Thanks, I appreciate your response, and agree on many of your points.

> whatever happens with the dollars and financial instruments you ignore, and you take a pure look at the real goods and services involved

The trick of forgetting about money altogether in definitions of wealth is incredibly useful. It's definitely an idea we're missing today, when we're surrounded by ideas of wealth being primarily measured in currency, I think, but you're mostly right in that economics is the art of redirecting real resources in the real world.

There's a nice history to the idea too, where theorists as broad as the Georgists, who discount finance (and land) in their definition of wealth [0]; or Ricardo, who used it as a basis for Metallism from a perspective of a (mostly) labour theory of value.

If any reprioritisation of mortgage or buy-to-let finance ever happens, as you've rightly described, there will be various squeezes and reallocations of consumption and production. But what I think you're underestimating is that other configurations of the economy can be more (or less) productive than this one, even given the same amount of labour, energy, and resource.

> How do you want to redirect the widget consumption to make the actual physical changes necessary to have additional productive economic activity? Do you want to apply the squeeze to landlord, tenants, or both?

If you're solely talking about physical widget consumption, I don't think our current arrangement is particularly efficient. In the UK at least, new dwellings have mostly kept pace with population increases — we've got more bedrooms per capita than we've ever had in aggregate. Even so, there's still been a reduction in availability of rental properties and ownership for vast swathes of the population, notwithstanding the increases in homelessness and housing insecurity, with all of the stress and inefficiency that creates. Tenants (and prospective buyers who are attempting to save huge deposits) are also likely to consume the least, so we could theoretically redirect that consumption into other pursuits.

If we flip that around and talk about misallocation of widget production, there are very real resources today that are ultimately directed into purely financial returns, that could otherwise be directed in more productive, wealth-creating opportunities.

That's everything from:

– Landlords who would otherwise be working to produce goods and services, alongside all of the legal, retail, and management support they receive.

– Builders, architects, and project managers who are working to extract more of their tenant's labour, by badly refitting existing dwellings into flat shares, HMOs, rather than building new towns and cities.

– Financial institutions spending much of their time and energy on creating financial returns above increasing the real wealth of society.

– Tenants, who may otherwise be able to invest in other productive activities.

– People currently working in other industries, which may or may not be particularly useful to society (I have my list of favourites…), who may switch to a productive one.

– Speculative land investments from builders, who are using real energy to devise and capture the inflation created from QE, alongside various demand-side reforms like Help to Buy.

From a macro perspective, around 70+% of new money created in the UK goes into existing housing stock, and is mostly inflationary. We appear to have stumbled into a system where this financial inflation is captured by some and not by others, leading directly to inequality and the misallocation of real wealth.

[0] https://oll.libertyfund.org/title/george-progress-and-povert...