> When property owners improve their land, neighbors also gain value - creating a positive-sum scenario even within your 'finite resource' example
There is a finite pool of property and of buyers though. Its reasonable to assume they if one piece of property gains in value others lose value because they are now less desirable. I'm not arguing the math is absolutely 1:1 in price increase/decrease.
Its very easy to zoom in on one portion of a zero sum game and view it as non-zero. If costs are externalized outside the scale you're considering then it can in fact seem magical, but at the end of the day everything is connected.
If your neighbor's house goes up in price, yours is likely to go up too, all else being equal.
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Economic interactions can create new (emergent) value, not just reshuffle existing value.
Adam Smith's recognition of this fact is what gave us the current western economies, where even poor people are relatively wealthy, compared to back in his day.
Adam Smith illustrated this 'emergent value' with his pin factory example: One person working alone might make 20 pins per day. But when ten people specialize and collaborate, they could produce 48,000 pins daily - not by using more resources, but through smarter organization. This 240x productivity gain created entirely new value without taking from anyone else.
> If your neighbor's house goes up in price, yours is likely to go up too, all else being equal.
Sure, if you're zoomed into a neighborhood scale. That wasn't my argument though, scale matters.
If your neighborhood sees an increase in value one across town could pretty easily see theirs go down. If your city goes up because it became more desirable for any number of reasons, other cities must be less desirable and seeing values go down.
We don't have unlimited demand for real estate. Buying real estate mostly in debt buffers the zero sum game somewhat, we have a finite pool of buyers but they aren't directly limited by a finite pool of money.
Edit because I forgot Adam Smith. He wrote of a fictional past and a fictional vision for the future. His examples are fine in theory but they weren't rooted in fact.
Ah, I think the pin factory was a place Adam Smith actually visited back in the day.
But... you have me curious now.
Does this mean you reject capitalism as a system?
And Karl Marx actually I think made similar observations, just came to his own slightly different conclusions. So I'm guessing you're not exactly going to be someone who identifies as socialist either.
Can you tell me if you come from some sort of interesting social/economic/political background? I'm fascinated!
I do actually support capitalism, though my opinion is that I only really support it in theory and that the few decades I've been alive have had too much market intervention to really be considered capitalism.
I generally would trust a free market to optimize well enough, much like I would trust "the mob" in a democracy to decide its own fate well enough.
I fall very must on the side of individual liberty. That means people should be able to do whatever they want as long as it doesn't impede other's rights to do the same. It also means, though, trusting that the outcome of such a system is going to be roughly optimized and should nearly always be better than a centrally planned solution.
In the context of housing prices, neighborhoods or cities rising and falling, etc I see that as a good thing and as a sign that markets are reflecting general sentiment among consumers. We learn from why we think one market is now more favorable and respond by shifting other markets to better match that demand.
Where Adam Smith really loses me is in monetary policy. Arguments of a world before money looking like someone with bread and in need of chicken wandering around to find someone with chicken and needing bread is just ridiculous. Societies without money, or with a very loose concept of money, were likely to be much smaller groups of people (think the Dunbar number) that worked to take care of each other. You may have had someone that made bread for the community and you just went and got some when you needed it. Everything didn't revolve around IOU transactions among unfamiliar parties because you were familiar. Money is way Kore useful as a medium when you don't really know or don't really trust the other party.
Oh! That's nuanced! I was just thinking that what we call non-zero sum thinking today is the basis of both capitalism and socialism. [1]
So if you reject it, I thought you must have some really interesting alternate economic theory you adhere to.
That said, do you think it's more likely that every single interaction between humans would be an exact -1/+1 value exchange, or do you think it'd be a bit more messy like -0.45/+1.213 . If the latter, couldn't -1.1/-4.5 or +2.43/+3.14159 also be possible exchanges?
[1] both capitalism and socialism (despite their many differences) share the premise that economic organization can create more value than would exist without it. They differ primarily on how that value should be distributed and who should control the means of production, not on whether value creation itself is possible.
There is a finite pool of property and of buyers though. Its reasonable to assume they if one piece of property gains in value others lose value because they are now less desirable. I'm not arguing the math is absolutely 1:1 in price increase/decrease.
Its very easy to zoom in on one portion of a zero sum game and view it as non-zero. If costs are externalized outside the scale you're considering then it can in fact seem magical, but at the end of the day everything is connected.