A Millennial’s New Perspective on Home Ownership

The last few years I’ve loudly protested that home ownership is overrated; it’s a bad investment plus lots of responsibility. And yet, this summer my fiance and I bought a 100 year old house on the south shore of Long Island.

Yes, I have lost my mind.

I basically stand by my earlier position, but with greater nuance. Owning a home is a complicated undertaking. But it’s given me a greater appreciation for the nuance involved in managing real estate.

Home ownership is a great big Gordian knot of inter-dependencies. It’s massive set of knowledge problems wrapped in externality problems.There’s a massive role for local knowledge which means policy makers’ attention should be less focused on things like home ownership rates, and more on guiding the right people into the right places to take advantage of that local knowledge.

With local knowledge comes local politics. I don’t know anything about local politics, but expect more posts about what’s going on in my town hall over the next few decades.

So what have I learned in this first month of home ownership?

  • There’s something to be said about pride in ownership

It’s still a real trip to turn on my lights in my kitchen so I can do my laundry in my laundry machines. I didn’t think I’d enjoy it this much. The endowment effect is real. One effect has been to increase my interest in contributing to local public goods via civic engagement and other routes.

I haven’t been to a town hall meeting yet, but I plan on going to one tomorrow. I suspect it will be awful. But I’m walking distance, so I’ll be a little bit drunk.

  • The real estate market has some serious frictions

This might be obvious, but it’s interesting. There are artificial and natural obstacles to the efficient use of real estate. Transaction costs are significant and property rights issues are hairy.

Buying a house is a complicated transaction and going through the process has really made clear to me how difficult it is to commodify land. Each piece of land has a unique location and history. Information asymmetries are substantial. The neighborhood you’re buying into is utterly out of your control. Put simply: Amazon won’t be selling real estate any time soon.

Part of the reason I’m happy with buying a house is that our rent had been increasing about $100/month/year. Land lords absolutely take advantage of real estate frictions to charge as much as they can. The alternative (which I chose) is to lock-in to a specific property.

  • The required knowledge to operate a home is significant and difficult to evaluate.

It takes a lot of knowledge to manage a house. If I were to take a wild guess (at this non-quantifiable variable), I’d say that between 5% and 50% of a homeowner’s brain is necessary to operate a house. Even if you bring in experts to do everything, evaluating those experts is a lot of work.

There are repairs and upgrades to make, and my formal education prepared me for exactly none of those projects. On the other hand, I’ve got the Internet. Without YouTube and Reddit I’d be a half dozen unlucky mistakes away from homelessness.

On the other other hand, I’ve learned a ton of stuff I’ve got no use for. Like how to grow asparagus (which it turns out it isn’t worth doing except out of boredom).

You can’t evaluate knowledge until it’s too late. And there’s more to learn than you ever will, so you have to make mistakes. It’s true of home ownership and it’s true of life more generally.

  • Gardening is a real trip.

In History of Economic Thought professor Gonzalez shared a story about two economists meeting in Switzerland during WWII. On showing his vegetable garden to the visiting economist, the visitor said “that’s not a very efficient way to grow food,” to which the gardener said, “yes, but it’s a very efficient way to grow utility.”

I’ve wanted to garden for some time, but the market for gardens is thin. So now I’m starting with almost no useful experience. My public stance has been that lawns are boring and dumb. But figuring out how to manage a little ecosystem ain’t easy. I now get why someone would just put in a lawn and be done with it.

At my old apartment complex the entire ecosystem was made of: humans, trees, lawns, cockroaches. I suspect the cockroaches did so well because all their competition was poisoned away. As an emergent order guy, I’m not really into that. But I get it now. In the same way the king wants everyone living in neat little taxable rows my life would be easier if I could just slash and burn all the complexity out of my yard.

Tl;dr: My biggest surprise as a new home owner is just how big a cognitive load owning a house is. You hear homeowners talk about how much work it can be, but I think it’s rare to hear someone talk about how much know-how is required.

Given the capacity to generate externalities, I’m a bit surprised that there isn’t more public policy devoted to issues of home ownership* (beyond subsidizing finance and increasing barriers to entry). I supposed I’ll learn a lot more about these issues as I learn about local politics.

*That isn’t to say I think it’s a good idea to get the government involved in trying to tell people how to go about the business of daily life. I think homeowners are (basically) doing fine left to their own devices.

Words on the Move

I just listened to a recent(ish) episode of Econ Talk: John McWhorter on the Evolution of Language and Words on the Move.

I particularly enjoyed this episode because:

  1. Emergent order (duh!).
  2. It shed new light (for me) on a category of words that serve a function but don’t really mean anything. “Well” doesn’t really mean anything. Well, sometimes it means a hole filled with water, but in this sentence I’m using it as a “pragmatic.” Other pragmatics like eh, and huh feel like filler, but they’re really a part of oral communication where the speaker can casually and non-disruptively check in with the listener. Pretty cool, huh?
  3. And the discussion of accents was interesting in light of an experience I had just the other day. I’ll get to that at the bottom, but let me set the stage…

I’ve been particularly aware of my own accent since a young age because kids have always been quick to point out how different I’ve always sounded. At around age 7 I moved from the prairies to southern Ontario and I remember some kid asking me if I was British. They might have been picking up on regional variation in the Canadian accent, or it might be that my accent was affected by the movies and TV shows I had watched to that point (I suspect watching Monty Python at a young age deeply affected me).

Later (aged 17) I moved from Canada to Texas where I worked very hard to ditch my Canadian accent and gain some Southern drawl. When I moved to California I kept trying to lose the Canadian parts of my accent but gave up on trying to gain the drawl. When I moved to Boston I picked up some affectations that now makes me stand out on Long Island. I drink kahfee instead of quofee, but since I never did like the mwahll, my pronunciation of “mall” is probably the slightly-off version I would have picked up in my youth.

The other day I was talking to a student and noticed something especially bizarre–as our conversation moved from seafood (note to self: soak calamari in buttermilk for 3 days) to boar hunting I found myself involuntarily moving back into my Texas voice! (You’ve probably already guessed that this was an econometrics student.) I have zero experience with hunting, but I had to suppress this reflexive change in my accent. Somehow, all the automatic processes in my brain have lined up in such a way that made it clear that not only do I have a lot of tacit knowledge, but I even have unseen triggers for how I communicate.

A metaphor for the Socialist Calculation Debate

This week’s episode of EconTalk was fantastic, and in particular drew an important parallel between the complexity of the human brain and the complexity of market economies. The guest was discussing radical nanotechnology (basically the idea that engineers could out do bacteria by applying good design principles in place of random mutation and natural selection), and Russ pointed out that the logic is basically the same as in Socialism. Radical nanotechnology runs into a fundamental problem as long as it ignores the emergent processes occurring at the molecular/cellular level.

Later, the guest discusses the issue of artificial intelligence and points out that the fundamental unit of biological computing is not the neuron (which we simulate on computers using neural networks), but the molecule. In other words, natural intelligence is the outcome of a complex process that isn’t simple enough for us to easily replicate on a computer.

All that in mind, the idea of socialism* is like the idea that we could replace a brain with a pocket calculator. Yes, the idea is to get a very powerful calculator, but the problem is that it’s replacing a computer that’s far more complex and sophisticated.


* i.e. Centralized control of the means of production… socialism has nothing to do with sharing (you’re thinking “Egalitarianism”) and everything to do with control, and particularly the attempt to rationalize complex systems.