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There have been some studies that show that if you remove housing, then the r>>g effect goes away (at least over recent decades; I don't think these studies wen
by ageek123 7y ago
There have been some studies that show that if you remove housing, then the r>>g effect goes away (at least over recent decades; I don't think these studies went back to 1870). We could fix a lot of the rent-seeking problem with saner housing/land use policy.
- e3b0c 7y ago> Rognlie, Matthew. 2015. Deciphering the Fall and Rise in the Net Capital Share. Brookings Papers on Economic Activity 46(1): 1–69 The paper briefly mentions it but does not address or refute the point further.
- onlyrealcuzzo 7y agoAnd I'm sure you could remove the wages of the top 0.1% and r>>g would be true again. The rate at which r is growing compared to g is accelerating. For anyone who works for a living, that should be unsettling.
- ericd 7y agoWe’re also (probably) at the tail end of an enormous credit cycle, with rock bottom interest rates, and that means hugely inflated asset prices (and a correspondingly grown wealth gap). After credit cycles end, though, you get deleveraging. Debts get defaulted on, and asset prices fall, both of which hurt the rich far more than those who have no assets and those who are in debt. Of course, deleveraging also coincides with unemployment and a bunch of other issues that harm the less well off.
- Mirioron 7y ago>Of course, deleveraging also coincides with unemployment and a bunch of other issues that harm the less well off. I don't think it's so much a coincidence, but rather a direct effect of it. Less investment into businesses usually means fewer jobs.
- deleted 7y ago[deleted]
- ericd 7y agoYep, that's exactly what I meant, coincide just means to occur at the same time. (https://www.merriam-webster.com/dictionary/coincide https://www.merriam-webster.com/dictionary/coincide)
- Mirioron 7y agoI guess I was caught by the word usage. It seemed to me that you were saying that they correlate rather than have a causal relationship. My bad.
- onlyrealcuzzo 7y agoPeople have been saying Japan has been at the tail end of it for 20+ years. What makes you so sure the US is at the tail end of it?
- ericd 7y agoI'm not sure, it just seems likely to me. I'm enjoying reading Ray Dalio's Big Debt Crises right now, which covers these cycles.
- Wildgoose 7y agoThat didn't seem to happen after the 2008 financial crash - the rich were bailed out by Quantative Easing while the poor lost their homes and had to suffer the taxes and austerity to bail out the rich.
- ericd 7y agoYep, QE seems to have largely limited the deleveraging in 2008 before it went all the way, and the USG took over a lot of the bad debts and socialized the costs. But the govt would have more limited options this time, since rates are so low already. Also, governments around the world have been doing QE since then, so this would be a world-wide thing. I don't know how it's going to play out, I just have some ideas.
- JMTQp8lwXL 7y agoI don't see interest rates going up anytime soon. The fed tried that and a handful of quarters later is reversing course. We know that debt will grow the economy, but it certainly seems like households are debt-saturated at this point.
- ericd 7y agoI agree, it doesn't seem politically possible with the current government to continue raising rates.
- runako 7y agoI would be curious as to the basis for removing one of the largest components of the economy. There's a lot of money tied up in housing! Removing housing reduces returns seems like a tautology: if you remove one of the best-returning asset classes, returns are lower.
- sien 7y agoThe argument is that there is an artificial, government imposed basis to the scarcity of housing in high value areas due to zoning. So zoning contributes substantially to wealth inequality.
- innagadadavida 7y agoWon’t this make housing more affordable and allow people to live a decent life? At least in the Bay Area, even rickety shacks now cost >$1M to buy.
- knowaveragejoe 7y agoIsn't the person you're replying to talking about saner use of land, not removing housing entirely..?
- darawk 7y agoThe basis is that when people say "r >> g" they think "business owners and the stock market" rather than "the house my parents own", and they think about reforms to the business sector rather than reforms to the housing sector.
- bildung 7y agoIt seems they would be more right than wrong, though, as business owners indeed also own the majority of US real estate, with about $30 trillion business-owned vs. $19 trillion privately owned: * Residential real estate market size was $33 trillion in 2018, of which about 80 million units are privately owned and 60 million units are not. * Commercial real estate market size (Office buildings etc.) was about $15 trillion.
- spenczar5 7y agoCan you link to one of these studies? I can't find them.
- Perceval 7y agohttps://www.brookings.edu/bpea-articles/deciphering-the-fall-and-rise-in-the-net-capital-share/ https://www.brookings.edu/bpea-articles/deciphering-the-fall...
- zzzzzzzza 7y agocough cough land value taxes cough cough
- kingkawn 7y agoIt is not surprising that property rights are the source of true wealth, and that property owners as cultural descendants of the feudal lords of the past have the history of the development of law and economy on their side
- autokad 7y agofrom paper: "However, the rental yield component is typically considerably higher and more stable than the dividend yield of equities so that total returns are of comparable magnitude" my take away was that equities produce a lot of wealth, but squander it by not returning it to shareholders (lack of dividends). look how many tech companies refuse to pay dividends because 'we are a growth company, we are always a start up". i hate stock buy backs, I think it just rewards people exiting the stock. in short, if you are a property owner, you can garentee cash flows. economy goes up, down, you more less have an income stream. stocks, they will always go out of business. a company that never returns money to share holders in the end is always worthless, but today, that is in vogue.
- Dylan16807 7y agoIf you sell enough stock to own the same dollar amount of the company whenever a buyback happens, it should be basically equivalent to a dividend.
- laurencerowe 7y agoPutting profits into stock buy backs instead of dividends still returns money to share holders (through the retiring of shares bought back.) It’s generally preferred since it allows shareholders to postpone (perhaps indefinitely) paying tax on the money returned. Good for shareholders but bad for society.
- mcguire 7y agoUnless the stock price declines after the buyback....