assume that the effect is accidental. A more reasonable assumption might be that the motivating force behind most new regulation is precisely to stack the economic deck.
I appreciate the suggestion, but I am not so sure it's really accurate. I have worked, for my whole career, in the heavily regulated industries of, first, asset management, and then, HFT.
Whenever we are hit with new rules, we certainly aren't rejoicing over them. We have to hire outside counsel to explain to us what the actual new rules are. The regulators are always vague on important details, which are left to be fought out in the courts. Then we have to do all the work to get into compliance and then also to continually monitor for compliance. I can't recall a single instance, in either industry, where we were thinking that the new rule would benefit us in the form of an additional barrier to entry for competitors. Our concern vis a vis competitors is generally that they have found a cheaper way to implement the rule, or some kind of legal loophole or workaround that we have not.
Often, it's a lot easier to build out the business infrastructure in a compliant way from scratch then it is to migrate a large legacy business.
In the back of our minds is always the idea that these regulators are political actors and being "tough on Wall Street" is a political agenda more than a coherent policy agenda. Wouldn't it be great if the regulators were just trying to build a moat around us. I don't think that's Gary Gensler's agenda, frankly.
I acknowledge it might be much different in other industries. My industries have low barriers to entry in other ways, e.g. we don't need much physical capital to get going. We are also seen by many voters as the root of all evil, for what it's worth.
I just basically wanted to caution against these kind of presumptions. The effect of erecting barriers to entry plays out over a very long period of time. New entrants take years of building to become competitive, even without regulatory barriers. So it might be 5+ years before the new barriers start to bite. The compliance costs are very real and immediate though. I don't know how many execs are saying "this is going to be great in 5 years", but I'm pretty skeptical...
A not-to-be named retailer (likely you've got one within easy driving distance) is well documented as lobbying for the expanded required registration of collecting tax for all online sales. Why? They were losing sales to out of state sellers, and they were already covered by those rules as they'd built the infrastructure to dominate. They were not asking for more work for themselves, they were demanding it of others. The same is true of other types of regulations where corporations are already going to have to do the work. Multinational corporations who already have built the technology for the onerous European reporting regulations are likely to either not, or softly, oppose that trend in the US.
That would depend on one’s definition of “uniform”. The complete rewrite of nexus rules that had been the interpretation of the law of the land, with an entire new class of people who, like the retailer, had played by the existing rules with each making fully informed choices to their advantage, now thrown into those rules through no new action of their own? Out of state sales were not a problem until they reached a level of competition with those who held the ground and the heft of lobby to ensure they got that ground back.
Thanks for the thoughtful post, it's good to have the view from the trenches. When I've worked at large companies our reaction has been similar. And also the same at small companies, where, as Noah suggests, new regulations often mean lost sales.
Agreed. It is not an accident that corporations lobby for, or conversely merely soft oppose, regulations that will have the effect of an additional barrier to entry.
Definitely we've seen dominant firms in a new space say they welcome regulations, because they know that their competitors will face more of an uphill battle to adapt. See: Amazon lobbying against sales tax for online retail, right up until they had already built the infrastructure and were happy to see competitors scramble to catch up.
There’s something else going on with inflation. Loss aversion. Since retreated gains and losses differently, a 10% increase in your wages is nice, a 10% increase in the grocery bill is disastrous.
Andy, you can correct your typos by clicking on the three dots bottom right of your comment.
I want to expand on your suggestion and add another reason why inflation arouses more anger.
1. The first is loss aversion. In 1992, Kahneman and Tversky proposed that losses can be twice as powerful psychologically as gains. This means that the pain of losing something of value is felt more intensely than the joy of gaining something of equal value. Thus, if inflation goes up by 10% and wages go up by 10%, human beings will play twice as much attention to the inflation.
I believe this bias goes far back in evolution. For survival, it is far more important to take threats seriously, than it is to celebrate successes. To use the proportion of Kahneman and Tversky, people would probably be happy to disregard inflation if their paychecks were steadily increasing at twice the rate of inflation.
2. Evidence of inflation in everyday life is far more concrete and frequent than evidence of an increasing paycheck. Inflation is noticed most dramatically at the gas pump and the grocery store, where the shopper is likely to experience sticker shock on every aisle. The realization that one can no longer afford one's favorite foods is particularly apt to trigger survival fears. On the other hand, with direct deposit, pay increases show up in our bank account as an undramatic line of data entry. Perhaps pay increases would have a greater emotional impact if the boss went around the office on Friday handing out handing out 20s, 50s, and 100s to dramatize the extra money.
On point three, if inclusionary zoning was applied with consistently and certainty, one would expect the impact on developer returns to be reflected in lower land values. There is some evidence that is the impact of what we call S106 affordable housing contributions in England, which deliver approx 50 per cent of all affordable units at a level which can be as high as 35per cent of a development in high value locations, such as London.
Quit a lot of potential problems in using means tested assistance to take the strain. In an American context, what is there to stop a landlord refusing to let to assisted tenants on the ground they are more of a rent risk or their existence in a development may reduce its attractiveness to higher income renters?
Important issue that deserves more debate and a wider evidence base.
On the arrows on graphs piece, you are correct to question the implied trend at the end of the series. Another way to look at it is the rate of change implied by those arrows, which is only seen once during the data set, from 80 to 84. And it took 60 years to see the overall change implied by those arrows.
On why people hate inflation, I've discovered that what I've thought since the 1980s inflation is called the 'sawtooth wages model of inflation'. Basically, with annually determined wages and inflation, people's experience for all the time except the annual pay review month is falling purchasing power of wages. Where there is intended annual indexation, but also a lag in implementation, this produces falls in real earnings over time.
“ First, it forces the developers/landlords raise rents for the rest of the units”
Developers and landlords don’t control prices they charge what the market will bear. I know you know this but it’s a huge issue with anti-development folks. They think landlords control prices.
It came out during the pandemic when rents in NYC and SF plunged. You’d ask someone who thought landlords controlled prices and they had no explanation for why prices plunged when demand plunged. And don’t get me started on demand staying the same while supply rises.
On #5, I work in data and having to deal with GDPR has made me realise what libertarians have been complaining about this whole time. Definitely raises costs (not even including the millions of years people have spent clicking stupid cookie banners) and for minimal benefit to users.
Not only notifications but the hard rules which say fax machines are compliant, but not internet communication, which is the only reason doctors and pharmacists still use that ancient technology.
An analysis of the supposed cost of regulation is pretty meaningless absent a calculation of the cost of not regulating, which itself often fails to capture the harms that regulation tries to mitigate or avoid. These are externalities for the most part, which is why corporations rarely undertake the modifications mandated via regulation voluntarily. Auto manufacturers vehemently opposed the imposition of rules mandating seatbelts and airbags but the benefits from requiring them are manifest yet nowhere reflected in the cost of regulation calculation.
RE:IZ, I think the case we have to make is that it should always be a “yes, AND, but” thing.
Advocates feel too strongly about this one to let it go. And the idea just makes too much sense to normies - even if they’re mistaken about it - for us to win a campaign to inform the normies about it.
So, the first answer has to be “yes”. Sure. Any zoning reform will do in a housing crisis. It’s not all going to be solved today.
The next answer has to be “AND”. We need to make the case to normies that IZ alone is not enough to get the job done. The crisis is simply too deep. IZ is only at best going to protect a few people at the bottom from the worst of the crisis while the rest of us dig our society out of the massive hole.
ONCE we’ve done that, THEN we can get to the “but”. We explain to anyone who will listen that IZ is counterproductive. In the long term, we shift what normies consider “common sense” so that we can get to a point where IZ is considered a dumb distraction in 100 years when we have the next major housing crisis.
Re #2, a tangent on "non-white vote share" is that the composition of "non-white" has changed substantially over the decades... So it's a little misleading - especially for the slow growth in GOP share shown up to 2020.
Yes, I came here to say this. IMHO the worst thing about that graph is the title. Even with no change in preferences, over the long term, the pct of non-White voters who vote R would have trended upward, and will continue to trend upward, because African Americans vote overwhelmingly D, but each year African Americans make up a smaller pct of the non-White vote (eg: in 1980, about 10/12 of the non-White electorate. https://ropercenter.cornell.edu/how-groups-voted-1980 But in 2020, only 13/30 https://ropercenter.cornell.edu/how-groups-voted-2020 ). It is certainly possible that voting preferences within each group are changing, but you can't infer that from that graph.
The population of non-White voters relative to the population of all voters are small. Furthermore, because majorities of non-White voters vote Democratic, the minorities of minorities who vote Republican will show more impressive growth because the GOP is starting from a lower base.
It's the magic of framing. The frame zeroes in on this movement because our mental biases intuitively conflate percentages with integers. Percentage growth snapshots in time always look impressive; that's because the data off frame tell a less impressive narrative and the big picture is less impressive.
That's what I think Noah was getting at by flagging the use of the arrows instead of dots in the charts. The arrows predict a continuing trajectory of a dataset going a certain way and anticipating an inflection point, whereas the dots preceding show an ebb and flow that could just as well mean the arrows are pointing the wrong way.
Another negative feature of rent control is that landlords tend to spend less on upkeep to maintain profit level. After 10 years or so, the effect can become quite obvious.
Concerning Below Market Rent requirements: this seems like the 10000th example of where the Left is strong when it comes to caring about how the unfortunate fare, and weak when it comes to grasping the importance of incentives.
I get what you're saying but the root of the problem is that in a profit-driven capitalist system, nobody has any incentive at all to provide housing (or anything else) to poor people. So it's not so much that the Left doesn't grasp the importance of incentives as that the Left is constantly trying to impose non-market incentives for people to do what a laissez-faire system alone will never incentivize them to do but which (in the Left's view) it is imperative to do for reasons of morality, stability, or whatever.
There are more and less effective ways to do this, but let's not act like there's some way to incentivize service to those with no ability to pay that is not going to piss off capitalists, since it will never be as gainful for them as simply ignoring the poor outright.
A basic income program would keep the incentives in place while making it easier for people with less money to reach their goals, such as having a place to live. Developers still compete, and capitalism stays intact.
It seems that dollar stores and Walmart can only make money as part of large chains with massive economies of scale and relatively little markup. The rich seemed to get their needs met more by boutique businesses that do not need to be so relentlessly efficient.
In general this whole blog is an example of the ups and downs of government interference in markets. An example of the damage bad policy for “good” ends up harming the very people government seeks to nurture.
There is a vast difference to requiring safety regulations for vehicles and roads to subsidizing markets. When passing legislation with some industrial policy in mind but then adding DEI, minority, and social requirements it doesn’t make the actual goal easier. It makes it harder. First of all industrial policy which lately is killing off the internal combustion engine while not having a replacement market completed is leading to issues with consumers. Joe Biden and his climate activists have set in motion the death of the Big Three automakers. They’ll survive if they can sell EV SU’v’s and Trucks for $60k plus but if they have to build a profitable $25,000 EV, they’ll die. They simply don’t have the ability to make those smaller vehicles at a profit. China does, not the US. Most Americans will not have the funds to put fast chargers in their homes, Apartment dwellers won’t have them nor will every workplace have the. The land requirements for charging stations will cause havoc in cities that gas stations don’t. Roadwarriors having to stop for 30 min for a 80% will cause havoc with their appointments. Adding charging in to equation of factoring in traffic and drives times may well be a hill to high to climb.
Government rather than make private investment in markets more difficult should instead streamline approvals and add in less social justice goals that cannot be easily integrated. We have so tied up construction in their country many companies can no longer make predictable judgment on costs.
Inflation is not a scalar; Inflation is an n-dimensional vector that also includes assets such as housing prices.
People want to buy things such as a house.
When the currency gets devalued because of printing money --> Asset prices go up --> This is a tax on people without assets; redistributing towards people with assets.
CPI only looks at non-assets. Therefore, the 'inflation' scalar massively understates the real inflation in, for example, buying a house. Unless your CPI corrects for asset inflation, housing prices go up faster than wages go up!
The reason people hate inflation is because we aren't measuring it correctly, and it actually makes them poorer.
Rent is about one third of the CPI and has been in there since the index was first computed in 1913.
You can quibble that rent isn't the same as a mortgage payment, but I think the two are going to be quite closely related, especially on longer timescales. The landlord ultimately has to figure the cost of the mortgage payment (or their own cost of capital) in renting out the place. I haven't seen anyone suggest that renting has become cheap relative to owning in recent decades.
I find this kind of confusion about CPI to be way too common in the discourse. On this very substack, last week, Noah shared a chart showing steady growth in real medial personal income. Naturally, a leftist jumped into the comments, claiming that folks are still worse off because healthcare, education, and housing have gotten so much more expensive. Of course, these expenses are all included in the CPI, and therefore "real personal income" increased even *relative* to these skyrocketing expenses.
Whether you are arguing with a rightist "hard money" person or a leftist "ugh, capitalism", type, the common thread with more extreme commenters is the rigid view that things have gotten worse here. Since the basic data shows the exact opposite, it becomes necessary to inject fantasies about CPI either being comically unrepresentative or an outright fraud.
Interesting. How would you explain these graphs that I have seen of housing/income ratios having increased substantially for the past 30 years? Is that just propoganda/misinformation?
Doesn’t use all national home price data, only large metros. No adjustments for house size or quality. 2022 income is Moodys forecast, not official data. They don’t indicate anywhere what data they are using for income (I tried to find but could not, let me know if you found it).
Anyways the chart doesn’t look anything like a relentless rise. It looks cyclical. It’s likely they stop charting at a local peak, as the housing market has been weaker since interest rates went up, but the chart doesn’t go that far. On the other hand, wages have been robust under the higher rates.
Moreover, I didn’t claim that housing costs haven’t increased relative to incomes at all. I am saying that there are other things that have become less expensive relative to income at the same time, so it’s usually wrong to make generalized claims that life is harder for most Americans than it was in some prior era.
Recall your original claim was that housing is not in the cpi and now you have retreated to housing/income ratios simply rising, which is just not the same thing.
It is reasonable to ask why housing is an increasing portion of household expenses, without further positing that things are worse in general. As I’m sure you’re aware, there’s a large nonpartisan movement (YIMBY) to address barriers to erecting new housing. I agree with YIMBYs on their policy proposals, mostly, but I think they overstate the benefits.
Everywhere that is desirable to live and has high area wages will have high housing costs. We can make things a bit better at the margins, but housing will never be cheap in the most desirable spots.
“In the US, a single fab, Intel’s 700-acre campus in Ocotillo, Arizona, produced nearly 15,000 tons of waste in the first three months of this year, about 60% of it hazardous. It also consumed 927m gallons of fresh water, enough to fill about 1,400 Olympic swimming pools, and used 561m kilowatt-hours of energy.
Chip manufacturing, rather than energy consumption or hardware use, “accounts for most of the carbon output” from electronics devices, the Harvard researcher Udit Gupta and co-authors wrote in a 2020 paper.”
-- The Guardian
Building chip fabs in Arizona is horrible fresh-water policy. U.S. chip fab policy funding should be contingent on building all new chip fabs in the Great Lakes corridor, the largest inland sources of fresh water, existing industrial infrastructure, and an area (Rust Belt) ripe and overdue for new job training/creation. Also, U.S. chip fabrication policy should create incentives for more trailing-edge chips to counter China’s effort to corner this very important segment of chip fabrication (autos, appliances, light industrial equipment, military, etc.
We have to be careful with numbers in isolation, and with unit conversion.
Farms don’t measure water use in gallons, they measure it in acre feet. 1 acre foot of water is about 325,000 gallons. Arizona is home to about 300,000 acres of alfalfa and hay farms which need about 4.5 acre-feet of water per year. That’s 1.35M acre-feet of water, or about 439,899,428,571 gallons. That’s one big crop, not all of Arizona’s farmland.
So… yes, chip fabs use a lot of water, and putting heavy water usage activities in the wet places is a good idea. But given there are only dozens of these in the world, even in Arizona these fabs aren’t going to be a huge problem.
Given California’s importance to U.S. food production (see below), when push comes to shove, 100% of that water for alfalfa farms in Arizona will go to California.
Agriculture is a significant sector in California's economy, producing nearly US$50 billion in revenue in 2018. There are more than 400 commodity crops grown across California, including a significant portion of all fruits, vegetables, and nuts in the United States. In 2017, there were 77,100 unique farms and ranches in the state, operating across 25.3 million acres (10,200,000 hectares) of land. The average farm size was 328 acres (133 ha), significantly less than the average farm size in the U.S. of 444 acres (180 ha).
Arizona uses 2,300,000 M gallons of water annually, so 927M is not that much, especially since 72% of the water use is agricultural, including alfalfa exports to Saudis Arabia.
TSMC says 95% of the water the new plants will be recycled.
I’m sure TSMC analyzed locations carefully and for a very expensive plant lack of earthquakes, hurricanes and tornadoes makes Arizona safe (we only have thunderstorms and dust storms to worry about) and since water is recycled that isn’t a worry. Taxes, energy and living costs are cheap, although housing is rising, unfortunately Governor Hobbs vetoed the upzoning bill which recently passed the legislature to appease donors and mayors, ridiculously blaming it on of all things opposition from the US Navy.
1. Has the report of the change at tsmc been confirmed? Specifically when one news story is saying another news story is wrong, I would want to be extra sure that the new one is right before concluding too much from it.
2. On the arrows on charts thing, the one about US traffic fatalities is definitely misleading in suggesting such a high rate of increase. But it’s also true that there has been an upward trend in US traffic fatalities for over a decade, even if the last few years are characterized by a spike in 2020 and then a return to trend.
You write that "well-meaning regulations can end up accidentally stacking the economic deck in favor of megacorporations" but this idea has been around for a long time, so why continue to assume that the effect is accidental. A more reasonable assumption might be that the motivating force behind most new regulation is precisely to stack the economic deck.
I appreciate the suggestion, but I am not so sure it's really accurate. I have worked, for my whole career, in the heavily regulated industries of, first, asset management, and then, HFT.
Whenever we are hit with new rules, we certainly aren't rejoicing over them. We have to hire outside counsel to explain to us what the actual new rules are. The regulators are always vague on important details, which are left to be fought out in the courts. Then we have to do all the work to get into compliance and then also to continually monitor for compliance. I can't recall a single instance, in either industry, where we were thinking that the new rule would benefit us in the form of an additional barrier to entry for competitors. Our concern vis a vis competitors is generally that they have found a cheaper way to implement the rule, or some kind of legal loophole or workaround that we have not.
Often, it's a lot easier to build out the business infrastructure in a compliant way from scratch then it is to migrate a large legacy business.
In the back of our minds is always the idea that these regulators are political actors and being "tough on Wall Street" is a political agenda more than a coherent policy agenda. Wouldn't it be great if the regulators were just trying to build a moat around us. I don't think that's Gary Gensler's agenda, frankly.
I acknowledge it might be much different in other industries. My industries have low barriers to entry in other ways, e.g. we don't need much physical capital to get going. We are also seen by many voters as the root of all evil, for what it's worth.
I just basically wanted to caution against these kind of presumptions. The effect of erecting barriers to entry plays out over a very long period of time. New entrants take years of building to become competitive, even without regulatory barriers. So it might be 5+ years before the new barriers start to bite. The compliance costs are very real and immediate though. I don't know how many execs are saying "this is going to be great in 5 years", but I'm pretty skeptical...
A not-to-be named retailer (likely you've got one within easy driving distance) is well documented as lobbying for the expanded required registration of collecting tax for all online sales. Why? They were losing sales to out of state sellers, and they were already covered by those rules as they'd built the infrastructure to dominate. They were not asking for more work for themselves, they were demanding it of others. The same is true of other types of regulations where corporations are already going to have to do the work. Multinational corporations who already have built the technology for the onerous European reporting regulations are likely to either not, or softly, oppose that trend in the US.
Asking for uniform enforcement of the rules is not the same as asking for the rules in the first place.
That would depend on one’s definition of “uniform”. The complete rewrite of nexus rules that had been the interpretation of the law of the land, with an entire new class of people who, like the retailer, had played by the existing rules with each making fully informed choices to their advantage, now thrown into those rules through no new action of their own? Out of state sales were not a problem until they reached a level of competition with those who held the ground and the heft of lobby to ensure they got that ground back.
Thanks for the thoughtful post, it's good to have the view from the trenches. When I've worked at large companies our reaction has been similar. And also the same at small companies, where, as Noah suggests, new regulations often mean lost sales.
Agreed. It is not an accident that corporations lobby for, or conversely merely soft oppose, regulations that will have the effect of an additional barrier to entry.
Definitely we've seen dominant firms in a new space say they welcome regulations, because they know that their competitors will face more of an uphill battle to adapt. See: Amazon lobbying against sales tax for online retail, right up until they had already built the infrastructure and were happy to see competitors scramble to catch up.
It’s called “regulatory capture” and it’s a well-established thing.
There’s something else going on with inflation. Loss aversion. Since retreated gains and losses differently, a 10% increase in your wages is nice, a 10% increase in the grocery bill is disastrous.
Or when we get a 10% increase in wages, we notice the prices that go up more than 10% but not the prices that haven’t gone up much
“We treat” not retreated
Andy, you can correct your typos by clicking on the three dots bottom right of your comment.
I want to expand on your suggestion and add another reason why inflation arouses more anger.
1. The first is loss aversion. In 1992, Kahneman and Tversky proposed that losses can be twice as powerful psychologically as gains. This means that the pain of losing something of value is felt more intensely than the joy of gaining something of equal value. Thus, if inflation goes up by 10% and wages go up by 10%, human beings will play twice as much attention to the inflation.
I believe this bias goes far back in evolution. For survival, it is far more important to take threats seriously, than it is to celebrate successes. To use the proportion of Kahneman and Tversky, people would probably be happy to disregard inflation if their paychecks were steadily increasing at twice the rate of inflation.
2. Evidence of inflation in everyday life is far more concrete and frequent than evidence of an increasing paycheck. Inflation is noticed most dramatically at the gas pump and the grocery store, where the shopper is likely to experience sticker shock on every aisle. The realization that one can no longer afford one's favorite foods is particularly apt to trigger survival fears. On the other hand, with direct deposit, pay increases show up in our bank account as an undramatic line of data entry. Perhaps pay increases would have a greater emotional impact if the boss went around the office on Friday handing out handing out 20s, 50s, and 100s to dramatize the extra money.
On point three, if inclusionary zoning was applied with consistently and certainty, one would expect the impact on developer returns to be reflected in lower land values. There is some evidence that is the impact of what we call S106 affordable housing contributions in England, which deliver approx 50 per cent of all affordable units at a level which can be as high as 35per cent of a development in high value locations, such as London.
Quit a lot of potential problems in using means tested assistance to take the strain. In an American context, what is there to stop a landlord refusing to let to assisted tenants on the ground they are more of a rent risk or their existence in a development may reduce its attractiveness to higher income renters?
Important issue that deserves more debate and a wider evidence base.
On the arrows on graphs piece, you are correct to question the implied trend at the end of the series. Another way to look at it is the rate of change implied by those arrows, which is only seen once during the data set, from 80 to 84. And it took 60 years to see the overall change implied by those arrows.
On why people hate inflation, I've discovered that what I've thought since the 1980s inflation is called the 'sawtooth wages model of inflation'. Basically, with annually determined wages and inflation, people's experience for all the time except the annual pay review month is falling purchasing power of wages. Where there is intended annual indexation, but also a lag in implementation, this produces falls in real earnings over time.
“ First, it forces the developers/landlords raise rents for the rest of the units”
Developers and landlords don’t control prices they charge what the market will bear. I know you know this but it’s a huge issue with anti-development folks. They think landlords control prices.
It came out during the pandemic when rents in NYC and SF plunged. You’d ask someone who thought landlords controlled prices and they had no explanation for why prices plunged when demand plunged. And don’t get me started on demand staying the same while supply rises.
On #5, I work in data and having to deal with GDPR has made me realise what libertarians have been complaining about this whole time. Definitely raises costs (not even including the millions of years people have spent clicking stupid cookie banners) and for minimal benefit to users.
Ditto HIPAA.
Given a chance to rewrite those laws, I’d keep the actual privacy protections, but reduce the amount of notification required.
Not only notifications but the hard rules which say fax machines are compliant, but not internet communication, which is the only reason doctors and pharmacists still use that ancient technology.
An analysis of the supposed cost of regulation is pretty meaningless absent a calculation of the cost of not regulating, which itself often fails to capture the harms that regulation tries to mitigate or avoid. These are externalities for the most part, which is why corporations rarely undertake the modifications mandated via regulation voluntarily. Auto manufacturers vehemently opposed the imposition of rules mandating seatbelts and airbags but the benefits from requiring them are manifest yet nowhere reflected in the cost of regulation calculation.
RE:IZ, I think the case we have to make is that it should always be a “yes, AND, but” thing.
Advocates feel too strongly about this one to let it go. And the idea just makes too much sense to normies - even if they’re mistaken about it - for us to win a campaign to inform the normies about it.
So, the first answer has to be “yes”. Sure. Any zoning reform will do in a housing crisis. It’s not all going to be solved today.
The next answer has to be “AND”. We need to make the case to normies that IZ alone is not enough to get the job done. The crisis is simply too deep. IZ is only at best going to protect a few people at the bottom from the worst of the crisis while the rest of us dig our society out of the massive hole.
ONCE we’ve done that, THEN we can get to the “but”. We explain to anyone who will listen that IZ is counterproductive. In the long term, we shift what normies consider “common sense” so that we can get to a point where IZ is considered a dumb distraction in 100 years when we have the next major housing crisis.
Re #2, a tangent on "non-white vote share" is that the composition of "non-white" has changed substantially over the decades... So it's a little misleading - especially for the slow growth in GOP share shown up to 2020.
Yes, I came here to say this. IMHO the worst thing about that graph is the title. Even with no change in preferences, over the long term, the pct of non-White voters who vote R would have trended upward, and will continue to trend upward, because African Americans vote overwhelmingly D, but each year African Americans make up a smaller pct of the non-White vote (eg: in 1980, about 10/12 of the non-White electorate. https://ropercenter.cornell.edu/how-groups-voted-1980 But in 2020, only 13/30 https://ropercenter.cornell.edu/how-groups-voted-2020 ). It is certainly possible that voting preferences within each group are changing, but you can't infer that from that graph.
Also, the innumeracy of journalists.
The population of non-White voters relative to the population of all voters are small. Furthermore, because majorities of non-White voters vote Democratic, the minorities of minorities who vote Republican will show more impressive growth because the GOP is starting from a lower base.
It's the magic of framing. The frame zeroes in on this movement because our mental biases intuitively conflate percentages with integers. Percentage growth snapshots in time always look impressive; that's because the data off frame tell a less impressive narrative and the big picture is less impressive.
That's what I think Noah was getting at by flagging the use of the arrows instead of dots in the charts. The arrows predict a continuing trajectory of a dataset going a certain way and anticipating an inflection point, whereas the dots preceding show an ebb and flow that could just as well mean the arrows are pointing the wrong way.
Also, since the graphs are found in a respected magazine like the Economist, the unwary will assume the projections into the future are reliable.
Another negative feature of rent control is that landlords tend to spend less on upkeep to maintain profit level. After 10 years or so, the effect can become quite obvious.
Concerning Below Market Rent requirements: this seems like the 10000th example of where the Left is strong when it comes to caring about how the unfortunate fare, and weak when it comes to grasping the importance of incentives.
I get what you're saying but the root of the problem is that in a profit-driven capitalist system, nobody has any incentive at all to provide housing (or anything else) to poor people. So it's not so much that the Left doesn't grasp the importance of incentives as that the Left is constantly trying to impose non-market incentives for people to do what a laissez-faire system alone will never incentivize them to do but which (in the Left's view) it is imperative to do for reasons of morality, stability, or whatever.
There are more and less effective ways to do this, but let's not act like there's some way to incentivize service to those with no ability to pay that is not going to piss off capitalists, since it will never be as gainful for them as simply ignoring the poor outright.
A basic income program would keep the incentives in place while making it easier for people with less money to reach their goals, such as having a place to live. Developers still compete, and capitalism stays intact.
Do dollar stores and Walmart not provide products that low income people want, or do you not consider that profit driven capitalism?
And poor people prefer using section 8 housing vouchers that go to capitalist landlords to living in government supplied housing projects.
It seems that dollar stores and Walmart can only make money as part of large chains with massive economies of scale and relatively little markup. The rich seemed to get their needs met more by boutique businesses that do not need to be so relentlessly efficient.
In general this whole blog is an example of the ups and downs of government interference in markets. An example of the damage bad policy for “good” ends up harming the very people government seeks to nurture.
There is a vast difference to requiring safety regulations for vehicles and roads to subsidizing markets. When passing legislation with some industrial policy in mind but then adding DEI, minority, and social requirements it doesn’t make the actual goal easier. It makes it harder. First of all industrial policy which lately is killing off the internal combustion engine while not having a replacement market completed is leading to issues with consumers. Joe Biden and his climate activists have set in motion the death of the Big Three automakers. They’ll survive if they can sell EV SU’v’s and Trucks for $60k plus but if they have to build a profitable $25,000 EV, they’ll die. They simply don’t have the ability to make those smaller vehicles at a profit. China does, not the US. Most Americans will not have the funds to put fast chargers in their homes, Apartment dwellers won’t have them nor will every workplace have the. The land requirements for charging stations will cause havoc in cities that gas stations don’t. Roadwarriors having to stop for 30 min for a 80% will cause havoc with their appointments. Adding charging in to equation of factoring in traffic and drives times may well be a hill to high to climb.
Government rather than make private investment in markets more difficult should instead streamline approvals and add in less social justice goals that cannot be easily integrated. We have so tied up construction in their country many companies can no longer make predictable judgment on costs.
Inflation is not a scalar; Inflation is an n-dimensional vector that also includes assets such as housing prices.
People want to buy things such as a house.
When the currency gets devalued because of printing money --> Asset prices go up --> This is a tax on people without assets; redistributing towards people with assets.
CPI only looks at non-assets. Therefore, the 'inflation' scalar massively understates the real inflation in, for example, buying a house. Unless your CPI corrects for asset inflation, housing prices go up faster than wages go up!
The reason people hate inflation is because we aren't measuring it correctly, and it actually makes them poorer.
Rent is about one third of the CPI and has been in there since the index was first computed in 1913.
You can quibble that rent isn't the same as a mortgage payment, but I think the two are going to be quite closely related, especially on longer timescales. The landlord ultimately has to figure the cost of the mortgage payment (or their own cost of capital) in renting out the place. I haven't seen anyone suggest that renting has become cheap relative to owning in recent decades.
I find this kind of confusion about CPI to be way too common in the discourse. On this very substack, last week, Noah shared a chart showing steady growth in real medial personal income. Naturally, a leftist jumped into the comments, claiming that folks are still worse off because healthcare, education, and housing have gotten so much more expensive. Of course, these expenses are all included in the CPI, and therefore "real personal income" increased even *relative* to these skyrocketing expenses.
Whether you are arguing with a rightist "hard money" person or a leftist "ugh, capitalism", type, the common thread with more extreme commenters is the rigid view that things have gotten worse here. Since the basic data shows the exact opposite, it becomes necessary to inject fantasies about CPI either being comically unrepresentative or an outright fraud.
Interesting. How would you explain these graphs that I have seen of housing/income ratios having increased substantially for the past 30 years? Is that just propoganda/misinformation?
It’s impossible for me to answer without seeing the graphs you refer to.
Here you go:
https://www.jchs.harvard.edu/blog/home-price-income-ratio-reaches-record-high-0
Doesn’t use all national home price data, only large metros. No adjustments for house size or quality. 2022 income is Moodys forecast, not official data. They don’t indicate anywhere what data they are using for income (I tried to find but could not, let me know if you found it).
Anyways the chart doesn’t look anything like a relentless rise. It looks cyclical. It’s likely they stop charting at a local peak, as the housing market has been weaker since interest rates went up, but the chart doesn’t go that far. On the other hand, wages have been robust under the higher rates.
Moreover, I didn’t claim that housing costs haven’t increased relative to incomes at all. I am saying that there are other things that have become less expensive relative to income at the same time, so it’s usually wrong to make generalized claims that life is harder for most Americans than it was in some prior era.
Recall your original claim was that housing is not in the cpi and now you have retreated to housing/income ratios simply rising, which is just not the same thing.
It is reasonable to ask why housing is an increasing portion of household expenses, without further positing that things are worse in general. As I’m sure you’re aware, there’s a large nonpartisan movement (YIMBY) to address barriers to erecting new housing. I agree with YIMBYs on their policy proposals, mostly, but I think they overstate the benefits.
Everywhere that is desirable to live and has high area wages will have high housing costs. We can make things a bit better at the margins, but housing will never be cheap in the most desirable spots.
Thanks, yeah I see your points on CPI!
But also: what about this source: https://www.longtermtrends.net/home-price-median-annual-income-ratio/
?
“In the US, a single fab, Intel’s 700-acre campus in Ocotillo, Arizona, produced nearly 15,000 tons of waste in the first three months of this year, about 60% of it hazardous. It also consumed 927m gallons of fresh water, enough to fill about 1,400 Olympic swimming pools, and used 561m kilowatt-hours of energy.
Chip manufacturing, rather than energy consumption or hardware use, “accounts for most of the carbon output” from electronics devices, the Harvard researcher Udit Gupta and co-authors wrote in a 2020 paper.”
-- The Guardian
Building chip fabs in Arizona is horrible fresh-water policy. U.S. chip fab policy funding should be contingent on building all new chip fabs in the Great Lakes corridor, the largest inland sources of fresh water, existing industrial infrastructure, and an area (Rust Belt) ripe and overdue for new job training/creation. Also, U.S. chip fabrication policy should create incentives for more trailing-edge chips to counter China’s effort to corner this very important segment of chip fabrication (autos, appliances, light industrial equipment, military, etc.
We have to be careful with numbers in isolation, and with unit conversion.
Farms don’t measure water use in gallons, they measure it in acre feet. 1 acre foot of water is about 325,000 gallons. Arizona is home to about 300,000 acres of alfalfa and hay farms which need about 4.5 acre-feet of water per year. That’s 1.35M acre-feet of water, or about 439,899,428,571 gallons. That’s one big crop, not all of Arizona’s farmland.
So… yes, chip fabs use a lot of water, and putting heavy water usage activities in the wet places is a good idea. But given there are only dozens of these in the world, even in Arizona these fabs aren’t going to be a huge problem.
Given California’s importance to U.S. food production (see below), when push comes to shove, 100% of that water for alfalfa farms in Arizona will go to California.
Agriculture is a significant sector in California's economy, producing nearly US$50 billion in revenue in 2018. There are more than 400 commodity crops grown across California, including a significant portion of all fruits, vegetables, and nuts in the United States. In 2017, there were 77,100 unique farms and ranches in the state, operating across 25.3 million acres (10,200,000 hectares) of land. The average farm size was 328 acres (133 ha), significantly less than the average farm size in the U.S. of 444 acres (180 ha).
Arizona uses 2,300,000 M gallons of water annually, so 927M is not that much, especially since 72% of the water use is agricultural, including alfalfa exports to Saudis Arabia.
TSMC says 95% of the water the new plants will be recycled.
I’m sure TSMC analyzed locations carefully and for a very expensive plant lack of earthquakes, hurricanes and tornadoes makes Arizona safe (we only have thunderstorms and dust storms to worry about) and since water is recycled that isn’t a worry. Taxes, energy and living costs are cheap, although housing is rising, unfortunately Governor Hobbs vetoed the upzoning bill which recently passed the legislature to appease donors and mayors, ridiculously blaming it on of all things opposition from the US Navy.
I think the Foxconn site in Kenosha is still available!
1. Has the report of the change at tsmc been confirmed? Specifically when one news story is saying another news story is wrong, I would want to be extra sure that the new one is right before concluding too much from it.
2. On the arrows on charts thing, the one about US traffic fatalities is definitely misleading in suggesting such a high rate of increase. But it’s also true that there has been an upward trend in US traffic fatalities for over a decade, even if the last few years are characterized by a spike in 2020 and then a return to trend.
Yes.
The TSMC press release says production will start next year, so the China based news report is already incorrect.
The traffic data is misleading since it is per capita instead of per miles driven, especially as the latter went down a lot during the pandemic.