Monday, 16 February 2015

Ricardo's Law of space?

I came across an interesting video on space saving furniture. At 2.45 the salesman points out that his furniture can allow you to live in a smaller apartment, presumably making a more desirable area affordable on a given budget.

Does Ricardo's Law not apply to space as well as rent? If, by using space-saving furniture, three people can afford to live an apartment that would otherwise only be big enough for two, is that not likely to push up the cost of those apartments, thereby rather defeating the object of the space-saving furniture?

8 comments:

Mark Wadsworth said...

Yes. I have thought about this before (maybe I posted about it).

It's an arms race - make TV's flatter etc and ultimately the gains accrue to landlords.

Ian B said...

Some while ago I bought a frying pan with a folding handle, sold on the virtue that since housing is getting smaller it takes less space to store. I admit that my actual reason was that I am a bit keen on gadgetty things and that was what appealed, though when the handle snapped off when I dropped it, the next one was a normal one. But anyway, the packaging actually quoted "dwellings getting smaller" statistics.

But yes, Ricardian theory or not, if you downsize the price of downsized stuff will rise to the old price of the upsized. Families used to live in one room; husband, wife, eleven children and granny. We seem to be heading there again.

Bayard said...

We've got a way to go: London is now back to the population it had 76 years ago and look how much more space it covers compared to then.

Jim said...

But does that mean that normal furniture and bigger houses would get cheaper, being they are less desirable?

Dinero said...

Yes Mark W did do a post on this sometime over the last two years. It equated number of occupants to rent per square foot.

Random said...

Mark, could you explain to this guy what a Land Value Tax is and its advantages, etc:
http://bilbo.economicoutlook.net/blog/?p=30215
You are knowledgeable on the subject and if other economists are engaging then we can spread the idea

Mark Wadsworth said...

Din, maybe I never posted the specific example I was thinking of (a business which specialises in dismantling bulky furniture to get it up narrow staircases into smaller flats).

But 'improvements' is of general application. The lift for example can increase the value of a city centre site dozens of times over.

R, nah, that's Billy Mitchell, he is MMT fundamentalist and is off on his own tangent i.e. "governments don't need to raise taxes at all to pay for spending".

Well, that's the first lesson of MMT - they don't.

But the second lesson is, having created money by spending, the government has to destroy it in similar measure by taxing - otherwise you get hyperinflation.

And hyperinflation is a kind of a tax on savers i.e. a wealth transfer from savers to 'everybody else'.

Ben Jamin' said...

Scrapping minimum size and materials standards are capitalised into higher selling prices for land.

Which is precisely why the Tories did it back in the 80s. It's in their DNA.

We could in theory triple the cost of building new homes, and aggregate HP's would not rise a penny.

William Vickery made this observation in the 70s in regard to building regulations for offices.

In the UK, thank to our f**kwit politicians we have rabbit hutch, poorly constructed housing and high prices.