Thursday, July 24, 2008

Incentives and Life

It is not without a certain level of embarrassment that I will admit that the house I owned in Corvallis was a new house in a new development that was almost 3000 square feet.  My wife and I never felt entirely comfortable there, neither of us really felt at home in a new neighborhood and we missed the character of older houses. Still, it was bought at a time when alternatives were very few and because we knew there was a reasonable chance we would make the move to Portland and it seemed a safe investment (it was).  Sure we have two kids, but we always felt the house was just too big for us.

Now, for a time, we are installed in a old 1000 square foot bungalow and the transition has been quite interesting for this economic naturalist.  You see, economics is all about how rational people respond to incentives, and in moving from 3000 to 1000 square feet, the incentives have sure changed.  In 3000 square feet there is no incentive to choose, to limit yourself, you never have to dispose, donate or never acquire in the first place.  This is especially true with the kids stuff.  Many old gifts that are now long forgotten and no longer played with remained stuffed all around the house.  Now, at 1000 square feet, every thing has to be carefully selected - so the toys have diminished considerably and guess what - the kids couldn't care less.  

So the cost of having stuff has gone way up and the incentive to have less stuff is now much stronger. Low and behold, it turns out we really don't need much stuff.  But I guess the real story is how just 2 years in a big house led to a massive increase in the amount of stuff - a fairly quick response to the lower cost of storage.  And we are not big consumers, its just that we never got rid of anything like infant clothes and supplies (e.g. a crib we hadn't used in a year).

So the point of all of this is that I don't think that your life determines what size house is right for you, I think its more that the house determines how you live.  Its the incentives once in a dwelling that kick in and define and guide your subsequent choices.  At 1000 square feet we are doing just fine and it is good to be reminded of what is really necessary and what is surplus to requirements. We haven't changed through the house changes and I thought that the big house would just remain pretty empty, but nope, the incentives were just too pervasive. Anyone in the market for old toys?...


Jamie said...

We should do a larger scale study of this very basic concept and see if consumerism rates have moved in line with increase in average home size - the correlation is definitely there, and is probably very strong.

Even more interesting will be to see how, as people downsize during this housing bust, if there is a huge increase in the second-hand, thrift store, and eBay markets. My guess would be "yes".

Gregory said...

My family moved from a 2700 sf house in Plano, TX to a 1050 sf apartment in the Irvington neighborhood of Portland. It was quite an adjustment, but overall we are doing well. My main issue is laundry--my wife really wants the washer and dryer inside the apartment. We are looking to buy, but can't find anything that doesn't suck and is affordable.

Anonymous said...

I am trying to leave the Washington and want to settle down in New york city,now i am staying in 2000 square feet house that was too conjugated for my family,i want 3000 square feet house in New York with good facilities.Until we find the good one we cannot vacant the old one.

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