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Market based solutions are great for fungible things, where it's kind of easy to setup a healthy market, where competition between sellers actively contributes
by pas 5y ago
Market based solutions are great for fungible things, where it's kind of easy to setup a healthy market, where competition between sellers actively contributes to having better products, that serve the buyers better.
Housing has the big problem that it's a monopsony market. For that actual plot/lot of land there is only one seller.
Yes, nearby plots are kind of fungible, but when the same incentives drive the price up everywhere you run into the problem of having a market in a pathological state. It's impossible to add new sellers, the barriers to entry is too high (eg. you can't create new land there).
This doesn't mean that forcing communities to change is the best solution, but if they want to remain frozen in time they should pay for that privilege. (Eg. they should buy the land around themselves and/or the air rights so they can control new developments to exactly zero, ie. in their case by keeping everything static.)
After all this kind of proscription on change depresses the value of individual plots, because if someone would like to sell their plot they only can sell it to folks who will keep the existing house (or at best build a very similar one there), which is a strictly smaller group of potential buyers, than were new developments allowed.
- dtgriscom 5y ago> monopsony... only one seller Monopsony is when there is only one buyer; monopoly is when there is only one seller.
- pas 5y agoAh right, thanks! I was worried not to accidentally misuse monopoly that I ended up not thinking about what I wrote instead :D
- Y_Y 5y agoYou make a strong point. I would argue that alternatives do exist in the form of other cities, and certainly jobs and people are (sometimes) choosing to go to e.g. Texas instead of California on the basis of cost. The fact that the current inhabitants have such control over new construction is something I was taking as fixed, but I wouldn't argue it's healthy. Finally, as a compromise between paying Nimbys and forcing them to pay, I would be interested in seeing a trial of a kind of mutual auction. For example, a group of residents and a group of developers secretly bid what the project is worth to them (positive or negative) and then the higher bid pays the other party the value of the lower bid. There is probably a name for this, and a theory that shows how to do it properly, but I'd be interested to see if some economic games could reach a better solution (in terms of regret-minimization, for example).