If you're in the US of late, you've probably heard about (or at least seen headlines about) a summer intern from North Carolina who commutes by air to her summer internship in New Jersey instead of renting a summer apartment… because it's cheaper. And there's been lots of roiling about it, leading to her CNN op-ed piece yesterday in which she denies that it's because of any sense of entitlement.
But she's completely, utterly wrong, in a very important sense: It's not her (purported) sense of entitlement that's at issue.1 There are at least two groups, with substantial but not complete overlap between them, whose overwhelming senses of entitlement have led to her decision.
- Real estate investors — including both residential buyers of single-family residences who expect to profit from that purchase (and pass either the residence itself or the profits down to a later generation) and commercial, multi-property/multi-resident-property buyers — who believe and act as if they are entitled to a substantially-above-inflation profit on that purchase. Not just hope for with active management; it's an entitlement, because the price must always go up. Further, it must be constant, all the time, and without regard to the (insanely illogical) tax benefits.
This is at best unethical, and hiding not just entitlement but far too often outright bigotry. There is no class of "investments" that actually does "entitle" investors to a positive return, risk-adjusted or otherwise. (And "risk" does not mean "variability in rate of implied-positive return," either.) There is especially no class of "investments" that actually does "entitle" investors to a positive return when that class of investments requires continued further attention and funding, whether for simple non-improvement maintenance ranging from lawn care and a new coat of paint to a new roof or water heater, or more-lasting improvements like replacing unsafe 1950s knob-and-tube wiring and hardwired phone jacks with code-current wiring and RJ41 plugs with wired connections to a router closet with a 12-hour backup power supply. In short, there is no "entitlement" to violating the first and second laws of thermodynamics.2
- Existing residents in places like Ms Celentano's home town who will not consent to paying, through an adequate and rational tax base, for the "services" necessary in more-urban locations. Especially far-away ones, and more-densely-populated ones, but nevernevernever because those more-urban locations tend to be… umm… demographically distinct from those home towns.3
In the US, these problems are perhaps most visible within states that have significant urban/rural divisions in which the rural elements have separate, regionally-concentrated aspects. In Washington state, for example, there are the "farming" and "timber" rural areas, always sniping at the big-city-slickers in the southern half of Puget Sound (Seattle/Tacoma/Everett, and of late including Bellevue/Redmond) as imposing taxes that are "too high for us rural folk" while nonetheless demanding broadband internet, world-class healthcare, and easy access to markets for their goods. Just because they can't see the immediate and direct benefits in their communities to better paving on the highway three counties over doesn't mean there are none… and, of course, the converse is true, too. (We'll leave suburban white-collar residents versus inner cities for another time.)
Rental real-estate markets are horribly distorted.4 This is in part because their pricing must meet the always-profitable-just-because entitlement of the owners… which, in turn, provides massive, distorted incentives to simultaneously overgentrify and scrimp on maintenance. Not to mention the dubious incentives to rely upon the racially/age/class-biased "credit score" in determining whether to rent to particular tenants.
And, of course, it's worse for short-term and indefinite-term rentals. Summer interns are just one aspect; anything related to students is another; military personnel is another; management incentives to limit labor mobility… ok, we're getting into second-order effects, but that's far from insignificant (consider the correlation between "union membership in multiemployer environments" and "rental availability and cost compared to the regional and national medians"). This feeds directly back in to the owners-are-entitled-to-a-profit issue, especially considering the diseconomies of scale involved.
So, Ms Celentano: I'll accept that you made a rational economic decision based upon your personal circumstances that does not present any more evidence itself of you having an "entitled" attitude than the fact that you thought of it as an option in the first place. (Well, being at UVa in a non-core-discipline major, too, but that's another story entirely.) But your somewhat understandable defensiveness about the term "entitlement" distracted you from the underlying entitlements that made the criticism possible in the first place.
- I do not know Ms Celentano, so I'm not saying that she has no problems at all with her own sense of entitlement — I have no data to make that judgment. My point is that she erred in her opinion not by defending herself, but by concluding that because it wasn't her entitlement (or her family's entitlement) that was behind her decision to commute that there was no entitlement of anyone involved.
- I'm going to repeat something I've been grousing about for the entire life of this now-two-decades-old blawg: Since there are no other known systems that violate these conditions, "economics" and "finance" need to provide extraordinary evidence for their extraordinary claim that they're allowed to do so. Cf., e.g., David Hume, An Enquiry Concerning Human Understanding § 10 (1748); cf. also, e.g.,, Pierre-Simon Laplace, Thèorie analytique des probabilitès (1812); most popularly, see Carl Sagan, Cosmos Episode 12 (1980). I have yet to see any such evidence, let alone any that is "extraordinary" (and certainly not enough to persuade). So: Absent such evidence, bugger off and inflict your theology on someone who blindly believes it.
- And this applies even if Ms Celentano's "home town" is urban Raleigh-Durham; it's a matter of degree, not of kind, to consider the regionality issues. To be quite direct, consider the nonzero benefit being accorded to her home town by the urban concentration in New Jersey that makes her internship available there… but apparently not in her home town.
It's called "comparative advantage," you idiots, and it's been a critical part of fully understanding economics since some Scottish philosopher wrote about the moral obligations of the propertied classes — obligations that those classes appear to neglect, and moreso when the "property" in question is "real" than otherwise.
- That they are the seed and basis for the Drumpf family's wealth should give you pause all by itself. Really: Name a non-rental-real-property business engaged in by any member of the Drumpf family has shown an above-median mid- or long-term profit for the entire business line. If that isn't enough to demonstrate the "entitlement" associated with owning real property, I'm not sure what would be.