Monday 2 July 2012

Utopia postponed - blame housing?

Owen Hatherley asks why those of us with jobs are still working so much when we have so much labour-saving technology. He doesn't get anywhere near a decent answer, and overall it's not a particularly good piece, what with the erroneous claim that the average Briton works a 12 hour day and the suggestion that all service jobs - including Owen's? - are "pointless". But it's an interesting question (go read Keynes), so here's my attempt to answer it.

Let's look at it in terms of supply and demand. More about supply later, but for the moment I think we can all accept that technology improvements have vastly increased the amount and quality of stuff we can afford. Most of us could probably work part-time and have a quality of life - certainly a life expectancy - that most of our ancestors would envy.

Yet we generally choose not to work short hours, and in part that's because we want a much better quality of life than our ancestors had. Our incomes have increased hugely in real terms, but so have our demands for goods and services. In economic terms, most of the stuff we want consists of 'normal goods', i.e. stuff we are willing to spend more on when our incomes increase. It's not clear, however, to what extent this all really makes us happier or to what extent we are just on a 'hedonic treadmill'.

But do we want more stuff for its own sake or because we want to show off to everyone else? Do we desire goods and services for their inherent consumption value or for the social status they impart? Social status is a positional good, something which we value according to rank rather than absolute quality - even if we could all have afford to have good lives, only one of us could have the best, and that seems to matter to us. It does of course help, but only a little, that we don't all share the same subjective rankings.

On the supply side, it obviously matters how the things we want are made. One important aspect is whether the production process is labour-intensive or not. Things that are easily mechanised have generally got a lot cheaper compared to our incomes over time, but things which require a lot of human labour, such as hairdressing or adult social care, have not. That's because you have to pay someone to do it and other people have high income demands just like you do.

I would suggest that the housing market combines many of these features, and may be the most important reason why we continue to work long hours. Housing demand is income-elastic: when we earn more we often spend it on bigger houses or better locations. Housing is positional in the sense of social status (one of the great things about a nice home is inviting people around to envy it entertain them) and in the sense that it is spatially fixed: each home gives us access to a different bunch of locational goods, which in some cases like access to a particularly good school may be extremely valuable. And housing production is intensive in two expensive and relatively scare factors of production: labour and land.

Certainly housing could be cheaper if we built a lot more of it, but I'm not sure whether it would be cheaper in absolute terms (i.e. we'd spend less on it) or in relative terms (i.e. we would maintain our level of spending but get more for it). Either outcome would be an improvement on what we've got now, but not necessarily in terms of fewer hours worked.

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