2min chapter

The Joe Walker Podcast cover image

Rational Minds Part 1: A Nation Of Gamblers - Ed Glaeser

The Joe Walker Podcast

CHAPTER

What Would a Good Bayesian Have Done?

A 100 basis point swing in interest rates is associated with about a 6% increase in housing prices. That's perfectly compatible with basic economic theory, but that doesn't give you a 50% increase. For every $10 housing prices go up in one metropolitan area they go down by 32 cents over the next five years. So there's a pretty regular feature of mean reversion which would have told you to be cautious.

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