Living Free
When the Rent Is Too Damn High: Why People Prefer Demand- Versus Supply-Oriented Policy Solutions to Scarcity
Franklin Shaddy, Linda Hagen & Ryan Hamilton
University of California Working Paper, May 2025
Abstract:
Any time demand exceeds supply, scarcity can result. When high prices inevitably follow, policymakers often propose one of two types of policy solutions: those that subsidize demand (e.g., giving people money to help them pay for scarce goods and services) and those that subsidize supply (e.g., giving producers money to help them increase the quantity of scarce goods and services). Do people generally prefer demand- or supply-oriented policy solutions to scarcity? Seven preregistered experiments (total N = 4,594) document a systematic preference for demand (vs. supply) subsidies -- that is, a demand subsidy bias -- and test two key psychological factors to explain why. First, people are better able to relate to those who directly benefit from demand subsidies (e.g., other consumers or buyers), relative to those who directly benefit from supply subsidies (e.g., suppliers, manufacturers). Second, demand subsidies feel less causally complex (i.e., they seem easier to understand) than supply subsidies.
The Varied Impact of Direct Democracy on Local Housing Policies: Unraveling the Role of Socioeconomic Context
Menglin Liu
University of California Working Paper, May 2025
Abstract:
Local opposition to high-density residential construction is a major contributor to the housing crisis in the United States. The lack of affordable housing has wide-reaching implications for local economic performance, social challenges like homelessness and food insecurity, and income inequality. Amid this housing struggle, this study delves into the role of direct democracy in affecting local land use polices in nearly 1,000 U.S. cities between 2006 and 2018. Although direct democracy is arising as a common solution for local land use disputes, its actual implications on housing policies remained unexplored. This study, using matching and difference-in-differences design, provides robust evidence that cities adopting direct democracy are more inclined to impose stringent land use policies, often favoring established antigrowth interests in the city. This study further reveals that, in high-income cities, the effect of direct democracy remains constant, irrespective of the homeowner and renter power dynamics. However, in lower-income cities, the effect of direct democracy becomes more pronounced, underlining significant changes based on the power balance of homeowners and renters. These findings shed light on how political institution could affect public policies, and how varying socioeconomic contexts could shape democratic process in city development.
Low-rise multifamily and housing supply: A case study of Seattle
Tobias Peter, Edward Pinto & Joseph Tracy
Journal of Housing Economics, September 2025
Abstract:
We provide an in-depth case study of land use reforms in Seattle to highlight how redevelopment of aging single-family housing to townhomes can lead to a significant increase in market-rate housing that promotes affordability. The key is to allow market forces to use by-right zoning to drive small-scale development, when also supported by clear and simplified regulatory frameworks. We have dubbed this the Housing Abundance Success Sequence, which is supported by this study along with over two dozen others. In Seattle, we document that such policies lead to a sustained 2.5% per year increase in the housing stock, with a range of about 1-2.5% in other case studies. Importantly, this approach requires no government subsidies and leads to higher local tax revenues. Our findings underscore the potential of thoughtful land use reforms to create more inclusive, affordable, and resilient housing markets, while also demonstrating that inclusionary zoning mandates do not work and can stop market-rate developers in their tracks.
Shorting Your Rivals: Negative Ownership as an Antitrust Remedy
Ian Ayres, Scott Hemphill & Abraham Wickelgren
Antitrust Law Journal, 2024, Pages 317-364
Abstract:
Antitrust authorities often have difficulty predicting whether a merger of rivals will enhance or degrade competition. For mergers that produce a mix of benefits and anticompetitive harms, they also have difficulty preserving the benefits while preventing the harms. To help solve these and other problems, we propose the use of negative ownership remedies, wherein the merged firm effectively takes a short position in its competitors. A negative ownership remedy provides multiple distinct benefits: First, approving a merger conditional on negative ownership provides an ex post incentive benefit, because a merged firm with negative ownership in its rivals will have less incentive to engage in conduct that reduces competition. Second, it provides an ex ante signaling benefit. Privately informed firms that volunteer to take a negative ownership position are less likely to have proposed a merger that weakens competition. Third, the availability of the negative ownership tool allows antitrust authorities to make more finely calibrated decisions about whether to approve proposed mergers. Taking a short position is just one way to implement the remedy. We describe a menu of alternatives, including executive compensation keyed to relative performance, derivative contracts (for example, selling at-the-money calls in rivals), and bespoke contracts that oblige the merged firm to make a payment to consumers if prices rise. The latter feature insures consumers against the prospect that, notwithstanding the firm's augmented incentive to compete, the merger weakens competition. We also discuss non-merger applications of the idea to improve competition -- including as a remedy for horizontal price fixing. Finally, we identify several limitations to our approach. Notwithstanding these complications, we conclude that negative ownership is a viable and powerful device that should be part of antitrust authorities' toolbox.
Growth in AI Knowledge
Joshua Gans
NBER Working Paper, June 2025
Abstract:
Building on recent advances in the literature on knowledge creation and innovation (notably Carnehl and Schneider (2025), we propose a novel general equilibrium model that explicitly incorporates artificial intelligence (AI) as a decision-enhancing technology capable of interpolating between known points of knowledge. Our framework formalises the trade-off between AI's coverage -- its ability to span wider knowledge gaps -- and its accuracy, and reveals the surprising result that, beyond producing immediate productivity gains, AI fundamentally alters the novelty of research. Specifically, when AI systems offer sufficiently broad coverage, they incentivise exploratory research that taps into novel, distant areas of knowledge and accelerates long-run growth; conversely, limited coverage promotes incremental research that may boost short-term efficiency while dampening the overall advancement of new ideas. Moreover, our analysis uncovers that the type of knowledge -- whether novel or dense -- plays a critical role in determining both the growth and welfare implications of AI, charting a new path for understanding how knowledge influences research strategies. By also examining the roles of market structure, licensing arrangements, and regulatory frameworks, our work contributes new, policy-relevant insights that reconcile the immediate benefits of AI adoption with the demands of sustainable long-term economic expansion.
Rail Liquor: Railroad Expansion, Social Movement Strategy, and Prohibition Law, 1865-1920
Robinson Woodward-Burns
Journal of Policy History, July 2025, Pages 178-198
Abstract:
This article considers the link between industrialization and social movement strategy. In the late nineteenth century, temperance organizations, rebuffed by Congress, won prohibition at the state level, especially in the American South and West. Simultaneously, lawmakers in the Reconstruction South and West built railroads to Midwestern rail hubs, which housed breweries and distilleries that shipped liquor by rail back into dry states. The Woman's Christian Temperance Union and Anti-Saloon League lobbied dry state congressmen to ban this interstate liquor traffic through the 1890 Wilson Act and 1913 Webb-Kenyon Act and eventually sought a complementary national amendment prohibiting liquor manufacturing, sale, and transportation. As railroad expansion and advances in liquor manufacturing undermined the state-level dry regime, prohibitionists pushed for a nationwide ban, contrary to voters' preferences. This case shows how interest groups adapted a new legislative strategy, partly in response to industrialization and interstate rail development at the turn of the twentieth century.
Measuring Markets for Network Goods
Leonardo Bursztyn et al.
NBER Working Paper, June 2025
Abstract:
Market definition is essential for antitrust analysis, but challenging in settings with network effects, where substitution patterns depend on changes in network size. To address this challenge, we conduct an incentivized experiment to measure substitution patterns for TikTok, a popular social media platform. Our experiment, conducted during a time of high uncertainty about a potential U.S. TikTok ban, compares changes in the valuation of other social apps under individual and collective TikTok deactivations. Consistent with a simple framework, the valuations of alternative social apps increase more in response to a collective TikTok ban than to an individual TikTok deactivation. Our framework and estimates highlight that individual and collective treatments can even lead to qualitatively different conclusions about which alternative goods are substitutes.
Monopolizing Minds: How M&As Stifle Innovation Through Labor Market Power
Alex Xi He & Jing Xue
University of Maryland Working Paper, June 2025
Abstract:
This paper argues that mergers and acquisitions (M&As) reduce inventors' innovation incentives and outputs by increasing firms' labor market power and limiting the rents inventors can capture. We develop a theoretical model to illustrate this mechanism and test its predictions using individual-level longitudinal data from the U.S. Census Bureau. We find that, at both target and acquiring firms, inventors exposed to greater increases in labor market concentration -- particularly in already concentrated markets -- produce fewer patents, earn lower wages, and exhibit reduced job mobility following mergers. In aggregate, the negative impact of increased labor market power on inventor productivity outweighs the potential benefits from innovation synergies. Overall, our findings highlight the critical role of labor market dynamics and inventor incentives in evaluating the innovation consequences of M&As.
Cosmetology Gets a Trim: The Impact of Reducing Licensing Hours on Colleges and Students
Nicolas Acevedo Rebolledo, Kathryn Blanchard & Stephanie Riegg Cellini
NBER Working Paper, June 2025
Abstract:
In the United States, licenses are required for entry into many different occupations. Requirements vary by state and occupation, but many licenses require a minimum number of training or instructional hours. We consider the impact of these hours requirements on students and postsecondary institutions, with a particular focus on cosmetology (also known as hairstyling or beauty). Cosmetology licensing requires extensive training hours (between 500 and 2,100 hours) in every state and typically exceeds the time required for similar licenses. We implement a difference-in-difference design based on state-level changes in required licensing hours for cosmetologists between 2011 and 2019. We ask how and whether changes to hours requirements influence student outcomes and institutional behavior. We find that lowering required hours is likely beneficial for students, as it raises completion, lowers tuition, and expands enrollment among some groups of students. Larger institutions appear to reduce their tuition by less than smaller institutions. We find no detectable effects on the earnings of cosmetologists.