If Scrooge McDuck’s downtown Duckburg apartment rises in price, and Scrooge’s net worth rises equally, but nothing else changes, the distribution of purchasing power is now more unequal — fewer people can afford that apartment. But nobody is richer in terms of actual material wealth, not even Scrooge. Scrooge is only “richer” on paper. The total material wealth of Duckburg hasn’t gone up at all.
Cities generate wealth from the Economies of agglomeration. Bigger cities have higher productivity than smaller cities. Some of that wealth naturally flows into the land price. Here is a good introduction: Scale Economies and Agglomeration
People become actually richer in terms of natural wealth in cities. The source of wealth is not the property and land itself, but the utility value of the land has in producing the positive agglomeration effects. Land is one of the primary ‘factors of production’ (land, labor, capital). Just like farmland, urban land creates value from produced output happening on it. The soil itself has no value without cultivation. Urban land happens to be more productive than farmland and it becomes more valuable.
The solution to this problem is better urban planning. Inefficient land usage is bottleneck for growth in the cities and it should be treated as scare resource and used very efficiently. Just building more, building dense and have good infrastructure helps to reduce the cost of living in high productivity areas.
Cities generate wealth from the Economies of agglomeration. Bigger cities have higher productivity than smaller cities. Some of that wealth naturally flows into the land price. Here is a good introduction: Scale Economies and Agglomeration
People become actually richer in terms of natural wealth in cities. The source of wealth is not the property and land itself, but the utility value of the land has in producing the positive agglomeration effects. Land is one of the primary ‘factors of production’ (land, labor, capital). Just like farmland, urban land creates value from produced output happening on it. The soil itself has no value without cultivation. Urban land happens to be more productive than farmland and it becomes more valuable.
The solution to this problem is better urban planning. Inefficient land usage is bottleneck for growth in the cities and it should be treated as scare resource and used very efficiently. Just building more, building dense and have good infrastructure helps to reduce the cost of living in high productivity areas.