Thursday Night Links

• Something there is that doesn’t love a wall, that sends the frozen-ground-swell under it, and spills the upper boulders in the sun; and makes gaps even two can pass abreast. The work of hunters is another thing: I have come after them and made repair where they have left not one stone on a stone, but they would have the rabbit out of hiding, to please the yelping dogs. The gaps I mean, no one has seen them made or heard them made, but at spring mending-time we find them there.
  [Robert Frost]
• In 2007, I didn’t think there was much of a housing bubble. Maybe prices were a little too high, but I wasn’t panicking about it. Then 2008 and 2009 came, and everyone started saying, “Oh my goodness, there’s a housing bubble!” Our financial system almost fell apart, and I started signing on to the view that there had been a housing bubble. The way prices have evolved over the past ten years indicates that the original 2007 prices were not a bubble. So, I’ve swung back to my earlier view. There was some kind of strange collective panic in 2008 and 2009, but most of the prices have been validated or even exceeded. Back then, everyone said, “Oh, we built too many homes!” And today, everyone says, “Oh, we haven’t been building enough homes!” Not that many people have raised their hand and said, “Wait, both of these can’t be true.” Homes are pretty durable. Did we build too many homes outside of Orlando? Yes, we did. But for the most part, building more homes was the correct decision. The shadow banking system was the more fundamental reason for the global financial crisis. Hardly anyone understood it. When people woke up and realized that that system didn’t necessarily have all the proper safeguards – and it didn’t – they panicked. They didn’t have to panic, but they did, and things came close to falling apart. So, I changed my mind about that twice – maybe the third time is yet to come. [Tyler Cowen]
• The Third Circuit held that each of the factors weighs in favor of a de novo standard of review. First, because demand futility is a pleading issue and the plaintiff’s allegations must be accepted as true, district courts are no better positioned than appellate courts to decide whether demand should be excused as futile. In fact, just like district courts, when appellate courts confront the dismissal of an action, the court reads the facts alleged in the complaint, assumes the truth of those facts, and decides whether those facts state a claim under the applicable legal standard. [Faegre Drinker] 
• That uptick coincided with a steep drop in the number of Asian matriculants and tracks the subjective impressions of faculty who say that students have never been more poorly prepared. One professor said that a student in the operating room could not identify a major artery when asked, then berated the professor for putting her on the spot. Another said that students at the end of their clinical rotations don't know basic lab tests and, in some cases, are unable to present patients. "I don't know how some of these students are going to be junior doctors," the professor said. "Faculty are seeing a shocking decline in knowledge of medical students." And for those who've seen the competency crisis up close, double standards in admissions are a big part of the problem. "All the normal criteria for getting into medical school only apply to people of certain races," an admissions officer said. "For other people, those criteria are completely disregarded." Led by Lucero, who also serves as the vice chair for equity, diversity, and inclusion of UCLA's anesthesiology department, the admissions committee routinely gives black and Latino applicants a pass for subpar metrics, four people who served on it said, while whites and Asians need near perfect scores to even be considered. [link]
• We use high-frequency interbank payments data to trace deposit flows in March 2023 and identify twenty-two banks that suffered a run—significantly more than the two that failed but fewer than the number that experienced large negative stock returns. The runs were driven by large (institutional) depositors, rather than many small (retail) depositors. While the runs were related to weak fundamentals, we find evidence for the importance of coordination because run banks were disproportionately publicly traded and many banks with similarly bad fundamentals did not suffer a run. Banks that survived a run did so by borrowing new funds and then raising deposit rates—not by selling liquid securities. [Federal Reserve Bank of New York]
• Management offered another surprise by bringing forward the timing of its pivot to 100% free cash flow payout to shareholders. Formerly, it planned to pay out 75% of free cash flow when its year-end 2023 net debt balance fell by an additional C$1.5 billion. It now intends to distribute 100% of free cash flow when it reaches that point. Another positive change is that management now intends to favor share repurchases over dividends. Its goal is to maximize total returns, not only income or capital appreciation. As long as Suncor shares trade at a discount, it believes share repurchases remain the most effective way to increase value on a per-share basis. We agree. In the long term, income investors will also benefit from repurchases, as dividend payout potential increases on a per-share basis with a falling share count. Management’s official guidance calls for its debt target to be hit next year, but CEO Kruger hinted that the target could be achieved by year-end. This was yet another positive surprise on the call that caused Suncor's shares to trade higher. [HFI Research]
• The ShotSpotter critique is emblematic of the RJA mentality. We are to believe that white neighborhoods are experiencing an epidemic of drive-by shootings and other crimes that the residents and the police ignore. If only ShotSpotter sensors were placed in white neighborhoods, they would pick up a proportional number of white shooters and white victims to match what is recorded in black and Hispanic neighborhoods. The belief that violent-crime rates are highest in minority communities is, according to RJA supporters, a function of over-policing, not of over-offending. But the bodies don’t lie. In 2021, blacks between the ages of 10 and 24 nationally died of gun homicide at nearly 25 times the rate of whites in that age cohort, according to the CDC. No one is hiding from the authorities the white corpses that would level that disparity. Black juveniles in New York, Chicago, Los Angeles, and Philadelphia were shot at 100 times the rate of white juveniles from March 2020 to December 2021. No one prevents white shooting victims from going to a hospital emergency room and getting counted in a city’s gun-violence data. [City Journal]
• We find that what one buys can explain what type of payer they are, even after controlling for various socio-demographic variables and credit scores. For instance, buying cigarettes or energy drinks is associated with a higher likelihood of missing credit card payments or defaulting, while purchasing fresh milk or vinegar dressings is linked to consistently paying credit card bills on time. Using item-level survey ratings, we find suggestive evidence that buying healthier but less convenient food items is predictive of responsible payment behaviors. Furthermore, we observe a positive and robust correlation between displaying greater consistency in various dimensions of grocery shopping behavior and making timely credit card bill payments. For example, cardholders who consistently pay their bills on time are more likely to shop on the same day of the week, spend similar amounts across months, and purchase the same brands and product categories. [Using Grocery Data for Credit Decisions] 
• Why does it cost so much to build a home? We formalize and evaluate the hypothesis that land-use regulation reduces the average size of home builders, which limits their ability to reap returns from scale and their incentives to invest in technology. Our model distinguishes between regulation of entry, which acts as a fixed cost and increases equilibrium firm size, and project-level regulation, which reduces project and firm size. If larger firms have stronger incentives to invest in technology, then such investment partially offsets the harm that regulation of entry does to consumers, but reduced investment exacerbates the negative impacts of project-level regulation. We document that the US has higher production costs than comparably wealthy countries, and that these costs are higher in more regulated American cities. Homes built per construction worker remained stagnant between 1900 and 1940, boomed after World War II, and then plummeted after 1970 just as land-use regulations soared. Residential construction firms are small, relative to other industries like manufacturing, and smaller firms are less productive. More regulated metropolitan areas have smaller and less productive firms. Under the assumption that one half of the link between size and productivity is causal, America’s residential construction firms would be 91% percent more productive if their size distribution matched that of manufacturing. [Why Has Construction Productivity Stagnated?]
• Until Argentina’s fiscal problems are solved, peso inflation must continue, if only to service the national debt. In fact, to the extent currency holders can shift into dollar holdings more easily, inflation may even accelerate. The base of peso holdings to be taxed by inflationary seigniorage would grow ever narrower, necessitating an ever-higher inflation tax to keep the government in business. [Tyler Cowen]