Saturday, March 23, 2019

Was the 2008 Recession Caused by a Shortage of Housing?

The Koch-funded Mercatus Center has moved even farther away from sound Austrian school business cycle theory.

An up and coming Austrian points me to a new book published by Mercatus, Shut Out: How a Housing Shortage Caused the Great Recession and Crippled Our Econom by Kevin Erdmann.

The Austrian emailer correctly observes:
Was the 2008 recession caused by a shortage of housing?

So claims Kevin Erdmann in a new book from the Mercatus Center.

Here is a slideshow (which contains a link to a more detailed paper) giving an overview of the data and argument.

I think he's confusing the claim that the credit boom fueled too much housing, with the claim that it caused too many houses.
Tyler Cowen does a polite takedown of Erdmann's thinking:
Kevin Erdmann has put forward the radical thesis that restrictions on housing supply have been at the center of America’s macroeconomic dilemmas, in addition to raising the cost of living for ordinary Americans. This is one of the few truly new ideas in the debate over the Great Recession. While I still am not sure how much I agree, I find myself thinking about Kevin’s ideas often, and they grow on my mind. Kevin has poured his heart and soul into making the case in this fascinating new book.

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