I was looking through my old email archives trying to find a receipt for something I bought online when I came across an old (unpublished) letter I wrote to The Economist in May 2004. I was working in telecom at the time. I titled my letter “The Cost of Housing”.
One of the most notable achievements of the liberal economic system is its ability to make products and services simultaneously better, cheaper, and more widely available. It’s an achievement that few if any other socio-political systems can claim.
Everything from cars to PCs to travel to food to entertainment, even the eponymous Big Mac, is getting better and cheaper all the time. Some product categories are improving in quality and performance and falling in price so fast it has even become difficult to include them in inflation calculations.
How can it be that such a powerful economic system cannot seem to make one particular product either cheaper or better? House prices in far too many countries are rising and rising and rising.
Petrol reaching $2/gallon or 80p/litre seems to be big and very bad news but house prices are rising to levels that put them at fantastic multiples of annual incomes and it seems to be good news. Even ignoring the obvious concerns with inflationary bubbles, shouldn’t persistent price rises and persistently high prices in any industry so central to a nation’s wealth and well-being be a cause for national concern rather than celebration?
Surely there is prima facie evidence of something structurally wrong with any such industry. If so, isn’t it something that governments should be trying to investigate and repair rather than something where they fight to take the credit?