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So late last year Matt Yglesias found a simple and concise way to create a good-enough estimate of the value of all privately-held American land, using the Fed’s Z1. He did not, however, go on to take the most-obvious next step, which was to use FRED to compile all the relevant series to calculate the entire time-series.

I have taken that bold step. Behold – the real value in present dollars of all privately held American land since FY 1951:

it's good to have land

Oh, look – a housing bubble!

But because this is the Age of Piketty, why stop there? Thanks to the magic of the internet and spreadsheets, all of the data Piketty relied on in his book is freely available – and perhaps even more importantly, so is all the data Piketty and Zucman compiled in writing “Capital is Back,” which may be even more comprehensive and interesting. So using that data, I was able to calculate land as a share of national income from 1950-2012. Check it out*:

 this land is my land; it isn't your land


Oh look – a housing bubble!

And why stop there? We know from reading our Piketty that the capital-to-income ratio increased substantially during that time, so let’s calculate the land share of national capital:


image (5)

Oh look – a…two housing bubbles?

It’s hard to know what to make of this at first glance, but after two decades steadily comprising a quarter of national capital, land grew over another two decades to nearly a third of it; and after a steep drop to under a fifth of national capital in less than a decade, just about as quickly rebounded, then plummeted even faster to under a fifth again.

So the question must be asked – why didn’t we notice the first real estate bubble, just as large (though not as rapidly inflated) as the first? There are two answers.

The first answer is – we did! Read this piece from 1990 – 1990! – about the “emotional toll” of the collapse in housing prices. Or all these other amazing pieces from the amazing New York Times archive documenting the ’80s housing bubble and the collapse in prices at the turn of the ’90s.

The second answer is – to the extent we didn’t, or didn’t really remember it, it’s because it didn’t torch the global financial system. Which clarifies a very important fact about what happened to the American economy in the late aughties – what happened involved a housing bubble, but wasn’t fundamentally about or caused by a housing bubble.

For context, here’s the homeownership rate for the United States:

get off my property


The 00’s housing bubble clearly involved bringing a lot of people into homeownership in a way the 80’s bubble did not; that bubble, in fact, peaked even as homeownership rates had declined.

There are a lot of lessons to learn about the 00s bubble, about debt and leverage and fraud and inequality, but the lesson not to learn – or, perhaps, to unlearn – is that a bubble and its eventual popping, regardless of the asset under consideration, is a sufficient condition of a broader economic calamity. Now, it does seem clear that the 80s housing bubble was in key ways simply smaller in magnitude than the previous one; it represented a 50% increase as a ratio to national income rather than the doubling experienced in the aughties even though both saw land increase similarly relative to capital. But there have been – and, no matter the stance of regulatory or, shudder, monetary policy, will continue to be – bubbles in capitalist economies. The policy goal we should be interested in is not preventing bubbles but building economic structures and institutions that are resilient to that fact of life in financialized post-industrial capitalism.

*Piketty and Zucman only provide national income up through 2010, so I had to impute 2011-2012 from other data with a few relatively banal assumptions.


Russ Roberts approvingly links to this diatribe from John Papola that is either very confused, attacking straw men, deliberately mendacious, or all of the above. Rather than engage it point-by-point, because I am tired and have better things to do, I will instead just start with the conclusion then go read a good book.

Of course economic growth is driven by production. Non-satiation is a key understanding of economics – that no matter how much people have, they will always want more (in some sense). Therefore, since the desire to consume is a constant the level of growth is almost definitionally a question of supply (though on a truly philosophical level, if humans did not experience want there would be no incentive to produce, but presumably that random mutation would be selected out). As long as we can continue to figure out how to make more, make better, and make more efficiently, consumers will demand the same.

But this is not the same question as what causes recessions. The reason that macro befuddles and confounds is that recessions are weirdOn the one hand, we have all these people who (as we just said, by definition) want more stuff; on the other hand, we have all these people who were making stuff yesterday and weren’t making stuff today. Here are some theories for what cause recessions:

1. A sudden and contagious plague of laziness.

2. A sudden and contagious plague of contentedness.

3. A sudden and contagious plague of confusion and stupidity.

These are idiot theories. None of them are remotely true. Yet recessions still happen. Which means that even though everyone who is consuming less would like to resume consuming what they were consuming and everyone who is producing less would like to resume producing what they were producing they can’t. For some reason.

That reason is, in a word, money. Why and how it’s money are complex and tricky questions, but there should be zero doubt that that is, in fact, the answer. And that means that recessions are about demand.

India is a really good example about how poor public policy and social organization can lead to unnecessary supply-side constraints that impoverish everyone. America is not India. We usually grow. When we don’t, it’s weird. It’s a malfunction.

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