Thursday, November 12, 2015

What Is Is the Richest City in America?

See This Is the Richest City in America by Alexandra Mondalek of Time. Excerpts:
"According to data compiled by Bloomberg, the newest reigning metropolitan area for wealth and productivity is San Jose, Calif., the third-largest city in the state and a hub of Silicon Valley. The 2014 gross metropolitan product (GMP) per capita—which is a technical way of saying economic output per resident—in the San Jose metro area was $105,482, more than double the national average.

Since the Great Recession, technology hot spots have inched their way forward in attracting the smartest and most highly compensated residents, surpassing the East Coast centers of the financial elite. To be sure, the other coast is well represented: cities like Boston and Philadelphia still rank highly, and Bridgeport, Ct., comes in second on Bloomberg’s list, with a per-resident GMP of $94,349."
The article later says: 
"Good news to those living in some of Bloomberg’s top-ranked cities (looking at you, Boston, San Fran, and Seattle): Your towns are among MONEY’s best places to live for rich singles."
I'm usually skeptical of any "best places" lists because if those places are so great, more people will move there, driving up the cost of living. Then it might not be such a great place.

Suppose that San Francisco is 6 times better to live in than Omaha, Nebraska. That is about how many times higher the median home price is in San Francisco. There is definitely more to do and more great sights in San Francisco, but it costs alot more to live there.

If SF were so great, everyone would leave Omaha and head to SF. But they don't. This is where  the "Indifference Principle"comes in.

If people really believe that SF is better many of them go there, but things won't be very fun due to the crowds (which reminds me of something that Yogi Berra said about a restaurant: "nobody goes there anymore, it's too crowded").

Prices of everything will be bid up. This also illustrates what economist Steven Landsburg calls the "Indifference Principle." "Except when people have unusual tastes or unusual talents, all activities must be equally desirable."

This applies to SF. Once everyone sees it as a good deal or great place, they start going there. Only people with unusual tastes will really enjoy it. That is, you will have to like what that SF has to offer alot more than the average person or the crowds and congestion and high prices will erode your enjoyment. It won't be any better than anywhere else to live. Other places will be just as desirable.

If home prices were only twice as high in SF, then lots of people will move there because it is such a great place. But then that drives up the home prices and eventually there is no advantage to moving to SF. All of its extra benefits are eaten up in higher costs of living.

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