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Tuesday, September 23, 2008

Money Mag Makes the Same Old Error

Here:

"Plentiful jobs, excellent schools, affordable housing - America's best small cities have all that and more..."

"Affordable" housing? Hmmm, demand must be low, and that must be because... this really isn't one of the best small cities!

11 comments:

  1. You're assuming there is perfect information about the cities. For example, there are a lot of up and coming villages and neighborhoods that are great in large part due to their being undervalued.

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  2. Not really -- just "not bad" information. For instance, I know Greenwich, CT, is a much more desirable place to live than is West Hartford, CT (which made the top 100, while Greenwich did not), having been in both -- which is why the median home price is $1,000,000 instead of $250,000!

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  3. Gene,

    Do you think the very idea of ranking cities is pointless, as (I think) Steve Landsburg believes? I.e. will the price of something fixed (like real estate) completely offset other differences?

    I think the way to avoid this conclusion, is to realize that people have different tastes. So even in equilibrium, people who love big cities are going to find NYC more attractive than some other city, notwithstanding the high rent.

    Basically all I'm saying is that even in equilibrium, most people who are heading to one city to live, would be worse off if you forced them to pick a different destination.

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  4. Sure, you can do ranking that are useful to some people. For instance, the people ranking might be good for, say, people who want a cheap, decent place to live, instead of "the best" places to live.

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  5. Gene,

    OK, but you're saying it's pointless to talk of "The Best" places to live? (I'm not trying to trap you, I just want to see how far you're willing to take your argument here.)

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  6. Not at all -- the best places to live are places like Darien, CT and Lake Forest, IL -- the places that cost the most to live in! My opint is that it is absurd for Money to count high housing prices as a negative, when, in fact, it's the best positive indicator we have! (Maybe their list should be re-named, "If you can't afford to live in a really nice place, here are some that aren't so bad.")

    (Oh, and in my previous post I wrote "People" went I meant "Money".)

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  7. Ah, the typos are piling up so fact there's no opint in continuing to apologize for them!

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  8. I think you're right that price tells the story, but the story is probably somewhat local.

    Even a dunghole like Dallas must have a best place, which can likely be identified quickly by the relative price levels of housing there. As far as metro Dallas is concerned, the most expensive might as well be the best place to live. People vote carefully with their wallets. (Tells you a lot about what people really think about cultural diversity too!)

    I knew little about this place where I live when I moved here. I really had no clue, but I knew the prices of real estate. I made my decision based almost entirely on the relative price level. It's one of the most expensive places to live in the Tampa Bay Area. As the years go by, and my knowledge of the local market increases, I am amazed at how well this predictive system worked.

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