Nearly all over the world, #housing is becoming more and more unaffordable.
Politicians' response is almost everywhere the same: "Let investors build more homes. Markets will then do their magic and push prices down."
Whilst obviously more homes need to be built, this argument is still fallacious, as it ignores the most basic rule of #capitalism:
Capital will only go where high returns on investments are to be expected. This means:
Only where sell prices and rents are rising,
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"Capital will only go where high returns on investments are to be expected."
Not only is this not "the most basic rule of capitalism", it's not a rule of capitalism at all.
Do you mind to elaborate?
Will capital be invested where there will be no return?
That's not the counterpoint to the first claim.
Plenty of people choose to invest where there is a relatively low expected return, because there is a relatively low risk. Some choose high expected returns at a higher risk.
Obviously, there is always a balance between risk and return.
However: As long as there are similar risk asset classes, most people will try to choose the ones with highest yields.
Understandibly.
Yes, people will tend to be drawn to the most profitable course of action. That's not capitalism, that's just efficiency. A lone hermit alone in the woods who wants to cut wood will use an axe, not beat a rock against a log, because using the axe will yield far more profit for the same amount of effort.
You're missing the point of the example. Humans (and, indeed, animals) have a natural pressure on them to act in an efficient fashion; there's a reason stotting exists. To claim that it's a rule of capitalism that people seek out higher rewards for investment or labor is not accurate. Pretty much all rational actors desire more profit for a given investment. You also characterize capitalism poorly with your last sentence.
Mina
AKingsbury
Thomas