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But the problem of your friend is not that you treat your house as an investment. By definition, if people "invest" in goods that can be produced at a certain

But the problem of your friend is not that you treat your house as an investment. By definition, if people "invest" in goods that can be produced at a certain price, then production should kick in and restore balance. In a functional housing market you shouldn't be able to get a better appreciation of housing than the inflation rate, except for perhaps some very limited and irreplaceble houses in the Hamptons or designed by famous architects. Housing should behave much like the painting market: a few are worth millions, but everybody can get a cheap painting for their living room because more painters are born every day. So the actual problem that enables this housing pyramid scheme is the lack of production and the entrenched policies of class and race discrimination in real estate development. Existing homeowners rationally want to exclude builders away from their neighborhoods to keep supply limited, so they are politically fighting for restrictive legislation. This problem can only be solved politically, with the state taking a major role in the supply of housing.

cozzyd 4y ago
Aren't condos basically illegal in many places? That's at least part of the problem, since obviously single family homes can't sprawl forever
pdonis 4y ago
> This problem can only be solved politically, with the state taking a major role in the supply of housing The state already takes a major role in the supply of housing, as you yourself acknowledge. That's the problem, not the solution.
- cornholio 4y ago
  The upper levels of government can and should correct the failures of the lower levels which are captive to local homeowner interests. The ideea that you can eject the state from regulating the use of a resource with so many externalities is a pipe dream, you either get some sort of favela or the residents re-invent a much more exclusionary and bigoted version of the state, for example the HOA.
  - pdonis 4y ago
    > The upper levels of government can and should correct the failures of the lower levels which are captive to local homeowner interests. They have been, for decades. That's where things like the Community Reinvestment Act, which played a significant role in causing the crash of 2008, came from. Not to mention the decades-old policy of encouraging mortgages by funding them with money printed by the Fed's printing press. > The ideea that you can eject the state from regulating the use of a resource with so many externalities is a pipe dream No, what is a pipe dream is the idea that governments can somehow fix problems with externalities or market failures. They can't; they make them worse. That's because governments are not magical entities that somehow always do what is best. They are organizations run by human beings, and their incentive structure is even worse than that of free markets. > the residents re-invent a much more exclusionary and bigoted version of the state, for example the HOA While I'm no fan of HOAs, at least the people in them have skin in the game, being members of the community themselves. However flawed this model is, it's still preferable to having unelected bureaucrats in a city a thousand miles away micromanaging people's lives.
    - cornholio 4y ago
      Governments fix market failures all the time. For example, there is not a single country on earth with unregulated environment policies, a high standard of living, and where the air is still breathable and water potable. Or one with no food safety regulations where street-food is somehow magically 100% safe to eat by virtue of the invisible hand. Or where banking is reliable despite no financial regulation. Or where justice is equitably delivered by for-hire private judges. Those things take coordination and effort to achieve, and some governments do achieve them, some to such a large extent that we come to take them for granted.
      - pdonis 4y ago
        > Governments fix market failures all the time. Governments claim to fix market failures all the time. That doesn't mean they actually do. > Those things take coordination and effort to achieve That is true, but governments are not the only way to do coordination. In fact they are usually the worst way.

cozzyd 4y ago

Aren't condos basically illegal in many places? That's at least part of the problem, since obviously single family homes can't sprawl forever

pdonis 4y ago

> This problem can only be solved politically, with the state taking a major role in the supply of housing The state already takes a major role in the supply of housing, as you yourself acknowledge. That's the problem, not the solution.

cornholio 4y ago
The upper levels of government can and should correct the failures of the lower levels which are captive to local homeowner interests. The ideea that you can eject the state from regulating the use of a resource with so many externalities is a pipe dream, you either get some sort of favela or the residents re-invent a much more exclusionary and bigoted version of the state, for example the HOA.
- pdonis 4y ago
  > The upper levels of government can and should correct the failures of the lower levels which are captive to local homeowner interests. They have been, for decades. That's where things like the Community Reinvestment Act, which played a significant role in causing the crash of 2008, came from. Not to mention the decades-old policy of encouraging mortgages by funding them with money printed by the Fed's printing press. > The ideea that you can eject the state from regulating the use of a resource with so many externalities is a pipe dream No, what is a pipe dream is the idea that governments can somehow fix problems with externalities or market failures. They can't; they make them worse. That's because governments are not magical entities that somehow always do what is best. They are organizations run by human beings, and their incentive structure is even worse than that of free markets. > the residents re-invent a much more exclusionary and bigoted version of the state, for example the HOA While I'm no fan of HOAs, at least the people in them have skin in the game, being members of the community themselves. However flawed this model is, it's still preferable to having unelected bureaucrats in a city a thousand miles away micromanaging people's lives.
  - cornholio 4y ago
    Governments fix market failures all the time. For example, there is not a single country on earth with unregulated environment policies, a high standard of living, and where the air is still breathable and water potable. Or one with no food safety regulations where street-food is somehow magically 100% safe to eat by virtue of the invisible hand. Or where banking is reliable despite no financial regulation. Or where justice is equitably delivered by for-hire private judges. Those things take coordination and effort to achieve, and some governments do achieve them, some to such a large extent that we come to take them for granted.
    - pdonis 4y ago
      > Governments fix market failures all the time. Governments claim to fix market failures all the time. That doesn't mean they actually do. > Those things take coordination and effort to achieve That is true, but governments are not the only way to do coordination. In fact they are usually the worst way.