AI has broken the job market

I don't mean bad for job seekers. I mean functioning badly as a market--a mechanism of matching buyers and sellers, mediated via prices. 

A combination of AI and Workday makes applying for jobs badly very easy, which generates a lot of marginal applicants that still require review by HR. But the sheer number of candidates overwhelm HR folks, who fall back on easy-but-bad heuristics to filter out people they don't expect to be suitable. Degree completion (testing grit and intelligence) is a reasonable heuristic for junior staff. But it is an increasingly bad one for more senior roles, where experience is far more important. But Workday doesn't provide an easy tool to filter for "20 years of experience in X". In my field, professional organization credentials/certifications play that role - EIT/PE and AICP/FAICP are reliable indicators of seniority and capability, and (crucially) allows folks in HR to filter using a single uniform term.

By many metrics, modern job markets do much better on an aggregation basis--bringing together a lot of buyers and sellers in one place. Which is overwhelming. Given too much to choose from, analysis paralysis and decision fatigue are taking over. Further, HR folks are (like teachers) suffering from AI, which has undermined their traditional evaluation mechanisms. In the past, word processors and spell check eliminated the ability to use typing ability and/or spelling as a filtering heuristic. AI has destroyed the utility of the traditional cover letter and resume--a decent quality version of either can be produced with almost no effort by the applicant. 

Further, a bigger market makes 'product comparison' (who is actually good at what / who is good to work for) much more difficult [1]. And when information asymmetry prevails, a 'market for lemons' emerges: any hire might be a lemon, nobody wants to overpay, so salary offers are lowballs, so none of the 'peaches' are willing to switch jobs, reinforcing the dynamic [2]. And so the job market locks up, which is terrible for both buyers and sellers. 

Price comparison for labor is always difficult - people are non-fungible, and the smaller the organization, the less standard the role they perform, and the more the functions they undertake resemble the job description [3]. So there is a huge push to commoditize labor competencies using things like certificates and boot camps. It is, at best, a partial solution--degradation of any credential is inevitable. For-profit diploma mills emerged in response to the value of a college degree as a credential [4]. And any bootcamps [5] that relies on customers through-put has every incentive to maximize volume [6] and customer satisfaction, regardless of how that undermines the credentials of past bootcamps. In turn, the need for HR folks to evaluate the quality of bootcamps and mini-credentials is itself exhausting. 

The long-term solution for ghost-written resumes/cover letters has long been interviews, which can't be conducted at scale. So to proxy that, more and more applications have required mini-essays, but which are subject to the same 'grading problems' as resumes and cover letters - AI generates a volume of text that outstrips human capacity to evaluate, and so HR departments increasingly outsource cognitive labor at to AI [7]. AI is both fallible and a black box [8] so unknown errors abound. Further, evaluative AI capacity is poor - AI is trained, not educated. It is reliant on its training [10] and does not get better over time [11], regardless of how many resumes it reviews. So the AI HR has available to it is hardly better than keyword searches, with all the associated flaws. 

There is also the issue of deception. A certain amount of exaggeration is expected on a resume, but in addition to the market for lemons, it can generate a Red Queen's Race--people lie more and more simply to be considered. Anecdotally, in New York, the norm for bar-service is to claim an order of magnitude great experience - months for weeks, weeks for days. And in the context of things like Workfront, clearing (arbitrary) thresholds for applications to be considered by a human, deceiving the AI filter becomes a necessity. 

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[1] Remote work magnifies this. There may be 5-10 employers (half of which are marginal) within a reasonable commute of home. But remote work requires evaluating employers all over the world. (Which has engendered entirely new varieties of employment scams). Evaluation is difficult, and expensive in time and cognitive capacity. 

[2] The first thing medieval guilds (and trade fairs) do is mandate standard quality. Not because they like quality (they'd sell a lemon if they could get away from it) but because suspicion of low-quality drives down prices for everyone.

[3] Efforts to replace truck drivers with AV have foundered thus - much of what truck drivers do is not driving trucks but rather acting as a 'resolution agent' for immediate logistical problems (breakdowns, missing cargo, etc). 

[4] Elite institutions (i.e. Yale) resist degradation by being exclusive, following a quality-not-quantity approach to education. Even if they admit a moron, that moron will become an educated moron. 

[5] Awkwardly, the push to raise college graduation rates did not help: Trying to provide 'good value for money' for the public by reducing the drop-out rate seems attractive, but faced with a need to increase a statistic, the easiest way to achieve it is to lower standards.   "When a measure becomes a target, it ceases to be a good measure".  (Goodharts law). Reduction in graduation rates are merely a lagging indicator of a failure during the admissions process - people unlikely to be successful were admitted for not good reasons: a reasoning error conflating a mediating variable (college education) between grit/IQ and success as a causal variable, a cognitive error recognized by politely ignored because it enabled Type A academic Deans to build empires. 

[6] Likewise, the MBA approach of reducing costs by reducing quality until volumes suffer doesn't work. In a market, the presence of competitors denies unlimited degradation. For a monopsonic public provider of higher education, there is no limit to the degradation of value (as nutrition, art history and English majors can attest). 

[7] In the future, most work consists of evaluating the quality of AI outputs and "prompt engineering". This will drive both an explosion in the demand for such services, but also dramatic increase in the cost of non-AI services (Baumol's cost disease). A hairdresser who can evaluate AI outputs chooses alternative, more lucrative employment, and the price for the remaining hairdressers rises to reflect the reduced competition. 

[8] Asked to explain its reasoning, an AI makes up a post-hoc explanation that fits the facts and deludes itself into thinking that was always what it thought. A distinction that can only be ascertained by lawyerly questioning or the parent of a precocious child. But, like the child, AI is getting better at an uncertain rate, with both greater cognitive capacity, but also greater meta-textual awareness - AI is getting better at assessing the qualities of its lies and the person asking the question, and so is getting better at being more deceptive. Arguably, this recapitulates the development of human cognition, where humans then developed a counter-strategy: to punish deception with viciousness disproportionate to its immediate harmfulness. 

[9] AI isn't educated, but trained, and is reliant on its training to make inferences. The quality of that training data is degrading exponentially, as an ever-larger volume of web-scrapable material consists of AI produced content, and ever more of the good stuff is secured behind paywalls and access denied by robots.txt. (Evidence that AI is semi-legally harvesting user documents has been a long-term suspicion and the recent Navier-Stokes scandal practically validates the suspicion).  

[10] It is not by accident that Google is now buying books by the load and scanning them all - it's a source of training data web-scraping can't match. Even the most dated Windows 3.1 guide represents substantially better training data than web-scraped AI generated content, because it was written, edited, reviewed and published in a context where publication (printing, warehousing, distribution, sales) represented a substantial and risky investment.

[11] In the not-too-distant future, AI training data will include everything ever written before AI, and there will emerge and industry of people whose role is to provide AI with training data by reviewing the quality of its responses and suggesting improvements, based on expert judgment. AI owners are already trying to crowdsource this specific form of labor, which will in turn fall victim to the market-for-lemons problem in which they only people who respond are cranks or malicious. 

Household type and transportation housing cost equilibrium

When apartments are in short supply, landlords outbid families for single family detached homes with yards, even while the premium offered for the yard is less. Three incomes beat two, even with substantial income differences. A family can only afford to outbid a roommate household where their transportation costs are lower: two cars beat three, even with substantial transportation differences. So new family housing gets produced where transportation costs are proportionally higher--at peripheral locations. Happily, this is also where regulation is least and hence supply most elastic. 

But for households that want/need lower transportation costs (and are willing/able to pay a premium for it), supply is much less elastic, as the land is already built up and adding new housing is more difficult. So to maintain affordability, households are forced to compromise on quality, accepting older and ore depreciated units. 

Depreciated housing is only acceptable on a temporary basis--as your income rises, you either have to be able to move up or fix up. And a fix-up is only worth doing if you can capture the value of that investment by enjoying it long-term. Hence, family households are forced into home ownership as a means to obtain decent housing in a decent location. 

What makes a market

 In the most basic village-produce-market sense, a market should enable:

1. Buyer and sellers to congregate 
2. Product comparison
3. Competitive Pricing

Lacking any of those, and you don't have a market. 

There have to be multiple buyers and sellers. Monopoly/monopsony are classic market failures--a single seller can rise prices and lower quality without limit, while a single buyer can lower wages and prices without limit. Congregation has to take place in both place and time. One buyer per day is just a series of monopolists. Likewise, an entire convention center full of stores of unlike products is not a market--it's just collection of monopolists [1]. And prices have to be competitive--a group who has come together to set prices is called a cartel [2]. In the early medieval ages [3], there is an immediate return of 'market days' (for perishable commodities like foodstuff) and 'trade fairs' (for industrial commodities like wool) [4]. 

[1] Retail centers are deliberately set up this way, so that there are never two of the same type of store/restaurant/service, lest competition between the two drive down prices. 

[2] Unless it's a cartel to set the price of labor, in which case we call it a union. <grin>. But almost all unions emerge in a response to a monopsony on the purchase of labor--people won't suffer the costs (union dues, lost income) easily. 

[3] As soon as it becomes reasonable safe to travel and commerce returns. Crime (Banditry and piracy) drops to a reasonable level. 

[4] Places without which are reliant on peddlers, door-to-door salesmen who are crazily inefficient, but able to function because they can extract high prices by being a mobile monopoly. They are also afflicted by 'buyers' and 'agents' why are mobile monopsonists. 

An imagined conversation about livestreaming the TRB conference (and reviewing for it)

TRB Attendees: "We want to be able to attend remotely, watching presentations and attending meetings.

TRB: "We want people to come and attend the conference in person".

TRB Non-Attendees: "The cost of attendance (transportation, hotel, opportunity cost of time) doesn't justify coming in person; remote meetings and webinars are a norm, and there is no reason you can't do them. Some dude with a laptop livestreamed what he attended, so it's technically feasible". 

TRB: "We will no longer permit livestreaming, so there is more reason to come in person!"

TRB Non-Attendees: "Why are you doing this?"

TRB: "We signed a lease at the conference center, so we are locked in for the next ten years, and we need enough people to come to pay for it!". 

TRB Non-Attendees & TRB Attendees: :|

TRB: "Also, the conference center Wi-Fi is too weak..."

TRB Non-Attendees: That seems like a conference-center problem. Are they having trouble supplying running water too? Can you not afford a cellular connection for four hours a day for five days? 

TRB: "Also, the point of the conference is networking -- TRB is funded by gas-tax research funding, so we have to demonstrate value to DOT staff (who attend for free)". 

TRB Attendees: "So we pay $800 in case DOT staff might want to talk to us?"

TRB: "And see cutting edge research presented in poster and panel sessions. And if an academic, present your own research. And if a DOT, present your own innovations. Oh, and sell things to the attendees, and sell things to people selling things to the other attendees.  TRB relies a lot on conference sponsor funding, and sponsorship amounts are proportional to the size of our in-person audience--there is a reluctance to pay the same amount for sponsorship when there are only half as many attendees". 

TRB Non-Attendees: "How about a half-price ticket, since we're not receiving a lot of the benefits of attendance?"

TRB: "Calibrating how much that ticket should cost, given its propensity to cannibalize our other revenue (tickets, sponsorships, political influence) just doesn't seem worth the risk". 

TRB Non-Attendees: "Well, that means I'm not attending".

TRB: "That is a risk we can take -- we can quantify dollars needed in a way we can't quantify people who didn't attend. Attendance is already down post-COVID, so we can't risk it shrinking more".

TRB Non-Attendees: "The value of the alternatives (webinars) got better, so that's not unexpected".

TRB: "TRB committees, stop sponsoring webinars--we can't have people getting TRB benefits if they aren't coming to TRB". 

TRB Committees: "But wait, I thought we were supposed to popularize and distribute research?"

TRB: "Yes, but not like that". 

TRB Non-Attendees & TRB Attendees: :|

...

TRB: "We are having troubling finding sufficient reviewers for our papers!"

TRB Non-Attendees & TRB Attendees: :|

TRB Reviewers: "Seems like a bit of a waste, to do this review for something that's only going to be presented at a conference a few people can pay to attend, or a journal only a few people can pay to access. Why am I donating time to this again?"

TRB: "We are having trouble articulating a value proposition as well and are relying on academic norms of unpaid labor for peer review. That norm is collapsing and with it the number of peer reviewers and hence the quality of peer review- papers are only getting single reviewers". 

TRB Reviewers: "Have you heard of a 'desk reject'? All the main academic journals do it; TRB's commitment to review everything is actually quite strange". 

TRB: "Again, funded by gas tax money for research--TRB is an applied research organization. The thing your average DOT official submits aren't anything close to academic quality, but they don't need to be, because our intended end-users are DOT staff. They can be highly contextual and very niche. 

TRB Reviewers: "Sounds like your model has been highjacked by academics using it to provide guaranteed and timely feedback on academic articles that aren't useful to your end-users". 

TRB: "Yes, but it's so valuable for supporting early career researchers!"

TRB Reviewers: "Didn't you say your end user was a DOT staff member?"

TRB: "Everyone who gets accepted to present (panel or poster) has to register for TRB (albeit at reduced student price) and that does wonders for our bottom line and attendance numbers!"

/cynicism

Why we stopped building houses in 2008 in one chart

 

Housing location is a matter of trading off between rents and transportation costs (all else equal). When transportation costs fall, people are able to pay more in rent. Sometimes they allocate that surplus money to nicer digs, sometimes to more square footage. But when transportation prices rise, people need lower rents--temporary fluctuations can be managed by curtailing travel (which can't be sustained long-term). So, when the price of gas spiked in 2008, a lot of households couldn't afford their homes. So they stopped paying. Which tanked the value of the mortgage back securities (MBS), which froze the creation of new MBS, which overloaded loan agencies with mortgage they couldn't resell, which froze mortgage lending, which destroyed demand for mortgages, which wrecked demand for homes, even as supply continued to expand. As house construction is a process you can't stop midway, any more than you can stop making an egg, additional housing supply continued to come online. And so housing prices went into freefall for a bit, and we stopped producing more houses entirely. 

By which point, the context had changed. When housing production ceased, with it went the entire institutional apparatus that been making money on the process of converting raw land into homes. In much the same way that the Great Depression wiped out local banks, the Great Recession wiped out local homebuilders, mortgage originators, and financiers. The survivors were much more risk-averse and less speculative (something reinforced by additional lending regulations). And no one was willing to invest in new housing, while there was existing housing out there selling for beneath its production cost. It wasn't until that 'latent supply' cleared that it made sense to produce more housing, and there isn't an increase in the number of 'new starts' until 2012. And, as the chart shows, the gas prices that had made all the peripheral homes reasonable and affordable didn't return until almost 2014. So even if your transport costs had been acceptable in 2008, it wasn't until mid-2014 that the transport/housing cost equilibrium again made those homes attractive to buyers. And even when gas prices fell, there is also the awkward reality of expectations: Expectations about gas prices set between 2005 and 2015 were very different than 1985-2005. 

Further, the demographics of demand had shifted and the "Great Housing Reversal" had begun. An oversupply of single-family detached housing had been predicted for decades, but the oversupply was worse than expected, due to a quirk in Millennial demographics: Less marriage hence and less homeownership. Fewer married couples mean fewer kids, which means living in a rental apartment is more acceptable, for longer, even after marriage. It also meant the people living in apartments were older and hence had higher incomes and were willing/able to pay more in rent. And that has kicked off a generational bonanza in apartment building, aided and abetted by increasingly-political-engaged renters (YIMBY), overcoming the supply restrictions imposed by the homeowner cartels.

Robo-taxi fleet economics napkin math

 Assuming $1 of monthly income supports $100 of expenditure, and that a robo-taxi costs $150k, a taxi needs to make $1500 a month (above operating costs). Marginal operating costs (beyond depreciation) can be assumed to be $.10/mile. Assuming 25 miles per hour (averaged over high speeds and waiting time), that's $2.50 in hourly operating costs or about $900 in monthly operating costs. So capital and operation is about $2400/month for a robo-taxi, or about $6.50 per hour. 

Of course a robo-taxi can make more than $6.50 an hour. A single Lyft trip reliable runs over $20. Assuming three trips per hour, $60 income versus $6.50 costs makes robo-taxi fleets a very attractive proposition. 

The counterpoint is that such a robo-taxi costs far more than a bus fare. The counterpoint to which is that we subsidize buses, so why wouldn't we subsidize robo-taxies? (For the sake of simplicity assume one pool of subsidy, and all operations are contracted out). Begs the question of how much it costs to provide service by bus. Costs varies wildly by service type - basic bus service is cheap, commuter bus is less so, demand-response (paratransit) is wildly expensive.

"UTA’s official published cost per passenger (per boarding) from its 2006 performance audit was $5.11 for buses, $3.51 for light rail, $36.82 for paratransit, and $3.53 for vanpool".

Add 57% for inflation (2006 to 2026) so it's about $7.25 per passenger for a bus. That's more than the capital + operations cost for P2P AV ($6.50), so our hypothetical subsidy provider would be better off switch many riders to subsidized AV. 

How many (and which routes) is a more nuanced question. Bus route productivity (passengers per service hour) varies widely. Removing the least productive routes would substantially reduce the average subsidy cost per passenger. $7.25 per passenger is $22 for 3 passengers per hour, so it would be far better to switch a lot of passengers to P2P AV. 

An intuition of averages suggest that would be a lot of riders. But that intuition is wrong. $7.25 per passenger is an average, and that average hides a staggering a range in productivity. There is one route that costs $40/passenger and another that costs $3/passenger. But the $3/passenger route has a low subsidy/passenger because it's transporting a lot of people. It's costing $150/hour to operate, but transporting 99 passengers/hour, which would cost $215 to do by PTP AV. In an economist's chart, the two lines in the napkin math would cross at about 75 passengers per hour. 

Assuming 15 mph for a bus, that's about 5 passengers per mile. Not a high standard. 

But a lot of transit agencies own some very expensive capital equipment (buses) that they can't resell, as the feds helped pay for it, and if they sell the buses they have to return the subsidy. So at best, agencies will shift to AV by not buying new buses rather than selling excess buses. So we'll see a lot of new PTP AV's serving marginal routes, as older and older buses serve the high-capacity routes. (Not a great outcome).

All of this assumes that bus costs remain fixed, and that the bus service provider doesn't also shift to fixed guideway AV vehicles. The advantage isn't as extreme for fixed guideway AV as for P2P AV, because the ratio of drivers/passenger is much lower. If it halved labor costs, the break-even point between fixed guideway and P2P AV shifts in favor of fixed route. This may be expected, and transit agencies are simply being quiet about it so as to not spook their driver's unions. (It will be a slow shift--a new bus has an operational lifespan measured in decades). 

It also assumes that P2P AV can only manage one passenger per vehicle. But even assuming extremely generous carpool standards (averaging 1.3/trip) it would only raise that number by a third. Most people don't start and end in the same location, and pairing up in even a portions of two trips requires them to coincide in time and space in an unlikely way. 

Finally, anyone providing services has to size their fleet (and supporting infrastructure) for the peak hour, whether that's 10 buses or 60 PTP AV vehicles. They also have to maintain sufficient 'spare' capacity to maintain that fleet capacity while part of the fleet is out of service and being repaired, which means 10-50% more vehicles than are actually in use even at peak. Which would substantially degrade the productivity we've assumed for AV vehicles. Vehicles achieving 3 trips during the peak hour are never going to achieve that outside of it. A key part of the economics of ride-hailing is part-time drivers who only work and accrue vehicle costs during the peak hour. In a 'fleet' context, that advantage vanishes. The operator wants to keep vehicles operating as close to constantly as possible, but the other 23 hours of the day are only ever going to be (at most), 90% of the peak hour volumes. So the operator will need to buy 110 P2P AV vehicles, of which only 90 will be operating 23 hours a day (10 spare, 10 idle for lack of demand). On which basis, the $6.50/hour operating costs looks a lot more like $8 an hour, further eroding advantage. 

[1] "But that's so much money!"---"Let me tell you about how much roads cost". 

[2]  In reality, assume the average fare is $2.00, so the subsidy is $5.50/passenger. 

Revanchist Planning

 Always depressing to see revanchist planning. Orlando, rather than working to make their downtown more pedestrian-ORIENTED, has decided that more people will come if they remove the bus lane to add half a dozen parking stalls, and ease car navigation by converting a major road to being bi-directional.

A downtown can compete (and fail) to be the best edge city or compete on the basis of walkable urbanism. It can't do both. Given that historic downtowns already possess a key asset (a street grid), trying to be the best exurb is a poor choice. 

"DISPOSABLE ARCHITECTURE IS A CULTURAL CRISIS"

Arguably, it's a matter of interest rates. When it costs a lot to borrow, you borrow less, which means you build less, and less well. So, when interest rates were running at 13%, our building sector responded with a type of building that could be built rapidly, but which depreciated rapidly. Indeed, reinforced concrete has proven to be worse than anticipated--concrete was thought to be waterproof (protecting the iron rebar from rusting). Which has not proven to be the case, as the Florida condo collapse showed (saltwater induces rust faster than rainwater).

There is also the hangover of anything built from 1947-1973, (pre-OPEC) when oil was cheap. And since oil was cheap, electricity was cheap, and concrete was cheap, and so concrete seemed readily replaceable. 

Zoning is only one of the most obvious of the obstructions to building Missing Middle housing

Zoning is only one of the most obvious of the obstructions to building Missing Middle housing. Parking a close second, especially as it interacts with setbacks, and driveway access to a rear lot, which in turn interacts with fire code, which can require enough space for two cars to pass. 'Stacked duplexes' are popular for a reason--central access alley avoids setback issues and counts as a driveway, so it doesn't trigger fire code issues.

Pedestrian protection hierarchy in traffic control

How serious someone is about urbanism based on the materials they use to protect people from vehicles. More serious means more permanence. And more damage to cars, with less notice. On a highway, if a pedestrian jaywalks, they get hurt. In a pedestrian zone, if a car drives, it gets hurt.

If it's a temporary (plastic) installation: cones < poles < barrels < portable safety barriers < traffic barriers.

Traffic cones are the stackable orange ones suitable for a few hours use. Poles are the taller ones you can leave out overnight. Barrels get used on highways, for blocking whole lanes. Portable Safety Barrier is a movable fence - no physical protection, but highly visible. Traffic barrier is a plastic jersey barrier, easy to move, but also capable of being filled with water to provide an actual physical barrier. 

For permanent (concrete) installations: signage < paint < flex-post < swale curb < armadillos < full curb < planter < jersey barrier* < bollards < raised planters < stair blocks.

Signage is functionally worthless, as the "Share the Lane" signs demonstrate.  Paint is meaningless without enforcement, as the abuse of bus, carpool and bike lanes readily demonstrates. Flex-posts are just road debris waiting to happen. Installation down the street from me is down 2 already. 25 MPH speed limit. They sit on top of a swale curb. Swale (mountable) curb is just tactile paint to an SUV. Armadillos promising - more damaging, less able to be damaged. Full curb is a serious barrier to preventing casual mis-use. Jersey barriers are designed to be relocated, and so are only sort of permanent. Bollards are like icebergs - most of them exists beneath the surface. 7-11 builds them for real, and they will stop a moving vehicle. Bell bollards are superior to pole bollards, but harbor bollards are superior to both. Counter-intuitively, the more likely a bollard is to damage a car, the more effective it is - it means that drivers have to look around and beware. Raised planters may have trees planted in them, but that doesn't require a foot thick concrete wall--it is security made pretty. Stair blocks the gold standard - are designed to prevent car ramming attacks by terrorists - they protect Federal Courthouses.

On Property Taxes

 The "Allodial Title" crowd will tell you that taxation is theft. Right idea, wrong crime. Taxation is extortion. Rents extracted under the threat of violence. But it's extortion by  an entity that has a local monopoly [1] on violence--once you've paid one tax collector, you don't have to pay another. And if a second tax collector tries to extort you, the first will do violence to them until they stop. 

The constitutional innovation of the Magna Carta was that it enshrined a right of the people being taxed to have a say in how much they were taxed. It became very traditional, so much that when an English King (Charles) figured a (legal) way to do an end-run around it, it fractured the state and caused what we call the English Revolution. (Aforesaid issue also a casus belli for the American revolution.)

“I like to pay taxes. With them I buy civilization” - Oliver Wendell Holmes, Jr., 

The counter-case is what goes in poor Latin American cities, where the state has collapsed and extortion is carried out by a patchwork of local gangs on an ad-hoc basis, without a schedule of how much is due or when it is due. When a gang acquires a territory (even a few blocks), tax collection is rapidly regularized--it's far easier to get money from people who are used to paying it, know how much to pay, and have set aside money for that purpose. Figuring out how much people can pay is always a tricky process--take too much and people go bust and lose the ability to pay in the future. Assessment is a tricky process--discovering the right level for "as much as possible but not too much" requires a lot of trial and error. 

In an inflationary context, ad valorem taxes (on the value) in general are necessary - a share of the value rather than a fixed value, lest taxes be degraded to peppercorn values by inflation over time. But inflation disrupts the local assessment equilibrium, requiring a lot of fresh 'price discovery', with the associated inevitable error. 

The less 'state capacity' exists, the more it relies on tariffs and other imposts. Limited number of locations, limited number of participants, and if the merchant doesn't return, you've overtaxed them, so the feedback loop for discovering the 'assessment equilibrium' is short and simple. Property taxes are the next easiest. Property is worth money; the worth of property is proportion to the income it brings. Real estate is an especially nice to tax--it doesn't go anywhere, and it doesn't change much. In a medieval context, the taxes your grandfather paid on farmland is probably a good rate for you as well. (With some local administration to adjust to circumstances i.e. bad harvests). The value of a house is generally a fixed ratio for the rents charged for it [2]. Hence the value of revenue a state can expect from property is relatively reliable. And for things like houses, comparables are readily obtained. 

An ad valorem tax on other economic activity (sales, VAT) is harder to collect and requires substantially more state capacity. The number of participants is larger, what is being taxed is more heterogenous, and people not cheating on their taxes requires substantial record collection. Income tax has yet higher tier of difficulty-requiring tracking not just corporations, but more numerous persons, and a commensurate level of state capacity required. 

A hierarchy of taxes thus runs:

• "Everyone pays X dollars"
• "Everyone pays X dollars per house"
• "Everyone pays X dollars per chair sold"
• "Everyone pays X dollars per dollar earned per chair sold" [3]

And it becomes a question of what your local unit of governance has the state capacity to administer. And across most of America, that local unit of governance is the county, with one or two people doing the work on a part-time basis. It takes a town (with fixed retailers) to make collecting sales taxes worthwhile, and a state (with fixed citizens) to make collecting income tax worthwhile. So for small urban aggregations, property taxes are the only viable taxation. Raise the sales tax too high, and the differential induces residents to shop elsewhere, and then local retailers close.  Property taxes are also very difficult to escape - real estate can't be moved, and so accidentally setting the exaction rate too high is less problematic. There is also a relative equilibrium - as property rates rise, property values fall, and hence so does the ad valorem revenue. So property taxes are simpler, safer, more resilient, and robust than any alternative. States maintain very large differences in property tax rates. 

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[1] There are, of course, always exceptions. But they represent cases where the state either hasn't noticed or hasn't bothered. Whether that is a rural town in the Old West, or an inner-city ghetto. 

[2] Why assessing owner-occupied housing is harder - there is no monetary rent, and the 'owners equivalent rent' has to be estimated. Owner 'customizations' in terms of improvements and tolerated nuisances also highly personal. 

[3] Right now, states are dealing with 'tax exiles'; people working remote in places with income taxes, and so we are seeing a shift to taxing people at 'place of employment', to which employers are responding to shifting the legal domicile to their employees to low-tax locations. To which states are adjusting by requiring additional 'local labor' requirements in procurement. 

Right-Sizing Roadways in Urban Locations is a Financial Necessity

Like an old person with a big yard, we own more than we can maintain. And once we let the weeds in, it's twice the work to remove them. And the longer we wait, the bigger the problem gets - weeds, then bushes, then small trees then big trees for a yard. 

Fifty years ago, when we designed most of our roads, asphalt cost a nickel and it was cheaper to pave space than to landscape it. That's no longer the case. Worse yet, patching potholes is a mugs game - they are forming faster than we can afford to patch them. And that is because we've deferred maintenance on roads, so what would have been a pothole fix has caused other problems. A car-suitable roadway is a complex structure of compacted soil, 'roadbase' (rocks, gravel, sand) all topped with as asphalt 'roof' that keeps the water off. When we let that roof fail water gets into the roadbase, freezes, and wedges it apart, causing larger cracks at the asphalt surface, letting more water in, until the soil underneath washes away and you get sinkholes that undermine the road. Lacking the money to fix everything, our best strategy is to limit what we fix.

And that means removing pavement. Leaving something unpaved seems reasonable, but that just opens the door to accusations of poor maintenance. Making the problem worse is past fecklessness - we've slopped asphalt on things that look like city streets but aren't. And no one likes to learn that the 'street' behind their house is actually an alley, and the city isn't ever going to repave it. 

The nightmare of reducing paving is that a roadway is a system--the asphalt hat carries water to the curb, which channels it to the gutter, which runs to the stormwater sewer, which is a huge network of pipes most people barely know exists. So reducing pavement by moving a curb is a non-starter. So either  reduce the paved area by converting the edge of the road into non-car uses (bi-directional cycle lane with a floating curb) or  take it from the center and add a median - either a bio-swale to contain water, or an elevated island with trees. 

 

Applying suburban SFD parking standards to urban rentals is stupid

Parking requirements are a pseudoscience, and most engineers mis-apply suburban standards to urban contexts when actual research is explicitly clear that vehicle ownership for urban renters (lower income, smaller households, shorter trips) is less than the '1 stall per bedroom'-ish metric most municipalities have fecklessly adopted.

On car-brain and respect

There are two very different types of respect; respect for a person as a human being, and respect for a person as an authority. But because we use the same word for these two different things, people often talk as if they were the same thing. So for example, when someone in authority says “If you don’t respect me, I won’t respect you.” What they’re actually saying (and justifying) is “If you don’t respect me as an authority, I won’t respect you as a human being.”

-Heather von Stackelberg, "Mugging the Muse", Medium, Oct 24, 2017

This came to mind when I was thinking about motonormativity. Auto-centric design and motor-normity is when the car says: "If you don't respect me as an authority, I won't respect you as a human being". When a car kills a pedestrian, people shrug and say: "must have been in the wrong place, or in the right place at the wrong time". Automobiles have no respect for anything that isn't an automobile. And that's the root of the enormous driver hostility toward bike lanes (especially protected ones) -- it's not just a denial of authority, but one backed up with consequences - enough reinforced concrete to damage a car. The use of flex posts and swale curbs rather than bollards and parking curbs is emblematic. It's nominally pedestrian-oriented design that does too little to challenge automotive authority. It's certainly better than nothing - like a crosswalk or a bike lane, it at least makes a claim that something other than a car has a right to the right of way. But data on sharrows (worthless, more dangerous than nothing) makes clear how much that is worth. 

Ground floor retail isn't vacant by accident

Lot of developers are happy to treat the required ground floor retail as a deadweight loss, much like they do required parking. So income from rents on that space doesn't enter into the proforma, and it's easier to just not deal with it. Compounding the issue is that for new builds, the leasing agent is looking for a stable corporate tenant who can afford to pay the high lease rates. And rather than simply accept lower rents, they are willing to wait. Waiting five years to rent for $100/sf for five years is better than renting for $50/sf for ten year - no buildout or depreciation.

When it comes to transit, there is no 'mode'.

BRT makes a mockery of the 'best for' typology, largely because BRT is such a heterogenous category - quality varies from being heavy-rail competitive to being a bus with slightly nicer stops. (FTA labels aside, most 'BRT' isn't actually 'Rapid'--it lacks exclusive guideway).

American light rail hardly a 'clean' category either - tram-train is the norm, resulting in things like poor Portland (and formerly LA), where a through-corridor suffers a tram section in the middle. All are 'light rail' because they can't share track with 'heavy' rail - metros and commuter rail roads. Light rail is a vehicle crashworthiness standard. 

Having tried to identify all light rail stations (prior to the Transit Politic getting it done) actually transit is bafflingly heterogenous. Even with the 'New Starts' light rail systems, there are three distinct tropes: 1) tram-trains, 2) diesel, and 3) streetcars. 

1) German tram-trains (stadtbahn) are the trope definer for most American light rail - rapid transit service in the suburbs by using a former freight rail corridor, street-running in the central city (to avoid tunneling costs)*. In America, when we lack a freight rail corridor, we've built in freeway medians. 

2) New Jersey River Rail line is the trope definer, but Texas has built a lot of it. Save yourself the costs of electrification (and unsightly catenary) by keeping power generation onboard the vehicle. But that same fix makes stopping and starting both slower and more expensive, so stop spacing is much wider than for electrified traction**. 

3) Portland Streetcar is the trope definer for American streetcars. Portland's modern streetcar uses standard European trams, but that wasn't what got America excited about streetcars--rather, it was Portland's historic streetcars that were the original 'Development-oriented transit'. Supported by a local option tax along the corridor (American transit owes a huge debt to Powell's city of books). The whole concept of a 'pedestrian extender' and using a streetcar as a catalyst for real estate development in a proximate but inaccessible area (Pearl district). All of it street running from go. Over time, Portland has taken streetcar to the next tier, with a streetcar-only bridge, applying the same logic to places across a river. 

*If you put your city center light rail in a tunnel, so it's all rapid transit, it's evolved into a light metro.

** Battery technology may be a game-changer for diesel light rail, permitting both low-cost installation and electric traction levels of acceleration. Getting the brakes right is going to be the sticking point - batteries weigh a lot, so regenerate breaking practically necessary, and the 'trucks' (wheels) on rail vehicles are already complex and putting that much potentially explosive silicon near track is a bit perilous. 

Doubtful battery will be as relevant for trams/streetcars - anyplace that already has transmission lines will keep extending them, so the use-case is marginal--places without systems, for which the competition is BRT, which has a far lower initial investment cost and far better capability for incremental upgrades. 

If you are developer, the things that matter

If you are developer, the things that matter are: 1) financing costs, 2) land costs, 3) construction costs) 4) regulatory costs, and 5) time. 1, 2 and 3 aren't generally in the local remit. 4 absolutely is--regulatory costs (height limits, setbacks, parking requirements, tree coverage) are. Time somewhat is (public process, design review). Right now, land costs too much, because landowners are still pricing it as if we still enjoyed the near zero interest rates of 2020.

Commercial Vehicle Electrification

Commercial vehicles like buses are one of the places where vehicle electrification is spreading like wildfire. Climate ideology may have driven the political mandate for developing electric buses, but their adoption is being driven by cold hard dollars. Fuel costs savings were always going to be greatest for the vehicles that spent the most time in motion. But I suspect once we get data on long-term maintenance costs, production of Internal Combustion Engine buses is done. 

"For-profit developers won’t build it because the ROI doesn’t match their pro forma"

The first time a developer returns a negative ROI on capital, and fails to repay their loans, they cease being a developer. Developers don't have any money of their own. They borrow it from banks or equity partners. And if those partners don't like the ROI, they don't lend the money. Developers watch interest rates (and hence their cost of capital) like it's the world cup, because it's key to their business model - it determines what 'pencils', what can feasible be built with and ROI that covers their cost of capital, their costs, and the risk they undertake borrowing money in the face of appreciating construction cost and uncertain regulatory delay. 

Peak Homebuying Window

 People decry high interest rates, but buying a house after a long spell of high interest rates is actually amazing: Once you buy the price is fixed--but you can always refinance to a lower rate. Admittedly, when rates spike, the housing market shuts down, and no one buys anything. Housing prices are sticky, so it takes a long time for them to adjust to lower prices. However, high rates also mean inflation, which takes the sting away: inflation drives housing prices up, even as financing costs are trying to drive them down.

Housing prices aren't a measure of affordability--the monthly payment is. And there is a mathematical relationship between interest rate and the price of an asset. In Economese: "When rates rise, the discount rate increases, reducing the present value of future cash flows and lowering asset prices"

When rates are low, both building* and borrowing are easy. But when rates rise, it costs more to borrow money, raising the monthly payment for the same loan amount. But income does not rise with financing costs, so buyers can only manage a smaller loan, for a worse location. Less demand for houses in better locations, and with fixed supply, that should lower prices. But house prices are sticky--someone who bought a house for $500,000 isn't going to sell it for $400,000 (How would they pay off their mortgage?).

But while rates remain high, the value of the home has fallen. It falls to inflation to balance things out. Over eleven years, even at 2% inflation, values go up 25%, and some with a $500,000 mortgage can sell for $500,000.

The best time to buy a house is always when rates fall - homeowners don't mentally reprice their asking price, even when shifts in the mortgage rate radically affect monthly payments. For example, on a $300,000 mortgage over 30 years:

At 3%: ~$1,265/month

At 4%: ~$1,432/month

Difference: ~$167/month (or ~$60,000 total over 30 years)

If an income previously supported a $1432/month mortgage payment at 4%, and rates drop to 3%, that supports an additional $35,000 worth of mortgage. A change that realtors have long** been slow to price in.

The 'Golden Age' is when rates have been high for a long time (long enough for inflation to 'float' everyone trapped in by a lower rate mortgage) and then rates start to come down.

*Builders operate almost entirely using borrowed money. When rates rise, it affects builders first. Even after they cease production of new houses, it takes months for homes under construction to finish, so the 'pipeline' of new stock that affects supply takes weeks to run dry.

**Less true today, thanks to Zillow and similar services, which have a large customer base, letting them spread research and analysis costs over multiple customers, enabling level of home price analysis far beyond the historical norm. Realtors were long dependent on 'comps' (comparisons) for recently sold homes, which lagged market prices by months.