No, it’s not a love match, just an interview. Kotkin says,
the valley that I used to cover back in the 80s, and even 90s, was filled with people who had been boat people, who had started PC board companies. You know, kind of somewhat people being able to make a career for themselves in the tech industry even if they didn’t, let’s say have a PhD or an MBA from an elite school. That’s just not the case anymore. I mean, you have a much more hierarchal order in Silicon Valley than you used to have and that is really reflected throughout most of this economy. I mean, what you see particularly here in California is wealthy, older property owners who are in pretty good shape because their property up, but young people can’t possibly buy a house.
He calls this “neo-feudalism” because it creates an order that is stable, but stagnant. I would argue that it is due mostly to natural forces, but there are policies at work as well. Read the whole interview.
The natural forces are the four forces that I often talk about.
1. The New Commanding Heights, as demand rises faster than productivity in education and health care.
2. Assortative mating and bifurcated family patterns.
3. Factor-price equalization (globalization).
4. The Internet and other new technology, which complements some skills and substitutes for others.
The policy forces at work include:
1. Credential requirements, which protect some workers by excluding others.
2. Subsidizing demand and restricting supply in health care and education. Credentialism does both, in that it adds to the demand for credential-providing schools and while restricting supply.
3. Subsidizing demand and restricting supply in housing markets. Environmental and other building restrictions in high-demand areas help to hold down supply and enable young professionals to outbid others for housing in places like San Francisco and Brooklyn.
4. The system of public education, which creates neighorhoods with “good schools” (meaning schools that have a lot of affluent students attending), leading people to bid up prices for those neighborhoods. If you had vouchers instead, parents probably would still bid up the prices of schools that attract affluent students (that is what happens in colleges–it is what the competition to get into “elite” colleges is all about), but at least this would not be linked as tightly to housing.
5. Various policies that redistribute income upward, particularly to the affluent elderly. Social security, Medicare, and public-sector pensions come to mind.
Upward redistribution not encouraging investment and job creation? What sacrilege. If the wealthy aren’t motivated, it can only be it hasn’t been sufficient. Increase them now. (Social security and medicare being capped at low levels are less significant for the wealthy.)
Low taxes on savers =\= upward redistribution, if that’s what you’re getting at.
Also, retired people have little reason to risk their savings in risky investments. They’re more interested in keeping what they have, so of course they’re no the most productive investors. So if you think this is a reason to increase capital gains taxes, you’re wrong.
Money is fungible. Some 80% of equities are held in tax deferred accounts making capital gains largely a moot point.
I haven’t read Kotkin elsewhere, but he just doesn’t sound credible in this interview. He says “…we want…something that resembles…the United States between 1940 and 1975-1980”. That’s just not going to happen. San Francisco is not as nice as it was 40 years ago? I’m sympathetic to the angst of the old-timers who yearn for days of yore (pre-Internet, no traffic on the highways) but that world is past. It’s not something that we could re-establish even if we wanted to.
Wow! Lots of California hate here and he does a number of things right
1) There is plenty economic mobility in California but the ones going up on the scale are minorities especially Hispanic-Americans. (And realize they are the majority population in the state at this point.)
2) Realize there is a lot of competition in Silicone Valley from immigrants. Also California population is not falling but yes it is not growing like it was in 30 – 50 years ago.
3) I do agree that the problem for red states like Kansas is Texas.
4) Throughout history there have been plenty of capitalism creating neo-feudalism systems for a couple generations. Read about any mining town in the US 100 years ago.
5) Assortative Mating has always been with us and they are exaggerating the changes the last 25 years! (If I may add that at my elementary about 10% of the kids are mixed race.) For Social Conservative problem is the the optimal marriage age is 26 – 30.
6) Again, why are you surprised that local city halls, usually dominated by long time residents and real agents, are slow to increase housing supply.
7) Reading about Texas, it sometimes appears to be 30 years behind California politics here. I noticed HRC won some of the big Texas cities and Hispanic-American voting there will continue to grow.
I think Kotkin is kidding himself about California here:
But California will always attract, whether it’s from abroad or domestically, people with money who want to live in a beautiful environment with good weather. It’s never going to become Detroit, but it’s not going to become something that rest of the country can do. If you take Californian housing regulations, which let’s say increases their prices twice what they should be, if Dallas tried that then who the hell would move to Dallas? If Dallas were as expensive as LA, nobody would go there. Why would you go there?
But New York City has the same weather as Detroit while being more expensive than LA. One bedroom apartments in Manhattan now average $3400/month and people still move there. On the other hand, Greece and southern Italy enjoy the same Mediterranean climate as coastal California as do many other Med regions but all of them remain poor relative to cold northern Europe. And let’s not forget that Tijuana has the same climate as San Diego. I’m sure there’s a lot of ruin in California (probably even enough to absorb a $100 billion dollar high-speed rail disaster), but ultimately the climate is really no guarantee of wealth.
Anecdotal, but I just got a call from a recruiter about an otherwise intriguing role in NorCal. Didn’t even consider it.
Actually, NYC’s weather is a little better (warmer winter, longer spring and fall) than Detroit.
Most parts of Greece and Italy have a Mediterranean climate, so the climate itself is not a draw, people can choose where to live within those countries based on other considerations. Similarly, Mexico is warm everywhere except the high altitude mountains (though not much of the country has a Mediterranean climate). On the other hand, coastal California is the only place in the United States with a warm Mediterranean climate, so the climate itself is a draw.
I don’t think CA’s climate makes it invincible, but it does give it more leeway than most places.
#4
The #1 desire in education is good peer groups. Basically, you want to discriminate against bad peers for your children.
The problem is that you allow no discrimination except price. Whether that price comes through tuition or real estate prices its still a very inefficient way to discriminate.
Lack of discrimination is the greatest deadweight loss in our society today. If you want a friendlier term just call it “illegality of voluntary association”.
Why do (you) we act like this is anything unique to education?
The entire purpose of hiring (and signaling) is to keep out the riff-raff. But pretend education can overcome signaling (while not even actually trying) and suddenly we have to feign surprise at cherry-picking.
It isn’t even controversial. You don’t mix 5 year Olds and 6 year olds (except when you do) and so on and so forth.
Allow me to channel Walter Williams.
It is insane that we can’t choose our classmates.
If the utterly stupid, inefficient, value-destroying, anti-community ways that people figure out how to do so look like racism to you, please grow up.
The definition of racism, not just in the modern mind but in legal fact, is disparate impact. Disparate impact is a statistical phenomenon. Since things people care about (like intelligence, behavior, etc) correlate with race any attempt to choose classmates based on factors that matter a great deal to people will also have a disparate impact on racial makeup. When they do it will be called racism and punished by the law.
There is no reason to believe these laws, or the social attitudes behind them, are going away. If anything they seem likely to strengthen due to a number of factors. Conservatives and libertarians have been useless at fighting this trend.
Since just about any kind of voluntary association is going to have some kind of disparate impact (reality being what it is) the ability of authorities to charge people with racism, sexism, etc will give authorities unlimited power. The various stop gaps that people come up with to try and shield themselves from that power will naturally be hypocritical and nonsensical because they can’t tackle it head on.
That is not racism. I don’t have to accept stupid, question begging lawyer logic.
…but the will of tyrants and all that.
It just happens that our tyrants today are a bunch of intellectual midgets.
My point directed at you is of course we want our kids to be surrounded by kids who take education equally as seriously as we do, just like we do with everything else everyone always does all the time every day and everywhere.
If the bad kids happen to be black, well, sorry about their luck.
Do you see a lot of blacks trying to get out of white schools? No
Because it has nothing to do with racism.
The funny thing about schools, is if you have trouble finding a proxy to separate good students and bad students, don’t rely on skin color, just wait 30 minutes and there will be another graded signaling test.
If I’m coming across as mildly contemptuous, please know that I’m actually wildly contemptuous.
It’s hard to know what exactly your contemptuous about. It’s less degree then direction that’s hard to understand.
Basically everything.
Start with this: of course we should be able to pick our schools. Kind of like how we should be able to choose every other thing.
It isn’t hard to determine who good students are, and it had nothing to do with race. They are tested every freaking day. If all the best students were black Mexicans, we’d want our kids to be in there with them.
The Herculean miracles that parents do to work around the dumb rules, ignorant jerks look upon it and call it racism.
Hey, at least you see freedom anf although yoi mistake it for racism, you like it because you like racism. So, for now we are in common cause.
I’m a bit confused. I was taught to hate racism growing up. I was also taught to believe that racism was irrational hatred for no reason, and I believed it wholeheartedly. I thought Southerners didn’t like blacks because of ignorance or some personal moral flaw, and that with education the issue would be solved over time.
I believed this basically until my late 20s. Looking back I see this was actually pretty hateful, assuming such terrible things about Southerners just because I was taught to do so.
Then I found there were all sorts of rational reasons why race mattered. So because I cared about those things, I had to care about race.
I’ll even go a step further. It’s more then IQ scores. In most cases where whites and Asians can choose who to live with, where to go to school, and what church to worship at, they tend to self segregate. The red dots on this map are nearly as separated from the blue dots as the green dots are.
http://demographics.virginia.edu/DotMap/
Even among expensive neighborhoods with good schools, they will congregate in their own expensive neighborhoods and their own good schools. I saw a lot of this being just one of five white kids in a majority Asian school. This is despite both being high IQ well behaved peoples. Cross over is easier, but its not like everyone with the same IQ score is an identical person.
They do this because even amongst high IQ well behaved people, there are an awful lot of different ways to live a life. People prefer some peer groups and not others. Certain social standards and not others. I wouldn’t want my kids spending the kind of time in mind numbing SAT cram school that I saw when I worked at a Korean tutoring company. There is more to how we are going to live as a community then whether a dude in a hoodie is about to jack me or not.
Even with a race, I’d have little in common with SJWs that have the same IQ as me. Or even apolitical hipsters and their skinny jeans. I probably have more in common with this guy then lots of white people:
https://www.youtube.com/watch?v=xlyqyz-9kr0
If we had true freedom of association most people would hang out with people like themselves most of the time. There would be exceptions. Occasionally “people mostly like yourself” would be a different race. For the most part people will accept people into their community regardless of race *if the person acts appropriately*. It’s up to the community to determine the criteria for acting appropriately. Not the government. Not some busy body stranger from some faraway place. Actual human beings should be free to live the way they want.
The leap comes when you realize that attaining that kind of freedom is not a given. It isn’t a universally supported value, and some societal arrangements promote it more then others.
Ultimately, all this racism talk is about some associations trying to make sure other associations can’t organize themselves, so that they can gain one over on rival associations in the competition for the usual chimp goods we all crave. Libertarian answer is to pre-emptively surrender to all aggressive action by any association. You just can’t rely on them in a fight, which means those willing to fight can push them around however they want.
Dealing with the real world is hard. You can’t get everything you want. There are trade offs. If you don’t want a busy body government calling everyone racist and interfering with their lives, you probably need an electorate that isn’t as diverse. If it is diverse then there is too much of a political incentive to rile people up over race. This is true whether you want it to be true or not.
The problem with libertarians is they don’t deal with man as he is. Only some ideal man that doesn’t exist.
Their ideal man isn’t even a very interesting man. Just some ahistorical consumption machine. If they are going pin their entire hopes on the emergence of some ahistorical “new man” you’d at least think it would be an inspiring vision. Not fried beans, porn, and pain killers forever.
I was bullied in school. I’m not complaining and I’m not talking about the candy-ass way everyone is bullied these days. I kicked their Fooking asses. But I’m also talking about the fact that whoever participated orcing kids like I was to be warehoused with those future felons literally deserves to be shot. They are lucky I’m a card-carrying libertarian.
Correction, current felons. Just because schools are anarchy doesn’t make them non-criminals. One time when I was a freshman, there was this 6 foot 2 old guy, I don’t remember if he was an adult, but he failed multiple times and they kept him in our freshman gym class. Ironically he was Mexican. The only Mexican I ever knew of growing up. He drove to the hoop and put his knee in one kid’s chest. The kid said “You can’t do that.” He said “stop me.” That is felonious assault. We just force kids to endure it unlike how in adult world he could be arrested immediately.
It is stagnant, but I’m not sure how stable it is. Does the past 20 years look stable to anyone? It seems stable sometimes, in that there is a cap on GDP growth. When the cities operating on the innovative frontier are exclusionary (through housing policy), there will be instability, because the equilibrium in those housing markets isn’t where the cost of building settles with regard to demand. The equilibrium settles where the unmet demand settles with the expectation of future political obstacles to entry. Those values are dependent on far future high rents that are based on political obstruction.
There is a lot of kvetching about how the Fed is just supposedly feeding asset bubbles. This is the reason. There is a cap on the number of people who can engage in dense networks of human capital and the number of people who can earn a living in the non-tradable sectors that serve those people. Economic growth devolves into a bidding war on access to those markets. Unstable stagnation results.
+1
When you print money, it inevitably flows to the bottleneck. If this were the 1960s that might have been middle class wages, but in 2017 its not. So you don’t get CPI inflation but you get asset bubbles.
Printing money isn’t the problem. Blaming this on money is like blaming a forest fire on the oxygen in the air. Popping the “bubble” with tight money is like fighting forest fires by initiating plankton kills.
The only legitimate way to bring down housing prices is to relieve the supply constraint. If we aren’t going to do that, then the local optimum includes high home prices in those cities.
Supply constraint issues don’t have easy fixes. SF hasn’t built enough housing to match demand since 1941. Either the problem isn’t politics, or the political problem is so difficult that we haven’t solved it in 75 years.
All the success stories are sunbelt cities that started with much lower density, have fewer transport bottlenecks, have tons of unoccupied land to develop, and lack any truly commanding heights sectors.
You are correct that it may not be solvable. The problem has gotten much worse in the past 20 years because density has become much more valuable. It was a latent problem that has become realized.
As a first step, I would hope we can stop trying to solve it by taking away the money.
Maybe if we made choice easier, we’d get LESS assortative migration. Since it is the right thing to do anyway, we should try it and see.