I have been thinking about the "we provide liquidity and accurate pricing services and that's good" argument in the context of housing costs and gentrification.

The housing market is very illiquid—it's much harder to buy or sell a home than to rent a place to stay for the night. In the context of gentrification, though, this seems to benefit the preexisting landowners: the difficulty of moving provides downward pressure on supply, increasing prices, and also makes it less likely that longtime residents will sell before prices peak.

But, as a thought experiment, imagine if there was perfect liquidity: you could buy and sell a house at any time at the click of a button with ready financing and (somehow) free moving services, etc.

If that were true, many more residents would sell much earlier in the gentrification wave, to slightly richer people, who would sell to people slightly richer than that. This would result in the original landowners only getting a tiny fraction of the peak land value, and most of the returns going to the richest people.

This makes me wonder if this isn't generally true: that high liquidity primarily benefits the capital class at the expense of small asset holders.

There's probably also a corollary about late stage VCs here somewhere.