Cost of Living Blues
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  • jeburke

    It has to be pointed out that “cutting high costs” is a tall order in densely populated cities where the cost of almost everything is a function of the scarcity of space. Residential rents are sky high anywhere reasonably close to central and downtown Manhattan because of intense market competition (everyone wants to live there). Commercial rents, ditto. Coffee and a roll will cost you because the rent for a modest retail space to run a take out joint are astronomical. And of course, higher wages and salaries add a wage push to this price pull inflation of everything. High taxes don’t help to be sure (which is proved every time the city and state offer tax breaks to developers), but they are as much a result as a cause of high COL.

    So, if subsidies to the poor is not an answer, what is? More physical development of less dense areas of the city and metro area is one — but this has been proceding apace for three decades, so it’s hard to lay blame on that score. Reducing taxes would help — a bit, but that’s likely to be marginal (most city taxes support essential services, not welfare). More better paying middle class jobs would be ideal, and I’d love to hear VM’s suggestions for how to attract/create them.

    • f1b0nacc1

      One thing that would help (though it is no panacea) is to get rid of rent control. This massive market distortion has the effect of discouraging the development of anything other than the highest of high-end housing in the cities in which it is used.

  • Anthony

    Some good points Professor. That said, it’s important to note – as Via Meadia favorite Joel Kotkin has noted – that all of the financial centers around the world are expensive. Sure you can think of New York and London as paradigmatic examples of “blue thinking” in the west, but don’t forget that Tokyo, Singapore, and Seoul are also quite expensive.

  • AD_Rtr_OS

    Trimming back the size, scope, and intrusiveness of government goes a long way towards reducing the costs of living under those governments.
    Every regulation is a compound cost as one builds upon another.

  • Pait

    New York City is expensive because everyone wants to live there, which in turn is caused by the fact that earnings there are much higher. This happens because work is more productive in NYC, a consequence of the fact that many highly productive people live in NYC.

    If this sounds like a circular argument, it is because there is a feedback loop involved. It has very little to do with government actions and very much to do with markets and individual actions. This is the subject of spatial economics, which I encourage you to study.

    • Jeff Jones

      Yes, I’m sure high taxes on businesses that, in turn, pass that expense on to their customers in the form of higher prices has nothing to do with it.

      • Pait

        Very little, as would be evident to anyone who knows fractions. Local and state taxes are a small percentage of the cost of living in NYC. Certainly much less than what what be needed to triple prices.

        Labor is costlier in NYC because there are many high paying job alternatives. And land is costly because so many people want to live there. This would be obvious to anyone who compared the populations of NYC and Harlingen.

        But to accept the argument one would have to understand market economies, and abandon the conspiracy theory that the government is responsible for all ills that befall oneself. For some this may be hard to do.

      • Jim__L

        Mostly it’s rent-seekers finding lots and lots of rent that makes the prices so high.

        Human beings were not made to live in the rabbit hutches known as “high-density housing” in urban areas. One of the appalling ironies of modern life is how many people are forced to live like that.

        • Pait

          Jim_L, your theory is wrong. The United States is a free country. People move to cities because they want to. No one forces them to.

  • Jim__L

    As telecommuting becomes more and more common, location is going to matter less and less. I work an engineering job in the Bay Area, and my own company has employees who do their work remotely from Oregon… my wife’s previous company had people living in Tempe Arizona, Modesto California (a couple hours’ commute), and the like.

    If I didn’t have to be on the factory floor now and then, I’d telecommute too, and pick up the family and move somewhere I could get a McMansion and two luxury non-commute-friendly cars, for what we pay for an all too modest attached home here.

    Fighting the problems of population density with higher population density makes no sense.

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