• Recommendations for Further Reading
  • May 6, 2024

The euro, housing policies, and sports venues


Giancarlo Corsetti and Marco Buti survey "The first 25 years of the euro" (CEPR Policy Insight 126, February 2024, https://cepr.org/publications/policy-insight-126-first-25-years-euro).

"At the age of 25, the euro has proven to be stable and resilient to existential threats. The great monetary experiment has gone through and passed a set of defining tests concerning its role in fostering the Single Market and providing an area of stability and inclusive growth for the residents of the union. . . . [T]he initial architecture and constitution of the euro was a ‘work in progress’ and required a dynamic development. [L]eaving the euro area construction intentionally unfinished is dangerous and costly. The GFC [global financial crisis] and the ensuing sovereign debt crisis were arguably ‘too big to swallow’ for an incomplete union: an insufficient and incoherent response pushed the euro area into a painful existential crisis in 2010, much larger than in other regions of the world. The euro area may not survive another round of dismal performance caused by its own institutional and policy deficiencies. In the near future, climate change, the energy transition and geopolitical instability will bring more tail events to the plate of euro area policymakers . . ."

Albert Saiz discusses 30 different housing programs used in cities and countries around the world in "The Global Housing Affordability Crisis: Policy Options and Strategies" (IZA Policy Paper No. 203, October 2023, https://docs.iza.org/pp203.pdf). Here’s an excerpt from a case study:

“Dutch Housing Associations (HA) are private, nonprofit enterprises that develop and manage affordable housing in the Netherlands. They account for approximately 75 percent of the three million rental homes and 35 percent of the entire housing stock, per 2016 estimates. HAs must lease 80 percent of their vacant units to low-income families and 10 percent to people with intermediate incomes. Ten percent can be leased to high-income families, which allows the associations to cross-subsidize their social mission. A government-regulated point system determines each unit’s rent, always substantially at below-market levels. Twenty-five percent of the total points are based on the tax-assessed market value of the property and 75 percent on the dwelling characteristics. The higher the number of points, the higher the allowed rental price. Points are also awarded based on factors such as size of the housing, facilities, and energy efficiency. The point system provides incentives to partially fund improvements with rental revenue growth. Subsequently, rents can only increase at a prespecified percentage annually (currently 3.3 percent). HAs utilized a revolving fund model that—in addition to their equity—is sustained through rental revenue from tenants and sale proceeds from parts of their stock to investors. Excess funds are reinvested into renovating existing buildings, developing new affordable housing units, or developing neighborhood regeneration projects. The associations do not require outside investors and can accept a lower or zero return on their equity. . . . Importantly, they do not utilize direct government subsidies. Instead, they benefit from cheap loans. In my view, the Dutch HAs model represents one of the most successful housing policies worldwide and is ripe for replication in other countries."

Megan T. Stevenson offers skepticism about the policy implications of randomized controlled trials in "Cause, Effect, and the Structure of the Social World" (Boston University Law Review, December 2023, 103:7, pp. 2001–2027, https://www.bu.edu/bulawreview/files/2023/12/STEVENSON.pdf).

"[M]ost reforms and interventions in the criminal legal space have little to no lasting effect when evaluated by RCTs [randomized controlled trials], and the occasional success usually fails to replicate when evaluated in other settings.” She backs this claim by discussing studies of counseling/therapy programs, criminal legal supervision, including intensive probation; scared-straight programs; work/job-training programs; drug testing, substance abuse counseling, and drug court; juvenile diversion; policing “hot spots”; and boot camps. “This Article shows that limited-scope, isolable interventions rarely lead to meaningful change. Those who desire meaningful change must therefore seek interventions outside the scope of what is evaluable via RCT. This includes changes that are so multipronged and entangled that it is impossible to hold all else constant. This also includes changes that are so large in scope that experimental evaluation is infeasible. It’s hard to know what systemic reform will bring, not only because we cannot test its impact empirically, but because it’s very hard to imagine a world that is otherwise the same as ours, while also being deeply, structurally different. When it comes to systemic reform, we are flying half-blind."

Gary Clyde Hufbauer and Megan Hogan argue that “America’s payoff from engaging in world markets since 1950 was almost $2.6 trillion in 2022” (Peterson Institute for International Economics, Policy Briefs 23-17, December 2023, https://www.piie.com/publications/policy-briefs/americas-payoff-engaging-world-markets-1950-was-almost-26-trillion-2022). Hufbauer and Hogan point to pre-2017 research on more than a dozen studies of international trade, which “calculated an average ‘dollar ratio’ of 0.24.” They explain:

“Simply put, the dollar ratio is the dollar increase in GDP divided by the dollar increase in two-way trade. In language familiar to economists, the dollar ratio is the elasticity of income (GDP) with respect to trade. Expressed another way, the calculation indicates that a 1 percent increase in trade yields a 0.24 percent increase in GDP—i.e., a $1 billion increase in two-way trade increases GDP by $240 million.” They argue that more recent studies since 2017 suggest a higher “dollar ratio” of 0.30.

Anil Ari, Carlos Mulas-Granados, Victor Mylonas, Lev Ratnovski, and Wei Zhao describe historical and international experience since 1970 in "One Hundred Inflation Shocks: Seven Stylized Facts" (September 2023, IMF WP/23/190, https://www.imf.org/en/Publications/WP/Issues/2023/09/13/One-Hundred-Inflation-Shocks-Seven-Stylized-Facts-539159). Here are their seven facts.

"Fact 1: Inflation is persistent, especially after a terms-of-trade shock. Only in under 60 percent of episodes in the full sample (64 out of 111) was inflation resolved within 5 years after a shock. Even then, disinflation took on average over 3 years. Fact 2. Most unresolved inflation episodes involved ‘premature celebrations’ Fact 3: Countries that resolved inflation had tighter monetary policy Fact 4. Countries that resolved inflation implemented restrictive policies more consistently over time . . . Fact 5. Countries that resolved inflation contained nominal exchange rate depreciation . . . Fact 6. Countries that resolved inflation had lower nominal wage growth . . . Fact 7. Countries that resolved inflation experienced lower growth in the short term but not over the 5-year horizon."

Davide Romelli discusses “Trends in central bank independence: a de-jure perspective” (BAFFI CAREFIN Centre Research Paper N. 217, February 2024, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4716704; for a readable short overview, https://cepr.org/voxeu/columns/recent-trends-central-bank-independence). From the abstract:

“This paper presents an extensive update to the Central Bank Independence—Extended (CBIE) index . . . extending its coverage for 155 countries from 1923 to 2023. The update reveals a continued global trend towards enhancing central bank independence, which holds across countries’ income levels and indices of central bank independence. Despite the challenges which followed the 2008 Global financial crisis and the recent re-emergence of political scrutiny on central banks following the COVID-19 pandemic, this paper finds no halt in the momentum of central bank reforms. I document a total of 370 reforms in central bank design from 1923 to 2023 and provide evidence of a resurgence in the commitment to central bank independence since 2016. These findings suggest that the slowdown in reforms witnessed post-2008 was a temporary phase, and that, despite increasing political pressures on central banks, central bank independence is still considered a cornerstone for effective economic policy-making.”

John Charles Bradbury, Dennis Coates, and Brad R. Humphreys review "The impact of professional sports franchises and venues on local economies: A comprehensive survey" (Journal of Economic Surveys, September 2023, 1389–1431, https:// onlinelibrary.wiley.com/doi/10.1111/joes.12533).

"Between 1970 and 2020, state and local governments devoted $33 billion in public funds to construct major-league sports venues in the United States and Canada, with the median public contribution covering 73% of venue construction costs. The prevalence of subsidized sports stadiums and arenas spawned an active economics literature evaluating their efficacy at stimulating economic activity. This literature contains near-universal consensus evidence that sports venues do not generate large positive effects on local economies. Robust empirical findings documenting the impotence of professional sports in local economies likely reflect a simple theoretical explanation: consumer spending on sports represents a transfer from other local consumer spending, not net-new spending. Although sports games attract some nonlocals to spend money in the area, these visitors also crowd out other tourists attracted to other consumption amenities common to major US cities. Even with the presence outside visitors attracted by sports events, most consumer spending in and around pro sports venues derives from local residents; therefore, the opportunity cost of local sports consumption falls primarily on other competing local businesses, such as movie theaters, restaurants, and retail shopping. Sports-related spending largely reflects a redistribution of existing spending by residents rather than increased local spending."

Distinguished Lectures

David A. Green delivered the Presidential Address to the Canadian Economic Association on the topic: “Basic income and the labour market: Labour supply, precarious work and technological change” (Canadian Journal of Economics, November 2023, pp. 1195–1220, https://onlinelibrary.wiley.com/doi/abs/10.1111/caje.12698; video of lecture at https://www.economics.ca/cpages/presidential-address).

"I examine the question of whether a basic income could alter the quality of jobs and the level of wages by giving workers greater bargaining power. Working within a standard search and bargaining model, I show that there is no reason to think that it would have either of these effects. Theoretically, a basic income could even lead to decreases in wages—particularly at the low end. But more importantly, the analysis points to deficiencies in our models that become particularly evident if we consider policies in light of a goal of creating a more just society. Once we look through that lens, the relationship of work to social respect and self-respect becomes more salient. The correct response to denigrating and otherwise problematic work conditions are policies that focus on elements of respect in the workplace. Treating those as reducible to monetary equivalents, as we tend to do in our models, misses the extent to which the work relationship is special and different from other exchanges in the economy. In addition, a focus on self-respect and social respect highlights people’s need for community as the basis of that respect. Truly improving working conditions requires engaging the community of workers at a work site. Again, our models are not well suited to investigating how to do that. But on the face of it, a basic income does not appear to be the best policy for improving job characteristics because it delivers only cash (which, again, is the wrong realm of consideration) and is given to individuals in the hope that they might use it to backstop community building behaviours without any particular evidence that it would actually do so."

Alan Blinder delivered the 2023 Daniel Patrick Moynihan Lecture in Social Science and Public Policy to the American Academy of Political and Social Science, on the topic “Economics and Politics: On Narrowing the Gap” (October 25, 2023, for text, see the Peterson Institute for International Economics website at https://www.piie.com/commentary/speeches-papers/economics-and-politics-narrowing-gap; for YouTube video, see https://www.youtube.com/watch?v=jaF4Cjundy4).

“May I start by dispelling a myth? Perhaps because economists are frequently trotted out to support or oppose policies, perhaps because we have a Council of Economic Advisers right in the White House, perhaps because the powerful Federal Reserve—so ably represented here today—is dominated by economic thinking, many people believe that economists have enormous influence on public policy. In truth, apart from monetary policy, we don’t. Almost a half century ago, George Stigler (1976, p. 351), later a Nobel prize winner, wrote that ‘economists exert a minor and scarcely detectable influence on the societies in which they live.’ Stigler was no doubt exaggerating to make his point. But he had a point. And things have not changed much since. So here’s my advice to economists interested in actual—as opposed to theoretical—policymaking. Don’t forget about efficiency. It matters. We are right about that. But we may have to content ourselves with nibbling around the edges, below the political headline level, to make the details of a complex policy package less inefficient. Call it the theory of the third or fourth best.”


Cityscape, published by the US Department of Housing and Urban Development, has a symposium on “100 Years of Federal Model Zoning” (2024, 25:3, https://www.huduser.gov/portal/periodicals/cityscape/vol25num3/index.html).

The introductory essay, by Pamela M. Blumenthal, explains “It’s Not Only Hoover’s Fault: Reflections and Opportunities on the Centennial of the State Zoning Enabling Act”:

“In 1921, the U.S. Department of Commerce, under its then-Secretary Herbert Hoover, supported the formation of an Advisory Committee on Zoning. The Advisory Committee’s charge included aiding communities interested in the “promotion of the public welfare and the protection of property values . . . Zoning ordinances had been adopted in 8 cities by the end of 1916, another 68 cities by 1926, and an additional 1,246 municipalities by 1936, constituting 70 percent of the U.S. population.”

In another essay, Paul Cheshire offers “An International Perspective on the U.S. Zoning System.”

"In planning systems, the level to which decisions are rule-based, discretionary, or reflect local or wider societal interests varies globally. Internationally, the U.S. system is among the most locally controlled but significantly rule-based because of the use of zoning. In contrast, in the United Kingdom and a range of other countries, local politicians largely decide on development on a case-by-case basis. More local control and discretionary decisions increase the power of the ‘not in my backyard,’ or NIMBY, interest because development costs are highly localized, but benefits range over a wide area, even a whole country. This process tends to end with generally restricted development, resulting in higher housing and land costs. This problem is increasingly visible on both U.S. coasts. . . . The planning system common to Continental Europe, the Master Planning system, is more clearly rule-based, prescriptive, and detailed than the U.S. zoning system. Uses for every parcel are planned, and permission to develop is virtually automatic if the plan and any other relevant regulations are followed. In countries such as Germany, France, or the Netherlands, plan formulation and decision control has an important element, which is national, or at least regional."

Social Philosophy and Policy has published a twelve-paper symposium on topics of “Poverty, Agency, and Development.” As one example, Johannes Haushofer and Daniel Salicath explore the evidence concerning “The psychology of poverty: Where do we stand?” (2024, 40:1, 150–184, https://www.cambridge.org/core/journals/social-philosophy-and-policy/article/psychology-of-poverty-where-do-we-stand/0EE340EA852D6F3688C27F03024FA4DF).

"The purpose of this essay was to provide an overview of recent developments in the literature on the psychology of poverty. There has been significant progress in recent years, in particular, in establishing causality in the effect of income on psychological well-being; elucidating the precise functional form of psychological well-being with respect to income (satiation); and improving our understanding of the importance of relative income. Most saliently, the causal effect of income on psychological well-being is now robustly established. Research on the effects of scarcity and stress on economic decision-making has also made great strides in the past few years. However, the picture that emerges from these literatures is not as clear; individual studies are often statistically weak, provide conflicting evidence, and replication efforts have not always been successful. While the last word has perhaps not been spoken, in our view, the case for a poverty trap that operates through the effects of poverty on stress, decision-making, and cognition is currently not strong."

Discussion Starters

Michael Bernick reminds us of "America’s Great Experiment With Jobs For The Underclass" (Forbes, February 21, 2024, https://www.forbes.com/sites/michaelbernick/2024/02/21/americas-great-experiment-with-jobs-for-the-underclass).

"This month marks the fiftieth anniversary of the National Supported Work Demonstration project, America’s experiment to end the underclass through jobs. Supported Work is little remembered today. But it was one of the largest employment demonstrations undertaken by the federal government up to that time. The Supported Work participants were drawn from four groups identified in the 1970s as the “hard to employ”: women who had been on welfare for at least 30 of the previous 36 months, ex-offenders, former drug addicts and unemployed out-of-school youth. The participants were provided with paid work experience, an array of training and social services, and placement assistance into regular jobs. . . . Supported Work operated from 1975 through 1979. During this time, around 10,000 workers were enrolled, split between the participant group and control group. . . . Only around a third of the 10,000 enrollees completed the program and went on to unsubsidized employment or to additional education/ training. Further, the employment and income gains of the participants were not far above those of the control groups."

Jan Feld, Corinna Lines, and Libby Ross provide evidence that even in academic research papers, “Writing matters” (Journal of Economic Behavior and Organization, January 2024, pp. 2378–397, https://www.sciencedirect.com/science/article/pii/ S0167268123004225). From the abstract:

"In this study, we estimate the effect of writing quality by comparing how 30 economists judge the quality of papers written by PhD students in economics. Each economist judged five papers in their original version and five different papers that had been language edited. No economist saw both versions of the same paper. Our results show that writing matters. Compared to the original versions, economists judge edited versions as higher quality; they are more likely to accept edited versions for a conference; and they believe that edited versions have a better chance of being accepted at a good journal."

Robert Francis provides some history at “Economic Ornithology: Before pesticides, birds were a farmer’s best defense against bugs. And the government’s economic ornithologists could tell you exactly how much each bird was worth” (Bird History substack, January 10, 2024, https://birdhistory.substack.com/p/economic-ornithology).

"[The] US Department of Agriculture established the Section of Economic Ornithology in 1885. The following year it became the Division of Biological Survey, and was upgraded to the Bureau of Biological Survey in 1905. In 1903, the Saturday Evening Post, for example, published a request that ‘every person in the United States who kills a bird is requested by the United States Government, not in a mandatory way, but as a matter of courtesy, to send the stomach and its contents to Washington.’ By 1916, the Bureau of Biological Survey had collected and analyzed the contents from more than 60,000 bird stomachs, which they used to determine whether each of the 400 species they studied was, on balance, helpful or harmful to man. Researchers divided the stomach contents into ‘good,’ ‘bad,’ and ‘neutral’ categories, based on whether the partially-digested bug and plant matter was beneficial or harmful to farmers. According to the Bureau of Biological Survey, native sparrows, who are ‘specially efficient destroyers of weed seeds’; saved farmers $35 million in 1906 by eating ragweed and crabgrass seeds. And during Nebraska’s 1874 Rocky Mountain Locust infestation, a single Marsh Wren was calculated to have fed her brood of chicks enough grasshoppers to save $1,743.97 worth of crops."