The Context is taking an indefinite break. Thank you for your support over the years – first with Brekky Wrap, then The Context – but I need to free up some of my increasingly scarce time to focus on other projects.
In the section at the end of this email I've linked to some excellent writers that I've quoted over the past several months, so be sure to follow them directly. Many have their own Substack newsletters to which you can subscribe, or you can use a free RSS reader such as Inoreader or Feedly to follow their posts.
All the best, Justin.
Housing is expensive despite generations of politicians attempting to 'solve' the issue. The reason they rarely succeed is because rather than tackle the root cause, they prefer to find scapegoats and spin false narratives that "distract attention from real problems, and plausible solutions":
"To state the obvious, stories can be compelling without being true. Especially suspect are stories that scapegoat a group or an entity that is impossible or at least very difficult to defend: banks or oil companies or criminals, say. The scapegoat takes the blame for a complex problem. The trick is to cast a villain such that the surrounding facts become irrelevant.
The latest version of the housing-villain story targets private-equity firms and hedge funds, broadly 'institutional investors' that have supposedly been outcompeting regular homebuyers and are therefore responsible for the skyrocketing rents and home prices of 2020 and 2021. 'One of the largest hedge funds, the largest Wall Street firms in the world, is going around and buying up every single-family home in this country,' J. D. Vance argued at the start of his senatorial campaign in 2021, noting that first-time homebuyers, disproportionately Black Americans, were unable to become homeowners as a result.
I don't want to be hyperbolic, but the idea that these firms are ultimately responsible for our housing-affordability crisis is absolutely ridiculous, and no one who knows anything about housing markets believes it. Yet this story has gained so much traction that it has spawned hearings and bills on Capitol Hill."
According to Jerusalem Demsas, "politicians conflate statistics, tangling up true facts with a predetermined story". But even a cursory look at the data shows that something other than institutional investors is driving prices higher:
"When trying to determine what is responsible for this phenomenon, you have to find an explanation that is common to all of these places, not one that is particular to this market or that one. From August 2020 to August 2021, Nevada, Arizona, Utah, Montana, and Idaho, saw the most significant home-price increases, but of those states, just the first two saw relatively high rates of mega-investors, again according to CoreLogic data."
Demsas agrees that corporate landlords aren't the best – they're much more likely to evict, and "may also take advantage of mobile-home owners, who tend not to own the land beneath their unit" – which is part of what makes them easy targets. But those problems can be solved with good old fashioned regulation. To address housing affordability, you have to go further:
"A lack of supply is caused by a complex web of rules and regulations that prevent developers—profit and nonprofit alike—from building enough housing to meet demand. A recent report from Freddie Mac estimates a shortage of 3.8 million housing units. For decades the United States has been underbuilding in employment hubs (such as San Francisco, New York, and Boston) and the surrounding suburbs, pushing prices up. Elected officials have allowed the home-building process to become hijacked by unrepresentative opposition and gummed up in legal challenges, many under the guise of bogus environmental concerns."
You can read Demsas' full essay here (~9 minute read), in which he notes that one of the reasons private equity is drawn to residential housing is because of the relatively high returns created by the lack of supply. In other words, fix housing supply and the "housing-villain" corporate owners and foreign buyers will find something more lucrative (and productive) to invest in of their own accord – two birds, one stone!
2—The uncanny valley
You may have heard about tech news site CNET using ChatGPT to write a bunch of articles, only for the editors to later discover that there were errors in 41 of the 77 it authored. According to AI expert Gary Marcus, that's because as automation gets better, humans get complacent:
"Automation is a double-edged sword, and there is a kind of uncanny valley. We know perfectly well not to trust lousy systems; and wouldn't need to pay attention to truly reliable systems, but the closer they get to perfect, the easier it is for mere mortals to space out. The CNET editors probably took a quick look at the large-language model generated prose, and thought it looked good enough; 'complacency and over-trust' to their own detriment."
Marcus traces the literature on this issue back to Mackworth's Dictum, named after cognitive psychologist Norman ('Mack') Mackworth, who during World War Two:
"[M]ade a fundamental discovery that is central to how any sensible person should think about artificial intelligence: humans, he discovered, were attentionally challenged; if you gave them a repetitive task, particularly one in which most of the time they don't have to do anything, they will eventually tune out. His finding is so foundational to cognitive psychology, and especially the field of attention, that I learned about it as a teenager. Anyone who thinks about how AI is used should know about it—especially as we are about to head into an era of ubiquitous yet fallible AI."
Mackworth's Dictum is why anything but full automation – i.e., not ChatGPT given how prone it is to making errors and hallucinating, nor Elon Musk's goal for Tesla to maintain partial driver-assistance – will result in potentially catastrophic failures, because they "require humans to stay focused at all times".
You can read Marcus' full post here (~6 minute read), in which he warns us to "be on our guard... if people start to rely on immature AI".
3—The Department of Luddites
How is basketball's Steph Curry so good? Natural talent, of course, but also practice. Lots and lots of practice:
"Curry uses innovative methods to improve decision making and reaction time in pressure situations. Payne [Curry's trainer] refers to this as neurocognitive efficiency and the goal is to overload or deprive his senses to be able to excel in chaotic environments. Sessions will often include strobe goggles, tennis balls, resistance bands, paddles, and sensory deprivation chambers.
To keep the workouts intense, Payne inserts conditioning and competition into each drill. He explains, 'Everything we do is against time and score. If you beat the number and you don’t beat the time, you still lose.'
One example is the Full-Court Star, outlined below, where Steph had to make at least eight of 10 shots in 55 seconds."
That's from Stephen Vafier, who points out that Curry wasn't always able to "shoot from anywhere at anytime", but developed the skill because while he was always "a good shooter", it got "blocked a lot". It's something he has been working on his whole life:
"Growing up, Steph compensated for his lack of size by perfecting his shooting motion. His mechanics are compact and efficient. This helps increase consistency and it's easier to improvise with less moving parts. He has a high release point and shoots early in his jump making the shot very difficult to block. Unlike traditional jump shooters, his minimal lift helps keep his legs fresh throughout the game.
And Curry is one of the best conditioned athletes on the planet allowing him to keep relentless pressure on the defense and eek out a few extra open shots each game. With his skillset, Steph could lean on endless pick and rolls like Trae Young. Instead he took a page out of the Reggie Miller playbook and never stops moving."
You can read the full story from Stephen Vafier's here (~5 minute read).
- Chartbook by Adam Tooze
- Conversable Economist by Timothy Taylor
- Croaking Cassandra by Michael Reddell (New Zealand focused)
- EconLog by David Henderson and Scott Sumner
- Economic Forces by Josh Hendrickson and Brian Albrecht
- Full Stack Economics by Timothy B Lee and Aden Barton
- Knowledge Problem by Lynne Kiesling
- Marginal Revolution by Tyler Cowen and Alex Tabarrok
- Noahpinion by Noah Smith
- The Grumpy Economist by John Cochrane
- The Macro Compass by Alfonso Peccatiello
- Experimental History by Adam Mastroianni
- The Upheaval by N.S. Lyons
- Unsupervised Learning by Razib Khan
- Wrong Side of History by Ed West
- Astral Codex Ten by Scott Alexander
- Don't Worry About the Vase by Zvi Mowshowitz
- Get Down and Shruti by Shruti Rajagopalan (India focused)
- In My Tribe by Arnold Kling
- ParentData by Emily Oster
- Richard Hanania's Newsletter
- The Permanent Problem by Brink Lindsey
- Essays by Benedict Evans
- Stratechery by Ben Thompson
- The Road to AI We Can Trust by Gary Marcus
- Vitalik Buterin's website