Virginia Postrel has a provocative post on How Elites Built America’s Economic Wall up at Bloomberg (ht Wilson Mixon). The gist of the post is summed up as follows:

Housing prices have always been steeper in high-income places, but the difference is much greater than it used to be […] This segregation has social and political consequences, as it shapes perceptions — and misperceptions — of one’s fellow citizens and “normal” American life. It also has direct and indirect economic effects. “It’s a definite productivity loss,” Shoag says. “If there weren’t restrictions and you could build everywhere, it would be productive for people to move. You do make more as a waiter in LA than you do in Ohio. Preventing people from having that opportunity to move to these high-income places, making it so expensive to live there, is a loss.” That’s true not only for less-educated workers but for lower earners of all sorts, including the artists and writers who traditionally made places like New York, Los Angeles and Santa Fe cultural centers.

This excerpt gets a high place for my Obvious Statement of the Year Award, but are elites listening? Government regulations hurt workers and drive out competition. This is a given, but I have some questions I thought readers could help me answer.

My questions are both broad and messy:

1. Is this “segregation” a problem of decentralization? I ask because I can think of no federal housing policy that dictates housing policies in various states and municipalities (aside from HUD, federal tax policies and Federal Reserve-set interest rates). Each state or municipality is beholden to factions within its jurisdiction, so it these factions that are to blame for the “segregation”. Perhaps this is not such a problem, either, especially when one considers that the policies implemented at the behest of rich, local factions are driving out “low earners of all sorts, including the artists and writers who traditionally made places like New York, Los Angeles, and Santa Fe cultural centers.”
2. Following question #1, Is there even a problem to begin with? These “segregationist” policies, after all, are keeping out otherwise smart and creative individuals from moving to cities like LA and New York, but they are not keeping talented people from leaving the US (yet, and do remember that our immigration policy is horrendous in this regard). In another twenty years, places like Cincinnati and Boise might be the new Hollywood or Harlem.
3. Contra question #2, I’d say that there is a problem, but it is not limited to housing choices. More affluent neighborhoods and municipalities are richer than everybody else, and if these local policies are keeping people who would otherwise be able to earn more money from earning more money than there is something wrong here. So how can it be addressed equitably (ie not demagogically)?

Overall, I’d say that while there is a definite segregation within American society, it has nothing to do with “neoliberalism”, weak private sector unions or even the crappy and condescending policies of Washington. It’s a simple public choice problem: factions have used the government to implement policies that keep out competition and other undesirables. As Postrel points out:

Finally, there’s the never-mentioned possibility: that the best-educated, most-affluent, most politically influential Americans like this result. They may wring their hands over inequality, but in everyday life they see segregation as a feature, not a bug. It keeps out fat people with bad taste. Paul Krugman may wax nostalgic about a childhood spent in the suburbs where plumbers and middle managers lived side by side. But I doubt that many of his fervent fans would really want to live there. If so, they might try Texas.

Hell, and who says that the fat people with bad taste even want to live among jerks like Paul Krugman? As long as people are free to choose where they live and what they do with their lives then nothing is wrong. This includes the choice made by black Americans, for example, to live in majority black neighborhoods. The problem arises, I’d argue, when policies – even those designed at the local level – limit other peoples’ choices in the marketplace.

So, what is to be done?