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A Few Remarks About Adding Supply Vs. Subsidizing
Let’s say you have market in a thing that everyone needs: housing. Let’s say you have people who are not able to acquire what they need in that market. Should you provide MORE housing, change the rules so that “invisible hand” “someone” provides MORE housing, or subsidize some customers in the market so they can afford to acquire what they need in that market?
If you answered that question with anything other than, I Need More Information Of This Sort to answer this question, I _think_ you are probably wrong.
The specific information I _think_ you need to answer the question is: how many customers are in the market, how much housing is available, what specifically are the customers able to pay and what will they regard as “better than no housing at all” (viz couch surfing, sleeping in a car, on the street, in a shelter, at the emergency department, etc.), what specifically do the sellers in the market regard as “better than leaving the housing unsold”.
The stupid first question that must be answered is raw units housing / raw total units desired, but unfortunately, even this is tricky because “better than no housing at all” calculation includes a bunch of elasticity around household size (that is, sometimes, a customer would rather sleep on the street than on his sister’s couch, but not if it is freezing outside; sometimes, a customer would rather spend less and share a unit but not during a pandemic, etc.). There is also the phenomenon of imperfectly connected markets (how far are you willing to commute / can you get a job in another place and move). But if you persistently have demand in a particular defined geography that exceeds numerically total units available, that’s clear cut — you need more unit.
BUT! What if you take effective action to build lots more units but you wind up making it so no one wants to live there anymore. This Is Not Theoretical.
There are also problems of people flowing from one place to another (in very large numbers!) that can destabilize a functional market (in either direction).
Most of our housing problem in the United States is directly attributable to underbuilding after the Great Recession. Some of our housing problem in the United States is further attributable to our failure to build out broadband everywhere — we probably could have avoided some of the mad rush to the coastal cities and then the subsequent exodus which took the asset inflation that occurred in coastal cities and then randomly distributed it around the country as people sold out of coastal cities and rebought Everywhere Else and bid up the prices on the housing in those places.
But I also think that a lot of the problem is our persistent resistance to thinking of the United States, or at least 48 states as being a unified housing market, and the importance of “what housing is better than no housing” / “what minimum rent is better than no rent”. People will sacrifice a lot of housing, if it means they can have a job. Property owners will refuse a lot of tenants when they believe there will be another, much more remunerative tenant along soon and/or if the cost/benefit tradeoff of a tenant is poor (the expected move in/move out/maintenance and general costs of having someone in a housing unit is non-zero, and sometimes the “expected rent” is too low compared to those general costs. Property owners who have struggled to collect rent learn this quick and unlearn it very slowly.).
I really do love democracy, but it is really frustrating looking at housing market failures and how various groups of voters with entirely understandable concerns and desires layer on limits on housing supply and then are surprised by the predictable consequences. I’m thinking about all this because my daughter expressed that what she was learning in school seemed really pointless so I started explaining to her — in response to specific classes and material — what that class and/or material was intended to teach and enable her to do in life. She got it very quickly, but then was like, well, how come no one ever told me (a classic question of childhood and, honestly, adulthood). We also got into questions about What _Should_ Math Be Like (I mean, we’ve had computer programs that could do _all_ the math taught in a high school and a big chunk of a math intensive undergrad since I was in college and I graduated in 1991). I said, well, Math should be taught as a way to solve human problems. I then went on to explain how the kind of reasoning used in a lot of humanities / social sciences / etc. did not reflect the nuance that really good quantitative reasoning can involve. This particular example sprang forcefully to mind.
If you answered that question with anything other than, I Need More Information Of This Sort to answer this question, I _think_ you are probably wrong.
The specific information I _think_ you need to answer the question is: how many customers are in the market, how much housing is available, what specifically are the customers able to pay and what will they regard as “better than no housing at all” (viz couch surfing, sleeping in a car, on the street, in a shelter, at the emergency department, etc.), what specifically do the sellers in the market regard as “better than leaving the housing unsold”.
The stupid first question that must be answered is raw units housing / raw total units desired, but unfortunately, even this is tricky because “better than no housing at all” calculation includes a bunch of elasticity around household size (that is, sometimes, a customer would rather sleep on the street than on his sister’s couch, but not if it is freezing outside; sometimes, a customer would rather spend less and share a unit but not during a pandemic, etc.). There is also the phenomenon of imperfectly connected markets (how far are you willing to commute / can you get a job in another place and move). But if you persistently have demand in a particular defined geography that exceeds numerically total units available, that’s clear cut — you need more unit.
BUT! What if you take effective action to build lots more units but you wind up making it so no one wants to live there anymore. This Is Not Theoretical.
There are also problems of people flowing from one place to another (in very large numbers!) that can destabilize a functional market (in either direction).
Most of our housing problem in the United States is directly attributable to underbuilding after the Great Recession. Some of our housing problem in the United States is further attributable to our failure to build out broadband everywhere — we probably could have avoided some of the mad rush to the coastal cities and then the subsequent exodus which took the asset inflation that occurred in coastal cities and then randomly distributed it around the country as people sold out of coastal cities and rebought Everywhere Else and bid up the prices on the housing in those places.
But I also think that a lot of the problem is our persistent resistance to thinking of the United States, or at least 48 states as being a unified housing market, and the importance of “what housing is better than no housing” / “what minimum rent is better than no rent”. People will sacrifice a lot of housing, if it means they can have a job. Property owners will refuse a lot of tenants when they believe there will be another, much more remunerative tenant along soon and/or if the cost/benefit tradeoff of a tenant is poor (the expected move in/move out/maintenance and general costs of having someone in a housing unit is non-zero, and sometimes the “expected rent” is too low compared to those general costs. Property owners who have struggled to collect rent learn this quick and unlearn it very slowly.).
I really do love democracy, but it is really frustrating looking at housing market failures and how various groups of voters with entirely understandable concerns and desires layer on limits on housing supply and then are surprised by the predictable consequences. I’m thinking about all this because my daughter expressed that what she was learning in school seemed really pointless so I started explaining to her — in response to specific classes and material — what that class and/or material was intended to teach and enable her to do in life. She got it very quickly, but then was like, well, how come no one ever told me (a classic question of childhood and, honestly, adulthood). We also got into questions about What _Should_ Math Be Like (I mean, we’ve had computer programs that could do _all_ the math taught in a high school and a big chunk of a math intensive undergrad since I was in college and I graduated in 1991). I said, well, Math should be taught as a way to solve human problems. I then went on to explain how the kind of reasoning used in a lot of humanities / social sciences / etc. did not reflect the nuance that really good quantitative reasoning can involve. This particular example sprang forcefully to mind.