Is segregation (and building restrictions) a normal good?

You can certainly add having bought the right properties in the right cities in the 1970s and 1980s to the list of drivers of inequality, but I don’t think it is a big piece of the puzzle. Instead, I think it is more accurate to point out that one of the first and most valuable amenities people purchase when they become wealthier is wealthier neighbors. Wealthy people self-segregate, and the places to which they self-segregate become valuable, because the way you get a place limited to wealthy people is by bidding up the price of being in that place. The community, or the city, is gated for a reason.

Here is much more by Steve Randy Waldman.  So given this not so ideal preference is in place, might building restrictions be a relatively efficient way to satisfy it?  Compare to violence, racism, or more direct interference with individual mobility?

Comments

I now live in a neighborhood with academics who are not wealthy. Your premise that being next to wealthy people is an amenity is more likely false...they are actually more likely to make you less happy than more happy, as you will be comparing your wealth to your neighbors, and will be on the hedonic treadmill.

It is better to live in the middle.

Also, if you live with the wealthy, expect your kids to be competitively consumptive as I have watched my colleagues who lived in a more wealthy area have found out.

Just live where you want, but don't assume that having wealthy people around you will make you happy.

Grr. Academics live like the wealthy except for the money part. They marry, stay married, then have children, raise their children competently, learn foreign languages, and go on vacation in interesting places. Living in the middle is fine unless those below you are muggers, crack addicts, etc. I'll stick with the upper middle class.

The wealthy are morally superior, only taking what they have rightly earned and not abusing harmful substances (including the morally superior powder cocaine and alcohol?) I was unaware, and remain so. Wait, I thought bilingual people were currently unacceptable. I have so much to learn!

Keep learning. http://press.uchicago.edu/ucp/books/book/chicago/B/bo3750637.html

Since when did middle income people not want to keep up with the Joneses next door? The difference is that the cost of keeping up will be less in absolute terms, and academics will tend to emphasize unusual service or experiential items rather than physical goods in their status competition.

Does the moon king act inferior? Don't Kinder Blumen still blossom. Sheila felt seasick, but she couldn’t have known it. Charles found her beautiful, but he didn’t really find her attractive. It was more the way Sheila’s slight blonde hair fell over her forehead and along her shoulders. And the fact that beyond Sheila he could see the moon's shape. There are things of note and then are the lakes on the moon. Sheila kissed him then too, if nothing but to gain a proper foothold. Charles stayed flat when he kissed a girl for the first time. He had found women respected this, and gave those women, who are often unable to carry on a conversation after a fleeting kiss, the composure to proceed as if nothing had happened.

Disagree. The amenities you get from the public goods that wealthy people's tax dollars provide outweighs that. For instance, public swimming pools, parks, playgrounds, and other facilities are way nicer in rich areas. And the rich support local arts and dining/shopping that you can't get in poor neighborhoods.
It's NOT because of the segregation from poor people though. It's because living next to rich(er) people is a way of free riding off their tax dollars.

"It’s NOT because of the segregation from poor people "

I'd quibble with this. It's kind of both. It's hard to get people to pay for these things when they will be destroyed within the year.

Swimming pools and other public amenities in rich neighborhoods? Not so much in my experience. The rich don't want public facilities. These just attract the poors, along with noise, "bad influences" and traffic. The rich own private facilities, and they tend to oppose public ones. Their neighborhoods have good public schools maybe, but that's only an advantage if you have school-aged kids. But standard rich kids don't generally have very cool places to hang out in their neighborhoods, because they tend to not be designed around public life. You're lucky if they have sidewalks!

The power and impetus to meddle in the affairs of cities by well meaning but foolish twits created the situation where the wealthy seek self segregation.

Deal effectively with crime, over the time frame that a building exists, and the problem will go away.

Let's say a city by a river tends to flood, and the price of land varies inversely to risk of flooding. Rich folks will tend to prefer to pay more for land less susceptible to flooding, and poor folks will trade off lower rents for higher risks, causing disaggregation. Build really good levees that protect all, however, and the reason behind the geographic segregation will lose its force. Or maybe the poor have to live next to noisy trains which rattle their plates, and the risk keep away from the tracks. But quieter, smoother-running trains might bring the rich back in to take advantage of proximity to the stations. Or maybe there's a pollution source, but then the scrubbers are installed, etc.

The quality of a neighborhood's human environment, and effective crime and nuisance deterrence everywhere is analogous. The income dispersion withing blocks was higher when the criminal incidence (and school discipline) dispersion between blocks was lower.

Waldman himself has remarked that a cost of inequality is the retreat of the rich into private solutions for public problems, withdrawing their influence and financial support for public solutions. Something similar has happened with the willingness to support investment in social technologies to maintain high neighborhood and human-environmental quality for everyone.

I don’t see the normative argument here. Just because people want some regulation doesn’t mean that the state has to provide it. I bet people with copyrights wish they were perpetual. There are all kinds of things the market doesn’t provide which the state shouldn’t provide either.

I have no issue with people wanting wealthy neighbors. But how you get there matters. To oversimplify, there are two ways to accomplish this:

1) Have the government pass zoning regulations to restrict the supply of housing in your neighborhood, thus driving its price up and ensuring that you will have only wealthy neighbors.
2) Let the market determine the supply of housing, with minimal government interference. Wealthier people will pay more to live in the relatively nicer areas. Poorer people will not. If your preferences line up with other wealthy people's, you'll have wealthy neighbors. Like all market driven outcomes, this will be dynamic and not guaranteed for the rest of your life. If you buy a house in a nice suburb in 1968 and then 50 years of population growth happen, there may be market demand for much denser housing in that area. You can either move further out or make your peace with having an apartment building next door.

I think for most people the value is in living away from poor people.

+1

While, I'm sure there's some intrinsic yacht-club snobbery, the vast majority of this segregation is escaping the dysfunctional lower classes. I don't think the neurosurgeon would be that upset to live next to a elementary school teacher. The problem is if drunken hillbillies on disability move in down the road. Maybe we should just figure out how make the lower classes less dysfunctional. That seems like a lot more elegant solution than the insane housing costs and periodic financial bubble crises driven by market distorting building restrictions.

Absent this, maybe you'd still have some ultra-rich Southhampton-like enclaves. But there'd be ample plenty of desirable, affordable housing in every metro. Some rich people would still want prestige zip codes, but the vast majority of demand would dissipate.

I think the desire to avoid crime and other dysfunction is much bigger than the desire to avoid being hit up for some help by your less well off neighbors. I think that desire comes up a lot more in not wanting to deal with panhandlers, because there’s a combination of guilt st not giving money and suspicion that anything you give will be spent on cheap wine or drugs.

Crime is part of it, but people often live only a few blocks from "bad neighborhoods" and rely on the local police to do a "good enough" job of keeping the dysfunction on the other side of the block. Sometimes they succeed and sometimes they don't, but it hasn't stopped gentrification yet.

The main problem is schools. It's just hell having underclass at your kids school.

Just to illustrate this point, let me give you an example from Baltimore.

Let's say you want to be in the city because "that's where the jobs are." Great centralization and all that.

Well, just about every single k-8 is a "bad school". There is all of one district anyone would consider sending their kid to. Homes there go for around 500k, maybe you could find one in the 400s if your lucky. And its just k-8. When you get to high school it is once again "bad (read black)". They have some charter schools that are OK but most of their slots are reserve for black kids on subsidized lunch. You probably couldn't get in, and it would still be a culture shock to go to a "discipline focused" 85% black high school. So now your paying $15k/year for a low end Catholic high school. That's 60k per kid or 120k for two. So through that on top. And oh yeah the property taxes are some of the highest in the nation.

Run all that through a zillow affordability calculator and see what household income you'll need to have to make that work...no middle class person can afford that.

If they could discriminate though. If regular middle class people could just say "fuck it only well behaved middle class people can go to this school" then they could settle in some part of the city that didn't cost 500k to keep the blacks out and have free education k-12.

@ asdf- Just so you know, Cincinnati has a school called Walnut Hills (middle school and high school) that has an entrance exam, that effectively functions like the hypothetical school you are talking about. However, I think its student body is more like 30% black, but white people have been sending kids there for generations (and seeing them go off college, most to state schools but at least a dozen or two to ivies every year) so they aren't panicked that the school will become bad, in part because they know that it will not become bad, because middle class blacks are invested in its success as well.

Maybe if we could encourage middle-class black people to segregate more into middle-class neighborhoods there would be majority black schools that white people wouldn't be afraid to send their kids to. Or maybe there are but people just assume that if most of the kids are black they must be bad. In either case it would be nice if some people were able to say most of the kids aren't white but so what? And then you get enough people in that district and it stops being a "bad school".

That's a totally inaccurate picture of wealthy and poor communities. (By wealthy and poor, I mean Park Avenue and East New York, not Monaco and Port-au-Prince, of which I know nothing.) Wealthy communities have high levels of social capital, and neighbors watch each others' belongings and children, help neighbors and family members in need, etc., much more than they do in poor neighborhoods. If your spouse suddenly becomes deathly ill, you could certainly knock on your Park Avenue neighbors' door and ask them to watch your children for a few hours, and be confident that they would do a responsible job. Most ghetto residents do not have anyone they can trust like that.

Lol, wut!

Hilarious.

If you live on Park Avenue you have a nanny to take care of your children. Your neighbors don't want you bothering them if your nanny falls ill or quits, though they might provide a recommendation for the agency they used to hire their own servants.

You don't live on Park Avenue.

Not near you.

Amazing

Tolstoy began writing his short story in the 1860’s, in consideration of his own troubled marriage, as his wife Sofia had an infatuation with a pianist, but he wouldn’t return to it until 1887 (naturally, since four score and seven years ago equal to eighty-seven years). Tolstoy wrote nine drafts and published the contentious story. In fact, he wanted his artist friend Ilya Rein to paint a painting on the same title, though that came to nothing. In the sring of 1888, following a performance in his home of Beethoven’s sonata—his son, a pianist, like Tolstoy himself, accompanied the violinist.

Read em & weep you fool!

While the post has many interesting points to make, the main point understates the importance of constrained housing supply on incomes as the main driver. Segregation is a side effect. One aspect of the issue I would point to as confirmation of this is that the primary complaint one hears from social justice advocates in the constrained cities is the complaint about gentrification. Gentrification is the opposite of what Waldman claims. The complaint there is that too many rich white people are moving into diverse working class neighborhoods. The motivation for moving to those cities is access to income, not to segregate.

I believe inequality to be an important issue and one causing much of the angst people feel about their financial future, i.e., it's not getting better. The answer could be more government redistribution or the economy actually and factually and seen to be helping all boats to rise, lessening the need for government intervention. Sadly, I don't think either party can handle this issue. Liberals don't want to face real change and conservatives don't really believe in a free market. Free means free to flow to me. Yes, I exaggerated a bit.

Real solutions, from a rising boat point of view ( looking at each issue without an overall goal is useless ) include a guaranteed income of some sort, narrow banking of some sort, a return to earlier rules regarding the ownership of banks, a progressive income tax, a very high inheritance tax, fierce enforcement of antitrust and fraud, gaining control of immigration so that we can at least figure out what's going on, an end to all housing and farming and whatever subsidies, an end to the corporate tax, a health plan guaranteeing costs that are catastrophic and unreal to shop and real competition where goods can be shopped by individuals. Since none of my views are realistic, I'll end with a few choice lines from The Temptations "Ball of Confusion"...People movin' out, people movin' in.
Why, because of the color of their skin. Run, run, run, but you sho' can't hide...An eye for an eye, a tooth for a tooth.
Vote for me and I'll set you free, Rap on, brother, rap on...& the band played on.

"So given this not so ideal preference is in place, might building restrictions be a relatively efficient way to satisfy it? Compare to violence, racism, or more direct interference with individual mobility?"

Sure.

But I think choices are seldom so stark. We can usually choose generic poor, or generic rich, or tidy suburb, or university town, or hippie enclave, or big lots and pickup trucks.

If you think your options are just price based, look around a little more.

This piece basically treats property prices are exogenous, which is preposterous.

By the same logic, couldn't you say that Jim Crow laws were a relatively efficient way for white Southerners to avoid interacting with blacks?

I don't support Jim Crow laws or artificially making housing more expensive.

Sure to that too.

While zoning might be the least pernicious form of discrimination, discrimination is not supposed to be what we are about.

We hold these truths self-evident, etc.

What this demonstrates to me is that legalizing discrimination in general would be beneficial to just about everybody. Not because (pick any group), or even most of them, are bad guys, but because a lot of the needless costs in life, not just in money but also personal effort, are the result of being forced to associate with, or at least live near and work with, people who don't share your most important norms regarding interpersonal behavior.

If discrimination were legalized I would not expect to see any race, religion, or gender excluded from whole areas of the social marketplace as they were before 1964. But I would expect to see apartment buildings and neighborhood associations start to impose rules such as "only people who speak language A may live here" or "no children" or "no smokers" or even "no Democrats". And I submit that the people who end up living in each of those places will enjoy less friction in their lives as a result, and will be willing to pay substantially more for that benefit.

Don't be a sucker.

https://youtu.be/23X14HS4gLk

Good video.

'The community, or the city, is gated for a reason.'

Fear. As one can see in several comments, actually.

I must admit my eyebrows shot up at the claim that poor communities help each other more than rich ones? Not only is this not true in my experience it betrays a classic liberal sentimental fallacy on behalf of the author.

But the policy solution to all this is school vouchers. This would mean people can easily move into poor neighbourhoods without fear of bad school, because they can send their kids to schools that remove the criminal elements.

How, exactly, do the poor send their kids to good schools with vouchers when those schools are 20 miles away and poor people don't have cars and no public transit free to students exists?

I live in NH with many poor schools which are poor because the tax base is poor, and the GOP proposing to solve this with school choice where 50 miles is probably the minimum to reach a non-poor school.

In reality, school vouchers are only useful in dense urban areas or to the wealthy - a parent with a car to provide taxi service.

"poor schools which are poor because the tax base is poor"

Nearly all schools in all states have relatively equal funding, with "poor" school districts tending to do slightly better then average. What happens is that local property taxes fund the local schools, but state and federal taxes almost exclusively go to "poor" schools, making the funding the same in the end. School outcomes are not funding driven, they are demographic driven.

The problem is when your kids IQ is significantly higher then that of the neighborhood you live in.

Someone might set up a school maybe if the demand was there? Schools don’t actually have to huge, maybe even as small as 20 kids will work. Also rural areas property prices are usually not the issue, it’s cities where property prices are crazy in good school catchment areas.

Do the rich have a housing problem? Why worry about gated communities when the housing problem is elsewhere?

This is another kind of self-segregation. Believing that making the rich change will improve the life of poor. In this way, you can help "others" without getting your shoes dirty. Lovely.

A counter narrative Malcolm Gladwell explored on his podcast concerned school teachers after segregation fell. The schools integrated students first rather than teachers. Segregated schools meant much of the south had too much capacity (if the black school was only 80% filled, they would not fill 20% with white students....when segregation was dissolved there they realized they had more capacity than they needed). The result was that black teachers were laid off in droves. While discrimination was a huge factor this would have been hard on the black professional community even if it wasn't. I'm sure white teachers had better training, more opportunities for additional courses and exceptional projects to pad their resumes. So while on one hand children were integrated, a black middle class was being put under huge pressure

Economically consider positional goods. Only 1 guy/gal can be #1, only 2% can be in the top 2% etc. It seems to me there's an analogy between desegregation and the Trumpist revolt against globalization. In huge community, the top 1% are truly the top 1%. The production of goods and services may be highly efficient. But there's no production of positional goods. The supply of 1%ers is capped at 1%.

In a world of 'small ponds', though, the supply of positional goods can be increased. If your world is a small town, you can be in the town's 1% and so could some chap in the next town. Put the two towns together, though, and half the people will need to suffer a demotion.

Now comes marginal analysis. Put the two towns together and you can produce goods and services more efficiently. The value of being on top goes up as the 'production' of ranking goes down. The more you put towns together, the lower the production of ranking goods. The marginal value of the added goods and services will fall while the marginal value of a high rank will explode.

People don't like looking at the mirror too often. The reason for Trump, by this reasoning, is that the Obama era exposed the emptiness of their previous elitism and showed that for much of America not only are they not elite but that they are not even theoretically in league with the actual elites. Cheaper prices for jeans and car wax at Walmart can only compensate for this so much. Trump and fakenews is a tonic then because it supplies, as best it can, ranking goods by ignoring reality. Chanting 'we're #1' can boost the spirit somewhat, even if your team is far from it. Ignoring reality is a feature, not a bug, because the medicine's mod of operation is as a placebo. Of course placebos rarely work if you know what they are so Trump supporters are angry that everyone else 'conspires' to spoil the illusion by, say, reporting actual facts.. On the flip side Trump detractors cannot comprehend the thinking of supporters as they dutifully collect more and more evidence that he has lied about something or has gotten some fact wrong.

This seems to be a paradox...we have an economy that is unable to produce enough positional goods. This inflates the price of positional goods and has encouraged fraudsters to enter the market to hawk inferior substitutes (Trump). Real solution might be a return to anti-monopoly 'trust busting'. A problem with large suppliers is that they increase the supply of goods and services by being more efficient but they lower the supply of positional goods. Amazon makes buying crayons cheaper but it decreases the number of people that can be called CEO...it also decreases the number of people that can be called 'vice president', or 'senior xxxx' and so on. Without the ability to feel positional goods are either in reach or maybe not absurdly out of reach, our culture may start to rot.

Cool story... until you mentioned Trump of course.

Wasn't planning too but it seems like there's a real connection there and to populism in general.

We live in interesting times:

"President Trump does not provide the U.S. with moral leadership, American voters say 63 - 33 percent. Again, there is virtually no gender gap as all listed groups, except Republicans and white voters with no college degree, say by wide margins the president does not provide moral leadership. Republicans say 80 - 16 percent he does provide moral leadership and white voters with no college degree are divided 47 - 47 percent. "

(Maybe msgkings can tell us that the mainline 63 percent have "derangement" and the Republican 80 percent get out of jail free.)

Positional goods are dead. Even with splintered institutions, the performance and ranking of these institutions is public knowledge (see universities). We demand that everything be ranked and measured.

Of course, there are attempts to create more ponds. If you can't make it in professional football/basketball/baseball, there are dozens of esoteric sports at the olympics. And if you suck at crossfit, there's always some ninja warrior weekend dad event on ESPN you can be the best at. But no one cares; they're just kidding themselves. There's a finite number of elite slots in society. You can tell because they're paid millions of dollars while the acro yoga world champion lives in a studio apartment sipping kombucha.

True professional sports and live entertainment are examples where there's real limits on how many positional goods are there and mass media means we are more likely to converge on a few stars rather than many esoteric ponds.

But I think most people have always been relatively ok with this. The bulk of society has always accepted they will never play, say, professional ball, even in an earlier age where segregation and regional divisions had more teams one could end up with.

My thinking is less about the very top and more about the upper strata of one's society. The pressure isn't so much on the bottom but upper middle class and it isn't coming from immigration (but immigration is easy to blame).

This is analysis is wrong on so many levels that you should just hit delete and start over.

You could write it a different way, but I think there is a good observation here, that Trumpism was "anti-elite" at that point in American history.

And then of course it turned around and heaped rewards on elites.

I am told that Breitbart loves Trump's warm reception at Davos. Does that deserve at least a WTF?

Keep in mind if the problem is there's fewer ways to be elite today, there's not a whole lot Trump could actually do to solve that. Look at the porn industry as a 'solution' to men who cannot hook up with very attractive women. Like with Trump voters, telling porn fans over and over that it's fake, airbrushed, staged, etc. isn't going to get people to ditch porn. If anything you're just going to get them mad at you because you're reminding them of something they already know.

In that manner think of Trump as 'elitism porn' for people who know they are unfit to be elite.

I guess I can give a qualified "yes" to that. If Americans are/become/remain very materialistic, then they will be unhappy when their private jet isn't as big as the next guy's.

But there are certainly other models of happiness in the world. The nordics pay more tax, but in return they have a lot less stress and more free time.

A bike ride through the park can make you feel good, even when it doesn't make you feel elite.

Here is a PDF on leasure in OECD countries

Speaking of which, maybe I have time for a hike in the Santa Monica Mountains. All are welcome, no entrance fee.

Being happy from owning a jet is a materialistic good. Being happy because you're the only guy who owns his own jet is a positional good. If it's just about the former then economic growth solves the problem because that means we can make more jets.

You're right, and these posts have proven it: msg would be nuts to point out people like Boonton are suffering from TDS and obsession.

It is not TDS to find something very disturbing in Trump.

The part about how half of the one percent class would get demoted if two towns merged was a clear demonstration of Bontoon's mind.

For simplicity sake I assume both towns have roughly the same population. That doesn't really change the dynamic. There is only one biggest fish in each pond, put two ponds together and one fish has to take a demotion. That applies to the positions of the second biggest fish, third, and so on. The only expansion that happens in positional ranks that happens when you combine ponds is at the bottom. Maybe the 100th smallest fish now finds there's now a 101sts smallest fish beneath him. That may make him feel a bit better but for all other other fish they see the ladder growing in the downward direction under them rather than the upward one.

Here is a very good summary (with reference to sources) by Tim Taylor on the decline of regional convergence: http://conversableeconomist.blogspot.com/2018/01/why-has-us-regional-convergence-declined.html Taylor's blog serves a different purpose than MR, but he has a knack for cramming lots of information and sources on important topics in each blog post.

Arguably, forcing richer people to keep moving in order to get away from the poor is a great way to redistribute wealth. Every time the rich people move, they have to spend money building newer, nicer homes, and fund the development of nicer public facilities in the new area. That improves property values for those who came before, and leaves better amenities behind for those who move into the rich areas later. And the costs of moving around are imposed on the people best able to afford it. If the rich had to pick a different part of town to live in every 10 years, a lot more housing would get renovated.

How exactly are rich people 'forced' to move away from poor people?

With libertarians like Hazel, who needs communists?

You have a defective sense of humor.

That might have been right 50 years ago, but I don't think that's how it works in practice these days. Rich people once escaped the cities and left them to the poor, but now they're taking the cities back. The shock troops of gentrification are hipsters, grad students and scenster youths who need to be somewhere urban to do what they do. Once a dense enough layer of them is laid down, the once-poor neighborhood attracts enough "charming" businesses that the more legitimately rich become ready to move in. That attracts "development," and so on. It's the poor who get priced out and have to leave. The rich are through letting themselves be chased out. Now they do the chasing.

This is the correct answer.

You can still have wealthy, gated segregated communities without building restrictions.

Building restrictions appear to be an INEFFICIENT way to achieve that good

Right. I don't know why Cowen thinks Waldman's post was primarily about building restrictions. The original post is more interesting than whatever point Cowen was trying to make about building restrictions, but also seriously flawed, in particular by the notion that wealthy people having balance sheets that would allow them to "self-insure" against personal disaster or misfortune is inherently inefficient. The real inefficiencies in this discussion come about through asset price inflation.

Given a choice or not the evidence shows everyone self-segregates which is why we have the constitutional right of freedom to associate. A Nobel Prze was given Schelling for pointing this out.

So given this not so ideal preference is in place, might building restrictions be a relatively efficient way to satisfy it? Compare to violence, racism, or more direct interference with individual mobility?

Uncomfortably close to arguments made by "moderate" segregationists about how Jim Crow was better than the obvious alternative of lynchings.

Though useful as a reducto ad absurdum of why it is not obviously good for government to eliminate all externalities.

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