The Danish Mortgage System Avoids Lock-In
Tyler and I have been promoting the Danish mortgage system for years. Recall that in the Danish system each mortgage is backed by a matching bond. As a consequence, mortgage holders have two ways to pay a mortgage: 1) hold the mortgage and pay the monthly payments or 2) buy the matching bond and, in effect, extinguish the mortgage. The latter option is valuable because when interest rates rise, the price of mortgages fall. As I wrote earlier:
Thus, if a Danish borrower takes out a 500k mortgage at 3% interest and then rates rise to 6%, the value of that mortgage falls to $358k and the borrower could go to the market, buy their own mortgage, deliver it to the bank, and, in this way, extinguish the loan. Since the value of homes also falls as interest rates rise this is also a neat bit of insurance. Remarkable!
James Rodriguez writing at Business Insider points out another advantage of the Danish system, it avoids lock in:
When mortgage rates shoot up, as they did over the past two years, many would-be sellers decide they don’t want to move after all. Sure, a new home could be nice, but trading up would mean parting ways with a cheap mortgage rate. What may have been a welcome change suddenly sounds like a painful, expensive divorce. So they sit tight. A gummed-up housing market is good for nobody: First-time buyers can’t find enough homes for sale, and wannabe sellers remain trapped in places that are either too big or too small. This is called the lock-in effect — and it could linger for decades.
… One estimate (here, AT) suggests the lock-in effect prevented more than 1 million people from selling their homes in the span of just a year and a half, a steep toll considering about 5 million homes exchange hands in a typical year. I used to think of these golden handcuffs as an inevitable side effect of the magical 30-year fixed mortgage. But it doesn’t have to be this way. The answer to our problems may lie thousands of miles away … in Denmark.
…Danish sellers are able to earn a profit when they trade in their low mortgage rates for more-expensive ones, making it easier to move even when rates rise.
*Cosmic Connections*
The author is Charles Taylor (yes, the Charles Taylor) and the subtitle is Poetry in the Age of Disenchantment. This book is a very good introduction to romanticism, and also to the poetry of romanticism, noting that its degree of originality may depend on how much you already know. I liked the chapters on Rilke and Mallarme best, here is one excerpt:
It follows that for Rilke, our full capacity to Praise can only be realized if we take account of the standpoint of the dead. The medium of Preisen is Gesang [song]. thus the voice which most fully carries this song would have to be that of the gold Orpheus, who moves in both realms, that of the living and that of the dead.
And the sonnet is the medium. As its name suggests, it is a poetic form which asks to be heard, and not only read on the page. These two modes of reception are essential to all poetry, but in the sonnet the musical dimension becomes the most important avenue to the message.
So a praise-song from both sides, that of the dead, as well as the living. They call on Orpheus, the singer-god who moves between the two realms. Hence the Sonnets to Orpheus.
I am very glad to see that Taylor is still at it, and 640 pp. at that. Furthermore, this book is (unintentionally?) a good means for thinking about just how much deculturation has taken place.
GDP vs. individual consumption
Here is the source tweet.
The partisanship of American inventors
Using panel data on 251,511 patent inventors matched with voter registration records containing partisan affiliation, we provide the first large-scale look into the partisanship of American inventors. We document that the modal inventor is Republican and that the partisan composition of inventors has changed in ways that are not reflective of partisan affiliation trends amongst the broader population. We then show that the partisan affiliation of inventors is associated with technological invention related to guns and climate change, two issue areas associated with partisan divide. These findings suggest that inventor partisanship may have implications for the direction of inventive activity.
Here is the full piece by Daniel Fehder, Florenta Teodoridis, Joseph Raffee, and Jino Lu. Via Kris Gulati.
Tuesday assorted links
Leopold Aschenbrenner on AGI, and security matters
Here is the 165 pp. pdf piece, here is html, here is a Twitter short TOC preview.
And now Leopold on Dwarkesh. I haven’t heard it, but a friend sends along this excerpt:
Why didn’t I ultimately pursue econ academia? There were several reasons, one of them being Tyler Cowen. He took me aside and said, “I think you’re one of the top young economists I’ve ever met, but you should probably not go to grad school.”
Dwarkesh Patel 02:19:50
Oh, interesting. Really? I didn’t realize that.
Leopold Aschenbrenner 02:19:53
Yeah, it was good because he kind of introduced me to the Twitter weirdos. I think the takeaway from that was that I have to move out west one more time.
Dwarkesh Patel 02:20:03
Wait Tyler introduced you to the Twitter weirdos?
Leopold Aschenbrenner 02:20:05
A little bit. Or just kind of the broader culture?
Dwarkesh Patel 02:20:08
A 60-year-old economist introduced you to Twitter?
TaskRabbit for AI Hires
Many people are interested in knowing, which AI is the closest to achieving AGI? That’s an important question for philosophers and computer scientists but more and more I am seeing firms arise to answer a different question, Which AI should I hire?
EquiStamp, for example, rates dozens of AIs based on multiple evaluations, including custom evaluations tailored to specific business tasks. For instance, one firm may want to hire an AI to handle customer queries, another to sort packages, another to summarize internal technical documents. The best AI for each task might differ from the AI that scores highest on general reasoning power. In addition, businesses care not just about performance but also about speed and cost. No reason to hire AI-Einstein to sort the mail. AIs are also continually being re-trained so their performance can fluctuate. Businesses, therefore, may want to continually test their AIs and quickly hire and fire AIs as needed.
In short, a spot-market for hiring AIs is developing.
*Playing Possum: How Animals Understand Death*
That is a forthcoming book by Susana Monsó, and I found it both interesting and illuminating. Here is one excerpt:
This fixation on the face suggests that Firuláis’s initial motivation was probably not to eat his human, but rather that this behavior started as an attempt to make him react. Our face is the part of our bodies that our canine friends pay the most attention to, for it is key to understanding our emotions and communicating with us. Consequently, it is to be expected that Firuláis, upon seeing his caretaker lying still after the gunshot, began to try to get a reaction from him by nudging his face with his snout. In the absence of a response, and in order to calm himself down or out of sheer frustration, he might have started licking, the nibbling, and once blood was drawn the temptation to take a bit might have been overwhelming. That is, it’s likely that Firuláis’s love for his keeper and his anguish upon his lack of response were at the root of his behavior.
Talk about “model this”! Comparative thanatology edition, of course. You can pre-order here.
Brain drain from Canada
Here is the source. Don’t forget — in the long run the policies you choose shape who is attracted to your country. So be tough, as selection matters above all else. These are not the Canadian losers we are getting.
Is broadband good for you?
Kathryn R. Johnson and Claudia Persico have a new NBER working paper on exactly that topic:
Between 2000 and 2008, access to high-speed, broadband internet grew significantly in the United States, but there is debate on whether access to high-speed internet improves or harms wellbeing. We find that a ten percent increase in the proportion of county residents with access to broadband internet leads to a 1.01 percent reduction in the number of suicides in a county, as well as improvements in self-reported mental and physical health. We further find that this reduction in suicide deaths is likely due to economic improvements in counties that have access to broadband internet. Counties with increased access to broadband internet see reductions in poverty rate and unemployment rate. In addition, zip codes that gain access to broadband internet see increases in the numbers of employees and establishments. In addition, heterogeneity analysis indicates that the positive effects are concentrated in the working age population, those between 25 and 64 years old. This pattern is precisely what is predicted by the literature linking economic conditions to suicide risk.
It seems broadband is indeed (was indeed?) good for you.
Monday assorted links
1. Do firearm norms explain the variation in interstate teen suicide deaths?
2. Rukmini S on the Tim Harford BBC podcast, and more here on data for India.
3. Italian village with 46 residents has 30 local election candidates.
4. Camille Paglia’s school closes (NYT). And more here, accreditation was pulled suddenly.
5. Aurelian Criautu and Ben Klutsey on moderation and liberalism.
6. Anton Jäger on Belgium (NYT).
7. On Milei’s fixer (FT).
8. Helen Dale on personality and politics.
9. Supermajorities in Mexico, good luck with that.
10. Ashlee Vance on Cradle and Laura Deming (Bloomberg). “The company says it’s successfully cooled and rewarmed a slice of rodent brain and found the sample retained the electrical activity in its neurons.”
Wealth Inequality in a Low Rate Environment
Contra Piketty:
We study the effect of interest rates on wealth inequality. While lower rates decrease the growth rate of rentiers, they also increase the growth rate of entrepreneurs by making it cheaper to raise capital. To understand which effect dominates, we derive a sufficient statistic for the effect of interest rates on the Pareto exponent of the wealth distribution: it depends on the lifetime equity and debt issuance rate of individuals in the right tail of the wealth distribution. We estimate this sufficient statistic using new data on the trajectory of top fortunes in the U.S. Overall, we find that the secular decline in interest rates (or more generally of required rates of returns) can account for about 40% of the rise in Pareto inequality; that is, the degree to which the super rich pulled ahead relative to the rich.
That is from a recent piece by Matthieu Gomez and Émilien Gouin-Bonenfant in Econometrica. Here are less gated copies. Via M.
Can we survive deculturation?– Olivier Roy’s *The Crisis of Culture*
I have been reading Olivier Roy’s new book The Crisis of Culture: Identity Politics and the Empire of Norms. It is the best book on culture in years, and if you enjoy Martin Gurri and Bruno Macaes you should try this one too. This book actually got me excited at the theoretical level.
Early on in the book you will read the key question:
Are we living in a new culture or, conversely, is this expansion of normativity the sign of a profound crisis in the notion of culture itself?
Perhaps it is the latter. To some extent the internet drives the process, by chopping things up into bits and enabling and indeed sometimes requiring greater literality. But it is also a cultural trend that predated the primacy of internet life. There has been an ongoing erasure of shared implicit understandings, and that is a key variable driving many global trends.
Roy applies those insights to current problems with immigration and assimilation (which is now tougher), how to understand algorithmic social media, self-sufficiency in Japanese culture (a precursor of broader trends), the prevalence of memes (deculturation personified), by the elevation of folklore by UNESCO and others, autistics doing better in the contemporary world, arguments over reparations (more of a whining than an actual politicized struggle), the EU (extreme deculturation), and our current obsession with food (and also food writing) as a form of compensating for a decultured world.
Here is one interesting passage of many:
Therefore, it is not that English is becoming dominant, along with its cultural underpinning, but that the use of English is becoming decultured. This is why the linguistic phenomenon definitely does not reflect an Americanisation of world culture. The aim is to avoid any misunderstanding and any need to refer to implicit understandings that might not necessarily be shared. Jokes are banned and emotions have to be expressed explicitly using an emoji with a pre-defined meaning. Emotion is allowed, of course, but it must be immediately understood by addressees, wherever they may come from, so it is “sourced” from a list that, while remaining open, is pre-prepared.
The conclusion of the book serves this up for a start: “The trilogy of declaration, coding and normativity seems now to structure all debates and strategies on every side…”
French thinkers remain underrated in the Anglosphere. It is also notable how little coverage Olivier Roy receives in the “on-line world,” which is all the more reason to read this one and absorb its alpha.
You may recall that Roy wrote the earlier The Failure of Political Islam, which I also found very interesting. So he is one of today’s top intellectuals, and still going strong at 74 years of age. I still am not sure how many of his propositions I agree with, but I feel he is making real progress on the issues under question.
*In This Economy*, by Kyla Scanlon
The subtitle is How Money & Markets Really Work. I am a big fan of Kyla Scanlon (see the link for her other work), who is a force of nature. She graduated from Western Kentucky University in 2019, and she has a new and very effective approach to how to talk. I first learned of her through her explanatory videos, and it turns out she does one almost every day.
Apart from being very well done, this economics book has two notable features. First, it elevates Kyla’s notion of “vibes” as a significant determinant of economic activity. I use the older (and less vibey) terminology of “cultural contagion,” but in any case I consider this a neglected and under-analyzed set of forces, including in the economic realm.
Second, this is the first popular economics book I have seen that takes 2024 seriously. Imagine you trained a “large language human” on what people actually talk and worry about today, and set that human loose to write an economics book. This is what you would get. It is a good and bracing shock to those who have trained their memories on some weighted average of the more distant past.
As an aside, here are some of Kyla’s favorite poems. Why are there no major MSM profiles of her?