Unrelated Lit in Review

I was going through the 2009 AER proceedings and found a few papers that have almost nothing to do with anything I do, but I thought their results or questions were interesting.

Housing Market -- Piazzesi and Schneider find that the housing market in 2002-2003 boomed largely because a large fraction of people said it was a good time to buy: interest rates were low and prices were reasonable. Between 04-05, however, house prices had risen enough that many people considered them "too expensive" but the fraction of the population who believed prices would continue going up indefinitely, the momentum traders, increased from 10 percent in 2003 to 20 percent in 2005, a 25 year high. They show that "a small fraction of optimistic households can have a large price impact, even if they buy only a small fraction of houses". Interesting future paper this occurs to me: try to identify how Fed policy impacts people's beliefs about housing prices and therefore their investment strategies. Why did the number of momentum traders double?

Recession -- Reinhart and Rogoff compare other financial crises in developed countries. On average over 21 current and historical financial crises during the last 30 years (plus the US 1930s Depression and Norway in 1899): housing prices drop 35 percent over 6 years, unemployment rises 7 percent for 4 years, output falls 9 percent for 2 years, and government debt explodes largely because of falling tax receipts and only secondly because of additional spending measures.

Brain Drain -- Ionescu and Polgreen consider brain drain between US states (37 percent of BA/BS grads leave the state that subsidized their education). They find that "investing in higher education attracts college students" and that if a state has "economies of scale in education," investing in higher education reduces brain drain but if they don't have economies of scale, it increases brain drain. The unstated implication is for more specialization of education in states with economies of scale and for other states to scale back what they do to meet more local needs.

QWERTY vs. DVORAK -- Hossain and Morgan performed some experiments of platform competition where there is a significant first-mover advantage to the inferior platform. "In 60 iterations of dynamic platform competition, our subjects never got stuck on the inferior platform." Never. "Somehow, the market always manages to solve the QWERTY problem."