Rowman & Littlefield Publishers / Mercatus Center at George Mason University
Trim: 6 x 9
978-1-5381-2214-3 • Hardback • January 2019 • $48.00 • (£37.00)
978-1-5381-6300-9 • Paperback • September 2021 • $29.00 • (£21.99)
978-1-5381-2215-0 • eBook • January 2019 • $25.50 • (£19.99)
Kevin Erdmann was a small business owner for 17 years. In 2010, he sold his business and earned his master’s degree in finance from the University of Arizona, which grounded his real-world experience of investing in the rigor of the academy.
In 2013, he began blogging at idiosyncraticwhisk.com to share his contrarian observations about investment strategies and research. He was surprised to uncover evidence that seemed to contradict conventional narrative and common assumptions about the housing bubble and the financial crisis. As the evidence accumulated, he developed a new account of the causes of the housing bubble and financial crisis. That account eventually became a two-book project, Shut Out and a follow-up book still in development, both of which synthesize and expand on the housing theories he originally published on his blog.
He lives in Gilbert, Arizona, with his wife and three children.
Part I: The Things
Know and the Things
That Just Weren’t
Chapter 1: High Home Prices Are Caused by Limited Supply 13
Chapter 2: Our Unexceptional Bubble
Chapter 3: A Tale of Credit 67
Part II: What Really
Chapter 4: How Rising Prices Cause More Rising Prices 91
Chapter 5: Migration and Contagion Cities 109
Part III: Symptoms of the Urban Housing Shortage
Chapter 6: Closed Access to Labor
Chapter 7: Broader Economic Implications
of Closed Access Cities 149
Chapter 8: Closed Access and International Trade 181
Chapter 9: A Moral Panic and a Financial Crisis 199
Appendix: Home Prices 243
About the Author 307
“Kevin Erdmann has put forward the radical thesis that restrictions on housing supply have been at the center of America’s macroeconomic dilemmas, in addition to raising the cost of living for ordinary Americans. This is one of the few truly new ideas in the debate over the Great Recession. While I still am not sure how much I agree, I find myself thinking about Kevin’s ideas often, and they grow on my mind. Kevin has poured his heart and soul into making the case in this fascinating new book.”— Tyler Cowen, author, "Stubborn Attachments," and blogger, "Marginal Revolution"
“Do you believe that you know what happened during the housing bubble and bust? Think again. Kevin Erdmann has amassed a wealth of fascinating data that sheds new light on what actually went wrong with America’s housing market. The basic problem was not too much building or too much lending to low-income people, but rather restrictive housing-development laws pushed people out of ‘closed-access cities’ on the two coasts and into the ‘contagion cities’ in Arizona, Nevada, and Florida that were the epicenter of the housing boom. This book sheds important new light on a number of issues beyond housing, including monetary policy, income inequality, and international investment flows.”— Scott Sumner, author, "The Midas Paradox," and blogger, "The Money Illusion"
“Kevin Erdmann challenges the most well-known explanations for the housing crash. He argues that the bust, rather than the boom, is the truly exceptional story—a result of excessive restrictive credit policy, borne out a lack of understanding of what caused the boom. One needn’t agree with his story in full to see that he scores extremely important points and adds a perspective that has been missing from discussions and public policy responses to the housing crash. Fixing supply constraints in rich areas, Erdmann shows, will not only make us richer by allowing people to move to areas where they can get higher wages; it will also make our economy sturdier and less prone to the type of disasters that set back the national and, indeed, the world economy in 2007–08.”— David Schleicher, Professor of Law, Yale Law School
Even readers convinced by Erdmann’s analysis of the housing market may find this inadequate as a narrative of the financial crisis. Nevertheless, that may be too much to expect of one book. Shut Out is still a provocative and illuminating read, which covers far more ground than this review, mostly on the causes and consequences of closed access cities. Erdmann, interestingly, is not a PhD economist, but a former small business owner with a master’s in finance. As a member of the PhD tribe, I occasionally found myself wishing for more equations and regression coefficients, and simpler charts. But still, somebody should give him an honorary degree.— Economic Record