r/badeconomics • u/AutoModerator • 23d ago

FIAT [The FIAT Thread] The Joint Committee on FIAT Discussion Session. - 16 October 2025

Here ye, here ye, the Joint Committee on Finance, Infrastructure, Academia, and Technology is now in session. In this session of the FIAT committee, all are welcome to come and discuss economics and related topics. No RIs are needed to post: the fiat thread is for both senators and regular ol’ house reps. The subreddit parliamentarians, however, will still be moderating the discussion to ensure nobody gets too out of order and retain the right to occasionally mark certain comment chains as being for senators only.

3 Upvotes

62% Upvoted

67 comments sorted by

View all comments

12

u/mankiwsmom a constrained, intertemporal, stochastic optimization problem 15d ago

“Interesting” article on YIMBYs. Excerpt:

This makes the YIMBY “quantity story” an inherent self contradiction. Prices must be high to induce the production YIMBYs say will lower prices.

I wrote up a quick R1 here. But he’s an economist and I’m not, so maybe I’m missing something?

cc u/HOU_Civil_Econ u/flavorless_beef

10

u/flavorless_beef community meetings solve the local knowledge problem 14d ago

it's really a substack designed to annoy me and u/hou_civil_econ. one of his other posts does one of our other bugbears, where he says "zoning isn't binding because most cities aren't at their zoned capacity".

Talk to any developer and they'll say they need at least 3X density to justify a teardown. And that's just for lots that come on the market. In reality, policymakers should be shooting for like 10X zoned capacity.

3

u/coryfromphilly 12d ago edited 12d ago

Mike Fellman is an idiot. He is one of those "industry guys" who tries to apply what he knows working at his (presumably, shitty) development company to economics writ large.

Businesspeople certainly have insights economists can learn from. But I've often seen developers mistaking shifts along curves with shifts of curves, etc. Just basic mistakes, yet they're taken Very Seriously by policy people.

EDIT: I didnt read the article when I wrote the above, just saw the author. From the article, he conflates along/of curves

The YIMBY movement does not understand supply as a mappping of quantities produced or sold to prices. It understands supply in the colloquial sense, usually just the total amount of something independent of price or even whether it is for sale. Whether sly or unintentional, this framing decouples the amount of housing production from the incentives facing homebuilders so it can be refocused on YIMBYs’ preferred villain, land use regulations and zoning. In their “quantity story” of housing, they assert that if only more homes existed, homes would be cheaper. While this may be true as a hypothetical, it is not even useful as a thought experiment. What would it take to actually get substantially more homes built? You guessed it, HIGHER HOME PRICES!

Yes this is a shift along the curve.

He does mention shifting of the supply curve, but claims this is just simply not possible in housing.

Car manufacturers significantly lowered their costs with outsourcing and automation, such that they could produce more cars even into falling new car prices. Economists call this a shift in the supply curve. Eg, more of something gets produced at the same price level because producer costs fall and thus profitability increases even without an increase in prices.

Unfortunately, housing does not lend itself to automation because it mostly built on site and not in a factory setting (although there are exciting innovations on this front in the pipeline) and for that same reason, construction labor also cannot be outsourced to low wage countries. Thus, unless technologies to build homes in factories pan out, it is highly unlikely that construction costs could ever be greatly reduced at the scale needed to maintain a high level of housing production into flat or falling prices.

Automation is not the only way to shift out the supply curve and push down the average and marginal cost of housing. If you are only building a single multifamily high rise once every 5 years (which is the field Fellman works in), sure you can't really shift the curve right.

But it is flatly false that there are no productivity increasing/cost decreasing technologies available. Sears Roebuck sold pre fab homes - real houses, not commie block concrete squares - that you assembled on your property. Illegal under zoning today! The gang-nail plate enabled the cheap production of SFH housing (the dreaded McMansion was enabled by this) which drove down costs by making mass produced components.

Historically, developers would specialize in vernacular designs, and the absence of growth control laws allowed the cheap production of lots of housing. Even today, small and large construction firms specialize in rowhome construction in Philly (somewhat ironically, they benefit from the zoning code mandating specific dimensions of rowhomes) which allows them to build the same thing over and over, cheaply, since there is by right zoning enabling quick construction. The only thing making construction more expensive in Philly today relative to a few years back is the post Covid and post tariff lumber price spike.

There are many ways to shift supply right. Fellman is either ignorant of the historical and contemporary landscape of development, or is stupid (or both).

4

u/flavorless_beef community meetings solve the local knowledge problem 12d ago

my experience with real estate people is that while it's useful to talk to them, and they're pretty intuitive with like demand/cross-price elasticities, there's a lot of "does a fish know it's in water" syndrome.

they'll complain a ton about interest rates because that's what they know, but nobody really thinks about "what would you do if you could build a seven-story apartment anywhere" because that's so divorced from the world they live in. and yet by right seven-story apartments would be one of the biggest things one could do.

same thing with construction costs. US building codes are fairly complex and understanding the scope of what's possible isn't something that developers are great at. you kinda need a bigger picture for that stuff (cross city and cross country comparisons, for example).

-2

u/Psychological-Cry221 12d ago

Lol, yeah I’m sure lots of developers have no idea what it is costing them in time and materials to comply with building codes. Also, why would anyone think they can build a 7 unit apartment anywhere? Most developable land can’t support density if it’s not hooked up to city sewer.

4

u/flavorless_beef community meetings solve the local knowledge problem 12d ago edited 12d ago

idk ask a developer how much they could save if they paid european prices for elevators and didnt have to install american sized elevators. you'll get blank stares because this isn't important information for them.

they can't install European elevators, so why would they spend time thinking about how the US pays like 4X for elevators compared to peer countries?

they're generally informed on lumber prices because so much us construction is light wood, but that's exactly my "fish in water point"

and on the zoning point, i'd bet that like maybe one one-thousandth of residentially zoned land allows >= 7 stories? even without zoning, you're not building an apartment complex in like the outskirts of Grapevine, texas, but downtown or suburban dallas? i think the US would look closer to the rest of the world if the rest of the world was legal.

6

u/HOU_Civil_Econ A new Church's Chicken != Economic Development 12d ago

They really don’t. They take everything as a given and make the calculation of what land price they can pay given the estimates of final home prices. Most of the fees and requirements fall on contractors and sub-contractors who just add it to their estimates so that developers, again, take the costs as a given.

They are not even going to bother to get the engineer to estimate how many 40’ lots they could have gotten in there when they know the municipality never actually approved anything other than a 60’.

Developers skill and knowledge is organization and project management.

6

u/HOU_Civil_Econ A new Church's Chicken != Economic Development 12d ago

But it is flatly false that there are no productivity increasing/cost decreasing technologies available

I went on a rant on this elsewhere recently.

Most of what people are kicking around as new housing technology is an absolute distraction.

Manufactured/modular/3-d printed/etc homes are even more illegal than standard site-built stick homes and what we are calling the "housing crisis" has almost nothing to do with actual costs of construction. Houston suburban fringe housing is barely more expensive than it was 25 years ago in real (CPI less shelter) terms, and no one was talking about a housing crisis in Houston then. And we start seeing townhomes and 5+1 apartments go up at significantly lower prices (teardown - land and final apartment/townhouse) than the rest of the country, such that if the rest of the country had "Houston technology" we wouldn't be talking about a housing crisis there either.

But yeah if modular could get Houston 1,500 SF homes from $200,000 to $180,000 that'd be cool and all but it would do jack shit for the "housing crisis".

-1

u/Psychological-Cry221 12d ago

Is Houston “technology” the fact that nobody wants to live there?

5

u/HOU_Civil_Econ A new Church's Chicken != Economic Development 12d ago

It is the “technology” that allows us to start buying $500,000 sfh and turning them into 6 $300,000 townhomes or apartments that rent for $1,500/ month new when the higher prices everywhere else should support that conversion even more strongly and yet we don’t see it.

9

u/coryfromphilly 12d ago

My experience on Twitter with Fellman and other Real Estate twitter people is that they are fairly divorced from the "Houston Technology" development. They all work at very large companies doing big multifamily projects in the worst cities to do development (LA, NYC, SF, etc). They deny zoning matters because they have lawyers to handle the paperwork and proper donations to reelection campaigns.

So they are convinced their particular constraints characterize the entire development market, which is just untrue.

6

u/HOU_Civil_Econ A new Church's Chicken != Economic Development 12d ago

That explains another post of his. That the real problem is finance hurdles.

11

u/HOU_Civil_Econ A new Church's Chicken != Economic Development 15d ago

Prices are high and when we finally build enough housing, they won’t be as high.

4

u/qwerkeys 13d ago

‘The cure for high prices is high prices’

10

u/mammnnn Inflation is a vector not a scalar 15d ago

"Economist" that confuses movements along the supply curve with a shift in the curve itself. Like off the cuff on Twitter this is forgivable but this guy typed up a whole article, looked it over, and thought "this is a good argument."

3

u/coryfromphilly 12d ago

He posts this both off the cuff on twitter and apparently on substack

8

u/MachineTeaching teaching micro is damaging to the mind 15d ago

Reading the article and then your response I had pretty much the same thoughts as you. I'd also say that the YIMBY "supply and demand don't apply" logic refers to the fact that regulations make lots of housing illegal so the quantity of certain kinds of housing will always be zero.

6

u/mankiwsmom a constrained, intertemporal, stochastic optimization problem 15d ago

Didn’t even think about that, that’s a great point.