Tuesday, January 20, 2015

It's not the size of the fight in the econosphere

Noah Opinion says, It's the size of the house in the fight;
Ragout4:43 PM
"Even as house size soared, real rents stayed flat over the latter part of the 20th century...that looks like a large increase in the standard of living of the average person."

The BLS, or any economist measuring rents, is trying to hold the quality of housing constant. So house size should have no effect on rents. Thus, if real rents have been flat, that means that housing has made no contribution to living standards.

One important reason for this is that productivity growth in homebuilding is typically very low, or even negative. So this has been a pretty big failure of the US economy.
  1. The increase in house size is a physical quantity; it means that people have more stuff, period!
As we have pointed out many times the size of the median newly constructed home is about 40% larger today than in the 1970s (and contains a lot more stuff, like bathrooms, appliances, garage space, closets, cable TV and internet connections). Which is a physical refutation of the claims of no increase in middle class incomes over the same period.

A point we've made to Brad DeLong a dozen years ago too. Keep up the good fight, Noah.

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