Episodes Economics

Bryan Caplan — The Economics of Housing Abundance (#155)

77 min read
Bryan Caplan — The Economics of Housing Abundance (#155)

Bryan Caplan is Professor of Economics at George Mason University. A bestselling author, his books include The Case Against Education, Open Borders, and Build, Baby, Build: The Science and Ethics of Housing Deregulation.



JOSEPH WALKER: Bryan Caplan, welcome to the podcast.

BRYAN CAPLAN: Fantastic to be here.

WALKER: So Bryan, 14 years ago you wrote, “I will consider my career a success if I publish a total of five excellent books on five different important topics.” Book number five has now arrived in the form of Build, Baby, Build: The Science and Ethics of Housing Deregulation. I read an advanced copy. It was excellent. We're gonna talk about it today.

But first, why was “five excellent books on five different topics” your metric for career success? I feel like most of the most influential living public intellectuals I know – people like Peter Thiel, Nassim Taleb – tend to be the sort of hedgehogs who have one central idea and they meditate on its implications over the course of many decades. So why is it better to be a fox than a hedgehog?

CAPLAN: I mean, that's possibly generous to me because you might just say, “Well, it's all hedgehog stuff and you're just pretending to be a fox.” But honestly, I just get bored doing the same topic. I work on it four, five years and I feel like, “I understand this well, I'm going to go and explain what I figured out.” And then to keep working on it or keep revisiting the same ground… it just seems like I've got more things to do. There's other projects. I've got something else to say. 

That's the main thing in my mind, I guess: do I want to be the person who just keeps rewriting the same book over and over? A few of my favourite people are like that, but for me it just is tiresome and it just is also not living up to my potential. I could move on and basically figure something out. It's like how much more precision do you really want to get on this one topic? I think it's close enough.

WALKER: If you were forced to characterise yourself as a hedgehog and you had to pick one deep idea that runs under all of your work, what would that be?

CAPLAN: Human irrationality. The world's wrong. It's wrong because human beings are wrong. They're wrong because they just aren't trying very hard. They are throwing away common sense because it conflicts with their emotions. I think that's the main idea. 

You could even summarise it just as simply as the world is wrong. That's not quite right. But if you really want to boil it down, it's something like that. So really, every one of my books comes down to: “There's something really important, and people are making mistakes, and as a result of thinking something false about the world  they are doing something that would make sense if the world were totally different. But since the world isn't that way, what they're doing is screwed up.”

[3:34] WALKER: Okay, so let's talk about housing deregulation. So at a very concrete level, how does America look different with full housing deregulation? Is it mainly that the non-metropolitan population drops to a few million, and then New York City and the Bay Area become megacities of 40 million people each?

CAPLAN: I think that's too strong. It is true that your downtowns are the most regulated, so I think in percentage terms they will gain the most. But the main thing is that there's just a long list of regulations, each of which is strangling construction of a particular sort. So, yeah, so in cities, the main issue is that it's really hard to build skyscrapers. And sometimes, like in San Francisco, you also combine it with really strict regulation of historic sites, just tearing things down. But that's one kind of regulation that makes cities a lot smaller than they would otherwise be. 

But when you move out to suburbs, then the issue is that it's really hard to go and do multifamily housing. Something like 80% of residential land gets reserved for single family homes. So we could have a lot more people living out in suburbs in apartments. You might say, “Well, it's not really ‘the suburbs’ anymore if it's apartments.” Well, it can be kind of like the suburbs. It's not so clear as to what the right dividing line is. 

And then finally, even with single family homes, what's crazy is that it's usually required to waste a ton of land. So these are minimum lot size regulations saying you've got to use like an acre of land for a house. Around here [Fairfax, Virginia], actually, sometimes it's two acres or even five acres. 

So I do think that things would tend to be more urban. But actually, I think a lot of it is just people spreading out. There's just a lot more legroom for everybody because we could just build a lot more in every location and it would be affordable. 

So I like the idea of: you live in Manhattan, but you aren't in a tiny apartment that's cheap. Instead, you spend a good amount of money and you have a very spacious apartment. Often people are getting worried: “Well, like, wouldn't it lead to really small family sizes – a lot of people moving to Manhattan?” Yeah, it would if they kept living in the same kind of square footage that they're in now. But if it were a lot cheaper, people wouldn't want to be in a shoebox. They'd want to have a much bigger place. And so it's once again a very different story.

[5:56] WALKER: Okay, so the most famous approach to measuring the impact of zoning regulations on house prices is the approach pioneered by Joe Gyourko and Ed Glaeser. And a lot rests on that approach. So, given that, how strong do you think their method is and what do you think its main limitation is or limitations are?

CAPLAN: Right. I would say that Gyourko in particular has done later work that avoids some of the main criticisms. But let's start with Glaeser and Gyourko. Essentially what they do is they try to find homes that are otherwise similar but some have some more land than the other. So you get two homes – ideally, it would be exactly the same home, same neighbourhood, but one has an extra hundred square feet of undeveloped land – and then you just see: so how much do people really value pure land? And the main result of this is that while people like it a little bit, they just don't like it very much. The actual marginal value of additional land is low.

So the way you could think about it is that that's kind of giving you a measure of: how much is land worth if you can't really build anything on it? And it turns out it's not worth very much. It'd be different for agriculture. For agriculture, having another hundred square feet…It'd be like, “Alright, fine, we'll go and put another hundred square feet of crops on it.” But when you're dealing with housing, having an extra area of land is just not very valuable. Which shows, first of all, what is the big problem with these minimum lot size regulations? You're making someone buy extra land that they actually don't appreciate very much. Why make someone buy an acre of land when they barely value it? Someone else – you could put another house there; you could put several additional houses there.

So anyway, that's basically what they're doing, is looking at the marginal value of additional land. So if you're in a city, this would be like the setback land. And then from there you can see, “Alright, we've got this measure of just the raw value of land but really without the permits to build things on it attached.” So we have this measure of the raw value of land. 

Then the next thing they do is they find manuals of construction costs which are actually used in the industry. They're like this thick, and from there it's like, alright, so if we just had from the raw value of land combined with the physical construction cost, what then would that be? If you sum that up, what would that expense be?

And then they compare it to market price. 

And then they treat regulation really as a residual. The cost of the regulation is the difference between the market price, on the one hand, and the physical cost of having the property. And then that difference is going to be their measure of all regulation combined. Why do they do it that way? Well, the problem is that there's so many regulations and they vary so much from area to area as to which ones matter, they're trying to come up with some general, generic way of measuring all regulation – or they call it “the zoning tax”, which is a bit of a weird term because most people who know something about zoning will say, “Well, we don't really tax things in the zoning code.” And it's like, “Yes, it's a metaphorical tax, or it's just a name we're giving to the full regulatory burden.” It would be more accurate to say, “what's the regulatory burden?”, rather than “the zoning tax?” But the zoning tax is a term of art that they wind up using.

WALKER: And what do you make of the critique that the real reason these parcels of marginal land are valued so little is actually just that land is indivisible, you can't really do anything with these offshoots, and so the market doesn't attach a great price to them.

CAPLAN: The answer is, for some particular cases that's reasonable, but it's not reasonable when you're talking about zoning saying you have to use an extra acre of land. In particular, you can really see this very clearly at the construction stage. You see there's a developer, he's got a substantial amount of land, he knows he can put more than one property on it. And then normally what a builder wants to do is just squeeze as many properties on it as he can get away with legally. It is totally standard to go up to the legal limit of what the regulators will allow, which does give you an idea of how little people actually appreciate the extra land. They want a little bit, usually, but they don't like it enough to really pay anywhere close to the value of preventing another person from having a property in the same location. 

So essentially, initially there is a division, and at that point that's where I would say the regulation really matters. Afterwards, you can come back and you could say, well, if you deregulate it now, it wouldn't change very much. And yeah, if it was a small amount of regulation, that's true. Although again, even in cases where you would have to go and tear everything down and start from scratch, if you go to places with high prices like San Francisco, I just say there's no doubt that if it was legal there would be developers going and buying up whole blocks of two and three story townhomes, demolishing them and putting skyscrapers there. I just think it's crazy to say they don't want to do that. They totally want to do it. It is a very standard regulatory thing to get a variance to go and add an extra property on a somewhat larger piece of land. So while what they're doing is not perfect – but what done by the hand of man is perfect? – it is a reasonable first approach. 

So what Gyourko wound up doing in some later pieces, he actually got prices of actual vacant lots, which does totally solve this problem, or almost totally solve this problem of just saying it's due to the indivisibilities where we can't go and combine a bunch of square feet from 20 different properties and put a home there – that's true.

But anyway, when you go and use the prices of actual vacant lots – and he was able to go and just get a giant sample of vacant lots – you get very similar results. So I think the method is sound.

[11:45] WALKER: Okay. So for better or for worse, immigration and housing are increasingly being linked in a zero-sum way. You see this in Canada. You see this in Australia. Should I think of Build, Baby, Build as the necessary sequel to Open Borders? My sense was that there are no keyhole solutions that will make housing sufficiently affordable in the face of high immigration-driven demand. And so if we want high immigration, we simply have to deregulate housing. Is that how you see it?

CAPLAN: I think that's a bit overstated. For the United States, we do have one virtue which is that almost all of these regulations are set at the local level, some more at the state level, and there's a lot of variation in the United States. There's some parts of the US where regulation remains quite light. And not coincidentally, you see that's where we're getting massive population increase because you can move there affordably. So Texas is probably the really famous state that would be known to people around the world for lighter regulation. A lot lighter. Even if you go to the boom areas of Texas, like Austin, you really only have to drive like 45 minutes to get to cheap housing again. It's not as cheap as the middle of nowhere, but by the standards of most of San Francisco or New York it's crazy cheap.

So basically in the US, I would say if someone says, “Do we have to first deregulate housing before we can allow immigration?” It's like, “No. Immigrants are going to places where we're allowing people to build, and so we can still get a lot of the gains even though we can't get all of them.” 

If you really were setting it at the highest level, I would still say that it's better to let people in and let housing prices go up, and people complain but it's still making the best out of a less than ideal situation anyway. But, yeah, when people are complaining that immigrants are driving up prices: alright, well, how about you allow the industry to build more homes for people? Is that really such a terrible thing, to allow this industry to do its job?

Of course, a lot of the workers that will be building those homes are themselves going to be immigrants.

WALKER: That all makes sense. But what about open borders?

CAPLAN: The truth is that the US was able to go and cope quite well with modest levels of regulation for 50 years. So if you were to go back to when zoning starts really taking hold in the 1920s, and then just say “the sky is going to fall, housing prices are going to go through the roof”... there's actually a long period where it doesn't happen. And it's like, well, why not? Well, there's a few things going on. The big one is regulation can be bad in principle without really being that harmful because it's not that strict and there's a lot of loopholes and there's other places you can build. So that's the main thing that I would say about “do you need to have full deregulation of housing to have open borders?” No. 

Is it important to have no more than a modest level of housing regulation with open borders? Sure. I mean, even there, I tend to be on board with the shock doctrine of, look, probably the best way to get the deregulation that we want is just to go and start deregulating other things until people say, look, this is intolerable. Maybe they will then go and say, fine, we'll reverse what we did in immigration. And then they’ll figure, “Well, we're not really worse off than we were before.” Or on the other hand, maybe they will finally say, “I guess we need to actually let people build stuff.”

So that is my general view of things; don't wait for one kind of deregulation before you do another kind of deregulation. Instead, just turn the dial as much as people let you get away with. And I think it's very likely that will put enough pressure on it that the dam will burst and you'll start deregulating other stuff. 

During the early days of the end of the Soviet Union, there was a big issue: “We can't go and change this thing without changing this thing. We can't go and deregulate this without deregulating that.” And at the time, and also in hindsight, say: “Just do it.” Just start deregulating. It's going to cause a bunch of problems. People complain. And then the likely outcome is that once you just get the ball rolling, a bunch of other things will happen. And finally you will get very wide scale deregulation. That is generally what happened there. 

On the other hand, saying we have to wait until all of our ducks are lined up in a row… It's like, “Yeah, if you wait until all the ducks are lined up in a row, you're just going to wait forever.” So don't wait.

WALKER: Yeah, fair enough. Okay, so if you saw them, what did you make of Angus Deaton's recent comments in that IMF publication? To put them in my own words, I think they were something like: in America, the low skilled end of the immigration distribution has pushed down wages for domestic low skilled workers, and that's unacceptable, not least because we owe special obligations to our fellow citizens that we don't owe to foreigners.

CAPLAN: Yeah. And you have to get a Nobel Prize in economics to understand that this argument is true, right? You know, what I'd say is that Deaton's comments were disappointing to me because in his book with Anne Case Deaths of Despair, he talks quite a bit about housing regulation and how this is a big problem. As to why it is that [his] first inclination is to go and try to keep out low skilled immigrants rather than focus on deregulating housing and doing other things that in his own book he said were important for going and making things better… I mean, that's disappointing.

This is a big part of my general critique of moderate left wing economists, which is that even though on their good days they will say, “Yes, government's doing a whole bunch of things that are bad for the poor, doing a whole bunch of things where if we just deregulated things would be better.” But it's really only on those days they'll mention it, and then on remaining days they're back to being a normal left wing person, just complaining about how the market is unequal and we need regulation. So that's a lot of my complaint there.

In terms of how he's discovered in his late age how important it is to go and take care of your own countrymen, it's like, well, first of all, I think that he probably knows that estimates of the effect of low skilled immigration on wages of low skilled Americans are small at best. And there actually is a debate about whether it goes the other way. 

How could it go the other way? The answer is that even though we call them all “low skilled workers”, whether they're native or foreign they actually have different skills. Most obviously, native born workers have much better language skills. And so when you get more immigration, a big part of what happens is that low skilled natives specialise in doing other kinds of jobs. They specialise in jobs where language skills are necessary. The really obvious one, of course, would be supervisor. One of the main things that happens when you let in more low skilled immigrants is that there is a promotion for natives who were doing similar jobs before but now they need to go and basically be the manager or the intermediary between native customers and the new workers. So that's actually a lot of what happens. 

Basically, it's like there's a lot of doubt about whether it's even true that low skilled immigrants are bad for low skilled natives. Rather, it looks like often they are complements. So there's that as well. 

I guess my general take on this is that Econ Nobelists often say, “Now that I've won this prize, I'm entitled to go and get up on a soapbox and give my general opinions about the world.”

Yet their whole career they have not really been training to do a good job on this. And so what they say is often just sadly conventional and not very thoughtful, whereas, say, bloggers who've been doing this their whole life, they've trained in giving the bigger picture and they're better at it. So Deaton is someone who has not really been thinking about the biggest issues in this way. And so it's not surprising that when he decides he's going to speak to it, he really says something very conventional and that doesn't even really incorporate his own best work.

WALKER: Bloggers are trained in consilience?

CAPLAN: Yes, well, some are self-trained anyway. It's not like there's a blogging school where they go, say in Consilience 101. But yes, bloggers are the people that are most likely to be trying to go and draw from a number of different bodies of knowledge to go and get a big, thoughtful picture. Obviously, the typical one is just a hack going and repeating talking points. But if you're saying, like, who are the people that are trying to go and combine a number of different areas of knowledge in order to get a thoughtful view of the world? Yeah, I'd say that bloggers are overwhelmingly overrepresented in that endeavour.

WALKER: Why does blogging incentivise that kind of eclectic style?

CAPLAN: Well, I think that probably the better way of thinking about it is why does everything else disincentivise it? So if you are a professor, the way that you gain status is by publishing very high quality, narrow articles that demonstrate a picky point with a great deal of certainty. At least that's how it is in economics and philosophy. There are some other academic fields that are worse and that are screwed up in a bunch of other ways. But that's the standard way that academics gain status – is by specialising, narrowing your focus to a really small range and then working it out in gory detail to the point where almost no one would want to read it. So that's what it's standard for academics to do. And then if you are a government worker writing a white paper or something, it's a pretty similar deal. If you're writing the CBO report on return to social security, you're on that exact narrow topic. 

For a journalist, it's much more about, “I need to talk about whatever's hot today”. Which is, in a way, an even more narrow focus. It's like, it's got to be the very thing that's hot today. And like, what about yesterday? What about tomorrow? Those take care of themselves. 

Bloggers are the main people where they've got this latitude: “Well, I could write about whatever I want that people read. And then what are the areas that other people aren't doing? Well, we're covering the super narrow topic. We're covering the super narrow chronological period. What could I do?” And of course, a lot of bloggers just go and do the super narrow chronological period. Not too many doing the really narrow topic, actually. 

So I'll expand in topic. I'll expand in time period. So that's probably what's going on with why bloggers do anything different. 

Important to remember that it's not like all bloggers do this. In fact, I think most bloggers are very much like journalists. They're talking about whatever's hot today. But there is this reduced pressure to do what everybody else is doing. And it's like, well, I need to find my niche. What niche is not being supplied? And I think it is the niche of doing the consilience or trying to do the interdisciplinary thing. 

I mean, there are a few interdisciplinary professors. I consider myself one. 

But normally, the way that you become an interdisciplinary professor is first you become a disciplinary professor, and you get tenure in whatever your regular field is. And then it's like you pull off the mask and say, “Actually, I have bigger thoughts, and I'm going to go and share them with the world at this point.” And the other colleagues are like, “Oh, no. Oh, no.” Some of it is just a feeling that no one can say anything worthwhile on a broader topic. But another thing is, it's just not what we do. That's for someone else to do. It's like, well, who is the someone else? I don't have to answer that question.

[23:38] WALKER: That's great. Okay, so let's talk about the gains of agglomeration and zoning. So the most relevant paper here is the famous 2019 paper by Hsieh and Moretti. And that paper has now more or less been refuted. You found some basic errors in it in 2021, and then at the end of 2023 Brian Greaney found some more errors. Could you just outline why you nevertheless think that housing deregulation would have massive productivity gains?

CAPLAN: Right. It's probably easiest to set back to immigration, and then move over to housing. The main benefit of immigration comes down to this: right now, most people in the world live in countries with very low productivity, but there are some other countries that are very high productivity. You might think the problem is the people, but we know that's wrong. And how do we know it? From immigration. Because from immigration, we've seen what happens when you go and you take a low skilled worker from Haiti (say, a shoeshine on the streets of Haiti), and you move them to Miami. Or you take a low skilled Mexican farm worker and you move them to an American farm. 

And basically overnight, what happens when you do this is that their earnings skyrocket. Well, how can the earnings skyrocket? Basically, economics says it's got to be their productivity is much higher. For a farm worker, it's obvious that their productivity is higher because on that primitive farm, they're barely growing any food, and on a modern mechanised farm they're growing a lot of food. For something like a shoeshine, it takes a little bit more reflection: in what sense is he more productive in Miami than in Haiti? Until you remember, “Oh, yeah. Shoeshining is a service. The point of a service is to save customers time. When you save more valuable time, then you are actually being more productive.”

So that's the main economic case for immigration: just that immigration restrictions prevent workers from doing what they naturally would do, which is move from places where their productivity is low to places where productivity is high. It is transformative to the point where it is easy to go and multiply someone's productivity by a factor of ten in a week. So that's how immigration works. 

If this is different from almost any pro-immigration argument you ever heard, it's like, yeah, I know, but this one's the best. It's one that is hard to get people on board with because it's like, “Well, gee, you mean that it's good to have illiterate workers on our farms coming from other countries?” Like, “Yeah, exactly.” It's like, “Well, why?” “Because they produce way more food for humanity. And that is not just good for the migrant, it's good for everybody who eats, namely everybody.” 

So this is the main benefit of immigration. It's just moving people from places where the productivity is low to places where the productivity is high. With immigration, the gaps in wages are often so dramatic that there's little doubt that incredible numbers of people would move. Often surveys will say like a billion people would move. And there's some reasons to think that's too high, some reasons to think it's too low (also depends upon over what time period). But still, massive migration would happen if people were allowed to move. 

Now, when we think about housing… So within a country, normally, there's no legal limitation on moving. So someone from rural Mississippi could move to the Bay Area today without getting any permission from anyone. And traditionally, this actually was very common in the United States and of course a lot of other countries, where there's some areas that are backwards, other areas that are advanced. And one of the main things that happens in these economies traditionally is that people from the backwards low wage places say, “Hey, I would like to get a large raise. I will go and move from Mississippi to California and get a better life for myself.” This is something that traditionally happened. And you can see in the data that both low and high skilled workers were moving out of low wage areas of the US, especially the South, into high wage areas. 

There's the famous giant move to California where huge populations moved to California in the forties, fifties, sixties, seventies.

The Grapes of Wrath would have you believe this was just a disaster and didn't solve anything. But actually the real story is for most people that moved, it was fine. It's like, “Yeah, things were bad back home, and now I'm in California and I have a much higher paid job and the weather's really nice, and I'm happy.” That was the normal thing that happened. 

But anyway, economically, why are people moving from one area to another? The answer is that they get higher pay in that other area. Why do they get higher pay? Again, just like with an immigrant, because their productivity is higher.

There's some areas that are more developed in (could be) technology, could be in management. It could just be that the land is better for agriculture; if there's some people farming the desert and there's some nice farmland that doesn't have a lot of people on it, then it makes sense to move the desert farmers to the fertile land. 

Alright, so anyway, if you take a look at the modern US, there's something pretty weird, which is that there's still very large gaps in measured productivity between the main regions of the US, but mobility has fallen a lot. 

When the economists Ganong and Shoag went and looked at what was going on, they found out, “Huh. Here's what's actually happening. There's still quite a bit of movement of high skilled people from low productivity areas to high productivity areas. But for lower skilled workers, it's actually going in reverse. Low skilled workers are actually leaving places like San Francisco where their wages are much higher, and going to places in Texas where their wages are lower.” 

It's like, well, that's weird. Why would you move to places where wages are lower? And the answer is that there is this strange feature of the modern world (it did not always work this way), which is that housing prices are so enormous in the high productivity areas that actually you need to be quite high skilled before the percentage wage gain exceeds the extra housing cost. 

So essentially what workers are doing is they are focusing on their own standard of living, which is wages minus housing cost (minus some other things, of course; minus cost of living). But the big difference in cost of living is just housing costs. 

So the reason why I do think that the story is right is that we, first of all, know that there are large differences in productivity. Second of all, we know that during the earlier period of much lighter regulation, that there was not much difference in housing costs between high productivity and low productivity areas. So it stands to reason that if we could get housing costs back down to reasonable levels, then we would restore this standard feature of the economy, which is that workers of all skill levels have a tendency to move to places where their wages are higher. 

It’s not going to be as extreme as with immigration, because when you can multiply your wages by a factor of ten by moving, that almost decides the issue. Like, if Haitians could just move to the US legally, probably Haiti would just almost empty. It's just so dramatic in terms of what their living standards are like in Haiti versus here.

Whereas [as with interstate migration] if it's just a matter of getting like a 20 or 30% gain, then some people say “it sounds great”, other people say “I don't want it that bad”. But still, the productivity differences between the Bay Area and the rural South are big enough that it does still seem likely that there'd be a lot of mobility if the housing costs were reasonable in the high wage areas.

[31:15] WALKER: Okay, so I want to challenge this story of productivity gains in a few ways. But first, just as a brief digression, the error you found in the Hsieh-Moretti paper reminded me a bit of the error that was discovered in the Reinhardt-Rogoff paper: a super basic error in a very influential paper. What percentage of influential economics papers – measured by, I don't know, they've got more than X number of citations – do you think are just built on houses of cards where there's some error that's passed through peer review? Would it be like a meaningful percentage?

CAPLAN: Yeah, I think so. I mean, again, it's one where people will hasten to say it's probably gotten less bad in recent years because the standards for what you have to disclose have gotten higher. But at the same time, there's not that much in it for a person to go and find a mistake. 

So what happened with me is I was rereading the Hsieh-Moretti piece very carefully, and then it just seemed like there were basic multiplication errors in some of the notes. And I'm like, “Alright, well, they're really smart guys. They're not gonna have basic multiplication errors.” And I talked to a few friends, and the usual thing friends said is, “Yeah, no, no. You're misunderstanding what's going on.” I'm like, “Alright.” And then I emailed them, and they wrote back and said, “Yeah, you're right. We made basic multiplication errors.” And I was like, “Oh, my God.”

Now what was striking is that these errors were actually against their thesis, because once you went and fixed the multiplication, they wound up concluding that there were even larger gains to deregulating housing than they originally found, or so that's what came out of it. In a way, it's like a good sign, because you figure if there was some kind of either conscious or unconscious bias towards inflating the result, then that would make sense – that's what you figure people would do; they want to get a big results and get extra attention. But then since I found that they were understating it, it's more of just a careless error rather than some systematic problem.

Then there was, as you mentioned, another critique by Brian Greaney – who I think is probably right, and most people who have looked into it say that he's probably right – which is just that they have a very strange model, and you have to be paying close attention to it, and really probably need to at least be in a graduate program in economics to know why what they did was odd. But I think the simplest way of explaining it is that intuitively, you would think, and I usually think, of deregulation as just something where it just breaks a dam and you can now build more housing, and the supply goes up. 

But they basically thought of it more along the lines of, there's just going to be a greater sensitivity of construction to price. And it's like, well, those are kind of related but not really the same thing. I mean, the main thing I think about, if you were to go and deregulate San Francisco, it's not so much that suddenly they would start building more if the price got higher, as they would just build a ton because prices are currently super high. 

But, yeah, if you were to do the full audit, that is a... It's a great idea. It's sort of like, it's a great idea for somebody other than me to do.

WALKER: Should someone offer a prize to incentivise it?

CAPLAN: Yeah. So if there's some philanthropist watching this and just wants to go and do a prize… And obviously, I think this would work totally, really well for medical research, too. There's probably just a lot of really basic errors. 

It's one where you can sort of go and offer different prizes for different levels, like basic arithmetic errors that lead to more than a 10% change in the prediction or in the claim of the paper. That's the one to start with. 

I mean, here's probably a lot of what was going on. This paper by Hsieh and Moretti was in the American Economic Journal. It's a top journal. Normally referees for those journals – I have talked to them, I've even seen them doing their job – they put a lot of work in. But they put a lot of work into the really intellectually demanding stuff. Like, they're like, let me take a really good look. Let's check every formula. Let's go and look at the statistical work and see whether they actually did exactly what they said. 

But the idea that they would need to go and check for basic arithmetic, that's not something that they're really used to. “Well, of course, the basic arithmetic is right.” And is it? How do you know that the basic arithmetic is right? So, in a way, it's one of the easiest things to check, and something where you don't need a lot of knowledge of the technical material in order to go and check that stuff. So that would seem like a pretty good thing to do. 

Something else that's been found is that when papers do get corrected, it doesn't seem to affect their citations or anything else. It's just like, people generally don't hear about it. You just keep citing the original piece. 

Doesn't this show that academia is corrupt? It's like, yeah, fairly corrupt. It's not as bad as possible. It's not all a pack of lies. But it does mean that quality control is just a lot lower than it seems. A good way of thinking about it is that there's probably, at least in fields like econ, there's really high quality control in some of the areas, but that does not mean that overall quality control is good. 

This would be like at the Coca Cola plant. Like, okay, we have fantastic checking for whether every can has as much liquid as it's supposed to have. We have fantastic checking for whether there's any stray glass around. And then once a year we look for rodents. And if there are rodents, then it's like, okay, well, I guess somebody should get on that eventually. And it's like, “Well, look, be fair. We're really careful about some issues in the Coca Cola factory.” 

It's like, “Alright, yes, you are. But that doesn't mean that the final product has great quality control, because that would require a high level of control for everything.” And in fact, you might say perhaps you're putting too much effort into making sure that every can has the right amount of liquid down to the 10,000th of an ounce, and you should move some of those resources into checking for the rats.

[37:25] WALKER: Okay, so let me challenge this story about the output gains we could get from deregulating, in a few different ways. So I think that the first and most obvious critique to make is that the people who've already moved to the big conurbations like the Bay Area and New York City are going to be the most naturally talented, ambitious people. And the next kind of 5 million, 10 million people who move there aren't going to have the same productivity as those people even after they've moved to those places. What do you make of that critique?

CAPLAN: Yeah, so it's totally reasonable as a general point. The key question is, first of all, does the Bay Area have better janitors than other places? There's just a lot of low skilled jobs where our stereotype of the ultra high skilled workers at Google is fine for Google, but those people are actually a pretty small percentage of the population. So I'd say that's the place to start, is just that while there are definitely quality differences between workers, they probably are not nearly as stark as you would think just from consulting stereotypes because of this thing that behavioural economists call representativeness bias; when we think about workers in the Bay area, the ones that pop to mind are your really high school tech workers. 

They’re still only a small fraction of the people there. Most of them do not have some incredible cutting-edge job. It's not like their janitors are at the cutting edge of janitor science or anything like that. So for most workers, they are not really special. They are typical. And, you know, especially if you just step back and just say, what fraction of the people that are already there were born there? And it is really high. And you might say, I'm someone who's really into behavioural genetics, so it's like, well, like, maybe what's going on was that the father of the Google executive worked for Hughes Aircraft and his father worked for some other big tech firm. There is some of that. But nevertheless, a lot of what's going on is that people just stay where they're born.

So there's this famous statistic about the fraction of Americans that live within, like, ten miles of their mother. And it's real high. So what does that mean for mobility? It does mean that you need to have very big wage gains to get a large share of the population moving. So, like Puerto Rico: there, over half of all people of Puerto Rican descent have left the island because there's such a large wage gap. On the other hand, when you're talking about a difference of ten or twenty percent, there's a lot of people who say, I will go and just take the hit so I can keep living near my family. But still, we do know that the US has much lower mobility than it used to. So it used to be that people were willing to move, and it does make sense that a lot of that reason is these differences in housing cost – cost of living generally, but housing cost is the really big hit. That's the main thing that varies tremendously. It's not like a loaf of bread has such a different price in San Francisco versus the South. But a mansion has a really different price. 

Now, in the case of work on this in immigration, my colleague Michael Clemens and coauthors actually made a pretty serious effort to go and adjust for worker quality. I don't think that the Hsieh and Moretti pieces make nearly as serious an effort to do it. But still, just basic things like conditioning on observables – like, well, let's go and match up high school dropouts with high school dropouts. Does the Bay Area really have fantastic high school dropouts? So that's where I would be focusing.

WALKER: Right. So I guess that gets me to my next challenge, which is, taking the Bay Area as an example again, does housing regulation somehow protect the weirdness that's concentrated in that community? And if you deregulate and had a lot of high skilled workers moving in, they kind of dilute that and you somehow lose the innovativeness of the Bay Area?

CAPLAN: Right. I mean, again, you figure that these agglomeration gains are based upon the total number of geniuses and innovators within driving distance of each other. If you just go and add a whole bunch of lower skilled workers, if they were literally blocking the roads or something so that people couldn't meet each other, then you can see what the problem is. But otherwise, it does seem pretty hard to see why that would actually mess things up. Obviously, even at the level of Google, they hire people that are not especially impressive to go and work as janitors and do other basic things. They don't seem to be worried, “Well, we better have only high school graduates going and taking out our trash, or else they might mess up with this incredible environment.”

The idea that agglomeration matters makes perfect sense. But what would it take to mess up the mechanism? So within a firm, there is this interesting question: how much does just switching to telework mess things up? You might think that messes things up a bit. But as long as people are physically in the same location, still interact with each other, still see each other, it is at least puzzling to try to figure out how would this mess up their innovation. In fact, I say the opposite story is the one that makes more sense: if we could, say, triple the amount of low skilled workers in the Bay Area and raise the number of high skilled workers by 50%, it seems like that would still totally raise the innovation of the area. Because you get these innovators who are right now kind of isolated and they're working on their own, or at least they're not at the absolute dead centre of progress, and you move them there. And it seems like that would actually be what would be really crucial for high innovation.

[43:09] WALKER: Right. Okay, next challenge. So there's, either explicitly or implicitly, two core objectives in YIMBY thinking. One is making housing more affordable. And then the second is these gains of agglomeration for, for example, productivity. But doesn't enabling more building in major cities intensify the economies of scale and therefore raise rather than lower prices and rents?

CAPLAN: I mean, the whole point of economies of scale is to be able to produce twice as much stuff at less than twice the cost.

WALKER: But if you have these huge agglomeration effects where the city, as it grows in size, just becomes qualitatively different and people are way more productive, earning higher incomes, doesn't that ultimately translate into higher rents and prices?

CAPLAN: I would say that it immediately translates into higher rents and higher prices. But the thing is that it is totally possible to just keep building more buildings. And again, that's something where you don't need any kind of incredible genius to do it. These are standard skills that have been known for over 100 years. So what I'd say is when the attraction of the agglomeration hits peak, there's still plenty of room to go and say, we can keep going and building more additional housing here.

Probably a good way of thinking about it is this. If you go to the US, we've got a few elite schools, but we have endless regular schools. Now, when you go to these schools and walk around the campuses, it's actually usually pretty hard to tell what kind of a school you're at based upon the buildings. You need to go into the classrooms. And in the elite places, alright, wow: the people in these classrooms are geniuses and they totally know their stuff. You go into classrooms at some school you never heard of, and it's like, I don't know why these kids are even here. But their buildings look very much the same. And it's like, what's the difference? The difference is that there is a fundamentally scarce supply of incredible human talent, but there is not a scarce supply of ability to construct stuff. So we can go and build nearly endless, beautiful college campuses with gorgeous buildings and landscaping. And there's nowhere in the country where we don't have the talent to do that if we got the money, and it doesn't even cost that much more to go and do it in one area versus the other. But there's no way we're going to go and have 100 places with a student body like Harvard because we don't have human beings to fill the school. We don't have a hundred times as many human beings of that kind. 

So that's what I would be saying is going on where eventually you've got such agglomeration that it’s not like you'll have all the talent in one city, but it's gotten to the point where it's like, alright, we've gotten everybody to move that is willing to move for anything that is approaching a reasonable amount. And at that point, it's like, but we still have tons of people that can go and build buildings and houses and do landscaping. And for them, that supply is just almost unlimited in the same way that we can build an almost unlimited number of attractive college campuses, but we can't fill the classrooms with fantastic students because that's scarce.

WALKER: Got it. Okay. So then, on the other hand, and this is, I guess, now coming back to the Hsieh and Moretti kind of model, but to what extent does that model fail to capture the gains that come from entrepreneurship?

CAPLAN: Yeah, that's a really good question. So the easy answer is they just have this one measure of productivity, and everything's in that measure of productivity. It's just “total factor productivity”. And in principle it should not include the total amount of capital or the total amount of labour. That stuff is in a different part of the model. But any kind of qualitative technological difference, any kind of difference in managerial quality, any kind of difference in entrepreneurship, that stuff all gets put into total factor productivity. Now, if you had some kind of a dynamic story about how if we move more resources in, that would actually change total factor productivity, that's not in the model.

So, normally, the model – basically all economic models really – treats total factor productivity as just a fixed thing, which then does lead critics (the intelligent, the thoughtful, critics) of both my stuff on immigration and my stuff on housing to say, “Well, aren't we messing up that total factor productivity?” And it's like, “Well, I guess that's possible. Let's go and think about these specific stories about what's going wrong and why we are messing it up.” 

In the case of immigration, the strongest story or the most horrifying story is maybe you let in a bunch of immigrants, it caused a civil war, and then your total factor productivity crashes down to the lowest in the world. And it's like, alright, if that would happen, that would be a really serious concern. Is this a serious concern?

What examples, if any, are there of immigration leading to civil war? There are probably a couple, but normally, it's nothing in that ballpark, and it's like, alright, fine: didn't actually cause civil war, just caused some other disruption. 

The main one that people talk about in social science is it causes a fall in social trust, and then that leads to some general collapse or something like that. And it's like, alright, let's go to the actual research on this social trust thing. It's the kind of thing where most people, when they hear how seriously social scientists take this construct, they’re puzzled because it is one of the least overwhelming ideas in all of social science. It's like, “Well, we just want to ask people: ‘generally, do you think you can trust people or not?’ And then we take whatever the societal percentage of people say you can generally trust strangers. And we use that to predict stuff.” 

And it's like, so that's your measure of trust, just whether people say you can trust strangers? “Yep.” And it's like, huh. Seems kind of like a weak measure anyway. But anyway. “Well, that's actually fine, because if it's a weak measure, if it's still really predictive, then that actually shows the real thing is really powerful.” It's like, is it? 

But anyway, some of the main things to know about this. For many people, this is the main case they make for what's wrong. First of all, in the rare cases where people have really measured the effect of rising diversity on trust, they find that more diversity leads to lower trust, but it's a microscopic fall.

This is actually one where there's a famous paper by Robert Putnam. I think it's the only paper that he ever did on trust where he went and did this actual quantitative work. This is one where I did not find an arithmetic error. Rather, I found that he just had a table where the arithmetic implied that the rest of the paper was greatly overstated. Because it wasn't like he went and did it, and then he said, “Okay. And then this shows there's this huge effect on trust.” He just put up a table, and then he just said, “And so we see that this is really horrible.” And it's like, well, is it? I just went and said, alright, so according to his paper, what is the effect of moving from our current level diversity to maximum level? And it was just a microscopic change. 

WALKER: Oh, that's so interesting. I know the paper. But I’d just heard the punchline.

CAPLAN: Right. So you can link to it in the show notes. So there's a lot of verbiage about how, “Oh, my God, it really pains me to accept this harsh truth that diversity is really bad for trust.” Then you look at the actual table and it's saying that trust is falling by a microscopic amount in the most extreme scenario. So then it's like, it's weird that you would do that. You would think that if you were really disturbed, you would go and multiply the numbers out… And it's like, well, maybe you weren't really disturbed as you said, or maybe you just got so worked up over the big picture that you didn't go and double check that the numbers actually were in line with your adjectives.

Now, it's not like there's some book that just says that you're only allowed to use the word “terrible” if a number changes by at least 70%. It's just a conversion that people use intuitively. “Terrible”. What would count as terrible? If you watch the news often they'll say something's terrible, and it's like something fell by 0.3% or something. It's like, is that terrible? 

But, I mean, it's one where it at least seems like in the broader scheme of things it is not really accurate to call it terrible. But anyway, this is the kind of thing where people have said immigration is really dangerous for trust. And it's like, well, at least by this diversity measure, it's not really bad.

There's another story which I think is a lot better, that almost nobody makes, which is, look, it's not really the diversity we're worried about. It's that we're worried about bringing in immigrants from really screwed up countries where people don't trust other people. And if you look internationally, you'll see that basically, really poor countries generally have low trust. Really rich countries generally have at least moderate trust. And so you might be worried about, just as a matter of if we bring in another hundred million people from a low trust country, that just lowers our average, and that's bad. 

And then there's this question of, well, first of all, maybe when you get out of a war zone, your trust would go up. Maybe if you go and ask someone in the middle of a civil war, “Can you trust people?”, and they say, “No”, they would give a different answer if you brought them to Switzerland. Because they look around, “Yeah, this looks really good, actually. People aren't killing everybody. So now I feel like I can trust these people.” So that's part of it. 

Another thing is just assimilation. So will their kids stick with their parental level of trust? There is at least a moderate literature on this which I say does show the obvious point of, yes, the trust attitudes do actually depend upon: if you grow up in a different country, that has a big effect upon your trust, and you do assimilate a lot to whatever is normal in that country. 

The last thing is actually suppose that you do have low trust. Suppose immigrants lower it a lot. How bad is that really?

And this is where when you actually look at the numbers, you'll say, look, the rock bottom countries for trust, they do look like they're messed up. Maybe that's causal. But once you get away from the rock bottom levels of trust, there's a whole lot of countries with very widely differing levels of trust that are all rich. So it's like maybe you've shown that rock bottom is bad, but once you're at the level of France, which is actually pretty low, it doesn't seem like that is any big hindrance to being a modern country. 

So anyway, that is the kind of thing that people talk about when they think about immigration messing up total factor productivity.

And I'd say if even these really dramatic changes from changing the national origin of your population are really overstated, then I'd say that it's very likely that whatever changes you'll get from having more internal migration are going to be modest at most.

WALKER: Okay, interesting. So to come at this from another angle, thinking about the gains from entrepreneurship that we can get by allowing our cities to densify, could you quantify this by, I don't know, looking at the number of unicorns produced in a big city versus a medium sized city, and extrapolating that somehow?

CAPLAN: It's a good question. To be clear, I don't generally think so much about urbanising the US, just as about making housing cheaper so that everyone can, to use the colloquial term, manspread more or womenspread, or just to spread out. I do think that since cities are more regulated, that's likely to be where there's the biggest changes. But even in suburbs, people are often living in fairly cramped conditions, like they would like to go and have more. It's just a matter of price. So there's this old idea of a starter home, but the home you're in a different world, if housing were half the price per square foot, then it's like, oh, I thought this was our final home, but this turns out to be our second starter home. 

But in terms of unicorns, that is a reasonable approach. I guess the main thing I would say is that the US is the main country on earth for unicorns, and most countries just have none. I mean, it does depend upon how high the threshold for a unicorn is. In a way, I would say that based upon the actual evidence, the thing that we can say with more confidence is just if the US let in a lot more high skilled workers, the US would get a lot more more unicorns, and the world would probably get more since most countries don't have any unicorns to lose. Their tech workers are just doing something lower down the food chain than what's happening in the tech hubs of the US.

[55:44] WALKER: Okay, let's talk about fertility. So in a way, I would love for it to be true that housing unaffordability was an important cause of declining fertility rates, as you suggest in Build, Baby, Build, because that would offer up a more tractable solution than some kind of harder to pin down cultural explanation. But there's a lot of research showing that there's an association between density and reduced fertility. And a couple of very clear examples of this would be Tokyo and Seoul. So what do you make of this result? Doesn't population density lower fertility?

CAPLAN: So here's what I'd say is that these papers are making a good point. It's one that we should be thinking about, but they are really jumping the gun because normally high density and high prices go hand in hand. We'd really need to be finding places where there's high density but housing is really cheap – and that's really hard to find. Why? Well, normally, anytime you actually get a city, then regulation is going to be at least fairly strict. And so we just don't get to actually observe this alternate universe.

WALKER: Is there anything that fits the bill there? Are there any examples of cities that are both high density and have low prices?

CAPLAN: So Japan has had flat prices, but they're still actually high, especially Tokyo. They're still high. So, yeah, I don't know of any good exceptions. There may be some somewhere on Earth. But that would be where you'd want to start. Definitely what we do know is there's basically places of similar density but different prices. So that is what you need for minimal social science. And as far as I can tell, the people that are getting worried about this just haven't done that basic homework of trying to disentangle price from density because those are logically different things. You can imagine an area that's very dense and yet the housing is cheap. So that someone that wants to go and have a lot of living space can get it. And we really just don't see that. 

Someone was getting upset at me because the cover of the book shows skyscrapers. Now, the actual book is talking about lots of different kinds of housing deregulation. What I'd say is there is really no argument against, and strong evidence for, that just allowing cheaper suburban housing is going to raise fertility, because here it's just a question of you've got more space and also it's cheaper to go and move out of your parents basement. So that is step one. So to say that making it easier for people to go and own their own single family house, that's going to raise fertility, I'd say there's just almost no doubt about that.

In the case of cities, what I'd say again, is if you could get the price down then for the people there, I think it's just very hard to argue that this would at least tend to make them more fertile if they could get cheaper housing. The reason for doubt is you could say, well, the people that are already in cities will have higher fertility, but it also makes cities more attractive to other people, and then maybe once they're there that will lead to some offsetting effect. I will say there is some doubt in my mind there. Say the overall package deregulation of just getting housing cheaper, I think that one, the pronatal effect is pretty clear. 

That there could be some offsetting effect from cities and if you just had a very large movement to cities, then maybe that would lead on net to lower fertility, I guess that is possible. I think that's unlikely. 

To my mind, probably the clearest sociological factor, which you can think of as cultural, but it is also economic, is living with your parents. Living with your parents, which varies a lot by country. So living with your parents varies a lot by country. So if you go and take a look at Europe, you'll see that especially in Southern, Eastern Europe, people just keep living with their parents till they're in their thirties or forties. And then there's the cultural fact that normally if you're living with your parents it's kind of awkward to get married, right? And if it's awkward to get married, it's even more awkward to have kids. 

So this is one where I said we don't have really strong evidence. What we do have are basic patterns, which if you take a look at Europe, you'll see that you do generally have higher fertility in the countries where people leave home at an earlier age. And you have the lowest fertility in places where people just keep living with their parents till they're in their thirties and forties. I’d also just say it is just common sense of you're not going to have many kids living in your parents basement, if any.

WALKER: If reducing housing costs reduces the cost of having kids, and enables people to have more kids, how do you square that story with the broader trend of as societies have been getting wealthier fertility rates have been declining?

CAPLAN: Well, I mean, of course there's the easy one, which is that the one area where economies have been underperforming is precisely in housing. So again, like in terms of it's easy to go and have better stuff than your parents for most areas of life that's totally and obviously true. And especially in rich countries, things have just improved a lot. Whatever official income numbers say, if you really compare “what do I have compared to what do my parents have at the same age?”, you're doing better. Housing is the one area where it actually is often hard for people to go and replicate what their parents had at the same age.

So I'd say this is a sector that we're strangling and so we're just not seeing a lot of the normal fruits of progress. So that's part of it. 

I am also very open to the idea that there is a general cultural change and you need to go and push back on that. So what this means is that just traditionalism, there is a whole worldview of kids [being] really important and that other things are not so important. And I think there has been a gradual cultural shift. With economic growth, there's just a lot more options to live a life of play, which really wasn't much of an option 100 years ago. With so much entertainment around, then it does make sense to me that some people say, “Well, now that I've got this totally different lifestyle that I could try of just basically getting to be an adult child for my whole life, I'll do that instead.”

I do have a whole book on fertility. I'm not someone who thinks that it's all economics. What I am someone who rather thinks is that economics is one of the easier dials to shift. And so if the cultural forces are going in one direction, then shifting the economic dial in the other direction is a very sensible response. At least if you think that low fertility rates are a problem. I definitely do think that they are a problem. 

Although for me, low fertility, it’s not this kind of thing where I'm predicting disaster so much as just it could have been so much better. So my colleague Robin Hanson has been talking about innovation grinding to a halt, using that phrase, “grinding to a halt”. And I'm like, well, why will it grind to a halt? Why won’t it just be that if our population is half as much, we’ll have roughly half as much innovation or maybe less than half as much. Maybe it'll be raised the 0.85 power or something like that. And he says, well, grinding halt just means that it's going down a lot. And I'm like, I think most people are not reading you that way. To me, grind to a halt means to go down to zero – eventually anyway. 

People who are worried about fertility decline, I don't think they really have any argument for why innovation will go to zero. I think they've got a great argument for how “wouldn't it have been better if we could have discovered a cure for ageing in half as many years as it's really going to take us?” We'll get there eventually. But wouldn't it be better if we figured it out in 50 years instead of 250 years? Say 50 years: maybe I can just get in under the wire.

[1:03:19] WALKER: What do you make of the fact that astonishing efflorescences have sprung out of cities that are quite small by today's standards? So, for example, Periclean Athens was home to somewhere between 215,000 and 300,000 people. Renaissance Florence was home to about 50,000 inhabitants, growing up to about 95,000 by the late 15th century. Manchester and Birmingham, I think, started in the low tens of thousands on the eve of the Industrial Revolution and then grew into the low hundreds of thousands through the Industrial Revolution.

CAPLAN: Don't forget Vienna.

WALKER: Vienna, yeah.

CAPLAN: For music.

WALKER: Yeah. Even San Jose is quite small and obviously punches well above its weight. So if we believe Paul Romer that population scale is really important – more minds means more Einsteins – how do we make sense of these small but highly productive centres?

CAPLAN: Right. So I think the best way of thinking about it comes from this paper by Charles Jones and I think some coauthors. And it comes down to low-hanging fruits. Early on, there are some ideas that are really valuable, but they're not actually that hard to get. And so you get some agglomeration. It's not like you had five incredible composers coming from one mountain village; they're still coming from one of the largest cities in the Austro-Hungarian Empire. So there's still agglomeration, and there's still value to agglomeration. But yes, early on, there's just ideas that are easier to get. (He's mostly focusing on technological innovation, scientific innovation, so there's ideas that are easier.)

And then what he shows is that while it does seem like population is still really helpful, you have to keep getting more and more minds working on the same questions in order to get the same level of innovation. Now, some of that, and I think he does admit this, some of this could be that when you, say, multiply the number of PhD physicists by a factor of a hundred, you don't really have a hundred times as many geniuses. The people that were the true geniuses were going to be in physics, probably either way. And then we're adding on more people who are second-stringers who wouldn't have been great innovators.

But some of it really is that people that in a lower population world would have just been farmers are incredible innovators, because with a larger population, there's just more to sustain this group of people that aren't concerned with immediate survival. But, yeah, the low hanging-fruit story makes a lot of sense; early on, ideas are not easy, but easier to find. 

Think about this: just to get to the research frontier is getting harder and harder all the time, just to learn everything that's already been learned that's important and relevant. In 1500, it's like, I need to learn everything that's already been learned about physics. Alright. Yeah. People barely know anything. There's this Aristotle stuff. I can read that. It's like, well, that's wrong. And then from there, to make any progress (most people would never have made any progress, of course), but it isn't that hard to go and absorb everything that's known in 1500 and then improve on it. 

Let's put it this way. It's set like a 9.9 on a scale of 0 to 10. But to go and improve upon what we got now is more like 9.99999 on a scale from 0 to 10. Or maybe it's mistaken to even have an upper bound on the scale, and just say difficulty goes from zero to infinity. And for Newton to do his work, maybe that was at a hundred, but to go and get a big advance now maybe is at ten thousand or a million. And so you just need to go and pour a lot more resources into innovation in order to get much of anywhere.

You can see this even in our own lifetimes. If you look at improvements in the Internet, the earliest stuff is just jaw-dropping and then you keep adding stuff. AI is sort of the latest thing that's really impressive. 

But my view is actually ultimately search engines were a bigger improvement over what we had than AI is over search engines. I know a lot of people love AI, but compared to the way people retrieved information before Google, it's like, “Let's go to the library and look in some books.” That's literally all we had. Google wasn't really the first search engine, but Google-like things. The change between what we had before search engines and search engines to me is a way bigger change than from search engines to AI.

WALKER: But AI is still developing.

CAPLAN: It is. And then there's the question of how far does it get. When, not if, does it asymptote? Everything asymptotes eventually. I know people don't like this idea, but everything does in time. You can find something else and then it gets further growth out of that. But every particular technology asymptotes in the end. And then also it takes decades for things to really actually live up to their potential. Always has. I know there's some people who even a year ago think AI will be the one exception to this. Look, electricity takes decades to spread. It’s so good, but why does it take so long to spread? Well, human beings. There's a bunch of human beings that stand in the way between adoption; some of its regulations, some of it's just inertia and just like, “Well, we can keep doing it this way.” Some of it just requires a lot of brain power just to go and re-adapt it so that it can go and work on the old thing.

WALKER: To tie the Chad Jones point back to cities, basically, we stand on the shoulders of giants.

CAPLAN: No kidding.

WALKER: And so we need the help of larger and larger [agglomerations] to get the same kind of productivity growth.

[1:09:00] A couple of questions on urbanism and architecture. So you recently took a trip to Japan, right?


WALKER: Was there anything on that trip that you learned or that surprised you about Japanese urbanism?

CAPLAN: So, one thing you can definitely see is they just barely worry about historic preservation because their cities just got torched during World War II. They just don't have much that's very historic. So, yeah, if you know the horrors of the war, Tokyo's basically burned to the ground. 

WALKER: The firebombing.

CAPLAN: So they had a long tradition of building in wood, and then also horrible firebombing and everything else. So they just don't have the same issues with, “We’ve got to preserve the past.” I mean, a lot of people also say there's this cultural thing where, because of Buddhism or Shinto, they just have the idea of reviving things. For historic buildings, they will actually periodically go and take them down and then rebuild them from scratch because it's made out of wood and the wood won't last forever.

There's this very famous shrine in Nara where it used to be – it’s still – the world's largest wooden building, but I think my book said it used to be fifty percent bigger. And they said, “We're just not going to go and build it the same size.” So that was something where it's like, wow, even for a tourist site, you'll go and do something different based upon, like, “We didn't have the money,” or… I don't know what the rationale was. So that's one thing. 

You can definitely see the benefits of mixed use there, because life is just really convenient in Japan as a result of having almost no regulation of “Can I put a store in the ground level of the building?” I'm going to admit I'm not an expert in Japanese regulatory law. I do know that it's at least a lot easier for a residential home to operate as a small business in Japan and just to go and hang out a little shingle and say, “We live here, and also you can get some sushi and just knock on our door.” I remember there was a small town in the UK where they just had a sign: “Knock and I'll sell you a coffee.” We're like, “Alright, my wife wants a coffee. Let's try it.” Knock. And a guy shows up in his bathrobe, “So you want a coffee then?” “Yes.” “Alright then.” And he just sort of shuffles in his slippers, in his bathrobe over to his little coffee pot, and you get a coffee out of somebody's front door. But Japan does make that kind of thing much easier. 

In terms of density, you can see that all of the heralded wonders of mass transit, which I'll say even in Europe, are really overblown and it's not that good. Ed Glaeser has a nice paper showing how the main reason why people like cars is that cars are faster almost everywhere. If you have any doubt, you can just go and start typing in “transportation times for car versus train”, even in Europe, and you'll see normally, at best, it's a tie. With very few exceptions, it's a tie. And for anything non-standard, car is much faster. Even in Europe, even in Germany or in the Netherlands or Belgium or Luxembourg, where people are so enthusiastic about how wonderful the mass transit is. 

And the Glaeser story is really pretty similar, namely, look, with mass transit, there's always the fixed cost of walking there, waiting and then you get off and then you have the final thing, or maybe there's transfers. With a car, you can just go out your door and drive there. And by getting rid of those fixed costs, you are able to go and save time for almost every kind of journey, unless there's horrible congestion. When people are saying, “The US government is really encouraging cars.” Is it though? If they did peak load pricing for traffic and for parking, then cars would be a lot better. I'd be happy to drive right into New York City if it cost me $40 but I knew that I could just go and pay market price in order to have no congestion and be able to park.

So I’d say the actual package of encouraging cars in the US, once you realise that not having tolls is anti-car… People think tolls are anti-car. No, no, it's not having tolls that is anti-car, because if you had tolls, then you could use the technology. 

But anyway, so Japan is a place where you can go and put in the times for driving versus mass transit. And you say, okay, the mass transit is actually absolutely faster in Japan, because it's not just the density, it's also just their incredible efficiency and conscientiousness of the Japanese. Their cultural differences are quite shocking, when you're there and you just see, wow, this would not work in other countries. In other countries, they would just be screwing up a bunch of things. And here in Japan, their trains really do work.

Now, it does not show they pass the cost-benefit test. That's something where you cannot see that with your eyes. You have to actually do the math. One big problem with all policy analysis is people sort of go as a tourist, they look and they say, “This works.” And it's like, well, it works in the sense that it's on time and it's convenient, but you have to actually look at costs before you know whether it's a good deal. And that's not something that you can see just with your own eyes. You've got to go and actually do the research, “Well, how much did they spend on this thing? And those numbers, do they really capture all the costs? Is there something else that I should be thinking about here? Is the land price in there?” I mean, like, questions that, in one sense, they're common sense, but on the other hand, when you hear someone report, “Oh, mass transit is 30% cheaper,” it's like counting what exactly? And the sad truth is, usually the person that's telling you the numbers has no idea, even what the source of the number is, much less what went into the number. 

I will confess, when I'm doing an interview like this, I often have a bit of a guilty conscience, because I'll cite a number, and I'm like, “Yeah, but what does that number mean exactly?” And it's like, well, if I wrote on it, I would have checked. When you're speaking, the burden of “double-check every fact before you say it” – there's no interview if you do it that way. But what I honestly do try to do is if I'm writing it, like, anytime I get to a number, I do say, “Okay, hold on. What's the source for the number? And what does the number even mean?”

WALKER: Much to the chagrin of Hsieh and Moretti!

CAPLAN: Yes. So it's like, “Well, hold on. What did they do there? But 0.6 times ten is six, isn't it?”

[1:15:31] WALKER: At the margin, how do you think about trade-offs between beauty (in buildings and architecture) and just increasing housing supply?

CAPLAN: Yeah, wonderful question. Many people said, “So why do it as a graphic novel?” And I said, “Yeah, a lot of the reason is because a graphic novel is aesthetic. It shows you things. It doesn't just describe them.” And I realised, well, a lot of the objections of construction are just aesthetic. It's just: “I don't like how it looks.” Although when you listen more closely, normally when there's regulation saying something isn't allowed, it's not really based upon “I don't like how it looks.” It's: “I don't like how I imagine it would look.” 

What I wanted to do in this book, in part, is to say, well, that's one way of imagining it. Why don't we imagine it differently? Maybe the future that we are preventing would be gorgeous.

So there's a whole chapter called ‘Bastiat's Buildings’ where I just tried to go and show people a vision of what a deregulated world could look like. Now is my vision of what the deregulated world would look like the way it would really be? I don't know. But I will say that the pessimists also don't know. The pessimists do not know that the worst will happen. What we do know from historical experience is the worst almost never happens. And in fact, if you just think about areas of the world that will be recommended in tourism books, normally it's not purely natural beauty. Normally it is an area that is naturally beautiful and then modified heavily by the hand of man to give a very pleasing combination. 

I say that is the most reasonable forecast for what would happen under deregulation. We wouldn't go and turn San Francisco into some horrible cesspool. Instead, it would become an incredible futuristic city. And if you say, “Well, I don't want it,” well, I think that after you saw it, you would probably change your mind. “Well, you don't know that!” Well, here's the thing: we do have a lot of historical examples of major changes in the urban landscape which at the time people thought would be bad. And then they were allowed. And now people not only are happy with the change, but they forgot that there was ever any alternative. So in the book I do travel with Ed Glaser in a time machine back to the current site of the Empire State Building. There was a gorgeous hotel – the original Waldorf Astoria Hotel was there. If you look at it, it's an awesome building.

And the question is, alright, it was awesome. But isn't the Empire State Building even more awesome? I know this is a matter of taste to a fair degree, but I will just say, look, we have a lot of facts that people who think that they're going to hate something new not only get used to it but come to love it. And I think that is a reasonable forecast for if we did deregulate: people who just say this would be horrible, horrifying, grotesque; like, if you allow it, then it is likely, though not certain…

I mean, wouldn't it make sense for us to now be trying to build the buildings that people a hundred years from now are saying are the fantastic patrimony of the 2020s? Right now, if you just go and strangle construction, then all we're giving to the future is our past. What if we were to go and add to it and improve it and say maybe some things from the past aren't that great? 

It literally is true that New York City has historic parking lots. There are parking lots designated as historic and you can't tear them down. And now someone might say, “Well, it's kind of a straw man; obviously there's some abuse.” It's like, you know, really, as soon as you got the laws, they just tend to be abused because it's always on the menu. And it's just hard for someone to be honest and say, “Pssh, who cares? Whatever. Tear it down, blow it up. Let's put something else there.” That just sounds so bad in a town planning meeting, versus someone else saying, “You know, when I was a child, we went and parked there.” 

Someone told me, like, there's some city – I don't even remember what it is – where they have historic vacant lots. There's vacant lots that have been designated as historic. There’s vacant lots that have been vacant for all these years, and we don't want to change that. It's like, I think we can do better than a vacant lot.

So the reason that chapter is called ‘Bastiat’s Buildings’ is there's this great 19th century French economist, Frederic Bastiat, and he had this famous essay called ‘That Which is Seen, and That Which is Not Seen’ where he said a lot of why people don't like free markets is they only see some visible benefit of government, but they don't see the cost. So they see, well, there's a giant army that does no military purpose but provides employment. And that's great. And it's like, well, but if we went and disbanded these superfluous soldiers, they would go and get jobs, and they would do something productive for society, and they'd have an income by delivering useful goods and services instead of just being parasites on taxpayers. And this is how he goes through a lot of different issues. 

He has this famous subsection called a negative railroad. People say, “Well, we need to add a stop to the railroad, because every time you have a stop on a railroad, it creates a lot of business for locals.” He said, okay, how about a railroad of nothing but stops, where all we do is stop? Because then every single stop would be great. And it's like, no… You're forgetting the whole point of the railroad is speedy travel. That's the reason why we're building it. And the fact that it's good to go and have a stop every now and then – it's like, look, if the stop is not justified by consumer demand, if it's not a place people want to stop at, then to be worrying about these minor side benefits is really just beside the point. You’ve got to keep your eyes on the prize.

So in that chapter, I basically get to have a tour of a futuristic urban landscape, or many different ones, with Bastiat, where we make this point of, “Look, this is what you see; you think it's great. But this is what you don't see; it's better.”

[1:21:16] WALKER: Okay, to finish, some questions on NIMBY and YIMBY. So you're familiar with the study that found that about 30% to 40% of Americans believe that a large exogenous increase in their region's housing stock would cause rents and home prices to rise.


WALKER: And the same result is found in Australia, by the way. So there was a recent survey that found that more Australians expect an increase in housing prices than a decrease with homes being built in their area. So, question: if supply scepticism is real, why aren't more people YIMBYs?

CAPLAN: Let's see. So you're thinking that if people believe that allowing more construction will raise prices, then homeowners would want to do it?

WALKER: Exactly.

CAPLAN: Yeah. I mean, I think the supply scepticism starts with, “I don't want construction,” and then people are just latching on to any possible reason why. And one reason to not allow construction is: “It won't have these gains for affordability that you're pretending it has, so we don't need to worry about it.” 

But just to back up. Political scientists know a lot about what determines people's views on policy questions. And one of the things that is best established is that objective material self-interest has almost nothing to do with what anybody thinks about politics. It's the kind of thing that you throw in your opponent's face and say, “Oh, the only reason you favour that is because it benefits you.”

But in terms of just basic common sense, it's like, well, is it true that on average, people who have this subjective self interest favour that policy more than people that don't? And for most things, we just barely see any connection between the two. 

There's another paper – I'm forgetting the authors, but they find that owners and tenants have very similar levels of resistance to deregulation. If it was based upon “homeowners want to go and keep supply scarce for their own self-interest, and tenants, on the other hand, want more supply so they can pay lower rents,” that's what objective self-interest would tell you. But the real story is people in general, whether they’re homeowners or tenants, just don't like the idea of deregulation. 

So, what's going on? Two things.

One is that while people don't like the idea of new construction, it's not primarily out of some fear of personal financial harm. It's more of a feeling that it will be bad in general for human beings. So why do people favour the regulations they do? I'd say basically every regulation exists because most people think the world would be worse without it, and not in particular that they would be a loser, but rather that just it would be bad for society. I was debating a guy who is actually a town planner, he's in town hall meetings and he says, “Nobody in a town meeting ever says, ‘I oppose this because it's bad for my property value.’ They always come up with some public-interested reason.”

Now you could just say this is all a smokescreen and they're pretending, “Oh, I really care about other people.” But the broader data just say that we just have a general result: it's not true that rich people are against high taxes on the rich, it's not true that poor people are really eager to go and expand the welfare state, it's rather that people form political views for philosophical reasons. It's not a very sophisticated philosophy, but it's philosophical rather than some assessment of material self-interest. 

On the specific question of why there's so much denial of allowing more construction will reduce prices, I think it starts with a philosophy of, “We don't want to let a bunch of greedy fat cats go and get rich building homes, and that's only going to be good for them.” And then once you have that philosophy, if someone says, “Oh, this is going to have these social benefits,” then the supply scepticism allows them to say, “No, it won't.” 

But why doesn't this turn big homeowners into YIMBYs? I think it's because the real philosophy is “building: bad and must be stopped and is bad for society.” 

Going through this list of other regulations – already mentioned, one of the main reasons people don't want a lot more construction is it causes traffic and parking problems. Now, why not solve that the cheap way? It's like, “No, the cheap way is terrible!” And also there's even sort of the equivalent of supply scepticism for tolls where people just say, “It wouldn't change anything.” And it's just like really? Charging $20 to go and drive during rush hour will not lead anybody to stop driving? That's pretty amazing. 

Often, not just critics, but the same person will vacillate between “it wouldn't change anything” and “no one would drive if you charge $20”, and it's like: I think it's actually in the middle. Some people would drive, but less depending upon what price you set. 

But things like, “If you allow more skyscrapers, it'll block people's views and cast shadows.” What are you even going to say to that? It's true, of course. But that is a fairly minor complaint compared to the incredible value of getting to build the skyscraper. How much weight are we going to put on people complaining about it? 

This is one where you might say it's all self-interest. But I think if you give this story to people that don't even live in the city, they will still generally side with the complainers. You might say, if you don't live there, why not side with the new tenants? Or why not side with landlords? 

But I think philosophically there is the strong tendency just to side with complainers. They're there. Things should not change. The fact that there's billions of dollars of gains and their complaints are fairly petty should not count. In fact, it might even be your philosophical principle: this is not about money. 

So in town meetings, a common reason to go and block a major construction project is it would disrupt some migratory birds. And it's like, well, how much are those birds’ migration patterns worth? Put a price tag on it. And it's like, “Oh, no, I'm not going to let you go and make me put a price tag on these noble birds. They have been flying this way for years, and the fact that someone can make a billion dollars is immaterial.” It's like, well, what would our whole society be like if the fact that you could get a billion dollars out of bothering birds was immaterial. Definitely Kentucky fried chicken has to go.

WALKER: So I buy your characterisation of NIMBY motivations at the local level. I agree. I think the “homevoter hypothesis” is kind of debunked now. It's not really about money or equity values. It's more about these more amenity-related concerns and status quo bias. But I feel like at the national level, or even the state level, it just seems implausible to me that if a federal politician or a state politician was proposing some policy whose clear stated objective was to reduce house prices, that would be greeted with warm applause by homeowners.

CAPLAN: So here's the thing: most of the major YIMBY moves have been done at the state level, to go and force localities to go and deregulate. So there have been state-level policies adopted in California, Oregon, Minnesota (probably one or two others), where essentially they just start putting a lot of pressure on local governments to deregulate. 

Now the usual economist story is that the state governments realise that there's some kind of prisoner's dilemma where almost every locality wants to go and have high regulation and yet people don't want to have regulation in general because they recognise the costs. That's a convenient story. I don't think that's what's really going on.

I think it's more along the lines of the elites in these states have realised the truth and then they're trying to figure out “How can I go and push things in a better direction without getting too much blowback?” And that's what they're doing. So it's like, “I'm going to go and push them to go and deregulate. I'm not going to go and actually order them. I'm not going to pass a law just invalidating the zoning rules.” Even there, some of these states, they have gone and officially said we're getting rid of single family zoning. So I guess that is invalidating a particular zoning rule – although normally with a bunch of exceptions and carve-outs so that it doesn't upset people so much.

But I'd say that either they are just doing what they think is the right thing, or maybe they have figured out the right policy and they're thinking, “Look, this policy by itself is not going to be really popular and people are going to be resentful of us, but they will like it when housing prices go down. And I'm hoping that their appreciation of lower prices will exceed their dissatisfaction with the policies.” 

Usually when you survey people, they do like the idea of making housing prices more affordable, but they want it to be from public housing or something like that. And the fact that public housing supplies less than 1% of all housing in America and almost everybody doesn't personally want to live there: when you put that together, it's like, isn't the more realistic thing just to deregulate the sector that works rather than to go and double down on this very small and disappointing sector? But people normally choose their policies based upon what sounds good, and government building housing for the poor sounds a lot better than letting the private sector go and build a lot more stuff which then indirectly leads to lower prices for older units.

WALKER: Right. Yeah, I want to come back to that because I have some questions on the politics of YIMBYism.

CAPLAN: Oh, yeah so on the federal level, that's one where very little has been tried. I did actually talk to at least one guy in early 2017 who was working for Trump, who said that Trump was open to this stuff, and then nothing came of it. It's one where, since the regulation is so strict in blue states, you could almost market it as another case of, “We're going to go and exasperate or aggravate blue states by going and overturning a bunch of local regulations that are, in fact, popular in those states.” So if it were sold in that way of “we're going to go and screw over blue states by ‘helping them’, something that's actually good for them.” You can see that getting some sadistic pleasure out of Trump supporters in other states.

This is one where I have this old essay called ‘Politics is Cruelty’. If you go and look at a face that gets labelled as cruel, anatomically this just combines the muscular movements for joy and anger. Cruelty is joy plus anger. And I say, yeah, what is politics? Politics in general is joy plus anger; the joy of victory and getting your way, with the anger against your enemies. And the combination is, “Yes, we've crushed our enemies. Ha ha ha. We're happy because they're mad.” And it’s like, gee, this is such a standard international feature. Is there anyone who comes to power purely on promising ponies and rainbows? No, there always has to be a villain. There has to be someone that you are going to be harming, someone that you blame for everything wrong. And yet they will suffer. They will rue the day that they went and crossed the American people.

[1:32:46] WALKER: Now that you've raised politics, I'll ask my political questions. So Operation Warp Speed was successfully run by the Trump administration. Trump boasts about “his vaccine”. But then somehow vaccines become left-coded, and so it becomes a Republican thing to not take a vaccine. Right now, housing abundance and YIMBYism seems more or less bipartisan, if you ignore the far left and the far right. How likely is it that YIMBY becomes either left-coded or right-coded? And which of those options is more likely?

CAPLAN: Yeah, good question. So I say right now, the two actual centres of YIMBY: there's largely left wing activists in major blue cities, and then there are just red states that are YIMBY by default where they haven't really turned it into a philosophy – it's just always been that way, and they don't have the same kind of resentment against construction. 

WALKER: Like a Texas.

CAPLAN: Yeah, like a Texas. So, basically, the places that actually have low regulation are clearly red states. The places that have an activist movement who want to have less regulation are basically blue cities and generally blue cities and blue states. 

In terms of what this means for the future, in the book I just express my dream, my hope, that it could be bipartisan. But, yeah, I think you are right that if something becomes popular, it will tend to go to one side. 

I would say that, strangely, the most likely outcome is that because the actual vocal activists tend to be left wing, that is enough to go and give it a left wing coding, because they're the ones that'll be on TV talking about it. Again, of course, if I go and influence a generation, then it could be different. But I'm just one person here. I think that I've got the absolutely most entertaining book on housing regulation that anyone has written. Let's stick my neck out and say that, because I think it's the only graphic novel about it. I think that by itself makes it more fun.

But, yes, having the most articulate spokespeople for a view be left wing gradually over time makes people think of it as a left wing thing. So I think that that is the more likely scenario. Especially because in low regulation red states, there's very little activist move of, “We want to become more like ourselves. We want to go and make sure that not only do we stay low regulation, we want to double down.” It's more like a default policy. So that's why I don't think that it's too likely to become right coded. 

But again, it's still in this inchoate phase, so maybe… 

The low regulation is in the red states, but the falling regulation is in the blue states. You get more media attention for the change than for the level, which is another reason I think that it will be thought of as one of those weird things they're doing in left wing states. Even though the truth is that most NIMBYs are also left wing. And these places – definitely towns with the very strictest regulation – are generally very left wing towns and places, places like California.

WALKER: Yeah, yeah. So at the moment, Ezra Klein and Derek Thompson are writing a book on supply-side progressivism. And I don't know, but presumably there'll be a chapter on housing, it’ll be one of the main chapters. What would your advice to them be? Tread carefully? Maybe just make it a section rather than a whole chapter?

CAPLAN: No, I mean, honestly, I almost always tell people to max out. I just figure that the people on your side read you to such a greater extent that you should never worry about improving your own side. Always try to make your side as good as it can be, and especially combine it with saying there's something we can learn from the other side. That last add-on does tend to make it hard to really persuade your side. But that's why it's great that someone as high status as Ezra Klein is going to be the voice, because it's like, “Well, do we go and kick him out of the movement or do we listen to him?” It's like, “Alright, which one: kick him out or listen to him?”It is true, especially one of the uglier features of the modern left is this very sanctimonious “you have to agree with every single part or else.” 

I don't see YIMBY as being part of wokeness. I see it as something that is in the same general area, but when someone is a YIMBY it's more inspired by effective altruism and evidence-based thinking. Although there are some YIMBYs where really it just comes down to “Regulation causes racial segregation, that's the worst possible thing. If we deregulate, then everything will be diverse.” Which I'd say is definitely one of the weaker arguments. But if that persuades you, I'll take what I can get.

[1:37:29] WALKER: So just a couple of final questions on regulation. What would a Robert Moses figure do today if faced like the regulatory environment in the tri-state area? Would he be completely screwed and he has to kind of live a diminished life? Or do you think you can still find some creative loopholes?

CAPLAN: So there's always creative loopholes. You can always find stuff. So there's the old saying: if you want it, you will find a way, otherwise you'll find an excuse. 

I think it would be a lot harder for him to go and do as much, because a big part of what's happened to modern regulation is not just the rules are stricter, but there's just more different approvals you have to get in order to move forward. 

The question is, would he be at the level where he could actually go to the state government of New York City and say, “I want you to go in and validate a bunch of local stuff”? 

The way the US system works is kind of strange, where state governments do have enforceable rights against the federal government, but local governments have no enforceable rights against state governments.

So that does mean that if your Robert Moses figure could go and get in good with the governor and the state legislature, then there's almost no limit to what he could get away with. And he could just say, “Look, you say I can't do this. Well, I've got this new law signed by the governor, passed by the legislature, saying that you guys no longer have any say, and we break ground today.” So that, in principle, is possible. Hard to imagine something that good happening, but some toned down version of that where you get the state government on your side to overcome local resistance would be the kind of thing that I would have in mind.

[1:39:07] WALKER: Do you know whether anyone in America is running a test case or a case to try and overturn the Supreme Court's Euclid decision? I was thinking it seems like a big opportunity for a YIMBY-sympathetic philanthropist, kind of in the manner of the Peter Thiel-funded Gawker case.

CAPLAN: I have not heard of any such case. Essentially, before Euclid it seemed like zoning regulation of most kinds would just be considered a government taking without compensation. So to go and say you can't build an apartment on your land, the government actually have to give you all the money that you would have made or all the extra money that you would have made building the apartments compared to doing whatever else they allow you to do. And this Euclid decision actually specifically said, “No, no. An apartment is like a nuisance. An apartment is like blowing horrible smoke on your neighbours.” We've had many centuries where you could sue your neighbour for creating a giant fire that made so much smoke that you were coughing on your property. But for most of this period, it had to be like that if you wanted to go and take them to court. 

The Supreme Court case basically said that local governments can go and have all kinds of rules, and basically almost anything could be a nuisance. It could be a nuisance to go and have a candy store, because the kids will go and complain about not getting candy. Or it could be a nuisance to go and build apartments. It could be a nuisance to go and build a skyscraper. It could be a nuisance just to go and put four homes on one acre – that could be a nuisance. 

For the Supreme Court to literally overturn it in the same way that they overturned Roe v Wade, I would be so stunned. I would just sit around for days saying, wow. And then once I overcame my shock, I'd be like, they're not going to get away with it because when the Supreme Court says something that is really out of line with what the rest of the country wants to do, then it doesn't happen. 

There's this famous line when the US Supreme Court actually upheld a treaty with some American Indians saying it was their land, and then Andrew Jackson, the president, famously said, “The Supreme Court has made its ruling, now let them enforce it. How many, how many divisions has the Supreme Court got?” And then he just ignored the Supreme Court and went and did ethnic cleansing anyway. So that's what happened then. 

In the case of the 1930s, there were a bunch of regulations that were popular that Roosevelt wanted to impose. The Supreme Court at first said they were unconstitutional, and then he said, alright, well let's just do court packing. That failed. But then what happened is, I think one Supreme Court justice either died or retired. He was able to go and flip what was a 5-4 decision against him to a 5-4 decision in favour, and then everything was fine after that. 

Now you might think, don't you need a constitutional amendment in order to fundamentally change the US constitution? No. The actual fundamental principle of US constitutional law is five votes. And if you’ve got five votes, then the constitution means whatever they say they want it to mean.

However, if there were actually a Supreme Court decision that were just overturning all zoning, I just think that local governments and state governments would be so resistant, they would just keep doing it and you just have to keep suing, and they would keep acting like every little case was a little bit different. And you can get away with this where you just drag it out every five or ten years. You get back to the Supreme Court. And say, “No, we changed it a little bit. This is legal.” And the Supreme Court says, “No, it's not. We were very clear.”

This is what people expect is going to happen with affirmative action in US colleges: they will claim they're abiding by the ruling, but the actual change might be quite small, and then you have to re-sue them and it takes another ten years. And if they really don't want to, they could just spend the legal fees and drag their feet and really resist. 

It doesn't mean that it wouldn't be great to have the ruling and then just throw all this stuff into doubt and at least then someone could flip it around and say, “Well, I'm building it. Supreme Court says I can, and if you don't like it, you have to sue me.”

There is this infamous case in India that Alex has blogged on where there's a developer that cannot get permission to build a property, so they just keep building it and then they just drag it out in court for as long as they can. They know they're going to lose in the end. And then after five years they're ordered to tear their building down, and they follow the law. And then the day that it’s torn down, they just start rebuilding it, and the lawsuit begins again. And they make so much rent off of the five years the building is intact that it pays for all the construction costs.

[1:43:31] WALKER: That is classic. That's also a very Indian story as well. So, final question. Taking the long view, what is your modal case for the future of cities? Do you see human history moving inevitably towards a planet where we just densify all of the available landmass? Kind of like a Coruscant in Star Wars?

CAPLAN: Yeah, interesting question. Very long run? Very long run, probably, yes, because despite low fertility rates, life finds a way. Jurassic park was correct. And we cannot have low fertility forever. We know that there is strong genetically-based variation in completed fertility. Some of it's just some people are more fertile, others it's just some people have a stronger preference for having kids. In combination this means that right now we are seeing a great die off of the genes of people that do not like children. And while in the short run this is very likely to go and lead to absolute population fall, eventually if you have a world where everybody who doesn't like kids has zero kids, and the only people having kids are people who like kids, there will be a transformation of human psychology.

And again, probably over the course of a few centuries, which in evolutionary time is not very much, we're just going to get rid of all or almost all of the anti-natal attitudes in the population, In the same way that right now almost everybody likes sugar, in a few hundred years almost everyone will like kids. And the complaints that make sense to people now, like “just a bunch of crying, changing diapers” – I love hearing that. There's variation, and as long as there's variation and there's sexual selection, put that together and there's going to be a change in the population, and the way that we think about things and feel about things, the emotions are going to change.

So my view is that it's often hard to see evolution at work over the course of one generation. Over the course of the ten generations, it's just unmistakable. 

So in the future, we are going to have to be very pro-natal. And once people are very pro-natal, then there's no reason for us to do anything other than just have very high population growth for a long time. And once we can do that, well, where are we going to put all the people? Yeah, in the very long run – so maybe in a thousand years – then the coruscant prediction is quite reasonable, all the way down to settling Antarctica and things like that. 

Based on my understanding of cost, I think that the bottom of the ocean is better than the Moon. So the bottom of the ocean has got problems, but the Moon is way worse on so many levels. I think that that bottleneck of getting to another planet that is comfortably inhabitable at a reasonable cost, that's a really big bottleneck, actually. I wouldn't be shocked if that took tens of thousands of years, actually. 

And that we do finally at least get close to a maximum human population using all available technology. We're using, like, a crazy amount from modern standards of the existing Earth. Things that are also probably a lot more doable than the moon are things like going and draining large oceans to get more land, that kind of thing.

So I think that is our long run future of looking like Coruscant, maybe even more – maybe even denser than Coruscant – and then having these amazing technologies of the future that will sustain us again. 

That bottleneck of getting to other habitable planets seems so big to me. We have these unfortunate facts of, like, you can't go faster than the speed of light, and the amount of energy to get anywhere near the speed of light is also crazy large. You’ve got to accelerate for half the way and decelerate for the other half, and then you show up there, and something could be wrong with the planet. It's like, well, from light years away, it seemed like it would be ideal for human habitation, but unfortunately, there's one previously unknown poison in this planet, and it ruins the entire planet. Oh, now what? Yeah, self-destruct? We were counting on getting in from this planet here, but it turns out we will melt if we land. Oh, no.

WALKER: It makes housing deregulation seem easy.

CAPLAN: It does. So you probably know about the Fermi paradox. If there's alien life elsewhere in the universe, where is it? My preferred choke point is: it's so crazy expensive to get to another habitable planet. So I think there's probably tons of intelligent life right here in our galaxy, but numbers that are successfully going and colonising other worlds at a rate that is visible, I think that's probably super low. The number of alien civilizations that have two planets in this galaxy, maybe that's zero. The other ones, there's got to be a bunch of alien civilizations. But multiplanetary alien civilizations – that's my preferred bottleneck. I'm almost the only person who believes this, because I talk to a bunch of people, and they go, “That's crazy, Bryan.” And it's like, is it really, though? It seems really hard, doesn't it? And the cost. It's not just whether it's physically doable, but whether it is cost-effective to do it, right?

WALKER: Right. Well, at least we can still have trillions of people here on Earth.

CAPLAN: Yeah, there's plenty of room.

WALKER: Yeah. Bryan, this has been so much fun. I really enjoyed it. Thank you.

CAPLAN: Thank you very much. Appreciate it. It's a real deep dive.

WALKER: Yeah, it was. Thanks so much, Bryan.

CAPLAN: Thanks very much.