I'm really shocked by some of the posts on Mamdani's election in NYC. Absolutely unbelievable how many bankers / business students on here are clueless about economics on both the Right and the Left.
If I can summarize the two claims which I believe are both wrong and economically ignorant, see below....this is not from a politcal standpoint but an Econ 101 standpoint:.
- Mamdani is elected and all the businesses will flee New York.
- No one is leaving New York. All these taxes and changes are relatively small.
The truth is in between. It's all about demand curves.
Let's say 100 people bought hamburgers at lunch for $15 each. If the price of hamburgers goes up to $17, will everyone stop buying hamburgers? No. Will all 100 people continue buying the hamburgers for $17? No.
Maybe 10 people will say, "$17 bucks is too much. I'm out. I'm taking my business to the Sweetgreen down the street." And sure, you could argue that nothing has changed. The restaurant is still open. 90 customers is still enough to keep the lights on.
But what you have to ask yourself is "where is this headed?" At $19, more customers will leave. At $21, even more will leave. There is some price that will eventually shut down the restaurant.
It's true that not much will change with Mamdani. Things will only get marginally worse for business in the city. You might not even notice it at first. Only a handful of businesses may leave. And then if the next guy makes the city marginally worse from there and the next guy does the same, you eventually get to a point somewhere down the road where you can't sell enough hamburgers to keep the lights on.
Is everyone going to flee New York tomorrow? No. Is this a good thing for the long term outlook of New York? No, it isn't. Demand curves don't lie. Make the price of an activity higher and you get less of that activity. It's as true as gravity.
Based on the most helpful WSO content, the analogy of demand curves and hamburgers effectively illustrates the economic principle at play. The election of Mamdani and the potential policy changes in NYC won't cause an immediate exodus of businesses or residents, but incremental changes in costs (like taxes or regulations) can gradually erode the city's economic appeal over time.
The hamburger example highlights how small price increases may initially have a limited impact, with only a few customers opting out. However, as prices continue to rise, more customers (or businesses, in this case) will leave, eventually reaching a tipping point where the activity (or business environment) becomes unsustainable. This aligns with basic economic principles: higher costs reduce demand, and over time, this can lead to a decline in economic activity.
The key takeaway is that while immediate drastic changes are unlikely, the cumulative effect of marginally worsening conditions can have significant long-term consequences for NYC's economic health.
Sources: The ‘Business Cycle’ framework, LIHTC during the next recession, Fashion Businesses? where are you?, Q&A: Director of Energy Trading
I agree with this conceptually but I think it ignores one major issue, which is housing. If Mamdani can actually address some of the affordability crisis, and in the long term help bring down housing costs, then that may more than offset any tax regime changes he (attempts) to bring to bear. Also, "worse" is obviously a subjective term. A year ago the conversation was all about crime, or rather, the perception of crime. Is the city better now than it was then, because fewer people are concerned about crime? So much of what we qualify as "good" or "bad" is simply the biases and prejudices of the person talking. People on WSO seem to love to talk about how dangerous the NYC subway is, despite it being objectively extremely safe.
Anyway, the point is that if Mr Mamdani is even borderline competent and basically honest, he has a chance to make a real dent in the affordability crisis. Not today, or tomorrow, or even in the next few years. But if he can keep the pro-development momentum going (such as it is) or even accelerate it, that would have a far greater positive impact than basically anything else he could do that would be negative.
Yes, Wall Street is a critical part of NYC. And the city hasn't been super business-friendly in recent years, though I think some of that is overblown, and ignores the stronger bargaining position NYC sits in than any other urban metro in the country. But at the end of the day, even business owners need a place to live, and except for the absolute tippy top of the income pyramid, even very wealthy people in NYC end up paying an enormous amount in rent. Anything that slows that growth or marginally reverses it in real terms will be a much bigger deal than an incremental increase in income tax (which I personally don't think Hochul will go for, though politically connected people I speak to are split about that).
Agree that affordability would improve the lives of a lot residents.
However, would note that at the end of the day, it's ultimately business and jobs that drives the livelihood of a city. You can't affordability yourself into serious job growth.
As an extreme example, if affordability was key, Jackson, Mississippi would be booming. It's not.
Also, it's great if your rent is $2,000 per month like Mamdani's rent controlled apartment versus $4,000 but guess what? You still need a really good job to even afford a $2,000/month apartment.
When you don't have a good job, nothing is affordable.
I mean, sure. But that's why rents are high, right? Because there are jobs and people do want to live here.
Look, the premise here seems to be that people/businesses are price sensitive actors and there will come a tipping point at which the costs of staying in New York outweigh the benefits, right? Well, if we believe that (and I think it is true enough, though obviously it's a complex issue) then we should equally believe that it isn't a taxation question, but rather a total cost of living question. Which includes taxation as a major, but not sole, factor. If I make $100,000 a year in NYC and am content to stay here if I only save $5,000 of that after taxes, expenses, etc, then theoretically it shouldn't matter where those $95,000 go. Whether it's 30% to rent and 30% to taxes, or 29% to rent and 31% to taxes, lands me in the same spot, net of everything.
NYC doesn't need job growth, at the moment. It has a lot of momentum on that front. What it needs is to continue to attract smart people and allow them the freedom to afford to live here so as not to slow that momentum. Yes, raising taxes impairs that. But reducing the cost of living, which is mostly driven by housing costs, would help. So I do think it is fair to say that if Mr Mamdani can bring down rents, nominally or in real terms, then that would go a long way to offsetting the negative impacts of his proposed tax policy, which I agree with you is probably a bad trend line for the city
I think a lot of people are completely attached to NYC more than just a lunch item like a hamburger.
Definitely don’t have enough Mamdani threads.
There will never be enough posts fighting the economic ignorance of socialism, an ideology which has literally enslaved, killed, and impoverished billions across the globe.
Plenty of ideologies and economic models have been used to justify slavery, murder, and impoverishment throughout time—absolutely including capitalism. "Socialism" is hardly unique in that matter.
That still doesn't mean we need our 10th thread about the mayor of New York, who hasn't even taken office yet.
You might want to look at the population flows in NY over the past 12 years.
real question is that with all the people saying they are going to leave, will this create a surplus in housing supply and a lower demand therefor driving prices down (or at least rise a tad bit slower) or are these people few and far between and will have no material effect on the overall housing market.
Yes to an extent on the margins. There are all kinds of factors playing into the price of housing but if the demand for housing drops, the price should decline all other things equal.
Per my response to Oz above, people forget that housing in NYC is so expensive because the jobs in the city are so good among other reasons. Remove jobs and demand and I'm sure your housing prices will feel that slightly on the margin. Happened during covid right when you could work from anywhere.
The data consistently proves out that billionaire, or even millionaire, tax flight is a myth. There will be a few high profile cases who actually follow through on their word, just like a small handful of Americans actually left for Europe after Trump's election, but the vast majority are just talking out of their ass.
There are still plenty of wealthy people in Massachusetts and California too, where they are taxed more. Why? Because place matters.
Your response is kind of the whole point of my post.....
Are you saying that demand curves are also a myth? Is that what you're saying? If the price of something goes up, there is no negative impact?
I don't disagree that we might be in a situation where the price of hamburgers went up from $17 to $19 and only 2 customers leave out of 98 but there is some price where a lot more will leave.
It's also quite possible that the price of hamburgers went up from $17 to $19 and the job and stock market are strong during the same time period, so no one stops buying hamburgers.
Also, yes place matters....what if you raise the price of hamburgers and the quality of the hamburger goes down at the same time....i.e. a much less safe city for example. Again, a negative impact on the margins. Maybe not everyone stops buying the burgers but some do.
Demand curves are real. We live in a world with lots of different forces affecting an economy, some good and some bad. It is extremely erroneous to cover for bad policies because other good factors in the city are keeping things afloat.....for now.
Look, the demand curve is just a convenient story economists tell, a neat little line showing how price supposedly affects how much people want to buy. But if you’ve ever watched markets long enough, you know prices don’t always move because of “supply and demand.” Sometimes, they move because someone decides they should. Or someones.
The textbooks don’t talk about that. They don’t mention the quiet meetings, the coordinated trades, or the strange, cold-blooded precision with which certain players seem to anticipate every shift. Call it “market sentiment” if you want, but some of us know better. Real market movers aren’t governed by human behavior at all.
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