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Economic Multiplier Effect of Housing - $1 spent on construction generates $3 in general economy
Topic Started: 3 Aug 2013, 11:34 AM (11,501 Views)
barns
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genX
3 Aug 2013, 10:52 PM
It's only abuse if it is not true. I am merely making an observation out loud, sorry if you weren't aware of this already.

My point is that the assertion that a house is productive is nonsense. A house certainly provides shelter, but it doesn't produce it. Builders produce shelter. It provides comfort, but it doesn't produce it. Designers and architects produce comfort. The production of houses is productive, but the houses themselves are not productive. There is nothing special about houses that the RBA would want them to rise in price such that more of them are produced. Does the RBA want food and clothing to rise in price so more food and clothing is produced? If the RBA's actions double the cost of petrol, will more petrol be produced? If petrol doubles in price, will people consume more of it or less of it? If the cost of petrol doubles in price, will consumers trade in their 3 door hatch for a 7 seater SUV, or the other way around?
Houses provide the service of accommodation. This is a productive use.

Being a durable good they maintain this productive use for many years and require additional productive elements such as renovation and maintenance during their useful life.

Also they incur (produce) tax in the form of rates and if rented out income tax and CGT.
“You Keep Using That Word, I Do Not Think It Means What You Think It Means” - Inigo Montoya
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genX
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barns
3 Aug 2013, 11:18 PM
Houses provide the service of accommodation. This is a productive use.

Being a durable good they maintain this productive use for many years and require additional productive elements such as renovation and maintenance during their useful life.
Cars provide the service of transport. This is a use of cars. The car, and the petrol in it are consumed over the lifetime of the car, just as a house and the various utilities that are supplied to it are consumed over the lifetime of the house.

Being a durable consumer good, cars provide the means to consume transport for many years, and require many other consumption costs during their useful life. Most people consider that the greatest value is derived from the consumption of cars at the minimum cost of purchase and operation. Just as a business considers the means of production (plant, equipment, raw materials) to deliver the greatest value when the purchase and operating costs are as low as possible for the same quality and quantity of productive capacity.

Likewise for those who consume housing to keep them warm, safe and protected from the elements while they earn their income. The greatest value is derived from the consumption of housing by the minimisation of purchase and operating costs, in order to profit the most from the income they facilitate the earning of. When house prices rise, they subtract from the profitability of income, which is transferred to the owners of capital.
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Also they incur (produce) tax in the form of rates and if rented out income tax and CGT.
Oh, tax is production is it? :bl: :bl:
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Mike
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genX
3 Aug 2013, 10:52 PM
It's only abuse if it is not true. I am merely making an observation out loud, sorry if you weren't aware of this already.

My point is that the assertion that a house is productive is nonsense. A house certainly provides shelter, but it doesn't produce it. Builders produce shelter. It provides comfort, but it doesn't produce it. Designers and architects produce comfort. The production of houses is productive, but the houses themselves are not productive. There is nothing special about houses that the RBA would want them to rise in price such that more of them are produced. Does the RBA want food and clothing to rise in price so more food and clothing is produced? If the RBA's actions double the cost of petrol, will more petrol be produced? If petrol doubles in price, will people consume more of it or less of it? If the cost of petrol doubles in price, will consumers trade in their 3 door hatch for a 7 seater SUV, or the other way around?
Those people living under bridges, how productive are they?

Did they feed the children under the bridge, help educate them under the bridge. What is their health considering they are exposed to the elements let alone food hygiene. Do these people have internet access, phones under the bridge so they can access services information to be more productive, perhaps further education online or night school.

By not having a place to live how many household items did they buy, which increases demand for other productive factories with innovative items to sell. I can go on and on.
http://mike-globaleconomy.blogspot.com.au/
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barns
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genX
4 Aug 2013, 12:04 AM
Cars provide the service of transport. This is a use of cars. The car, and the petrol in it are consumed over the lifetime of the car, just as a house and the various utilities that are supplied to it are consumed over the lifetime of the house.

Being a durable consumer good, cars provide the means to consume transport for many years, and require many other consumption costs during their useful life. Most people consider that the greatest value is derived from the consumption of cars at the minimum cost of purchase and operation. Just as a business considers the means of production (plant, equipment, raw materials) to deliver the greatest value when the purchase and operating costs are as low as possible for the same quality and quantity of productive capacity.

Likewise for those who consume housing to keep them warm, safe and protected from the elements while they earn their income. The greatest value is derived from the consumption of housing by the minimisation of purchase and operating costs, in order to profit the most from the income they facilitate the earning of. When house prices rise, they subtract from the profitability of income, which is transferred to the owners of capital.

Oh, tax is production is it? :bl: :bl:
I'm sure you are correct academically. However it's just not persuasive.

I consider the provision of services to be productive. The service of providing accommodation is accordingly productive.

You are incorrect about the greatest value coming about from minimising purchase and operating costs. If, as a society, we thought like that we would all have 2/3 bedroom basic low maintenance townhouses. It's almost exactly the opposite to the truth. People love to spend big on their house and then enhancing it. Lots of people think this way about cars as well.
“You Keep Using That Word, I Do Not Think It Means What You Think It Means” - Inigo Montoya
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genX
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barns
4 Aug 2013, 03:40 PM
I'm sure you are correct academically. However it's just not persuasive.
You are right, dishonesty is the best policy these days. I've decided to switch over myself.
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I consider the provision of services to be productive. The service of providing accommodation is accordingly productive.
That explains a lot about the modern world.
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You are incorrect about the greatest value coming about from minimising purchase and operating costs. If, as a society, we thought like that we would all have 2/3 bedroom basic low maintenance townhouses. It's almost exactly the opposite to the truth. People love to spend big on their house and then enhancing it. Lots of people think this way about cars as well.
In the new way of thinking, you are of course correct. Those Romans loved all that free bread and entertainment and look how successful they were.

Mike
4 Aug 2013, 01:55 PM
Those people living under bridges, how productive are they?
As productive as those labourers not living under bridges (and as a cost per unit output, MORE productive).
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Did they feed the children under the bridge

Not usually.
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help educate them under the bridge.
No.
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What is their health considering they are exposed to the elements

Their health is fine. The air is warm and they don't spend the night breathing in carcinogens off-gassing from the furniture like those who live in apartments.
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let alone food hygiene.
Food hygiene is fine. They buy their food cooked.
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Do these people have internet access, phones under the bridge so they can access services information to be more productive
How does internet access or a phone make you more productive at manual labour?
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, perhaps further education online or night school.
For?
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By not having a place to live how many household items did they buy, which increases demand for other productive factories with innovative items to sell.
Very few, which had no effect on their own productivity.
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I can go on and on.
You sure can.
Edited by genX, 4 Aug 2013, 05:19 PM.
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skamy
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Soul Torpor
3 Aug 2013, 04:06 PM
Careful, dishing out those tired old taunts makes you sound like that mind numbing buffoon Skamy - perhaps she's your cranky-just-got-out-of-bed sock puppet?

Just for the record, not all bears are 'cheap house dreamers', if you knew anything about property crashes you'd know that there is often a long lag between financial liquidity tightening up (i.e. 20-25% LVRs) and price corrections, due to home owners' unwillingness to realise their loss.


I love it when I play on someones mind - you are just like most of the brainwashed cheap house dreamers on here who have completely fallen for a version of the doom and glooming straight for m the 70s and repackaged for a whole new generation of idiots wanting to pay less than the majority for their homes.

You live in a completely alternate fantasy land where you hang around with the rest of the vultures celebrating any small sign of bad news for other people.

Not all bears are cheap house dreamers - but you are mate.



Definition of a doom and gloomer from 1993
The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
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barns
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genX
4 Aug 2013, 05:13 PM
You are right, dishonesty is the best policy these days. I've decided to switch over myself.

That explains a lot about the modern world.

In the new way of thinking, you are of course correct. Those Romans loved all that free bread and entertainment and look how successful they were.


It's not dishonesty it's more real world v academia. I studied economics its as well. A lot of the terminology used and distinctions made are just silly. Economics would consider a factory that makes clothes irons to be productive. All those engineers, techs, warehouse men and box fillers are doing great productive work to make a durable good that makes clothes somewhat less creased than when it was hung on the line plus uses quite a bit of power and cost in time to do so. Brilliant. However, a real estate agency that matches landlords with tenants is not productive as it's merely a service. Huh? I know which I consider more useful to the community.

I'm not sure whether you are being sarcastic about the Romans? They were very successful as a nation state. Of course it ended, but all current nation states will also end. Most will have a shorter duration than the Romans managed, including Australia in its current form.
“You Keep Using That Word, I Do Not Think It Means What You Think It Means” - Inigo Montoya
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Timo
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Shadow
3 Aug 2013, 11:34 AM
This is why the RBA wants house prices to rise and lead to a construction boom.

Housing construction employs architects, builders, plumbers, electricians, as well as the people who supply the raw materials for building. The houses require furnishing, whitegoods, TVs, generating business for many companies. Then you've got the extra business for real estate agents, brokers, lenders, solicitors etc.

For every dollar spent on construction, three dollars worth of activity are generated in the overall economy...

http://www.abs.gov.au/Ausstats/abs@.nsf/94713ad445ff1425ca25682000192af2/ed6220072793785eca256b360003228f!OpenDocument

Do you actually believe this?

For every $1 spent, about $10 is ripped off the tax payer.
After a bubble has burst, no one denies that it existed. But before it does, the popular refrain is that though bubbles existed elsewhere in the world, “there’s no bubble here”. So housing bubbles are admitted to have existed in Japan, the USA, Spain and Ireland – because they’ve already burst.
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Trojan
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barns
4 Aug 2013, 11:35 PM
It's not dishonesty it's more real world v academia. I studied economics its as well. A lot of the terminology used and distinctions made are just silly. Economics would consider a factory that makes clothes irons to be productive. All those engineers, techs, warehouse men and box fillers are doing great productive work to make a durable good that makes clothes somewhat less creased than when it was hung on the line plus uses quite a bit of power and cost in time to do so. Brilliant. However, a real estate agency that matches landlords with tenants is not productive as it's merely a service. Huh? I know which I consider more useful to the community.
Farmers are produced the food - chef's don't.
Pharmaceutical companies are producing health care - the doctors aren't.
Mercedes is producing Sydney's transport - not the government.
Boeing and Airbus produce air travel - not the airlines.
The sun produces the energy - energy companies produce nothing.
God produced the sex mel is getting - the hookers contributed nothing.

:lol :lol :lol
Edited by Trojan, 6 Aug 2013, 01:51 AM.
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
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Sydneyite
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genX
4 Aug 2013, 05:13 PM
Those Romans loved all that free bread and entertainment and look how successful they were.
Yea - they "only" managed to build and maintain an empire that covered basically the whole known world at the time, and managed to maintain their status, power, wealth and economic + military dominance for about 800-1000 years. A real "failure" there...... :re:
For Aussie property bears, "denial", is not just a long river in North Africa.....
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