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> He speculates that poorer city dwellers are missing out on the increased social interactions that are credited with driving innovation and wealth creation in

> He speculates that poorer city dwellers are missing out on the increased social interactions that are credited with driving innovation and wealth creation in large metropolises. I don't disagree, but it seems a little strange that the article highlights this point rather than the endemic rent-seeking of the urban upper-classes?

Ensorceled 5y ago
It does seem strange to relabel the accelerating trend of converting housing into speculative investment vehicle as "wealth creation" and wondering why the poor are "missing out".
- sgregnt 5y ago
  IMO, the eeath creation happens almost by definition from increased efficiency of resource allocation in the society: Thebl free market forces drive more efficient allocation of scarce resources, so the weath is created in a sense, that there is the least amount of waste compared with other alternatives.
  - lumost 5y ago
    In a free market of rational economic actors, no externalities, no liquidity limitations, and an unlimited time horizon this is probably true. The North American urban real estate market is increasingly dominated by a dwindling number of economic actors who collectively act to restrict housing supply. This is not a system where the free market is functional or would necessarily produce the best results.
    - sgregnt 5y ago
      > In a free market of rational economic actors Not sure what rationality has to do with this. It is about personal utility which is subjective and at time irrational. > liquidity ... time horizon Not sure how is this related? Liquidity in itself is an asset, if you have readily available money vs oney on paper that a big difference, always was and always will be. But how is this related? > ...limited number of actors... IMO, there are always so many alternatives, (e.g. moving to a different city, living in suburbs) it is hard to image uncompetitive real estate market, even if all the land in a city was in a private hands of a single "actor" it would still be very competitive market overall. But that's hardly a case, indeed even if the land is in hands of two actors it's enough for a competition here. Or do you suggest there is a cartel? In that case it's a legal issue of failed police force not a free market failure unless you privatize police as well.
      - lumost 5y ago
        Liquidity matters in free markets as it effects the ability of buyers to buy and sellers to sell. In Urban housing markets many individuals do not have the liquidity to buy even if they have the cash flow. The number of actors matter as moving to different cities typically means changing jobs which may or may not be viable, if alternative cities have the same pricing dynamics at play - then it may not be possible to find a better alternative in price. As to the reason why this all matters and we aren't content with simply choosing to rent from REIT A or REIT B is that zoning boards have proven unable to cut through A & B's protests against new construction. While A&B may compete with each other they do not compete with any alternative, and all potential customers must acquire housing. As long as the total number of housing units remains below the demand for housing then A&B will benefit. In practice there are still a number of players who interact with the zoning board - but the net result is still a frustratingly stagnant housing supply.
        sgregnt 5y ago
        IMO, this is still a free market modulo the part with the city planning which is not about voluntary exchange of services or goods but a coertion by law. The definition of free market is so much broader than the peculiarities you've mentioned. Couldn't there be a free market before the fiat money existed? In any case, in my original post I was talking about forces of free market, these forces might exist in partially free market where many things are not a free choice but consequence of one or the other type of social coercion. Free market force: all it means is that the specific exchange between the parties was done voluntarily as a manifestation of the parties preferences in face of all other alternatives they have. In this sense the parties came to a conclusion that this action maximizes their utility. I'm not arguing that free market forces are better than the alternative (you need to define what you mean by better), just saying in terms of resources allocation, free market forces maximize utility in face of other alternatives. You can argue that this is a prisoner dilemma situation etc... but that's a fallacy as well IMO (can discuss this if more details are desired)
- CryptoPunk 5y ago
  Investing in housing is GOOD for society, because housing is not a scarce resource - the more is invested the more is built. It's precisely those places that have put up the most barriers to investing and building housing that have seen the greatest deterioration in housing affordability: https://www.econlib.org/library/Enc/RentControl.html https://www.econlib.org/library/Enc/RentControl.html https://www.aeaweb.org/articles?id=10.1257/mac.20170388 https://www.aeaweb.org/articles?id=10.1257/mac.20170388 Beware of the anti-profit bias: https://digest.bps.org.uk/2017/08/04/we-have-an-ingrained-anti-profit-bias-that-blinds-us-to-the-social-benefits-of-free-markets/ https://digest.bps.org.uk/2017/08/04/we-have-an-ingrained-an...
  - taurath 5y ago
    Obviously having housing stock is probably good. Housing however IS a scarce resource, especially housing when it comes to being close to things like transit, views, natural amenities, parks, businesses and other amenities - and one of the most important things that doesn't seem like its talked about: neighborhoods of similar social classes. There are myriad reasons one area does great, and I don't think its entirely due to barriers in investing and building, else those with no barriers would see massive movement towards them. Often times the desirability of living in a place is almost directly inversely related to how little regulation they have.
    - CryptoPunk 5y ago
      >>Housing however IS a scarce resource, especially housing when it comes to being close to things like transit, views, natural amenities, parks, businesses and other amenities Obviously density can compromise something like having good views, or the benefit of a relaxed low-density neighbourhood, but almost any other kind of housing scarcity can be addressed through densification. The study in the aeaweb link above estimates that increased housing restrictions in just three cities in the US; New York, San Francisco and San Jose, caused the US to have 36% less economic growth between 1964 and 2009 than it otherwise would have, by inhibiting population growth in these cities, which all provide settings for higher productivity due to agglomeration effects and being coastal cities with low logistical costs. A report by the White House's Council of Economic Advisors in 2016 largely came to the same conclusion: https://obamawhitehouse.archives.gov/sites/whitehouse.gov/files/images/Housing_Development_Toolkit%20f.2.pdf https://obamawhitehouse.archives.gov/sites/whitehouse.gov/fi... >>else those with no barriers would see massive movement towards them We see a massive movement of people from New York and California to Texas: https://www.northamerican.com/migration-map https://www.northamerican.com/migration-map It's hard to isolate factors behind this move, but I don't think it's a leap to assume lower housing costs, largely due to fewer restrictions on housing investment and construction, is one of them. In contrast to San Francisco, which is notorious for zoning restrictions and rent control mandates instituted by extreme-left city governments, and unsurprisingly, has the highest rental rates in the world (while not having the highest average income rates), Houston is renowned for its pro-free-market housing policy, and communersately affordable housing: https://www.sightline.org/2017/09/21/yes-you-can-build-your-way-to-affordable-housing/ https://www.sightline.org/2017/09/21/yes-you-can-build-your-...
teclordphrack2 5y ago
This article is about the study. If you want the article to be about "rent-seeking of the urban upper-classes" then you would need to do a study for that.
pasquinelli 5y ago
maybe it's strange, or maybe the santa fe institute's funding would be in danger if they published that sort of analysis. i tried to get in idea of what they were about briefly, but it made my eyes cross.
throwawaylinux 5y ago
What are the urban upper-classes, and what is the endemic rent-seeking they are engaging in?
- BirdieNZ 5y ago
  Urban upper-classes are landowners, the endemic rent-seeking they are engaging in is via monopoly control of land, which people need for living and working. They are able to extract high proportions of people's income for rent from those who are unable to afford to join the land-owning upper class.
  - throwawaylinux 5y ago
    > Urban upper-classes are landowners, the endemic rent-seeking they are engaging in is via monopoly control of land, Who has monopoly control of land? is there a cartel or corporation of all these shadowly urban upper-classes who own everything? > which people need for living and working. They are able to extract high proportions of people's income for rent from those who are unable to afford to join the land-owning upper class. Owning land is not "rent-seeking". Owning highly desirable land is not. Owning a large amount of highly desirable land is not. Renting it out is also not. Investing in appreciating assets of any kind is also not.
    - BirdieNZ 5y ago
      Landowners have monopoly control of land. There are ways of defining monopolies that avoid this conclusion, but the effect of a monopoly is precisely the effect of landowners. See, for example, Churchill: http://www.andywightman.com/docs/churchill.pdf http://www.andywightman.com/docs/churchill.pdf Land is essentially monopolised through regulatory capture (council land use restrictions) and the lack of new production of land (ignoring for now the very minor exceptions of, say, Dubai, Singapore, the Netherlands). There is a lack of viable substitutes of land, and due the necessity of land for human life, the owners of land are able to extract rent far above their marginal cost. It would be possible for landlords to not engage in rent-seeking, but in practice there are exceedingly few landlords who do not. See, for example, Ricardo's Law of Rent for an introduction as to why land-lording is the classic example of rent-seeking. Note that by saying "Investing in appreciating assets of any kind is also not." I suspect that you see land as equivalent to other forms of capital, and thus a legitimate form of investment to be pursued without any ethical qualms. However, land is not capital, and is distinct from other forms of investment.

Ensorceled 5y ago

It does seem strange to relabel the accelerating trend of converting housing into speculative investment vehicle as "wealth creation" and wondering why the poor are "missing out".

sgregnt 5y ago
IMO, the eeath creation happens almost by definition from increased efficiency of resource allocation in the society: Thebl free market forces drive more efficient allocation of scarce resources, so the weath is created in a sense, that there is the least amount of waste compared with other alternatives.
- lumost 5y ago
  In a free market of rational economic actors, no externalities, no liquidity limitations, and an unlimited time horizon this is probably true. The North American urban real estate market is increasingly dominated by a dwindling number of economic actors who collectively act to restrict housing supply. This is not a system where the free market is functional or would necessarily produce the best results.
  - sgregnt 5y ago
    > In a free market of rational economic actors Not sure what rationality has to do with this. It is about personal utility which is subjective and at time irrational. > liquidity ... time horizon Not sure how is this related? Liquidity in itself is an asset, if you have readily available money vs oney on paper that a big difference, always was and always will be. But how is this related? > ...limited number of actors... IMO, there are always so many alternatives, (e.g. moving to a different city, living in suburbs) it is hard to image uncompetitive real estate market, even if all the land in a city was in a private hands of a single "actor" it would still be very competitive market overall. But that's hardly a case, indeed even if the land is in hands of two actors it's enough for a competition here. Or do you suggest there is a cartel? In that case it's a legal issue of failed police force not a free market failure unless you privatize police as well.
    - lumost 5y ago
      Liquidity matters in free markets as it effects the ability of buyers to buy and sellers to sell. In Urban housing markets many individuals do not have the liquidity to buy even if they have the cash flow. The number of actors matter as moving to different cities typically means changing jobs which may or may not be viable, if alternative cities have the same pricing dynamics at play - then it may not be possible to find a better alternative in price. As to the reason why this all matters and we aren't content with simply choosing to rent from REIT A or REIT B is that zoning boards have proven unable to cut through A & B's protests against new construction. While A&B may compete with each other they do not compete with any alternative, and all potential customers must acquire housing. As long as the total number of housing units remains below the demand for housing then A&B will benefit. In practice there are still a number of players who interact with the zoning board - but the net result is still a frustratingly stagnant housing supply.
      - sgregnt 5y ago
        IMO, this is still a free market modulo the part with the city planning which is not about voluntary exchange of services or goods but a coertion by law. The definition of free market is so much broader than the peculiarities you've mentioned. Couldn't there be a free market before the fiat money existed? In any case, in my original post I was talking about forces of free market, these forces might exist in partially free market where many things are not a free choice but consequence of one or the other type of social coercion. Free market force: all it means is that the specific exchange between the parties was done voluntarily as a manifestation of the parties preferences in face of all other alternatives they have. In this sense the parties came to a conclusion that this action maximizes their utility. I'm not arguing that free market forces are better than the alternative (you need to define what you mean by better), just saying in terms of resources allocation, free market forces maximize utility in face of other alternatives. You can argue that this is a prisoner dilemma situation etc... but that's a fallacy as well IMO (can discuss this if more details are desired)
CryptoPunk 5y ago
Investing in housing is GOOD for society, because housing is not a scarce resource - the more is invested the more is built. It's precisely those places that have put up the most barriers to investing and building housing that have seen the greatest deterioration in housing affordability: https://www.econlib.org/library/Enc/RentControl.html https://www.econlib.org/library/Enc/RentControl.html https://www.aeaweb.org/articles?id=10.1257/mac.20170388 https://www.aeaweb.org/articles?id=10.1257/mac.20170388 Beware of the anti-profit bias: https://digest.bps.org.uk/2017/08/04/we-have-an-ingrained-anti-profit-bias-that-blinds-us-to-the-social-benefits-of-free-markets/ https://digest.bps.org.uk/2017/08/04/we-have-an-ingrained-an...
- taurath 5y ago
  Obviously having housing stock is probably good. Housing however IS a scarce resource, especially housing when it comes to being close to things like transit, views, natural amenities, parks, businesses and other amenities - and one of the most important things that doesn't seem like its talked about: neighborhoods of similar social classes. There are myriad reasons one area does great, and I don't think its entirely due to barriers in investing and building, else those with no barriers would see massive movement towards them. Often times the desirability of living in a place is almost directly inversely related to how little regulation they have.
  - CryptoPunk 5y ago
    >>Housing however IS a scarce resource, especially housing when it comes to being close to things like transit, views, natural amenities, parks, businesses and other amenities Obviously density can compromise something like having good views, or the benefit of a relaxed low-density neighbourhood, but almost any other kind of housing scarcity can be addressed through densification. The study in the aeaweb link above estimates that increased housing restrictions in just three cities in the US; New York, San Francisco and San Jose, caused the US to have 36% less economic growth between 1964 and 2009 than it otherwise would have, by inhibiting population growth in these cities, which all provide settings for higher productivity due to agglomeration effects and being coastal cities with low logistical costs. A report by the White House's Council of Economic Advisors in 2016 largely came to the same conclusion: https://obamawhitehouse.archives.gov/sites/whitehouse.gov/files/images/Housing_Development_Toolkit%20f.2.pdf https://obamawhitehouse.archives.gov/sites/whitehouse.gov/fi... >>else those with no barriers would see massive movement towards them We see a massive movement of people from New York and California to Texas: https://www.northamerican.com/migration-map https://www.northamerican.com/migration-map It's hard to isolate factors behind this move, but I don't think it's a leap to assume lower housing costs, largely due to fewer restrictions on housing investment and construction, is one of them. In contrast to San Francisco, which is notorious for zoning restrictions and rent control mandates instituted by extreme-left city governments, and unsurprisingly, has the highest rental rates in the world (while not having the highest average income rates), Houston is renowned for its pro-free-market housing policy, and communersately affordable housing: https://www.sightline.org/2017/09/21/yes-you-can-build-your-way-to-affordable-housing/ https://www.sightline.org/2017/09/21/yes-you-can-build-your-...

teclordphrack2 5y ago

This article is about the study. If you want the article to be about "rent-seeking of the urban upper-classes" then you would need to do a study for that.

pasquinelli 5y ago

maybe it's strange, or maybe the santa fe institute's funding would be in danger if they published that sort of analysis. i tried to get in idea of what they were about briefly, but it made my eyes cross.

throwawaylinux 5y ago

What are the urban upper-classes, and what is the endemic rent-seeking they are engaging in?

BirdieNZ 5y ago
Urban upper-classes are landowners, the endemic rent-seeking they are engaging in is via monopoly control of land, which people need for living and working. They are able to extract high proportions of people's income for rent from those who are unable to afford to join the land-owning upper class.
- throwawaylinux 5y ago
  > Urban upper-classes are landowners, the endemic rent-seeking they are engaging in is via monopoly control of land, Who has monopoly control of land? is there a cartel or corporation of all these shadowly urban upper-classes who own everything? > which people need for living and working. They are able to extract high proportions of people's income for rent from those who are unable to afford to join the land-owning upper class. Owning land is not "rent-seeking". Owning highly desirable land is not. Owning a large amount of highly desirable land is not. Renting it out is also not. Investing in appreciating assets of any kind is also not.
  - BirdieNZ 5y ago
    Landowners have monopoly control of land. There are ways of defining monopolies that avoid this conclusion, but the effect of a monopoly is precisely the effect of landowners. See, for example, Churchill: http://www.andywightman.com/docs/churchill.pdf http://www.andywightman.com/docs/churchill.pdf Land is essentially monopolised through regulatory capture (council land use restrictions) and the lack of new production of land (ignoring for now the very minor exceptions of, say, Dubai, Singapore, the Netherlands). There is a lack of viable substitutes of land, and due the necessity of land for human life, the owners of land are able to extract rent far above their marginal cost. It would be possible for landlords to not engage in rent-seeking, but in practice there are exceedingly few landlords who do not. See, for example, Ricardo's Law of Rent for an introduction as to why land-lording is the classic example of rent-seeking. Note that by saying "Investing in appreciating assets of any kind is also not." I suspect that you see land as equivalent to other forms of capital, and thus a legitimate form of investment to be pursued without any ethical qualms. However, land is not capital, and is distinct from other forms of investment.