The facts are real wages moved very strongly with employment across regions. Nevada was hit very hard by the recession, for example, while Texas was hit much less hard. Wage growth, both nominal and real, was about 5 percent higher in Texas than it was in Nevada during the Great Recession.
Pointer from Tyler Cowen.
The point is that we do not have a single aggregate economy. If you think that every state faced identical demand conditions, then the state with the higher real wage growth (Texas) should have had the worse unemployment. And Hurst goes on to point out how the regional data make it difficult to defend the view that wage stickiness is the cause of unemployment. In fact, he refers to work, which I noticed earlier, that suggests a PSST story.
I don’t think I previously knew about this thinking, which also agrees with mine:
When we all come together as individuals, we may create agglomeration forces that produce positive or negative consumption amenities. Thinking about it this way, when a lot of high-income people live together, maybe there are better schools because of peer effects or higher taxes. Or maybe there are more restaurants because restaurants are generally a luxury good. Or maybe there’s less crime because there is an inverse relationships between neighborhood income and crime, which empirically seems to hold. So, while we value proximity to firms, that’s not the only thing we value.
What it seems you are striking at is the value, the importance, of individuality.
You observe what happens when we as individuals (not as “us”) look upon one another as individuals (not as “them”).
The circumstances (“environments”) in which that can occur are adversely impacted by the many who do not want to bear the burdens of, or make the efforts required by, individuality and require the “shelter” of “us;” becoming anti-individuality.
The circumstances become regional, even gated community in many aspects. Societies fragment.
It’s a bit of a chicken and egg feedback problem, but a good ecological metaphor is to a group of fowl. Birds of a feather flock together, because flocking produces public goods from which they all benefit, at the price of a risk of overwhelming local resources and more difficulty foraging and finding an available nesting spot. But the murmur of sparrows doesn’t converge in any random or arbitrary place, but where the food supplies can be found.
Areas with higher concentrations of affluent people make up better communities in many respects, which reinforces desirability. However the supply of both real estate in these neighborhoods and the potential pool of ‘good neighbors’ is scarce, so the price is that access is bid up to the limits of affordability, including rents, predatory local governments, and congestion costs.
However, I think one can disaggregate the trends in prices in terms of the relative impact of the trends of these underlying influences of both neighborhood amenities and the increasing geographic concentration of lucrative employment opportunities.
In my view, the latter influence is the more explanatory, and duels positive neighborhood effects in some special affluent areas is mostly a ‘bittersweet mixed blessing’ side effect of the larger economic and technological phenomena.
Yes, but we have one currency and one interest rate for a given risk and collateral. Money is aggregate.
Not sure of your points here. Texas is a cheaper place for companies to do business, for a number of reasons (taxes is one). Companies flock to Texas. Labor in Texas is inadequate, so wages must be raised to level to attract out of state workers to relocate.
Also, many of businesses relocating in Texas employed higher wage workers than average. For one, growth is in large metro areas (Dallas, Houston, Austin) where average wage is much higher than rural area.
Really, US economy has become less regionalized over time as federal government transfer payments become a larger part of each regions economy. I think of Oklahoma from 1981 to 1996 or so when it went through its own 15 year recession.
As to point about high income areas, rich people like to live around other rich people. That is just the way it is. Why ask why. It is kinda of like asking why boys like good looking girls. If you have to ask, it shows you really are clueless.
Is this an argument for PSST, or an argument that the US is not an optimal currency area?