A commenter refers to John Nye’s 2002 essay. Nye writes that as economic growth improves food choices for everyone,
For those who only care about getting a good meal, this is a blessing not a tragedy. But those with expectations of going to the great restaurants as their incomes rise will be frustrated by the fact that the best remain agonizingly out of reach unless they grow rich much faster than the average. So only the wealthiest of the wealthy can have these goods and must pay a growing premium to do so.
Nye’s point is that the price of positional goods will go up faster than people’s incomes. Think of Harvard as a positional good. The commenter’s claim is that the key positional goods are indicators of cultural supremacy. This would imply that the conflict between old-fashioned liberal values and the new social justice values is over positional goods and thus will be very intense.
Are good neighborhoods the ultimate positional goods?
For me, I have no interest in trying the best restaurants, cars, watches, liquors, etc. I have actually found them overrated and disappointing. But golly gee, I will do everything within my means to live in a nice neighborhood.
My conjecture: good neighborhoods are the ultimate bundled good – they have intrinsic value and positional value. And, the ultimate positional value of a good neighborhood is keeping out the riff raff.
The purpose of discrimination (in the grandest sense, not just racial) is to include/exclude effectively. If you outlaw discrimination on all metrics but price…price skyrockets.
Imagine something like “anyone with a criminal record can’t live here” or “only people who can pass a test can live here” or “you need proof of a certain gross income to live here” or “you have to be married and have children to move in here”. To be truly complete “here” would probably need to encompass “this school district”.
A lot of these could solve the problem of discriminating without having people pay lots and lots of extra money for a mortgage.
Your approach seems totally unnecessary and mildly fascist (sorry, but who gets to enforce your rules?) Also, it assumes that there is a bunch of low hanging fruit that could be picked if only we had the right policies in place.
Here are my thoughts:
1) a significant portion of real estate prices are primarily determined by intrinsic value (i.e. implied rents).
2) those implied rents are primarily a function of the local economy and the economic value derived from that economy. That’s why home prices are drastically different in the SF Bay Area than say vs. Minden, Nebraska.
3) once we have isolated for 1) and 2), we are still left with who gets to live where in a certain geographic region. Well, the highest bidders (i.e. the wealthiest) get to pick the best spots and it just cascades from there.
4) where those highest bidders choose to live will be based on intrinsic qualities (e.g. commute time, surrounding beauty, etc.) and positional qualities (e.g. whom can I exclude). Trying to isolate those qualities and de-bundle them seems like a fool’s errand.
Or, in other words, under your preferred approach, we are still left with a bidding process, since the underlying good (land) is scarce within a geographic area.
1) a significant portion of real estate prices are primarily determined by intrinsic value (i.e. implied rents).
2) those implied rents are primarily a function of the local economy and the economic value derived from that economy
I can walk a half-mile, to a house that’s nearly identical to mine which costs twice as much. It’s in a wealthier town with much better schools. That’s common, nationwide–there may be some areas like SF where it is not the case, but those are the exception.
What’s the big difference? At a rough guess, 90% of the children in the next two live with both their parents; less than half the children in my town do. It would be perfectly feasible to have an HOA with a restriction like that if it were not illegal–and it would mean that the prices in a “good” neighborhood didn’t need to be high enough to require two paychecks to live there, which is how it works now.
So, if I understand you correctly, you want to force wealthy single parent families out of the nice town, so that less wealthy two parent families in the less nice town can occupy their spot? Whether you intend it or not, that’s precisely the equilibrium that would result from your HOA restriction approach.
Or perhaps you missed my point that land is scarce? Thus, it must be allocated in some manner.
On average for the US, in 2016, for children of parents with college degrees, about two thirds were raised from birth by their married, biological parents.
For children with parents without high school diplomas, it’s only 29%.
Source
No, you’ve missed my point.
It would be easy to expand the area that is 90% two parent families: that’s a matter of rules, not of land. And by doing so, less wealthy two parent families could have access to areas that are mostly two parent families–the discrimination would be directly on marital status, rather than using wealth as a proxy for marital status.
I think that people should be able to form communities with people that share their values and behaviors without paying the absolute maximum amount of implied rent their potential income will bear. I don’t see how devoting a huge chunk of their lifelong productivity to enrich those who own those unimproved land rents is a favorable equilibrium.
The land is there. The problem is the dysfunctional squatters reduce the value of the land below what it would be if they didn’t exist at all.
@asdf
“I don’t see how devoting a huge chunk of their lifelong productivity to enrich those who own those unimproved land rents is a favorable equilibrium.”
1) you can always rent (vs. buy) if that makes you feel more comfortable
2) land is an investment. When you purchase a home (whether you acknowledge it or not), you’re basically making a bet that land values will appreciate, which is basically making a bet on the prospects of that neighborhood and the local economy.
3) you’re probably devoting a good portion of your lifelong productivity to your 401k or similar device. And, there are quite a bit of rents tied up in the stock market (i.e. the entry price for sure isn’t free). Why bias land rents vs. other rents?
Sam, allowing HOA to enforce rules on marriage is a great idea.
Divorce means leaving the nice area.
It’s a nice area BECAUSE the people have chosen to get married, and stay married.
Nice areas are nice because the people nearby are nice.
The pro unmarried-mother policies of welfare, rewarding promiscuity with gov’t benefits based on need, has been a disaster for poor people in general, and Blacks in particular.
The only reason not-nice areas are lousy, is because of the lousy behavior of the not-nice people who live there.
There are as many, if not more, not-nice Whites as Blacks. Some 30% of white kids are not being raised by married parents. But the percentage of not-nice Black parents is higher, over 70% of Black kids are not being raised by their married parents.
Anti-racism and anti-sexism PC untruths make it politically unlikely that gov’t will repeal their laws which dis-allow such HOA contracts. Thus, fewer and more expensive places attempt to do this thru huge price differences based on school districts.
“sorry, but who gets to enforce your rules”
The government made such home owners association covenants illegal. It need only stop making them illegal. Free individuals will find a way to enforce their contracts. HOAs are very good at enforcement.
As to calculating value, it’s beyond easy. In any major city you have good parts of town and bad parts of town right next to each other. Commuting time, surrounding beauty, and housing stock are often fairly equivalent.
Only the neighbors are different.
Here are DC house prices:
https://www.dcpolicycenter.org/publications/taking-stock/
Here is the demographics.
http://racialdotmap.demographics.coopercenter.org/
Notice a trend? It ain’t commute time.
Or if you want you could look at how the price of the same houses perform as neighborhood demographics change.
That’s right – I want to live next to the wealthiest people possible. I do this both from an intrinsic and positional value perspective, which is impossible to unbundle. And, the market process accomplishes this.
What you are suggesting is that we replace ability/willingness to pay with some strange HOA restrictions, which won’t really do anything at the margins except discriminate against wealthy people for less wealthy people.
I want to live next to the wealthiest people possible.
And I don’t. I just want to have substantially all the children in my neighborhood to live with their own two parents; given that, I’d actually prefer a lower-income neighborhood with more stay-at-home moms. Having a “marital status” rule in an HOA lets me get what I want, and doesn’t make it any harder for you to get what you want.
@SamChevre
Absent a time machine to transport you back to the 1950s, you’re probably not going to get what you want based on your current location.
As a practical matter, if it’s that important to you, look for a metro area with more housing stock and more emphasis on traditional families. We would welcome you here to North Texas (if you agree to vote red), but there are many other good options out there.
That’s right – I want to live next to the wealthiest people possible.
Really? I don’t think that’s typical. Remember H.L. Mencken’s the old joke that ‘a rich man is one who makes more money that his wife’s sister’s husband’? My sense is that most people who become wealthy don’t want to leave their social and cultural circles. Rich people in the countryside buy expensive pickup trucks, bass boats, 4-wheelers, huge RVs, etc that they store in that shiny new pole barn they built last year. The very last thing on earth they want to do is move out and go live and rub shoulders in Manhattan.
Having satisfied needs of safety and good schools, I think most people would prefer to save hundreds of thousands of dollars as opposed to chase living next to the richest people they can. First and foremost such savings would enable a one income household when desired/necessary.
It also ignores that while schools and safety are prime goods, people also value cultural fit. That doesn’t necessarily correlate with income. While I share the cultural values of “don’t get piss drunk and have a fistfight outside the bar” with UMC professionals, I don’t really see eye to eye on them with a lot of other things.
I would think that the above say the 60% level neighbor quality does not change much.
BTW college towns are great. Lot’s of professors and if there is a Medical school and hospital many MDs.
Gainesville FL where I live is great and the real-estate even in the best part of town is not expensive.
That’s right – all of these whiners from NY, DC, SF need to branch out and look for other underrated metro areas that have more reasonable home prices. I loved Florida when I visited recently.
The 60% threshold seems way too low to me, but this is ultimately a personal preference. We’ve got it at roughly 80% as our personal minimum. The neighborhoods and schools look significantly better with the 20% jump based on our research from having re-located to a different state 3 years ago.
However, your broader point is not lost on me and it is a good one. There will in fact be diminishing marginal returns and I should have included that in my overly bold statement.
Ultimately, to follow Tyler Cowan’s thinking, the ultimate positional goods involve attention; receiving it, demanding it. This is why restaurants exist as places to be seen. De-platforming/cancel culture is focused on denying attention and routes to attention.
Sorry, Nye sounds like he is using a truism to defend the status quo and to denigrate the aspirations of the lower classes struggling for opportunity.
The plebiscite on a constitutional convention in Chile on Sunday offers a much more relevant case study in the consequences of inequality: https://www.csis.org/analysis/2020-chilean-plebiscite-overview-citizen-engagement-and-potential-impact
A new constitution, would address inequality: “An expansion of social safety nets would also profoundly impact the day-to-day lives of ordinary Chileans. Lower- and middle-class Chileans have long felt the effects of economic inequality and lack of financial security. Pensions are low, health care and education is expensive, and the overall cost of living is untenable for many.”
Consensus democracies (parliamentary with proportional representation) outperform majoritarian democracies (presidential with single member district winner-take-all) producing wealthier and “kinder, gentler” societies. See Arendt Lijphart’s Patterns of Democracy. The plebiscite and, if approved, constitutional convention may be one of the most exciting and important opportunities to test Lijphart’s conclusions.
There is of course much that can be done to meaningfully address inequality short of a constitutional convention. Perhaps the most important is for President Trump to amend Executive Order 11478 to prohibit discrimination in the federal government on the basis of caste. South Asians are the fastest growing population group within the USA but are disproportionately of the Brahmin caste. Discrimination against non-Brahmins, particularly in Silicon Valley, has discouraged the entry of many potential immigrants to the USA as well as limited opportunities for those already here. The impending installation of a Brahmin as successor to Joe can only send a message of exclusion and intolerance to non-Brahmins. Banning caste discrimination is the right thing to do.
I think you’ve nailed it – what we need at this point in the U.S. is many many more low IQ immigrants! Let’s go for it! What could possibly go wrong?
There is no evidence that Brahmins are higher IQ than other castes: look at Harris. Ambedkar, a Dalit, was of extraordinary high intelligence. But prohibiting caste discrimination would in no way affect current immigration law. If we look to the consensus democracies we see that none have the open borders that our elite masters are attempting to foist upon us.
Perhaps, as a compromise, we can send them all down to Chile and then evaluate it from there?
(I’m a big fan of how the rest of the the world loves to moralize to us about this and that, but they are almost never willing to actually sign-up for those same policies in their own locales.)
“but are disproportionately of the Brahmin caste.”
What does it matter to USA if South Asian immigrants tend to belong to some specific sub-group? Why should USA care about reproducing the exact group structure of South Asia?
And as Tocqueville and Helmut Schoeck warned, resentment increases exponentially against remaining small differences as we necome more equal.
Freud also weighed in here. See “vanity of small differences”.
According to Wikipedia, we should distinguish the “trickle-down economics” from the “trickle-down effect”. When we talk about positional goods we refer to the “trickle-down effect” as introduced by Rudolph von Jhering, a well-known German jurist of the 19th century (I read some of his works 60 years ago), extended by George Simmel, a well-known German sociologist that wrote “Fashion” in 1904 (English version published in 1957). I strongly recommend reading
https://sites.middlebury.edu/individualandthesociety/files/2010/09/Simmel.fashion.pdf
The basic idea is that innovation succeeds when everyone adopts it, either in the early stages when is expensive or in the late stage when cheap versions are introduced. The main challenge to all observers of the innovation’s diffusion process is how long it will take to benefit “all” the population. Yes, during and certainly by the end of the process, we can assume that several versions of different quality coexist. So, what is the problem? to protect the inventor? to accelerate cheaper versions? to prohibit the use or consumption until everyone can have it?
Is a positional good the same as a Veblen good, or is there a subtle difference?
The price rises on a positional good to restrict demand so that it remains a status symbol. The price rises on a Veblen good to increase demand, the price supposedly indicating higher quality.
But Veblen goods a subset of positional goods, in that as real incomes increase to the point where everyone can afford a Ferrari, the price of a Ferrari must go up to where only the relatively rich can afford it to continue to confer high status.
In fact for there to be a real distinction between a Veblen good and a positional good, wouldn’t there need to be a good that people buy purely to signify absolute wealth, not relative wealth, but ultimately becomes affordable to everyone as real incomes increase? If Veblen goods signify relative wealth, the high price increasing demand is indistinguishable from fixed supply driving up prices as incomes and demand go up.
In theory, everybody in America could live in a “good neighborhood” – with neighbors that are well behaved. It doesn’t happen only because, for some nature & nurture reasons, many Americans are not well behaved.
So housing in the good school districts is rationed by a high price. For middle class, and even most lower-upper class (around $250-$500k/yr?), the main financial goal is a good school area.
Yes, the prestige oriented will want some ostentatious wealth signal. Because while absolute wealth is unlimited, status is always zero-sum. Using wealth to gain status only comes by lowering the status of others not using the wealth.
“Went to Harvard” is certainly more of a positional good than absolute higher education value. And such status symbols need to remain limited – or else they lose a good part of signaling status.
It doesn’t happen only because, for some nature & nurture reasons, many Americans are not well behaved.
You are missing a key part of the explanation, though–I strongly disagree with “only”. It doesn’t happen because excluding people from neighborhoods because they or their friends are badly behaved, or likely to be, is illegal unless it’s done by having high prices. 60 years ago, it was legal, common, and many more Americans could afford to live in good neighborhoods.
It’s illegal in so many ways. You know I’ve seen neighborhood housing values destroyed by having people move into a totally different neighborhood, but it happens to be within the same school district lines and thus the value of the public schools inherent in the property goes to zero. If you could do more tracking, more expulsion, more zero tolerance discipline and policing, you could restore 1950s norms of behavior and then it wouldn’t be such a threat.
Simply put, if you allowed a reasonable degree of academic tracking and you got the dysfunction caused by teenage and young adult underclass males under control, this would ease a lot of the demand for segregation of various kinds.
Yes, it would. But there are two big problems.
1) What is to be done with the people who run afoul of “more expulsion, more zero tolerance discipline and policing”? They can’t be sent to Australia.
2) Such policies, along with substantial tracking, would be considered mean and vocally opposed by most all “right-thinking” people.
Not to mention the racially disparate elephant in the room.