Why is London so expensive?

I mentioned London had dropped from the third most expensive city, to the 16th, but I don't really understood what that means, so I googled it.

Unfortunately, most of the 'answers' were from people who clearly don't understand supply and demand, and believe companies will charge what the market will bear. While that may be true, it is really a symptom more than a cause, and indicates an imbalance on the supply side; if a competitor could charge less, he would do so to increase his business.

The New Economist blamed 9 things compared to the US: Higher taxes, a higher minimum wage, a stronger currency, less economy of scale, less competition, higher property rates, higher transport costs, the growing divide between the rich and poor, and, uh, "weaker consumers."

Unfortunately, again, most of these aren't causes, or are relative to the entire country--and nobody is complaining about how expensive Scunthorpe is. (Well, I'm sure somebody is, but that's not my point.) The gap between the rich and poor is also just silly -- unless they are suggesting it is because there are fewer poor people.

Of course, in London, property rates and transport costs are higher. A few months ago I read an article about a new high-speed train link, and how every minute closer to London increased house prices by £2,000! (Plus Britain is an island, as are several of the other most expensive cities.)

But while I was shopping today, I was thinking about the "weak consumers" argument. That is not to say Londoners are stupid, simply that they value other things above cost. There are discount options, just as there are luxury options, but they choose the "British" options -- stores that have been in business for 150 years. And while they may not be the most efficient, they do have a track record most companies cannot imagine.

And not surprisingly, today I bought my clothes at Marks & Spencer, not Primark.

P.S. One of my favorite comments was on the actual study, suggesting it should be titled, "How much does it cost to live like an American in this city?" In other words, a Big Mac may be expensive in China, but a bowl of noodles is not.