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I'd add two other things to fix too. The first is housing. It is not a triumph every time the cost of housing goes up. That just diverts funds that could hav

I'd add two other things to fix too. The first is housing. It is not a triumph every time the cost of housing goes up. That just diverts funds that could have been spent on other things into housing, makes it considerably more expensive to move, and reduces the runway given a certain amount of funding. We would all be better off if houses were $1 each not $1m each. The second is the pitiful broadband available all over the country. With better broadband it is far easier to take advantage of contributors all over the country. Telepresence would allow collaborators to feel as though they are in the same room, and is best served by high bandwidths. Data files keep getting larger so it helps there too. And if you are using a remote computer displaying locally then again it is best served by higher bandwidths (and lower latencies).

potatolicious 14y ago
> "We would all be better off if houses were $1 each not $1m each." We would? Last I checked $1 can't even build some branches and a tarp. But to address your main point: > "It is not a triumph every time the cost of housing goes up." Indeed. Neither is it a triumph every time the cost of food goes up. Or the cost of gas. Or the cost of clothing. Or the cost of basic needs like the plumber or the mechanic. We would all (on a micro scale) be much better off if prices simply stayed put. Except in an economy where all prices are fixed your entrepreneurship wouldn't go anywhere either... What you're proposing is a complete removal of the free market economy and putting vast portions of it under central planning. History has some indications as to how that works (tip: "disaster" doesn't begin to describe it).
- rmason 14y ago
  Not in Detroit. True most of the $1 houses are gone but you'd be surprised by what $100 will purchase. http://www.businessinsider.com/detroit-houses-for-1-dollar-2012-2?op=1 http://www.businessinsider.com/detroit-houses-for-1-dollar-2...
  - potatolicious 14y ago
    And Detroit isn't the aftermath of a gigantic disaster? ;) Granted, Detroit is a disaster that didn't come from the nationalization of vast portions of private property.
- eli_gottlieb 14y ago
  We would? Last I checked $1 can't even build some branches and a tarp. You're ignoring, or haven't seen, the real meaning of his words. Indeed, $1 houses will probably always be undesirable and poorly constructed. But, that doesn't mean $1 million is a reasonable amount to spend on a house. The real problem is that housing has been turned from a durable good (like an automobile or a refrigerator) into a capital asset (like a stock or bond). So when housing prices go up, the people on the news say it's good for homeowners. However, it's only good for homeowners as a rise in stock-price is good for stockholders: the gain must be realized via an actual sale to someone who can afford this higher purchase price. With stocks and bonds, it's easy-enough to say that there's always another investor, and if there isn't, then whoever died from lack of a share of stock? You might be totally unable to realize your financial gain, causing a stock-market bubble to pop and destroying your net worth, but only you, the asset holder, are taking any damage. Ah, but housing is actually desired chiefly for its use-value, ie: to live in. So as the investment-ization of housing raises prices throughout whole markets at a time, it pushes out whole classes of people who just wanted somewhere to live, and increases the debt/mortgage burden for those who can still afford to buy. So, to sum up this bit of the shpiel, a rise in housing prices only benefits society insomuch as it spurs the construction of new housing in useful locations by signaling through the market to real-estate developers to build more. When the housing supply is fixed, or growing far more slowly than the price of housing (as in places like San Francisco or Boston), a rise in housing prices is effectively just a zero-sum transfer of wealth from society in general to real-estate owners -- economic rent-extraction. Contrast with automobiles, or refrigerators. We expect to buy them fresh and new, and watch them depreciate over time. It's entirely sensible to buy a used one, but we don't ever expect to buy a used car and sell it for more later. We do, however, expect these things to last a long time, whole decades. It's easiest for current municipalities, in the thrall of property owners, to treat housing as a capital asset and use it to extract economic rent (income earned for ownership rather than production) from the rest of society. However, it's best for society if we manage to get housing treated as a durable good: worthy of our money, but ultimately something we produce rather than invest in. We want housing to be like cars: expensive, but not so expensive that we feel a need to sell it off at a profit later and pervert both governments and markets to achieve that goal.
- rogerbinns 14y ago
  Others have answered you far better. It should be noted that there aren't newspaper articles praising increases in the prices of food, gas or clothing, but there are for house prices. Heck increasing house prices are mentioned in the context of politicians and giving them credit for doing such good things (hence my wording of "triumph"). I don't know why you think the housing market is a free market. If it was then this headline would not be possible "Obama policies ended housing free fall". And what about all the tax credits - not a free market. And what about the government pseudo agencies (Fannie/Freddie) - again not a free market. Planning permissions and zoning regulations are also part of the discussion about a free market. Even relocation allowance being taxable or not is an issue. I'd be far happier with an actual free market rather than one favoured by tax and similar policies with the goal of increasing the prices and hence taking money away from other things. (I also believe in a separate social safety net - all residents should have shelter, food, health and justice.) Back to my original point, which scenario do you think is better for a household taking home $4,000 a month - one where they spend $1 of that on housing or where they spend $2,500 of that on housing? I think the former would greatly benefit the country. (Obviously the exactly $1/house wouldn't happen but this is about the general order of magnitude of pricing.)
- dbattaglia 14y ago
  I read it as "we'd all be better off if the average house was closer to $1 rather that $1M".
Lukeas14 14y ago
Entrepreneurs would be better off if houses were $1 each not $1m each because our wealth comes from our businesses. However, for much of the past century most of the wealth accumulated by middle class America has come from their real estate investments. It's common for an urban or suburban house bought for $50,000 in the 1960s - 1970s to now be worth $500,000. So it actually is a triumph for many Americans when housing prices go up. Until of course they rise too quickly and we have a crash.
- yourapostasy 14y ago
  I believe this common perception rests upon a conflation of wealth, asset, and income. Middle class America received high incomes for a period of time, and converted a chunk of it into an asset in the form of residential housing, then thought it had substantial wealth embedded in that asset. Not so. Residential housing can be somewhat modeled by the purchasers/debtors as a put option that the debtor's income will not fall below a certain floor (sufficient to service the note), with a 7 to 10-year expiration date (the average age of a mortgage in the US before it is extinguished). If the residential housing is purchased outright, then it is a put option on the area's prevailing wages, which in turn supports the valuation. The housing structure and property itself is much more wage-linked asset than wealth that intrinsically generates income. It is wealth only in a derivative sense, as a high-latency indicator of prevailing wages in the area when it changes ownership. To cheerlead for housing prices to go up as an unalloyed good is to misplace the context of why it goes up in the first place. For a certain phase of economic development, it can be good because of the cascading economic benefits that arise from the growth such pricing deltas signal. For America, at its current stage of economic, technological and demographic development, in its place in the world economy, it is at least highly debatable whether housing prices going up actually leads to much positive externality economic benefits as before.
  - Lukeas14 14y ago
    Thanks for shedding more light on this. It sounds like you're saying that since the valuation of housing is primarily based on the wages of the surrounding population it should not be considered wealth. And that we shouldn't praise rising prices because we're not sure if they have a positive effect on the overall economy. But how is this different from any other investment if stocks, businesses, bonds, currency, etc all have these same properties? Or do they not? Also what is your definition of wealth? Even though most people don't receive income from their houses (unless it's a 2nd house), I think the intent to pass it on as an asset to their family would classify it as wealth since it would then be an abundant resource as opposed to necessary shelter. And if we got rid of housing as an investment what does the middle class have left? I'd love to see more people get into business either as an entrepreneur or an investor the risk and upfront cash means it's not for everybody. CD's and bonds are safe but no longer give the returns they used to.

potatolicious 14y ago

> "We would all be better off if houses were $1 each not $1m each." We would? Last I checked $1 can't even build some branches and a tarp. But to address your main point: > "It is not a triumph every time the cost of housing goes up." Indeed. Neither is it a triumph every time the cost of food goes up. Or the cost of gas. Or the cost of clothing. Or the cost of basic needs like the plumber or the mechanic. We would all (on a micro scale) be much better off if prices simply stayed put. Except in an economy where all prices are fixed your entrepreneurship wouldn't go anywhere either... What you're proposing is a complete removal of the free market economy and putting vast portions of it under central planning. History has some indications as to how that works (tip: "disaster" doesn't begin to describe it).

rmason 14y ago
Not in Detroit. True most of the $1 houses are gone but you'd be surprised by what $100 will purchase. http://www.businessinsider.com/detroit-houses-for-1-dollar-2012-2?op=1 http://www.businessinsider.com/detroit-houses-for-1-dollar-2...
- potatolicious 14y ago
  And Detroit isn't the aftermath of a gigantic disaster? ;) Granted, Detroit is a disaster that didn't come from the nationalization of vast portions of private property.
eli_gottlieb 14y ago
We would? Last I checked $1 can't even build some branches and a tarp. You're ignoring, or haven't seen, the real meaning of his words. Indeed, $1 houses will probably always be undesirable and poorly constructed. But, that doesn't mean $1 million is a reasonable amount to spend on a house. The real problem is that housing has been turned from a durable good (like an automobile or a refrigerator) into a capital asset (like a stock or bond). So when housing prices go up, the people on the news say it's good for homeowners. However, it's only good for homeowners as a rise in stock-price is good for stockholders: the gain must be realized via an actual sale to someone who can afford this higher purchase price. With stocks and bonds, it's easy-enough to say that there's always another investor, and if there isn't, then whoever died from lack of a share of stock? You might be totally unable to realize your financial gain, causing a stock-market bubble to pop and destroying your net worth, but only you, the asset holder, are taking any damage. Ah, but housing is actually desired chiefly for its use-value, ie: to live in. So as the investment-ization of housing raises prices throughout whole markets at a time, it pushes out whole classes of people who just wanted somewhere to live, and increases the debt/mortgage burden for those who can still afford to buy. So, to sum up this bit of the shpiel, a rise in housing prices only benefits society insomuch as it spurs the construction of new housing in useful locations by signaling through the market to real-estate developers to build more. When the housing supply is fixed, or growing far more slowly than the price of housing (as in places like San Francisco or Boston), a rise in housing prices is effectively just a zero-sum transfer of wealth from society in general to real-estate owners -- economic rent-extraction. Contrast with automobiles, or refrigerators. We expect to buy them fresh and new, and watch them depreciate over time. It's entirely sensible to buy a used one, but we don't ever expect to buy a used car and sell it for more later. We do, however, expect these things to last a long time, whole decades. It's easiest for current municipalities, in the thrall of property owners, to treat housing as a capital asset and use it to extract economic rent (income earned for ownership rather than production) from the rest of society. However, it's best for society if we manage to get housing treated as a durable good: worthy of our money, but ultimately something we produce rather than invest in. We want housing to be like cars: expensive, but not so expensive that we feel a need to sell it off at a profit later and pervert both governments and markets to achieve that goal.
rogerbinns 14y ago
Others have answered you far better. It should be noted that there aren't newspaper articles praising increases in the prices of food, gas or clothing, but there are for house prices. Heck increasing house prices are mentioned in the context of politicians and giving them credit for doing such good things (hence my wording of "triumph"). I don't know why you think the housing market is a free market. If it was then this headline would not be possible "Obama policies ended housing free fall". And what about all the tax credits - not a free market. And what about the government pseudo agencies (Fannie/Freddie) - again not a free market. Planning permissions and zoning regulations are also part of the discussion about a free market. Even relocation allowance being taxable or not is an issue. I'd be far happier with an actual free market rather than one favoured by tax and similar policies with the goal of increasing the prices and hence taking money away from other things. (I also believe in a separate social safety net - all residents should have shelter, food, health and justice.) Back to my original point, which scenario do you think is better for a household taking home $4,000 a month - one where they spend $1 of that on housing or where they spend $2,500 of that on housing? I think the former would greatly benefit the country. (Obviously the exactly $1/house wouldn't happen but this is about the general order of magnitude of pricing.)
dbattaglia 14y ago
I read it as "we'd all be better off if the average house was closer to $1 rather that $1M".

Lukeas14 14y ago

Entrepreneurs would be better off if houses were $1 each not $1m each because our wealth comes from our businesses. However, for much of the past century most of the wealth accumulated by middle class America has come from their real estate investments. It's common for an urban or suburban house bought for $50,000 in the 1960s - 1970s to now be worth $500,000. So it actually is a triumph for many Americans when housing prices go up. Until of course they rise too quickly and we have a crash.

yourapostasy 14y ago
I believe this common perception rests upon a conflation of wealth, asset, and income. Middle class America received high incomes for a period of time, and converted a chunk of it into an asset in the form of residential housing, then thought it had substantial wealth embedded in that asset. Not so. Residential housing can be somewhat modeled by the purchasers/debtors as a put option that the debtor's income will not fall below a certain floor (sufficient to service the note), with a 7 to 10-year expiration date (the average age of a mortgage in the US before it is extinguished). If the residential housing is purchased outright, then it is a put option on the area's prevailing wages, which in turn supports the valuation. The housing structure and property itself is much more wage-linked asset than wealth that intrinsically generates income. It is wealth only in a derivative sense, as a high-latency indicator of prevailing wages in the area when it changes ownership. To cheerlead for housing prices to go up as an unalloyed good is to misplace the context of why it goes up in the first place. For a certain phase of economic development, it can be good because of the cascading economic benefits that arise from the growth such pricing deltas signal. For America, at its current stage of economic, technological and demographic development, in its place in the world economy, it is at least highly debatable whether housing prices going up actually leads to much positive externality economic benefits as before.
- Lukeas14 14y ago
  Thanks for shedding more light on this. It sounds like you're saying that since the valuation of housing is primarily based on the wages of the surrounding population it should not be considered wealth. And that we shouldn't praise rising prices because we're not sure if they have a positive effect on the overall economy. But how is this different from any other investment if stocks, businesses, bonds, currency, etc all have these same properties? Or do they not? Also what is your definition of wealth? Even though most people don't receive income from their houses (unless it's a 2nd house), I think the intent to pass it on as an asset to their family would classify it as wealth since it would then be an abundant resource as opposed to necessary shelter. And if we got rid of housing as an investment what does the middle class have left? I'd love to see more people get into business either as an entrepreneur or an investor the risk and upfront cash means it's not for everybody. CD's and bonds are safe but no longer give the returns they used to.