The Local Population Growth Problem

I wanted to start a thread on this, as this is one of the harder economic riddles that I have yet to find a good answer for. Also, I'm talking about local population growth, not the world wide population question, or even the national one, if possible, I'd love to have a good discussion on just the topic of local population growth.

I'm the oldest child of six kids that my parents had, and we've produced some 20 grandchildren between us. We've often observed that we live all over the place and none of us live in our hometown. Having been bored at one family gathering, I started building a quick model, and was taken back by the basic predictions of what it would take for a family to all live in the same city over the years. This is of course built on the assumption that living in the town you grew up in is valuable.

The first problem is that when you have people growth, you need home growth to house everyone. In our case, I grew up in a family of 8, and now we live in 7 homes. There were about 35k houses in my town when I grew up, they would need 122.5k homes to keep up with my family's growth rate (assuming we all married local). (note using my family to over stress the problem, clearly you get a similar problem at a slower growth rate).

In the case that the town can't keep up with 90k new homes in 30 years, you then get a situation of figuring out who has to move out of the town. In the current market, you get everyone who can't afford to live there, or who don't want to pay the costs to live there moving out. So, lets say that in one generation that the town can only grow houses 150%, or from 35k homes to 85k homes, you have 40k homes worth of people that have to move out of the town.

Obviously the houses in the town will go up in price due to demand, as well as inflation. Median incomes will also go up, as the result of all the people who could not afford to live there moving out.

Repeat this a few generations and you have only a small percentage of people that would like to live in that town able to actually live there.

While this is pretty simple model, it explains many of the common problems that we all see in our local communities, families not being able to live with families, grandparents that have to move away as they retire. The need for suburbs, and suburbs to suburbs. The need for continual housing growth in what used to be small towns. The disappearance of local farmlands. The need for local increases in industrial buildings inside cities or local suburbs. etc, etc.

If we say that the family is the core to local communities, and communities are the core to the very fabric of the Country, without solving this very simple local growth model, we'll never get the equation right.

To-date the only model that I can find that has even a half chance in keeping a family together for a few generations, is the model of moving the whole family to someplace that has a ton of very open space which is what my great, grandparents did when they moved to California nearly a century ago. But eventually this breaks down, as it did in my generation.

Hi Boldhawk,

I'll also agree that the Government needs to do way more in terms of data gathering, simple aggregations, and then turning around and making this information available back to he public.

Amazon has just started an effort to host this type of information, http://aws.amazon.com/publicdatasets/,but really the government should have this in a format that can be used by everyone.

On the 'man hours' suggestion, these type of calculations have been long suggested for many years within proposals that suggest alternatives to straight 'money valued' calculations.

The problem with these sort of calculations is that when used to replace 'money values' you get one of two situations, 1) they correlate very closely with 'money values', or the opposite 2) they don't correlate. In the first case, the basic decisions that get made don't really change, in the second case, they do, but its hard to say they get better.

Take for example, two methodologies, one that costs 20% more but gets the job done in 10% less man hours. Optimize for man hours and you get higher costs.

Man hour calculations also don't solve the investment problem which is at the core of most financial problems. Investments that cost less then the returns never cause problems, its the reverse. The 'man hour' calculation doesn't really help much here, as the fuzzy math proposals would be happy to use a fuzzy metric in measuring success.

Stock dividends will never be in any form except money, and so really calculations need to be in that form.

That said, there are a ton of data that companies have that that could be used to evaluate economics better.

Hi Andy,

I hear a lot of discussion about 'confidence' and the lack thereof as one of the reasons why people are not spending.

Personally, I'm not a big fan of 'confidence' based economics. Economics seems to work best when its based on 'trust', which is similar to 'confidence', but I think puts a finer point on what it is that the Government, and Industry, and the Consumer should be trying to build.

When you tell a mathematician to increase the 'confidence' (interval) in their equation, they will typically start running statistical risk assessments. Having done this for a living, complicated statistical risk assessments, especially when you try to walk someone through them, does not increase people's 'trust' in the system.

In contrast, proposals that are clear, transparent, simple and quickly show when you are trending in the right direct or not, do breed trust. Its when everyone in the room can trust the basic framework of a proposal, and trust that everyone will act, and trust that things will be measured and halted in things go wrong, is way more important than the un-due confidence that people had when they took loans they couldn't afford, or started businesses that fail 9 out of 10 times.

Do we still need risk takers? Yep, but we need way more math in the equations, and much less of the 'out of tune american idol contestant whose mother said they sing well' type investment strategies that too many American's have.

Hi Jeff,

Not just writing them a check would be better than just writing them a check. My fear is that we have put the worst proposal forward as a strawman proposal so that whatever gets recommended is way better than the strawman.

What the Auto Industry really needs right now is a revolution. Having been in that industry for a while, there is just a huge amount of talent in all 3 companies. The best of the best need to band together, form a new company, buy the 'good' assets from the companies that fail, and build a all-star automotive dream team that can represent America in the global economy.

They may not have enough talent, and too much legacy in the existing companies, to make all vehicles, in all product lines, in all brands, in all 3 companies work.

This by no means equates to the assumption that they don't have enough talent, resources, and ingenuity to build the best vehicles in the world.

Hi Anomar,

Just to be clear, I do not blame the average person for what happened, but I do believe that the average american can be responsible for what happens going forward.

As noted before, I see this as a 'natural disaster'. No one 'caused' Katrina, and yes, it was made worse by having a storm protection system that failed. But, going forward, it is really the people in that area that are going to decide what gets rebuilt first, in all likelihood it will be rebuilt by locals, and yes, there is a Government role in the short-mid term as they go through a recovery process.

Likewise, the US is going through a economic natural disaster. People who built on the hill, will feel less of the problems than people below sea level. Yes, the problems are made worse by policies that encourage home investments, and banks that give unqualified loans, and companies that waste money on bad investments.

If you reasonably believe, that there are some in the current government, and some in the current industries that used the storm as cover to go loot peoples financial houses, then yes, the Obama Administration should do all they can to clean house.

As far as people being pawns, I just don't see people like cheney being competent enough to pull something like that off. cheney and bush 2 are going down in history like Chernobyl and Pearl Harbor.

That said, if crimes were committed, then they should be prosecuted. Failure to do so by the Obama Administration would mean that it was either not a top priority for economic recovery, or they felt they had bigger fish to fry.

Hi Anomar/Sliderkta,

Ok, i'm in. If there is a reasonable belief that trillions have been stolen and it is currently somewhere, then the Obama Administration should make this search a top priority. I agree that the public may not have the best visibility, into these sort of transactions.

Hi Anomar,

I think we have to discuss the methodology for 'holding ceos and politicians' responsible if we want to go down the path of holding these people responsible.

Hi Jeff/kin-Kam,

Let me respond in a combined post.

As Kin-Kam notes, the problem with just giving $20k to people is there isn't a guarantee that the money goes to where we want it to go.

Vouchers often get suggested as a way to channel money into the 'right direction' Often the problem with this is that vouchers often get used the most by people that are in a position to use them. For example, if you own a home, a 'down-payment' voucher may not be very useful to you. Also, if you are not in the market for a new car, a $20k voucher may not be useful.

Now, a $20k discount on a car is pretty good, so there may be a high number of people that go out and use them. Two concerns here, a) if everyone goes o and buys a new car, people like myself wont need another car for another 10 years, and so you really start to skew the natural cycle that allows for leveled production. The second problem is that for everyone that was going to buy a car, and when everyone stops buying a car, our cars are all getting old and at some point we'll need to buy a car, but it you offset the cost of buying a car, then people just save that money and spend it on something else, very close to what they would do if you just give them $20k. For example, if someone is going to lease a new car for $250 a month, but with the voucher they can lease it for $50 a month, they'll just use the $200 savings for 'wrong direction' spending.

Hi Anomar,

I have a hard time believing that anyone with so much distrust in government, Society, Business, the Public and life in general has any hope at all that things can or will get turned around.

Ponzi schemes are born when people focus on the money and forget that people need real products and services. I'm well aware how these work, and many of the ways that they can be devised and revised.

I also agree that the Bernard Madoff situation is extremely ugly.

Hi Boldhawk,

Totally agree with the need for greater transparency at all levels of the government and economy.

I think it will be many years before we can get a simple system that provides the type of information that you suggest. I've worked in business systems development for some very large companies, and the task to provide even a very small group of people, clear answers on a very small part of the overall business. Even when we have clear numbers, there are so many opinions and theories. Even when I worked with Toyota, they had no where close to unified systems of information upon which everyone could come to a unified conclusion.

Toyota instead used a system of local responsibility to create the quality that they create. every worker on every line has the responsibility to raise quality concerns to their manager, and work out a system to improve their piece of the overall manufacturing system.

In the US, I also think we can get to a system of better Transparency, and I might recommend increased levels of local responsibility and control. Systems that are highly successful should be studied, and replicated over and over across localities all over the US.

To the 'real value unit of measurement' this has been proposed many, many times by many, many people. On paper it sounds really good, but no one has ever been able to make it work past a few conversations.

As for the government being able to use data in highly useful ways, this too would be great. Again, its not very easy and will require a great deal of effort. That said, if you know of a Government agency that is trying to do this, let me know, I'd love to help out.