I have a massive collection of music CDs, about 4,000 in total. Over the years, I probably spent about $40,000 acquiring them. Now, thanks to streaming, they’re virtually worthless. While perusing the used CD section at Amoeba Music (both the LA and Berkeley locations), I discovered that most of my discs now retail for about $3. I doubt Amoeba would pay me $1 a disc, assuming they’d take them at all.
Applying familiar NIMBY logic, you might insist that streaming “hollowed me out.” Sure, kids can now enjoy unlimited music free of charge. But I’m $40,000 poorer. A victim of cruel progress. A clear-cut “loser.”
If I had zero interest in listening to any new-to-me music, that would be a fair, if self-pitying, verdict. Fortunately, I am not dead inside. I don’t want to keep listening to the same 4,000 albums for the rest of my life. I want to hear the albums whose release I overlooked. I want to hear the albums from before my time. And due to my neoteny, I want to hear new music. The music of the future. The music of the far future.
Thanks to streaming, I can now consume infinite new-to-me music gratis. Given my tastes, that means massive consumer surplus for multiple decades. In present value, that’s vastly more than $40,000. YouTube access to the complete Lebendige Vergangenheit catalog of vintage opera recordings alone is plausibly worth $5,000. Back in the day, I paid $13.99 for each of these premium imports. Now they’re all $0.
To repeat, the lesson is not that everyone in my position gains from streaming. If I were totally set in my ways, I really would be $40,000 poorer with no offsetting gain. The lesson, rather, is that NIMBY negativity is not the automatic response for everyone who experiences a capital loss. Most enjoy some upside with their downside. Some, like me, enjoy a net gain despite a large gross loss.
But the more general lesson is that this is not just a curiosity for music lovers. It fully applies to the archetypal NIMBY who opposes housing deregulation because he already has a valuable home!
Suppose you own a $1M home, then deregulation halves its value. Yes, someone who has zero desire to live in any other home suffers a $500k loss. But suppose they want to upgrade to a better home. Then they have an offsetting gain: The dream home that previously cost $2M now only costs $1M, so their consumer surplus potentially rises by a full $1M. And the same goes to a lesser extent if they were planning on downgrading: The home that cost $500k is now just $250k.
The offset is even larger if the homeowner was thinking of buying a second home. Indeed, since rental and sale markets are closely connected, the owner gets an offset every time he checks into a hotel or rents a vacation property.
For alleged “losers” who love their children, the potential upside is greater still. Let’s go back to my CD collection. Even if streaming didn’t benefit me personally, I have four children. I love them, so their surplus is also my surplus. The $40,000 capital value I lost was going to them anyway. So while each will now inherit $10k less, in exchange they get infinite free music for a lifetime. And so will their kids. The blessings of streaming shall be their patrimony.
The same holds for any homeowner who loves his children. Even if you’re in your “forever home,” even if you have no desire to travel, crashing housing prices have a massive upside: cheaper housing for your kids. Maybe even cheap enough to buy the house down the street. Yes, their inheritance will be less, but they’ll get to enjoy cheaper housing for a lifetime.
If all this sounds like wishful thinking, consider the polar case where housing deregulation drives the price of housing to zero. Yes, this wipes out the value of whatever housing you already own. But it also means that you can move to a palace anywhere on Earth for free. Indeed, it means that you could own a palace in every location you desire for free. Lose the value of your home, gain access to every home of your dreams. It’s not just a fair trade. It’s the deal of a lifetime.