I've often noticed that maths teachers and scientists tend to grasp economic ideas far more quickly than most people, presumably because they are accustomed to thinking up theories, then doing experiments or observing real life, and then drawing more conclusions from their observations and changing the theory if necessary. Further, proper observational scientists try to put their personal views to one side: either lead is denser than gold or vice versa, this is not up to personal interpretation.
For example, from PhysOrg.com:
The mortgage interest deduction, also called the MID, is the second largest tax break in the federal tax code and is meant to promote homeownership by allowing itemizing homeowners to deduct the annual interest payments they make on their primary residence and second home real estate loans.
For the 2011 fiscal year, the deduction will account for an estimated $104.5 billion in revenue loss for the U.S. Treasury. However, since the Reagan administration, the deduction has been viewed as a vehicle for promoting homeownership.
"In urban places suffering from neighborhood instability, underperforming schools, low social capital and poor governance, increasing homeownership rates may improve conditions in these communities. This is because when households own their housing, they have more of a stake in the success of their communities," Turner said. "But in these urban places the MID is doing the opposite; it's actually lowering the likelihood of owning a home."
The duo's study analyzed household data collected from 1984-2007 by the Panel Study of Income Dynamics. Findings showed that the mortgage interest deduction boosts homeownership rates only in areas with an abundant housing supply, like the Midwest -- but only for higher-income households.
In denser urban cities with limited housing available, the deduction actually has a negative impact, reducing homeownership and instead inflating housing prices. According to Turner, the finding is consistent with economic theory: tight land restrictions mean that the higher demand for owner-occupied housing – because of increases in the mortgage interest deduction -- will only bid up house prices without expanding the house stock, which in turn means higher down payments.
Consequently, though households may be able to make monthly payments, low-wealth households can't afford the elevated down payment. These high house prices, and therefore higher transaction costs, also make homeownership a less attractive option to mobile households that may not be looking for a long-term purchase.
Belated hat tip: Anti-Citizen One.
Surprised by the outcome
3 hours ago
9 comments:
"allowing .. homeowners to deduct the annual interest payments they make on their primary residence and second home real estate loans": I know (and laugh at) the justifications that will be given for this treatment of loans on a "primary residence" but how in God's name do they attempt to justify it for a "second home"?
D, surely if owning one home is good, then owning two is even better?
No Hat Tip?
:(...
"Scientists, mathematicians' abd Engineers.
If you doing engineering at any educational institution you'll see engineers at arts functions, but you'll never artists at engineering dos. Small closed minds y'see, artists that is. Can't really see the whole world. Very limited imaginations, I think.
AC1, I have updated.
L, sure, engineers are applied scientists-cum-mathematicians.
I'm a scientist by profession and I shall take this as a complement.
It is true that scientists come up with models to describe what is going on in the world. Then they test this model with gathered evidence and if it doesn't agree they come up with a new model based on what they have observed.
However sometimes I feel that economists come up with models to describe what is going on in the world. Then at some point some else might gather some evidence to test the model. Then if it doesn't agree, the economist explains what must change in the world for it to fit his model. :)
DNAse, that's still way better than Climate Sc[am|ience] where they exclude data till it fits the model.
DNAse, the problem is that most economists are just cheerleaders various vested interests, i.e. the Labour supporting ones say they are Keynesians and call for more public spending; others say they want to help FTBs to buy their own home and so hose subsidies at them; yet others are totally in the pocket of the banks (see: "Inside Job"); and the Bank of England ploughs its own furrow etc.
My point about turning off traffic lights is that as a matter of observation, things work better when they are off. Quite what the explanation is, is a secondary matter (that debate gets very 'political' and has little to do with observation or logic).
AC1, these climate scientists and indeed most pro-nuclear scientists are just fronts for vested interests.
I should n't be too sure of this economics is so readily understood by scientists stuff.There was a huge rebellion among Economics students at the Sorbonne in 2000(?), which carried over to the UK, against the domination of the subject by Maths.They described the neo-classical approach, reliant on the free play of numbers unrestricted by any ethical questions of justice or whatever as "autistic".(Although this designation appears peculiarly insensitive,matters were n't helped by Vernon Smith winning the Nobel Prize in 2002 for something called "experimental economics" while having Asperger's and claiming "certain mental deficiencies may actually have some selective advantages."
The movement came to be called the Post Autistic Economics Movement though it later changed its name to something less hurtful.A continuation appears to have sprung up in California where the Kick over Manifesto was issued in October 2010)
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