Affordability Crisis Glossary of Terms - Part I
Attitude Adjustment
The terms “affordability” and “crisis” are ambiguous. What is affordable to some people is unaffordable to others - and that depends on current prices relative to available resources. And for events qualify as a crisis will depend on their severity relative to the circumstances that preceded them.
However, the general prices levels of housing, medical services, food, and childcare compared to five or ten years ago are certainly higher in dollar terms - and owning a home is cost prohibitive in many regions, particularly urban areas.
Yet, this wouldn’t be much of a crisis if average wages and after-tax income had kept pace, but let’s put aside the debate about living wages and public policy solutions for now and discuss the common wisdom that causes these debacles.
Empowerment - Becoming a self-made man or woman is the spirit of Americanism. In fact, it was concretized in the Preamble to the Declaration of Independence as life, liberty and the pursuit of happiness. But because that’s not easy, the humanitarians in government believe they must be empowered to empower the disempowered. When they do, prices naturally rise to the extent of the redistribution to government agencies and their client NGOs. Billions have been spent empowering homelessness, for example.
Giving back - For the benefit of those empowered by their own ingenuity, humanitarians mitigate their guilt for being productive with progressive income tax schedules and tax-deductible contributions. Their circular logic is that redistributed wealth empowers those who feel disempowered by the economic power of others that produce goods and services that should have empowered the disempowered in the first place. It gets better.
Servant leadership - Because virtues like honesty, independence and pride lead to the productiveness and integrity of economic power, leadership needs to change its priorities to helping employees find themselves. To that end, human resources has been empowered to make critical decisions for hiring, compensation, promotion, and termination policy. There are significant costs for this - not the least of which is the capital that did not flow to the talent that is capable of reducing prices.
Sustainability - This concept was elevated to the status of a collective virtue in the context of the natural environment. Today, it transcends plant and wildlife preservation to the sustainability of all institutions that succeed or fail depending on their compliance with ever-changing “diversity” and “clean energy” regulations. Naturally, that drives up the price of everything because energy is everywhere and “collective virtues” are nowhere.
Renewables - Anything that is renewable sounds better, but there is nothing renewable about non-living existents. Living organisms reproduce and they regenerate themselves when injured. Matter and energy are not living things; they merely change form. And to assign renewable status to diffuse forms of energy only serves to whitewash the incredibly high costs that get passed along in the form of higher prices for housing and utilities.
Price Gouging - Whenever there is spike in prices from a natural disaster or other cause for a sudden shortage, people who know nothing or care nothing about the price mechanism will complain. It makes them feel good about themselves. After all, need is the only priority of the humanitarian - and the more people who are in need the better.
Billions in Profits - Whenever there is spike in prices from a man-made (government) disaster like medical services, energy, or mortgage loans, people who know nothing or care nothing about the price mechanism will complain about insurance companies, energy companies or banks. Never mind that their subsidies and tax credits are miniscule compared to the trillions that are bled by a wholly unaccountable government. In turn, that drives up the price of housing, medical services, and utilities.
Stakeholder Capitalism - To sustainably give back to the disempowered with renewable leadership, shareholders have been replaced by stakeholders. And to qualify as a stakeholder, all you need is to have no skin in the game. Think of the possibilities! Return on investment and shareholder equity have been replaced by “community” that gets to extract indulgences for the local politicians. All of that is capital that did not flow to talent that is capable of reducing prices.
Resolution
The subtitle of this essay is Attitude Adjustment because the eight subjects listed above are commonly held attitudes that support the economic policy decisions that created the affordability problem that is front and center today. My next article will list eight specific economic policy themes that are responsible for the inflated prices that have discouraged young people across America and across the world.
Ultimately, the solution to any socioeconomic problem must begin with individuals, their attitudes, their ideas, and their actions toward their chosen values and goals. That is The Moneyball Method.