I see lots of commenters making an EC101 error. They notice that Canadians are much more likely to live in high rises, and assume that this reflects a difference in preferences. It’s certainly possible that preferences differ in one country from another, but to demonstrate that to be true you’d first have to consider supply factors.

Canada builds almost 20 times as many high rises as California, despite having a similar population. It might be true that Californians don’t like high rises. But if that were the case, then why are high rise condos in California so incredibly expensive? Even a very small condo in San Francisco costs well over a million dollars. The high price of apartments and condos in California is a pretty good indication that there is strong demand for such units.

So why are they not being built? Presumably because it’s too expensive, or perhaps it’s impossible to get permission to build due to zoning regulations. I suspect it’s a bit of both. Construction costs might be a bit higher due to earthquake risk, but by far the most important factor is regulation, which increases the cost to build in all sorts of different ways. (Lots of high rises were profitably built in places like Santa Monica and Marina Del Rey before regulation made it almost impossible to get approval.

People mentioned that Canadian cities have restrictions on suburban development. Well California has extremely restrictive limits on suburban development.

What would low demand for high rise living look like? Check out the market for condos in places like St. Louis, Detroit and Cleveland, where you can find units at very reasonable prices. Those are cities where it makes sense to suggest that low demand explains a dearth of construction. But San Francisco? San Jose? Los Angeles? San Diego? There’s an extreme need for more housing. The same is true in New York and Boston. Lots of high rises have been going up in Jersey City precisely because their regulations are less strict.

No, it’s not a lack of demand—the price of housing here in California is insanely high, and getting higher, and yet very little construction is occurring. Orange County now has the fastest rising house prices in America, and yet (outside Irvine) construction seems to be slowing down. It’s almost all due to zoning and regulation.

This tweet caught my eye:

The tweet included this graph (click link for closer view):

In the unlikely event that my math is accurate, I counted 624 high-rises under construction in Canada and 796 in America. But the US has more than 8 times the population of Canada. In addition, we are more densely populated, even if you throw out the vast northern parts of Canada. And the US invented the skyscraper.

I noticed this pattern way back in the 1970s, when I first drove across Canada. I was surprised to see tall residential buildings in some very modest sized Canadian cities, places that in America would be exclusively low rise. Thus Kelowna in central British Columbia has 5 high rises under construction and Halifax has 22, whereas Metro LA has only 9, despite having nearly 100 times the population of Kelowna and 25 times the population of Halifax. What explains this?

1. It’s possible that Canadians prefer living in tall buildings. But why such a large difference? In other respects Canada is quite similar to the US. Canadian areas with single family homes look a lot like the US.

2. It’s possible that Canadians build up because restrictive building regulations make it hard to build enough single family homes. But restrictions are also severe in LA, causing extremely high house prices.

3. There actually seem to be three regimes. Places with extremely high volume of high rise construction relative to population (i.e., Canada.) Places with a medium level such as New York, Atlanta, Boston and Miami. Even my home town of Madison. And places with a very low level of high rise construction relative to population—notably California, but also in less dynamic cities in the middle of the country.

4. It seems likely that the low construction rate in California is due to regulation. Even big cities like LA have far more empty lots than New York, places where it would be technically easy to erect high-rises. I suspect that it’s a mixture of zoning rules that restrict where you can build, and other regulations that make it much more costly when you do get permission to build (such as requirements to use union labor.)

If any readers are familiar with the construction industry, I’d like to hear your thoughts on why you see far more such buildings in some cities than others. I couldn’t even tell you why my hometown has as many high-rises under construction (seven) as the entire state of Michigan, with a far larger population. Or why Tampa has 23 while Jacksonville has zero.

Today, the San Jose metro area is perhaps the most economically dynamic place the world has ever seen, at least in terms of creating wealth. And yet even very depressed cities like Detroit and Cleveland are currently building more high-rises.

PS. Some people argue that single family homes are better than high-rises for solving the fertility crisis. But even if that were true, it would help to build more high rises for single people and childless couples in places like LA, in order to to free up more single family homes for families with kids.

Tyler Cowen linked to an interesting set of tweets:

Neither observation impresses me. The fast growth over the past 51 months comes from a rebound from Covid (plus strong immigration.) The expansion after March 2009 was way too slow, featuring very high unemployment for a number of years.

I am impressed by the low unemployment rates since March 2022, and (in fairness to Trumpistas) the low unemployment of 2018-19. So I do see some things to be impressed with, just not those two data points.

If we get to a soft landing in 2025, then I’ll be really impressed.

PS. The subsequent tweet is also misleading:

Look at 1929. Are we to believe that during WWI and the Roaring 20s the economy spent more time in recession than during any postwar 15 year period? Even more than 1970-85? NBER recession dating is not reliable prior to WWII.

Matt Yglesias directed me to this audio:

Obsession with George Soros? Check

Obsession with black women getting abortions? Check

Unease with women being free to travel to other states? Check

All in 48 seconds, three seconds longer than the shower scene in Psycho.

Yes, you could probably find just as many offensive statements in this blog. But guess what—I don’t plan to run for vice president.

Trump would be our oldest president and may not last for 4 1/2 more years. Cat ladies need to get ready for President Vance. (Here’s another Vance dig at the childless. Jesus?)

If you wish to read a more serious take on Vance, check out this Fukuyama essay. Or this Janan Ganesh piece.

PS. Strange new respect for Trump on my part. It seems he (correctly) wanted Doug Burgum and his sons talked him into (creepy) Vance. Trump has also come around to my view on TikTok and housing construction. He’s “evolving”.

PPS. Over at Econlog I’ve done some posts pointing out that taxes and subsidies are essentially the same thing. Matt Yglesias makes the same point in a more colorful way:

During the 2010s, Jim Bullard was probably my favorite Federal Reserve bank president. David Beckworth has an interview with Bullard, in which he makes a number of insightful observations. As usual, I’ll focus on an area where I seem to spot a difference of opinion:

Bullard: So, the mentality at the time [2020] was, still, that this shock was going to be like the global financial crisis shock, in the sense that it would take many, many years for the economy to fully get back to trend, and a lot of the rhetoric at the time was that this is not going to be V-shaped. This is going to be an L-shaped recovery, and all of those kind of things. So, there’s a lot of fighting the last war, and I would actually give credit to former Chair Ben Bernanke, who, I think, had a better analogy for the pandemic. He said that it’s like a big snowstorm, and you have to wait for the snow to melt, but it’s really just waiting for the snow to melt.

So, it’s not a fundamental disruption, the way that the financial crisis was, and you shouldn’t necessarily expect this very long recovery. Well, if you look at the data now— it’s about GDP anyway— It’s about as V-shaped as anything that you’ll ever see, and so I think that just this misreading of it and this kind of rhetoric around the idea that we were going to be in a very, very long recovery period, and so, therefore, if that’s what you thought, then you should say, for monetary policy, look, we’re not going to deviate from our balance sheet policy or our interest rate policy for a couple of years at least, because we think that the recovery is going to be so slow.

I would expect a slow recovery if a recession were caused by “real” or supply-side factors, and a fast recovery if the recession were a demand side problem. After all, demand shortfalls can be easily addressed with monetary stimulus. So was the 2008-09 more of a real shock whereas 2020 was a demand shock? I’d say the exact opposite. In 2008, the problem was a lack of aggregate demand (falling NGDP), whereas in 2020 the problem was real—much of the economy shutdown by Covid. That’s a harder problem to resolve.

Now of course the advent of vaccines in early 2021 made the real shock less persistent than expected in 2020. Even so, I cannot see why we’d expect a faster recovery from Covid than from the 2008 recession.

I worry that the Fed is too fatalistic. The Fed sees itself facing problems like an L-shaped recovery, whereas I see the Fed creating problems like an L-shaped recovery.

Bullard is a smart guy, and presumably would have a good response to this line of argument. He might argue that while inadequate NGDP was the problem after 2008, there was nothing the Fed could do about it. Or perhaps that there was something the Fed could have done about it, but it would have required such a rapid and radical regime change as to be politically impossible. If that is the argument, then I’d agree.

But my goal is not to discuss what’s politically feasible at a point in time; it’s to make people rethink the way the macroeconomy works so that ideas that once seemed politically infeasible (say NGDP level targeting), can move within the Overton window.

Later in the podcast, Bullard makes a strong argument for NGDP level targeting, which centers on the observation that almost all of our contracts are specified in nominal terms.