"Houses are assets not goods: taking the theory to the UK data"

From Bank Underground:

In yesterday’s post* we argued that housing is an asset, whose value should be determined by the expected future value of rents, rather than a textbook demand and supply for physical dwellings. 

In this post we develop a simple asset-pricing model, and combine it with data for England and Wales. We find that the rise in real house prices since 2000 can be explained almost entirely by lower interest rates.

Increasing scarcity of housing, evidenced by real rental prices and their expected growth, has played a negligible role at the national level.

Includes lots of lovely charts, tables and calculations.

As I have said many a time, all you need to know is
(1) local average wages in each area of the country, which tell you what local rents will be, and
(2) prevailing interest rates. You multiply local rents by the inverse of interest rates (or divide local rents by interest rates, same thing) and that tells you what house prices will be in each area to within a tolerable margin of error.

There is no need to factor in 'scarcity' to the equation, being impossible to measure once you have done the two-stage calculation.

This also explains why there is a larger variation in very local house prices within larger cities/conurbations. This is because there will also be a larger variation in wages in larger cities. Office cleaners earn the same everywhere, but the higher paid jobs are in the larger cities/conurbations, so there will be a wider range of wages in larger cities/conurbations, hence a higher range of rents and a higher range of house prices.

* "Yesterday's post" is also well worth a read, that also boils it down to the two-step calculation. They also include a section headed "Higher property taxes needn’t mean higher rents…".

"The world's first floating nuclear reactor"

From The Daily Mail:

The world's first floating nuclear reactor dubbed 'Chernobyl on ice' has arrived at its permanent location in the Arctic after a perilous sea voyage of almost 3,000 miles.

The Russian-made power station is due to start providing power to the most northerly settlement in Asia by December.

Named the Akademik Lomonosov, the 472ft vessel carries two 35-megawatt nuclear reactors, and has been under construction since 2006.

The world's first?

Have they not heard of nuclear submarines or nuclear-powered aircraft carriers, all of which float? Admittedly, Russian nuclear submarines are better at catastrophically failing and then sinking than they are at floating, but I don't think that's what they meant.

"Protests as five-week Parliament suspension begins"

From the BBC:

Parliament has officially been suspended for five weeks, with MPs not due back until 14 October.

Amid unprecedented scenes in the Commons, some MPs protested against the suspension with signs saying "silenced" while shouting: "Shame on you..."

Zero sympathies from me.

Rumours - well-founded as it turns out - that Johnson would suspend Parliament if he couldn't get his own way started circulating three months ago, before he'd even won his party leadership contest and thus by default (or by tradition or by custom, but with no particular legal force) become Prime Minister.

MPs have therefore had plenty of time to organise a vote of no confidence. It appears that they were incapable of agreeing on who would be the replacement PM. By default, it would have to be a moderate Conservative MP who is a Remainer (of which there are plenty) or at least in favour of a soft-ish Brexit (of which there are also plenty).

The template for this is the Chamberlain-Churchill handover. Technically, the Norway Debate was not a vote of no confidence, but it is accepted as having had the same effect. A majority of MPs from all parties had more or less agreed beforehand that Churchill - who was a Conservative MP, just like Chamberlain - would replace Chamberlain as PM. The whole thing took three days start to finish.

Today's MPs have been fannying around for three months and achieved precisely nothing. Corbyn had the mad idea that he might be PM; Lucas thought there should be an all-woman government and heck knows what Swinson wanted. Not exactly serious grown-up debate, in other words.

"The Haywain" by John Constable

I had always assumed that the hay wagon in the famous painting was fording a shallow river that flows off between the trees in middle of the painting.

Mrs W and I visited National Trust, Flatford on Sunday, and took the obligatory 'gate crashing The Hay Wain' photo in front of the cottage, which still looks exactly the same.

Two things struck me:

1. That is not actually a river, it is a pond (or non-flowing side-arm of the actual river, or however you wish to describe it), which ends roughly where the trees in the middle of the painting are. Nobody would be daft enough to ford it, they'd just go round it, which would take about one minute. So the event he painted never happened.

UPDATE: Sobers' explains in the comments why the wagon is in the pond.

UPDATE: NT map:


2. While the cottage looks exactly as it did, the National Trust haven't bothered to install a hay wagon in the middle of the pond, which would enhance the overall visitor experience and make those photos all the more enjoyable. Especially if you could wade out and pose on it, like on the zebra crossing in Abbey Road.

Lest ye think this is some sort of sacrilege, there are precedents for this, i.e. statues commemorating something that never happened or somebody who never existed, which become visitor attractions in their own right, for example The Little Mermaid in Copenhagen harbour, Manneken Pis in Brussels or various Swords in the Stone dotted around anywhere with a vague connection to King Arthur. See also Waverley Station in Edinburgh.

Awkward conversations of our time...

From the BBC:

Sophie - not her real name - told the BBC's Victoria Derbyshire programme she had been on a day out with her family 18 months ago when she had checked her phone to find missed calls and messages.

Her sister's partner had found videos of her on Pornhub - the world's largest porn website. One was in a top 10 chart and had had hundreds of thousands of views.

How does that work?

"Oh darling, I was browsing for porn and I stumbled across this one with your sister in it. It's really filthy, especially the ending where she [content removed]."

James James' chapter on LVT

Reader James James writes: "I've just finished a draft chapter on Location Value Tax for a forthcoming book and would welcome your readers' comments and suggestions. Links will stay live for a few months. Ask people to leave comments on your blog. Thanks! (Warning: 20,000 words)"

You can download from DropBox or Mega.NZ. No need to create a user account.

"Why is the "Cost of Living" in Cities so High?"

Spotted by Lola at Mises.org.

Most of the article is the author discussing the correct interpretation of The Gospel according to St Mises, the interesting bit is near the end:

This raises the question, then, of why do workers move to a big city where the rent is so high? As I’ve exhaustively argued above, this isn’t a mere matter of units. Dollars are the same in San Francisco, but most of the prices are higher. Why do people put up with this?

The obvious answer is, “Because wages and salaries tend to be higher.”

... The brief explanation is that the productivity of many types of labor is much higher in urban areas than elsewhere. Historically the development of the big cities in the United States was tied to water transport: New York, Los Angeles, and Houston are still major port cities, while Chicago’s access to the Great Lakes and key rivers played an important role in its growth.

So it wasn’t a coincidence that America’s largest cities developed where they did. However, once people start living in close proximity because of some external factor (such as access to the water), there is a separate effect: Their productivity is amplified in other areas too, simply because of their proximity. The “economic approach to cities” is an entire subfield, so I won’t dwell on it here. Suffice it to say, people don’t spread out uniformly across the land, the way electrons repel each other on the surface of an object to distribute the electric charge uniformly.

Rather, more than half of the people in the world currently live in urban areas or cities, with projections that that figure will rise to two-thirds by 2050. There must be some reason for this attraction. On the consumer side, it might be the ability to eat at the finest restaurants and go to a Broadway show (if we’re talking about Manhattan). On the producer side, it might be because cities offer the highest salaries, and are worth moving to, despite the higher price for an apartment of a certain size.

Yet contrary to Cochrane, these high wages aren’t due to a difference in currency; they are supported by the fact that the productivity of workers is genuinely higher. The worker who is paid $100,000 in San Francisco is producing twice as much for his employer as the worker who is paid $50,000 in Cleveland. This isn’t because the units are different, it’s because the first worker is genuinely more productive.

Yes and amen to all that, that's Von Thünen's-Ricardo's law of Rent. The author does not just trot out the Faux Lib argument about lack of supply. Whether he draws the obvious conclusion on what should and what shouldn't be taxed is unknown.

"Why the Amazon doesn’t really produce 20% of the world’s oxygen"

I was about to do a post debunking the clearly inaccurate claim that More than 20 percent of the world oxygen is produced in the Amazon Rainforest, but those nice people at National Geographic have saved me the bother:

“The net [oxygen] effect of the Amazon, or really any other biome, is around zero,” he explains.

No point me summarising such a neat article, you might as well read it in full, if you're interested.

"Cows pay early-morning visit to startled Ribble Valley families"

From The Lancashire Telegraph:

COWS were seen grazing in people’s gardens in the Ribble Valley over the weekend.

Witness Richard Bowie appears to be the world's most sensible man:

“Also as they were by my car I did not want to startle them and damage my car. I then found it hilarious as, when I looked out of the upstairs window, they were in everyone’s garden. We fed the baby and went back to sleep.”

Wowzers! Who would have expected that?

From The Sun:

THE Government’s Help to Buy scheme has benefited more rich than poor households, a new report found amid claims that the scheme is a “major failure”...

Shockingly, around one in 20 households who use the scheme earn over £100,000.

The flagship scheme has also boosted profits of the country’s three largest developers – Persimmon, Barratt and Taylor Wimpey.

According to Shelter, all three have managed to more than double their reported profits in under six years, with Barratt seeing the greatest profit rise of 325 per cent.