For instance, there's Scott Sumner's suggestion to make peace with "unaffordable housing". While this approach is far from perfect, it remains the logical way to increase output via general equilibrium means. Recall that general equilibrium can only coordinate aggregate wealth in a complete context of full resource capacity, yet aggregate time value does not yet contribute to general equilibrium capacity in a wealth origination context. Meanwhile, new traditional construction is a leading edge of wealth generation, insofar as it serves as a repository for the higher income levels of skills compensation.
Nevertheless, the output which could bring more of the marketplace within reach of lower income levels, has proven difficult to imagine in ways that are agreeable to all concerned. Possibly the best way to supplement this unfortunate general equilibrium result, is to create new forms of productive agglomeration which would thrive in scattered and decentralized settings. Such an approach would reduce the global extremes of skill and income coordination, which now inhibit the framing of services generation for low income groups. A defined equilibrium for services and broad ownership of building components, would make it possible for lower income levels to expand the marketplace definition (hence output) of non tradable sector activity.
Otherwise: Without options such as these, many citizens with small incomes, will struggle to maintain sufficient levels of personal responsibility and social engagement in today's society. This reality holds not only locally, but across international contexts and cultures as well. After all, much of today's recognized economic time value aligns with global wealth capacity, hence no longer exists in relation to other time value in aggregate.
And so long as societies rely on the prosperity of human capital which lacks any internal coordination point for time aggregates, human capital can't be allocated as efficiently as other forms of capital. One could even think of a marketplace for time value, as a framework in which human capital experiences efficiency gains that place time use capital on a par with financial capital. So long as aggregate time value only exists in relation to total or global resource capacity, traditional housing and service generation will continue to present problems for lower income levels.
Land contributes the largest general equilibrium coordination of value, in terms of productive agglomeration for knowledge use, as today's most important wealth source. Wherever productive agglomeration is clearly evident, housing valuations begin to align with the same land valuations which are correlated with the aggregate values of global resources. In "Land is Underrated as a Source of Wealth", Noah Smith cites a recent Vox study and emphasizes at the outset:
In the long run, housing does about as well as stocks. It's also a major driver of inequality.Alas, his reasoning is another way of describing how extensive land value is closely associated with certain forms of human capital valuation, even as other vital aspects of human capital have little formal economic definition in general equilibrium dynamics.
Also note that land isn't easy to tax so as to make a tangible difference for redistribution, in terms of inequality. How do we know? There's a recent, even somewhat odd example which just occurred. Rather than completely remove the mortgage interest deduction, policy makers opted to cap mortgage deductions instead. The result is that higher income levels will consequently still be taxed for - yes - land which holds the highest values in terms of economic access and value. Given renewed arguments for land taxation as redistribution to address inequality, there's too many complex general equilibrium dynamics at play, for policy makers to claim taxation sources for the "right" reasons - however those reasons are perceived.
General equilibrium settings have proven notoriously difficult, for any redistribution which purportedly addresses inequality. I believe it would be helpful to distinguish housing, land and time based service generation as defined equilibrium components, so as to reduce exposure to global extremes in skill and compensation which are not readily amenable to redistribution. It's worth a try this time to allow people to help themselves, since policy makers and other elite have bungled the process of doing so in their stead.
How so? When societies attempt to "help" lower income levels from what they often perceive as a never ending supply of wealth, they become tempted to serve up portions out of that general equilibrium pot with major helpings for themselves. Timothy Taylor provides some beautiful examples how this unfortunate reality plays out, in "When Invoking Poverty and Necessity is a Ruse". His post is absolutely spot on and deserves to be read in its entirety.
Ultimately, no one can "force" affordability in the wealth dynamics of general equilibrium. And today's major issue in terms of general equilibrium values, are the constraints of productive agglomeration. This is where the vast majority of today's wealth is contained, yet the primary sources of knowledge use are still limited at the core. That - in turn - impacts the housing output and land values which are perceived as "well suited" for economic access.
Fortunately, it's possible to greatly expand the output of productive agglomeration, via defined equilibrium settings. After all, arbitrary limits for productive agglomeration bear the greatest responsibility, for today's extremes in terms of land use valuations and housing options. And just as Scott Sumner emphasized, increased output is the best way to make a marketplace more accessible to all.
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