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Government run grocery stores and slopulism
I am not an American and don't live in NYC, but I've recently been thinking about the news of there being government run grocery stores in NYC. In my mind, NYC is in at least one way a heart of capitalism in the world, so this at least has some symbolic significance. On a more serious note, I find it interesting what the idea that government-run grocery stores would fix anything reveals about its thinkers.
If you speak to most people, even very intelligent ones, they tend to have narrative-driven models of reality. For example, if you go on Reddit, talk to a co-worker or whatever about health insurance companies or grocery stores, they'll often make these entities responsible for high prices for groceries or healthcare, claiming greed, manipulation and dishonesty in some fashion.
While it is absolutely true that these entities operate out of greed and not e.g. compassion, if one looks at the claims, they are often weak at best. Both grocery stores and health insurance companies have rather low margins (typically 1-3% of net margin for grocery stores, 2-5% for health insurers) in most places. The idea that the only thing preventing us from a post-scarcity, food and healthcare-too-cheap-to-meter society are somehow corporations made up of morally abhorrent people seems to quite attractive to a lot of people.
While both grocery stores and health insurance companies do have plenty of issues, my personal view is that they act in as kind of stand-ins for people's rage; between choosing to believe that either:
a. Healthcare is an enormously and ever-more expensive thing in most of the world, with 15-20% of GDP (!) going to healthcare in the US and usually >10% in most developed nations, because people's expectations of healthcare service are ever-rising and people believe that healthcare is a "human right" and the fact that it's such an expensive thing and requires a lot of staff (health services are the number 1 employer in a lot of US states now) means that when you need healthcare, it'll cost you a lot and insurance premiums reflect that. Similarly with grocery stores; food is actually cheaper than ever as measured by % of people's income being spent on it
b. There are evil people colluding to drive up the prices of essential goods
most people choose b.)
Even most smart people! I have some very sharp colleagues who are economically extremely illiterate and I work in quantitative finance, a field where one would hope people understand things about supply and demand.
And this extends to the right as well! Most populists-right movements have been exerting more, not less, command upon the economy; even Mottizens veer into this, seeing working in finance as parasitising upon society rather than allocating where goods and services ought to go.
I think this sort of feel-good, narrative-driven politics is ultimately an issue simply because reality is not narrative-driven; the progression to the modern world has broadly shown that in a lot of cases, reality is random, cruel, senseless, not governed by human-compatible narratively satisfying laws. There isn't necessarily a cabal; a lot of things are driven by emergent phenomena.
However, the "grocery stores are not evil camp" tends to have shitty marketing (perhaps due to not thinking in terms of attractive narratives itself too much) and loses to people like Zoran Mamdani. Indeed, that is broadly the story of populism and demagoguery, which seems to recently have gained a lot of ground in a lot of places in the world. Maybe the internet and especially things like TikTok makes small soundbites do better these days.
Most people, even often intelligent people*, approach economics with the mindset of a medieval peasant.
That is to say, they see it as a zero-sum, moralistic story. If the travelling merchant doesn't make anything but sells cloth for two ducats a yard while buying it for one ducat a yard, he's a greedy middle-man who doesn't do anything of value (although I'll still sell him my cloth because nobody else will buy it...).
I'm convinced this is the default way of thinking about things. Just as we hate the rich because he evolved as hunter-gatherers who had to share meat with our tribe-mates, we struggle to understand positive-sum interactions, prices as signals, and other essential economic concepts.
I'm not a fan of the general impulse of 'things I value should be on the national curriculum because then other people would think like I do', I don't care about forcing kids to do art, music, literature, foreign languages etc.
But economics should absolutely be taught to children. We can't trust leaving our elites alone to understand economics since they've burned that trust on things like open borders and abolishing the police, so normal voters should understand (or at least be able to repeat as a maxim) that building houses causes house prices to go down, or that nothing in economics can be explained by 'greed'.
*I once had a conversation with a very intelligent software engineer who argued that everyone should be limited to owning one house, so that greedy landlords couldn't buy them all up and stop everyone else sharing in the property market. How exactly he expected renting to work when owning a rental property in addition to a house you live in was illegal wasn't clear.
Was he allowing for collective ownership of rentals? Say, publicly traded corporations. They’d probably end up as larger cartels, but in some of our worst housing markets, that might be an improvement. Might.
Renting out houses feels scummy, illegitimate in a way that renting office space or even apartments does not. I don’t know if I can justify that feeling. It might just be a lifetime of cultural conditioning.
But speculating on houses? Using them purely as a store of value decoupled from the normal economy? That part I hate and resent. We put so many fingers on the scale to smooth out the largest, most important purchase most Americans will ever make. If one has enough money, though, one can just…exploit that. Free ride on the distortionary effects. I wouldn’t mind seeing that use case disappear.
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Which concepts would you teach?
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You put stuff in someone else's name and then rent it out anyways.
My programmer friend wasn't advocating for a law with the intention that everyone would break it. He genuinely thought that 'one house per person' was a good policy.
I think it's a good policy. Shelter is not like other goods - you can literally only use one house at a time, and you must have one house as a roof over your head. So you enforce no superfluous houses per person, and if you want to move, you sell your house and buy another house. Obviously you need a few other bits to make it work: hotels for people who need to be somewhere temporarily, sublets for people who can't afford a full house. But freeing up the majority of the supply and making the market much more fluid should do a lot of good work.
What do you think a sublet is exactly?
Lodgers. You live in the house, they live in a part of the house (potentially a big part). Subletting is probably the wrong word for letting a subsection.
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Or, you know, you can just build up. Demolish the houses and build skyscrapers. Just let people profit from owning real estate and they will trip over themselves to do it for you.
No need to ration the supply when you can just increase it.
Apartments are a necessarily evil but are considerably worse for human flourishing than even small houses, and if there are ways to address the failure of the housing market without building more of them, we should take them even at a significant premium, for the sake of our species' dignity. Backyards should be the default for any family with children, not a luxury. I'm a very literal NIMBY in this sense. Humans need greenery in their lives, little humans need space to run and play and goof around.
(No, public parks don't make up for this. Even if you live very close by, a trip to the park is a whole thing, you need to get the kid dressed, drive or walk them, and then watch them the whole time. Going more than once a week is a tall order. The mental health benefits for the kid, and peace-of-mind benefits for the parents, don't remotely compare to the availability of a private garden that they can run out into at ~any hour of the day or night if they're going a bit stir-crazy in their bedroom.)
I agree that backyards are incredibly elite, but how do you solve traffic from the ever increasing urban sprawl? Especially considering the ever increasing urbanization and demand to live in megacities that have all the economic growth
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There aren't. Pigeonhole principle; if you have housing for 1,000,000 people but 1,500,000 people want to live in the city, 500,000 of those will either be homeless or forced to live elsewhere, and the 1,000,000 winners will have to spend all their money bidding up against each other for the privilege.
Yes, houses with backyards are much nicer than apartments, all else being equal, but all else is not equal. Giving every family their own detached home and backyard is not possible. It's like trying to make sure all kids are above average. The fertility and quality of life hit from young adults not being able to afford housing is much larger than the fertility and quality hit from not having backyards. And since most people don't need a whole house to themselves, most people living in detached family housing end up becoming roommates, which is its own indignity against the human spirit.
That's putting it too strongly. Making all kids above average is a logical impossibility even if you had a literal magic wand. There would, on the other hand, be nothing logically or scientifically impossible about ordering society so that every (family of) citizen(s) is guaranteed a house, though barring space colonization it may require population caps once all available land has been tiled with houses.
Regardless, if we agree houses are superior to apartments, I maintain that demolishing houses to make room for apartments should be regarded as a product of dire straits, an extremely regrettable thing to do, to be undertaken only when the humanitarian concerns are overwhelming. To do otherwise is sheer Repugnant Conclusion stuff - depriving people of an actually good life for the sake of making some other people's sucky lives fractionally less sucky. 1,000,000 happy house-owners and 500,000 disgruntled apartment-owners is preferable to 1,500,000 slightly-less-disgruntled, but still fundamentally unfulfilled and frustrated apartment owners.
(And all this is without going into my objection to demolishing living spaces at all; I think it's deeply regrettable that we live in a society where living in the same house from birth to death, over multiple generations, has become abnormal; I suspect that we're like fish not seeing water with regards to widespread psychological issues caused by a majority of the population being cut off from their childhood homes in adulthood. Humans did not use to live like this. We're not built for it.)
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It's funny, all the YIMBYs want this or claim to, but when there's complaints about the cost of housing, it's always a single-family detached home used as the benchmark for complaining.
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It's not going to happen, and even if it were, unless massive changes were made they would just become assets in the same way. Britain's housing market is hugely dysfunctional because houses are assets first and shelter second: it's hugely sticky, people just point-blank refuse to sell if the market starts turning down and they have very little incentive to. The market is so sticky that prices almost can't change.
I thought it was because (1) by-right zoning doesn't exist, so instead literally every single attempt to build housing has to run the gauntlet of getting permission from the govt., and (2) urban growth boundaries stymie building near large cities.
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So if supply - demand curves are generally accurate, you want to decrease price but limiting supply, and think price will come down?
Eh? No? If you assume that most renters would prefer to own, which in my experience is true and is also the default assumption of the vast majority of discussion, then most people are paying rent when they would prefer to be paying mortgages but can't because landlords have driven up the price of housing to sell it back to people, often literally making you pay their mortgage in the process. The point is to increase the supply of buyable houses, driving down the price of the asset and moving them from 'financial asset and moneyspinner with that income priced in' back to 'shelter'.
The main problem is transferability of mortgages but buy-to-let pretty much has to be predicated on rent being greater than mortgage payments in any case so I think it must be possible to work something out.
If everyone can only own one home, then it seems you fixed supply.
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I mean, you've essentially made full-property rentals illegal. So if you have a family and want to move city, but don't want to buy, tough. If you are young and starting out but want your own place, tough. And it doesn't make housing any cheaper or more abundant, it just makes it less convenient for everyone. There's a reason that even the most insane socialist hell-holes haven't pursued this policy, because it's the sloppiest of slopulism.
Your reply doesn't seem to deal in any way with the consequences of making housing abundant. The picture you are painting is just 'like now, but you aren't allowed to rent any more', and you don't seem to be engaging in any way with the massive systemic changes that would likely result in effectively 2Xing the amount of housing in the country and vastly increasing the buy/sell frequency of houses.
(Only 60% of housing in the UK is owner-occupier, and if we assume at least another 5% of that is second-homes, that's 2X the housing stock.)
EDIT: not 2x because obviously you have renters living in the houses already, I'm being thick.
How exactly do the policy of making it illegal to pay to own another house make housing twice as abundant? Your policy seems to be missing a way to address the actual hard part. I agree this demand is already over subscribed so slashing it won't necessarily being a death blow, but it definitely doesn't juice supply to reduce demand.
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It appears about 3% of houses in the UK are second homes (not rented out).
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Ok, but what do people who can't afford a down payment but want to live in a house do? Someone has to own a house in order to rent it out.
Subletting seems ok. The idea is to prevent massing property empires, as e.g. the Swiss do by requiring that every building be partially occupied by a Swiss person. But if you zoom out I think this question becomes pretty similar to the question of what to do if you can't afford rent: you do something with your life so you can afford rent, like move, or you're homeless.
Obviously the paradigm assumes that if you free up the 40% of UK homes that are not currently owner-occupier then it produces a big, big drop in price. If not, you've failed and should put the previous paradigm back in.
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I think something like this happened in late Republican Rome.
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No one else will buy it because the merchant has patent from the king to only serve this area.
Modern businesses excel at creating environments where they need not compete. Regulations, vertical integrations, captive customers, licensing, cartels, centralization, credentialism - businesses love them. They hate the free and efficient market with a passion. Anything that raises the barriers of entry - they approve.
One of the great paradoxes of political economy is that the free market is the creation of the State, and must be carefully stewarded by the State if it is to survive. In fact, after law and public order, it's probably the paramount criterion of good governance in the modern age. How free are your markets = how good is your State.
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Agreed. Economics is as counterintuitive as quantum mechanics or general relativity. Except, of course, that most people have no reason to go around thinking about modern physics, but everyone must interact with the market.
Try explaining to people that wages are the price of work, and just as the price of meat must go up or down depending on whether there is shortage or a surplus of cattle, salaries should also go up or down depending on how the labor market is doing, and they will look at you like you are the villain of a fantasy novel. Hence, nominal rigidity, and the necessity of inflation.
This would go about as well as forcing everyone to learn algebra does now. The course would be watered down until the average student could memorize enough answers to get a C without understanding the concepts, then immediately forget everything after graduation.
Maybe if you made it a general education requirement for college students, that would actually do something... although even they often fail to absorb the concepts.
Salaries that don't go down fall under Chesterton's fence, and you should make a better attempt to understand why people want them before deciding that we should get rid of them.
Actual human beings need to do long term planning, if only for things like "I'll know that if I keep this job I'll still be able to survive next year". Predictability is important, and salaries that don't go down are a lot more valuable than salaries that do, over and above the loss in money from the salary going down.
(Note that a common libertarian answer, "well, they can take insurance against their salary going down", doesn't work because the argument is that this desire should be eliminated from the market, not just satisfied in some way other than through salary. After all, an employer who won't lower salaries is already providing implicit insurance.)
And we do have salaries that go up and down. They are limited to either 1) low-end jobs where the effective salary varies because of tips, but the jobs are undesirable in general, such as odd working hours, bad conditions, and low pay; or 2) high end jobs where the salary doesn't matter, i.e. executives getting bonuses.
Also, notice that your reasoning leads to "it's irrational to rent an apartment for a year under a lease that has a constant monthly rent, rather than letting the landlord raise and lower the rent."
Lots of midrange jobs have pay that effectively goes up or down. It takes many forms, the most common is a bonus, but also fixed period equity grants, incentives based on company performance, and taxable fringe benefits. Most big companies have a big chunk of comp in these areas over the base pay.
Equity grants work especially well because they automagically go down if the company is doing bad, but the company can always top them up. And if the company wants to cut pay even more than the drop in stonk price, they can decline refreshers.
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If the government is doing its job, the salaries will go down anyway, in real terms if not in nominal terms. That's why a small amount of predictable inflation is considered good for an economy; because it lets wages adjust without ever having to go down in nominal terms; you just grow some of them slower than others!
At that point, whether the job will still let you survive next year or not depends on how much your salary went up (if at all) compared to the price of other things; it is very much not guaranteed. Which is exactly the same as if the nominal wages had been allowed to go up or down without inflation; the mechanism is just hidden as a concession to human nature.
The alternative is that salaries never go down in real terms, which is actually really bad when you think about it? Solve for the equilibrium.
People object to inflation like they do to salaries going down, for similar reasons.
They have a lot less power to stop inflation. (yeah, they can vote for the other guy. It generally doesn't work, and when it does they notice the prices are still high and punish the guy they voted in for that by bringing the previous bunch back).
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I'm not sure to what equilibrium you are referring; can you elaborate?
The great-uncle comment by @The_Nybbler already covers some of the things companies would do to get around this; laying off higher-paid workers and hiring new workers at lower wages. Another likely consequence is that companies would be much less willing to give raises when times are good, because now raises are a much bigger commitment. And if a company is unwilling or unable to do these things, it might well go under because it simply is unprofitable at higher salaries.
Now, what happens to the newly unemployed workers? If they are willing to work at a lower wage, they can probably find new work soon enough, but now they have to eat the transaction cost of switching jobs; if they were willing to take lower wages in the first place, they could have just stayed with the same employer. Alternatively, if they are not willing to take lower wages, thinking themselves too good for them now that they have been employed at a higher wage, they end up in a sad imitation of Latrell Sprewell refusing a $21 million deal because "I have a family to feed", and the world has to do without their labor until they get desperate enough to change their minds.
This can all be avoided by simply letting real wages vary up and down, and the easiest way to do that is to inflate nominal wages less or more; that way, the number never goes down.
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Wage stickiness is a complication, but salaries still do go up and down. Instead of individual salaries going down, expensive individuals get laid off and/or juniors are hired at lower rates than previously. Though the general "solution" to wage stickiness has been inflation, and that's been around long enough to pass the fence.
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