Random Thoughts on: Politics Property and Population

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Even more than my normal Random thoughts, these thoughts are a bit disorganized. I wanted to post something. I was going to post these thoughts (including ones on property prices) before but saved work by posting the real-estate roller coaster thing.

But, for what its worth (as much as a campaign promise, at least) here are my thoughts on politics, property, and population.

Politics:

What does the recent election mean? I suspect little. With some upsets, it was mostly a victory for the establishment. There was a change of power but I imagine there will be less change of policy. Rand Paul aside, many of the Republican failures were Tea Party candidates. Indeed, the establishment Lisa Murkowski looks to have won as a write in. Just as the Democratic swing in 2008 did not represent a large change in ideology (many of those Dems ran as moderates), the current crop of new arrivals represents only a slight move to the right (the Republicans ran more conservatively but the more “mainstream” candidates seemed to have faired better).

Opinion elsewhere:

Population:

Mark Steyn, amongst others, has warned of demographic decline. His big fear is that white Western populations are not replacing themselves. While imbalances in the welfare state (pensions) do pose a problem, I am less sure that the problem is demographic decline rather than demographic change. The problems faced by many Western nations do not just revolve around demographic decline, they revolve around demographic change. The relatively tiny island of Britain once ruled the World. America was at the height of its influence when it had a population was no more than two thirds of today’s [1]. Switzerland has achieved its prosperity with a relatively small population. [2] Its population represents about six years of United States immigration. Yes, at current US immigration rates we could empty the population of Switzerland in six to seven years. Now that would be demographic change (and might be a better deal than current policy).

Japan faces a demographic decline, but their response is to develop robotics. A recent Citizen Renegade post on sexbots illustrated the strides they have made in giving human form to machines. Sexbots are probably not where such robotics will find their biggest markets. The caring and hospitality services offer a potentially huge market. While the United States develops expertise in English as a Second Language, the Japanese are developing expertise in robotics. Which would you rather as the basis for a prosperous society? Even if robots cannot completely relieve labor shortages, so what? Labor shortages equal higher wages and higher wages equal greater optimism. It is true that higher wages lead to higher prices but that does not mean workers (that is most of us, by definition) are falling behind. The workers that assemble Ferraris, Bentleys, and Bugatti’s may not be able to afford their product, but they can certainly afford to house, clothe, and feed their families.

This is not just about human capital either. Even if the demographic change was in the direction of importing only smart outsiders (and almost no country completely adopts this policy) you have to account for cultural change.

Although usually dismissed by technocratic open borders types, it is vital to the well being of any society. Culture is the infrastructure upon which we deploy human capital. Diversity creates the human equivalent of gridlock: what should be able to move fast and free, ends up caught in jams and crashes. A smart new machine is no good if it cannot work with the existing plant.

It amazes me that many who call for maintaining and upgrading our physical infrastructure are so blithe to the degradation of our human infrastructure. Those who insist we “invest” (spend tax money) in a 21st century workforce also insist on importing 19th century workers.

In short: I believe that any nation can bounce back from demographic decline. Cheaper land, higher wages, and increased optimism can possibly raise birth rates once again. What no nation can survive is demographic change of the type many Western countries impose upon themselves.

Property:

Why are rising property values considered such a good thing? When a property moves from $250,000 to $500,000 it does not get larger or more comfortable. The price change generates no wealth (although money may shift around). When you move you still need to purchase another home that has presumably risen likewise in value. Is it really a good thing that your children will not be able to afford your neighborhood? Is it really a good thing that to have so much of your wealth tied to an illiquid asset?

I understand the pain of those who have lost money in recent property price declines. I am asking why rising property values was ever declared a good thing in itself.

Some may see high prices as a way to prevent undesirables from moving in, but I don’t see that. If an average house cost $5,000 and a luxury house cost $20,000, even the luxury house would be affordable to almost everyone. However, once a cheaper alternative is available I see no reason why poorer people would rush to the swanky neighborhoods. The same price differential exists between a secondhand clunker and a new shiny sedan, yet poorer people tend to drive the clunkers while middle class opt for the sedan. Indeed, I suspect that more poor people would choose the sedan over the fancy house.

Notes:

[1] 1940: 132 million; 1950 151 million; 1960: 179 million; 1970: 203 million. Source: Wikipedia    [back]

[2] Population of Switzerland 7.8 Million in 2009. Source: Wikipedia    [back]

This is another Random Thought in the Random Thoughts series of quickfire posts (more like comments than articles).

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3 Responses to “Random Thoughts on: Politics Property and Population”

  1. David Foster Says:

    I think you’re correct that rising home prices do not represent a true increase in national wealth–actually, they represent a wealth transfer between generations. I debated this with an economist several years ago and he disagreed: I wonder if he’s rethought his position since then.

    One of the main factors driving moves to more expensive neighborhoods is school systems: the cost of private schooling is so high that if a family has to pay more $$$ for their house in order to be near a useable public school system, the tradeoff may make sense.
    [DU: I agree on the public school reason for property prices. I see it as a problem: families forced to over-extend themselves so they can get into good school districts. Of course that is another (long) discussion.]

  2. Gunslingergregi Says:

    On the housing.

    You got to look at how many people actually own the house.

    Even in the sense of how many people only have to pay the tax on a house because they don’t have a mortgage.

    Probably not to many in a 500 k house neighborhood or anywhere.

    It is like trump when a bunch of his buddies lost all their shit.

    Guy went from 170 million supposed worth to bagging groceries for a job because it wasn’t real worth.

    It was fake. Guy was making maybe 10 percent on borrowed money so it looked good until the market goes down ten percent and he goes out of business.

    Like the guy I went to work with had 10 million in real estate then it was gone same problem.

    It was all on loan not actually his.

    So when it was ok he made some percentage but there was no leway no actual ownership.

    So really the house price going up fast helps out the government with higher taxes and then people can refinance and take vacations which as I know personnaly no matter how much money you want to spend you can spend it.
    So people prob thought they could do a lot with a 100 grand refinance and then it was gone. Probably felt like free money at first until the payment is due. Then the new tax bill is due. Couple those together and it doesn’t feel free anymore but is painfull. Now if the house keeps going up then they can keep doing it. At some point though nobody could really afford the 500 k for just a regular house so there was no more room.
    When your house bills alone are 6k to 9k where is the room for slippage. Basically just working to have a place to live.
    Then you have divorce in 50 percent of the cases fucking that up. So it just can’t be afforded anymore no matter how much you try to suck out of the guy if they were affording it on two incomes and now only have his and he has to keep a little and the government gets a chunk and the alimony child support gets a chunk.
    It just always boggled my mind that the people I worked with before it was like just household bills 6 to 9k and they were making 8 to 10k a month. So lose a job and fucked. Lose a job and have to take paycut fucked.
    Why you should always live below your means.
    [Live below your means. Excellent advice that I should have included in my “advice” post. Your points on property taxes and general over leveraging are good. A million bucks a year is not much good if you are spending 1.1 million a year]

  3. chic noir Says:

    not all public schools are bad. the private vs public school thing is another form of status show that the middle class have picked up from the upper class.

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