Ed Glaeser: Harvard's housing huckster

His absurd housing analysis makes you wonder if he knows anything about housing markets at all

Academia is often a social status game more than a knowledge production game.

Everybody knows this. But few say it.

Everybody knows that there are clueless experts. But few say it.

So today, I’m going to say it.

If what Harvard Professor Ed Glaeser writes about housing markets reflects his understanding of them, he is a clueless expert.¹

This is a guy with hundreds of academic articles on property markets. His body is a machine that converts money into academic papers. But what about knowledge?

I want to change the social status game and be the first mover to call out this poor economics. I hope others will feel more comfortable doing the same.

Today I’m going to explain the ridiculous problems with the economic analysis in his 2018 paper in the Journal of Economic Perspectives with Joseph Gyourko entitled The Implications of Housing Supply.

It’s not the first time I’ve called out his dodgy analysis.

I spent many years trying to get people to see the problems with one of Glaeser’s other famous but useless methods for analysing property.

But social status games dominate. This was made clear by the comments I received from an anonymous reviewer about my paper critiquing Glaeser’s analysis.

The main point of this paper is both correct and important: the popular hedonic price method of calculating a "regulatory tax" initiated by Glaeser and Gyourko (2003) (henceforth G&G) has little or no scientific merit, and should not be used.

...So the G&G method is ripe for criticism. The early critiques by Somerville (2005) and O'Flaherty (2003) were massively ignored, and their authors probably didn't notice because they thought that the G&G method was too ditzy to go anywhere. But as Murray points out, the method has become popular and its results have become influential. So Murray's critique is timely.

But it has to be rewritten. G&G have both done a lot of good work; this strand of literature is really an aberration. So the profession's prior is that G&G are right and Murray is not. To move the prior, Murray has to be both succinct and serious: succinct because nobody is going to start reading a long paper by someone they think is a kook, and serious because Murray must prove himself part of the brotherhood, not an outsider or rabble-rouser.

If ignoring status games because you want to understand the world and gain knowledge is rabble-rousing, then so be it.

And strongly disagree with the reviewer that Glaeser’s previous dodgy analysis was an “aberration”.

Glaeser and Gyourko’s 2018 article claims to review “the basic economics of housing supply and the functioning of US housing markets to better understand the distribution of home prices, household wealth, and the spatial distribution of people across markets.”

It does nothing of the sort. Below I explain why in detail.

I am confident that most people who understand housing markets think this paper is silly and wrong, but aren’t willing to say it. Maybe people think you need status to call out a well-published and cited Harvard professor.

But knowledge production doesn’t care about status, even if academic careers do.

I’m sure some people will respond to this Fresh Economic Thinking article with more status games: “You don’t understand Glaeser’s model” and “Are you really saying a Harvard professor doesn’t know his stuff?”. These are not arguments. And I don’t expect to hear any arguments, as there are no arguments in favour of this absurd economic analysis. When I posted about this poor analysis on X/Twitter no one defended it.

Absurdities in his housing analysis

Let’s go through the major errors of logic and reasoning in The Implications of Housing Supply paper by Glaeser and Gyourko. As a quick summary, Glaeser and Gyourko assume in this paper that in an unregulated market, cities will only have detached housing and that every home in every city will have the same market price which is always construction cost multiplied by 1.4625.

Absurd, right?

1. Theoretical issues

The underlying theory relied on in the paper is that there is an independently determined thing called a minimum profitable production cost (MPPC) for a single detached dwelling.

The ratio of the market price of a home (at a location) to this MPPC production cost of a home is thought to capture the idea of Tobin’s q, and that “regulatory construction constraints can explain why this variant of q may be higher than one”.

So according to their argument, if the market price of a housing asset is above the cost of producing the home, or q >1, this indicates a regulatory barrier.

They write: