How to Install Drywall

Scott BuchananLeave a comment

Nearly every interior wall and ceiling in every home in America is covered with sheetrock = drywall = gypsum board. Sheetrock (a brand name for drywall) consists of an interior layer of rigid gypsum (a mineral composed of calcium sulfate dihydrate) plus some additives, with outside layers of strong paper or fiberglass. It normally comes in 4 ft x 8 ft sheets.

Normal houses have a framework of mainly 2×4 or larger wood lumber. Each wall has vertical 2×4 studs, spaced every 16”. Sheetrock is trimmed to size, and nailed or (these days) screwed into the studs.

That is the theory, anyway.

I have never done this stuff at large scale before, other than clumsily patching occasional small dings in a wall. A little while ago, I got to experience the process, hands-on. I was part of a team that helped someone whose basement had flooded. We cut out the lower ~4 ft of drywall, and replaced it with fresh drywall.

First, how to you cut drywall? A long, straight cut is accomplished by drawing a straight line and cutting along it, all the way through one layer of the facing paper. Then you hang the drywall sheet on the edge of a table, and crack the interior gypsum layer. Then you cut the other side of the paper. The end result of such a cut is like this:

Typically, you install drywall on the ceiling first. Then the top 4 ft of the walls, then the bottom 4 ft of the walls. You butt the pieces close to each other. For the lowest piece of drywall, you insert a curved metal wedge under it, and step on the wedge with your foot to lift that drywall piece to butt its top edge up against the upper piece. If you look carefully near the middle of the following photo, you can see the red wedge I used to jack up that small lower piece of drywall. It’s OK to leave a gap between the floor and the lower edge of the bottom drywall, since that gap will be covered by baseboard.

This was in a bathroom. I cut the lower green pieces with a little hand power saw, and screwed them into the studs, using the green and black driver visible on the stand in the left foreground.

The next two photos are before and after of a bedroom wall, again showing the bottom course of sheetrock we installed.

Filling in Cracks and Holes

As you can see, at this stage, there are like ¼” cracks between the installed sheets of sheetrock, and the mounting screw holes are visible. These imperfections are filled in with goo called joint compound, or “mud.” The mud is applied with a “knife” like this:

Cracks are covered with paper or fiberglass tape, with mud smeared over the tape. Typically, three layers of mud are needed to achieve perfect, smooth coverage. Each layer must dry hard before applying the next layer. Each layer may be sanded lightly as needed.

 A key technique is to tilt the knife so the mud is maybe 1/16” thick over the tape or over a screw, but taper the mud to zero thickness on the wall away from the tape or screw. This feathering is essential; if your mud layer ends with appreciable thickness instead of feathering, you have to do a lot of sanding to get a smooth blending into the plain drywall at that edge. Pro tip: carefully stir more water into the joint compound as needed to keep it wet and flowing, especially for overnight storage. This video from Vancouver Carpenter displays mudding technique.

That is mainly it. For perspective and confidence building, it is helpful to work with an expert, as I was able to do.

The theory of the firm remains unfinished

mdmakowskyLeave a comment

Why do firms exist? Transaction costs. Specialization. Returns to scale. Risk pooling. Reputation. Institutional capital. Is that everything? Probably not.

It wasn’t that long ago we were talking about the prevalence of zero marginal productivity employees within firms. Perhaps we should add low (zero?) marginal productivity employers to our list of considerations.

Graduate students rejoice, there remains more work to be done.

What is an AI Skill?

Zachary BartschLeave a comment

If you’ve been on LinkedIn recently, then you may have seen the chatter about teaching your artificial intelligence to have various skills. I saw one post by a guy who claimed to have created several skills, each representing a tech billionaire.

At first, I thought “I am behind the 8-ball. What is this new thing?”. Obviously I know what the word “skill” is and how people use it, but I had not encountered its use in the context of AI having it. What does it mean for an AI to have a skill? I somewhat dreaded the the work of learning the new skill of teaching my AI skills.

Then I had lunch with a computer scientist and I learned that skills are nothing new.

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Does Broadband Bring Jobs?

James BaileyLeave a comment

No, according to a new paper from the University of Georgia’s Michael Kotrous.

Many people expected it to, partly by thinking about the jobs that could benefit from faster internet, and partly by looking at the experience of Chattanooga, Tennessee. Chattanooga was the first major city to get gigabit-speed broadband, and they did see a huge improvement in the labor market right afterwards:

But as the graph shows, the introduction of broadband there coincides with the end of the nationwide Great Recession. Was the boom in jobs after 2009 because of the broadband, or would it have happened anyway as party of the recovery from recession? A synthetic control strategy shows that Chattanooga’s recovery was pretty typical for cities like it, so the broadband angle probably didn’t do much:

This might seem like a historical curiosity about one city, but the federal government is currently trying to spend $42 billion to expand broadband to more places, partly motivated by the idea of bringing jobs. I thought the Broadband Equity Access and Deployment Program‘s big problem is how slow it is- Congress created with the Infrastructure Investment and Jobs Act of 2021, but money didn’t start getting sent out until late 2025, and it could be many more years before it leads to any useable broadband. Even then it now seems unlikely to bring jobs, though there could be other benefits.

This paper’s author Michael Kotrous is currently on the economics job market. As his former professor and coauthor, I recommend hiring him if your school gets the chance.

Gasoline Prices Have Increased at Record Rates, but Remain At About Average Levels of Affordability

Jeremy Horpedahl1 Comment

In the (so far) short military engagement with Iran, crude oil and gasoline prices have jumped significantly. The three-week change in gasoline prices at the pump for US consumers was 27 percent, the largest three-week increase consumers in the US have ever seen (with data back through the 1990s). The four-week increase is also a record.

Despite this sharp increase, gasoline prices remain near the long-run average in terms of affordability: it takes about 7 minutes of work at the average wage to purchase a gallon of gasoline. To be sure, this is a big jump of where it had been earlier in 2026, at about 5 minutes of labor. Nonetheless, gasoline is still (for now!) more affordable than it was, relative to wages, for almost all of 2022 and 2023.

A Bull Case for Tech Stocks

Scott BuchananLeave a comment

Negative headlines tend to get more attention than bland positive titles. We have seen a lot of angst in the past few months over the massive capex spend by big tech companies, with questions over whether there will be adequate returns on these investments.

There was a genuine untethered bubble in tech stocks circa 1997-2000. Companies with no earnings and no moats were given billion-dollar valuations, on the strength of a business plan sketched on a cocktail napkin. After the brutal bursting of that bubble, tech stocks repriced and then steadily strengthened for the next 25 years.

Nevertheless, it seems there is always some negative narrative to be found regarding tech stock valuations and prospects. Seeking Alpha author Beth Kindig writes that investors who were spooked by all those bubble warnings lost out big time:

Investors have been hearing “tech bubble” warnings for more than a decade — but instead of collapsing, the Nasdaq‑100 has gained 550%. If we look back ten years ago to 2015, headlines such as “Sell everything! 2016 will be a cataclysmic year” confronted investors with calls for an imminent recession. The bears made repeated claims that a “tech bubble” was about to burst with some of the world’s most prominent venture capitalists drawing parallels to the dot-com era.

What followed tells a very different story, with not only the Nasdaq-100 up 550% over a 10-year period but also high-flying stocks like Shopify returning as much as 5200% and Nvidia returning 22,000% over the same period.

It’s true that capturing those gains does not come easy. Investors had to hold through five drawdowns that were greater than 20%, including two declines greater than 30%, while tuning out a constant stream of bearish commentary – often from reputable sources – proclaiming the long-awaited tech bubble has finally “popped.” Despite these strong convictions, the long-term trend remained intact.

She presented this graphic which illustrates many of the negative headlines over the past decade:

While she acknowledges that traditional cloud computing applications are slowing in growth rates, and there will be general market price volatility, she contends that AI is still in an acceleration phase:

The dot-com era was defined by oversupply and fragile fundamentals; today’s AI buildout is being led by the world’s strongest operators, backed by real revenues and profits, and constrained by hard limits in compute, memory, networking, and power.

The more important question isn’t whether we’ll see a pullback — it’s where we are in the cycle. AI is still transitioning from the training phase into the inference phase, where monetization will accelerate and the “capex with no revenue” narrative will begin to fade. In other words, the loudest bubble debates are arriving before the most important revenue engine fully turns on.

Those of us who are long tech stocks hope she is correct.

The Heartwarming Sincerity of Gravity Falls

Joy BuchananLeave a comment

I learned about the children’s cartoon Gravity Falls this year from my kids.  

Bluey is wonderful for kids and adults, but it does feel like a baby show since the younger dog Bingo is 4. If you are getting out of the baby stage with kids, Gravity Falls is great next step with 12-year-old twins. The jokes are funny, especially for American parents today who would have grown up with the cultural references.

Gravity Falls has emotional depth. These days the young folks are in “situationships” trying not to catch feelings (I hear). In Gravity Falls, everyone catches feelings so hard. It’s tragically beautiful like Anna Karenina.  You can watch it on Disney+ and YouTube.  

The Economic Story of Mike Mulligan and His Steam Shovel

Zachary Bartsch1 Comment

Mike Mulligan and His Steam Shovel, by Virginia Lee Burton, is a classic 1939 children’s book about a man, Mike Mulligan, and his beloved steam shovel, Mary Anne, who are replaced by modern machinery. They get one last chance to demonstrate their worth by digging the cellar for a new town hall in a single day.

This book is more than just a nostalgic children’s story with a happy ending. This is a tale about economic history, comparative advantage, non-pecuniary benefits, labor and capital heterogeneity, and, of course, transaction costs.

Here’s some background. Historically, excavating or earth-moving equipment was powered by steam. Much like a steam engine locomotive (train), a steam shovel burns coal to heat water in a boiler, creating steam that can drive pistons that operate the mechanics. The result is machinery that can move a greater volume of soil at a faster speed than humans with simple hand shovels. Advancements in oil extraction and refining and internal combustion made the steam methods obsolete. Diesel or gasoline made earth movers safer, faster, and larger all because there was no need to build high pressures from boiling water. Steam pressure in the field takes a lot of time and is dangerous. 

Here is how the story goes. Mike enjoys his earth-moving work with his steam-shovel and is proud to be more productive than hand-shovels. One day, diesel, electric, and gasoline-powered shovels arrive. They’re bigger and better than Mary Anne. She is now obsolete. It’s unclear whether Mike’s skills are transferable to the newer equipment, but he implicitly prefers working with Mary Anne.  Together, they can’t compete in the urban areas where the value placed on quick excavation is high. So, they flee to the countryside.

The text doesn’t say why the newer shovels aren’t in the countryside. Let’s address that first. The new shovels haven’t spread to the rural areas because the opportunity cost is too high. Diesel Shovels are expensive and the owners/operators need revenue from many jobs in order to pay for their equipment in a reasonable amount of time and earn a positive return. Rural areas don’t have the same willingness to pay for as many projects, so less specialized capital is limited by the smaller extent of the market. Clearly, a higher cost of capital – the cost of the loan that pays for the diesel shovels or the alternative uses of the resources – accentuate the necessity for project volume.

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Is a US Oil Export Ban Coming?

James Bailey2 Comments

The Iran regime’s military strategy seems to be that by bombing the oil infrastructure of their neighbors and neutral shipping, US gasoline prices will go so high that Americans will demand an end to the war.

How many Americans would be willing to pay $6/gallon gas for months for a ~50% chance of toppling a regime that oppresses 90 million people and destabilizes its region on the other side of the world? Probably only a minority of voters, especially when the President didn’t make the case to the American people or Congress beforehand.

But the US produces more than enough oil for its own needs. Why does the Strait of Hormuz being closed mean higher gas prices here? Only because US oil companies can sell to global markets, and they won’t choose to sell a barrel of oil to a US refiner for $60 when they could sell it to a foreign refiner for $100. If the government took away the foreign option, US oil producers would sell to US refiners at prices consistent with pre-war sub-$3/gallon gasoline.

Naturally there would be costs to an export ban. US oil producers would miss out on windfall profits, while Russian producers would benefit. Foreign customers of US oil, many of them in allied countries, would be angered by the missed shipments and global oil prices would soar further.

But if the US administration wants to avoid a midterm wipeout driven by high gas prices, I see only 3 options:

  1. Get lucky and see the Iranian regime fall quickly
  2. Negotiate an end to the war quickly (which might itself be unpopular if they can’t get a good deal) or just declare victory and go home (but its not clear whether Iran would re-open the strait now just because the US stopped bombing)
  3. Restrict Exports

I say “restrict” not “ban” because I don’t think a complete export ban is necessary to stabilize US prices. You could instead do an export tax (high enough to stop many exports but low enough to allow the buyers with the highest values / fewest alternatives to stay in the market), or you could do a ban but allow a few export waivers for favored buyers or sellers (which seems like Trump’s style), or similarly a quota limiting exports to a certain number (say, limit each company’s monthly exports to 90% of their volume in the same month last year).

This has an obvious precedent: the Biden administration stopped issuing new permits to export liquified natural gas in 2024 to prevent prices spiking here during the Ukraine war (which led to even higher prices for our European allies). But a total ban on oil exports would be a much bigger deal.

Will the Trump administration actually try something like this? It will be an interesting test of US political economy to see what happens when the interests of the military-industrial complex conflict with the interests of oil producers.