In this episode, we are joined by Sam Bowman to talk about the housing theory of everything, the slowdown in science and technology, the long term economic future of the UK, and a whole lot more.
William Jarvis 0:05
Hey folks, welcome to narratives. narratives is a podcast exploring the ways in which the world is better than in the past, the ways that is worse in the past, or it's a better, more definite vision of the future. I'm your host, William Jarvis. And I want to thank you for taking the time out of your day to listen to this episode. I hope you enjoy it. You can find show notes, transcripts and videos at narratives podcast.com. Additionally, in this episode, my friend Lars to say joins us as a co host. Well,
Unknown Speaker 0:40
Sam, how are you doing this afternoon?
Sam Bowman 0:43
I do very well. It's a very, very warm day in London. We've had something like as close as you can get to a heatwave in the UK. So the grass has gone Brown. The trees are desperate for water. And obviously every single person is complaining about how hot and sweaty they are. But I like it. And I'm enjoying the summer as much as you could call it that.
Unknown Speaker 1:07
That's great. That's great. I'm glad you're avoiding the rain right now. It's a It's nice to see the sun a little bit. Well, Sam, thank you so much for hopping on and joining us for an hour today. Do you mind giving us a brief bio and some of the big ideas you're interested in?
Sam Bowman 1:21
Sure. So my name is Sam Bowman, I live in London. But I'm from Ireland. I moved here in 2009. So about 13 years ago. Now I can't believe it's been that long. And for most of my life, I've worked in public policy. So mostly in big tanks. I worked for a libertarian neoliberal think tank called the Adam Smith Institute, which I ended up being executive director of a pretty young age, I worked in the world of antitrust, both on the advisory side and the private sector. And also for a think tank called the international center for law and economics, working on things like tech regulation. And most recently, having set up a website called works in progress with some friends as a sort of side project hobby, which was really just a website about how to make the world get better faster. We joined a company called stripe, and now I work on works in progress in my full time, as well as on something called stripe press. So really, I'm somebody who's interested in progress, technological, scientific, economic advancement, and really kind of interested in the, I suppose you could call them the kind of dollars on the sidewalk type of policies, maybe we'll talk about them later on. But my my kind of vision of politics is that there are probably a lot more kind of win win solutions to problems. And we imagine, and often when we get sort of sucked into, you know, political trench warfare, where we hate each other, and we are screaming at each other and barely making any progress on one side or the other. And, and believe me, I've been on many of those sides, I really understand that it's very easy to get into those kinds of fights. But that actually, we're missing, you know, lots of areas where we could make steps forward that everybody agrees or steps forward. And so what I'm really interested in now is is what those things are and what those areas that we can we can make those sorts of progress in I
Unknown Speaker 3:16
will say I've I definitely think you're right. And that there, there seems like quite a few areas where there are $20 bills in the sidewalk in the policy arena where we could pick them up and and everyone would be better off if we did that. But it seems like we've gotten a lot worse in the western world at doing that since perhaps the 1970s or something like that, like like that timeframe. What do you have a sense of why that might be why we've gotten more polarized, or why it's harder to kind of work together and kind of get these things done?
Sam Bowman 3:45
Well, I I'm kind of talking my own book here. But I think that housing supply shortages are a really big part of the puzzle. Now there is a there is a related debate around what Tyler Cowen calls the great stagnation, which is this slowdown in GDP growth in productivity growth, in various measures of productivity growth. So you know, controlling for how much capital we put in, and the quality of labor and things like that, and still seems as if we're getting worse at making things and coming up with new ideas for every kind of unit of stuff. And every unit of brainpower we're putting in. I recently recorded a presented a documentary for the BBC on this question. And, you know, this question of whether ideas are getting harder to find is something that, you know, I certainly don't feel that I have a perfect answer to
on the separate question of whether ideas are getting harder to find and I'll get back to housing in a minute because that's such a passion subject for me, I need to you know, we can spend the next hour talking about that. My view is that it's possible that we are at a point where we've picked the low hanging fruit and ideas you know, it's possible that electrification and the jet Engine and antibiotics, you know, those are things that were comparatively easy to discover, compared to the sorts of things we would need to do today. You know, if you think about the advanced that the discovery of antibiotics represented in terms of human wellbeing, compared to the sorts of advancements we need to make now to, because our because our lives have gotten so better, because we've solved so many problems, it could be that the problems that are left are just inherently much harder. On the other hand, there's the I think, the very good point, that there's pretty much no point in human history where that would have been true, you know, you could have we could have been sitting here in 1850, saying, you know, well, you know, we've discovered the steam engine, you know, surely that's it, like, surely we've exhausted all of the really easy advances that there are to make. And I think you could look at other areas of human output, like music and art, and sort of say, Okay, well, there have been times where we've seemed like we've been in a bit of a rut, and then we've made some sort of breakthrough that's led to a huge flowering of new output. So, you know, music is my favorite example, where, if we were sitting in 1950, talking about basically musics been on a downhill trend since, you know, the late 19th century, you know, since Tchaikovsky died, and since the, and I guess, people like Stravinsky, showing my musical ignorance here by ignoring the many brilliant 20th century composers but, you know, you could, you could definitely have made the point at certain points in history, that music seems to have slowed down. And then when music began to kind of take off with the rise of doowop, and jazz and blues, and rock and roll, and then the explosion in pop music that was sort of down and rock music that were downstream of all those things, in the 60s, and after, you know, it seems as if progress in lots of areas of our lives, you know, goes and stops and starts and you know, you make a breakthrough. And then that leads to a huge amount of other downstream breakthroughs. So, so I'm not completely convinced that we know that we've picked all the low hanging fruit and it wouldn't shock me if some advancement that we made, you know, whether it's AI and of course, there are things to worry about there as well. Or whether it's other technologies around maybe genetic engineering or things like that, that we don't know about, that could lead to this breakthrough that makes us all laugh at people talking about the great stagnation in 2022. My view, and maybe we can come back to this later on, is that we're also doing science in quite bad ways. And the documentary I did for the BBC, the sort of exploring the first question of whether ideas are getting harder to find and say, okay, look, I don't really know, but then saying, but it seems as if we're not doing a great job at finding ideas. You know, it seems as if a lot of scientists lives are pretty awful. Most scientists I know hate their jobs and hate the amount of time it takes to get grants and the amount of work they have to put in to the to the grant receiving process. They have to wait months, if not years to get papers published. The process for getting papers published is at best, very inefficient, and at worst, outright corrupt. And nepotistic. You know, they often feel that more senior members of their of their faculties or more senior colleagues end up getting credit for the things that they have done. And so, you know, the personal reputation and the personal return that should come to scientists for doing really well, is being diminished. And it's my argument was that even if ideas are getting harder to find, there are probably still things we can do to improve how we're finding them. So you know, we can we can improve the input side, even if the output side isn't doing so well. So So that's on the question of the great stagnation, which is, I think, has to be a huge part of the story of why things have slowed down since the 1970s. I'm kind of undecided. But I think we we could do things better. But I really think and I think that the the great underappreciated cause of slowdown and cause of our lives being a lot less good than they could be, is the lack of housing being built in in and this is the crucial point being built in the places that people want it to be built. You know, there's nothing more frustrating than people looking at national numbers of houses being built. So that, you know, houses being built in North Carolina, or North Dakota account the same as has been built in the Bay Area, nothing against North Carolina or North Dakota. My suspicion is I would rather live in those places. But I think I could probably get a more highly paid job if I was living in the Bay Area. And I think there are lots of people who would who would want to do that for work on the on the aggregate level.
We think when we think about housing supply shortages, we usually think of them as being a problem to do with the cost of living and to do with the amount of money that we have to spend on housing. But then we can start to think about the second order effects. You know, it's certainly true that too few houses in places like London and the Bay Area in New York, and lots of other cities that are very, very highly productive. certainly true that that means that you spend more of your money on rent or on your mortgage if you want to live in those places. But it's also true that those high prices, keep some people out. You know, there are lots of people who just don't move to the Bay Area for jobs for work, or don't move to London, because they can't afford it or because the cost isn't worth it, they've maybe been able to scrape by, but they can have a better life even on a lower paid income somewhere else in the country. And so they very rationally and very sensibly do that. And what we miss, I think, for the most part, as a kind of society, when we're thinking about these problems, is those people who don't move and all the gains that would come if those people did move. And this, this relates to what economists call agglomeration economies, agglomeration kind of referring to people being at the same place and the benefits and the the things that happen when people are close to each other. And in my opinion, and in the opinion of much more esteemed and eminent economists than me who have done some very interesting work to try to estimate how big this effect is. It isn't, you know, a few percentage points of GDP, it's, it's something more like 20% of GDP in countries like the US and the UK being lost, just because people can't move to cities where they would be able to get the best jobs for them. And then there's a second, there's a kind of a third order effect, there's, there's an effect of people not being able to get the best jobs for them. And then there's the effect of the the ideas that they would come up with, if they were around people who they might have kind of interesting exchanges with. And this is something that you can see, again, there is good empirical evidence, I wrote a piece called the housing Theory of Everything, which is on works in progress, and has all this evidence that shows that proximity is a huge determinant of innovation. So when So historically, you look at medieval Florence, you look at the Renaissance, you look at the Dutch Golden Age, you look at Scotland, and England in the just before the Industrial Revolution, and the during the Industrial Revolution. And in all of these places, there is a an unbelievable amount of flowering of innovation and output from way more way, way, way, way out of proportion to the number of people in those places, because you get certain kind of magic effects in when you have the right people in the right time, talking to each other and working around each other. And they often have effects in unexpected ways. So you know, David, David Hume and Adam Smith were great friends in Edinburgh in the 18th century, Hume was mostly a philosopher, he did a little bit of economics. Smith was mostly an economist, but he did quite a bit of philosophy, actually, but you know, we mostly remember him for his economics. And, and each of those people as extremely good friends, you know, if not more who, though, it's sometimes been speculated, those two people as extremely good friends or more, had huge amounts of effects on each other's work and on each other's thinking. And in workplaces, you see the same thing. So Pixar is a lovely example. It was the offices of Pixar were specifically designed so that people from different departments, and different sections would bump into each other, and, you know, grab a quick coffee with each other. And a lot of successful tech companies today encourage that sort of crossover between different departments. And so if it's true for historical cities, and if it's true for successful creative companies today, then it seems like to me it should be true for and I think there's pretty good evidence for this, that it should be true for cities and countries as a whole, that if we can get more people close to each other, and interacting with each other, and, and coming up with ideas together, we will probably get more innovation in the form of entrepreneurship in the form of inventions and, and in the form of other things like like the creative arts, and it's like that. So I think that's one of the many ways that insufficient housing has has led to a drag on our innovative capacity and on our kind of productive capacity, all of which factors into our cut the slowdown in productivity growth. And this dissents of I think malaise, like the where I use the word malaise a lot, because I think it's a great word. And I think that, you know, increasingly, people are feeling like, we are in a sort of repeat of the 1970s. And it's not really clear how we get to the 19. How do we get to a repeat of the 1980s?
Lars Doucet 14:13
Right, so you talk about this housing supply shortage, and you've written this very influential piece, the housing Theory of Everything. I keep seeing people put that around? How much everything is does the theory account for
Sam Bowman 14:27
in terms of GDP per capita? I think that it's a fair guess, that in the UK, GDP per capita could be about 20%, higher than it is now. If housing supply constraints did not exist. In terms of the US, I have to go back to the original paper, but I think it's something in the order of 20 to 30% GDP per capita. But I think that there have been a couple of questions about whether that number is slightly understates the At the figure, I mean, it's more about magnitudes. To me, I kind of I think it's more a question of magnitudes. And we should be thinking more in terms of magnitudes here than in terms of specific numbers.
Lars Doucet 15:09
And just to just to put that number in perspective, like 20 to 25%, GDP has an effect size you basically don't see ever. So like, I mean, that's like, I don't know, like, like, what, what is California's contribution to GDP? Does anyone know? It's not 25%, I'm assuming.
Sam Bowman 15:30
So to do Rantanen, puka estimate is that the average income gain would be 25%. I think that it's only an effect size that we don't see, because there are very few markets that are as important as housing that are as dysfunctional as housing. I think if we, for example, destroyed 30% of the roads in the country at random, and never allowed them to be rebuilt, then we might see something like 10 to 20, because we might see a really huge distraction in in wealth, you know, or if we sort of arbitrarily banned half the country from going to university, then or from going to school or learning to read, then we might see really, really huge effect sizes, it's only because housing seems like a thing that it we're kind of used to housing being a really dysfunctional market, that we don't really appreciate how important it is and how dysfunctional it is.
Lars Doucet 16:27
So the put this in perspective, you know, I think a good example of this is like we typically, you typically hear people talk about, you know, capital and labor just being the two things everyone talks about in economics, that it's like, how do we and you, you talked about this earlier in your beginning about how we're so used to seeing everything as like a zero sum trade off, that it's like, either capital gets the money or labor gets the money. And so like, you see, this one, like people can't decide like, like, the Biden administration can't decide if it's good news or bad news that the labor markets are hot, for instance, where it's like, people are like, yeah, people are getting more wages. It's like, oh, well, well, the cost of labor is going up. And that's bad, y'all. And it's like, well, which is it? Is it good? Or is it bad? And so you're saying basically, that there's this third category, you know, housing, real estate, that is basically suck serving as like a drag on the entire economy is essentially kind of the linchpin on
Sam Bowman 17:21
well, so I'm saying that we could actually, if you want to hold on to the capital labor model, the simple capital labor model, I'm saying that housing supply is a huge determinant on the allocation of labor. And thus, we were basically who tied one or maybe even both hands of labor behind its back. So basically, I'm saying that housing determines where you are, and where you are, determines what kind of job you do, and lots of other things about what your life is like, you know, so. So, you know, for example, and I have to be a bit careful here, because I think that the evidence is pretty thin. Not, I don't think it's bad, I just that there isn't that much. But I think that housing is probably a pretty big determinant of how big people's families are, you know, the age at which people do decide to have families is a big determinant of how many children they have. And obviously, how many rooms they can afford, and how much space they can afford, is probably a big determine, although I, you know, I wish there was more evidence around this kind of thing. I haven't seen really great empirical evidence, but I think it doesn't seem like that unintuitive it doesn't seem that unlikely. But that's,
Lars Doucet 18:27
I mean, anecdotally, that matches everything, all my friends say about, like, why they've had, why they haven't had more kids, or why they waited until they were 30, to have kids or whatever is because Santa for it is because they can't afford the house, they can't afford the location.
Sam Bowman 18:40
And then when they do have kids, at least in the UK, especially in London, but in other parts, they leave the city, you know, they can't afford to live in central London, they could never afford the sort of house that they think their kids deserve. You know, for example, either with a garden, or with a park close by, that they can bring the kids to, and again, that affects their the job they can do. But obviously, it directly affects probably the most important thing in their lives. You know, having having one versus three children may be the most important decision that most people have in their lives. Not say exclusively, but I think for a lot of people, they would say that that is that has had the biggest effect on my third child, but my second child, whatever, has had such a huge effect on my life, hopefully, mostly positive. And given that we kind of I think, you know, I think it's pretty hard to deny, I just think that we don't have great aggregate evidence. So I think it's pretty hard to deny that housing has a really, really big effect on family formation and things like that. If that's true, and if we accept that family formation is an unbelievably important part of people's lives, then it shouldn't be that surprising that it also affects this other really important part of our lives, which is the jobs we do and the businesses that we set up and things like that. I think there's also another effect that is kind of counterintuitive, but when you think about it becomes less so which is the effect of housing supply constraints. on regional inequality, so I think that's a really big driver of the political polarization that we taught that we mentioned earlier. And I, you know, I come from a relatively prosperous part of Ireland, but nonetheless, a place where pretty much everybody in my university, I went to university there as well, pretty much everybody in my university graduating class that I was friends with left and went to either the UK or the US, or sometimes Australia. across the UK, and across much of the US, you have a kind of effect were well educated and people who can earn high amounts on the job market, leave their hometowns and leave the places that from and move to the big city, or at least to sort of high productivity parts of the country. But they're less well educated classmates, people, they might have gone to primary school or secondary or high school with don't. And so you get a sort of a separation of highly productive. And I just mean that the economic sense, economically productive people, well educated people leaving for better lives. And people who can't earn as much money on the job market, not being able to that that's a historical aberration there is there is good evidence that historically, both in the UK and in the US, it used to be the case that people of all education and income attainment levels would leave the places that they were from to go to the big city for a better life. Now, it is an increasingly it is people with good good college degrees, people who can earn enough to live in New York City, you know, it's not really an option to move to New York City if you don't have a decent education or the prospect of earning a lot of money in another in some industry. So so what you have is a historically unusual effect of less highly paid people being left behind, as they're more highly paid. schoolmates, I guess, wait, go to
Lars Doucet 22:02
I just, I just want to jump over something because I just want to like notice something that like, messes with my intuition. So you're saying historically, it's the poor people that used to go to cities to find opportunity?
Sam Bowman 22:15
And it was all of them. So it was it was across the it was across the income level? Okay, so it used to be that it used to be that a Big Lots, lots and lots of poor people, incidentally, yes. You know, in Ireland, historically, it was disproportionately poor people who would emigrate because they had a very strong reason to they couldn't get a job, they couldn't get a job in in a sort of pre industrial, kind of non industrial stuff country that at times was either in famine, or on the brink of famine. In the UK, during the industrial revolution, it was largely poor migrant workers who would leave their farms and leave their villages and go to the kind of newly rising industrial centers to to get jobs and to get money, and probably not have amazing lives, but possibly give their children a better a better prospect in life than they would have had otherwise. And you can, and it's visible in the in the data for the US that convergence between poor states and rich states, as it relates to the movement of poorer people from rich, from poor states to rich states, has slowed down. And and basically, that convergence is taking place much less dramatically than it used to,
Lars Doucet 23:24
right. Because Because my intuition now is that anyone? Yeah, that now basically everyone, but very, very rich people are fleeing cities, because you do you just get pushed out. Right. Yeah.
Sam Bowman 23:35
And, and usually, often the press, often the processes, you go to cities, when you're young, you live with flatmates, you get to get a job, you know, maybe acquire skills that you wouldn't be able to get outside. And then maybe you go remote, you know, maybe and actually, I think remote work is a is a potentially very, very promising counterpoint countervailing effect to the stuff I'm talking about. I don't I don't think it'll solve the problem, but I think it might help. But you you, as I say, you leave when, as you say, you leave the city when you want to have kids and when you settle down, and when you want to kind of get your sort of serious career path where you know, you will have a steady income and as much as anybody can get that these days. And and that that's so that's an effect. But that's an effect for people increasingly who have like pretty good prospects in life, like people who are pretty lucky in terms of their their income and their education and their their background and stuff like that. And it's I think it's it's really striking in the UK, in the UK. Areas that are left behind are often places that have really good universities, you know, and there's a there's a constant desire to sort of say, Let's make these universities like the engine of progress in these areas. And that's a great idea. But the the way you would do that is by persuading the graduates of those universities to stick around in those areas. And how on earth do you do that? You know, how on earth do you say to somebody? Well, you just graduated from the University Sheffield, great university, good science for that. But there isn't that much in Sheffield, although it's a lovely, lovely city, there isn't that much in Sheffield, for somebody with a kind of an advanced degree or kind of a good degree of any kind? So how do you persuade those people to stay? And I'm not I'm not really sure that there is a simple way, I am a little bit down on the idea of doing that, because it's a lovely thought, in theory, we just persuade people to stay in this very poor city and not move to London, or Oxford or Cambridge where they can get much better paid jobs and have like very, very easy lives around people like them that they probably want to be around. It's it's a really hard question. It's not a simple question by any means. But but it's but it's really underrated this, this the effect of expensive housing in rich cities, on the prospects of poor sort of so called left behind parts of the country.
Unknown Speaker 25:53
That makes a lot of sets. Sam, I'm curious, you mentioned something interesting there a little bit earlier, around remote work. You know, we'd had this big experiment during during COVID, where everyone was forced to go remote. Maybe it solved a bit of this collective action problem, where, you know, people that companies that could go remote that that had not suddenly tried it, and maybe there's some momentum there. But it seems like things have kind of stabilized where remote work is a certain percentage of the workforce now, but it doesn't seem like it's like rising anymore. It seems like it's kind of stabilized. Do you think we'll see a long run trend towards more remote work? Or is it just kind of where bottleneck by technology or something like that, where zoom calls are only so good. And in reality, it doesn't solve all the agglomeration problems that at bringing people physically together kind of solves?
Sam Bowman 26:42
I have to say, Well, I'm not I'm not an expert. And the person who I kind of defer to on this is a guy called Matt Clancy, who's done some really interesting, both research and really interesting kind of summarizing of the research. I do tend to think that the main bottlenecks are technological, as you say, that implies that there are huge rewards to people who can solve those bottlenecks. You know, I can't be alone in finding zoom calls, exhausting, you know, but I am a very sociable person. And I love seeing people in real life. And I dread the you know, having to pick up on and over produce body language, whatever the video call to make sure the other person can kind of get get a feel for what I'm saying and how I'm how I'm thinking. But that's a technological problem, you know. And, as as we may or may not roll our eyes at the kind of the metaverse and all that, and they sort of Facebook pivot to that kind of thing. But it's kind of clear what they're trying to do. And it's clear why they're trying to do it. And it seems like a really big prize. Having said that, I think that the benefits of city life, to those who like it are really, really huge. You know, the downside, of course, is that you're away from nature and that you're away from, you know, a lot of the can space and peace and quiet that you can get in the countryside. I should declare my interest here. Having grown up in the countryside, I never want to live in it again, it's lovely to visit for a week. But it's it's not great to live in for 15 years. But I for me, for me, I know that lots of other people disagree, but it's I'm a real city, it's like a but you know, having said that, like cities do have huge, huge amounts of immunity. And they have friends, they have you know, my colleague, Ben Southwood wrote a lovely piece on the kind of the under the under agglomeration of friends. And, you know, why is it that people love their university days when they look back, like, it's not really the university lectures, it's the fact that you're on a campus together, and you're all sort of able to just hang out with your friends at 10 minutes notice and go and get a beer or watch a sports game or whatever it might be. And cities provide that to some extent, in a way that country living and suburban living doesn't really offer that. Obviously, I'm a, you know, I am not that young anymore, but I'm kind of on the younger side of death. So I so I may, I may feel differently when I when I am more settled in my life. But I think that cities will always have that sort of melting pot effect of, you know, good foods, lots of options in terms of nightlife and lots of options in terms of it and entertainment, and people. And, you know, I do think that to those people who like to innovate, whether it is in the creative arts or in business or whatever, they will tend to find it easier to do it in real life. You know, I work at works in progress with a team that is split kind of across the world. But we often will try if we can to co locate in the same city or you know, spend a week in one person's area or another person's area because there's there's a lot of magic that happens when you're a face to face and you know, in the pub or just working in the same office and you can just you know, have a quick random chat about something that doesn't really kind of zoom and slack don't really care convey, but you know, I wouldn't claim to be an expert by any means on the general trends.
Unknown Speaker 30:06
That make sense. Sam, we've talked a lot about, you know, housing and how restricted housing supply and the nature of housing itself has contributed to perhaps a lot of our stasis stagnation in decades here in the West, what are some policy interventions you're a fan of that you think could help? Is it you know, just upzoning? Everything? Is it, you know, special tax regimes? Is there anything we could do that could could help fix this problem?
Sam Bowman 30:33
Yeah, so I think there are loads of things. And there is, I think, a very big split, although hopefully, it's a friendly split in the supporter Eunbi movement, but kind of the pro housing, yes, in my backyard people. One side, I think sees the path to more housing as being about, you know, building a political coalition that is larger than the NIMBY side, and changing the law in such a way that, for example, you get rid of single family zoning laws, so that it's possible to build more densely and stuff like that in suburban areas. I think that that probably does have legs in lots of places. And I think that in the US, especially because the political system is relatively localized compared to the UK, I think it's a lot more feasible that there will be cities where you can build that coalition, or where you know, just because of randomness, because of some, some politician has a scandal, and they need to get the headlines out of the way. So that the, you know, the author ads are kind of random effects that can lead to policies being moved. So I think that people who see it as being about a kind of coalition or being created in a lobbying past, that's, that's kind of one way of doing it. The other side, and I have to admit that I'm not on that side, I sort of tried for about 10 years to be on that side, or it used to be on that side in the UK. And maybe because the UK has such a centralized legal legislative system, there is pretty much in my view, no way of beating the kind of NIMBY bloc, politically, like there's nothing that we can do to just say, you know, what guys, you lose where we're going to allow much more housing to be built. So my, my greater interest is in how do you if I'm right, and if we are right, that there are huge amounts of wealth gains, and there's huge amounts of extra output and wealth that could be created through housing liberalization? How do we design mechanisms such that we are able to share some of those benefits with the people who would lose otherwise from the policy? And that's kind of what I mean by like, Win Win policies? I think that in lots of areas, if you put a gun to my head, I would say, Yeah, I think I do probably have, I do kind of have the right. I do know what the best health system roughly looks like. I do roughly know what that yeah, and maybe that's a kind of an arrogance thing. But I think there are lots of people in those areas, who would all agree that they you know, even if they are on different sides, they will all agree. Okay. Yeah, this is an improvement on the pension system we've got this is an improvement on the climate system, the climate policies that we've got, the difficulty is how you get there. And the difficulty is how do you craft a political solution such that the people who would lose out from moving to that can be either bought off if you're cynical or can share in the benefits if you're using kind of politically nice language. So with housing policy, a favor is basically very, very, very localized democracy, on the street level, or on the block level. So in the UK, we call this street votes. And the idea is to say that individual streets and you know, what counts as a street is a highly controversial issue that needs very, very careful legal consideration. And and, you know, we are, we have, we have kind of made suggestions about what that should be. But individual streets can opt to have a vote for residents of that street, which includes renters. So renters are not disenfranchised, and landlords who are not who are not resident in their properties do not get a vote, get to decide on whether they want to allow denser construction on that street. And usually, it's it would go along with a design code that they would choose as well. And in the UK, the design code would be the sort of it would be up to them. Most people according to the polling that we've done, and most people according to the surveys we've done would tend to prefer the sort of Georgian and Edwardian style that I think probably most people listening who have visited the UK will associate with sort of the beautiful parts of London, the kind of mansion flats that are maybe six storeys but not not 10, not 20 but not to either a different streets votes with a supermajority to allow more dense construction and to design code, then they are allowed to do that and the existing rules that constrain their development. Don't apply
Lars Doucet 35:00
So this is a way to get around the whole, like, local control argument where local control means like 10, organized NIMBYs, who are super loud show up to every council meeting drown out everybody else. And so you're like, because I'm like, do some demos. This. She's a really, really, really great housing writer, she's written a piece called local control is bad, actually. And her solution is to move the locus of decision making up to preempt the local decisions, but you're saying the other way to do it is to go even further down.
Sam Bowman 35:32
Right? Correct. So so and so why would you ever want to do that? Right? Like, why would you possibly and and you know, to many people, this looks like a NIMBYs chatter. The reason is that the closer you get, and the smaller the breath, the smaller the unit of decision making, the more connected the decision is to the benefit. So for example, imagine if we had a single house on a street, and we said individual houses can decide on their
Lars Doucet 36:00
density laws. Well, that's a libertarian argument.
Sam Bowman 36:03
Indeed, indeed. And and I think that we would, if anything, have too much housing being built, I don't really believe that such a thing. But you know, if there is such a thing, that would get us to much hasn't been built, because the decision maker would have a huge incentive to vote for more development, they would be they would become rich, they would, they would never have to think about anything, any of that none of the externalities of new housing would apply to them, they would just be able to vote for more housing, and they would do it. If you then said, Okay, maybe we will see two houses get to decide to any joint pair of houses can decide, I think, again, you would say, okay, then they do start to experience some of the negative externalities of the housing on each other. But the benefit is mass is massive. And the benefit is, is, is so enormous, that they will probably all just vote for more housing. So the broader you make that decision making, the more important I believe the negative externalities of housing become, and the less important the positive private benefit of the extra density, which is the increase in your land value becomes. So the real question is, at what point should we draw that line? So So if we think one house basically bears none of the negative externalities and gets all of the private gains, a city deciding, basically gets all of the negative externalities, and are a kind of a local municipal council deciding on a street and developing that local municipal council experiences all of the negative externalities more or less, but very, very, very little of the positive benefits, the increase in the land value? So my argument is just that we we have to find a point in between a single house and a local municipality that is better balanced between the negative externalities and the positive gains,
Lars Doucet 37:47
but you're arguing still that like these negative externalities balance out in the large picture, like it's still a major net gain to build housing, it's just the configuration of the negative externalities causes these weird market failures with local councils?
Sam Bowman 38:02
It's yeah, so I think in terms of aggregate welfare, more housing, almost always benefits is almost always beneficial for a kind of aggregate global welfare. But the system that Jerusalem is criticizing is one where you basically have no incentive to say yes, you There is basically no reason at all, at the I actually don't know the exact kind of levels of US housing decision making. But at the UK, the kind of the Borough Council level or the parish council level, basically, the the different types of local councils that make decisions about housing. At that level, they have only negative reasons, they only really have they don't get the benefits, they don't experience the benefits, the benefits are pretty centralized, and then really only accrue to the landowners who would be able to build more densely, and the potential homeowners who probably possibly don't even live in that area. So it's street votes does is to try to align the decision making with the benefit and the negative externality so that the people who bear most of the negative externalities are also the people who would make most of the gains. And so you can just imagine, in a street in London, would like the one I live on, which might have a lot of two story houses. If you if those houses could opt to be, say, five stories or six stories, the owners of those properties would become a lot richer, they would possibly see their properties double in value, they can become multimillionaires overnight. So on that street, all of those homeowners, even though they might not want any of their other neighbors in a perfect world, they might veto all of their other neighbors getting more houses being built. If they also get a benefit from more houses being built because their land is reclassified as well. They suddenly have a really big financial incentive to vote for more density. And I think that that will probably get us quite a bit more housing. I don't think it will solve the problem by any means. But I think it will get us quite a bit more housing, and I think it will do it through In what is in effect, a cozy and bargain, where you're effectively being able to sell your objection to new has in exchange for you also getting permission to build more housing, we're making the decision so collective that there's a really, really big incentive for you to vote yes.
Lars Doucet 40:22
So if you can close in two as Americans here, like what what exactly is going on in the UK right now, you know, you've got the Tories, you know, figuring out who they're gonna replace Boris with? I'm not sure if they've made a decision yet, you know, is is the housing crisis salient in UK politics? Like I assume it's salient for the average UK citizen, you know, as to like, deal with trying to find a place to live. But like, are the UK politicians like talking about housing policy? Are they talking about, you know, gimpy policies or, or anything like that?
Sam Bowman 40:55
So it's somewhat salient, but I don't think yes, it is salient, especially for younger people. House prices are very salient for older people, because older people disproportionately own their own homes and have a very strong interest in not losing value in their own homes. It isn't a massive political issue. Interestingly, the previous Boris Johnson administration, which which we're living through the last couple of weeks have did actually try a very radical approach to housing they actually that that government tried to do something akin to the kind of what I characterize as, like the US can be approach, which is they basically tried to bring in zoning into the UK and tried to say, you know, you will have by right zoning and lots of parts of the UK where the law is that you can build up to a certain story, we will just impose these rules on lots of parts of the country, and so on. And had that pass, that would have been an incredibly radical change. And it would have it wouldn't have solved all of our problems, but it would have made a huge step forward. But it was doomed to fail. It was always going to fail. And I did a Twitter threads last year, in May last year, kind of as this was being released, saying like, I look, I wish this would pass, but these are the reasons it's going to fail. And this is how it's going to fail. And you know, not to toot my own horn. I was bright, you know, I was I was and it failed. It crashed and burned, very large block of backbench Conservative MPs mobilized because they were people who represented all these areas that felt that they were having more housing imposed on them. And they said, Look, we're going to rebel. And the way that UK system works is if you get a big enough backbench rebellion, you very very seldom get support from the other side of the house. So it's very difficult that basically bipartisan legislation doesn't exist in the UK, it's it's almost unheard of. So you have a sort of elected dictatorship for five years at a time that sort of passes for passes between each side of the house. But if you have a backbench rebellion, that's big enough, and you just can't get your thing through. And I think it was, in my opinion, it was always clear that this was going to happen. I think that it's it's very predictable why that was the case, I don't think I'm a prophet. It's just that if you try to if you try to force via legislation in a country that has a very large block of homeowners who like the way things are, and if you force on them, that we are going to change the way your neighborhood looks, without them having any option in that and without them having any any way to stop that they will, they will be furious, and they were furious, and it failed. I am more optimistic about street votes. It was in the draft white, the draft bill that the government recently brought forward to replace the previous bill, the previous bill was scrapped it when it failed, they brought forward a much more timid bill, sadly timid, but on the bright side, it might actually pass there is a lot to be done on the detail. And, you know, as I've said, there are huge arguments about like, even what counts as a street, let alone what are the exceptions to this? What are the processes by which you can have a vote? Who How do you make people that are how do you get people to vote? How do you allow people to vote? You know, what can be proposed? What can't be proposed? What happens? And there? Are there all sorts of negative externalities that aren't felt on the street, you know, our view is that like roughly something like 90% of the negative externalities are felt on the street. But you know, for one is but one very obvious negative externality is still we're broadly is traffic congestion. And as much as I would love road pricing to be brought in, we're not going to get that anytime soon. So what happens about the extra drivers that you have when you densify a street when and how does the kind of the community more broadly, that gets negatively affected by that and get to have a say, these are all things that we have given thought to we have suggestions about how you can either avoid that happening. So for example, in lots of parts of London, you could tack some of the uplift and put that into public transport and require that the new development doesn't have parking spaces. So you can see, basically, these houses can't just cannot have cars, unless they can find a private way of providing for them. But there are all sorts of questions like that, that probably are too boring and detailed to get into here that we need to get through. But there's lots, there's lots else that we can do on housing in the UK, at least.
In addition to streets, there's a lot of land behind houses so so a lot of the kind of blocks that are particularly in London that exist have either kind of car parks or sort of slightly wasteland kind of no man's land type areas and sort of just, you know, alleyways and things like that, and, you know, sometimes gardens as well, that, in my opinion, could be used a lot more productively, and a lot more valuably if we densify them and kind of turn them into super blocks in the in the Barcelona style, where you have roads at the front, and then you have kind of pedestrian passageways in that that lead into little cute housing developments. Again, the best way I think of deciding on whether that can happen is letting the relevant people in this case, not the street, but the block around that those areas, vote on whether to allow densification on those on those areas. And that's another way of using urban land in a much more intensive way than we do right now. So I'm pretty optimistic about those kinds of approaches, kind of more broadly. You know, I talked about agglomeration. And housing isn't the only element of agglomeration. You know, we also have things like traffic congestion, like road pressing, which I just mentioned. And you know, for me right now, one of the cutting edges of policy is how do you make road pricing something that we actually can implement? You know, how do you first of all, make it so that you don't have drivers, blockading every every roads? And truck drivers block every road and fury? Like what are there things that we can do so that motorists feel that this is a good thing for them? Which I think it would be, but I think it's hard to it's hard to get people to feel that, hey, we're going to start charging you by the mile. Good. Congratulations, we need to come up with ways of doing that. Crime, I think it's a really underappreciated issue in the, in the Western world, they'd be effective crime on people's willingness to live in cities, and people's experience of living in cities is really underrated. And the more that we can reduce crime, via things like better detection, better and smarter approaches to sentencing and rehabilitation, it's like that, I think the better we can make it to live in cities, and so that so the more easily people can agglomerate. And you know, things like urban pollution, air pollution, again, you know, there aren't that many people who are pro air pollution. But it's difficult to think of ways of reducing certain kinds of air pollution in ways that doesn't create in ways that don't create massive losers. I think it's possible, because I think the benefits are really large, if the benefits of a policy are large, but it should be theoretically possible to share them in such a way with the losers such that they become winners, too. The question is, how do you design that? And to me, that's quite an exciting frontier of public policy work. I think that some certainly not suggesting that I am. Or, you know, we are the only people to ever thought about this. But I think that the most interesting work in this sort of area is around crafting these kinds of ideas. And sometimes it's about looking to the past and looking at ideas that have worked before.
Unknown Speaker 48:21
Sam, I'm curious, you mentioned the problems with perhaps a public building political coalition's around the NBA ism and pushing that through against like a strong, you know, NIMBY lobby, particularly in the UK, and in some of the some of the problems with that, you know, how do you think about, you know, when it's best to go kind of straight on against these problems? And when is it best to kind of take this this hyperlocal level, and it's just like the hyperlocal approach, underrated at some level, and we should just lean on that more for some of these problems.
Sam Bowman 48:53
So I wouldn't characterize the general theory as hyperlocal. I think hyperlocal works when it comes to housing, I hope I could be wrong. But you know, when it comes to something like, taxation, you know, I think that I'm a big believer in not how much we tax being the major question, but how we tax it. And, you know, whether we tax via capital taxes or taxes on negative externalities, like pollution, or taxes on consumption, or whatever it might be, I think that those have huge effects on how rich we are and what our economic activity is. And so it's something I'm really interested in is how do we move to say, taxing the consumption of the rich, less than taxing the investment of the rich? You know, how do we how do we make it so that we get people when they buy a $20 million yacht, rather than when they invest $20 million in a factory or when they invest $20 million in a VC fund or whatever it might be? Because eventually that investment, they will, they will consume at some point they will buy a yacht or whatever, at some point. And I'd much rather get them at that point when basically the resources are no longer being used by society. Actually, they're being used by the rich person. But again, that's like a very difficult question about how do you design a system in such a way that you can kind of make sure that people who are not rich or people who are who are either who are either not rich or her either a large or a large enough political bloc, that they will stop you from doing this. feel kind of bought off? Again, I don't know, the straightforward answer to that question. How do I think about that? It's, I think it's really about how big and how important and powerful is the coalition against doing it? So you know, in the US, I'm sure there are places where people can be convinced, where, you know, you can use arguments. And, and ultimately, I do have to say, I do believe that most people vote in altruistic ways. And most people do actually vote in, in where and I think there's pretty strong empirical evidence for this, I'm not just kind of Starry Eyed IADLs, I think that there, there is pretty strong empirical evidence that people vote for at least what they think is in the interests of their country and their their neighbors and things like that. It's just that people have an extremely biased and skewed version of that, because it's mostly drawn from the people immediately around them socially, professionally, and geographically. So sometimes you can persuade them and like, sometimes I think climate change, for example, you know, it, the huge strides forward, that have been made in terms of climate change, have not really been made by coming up with a really clever policy that we've sort of snuck in here, some, some kind of side door that had been made through debates and people looking at the world around them, and, and kind of public education and, and stuff like that. So I think that's an example. And you know, sometimes you sometimes you just can't craft a solution, sometimes you sometimes the rhetoric will just and they the explanation and the education, whatever you want to call it will be a more effective tool. But I think we're just underrating the kind of clever keyhole solution approach. You know, the A great example is what I think it's called the 401 C three, or is it the 401? K? Sorry, um, yeah. For retirement plan. Yeah, I'm mixing my 501 C three with my four. Okay, so American tax code is a is a really extremely difficult thing to reveal your subclasses of, but the 401 K really was very, very obscure element of a bit of a budget bill. Decades ago, that was not widely debated, it was not widely considered to be a massive change, it was not at the time brought in, maybe, maybe it's maybe the people who actually wrote it in did think it would be a huge change, but it was not recognized as such. But once it was in, people started to use it. And once people started to see other people using it, it became an incredibly powerful vehicle for people to save for their retirement. And so I think we underrate their quiet, small keyhole solutions that look very simple and look very bland, but may have really, really significant kind of gains. And and to me, that's kind of where the frontier of researchers, you know, it's it's not in, I don't really think I have a general rule, I think more of that I'm really interested in seeing, like, where are these ideas? Like, where are these things that we could do to improve it? You know, another another area where I think there's unlikely to ever be large public debate on one side or the other, but it's around how we do science. So meta science is the term that I like,
I don't think that there is a clear solution. And I don't I don't know, and it would be crazily presumptuous of me to say, you know, oh, we should we should do research funding like this, or we should research funding like that. And I don't really think anybody knows the real answer to how we should do research funding. But I think we should probably experiment on it. And I think that the real challenge at the moment is to come up with ways of facilitating that kind of experimentation, make it easy for institutions to be a bit more unorthodox in the way they do their funding and measurement and for that, and, and just track what they're doing and make it easy for people to experiment a bit more. And hopefully, that leads to slight momentum. And, and learning around what works and what doesn't work. There are loads of areas where I think that the world is and I think that everybody in those areas would agree, things are much less good than they could be, you know, the one thing that I'm really struck by and the reason that I kind of an optimist is that people, wherever, you know, you know, this expression, everybody's a conservative about the thing that they know best. But everybody is also incredibly depressed because everybody thinks that the area that they work in could be so much better. And they may have a really crazy madcap idea, but the knowledge base, there are loads and loads and loads of parts of the economy and none of our lives where we're sort of underperforming can be Add to various other parts of the world or compared to other parts in history where we've done it better. Makes me think that there are very, very significant welfare gains to be had, just by changing how we do things, rather than by having a big fight. We're having a big kind of war over over what we do.
Unknown Speaker 55:18
That's great. That's great.
Lars Doucet 55:19
So So to sum it kind of up, if you can complain about the state of the world that strictly implies, what could be better, that you have an idea of how it could be better.
Sam Bowman 55:28
It doesn't strictly imply, but most of the time when people who are knowledgeable and good faith and fair minded complain, when pushed, they will start to give you examples of how they think that their area could be improved. And they could be wrong. But at least for knowledge that there is experimentation that could be done that isn't being done, kind of makes me think that there could be gains to be made.
Unknown Speaker 55:51
That's great. That's great. Sam, I love that call to action. And hopefully, hopefully, people can go out there and improve the world and in their specific domain with that kind of knowledge. Sam, thank you so much for joining us today. Where can people find you? Where should we send them to find your work?
Sam Bowman 56:08
The best place is Twitter. I'm s eight, the number eight and be on Twitter. And that's kind of how I run my life. So if I've done something, it'll be there. Excellent. Excellent.
Unknown Speaker 56:20
Thank you so much, Sam. Thank you.
Unknown Speaker 56:26
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Transcribed by https://otter.ai
110: Sam Bowman - The Housing Theory of Everything