The “cost of living” is extremely subjective – Econlib


[Note to readers: This post is not about inflation. The rate of inflation is a little bit subjective, but much less subjective than the cost of living.]

In my earlier put up, I mentioned Singapore. Right this moment’s FT has an article on Singapore, which accommodates this attention-grabbing truth:

Town, one in every of Asia’s fundamental monetary centres, has been ranked the world’s most costly for 9 of the previous 11 years by the annual Worldwide Value of Dwelling survey from the Economist Intelligence Unit.

That shocked me for a pair causes. First, I’ve been to Singapore on a number of events and didn’t discover it to be costly. Second, I recalled some IMF PPP comparisons that steered Singapore was truly fairly low-cost.  After I doubled checked, my reminiscence turned out to be right:

Should you divide 88.45 by 133.74 you get 66.1%.  In plain English, the IMF estimates Singapore’s price of residing to be an astounding 33.9% decrease than the price of residing within the US.  Not 33.9% beneath NYC, moderately 33.9% beneath the US common.  There’s an nearly loopy disparity between the IMF’s declare that Singapore is a really low-cost metropolis and surveys exhibiting that Singapore is actually the costliest metropolis on Earth.  What provides?

Fortuitously, the FT hyperlinks to a helpful linked article that explains the truth of costs in Singapore.  The “TLDR” synopsis is as follows:

1. Singapore is a very costly metropolis for expat enterprise individuals who want to hire a personal residence in trendy central neighborhoods, have a personal automotive, and have membership in a golf membership.

2. For common Singaporeans residing additional out and never proudly owning a automotive, the price of residing is kind of cheap.

The article matches my observations.  I recall that subway fares had been low and restaurant meals had been low-cost.  I presume that a lot of different companies that use imported low expert short-term staff (say nannies, nail salons, residence remodelers, and so on.) are additionally low-cost.  Right here’s what the linked article says about transport prices:

Proudly owning a automotive in Singapore is actually pricier than in different nations – no argument about that! It’s because the certificates of entitlement (COE) that each automotive proprietor should buy averages a whopping $75,000 for a sedan – and that excludes the price of the automotive, highway tax, gas, and insurance coverage. 

It’s a serious contributing issue to Singapore being ranked the costliest metropolis within the EIU survey.

There’s a purpose for it, although. Given Singapore’s small measurement, the amount of visitors on the highway is rigorously managed to make sure we meet sustainability targets in addition to keep away from visitors gridlocks widespread to dense cities.

Paired with Singapore’s compact measurement, an environment friendly and reasonably priced public transport infrastructure means there is no such thing as a must personal a automotive. That is not like bigger cities the place driving an hour or extra to your vacation spot is widespread.

If you really want a automotive sometimes, rental companies like GetGo are an reasonably priced different that begins at $2.20/hour and go as much as $65.50/day. Longer-term leases begin at $283/week for non-luxury fashions. 

Taxis and ride-hailing companies like Seize, CDGzig or Gojek are available in Singapore for round $11 to $26 per journey, much less should you go for shared rides. 

It needs to be famous, nevertheless, that this text is a authorities sponsored rebuttal to the price of residing survey that claimed Singapore was extraordinarily costly.

For my part, the reality is someplace in between these two estimates.  Recall my earlier put up arguing that Newport Seaside was America’s finest place to dwell.  That declare was based mostly on a survey that confirmed Newport Seaside to be America’s most “unaffordable” metropolis (of greater than 100,000 individuals.)  The essential thought is {that a} extremely fascinating place turns into “unaffordable” as individuals bid up housing costs to a excessive a number of of common incomes.  Unaffordability is an index of “revealed preference”.

Central Singapore is extraordinarily fascinating, particularly to expat enterprise individuals who wish to be near the motion.  So the excessive “cost of living” there may be basically a measure of its engaging facilities.  

However all of Singapore is comparatively engaging, at the least in comparison with most different Asian nations.  Thus actual property in even the outlying districts is way more costly than in a lot of the US.  An American household with a 2500 sq. foot residence, a pleasant yard, and a pair of SUVs within the driveway, would have a troublesome time recreating their life-style if transplanted to Singapore.  They might view the IMF estimate as an nearly absurd underestimate of Singapore’s price of residing.

Alternatively, Singaporeans do take pleasure in a comparatively low price of residing in most issues, together with some areas which are way more vital than restaurant meals and nail salons.  Health care is kind of cheap and earnings taxes are very low.

My basic sense is that Singapore does pretty properly on service-focused measures of residing prices (and maybe some imported items), and the US does comparatively properly on “physical goods” based mostly measures of residing prices.

Throughout the US, dense coastal cities like New York are significantly costly for those who need large homes and vehicles.  It wouldn’t shock me if research even discovered a political dimension, with Republican consumption baskets skewing a bit extra towards issues, and Democrat consumption baskets skewing a bit extra towards companies.

The price of residing is thus extremely subjective:  The price of residing how?

PS.  Singapore additionally does properly on many “intangibles” that don’t present up in worth indices.  Subways are clear and environment friendly.  Crime may be very low.  There may be a lot much less air pollution and visitors congestion than different Asian cities.  On the detrimental facet, there may be much less freedom of speech.  After my earlier put up, Jim Glass supplied a really astute touch upon Singapore’s glorious well being care system, and the political obstacles to translating that success to different nations.

PPS.  Even service high quality is extremely subjective.  People who wish to eat steak and potatoes in a giant restaurant with plush chairs may not just like the hawker’s markets the place many Singaporeans eat.  Tyler Cowen loves these eateries:

Screen Shot 2024 07 03 at 2.01.10 PM e1720029843264 

PPPS.  Yesterday, a New Zealand vacationer was murdered throughout a holdup at one in every of Newport Seaside’s most elegant purchasing malls.  This can be a reminder that even America’s most secure areas wouldn’t be seen as all that secure by Singaporean requirements.  Certainly, even Canada’s homicide charge is sort of 20 occasions increased than the speed in Singapore.

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