I read an economics article this weekend from a New York Times magazine on real estate.
It was called, not too descriptively, "Holding On"
By DAVID LEONHARDT (April 6, 2008)
New York Times Key Magazine.
The author, an economics writer for the New York Times,
observed the disparity of housing prices and good places to live.
Good places to live are less expensive now, with a housing price decline.
Yet some cities haven't seen this decline, or much of one.
People still want to live there, even if they get less--sometimes much less--
housing value for the money.
Here follows a key quote, on why to live in cities that are communities of ideas, as I call them:
What, then, can explain the contours of this housing bust? The best answer is that the sheer scale of the bubble obscured another — in all likelihood, more lasting — trend: despite all the ways that technology has made distance matter less, geography matters more. It may be easier to transport an individual job from New York to Vermont, but the value of being in New York is actually greater than it used to be.“The essence of cities is physical proximity,” explains Edward Glaeser, a Harvard professor who specializes in the economics of geography. “They’ve always had the advantage of making the movement of people easier, the movement of goods easier and the movement of ideas easier.” What has changed over the last few decades, Glaeser says, is that good ideas — be they in finance, entertainment, technology — have become much more valuable. The best ones can be turned into products that are soon being sold all over the world, thanks to globalization, FedEx, the Internet and a host of other forces. But it’s still much easier to come up with a good idea when you are surrounded by a lot of other people working on the same problems as you are.
The textbook example is Silicon Valley. In 1955, the physicist William Shockley set up a semiconductor laboratory in Mountain View, partly to be near his mother in Palo Alto. Some employees of Shockley Semiconductor Laboratory later left the company to found Fairchild Semiconductor, and Fairchild alumni in turn founded Intel. In 1980, an Intel salesman named John Doerr quit to become a technology investor, and he helped provide seed money for Netscape, Sun Microsystems and Google, among other companies. The story is not wholly new — there is a similar one about Detroit in the early 20th century — but the benefits from this kind of clustering are bigger than ever. The Ford Motor Company wasn’t distributing its products in China a dozen years after its founding. Google is.
As a result, inequality hasn’t just increased among workers; it has also increased among cities. In recent years, New York, Boston, Washington and San Francisco have widened their lead in household income and educational attainment over much of the rest of the country. So it makes perfect sense that they have widened their lead in housing prices, too.
Do you see the money quote, so to say, of economist Edward Glaeser above? Here it is:
What has changed over the last few decades, Glaeser says, is that good ideas — be they in finance, entertainment, technology — have become much more valuable. The best ones can be turned into products that are soon being sold all over the world, thanks to globalization,
Live in a community of ideas. Build one if you can't find one. It's the beachfront property of our time.
JEG
Posted by Jay Gillette at April 8, 2008 02:31 PM