Matt Yglesias cracks me up sometimes:

I've been sporadically engaged in an interminable email list debate that hinges on the phenomenon of a "house rich, cash poor" person. Someone who, for example, draws a middle class salary and used said salary to buy a then-cheap apartment in then-cheap New York City circa 1981, only to find that he now owns a place worth $2 million free and clear. Obviously the psychology and life story of such a person is probably going to be different than someone who's got $2 million stashed in the bank or whatever. But some folks are maintaining that in some sense the house rich person isn't "really" rich.

The discussion has taken a lot of avenues, but what I think is most interesting about it is just the kind of fuzzy thinking that occurs as a result of Americans' habit of essentially living inside their most valuable financial asset. Imagine you came across a person living in Lafayette Park, sleeping underneath a tent made out of 20,000 $100 bills. This guy is trying to tell you that obviously he's poor--after all, he's homeless and sleeping in the park! The reality, of course, is that his tent could be traded for a fancy $2 million house, and anyone who can pay cash for a $2 million house is pretty rich. But conversely if you're living in a $2 million house, you can trade the house for 20,000 $100 bills. Then you can use the bills to construct a tent and go live in the park if you like, but that would just make you the crazy person who thinks he's poor and homeless even though he can afford to pay cash for a $2 million house.

As a Californian, I am very familiar with people who are more house rich than rich, and while Mr. Yglesias is correct in his analysis, it doesn't mention that house rich, cash poor people have usually set down roots that they don't think about in monetary terms. That is to say, when you raise your kids in a house, customize it in a thousand ways over many years, befriend the other families on your street, and become part of the community, the idea of moving to a cheaper residence -- which usually entails leaving the whole neighborhood, maybe even the city -- isn't primarily a financial one.

Being influenced by non-financial factors isn't irrational. But Mr. Yglesias is right that public policy shouldn't subsidize these kinds of preferences either.