I'm not a fan of the word "affordable" because specifically "affordable housing" is code for a bunch of terrible ideas. In practice it means, let's raise taxes on the people actually building housing and spend that money on redistributing a small amount of expensive yet low-quality apartments via lottery.
I'd like to add something on affordable housing in addition to the zero sum transfer from landlord to tenant. It is also just purposeful waste. When I was financing apartment projects, I estimated that the affordable units cost 5% to 10% less to build than the market rate units. Mostly cheaper finishes. But those units, if they could get released from the affordability covenants would likely have rented, on a market basis, for 15% to 20% less than the other market units. It makes sense. The developers add upgrades when they are marginally profitable. By law, of course, the rents were at an even greater discount but like you said, that's just subsidy/transfer. But society as a whole would have been better off with building whatever the developer thought was best and letting them pay an "affordability" tax to and affordability fund. We'd all really be better off if we just let people build without penalties on new housing and just having all people in the bottom 75% (or whatever) get a unit for a percent or 2 less through filtering instead of concentrating the subsidy on a few lucky lottery winners. My point is that the value of the subsidy was less than the cost.
Good points, and recall that it's not a zero sum game (not just transfers). Affordability mandates also reduce construction, increasing homelessness. So does rent control.
There's a politically powerful contingent in housing policy that I'm going to refer to as the "bad leftists" who support the following policies in the name of "affordability":
-Inclusionary Zoning--with no density offsets for developers
-Rent Control-legislation seems to be gaining traction in Massachusetts
-Government financed and managed housing projects
Adjacent to these bad leftists is the community engagement crowd--i.e. any urban housing project requires buy-in from locals through an endless series of public meetings.
The obvious outcome is sluggish growth in housing in places like Boston and NYC and gruesomely high costs for poor quality housing stock.
The duality of the shifting conservative critique of people of color, while mistakenly stereotypical, is not invalidated by its duality.
There are multiple issues:
1. The moral hazard of the welfare state.
2. The globalization of the workforce and its inevitable downdraft on the prosperity of the middle class.
3. The undeniable reversal of discrimination against the straight, white male.
The resentment and anger inevitably engendered by these policy changes in their victims were either unanticipated, discounted, or actually desired out of a vengeful spirit by those who instigated them. Rather than leaving the playing field, they turned the tables.
Those who implemented these ruinous policies sowed the wind. Trump’s MAGA is the resulting whirlwind.
I am open to the idea that discrimination against straight, white males exists but while anecdotal cases exist, just as it exist for women and minorities, I have yet to read any statistical evidence supporting the claim that it is a real issue and I have looked. If you have data please provide it. Note that DEI resulted in very little hiring of minorities. It was largely a mix of scam and signaling. Also, Scott can correct me if wrong, but hasn't income for the middle class increased? It was stagnant for a while but for last 20 years has increased IIRC.
As an aside, before I retired and was running my corporation I was asked several times to start a DEI program. I always replied I would be willing to look at it if evidence could be provided that any proposed DEI program had metrics that proved it worked. Never happened.
This of course is assuming you believe that deflating nominal income with CPI or PCE is coherent enough to make long-horizon comparisons.
I also find the framing amusing: doesn't "income for the middle class increased" really imply that some middle class have moved to upper class? Since middle class is usually defined as an income bracket itself. (I don't find the idea of "class" useful for that reason.)
Yes, there's no doubt that real incomes have risen over time. Perhaps it would be possible to fool a young person, but people like me recall the 1970s.
Any definition of "upper middle class" is arbitrary, but certainly that class has gotten larger.
I would like to know something about hedonics and housing.
They have tablets-smartphones now in Los Angeles, a miracle device...cars last longer than they used (though much smaller and lacking in bravura styling), better color TVs, and better restaurants. Cheaper clothing. Less smog.
Yet housing is very expensive. In post-rent incomes, Sapporo Japan tops Los Angeles ($400 a month in Sapporo for a one-bed unit v $2,400 in L.A.). An average person has more after-rent money in Sapporo than Los Angeles.
In L.A, sales taxes now at 9.25% instead of 4% back in the 1960s. Social Security taxes much higher than 60 years ago. State taxes too.
Most employers are switching cost of (better quality) health care onto employees.
It is a swirl, a mish-mash of influences...but living standards are lower in L.A. than 50-60 years ago, is my call.
Any reasonably diligent couple could move to L.A. and buy a house and raise a family in the 1960s. That never happens anymore.
I think this declining standard of living has spread to the entire West Coast and now to much of the nation, as rents soar.
Kevin Erdmann has done a lot of good work in this area.
A national moratorium on property zoning is likely a good idea. Or a $100k bounty to all housing units built in dense zip codes.
But...there are no atheists in fox holes, and no libertarians, or liberals, when neighborhood property zoning is under review.
All new housing increases the supply of affordable housing.
The evidence is pretty easy to find. Just look at the average GPA/SAT for blacks/hispanics versus whites/asians for selective Universities. You can't get much more blatant than that. I don't think the same applies to straight people (though not sure) or males.
There have long been corporate set-asides for vendors specifically for racial and sexual minorities. The federal government has also long had contract set-asides for racial minorities. If you are familiar with the people who get these awards, it seems unlikely they would otherwise receive them.
There is one place where discrimination against straight, white males is almost inarguable: academia. All had in place implicit, and some quite explicit, quotas to ensure that fewer straight white makes were hired.
I will not provide links, but the evidence is easy to find. And it is NOT merely the occasional anecdote.
“I am open to the idea that discrimination against straight, white males exists but while anecdotal cases exist, just as it exist for women and minorities, I have yet to read any statistical evidence supporting the claim that it is a real issue”
I’m pretty sure the evidence in Hollywood is quite substantial as well. For actors, it is almost self-evident from what you see on the screen.
When for the last several years they have made no attempt at all to hide it, it would be a lot more surprising if it did not exist.
Scott, having read many, perhaps all, of your posts touching on immigration, some things are clear.
(1) I understand the economics of immigration better than you do.
(2) I have read far more of the economic and non-economic scholarship on immigration than you have (but see (1)).
(3) If someone writes about immigrants as if they are a homogenous group, they are not doing serious Economic analysis, they are social signalling.
(4) If someone writes as if there is this phenomenon—immigration—where marginal benefits exceed marginal costs for all people across all ranges in all forms, they are not engaging in serious Economic analysis, they are engaged in magical thinking (and social signalling). In particular they are breaking the Sowell dictum—there are no solutions, there are only trade-offs.
(5)If someone writes as if there are no costs to immigration, they are not engaged in serious Economic analysis, they are engaged in magical thinking (and social signalling).
(6) If someone does any or all of (3), (4), (5) they are not engaging seriously with critiques of immigration. But, then, there really isn’t a debate about immigration, there are people in different information bubbles shouting past each other.
(7) The political/policy issue with immigration is not how it could be managed as some ideal public policy issue, but how is it actually being managed. To say “it would not be a problem if we did X” does not reduce the political salience of the (mis)management of immigration if X is not being done: people are still bearing the costs of X not being done. This is especially true if there is no good grounds to think that X will be done.
(8) Much of the political salience of immigration comes from how badly it is being (mis)managed, has been mismanaged and there being no strong reasons to think that it will not continue to be mismanaged.
(9) A lot of what is passed off as “The” Economics of immigration fails to grapple with why countries have borders, why there is this thing called ‘citizenship’, and the lack of a robust theory of long-term economic growth.
(10) Such “Economics” also displays some key problems of mainstream Economics: over-focusing on efficiency and transactions while under-focusing on connections and resilience. So much of our economic activity is actually managing connections—for instance, Coase’s theory of the firm is basically explaining the choice to either rely on connections or to use transactions.
(11) Such problems with mainstream Economics includes hugely under-rating the significance of culture when we spend at least 20 years absorbing cultural framings, patterns of actions, norms, etc before we ever become serious economic transactors—we are the products of gene-culture co-evolution for powerful reasons. Culture provides coordinating framings, economises on decision-making, and supplies mythic resources—i.e., mechanisms to cope with the problems of being self-conscious social beings, including being conscious of our own death.
(12) Fortunately it is easy to solve not engaging with (serious) critiques of how immigration has been mismanaged. Just click on my latest post on immigration, and the mismanagement thereof, and you are away.
You say you know more about immigration than I do, but I don't see high quality analysis in your comments. So what am I to believe? Should I just take your word for it?
Try reading my post? It is just a click away. The trouble with comments is if there are disagreements on fundamental assumptions, they don’t resonate. Nowadays, there are also serious different informational universes problems.
I have come to the conclusion that there are no honest advocates of high immigration because they all fail to engage honestly with the serious critiques.
Demographia has an affordability index—the ratio of median house prices to median household income. How much of your income you have to spend on shelter is most people’s experience of “affordability”.
Arnold Kling’s dictum about governments ramping up demand (immigration) while restricting supply (land use regulation) strikes again. The abundance agenda is indeed trying to reverse the last. Whether the Democrats—who have become the Party of the unaccountable classes (those paid to turn up, not on performance: DEI is all about the unaccountable classes grabbing resources and authority)—can deliver is another question.
Britain is in a bad way because Tony Blair’s constitutional vandalism transferred policy decisions from elected politicians to quangoes (government and quasi-government agencies), to judges (via human rights legislation) and the EU. Brexit as implemented did not represent a clean break, because the popular vote was sabotaged by an official and political class that clearly despises much of its own citizenry, particularly its working-class citizenry.
The result of said constitutional vandalism (which the Tories either continued or extended) has been to sabotage democratic feedback, to massively degrade/atrophy UK state capacity, and to hand over power to unaccountable elite networks.
A lack of output tends to worsen inequality. For example, if we don't build enough houses for the entire population, it is those at the bottom who will be left without a roof over their heads. The affluent can always find housing, even in places like California. That's why many working class people are moving from places like California and New York to places like Texas.
You can have lots of output but if most Americans cannot afford to buy life necessities like food and shelter you still have serious problems. More output is good, but it will not restore the American dream.
You are missing the point; output and affordability are two sides of the same coin. Remember the meme using Pam from The Office? "It's the same picture."
Sumner, I suggest you read Bernie Sanders's "Our Revolution" (which is undeniably his best book). He seems to think trade hurts both countries (e.g., both Mexican agriculture and American industry).
Also, you are right on the right often being pro-immigration; there are plenty of immigrants from poorer nations in Hungary and Russia.
This piece is really good (other than the Hanania P.S.); the only problem is with your title.
Because output is Abundance is THE GOOD PART OF Affordability.
The parts that Mamdani emphasizes - rent control, government subsidies, government run stores, etc.- are, as you well understand and sprinkle a bit throughout the piece, by far the *bigger* part of the left’s “affordability“ story.
So I agree with you and Yglesias that it’s smarter politics indeed for Dems to run on “affordability”, for the reasons he cites.
But while the content of your piece is quite good - especially on housing, and most especially on defending “supply side” - your title (only) is political and/or Orwellian, precisely because there are two sides to the “Affordability” political coin, and the Dems are much more emphasizing the *anti-abundance*, *anti-output* parts rather than those favored by you and Yglesias.
On a relative basis, both parties are worse than before, no doubt.
To claim that the GOP is now literally on the bad side is imo very wrong. But you will do you.
The implicit claim that the GOP is just as bad as the Dems on this is of course absurd. The claim that the GOP is almost as bad as the Dems here is merely preposterous.
But yes, I indeed misread your comment as claiming that my critique was wrong.
For many industries, it is not just the price, it is also low quality due to lack of competition. With respect to housing, national home builder lennar has a class action law suit pending. There are many other instances where mildly competitive industries have been rolled up to achieve a monopoly in a region and then raise prices, reduce quality, and block new entrants.
In general, somewhere between 95% and 99% of barriers to competition are the result of government regulations, and a trivial percentage are due to private sector actions. In real estate, it's almost all about regulation; builders are not the problem.
Pointing to a class action lawsuit is meaningless, as America's tort system has become a bad joke.
All too many are looking to scapegoat one group or another for personal gain of one kind or another and for the most part that is usually power. Anyone who wants to come to the US and can hold a job should be allowed to, but as a nation of laws, the immigration laws currently on the books need to be upheld. When one does not like a law they work to change it and not look the other way while allowing it to be violated.
Time will tell re your guarded optimism re Mamdani, but i would not be all that optimistic. When one says that zoning is a prime if not primary issue re housing costs in NYC and shows very strong support for need of rent control, it becomes very hard to believe what he really thinks.
As to NYC housing stock being greatly affected by investors or investment bank portfolios, i would like to see specific data supporting that contention.
Honest, open, and direct communication to the public about how to address any number of shortcomings is sorely needed vs pandering to this or that group to get votes and obtain power or keep it.
I should have been clearer; was not suggesting you were showing any degree of optimism re ZM, but just echoing your sentiments re the FT.
I do think perhaps unlike you that the FT in recent years has moved to the Left side when writing about most issues. Not sure how you feel about FT today vs in the past.
Good zinger on Vance at the end. I don't understand your basic premise though.
"So why do I say that new cars and new houses should be unaffordable? I recently read that the average price of a new car has now surpassed $50,000. But lots of people (including me) buy used cars, which average just over $25,000. Let’s suppose the average sale price for all cars (new and used) is $35,000. In that case, the average new car is “unaffordable” to the average car buyer, who spends $35,000. And that’s as it should be, because new cars are better than used cars."
If cars became somehow really easy to produce, such that a nice new car suddenly costed 25 cents, that would be a big win for supply-side economics and everybody would revel in the technological progress. (In reality, one could argue a similar thing has happened with TVs.) So please spell it out for dummies like me: why is it good for the economy that we produce cars at a price level that is "unaffordable" for most people? Why is it important to produce things only rich people can afford?
Your premise seems to be that inequality and prosperity are inextricably linked. Is that true?
"Your premise seems to be that inequality and prosperity are inextricably linked. Is that true?"
Not at all. My premise is that new products should normally be better than used products, at least on average. In that case, in an advancing economy the average new product will go to someone with an above average income.
Cars are widely affordable in America, as they should be. But not everyone needs a new car--I've never bought one.
No, unless you define “inequality” as “everyone really does have almost exactly the same”
Improvements in car production would reduce prices all across the board, but it would probably still make sense for someone at the 65th income/wealth percentile to buy a less expensive car than someone at the 20th percentile.
The point is clearest with cars because it’s the one place that we know that a lot of people buy used in addition to plenty of people buying new.
Scott’s narrow point is that, on an ongoing basis, if we are prospering you’d want the average new car to be worth more than the average of all cars - new and used - outstanding, whether on the market or not.
I'm not a fan of the word "affordable" because specifically "affordable housing" is code for a bunch of terrible ideas. In practice it means, let's raise taxes on the people actually building housing and spend that money on redistributing a small amount of expensive yet low-quality apartments via lottery.
I'd like to add something on affordable housing in addition to the zero sum transfer from landlord to tenant. It is also just purposeful waste. When I was financing apartment projects, I estimated that the affordable units cost 5% to 10% less to build than the market rate units. Mostly cheaper finishes. But those units, if they could get released from the affordability covenants would likely have rented, on a market basis, for 15% to 20% less than the other market units. It makes sense. The developers add upgrades when they are marginally profitable. By law, of course, the rents were at an even greater discount but like you said, that's just subsidy/transfer. But society as a whole would have been better off with building whatever the developer thought was best and letting them pay an "affordability" tax to and affordability fund. We'd all really be better off if we just let people build without penalties on new housing and just having all people in the bottom 75% (or whatever) get a unit for a percent or 2 less through filtering instead of concentrating the subsidy on a few lucky lottery winners. My point is that the value of the subsidy was less than the cost.
Good points, and recall that it's not a zero sum game (not just transfers). Affordability mandates also reduce construction, increasing homelessness. So does rent control.
For sure! All negative sum! Thx
There's a politically powerful contingent in housing policy that I'm going to refer to as the "bad leftists" who support the following policies in the name of "affordability":
-Inclusionary Zoning--with no density offsets for developers
-Rent Control-legislation seems to be gaining traction in Massachusetts
-Government financed and managed housing projects
Adjacent to these bad leftists is the community engagement crowd--i.e. any urban housing project requires buy-in from locals through an endless series of public meetings.
The obvious outcome is sluggish growth in housing in places like Boston and NYC and gruesomely high costs for poor quality housing stock.
Good points. This is why we see people moving away from our most prosperous states, toward areas where their productivity is lower.
I'm amused that Mamdani's "sophisticated" view is an equally lowbrow scapegoat 😂
The duality of the shifting conservative critique of people of color, while mistakenly stereotypical, is not invalidated by its duality.
There are multiple issues:
1. The moral hazard of the welfare state.
2. The globalization of the workforce and its inevitable downdraft on the prosperity of the middle class.
3. The undeniable reversal of discrimination against the straight, white male.
The resentment and anger inevitably engendered by these policy changes in their victims were either unanticipated, discounted, or actually desired out of a vengeful spirit by those who instigated them. Rather than leaving the playing field, they turned the tables.
Those who implemented these ruinous policies sowed the wind. Trump’s MAGA is the resulting whirlwind.
"The globalization of the workforce and its inevitable downdraft on the prosperity of the middle class."
That's a complete myth.
I am open to the idea that discrimination against straight, white males exists but while anecdotal cases exist, just as it exist for women and minorities, I have yet to read any statistical evidence supporting the claim that it is a real issue and I have looked. If you have data please provide it. Note that DEI resulted in very little hiring of minorities. It was largely a mix of scam and signaling. Also, Scott can correct me if wrong, but hasn't income for the middle class increased? It was stagnant for a while but for last 20 years has increased IIRC.
As an aside, before I retired and was running my corporation I was asked several times to start a DEI program. I always replied I would be willing to look at it if evidence could be provided that any proposed DEI program had metrics that proved it worked. Never happened.
Steve
Real median household income has increased, FWIW:
https://fred.stlouisfed.org/graph/fredgraph.png?g=1O0ml&height=490
This of course is assuming you believe that deflating nominal income with CPI or PCE is coherent enough to make long-horizon comparisons.
I also find the framing amusing: doesn't "income for the middle class increased" really imply that some middle class have moved to upper class? Since middle class is usually defined as an income bracket itself. (I don't find the idea of "class" useful for that reason.)
Yes, there's no doubt that real incomes have risen over time. Perhaps it would be possible to fool a young person, but people like me recall the 1970s.
Any definition of "upper middle class" is arbitrary, but certainly that class has gotten larger.
I would like to know something about hedonics and housing.
They have tablets-smartphones now in Los Angeles, a miracle device...cars last longer than they used (though much smaller and lacking in bravura styling), better color TVs, and better restaurants. Cheaper clothing. Less smog.
Yet housing is very expensive. In post-rent incomes, Sapporo Japan tops Los Angeles ($400 a month in Sapporo for a one-bed unit v $2,400 in L.A.). An average person has more after-rent money in Sapporo than Los Angeles.
In L.A, sales taxes now at 9.25% instead of 4% back in the 1960s. Social Security taxes much higher than 60 years ago. State taxes too.
Most employers are switching cost of (better quality) health care onto employees.
It is a swirl, a mish-mash of influences...but living standards are lower in L.A. than 50-60 years ago, is my call.
Any reasonably diligent couple could move to L.A. and buy a house and raise a family in the 1960s. That never happens anymore.
I think this declining standard of living has spread to the entire West Coast and now to much of the nation, as rents soar.
Kevin Erdmann has done a lot of good work in this area.
A national moratorium on property zoning is likely a good idea. Or a $100k bounty to all housing units built in dense zip codes.
But...there are no atheists in fox holes, and no libertarians, or liberals, when neighborhood property zoning is under review.
All new housing increases the supply of affordable housing.
The evidence is pretty easy to find. Just look at the average GPA/SAT for blacks/hispanics versus whites/asians for selective Universities. You can't get much more blatant than that. I don't think the same applies to straight people (though not sure) or males.
There have long been corporate set-asides for vendors specifically for racial and sexual minorities. The federal government has also long had contract set-asides for racial minorities. If you are familiar with the people who get these awards, it seems unlikely they would otherwise receive them.
There is one place where discrimination against straight, white males is almost inarguable: academia. All had in place implicit, and some quite explicit, quotas to ensure that fewer straight white makes were hired.
I will not provide links, but the evidence is easy to find. And it is NOT merely the occasional anecdote.
“I am open to the idea that discrimination against straight, white males exists but while anecdotal cases exist, just as it exist for women and minorities, I have yet to read any statistical evidence supporting the claim that it is a real issue”
I’m pretty sure the evidence in Hollywood is quite substantial as well. For actors, it is almost self-evident from what you see on the screen.
When for the last several years they have made no attempt at all to hide it, it would be a lot more surprising if it did not exist.
Scott, having read many, perhaps all, of your posts touching on immigration, some things are clear.
(1) I understand the economics of immigration better than you do.
(2) I have read far more of the economic and non-economic scholarship on immigration than you have (but see (1)).
(3) If someone writes about immigrants as if they are a homogenous group, they are not doing serious Economic analysis, they are social signalling.
(4) If someone writes as if there is this phenomenon—immigration—where marginal benefits exceed marginal costs for all people across all ranges in all forms, they are not engaging in serious Economic analysis, they are engaged in magical thinking (and social signalling). In particular they are breaking the Sowell dictum—there are no solutions, there are only trade-offs.
(5)If someone writes as if there are no costs to immigration, they are not engaged in serious Economic analysis, they are engaged in magical thinking (and social signalling).
(6) If someone does any or all of (3), (4), (5) they are not engaging seriously with critiques of immigration. But, then, there really isn’t a debate about immigration, there are people in different information bubbles shouting past each other.
(7) The political/policy issue with immigration is not how it could be managed as some ideal public policy issue, but how is it actually being managed. To say “it would not be a problem if we did X” does not reduce the political salience of the (mis)management of immigration if X is not being done: people are still bearing the costs of X not being done. This is especially true if there is no good grounds to think that X will be done.
(8) Much of the political salience of immigration comes from how badly it is being (mis)managed, has been mismanaged and there being no strong reasons to think that it will not continue to be mismanaged.
(9) A lot of what is passed off as “The” Economics of immigration fails to grapple with why countries have borders, why there is this thing called ‘citizenship’, and the lack of a robust theory of long-term economic growth.
(10) Such “Economics” also displays some key problems of mainstream Economics: over-focusing on efficiency and transactions while under-focusing on connections and resilience. So much of our economic activity is actually managing connections—for instance, Coase’s theory of the firm is basically explaining the choice to either rely on connections or to use transactions.
(11) Such problems with mainstream Economics includes hugely under-rating the significance of culture when we spend at least 20 years absorbing cultural framings, patterns of actions, norms, etc before we ever become serious economic transactors—we are the products of gene-culture co-evolution for powerful reasons. Culture provides coordinating framings, economises on decision-making, and supplies mythic resources—i.e., mechanisms to cope with the problems of being self-conscious social beings, including being conscious of our own death.
(12) Fortunately it is easy to solve not engaging with (serious) critiques of how immigration has been mismanaged. Just click on my latest post on immigration, and the mismanagement thereof, and you are away.
https://www.lorenzofromoz.net/p/collapse-of-confidence-destruction
You say you know more about immigration than I do, but I don't see high quality analysis in your comments. So what am I to believe? Should I just take your word for it?
Try reading my post? It is just a click away. The trouble with comments is if there are disagreements on fundamental assumptions, they don’t resonate. Nowadays, there are also serious different informational universes problems.
I have come to the conclusion that there are no honest advocates of high immigration because they all fail to engage honestly with the serious critiques.
https://www.lorenzofromoz.net/p/collapse-of-confidence-destruction
Demographia has an affordability index—the ratio of median house prices to median household income. How much of your income you have to spend on shelter is most people’s experience of “affordability”.
http://www.demographia.com/
This can, of course, lead to falling living standards.
https://kevinerdmann.substack.com/p/why-the-economy-isnt-working
Arnold Kling’s dictum about governments ramping up demand (immigration) while restricting supply (land use regulation) strikes again. The abundance agenda is indeed trying to reverse the last. Whether the Democrats—who have become the Party of the unaccountable classes (those paid to turn up, not on performance: DEI is all about the unaccountable classes grabbing resources and authority)—can deliver is another question.
Britain is in a bad way because Tony Blair’s constitutional vandalism transferred policy decisions from elected politicians to quangoes (government and quasi-government agencies), to judges (via human rights legislation) and the EU. Brexit as implemented did not represent a clean break, because the popular vote was sabotaged by an official and political class that clearly despises much of its own citizenry, particularly its working-class citizenry.
The result of said constitutional vandalism (which the Tories either continued or extended) has been to sabotage democratic feedback, to massively degrade/atrophy UK state capacity, and to hand over power to unaccountable elite networks.
I think there is one factor you have failed to take into account: Enormous inequality in the United States.
A lack of output tends to worsen inequality. For example, if we don't build enough houses for the entire population, it is those at the bottom who will be left without a roof over their heads. The affluent can always find housing, even in places like California. That's why many working class people are moving from places like California and New York to places like Texas.
You can have lots of output but if most Americans cannot afford to buy life necessities like food and shelter you still have serious problems. More output is good, but it will not restore the American dream.
You are missing the point; output and affordability are two sides of the same coin. Remember the meme using Pam from The Office? "It's the same picture."
Actually, after-tax and subsidies the US is does not have bad inequality.
Sumner, I suggest you read Bernie Sanders's "Our Revolution" (which is undeniably his best book). He seems to think trade hurts both countries (e.g., both Mexican agriculture and American industry).
Also, you are right on the right often being pro-immigration; there are plenty of immigrants from poorer nations in Hungary and Russia.
Great report, thank you! With rising tariffs and falling actual productivity, there will be constant downward redefinings of "affordability."
This piece is really good (other than the Hanania P.S.); the only problem is with your title.
Because output is Abundance is THE GOOD PART OF Affordability.
The parts that Mamdani emphasizes - rent control, government subsidies, government run stores, etc.- are, as you well understand and sprinkle a bit throughout the piece, by far the *bigger* part of the left’s “affordability“ story.
So I agree with you and Yglesias that it’s smarter politics indeed for Dems to run on “affordability”, for the reasons he cites.
But while the content of your piece is quite good - especially on housing, and most especially on defending “supply side” - your title (only) is political and/or Orwellian, precisely because there are two sides to the “Affordability” political coin, and the Dems are much more emphasizing the *anti-abundance*, *anti-output* parts rather than those favored by you and Yglesias.
Both parties are now anti-output.
That is just a bad comment.
Because even if it were true, it changes nothing about my critique.
“Affordability” *can be* equal to Output and Abundance, but far larger swaths of “Affordability” are in fact anti-Output, anti-Abundance.
As the content of your piece indicates. Quite well.
I was merely pointing out that both parties are really bad on the output question, I didn't say your critique was wrong.
You mentioned the Dems, I pointed out that both sides are now really bad.
On a relative basis, both parties are worse than before, no doubt.
To claim that the GOP is now literally on the bad side is imo very wrong. But you will do you.
The implicit claim that the GOP is just as bad as the Dems on this is of course absurd. The claim that the GOP is almost as bad as the Dems here is merely preposterous.
But yes, I indeed misread your comment as claiming that my critique was wrong.
At the national level, the GOP is worse on trade, immigration and clean energy. At the local level, the Dems are usually more anti-output.
For many industries, it is not just the price, it is also low quality due to lack of competition. With respect to housing, national home builder lennar has a class action law suit pending. There are many other instances where mildly competitive industries have been rolled up to achieve a monopoly in a region and then raise prices, reduce quality, and block new entrants.
In general, somewhere between 95% and 99% of barriers to competition are the result of government regulations, and a trivial percentage are due to private sector actions. In real estate, it's almost all about regulation; builders are not the problem.
Pointing to a class action lawsuit is meaningless, as America's tort system has become a bad joke.
All too many are looking to scapegoat one group or another for personal gain of one kind or another and for the most part that is usually power. Anyone who wants to come to the US and can hold a job should be allowed to, but as a nation of laws, the immigration laws currently on the books need to be upheld. When one does not like a law they work to change it and not look the other way while allowing it to be violated.
Time will tell re your guarded optimism re Mamdani, but i would not be all that optimistic. When one says that zoning is a prime if not primary issue re housing costs in NYC and shows very strong support for need of rent control, it becomes very hard to believe what he really thinks.
As to NYC housing stock being greatly affected by investors or investment bank portfolios, i would like to see specific data supporting that contention.
Honest, open, and direct communication to the public about how to address any number of shortcomings is sorely needed vs pandering to this or that group to get votes and obtain power or keep it.
"Time will tell re your guarded optimism re Mamdani"
Not sure if this is directed at me, but I have no optimism about Mamdani. I was mocking the FT passage I quoted.
I should have been clearer; was not suggesting you were showing any degree of optimism re ZM, but just echoing your sentiments re the FT.
I do think perhaps unlike you that the FT in recent years has moved to the Left side when writing about most issues. Not sure how you feel about FT today vs in the past.
Regards.
Good zinger on Vance at the end. I don't understand your basic premise though.
"So why do I say that new cars and new houses should be unaffordable? I recently read that the average price of a new car has now surpassed $50,000. But lots of people (including me) buy used cars, which average just over $25,000. Let’s suppose the average sale price for all cars (new and used) is $35,000. In that case, the average new car is “unaffordable” to the average car buyer, who spends $35,000. And that’s as it should be, because new cars are better than used cars."
If cars became somehow really easy to produce, such that a nice new car suddenly costed 25 cents, that would be a big win for supply-side economics and everybody would revel in the technological progress. (In reality, one could argue a similar thing has happened with TVs.) So please spell it out for dummies like me: why is it good for the economy that we produce cars at a price level that is "unaffordable" for most people? Why is it important to produce things only rich people can afford?
Your premise seems to be that inequality and prosperity are inextricably linked. Is that true?
"Your premise seems to be that inequality and prosperity are inextricably linked. Is that true?"
Not at all. My premise is that new products should normally be better than used products, at least on average. In that case, in an advancing economy the average new product will go to someone with an above average income.
Cars are widely affordable in America, as they should be. But not everyone needs a new car--I've never bought one.
No, unless you define “inequality” as “everyone really does have almost exactly the same”
Improvements in car production would reduce prices all across the board, but it would probably still make sense for someone at the 65th income/wealth percentile to buy a less expensive car than someone at the 20th percentile.
The point is clearest with cars because it’s the one place that we know that a lot of people buy used in addition to plenty of people buying new.
Scott’s narrow point is that, on an ongoing basis, if we are prospering you’d want the average new car to be worth more than the average of all cars - new and used - outstanding, whether on the market or not.
How true is it that a nation's output is what it can afford to buy?
True in the long run, although because of debt it's not true each and every year.
And also because of savings / prior investment.
What is “Affordability is just high nominal prices" supposed to mean?
Am I correct in inferring that the scare quotes actually mean that the intended term is inaffordability?
He meant that complaints about affordability are actually complaints about high nominal prices.