6 ms·

Short answer: No. The problem with these insane prices isn't really that you have disparity within the same country, but that a significant amount of people in

Short answer: No. The problem with these insane prices isn't really that you have disparity within the same country, but that a significant amount of people in these places cannot afford to live in there. You can't have a restaurant because you need to hire waiters but you can't pay waiters enough for them to pay the rent. So your service industry is disrupted or alternatively: people need to commute 1 or 2 hours to get to these jobs. The reason it is not shocking that people in the midwest pay more than people in developed countries is because in the midwest most people have a relatively better life than most people in those developing countries. Whereas, say, a waiter living in San Francisco is not going to live a very different life from a waiter living in the Midwest who will, in turn, be living a much better life than a waiter in a developing nation. So I think people are shocked because they realise their quality of life is not so different but there is a huge disparity in prices. Same country, similar quality of life, hugely different prices? This is definitely an anomaly!

golergka 4y ago
> The problem with these insane prices isn't really that you have disparity within the same country, but that a significant amount of people in these places cannot afford to live in there. You can't have a restaurant because you need to hire waiters but you can't pay waiters enough for them to pay the rent. So your service industry is disrupted or alternatively: people need to commute 1 or 2 hours to get to these jobs. Haven't you described a problem that fixes itself through market forces? Restaurant waiters move to other cities, restaurants (and millions of other businesses) close, city becomes less desirable, rents go down.
- mindslight 4y ago
  The mere existence of a negative feedback mechanism does not imply a "fix". Rather depending on the magnitude, momentum, and damping, can result in many different system behaviors, including increasing oscillation. Meanwhile the current conditions cause actual damage to people's lives, even if they may converge in the future. So no, market fatalism is not very insightful here.
- michaelchisari 4y ago
  On a long enough timeline, maybe. But societies can't wait the 5-10-20-30 years it might take the market to correct itself. That's one dimensional thinking. Political and social destabilization brought on by market inefficiencies can create dangerous situations that are deep and long-lasting.
- littlecosmic 4y ago
  People often want/need to live near their friends and family, which makes them irrational from the market's point of view. Treating location as fungible gives them cheaper housing, but isolation.
  - lotsofpulp 4y ago
    Wanting to live near friends and family is rational. It all gets fed into the utility function that tells people if something is worth paying for or not, and people are what the market is composed of.
- DoughnutHole 4y ago
  Only if the housing market is functional and responsive, ie high rents are only driven by "desirability" and so demand can adjust quickly. The reality is that trends in the rental market are very slow to reverse outside of the collapse of a bubble like in 2008. At the moment it is completely dysfunctional since nearly every city in the Anglophone world is experiencing both a housing shortage and massive speculation in the housing market. Additionally peoples' housing decisions are much less fluid than their decisions on to say buy a particular product - the entire basis of their financial security is tied up in where they live. Just because rent is lower in a less desirable city that's no help if they can't find a decent job in the less desirable city, or if due to high costs where they already live they don't have the liquidity to finance a major move. And that's not even getting into the social cost - uprooting yourself from your home can cost you resources that can't easily replaced, such as a social safety net in the form of family and close friends, potentially providing things like free childcare, help in emergencies, rides to work if you can't drive/can't afford a car, interest-free loans etc etc. Because of all this people will stick with unbearable rents until long after they stop being able to comfortably afford them. Housing responds to market forces, but since the supplier has a far more captive market than most industries the time horizon for changes is very slow. It doesn't really help people to claim that the market will sort itself out so just put up with this misery for 10-20 years - especially when in the past 10 years the market has only become if anything more dysfunctional.

golergka 4y ago

> The problem with these insane prices isn't really that you have disparity within the same country, but that a significant amount of people in these places cannot afford to live in there. You can't have a restaurant because you need to hire waiters but you can't pay waiters enough for them to pay the rent. So your service industry is disrupted or alternatively: people need to commute 1 or 2 hours to get to these jobs. Haven't you described a problem that fixes itself through market forces? Restaurant waiters move to other cities, restaurants (and millions of other businesses) close, city becomes less desirable, rents go down.

mindslight 4y ago
The mere existence of a negative feedback mechanism does not imply a "fix". Rather depending on the magnitude, momentum, and damping, can result in many different system behaviors, including increasing oscillation. Meanwhile the current conditions cause actual damage to people's lives, even if they may converge in the future. So no, market fatalism is not very insightful here.
michaelchisari 4y ago
On a long enough timeline, maybe. But societies can't wait the 5-10-20-30 years it might take the market to correct itself. That's one dimensional thinking. Political and social destabilization brought on by market inefficiencies can create dangerous situations that are deep and long-lasting.
littlecosmic 4y ago
People often want/need to live near their friends and family, which makes them irrational from the market's point of view. Treating location as fungible gives them cheaper housing, but isolation.
- lotsofpulp 4y ago
  Wanting to live near friends and family is rational. It all gets fed into the utility function that tells people if something is worth paying for or not, and people are what the market is composed of.
DoughnutHole 4y ago
Only if the housing market is functional and responsive, ie high rents are only driven by "desirability" and so demand can adjust quickly. The reality is that trends in the rental market are very slow to reverse outside of the collapse of a bubble like in 2008. At the moment it is completely dysfunctional since nearly every city in the Anglophone world is experiencing both a housing shortage and massive speculation in the housing market. Additionally peoples' housing decisions are much less fluid than their decisions on to say buy a particular product - the entire basis of their financial security is tied up in where they live. Just because rent is lower in a less desirable city that's no help if they can't find a decent job in the less desirable city, or if due to high costs where they already live they don't have the liquidity to finance a major move. And that's not even getting into the social cost - uprooting yourself from your home can cost you resources that can't easily replaced, such as a social safety net in the form of family and close friends, potentially providing things like free childcare, help in emergencies, rides to work if you can't drive/can't afford a car, interest-free loans etc etc. Because of all this people will stick with unbearable rents until long after they stop being able to comfortably afford them. Housing responds to market forces, but since the supplier has a far more captive market than most industries the time horizon for changes is very slow. It doesn't really help people to claim that the market will sort itself out so just put up with this misery for 10-20 years - especially when in the past 10 years the market has only become if anything more dysfunctional.