4 ms·

The main externality is driving the price up and shrinking the pool of homes for actual residents who need to rent a place to live. This is already happening in

The main externality is driving the price up and shrinking the pool of homes for actual residents who need to rent a place to live. This is already happening in some parts of the world. For example, people from Barcelona are starting to protest (see [1], and [2] by the way. In Spanish, sorry!). In my city, Málaga, it's starting to happen as well. I personally know a person who had to move out because the landlord wanted to use their flat for Airbnb. [1] https://cincodias.elpais.com/cincodias/2017/08/03/companias/1501774445_329587.html https://cincodias.elpais.com/cincodias/2017/08/03/companias/... [2] http://www.lavanguardia.com/local/barcelona/20170626/423707143344/directivo-airbnb-piso-ilegal-barcelona.html http://www.lavanguardia.com/local/barcelona/20170626/4237071...

zimablue 9y ago
I don't think that you can actually call increasing property prices a negative externality. It's a natural consequence of making that tourism more efficient. It's like someone invented a way to turn fruit into gold and you're complaining that it drives the price of fruit up. Well, OK that has some bad effects but they're almost by definition (like, how economics works) less than the positive effects of now having more gold.
- wpietri 9y ago
  That is very much a rich person's answer. It's certainly "more efficient" for the wealthy if they can drive poorer people from their homes when the rich find it convenient. But that's not what it feels like if you're on the other end of it.
  - chii 9y ago
    if the demand for property in an area grows, the poor is going to get priced out no matter what. Whether it's airbnb doing it, or some other factor (like tech investment money or something to such an effect). The problem to solve isn't to stop airbnb from working, but to increase the opportunity for the poor to get out of poverty. Otherwise, the next airbnb-like disruption will cause the exact same problem for the poor.
    - wpietri 9y ago
      There's no reason we can't do both.
    - closeparen 9y ago
      What? If people who are currently housing-insecure started making more money, rents would rise accordingly. There are always going to be people who can't afford to live somewhere (particularly major world cities attractive to tourists) and just above them, there are always going to be people barely afford to live somewhere. We can and should lift the currently housing-insecure to comfortable homeownership, but just as many housing-insecure people will rise from the previously totally-priced-out to take their place.
- jtolmar 9y ago
  That only works if everyone has equal bargaining power. In the fruit-gold machine world, sure the price of gold tanks, but as long as there are people willing to pay more for gold than others are able to pay for fruit, the poor can't eat fruit anymore. That's bad for them. The free market doesn't do what's best for everyone, it weighs people by their ability to pay.
FooHentai 9y ago
Hmm, can your example really be called an externality? Real estate price rises as a reaction to the economic activity in question? I'd say it fails the definition "cost or benefit that affects a party who did not choose to incur that cost or benefit", particularly at the part "party who did not choose to incur". Finding prices higher in an area, when choosing to purchase or not purchase, doesn't match that IMO.
closeparen 9y ago
In most of the US, this is considered a great thing. The most populist thing you can do is help homeowners reap capital gains. There was no question, for example, that the federal government would have to act to re-inflate housing prices after 2008. The mortgage interest deduction is untouchable. Nearly all voters own real estate. You're only going to be subject to the rental market if you're a student or poor. Even the lower middle class (by definition, kind of) have a mortgage of some kind, and therefore benefit from rising property value. It's not clear why "it drives up property prices" is a bad thing in the US, except in San Francisco and (maybe) New York where renters have a little bit of power.

zimablue 9y ago

I don't think that you can actually call increasing property prices a negative externality. It's a natural consequence of making that tourism more efficient. It's like someone invented a way to turn fruit into gold and you're complaining that it drives the price of fruit up. Well, OK that has some bad effects but they're almost by definition (like, how economics works) less than the positive effects of now having more gold.

wpietri 9y ago
That is very much a rich person's answer. It's certainly "more efficient" for the wealthy if they can drive poorer people from their homes when the rich find it convenient. But that's not what it feels like if you're on the other end of it.
- chii 9y ago
  if the demand for property in an area grows, the poor is going to get priced out no matter what. Whether it's airbnb doing it, or some other factor (like tech investment money or something to such an effect). The problem to solve isn't to stop airbnb from working, but to increase the opportunity for the poor to get out of poverty. Otherwise, the next airbnb-like disruption will cause the exact same problem for the poor.
  - wpietri 9y ago
    There's no reason we can't do both.
  - closeparen 9y ago
    What? If people who are currently housing-insecure started making more money, rents would rise accordingly. There are always going to be people who can't afford to live somewhere (particularly major world cities attractive to tourists) and just above them, there are always going to be people barely afford to live somewhere. We can and should lift the currently housing-insecure to comfortable homeownership, but just as many housing-insecure people will rise from the previously totally-priced-out to take their place.
jtolmar 9y ago
That only works if everyone has equal bargaining power. In the fruit-gold machine world, sure the price of gold tanks, but as long as there are people willing to pay more for gold than others are able to pay for fruit, the poor can't eat fruit anymore. That's bad for them. The free market doesn't do what's best for everyone, it weighs people by their ability to pay.

FooHentai 9y ago

Hmm, can your example really be called an externality? Real estate price rises as a reaction to the economic activity in question? I'd say it fails the definition "cost or benefit that affects a party who did not choose to incur that cost or benefit", particularly at the part "party who did not choose to incur". Finding prices higher in an area, when choosing to purchase or not purchase, doesn't match that IMO.

closeparen 9y ago

In most of the US, this is considered a great thing. The most populist thing you can do is help homeowners reap capital gains. There was no question, for example, that the federal government would have to act to re-inflate housing prices after 2008. The mortgage interest deduction is untouchable. Nearly all voters own real estate. You're only going to be subject to the rental market if you're a student or poor. Even the lower middle class (by definition, kind of) have a mortgage of some kind, and therefore benefit from rising property value. It's not clear why "it drives up property prices" is a bad thing in the US, except in San Francisco and (maybe) New York where renters have a little bit of power.