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I feel like this kind of zero-sum argument does the rounds quite frequently. The reality is that housing is the main mechanism used by the older wealthy folk f

I feel like this kind of zero-sum argument does the rounds quite frequently. The reality is that housing is the main mechanism used by the older wealthy folk for their pensions, and subsequently transfers wealth up through the generations. What we need is a way for all that unproductive capital used to directly fund the businesses of the young, growing the real economy (rather than the financial). Alongside that, additional legislative arrangements to provide security for renters. Pension pots should be a return on investment, not speculation.

ThrustVectoring 4y ago
> What we need is a way for all that unproductive capital used to directly fund the businesses of the young, growing the real economy (rather than the financial). You're conflating financial "capital" with real productive capital here. In real terms, non-productive financial assets simply do not matter; whether landlords extract a billion or a trillion dollars makes not a whit of difference in the real goods and services the economy produces. If you redirect financial assets from bidding up the value of housing to bidding up the value of small businesses, you've simply moved the siphon from cost of rent to the cost of owning your own business and/or suppressing wages.
- coxmichael 4y ago
  Again, there’s the idea that wages and businesses produce nothing. They don’t.
  - ThrustVectoring 4y ago
    Yes, businesses produce actual value. The problem is in what you're diverting from, the ground rents extracted by artificial housing supply constraints. Whether you pay your landlord $X or $Y has zero direct effect on the total amount of real goods and services produced and consumed by the economy as a whole, it's purely redistributive. So if you reduce the total amount of rents paid to landlords, you are enriching renters at the expense of landlords without changing the total size of the real economy, and there's no real goods and services freed up to then be productively used by businesses to generate actual value.
    - coxmichael 4y ago
      Exactly, it’s redistributive to the public good. That is, productive.
    - coxmichael 4y ago
      Apologies here, my previous comment was a little flippant (I was at the pub…). There's absolutely an argument here that rents, as a basic dead-weight cost of all people within a society, don't affect the real economy or productivity. This could be true, but only if the access to finance is distributed across society relatively equally, with a positive effect on productivity. My understanding of, at least in the UK, is that it's not. The relationship between financial capital and other forms is lossy at the moment — the purpose of financial capital is the creation of new goods and services, and we've spent 40-odd years making sure it goes largely into something that already exists (housing). In that process, funding for new stuff, for non-rent economic activity, hasn't been properly funded.
      - ThrustVectoring 4y ago
        Apology accepted, and I'll take that as permission to try to re-explain myself while I'm three beers deep. There's an economic analysis trick that can cut through a hell of a lot of cruft and confusing abstraction - whatever happens with the dollars and financial instruments you ignore, and you take a pure look at the real goods and services involved. In these terms, the landlord/tenant relationship looks like "some guy makes a bunch of widgets and only uses some of them, selling the rest for rent money. The rent money can be used to buy those widgets, letting the landlord consume that many widgets without physically making them. Generalize this about generic 'stuff' instead of just widgets." This is what bothers me about your suggestion to redirect money from non-rent economic activity. How do you want to redirect the widget consumption to make the actual physical changes necessary to have additional productive economic activity? Do you want to apply the squeeze to landlord, tenants, or both? And again, I'm not asking where the money comes from because it's completely irrelevant to this analysis: a more productive set of businesses will require more machinery, warehouses, etc. The labor and material used for these come at the expense of making other stuff, and this physical investment of real goods and services is someone's stuff that they made without consuming. Like, the lack of an answer to this question is really what makes me think this solution is wishful thinking. There's many answers to the question of who gets squeezed in terms of real consumption, but with very different consequences: 1) Nobody gets squeezed. Workers produce and consume the same, there's the same amount of real businesses, and the same amount of non-worker consumption. The difference is something like "instead of your job paying $4000/mo (after tax) while rent is $2000/mo, now your job pays $3000/mo and rent is $1000/mo". You still have the same excess production over consumption, but more of it gets siphoned off by your employer instead of your landlord. 2) Landlords get squeezed. Rents might get reduced, but this isn't necessary - what matters is landlord consumption goes down. If rents are lower, then workers have excess consumption available, but they forgo it in favor of productive investments in new businesses. If rents don't go down, then landlords forgo this consumption in favor of productive investments in new businesses. Either way, it's landlord consumption that is reduced, the only thing that changes is the nominal owner of these businesses. 3) Workers get squeezed. Rents might or might not change, again, and it's only relevant for who the on-paper owner of these new businesses are. If rent is the same, then workers have to save more and forgo more consumption to make the businesses exists. If rents change to finance this, then they go up so that landlords can build businesses without reducing their consumption. 4) Mix-and-match between the effects of various changes. You can literally get all three of the previous situations simultaneously - businesses get better at underpaying employees for their owners' benefit, landlords consume somewhat less, and workers also consume less, all while rents do anything. In summary, allocating more investment into non-rent economic activity requires someone to not consume the real goods and services that go into making these businesses. It's some combination of the renter and the landlord depriving themselves of consumption, and if neither consumer budgets on the question then you've merely changed the financial description for why identical real transfers are happening.

ThrustVectoring 4y ago

> What we need is a way for all that unproductive capital used to directly fund the businesses of the young, growing the real economy (rather than the financial). You're conflating financial "capital" with real productive capital here. In real terms, non-productive financial assets simply do not matter; whether landlords extract a billion or a trillion dollars makes not a whit of difference in the real goods and services the economy produces. If you redirect financial assets from bidding up the value of housing to bidding up the value of small businesses, you've simply moved the siphon from cost of rent to the cost of owning your own business and/or suppressing wages.

coxmichael 4y ago
Again, there’s the idea that wages and businesses produce nothing. They don’t.
- ThrustVectoring 4y ago
  Yes, businesses produce actual value. The problem is in what you're diverting from, the ground rents extracted by artificial housing supply constraints. Whether you pay your landlord $X or $Y has zero direct effect on the total amount of real goods and services produced and consumed by the economy as a whole, it's purely redistributive. So if you reduce the total amount of rents paid to landlords, you are enriching renters at the expense of landlords without changing the total size of the real economy, and there's no real goods and services freed up to then be productively used by businesses to generate actual value.
  - coxmichael 4y ago
    Exactly, it’s redistributive to the public good. That is, productive.
  - coxmichael 4y ago
    Apologies here, my previous comment was a little flippant (I was at the pub…). There's absolutely an argument here that rents, as a basic dead-weight cost of all people within a society, don't affect the real economy or productivity. This could be true, but only if the access to finance is distributed across society relatively equally, with a positive effect on productivity. My understanding of, at least in the UK, is that it's not. The relationship between financial capital and other forms is lossy at the moment — the purpose of financial capital is the creation of new goods and services, and we've spent 40-odd years making sure it goes largely into something that already exists (housing). In that process, funding for new stuff, for non-rent economic activity, hasn't been properly funded.
    - ThrustVectoring 4y ago
      Apology accepted, and I'll take that as permission to try to re-explain myself while I'm three beers deep. There's an economic analysis trick that can cut through a hell of a lot of cruft and confusing abstraction - whatever happens with the dollars and financial instruments you ignore, and you take a pure look at the real goods and services involved. In these terms, the landlord/tenant relationship looks like "some guy makes a bunch of widgets and only uses some of them, selling the rest for rent money. The rent money can be used to buy those widgets, letting the landlord consume that many widgets without physically making them. Generalize this about generic 'stuff' instead of just widgets." This is what bothers me about your suggestion to redirect money from non-rent economic activity. How do you want to redirect the widget consumption to make the actual physical changes necessary to have additional productive economic activity? Do you want to apply the squeeze to landlord, tenants, or both? And again, I'm not asking where the money comes from because it's completely irrelevant to this analysis: a more productive set of businesses will require more machinery, warehouses, etc. The labor and material used for these come at the expense of making other stuff, and this physical investment of real goods and services is someone's stuff that they made without consuming. Like, the lack of an answer to this question is really what makes me think this solution is wishful thinking. There's many answers to the question of who gets squeezed in terms of real consumption, but with very different consequences: 1) Nobody gets squeezed. Workers produce and consume the same, there's the same amount of real businesses, and the same amount of non-worker consumption. The difference is something like "instead of your job paying $4000/mo (after tax) while rent is $2000/mo, now your job pays $3000/mo and rent is $1000/mo". You still have the same excess production over consumption, but more of it gets siphoned off by your employer instead of your landlord. 2) Landlords get squeezed. Rents might get reduced, but this isn't necessary - what matters is landlord consumption goes down. If rents are lower, then workers have excess consumption available, but they forgo it in favor of productive investments in new businesses. If rents don't go down, then landlords forgo this consumption in favor of productive investments in new businesses. Either way, it's landlord consumption that is reduced, the only thing that changes is the nominal owner of these businesses. 3) Workers get squeezed. Rents might or might not change, again, and it's only relevant for who the on-paper owner of these new businesses are. If rent is the same, then workers have to save more and forgo more consumption to make the businesses exists. If rents change to finance this, then they go up so that landlords can build businesses without reducing their consumption. 4) Mix-and-match between the effects of various changes. You can literally get all three of the previous situations simultaneously - businesses get better at underpaying employees for their owners' benefit, landlords consume somewhat less, and workers also consume less, all while rents do anything. In summary, allocating more investment into non-rent economic activity requires someone to not consume the real goods and services that go into making these businesses. It's some combination of the renter and the landlord depriving themselves of consumption, and if neither consumer budgets on the question then you've merely changed the financial description for why identical real transfers are happening.