Monday, 11 May 2015

"According to economics..."

James James in the comments here:

"According to economics, the burden of commuting is chosen when compensated either on the labour or on the housing market so that individuals’ utility is equalized. However, in a direct test of this strong notion of equilibrium, we find that people with longer commuting time report systematically lower subjective well-being."

There are endless studies by estate agents showing that each extra minute's walk from the nearest Tube or train station in London = £A off the rent or £B off the price of a home; that each extra minute's commute time from London overground stations = £C off the average rent or £D off the price of a home etc.

It's a bit presumptuous of these psychologists to say that all this numbers are "too low". Nearly half of people in London rent and most new arrivals rent; the rental market is very fluid so if people were really so hacked off with commute times, they can move somewhere else in six months' time. We have to assume that £A, £B etc. are roughly correct.

We can reasonably assume that if we have two same aged people with same amount of savings, who both start a new job at the same place in central London with the same pay and working hours will make that difficult trade-off between walking time, train time, ticket cost and rent. This tells us the value in £'s per hour that people place on shorter commute times.

But you can bet a pound to a penny that the psychologists haven't equivalised for all these factors.

So on the whole people with longer commute times will probably be younger people on lower pay with high rents; and those with shorter commute times will be older people with a small or no mortgage who had the luck to buy nearer the centre more than fifteen years ago. So the latter group has shorter commute times, lower effective housing costs and lower travel costs and it's hardly surprising that the former group has a systematically lower sense of well-bring.

(And we also know that plenty of people who move out of London into the Faux Bucolic Rural Idyll end up bitterly regretting it; they just can't survive out in the real world any more, just like zoo-raised animals released into the wild.)

13 comments:

James James said...

Mark, you're not engaging with Stutzer and Frey's argument. No one's disputing that people pay more for a shorter commute, the question is should they pay even more? Saying "We have to assume that £A, £B etc. are roughly correct" is begging the question -- you're just assuming your conclusion. Whether £A, £B etc are roughly correct is the matter under discussion -- you can't just assume they are and claim victory.


Stutzer and Frey say: "According to economics, the burden of commuting is chosen when compensated either on the labor or on the housing market so that individuals’ utility is equalized. However, in a direct test of this strong notion of equilibrium, we find that people with longer commuting time report systematically lower subjective well-being."

You say: "trade-off between walking time, train time, ticket cost and rent... But you can bet a pound to a penny that the psychologists haven't equivalised for all these factors."

Wrong. Both you and the psychologists agree that all those factors ought to be taken into account by market prices, therefore the psychologists don't need to control for them.


The question is, after all these factors have been taken into account by people resulting in different land prices in the countryside and the city centres, why do people with longer commutes still report lower subjective well-being?


***


The only argument you've made so far which tries to answer this question is that "those with shorter commute times will be older people with a small or no mortgage who had the luck to buy nearer the centre more than fifteen years ago".

That would indeed explain it if it were true and not made up. Do you have any data to show that people with shorter commutes are more likely to own? Earlier you say "Nearly half of people in London rent" which is higher than the national average so seems to contradict your claim.

Lola said...

Speaking as a resident in FBRI I can confirm that although I travel to London on business reasonably frequently to do it every day would be appalling.

The Stigler said...

James James,

"No one's disputing that people pay more for a shorter commute, the question is should they pay even more?"

Of course they should. Given a choice, pretty much anyone working in central London would live in Eaton Square. They'd choose that option over living in Slough and travelling in.

So, who do you decide who gets Eaton Square and who gets Slough? Regardless of who gets the rent, the best mechanism is price. Which you pay more for a shorter commute because markets.

Bayard said...

"why do people with longer commutes still report lower subjective well-being?"

Possibly because the low well being is one of the factors taken into account when deciding how long to commute for?
i.e. richer and less happy versus less rich and happier.

A K Haart said...

It may be worth noting that the use of self-reported parameters are known to introduce a problematic bias into other areas such as calorie intake.

Stutzer and Frey also say

“Well-being must be cardinal and interpersonally comparable. Economists are likely to be skeptical about both claims.”

Dinero said...

From the reported paragraph there are two phrases, with the second used to measure the first, but the phrases "individuals utility" and "subjective well being" have different definitions, if you look them up

Sean Vosper said...

Good piece on housing: http://www.telegraph.co.uk/finance/newsbysector/constructionandproperty/11597496/Owning-a-home-is-falling-out-of-fashion-around-the-world.html

Mark Wadsworth said...

JJ, I am very much engaging with it.

My point is that on the whole,
- rich people are happier than poor people;
- people with short commutes are happier than people with long commutes;
- people with big house/garden are happier than people in a cramped flat.

Using their logic, we could say that "large homes are underpriced relative to small ones".

The point is that poor people have a choice between long commute and cramped housing; rich people can have short commute AND spacious housing.

So on the whole, people with longer commutes will be less happy because the alternative is living in somewhere REALLY CRAMPED that would make them even less happy than they already are.

L, yes. But most Londoners don't commute in from Suffolk, obviously.

TS, yes.

B, good one (I think).

AKH, Din, they're all fancy words for "happy", let's not split hairs.

Mark Wadsworth said...

SV, it's a lot of Torygraph home-owner-ist shite.

"The lesson is we should try to intervene as little as possible in the housing market, and let consumers decide the right balance between owning and renting"

The only reason that most Torygraph readers own a house is because of massive government intervention over the 20th century keeping prices down and quantity up.

And Germans are happier renting than Brits because tenants in Germany have rights and lower rents. Again, not the result of 'free consumer choice' but the result of massive government intervention.

Land value tax will sort it out.

Lola said...

MW. You are correct. But quite a few do commute in from places like Diss and Stowmarket, bizarrely. And Ipswich to LLS are very full at 'commuting time'.

blissex said...

Well, either many men don't even think of women's influence on them, or are too politically correct to point out the obvious.

Usually the dominant influence on house location and type is the female partner (after all both before and after divorce she considers it *her* house), and usually the male partner somehow gets the longer commute.

Perhaps the male partner would rather like the 3 bed flat near *his* workplace, but the female one will just fall in love with the 5 bed semi or detached with the big garden. And it would be misogynist for the male partner to be abusive to the point of disregarding her needs :-).

James James said...

This is much better. The researchers need to control for how rich people are.

Mark Wadsworth said...

B, excellent.

JJ, thanks, that's the point, you would have to control for so many variables that it would be pointless, which is why I personally simply accept that market prices reveal people's overall general preferences (convenience vs comfort) and clearly people have to make do with whatever limited budget they have.