I don't understand how housing can increase in cost in a stable steady manner, as a fraction of household income over long periods of time like more than 100 years. It seems to defy logic, so it makes me suspect how it is being calculated when people claim that housing costs have gone up by massive amounts.
Since only a small increase would price a large number of people out of the market- it seems logical that housing can't really increase in cost/value over long time spans, but must track the overall economy almost exactly.
To help you conceptualize how that is possible: 100 years ago the world population was 2 billion, and now it is 8 billion. While the housing stock is also increasing with that population growth, the actual amount of desirable land does not grow as fast. That's why -- for example-- the US gov't in the 1850s could just hand out 40 acre plots of land to people. They can still do that, but it has to be way out in Alaska or something.
A hundred years ago it took much more labor to produce enough food to feed a person. Before the industrial revolution let's say 90% of all people were farmers. In 1850 in the US that was maybe 50% of all people were farmers. So the % of GDP going to food was much higher. Now 1-2 people can feed 100 in the west. That means less of your income proportionately goes to food.
Similar declines in the amount of labor required to produce a thing are happening in manufactured goods. So it may have once taken hundreds of hours of human labor to build a car, but now it takes much fewer.
So the wealth of everyone is going up faster than the supply of desirable land. That does mean people are getting priced out. But also people find ways to live on less land. Before the industrial revolution most families needed a farm to survive. Now many, many families can live in an apartment building in a city that takes way less land.
> So the wealth of everyone is going up faster than the supply of desirable land
We are also slowing down the rate we are making land desirable. During the 50s-70s we had massive success by creating suburbs that were connected to city centers. Due to how geography works, new suburbs are further from city centers and inherently less desirable. We have developed most of the geographically appealing regions of the US. The regions that can support more sprawl are seeing growth at a high enough rate that local infrastructure such as schools, roads, water, and construction labor is being stressed.
In the not too distant future we will have climate change that will displace people and a declining population that will reduce housing demand. Combine that with new building techniques/materials and in 100 years the housing situation will be totally different than today.
To add to that, a house a hundred years ago was nothing like a house today: building codes, square footage per person, heating, plumbing, connectivity... Building and maintaining a decent housing unit is far more expensive in material and energy than it was 60 years ago.
People get much larger houses today because they can afford much larger houses. This comes from both increased prosperity and having fewer kids.
1950s: The average new home sold for $82,098. It had 983 square feet of floor space and a household size of 3.37 people, or 292 square feet per person.
2010s: The average new home ($292,700) offers 924 square feet per person (2.59 people per household, 2,392 total square feet) — three times the space afforded in the 1950s.
Around here, they're building bigger houses, but also on much smaller plots without gardens or dogs or tree-houses or places for kids to play outdoors.
I suspect it's the same in a lot of places.
Maybe these square-foot-per-person calculations should also include square feet of land.
A few ways that housing can continue to increase as a percentage of income:
1.) Go from a single income supporting to a house to multiple incomes supporting a house. This is actually happening, with the shift from single-earner households in the 1950s to dual-income households to groups of unmarried professionals living together as roommates. The preponderance of post-1950s data can also overweight this effect: historically, the norm was far large extended families to live together in one household, and the single-earner U.S. nuclear family was an aberration created by suburbanization.
2.) Have reset points. How can real estate continue to return 7% real returns for 120 years? Well, return 7% for 40 years, at which point your investment is up 15x. Then bomb the house and kill the owner. Then give the land to the guys who helped you kill the owner at a low, low price, help them build a house on it cheap, and start the 7% appreciation calculator over again from a new low baseline. This is also very close to what actually happened over those 120 years, between WW1, WW2, the Russian/Ottoman/Austrian revolutions, the fall of the Warsaw Pact, the Chinese Civil War / Cultural Revolution / Great Famine, and so on.
3.) Have a smaller percentage of people owning houses. The average housing price can absolutely escape the confines of the median income, if the median person does not own a house. The study's use of rent and imputed rent partially controls for this, but the broad answer for "Housing prices can't outstrip incomes forever, can they?" is "Sure they can, if nobody can afford houses."
4.) Have more people. If you're talking the returns to an asset class, and you own all that asset class, and then suddenly there are more people that need that asset, you're going to make money. This, to a large degree, actually happened during those 120 years.
I sort of think there are other things still at work here.
People still live near infrastructure (although requirements change)
Maybe 1000 years ago, they probably lived near a port, water source and source of food.
Nowadays we have efficient transport with semis and container ships, but I would imagine that there are still things like say power infrastructure, sources of commerce and schools and even internet that make living practical and affordable.
I'll bet as we can do distributed living practically (PV+batteries, wells/septic , starlink and amazon) that maybe more things are possible.
I wonder if Texas, especially around Dallas, is settling into a pattern that'll work well. If you have enough land, that is. Instead of single big city with dense downtown surrounded by progressively less dense housing, there are multiple cores. Smaller cities, close enough that their suburbs mix. On the surface that does seem more workable than building mega-cities.
I don’t understand the logic here, the land itself will be valuable regardless of whether or not there is a house there or an apartment building. The principal component of the cost of buying a house or a condo is the associated land cost. Building more density gives more people access to that land.
If your contention is that more housing is bad because it draws more economic activity which raises land values then that’s fair but this is the same as arguing for less freedom of movement. Essentially any nation that adopts your policy prescription is taking a step towards turning into the Soviet Union.
That may sound like hyperbole but that is the end result of NIMBYism and illiberal land use policy.
> I don't understand how housing can increase in cost in a stable steady manner, as a fraction of household income over long periods of time like more than 100 years.
It hasn't. House prices have been stable for hundreds of years. They're currently being used as financial vehicles, and as another government asset inflation to ward off that pesky balance of accounts reckoning, but they'll be back down eventually.
Rents are different, probably because landlords collude. Or irrational exuberance or whatever. Times when everybody suddenly agrees that housing is worth a lot more, for no particular reason.
I would say that the fact that we didn't see a dip after the bubble makes it pretty obvious that if you deal in financial instruments around houses rather than houses themselves (including rents), there had to be a lot of money made that never came back. Renters never got a refund of the inflated rent that they paid during the time of those inflated house prices; that seems like it would account for the 6.6% a year that this paper claims as the return on owning housing. Because the buying and selling of houses is ultimately going to be a wash.
That says to me that housing bubbles are required in order to make any money from housing. That money will be supplied by renters and overextended owners who can't buy when prices return to the ground, and can't hold out until the next bubble.
There have been two major real housing price jumps that I know of, and both are correlated with significant household income increases (at least nominal). Almost everything else can be factored into changes in what the "nominal house" is - from a one room cabin without plumbing to a McMansion with a three car garage.
One was the great urbanization post-world wars and the other was the great increase in dual-income households.
But if you factor things out and try to correct for as many variables as you can, housing is pretty "steady state" though the percentage of income directed toward it that's acceptable has crept up somewhat.
Shelter is, like food, one of the few real necessities and so it will be bid up to the point of pain or worse if there is a scarcity.
Fair point, in that sense it seems like some fairly fixed step-ups are possible where people culturally decide to spend more of their income on housing, but it cannot be a steady trend to profit from as an investor, because it will always have a hard cap at 100% of household income. It can't steadily beat inflation over long time scales.
With extreme consequences to the population. When people are not given space to create their own families, the result is the massive population decrease we're living through now in industrialised nations.
Is the housing price adjusted to sqms / sqft and equipment / amenities?
Because my grandparents with their two kids and great-grandma literally lived in a one-room studio in the 1950s, even though they weren't poor. (Grandpa was an engineer for state railways, a good job in 1950s Czechoslovakia.) The toilet was common for 3 households. That was just the standard of living back then. You wanted to be warm, you had to drag coal upstairs from the basement and feed the home furnace. Daily.
In 1964, all five moved to a 3-room apartment, which increased their living space a lot, but it would still feel incredibly cramped by today's standards. It had a separate toilet just for them, though, and centralized heating. No more hauling coal upstairs. Progress!
Of course that those smaller, more primitive apartments were much cheaper than the house built in 2022 that I am now living in, and that is stuffed full with various sophisticated devices.
I'm talking about in proportion to income... for example, if people spend 30% of household income on housing, you cannot have an order of magnitude increase in housing prices over any time scale as it will always have a hard cap at 100%.
> In fact, the long decline observed in the past few decades is reminiscent of the secular decline that took place from 1870 to World War I.
> The fact that returns to wealth have remained fairly high and stable while aggregate wealth increased rapidly since the 1970s suggests that capital accumulation may have contributed to the decline in the labor share of income over the recent decades (Karabarbounis and Neiman 2014).
Predicted here:
Piketty, T. (2014). Capital in the twenty-first century. Harvard University Press.
> In terms of total returns, residential real estate and equities have shown very similar and high real total gains, on average about 7% a year.
> Housing, equity, bonds, and bills make up over half of all investable assets in the advanced economies today, and nearly two-thirds if deposits are included.
Interesting, Housing is marked as "risky", and yet heavily invested. Investors are over leveraged in risky investments. They probably do it because controlling housing nets them power above and beyond normal returns. I wonder if this part of the reason for the "boom and bust" of market economies in the West when proper government regulation is removed. The riskiness of much of the investment of most investors may lead to sudden losses and shifts in risk, which may result in them withdrawing capital to "safer" investments, thus triggering a "bust".
And `r ≫ g` shows why the wealthy can wield so much power. Holding capital hostage to regulate economic growth and control it is very powerful, and why they can exercise the kind of control they can.
Politicians in democracies favor property owners because they are a majority, reliable voters and are likely to stay in the district. Therefore, the tax and political policies encourage owning a house. Many families take inordinate risks to own a house when, with fairer rules, they would rent.
It's actually one of the big problems with Capital in the 21st century: if you strip out housing, r < g! Turns out it's all zoning and rent control all the way down! Fix zoning and you end up incidentally fixing inequality too because it's such a large part of economic rents.
if it's all because of zoning, then how come we built more housing in the period leading up to the great recession (with the strict zoning laws that already existed)?
I shall continue to quote 7% as the acceptable long term rate of return in aggregate and look at apple, telsa, Nvidia, Google askance, wondering when they will return to baseline.
They don't need to return to baseline. The overall market return can be around 7% - within that you'll have losers, flat lines and huge winners like Apple and Nvidia. That's how you get to the 7% average - by having some companies gain much more than that.
It's very hard for that to sustain over decades without causing market distortions. I'd be interested in what is the longest run of above-market returns by any company since the 1870s.
In effect, if they accrue enough value, then they alter the average rate of return. And, since that sucks capital out of the rest of the economy, we're kind of fucked overall because companies making tinned peaches and medicine actually need capital, and a good rate of return depends on that capital.
It's nothing to do with money. We're literally producing more and better goods than the previous year. This can be due to better technology, more tools, or increasing population (and probably some other factors I forgot).
Money doesn't affect the size of your economy, in general money is not even relevant to the discussion, save for the fact that it gives us a unit of measurement. Money is a relative resource, in a simplified manner, money dictates who gets what fraction of the pie. By printing more money you're not making more pie, just dividing the existing pie into thinner slices. Economies grow because of improvements in technology, science, using or finding natural resources, producing things etc.
"By printing more money you're not making more pie, just dividing the existing pie into thinner slices."
So if you need a haircut but can't afford one, and I give you a new £10 note to get a haircut, and the barber works the extra 10 minutes to do that haircut and earn that £10 there's no new pie there.
Looks like 10 minutes more output to me.
"Printing more money" does make more pie. That's exactly what happens every time a loan is taken out, or government hires somebody who would otherwise be unemployed.
"Printing more money" leads to "shredding more money" via loan repayments and increased tax take, all via increases in the utilisation of existing resources.
That because "printing more money" is about buying something. That something has to at least potentially exist or more money will not be printed and circulated in the first place.
You live alone in the forest and chop wood during the winter. The next winter you're much better at the task and chop more wood. There's no difference in money supply, population or any such. But your economic output has increased.
Demand increases due to population growth. Population goes down, growth goes down (broadly speaking, some caveats and nuance as always depending on some goods or services).
Or demand increases due to some major new factor (which has happened a few times in recent history) that basically enables new energy extraction, or new resource extraction.
But over very long periods of time, it does seem to mostly be connected to population.
Regardless of inflation or changes in the money supply, new techniques, new technologies, trade, and population growth can cause the value of everything bought and sold to increase over time. You can measure that value in dollars, or you can look at changes in the quantity and quality of goods and services.
Money just represents tokens to use on our collective pile of goods and services. Growth refers to the rate at which the pile grows, and is largely divorced from money. Money is fake, and the systems behind it's distribution/allocation is regularly gamed for personal gain, in ways that go against the spirit of what money is supposed to represent. Money is an intermediate tool to help keep a track of who put how much on the pile so that everyone can focus on doing what they are good at, and in return, take from the pile what they need, as made by others who are good at other things.
Increasingly we see a problem of people who add nothing to the pile getting large wads of money and taking more than their fair share from the pile. This is a problem.
There has to be a level of personal/private intent for this to be true.
I would argue that under a centrally planned economy, you could have the same number of people working, using the same tech/equipments and energy, but not be a good economy because the output isn't what those individual participants in the economy wants to consume.
That calculation does not factor into the rent you will not pay when you buy a house and live in it. Imputed rent is a thing and you need to consider it. If you don't live in the house you wouldn't let the house sit vacant: you would rent it. In your formula the rent can be thought of as if it's a dividend of the investment.
Alternatively just read the linked article; the linked article makes the correct fair comparison. You will arrive at that conclusion by reading just the second paragraph, which says
> data on total housing returns (price appreciation plus rents) has been lacking (Shiller 2000 provides some historical data on house prices but not on rents). In this article we build on more comprehensive work on house prices (Knoll, Schularick, and Steger 2017) and newly constructed data on rents (Knoll 2017) to enable us to track the total returns of the largest component of the national capital stock.
Shiller is explicitly mentioned. And the article authors disregarded it because it failed to include rent.
Housing prices may collapse over the next 50 years as the population pyramid inverts and buyers demand decreases due to fewer individuals. What is the definition of long-term though?
If anyone wants to download the data, it's available at:
> The Jordà-Schularick-Taylor Macrohistory Database is the result of an extensive data collection effort over several years. In one place it brings together macroeconomic data that previously had been dispersed across a variety of sources. On this website, we provide convenient no-cost open access under a license to the most extensive long-run macro-financial dataset to date. Under the Terms of Use and Licence Terms below, the data is made freely available, expressly forbidding commercial data providers from integrating, in addition to any existing data they may already provide, all or parts of the dataset into their services, or to sell the data.
There's also the The Credit Suisse Global Investment Returns Yearbook:
> The Credit Suisse Global Investment Returns Yearbook is the authoritative guide to historical long-run returns. Published by the Credit Suisse Research Institute in collaboration with London Business School, it covers all the main asset categories in 35 countries. Most of these markets, as well as the world index have 123 years of data since 1900.
> The Global Investment Returns Yearbook, an authoritative guide to historical long-run returns, launched by UBS Investment Bank Research and UBS Global Wealth Management’s Chief Investment Office. This edition demonstrates the combined strength of UBS and Credit Suisse as the integration of the two banks progresses, and also marks the continuity of a longstanding relationship with the authors, Professor Paul Marsh and Dr Mike Staunton of London Business School and Professor Elroy Dimson of Cambridge University.
> In peacetime, r has always been much greater than g
This is an ultra simplistic formula, made by someone who's been born, raised and fed in a highly socialist country where the only word politicians know is "tax".
No shit. What gave it away, the two terms or the inequality? :)
Joking aside, it's simplistic because it's elementary. If real returns exceed real growth, ceteris paribus, you have a net flow of principal (so to speak) from labour to capital. That doesn't mean one can conclude the argument with those two variables alone. But it's a valid starting point, and concludes with many solutions other than increasing taxes to reduce r.
Readit News
Since only a small increase would price a large number of people out of the market- it seems logical that housing can't really increase in cost/value over long time spans, but must track the overall economy almost exactly.
A hundred years ago it took much more labor to produce enough food to feed a person. Before the industrial revolution let's say 90% of all people were farmers. In 1850 in the US that was maybe 50% of all people were farmers. So the % of GDP going to food was much higher. Now 1-2 people can feed 100 in the west. That means less of your income proportionately goes to food.
Similar declines in the amount of labor required to produce a thing are happening in manufactured goods. So it may have once taken hundreds of hours of human labor to build a car, but now it takes much fewer.
So the wealth of everyone is going up faster than the supply of desirable land. That does mean people are getting priced out. But also people find ways to live on less land. Before the industrial revolution most families needed a farm to survive. Now many, many families can live in an apartment building in a city that takes way less land.
"Buy land, they're not making it anymore." — Mark Twain
We are also slowing down the rate we are making land desirable. During the 50s-70s we had massive success by creating suburbs that were connected to city centers. Due to how geography works, new suburbs are further from city centers and inherently less desirable. We have developed most of the geographically appealing regions of the US. The regions that can support more sprawl are seeing growth at a high enough rate that local infrastructure such as schools, roads, water, and construction labor is being stressed.
In the not too distant future we will have climate change that will displace people and a declining population that will reduce housing demand. Combine that with new building techniques/materials and in 100 years the housing situation will be totally different than today.
1950s: The average new home sold for $82,098. It had 983 square feet of floor space and a household size of 3.37 people, or 292 square feet per person.
2010s: The average new home ($292,700) offers 924 square feet per person (2.59 people per household, 2,392 total square feet) — three times the space afforded in the 1950s.
https://compasscaliforniablog.com/have-american-homes-change...
I suspect it's the same in a lot of places.
Maybe these square-foot-per-person calculations should also include square feet of land.
[1] https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=82098&year1=19...
If you plot house prices against incomes they do a wave pattern which is high at the moment. But they were even higher against income in 1845.
Article here has data from 1845 for the UK https://archive.ph/FRzaA
1.) Go from a single income supporting to a house to multiple incomes supporting a house. This is actually happening, with the shift from single-earner households in the 1950s to dual-income households to groups of unmarried professionals living together as roommates. The preponderance of post-1950s data can also overweight this effect: historically, the norm was far large extended families to live together in one household, and the single-earner U.S. nuclear family was an aberration created by suburbanization.
2.) Have reset points. How can real estate continue to return 7% real returns for 120 years? Well, return 7% for 40 years, at which point your investment is up 15x. Then bomb the house and kill the owner. Then give the land to the guys who helped you kill the owner at a low, low price, help them build a house on it cheap, and start the 7% appreciation calculator over again from a new low baseline. This is also very close to what actually happened over those 120 years, between WW1, WW2, the Russian/Ottoman/Austrian revolutions, the fall of the Warsaw Pact, the Chinese Civil War / Cultural Revolution / Great Famine, and so on.
3.) Have a smaller percentage of people owning houses. The average housing price can absolutely escape the confines of the median income, if the median person does not own a house. The study's use of rent and imputed rent partially controls for this, but the broad answer for "Housing prices can't outstrip incomes forever, can they?" is "Sure they can, if nobody can afford houses."
4.) Have more people. If you're talking the returns to an asset class, and you own all that asset class, and then suddenly there are more people that need that asset, you're going to make money. This, to a large degree, actually happened during those 120 years.
It's the density death spiral. Dense housing gets more expensive (yes, dense housing IS more expensive!), that in turn drives even more density.
The only way to fix it? Promote suburbs and smaller cities. There is literally _no_ other fix.
People still live near infrastructure (although requirements change)
Maybe 1000 years ago, they probably lived near a port, water source and source of food.
Nowadays we have efficient transport with semis and container ships, but I would imagine that there are still things like say power infrastructure, sources of commerce and schools and even internet that make living practical and affordable.
I'll bet as we can do distributed living practically (PV+batteries, wells/septic , starlink and amazon) that maybe more things are possible.
Dense housing is more expensive. Dense living massively less so.
If your contention is that more housing is bad because it draws more economic activity which raises land values then that’s fair but this is the same as arguing for less freedom of movement. Essentially any nation that adopts your policy prescription is taking a step towards turning into the Soviet Union.
That may sound like hyperbole but that is the end result of NIMBYism and illiberal land use policy.
It hasn't. House prices have been stable for hundreds of years. They're currently being used as financial vehicles, and as another government asset inflation to ward off that pesky balance of accounts reckoning, but they'll be back down eventually.
Rents are different, probably because landlords collude. Or irrational exuberance or whatever. Times when everybody suddenly agrees that housing is worth a lot more, for no particular reason.
Some guy here (https://www.reddit.com/r/Economics/comments/sq1pb/graph_of_c...) plotted the 2000s housing bubble vs. inflation-predicted price.
I would say that the fact that we didn't see a dip after the bubble makes it pretty obvious that if you deal in financial instruments around houses rather than houses themselves (including rents), there had to be a lot of money made that never came back. Renters never got a refund of the inflated rent that they paid during the time of those inflated house prices; that seems like it would account for the 6.6% a year that this paper claims as the return on owning housing. Because the buying and selling of houses is ultimately going to be a wash.
That says to me that housing bubbles are required in order to make any money from housing. That money will be supplied by renters and overextended owners who can't buy when prices return to the ground, and can't hold out until the next bubble.
It just went up up up, and the lines would show divergence.
And of course if that chart continued into 2022...
One was the great urbanization post-world wars and the other was the great increase in dual-income households.
But if you factor things out and try to correct for as many variables as you can, housing is pretty "steady state" though the percentage of income directed toward it that's acceptable has crept up somewhat.
Shelter is, like food, one of the few real necessities and so it will be bid up to the point of pain or worse if there is a scarcity.
Based on prices, you can have roommates, children can live with parents, etc.
Real housing costs could double tomorrow, and people would survive (not happily).
Because my grandparents with their two kids and great-grandma literally lived in a one-room studio in the 1950s, even though they weren't poor. (Grandpa was an engineer for state railways, a good job in 1950s Czechoslovakia.) The toilet was common for 3 households. That was just the standard of living back then. You wanted to be warm, you had to drag coal upstairs from the basement and feed the home furnace. Daily.
In 1964, all five moved to a 3-room apartment, which increased their living space a lot, but it would still feel incredibly cramped by today's standards. It had a separate toilet just for them, though, and centralized heating. No more hauling coal upstairs. Progress!
Of course that those smaller, more primitive apartments were much cheaper than the house built in 2022 that I am now living in, and that is stuffed full with various sophisticated devices.
Deleted Comment
There are more people than ever and the surface area of the planet hasn't increased.
https://news.ycombinator.com/item?id=16078059 on Jan 5, 2018
https://news.ycombinator.com/item?id=19817584 on May 5, 2019
> The fact that returns to wealth have remained fairly high and stable while aggregate wealth increased rapidly since the 1970s suggests that capital accumulation may have contributed to the decline in the labor share of income over the recent decades (Karabarbounis and Neiman 2014).
Predicted here:
Piketty, T. (2014). Capital in the twenty-first century. Harvard University Press.
> In terms of total returns, residential real estate and equities have shown very similar and high real total gains, on average about 7% a year.
> Housing, equity, bonds, and bills make up over half of all investable assets in the advanced economies today, and nearly two-thirds if deposits are included.
Interesting, Housing is marked as "risky", and yet heavily invested. Investors are over leveraged in risky investments. They probably do it because controlling housing nets them power above and beyond normal returns. I wonder if this part of the reason for the "boom and bust" of market economies in the West when proper government regulation is removed. The riskiness of much of the investment of most investors may lead to sudden losses and shifts in risk, which may result in them withdrawing capital to "safer" investments, thus triggering a "bust".
And `r ≫ g` shows why the wealthy can wield so much power. Holding capital hostage to regulate economic growth and control it is very powerful, and why they can exercise the kind of control they can.
In effect, if they accrue enough value, then they alter the average rate of return. And, since that sucks capital out of the rest of the economy, we're kind of fucked overall because companies making tinned peaches and medicine actually need capital, and a good rate of return depends on that capital.
So if you need a haircut but can't afford one, and I give you a new £10 note to get a haircut, and the barber works the extra 10 minutes to do that haircut and earn that £10 there's no new pie there.
Looks like 10 minutes more output to me.
"Printing more money" does make more pie. That's exactly what happens every time a loan is taken out, or government hires somebody who would otherwise be unemployed.
"Printing more money" leads to "shredding more money" via loan repayments and increased tax take, all via increases in the utilisation of existing resources.
That because "printing more money" is about buying something. That something has to at least potentially exist or more money will not be printed and circulated in the first place.
and also not evenly distributing those slices according to previous ownership %.
Edit: https://journals.sagepub.com/doi/full/10.1177/21582440177360...
But over very long periods of time, it does seem to mostly be connected to population.
Increasingly we see a problem of people who add nothing to the pile getting large wads of money and taking more than their fair share from the pile. This is a problem.
If lots of people are doing a lot of work powered by a lot of energy and productive technology equipment, the (material) economy is good.
I would argue that under a centrally planned economy, you could have the same number of people working, using the same tech/equipments and energy, but not be a good economy because the output isn't what those individual participants in the economy wants to consume.
Alternatively just read the linked article; the linked article makes the correct fair comparison. You will arrive at that conclusion by reading just the second paragraph, which says
> data on total housing returns (price appreciation plus rents) has been lacking (Shiller 2000 provides some historical data on house prices but not on rents). In this article we build on more comprehensive work on house prices (Knoll, Schularick, and Steger 2017) and newly constructed data on rents (Knoll 2017) to enable us to track the total returns of the largest component of the national capital stock.
Shiller is explicitly mentioned. And the article authors disregarded it because it failed to include rent.
> The Jordà-Schularick-Taylor Macrohistory Database is the result of an extensive data collection effort over several years. In one place it brings together macroeconomic data that previously had been dispersed across a variety of sources. On this website, we provide convenient no-cost open access under a license to the most extensive long-run macro-financial dataset to date. Under the Terms of Use and Licence Terms below, the data is made freely available, expressly forbidding commercial data providers from integrating, in addition to any existing data they may already provide, all or parts of the dataset into their services, or to sell the data.
* https://www.macrohistory.net/database/
See also perhaps "Historical Returns on [US] Stocks, Bonds and Bills: 1928-2023" (updated annually AFAICT):
* https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile...
There's also the The Credit Suisse Global Investment Returns Yearbook:
> The Credit Suisse Global Investment Returns Yearbook is the authoritative guide to historical long-run returns. Published by the Credit Suisse Research Institute in collaboration with London Business School, it covers all the main asset categories in 35 countries. Most of these markets, as well as the world index have 123 years of data since 1900.
* https://www.credit-suisse.com/about-us-news/en/articles/medi...
* https://www.credit-suisse.com/about-us/en/reports-research/s...
As well as:
> The Global Investment Returns Yearbook, an authoritative guide to historical long-run returns, launched by UBS Investment Bank Research and UBS Global Wealth Management’s Chief Investment Office. This edition demonstrates the combined strength of UBS and Credit Suisse as the integration of the two banks progresses, and also marks the continuity of a longstanding relationship with the authors, Professor Paul Marsh and Dr Mike Staunton of London Business School and Professor Elroy Dimson of Cambridge University.
* https://www.ubs.com/global/en/investment-bank/in-focus/2024/...
This explains the enduring link between populism and war mongering.
This is an ultra simplistic formula, made by someone who's been born, raised and fed in a highly socialist country where the only word politicians know is "tax".
No shit. What gave it away, the two terms or the inequality? :)
Joking aside, it's simplistic because it's elementary. If real returns exceed real growth, ceteris paribus, you have a net flow of principal (so to speak) from labour to capital. That doesn't mean one can conclude the argument with those two variables alone. But it's a valid starting point, and concludes with many solutions other than increasing taxes to reduce r.