The Cost of Living in the United States

Edward J. Dodson

[Reprinted from Equal Rights, Winter and Spring 2005]

Economists have since the mid-twentieth century described the United States as a "mixed economy." Government has played an increasingly complex role in markets and in the distributional outcomes where income and asset ownership are concerned. Political scientists use the term "disjointed incrementalism" to describe the process by which decisions are made concerning changes in public policy. And, analyzing the net results of all this complexity has spawned a rebellion among (mostly) younger economists who have created "post-autistic economics." Want to learn more about this new school of economics? Sign up for a free online subscription to post-autistic economics review (I think it is significant that the publishers have chosen to use all lower case letters, as an emblem of their rebellion against conventional wisdoms.).

These post-autistic researchers come down hard on neo-classical economics. They think there is much to be learned by scientific examination of what is actually happening in the real world. In the 6 December 2004 issue of the review, Juan Pablo Pardo-Guerra puts his finger squarely on the problem:

"Economics has suffered a series of dramatic changes over the last 200 years. From emerging as one of the strongest arms of moral philosophy, it has not come to resemble a formal, axiomatic dictum tailored with the patterns of physics and mathematics rather than with those of sociology and culture studies."

Well, I certainly agree. A resurrection (or reconstruction) of political economy as an interdisciplinary area of study is needed in our universities.

The return of political economy to its distinctive status as a science that examines human behavior, examines socio-political arrangements and institutions, examines market forces and recognizes there are three distinct factors of production is essential to the ultimate achievement of equal rights.

While we wait for the academic and research communities to find their way to political economy, we continue to maintain a rearguard action. We are voices in the wilderness, but our message is increasingly supported by data from the real world. The "single tax" has yet to find a home, a real test of the power of lifting the burden of taxation from labor and capital; however, all one has to do is visit the City of Harrisburg in Pennsylvania to see first-hand what even a geographically small city - surrounded by relatively inexpensive open land - can achieve by even modest shifts in where its revenue is raised.

Returning land to its natural and appropriate place as a distinct factor of production - and, morally, as the source of all wealth rather than as wealth itself -- is fundamentally important. Then, and only then, looking at regional differences in the cost of living will begin to make sense.

The United States is an enormous land mass. Yet, the nation's population is heavily distributed along or near the coasts (or at least near major waterways). We know where the highest land values are; and, because of the existing way government raises its revenue, we know these are the same places where the cost of living is the highest. Land costs are passed on up to everyone who produces goods or provides services until these costs collide with price competition from lower cost environments.

Until the last dozen years or so, there were many options for profit margin stressed business owners and workers having a tough time finding steady employment. Regional economies seemed to be at very different points in their land market cycles. Even so, many businesses were moved out of the United States entirely in search of lower cost land, labor (and, too often, nonexistent anti-pollution regulations). The situation today is much more fragile. Land costs are historically high in every significant population center across the country. When businesses feeling the stresses of global price competition look around for new locations, their choices in the U.S. are fewer and fewer.

I have no idea of how soon the pressure of escalating land prices will become the straw that breaks the camel's back. Government spending (now based more than ever on borrowing) creates an illusion of economic growth, as reported by annual increases in Gross Domestic Product. For those of us who guess right, we can sell our house, move into an apartment (or with relatives) and park our windfall profits in some relatively safe investment and wait for land prices to fall back. Already, a fairly large number of property owners in the highest cost regions of the country have cashed out and moved to where the cost of living has yet to claim quite so much of everyone's disposable income. Hopefully (for them), only a small number of people with the same or greater net worth decide to move to the same area.

But, then, there is always Harrisburg.