Wither housing?

Calculated Risk has a good post on the question of the hour -- to what degree will the slowdown in housing impact the broader economy?

He looks at two elements -- job losses in the construction sector, and a decline in consumer spending through reduced mortgage equity withdrawals.

As a renter, I am hoping for (and will benefit from) a major decline in housing prices, but I'm skeptical about how much that will impact the broader economy. Firstly, it is true that people in the construction sector will lose jobs, but it's not clear to me that they simply won't do other types of handyman activity. Anecdotally, it's been hard to find a repair man lately, given that they are all busy building houses, so there may be enough built up repair work to absorb them as they move out of house. Also, the people I know who are in home construction tend to have (and be able to do) odd jobs in a wide variety of industries. They probably have more alternatives than a Java engineer.

Secondly, anecdotally again, most housing driven consumer spending has been spent on... housing. People take out second mortgages on their homes to buy a holiday house, or to pay for a new extension or remodeling job. I don't know if people are cashing in their homes to buy sweaters, cars, or restaurant dinners. So I'm still not sure to what degree a housing slowdown will impact the broader economy. Certainly, people putting every dime of disposable income they can into huge mortgages is using up money that could be spent on sweaters, cars, and restaurant dinners, so if that cash is freed up (thanks to cheaper housing) it may mitigate whatever negative effects a decline in that sector has.

Great Economist Blog Post

I like this Economist post on the politics behind global warming. (One interesting thing about the blog is that the writer's personalities creep through a little more, and, surprise surprise, they seem to be more NYTimes than Cato. Not that that's a bad thing, but some people do view the Economist as being a far right publication).

In particular, I thought their observations about the unpoplarity of carbon sequestering as a solution to CO2 emissions was a good one.

Carbon sequestration, for example, which (apparently relatively cost effectively) neutralises emissions from coal, the dirtiest fossil fuel, gets surprisingly little coverage. Especially when compared to things like hydrogen fuel cells, which absolutely nothing to reduce carbon emissions by themselves, since hydrogen has to be made at great (energy) cost before it can be poured into fuel cells*. Why does abatement, rather than prevention, get so little attention?

Another option also seems unpopular -- moving.

When I fly from Boston to Florida, I experience dramatic climate change. Yet, human beings seem to be quite able to thrive in both climates. If Boston became more like New York, and New York became more like Phillly, which became more like DC, which became more like Miami, who really cares? Particularly if it takes the thousands of years that climate modelers suggest. But even if it takes 200 years, why should we care? And even if it results in more hurricanes etc, this is the equivelent of people in Arizona, say, moving to Florida. You go from zero hurricanes, to a few hurricanes.

OK, so what about the catastrophic scenario of the Gulf Stream shutting down, making London more like Oslo?

The dramatic finding comes from a study of ocean circulation in the North Atlantic, which found a 30% reduction in the warm currents that carry water north from the Gulf Stream.

The slow-down, which has long been predicted as a possible consequence of global warming, will give renewed urgency to intergovernmental talks in Montreal, Canada, this week on a successor to the Kyoto Protocol.

Well, the Gulf Stream itself is caused by wind and rotation of the Earth, so probably will not be impacted by global warming, but the North Atlantic drift is another matter. If it goes away, the mild European climate might become more like a more extreme American climate, over a period of thousands of years.

Clearly I'm missing something, but I don't get it. Humans seem capable of living quite happily in all manner of environments, so long as we have time to adjust. Even the most dire global warming forecasts give us plenty of both.

Praise be

The ugliest building in Boston is going to be demolished.

I'd love to know who OK'd the project.

Is simplicity dead

Donald Norman invites journalists over to check out some simple products -- and they all find critical features missing. Joel Spolsky finds that nothing increases revenue more than adding features. Simplicity, they conclude, is dead.

Donald notes from a trip to Korea:

I found the traditional “white goods” most interesting: Refrigerators and washing machines. The store obviously had the Korean companies LG and Samsung, but also GE, Braun, and Philips. The Korean products seemed more complex than the non-Korean ones, even though the specifications and prices were essentially identical. “Why?” I asked my two guides, both of whom were usability professionals. “Because Koreans like things to look complex,” they responded. It is a symbol: it shows their status.

...the people want the features. Because simplicity is a myth whose time has past, if it ever existed.

I disagree with Joel and Donald. Firstly, I don't think that seeing something in a shop tells you much about how it sells, or how much people actually like it once they bring it home. Unfortunately, what gets someone to purchase something is different from the value they get out of actually using it.

More importantly, if features get in the way of someone using the device (or website, or whatever) then it's a bad experience. Knowing which features to bring upfront, and which features to highlight, sits at the heart of creating good customer experiences. Features are extremely hard to cut. They are very hard to hide. The best experiences know enough about the customer to include the key features upfront, and hide the rest for the power users.

Best Books

The Economist has a "best books" list.

I think back on what books I've in 2006, and the answer is -- very few. I read the first three novels in the Jack Aubrey series, reread volumes 1-3 of Cerberus the Aardvark, and that's it.

Books take too long to read. And just as all movies are 30 minutes too long, all books are 25% too long. The authors could make the same point, to better effect, in less space. But when you're investing all that time and effort, why not indulge yourself.

I also find I have hardly any time for TV. I manage 40 minutes of TiVo-slimmed Battlestar Galactica a week.

What do I do with my free time? Enjoy my beautiful surroundings in Northern California. Friends. Family. Internet.

It's the utility, stupid

Michael Blowhard asks why do we blog? In particular, he asks how economists would explain the phenomenon, given what a waste of time it is.

Michael seems to think that since there is no money in blogging, but people seem to spend a great deal of time doing it, it runs afoul of traditional economic maxims.

Such as, I'd suggest, the pleasures of self-expression, connecting with other people, and perpetrating some completely-useless mischief. I won't speak for other blog-denizens, but when I write postings or cruise other blogs, I'm pitching in because it's fun and rewarding to meet interesting people and to take part in freewheeling conversations. Part of the fun, I'd argue, comes from the fact that it's all so defiantly un-sensible in economic terms.

But blogging is not unsensible in economic terms -- economics is not about money, it's about how people make choices and tradeoffs. The rational, forward looking utility maximizer, who sits at the heart of all neo-classical economic models, is maximizing utility not money, and fun is certainly a utility.

I'm not sure why economics cannot shake this reputation for only being interested in money, since all intro to economics classes talk about people valuing other things more than money on day 1 (think of it this way -- every time you buy something you're valuing that thing more than money, otherwise you would not buy it).

It's also unfortunate that behavioral economics is considered as an antidote to neoclassical economics in a "see, there is more to human behavior than making the most money" way, because neoclassical economics knows that, and behavioral economics doesn't support that argument the way it's populist boosters thinks it does. Behavioral economics undermines the rational, forward looking utility maximizer by highlighting the importance of framing effects, time sensitivity, etc., in individual decisions. Behavioral economics has to show that people are making inefficient decisions, not just maximizing something different from what we think people maximize most. And it's done this in lots of areas.

The economic explanation of blogging, if there is anything interesting to say here other than "blogging is fun" is that 1) when blogging gets easier, more people blog; and 2) probably, most people will never blog. Blogging was around long before Blogger launched, but Blogger made the process so much easier that it's not surprising it heralded the great blogging boom. Also, given that blogging is time intensive, and most people are short of time, you'd expect blogging to be rare in general, and perhaps common amongst those who have time to spare (students, academics, eventually retired people).

Behavioral economics would say that bloggers will overestimate the importance and ubiquity of blogging, by confusing their own experience with the medium, to the average experience with the medium.

Find the blog

The Economist has a rather good economics blog called "Free Exchange". But just try finding it off their homepage.

(Hint: Looking for the word "blog" will get you nowhere)