NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

A Nation Of Gamblers: Real Estate Speculation And American History

Edward L. Glaeser

NBER Working Paper No. 18825
Issued in February 2013
NBER Program(s):   EFG

The great housing convulsion that buffeted America between 2000 and 2010 has historical precedents, from the frontier land boom of the 1790s to the skyscraper craze of the 1920s. But this time was different. There was far less real uncertainty about fundamental economic and geographic trends, making the convulsion even more puzzling. During historic and recent booms, sensible models could justify high prices on the basis of seemingly reasonable projections about stable or growing prices. The recurring error appears to be a failure to anticipate the impact that elastic supply will eventually have on prices, whether for cotton in Alabama in 1820 or land in Las Vegas in 2006. Buyers don't appear to be irrational but rather cognitively limited investors who work with simple heuristic models, instead of a comprehensive general equilibrium framework. Low interest rates rarely seem to drive price growth; under-priced default options are a more common contributor to high prices. The primary cost of booms has not typically been overbuilding, but rather the financial chaos that accompanies housing downturns.

A non-technical summary of this paper is available in the July 2013 NBER digest.  You can sign up to receive the NBER Digest by email.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w18825

Users who downloaded this paper also downloaded these:
Knittel and Sandler w18849 The Welfare Impact of Indirect Pigouvian Taxation: Evidence from Transportation
Meyer and Sullivan w18718 Winning the War: Poverty from the Great Society to the Great Recession
Sensoy, Wang, and Weisbach w18793 Limited Partner Performance and the Maturing of the Private Equity Industry
Bordo and Rockoff w18828 Not Just the Great Contraction: Friedman and Schwartz's A Monetary History of the United States 1867 to 1960
Anderson w18757 Subways, Strikes, and Slowdowns: The Impacts of Public Transit on Traffic Congestion
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us