The Economist's Apprentice

In which a little girl confronts the world and battles the anti-humans.

Friday, August 05, 2005

Response to Miss Anne Thrope

My post Limited Beachfront Property and Population Growth received the following post from Miss Anne Thrope.
What if those who would derive the most satisfaction from beach happen to be
poorer than average, and become unable to afford it?
Her point is interesting. As population grows, the price of unique tourist paradises rises, meaning that the tourists at them will probably become wealthier. Some poor 'beach bums' will be priced out of the market. It is even possible, though in my opinion unlikely, that this might dominate the effect that an increase in population increases the number of beach bums vying for the unique spots. The most likely outcome is that tourists will become wealthier and more predisposed to enjoy the beach.

Unique spots becoming pricier brings an additional social benefit - it increases the motivation of the wealthy to achieve wealth. The existence of luxury goods provides a motivation for people to create the goods and services that provide high incomes. If wealth did not bring its privileges, people wouldn't strive for it. Why become a heart surgeon, if a general practitioner can afford everything desirable? Why become a doctor, if a nurse can afford everything desirable? This is one reason why market price is often a good indicator of social value.

Of course, new construction of resort hotels is making these unique spots less unique everyday. Perhaps someday all developable beachfront property will be put to its best use.


Post a Comment

<< Home