AI and bankrupcy: "Plenty of capital" IFF the Fed does not allow a sectoral demand shock to metstasize into a recession, falling price level, and so on. Will we have a Powell or a Bernanke when it happens?
"The question is why useful knowledge produced sustained economic growth in a small number of societies and not in countless others."
Might one consider whether there were other commonalities in the successful early commercial societies Magoon lists?
For example:
(1) Urban Autonomy via Charters: Townspeople sought and often obtained charters from kings or emperors that granted legal independence from local feudal lords, allowing cities to self-govern, regulate trade, collect taxes, and administer justice independently.
(2) Communal Oaths and Mutual Defense: The foundation of many urban communities, particularly in Northern Italy and the Low Countries, was the medieval commune, a sworn alliance of citizens promising mutual physical defense and peace within the city walls, effectively turning cities into self-governing corporate entities.
(3) Exemption from Feudal Obligations: Urban residents were generally considered "free men," distinct from the serfdom prevalent in rural areas; a common proverb held that "the air of the town makes men free," meaning a serf could gain freedom by residing in a city for a year and a day.
I suspect one might be able to make a case for these as important factors. I have in mind Harold J. Berman's Law and Revolution: The Formation of the Western Legal Tradition as a source providing some ideas in that regard but unfortunately don't have a copy to hand to plumb the question myself.
Ah, found it. There on the desk stack instead of the shelf. Always the last place you look. So Chapter 12, “Urban Law” treats with the question. Interestingly, at least to me, Berman writes:
“Such legal institutions as the corporate charter of the city, the alienability of urban property, and the liberties of the citizens are to be understood partly as manifestations of ideas and values and partly as instruments of economic and political power, but also to be understood as significant historical events and as parts of significant sequences of historical events.”
He then looks at some urban areas including those of the Low Countries, a handful of German cities, and the Italian cities, before identifying some commonalities. One that seems to be oft ignored is the communitarian character of urban law in those cities:
“The communitarian character of urban law took the form not only a covenantal relationship but also of a participatory relationship among the members. This participatory relationship was reflected in legal requirements of mutual aid among citizens and mutual protection against strangers and enemies; provisions for exercise of the “common counsel” of the citizenry in consenting to new laws, provisions for common consent to the elections of officials; a system of formal adjudication by fellow citizens (‘peers’) of the person who claimed vindication of his rights or against whom a claim for vindication of rights had been made by another; a system of informal arbitration of civil disputes, lightly supervised by town authorities; strict regulation of economic activities through guilds of artisans and merchants; and man other provisions for popular participation in the life of the community.”
I beg forgiveness for suspecting the possibility that the prevalence of these features among European cities are correlated with their commercial success and that the correlation is particularly pronounced among those listed by Magoon.
I’m trying to make sense of Arnold the cultural analyst vs. Arnold the economist. Can someone please help with what seems like a contradiction?
Arnold the cultural critic (above):
His argument is that the cost of living is higher for young adults today because of what he calls a decline in social capital. I would call it costly cultural change.
A stay-at-home mom provides a positive externality. If there are two stay-at-home moms, or part-time-working moms, living close to one another, then neither one needs to pay for as much day care. Once again, I praise the cul de sac, where children keep one another occupied and parents can share oversight responsibilities.
Arnold the economist (2024):
People who think in terms of production complain that housework belongs in GDP. But I say that if a woman (or a man) engages in housework, that is economic malfunctioning.
That’s a very bizarre thought you’ve surfaced. Could we be misunderstanding it? I can’t imagine it being appropriate for an economist to rule as settled that people want somebody not related to them in their house all the time.* And I’m not sure I would want to know what a house is like where the people do no housework because “there are machines” in it. You wait a long time for those machines to start up the housework all by themselves. I guess in certain social milieus it is still declasse not to have “help”. I would consider that I had taken a wrong turning somewhere if I did not have my house to myself, and if had lost the means to take care of myself.
*A girlfriend of mine, in truth no very good housekeeper, but then she did always work full-time, even if from home, wanted for years to let go her house cleaner, not because she did a bad job of cleaning, but because my friend inevitably just kept getting mixed up in this woman’s life, and her dysfunctional family. She just wanted freedom from people.
They finally separated. I noticed no real difference in her house. It turns out having somebody clean once a week just isn’t enough to overcome people’s natural inclinations to be tidy, or not.
My views are even stranger. My wife's contribution to the care of your children should count as GDP, but my wife's contribution to the care of my children should not.
Yes, I concede that it is most accurate for developing economies. For rich economies, I guess it’s the worst form of measurement ever invented - except for all the others.
Our family genuinely enjoys being tarred with the "economic malfunction” label as we clean the house, tutor our daughter or cook our own meals. I always imagine Arnold grimacing in disgust as we go about joyfully completing the household chores and projects.
It’s pretty straightforward: the value Arnold is suggesting would have to be more than the gap between the infrastructure cost and what residents currently pay. And then the actual payment for the roads has to come from somewhere. All the things with positive externalities that are not pecuniary still need to get paid for from somewhere.
Cul de sacs are nice for the people on them at a cost that falls on other people. The positive externality is very local; the cost is not.
That's a reasonable analysis; my only quibble is that the positive externalities of happy families and more children (certainly above replacement rate) are not hyperlocal in a town or city. I think there are other things that Strong Towns gets right, e.g., the cost of big-box stores and strip malls compared to traditional downtowns; my sense is that I would focus my urban improvement efforts there before blocking cul-de-sacs.
I think it depends on the cul-de-sac. It really needs to be right sized. A 90s development near my old house had huge cul-de-sacs, sort of convex, I guess so as to shed water, so that the center was higher than their driveways; with about eight houses around them like pie pieces, each with a tiny strip of street frontage. The paved area was so large that people treated it as a parking lot and parked their cars in that manner. Ideally there would’ve been a little island in the middle with trees. The streets in that city were asphalt not concrete and it was hot as fire out there. Not the charming thing described by AK who has the good fortune to live in a place where the exercise of good taste is not culturally discouraged.
If you live in Austin, the difference may be seen in the cul de sacs off Escarpment/Wm. Cannon - forget the neighborhood name - and a couple of the cul de sacs in a rather badly done (despite being a bit more upscale) neighborhood called Treemont.
In general I think cul de sacs are okay esp. if backing to green space, but it becomes a little more important who your neighbors are. It’s all tighter. And parking can be weird. I did live on a cul-de-sac for about a year and when I moved in, the people had to give me a tutorial about how we managed to set up the trash cans and yet park and so forth. There was a stray cat colony, and they were so spoiled - they just lay in the middle like drug addicts, and refused to move when you pulled out into the cul-de-sac.
My child didn’t get that either. Ours was a fairly busy street, when we left apartment living as he entered third grade. The upside was that everybody knew where we lived, saw us outside, and so we had a lot of contact with the friends that way. And he could walk wherever he wanted to go.
But that chip and seal stuff really is not a great surface for anything.
It was not a cul-de-sac, but I was lucky to grow up on a street that was quiet enough for ample play. Concrete: we never wore shoes.
Even so we would look down the block and holler, “turning” or “car” so as to clear the street efficiently and stop the game if it was being conducted in the street and not a front yard.
The street was not too wide, which was good. Cars kept to a sedate pace for the most part. It had the cul-de-sac aspect in that it was the back of the subdivision, and there was no real reason for anyone to drive there who didn’t live there. Also, at that time people didn’t get presents delivered to their home every day. And no constant whine of lawn crews.
People cut their grass when it needed it not because they felt bad about not giving Juan work every week.
Finally, an underrated aspect was there were long driveways to detached garages, and it was rare for people who lived there to park in the street.
I contrast that with some of the denser (in terms of lot size) streets where we have looked at houses occasionally. The cars line the streets, preventing a safe view of things, and shrinking it for playing; and fill the driveways, generally blocking the sidewalks in that manner as well. Garages are converted or full of stuff.
Seems not a good play situation at all.
Anyway, kids mainly play outside with their parents now that is to say they go on bike rides altogether and that’s the outdoor time. So my remarks probably are only apposite to there being a kid world outside, where kids play games.
I live in in an area with thousands of mid-century homes. People like to fix them up - in particular they like to add onto them. This is disappointing for me if I notice that an attractive modest-looking one has gone for sale and I go to the open house and find that they’ve saddled it with often pointless extra square footage at the back, at the loss of yard, which also usually makes the OG interior of the house darker and more formless.
I do like when they’ve added a screened porch.
People like these houses, there is no barrier here to replacing them - and clearly in decades past, especially, there were some really great design build firms remodeling them.
The work of the flippers, however, is of a different quality altogether. In fact, I would not associate remodeling versus new building as alternatives in connection with the flippers. 9/10 times no one could see their work and hope that they were given the charge of building a house from scratch. Mostly what they do is take away, take away the walls. Take away the built-ins. Take away any ornament. The result looks like nothing so much as a rollerskating rink with a kitchen stuck in a corner.
I wonder sometimes about the more recent housing developments. The “rooftops” where every roof is the same, and the houses are virtually all the same, often identical.
I think that’s gonna be a tough nut to crack for the home remodeling industry.
What could you really do to a house like that? Although often comparatively big and two-storied, they are often built on a sort of shotgun principle.
You can’t really change the exterior, at least in the neighborhoods where they have their deed restriction standards to keep. And I don’t think you’d wanna invest in a house in a neighborhood where they didn’t even care to that degree. Everything will remain beige or white. The front elevation is often mostly garage with rear attached house.
The yard barely deserves the name so the not-quite-right addition is out, at least.
The mid-century neighborhood is a rich smorgasbord by comparison and I suspect that’s one reasonable people like it.
That and the fact that there is enough non-impervious cover to support big trees.
That said, I rather long for a new house. I don’t really want to look at another Pacific Electric breaker box, with an inspector telling me it’s going to burn down the house and an electrician showing up and saying look it’s been here for 50 or sixty years and nothing happened.
So if I should ever buy that new house, if I could bring myself to do it, I’d better be pretty sure it’s a cool and comfortable house because it seems impervious to change.
Joey is just wrong? (a) Every low slung ranch on a buildable single-family lot in prime Northeastern suburbs is a target for builders to buy and replace completely with a mcmansion. That's literally their business. Single family completions in both the NE and MW have been flat for a long time--the NE especially is basically a flat line up until the GFC, followed by a step-down, and then another flat line. All the growth is in the South and to a lesser extent the W, and zoning has nothing to do with it. Where are you going to put new single family homes in leafy acela corridor burbs that have been around for 100+ years? The unmentioned reality for team build moar is that there aren't vacant single family lots lying around in Westchester, etc. It's not a zoning problem--it's a "we need more nice suburbs problem." (b) the reason that SF builds have gone down nationally is that demand is soft--builder margins are at GFC levels. And yes, people will renovate when they can't buy, and they won't buy until the bid-ask spread closes, which it won't until rates come down or incomes catch-up to the change in rates.
I also wonder if the renovations number isn't an artifact of the age of the existing housing stock. In other words, there was a boom of home building in the the past which has gotten to the age where everything is really dated or in need of repair. This sounds a lot like my neighborhood, when most homes were built around the same time decades ago, and now there is a sudden spike in everyone doing renovation work at the same time. This would be like noticing a sudden surge in the relative ratio of old-age-associated medical procedures to maternity ward procedures, as a past baby boom gets to the age where a lot of them suddenly need those elderly procedures.
And yet… if it were truly much easier to build much more market-rate housing, I suspect that an enormous fraction of the remodeling would not get done.
Because it would be more efficient for people to buy the house of their choice than to remodel their existing one. Since economically most remodels are economic destroyers of capital (I.e. the increase in the value of the house is much less than the cost of the remodels.
Yes there are exceptions, and yes, of course, most *repair* work does increase the value of the propoerty.
AI and bankrupcy: "Plenty of capital" IFF the Fed does not allow a sectoral demand shock to metstasize into a recession, falling price level, and so on. Will we have a Powell or a Bernanke when it happens?
"The question is why useful knowledge produced sustained economic growth in a small number of societies and not in countless others."
Might one consider whether there were other commonalities in the successful early commercial societies Magoon lists?
For example:
(1) Urban Autonomy via Charters: Townspeople sought and often obtained charters from kings or emperors that granted legal independence from local feudal lords, allowing cities to self-govern, regulate trade, collect taxes, and administer justice independently.
(2) Communal Oaths and Mutual Defense: The foundation of many urban communities, particularly in Northern Italy and the Low Countries, was the medieval commune, a sworn alliance of citizens promising mutual physical defense and peace within the city walls, effectively turning cities into self-governing corporate entities.
(3) Exemption from Feudal Obligations: Urban residents were generally considered "free men," distinct from the serfdom prevalent in rural areas; a common proverb held that "the air of the town makes men free," meaning a serf could gain freedom by residing in a city for a year and a day.
I suspect one might be able to make a case for these as important factors. I have in mind Harold J. Berman's Law and Revolution: The Formation of the Western Legal Tradition as a source providing some ideas in that regard but unfortunately don't have a copy to hand to plumb the question myself.
Ah, found it. There on the desk stack instead of the shelf. Always the last place you look. So Chapter 12, “Urban Law” treats with the question. Interestingly, at least to me, Berman writes:
“Such legal institutions as the corporate charter of the city, the alienability of urban property, and the liberties of the citizens are to be understood partly as manifestations of ideas and values and partly as instruments of economic and political power, but also to be understood as significant historical events and as parts of significant sequences of historical events.”
He then looks at some urban areas including those of the Low Countries, a handful of German cities, and the Italian cities, before identifying some commonalities. One that seems to be oft ignored is the communitarian character of urban law in those cities:
“The communitarian character of urban law took the form not only a covenantal relationship but also of a participatory relationship among the members. This participatory relationship was reflected in legal requirements of mutual aid among citizens and mutual protection against strangers and enemies; provisions for exercise of the “common counsel” of the citizenry in consenting to new laws, provisions for common consent to the elections of officials; a system of formal adjudication by fellow citizens (‘peers’) of the person who claimed vindication of his rights or against whom a claim for vindication of rights had been made by another; a system of informal arbitration of civil disputes, lightly supervised by town authorities; strict regulation of economic activities through guilds of artisans and merchants; and man other provisions for popular participation in the life of the community.”
I beg forgiveness for suspecting the possibility that the prevalence of these features among European cities are correlated with their commercial success and that the correlation is particularly pronounced among those listed by Magoon.
I’m trying to make sense of Arnold the cultural analyst vs. Arnold the economist. Can someone please help with what seems like a contradiction?
Arnold the cultural critic (above):
His argument is that the cost of living is higher for young adults today because of what he calls a decline in social capital. I would call it costly cultural change.
A stay-at-home mom provides a positive externality. If there are two stay-at-home moms, or part-time-working moms, living close to one another, then neither one needs to pay for as much day care. Once again, I praise the cul de sac, where children keep one another occupied and parents can share oversight responsibilities.
Arnold the economist (2024):
People who think in terms of production complain that housework belongs in GDP. But I say that if a woman (or a man) engages in housework, that is economic malfunctioning.
https://arnoldkling.substack.com/p/the-gdp-indicator?utm_source=publication-search
So, which is it? A costly cultural change or economic malfunctioning?
That’s a very bizarre thought you’ve surfaced. Could we be misunderstanding it? I can’t imagine it being appropriate for an economist to rule as settled that people want somebody not related to them in their house all the time.* And I’m not sure I would want to know what a house is like where the people do no housework because “there are machines” in it. You wait a long time for those machines to start up the housework all by themselves. I guess in certain social milieus it is still declasse not to have “help”. I would consider that I had taken a wrong turning somewhere if I did not have my house to myself, and if had lost the means to take care of myself.
*A girlfriend of mine, in truth no very good housekeeper, but then she did always work full-time, even if from home, wanted for years to let go her house cleaner, not because she did a bad job of cleaning, but because my friend inevitably just kept getting mixed up in this woman’s life, and her dysfunctional family. She just wanted freedom from people.
They finally separated. I noticed no real difference in her house. It turns out having somebody clean once a week just isn’t enough to overcome people’s natural inclinations to be tidy, or not.
My views are even stranger. My wife's contribution to the care of your children should count as GDP, but my wife's contribution to the care of my children should not.
Or perhaps GDP is a flawed and usually misleading construct.
Or perhaps GDP is a flawed but yet nevertheless a pretty good construct for measuring… pretty much all the things that matter most.
https://lantpritchett.substack.com/p/economic-growth-is-enough
Yes, I concede that it is most accurate for developing economies. For rich economies, I guess it’s the worst form of measurement ever invented - except for all the others.
Our family genuinely enjoys being tarred with the "economic malfunction” label as we clean the house, tutor our daughter or cook our own meals. I always imagine Arnold grimacing in disgust as we go about joyfully completing the household chores and projects.
What if your wife makes a sandwich for both her own child and her little friend, sushi’s child?
It's interesting to me that the Strong Towns folks don't have a way to account for the social capital and community connections that cul de sacs create. See https://www.strongtowns.org/journal/2020-8-10-i-did-the-math-on-my-towns-cul-de-sacs for their effort to run the numbers. I buy into your math more than theirs.
It’s pretty straightforward: the value Arnold is suggesting would have to be more than the gap between the infrastructure cost and what residents currently pay. And then the actual payment for the roads has to come from somewhere. All the things with positive externalities that are not pecuniary still need to get paid for from somewhere.
Cul de sacs are nice for the people on them at a cost that falls on other people. The positive externality is very local; the cost is not.
That's a reasonable analysis; my only quibble is that the positive externalities of happy families and more children (certainly above replacement rate) are not hyperlocal in a town or city. I think there are other things that Strong Towns gets right, e.g., the cost of big-box stores and strip malls compared to traditional downtowns; my sense is that I would focus my urban improvement efforts there before blocking cul-de-sacs.
I think it depends on the cul-de-sac. It really needs to be right sized. A 90s development near my old house had huge cul-de-sacs, sort of convex, I guess so as to shed water, so that the center was higher than their driveways; with about eight houses around them like pie pieces, each with a tiny strip of street frontage. The paved area was so large that people treated it as a parking lot and parked their cars in that manner. Ideally there would’ve been a little island in the middle with trees. The streets in that city were asphalt not concrete and it was hot as fire out there. Not the charming thing described by AK who has the good fortune to live in a place where the exercise of good taste is not culturally discouraged.
If you live in Austin, the difference may be seen in the cul de sacs off Escarpment/Wm. Cannon - forget the neighborhood name - and a couple of the cul de sacs in a rather badly done (despite being a bit more upscale) neighborhood called Treemont.
In general I think cul de sacs are okay esp. if backing to green space, but it becomes a little more important who your neighbors are. It’s all tighter. And parking can be weird. I did live on a cul-de-sac for about a year and when I moved in, the people had to give me a tutorial about how we managed to set up the trash cans and yet park and so forth. There was a stray cat colony, and they were so spoiled - they just lay in the middle like drug addicts, and refused to move when you pulled out into the cul-de-sac.
Reasonable people may differ. Even the hot asphalt sounds better than growing up on a busy street as I did. It cuts the neighborhood in half
My child didn’t get that either. Ours was a fairly busy street, when we left apartment living as he entered third grade. The upside was that everybody knew where we lived, saw us outside, and so we had a lot of contact with the friends that way. And he could walk wherever he wanted to go.
But that chip and seal stuff really is not a great surface for anything.
It was not a cul-de-sac, but I was lucky to grow up on a street that was quiet enough for ample play. Concrete: we never wore shoes.
Even so we would look down the block and holler, “turning” or “car” so as to clear the street efficiently and stop the game if it was being conducted in the street and not a front yard.
The street was not too wide, which was good. Cars kept to a sedate pace for the most part. It had the cul-de-sac aspect in that it was the back of the subdivision, and there was no real reason for anyone to drive there who didn’t live there. Also, at that time people didn’t get presents delivered to their home every day. And no constant whine of lawn crews.
People cut their grass when it needed it not because they felt bad about not giving Juan work every week.
Finally, an underrated aspect was there were long driveways to detached garages, and it was rare for people who lived there to park in the street.
I contrast that with some of the denser (in terms of lot size) streets where we have looked at houses occasionally. The cars line the streets, preventing a safe view of things, and shrinking it for playing; and fill the driveways, generally blocking the sidewalks in that manner as well. Garages are converted or full of stuff.
Seems not a good play situation at all.
Anyway, kids mainly play outside with their parents now that is to say they go on bike rides altogether and that’s the outdoor time. So my remarks probably are only apposite to there being a kid world outside, where kids play games.
Good comment by Tyler.
It's not true, though, that the big 3 controlled 80% of the market. They didn't control it. They sold to it.
I live in in an area with thousands of mid-century homes. People like to fix them up - in particular they like to add onto them. This is disappointing for me if I notice that an attractive modest-looking one has gone for sale and I go to the open house and find that they’ve saddled it with often pointless extra square footage at the back, at the loss of yard, which also usually makes the OG interior of the house darker and more formless.
I do like when they’ve added a screened porch.
People like these houses, there is no barrier here to replacing them - and clearly in decades past, especially, there were some really great design build firms remodeling them.
The work of the flippers, however, is of a different quality altogether. In fact, I would not associate remodeling versus new building as alternatives in connection with the flippers. 9/10 times no one could see their work and hope that they were given the charge of building a house from scratch. Mostly what they do is take away, take away the walls. Take away the built-ins. Take away any ornament. The result looks like nothing so much as a rollerskating rink with a kitchen stuck in a corner.
I wonder sometimes about the more recent housing developments. The “rooftops” where every roof is the same, and the houses are virtually all the same, often identical.
I think that’s gonna be a tough nut to crack for the home remodeling industry.
What could you really do to a house like that? Although often comparatively big and two-storied, they are often built on a sort of shotgun principle.
You can’t really change the exterior, at least in the neighborhoods where they have their deed restriction standards to keep. And I don’t think you’d wanna invest in a house in a neighborhood where they didn’t even care to that degree. Everything will remain beige or white. The front elevation is often mostly garage with rear attached house.
The yard barely deserves the name so the not-quite-right addition is out, at least.
The mid-century neighborhood is a rich smorgasbord by comparison and I suspect that’s one reasonable people like it.
That and the fact that there is enough non-impervious cover to support big trees.
That said, I rather long for a new house. I don’t really want to look at another Pacific Electric breaker box, with an inspector telling me it’s going to burn down the house and an electrician showing up and saying look it’s been here for 50 or sixty years and nothing happened.
So if I should ever buy that new house, if I could bring myself to do it, I’d better be pretty sure it’s a cool and comfortable house because it seems impervious to change.
Joey is just wrong? (a) Every low slung ranch on a buildable single-family lot in prime Northeastern suburbs is a target for builders to buy and replace completely with a mcmansion. That's literally their business. Single family completions in both the NE and MW have been flat for a long time--the NE especially is basically a flat line up until the GFC, followed by a step-down, and then another flat line. All the growth is in the South and to a lesser extent the W, and zoning has nothing to do with it. Where are you going to put new single family homes in leafy acela corridor burbs that have been around for 100+ years? The unmentioned reality for team build moar is that there aren't vacant single family lots lying around in Westchester, etc. It's not a zoning problem--it's a "we need more nice suburbs problem." (b) the reason that SF builds have gone down nationally is that demand is soft--builder margins are at GFC levels. And yes, people will renovate when they can't buy, and they won't buy until the bid-ask spread closes, which it won't until rates come down or incomes catch-up to the change in rates.
I also wonder if the renovations number isn't an artifact of the age of the existing housing stock. In other words, there was a boom of home building in the the past which has gotten to the age where everything is really dated or in need of repair. This sounds a lot like my neighborhood, when most homes were built around the same time decades ago, and now there is a sudden spike in everyone doing renovation work at the same time. This would be like noticing a sudden surge in the relative ratio of old-age-associated medical procedures to maternity ward procedures, as a past baby boom gets to the age where a lot of them suddenly need those elderly procedures.
I am quite sure you are correct.
And yet… if it were truly much easier to build much more market-rate housing, I suspect that an enormous fraction of the remodeling would not get done.
Because it would be more efficient for people to buy the house of their choice than to remodel their existing one. Since economically most remodels are economic destroyers of capital (I.e. the increase in the value of the house is much less than the cost of the remodels.
Yes there are exceptions, and yes, of course, most *repair* work does increase the value of the propoerty.