Austin Contrarian

This is pretty wild.

A new study (via Steven Levitt) says the relative length of someone's ring and index fingers predicts whether that person will score better on the math or verbal section of the SAT.  Someone with a longer ring finger is likely to have better math and spatial skills than verbal skills.  Someone with a longer index finger is likely to be more verbal.  There's apparently a biological reason why this should be true.  People with longer ring fingers were exposed to more testerone in the womb, while people with longer index fingers were exposed to more estrogen.  Exposure to different hormones causes the brain to develop differently.

This is consistent with the three-person sample in my household.  My wife's index finger is much longer than her ring finger, and she is much more verbal than mathematical.  My ring finger is much longer than my index finger, and I'm probably more mathematical than verbal.  (I always got higher scores on the math sections of the SAT and GRE, although the math and verbal percentiles were usually the same.  Oh, and I spent three years in math grad school.)  My 16-month-old has a longer ring than index finger.  He's been kind of slow to talk, but he was trying to assemble his nebulizer at one year.

Just out of curiosity, do this blog's readers mainly have long index fingers  or long ring fingers?

Those high-priced condos will be great for families with children

There's a common perception that the condo boom is making central Austin less family-friendly.  Some people argue that because the new condos won't attract many families with children, they are turning central Austin into a playground for rich singles and couples.  Council member Kim has even taken up the cause, suggesting we need more four-bedroom condos downtown.

It is true the new condos are aimed at affluent singles and couples.  But this does not mean they are bad for families with children.  Just the opposite.  Building lots of expensive condos is one of the best strategies for getting more families with children into central Austin.

Here's why:  The supply of single-family houses in central Austin is essentially fixed.  Families with children must compete with singles and couples for these houses.  There are lots of affluent singles and couples to compete with.  This competition has pushed up prices, and will continue to do so for the foreseeable future.  If we want more families with children, we have to give them an edge in the bidding.

One way to do this is to stack the market with homes that appeal more to families with children.  This means replacing small homes with large homes.  Large households generally want large homes more badly than small households do.  The typical family with three kids is willing to spend more for, say, the 2,400th square foot of living space than the typical single.  All else being equal, a family with children is likely to outbid a single or couple for a large home.  Whenever a small home is replaced by a large home, the odds go up that a large household will win the bidding on another home.  (On the other hand, artificially restricting the supply of large homes is a good strategy for driving families with children away.)

There is another way to give families with children a better shot:  Add lots of homes that singles and couples will view as close substitutes for single-family homes.  Giving singles and couples a good alternative makes them less likely to bid up the price of the existing stock.  Why pay a steep price when there's an equally attractive option just around the corner?

The expensive condos sprouting up around downtown will attract affluent singles and couples who are willing to pay a premium to live in central Austin.  In other words, they will attract exactly the class of buyers most likely to compete with families with children for scarce single-family housing.  And unlike single-family homes, there is a huge potential supply of new condos.  This steady supply of new homes will give small households other choices, cutting what they are willing to pay for detached single-family homes. Over the long run, families with children will see less competition and pay less for housing than they otherwise would.

So there are really two ways to get more families with children into central Austin.  One is to build large houses.  The other is to build a lot of small, expensive condos.

McMansions in the New York 'burbs

From the New York Times.

Here's the accompanying photo:

 

I assume the house on the left is being singled out as a McMansion.  I doubt it would have been singled out if it were less ostentatious and followed the neighborhood's architectural style.  This house isn't "too big," in other words; it's too showy, with bad architecture to boot. 

A comment on Peak Oil

Here's a comment I posted on this M1EK's BSOB thread.  I'm reposting it here because (i) it's what I think about Peak Oil; and (ii) it took me a long time to write.   

The crux of the issue is this: Should we reallocate our resources today in anticipation of a potential future scarcity? The peak oilers say yes, although they differ in how much reallocation is necessary.

The anti-peak oilers say no. Here's the argument, at least as I see it:

(1) Reallocating resources today will cause certain and quite genuine economic loss. (E.g., reserving valuable urban land as marginally productive farmland, a common peak-oiler policy recommendation.)

(2) The peak oilers assume that we should reallocate resources today because it will be easier now than when scarcity sets in. But that's got to be wrong. What matters is the price of energy relative to other goods. We can't possibly know what that relative price will be in 10 or 20 or 30 years. For example, it "costs" an average worker X minutes of labor to drive one mile. How much will it cost an average worker, measured in minutes of labor, to drive one mile 20 years from now? That depends not only on how much oil's left, but on increases in average productivity, technological innovation (substitutes for oil or the combustion engine), and the amount of demand for driving one mile. No one know what that relative price will be in 20 years. Anyone who says he does know is practicing religion, not science or economics.

(3) Because we do not know what the relative price will be in 20 years, it is foolish to reallocate resources today based on a wild-assed guess. Rather, it is better to let rising prices encourage efficient conservation and reallocation of resources, as well as technological innovation. (We should diversify our energy base, but not because of peak oil. Diversity will cushion us against sudden shocks to our oil supply.)

The "cornucopian" part of this argument is (2), where people like me say that energy may be cheap in the future because of technological innovation. No, technological innovation is not guaranteed. But technological innovation is a possibility, and a real one based on past results. The constant technological innovation that's going on around us -- innovation unmatched by any society, past or present -- is relevant to our capacity to innovate in the future.

Peak oilers generally refuse to recognize the possibility of technological innovation; that's where they fall into the malthusian trap. Once we recognize that innovation is a genuine possibility, then it's hard to say that we should incur a certain loss today to avoid a speculative loss tomorrow, particularly when we don't know how to reorganize things to avoid that loss.

Note that I do not dispute that the world's oil production has peaked.  I'm agnostic on that particular issue.

Very, very expensive farmland (updated)

A new idea for allowing NYC residents to grow produce locally (h/t Robin MaroneyMoroney/WSJ Informed Reader):

High-rise city farms could allow city dwellers to eat local produce as the population of the countryside dwindles, reports U.S. News & World Report. Columbia University parasitology professor Dickson Despommier, came up with the concept with his students while investigating ways to make third-world agriculture less prone to the parasites that can enter the food chain when human waste is used as fertilizer. His “vertical farm” would work around the year without pollutants or parasites. He estimates 150 farms, 30-stories each, could feed all of New York City. It would water the plants with some of the 1.4 billion gallons of water that New Yorkers pour down the drain. The plants would be grown without soil, suspended in water or a nutrient-packed solution. Lots of windows and solar panels would bring in light. Fish would be kept in tanks and poultry in small pens. Several New York companies, including International Business Machines Corp., have shown interest in building a vertical farm, said Mr. Despommier, who predicts one will be in business in 10 years.

A 30-story building means steel-and-concrete construction, especially if each floor will be loaded up with plants and elaborate irrigation systems.  Around here, that kind of building costs $300+ per square foot, without the fancy finish-out.  Equivalent high-rises in NYC go for $1,000+ per square foot.  That would be the market price -- or opportunity cost -- of one square foot of this "urban farmland."

Let's see.  There are 43,560 square feet in an acre.  That means this "urban farmland" would cost between $13 million and $43 million per acre.  I don't know exactly how productive this super-duper advanced hydroponics system would be, but I doubt it's 4,000-14,000 times as productive as $3,000/acre farmland in Indiana.  That locally-grown broccoli had better taste really, really good.

Update:  There's a lively discussion of vertical farming over at Slashdot.  Some people actually think this will make sense for New York when gas gets real expensive.

I'm always surprised that people don't have a better sense of relative magnitudes.  If you assume that an acre of hydroponic "land" can support 10 people per year (a generous estimate), then 8,000 acres could support 80,000 people per year -- or 1% of New York City's population.

8,000 acres is roughly 348 million square feet, which, coincidentally, is almost exactly the size of Manhattan's entire inventory of office space.  So to meet just 1% of NYC's annual food needs, you would have to find space in NYC to duplicate one of the planet's great concentrations of skyscrapers.

Out in the heartland, where space isn't as valuable, they're more likely to measure land in square miles than square feet.  8,000 acres there isn't 348 million square feet; it is just 12.5 square miles -- a tiny corner of an average county. 

I'm apparently too pessimistic, though.  The vertical farm people claim you can feed 50,000 people per year with just 13 million square feet of floor space.  This extrapolates to 21 million square feet for 80,000 people.  As best I can tell, they get there by assuming that hydroponic techniques will yield 10 to 100 times as much as dirt farming.  (Someone should tell the farmers.)

Fine.  So we really need just 21 million square feet to feed 1% of NYC's population for one year.  No sweat.  That's just eight Empire State Buildings.  And, for another 792 Empire State Buildings, we could feed the other 99% as well. 

Zoning and daycare

A developer wants to redevelop property at the corner of South Lamar and Manchaca as vertical mixed use.  The developer wants to replace this:

with a 360-unit mixed-use project that looks like this:

California-style zoning

Michael Barone on recent demographic trends: 

This is something few would have predicted 20 years ago. Americans are now moving out of, not into, coastal California and South Florida, and in very large numbers they're moving out of our largest metro areas. They're fleeing hip Boston and San Francisco, and after eight decades of moving to Washington they're moving out. The domestic outflow from these metro areas is 3.9 million people, 650,000 a year. High housing costs, high taxes, a distaste in some cases for the burgeoning immigrant populations--these are driving many Americans elsewhere.

The result is that these Coastal Megalopolises are increasingly a two-tiered society, with large affluent populations happily contemplating (at least until recently) their rapidly rising housing values, and a large, mostly immigrant working class working at low wages and struggling to move up the economic ladder. The economic divide in New York and Los Angeles is starting to look like the economic divide in Mexico City and São Paulo.

As I've pointed out before, California-style zoning is a bad, bad thing to imitate.  Incumbent homeowners, through strategic NIMBYism, strangle the supply of new housing.  The high-income types bid up the price of the existing stock.  Skyrocketing prices push out the middle- and low-income classes.  The incumbents, professing alarm over rising inequality, push new regulations (inclusionary zoning, for example) that burden new development, further dampening supply.  Prices predictably continue to rise until enough people decide the city's amenities just aren't worth the price.  (The initial price peak is probably not an equilibrium since housing demand is inelastic in the short run but elastic in the long run; i.e., people won't abandon the city immediately in response to high prices.  This may partly explain the housing bubble in California and the East coast.) 

If you think that places like San Francisco and LA are already "built out" and simply can't do anything to increase the supply of housing, you're wrong.  Here's a recent example via the San Francisco Chronicle:  A developer wanted to convert an abandoned hospital just inside the Presidio National Park into 350 apartments.  The developer did not even propose expanding the building; it just wanted to subdivide the existing structure into apartments.  Thanks to the opposition of local neighborhood groups, the project has been scaled down to 186 apartments.  As part of the agreement, the developer will demolish two wings of the building.  The justification for the neighbors' demand?  These wings were "architectural blunders."  That these "blunders" have been in place since 1952 apparently was irrelevant.

Now repeat the same story twenty or fifty or a hundred times.  That's a lot of housing lost to incumbent protectionism.   

Protecting us from interior-design related injuries

Interior designers want to make it a crime to decorate places of "public accommodation" without a license.  In other words, they'd like the Legislature to help them cartelize the interior design industry in Texas.   

The interior designers, of course, don't see this as an income-maintenance program.  They're just worried about safety.  "[L]icensed interior designers are trained in health, safety and welfare, are qualified to draw and develop specifications (electrical or plumbing fixtures or ceiling modifications, for example) and to create non-load-bearing elements of buildings, whereas non-licensed decorators are not."  Makes a lot of sense.  Because someone somewhere may want his plumbing redesigned, I have to hire a licensed professional to pick out a wall color.   That's like making me hire a certified arborist to mow my yard. 

Professions that petition the Legislature to protect the "public" usually have better cover than this.  Typically, there's been a gory accident, triggering predictable calls for tighter standards.   What the decorators really need is a good newspaper headline, something like "Family wiped out in grisly interior-design related accident; state's lack of certification program called into question."

But let's suppose for just a minute that it really is safer to hire a licensed interior designer than an unlicensed one.  Will this legislation promote safety?  No.  Just the opposite.  The proposed legislation applies only to the design of businesses and other public places.  It will force out cheap, unlicensed designers, raising fees for licensed interior designers who design for public spaces.  The higher fees will induce licensed interior designers to substitute out of residential design into commercial design.  Meanwhile, unlicensed decorators will be herded into residential design.  Homeowners, as a result, will be more likely to end up using unlicensed designers.  Since they're presumably less sophisticated than businesses -- and thus less able to screen designers without the state's assistance -- they're more likely to end up with unqualified designers.  And we can expect more interior-design related injuries at home.

Frankly, I'm surpised that the interior designer profession would ignore such an obvious threat to safety.  Our homeowners surely deserve just as much protection in the home as they receive at work.

A dumb, dumb tax loophole

Wednesday's Statesman had a piece on a property-tax break for "ecolabs."  A property owner who opens up his property to ecological research is entitled to reduced property taxes.  Not surprisingly, this has sparked intense interest in bugs and grass among a number of property owners (including Michael Dell).  The tax appraisers are more skeptical:

The issue has led to an unlikely contest, with academics and some landowners squaring off against tax appraisers.

Ecolab exemptions, like those for farming, ranching or wildlife management, can reduce the appraisal value of a property as much as 90 percent. The land is valued as if it were dedicated to agricultural use.

. . .

But county appraisers, suspicious of the arrangements, have begun rejecting ecolabs.

The Travis Central Appraisal District has overturned all ecolab exemptions it granted last year. And within the past year, the Hays Central Appraisal District has rejected eight ecolab applications, and the Bexar Appraisal District has rejected one.

The appraisers say the ecolabs have little oversight and cost counties and school districts thousands of dollars in missed revenue, and they question the merits of the research projects.

The appraisers are being diplomatic.  This is an idiotic loophole.  Not because ecological research is not valuable.  It is.  It is certainly something that our universities should do.  This is just a stupid way to fund it.

The ecologists complain that they need access to private land.  There's no question that they do.  But people get access to private land all the time.  They rent it.

That's effectively what's happening here.  The state is renting land for ecological research, paying rent in the amount of the tax breaks.  (Actually, that's not quite right:  The state is obtaining access to the land but compelling counties and cities to pay the rent.)

This is a dumb, dumb way to pay rent, and not just because city and county governments are being forced to pick up the tab.  This is a dumb way to pay rent because the people who obtain the benefit from the property, and are therefore in a position to judge the value of the property, don't pick up the tab.  This means that the amount of rent doesn't necessarily have any bearing on the value of access to the property.  For example, one property owner's assessed value has been cut by $2.8 million.  He's effectively getting $60,000+ in rent per year for letting researchers perform ecological research on his property.  Is it worth it?  I don't know.  No one knows, because the researchers' institutions don't have to foot the bill.  If we gave the institutions an extra $60,000 to spend on ecological research, they might spend it all for access to a single piece of property.  But then they might not.  They might decide that $60,000 could be used better to fund a bunch of other projects. 

Even if the researchers were determined to get access to a specific property, they might be able to get it for a lot less than $60,000.  The typical property owner probably wouldn't give access for free.  But if he's got 40 undeveloped acres just sitting there, earning no economic return at all, he might consider even a few thousand dollars a windfall.  This loophole virtually guarantees that we'll overpay for ecological research.

Access to the property might not be worth the price for another reason.  The research itself might not be worth very much.  All research is not created equal.  Universities, departments, and even individual researchers have to prioritize all the time.  They do this in part based on a cost-benefit analysis.  I don't mean they calculate the fiscal benefits of the research -- there frequently is none -- but they balance the potential advance of knowledge against the cost of procuring that advance. 

When universities or academic departments or grant-issuing government agencies foot the bill, they have an incentive to monitor the research project, to make sure it is worth the resources it will consume.  This is a good system because they have the expertise to decide what's valuable and what's not.  Under the tax-break system, though, the university or academic department or grant-issuing government agency doesn't have to worry about the cost of property access.  Trivial research -- that is, research that no sensible academic would spend ten bucks on -- can be used to lop thousands of dollars off the tax rolls.  (Also, there's the possibility of collusion between property owner and researcher.)

This system forces the burden of monitoring the quality of the research on . . . the tax appraiser.  The tax appraiser must determine whether the project is a justifiable ecological research project or just a tax dodge.  I doubt many tax appraisers anticipated that they would need a research degree in ecology when they signed up for the job. 

Rep. Patrick Rose has introduced a bill to tighten the ecolab tax break.  Do us a favor, Representative.  Don't tighten.  Chop. 

The urban home discount

As I've mentioned before, I live in a small neighborhood of urban homes in south Austin, about 2.5 miles south of Town Lake.  The homes are a decent size for central Austin; most have between 1,600 and 2,400 square feet.  What marks them as "urban" is the lot size.  They are very small.  Ours is one of the larger ones and it's only 4,400 square feet.  Most of the lots are under 4,000 square feet.  (This is roughly the size of the small yard-home lots at Mueller.)

Some people don't want to bother with a yard. My neighborhood might be an attractive choice for them.  But if you want a real yard, pass on my neighborhood.  At my house, we've only got room for a patio, a sandbox, and a strip of grass.

Of course, that postage-stamp yard might start to look better when you consider what a larger yard costs.  Some recent MLS listings give us a pretty good idea.  Homes in my neighborhood list for roughly $175 per square foot.  (Here's one at $173 psf (2,200 sq. ft.) and another at $178 psf (2,000 sq. ft.))  Meanwhile, just down the street, a house of the same vintage and roughly the same size -- but on a 7,500 sq. ft lot -- is listed at $227 psf, and the owners already are taking backup offers.  That works out to a $100,000 premium for the yard, or an extra $850/month when you factor in taxes.  (In fact, the premium may be even larger than that; the "yard" house does not have a garage, while the two listings in my neighborhood have two-car garages that back out onto an alley.  On the other hand, the "yard" house probably has a nicer finish-out.) 

I'm not complaining about the price difference.  My house was cheaper than other stuff in south Austin when we bought it back in 2001; that's how we could afford a good-sized house in south Austin back then.  My point is that it is possible to mitigate central Austin's sky-high home prices.  (Note, I use "mitigate" because $175 psf is hardly cheap, even if it's a lot cheaper than $225 psf.)  In fact, one of the affordable housing task force's draft recommendations was to make it easier to build small-lot homes in SF-3 neighborhoods. 

Needless to say, the enemy of urban neighborhoods is not the market; it is the run-of-the-mill neighborhood activist.  NAs fight small-lot zoning tooth and nail.  For example, at one of Brewster's VMU roadshows, one of SLNA's officers openly pressed Brewster to guarantee that there would be no more "urban neighborhoods" -- small-lot zoning -- in SLNA.  You know, as a quid pro quo for tolerating VMU. 

Council should give this type of objection short shrift.  Urban neighborhoods house almost twice as many households at a much lower cost per household.  Considering all the hand-wringing over home prices and density, you'd think Council would jump at the chance to add more of them.