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The article implies that it's a big problem for commodities to go to the people willing to pay the most for them. Housing is just another commodity; is it surpr

The article implies that it's a big problem for commodities to go to the people willing to pay the most for them. Housing is just another commodity; is it surprising that the people who derive the most value from being in a city center (professionals in finance, law, business) end up paying the most for the privilege?

icebraining 13y ago
That it's not surprising doesn't mean it's not a problem. And while those classes may derive the most value from being in the city center, it doesn't necessarily mean that society as whole does. Or even those individuals themselves, in the longer term.
- salmonellaeater 13y ago
  The questions of distorted incentives and short-term decision-making are much more interesting questions! As to whether it's a problem or not, how would you argue that it is? Is there cultural value to having bohemians or artists or people other than high-income professionals clustered in city centers, value which isn't represented in their incomes? If so, wouldn't it be more efficient to provide a subsidy for their cultural output and let them choose where to live?
  - icebraining 13y ago
    More efficient than what?
twic 13y ago
Housing is simply not just another commodity. An utterly fundamental aspect of commodities is that their production is price-elastic, and governed by supply and demand: if demand increases, prices rise, so, supply increases, prices fall again, and the market remains efficient. The housing supply has very little price elasticity, at least in London. This is for the very simple reason that there is hardly any space to build new housing, and enormous barriers to demolishing existing housing to free up such space. So, when prices go up, as they do every year, supply does not expand accordingly. I'm sorry, but to brush the problem off with an assertion that houses are just another commodity is simply to advertise one's ignorance of economics.
- deleted 13y ago
  [deleted]
- salmonellaeater 13y ago
  You're right: I chose the wrong word. My point was more about the allocation of housing to the people willing to pay the most. I don't see why housing ought to be special in this regard; most things money can buy are sold at market prices.
- michaelochurch 13y ago
  The housing supply has very little price elasticity, at least in London. Demand is also inelastic, which leads to some counterintuitive results. Let's say that you destroy 5% of housing (a catastrophic flood). Prices will double. Dumbasses will assume that housing became more desirable. ("People really want to live here! Prices are going up rapidly!") No, it just became scarcer. However if you conflate price and value, which most people do, that disaster (that reduces quantity by 5% but doubles prices) will be taken to cause a 90% improvement in "value". Wrong. See also: 9/11. After the terrorist attack, prices in Manhattan actually went up as speculators bet on future supply compromise/destruction in NYC real estate. There was a brief dip in Lower Manhattan (panic selling) but the more adept speculators bought, creating the morbid 9/11 Boom in NYC real estate. Slight margins in supply problems have huge price effects. That is the story of housing. That's why it's so infuriating when upper-middle-class people get rent control through connections. It's not that there are many of these people-- they're much less than 1%-- but that they have such a disproportionate impact. The global elite's parasitism is just one catastrophe that is driving up prices. It doesn't take many houses to be pulled off the market to push them up by huge amounts.
victorNicollet 13y ago
It is not surprising. But it's a very bad idea. A city needs low- or medium-wage jobs. Teachers. Paramedics. Firemen. Policemen. Bus drivers. Public workers. If these people get pushed out of the city, a workforce shortage occurs, with obvious consequences : there are fewer such workers around, and they get paid more for less work. If you take into account all the bonuses, perks and short hours, it's not unheard of for a bus driver to earn as much, per hour of work, as an average lawyer.

icebraining 13y ago

That it's not surprising doesn't mean it's not a problem. And while those classes may derive the most value from being in the city center, it doesn't necessarily mean that society as whole does. Or even those individuals themselves, in the longer term.

salmonellaeater 13y ago
The questions of distorted incentives and short-term decision-making are much more interesting questions! As to whether it's a problem or not, how would you argue that it is? Is there cultural value to having bohemians or artists or people other than high-income professionals clustered in city centers, value which isn't represented in their incomes? If so, wouldn't it be more efficient to provide a subsidy for their cultural output and let them choose where to live?
- icebraining 13y ago
  More efficient than what?

twic 13y ago

Housing is simply not just another commodity. An utterly fundamental aspect of commodities is that their production is price-elastic, and governed by supply and demand: if demand increases, prices rise, so, supply increases, prices fall again, and the market remains efficient. The housing supply has very little price elasticity, at least in London. This is for the very simple reason that there is hardly any space to build new housing, and enormous barriers to demolishing existing housing to free up such space. So, when prices go up, as they do every year, supply does not expand accordingly. I'm sorry, but to brush the problem off with an assertion that houses are just another commodity is simply to advertise one's ignorance of economics.

deleted 13y ago
[deleted]
salmonellaeater 13y ago
You're right: I chose the wrong word. My point was more about the allocation of housing to the people willing to pay the most. I don't see why housing ought to be special in this regard; most things money can buy are sold at market prices.
michaelochurch 13y ago
The housing supply has very little price elasticity, at least in London. Demand is also inelastic, which leads to some counterintuitive results. Let's say that you destroy 5% of housing (a catastrophic flood). Prices will double. Dumbasses will assume that housing became more desirable. ("People really want to live here! Prices are going up rapidly!") No, it just became scarcer. However if you conflate price and value, which most people do, that disaster (that reduces quantity by 5% but doubles prices) will be taken to cause a 90% improvement in "value". Wrong. See also: 9/11. After the terrorist attack, prices in Manhattan actually went up as speculators bet on future supply compromise/destruction in NYC real estate. There was a brief dip in Lower Manhattan (panic selling) but the more adept speculators bought, creating the morbid 9/11 Boom in NYC real estate. Slight margins in supply problems have huge price effects. That is the story of housing. That's why it's so infuriating when upper-middle-class people get rent control through connections. It's not that there are many of these people-- they're much less than 1%-- but that they have such a disproportionate impact. The global elite's parasitism is just one catastrophe that is driving up prices. It doesn't take many houses to be pulled off the market to push them up by huge amounts.

victorNicollet 13y ago

It is not surprising. But it's a very bad idea. A city needs low- or medium-wage jobs. Teachers. Paramedics. Firemen. Policemen. Bus drivers. Public workers. If these people get pushed out of the city, a workforce shortage occurs, with obvious consequences : there are fewer such workers around, and they get paid more for less work. If you take into account all the bonuses, perks and short hours, it's not unheard of for a bus driver to earn as much, per hour of work, as an average lawyer.