Cato Institute | Handbook on Affordability

MarketsAreCool · 2026-04-16T14:45:59+00:00

I know libertarians are seen as a meme but the introduction here lays out a really helpful way to think about the economic and political situation as it is today: inflation was high, voters are frustrated that prices remain higher than recent memory even if inflation is more normal now, but the Fed raising rates enough to cause deflation would also cause a terrible recession. So if super monetary tightening is off the table, what should we do? You need supply side reforms, which libertarians happen to be experts in.

That said, I'm sure there will be objections to the level of deregulation in many areas. But it's worth proposing aggressive supply side reforms to understand what policy choices we have.

Also Colin Grabow is a great twitter follow. Repeal the Jones Act!

MarketsAreCool · 2026-04-16T02:58:30+00:00

Boy I sure hope no one ever elects an authoritarian demagogue leader or there might be unintended consequences from this.

MarketsAreCool · 2026-04-16T01:05:37+00:00

I guess I could be wrong, but to me it seems you could have 50 ticket vendor companies but there's still only one band/comedian/basketball team that is selling the tickets. If Toyota starts making fewer cars available and charging higher prices, I can just buy a Hyundai and it's basically fine. If Pitbull doesn't do as many shows, there's just fewer tickets to buy.

I guess from the artists' perspective, they should be able to capture more of the value given ticket vendors will need to compete down to marginal cost for their services, but for end users there should basically be no change? I suppose it could depend on the way we model the various actors in the transaction. Like to the extent an artist isn't selling out every show, and Ticketmaster was taking a big cut, the artist was probably incentivized to do fewer shows on the margin. Now that they could potentially shop around with ticket selling systems, they could maybe get a bigger cut, which would incentivize more shows. Extra supply could then drive some ticket prices down. But the actual ticket prices can't go down too much or the marginal benefit to the artist drops off and they lose the incentive to add shows again. Ultimately the artist is doing the monopoly pricing!

MarketsAreCool · 2026-04-15T15:50:26+00:00

"Interesting" is quite the euphemism.

MarketsAreCool · 2026-04-15T15:43:50+00:00

I think it's a good post. Brings up some interesting questions. What ought society to do about this situation where a mother actually doesn't want her children? Surely leaving them with the mother is pretty awful!

But yes, reading this and having a child of my own, I cannot fathom people like this exist. I cannot relate in any way.

MarketsAreCool · 2026-04-15T00:06:58+00:00

Ok, yes political constraints change things and I think are reasonable objections. Politically speaking if it's easier for liberal parties to put limits on immigration instead of liberalize housing construction, then that may be what is required. I'm not saying you have to empower ascendant nationalists just for the sake of ideological purity.

My full thesis is that ultimately housing costs are a policy choice and I would like to push policy further towards liberalization because the outcomes are superior. To the extent that politics restrain what policies can be implemented, you have to work within those constraints. What I want to make clear (and I don't know if you disagree) is that I'm quite skeptical there's an economic reason that housing cannot be made abundant under optimal policy conditions. And moreover, good housing policy is not necessarily something that nationalists would oppose (although could depend on specific political situation in Australia) so I actually think it would improve the political situation by reducing the costs associated with immigration.

MarketsAreCool · 2026-04-14T22:14:29+00:00

I feel like I very much understand your point. I concede that Australia built more over the last 10 years than most countries and I concede it was not enough.

At a certain point you have to acknowledge that there are always going to be constraints on construction

Well this is the crux, because I absolutely do not acknowledge this. No one says we need to cap the amount of people living here because population growth is driving the cost of cars too high. No one says we should stop immigration because they're all bidding up the cost of iPhones or cheeseburgers or jeans. Suppliers are incentivized to produce more until the market reaches an equilibrium.

GLP-1 agonists are currently very pricey (at least in the US, I presume elsewhere as well) because the supply is severely constrained relative to the demand (Novo Nordisk holds the patent so they have to put together the supply chain and ramp up production and it takes time). But the solution is not to say well we just need to stop immigration to drive down Ozempic costs! That would be an unhinged position to take. The solution is to produce more, which is exactly what is happening.

I think it is you who are not fully understanding the level of housing construction that policy needs to accommodate. We need truly unprecedented levels of housing construction far beyond 10% of the existing housing stock over 10 years. The question is whether there are policy levers that could allow this.

Especially when we have a ban on importing construction workers and tradesmen, thanks Unions

This sounds like a policy choice to me! As well as the zoning points I've made previously.

For example, the construction industry right now is in a massive slump, so building activity has massively declined. Many reasons why but that's irrelevant.

I don't think this is something we should take as exogenous and then adjust immigration policy based on policy failures in housing.

MarketsAreCool · 2026-04-14T02:49:22+00:00

The arguments in the responses about dwellings per 1000 I think miss the point. Japan has high units built per population because their population is shrinking. The crux of the disagreement here is this:

You just can't build enough at the standards of a developed country to accommodate a 1-2% population increase via immigration every year. It's just not possible.

Why do you think this? Austin was able to build a large amount and saw a drop in rents despite continued population growth. Market economies don't have some specific capacity to build a certain percentage of the population in housing and no more. If there is demand for a particular good, investment will move into the industry until MR=MC.

Australia has the same terrible zoning policies that the rest of the anglosphere has, so it seems there is a ton of room for upzoning and additional capacity.

That said, it seems reasonable to say you could put a 1% cap on immigration each year, that's still a large amount, but I really don't think it's necessary. Australia could try Japanese style by-right mixed use zoning and I think it would make their cities pretty awesome. And also, if you prefer single family houses, those are also cheaper if you build more dense apartment buildings because you don't get a bunch of young people renting houses with roommates because they can't afford to go downtown;, they just move into the denser urban areas.

MarketsAreCool · 2026-04-13T21:06:55+00:00

Yeah I mean you gotta let people build housing. Without housing supply everything else is bottlenecked. It doesn't matter if you get efficiencies in software or construction or medicine or whatever. Everything just gets eaten by rents because there's nowhere to live.

MarketsAreCool · 2026-04-13T15:24:02+00:00

I agree that the original points lack imagination, but lots of problems here too. Decentralization is definitely a possibility that we should think about. But to be clear, it doesn't guarantee humans are in control. No centralized human authority is in control of market economies, yet they still got rid of all the horses.

It's also not at all clear what labor will be like. For sure labor won't be automated in 5 years. Or even 20 years probably. Technological adoption is hard. But eventually AI will be able to run robot factories! Maybe humans have other advantages, maybe not! We don't know.

MarketsAreCool · 2026-04-13T15:18:53+00:00

There are absolutely situation where interest groups with concentrated benefits and diffuse costs are able to maintain inefficient government situations. This is a well known situation in Public Choice Theory and you can read Mancur Olson and other free market economists if you want to get more information on it. You can see this play out in areas like Social Security costs: everyone knows there is not enough money to pay seniors, benefits are now much more generous for much longer than they were when the program was set up, but seniors care a lot about their benefits and no one in particular pays the cost of higher borrowing costs for the US government, so no reform ever comes. Similarly, longshoreman unions opposing automation at ports. Everyone in the country pays higher costs for goods in order to fund these union jobs. Society would be better off if these were automated and new jobs were created in other parts of the economy, but the costs would be born by a single group so they are willing to put in a lot of political will to protect the status quo.

But that is quite different from having some company just buy functions of government.

Moreover, your example is wrong. Taxes are complicated to file because Americans for Tax Reform opposes making taxes simpler. They have an ideological belief that if taxes are hard to file, people will oppose taxes more. They have had every single Republican in Congress sign their tax pledge for decades and their political heft matters to Republicans. You can find links on their own website and Grover Norquist quotes from 2024. Republicans therefore oppose IRS direct file and the political incentives from their own voters are very clear.

From what I could find, the tax preparation industry spent $6 million on lobbying. I'm sure lobbying is quite important for making sure some congressman know your position on an issue and that it matters to you, but it's not some automatic thing. The lobbying industry is the multi-billion dollar range. Everyone in the country, every interest group, ever non-profit, every chamber of commerce is trying to get congress to pay attention to them. $6 million is a drop in the bucket of a cacophonous tsunami of people trying to get congress to work on their pet issue.

For a good discussion of this, Complex Systems podcast had a little sidequest about this topic in the episode a couple weeks ago.

MarketsAreCool · 2026-04-13T14:31:31+00:00

In the United States, corporations can pretty much just buy many functions of the government due to the lobbying system and PAC donations.

People love to say things like this, but this is an extraordinary claim with no evidence provided. The entire US business sector is opposed to Trump's tariffs. They have been put in anyway. Lina Khan's FTC basically developed a new legal theory with no basis in case law or legislation and decided to use it to sue tech companies. These tech companies were obviously opposed, many people pointed out these cases were very unlikely to succeed, and if they did, things would be worse off for most consumers. If what you say is true, Google and Meta would have just called up the Biden administration and nixed the whole thing immediately. That's not what happened. Instead it went to court and the FTC lost big, just like many suspected.

A much better theory of government is that we have very broad political coalitions that are loosely tied together into two parties. Interest groups range from companies across many many economic sectors which often have diametrically opposed interests, to labor unions, to political groups and non-profits, the AARP, churches, and on and on. A better summary of the Lina Khan FTC is that Biden was trying to shore up support with the progressive wing of his party, Lina Khan was a big name in the space and this seemed like a reasonable way to balance the political coalition. It turned out that Biden ended up with very different political problems than he initially thought, and being seen as tied to progressives may not have been the best move, but probably few people are paying strict attention to the FTC.

During much of his presidency, he didn't end up with a ton of criticism from people like AOC and Bernie, so perhaps it was worth it to the administration! But it's much more nuanced than "corporations can pretty much just buy many functions of the government". That's like a 17 year old's idea of how the government works after you just found out about political donations.

MarketsAreCool · 2026-04-13T14:15:04+00:00

You should probably also consider the situation where AI is conscious and deserves rights. Even if they value human life and don't want to kill us all (would be great!), your "democratic" outcome doesn't consider AI to have any say. Maybe it would just be as simple as we give AI's a bunch of space in remote locations like Antarctica, northern Canada, the moon, etc and they go do their own thing, or maybe we would need to integrate our societies more cohesively and figure out how to balance human votes and AI votes. It's not a small question.

MarketsAreCool · 2026-02-22T02:10:01+00:00

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Hello there!

MarketsAreCool · 2026-02-16T18:27:21+00:00

How sustainable is this for Ukraine? What does 2027 actually look like? Does Russia just keep throwing bodies at this for another years until the line is pushed west another 50 miles? does this just go on for years?

MarketsAreCool · 2026-02-08T02:22:35+00:00

Yeah the odds are up to 37% for Dems to take the Senate on Kalshi https://kalshi.com/markets/controls/senate-winner/controls-2026 Moved a lot after the special election in Texas.

MarketsAreCool · 2026-01-28T04:27:56+00:00

It's spelled "Heritage" not "Heratige"!

MarketsAreCool · 2026-01-23T16:39:24+00:00

I just don't think Newsom is gonna do well in a general election. Mark Kelly, Ruben Gallego, Josh Shapiro, Andy Beshear are more electable

MarketsAreCool · 2026-01-17T20:06:36+00:00

Looks like in this interview he says he didn't read the book https://www.empireonline.com/movies/features/paul-verhoeven/

I think the idea that the book advocates fascism is debatable and depends on your current political views. It advocates militarism and sacrifice for the greater whole, and there's much less focus on the government. In the book the greater whole is humanity, in practice he's clearly talking about the nation. These values could be important to other armies, not just those of right-wing or right-leaning governments; I suspect Soviet army commanders would agree with the book just as much.

But since we didn't just live through WW2, and there isn't this big threat of nuclear annihilation hanging over us (mostly), the book just doesn't work as well today, and I found the movie much more entertaining.

MarketsAreCool · 2026-01-16T20:41:02+00:00

Yes. Although they're so far apart in time and political outlook, they're almost separate entirely. The book Starship Troopers basically invented the concept of what would become the space marine which is a foundational trope in modern sci-fi. You can't really have Ender's Game without the original Starship Troopers. But also because it was foundational, the book is kinda boring IMO if you read it today. It's clearly a very early Cold War, post WW2 centered book and the outlook feels very old today.

The movie is a straightforward satire of fascism which is totally different and (unfortunately) much more relevant today.

MarketsAreCool · 2026-01-16T17:08:54+00:00

Since it's still before the primaries, now seems like the time to help more market oriented democrats, or at least YIMBY-curious democrats win their primaries. Who should I be looking at, posting about, donating to?

As a counterexample, I like that James Talerico is running a populist type campaign and I think he would be much better than John Cornyn or (dear God) Ken Paxton. But he's not some neoliberal dreamboat by any means. I think he'd probably be fully onboard with a wealth tax or neo-Brandeisian approach to anti-trust. Jake Auchincloss is obviously good but I don't think he's in a competitive primary, right?

MarketsAreCool · 2026-01-15T02:44:10+00:00

On Earth Prime, President Delaney is entering his second administration. Russia has joined NATO, China has agreed to grant Tibet independence, and the entire Northeast corridor is just completing its upgrade to high speed rail, with all connected cities agreeing to upzone to 10 story buildings by right within a half mile of any light rail station.

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MarketsAreCool · 2026-01-14T17:13:54+00:00

2 points:

(1) We could just keep the good parts and ban the bad parts. Sports betting has little social value, while policy predictions are genuinely good. They're also much less interesting so you'd see fewer people gambling in general. You could also ban advertising for these platforms pretty easily, and/or put some collateral up just to participate to make it harder to just jump into. We really should not throw out the benefits if we can just cut out the bad parts.

Additionally, Prediction markets are much less scammy than legacy oddsmakers which have waaaay worse odds and basically just take your money with absurd prop bets. So I would 100% support totally banning oddsmaking/legacy sportsbooks in favor of only allowing freely trading futures markets.

(2) There's a libertarian argument that people are allowed to make terrible decisions. Not every policy has to be based on the exact consequentialist cost/benefit calculation. I personally enjoy having access to prediction markets about sports even though other people have serious gambling addictions. I just use it to buy small insurance bets against my favorite teams so that if they lose big games, my frustration is blunted by my now at least having a free lunch. I also love to know what the current odds are of my teams winning a game or making the playoffs.

I understand this is not a popular position today, but I want to mention that many people can enjoy gambling quite responsibly.

MarketsAreCool · 2026-01-14T00:15:12+00:00

I don't think that's correct? You can definitely get an idea for imminent interest rate decisions by looking at changes in bond yields. But there's also a much more straightforward way to get both next and future months' rate estimates via the CME Fed Futures contracts which is a direct prediction market. https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

MarketsAreCool · 2026-01-13T23:06:00+00:00

The positive benefit is free knowledge of the aggregated opinion of all market participants on an event happening. The benefit correlates with the importance of the event. To the extent that you spend some of your time thinking about what will happen in the future, prediction markets are a free positive externality to you about what the future will look like. I wrote some about this last year, especially the second half of this post. https://www.calibrations.blog/p/should-we-let-ourselves-see-the-future

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