Brian Potter: belief

Transcript context

…Now, if you take a step back and talk how expensive construction is overall, how much of it can just be explained by the Baumol cost effect? As in labor costs are increasing because labor is more productive than other industries and therefore construction is getting more expensive. I think that's a huge, huge chunk of it. The labor fraction hasn’t changed appreciably enough. I haven't actually verified that and I need to, but I remember somebody that said that they used to be much different. You sent me some literature related to it. So let’s add a slight asterisk on that. But in general the labor cost has remained a huge fraction of the overall cost of the building. Reliably seeing their costs continue to rise, I think there's no reason to believe that that's not a big part of it. Now, I know this sounds like a question with an obvious answer, but in your post comparing the prices of construction in different countries, you mentioned how the cost of labor and the cost of materials is not as big a determiner of how expensive it is to construct in different places. But what does matter? Is it the amount of government involvement and administrative overhead? I'm curious why those things (government involvement and administrative overhead) have such a high consequence on the cost of construction. Brian Potter Yeah, that's a good question. I don't actually know if I have a unified theory for that. I mean, basically with any heavily regulated thing, any particular task that you're doing takes longer and is less reliable than it would be if it was not done right. You can't just do it as fast as on your own schedule, right? You end up being bottlenecked by government processes and it reduces and narrows your options. So yeah, in general, I would expect that to kind of be the case, but I actually don't know if I have a unified theory of how that works beyond just, it's a bunch of additional steps at any given part of the process, each of which adds cost. Dwarkesh Patel Yeah. Now, one interesting trend we have in the United States with construction is that a lot of it is done by Latino workers and especially by undocumented Latino workers. What is the effect of this on the price and the quality of construction? If you have a bunch of hardworking undocumented workers who are working for below-market rates in the US, will this dampen the cost of construction over time? What do you think is going to happen?…

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