| > However, when suddenly a large chunk of population gets extra disposable income - say a hypothetical UBI experiment (or not so hypothetical universal or near-universal social handouts), or as two-income household model gains popularity in a country, or (indirectly) some innovation creates a new, widely-applicable efficiency - then the market absolutely swoops in and eats all the average surplus. My argument is that this is not a feature of markets but rather government action. The rise of two-income households is a great example. Historically only the husband worked for money and the wife would do domestic work like washing clothes etc. Now the washing machine washes the clothes, which takes 15 minutes of human labor instead of four hours, and the labor is then spent working a job that does something else. Meanwhile the family has more money, which allows them to buy those same additional products and service now being provided. And yet this hasn't happened. The surplus went somewhere else. You already know where: > You mention some regulatory overhead being eliminated, but more often than not, a surplus of disposable income enables passing further regulatory requirements that improve (or at least purport to) safety or quality of products and services It "enables" that to happen, but we as a populace are not actually required to do that. And when we do, the overhead eats the surplus. So maybe we shouldn't? > If I parse this correctly, then the latter is definitely the case. Real estate is the prime force that eats all surplus disposable income. Oh, absolutely. This is why uncompetitive markets are a problem. Real estate is an unusual case, because the really isn't anyone with a monopoly on real estate. The supply constraint comes directly from the government through zoning rules. We effectively have a cartel whose board of directors is the zoning board. In a free market, if wages go up, people who had been living with their parents will want to get their own place, so they would use the extra money they're making to do that, and the extra money would pay construction companies to build more housing. But if that's prohibited by law then the extra money only goes to bid up the price of existing housing, people don't get housing who didn't have it before because new housing is not created, and the money just goes to landlords. That is an independent problem that we badly need to solve, because it isn't just a problem when people make more money. If you get more benefits, the same thing happens. If companies all start providing free daycare, people save the money they'd been using to pay for daycare, they want to use the money to get their own place, rents go up. If prices go down, the same thing happens. Computers get cheaper, you can get a suitable one for $400 instead of $2000, landlords take most of the difference. This needs to be fixed or it eats any surplus that would otherwise go to the middle class. It's a huge problem, but it's a solvable problem. Build more housing. And either way it doesn't affect whether you should prefer cash or "benefits" as compensation, because when a market with an artificial supply constraint is eating the bulk of any surplus, it would just as well eat the surplus created by benefits too. At which point we're back to "money is better than arbitrary stuff" because turning money into stuff you want has lower deadweight friction losses than turning stuff you want less into stuff you want more. |
It happens basically everywhere, even when the rules are different. If I understand correctly, the primary limit in the UK is there's not enough builders, which is not to say the government isn't in the way as that's despite it also having constant planning issues with regard to the "green belt"; likewise in modern Germany, my understanding is not enough builders (and again yes the government could be better because bureaucracy is very slow, but they're not the limiting factor); likewise DDR (not even trying to be a free market) where the government was organising the construction work and trying to do it cheap and fast but there still wasn't enough.