A lot of the "regulations" baked into childcare aren't really going to move the needle - the inefficiencies are baked into the model. I don't care how lax your state is, you're not going to run a successful childcare center with 100 kids and 1 caretaker. So the cost of childcare is always going to be linked strongly to median prevailing wages.
While I think Baumol may have something to say here, I think we should listen to Henry George a bit more. The lion's share of overhead for a daycare goes towards its real estate costs. Similarly, it's a growing share of cost of living for both the workers and the customers. And as Henry George pointed out, the cost of housing goes up without creating economic value for anyone.
J_Shelby_J · 20h ago
The knock on effect of high housing costs is driving force behind price increases and declining quality of service everywhere.
It’s an absurd situation here in California, where we are some of the richest people in history, but because the cost of housing so high, the price of everything is driven to the breaking point… meanwhile, the important jobs required for a nicely ran country are too expensive to afford and so our transit, healthcare, service industry, etc is awful.
jjav · 9h ago
> The lion's share of overhead for a daycare goes towards its real estate costs.
Not really. Salaries are by far the highest cost.
BoiledCabbage · 4h ago
And the largest part of those salaries is again used to pay for housing.
Roughly one thirds of American incomes go to cover housing. Cheaper housing means lower wage demands.
bryanlarsen · 16h ago
Daycare is expensive even when located in places where they get free or heavily subsidized rent, like church basements.
lcnPylGDnU4H9OF · 15h ago
> the cost of housing goes up without creating economic value for anyone
This is kinda wrong. It does create value for the people who are loaning out the money that the working class uses to purchase the houses. Of course, in this context that value goes straight to the hands of bankers and never leaves but it's worth noting that this situation that the working class hates happens to be rather beneficial to the capital class.
cced · 8h ago
> cost of housing goes up without creating economic value for anyone
The banks capture that in interest payments.
secabeen · 20h ago
Another important factor in many states is the drive towards living wages across the board. For decades, child care (and probably pet care) was done by low-status immigrants and women, often at wages not sufficient to live alone or raise a family on. In more recent years, we've pushed up minimum wages and allowed not just white men to seek and obtain jobs that do pay more. It's overall good that we shrunk the under-classes compared to 100 years ago, but that does mean that if your business model depends on taking advantage of low-status people, it's not sustainable anymore, and you have to raise prices.
8200_unit · 20h ago
We've lost the fundamental stability of a time when one income could comfortably sustain a family. There has been a systemic shift that undermines family well-being.
csa · 20h ago
> We've lost the fundamental stability of a time when one income could comfortably sustain a family. There has been a systemic shift that undermines family well-being.
I used to agree with you.
I currently believe that period of time (mid-20th century, esp. in the US) was a historical anomaly set up by a fairly unique set of circumstances, and we’re just on a long and slow path to reverting back to equilibrium/norm now.
I hope I’m wrong.
BoiledCabbage · 4h ago
> I currently believe that period of time (mid-20th century, esp. in the US) was a historical anomaly set up by a fairly unique set of circumstances
It was a period of high taxation on the highest incomes, large social welfare programs and by relative terms fairly low income inequality.
Finally productivity gains benefitted the labor class and not just the capital class.
That all halted in the 70s and 80s.
e40 · 49m ago
This. And this high taxation and middle class prosperity was the fuel that drove those who paid higher taxes to give us all the system we see today. Trump is not the cause, he’s the result.
ponector · 16h ago
I'm quite sure if you spend money on the same goods like during that day - you can sustain a family. Small house with asbestos, little amount of home appliances, basic small car, no food delivery, no AC etc.
lozenge · 2m ago
This is an outdated view.
The essential costs - housing, healthcare and education - have far outpaced inflation while the cost of food and appliances has not. How can a single income compete in buying from the limited supply of houses against dual incomes?
bombcar · 8h ago
I know a decent number of single income families and they even have A/C!
You do have to intentionally budget but you can raise five+ kids on a single salary if you want to.
robertjpayne · 9h ago
The primary cause of population decline has nothing to do with incomes. You see high income earners having a smaller number of children.
It's because women frankly have better options than motherhood and what stay at home parenting entails.
pempem · 4h ago
I just had this conversation with a friend today.
Yes - given a small number of rights that frankly we should have always had - women have found all kinds of representation in education, salaries and diverse paths in life. Paths not previously open to us and pursued at tremendously high cost.
But population decline frankly is occurring because society is uninterested in changing its relationship with child bearing and child rearing. Men have limited interested in stepping up, women are doing work at home, work at work, work in society. Corporations have less interested in flexibility where women are near continuously penalized or held back. Even in a "progressive" presidency there were more CEOs named John than women CEOs. There's disinterest even when the next generation of workers is on the line and the government...well they are actively moving to unwind the rights we've won.
lotsofpulp · 20h ago
That stability existed due to half of the population (women) not having the option to attain high paying jobs.
e40 · 47m ago
Let’s now t forget about the large population of black Americans who were left out, too.
8200_unit · 19h ago
While it's true that women's professional opportunities were limited in the past, I disagree that this was the sole or even primary reason for single-income stability. My grandparents' generation, for example, often saw one parent (usually the father) working a manufacturing or union job that paid enough to cover a mortgage, raise several children, and afford basics, even with the mother not working outside the home. The purchasing power of those wages was simply far greater.
clove · 19h ago
Now they don't have the option to be housewives unless they actively seek out a rich husband. Who benefits? (There is only one correct answer):
1. Families.
2. Women.
3. Corporations.
BobaFloutist · 17h ago
Not having the option of being a housewife is a low cost for having the option to be literally anything but a housewife.
lotsofpulp · 19h ago
Women who wanted financial freedom so that they have negotiating power benefited.
Tadpole9181 · 10h ago
The workforce saw an explosion of productivity, and women added upwards of 100% more members of the workforce.
The problem is that all of that wealth went to the billionaires and the rest of us got the bones in the scrap pile. Now we can't even raise our children because we need to work, but we cannot even not raise our children because it costs more than we make.
fsckboy · 20h ago
the Baumol effect isn't an effect, it just describes a narrow case of the Substitution Effect. Price of beef goes up, you substitute pork and chicken, and those prices go up. You may think of yourself as a Computer Programmer but if Ditchdiggers get paid 3x as much in your area, you'd put Ditch Digging on your resume. To get you to program computers again, they'd have to pay you more.
goda90 · 21h ago
> Many explanations have been offered for rising child care costs. The Institute for Family Studies, for example, shows that prices rise with regulations like “group sizes, child-to-staff ratios, required annual training hours, and minimum educational requirements for teachers and center directors.” I don’t deny that regulation raises prices—places with more regulation have higher costs—but I don’t think that explains the slow, steady price increase over time. As with health care and education, the better explanation is the Baumol effect, as I argued in my book (with Helland) Why Are the Prices So Damn High?
While I agree regulation probably doesn't explain the whole price increase, I wonder if governments can do a better job preventing regulation from causing price increases without cutting corners on the regulation itself. Subsidize training for example. Make the child-staff ratios and group sizes a more dynamic factor based on age and needs. Maybe set aside funds to subsidize targeted special needs child care so the kids with fewer needs can be cared for more cheaply(I imagine this is controversial just like schools having separate special needs classes was).
Of course there's the catch all approach of adding childcare to the public schools budget and rolling the cost into taxes.
bglazer · 21h ago
The article makes very clear that costs are rising for "pet day care" just as quickly as for real day care for children. This can not be explained by regulation, as pet day care is far far less regulated compared to daycare for children.
lantry · 20h ago
> Subsidize training for example
This just spreads the cost across all taxpayers, instead of just the people consuming the service. Not to say that's a bad thing, just saying that it's not really "reducing the cost of regulation".
> Make the child-staff ratios and group sizes a more dynamic factor based on age and needs.
At least in my state, this is already the case. for infants, 1 adult per 6 children; increasing the ratio as they get older, up to 1 adult for 18 children when they're 4.
I don't think you're wrong that there are ways to reduce the burden of regulation, but I think we overestimate how much "low hanging fruit" there really is here. The common-sense, obvious, uncontroversial solutions are usually already in place
danaris · 29m ago
> This just spreads the cost across all taxpayers, instead of just the people consuming the service.
Yes—and then we can (in theory—obviously not going to happen in the current political climate) shift the bulk of that cost onto the taxpayers who can most afford to subsidize it, and away from the people who are just getting by. Who are, not entirely coincidentally, also the people most likely to be in need of childcare services.
squigz · 5h ago
1 adult per 18 4-year old children seems... hectic.
egypturnash · 20h ago
I wonder how much of the need for both of these industries would vanish if more families had one stay-at-home parent.
showerst · 20h ago
We send our daughter to a daycare that has a number of families so wealthy that one or both parents wouldn’t have to work. They still do daycare because many people want careers, and/or because they think the socialization and environment diversity is good for their kids.
bombcar · 8h ago
Obviously you’re not going to meet the families that don’t use daycare … at daycare.
ponector · 13h ago
Daycare and basically all child non-entertainment services (health and education) should be heavily subsidized. It's a new taxpayer, all money will be repaid tenfold.
bombcar · 8h ago
Apparently much cheaper to simply import a fully grown taxpayer instead.
akimbostrawman · 6h ago
Infinite money glitch with no downside??? Simply never stop importing people I'm sure there won't be any issues at all!
donjoe0 · 2h ago
Like running out of unskilled people to import, especially in these times of rapid emancipation of countries that used to be forcefully held down in an undeveloped state so they could be used precisely as reservoirs of natural resources and cheap labor, to be tapped at will. Witness the collapse of 200 years of "economic theory" in the White Racist West that was basically just some shiny wrapping over the doctrine of "well we will just rob all those other countries that can't defend themselves".
skeezyboy · 20h ago
wage increases not matching price increases... ah yes the american dream. simply put, youre poor, youre country has conned you, people live in better conditions all over the world.
soulofmischief · 20h ago
Who exactly is this comment directed towards? Americans can't help the fact that they were born in America. Also, you meant to say "your" and did not add an apostrophe to your contractions.
skeezyboy · 1h ago
umm, americans? its true though. how can there be so many people struggling financially in the richest country on the planet?
mschuster91 · 20h ago
> Still, the basic truth remains: if we want more affordable day care—for kids or pets—we need to use less of what’s expensive: skilled labor. That means either importing more people to do the work, or investing harder in ways to do it with fewer hands.
Both has serious problems. #1 is politically untenable (unless, of course, continuing the status quo of turning a blind eye towards employers abusing undocumented people to drive down wages), and #2 is fundamentally impossible until we gain AGI. It's bad enough when bad AI deletes production databases [1] - I'd raise hell when an "AI cat care" provider would kill my cat, and probably engage in some sort of self-justice should an "AI child care" provider kill or maim my child.
Perhaps the "barrel children" concept can be utilized within countries like the united states where the parents work in urban centers to provide for the children living in lower cost rural areas?
dukeofdoom · 21h ago
Maybe property taxes. Cities keep bumping these up. But also the intersection of people that neet multiple sets of requirements approaches zero pretty quickly. I watched a guy that's a professional filmer, and he explained that actually the circle he's in is pretty small. So while the set of people that want to do his career is fairly large. That people that jumped through all the requirmeny hoops is like filter. So he has no problems finding work because of it
moomoo11 · 21h ago
There’s a lot of PE activity in this sector imo.
They buy out all these established places and jack up the prices. It goes from calling them to book to some polished booking portal.
It’s mostly catered towards those who can afford it, so the 200k base SWE x 2 family can afford the 2x jacked up prices, and they continue increasing the prices every 1-2 years.
orangecat · 21h ago
They buy out all these established places and jack up the prices
Is the theory here that the previous owners were altruistically pricing below what the market would bear?
joncrocks · 20h ago
I think the theory is that they buy up a significant portion of the market, i.e. consolidate lots of independents. Then they raise prices in concert, and take advantage of reduced competition.
em500 · 20h ago
Wouldn't that create a good opportunity for people to start new pet cares, and undercut the presumably overprized PE-consolidated chains? Pet care doesn't seem to be highly regulated or have other high barriers to entry AFAIK.
BobaFloutist · 17h ago
PE seems to do well in industries where consumer choice has a good amount of inertia, where it's a pain in the ass to change providers - anything that's at least partially trust and reputation based and where people order to lock in a choice and sit on it.
Basically, they're liquidating built up customer goodwill.
csa · 20h ago
> Is the theory here that the previous owners were altruistically pricing below what the market would bear?
As someone who has done research on pricing in a range of sectors, it’s usually some form of ignorance rather than altruism.
In case you think I’m just picking on child care providers, I will provide an additional example — non-VC SaaS services were often wildly mispriced/underpriced until the “charge more” mantra became more widespread (thank you, patio11).
wmorgan · 20h ago
Concerns about reputation, too, as well as general friction. I used to do the menus for my dad's restaurant, which was always a big hassle first of all with the typesetting and going to the printers and everything, and then also it was such a struggle to get him to go up on prices. He'd just rather undercharge a little bit and make less money than be known as the guy in town who sold the "expensive" burgers.
blargey · 8h ago
I'm starting to think "altruistic pricing" is a skewed framing to begin with. The implication that not maxing out every trick in the book to find the highest price the market will "bear" is a loss.
That "slack", where people provide better goods and services, for a lower price than the market could theoretically bear, is the very definition of Having Nice Things.
The implied "optimal" price discovery is a highly adversarial process - derived from an every-growing playbook of price discrimination tactics, deceptive marketing, high-pressure sales tactics, exploitation of intertia and other external overheads, covert cuts to the quality being provided, etc, etc.
Such pricing is both a symptom and cause for "low trust society" behaviors. The increasing ubiquity of those "efficient" pricing strategies may very well have amounted to a covert pillaging of the commons.
lesuorac · 37m ago
"altrustic pricing" is also skewed because monopolies and competitive markets have different economically correct prices.
When you have a monopoly you want to supply less at a higher price because it's more profit overall. See chart under "Monopoly Price and Profit" [1]. Layman way to think about this is doubling your price more than doubles your profit (per unit sold) and when you have no competition might not even drop your sales in half.
PE buys all these businesses out (there's demand, and its rising), and they close most of them to consolidate into cold, brutal buildings.
PE did this with medical providers. When I was a child family doctors were a thing (btw, 2000s). I saw in my area that a lot of the small practices were bought out, and now there are medical "campuses" which have like dozens of different providers. I was talking to my dentist about this and she explained it to me that way so unless she's lying idk what to say.
fsckboy · 20h ago
>o the 200k base SWE x 2 family can afford the 2x jacked up prices
you are talking about housing in a high income area and of course those prices are going to be higher, it would start out shocking if they weren't, and quickly stabilize where we are now, as people loaded up their wagons and headed toward the landrush
>It’s mostly catered towards those who can afford it
all markets cater to those who can afford it. if not, prices go down, or up, to establish a new equilibrium.
No comments yet
blakesterz · 21h ago
That was my first thought as well. I know PE is famously eating up Vets, I wonder if they've started on these too?
andrepd · 21h ago
It's so great living in the ~best~ only system for organising the economy.
Working people can't afford homes or starting a family, but at least we are generating amazing value for shareholders.
orangecat · 20h ago
Working people can't afford homes
Always amusing that this is the go-to argument against free markets, when the major cause of housing unaffordability is that governments prevent housing from being built.
csa · 20h ago
> Always amusing that this is the go-to argument against free markets, when the major cause of housing unaffordability is that governments prevent housing from being built.
I’m not sure where you live, but in my little corner of California, this is not the major problem.
The bottleneck is builders.
There are requests from local government for affordable housing all the time, but builders earn more on the higher end stuff.
The governments are starting to do workarounds by bundling high end developments with affordable housing, so I hope that works moving forward.
Source: My buddy who is a general contractor. I don’t know how this works, but he has pointed out local examples to me.
ProfessorLayton · 16h ago
Builders may earn more making "higher end stuff" but the people who can afford those units can also afford the less expensive ones, pricing everyone else out. More housing, regardless if it's affordable or not helps keep prices in check.
Dictating what builders can make, if they can at all, is a large reason housing prices have gotten out of hand.
bombcar · 8h ago
Builders gonna build for most profit. Why wouldn’t they?
But if they build tons, the older stock drops in value. Nobody is paying $500k for a 20 year old house if a brand new one is available for $500k next door.
csa · 5h ago
> But if they build tons, the older stock drops in value.
Maybe I wasn’t clear.
The local builders are at capacity. They literally can’t build any more.
> Nobody is paying $500k for a 20 year old house if a brand new one is available for $500k next door.
People are paying $700k for a 70 yo 750 sq ft house in a mediocre neighborhood, and $1m+ for a 50 yo 1000+ sq fr house.
New houses start at $1.5m and quickly go up from there.
Most of the new housing is not in the most desirable neighborhoods (there is no space to build new SFH housing in there), so the houses in the better, established neighborhoods are holding their prices. Note that the prices might be lower than the new houses (sometimes), but they are not going down.
A result of this, using your example, is that there are rarely comparable old and new houses at similar prices.
kcb · 9h ago
So the response of the government is to add even more rules and limitations to building housing…
csa · 5h ago
> So the response of the government is to add even more rules and limitations to building housing…
I mean… they are rules, but not limits. Low-income housing is being built. All of the locals I know consider it a win.
Note that “low income” housing qualification here is about $60k for a single person (often retirees) and $120k+ for a family of four.
charlie90 · 16h ago
weird, I thought the labor theory of value was "debunked".
tayo42 · 21h ago
Child care is incredibly expensive, idk how anyone who isn't incredibly rich does it. Like 1k a month to get your child watched for 3 half days a week.
Who has a spare 1-2k laying around per month?
Also annoying this article introduced Baumol effect without mentioning what it is and just plugging a their book.
mjohn · 21h ago
That's a bit unfair. The Baumol effect is well known to most people in the author's audience.
It seems like the childcare companies recognize that it's either one parent quits their full-time job or pays them.
bombcar · 8h ago
Quit your full time job and do home childcare!
jmclnx · 21h ago
Yes it is rising and how would one stop it ? In reality there is no way to stop it outside of what the article recommends. Plus this also applies to many other
labor intensive industries.
People who work in these industries want to be paid and deserve to be paid enough to live on, so the money needs to come from somewhere.
Lets pretend a way is found to make things real cheap, doing that means many people will not be able to purchase other items, thus harming the bottom line of many other industries.
Add to that the very rich is hording wealth. It seems today's economic society is racing to a big crash, unless a way is found to release that wealth to subsidize these activities. I think the wealth is there, but it is locked up by the very rich.
monkeyelite · 21h ago
It’s expensive because people are willing to pay a lot for it.
Complaints about child care costs never end in “so I stopped paying them”.
makeitdouble · 21h ago
> “so I stopped paying them”.
This was exactly what I got from a colleague about a decade ago. Day care was so expensive it was eating half of her salary, so she quit, stopped paying for day care and stayed at home instead.
A lot of couple do the math and end up in the same place, where working their ass off to earn more, just to pay more doesn't make sense.
lesuorac · 32m ago
> A lot of couple do the math and end up in the same place, where working their ass off to earn more, just to pay more doesn't make sense.
I think if you're breaking even on daycare and salary then you're still coming out economically ahead to keep working.
Daycare costs stop once you enroll the kid into school. Typically salaries scale with years of experience so you're forfeiting ~7-9 years of salary growth by stopping work.
That said, there are non-economic reasons to raise your kids ...
bombcar · 8h ago
Exactly this. And those people never complain about daycare costs because they’re not paying them at all.
And for awhile the market looks good as the prices can rise as the “cheapest” leave.
But eventually it will collapse.
WesleyLivesay · 21h ago
No, but it might cause some people to say "so I am not having kids"
While I think Baumol may have something to say here, I think we should listen to Henry George a bit more. The lion's share of overhead for a daycare goes towards its real estate costs. Similarly, it's a growing share of cost of living for both the workers and the customers. And as Henry George pointed out, the cost of housing goes up without creating economic value for anyone.
It’s an absurd situation here in California, where we are some of the richest people in history, but because the cost of housing so high, the price of everything is driven to the breaking point… meanwhile, the important jobs required for a nicely ran country are too expensive to afford and so our transit, healthcare, service industry, etc is awful.
Not really. Salaries are by far the highest cost.
Roughly one thirds of American incomes go to cover housing. Cheaper housing means lower wage demands.
This is kinda wrong. It does create value for the people who are loaning out the money that the working class uses to purchase the houses. Of course, in this context that value goes straight to the hands of bankers and never leaves but it's worth noting that this situation that the working class hates happens to be rather beneficial to the capital class.
The banks capture that in interest payments.
I used to agree with you.
I currently believe that period of time (mid-20th century, esp. in the US) was a historical anomaly set up by a fairly unique set of circumstances, and we’re just on a long and slow path to reverting back to equilibrium/norm now.
I hope I’m wrong.
It was a period of high taxation on the highest incomes, large social welfare programs and by relative terms fairly low income inequality.
Finally productivity gains benefitted the labor class and not just the capital class.
That all halted in the 70s and 80s.
The essential costs - housing, healthcare and education - have far outpaced inflation while the cost of food and appliances has not. How can a single income compete in buying from the limited supply of houses against dual incomes?
You do have to intentionally budget but you can raise five+ kids on a single salary if you want to.
It's because women frankly have better options than motherhood and what stay at home parenting entails.
Yes - given a small number of rights that frankly we should have always had - women have found all kinds of representation in education, salaries and diverse paths in life. Paths not previously open to us and pursued at tremendously high cost.
But population decline frankly is occurring because society is uninterested in changing its relationship with child bearing and child rearing. Men have limited interested in stepping up, women are doing work at home, work at work, work in society. Corporations have less interested in flexibility where women are near continuously penalized or held back. Even in a "progressive" presidency there were more CEOs named John than women CEOs. There's disinterest even when the next generation of workers is on the line and the government...well they are actively moving to unwind the rights we've won.
1. Families. 2. Women. 3. Corporations.
The problem is that all of that wealth went to the billionaires and the rest of us got the bones in the scrap pile. Now we can't even raise our children because we need to work, but we cannot even not raise our children because it costs more than we make.
While I agree regulation probably doesn't explain the whole price increase, I wonder if governments can do a better job preventing regulation from causing price increases without cutting corners on the regulation itself. Subsidize training for example. Make the child-staff ratios and group sizes a more dynamic factor based on age and needs. Maybe set aside funds to subsidize targeted special needs child care so the kids with fewer needs can be cared for more cheaply(I imagine this is controversial just like schools having separate special needs classes was).
Of course there's the catch all approach of adding childcare to the public schools budget and rolling the cost into taxes.
This just spreads the cost across all taxpayers, instead of just the people consuming the service. Not to say that's a bad thing, just saying that it's not really "reducing the cost of regulation".
> Make the child-staff ratios and group sizes a more dynamic factor based on age and needs.
At least in my state, this is already the case. for infants, 1 adult per 6 children; increasing the ratio as they get older, up to 1 adult for 18 children when they're 4.
I don't think you're wrong that there are ways to reduce the burden of regulation, but I think we overestimate how much "low hanging fruit" there really is here. The common-sense, obvious, uncontroversial solutions are usually already in place
Yes—and then we can (in theory—obviously not going to happen in the current political climate) shift the bulk of that cost onto the taxpayers who can most afford to subsidize it, and away from the people who are just getting by. Who are, not entirely coincidentally, also the people most likely to be in need of childcare services.
Both has serious problems. #1 is politically untenable (unless, of course, continuing the status quo of turning a blind eye towards employers abusing undocumented people to drive down wages), and #2 is fundamentally impossible until we gain AGI. It's bad enough when bad AI deletes production databases [1] - I'd raise hell when an "AI cat care" provider would kill my cat, and probably engage in some sort of self-justice should an "AI child care" provider kill or maim my child.
[1] https://www.heise.de/en/news/Artificial-intelligence-Vibe-co...
They buy out all these established places and jack up the prices. It goes from calling them to book to some polished booking portal.
It’s mostly catered towards those who can afford it, so the 200k base SWE x 2 family can afford the 2x jacked up prices, and they continue increasing the prices every 1-2 years.
Is the theory here that the previous owners were altruistically pricing below what the market would bear?
Basically, they're liquidating built up customer goodwill.
As someone who has done research on pricing in a range of sectors, it’s usually some form of ignorance rather than altruism.
In case you think I’m just picking on child care providers, I will provide an additional example — non-VC SaaS services were often wildly mispriced/underpriced until the “charge more” mantra became more widespread (thank you, patio11).
That "slack", where people provide better goods and services, for a lower price than the market could theoretically bear, is the very definition of Having Nice Things.
The implied "optimal" price discovery is a highly adversarial process - derived from an every-growing playbook of price discrimination tactics, deceptive marketing, high-pressure sales tactics, exploitation of intertia and other external overheads, covert cuts to the quality being provided, etc, etc.
Such pricing is both a symptom and cause for "low trust society" behaviors. The increasing ubiquity of those "efficient" pricing strategies may very well have amounted to a covert pillaging of the commons.
When you have a monopoly you want to supply less at a higher price because it's more profit overall. See chart under "Monopoly Price and Profit" [1]. Layman way to think about this is doubling your price more than doubles your profit (per unit sold) and when you have no competition might not even drop your sales in half.
[1]: https://socialsci.libretexts.org/Bookshelves/Economics/Econo...
PE did this with medical providers. When I was a child family doctors were a thing (btw, 2000s). I saw in my area that a lot of the small practices were bought out, and now there are medical "campuses" which have like dozens of different providers. I was talking to my dentist about this and she explained it to me that way so unless she's lying idk what to say.
you are talking about housing in a high income area and of course those prices are going to be higher, it would start out shocking if they weren't, and quickly stabilize where we are now, as people loaded up their wagons and headed toward the landrush
>It’s mostly catered towards those who can afford it
all markets cater to those who can afford it. if not, prices go down, or up, to establish a new equilibrium.
No comments yet
Working people can't afford homes or starting a family, but at least we are generating amazing value for shareholders.
Always amusing that this is the go-to argument against free markets, when the major cause of housing unaffordability is that governments prevent housing from being built.
I’m not sure where you live, but in my little corner of California, this is not the major problem.
The bottleneck is builders.
There are requests from local government for affordable housing all the time, but builders earn more on the higher end stuff.
The governments are starting to do workarounds by bundling high end developments with affordable housing, so I hope that works moving forward.
Source: My buddy who is a general contractor. I don’t know how this works, but he has pointed out local examples to me.
Dictating what builders can make, if they can at all, is a large reason housing prices have gotten out of hand.
But if they build tons, the older stock drops in value. Nobody is paying $500k for a 20 year old house if a brand new one is available for $500k next door.
Maybe I wasn’t clear.
The local builders are at capacity. They literally can’t build any more.
> Nobody is paying $500k for a 20 year old house if a brand new one is available for $500k next door.
People are paying $700k for a 70 yo 750 sq ft house in a mediocre neighborhood, and $1m+ for a 50 yo 1000+ sq fr house.
New houses start at $1.5m and quickly go up from there.
Most of the new housing is not in the most desirable neighborhoods (there is no space to build new SFH housing in there), so the houses in the better, established neighborhoods are holding their prices. Note that the prices might be lower than the new houses (sometimes), but they are not going down.
A result of this, using your example, is that there are rarely comparable old and new houses at similar prices.
I mean… they are rules, but not limits. Low-income housing is being built. All of the locals I know consider it a win.
Note that “low income” housing qualification here is about $60k for a single person (often retirees) and $120k+ for a family of four.
Who has a spare 1-2k laying around per month?
Also annoying this article introduced Baumol effect without mentioning what it is and just plugging a their book.
If you had clicked on the link to his book you would have found out that it's available for free: https://www.mercatus.org/students/research/books/why-are-pri...
People who work in these industries want to be paid and deserve to be paid enough to live on, so the money needs to come from somewhere.
Lets pretend a way is found to make things real cheap, doing that means many people will not be able to purchase other items, thus harming the bottom line of many other industries.
Add to that the very rich is hording wealth. It seems today's economic society is racing to a big crash, unless a way is found to release that wealth to subsidize these activities. I think the wealth is there, but it is locked up by the very rich.
Complaints about child care costs never end in “so I stopped paying them”.
This was exactly what I got from a colleague about a decade ago. Day care was so expensive it was eating half of her salary, so she quit, stopped paying for day care and stayed at home instead.
A lot of couple do the math and end up in the same place, where working their ass off to earn more, just to pay more doesn't make sense.
I think if you're breaking even on daycare and salary then you're still coming out economically ahead to keep working.
Daycare costs stop once you enroll the kid into school. Typically salaries scale with years of experience so you're forfeiting ~7-9 years of salary growth by stopping work.
That said, there are non-economic reasons to raise your kids ...
And for awhile the market looks good as the prices can rise as the “cheapest” leave.
But eventually it will collapse.