Last Saturday, several hundred anti-gentrification protesters attacked a ‘hipster’ café in Shoreditch, throwing paint bombs against the windows, and trying to throw a smoke bomb inside. Riot police dispelled the crowd before it went any further. The Guardian, obviously, immediately gave some column space to one of the protesters, so that he could explain why they really did it out of love for the poor:

“[S]ome paint and cornflakes were thrown at the [café] which received a lot of attention, while the issues at the heart of the protest – inequality and social cleansing – were largely ignored. […] the petty vandalism that occurred pales in comparison to the brutality of the gentrification that is destroying the lives and demolishing the homes of some of London’s most vulnerable people.”

Anti-gentrification sentiments are nothing new, and they are not limited to Shoreditch, or, for that matter, to London. They are also unlikely to go away anytime soon, if ever. This is because gentrification causes two different sets of problems, one of which could be solved, and one of which is unsolvable.

Let’s start with the solvable part. If a group of relatively well-off people move into a relatively poor area, they change demand patterns and raise the local price level. This is probably inevitable, but the magnitude of this effect can vary hugely. It is a vastly greater problem in a city where there is a general shortage of residential and business premises, and where rents and house prices are already soaring across the board.

For a while, I lived in a mildly gentrifying borough of East Berlin, where the property market was quite relaxed, and quite able to accommodate the newcomers as well as the businesses catering to their tastes. You would hear the occasional grumble from ‘indigenous’ residents about how their neighbourhood was no longer what it used to be, but life went on. Alternative-styled bars opened next to more traditional workmen’s pubs. Wholefood stores and artisan shops opened next to tanning studios. The newcomers would talk about smashing neoliberalism, the settled residents would talk about more practical matters. Did the two tribes mix much? Of course not. But it was a peaceful coexistence.

So to some extent, the problem is not gentrification per se, but inelastic housing supply. The solution, then, is to flatten the housing supply curve by making it easier to build upwards and densify popular urban areas.

Would gentrification cease to be an issue if those issues were addressed? Absolutely not. Anti-gentrification protests also occur in places where the property market is fairly relaxed. (They are also a massive issue in Berlin: my old borough was a bit atypical in that respect). There is a second, and arguably more important layer to those protests, which is not about hard economics, but which can nevertheless be explained using economic logic.

It is important to note that anti-gentrification protesters almost never have deep roots in the neighbourhood where they now want to pull up the drawbridge. They are an earlier wave of newcomers; more precisely, they are people who moved to the area before it became popular. They are what marketing folks call the ‘early adopters’.

It usually works like this: A few trendsetters – e.g. artists – move to an area which is uncharted territory for almost everybody in their social circles, because it is run-down, scruffy, and suffers from high crime rates. The presence of these trendsetters then gives the area an air of ‘coolness’, which attracts the early adopters. A cool area, however, is like a secluded beach: We cannot all go there. By definition. If we all go to the secluded beach, it ceases to be secluded, and if we all move to the cool area, it ceases to be cool. Coolness is about distinction. What makes an area cool is the fact that it is off the well-trodden paths, it is different from elsewhere, it is a bit adventurous, it is edgy, it is non-mainstream, it is – well, cool.

When looking for a place to live, most people concentrate on factors like local amenities and transport links, but some also use their postcode as a marker of social status. “I live in Mayfair” does not just mean “I live in Mayfair”, it also means “I have money; probably a lot more than you.” In the same way, a couple of years ago, “I live in Shoreditch” did not just mean “I live in Shoreditch”, it also meant “I am cool; probably a lot cooler than you.” But at some point, every Tom, Dick and Harry began to move to Shoreditch, thus eroding the coolness effect. If coolness is about distinction, it is inherently scarce. Sure, more people can acquire a coolness signal, like a Shoreditch address, but that just makes the signal less and less powerful.

So call me a cynic, but when anti-gentrification protesters claim that smashing up shops is an expression of love for the poor and vulnerable, I don’t take it at face value. I am more inclined to see them as a group of early adopters who once acquired a powerful status signal, who have seen the value of that signal steadily eroded, and who now try desperately to restore some of its value. (You can also explain Political Correctness along the same lines.)

If that interpretation is correct or correct-ish, it means that we will still see anti-gentrification protests in ten, twenty or thirty years’ time. But not in Shoreditch, obviously, which will by then be seen as boring, bourgeois and middle-class.

Dr Kristian Niemietz is the IEA’s Head of Health and Welfare.