Irrationality in Real Estate Investment: The Case of Houston

Abstract

Numerous Marxist theorists have written about the irrationality of accumulation and investment process under capitalism. Overaccumulation of capital in certain enterprises and business sectors leads to a quest for new outlets for investment of surplus capital. But where should that surplus capital be invested for the best possible return? The urban real estate sector has in recent decades been a major part of the answer. Real estate in the United States has attracted foreign as well as domestic investors, because overaccumulation is a worldwide problem. Latin American, Asian, and European investors have poured large amounts of money into an array of land and building projects in cities from Boston to Houston to Los Angeles and San Francisco. While it makes sense for individual capitalists to seek the best return on their money in this fashion, the result is often highly irrational investment behavior considered from a collective capitalist or general public welfare point of view. And given the fixed character of such investments, these irrationalities are literally enshrined in concrete.

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