Category Archives: Economics

HPR: Government’s Affordable Housing Model Doesn’t Work

Current Events, Economics, Public policy, , ,

Hawai’i Public Radio’s Wayne Yoshioka had a great story earlier this month about how the government’s affordable housing model doesn’t work.

In essence, Hawaii tries to promote affordable housing by requiring private developers to sell units above market prices to off-set lower-priced affordable housing. However, Carl Bonham (Executive Director of UHERO) stated his skepticism of the model, stating:

There’s very little evidence that I’m aware of that that model works anywhere in the country.  And the only time that it works is when you have demand for housing that outstrips supply so that prices can go up and developers are able to charge more than what they would in an unrestricted market, right.  That only works for very short periods of time during what we typically refer to as housing booms.

This story is part of a series by Yoshioka examining the state of housing in Hawaii. The other two entries in the series are also worth reading, including: “Affordable Housing: Nothing Being Built on Neighbor Islands” and “Millennials in Hawai’i Are Purchasing First Homes.”

Behavioral Economists

Economics,

Behavioral economics is an interesting branch of economics that combines economics and psychology. It studies personal decision making in the context of economics. Perhaps the best way to view the field is as the field that studies why people do not follow the “economic rules of life,” which I’ve generalized in my previous entry. Why do people make economic decisions that do not appear to be rational? Why do they not respond to certain incentives? Does realization of opportunity cost make a huge difference in decision making?

Individuals in many humanities and social sciences fields tend to strongly dislike this field (including several of my history professors). In my experience, their main question tends to be: “How accurately can one use science to examine human decision making?” Can we really decipher human decision making on the basis of a scientific model? Those in the humanities are more inclined, I think, to view the human mind on a, well, humanist level. Specifically, I think they view the human mind as being filled with a lot of human values and concerns that science cannot necessarily detect and quantify scientifically.

How abstract is the human mind? To what level can we use the scientific method to predict human choices? Are we really as “human” as we perceive ourselves to be?

Just some thoughts as I am forced by Maruel to think about how economics can be used to bring about some sort of institutional reform to Hawaii’s public sector and education systems.