did someone muck with the backend here

Re: Guest Post -

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I thought the housing bubble/crash/continuing recession were all just symptoms of the same thing: Too much money going to capital and too little going to labor.


Posted by: Moby Hick | Link to this comment | 04-12-18 7:23 AM
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I still think that guy is maybe a shit because of how he concludes (and because George Mason):

It may be that a moral panic developed about building and lending. The policies the public demanded as a result of that moral panic led to a recession that was largely self-inflicted and unnecessary.

It sounds like what he's saying is that expecting people to pay mortgages that are half or more of their take-home pay is a reasonable solution for wages not growing fast enough to keep housing affordable.


Posted by: Moby Hick | Link to this comment | 04-12-18 7:26 AM
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My cousin wants to retire in Phoenix for reasons that frankly baffle me. However, he did it very nicely and bought a house there at the bottom of the market. He's now renting it out because he probably won't retire for another decade.


Posted by: Moby Hick | Link to this comment | 04-12-18 7:28 AM
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2 is totally right. The root of the crash was bad mortgages. The mortgages weren't bad because there wasn't anyone to live in the houses, they were bad because those people couldn't afford the mortgages.


Posted by: Mossy Character | Link to this comment | 04-12-18 8:01 AM
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In China they "overbuilt" apartments next to miles people living in shacks.


Posted by: abia | Link to this comment | 04-12-18 8:06 AM
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There is certainly a lot of moral panic around housing and credit (e.g. the kids are having trouble buying houses because they eat avocados, people are in more debt these days because of $4 cups of coffee instead of 30 years of below-inflation wage growth). A certain portion of the public really gets off on stuff like that, but as near as I can tell, it's mostly people who already paid off their house because they bought it in 1983.


Posted by: Moby Hick | Link to this comment | 04-12-18 8:07 AM
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4: I'm not sure how much of the subprime market represented people buying second homes (which actually are houses that don't have anyone to live in them); can't have been much though.

If anyone hasn't seen The Big Short, by the way, it's great.


Posted by: ajay | Link to this comment | 04-12-18 8:07 AM
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Figure 3 doesn't just show above-average starts from c.1996-2005, it also shows housing starts falling off a cliff in 2005, bottoming out in 2008, well below average, and then rising steadily since 2008. That might imply (I guess) surplus stock before the crash (contrary to the author) but not after it (as the author says).


Posted by: Mossy Character | Link to this comment | 04-12-18 8:08 AM
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7.2: I read the book and remember it well, but that was a while ago.


Posted by: Moby Hick | Link to this comment | 04-12-18 8:09 AM
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On the highest level point that there wasn't a national level housing oversupply, I can find that arguable, but he does make some specific claims . The point, surely, is that post-crisis, the places where people wanted to live couldn't/wouldn't build more, and the places that had excess housing or the ability to build more, cheaply, people didn't want to live because among other things their economies had been devastated by the crash. The overhang of housing wasn't nationwide, but it didn't need to be to have national level effects because of inelasticity.


Posted by: Ginger Yellow | Link to this comment | 04-12-18 8:10 AM
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7: That was pretty small in America because even in the boom they didn't like lending for second homes without good income. People were doing stupid stuff, like getting a home equity loan on the house they lived in and using it to buy vacation property. I'm not going to argue that there were no stupid borrowers. Just that the stupid borrowers weren't poor people needing housing.


Posted by: Moby Hick | Link to this comment | 04-12-18 8:11 AM
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"specific claims... that I would dispute."

I'm not sure how much of the subprime market represented people buying second homes (which actually are houses that don't have anyone to live in them); can't have been much though.

Pretty sizeable, actually, if you count flippers (and I don't see why you wouldn't).


Posted by: | Link to this comment | 04-12-18 8:15 AM
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I think flipping is distinct from a second home. It takes a house off the market temporarily, and possibly results in a house going from affordable to the average worker to being affordable, but it is a temporary removal from the market (assuming the flipper isn't going broke).


Posted by: Moby Hick | Link to this comment | 04-12-18 8:19 AM
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The point, surely, is that post-crisis, the places where people wanted to live couldn't/wouldn't build more

Well, this is a widely accepted fact, but I'm not sure it has anything to do with the claim that the US as a whole never overbuilt. That is, he's making a novel claim to complement a trivial one, and I don't want the former gaining credibility because he mentions the latter.


Posted by: JRoth | Link to this comment | 04-12-18 8:20 AM
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I'm using subprime in an expansive sense here (ie not just low FICO, but Alt-A and HELOC/second lien and so on). Alt-A losses were nearly as bad as subprime, and in fact the securitised losses were worse because they had lower credit enhancement.


Posted by: Ginger Yellow | Link to this comment | 04-12-18 8:20 AM
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Figure 3 is also interesting in showing the proportion of multi-unit to single-unit starts. The share of multi-unit starts appears roughly to rise on the back of a rising economy, plus a huge spike in the early 1970s (Great Society?). I've no idea what that means.


Posted by: Mossy Character | Link to this comment | 04-12-18 8:21 AM
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My link was broken. This should work.


Posted by: Ginger Yellow | Link to this comment | 04-12-18 8:22 AM
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Haven't read the article, but this line of the OP jumped out at me.

I got the link from Yggles, whom I generally trust not to spread bullshit, but

Yggles is a good writer. Badly needs an editor but can write good, clever arguments. His heart is in the right place on many issues, particularly those that were important during the Bush years roughly two-thirds of the country had really taken crazy pills. (He initially supported the idea of invading Iraq but IIRC he came around months before it actually happened.) (As opposed to now, when just two-thirds of the Republican Party has taken crazy pills, but that's enough to capture all the levers of power with Russian meddling and a system designed to protect the peculiar institution of slavery.) But... no spreading bullshit? He's one of the more glib people involved with Vox, IMO. If you want rigorous fact-based analysis he's not in the top half of the of the leftosphere. And, as JRoth acknowledges, this is one of the issues he's a fanatic on.

I haven't finished reading the article so forgive me for a glib and ad hominem take, I'm just saying I start out fairly skeptical of it.


Posted by: Cyrus | Link to this comment | 04-12-18 8:34 AM
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Anyway, I'm perpetually frustrated by the Build It and They'll Have Housing types, because they spend all their energy on zoning and parking minimums, but none of it on basic financial issues, like the one where someone making $15/hour full time basically can't afford a newly constructed housing unit*.

The supposed answer to this is to move everyone one house over, where you build new units for everyone who can afford them, leaving empty units for everyone who can't afford new. I don't actually think the population numbers work for that, and it's not clear to me why somebody moving into a @2300/mo. unit is leaving one that will suddenly be renting for $750. In reality, landlords prefer to let properties sit empty than to rent them at rates way, way below carrying cost. But, again, YIMBYs are operating on an ideological framework, not a practical one.

*$15*40*50*30%=$9,000/yr available for housing**. Developers look at 10 year numbers, but let's play along at 30 years, for mortgage reasons. That's $270k. You basically can't build an urban apartment for less than $300k, and it's getting hard to find suburban houses under $200k (at 4% interest, $750/mo can pay a $160k loan; again, not including taxes & insurance)

**this is if that income is somehow tax free; it might be below IRS thresholds, but would still owe the various payroll deductions like SSI


Posted by: JRoth | Link to this comment | 04-12-18 8:38 AM
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18 is all well-taken. I guess what I mean is that I would probably not give this study the time of day if it came from a rando or somebody I'm only following because they're funny on Twitter. MY has done enough genuine policy analysis to know the difference between bullshit and research. But I agree he's not exactly ruthless in calling out the former.


Posted by: JRoth | Link to this comment | 04-12-18 8:41 AM
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The point, surely, is that post-crisis, the places where people wanted to live couldn't/wouldn't build more, and the places that had excess housing or the ability to build more, cheaply, people didn't want to live because among other things their economies had been devastated by the crash.

I don't have much direct experience with the vast, soulless suburban housing developments where this played out, but I thought the issue wasn't so much that the housing got built in places where the economy was later devastated, but that plenty of housing got built where nobody ever wanted to live (because of horrible commutes) but people bought it as a necessary bottom wrung of a property ladder they intended to climb toward something in a reasonable location. Once the ladder was revealed to be a Ponzi scheme, the market in those too-remote places collapsed without any change in the actual economy being necessary.


Posted by: Moby Hick | Link to this comment | 04-12-18 8:44 AM
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instead of 30 years of below-inflation wage growth

Just to quibble for no good reason -- I think you can say that wage growth has been slower than either (a) productivity growth or (b) increase in housing costs, but not than overall inflation.


Posted by: NickS | Link to this comment | 04-12-18 8:46 AM
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In reality, landlords prefer to let properties sit empty than to rent them at rates way, way below carrying cost.

In my area, it appears that what they have been doing is selling them to owner-occupiers. I can think of three on my street.


Posted by: Moby Hick | Link to this comment | 04-12-18 8:48 AM
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22: O.K.


Posted by: Moby Hick | Link to this comment | 04-12-18 8:48 AM
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Do you mean to say that it's specifically incorrect to say that wages have grown slower than inflation in the US in recent decades, or that it's incoherent to say that ever -- wage growth and inflation are the same number by definition? Because I'm pretty sure that both of those statements are wrong.


Posted by: LizardBreath | Link to this comment | 04-12-18 8:48 AM
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O.K. withdrawn?


Posted by: Moby Hick | Link to this comment | 04-12-18 8:49 AM
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Do you mean to say that it's specifically incorrect to say that wages have grown slower than inflation in the US in recent decades

This. I'm just checking to see if I can find a multi-decade chart of Kevin Drum's preferred metric but you can see that in the last few years (albeit in a strong economy) it was above inflation.


Posted by: NickS | Link to this comment | 04-12-18 8:51 AM
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I'm not going to pick sides, but I will say that there's only one statistician in the room and isn't Nick.


Posted by: Mossy Character | Link to this comment | 04-12-18 8:52 AM
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If that's a reference to me, I was just pulling a number out of my dog-bitten ass.


Posted by: Moby Hick | Link to this comment | 04-12-18 8:53 AM
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So is the Mercatus Center some sort of bullshit?

I haven't read the linked study, but in my prior experience, you can't trust their research. Tendentious baloney at best,

I am interested in the broader topic, though. I've been in Phoenix three times in the past six months, and I'm bowled over by the amount of construction and the apparently loosey-goosey terms on which mortgages are being handed out. I've talked to several real live people who have moved to AZ in the past year to escape CA's insane housing costs, so I know there is legit activity in the housing market, but I'm unconvinced that there is enough demand for all the supply they are creating.

I also talked with a small scale real estate flipper who worked for years in Mexico City and is now working in Phoenix. He told me that mortgage companies are now approving people who are spending up to 60 percent of their gross income on housing. Assuming he's right -- and I have no reason to believe he was exaggerating or lying to me -- that just seems like a recipe for disaster to me. But of course the mortgages get sold as soon as they're made, so it's a game of hot potato.

In conclusion, my pre-existing biases are obviously correct and we should have had more public trials, massive fines, and humiliating perp walks for the architects of the *last* housing crash.


Posted by: Witt | Link to this comment | 04-12-18 8:54 AM
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I need to go soon, but at a glance, hourly wages (non-supervisory) have doubled since 1994 (and almost quadrupled since 1980). That is going to be close to the rate of inflation, but I'd guess it's going to be slightly over.

Again, it's a pointless quibble, and that's certainly not a good result. But that is the claim I was making.


Posted by: NickS | Link to this comment | 04-12-18 8:56 AM
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First thing I can find online says that CPI has ~ trippled since 1980. So wage growth (for non-supervisory employees) has been just slightly above inflation (and, I'd guess that the post tax-and-transfer number is better than the raw number because of EITC).


Posted by: NickS | Link to this comment | 04-12-18 8:59 AM
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I've been in Phoenix three times in the past six months

That sounds like a cry for help.


Posted by: Moby Hick | Link to this comment | 04-12-18 9:05 AM
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mortgage companies are now approving people who are spending up to 60 percent of their gross income on housing.

At least this time we have the Consumer Financial Protection Bureau to forestall any shenanigans.


Posted by: Spike | Link to this comment | 04-12-18 9:05 AM
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At least this time we have the Consumer Financial Protection Bureau to forestall any shenanigans.
D'oh!


Posted by: Ginger Yellow | Link to this comment | 04-12-18 9:09 AM
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30 We're having something of a housing boom here as well; lots of new apartment buildings, houses get sold fast, all the rest. As telecommuting becomes more possible and accepted, we have more and more people working in Seattle but living here. It's a 90 minute flight, and if you can go to the office a few days a month and otherwise work from home, it can pencil out. I know a couple people who work week-on week-off in DC; I'd find the travel time for that prohibitive, but there's a reason they make both chocolate and vanilla ice cream.

I don't think our banks are gaming: they don't have to, because out-of-state derived incomes are high enough and housing prices low enough that anyone getting paid big city money can afford a house here.

This is obviously both a class and a culture issue. It's way worse in Bozeman, but no one knows (or likes to think about) where we'll be with a couple decades more of this.


Posted by: CharleyCarp | Link to this comment | 04-12-18 9:09 AM
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33: You have no idea how grouchy I was when I saw that three separate professional conferences had all picked Phoenix. And it's not just because they stole Philadelphia's title as the 5th largest US city. It's because Phoenix is filled with people pouring water and chemicals into the desert trying to recreate their suburban New Jersey green lawns. At least Tucson has more xeriscaping.

34: Ahem, I think you mean the Bureau of Consumer Financial Protection. Because consumers no longer come first, according to Mulvany.


Posted by: Witt | Link to this comment | 04-12-18 9:13 AM
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People with a mortgage at 60% of gross income basically have to be working off the books or getting money from undeclared members of the household, don't they? There's just not enough money left to pay for a car and food.


Posted by: Moby Hick | Link to this comment | 04-12-18 9:14 AM
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31: You're righter than I thought you were (and when I say righter, I mean I think you're squarely right), but here's a set of charts showing that all the real wage growth has gone to high-wage and middle-wage workers: real wages for low-wage workers have fallen since 1979: https://www.epi.org/publication/charting-wage-stagnation/ . That's the sort of thing I was thinking about.


Posted by: LizardBreath | Link to this comment | 04-12-18 9:14 AM
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At least Tucson has more xeriscaping.

I was going to suggest Tucson.


Posted by: Moby Hick | Link to this comment | 04-12-18 9:16 AM
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39: So, OK restored?


Posted by: Moby Hick | Link to this comment | 04-12-18 9:16 AM
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My dog-bitten ass must know. I should maybe rely on the other cheek for economic indicators.


Posted by: Moby Hick | Link to this comment | 04-12-18 9:18 AM
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Ok, in fact, restored.


Posted by: LizardBreath | Link to this comment | 04-12-18 9:23 AM
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Great. And my butt has only minor scarring.


Posted by: Moby Hick | Link to this comment | 04-12-18 9:25 AM
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out-of-state derived incomes are high enough and housing prices low enough that anyone getting paid big city money can afford a house here.

This is my current strategy. We are in the process of buying a very affordable house and, while I'm not making "big city money" these days, what I can pull in from out-of-state consulting gigs is well above average in this community. And I do what I can to spend money locally.

I think that attracting people like me is a model that will become more and more important for the economic sustenance of places outside of major metropolitan areas. That's one reason rural broadband is so important.


Posted by: Spike | Link to this comment | 04-12-18 9:33 AM
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Mercatus might be BS, I don't know, but I wouldn't be so quick to dismiss this. His graphs are nearly impenetrable, so it's hard to tell whether his conclusion has merit solely based on that. But I think you can make a solid case that while the level of overbuilding from 2004-2007 wasn't zero, it also wasn't that large and we are in the middle of a massive overreaction to that which has more than compensated. If you compare new household formation to housing starts, you get a pretty good match. On average, about 175,000 more houses are started each year than households are formed, which is probably due to old housing stock being destroyed. From 2004-2007, there was an excess of building, partly to make up for underbuilding in the 90s. But the most generous estimate I can come up with totals only 2 million excess units (out of ~120 million total).

As to your second point, don't you have to take into account the natural population growth (estimated at ~40k per year for Maricopa county)?


Posted by: F | Link to this comment | 04-12-18 10:04 AM
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Again, it's unclear because he doesn't discuss his graphs properly, but I think the point is that the increase in net migration (from 20k to 35k per year) was roughly matched by the increase in housing permits (from 45k to 60k per year), not that the total housing permits should only match net migration (because new housing is needed for other reasons like destruction and natural population growth).


Posted by: F | Link to this comment | 04-12-18 10:08 AM
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I'm not really disputing his points about the minor (or non-existent) over-building.


Posted by: Moby Hick | Link to this comment | 04-12-18 10:14 AM
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19: I think some YIMBY types can be overly glib, but I definitely think they are onto something that can be a part of practical solutions. While the benefits of filtering are controversial, when cities are adding residents rapidly, I can't help but think that new construction is siphoning off a good amount of wealthy new arrivals who would otherwise have contributed to displacement. It is also clear that "reverse filtering" is a real thing, in which small or poorly maintained older properties bring huge sums in rents because of location and the lack of other options. Wherever jobs, amenities, and services are concentrated, the wealthy will always be able to outbid others for proximity to them. Isn't it more egalitarian to allow more people to share proximity?

Upzoning can also benefit those who, as you say, may never be able to afford market-rate housing. It's a leverage point for cities to request affordable units, impact fees, or other community benefits in a way that is mutually beneficial to developers (even non-displacement covenants in the recent sb 827 amendments in California). Also, the increase in property tax revenue from density is an opportunity to additionally fund redistribution and services directly, or build mixed-income social housing. (A study here in Nashville found net revenue per-acre from dense infill was more than 1000x that of suburban development). It seems like housing affordability in booming cities is a problem nobody has been able to solve yet, so I'm open to trying a variety of methods.


Posted by: Scott | Link to this comment | 04-12-18 10:37 AM
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I'm anti-glib but holy shit are the anti-YIMBY people monsters and at some point you have to choose sides. At least in California where dumbass zoning and housing policy of purported liberals has created an economic crisis for working people at least as bad as anything *economic* done by the Trump or George W Bush administrations. It's a fucking moral responsibility to be a YIMBY in this State and if you're not my response is fuck you, you're a moron on the other side.


Posted by: Robert Halford | Link to this comment | 04-12-18 10:48 AM
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Should add that I'm vacation day-drinking today so expect spicyness and misunderstanding!


Posted by: Robert Halford | Link to this comment | 04-12-18 10:49 AM
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Honestly, sober-you isn't very different.


Posted by: Moby Hick | Link to this comment | 04-12-18 10:50 AM
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That's one reason rural broadband is so important.

There's also a chicken/egg problem with schools.


Posted by: ogged | Link to this comment | 04-12-18 10:51 AM
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I went to a rural school. It's totally slander to say we have to raise our own meat or eggs.


Posted by: Moby Hick | Link to this comment | 04-12-18 10:52 AM
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50
the anti-YIMBY people

It seems to me that there must be a more succinct term for this, but I just can't think of what.


Posted by: Cyrus | Link to this comment | 04-12-18 11:01 AM
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antidisNIMBY?


Posted by: Moby Hick | Link to this comment | 04-12-18 11:02 AM
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47 is very helpful, and makes it seem less like he's bullshitting, and more like he's overstating his case.

IMO it' indisputable that the crater after the crash was unnaturally deep, but I think that's more to do with macroeconomic factors, where YIMBYs want to blame zoning


Posted by: JRoth | Link to this comment | 04-12-18 11:37 AM
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53: You know we are allowed to discuss teen pregnancy openly now.


Posted by: peep | Link to this comment | 04-12-18 11:41 AM
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50: CA is clearly an outlier along several dimensions. I suspect that Prop 13 actually plays a much bigger role than zoning*, but clearly the system is broken, and needs to be chipped at from any direction available.

55: A YIMBY just called me a NIMBY yesterday. Motherfucker, I've dedicated countless hours of my life over the past 2.5 years fighting to increase the amount of affordable housing being built down the block from me. The difference between me and YIMBYs isn't that I oppose development, it's that I know what the fuck I'm talking about.


Posted by: JRoth | Link to this comment | 04-12-18 11:42 AM
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59:2: So, are you a MIMBY? Or a FIMBY?


Posted by: peep | Link to this comment | 04-12-18 11:45 AM
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(A study here in Nashville found net revenue per-acre from dense infill was more than 1000x that of suburban development)

Oh yeah, this is (no offense) old news. Suburban development is essentially a Ponzi scheme, where new arrivals pay for the infrastructure needs (broadly defined) of incumbents, and there's no real plan for replacing infrastructure (more narrowly defined) when it wears out.

But hey, it allows whites to send their kids to public schools that are geographically segregated, so it's all good.


Posted by: JRoth | Link to this comment | 04-12-18 11:45 AM
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I'm skeptical you can learn much from these kinds of statistics. It seems quite clear the bubble burst because banks weren't getting loan payments they were expecting. Since banks also fund construction, their pullback killed homebuilding (and lots of other things). I'm not sure you can draw much of a conclusion about whether there were too many or too few houses based on what we call the housing bubble.

You can have empty houses that are desired but simply aren't affordable. You can call that overbuilding if you want, but if families are living in parents' basements because they can't afford the empty houses, the problem isn't really too many houses, per se.

You can have no houses available and people with good income who want to buy for various reasons (people don't want to work construction because wages are too low, land restrictions, development time too slow, skittish banks, etc.)


Posted by: abia | Link to this comment | 04-12-18 11:45 AM
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You can call that overbuilding if you want, but if families are living in parents' basements because they can't afford the empty houses, the problem isn't really too many houses, per se.

It's not precisely the same, but this reminded me of a story about how difficult it is for restaurants in Washington DC to fill jobs in the face of a labor shortage. Halfway through the article, it gets mentioned that raising salaries is completely out of the question, at which point... I don't know if that's exactly a labor shortage.


Posted by: LizardBreath | Link to this comment | 04-12-18 11:52 AM
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They're desperate for substitute teachers where I live. So desperate that they pay $10/hr.


Posted by: abia | Link to this comment | 04-12-18 11:58 AM
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Sometimes they can get away with really low salaries for substitute teachers by making getting a permanent job contingent on doing a year or two of substituting, but I'm guessing that if the substitute gets $10/hour, the permanent teachers aren't making enough that anybody would pay dues to get the job.


Posted by: Moby Hick | Link to this comment | 04-12-18 12:02 PM
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60: What I'm for is treating the housing problem as a serious one in need of actual solutions, not Econ 101 wanking.

The specific cause for the NIMBY accusation was a tweet to MY noting that Sydney, from '10 to '16, built 275k units for 375k more people (so between 137k and 187k new households), and the net result was about 1000 affordable units and the second highest rents on earth.

So the point is that the construction approach--new units well above replacement*, with no concrete affordability requirements--was precisely what YIMBYs call for, and the outcome was the exact opposite of what they predict. Serious people would find this concerning! YIMBYs respond with epithets.

*I"m actually struggling to come up with a reliable estimate of natural replacement for housing. In the US, median housing stock ranges between 18 years old in AZ and 74 in DC. There were ~1.7M housing units in Sydney at the start of the period in question; did more than 1 in 17 need to be replaced over 7 years? That seems high, given that even fairly shoddy construction has a viable lifespan over 50 years. And in high demand markets, it's less common for old stock to be neglected into failure.


Posted by: JRoth | Link to this comment | 04-12-18 12:08 PM
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Markets have huge problems, including long lags. Sydney (and the whole of Australia) had a bubble that is bursting now.


Posted by: Moby Hick | Link to this comment | 04-12-18 12:13 PM
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62: Where it (might) matter is in figuring out why construction came back so slowly, because normally housing construction is the engine of economic recovery. If there really was an overhang, then you can expect that engine to be a long time in starting.

That said, the conventional story is still that the overhang worked through the system within a couple years (due to population growth and lost stock), but we're still not truly in a boom. So most people are arguing about that--why no boom--and this guy seems to want to change the original story.

But I'm not sure it really matters whether there were just enough houses in 2007 or way too many, because, as you and others have said, the crash had more to do with financial markets and, to whatever extent, consumer behavior, rather than a simple economic model where farmers plant too much corn and then corn prices drop.


Posted by: JRoth | Link to this comment | 04-12-18 12:14 PM
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You're righter than I thought you were (and when I say righter, I mean I think you're squarely right)

I want to frame that; I love it.

I started a longer comment but I'll come back to that later (and I don't want to derail the discussion about affordable housing, which is interesting -- thanks F and JRoth).


Posted by: NickS | Link to this comment | 04-12-18 12:21 PM
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Anyway, I'm feeling very pro-MY this week because of his Murray piece (I only read the headline and tweet) and his repeated "Paul Ryan wasn't a good leader too cowardly to stand up to Trump but a bad man who got exactly what he tried to get" line.


Posted by: Moby Hick | Link to this comment | 04-12-18 12:24 PM
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Also, I think the Saturday Night Massacre 2.0 is going to happen day after tomorrow.


Posted by: Moby Hick | Link to this comment | 04-12-18 12:28 PM
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70: The Murray piece was actually very good.


Posted by: peep | Link to this comment | 04-12-18 12:31 PM
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The tweet was much shorter.


Posted by: Moby Hick | Link to this comment | 04-12-18 12:32 PM
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I have only skimmed the linked article, but it seems to be bullshit in the way that one would expect of a Mercatus piece. If you're Mercatus, the actual events surrounding the financial crisis couldn't possibly happen -- markets wouldn't permit it -- so you have to come up with another, "market-oriented" explanation:

The question that needs to be addressed about the housing bubble and the ensuing bust is not what caused prices to rise so sharply. That is a fairly straightforward question, with a standard economic answer. Fundamentally, there weren't enough houses.

That's just bullshit. The question isn't "what caused prices to rise so sharply/" It's "what caused prices to rise so far beyond the fundamental value of the houses?"

If prices rose because of a lack of supply, that's the normal function of markets -- housing prices rose because houses were worth more. This isn't, and cannot be, an explanation for a bubble, which is a circumstance where a commodity rises beyond its value.


Posted by: politicalfootball | Link to this comment | 04-12-18 12:33 PM
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All I need to know about economics I learned from 63.

Ways to attract workers that are being tried, but are still insufficient:
* Student loan repayment programs
* Hiring prisoners
* Hiring older people
* Hiring people with learning disabilities
* Poaching employees from competitors
* Asking competitors if they just fired anyone
* Tequila-tasting seminars
* Flexible schedules
* A faster pipeline up the ranks
* "Some growth defined for them"
* Temporary year-round visa programs
* Quality of life
* Not screaming at people as much
* Respect
* Admiration
* Learning
* Trips to Italy

Michael Schlow, who owns restaurants around the country, offers his team educational workshops on wine and spirits, and recently took two chefs on a trip to Italy to study cooking techniques and eat.

"We don't win them over with a paycheck," he said. "Pay is important, but of more importance is respect and admiration and learning. If people feel like they are learning, they are more apt to stay."

Ways to attract workers that we know will not work:
* A paycheck


Posted by: Cryptic ned | Link to this comment | 04-12-18 12:35 PM
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Benefits like health insurance don't hurt either.


Posted by: abia | Link to this comment | 04-12-18 12:38 PM
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Is there anyone who thinks that the crash was caused by an excess of new construction housing supply? I haven't seen anyone thinknor say that anywhere, I don't think ever. If someone does say that, they are dumb.

In California the new construction pre-2008!provided very little relief to rents or housing costs in the coastal cities, in large part because it was built far off in the nonzoned interior. That did ease affordability a little (and still does -- Palmdale is still cheap) but at the cost of 3+hour commute).

I don't know anything about Australia but I thought vaguely it had both heavy duty zoning and (like California) all kinds of EIR restrictions for new development.

In CA I'd say zoning and CEQA are the biggest problems, CEQA is probably worse and is a nightmare that needs to die. The City of La itself has been better than most other CA cities but is still way too addicted to keeping a shitty planning regime in place and ruling by waiver -- which is better than the other option of not permitting development at all but is becessary because of our deeply stupid overall planning system.


Posted by: Robert Halford | Link to this comment | 04-12-18 12:41 PM
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75 is great.

But I'm surprised that "Make employees feel like they are part of something bigger than themselves" isn't on the list.


Posted by: peep | Link to this comment | 04-12-18 12:45 PM
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The conclusion of the linked piece:

The surprising answer to those questions may be that a housing bubble didn't lead to an inevitable recession. It may be that a moral panic developed about building and lending. The policies the public demanded as a result of that moral panic led to a recession that was largely self-inflicted and unnecessary. They also led to an unnecessary housing depression that continues to this day.

Right. The Ponzi scheme collapsed because people panicked and stop investing in it.


Posted by: politicalfootball | Link to this comment | 04-12-18 12:45 PM
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78.2: Human centipede.


Posted by: Moby Hick | Link to this comment | 04-12-18 12:47 PM
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Is there anyone who thinks that the crash was caused by an excess of new construction housing supply?

Not quite. The argument is that the same factors that led to the crash -- an excess of mortgage lending, basically -- led to excessive building in addition to excessive prices.

If you prove that excessive building didn't take place and you ignore or mis-describe excessive prices, you can find a cause for the bubble other than financial shenanigans. That is the Mercatus guy's project here.


Posted by: politicalfootball | Link to this comment | 04-12-18 12:51 PM
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Have you been following Wiener's housing bill, SB-827? (It basically sets state standards for housing development w/in a radius of a public transportation stop, overriding all local zoning.) I'm in favor.


Posted by: Megan | Link to this comment | 04-12-18 12:58 PM
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She said "Wiener housing." Heh, heh, heh.


Posted by: Moby Hick | Link to this comment | 04-12-18 1:02 PM
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The problem with Yglesias is that his generally appropriate respect for the functioning of markets and his desire to find non-idiotic conservative interlocutors leads him to treat charlatans like the Mercatus guy with undeserved credibility.


Posted by: politicalfootball | Link to this comment | 04-12-18 1:09 PM
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Was essentially pwned by 75. That's blinkered. Seems like a common issue, too. Someone with more motivation, focus, or free time than me should start keeping track of commentary on "labor shortages" that doesn't raise the possibility of increasing salaries.


Posted by: Cyrus | Link to this comment | 04-12-18 1:12 PM
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You could hire somebody to do it.


Posted by: Moby Hick | Link to this comment | 04-12-18 1:24 PM
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75,85: But restaurant owners are not especially making huge profits. Part of the issue is patrons unwilling to pay enough to subsidize high rents for businesses that make most of their money in a a brief weekly peak.

Its a shitty article for not mentioning this either, and not raising the point that restaurants often do not make it


Posted by: lw | Link to this comment | 04-12-18 1:39 PM
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You guys know how many Missoulians it takes to screw in a lightbulb, right?


Posted by: CharleyCarp | Link to this comment | 04-12-18 2:37 PM
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One, unless you need a ladder.


Posted by: Moby Hick | Link to this comment | 04-12-18 2:49 PM
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I've been reading the OSHA pamphlets.


Posted by: Moby Hick | Link to this comment | 04-12-18 3:10 PM
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Only one, but there are 400 applicants for the position. Which is an unpaid internship.


Posted by: CharleyCarp | Link to this comment | 04-12-18 3:26 PM
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That more of a "who" than a "how many".


Posted by: Moby Hick | Link to this comment | 04-12-18 3:28 PM
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I should probably just find something do to.


Posted by: Moby Hick | Link to this comment | 04-12-18 3:34 PM
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Come to Missoula. I might be able to hook you up with one of those sweet lightbulb gigs.


Posted by: CharleyCarp | Link to this comment | 04-12-18 4:18 PM
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I'm irrationally excited about SB 827. I know it'll get shot down, but I can't help but hope.


Posted by: F | Link to this comment | 04-12-18 5:00 PM
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I have generally bad feelings about states taking over control of local zoning rules because the time that happened here, it was to allow fracking to be done in the city.


Posted by: Moby Hick | Link to this comment | 04-12-18 5:29 PM
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77, 82, 95: The precursor bill was a big topic at CALBO a couple of weeks ago. Most planning roadblocks to Accessory Dwelling Units (ADUs) aka second homes on a lot, got blown up last year. Local requirements that didn't comply were eliminated as of Jan 1, 2018.

The slides are here: https://cms.capitoltechsolutions.com/ClientData/CALBO/uploads/2018CALBOABMADU.pdf

SB 827 looks interesting. FAR and parking are popular planner's tools. I know that Palo Alto has been resisting the ADU / JADU overrides that were passed last year.


Posted by: Mooseking | Link to this comment | 04-12-18 5:30 PM
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OT: Trump asked Comey the exact same question I would ask Comey, "Is there a pee tape?" That Trump asked means there was a pee-incident, doesn't it? He's just asking if there was a recording or not.


Posted by: Moby Hick | Link to this comment | 04-12-18 5:32 PM
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I guess he technically asked Comey to prove there wasn't one, but same difference.


Posted by: Moby Hick | Link to this comment | 04-12-18 6:01 PM
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Whether YIMBY efforts are good policy varies a lot by region. From what I've read, they wouldn't work very well in NYC because a lot of investors buy apartments and let them sit empty rather than renting them out. NYC actually builds housing at a decent rate but a lot of it sits empty.

In CA it seems sorely needed, though. The lack of construction relative to population growth has been documented in many other places. Also, the Californian opposition to density (and hence to public transit) is insane given all the problems with traffic, a supposed commitment to fighting climate change, and so on.


Posted by: Ponder Stibbons | Link to this comment | 04-12-18 7:21 PM
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At best the article is ingenuous. In summary, its argument is about "Why did prices and housing starts collapse even though the supply shortage remains?" The obvious answer is that wages are too low, but that doesn't fit their framing. There is an immense NEED for housing, but the DEMAND for housing is limited by what people can pay. Economists just hate that kind of reasoning, so I'm assuming this was written by an economist.

To be fair, one could argue in good faith that it wasn't the housing bubble that led to the recession. The recession was a result of a mortgage bubble. Clever financial engineering and rating laundering made mortgages a valuable commodity. It was like dead serfs in Gogol's 'Dead Souls', a tale of census arbitrage and financial chicanery. Making mortgages requires borrowers and housing. The demand for mortgages grew so extreme, that the supply of borrowers who could actually pay the mortgages quickly ran out leading to clever mortgage construction and, often, out and out fraud. Accounting, like quantum mechanics, lets you get any number you want, but only for so long. Then the underlying mortgages started to fail, and the whole edifice collapsed. That's a reasonable argument, take it or leave it, but it isn't the one they made.

I have no idea why they were concerned with the soaring prices in certain major metropolitan areas, save that most of them vote for Democrats. There were soaring prices everywhere. Those areas were just a lot more desirable or there would have been a lot more disappointed sellers. Hell, I live out in the sticks, and I made money buying and selling real estate, following the bubble.

I still haven't really been able to follow their argument. Why did they choose Phoenix? Phoenix is full of retirees who are playing arbitrage by moving from a place where they had a job to a place where they don't need a job. Why are they concerned with rates of change instead of values? Why don't they account for population growth and household size? Those figures tell a story, but it isn't the one in the text.

So, ingenuous at best. More likely mild-BS.


Posted by: Kaleberg | Link to this comment | 04-12-18 8:41 PM
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"The obvious answer is that wages are too low, but that doesn't fit their framing"

Well, wages were low and at the other end of the wealth distribution there were large pools of money looking for yield.

Offshore money ends up being recycled into the economy as debt.


Posted by: Chris S | Link to this comment | 04-13-18 5:52 AM
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87: Yeah, I realize a lot of restaurants don't last long. My gut reaction was along the lines of the critique often aimed at Wal-Mart, that it gets away with paying below living wage even though it totally could pay better because it's essentially subsidized by the social safety net. That makes sense when talking about a single company bigger than some governments, but the only way to talk about the restaurant industry like that would be to make it one of those late-stage capitalism things. I'm not good at that in general and it doesn't seem very relevant here in particular.

But still! There's a labor shortage. The remedy for that in pretty much anything except a slave state or full end-stage communism is to make the jobs more attractive to potential employees. For most people, money is one of the biggest factors in considering whether to take a job. According to that article in 63, the restaurant industry is currently trying 17 different things to attract potential employees and paying people better isn't one of them. Maybe the industry should try that. If the industry can't afford to, maybe there's a problem with the industry.

Labor Shortage Watch: Here are the first two items from Google news this morning.

This editorial urges the relevant House subcommittee to do something. Options discussed: a change to the Pell Grant program, improved access to technical education, work-study, new licensing requirements, immigration reform, criminal justice reform, doing something about the opioid epidemic, and bringing back the tax deduction for relocation. Most of those seem like good ideas to me (although I have a feeling the last one is one of those tax loopholes that mostly just rich people took advantage of), but wouldn't actually result in people getting paid more for the same jobs.

And Michigan's governor has proposed a "Marshall Plan for Talent." Strategies tried: poaching workers from each other, paying for workers' educations, "a work/school model" that includes indentured servitude, and a Manufacturing Day.


Posted by: Cyrus | Link to this comment | 04-13-18 9:38 AM
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Because obviously what restaurants need is assistance with their postwar balance-of-payments crises.


Posted by: Mossy Character | Link to this comment | 04-13-18 9:58 AM
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It was a mistake to end the Central Appetizer Command just because the Soviets collapsed.


Posted by: Moby Hick | Link to this comment | 04-13-18 9:59 AM
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If we're honest about it, the Russians can't challenge your appetizers even today, whatever Putin wants you to think. What you're really missing is the US Menu Agency.


Posted by: Mossy Character | Link to this comment | 04-13-18 10:06 AM
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The thing with nice-ish restaurants is that they need somebody who can perform middle classness on cue but they aren't willing to pay middle-class wages (excepting, if the circumstances are right, the waitstaff, who need to be directly observed at all times properly performing middle classness). During good economic times, the younger middle-class people can get jobs at desks (which make it easier to perform middle classness because you can look productive at a computer with almost no effort) and the not-middle class people can make wages at least as good as back-of-the-house wages without having to be nice to assholes so often.


Posted by: Moby Hick | Link to this comment | 04-13-18 10:11 AM
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The thing with nice-ish restaurants is that they need somebody who can perform middle classness on cue but they aren't willing to pay middle-class wages

That reminds me of the (excellent) 2014 "Inside The Barista Class." The original link seems to have rotted, but a good chunk of it was excerpted by DeLong.

I once had a friend who quit his job as a bike messenger because, as he told it, people on the street started to resemble nothing more than obstacles in the way of his next commission. If delivery work makes all humans into roadblocks, front-of-the-house service professions render them as a collection of preferences and tastes and, as both Pierre Bourdieu and latte orders have taught me, taste is almost never singular. Luckily there really aren't that many kinds of people buying $5 coffees in Brooklyn, and thus there are a limited number of ways in which it becomes necessary to communicate, particularly once you figure out which parts of yourself are most in demand.

Posted by: NickS | Link to this comment | 04-13-18 11:43 AM
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Here's the full essay.

[emphasis mine]

In Brooklyn, as you order your home-grown-arugula and lemon pizza, your server can entertain you with their opinions on Jonathan Franzen, their fluency in Swedish design concepts. Tipping them is kind of like supporting the arts. Somewhere, I imagine, there really is a place where the server and the served interact on equal footing, reciprocally enjoying a shared culture. Perhaps it's simply an issue of remuneration. Maybe that place is in Portland, where rents are cheaper and the rich aren't as, well, filthily so.

...

...For all of North Brooklyn's book groups and websites and meet-ups dedicated to alternative monetary systems, the solidarity economy is, for the time being, at its best in the service sector. I can barely remember paying full price for anything. Checks for Negronis, artisanal spicy pickles, hand-roasted coffee beans, and sometimes entire locally sourced meals disappeared with a wink and a nudge reminiscent of Fight Club's ominous waiter scene. At the very least, it allowed us to participate in a culture we couldn't really afford. At its vilest it felt like a neighborhood of people working for slightly more than minimum wage in exchange for a chance to play-act at brunching in a nice neighborhood.

Rarely spoken aloud, the tendency of Greenpoint's service class to take care of its own was one of the only outright gestures of solidarity I witnessed, the only place where a distinction was made between the server and the served. I suspect the rarity of that admission has something to do with the fact that, for most intents and purposes, our jobs relied on completely erasing that distinction from public view.

Posted by: NickS | Link to this comment | 04-13-18 11:48 AM
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I used to try to figure out if I could perform upper middle classness, but I spilled mustard on my shirt too often.


Posted by: Moby Hick | Link to this comment | 04-13-18 11:52 AM
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On reflection, maybe the secret was to act as if the mustard was suppose to be there.


Posted by: Moby Hick | Link to this comment | 04-13-18 11:57 AM
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111: Yellow shirts.


Posted by: peep | Link to this comment | 04-13-18 12:07 PM
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