Dylan Matthews brings our attention to this map from the Tax Foudation:

all about the variable purchasing power of a benjamin

Basically, they inverted the BEA’s Regional Price Parities and mapped it – cool!

It needs a bit of context, though. Specifically, there’s something very clearly driving this outcome. Fortunately for us, BEA subdivides the RPPs into Goods, Rents, and Other Services, and provides us with a good-enough guide to how it weights them that we can create a parallel “non-housing cost” index and see what happens. And what do you know?

histograms ftw

Once you exclude housing, the distribution of outcomes is much narrower and much more clustered around its central tendency. Or more bluntly – everywhere costs a lot more like everywhere else when you don’t consider housing.

Of course we should consider housing! It’s really important! But we should also be clear what expensive housing means – lots of people want to live somewhere. Often because wages are high. And guess what? If we graph the state rent index against state per capita income:

mo money mo housing demand

It becomes pretty clear that higher wages (or at least higher average incomes) are likely the reason housing prices are high.

So if you live in DC, you’re probably not paying that much more for most things than an Alabaman is; you’re just paying a premium to live in a high-wage area that can’t – or won’t – build enough housing to keep up with the demand to live somewhere wages are high.

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