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Analysis of Argument # 5


ESSAY QUESTION:
The following appeared in the personal finance section of a popular magazine:“The average price of an acre of land in the United States is now 50 times what it was in 1970, and nearly 200 times what it was in 1920. The nation’s population is projected to keep increasing, even as the amount of land remains constant. Therefore, people who are approaching retirement should invest heavily in real estate in order to ensure their financial security.”

Discuss how well reasoned you find this argument. In your discussion be sure to analyze the line of reasoning and the use of evidence in the argument. For example, you may need to consider what questionable assumptions underlie the thinking and what alternative explanations or counterexamples might weaken the conclusion. You can also discuss what sort of evidence would strengthen or refute the argument, what changes in the argument would make it more logically sound, and what, if anything, would help you better evaluate its conclusion.

YOUR RESPONSE:
The argument states that the average price of land in United States in now 50 times what it was in 1970, and nearly 200 times what it was in 1920. The nation’s population is projected to keep increasing, even as the amount of land remains constant. Thus the argument suggests that people who are nearing retirement should invest heavily in real estate in order to ensure their financial security. Presented in this way the argument fails to mention several key criteria on the basis of which it could be evaluated. The argument appears flawed on various levels.Firstly, the argument mentions the increase in average price of an acre of land in the USA. But it does not tell us about the increase in land prices in different regions of United States. The problem with taking averages is that we are prone to errors due to outliers. For example, there could have been a tremendous increase in the price of land in metropolitan areas like New York and Los Angeles. This would drive up the average price of land throughout the United States, even though some regions might have witnessed stagnant or even decreasing land prices. The argument would have been better served by mentioning the median increase in prices or discussing price increase across several regions.

Secondly, the argument compares today’s prices with those of 1970 and 1920, but does not take inflation into account. The increase might be steep when compared in terms of absolute dollar value. But if we adjust the land prices of 1920 and 1970, taking inflation into account, we might observe a completely different picture. Consequently the price increase may not be as stark as it appears today.

And finally, the argument is primarily aimed as an investment advice for people who are nearing the retirement age, and it still compares prices across a period of 30-40 years. For a person who is nearing retirement, the investment horizon is much smaller. He would look to make gains on his investments within a time frame of 5 to 7 years. Based on the argument, we have no way of knowing the performance of land prices in such a small time frame. There might be a case that the land prices increase for a number of years and then actually decrease for a next few years, as was the case when the recent housing bubble went bust.

In conclusion, the argument does not provide enough evidence to compare property prices in different regions of United States, fails to take inflation into account and does not present trends in land prices for a horizon of 5 to 7 years, which is what the people nearing retirement age need. The argument could be further strengthened if it mentions the median increase in land prices across different regions of United States, takes inflation into account and compares land prices across a smaller time horizon of 5 to 7 years. In the absence of this evidence, the argument seems to be unsubstantiated and flawed.

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