From: James Rogers (jamesr@best.com)
Date: Tue May 28 2002 - 13:50:12 MDT
On Tue, 2002-05-28 at 06:43, Brian Phillips wrote:
> Does the variance in the price of living mostly reflect market
> pressures (i.e. the invisible hand) or is regulation (i.e. more
> regulation and codes in the big liberal cities) driving up
> costs? Insurance rates etc.?
It reflects market pressures, but the market is influenced by government
factors as well. For example, Silicon Valley is very expensive in large
part because the land is very expensive. The land is expensive for a
few reasons. First, the local geology and geography of the area puts
severe limits on the expansion of the metro area, so there is limited
supply immediately in the this metro area. Second, there is plenty of
land outside the immediate geological hazard which is being developed
very rapidly, but there is woefully inadequate public infrastructure for
connecting the outlying areas to the core metro area so many people
don't find it practical to live in the buildable areas. Third, there is
a lot of disposable capital in Silicon Valley, so people are willing to
pay high prices for the convenience of being inside the metro area,
driving the market prices up. Fourth, a number of city governments in
the Silicon Valley metro area have an aversion to high-density or
high-rise buildings and won't grant permits to build them (or in some
cases will revoke permits already granted, a situation which has been
tested in the US Supreme Court regarding the city of Palo Alto). Fifth,
there is substantial population growth in the area, which is only
aggravating the situation.
Therefore the obscene cost of living, particularly as it relates to
housing, is a combination of a lot of factors that contribute to the
market being very biased towards elevated pricing; it is the classic
combination of very limited supply and a very strong demand.
-James Rogers
jamesr@best.com
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