I read the whole post. Really revealing - so much analysis but not a single mention of a global system that is reaching a singularity in wealth concentration, and maybe how that might be an important dimension to reflect on. Its like using so many words to deeply analyze the speed differentials in a car race, but not looking up to see that all the drivers are racing towards a brick wall.
Sometimes I wonder if our system evolved the discipline of economics as an incredibly expensive intellectual distraction to pacify the petit bourgeois.
We can read Dan Wang and Tyler Cowen and whoever else to educate ourselves on the idea that {interests aligned with the further concentration of capital} are the real reason why we the people of the middle class can’t afford to buy a home, and actually you should be grateful you have antibiotics and shelf-stable, flavorless tomatoes and Instagram Reels. Your forebears were not so lucky!
You can’t afford to buy a home because the current owners vote to restrict new housing through zoning and expensive regulation on construction permitting, so supply is limited in the places you’re trying to live (a higher income region?).
The government also subsidized mortgages for the prior generation to increase asset values and now that time is up. Subsidized demand = inflation
Finally, you likely want a bigger house than your parents had. And most people want it to be in the cooler area, not somewhere in Iowa where schools are great but restaurants and non-remote jobs are lacking
> And most people want it to be in the cooler area, not somewhere in Iowa where schools are great but restaurants and non-remote jobs are lacking
This is a fundamental problem. People in big cities are on average richer. That's not just a US thing. People in a Tier 1 city in China have a substantially higher standard of living than people in lower tier cities. There is a very real hierarchy.[1] City tier is determined by size, not income, but income tracks size.
This is the phenomenon that induces over-concentration. Go to the big city and make your fortune, or at least find enough scraps to keep you alive. That's why US homelessness is a rich city thing.
Figuring out how to make mid-sized cities, at the 0.5M to 1M population level work, is something the US currently is not doing well. Those cities have housing, but not jobs.
Supply and demand doesn’t just work in terms of raw housing supply, but in terms of housing that is “on the market”, which is a critical distinction that economists’ arguments deliberately ignore.
In my parents’ generation, it used to be that if you moved or stopped living in a house, you would sell the house in location A and buy a house in location B. Today this would be considered a critical wealth-building error / faux pas. Widespread absenteee landlordism is a new phenomenon, and the fact that we allow it to exist is a de novo policy decision constructed to inflate property value (similar to the subsidized mortgages you referenced).
The reason housing is so unaffordable in my city is not because there isn’t enough housing for the people who live here, it’s because I (along with countless other professionals) am given a choice between subsidizing the lifestyle of somebody who literally doesn’t live here if I’m living in old housing stock, or I’m subsidizing the unavoidably high cost of developing new property (and the lifestyle of property developers) if I’m living in new housing stock.
If the balance of households renting vs owning were inverted, housing would be more affordable. I agree that subsidized mortgages helped create this beast. But the superset problem is the financialization of housing, that the American dream stopped being about the picket fence and started being about securing a passive income / rent-seeking on that picket fence. There are many policies that contributed to this problem.
No mainstream economists touch this problem because we’ve become a country of rent-seeking. So right-leaning economists will say we just need to relax regulation (read: increase the profit margin of property developers) and liberal economists will say we need more “affordable housing” (read: remove more housing stock from the market, for the benefit of a few lucky souls), while neither addresses the core problem of putting median housing titles in the hands of median people, which was perfectly normal from the 50s-80s, before our current system crystallized.
In our current system, building marginal housing and reducing regulation more benefits capital (the top 1% of asset holders; the property developers and the people who can afford to subsidize their profits), not the people who actually live here.
Emotionally, I agree that the current system sucks. But how exactly do you "[put] median housing titles in the hands of median people"? Government seizure and redistribution of property titles? That's where I always get stuck: criticizing society ills is much easier than proposing concrete, pass-able policy.
"No mainstream economists touch this problem" because it's a damn hard problem without painless solutions.
I mean the problem will solve itself eventually. As wealth continues to centralize and urbanization continues unchecked, the “renter” voting block will eventually be state-level majorities in places like New York and California.
There are plenty of ways for people to “vote themselves” property, whether it happens peacefully or not is a decision of those in power. The spectrum runs from land value tax to punitive landlord taxes, improving tenant rights, squatter rights, and outright seizure.
I don’t know which path we’ll go down, but some step in that direction feels inevitable within the next 60 years.
US Per-capita real income tracked productivity growth until about 1975. After that, productivity continued to climb, but per-capita real income did not. This is why life sucks worse than it used to for everybody but the top 10%.
With AI coming along, productivity is about to get another boost. Maybe a big boost. But will most people benefit from it? Under capitalism as currently implemented, no.
That's the meaning of Sam Altman's “I think that AI will probably, most likely, sort of lead to the end of the world. But in the meantime, there will be great companies created with serious machine learning.”
Universal basic income is not the answer. That's welfare 2.0, leading to high-rises of useless people. Altman doesn't have the answer. Wang doesn't have the answer. They both see the problem coming but suggest no viable solutions.
I agree. The center of capitalism may have shifted to China, but they'll have to deal with (are already) dealing with the same problems and it'll probably happen even faster for them. Instability in the system is only overshadowed by the growing instability in peoples lives. I think most people feel this and the discourse has fundamentally shifted in the west, but these are tectonic and unpredictable forces.
A parting thought: from a geo-political perspective, I understand the purpose of essays like this but like I said I think its losing the forrest for the trees and at great risk.
Consider PRC has 90%+ home ownership rate and declining population, i.e. almost every person in PRC is functionally going to inherit a house, likely multiple, the floor for stability is going to be much higher. This is not west where high % of population is one paycheck away from eviction. Worst case scenario for PRC youth is to have roof over head. Worst case scenario for PRC elderly is they die 100s of times more materially affluent than any past Chinese. VS west deals with onerous social safety nets that's increasingly unsustainable, old gen will lose benefits while new gens finance and live worse off then old gens... because everything is financialized, something CCP very keen to guard against... because it regulates capitalism. IMO very different scale instability to govern for.
those articles were written a plenty about the Davos Elite - even precovid. It’s a tad lazy now.
Sure there was some evidence of wealth concentration mattering. But there was also evidence against it (like Jack Ma). Power is still the ring to kiss.
And hopefully it’s very understood to the parent comment and agreers, wealth creation is not zero sum. When something new is created the pie gets bigger. All wealth inequality discourse is driven by that misunderstanding and a lack of building more homes https://www.sciencedirect.com/science/article/pii/S001429212...
Maybe your brick wall is the singularity instead and I misread you but I don’t think so.
Entirely not the point. We know that monopolies and wealth _concentration_ reinforce each other, at the cost of wealth creation.
Every time a monopoly buys a company, a chance of competition gets eliminated. As monopolist have enough money to buy the government by regulatory capture or even state capture, competition cannot grow, stifling innovation and growth. Parasitism is the most apt way to understand, because the host will wither away from it.
I agree we should be busting more monopolies in the vein of Teddy Roosevelt, but you are forgetting the monopolies and capture political parties have on the states themselves.
I know its a hot issue and I apologize, but if you look at Minnesota with its likely fraud: would their social welfare program numbers look better without the fraud? Could California be run better without its (also likely) welfare fraud? You might really want this but the leadership doesn't want to root it out. So you're left with voting for the opposition but how many want to do that? Nothing happens.
There's no competition in politics. It's two parties or nothing right now.
There's Californian billionaires who loudly hate the Government but can't get anything to change. I feel you are overestimating wealth's influence too some degree as well.
>but not a single mention of a global system that is reaching a singularity in wealth concentration
that's not the case though and Dan is implicitly addressing this given that China is the subject of a decent chunk of the letter. Wealth in the global system is much more evenly distributed these days. We're much closer to a multi-polar world than we used to be in a long time. A lot of the emerging economies are building middle classes of serious size, it's a whole other world compared to 20 to 30 years ago. The developed world's been mostly stable inequality wise, the only outlier being tech oligarchs in the US but that's hardly a defining feature of the global system.
But globally we're likely living now in the first time in human history when the median human is going to see a drastic increase in their fortunes.
