Saturday, November 30, 2019

Great Review of Shut Out in the Economic Record

Declan Trott, an economist with Australia's Department of the Treasury, has written a very nice review of Shut Out for Economic Record, a journal of the Economic Society of Australia.  It offers a concise and well-written overview of the book's thesis.

Unfortunately, there is a pretty hefty paywall.

A couple of brief excerpts:
But what if this fall in prices were not the inevitable bursting of a bubble, but an unnecessary and self-inflicted panic? This is Kevin Erdmann's contention. . . This is a provocative thesis, not to be accepted lightly.  Yet Erdmann has assembled a formidable battery of data and argument to support it.
. . .
It is the detailed documentation of the (housing bust), and the treatment of the entire episode as a panic rather than a bubble, that is Shut Out's key contribution relative to the academic literature. 
. . .
And, I was flattered by his closing comment.
As a member of the PhD tribe, I occasionally found myself wishing for more equations and regression coefficients, and simpler charts.  But still, somebody should give him an honorary degree. 

That sounds just like my editors and internal reviewers.  Why does everyone hate complicated charts so much? Anyway, this review was a pleasant Thanksgiving surprise.


  1. I haven't been able to buy your book in my part of the world yet, so can't say anything about the charts in there.

    I can say something about the charts on your blog:

    I do have a reasonably high tolerance for complication in a chart, but the more you cram into one, the more you need be careful about your visual representation. Eg thin lines that only differ in colour are almost impossible for me to tell apart, thanks to some form of colour blindness. is the classic about how to do good charts.

    1. (Correction: I have your book as an e-book. But I haven't gotten around to reading more than the first two or so chapters.)

    2. Thanks for the link.

      Sorry. The poor quality of charts on the blog is mostly just due to lack of attention because I don't spend as much time editing as I would in other formats, though I could still simply improve my habits as I construct things.

  2. Congratulations. Australia appears to be suffering from the same problem as the US, that is property zoning is leading to artificially tight supplies and skyrocketing housing prices.

    Australia also runs a large current-account trade deficit, which results in capital inflows, which to find their way into real estate. Interestingly, many Australian banks will no longer give mortgages to foreigners.

    I understand that Kevin Erdmann contends that it is rents that determine house prices, but I worry about the capital inflows anyway. It sure is consistent---wherever you see nations with large current trade deficits you see soaring house prices.

    Which leads me to quote my late great Uncle Jerry. "If you are not confused, then you probably don't understand the situation."

  3. Don't give up on the charts. More "mathiness" and "simple" charts certainly wouldn't make anything more clear. The charts only seem complicated to some people because they are a non-sequitur from their understanding of the traditional story. They will get it eventually.

    1. Thanks.

      I have slowly learned, though, that complex charts are a part of my learning process, but that doesn't necessarily mean the charts I learn from carry through to being good communicators of what I have learned. In the past, I have just reposted the charts I found useful, but it isn't realistic to expect a reader to put the energy into understanding a chart that I put into it as I was collecting data, etc., over the course of several days.

  4. At least one reader finds them useful, good communicators


  5. Median US Homebuyers Age in 1981 was 31. Today it is 47.

    by Barry Ritholtz
    From Torsten Sløk:

    The rise since the financial crisis is particularly noteworthy. This is driven by an aging population, affordability, higher student debt levels, and tighter mortgage lending standards for young people and individuals with lower credit scores. All these forces have also contributed to lower levels of residential mobility, see also our chart from last week.

  6. BTW, re tougher underwriting regs for home borrowers.

    Evidently, about half of mortgage loans today are made by non-banks.

    "Nonbanks originate 51% of all new mortgages compared with just 10% at the height of the subprime mortgage crisis in 2009, according to the panel of the top U.S. regulators which is tasked with identifying systemic risks. Nonbanks service 47% of outstanding mortgages compared to 6% in 2009, it added."

    So....what does mean for Kevin Erdmann? The federales are trying to keep certain lower-class people out of the mortgage market, but they get in anyway?

    Still, young Americans don't buy houses anymore, and they don't have families. The nation must import an employee class. This is better than before.

    1. CFPB, FHA, and FHFA standards apply to both banks and non-banks.