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0 pointsrandomdata2y ago0 comments

> Thus price is no longer determined purely by the market supply/demand of the good, but also profit margin of the monopolist.

In fact, the price is "purely determined" by supply/demand in the scenario you gave. The monopolist is using their monopoly position to create artificial scarcity, thus driving up prices. This is consistent with the law of supply and demand.

> would that indicate the world has a water shortage?

Impossible to say without more information. What is happening around the 2L for sale? Are you rejecting the sale based on price (i.e. preventing price from rising), instead selecting who gets it using some non-priced-based mechanism, such as a lottery or first-come, first-served? If yes, then that indicates that there is a shortage. If it is sold using a price-based mechanism, then clearly not. That is a "normally functioning" market.

Once the water is all used up and there is no remaining water supply, where no amount of money can buy more (i.e. preventing from rising), then perhaps you might say that there is a shortage. However, in the real world, absent of some other factor (e.g. price gouging laws), price will keep rising until you are compelled to make more of that water available, so that still wouldn't be a shortage situation.

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Rury2y ago· 2 in thread

> In fact, the price is "purely determined" by supply/demand in the scenario you gave. The monopolist is using their monopoly position to create artificial scarcity, thus driving up prices. This is consistent with the law of supply and demand.

Yes, if you look at it from the perspective of only the "supply for sale", then everyone still is a "price taker", so what I said is in full agreement. But if you draw your boundaries to include that additional supply that's hoarded and not for sale, the theory no longer holds. Do you see what I mean now?

In other words, this is entirely a matter of how we define things, and draw our boundaries. How we do that isn't what's important. What is important is that everyone holds the same axioms. For example, we can define 3 means 3 and 3 + 3 = 6, or we can define 3 means 27, and 3 + 3 = 54. But if you think 3 means 3, and someone else thinks 3 means 71, it's hard to have a fruitful conversation as people will be in disagreement. This is why I made the distinction of "supply" and "supply for sale".

So when it comes to building more housing supply, it will never help housing prices no matter how much we build, if that supply which gets built is never for sale. You need to address the issue of what's for sale.

Now you might think this is a silly distinction to make, but it isn't. If the data provided in the top post is any accurate, then there are quite a few more vacant properties than what's listed for sale in many markets, suggesting that needing more supply isn't the core of the problem, but obviously needing more supply for sale is. And IMO, as the top post had earlier mentioned, cheap credit is largely to blame.

> Impossible to say without more information. What is happening around the 2L for sale?

It was just hyperbole to demonstrate a concept. You can of course disagree depending on the circumstances and the axioms you choose, but hopefully you understand the point I was trying to make.

randomdataOP2y ago

> But if you draw your boundaries to include that additional supply that's hoarded and not for sale, the theory no longer holds. Do you see what I mean now

In the same vein, if we consider the earth to be flat then the law of universal gravitation no longer works. I see what you mean, but I have no idea why anyone would ever want to convey such meaning. Of course you can "invalidate" every law in existence if you completely redefine the conditions under which the law is made, but that's rather nonsensical.

> So when it comes to building more housing supply, it will never help housing prices no matter how much we build, if that supply which gets built is never for sale.

While I am unsure of how this relates to our discussion, I expect you will find that virtually every house is for sale. Sure, there is always a "stubborn old mule", but I'm certain the vast majority of homeowners would not say no to you dropping a billion dollars in front of them.

The biggest trouble is that new construction costs even more than used houses. Nobody is going to purposefully go out of their way to build a home in order to lose money on it. So while building endless new homes would theoretically reduce prices, it would never happen in the real world because who is going to do it? Houses most certainly don't just magically spring out of the ground.

Rury2y ago

I mean, the reason I convey such a meaning is kind of exactly why we're having this discussion, which is people often have different (hidden/underlying) assumptions (which they take for granted), and conversations don't go anywhere because of it. No one does this intentionally, everyone makes and holds assumptions, but it's important we all hold the same ones if we want to come to an agreement. That's all.

Anyways, as what I meant about building more houses...

You can see elsewhere in this thread that people disagree on whether or not the core issue is that we have a shortage of houses. Some people are holding the assumption that, building more houses will increase the inventory for sale, and therefore help prices. Good old supply/demand. That's a perfectly rational assumption, and I don't necessarily disagree, but like you note, new construction is costly...

Additionally, as data given above (and elsewhere) indicates, housing per capita in 2022 is similar or better than in 2011 for many markets, but as we know, prices (even adjusting for inflation) are higher than 2011. From the theory of supply/demand, this suggests some degree of hoarding is happening, but as to how that is happening is not certain, as people could simply be living with fewer people than the past, or people could be living more or less the same amount people and investors are more of the ones who are buying up new construction. If the latter, then that new built construction might not really be for sale if you get what mean, as investors may simply rent it out or use it as a seasonal. Hence why I said "building more supply won't help if it is never for sale".

Now of course everything is for sale, just a matter of price, but who does cheap credit / inflation help more, people with assets or people without assets? That's right investors. And, given vacancies are higher than inventory for sale, I just have a hard time finding support for the idea that the core issue is that there is insufficient houses and we need to build more. The only reasoning for it seems to be the idea that more supply = lower prices (an idea which falls apart if it is simply hoarded). But of course, that's not to say, that many markets likely do need more supply, just that it doesn't seem to be the fundamental issue.

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