Re:Priced out of home ownership – 'It makes me want to throw...
by AnthonyMouse on Tuesday May 28, 2024 @07:49PM
(#40506774)
> But sometimes a vast increase in supply actually induces additional demand by itself.
Induced demand is a specious argument because the demand is not actually induced by the new construction, it's suppressed by its absence.
If you have traffic congestion, or a housing shortage, then people who would have used the road or moved to the city instead do something else. The normal amount of demand that would exist in a functioning system is suppressed.
If you then alleviate some of the shortfall, that demand comes back. But you haven't induced it, you've just stopped suppressing it through congestion or high prices.
The most important thing about this is that the amount of demand at the lower cost isn't infinite. It's just more than there is at the higher cost. What this means is that you thought you had a shortfall of 100,000 units but you actually had a shortfall of 250,000 units. What it doesn't mean is that you can't solve the problem by building more units -- you just have to build 250,000 rather than 100,000.
Induced demand is a specious argument because the demand is not actually induced by the new construction, it's suppressed by its absence.
If you have traffic congestion, or a housing shortage, then people who would have used the road or moved to the city instead do something else. The normal amount of demand that would exist in a functioning system is suppressed.
If you then alleviate some of the shortfall, that demand comes back. But you haven't induced it, you've just stopped suppressing it through congestion or high prices.
The most important thing about this is that the amount of demand at the lower cost isn't infinite. It's just more than there is at the higher cost. What this means is that you thought you had a shortfall of 100,000 units but you actually had a shortfall of 250,000 units. What it doesn't mean is that you can't solve the problem by building more units -- you just have to build 250,000 rather than 100,000.