You are here:

Economics/Costs of living

Advertisement


Question
Dr. Warren D. Miller,

I studied economics before but thereīs a topic which is not clear to me and Iīd like to have your opinion/view about it:

What drives different "costs of living" between different countries and, even, between different cities in a same country?

What factors could make a city "more valuable" than others? Why do some companies pay considerably higher rents to locate themselves in certain cities?

Could that be because: workers are more productive in some cities than others? (I find it hard to relate, however, higher "costs of living" with higher productivity); there are benefits in terms of transportation costs? other valuable factors? In which way would these factors affect prices (and, consequently, "costs of living)?

[another but related question]: I have this idea that higher "costs of living" are usually related to services and not physical goods (In a supermarket I donīt think prices will differ that much), but I would also appreciate any thoughts about this.

This is a very general question but I extended it in order to make it more understandable. Iīll appreciate any answer, specially because I donīt think thereīs a unique answer to my question.

Thank you for reading

Answer
Luis, I'm sorry, but your question is too general for me to respond to. It would take a VERY long time. Inasmuch as I'm an unpaid volunteer with a family to support, I simply cannot afford the dozens of hours that it would take to answer this question.

I will make you a deal, however: I'm going to suggest some phrases that you should Copy (Ctrl+C) and then Paste (Ctrl+V) into your browser, one at a time. When you get the first one in there, hit the Enter key. Then start clicking on the first few 'hits' that you get. Read each one. You will learn from each. Then Copy and Paste the second phrase, hit Enter , and then start clicking and reading. As you look at the results for each search, be sure to zero in on sources such as: Wikipedia, Investopedia, Money.cnn.com, and www.econlib.org.

When you're done doing that on each of the following phrases, THEN resubmit your question, but make it more specific, based on what you've learned as a result of what I call 'creative googling.' DO NOT ask more than one question at a time. I will do my best to answer each one. But you must make them specific, not general. What you asked for tonight is simply out of the quesiton. That's not fair to my family or to me, esp. when you can do a lot to help yourself first . That's what I'm trying to do: help you learn to help yourself.

There's an old saying, Chinese, I think: "If you give a fish to a hungry man, he will eat it and get hungry again in a few hours. If you teach a man to fish, he can feed himself for the rest of life." I'm in the teaching business, Luis. If you're in the learning business and are willing to help yourself, we'll get along just fine here.

The phrases I recommend (one at a time, Luis):

"cost of living"

"What causes differences in cost of living?" (read the first three hits, all @ Wisegeek.com)

"purchasing power parity"

"cost of living" and "standard of living" (Copy/Paste both at the same time - check the two links to HayekCenter.org and Wisegeek.com)

Those four should be enough for you to learn quite a lot. If you run into problems, post a question telling me how I can help you better. When you're done, please submit a narrower question.

Take care, and good luck, Luis!!

Economics

All Answers


Answers by Expert:


Ask Experts

Volunteer


Warren D. Miller, CFA, CPA, ASA

Expertise

My expertise in economics is limited to three sub-disciplines: Austrian economics, industrial organization, and evolutionary economics. Questions dealing with macroeconomics and other sub-disciplines of the subject should be submitted to those who have the appropriate expertise. N.B.: I DO NOT ANSWER QUESTIONS MARKED 'PRIVATE' because I believe that knowledge should not be hoarded. I also believe that such questions are likely to come those trying to cheat. Also, as one who was a full-time academic for half a decade, I can recognize test/homework questions several time zones away. Do not demean yourself by submitting such questions to me. Those who do so are cheating; I WILL call you out publicly. I have a zero-tolerance policy for cheating and dishonesty. In addition, please don't emulate the businessman who posted a request for help in August 2008. He expressly denied that he was seeking "investment advice" and said that his query was for, and I quote, "educational and informational purposes." Later, he allowed as how his questions related to the possible purchase of a $500K piece of equipment. I said I thought he had misrepresented himself. Bottom line: high-end business consulting is how I make my living. I am the sole support for my family. Please respect that fact and don't try to get for free what our clients pay for. If your company is big enough to have a sophisticated problem, it can afford to pay for the expert advice we and others provide. Beckmill Research, LLC, is a 95-octane firm. We're small, but we've been at this for nearly 20 years. We know what we're doing. Segue: Early on, some asked me for career advice; I gave it. I now get many such requests. The demand for a valuable good that is free is unlimited, so I now charge for that advice. Email me: cfa2005@gmail.com. Finally, PLEASE DO NOT ASK FOR INVESTMENT ADVICE. I am not licensed to provide such advice. If you want such counsel, talk to your financial planner or other financial adviser.

Experience

I work with Austrian economics (which differs in major respects from the traditional economics), industrial organization (which is about industry structure, conduct, and performance), and evolutionary economics (almost, but not quite, the economic analog of its biological counterpart) every day in my work. I appraise closely-held businesses, provide exit-planning services, and offer high-level strategic analysis, advice, and solutions to CEOs and owners of mid-sized businesses. Understanding, applying, and writing about these disciplines is an essential part of how I have made my living since 1993.

Organizations
CFA Institute, Strategic Management Society, American Society of Appraisers, Academy of Management, Culver Legion, National Association of Scholars.

Publications
CFA Magazine, Strategic Finance, Valuation Strategies, Journal of Advanced Property Economics, Harvard Business Review, American Fly Fisher, CFA Digest, CPA Expert, Business Valuation Review, among others

Education/Credentials
Chartered Financial Analyst designation (2006); Accredited Senior Appraiser in Business Valuation (2006); Certified Public Accountant (1992); MBA - Oklahoma State University (1991); Completed all of my Ph.D. coursework in strategic management - Oklahoma State University (1983-87); BBA in finance and accounting - U. of Oklahoma (1975)

Awards and Honors
Business Valuation Volunteer of the Year (2001) - American Institute of CPAs; Winner - Oklahoma Humorous-Speaking Contest - Toastmasters International (1971)

Past/Present Clients
Names are confidential. However, the "sweet spot" of our target market is companies that are too big to be small and too small to be big. Usually, those are companies with employees in the 15-to-100 range. At the low end of that range is where companies can first take advantage of the specialization of labor. However, having everyone do everything is a tough habit for many--most, I would argue--small enterprises. That is why they not only remain small, but also fail to survive beyond a second generation. Only 5% (one in twenty) companies make it to the third generation of ownership.

©2016 About.com. All rights reserved.