The area from Sevierville, TN to the peak of the Smoky Mountains is a popular destination for summer road trips.
Much of the American Southeast is too hot in July for hiking. The nice thing about the Great Smoky Mountains National Park is that you can keep driving up in elevation until you get to 70 degrees F or less.
The problem with the Smoky Mountains is that too many people want to go. The economist Donald Shoup has written about The High Cost of Free Parking. Entry to the national park is still free, however as of 2023 parking is paid. Good for them. The fee is very cheap. You can print a pass before you go or easily buy one on the way in.
The parking pass didn’t deter many people when we went in 2023. I recommend going early if you want to be able to park near a trailhead, or if you want to avoid a line getting into the Clingman’s Dome parking lot.
Our family has a running joke about “the pancake cabin people”. As we drive into the mountains in the morning, we pass parking lots full of cars outside of restaurants called pancake cabins. As long as you are up early enough to beat the pancake cabin people, you should be able to park where you want to.
There are more attractions in the national park than you could see in one day. The most dramatic view is at the top of Clingman’s Dome. The most historic educational sites are at Cades Cove. The best swimming (that I know of) is in the creek at Chimneys picnic area.
There are dramatic lookouts that you can drive right up to. Cades Cove is mostly a driving experience with lots of optional stops (closed to cars on Wednesdays).
With little kids in tow, it’s hard to make progress on the hikes. The map says just 2 miles to a waterfall. Sounds great. We make it 0.3 miles in. Then someone demands to be carried. Someone trips and breaks down crying. Our snacks are gone. We turn around and return to the car… it’s all good as long as you get excited about leaves and bugs. If you are in the stroller stage of life, don’t expect to get far on any hikes.
If you get a hotel within an hour of the national park on the Tennessee side, there is a lot to do. I might call it “the Orlando of the mountains.” Dollywood is darling at Christmas time.
Years ago, I sent out a note from Chattanooga, a few hours away in Tennessee. That’s another cute green place with hiking and restaurant options, on a smaller scale than the Smoky’s area. Their aquarium is fantastic. It’s neat how their “River building” starts by showing how small streams in the Smoky Mountains feed into the Tennessee River.
We have all heard of the prohibition era. Popularly, it refers to the period from 1920-1933 during which it was illegal to sell, transport, and import alcohol in the US. National prohibition was enacted by the 18th amendment and repealed by the 21st amendment. That’s the basic picture.
But did you know that there were state alcohol prohibitions prior to the national one? In fact, there were 3 major waves of state alcohol prohibitions. The first was in the 1850s, the 2nd was in the 1880s, and then the 3rd preceded the 18th amendment. The image below illustrates the number of states that had statewide dry policies. You can see the first two waves and then the tsunami just prior to 1920.
I just found out I’ll be receiving a Course Buyout Grant from the Institute for Humane Studies. It will allow me to teach less next year in order to focus on my research on how Certificate of Need laws affect health care workers.
I’m happy about this because I think this research is valuable and time is my main constraint on doing it (especially doing it quickly enough to inform ongoing policy debates in several states). But I’m also happy because I finally got what I consider to be a “true” grant after many rejections.
I’ve received research funding many times before (e.g. Center for Open Science funding for replications), but it was always relatively small amounts that went directly to me. True grants tend to be larger and to be paid directly to the university. That’s the case with the course buyout grant, which essentially pays the university enough that they can hire someone else to teach my class.
I may have lost count but I’m pretty sure this was the 13th “true grant” I have applied for, and the 1st I will actually receive. Academics have to get used to rejection, since we need to publish and decent journals tend to reject 80%+ of the articles they receive. But for some reason I’ve found grants much harder even than that. From some combination of skill, luck, and targeting lower-tier journals than perhaps I could/should, my acceptance rate for journal articles is probably nearing 50%. I expected this to translate over to grants but it absolutely did not, they seem to be a much different ballgame, one I’m still figuring out.
I’d like to share some of those past misses, both to let junior people see the bumpy road behind success (like a CV of failures), and to try to extract lessons from an admittedly small sample. These proposals were not funded, and probably weren’t even close:
Peterson Foundation US 2050
MacArthur Foundation 100 & Change
RI INBRE (2x)
National Institute for Health Care Management (1x, waiting to hear but probably about to be 2x)
What did these failures of mine all have in common? Me, of course. This is not just a truism; in most of these cases I was applying for major grants solo as an assistant professor without previous funding. The usual advice is to work your way up with smaller grants or, preferably, as the collaborator of a senior professor with lots of previous funding who knows how things work. I knew that would be smart but I’ve tended to be at institutions without senior people in similar fields; almost all my research has either been solo or coauthored with students or assistant professors. Even my PhD advisor was a brand-new assistant professor when we started working together. I had good reasons for ignoring the usual advice to work with well-known seniors, and it has mostly served me well, but grants seem to be the exception.
Twice, I think I did come close on grant proposals, and both times it involved help from seniors at other institutions who had lots of previous funding. At one foundation that funds a lot of social science, my senior coauthor and I got glowing external reviews, but the internal committee rejected us on the grounds that we could do the project without their funding. They were right in the sense that we did do project anyway with no funding; it got published and even won a best paper award. But with their funding we would have done it faster and better and they would have gotten credit for it.
I do think it is smart for funders to consider whether the research would happen anyway without them, or whether their funding really improves things. But I think it is rare for funders to actually do this, and taking this rejection as advice probably led me to more rejections. I tried to propose bigger, more ambitious projects that needed expensive data so it was clear that I really needed the funding; but for most funders this probably made things worse. I have since heard several times that people who get lots of funding from major funders like NIH tend to submit proposals for research they have essentially already finished; that is why their proposals can look so thorough, credible, and polished. They then use the funding to work on their next project (and next proposal) instead of what they said it was for. That seems sketchy to me, but it’s certainly ethical to turn the proposal dial back somewhat toward “obviously achievable for me” from “ambitious and expensive”, and that’s what I’ve done more recently.
The other time I came close was with an R03 proposal to the Agency for Healthcare Research and Quality. First I got a not-close rejection, as I mentioned in the big list, where my proposal was “not discussed”. But AHRQ allows resubmission. At the prompting of my (excellent) grants office, I got feedback on the proposal from two kind seniors at other schools who get lots of funding. I rewrote the proposal based on their comments plus the rejection comments (which were actually quite detailed despite it being “not discussed”) and resubmitted it. This went way better- the resubmission got discussed with an impact score of 30 and a percentile of 17. Lower scores are better for AHRQ/NIH so this was pretty good, good enough that it might have been funded in a normal year, but 2019 was a bad year for government funding (though through some weird quirk I never actually got rejected; 4 years later their system still says “pending council review”). Again, the key to getting close was getting detailed feedback from people who know what they are talking about.
Of course, it also helps to get to know people at the funders and to become more senior yourself. It’s not surprising that my first major grant is coming from IHS given that I’ve been involved with them in all sorts of ways since going to a Liberty & Society seminar way back in 2009. Most funding goes to more senior people who have more connections, knowledge, and proven experience. This is extreme at perhaps the largest funder of research, the National Institutes of Health, where less than 2% of funded principal researchers are under age 36.
This may be the real secret for winning grants- just get older. My 12 rejections all came when I was younger than 36, while my first acceptance came less than a month after my 36th birthday.
In all seriousness, thanks to the Institute for Humane Studies, and I hope that a year from now I’ll be writing here about the great work that came out of this. For everyone with a growing pile of rejections, maybe the 13th time will be the charm for you too.
The latest CPI-U price data shows that the rate of inflation in the US has slowed significantly to just 3% in the past 12 months. That’s a huge improvement from the peak last June, when the annual rate of inflation was over 9%. Still, prices as a whole aren’t falling, and they clearly aren’t anywhere near where they were before the pandemic: using the CPI-U, prices are up over 17% since January 2020.
Lately I’ve heard many people asking a good question: will prices ever get back down to where they were? Usually they mean pre-pandemic prices, though sometimes they refer to a particular point-in-time (such as the start of Biden’s presidency). The only correct answer is “we don’t know,” but I think a likely answer for many goods and services is “no.” For many reasons, the nominal prices of most goods and services rise over time. Though this is not true for everything, of course (newer technologies are one example we often see).
But what about specific goods that we buy frequently? Will we ever see gasoline consistently below $3 per gallon again? Will we ever see milk consistently below $4 per gallon again? What about eggs and bread? And indeed, these prices are well above January 2020 levels: 23% higher for milk, 43% for bread, 45% for gasoline, and a whopping 52% for eggs. For the price data, I am using this convenient data on common food and energy goods from BLS.
For some of these items, I do think you might someday see prices fall back to levels consumers were used to from the recent past, since food and energy prices tend to be volatile. For others, though maybe not. But I think we as consumers can become overly focused on staples that we buy frequently and can easily recall the price in our heads. For example, while eggs, bread, and milk are items that we buy frequently (including being the staples of stocking up before a storm), in total these constitute just 0.6% of average consumer spending.
If instead of those 3 staples, your mind naturally anchors on produce prices, the trends look different: oranges are up 23%, but bananas are only up 10%, and tomatoes are, in fact, down 14% since January 2020. But again, these items are less than 0.5% of total consumer spending. Ideally, we shouldn’t anchor on any one subset of goods when doing a good analysis, even if it is natural for us to do so in our lives as consumers.
This is where the benefit of a price index, like the CPI-U, comes in.
Many of us desire at times to overcome insomnia, anxiety, brain fog, depression, or some other mental/emotional hindrance. Some common interventions include healthy lifestyle changes like better diet, drink more fluids, and exercise (all of which we should just do anyway), and more expensive therapies such as counseling or doctor-prescribed pharmaceuticals. These all have their places, but (in keeping with an economics blog) I’d like to call attention to another treatment modality which seems quite cost-effective and harmless*.
It has been known for decades that the electrochemical activity in our brains occurs in measurable waves. “Alpha waves” are pretty well known as a state associated with calm attention, and can be attained by meditation. These waves operate at a frequency of about 10 cycles per second, or 10 Hertz (Hz). Deeper meditation and sleep are associated with slower frequencies, while intense attention and problem-solving thought operate at faster speeds.
Ideally, your brain would automatically generate the right waves for the situation you are in, and for the most part it does. However, for some folks, their brains don’t make the most effective waves much of the time, and even for more normal folks, it can be helpful to tweak it now and then.
Ways To Shape Your Brainwaves
There are three main avenues for you to manipulate your brainwaves. These are indirect methods, neurofeedback/biofeedback, and direct stimulation. Some indirect ways are to practice various types of mindfulness or meditation, which usually move you towards alpha waves, or intense exercise can lead to alpha in the subsequent rest session.
A direct route, which involves training yourself, is to don some sort of device on your head that measures brainwaves or a correlate such as cerebral blood-flow or heartbeat, and feeds back to let you know what your brain state is. It turns out that humans (without being to explain how) are able to learn to shift their brain states if they are given feedback on whether they are getting closer or further from some desired target. Consumer devices are available in the $400-$1400 price range that can do this with varying degrees of sophistication and requiring various degrees of training and effort. More extensive and targeted training of specific frequencies in particular spots in the brain is done in the offices of neurofeedback clinicians, often as an adjunct to talk therapy. The neurofeedback can calm the animal-level fear/panic/emotional noise, such that the client can relate therapeutically with the counselor. This can be very helpful to address specific pathologies including depression (and here), anxiety, PTSD , reactive attachment disorder, and maybe even autism, but naturally it is expensive to go through a course of say ten sessions with a highly trained professional. Unfortunately, you cannot count on routine coverage by insurance.
Direct Audio-Visual Stimulation
A less-expensive way to achieve a desired brainwave state is to present yourself with (say) 10 Hz stimulation of light and sound. The theory is that your brain waves become “entrained” along with these external stimuli. Hence the name audio-visual stimulation or audio-visual entrainment (AVE).
There are many YouTube videos claiming to have embedded alpha or other frequencies. These videos often have many comments from appreciative users claiming calming or other effects, so they are certainly worth a try. The price is right. However, research studies cast doubt on whether sound alone is very effective at creating specific brainwaves. Light stimulation has been shown to evoke e.g., alpha waves.
What has been shown to work well are systems where you don headphones for the sound and lightweight “goggles” (thin opaque glasses with LEDs on the inside). Studies have shown this to help with ADD, anxiety, depression, and migraines. Perhaps the most widely produced AVE devices are the “DAVID” models from MindAlive. MindAlive is headed by David Siever, who has spearheaded numerous studies of AVE.
The AVE devices can quickly move you into desired brain states, in the comfort of your home, for just a modest (~ $400) up front cost. You can use them with your eyes open or closed. They are perhaps more usable for children and seniors than the neurofeedback modalities, where the client has to engage with some feedback and learn to make their brainwaves go where they should. [1] With AVE, you just sit back and relax and let the sound and light carry you along. However, AVE is something of a blunt instrument, stimulating the auditory and visual and linked centers in the brain, whereas regular neurofeedback can train say two specific spots in the brain to two different specific frequencies, and has more enduring effects.
My Experience with AVE
I have owned a DAVID for many years. I and my family members have used it off and on, when we happened to feel a need for it. We all find that straight down the middle 10 Hz alpha sessions make us feel just plain good, positive, calm, etc. This can help cure anxiety (mind too fast, hard to focus) or sluggishness (mind too slow). It only takes about ten minutes exposure to the 10 Hz to get us in “the zone.” [2] On most mornings, when I wake up feeling OK anyway, I don’t bother with it. But it is good to have it around as needed. We find the feeling from an AVE session sticks with us for a number of hours.
AVE has been shown to help with seasonal asset disorder (SAD). That makes sense because SAD is about light deprivation. I had a bit of SAD when we lived in a house with few windows, and tried my DAVID for that. It did help, but it turned out to be more satisfactory and less bother to just use a big bright sunlamp at the breakfast table.
We find the slower AVE sessions useful to combat occasional insomnia (where mind is anxious or racing) and even to help with pain. A month ago I had some serious pain from an injury, that was so bad I could not sleep. These slow programs (3.5-7 Hz) did help to divert and relax my brain and help me get to sleep. Again, the effects can be enduring. If we have used a really slow, say 3.5 Hz, program to knock us out at night, we often are sluggish the next morning, so we reset our brains with some 10 Hz alpha. For sleep, I usually prefer a 7-7.8 Hz protocol that does nicely slow and relax my brain, but does not leave me groggy in the morning.
The literature and the operator’s manual recommend slightly faster waves, e.g. 14 Hz “beta” waves as a normal morning waker-upper, like a cup of coffee. These faster “Brain Brightening” protocols have shown benefits for seniors. My family does not necessarily find 14 Hz enjoyable. It sometimes feels feels tiring.
One the other hand, the 14 Hz protocol can sometimes be quite helpful as a pick-me-up. Early one winter, I was feeling sluggish and low, not wanting to get out and exercise, and was nearly ten pounds over my normal weight. It probably had something to do with an extended road trip (stress, food) plus Thanksgiving (food) and the reduced sunlight hours, including daylight savings time ending, plus a stretch of cloudy/rainy weather. I did use a sun lamp to get more photons into my head, but that didn’t cut it. I decided to push myself and use the 14 Hz flashing lights, instead of the comfy 10 Hz, to get more of an activation. It actually worked out well. Three mornings in a row with the 14 Hz, and I felt “reset” to a more energetic, optimistic me. So score one for beta waves.
A couple of us have experimented even faster programs, around 18-20 Hz. That gave an unpleasant buzz, which persisted. I think if I had to drive a truck all night, it might be useful for keeping me awake and alert. After these high frequency sessions I soon used the 10 Hz program to reset to my nice smooth alpha. It is nice to know that if I go too high or low on an entrainment session, I can always recover by using the 10 Hz alpha session [3].
At any rate, I am a satisfied customer and I think this is a cost-effective treatment modality for amateurs to use, or for therapists to prescribe.
* If someone is susceptible to seizures, they should avoid any device like this with repetitive flashing lights.
ENDNOTES
[ 1 ] There is a newer, less-studied technique called LENS that kind of bridges between classical neurofeedback and AVE and trans-cranial magnetic stimulation (TMS). “Transcranial” means the stimulation is from coils outside your skull. Straight TMS is approved by the FDA for treatment of major depressive disorder (MDD), obsessive-compulsive disorder (OCD), migraines, and smoking cessation. With LENS, the brain waves are monitored with electrodes, and this information is used to shape special synchronized electromagnetic stimulation of the brain (from outside the scalp). This stimulation is keyed to the existing brainwaves, which may make it particularly effective, e.g. for reducing anxiety and helping with PTSD and traumatic brain injury (e.g., from military explosion exposure). This LENS technique is also called direct neurofeedback, in contrast to the standard neurofeedback, where the client must actively muster the altered brainwaves via training.
[ 2 ] Many of the canned protocols in the DAVID devices begin with about ten minutes of transitional sound and light pulses. These “dissociation” segments are intended to help users transition from their starting brain states and move to the final target frequencies. But we find these segments to be an unnecessary waste of time. We fire up a program, do something else for 8-9 minutes, and then don the headphone and glasses and dive right into the desired frequency, with only 1-2 minutes of dissociation.
One other user tip is that there is some virtue in starting with the lights a little dim (which I do by either playing with the Intensity setting, or by holding the goggles an inch away from my face), and by tapering down the brightness at the end of a session as you reenter the real world. With the David, you can push a pair of buttons to have it automatically ramp down light and sound intensity over the course of a minute or so.
[ 3 ] There is some evidence that super-fast AVE, at 40 Hz, stimulates cerebral bloodflow which can do marvelous things with the brain, such as mitigate Alzheimer’s degeneration.
I don’t know if Team Transitory (in which I count myself, though I included Fed intervention in my expectations) gets to take home the final prize regarding inflation. Certainly the timeline was imperfect. It’s good that we’re debating who and what gets credit for a soft landing, though, since it means that Covid recovery policies haven’t likely mired us in a decade of heavy inflation (let alone hyperinflation). No, that doesn’t mean that the last round of payments wasn’t a net welfare loss, but let’s do our best to be sympathetic to the possibility that one-too-many is preferable to one-too-few when trying to bubblewrap your economy through the worst global pandemic in a century.
I bring this up because we will no doubt continue to suffer through “If inflation is under control, why is _____ so expensive” takes for a few year. I look forward to entirely ignoring these takes, with the occasional link back to this post when the commenter is sufficiently thoughtful (or annoying) to engage. And I just want to remind everyone that a lot of goods and services continue to steadily rise in price, not just because of the opportunity cost of labor (i.e. Baumol’s disease), but because of the opportunity cost of death.
We value human life more than at any previous point in human history (I haven’t consulted actuarial tables, or even googled it, but remain confident this is true). There are a lot of things we used to produce cheaply by throwing labor at the problem until it was built or everyone was dead (see Giza, the Pyramids of). You don’t have to go back nearly so far to appreciate the phenomenon.
Have you ever seen The French Connection? It has the single greatest car chase in history. It’s amazing. How did they do it? By not giving a damn about anyone or anything, including the actors in the cars and the unknowing civilians on the street. The film with arguably the greatest long-form stunt set-piece was produced for a total of $1.8 million (12.8 in 2023 dollars). Not that scene, mind you, the whole movie. It was cheap in dollars, but they had to put hundreds of people at risk to do it. Just because a miracle occurred and no one died doesn’t mean it was enormously expensive in turns of human risk (including unconsented risk).
Did you see John Wick 4? It has the best chase scene I’ve seen since the French Connection (at the Arc de Triomphe in Paris, no less). Priscillia Page, without question my single favorite film writer going these days, interviewed the director, and brilliant action movie obsessive that she is, got him to discuss in extensive detail the months of planning, the small city of professionals, and the enormous investment that went into mitigating risk at every possible turn for just that scene. All in service of John Wick driving the wrong way on the world’s most famous roundabout and then running through traffic. John Wick 4 cost $100 million to film precisely because it places so much value on every human being directly and indirectly involved.
just dropped the first part of my interview with Chad Stahelski, one of my absolute favorite filmmakers https://t.co/BPpjTRbjGk
Does anyone seriously believe movies are more expensive because of decades of inflation? Of course not. We know, at some level that the products have become more costly to produce and that that is reflected in the price facing consumers. I remain an unrepentant YIMBY who thinks that the key to the future of the US economy is lowering the costs of rebuilding our infrastructure, but we would do well to remember that the dollar costs of the past are no longer attainable because we are (gratefully) no longer comfortable throwing human suffering at a problem instead of money. This doesn’t let us off the hook from permitting, NIMBY, and public union gridlock, but we would do well endure rising costs with a bit more alacrity.
Technological innovation means the total cost of most things has gone down. That total cost includes dollars and physical risk. Our willingness to tolerate physical risk has gone down so much that, even in our world of technological miracles, there are some products that the dollar cost we are left with has gone up. But that’s not inflation. Or even a problem. It’s literally the best thing about living in the modern world.
Secondhand: Travels in the New Global Garage Sale is a great book in my summer stack on fast fashion. I have always been interested in the combination problem-blessing of too much stuff. Adam Minter explains perfectly what many of us have been curious about.
Secondhand is America-centric, but he also travels to Japan to observe a country that is ahead of us both in terms of the demographic crisis and the mechanisms for handling old stuff. The reports from Africa are very interesting.
I have been wondering what is happening with Goodwill and with recycling in general. What hope do we really have of keeping goods out of the landfill? What should I do with a shirt my kid has grown out of? (The lady at work I used to give clothes to now runs away at the sight of me. I gave her too many bags.)
The Goodwill collection center near me looks cluttered and weird. After reading Secondhand, I’m more optimistic about dropping off bags there.
The barrier to sorting the used goods of the rich world is the scarcity of time and attention. This paragraph about a used book seller in Japan is heart-breaking:
It’s a thirty-year-old hardback novel, and the edition is rare. If it were at a traditional bookstore, it’s command a premium price. But Bookoff is about volume, and there’s a problem: not only does it lack a barcode, but it lacks an ISBN… “So there’s no way to price it in Bookoff’s system,” Kominato says. With a grimace, he gently places it on top of the books filling the recycling cage and steps away. (pg 40)
At least the book will get recycled into new paper, and the reality is that it was providing negative value as clutter in someone’s home.
Back in America, Minter describes what happens to donated goods at Goodwill in detail. Sometimes high-quality clothes are identified, but it is hard to get a good price for them. Some customers expect to pay less than $5 for a shirt, no matter what.
Customers are all about price, not quality…They won’t buy a $6.99 shirt that will last. If that’s the option, they’ll buy a $2.99 shirt from Walmart. (pg 57)
Some consumers are in the habit of treating clothes almost like disposable goods instead of durable assets. They won’t pay for quality. Going out and getting a new replacement shirt costs less than lunch.
I don’t want to give away too much, since you will want to go get the book yourself. Here’s the funniest page:
Lastly, I’ll share a personal win. I know that I’ll need a school backpack for my youngest in August. I went to a local rummage sale and went to the backpack section. I found one that is good enough (some scuffs but plenty of sparkles). I’m happy about keeping this sparkly pink backpack out of the landfill for a few more years. I walked out of the sale with a load of gear that cost a total of $10. Next, I went to a coffee shop to work where I also spent $10. Used textiles and books are dirt cheap.
Who’s your favorite artist? Warhol? Picasso? Van Gogh? Maybe someone much earlier, such as Michelangelo or Titian? Of course, there is something about the style or subjects that you enjoy. But something about the artist’s personal life might also matter to you. Personally, I’m a fan of Hieronymus Bosch, about whom we know little, and William Blake, who had some social and political opinions that would still be considered liberal even today.
Picasso, Dalle, and Warhol were all eccentric. Picasso had multiple girlfriends who didn’t get along, Dalle enjoyed exemplifying surrealism in his dress and behavior, and Warhol was a reclusive hoarder. Their eccentricity increases their allure and fosters an aura of mystique that they are privy to some unknown truths.
That is the conclusion of a recent Philadelphia Fed working paper by Ronel Elul, Aaron Payne, and Sebastian Tilson. The fraud is that investors are buying properties to flip or rent out, but claim they are buying them to live there in order to get cheaper mortgages:
We identify occupancy fraud — borrowers who misrepresent their occupancy status as owner-occupants rather than investors — in residential mortgage originations. Unlike previous work, we show that fraud was prevalent in originations not just during the housing bubble, but also persists through more recent times. We also demonstrate that fraud is broad-based and appears in government-sponsored enterprise and bank portfolio loans, not just in private securitization; these fraudulent borrowers make up one-third of the effective investor population. Occupancy fraud allows riskier borrowers to obtain credit at lower interest rates.
One third of all investors is a lot of fraud! The flip side of this is that real estate investors are much more prevalent than the official data says:
We argue that the fraudulent purchasers that we identify are very likely to be investors and that accounting for fraud increases the size of the effective investor population by nearly 50 percent.
Many people blame investors for making housing unaffordable for regular people. Economists tend to disagree, and one of our arguments has been to point out that investors are still a small fraction of home buyers. However, official statistics recently showed the investor share over 25% (though dropping fast), and apparently that may still be an understatement. If investors are a problem, there are enough of them to be a big problem.
Of course, there are other reasons economists aren’t so concerned about real estate investors. One is that they can provide the valuable service of renting out homes to people who couldn’t qualify for a mortgage themselves (especially after 2010, when Dodd Frank made it difficult for people without great credit to qualify). Another is that many investors seem to be surprisingly bad at flipping homes for higher prices. The panic over “ibuyers” that would buy houses sight unseen based on algorithms abated when it turned out those those companies lost a ton of money, saw their stock prices plunge, and gave up.
The mortgage fraud paper also provides evidence of investors losing money. In particular, rather than fraudulent investors crowding out the good ones, they are actually more likely to end up defaulting on their purchases:
These fraudulent borrowers perform substantially worse than similar declared investors, defaulting at a 75 percent higher rate.
Still, such widespread fraud is concerning, and I hope lenders (especially the subsidized GSEs) find a way to crack down on it. Based on things I see people bragging about on social media, I’m guessing that tax fraud is also widespread in real estate investing, though I haven’t looked into the literature on it.
This mortgage fraud paper seems like a bombshell to me and I’m surprised it seems to have received no media attention; journalists take note. For everyone else, I suppose you read obscure econ blogs precisely to find out about the things that haven’t yet made the papers.
As we prepare for the release of second quarter GDP data over the next few weeks, here is a chart showing cumulative GDP growth (inflation adjusted) and Price inflation for G7 countries. While inflation has been high everywhere (except for Japan), the US comes out looking very well relatively on GDP growth. That’s especially true compared to the UK and Germany, which have also had high price inflation, but have actually had negative economic growth since the end of 2019.
Economist Writing Every Day 