Bird’s Eye View


     Megan McArdle has a post up over at The Atlantic, “Expensive Urban Real Estate Is a Choice.” This is a response to someone looking up the arrest records of Occupy Wall Streeters and subsequently finding that their addresses were (outside the context of New York) relatively pricey. While that original article described protesters as living in “luxury,” it perhaps shouldn’t surprise anyone that it’s expensive to live in and around New York City. Yet some of this is besides the point. From McArdle:

My initial reaction was the same as many people I’ve seen in comments sections: the protest is in New York, which is expensive.  This is hardly surprising.
But on second thought, I don’t think that’s quite right.  At least some of the houses identified by the Daily Caller are in places like Texas and Wisconsin.  But more importantly, I’m not sure we should “discount” these home values for location.  The fact is that living in an expensive city is a consumption choice.

Well, I suppose you could think about it that way. She continues:

There’s a sort of irritating supposition in all of this that living in New York (or San Francisco, or Boston) is something that just happens to you, like getting cholera.  And that therefore high incomes, expensive real estate, and so forth, somehow don’t count for the purposes of assessing how well off you are relative to the rest of society.  In fact, perhaps society should get busy making it up to you for all the hardships.
Perhaps we should offer such a perceptual discount to the small number of people who really couldn’t make anything like their current incomes in any other place—investment bankers, some securities lawyers, a handful of entertainers and creative types.  But in most cases, this is ludicrous

     This kind of idea might work for, say, middle-management bankers and payroll associates at small businesses. Indeed, it would be disingenuous to imagine that a branch manager for a national pest control company or shift manager at a chain burger joint couldn’t enjoy a higher standard of living in Topeka or Omaha.

     However, there are inherent flaws to this sort of thinking. It imagines living in NYC as only a choice of consumption. You must disregard that the burger joint employee might have been born and raised there, that subsequently their entire social support network is not in Topeka or Omaha. Social safety nets are a powerful incentive for individuals to live in an area regardless of costs, but for the purpose of this discussion it isn’t even the most relevant incentive. The most relevant incentive for our burger joint employee is the demand for their employment. NYC is a global city. They’re hosts to major economic factors and thus require lots of high skilled, high wage employees. Those high skilled, high wage employees create demand for goods and services provided by low wage workers. They demand things like pet food and enjoy their niche burger joints and bars. They need to have their clothes dry cleaned, taxis to drive them to their destinations and people to clean their offices. Yet because they earn high wages and lots of them want to live in and around NYC the cost of living rises with them. Therefore low wage workers must be compensated at a level that is bearable for them to live close enough to provide those goods and services. If all of them left because they were tired of paying $1800.00 a month for a crappy apartment the demand for that job would still be there. Yes, of course, any one of them may be able to leave for a comparable job with a lower cost of living. That may be the very advice you would give to a friend. That isn’t the advice that a senior editor for The Atlantic who writes about business and economics should be giving to an entire economic sector.

     Viewing individuals and their actions as economic actors is just a way to judge individuals for the choices they make. It is not a good way to explain why a shift manager at a fast food restaurant has the income and expenses that to anyone outside NYC would think is absurd.