Scott Alexander not too long ago argued that constructing extra housing in a given metropolis causes housing costs to go up in that metropolis. He acknowledged that earlier research had discovered the other relationship, however recommended that he was extra impressed by the robust optimistic correlation between inhabitants and costs when there are large adjustments:
Matt Yglesias tries to debunk the declare that constructing extra homes raises native home costs. He presents several studies exhibiting that, at the least on the marginal street-by-street degree, this isn’t true.
I’m nervous disagreeing with him, and his research appear good. However I discover searching for tiny results on the margin much less convincing than searching for gigantic results on the tails. If you try this, he has to be incorrect, proper?
I additionally consider that wanting on the tails (large adjustments) is usually extra revealing than taking a look at plenty of small adjustments. However provided that you’ve acquired causality proper. And on this case, Alexander hasn’t essentially performed so.
Right here’s an analogy: Suppose you wished to check the mainstream view of monetary policy (elevating rates of interest is deflationary) with the NeoFisherian view (elevating rates of interest is inflationary.) So that you targeted your consideration on instances the place there have been really huge will increase in interest rates—say to twenty%, 30% or 50%. In just about all of these instances, inflation can be very excessive when nominal rates of interest are very excessive. That appears to help the NeoFisherian place. (I’m wondering how Alexander feels about this debate.)
However this form of correlation doesn’t handle the difficulty of causation, and thus most economists reject the notion {that a} excessive rate of interest coverage is inflationary, regardless of the clear correlation. They see this for instance of “reasoning from a value change.”
In my analysis on market reactions to coverage information through the Thirties, I argued that large adjustments had been particularly revealing. However in these types of “occasion research” the path of causation is obvious—coverage information results in instant adjustments in asset costs.
Massive adjustments don’t assist if the home value mannequin you’re criticizing can also be per the stylized incontrovertible fact that greater cities are usually costlier. That stylized reality could be true even when constructing extra homes decreased home costs on the margin.
Scott Alexander not too long ago argued that constructing extra housing in a given metropolis causes housing costs to go up in that metropolis. He acknowledged that earlier research had discovered the other relationship, however recommended that he was extra impressed by the robust optimistic correlation between inhabitants and costs when there are large adjustments:
Matt Yglesias tries to debunk the declare that constructing extra homes raises native home costs. He presents several studies exhibiting that, at the least on the marginal street-by-street degree, this isn’t true.
I’m nervous disagreeing with him, and his research appear good. However I discover searching for tiny results on the margin much less convincing than searching for gigantic results on the tails. If you try this, he has to be incorrect, proper?
I additionally consider that wanting on the tails (large adjustments) is usually extra revealing than taking a look at plenty of small adjustments. However provided that you’ve acquired causality proper. And on this case, Alexander hasn’t essentially performed so.
Right here’s an analogy: Suppose you wished to check the mainstream view of monetary policy (elevating rates of interest is deflationary) with the NeoFisherian view (elevating rates of interest is inflationary.) So that you targeted your consideration on instances the place there have been really huge will increase in interest rates—say to twenty%, 30% or 50%. In just about all of these instances, inflation can be very excessive when nominal rates of interest are very excessive. That appears to help the NeoFisherian place. (I’m wondering how Alexander feels about this debate.)
However this form of correlation doesn’t handle the difficulty of causation, and thus most economists reject the notion {that a} excessive rate of interest coverage is inflationary, regardless of the clear correlation. They see this for instance of “reasoning from a value change.”
In my analysis on market reactions to coverage information through the Thirties, I argued that large adjustments had been particularly revealing. However in these types of “occasion research” the path of causation is obvious—coverage information results in instant adjustments in asset costs.
Massive adjustments don’t assist if the home value mannequin you’re criticizing can also be per the stylized incontrovertible fact that greater cities are usually costlier. That stylized reality could be true even when constructing extra homes decreased home costs on the margin.