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by WalterBright
2236 days ago
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> Relativistic gravity is an incredibly difficult and complex concept to understand You're right, but the underlying rules are simple. > leading to empty buildings, while prices still rise That's still supply & demand. In this case, it is likely that the demand is rising fast enough that delaying renting the building will result in higher rents in the future for that building. It's a chaotic system, and I mean that in the mathematical sense, where simple rules lead to complex (and counter-intuitive) behaviors. |
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I agree, it is indeed a chaotic system, and is even worse than that because there is no simple rule any agent is following.
If it is the case that not renting a building will result in higher revenue because rents will be higher in the future, then that building will not be rented out and neither will similar buildings, which will continue increasing rent at increasing speeds; and at the end rent will increase towards infinity. The simpler explanation is that no, not renting a unit does not lead to higher revenue, as leases are at most YoY, the YoY increase in rent would have to be over 50% for this to make sense, which isn't the case, and in fact actors in the market simply do not act as one can accept in any way, which is why you can't use supply and demand, or any basic economics for that matter.
For rent, for instance, you could have supply completely equal or even significantly higher than demand, as in there are significantly more buildings than tenants and more empty buildings that tenants looking for landlords, and still see prices increase. Indeed, if the landlords are coordinated or if they know that their tenants will not act rationally in the economic sense, you can simply have a system where all landlords continuously increase rent every year. And there is nothing that any tenant can do, so they have to pay increasing amounts of rent every year. In such a system, because commodities are not perfectly fungible, because actors are very far from fully rational, because knowledge from every actor is imperfect and because there are hidden costs both monetary and non-monetary, you can have a system where supply is higher than demand, and yet prices rise. No matter how you dice it, no matter which definition of supply and demand you use, the laws of supply and demand aren't being followed. Rental markets tend to follow this pattern, in even more complex ways with other effects that lead to supply and demand breaking down even more.
This is why trying to use macro-economic laws such as supply and demand without carefully going through each assumption behind them is a very dangerous mistake.