The Unassuming Economist

From The Conversation:

“Economists working on macroeconomic policy – things like taxes and spending, interest rates and border controls on flows of trade and money – often refer to a set of key relationships governments can influence. In the textbooks, each of those relationships is drawn as a curve in a graph.

First is the IS (“investment–saving”) curve. This says that if everything else stays the same, the Reserve Bank can increase economic output and employment by lowering the interest rate. Or it can cause a recession by raising the interest rate. (For simplicity’s sake, the curves here are depicted as straight lines.)

Second comes the Phillips Curve, which is usually drawn sloping upwards to suggest that if everything else stays the same, inflation will rise during economic booms and fall in recessions. In other words, the Reserve Bank or the government can apparently bring inflation down by causing a recession.”

Third comes the trade balance – the current account of the balance of payments (investment income and traded goods and services between New Zealand and the rest of the world).

If everything else stays the same here, as the exchange rate of the dollar falls, the current account strengthens by moving towards or expanding a surplus. If the exchange rate rises, the current account weakens: exports fall and imports increase.”

Continue reading here.

From a new World Bank report:

“We are facing a series of overlapping and interconnected crises that are impacting lives and livelihoods almost everywhere. The combined effects of slow economic growth, rising conflict and fragility, persistent inequality, and extreme weather-related events have sent shockwaves across the globe.

High-income economies are showing signs of resilience, but the outlook for low-income economies and fragile countries remains deeply troubling.

Just a decade ago, we had cause for more optimism. There was significant progress in sustainable development between 1990 and 2015, with more than a billion people lifted out of extreme poverty. This was a monumental achievement, driven primarily by strong economic growth in China and India, and it brought the wealthiest and least-well off economies closer in income levels.

Yet, what seemed like a clear path to complete poverty eradication has since faded. Our new report shows that global poverty rates have only now gone back down to pre-pandemic levels, with forecasts indicating a trajectory for the coming years that is dismal at best.

Almost half the world’s population—around 3.5 billion people—is living on less than $6.85 a day, the poverty line for upper-middle-income countries. At a more extreme level, almost 700 million people are living on less than $2.15 a day, the poverty line for low-income countries. Extreme poverty has become increasingly concentrated in Sub-Saharan Africa or places affected by conflict and fragility.”

Continue reading here.

From Nishtha Anushree at Swarajya:

“The Nobel Prize 2024 in Economic Sciences has been awarded to Daron Acemoglu, Simon Johnson and James A Robinson “for studies of how institutions are formed and affect prosperity.”

The Royal Swedish Academy of Sciences has chosen the awardees of the 2024 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for demonstrating the importance of societal institutions for a country’s prosperity.

The laureates’ model for explaining the circumstances under which political institutions are formed and changed has three components. The first is a conflict over how resources are allocated and who holds decision-making power in a society (the elite or the masses).

The second is that the masses sometimes have the opportunity to exercise power by mobilising and threatening the ruling elite; power in a society is thus more than the power to make decisions.

The third is the commitment problem, which means that the only alternative is for the elite to hand over decision-making power to the populace.

“The introduction of inclusive institutions would create long-term benefits for everyone, but extractive institutions provide short-term gains for the people in power,” the laureates say.

The laureates have also developed an innovative theoretical framework that explains why some societies become stuck in a trap with what the laureates call extractive institutions, and why escaping from this trap is so difficult.

They have added a new dimension to previous explanations for the current differences in the wealth of countries around the globe. One of these relates to geography and climate.

Their insights regarding how institutions influence prosperity show that work to support democracy and inclusive institutions is an important way forward in the promotion of economic development.”

From McKinsey & Company:

“Daron Acemoglu and Simon Johnson of MIT, and James Robinson of the University of Chicago were awarded the 2024 Nobel Memorial Prize in Economic Sciences for their research on how societal institutions shape a country’s prosperity. “I believe that the political economy of growth, how we make it happen, what sort of institutions we have to have in order to undergird growth, who benefits from growth, how you regulate growth, and technology, automation, AI, the direction of technological change—those are intimately connected,” said Acemoglu in a 2021 episode of the McKinsey Global Institute’s Forward Thinking podcast with Michael Chui.

For more on the role of inequality in economics, check out McKinsey Publishing interviews with Nobel Prize winners Angus Deaton, Robert Solow, and Richard Thaler, and insights from McKinsey’s Anu Madgavkar, Sven Smit, Kweilin Ellingrud, Tracy Francis, and Asutosh Padhi.”

On cross-country:

• Taming the World’s Affordable Housing Crisis – Insead
• The EU’s plan to make housing more affordable. The European Commission has a plan to tackle the housing squeeze even as it acknowledges that its powers are limited. – Politico
• Why does the Anglosphere Suck at Housing? Speaking English is part of the problem – Home Economics
• Global house price growth accelerates. House prices across our 56-country basket rose by 3.3% in the 12 months to the end of June, with prices increasing by 1.9% over the past three months alone – Knight Frank

Working papers and conferences:

• Monetary policy transmission: why consumers’ housing situations matter. – European Central Bank
• Long-term fixed-rate mortgages through an international lens: could they lead to higher home ownership? – Bank of England
• House Price Experiences and Consumer Spending – SSRN
• Housing Policy, Homeownership, and Inequality – SSRN

On the US—developments on house prices, rent, permits and mortgage:    

• Why have mortgage rates fallen, and where are they headed? – Brookings
• US 30-Year Mortgage Rate Climbs by Most in More Than a Year – Bloomberg
• Asking Rents Mostly Unchanged Year-over-year – Calculated Risk
• Why Mortgage Rates Haven’t Fallen Since the Fed Cut. Would-be home buyers anticipating more relief from the Fed might be waiting a while – Wall Street Journal
• 1st Look at Local Housing Markets in September. Significant Regional Differences for Active Inventory – Calculated Risk
• NYC Apartment Renters Get a Break But Bargains Remain Elusive. Manhattan median is $200 below record after string of declines. Leases jump, signaling the market’s still fiercely competitive – Bloomberg
• Remodeling Market Sentiment Dips in Third Quarter – NAHB
• Moody’s: Apartment Vacancy Rate Unchanged in Q3; Office Vacancy Rate at Record High – Calculated Risk
• Housing Confidence Inches Higher Amid Record-High Optimism Toward Mortgage Rates. Renter Sentiment Also Up, Including Share Expecting Rates to Fall – Fannie Mae
• Mortgage rates are rising again. An uptick in rates slowed total loan applications after several months of growth – Quartz
• Despite Housing Shortage, America Has 5.6 Million Vacant Homes—What Gives? – Realtor.com  

On the US—other developments:    

• Removing Barriers to Abundant, Affordable Housing. InsideSources published an op-ed from Kevin DeGood about the role that state and local governments play in America’s housing affordability crisis. – Center for American Progress
• Americans Recognize Housing Affordability Crisis, Support New Policies To Fix the Market and Build More Homes. New survey data show housing affordability is a salient national issue. – Center for American Progress
• Contra J.D. Vance and Tim Walz, Housing Should Be a ‘Commodity’. Housing is unaffordable because regulations have prevented its commodification. – Reason
• Why YIMBYs like Kamala Harris – Axios  
• The link between immigration and housing costs isn’t as obvious as it seems – Axios
• Gavin Newsom’s blunt instrument on housing – Politico 
• The Week in Review. Week of Sept 30th — Payrolls pop – Home Economics
• San Francisco’s mayoral election defined by housing crisis and shift to right – Reuters
• Housing costs are rising. How do Trump and Harris plan to tackle them? – NPR
• Manufactured Homes: Shipments, Prices, and Characteristics in 2023 – NAHB
• ICE Mortgage Monitor: Insurance Costs “Spike”, Especially in Florida – Calculated Risk
• See Where the Housing Market Could Change the Most as Mortgage Rates Drop – Realtor.com
• Soaring Insurance Costs Are Menacing Owners of Big Buildings, Too. Struggling landlords and developers are seeking leeway on coverage from their lenders — mostly in vain. – New York Times
• State of Local Homeownership Prior to the Election – NAHB 

On Australia and New Zealand

• [Australia] Downsizing How Australia’s housing crisis opens door for eager Asian investors. The factors in Australia’s affordability crisis can be seen elsewhere in Asia, making it important for investors not to overlook their own markets – South China Morning Post
• [New Zealand] Difficult mortgage decisions for borrowers likely to continue – CoreLogic

On other countries:  

• [Canada] Buying a home gets a tad more affordable as rates drop – RBC
• [Canada] Can private real estate help lead Canada out of the housing crisis? – Bloomberg
• [Korea] Korea Touts Progress in Cooling Real Estate Ahead of BOK Meeting. Finance Ministry comments just days before Bank of Korea meets. BOK has delayed cutting interest rates on concerns about debt – Bloomberg
• [Korea] Cooling in Seoul’s Apartment Market Pauses Ahead of BOK Meeting. High-frequency data show top properties demand still strong. Government continues to pledge to rein in household debt – Bloomberg
• [Kuwait] Why Housing Prices in Kuwait Keep Going Up? Unveiling the Drivers Behind the Crisis – LSE
• [Hong Kong] Hong Kong property prices have ‘bottomed out’ and will ‘rebound slowly’, sector leader says. Recent strength in stock market can help drive economic recovery and boost property sector, head of developers’ association says – South China Morning Post
• [United Kingdom] UK property market strengthens, pressure on renters intensifies, RICS says – Reuters
• [United Kingdom] UK house prices rising for first time in two years – Yahoo Finance