"The Recession of 2007 to ?" by Robert E. Lucas - Friedman Forum Lecture

Nobel laureate Robert Lucas, the John Dewey Distinguished Service Professor in Economics and the College at the University of Chicago, shared data on the slow financial recovery with UChicago undergraduates at the Friedman Forum on October 10, 2012. Hosted by the Becker Friedman Institute for Research in Economics, this lecture series allows young scholars to engage with renowned researchers and to discuss important economic problems of the day.
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[@nthperson]

Investors with cash have done just this, in a sense. Many investors have acquired properties at foreclosure sales or from banks, offering them for rent or simply holding them vacant waiting for the property markets to "recover." This is a prudent and potentially profitable approach given government policies designed to pull property prices back up. The inventory of empty properties in many markets has been absorbed and market equilibrium somewhat returned. There are now seller's markets again.

[@alang.846]

Why isn’t the Chinese or Russian economy being compared?

[@nthperson]

Prior to the 2007-2008 downturn recessions in the U.S. during the post-WWII years tended to be regional. Labor and capital mobility explain a good deal of this, as businesses could move within the U.S. to lower cost environments. While there is still some opportunity to do this (e.g., North Dakota) labor mobility has greatly declined for people highly leveraged with mortgage and other debt. Same for some businesses. (continued)

[@nthperson]

Land prices in most sections of the U.S. fell back in 2007-2010 by between 10-30 percent. Of course, land markets are local. That said, many land markets have already re-climbed to close to their 2007 peak. A reasonably good measure of what is happening is to look at the median price of existing housing units in an MSA from, say, 2000 to now. In desirable urban neighborhoods, land value tends to be at 50% or higher of total value. In San Fran this might be 65-70%, NYC, etc.

[@bleacherz7503]

What an apologist for corporate investment: more and more recessions are much ado about nothing - 5% or gdp ? Our budget deficit is close to that. This is all about corporations extracting wealth from workers and creating monopolies

[@scottab140]

Lots of job opportunities currently for the lower class as farmers. Anyone can be a landowner and CEO farmer in one day in getting free land from the state.

[@nthperson]

I did not mean to imply that property prices are climbing in every market. However, property prices outside the urban cities have started upward again even in the MSAs that include Detroit, Cleveland, Buffalo and Pittsburgh, for example. Fixing up a $1 house in Detroit might or might not be profitable. Most need much more than cosmetic work, and those willing to live in the neighborhoods are not likely to afford a renovated property without public subsidies. It is a case-by-case issue.

[@Rachaelshaw7]

23:53 current recessions

[@nthperson]

As the decade of the 2000s advanced, the median price of residential property climbed rapidly. Looking more closely at appraisal data, the land-to-total value ratios in many markets rose above 50% and higher. Thus, lenders were providing as much or more financing to pay for land acquisition as for housing. The same was true of commercial properties. Extensive fraud in the sub-prime mortgage market contributed to the depth of the crash but land speculation was the core driver.

[@bleacherz7503]

By now we see that land and real estate are the govs method to generate gdp and the wealthy’s way to generate tax free income and wealth

[@ADRIANC92ER]

"It is a case-by-case issue"Exactly, so there isn't a general housing bubble every so often.Most land in the US is probably relativly cheaper than it was 60 yrs ago. People perfer to live in the city which does not account for much of the land in the US.

[@ADRIANC92ER]

I don't believe this is true, I read a paper a while back, I can't recall the name of it, but what it said was that the aggregate home price level was been helped by a few cities such as SF, NYC, LA, while many in the rust belt still had not caught up to trend. Look at Detroit you could buy house for $1. Why wouldn't investors buy them fix them up and sell them.

[@alang.846]

Ironically enough he’s comparing G7

[@HerrRaskolnikov]

what the hell were they talking about?! ahah, long live the Bob!

[@nthperson]

Sadly, Prof. Lucas ignores the powerful nature of property markets as the fundamental driver of boom-to-bust cycles. More specifically, our land markets have been characterized by intense speculation going back to the early colonial period. Easy and cheap credit add fuel to the fire. Analysts who study land markets see an 18-20 year cycle, toward the end of which land costs place great stress on households (whether renting or purchasing residential property) and on business costs. (continued)

[@ADRIANC92ER]

If that were the case wouldn't you become very rich if you shorted the market when it was coming down, bought at the bottom and sold at the top.

[@Rob-fx2dw]

What ' something happened' (22:50 as Robert expressed it) in the late 1960's and early 1970's was an impact of the expenditure on the Vietnam war, along with an oil embargo placed by Saudi Arabia on sales of oil to the US in a time when they had experienced an internal oil production peak and shortage. On top of that the US government imposed a freeze on wages and an expansion of the government budget deficit along with the inflation from the Vietnam war and cost of social welfare which had more than doubled since 1965.. Other countries were also affected by the shortages of energy. The combined effects were a slowdown of their economic activity.

[@juanantoniolagunaguerrero4520]

¡No entiendo ni madres! Me acuerdo mucho de ti. ¡¡¡¡MUCHAS GRACIAS!!!!!!! Sigues cuerísimo y ahora te vistes mejor que antes.

[@wanderingfido]

No one can accurately debate capitalism. Not anymore. Learn business law. Learn about lobbyism. Leave colonialism in the past. It's done and dead. Dare to be a pariah. Because then, at least, you'll be correct.

[@mr72520]

BIG TEACHER gimme a lecture on the increasing costs of armaments, U.S.Army military bases around the world, toward hegemony in Central Asia and beyond. Teacher please note that only the war leads to economic failure so today the presence of economic stagnation in Europe and the world is the fault of the U.S.A. 'n UK to give money to I.n.c. as La General Dynamics and all..........

[@mr72520]

Yeah but if I haven't job I can't buy car, i can't buy that it'll my future home. So we must remeber that we've to work for each other. USA is the evil of you that you're always a people of contemporary without ancestors and without posterity only be a people of contemporaries remain a people without a future. USA have destroyed EUROPE Italy with war 'n oils. I'm italian as he said in his book Seymour Melman WAR Ltd. GRANATA GIANLUCA