Barry Rene DeCicco wrote:
> I had three observations about Prof. Krugman's
> article:
>
> 1) When a lot of money comes into a city quickly,
> I'd expect rents to rise, until new construction
> can bring them down. And since much of the new
> construction might be far from the center of the
> city, rents near there might go up and stay at
> an elevated level.
>
> 2) I would expect this effect to be more severe in,
> (taking an example *totally* at random) a city
> squeezed between a bay and some mountains, because
> geography would constrain building and transportation.
>
> 3) A quantitative analysis would be necessary to figure
> out how much of the housing price increase was due
> to the swift inflow of dot-com cash, the geographic
> constraints of San Fransisco, and rent control. Prof.
> Krugman did not (IIRC) mention this even in passing
> (a single sentence mentioning this would have sufficed
> to those who know, and not been an obstacle to those who
> don't know such things).
>
> 4) I live in a non-rent-controlled city. My landlord wanted
> references. This is to give a good chance that I would
> not trash the place, and that I wouldn't leave in the middle
> of the lease period without paying (I live in a university
> town - it's a landlord's market in general, but finding
> a new tenant in the middle of the year can be hard). I can see
> similar reasons for doing so in SF, with the added reason
> that the dot-com employment situation is more volatile. A landlord
> might want to make sure that the tenant will be able to pay
> the steep rents for the reasonable future.
>
> This leads me to the conclusion that Prof. Krugman was leaping
> from real-world event to the economic principle that he wanted
> to illustrate, bounding over the actual causality which might
> or might not be involved.
>
> Barry
-- Michael Perelman Economics Department California State University Chico, CA 95929
Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu