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Comment by randomdata | Hacker News Reader

But the economy always seeks equilibrium eventually. Rents are rising in places like San Francisco because it is trying to reach equilibrium with Flint. While it may take time to get there, eventually we should see rents reach a point where it is a better deal, or at least no worse of a deal, to live in Flint, even if the career opportunities are not as good.

For instance, as a hypothetical, if you make $70k post-tax as a developer in SF, or $15k working part time at Mcdonalds in Flint, once your rent reaches about $5,000/month, you may actually be better off in Flint career-wise. But in fact, the median household income in SF is only $88k/year (pre-tax), which means that there are probably people already living in SF who aren't far off being better off moving to Flint for career reasons (not necessarily for the other reasons listed).

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How does the economy know what equilibrium is?

This seems like kind of an absurd oversimplification. Maybe what you're saying is true over geologic timescales but if SF suddenly had a large amount of vacant housing, rents wouldn't continue to increase regardless of what's happening economically in Flint.

Why would SF suddenly have a large amount of vacant housing that isn't there now, unless people lost interest in the city? A large surplus like that suggests that things have swing too far in the other direction. At that point, rents will decline to try and bring equilibrium back the other way, exactly like you see in Flint today.

I don't know, overoptimistic real estate developers? My point is just that asserting that rents in SF are increasing because they are trying to reach some kind of equilibrium with Flint, MI obviously involves glossing over tons of factors that affect rents more in the short term. You might as well argue that rents in SF are rising because they are trying to reach equilibrium with the rents in rural villages in Mali

> I don't know, overoptimistic real estate developers?

If developers in SF become too optimistic then those homes become a drag on the economy, and SF soon loses the career advantage it currently has, still leading to equilibrium eventually.

> tons of factors that affect rents more in the short term.

I felt I was quite explicit that finding equilibrium takes time. I am not sure why you are focusing on short term movements in price.

> You might as well argue that rents in SF are rising because they are trying to reach equilibrium with the rents in rural villages in Mali

In some ways that is true. China's rags to riches story happened in large part due to costs in the US rising to the point where it became cheaper to move (some) operations over there. Reaching equilibrium at the international scale is more difficult due to many artificial barriers found along the way, however. There is really nothing stopping an American citizen living in SF from moving to Flint.

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