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I think this thread is correct on the artificial nature of the scarcity. I had an epiphany that this is what we are doing in the stock market (via tax codes and

I think this thread is correct on the artificial nature of the scarcity. I had an epiphany that this is what we are doing in the stock market (via tax codes and retirement plans), and something similar in the housing market via credit schemes (typically govt backed). In the stock market, there is an evergrowing pool of securities getting sequestered away into pension schemes and RRSPs. You can change what security you are in, but people/funds seldom get out of the market. When you cash our of your retirement (before actual retirement), there are huge tax disincentives to do so. For housing, people generally have a progression as they move to larger houses (as they have more kids, or kids get older). If all houses continue to get expensive, you just always stay in the housing market (well, until you go to a retirement home or expire). Both seem to remind me of the classic definition of a ponzi scheme, except housing is a basic necessity. We are basically saying there is an evergrowing mountain of wealth - you just can't spend it till you retire.

kwertyoowiyop 5y ago
Interesting point! And in fact, since you can pass along most assets to your heirs without taxation, even your death won’t prompt a sale.
peytoncasper 5y ago
Fundamentally, if you boil any growth based asset down its going to be a “ponzi scheme” in architecture but not in intent. Growth is natural, given that there are more people born, more money is printed and the economy expands to add jobs to meet those needs. So yes, if tomorrow, no one else was born, a lot of systems would fall apart. Because growth would stall and liquidity would soon disappear as the last sellers find the last buyers. There are disincentives around divesting your retirement funds because at that age you probably won’t have the physical capacity to work anymore. So encouraging investment into a vehicle that has shown generational abilities to generate growth and returns and beat deflationary effects seems only logical. The government creates this behavior by agreeing not to tax some income if you invest in your retirement. However, this isn’t scarcity, stock markets are probably one of the most liquid assets on the planet besides literal cash. If an economy is inherently inflationary then asset prices will literally always have to increase. In my mind this is less about house prices rising and more about the centralization of well paying jobs within specific economic hubs. There are millions of homes and hundreds of thousands of acres of lands that are practically worthless, but aren’t actually viable candidates because until recently you had to commute and the land lacked investment into the necessary infrastructure to support those jobs. I’ve seen some arguments that no one wants live in small towns. And I don’t necessarily disagree, because the centralization of talent, competition and investment is often what makes large cities attractive. However, I would be remiss if I didn’t recognize the fundamental aspect that all large cities were once small towns. If companies or individuals aren’t willing to take a risk and move to underdeveloped areas, then it seems only logical that scarcity will be created in centralized pockets and prices will be driven up doesn’t it? Lastly, this idea that an object that for most people will be the most expensive purchase they ever make should be a static or deflationary asset is not something I understand. Home ownership isn’t cheap between maintenance and property taxes. Ideally those costs should be recouped somehow.
- prirun 5y ago
  > I’ve seen some arguments that no one wants live in small towns. And I don’t necessarily disagree, because the centralization of talent, competition and investment is often what makes large cities attractive. I prefer small town life, and I'm sure many others do too. One upside of the pandemic is that with more companies getting comfortable with remote work, centralization of talent is not quite as big a deal as before.
  - peytoncasper 5y ago
    Its a great point, I wasn't taking a pot shot at small town life. :) Just if everyone wanted to live in a small town, there would be a ton of medium size towns instead.
    - twoodfin 5y ago
      There are a lot of newly medium-sized towns, they're just in suburbs proximate to Salt Lake City, DFW, Jacksonville ... that don't frequently intersect with the HN interest space.
- lotsofpulp 5y ago
  Good comment. Also, density of people makes a very big difference in quality of life. If you upzone the popular western US cities to fit everyone in the world that wanted to live there, it would inherently change the quality of life. Obviously, whether or not people that already own land there should have some type of priority on deciding who and how many people get to live there is a political problem probably as old as the human race.
  - seanmcdirmid 5y ago
    Denser cities seem to be even more expensive than less dense cities (eg New York, Shanghai, Singapore, Tokyo, Hong Kong, Melbourne, etc…). So my guess is that denser cities already provide higher quality of life that people are bidding up. Eventually the government can only intervene with middle class public housing (eg in Singapore and a lesser extent Hong Kong).
Iefthandrule 5y ago
Did someone say ponzi scheme? https://news.ycombinator.com/item?id=27585207 https://news.ycombinator.com/item?id=27585207
marcosdumay 5y ago
Oh, wait, you are claiming that the retirement bubble is correlated with the stock market bubble, and you are making a pretty good point for it. That's scary.

kwertyoowiyop 5y ago

Interesting point! And in fact, since you can pass along most assets to your heirs without taxation, even your death won’t prompt a sale.

peytoncasper 5y ago

Fundamentally, if you boil any growth based asset down its going to be a “ponzi scheme” in architecture but not in intent. Growth is natural, given that there are more people born, more money is printed and the economy expands to add jobs to meet those needs. So yes, if tomorrow, no one else was born, a lot of systems would fall apart. Because growth would stall and liquidity would soon disappear as the last sellers find the last buyers. There are disincentives around divesting your retirement funds because at that age you probably won’t have the physical capacity to work anymore. So encouraging investment into a vehicle that has shown generational abilities to generate growth and returns and beat deflationary effects seems only logical. The government creates this behavior by agreeing not to tax some income if you invest in your retirement. However, this isn’t scarcity, stock markets are probably one of the most liquid assets on the planet besides literal cash. If an economy is inherently inflationary then asset prices will literally always have to increase. In my mind this is less about house prices rising and more about the centralization of well paying jobs within specific economic hubs. There are millions of homes and hundreds of thousands of acres of lands that are practically worthless, but aren’t actually viable candidates because until recently you had to commute and the land lacked investment into the necessary infrastructure to support those jobs. I’ve seen some arguments that no one wants live in small towns. And I don’t necessarily disagree, because the centralization of talent, competition and investment is often what makes large cities attractive. However, I would be remiss if I didn’t recognize the fundamental aspect that all large cities were once small towns. If companies or individuals aren’t willing to take a risk and move to underdeveloped areas, then it seems only logical that scarcity will be created in centralized pockets and prices will be driven up doesn’t it? Lastly, this idea that an object that for most people will be the most expensive purchase they ever make should be a static or deflationary asset is not something I understand. Home ownership isn’t cheap between maintenance and property taxes. Ideally those costs should be recouped somehow.

prirun 5y ago
> I’ve seen some arguments that no one wants live in small towns. And I don’t necessarily disagree, because the centralization of talent, competition and investment is often what makes large cities attractive. I prefer small town life, and I'm sure many others do too. One upside of the pandemic is that with more companies getting comfortable with remote work, centralization of talent is not quite as big a deal as before.
- peytoncasper 5y ago
  Its a great point, I wasn't taking a pot shot at small town life. :) Just if everyone wanted to live in a small town, there would be a ton of medium size towns instead.
  - twoodfin 5y ago
    There are a lot of newly medium-sized towns, they're just in suburbs proximate to Salt Lake City, DFW, Jacksonville ... that don't frequently intersect with the HN interest space.
lotsofpulp 5y ago
Good comment. Also, density of people makes a very big difference in quality of life. If you upzone the popular western US cities to fit everyone in the world that wanted to live there, it would inherently change the quality of life. Obviously, whether or not people that already own land there should have some type of priority on deciding who and how many people get to live there is a political problem probably as old as the human race.
- seanmcdirmid 5y ago
  Denser cities seem to be even more expensive than less dense cities (eg New York, Shanghai, Singapore, Tokyo, Hong Kong, Melbourne, etc…). So my guess is that denser cities already provide higher quality of life that people are bidding up. Eventually the government can only intervene with middle class public housing (eg in Singapore and a lesser extent Hong Kong).

Iefthandrule 5y ago

Did someone say ponzi scheme? https://news.ycombinator.com/item?id=27585207 https://news.ycombinator.com/item?id=27585207

marcosdumay 5y ago

Oh, wait, you are claiming that the retirement bubble is correlated with the stock market bubble, and you are making a pretty good point for it. That's scary.