Brian Potter: uncertainty

Transcript context

…Okay, so China is the third one here. There's been a lot of talk about a potential real estate bubble in China because they're building housing in places where people don't really need it. Of course, maybe the demographics aren't there to support the demand. What do you think of all this talk? I don't know if you're familiar with it, but is there a real estate bubble that's created by all this competence in building? Oh, gosh, yeah, I have no idea. Like you, I've definitely heard talk of it and I've seen the little YouTube clips of them knocking down all these towers that it turns out they didn't need or the developer couldn't, finish or whatever. I don't know a huge amount about that. In general, I wish I knew a lot more about how things are built in China, but the information is in general, so opaque. I generally kind of assume that any particular piece of data that comes out of China has giant error bars on it as to whether it's true or not or what the context surrounding it is. So in general, I do not have a hard opinion about that. This is the second part of Simon's question, does greater competence and being able to build stuff translate into other good outcomes for these countries like higher GDP or lower rents or other kinds of foreign outcomes? Brian Potter That's a good question. Japan is an interesting place where basically people point to it as an example of, “Here's a country that builds huge amounts of housing and they don't have housing cost increases.” In general, we should expect that dynamic to be true. Right? There's no reason to not think that housing costs are essentially a supply-demand problem where if you built as much as people wanted, the cost would drop. I have no reason to not think that's true. There is a little bit of evidence that sort of suggests that it’s impossible to build housing enough to overcome this sort of mechanical obstacle where the cost of it tends to match and rise to whatever people's income level are. The peak and the sort of flattening of housing costs in Japan also parallel when people basically stopped getting raises and income stopped rising in Japan. So I don't have a good sense of, if it ends up being just more driven by some sort of other factors. Generally though I expect the very basic answer of “If you build a lot more houses, the housing will become cheaper.” Right. Speaking of how the land keeps gaining value as people's income go up, what is your opinion on Georgism? Does that kind of try and make you think that housing is a special asset that needs to be more heavily taxed because you're not inherently doing something productive just by owning land the way you would be if you like built a company or something similar?…

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