What happens when you release a constraint on the economy?

The economy is a giant optimization problem with multiple objectives, many variables and tons of constraints.

Thinking about the constraint of just one item such as location of people vs. location of jobs can have a massive impact on the way the economy behaves.

As a result of the pandemic, we are seeing a massive shifting of one of the constraints, location. Jobs that had all the technology to be remote previously, still hadn’t adopted the idea of remote work. The pandemic made this happen, and now that people have seen it there is no going back. What repercussions do you think this constraint change will have on the economy?

Here’s my guesses:

  1. Remote workers working in high cost of living areas will relocate to low cost of living areas
  2. The effect of item #1 above will raise the cost of living in areas that are currently cheap which will put upward pressure on wages in those areas
  3. As people redistribute, the country will undergo a change of offerings, such as more high-end dining accommodations will become available in smaller towns that they traditionally couldn’t serve.
  4. Cities will not disappear, but they will rearrange fairly significantly over the next 10 years. Rents may stagnate as less people need to be there.
  5. There is and will continue to be an undersupply of home builders as some percentage of the country (5%-10%) redistributes more rurally and due to the nature of rural areas being spread out serving those with many home builders in a region is tough.
  6. Though not necessarily a good thing, we’ll see a rise in people scamming companies and collecting multiple salaries at the same time.

I’m sure there’s more, but the thing about changing a single constraint on an optimization problem is that the outcome can be radically different. We’ll see that here in the coming years.