Rent control is back. And that’s bad
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The researchers suggest transfer payments instead of rent control, minimizing negative effects on supply. But Americans, and I'd bet most people around the world, dislike transfer payments. Nobody wants to be "on the dole", and in any event signing up for those payments comes with its own form of social cost and insecurity. Rent control is a silent tax that is relatively optimal from a political-economic perspective (not just an economic one).
The same dynamics are at play with free trade. Academics said dislocation costs of free trade could be ameliorated with transfer payments. But those payments never came, and voters would never accept them as a substitute for lost jobs. And for similar reasons--people don't want to feel forced to move, they want to feel like their pursuing better opportunities. But when a factory shuts down or a landlord effectively evicts you, it's not a choice. And even if it only happens to a small fraction of people, many more feel insecure even if they have no rational reason to feel insecure.
The question isn't whether rent control is good or bad, it's whether and to what extent it's possible to extract in exchange zoning and development concessions that promote supply increases. Unfortunately, the outlook doesn't seem so good. The only other alternative is Federal pressure, which doesn't seem too likely, either, unless it comes in the form of a Supreme Court decision that constrains zoning practices.
In the most popular cities, where housing insecurity sentiments are acute, rent control has the same logic and appeal to voters as anti-price gouging. And just like with anti-price gouging laws, arguments that such measures negatively moderate price signaling (which might induce greater supply) are insufficient to persuade voters to oppose them. (The more persuasive argument concerns opposing government and advocating for property rights, but in cities with large renting populations that argument is a difficult sell, especially if single-family homes are excluded, which is very often the case.)
Housing security is a fundamental, high priority need (see Maslow's hierarchy of needs). When it's threatened, promises of future supply and price improvements are simply insufficient to resolve the felt problem. There's a time asymmetry dilemma to such structural problems, and there's no easy way to solve it. I argue that some rent control laws (at least in certain geographic areas) are as inevitable as some tariffs, at least in the short term, so long as there's a strong democratic process. Remove or weaken the democratic process and you can more easily resolve that particular dilemma (while creating other ones). I might cite as a supplemental source Platos' The Republic.
Economists systematically underestimate the value of security (defense, shelter, food, etc, and pricing stability thereof). Perhaps because it's difficult to accurately measure. We can "price" the value of a human life in the aggregate or in special situations, and we do for various purposes, like various forms of insurance, or civil restitution. But good luck convincing people to make criminal penalties against murder contingent on inability to pay restitution. (That is, legal if you can afford it.) Even with a trillion dollar premium (above and beyond existing restitution formulas--earnings, pain & suffering, etc), few people would vote for that, which means that in some sense the value is infinite.
Can't you make them stop worrying by building enough housing that they believe the free market will give them affordable rents even without rent control?
This is different from a factory shutdown because there's much less of a natural cap on housing supply than on job supply. You can build four-story apartment buildings basically everywhere, modulo government interference (zoning, permits, etc.), and they'll work, so you can just build enough to pull down the supply/demand intersection to where people want it, that is, in a free market you can just build residential buildings and expect them to turn into housing. You can't just build a physical factory and expect it to turn into jobs.
Rent control is even on the table in cities like Chicago, which relatively speaking has been pro development. But for a state law prohibiting it, Chicago would now have rent control; and it seems likely that exceptions to that prohibition will pass the legislature. That goes to show that time asymmetry is problematic even without the scourge of single-family home NIMBYs.
Regarding the free trade analogy, the alternative I had in mind wasn't building factories, but moving to new locales and finding new jobs. Which is the de facto existing alternative for housing supply-constrained cities, which have been free all along to promote greater densification, but simply incapable of doing so to the extent necessary.
Isn't the American healthcare system a convoluted set of transfer payments?
There's enough articles here on HN that tell me the high prices and subsidies for a privileged few aren't really a solution to healthcare. I hope that kind of industry stays out of accommodation.
Rent control disincentivizes renovation of existing apartments and building new ones. It also encourages people to stay in apartments that are too big for them, because rent control typically locks price for existing, long term tenants on lower level than paid by new tenants. All this makes housing crisis worse.
In this case, the ideal is stable, affordable rent prices. The proposed solution is rent control.
Rent control, from a policy standpoint, does not create affordable rent prices by itself. It needs to be paired with a lot of other policies - supply control, great city planning, landlord incentive adjustments via taxes, fines / punishments, enforcement of it, etc.
So, people espousing rent control as the solution are inaccurate semantically. Rent control is part of the solution, but what's more important is how rent control is paired with other policies.
Rent control is not an independent solution, but (as most policies are) its complementary and needs to fit with the rest of the policy package. For instance, if you had a policy to force housing to double every year (and somehow it actually happened), rent control is not needed because supply would reduce pricing naturally. And in a supply blocked economy, the issue is that demand is high - rent control would do nothing to reduce demand.
If you're going to create a policy that creates stable, affordable rent prices, you'll need to look holistically at the each sub-part of the issue. Saying that we need stable, affordable rent prices is natural - it's a human need, a moralistic ideal, and also great for many people. But it doesn't add much to the conversation, and it makes it difficult to have dialogue with actual proposed solutions over the loud, muddled public debate.
But then, yeah, the real goal is "keep housing prices low, and keep newcomers out," not "rent control."
I see rent control as a fix for a symptom. Answering the question about the ideal living condition for a city and how to grow successful, long lasting sustainable, healthy cities is the real issue. Rent control is a bandage, and the collection of rent adjustment policies is not as elegant as just a strong set of policies to promote healthy cities.
Admittedly this is really, really idealistic, it ignores the fact that we have a lot of cities that need help right now, and it assumes that there is a standardized way to build great cities.
A prospective landlord might have been required to live in their building for a minimum of a year first. That dampener would slowed down the fission reaction. But oh no, regulation is bad. Trickle-down is good.
We've already experienced the result ... tens of thousands of homeless. Who -should- pay?
To claim that something is great, you should at least address the standard arguments that it's bad!
But I see the ignorance of the left-wing base as just as dangerous. The idea that there's a capitalist conspiracy to trick the populace into believing that free markets are better for public welfare, and that price controls like minimum wage and rent control harm the public, is extremely widely accepted.
Left-wing misconceptions about economics are even more consequential than right-wing populist ideas about vaccines. They have the critical mass of support needed to turn into policy in the most economically important housing markets in the US.
Also, the anti-vaccine movement seems more leftish than rightish as it seems to correlate with higher incomes and education (paradoxically), and over the past several decades higher income and college educated brackets have strongly shifted Democratic.
Obviously not good education. I see anti vaccine nonsense from both sides, with the common theme being contrarian and not trusting big government or corporations, and thinking highly of themselves because they think they have some insider scoop on what is going on.
1) Does Piketty's "Capital in the Twenty-First Century" advocate a conspiracy? Quoting it Wikipedia entry:
"The book's central thesis is that when the rate of return on capital (r) is greater than the rate of economic growth (g) over the long term, the result is concentration of wealth, and this unequal distribution of wealth causes social and economic instability."
That is, there's no need for a conspiracy to get the results we see, and leftists like me don't need to appeal to conspiracy theories.
2) You mention "believing that free markets are better for public". But what's pushed isn't a "free market" - what's pushed is a lack of constraints on those who control capital. Few who push for a free market also push for loosening constraints on labor.
Taft-Hartley should be seen as offensive to a real free market. So-called "free market" advocates protest minimum wage laws, but omit mentioning that labor power, when not hobbled by restrictive US laws, would be the free market solution.
As an example, the Nordic countries don't have minimum wage laws. Instead, minimum wages for a field are set by collective bargaining, which is possible because of stronger labor unions in those countries.
As you can see, I don't believe that "price controls like minimum wage" are the right solution to that problem.
But to your strawman, Piketty's observation turns out to be entirely explainable by real estate:
https://medium.com/the-ferenstein-wire/a-26-year-old-mit-gra...
2. I wasn't contradicting your assertion at all. I was just claiming that it's a very common belief within left-leaning circles that economists' claims of the social benefits of free markets are propaganda formulated by and pushed for the benefit of a capitalist elite.
This conspiratorial view of the economic science is similar to anti-vaxxer theories about Big Pharma and Big Gov being behind the scientific opions on the efficacy of vaccines.
>>As you can see, I don't believe that "price controls like minimum wage" are the right solution to that problem.
Going back to 1, I wasn't generalizing all left-leaning people. Just as all right-leaning people don't believe in anti-vaxxer theories, not all left-leaning people believe in price controls like rent control and minimum wage.
The specific validity of Piketty's observation is irrelevant. I mention it as an example of an argument which is not based on the "idea that there's a capitalist conspiracy".
Focusing on the weaker conspiratorial argument and leaving out any more substantive arguments = strawmanning.
Criticizing sweeping language for its imprecision is not strawmanning.
You switched from "The idea that there's a capitalist conspiracy to trick the populace into believing that free markets are better for public welfare" to "a very common belief within left-leaning circles that economists' claims of the social benefits of free markets are propaganda formulated by and pushed for the benefit of a capitalist elite".
What makes something a "conspiracy"? Because your latter formulation doesn't sound like a conspiracy to me.
My position is that people who advocate for a "free market" but don't advocate removing the existing severe restrictions on labor power aren't really promoting a free market, but rather want to give more power to capital owners.
My point was only that it exists in high enough proportions to be impactful, and juxtapositioned it with the ignorance seen in the conservative base.
My broader point is that the widespread ignorance seen in the left-wing base is largely ignored, in contrast to the ignorance seen in the right-wing base, which is rightly ridiculed.
>>What makes something a "conspiracy"? Because your latter formulation doesn't sound like a conspiracy to me.
The latter formulation is a conspiracy theory, and one that is completely baseless and borne from ignorance of the economic science.
Economists, free from any undue influence, have almost universally come to the conclusion that markets free of government intervention beyond enforcing criminal and contract law, are more efficient, and effective at advancing the public welfare, in almost all domains other than those subject to market failure (e.g. natural monopolies, and markets subject to positive or negative externalities best addressed by government provisioned public goods, etc).
When done poorly - which I think you have done - another term for your juxtaposition is "false equivalence".
I asked "what makes something a 'conspiracy theory'". You have not answered but only asserted.
To your last paragraph, I again point out that "markets free of government intervention" must necessarily include being free of government intervention with respect to labor power. Eg, the law must not prevent a company and a union from signing a contract to make the company a closed shop.
Anyone not supporting a repeal of Taft-Hartley and related labor laws cannot be in support of a free market, by your definition.
But many of the people I hear who advocate for a 'free market' support those anti-labor laws. Indeed, there is an almost complete lack of discussion on the topic.
Ergo, they aren't actually supporting a free market.
You tell me - why aren't more free market economists calling for the repeal of Taft-Hartley?
It's not a false equivalence, and for me to explain to you how your theories constitute baseless conspiracy theories is outside the scope of this discussion.
If you'd like to have an indepth discussion about economics, please create a post in another forum, and link me to it, and I'd be happy to carry it on there.
>>Eg, the law must not prevent a company and a union from signing a contract to make the company a closed shop
Prohibiting companies from discriminating against unionized workers is an infringement on the freedom of contract, as are several other legal prohibitions relating to how companies are permitted to deal with workers attempting to unionize, and unionized workers striking.
Laws relating to collective bargaining, which prohibit a company from negotiating with any party other than the union, in the event that a work unit votes to unionize, are blatant violations of the freedom of contract.
Unions would have no market power without said laws. If you support the upholding of the free market, and the principle of contract liberty that underpins it, then you are acquiesing to the total disempowerment of unions.
Well, that's a-historical.
Unions existed before laws were in place to support unions. https://en.wikipedia.org/wiki/Commonwealth_v._Hunt .
The union power in the late 1800s was not built on laws which supported them. Often the government stepped in to fight the unions. And the unions sometimes won power, and were able to get the laws changed to prevent, eg, bloodshed in the future.
Your other comments still do not address the questions I asked, like, "what makes something a 'conspiracy theory'?".
Your "freedom of contract", if you really believed it, should apply to any situation which restricts trade.
If my contract with you says that disputes are exclusively to be settled by mediation with company X, then that prohibits other companies from being involved in the mediation.
"Freedom of contract" lovers think that sort of exclusive agreement is fine.
Similarly, a company A might contract with company B so that B is the exclusive supplier of temp workers.
"Freedom of contract" lovers think that sort of exclusive agreement is fine.
But somehow "organizations A and B enter into a contract such that A will only hire members of B" when B is a union is not fine?
Balderdash.
Whatever power they did have emanated from the threat of their illegal activity, ranging from blockading company premises (e.g. stopping trains) to setting up picket lines that involved violence against 'scabs'.
>>Your other comments still do not address the questions I asked, like, "what makes something a 'conspiracy theory'?".
I'm happy to carry that line on in another forum.
>>If my contract with you says that disputes are exclusively to be settled by mediation with company X, then that prohibits other companies from being involved in the mediation.
Of course, but labor laws, as they stand, prohibit companies from negotiating with any party but the union in the event that one of their work units unionizes and demands collective bargaining. This is regardless of what the company agreed to.
The Boston Journeymen Bootmaker's Society won the labor action, and the lawsuit. Why should I believe the Society was weak?
Wait employed five or six Society members, and only one not willing to be in the Society. That sounds like the boot industry, at least, had a high unionization rate.
Of course, that was a craft union. I think you are talking about industrial unions. Which didn't, you know, really exist until after there were big industries in the late 1800s.
"Whatever power they did have emanated from the threat of their illegal activity"
I don't think you read the Wikipedia page on Commonwealth v. Hunt that I linked you to.
It was clear that the Society's power emanated from the threat of a walkout, and not from any sort of illegal activity. Indeed, the court decision was that "labor combinations were legal provided that they were organized for a legal purpose and used legal means to achieve their goals." (quoting Wikipedia).
A walkout must be legal in a free market. Otherwise it's forced labor to say that someone can't quit if they no longer want to work a given job.
You write "as they stand". Which is entirely my point. We are not in a free market. If people really want a free market, they need to advocate for removing restriction on both labor and capital.
Those who only want to remove restrictions on the control of capital, and not labor, are using "free market" hypocritically.
Edit: And remember, the union powers prohibited by Taft-Hartley were legal until then, so those aren't examples of the illegal actions you refer to.
But you're being disingenuous and or are deluding yourself if you claim that union power wasn't vastly more limited before the advent of labor laws, and that what power they did have wasn't disproportionately as a result of the threat that they'd engage in the illegal acts that they were so well known for.
So to clarify, while I predict any transition to a free market would result in a drastic reduction in the power of unions, I would have no problem with a scenario where my prediction proves wrong and unions have substantial power in a free market. I just don't like the laws that overwhelmingly advantage unions at the expense of investors.
Why or why not?
Since you argue "I just don't like the laws that overwhelmingly advantage unions at the expense of investors", I think you believe the current US laws are too union friendly. Which is hilarious. Was there ever a time in US history when you think the balance was right? Or have they always been pro-union? If not, when do you think the balance changed, and what caused that change?
Part of what makes it hilarious is that we only need to look at the recent wildcat strike by teachers in West Virginia to see that 1) their actions were illegal - state law prohibits public employee strikes, 2) it was effective not due to threat of physical intimidation but by threat of mass departure.
Companies right now are disproportionately powerful, including as as a result of actually doing illegal acts. Wage theft is one of the most common crimes in the US, and it often goes unpunished.
About 10 years ago, Apple, Google, Intel and Adobe Systems and others conspired to refrain from soliciting each another's employees to keep their salaries artificially low. Their fine was less than their profit from the crime, no high-level exec went to jail, and all the companies are still geld in high esteem.
Even if we stick to corporate involvement with unions, "U.S. employers are charged with violating federal law in 41.5% of all union election campaigns" - https://www.epi.org/publication/unlawful-employer-opposition...
> Employers are charged with violating federal law in 41.5% of all union election campaigns. And one out of five union election campaigns involves a charge that a worker was illegally fired for union activity. Employers are charged with making threats, engaging in surveillance activities, or harassing workers in nearly a third of all union election campaigns. Beyond this, there are many things employers can do legally to thwart union organizing; employers spend roughly $340 million annually on “union avoidance” consultants to help them stave off union elections. This combination of illegal conduct and legal coercion has ensured that union elections are characterized by employer intimidation and in no way reflect the democratic process guaranteed by the National Labor Relations Act.
This is not surprising, because just like pro-union people engaged in "illegal acts" - and mind you, who had the biggest influence in creating all of those laws? - companies also engaged in horrid, immoral, and illegal acts.
Or, do you defend the action of the government and coal mine owners involved in the Ludlow Massacre?
Do you defend the actions of the Pinkerton National Detective Agency as they hired goons to physically intimidate and attack union members? There are still federal laws limiting the federal use of "The Pinks."
What is your take on the conclusions of the La Follette Committee? Did the extensive espionage system of private corporations, as part of their union-fighting efforts, indeed mean that "employees became subjugated to private corporations and were denied constitutional rights"? Why did companies need to use "[M]achine guns, tear gas bombs, and clubs ... to prevent and disperse union meetings"? https://en.wikipedia.org/wiki/La_Follette_Committee
So sure, you can bring up "the illegal acts that [unions] were so well known for". "But you're being disingenuous and or are deluding yourself if you claim that" businesses weren't engaged in even more horrid behavior.
Yes, in the 1880s, where there were no federal laws violating freedom of contract, and state laws that did violate it frequently being struck down by the Supreme Court under Lochner Era judicial doctrines.
Do you really believe that unions were no less powerful before the advent of labor laws? Have you seen the unionization rate statistics?
I'm puzzled by your insistence on this absurd notion that labor laws that violate freedom of contract don't disproportionately advantage unions. Your Gish Gallop of off-tangent anecdotes notwithstanding.
I mean, if companies can establish company towns, since under the freedom of contract ideology employees are willing to live there as a condition of employment (a la Pullman), then surely a closed shop contract must also be acceptable.
My "Gish Gallop"[1] is because you keep cherry picking your history to justify your specific pro-capital/anti-labor "free market" viewpoints. But you cannot point to the worst actions of unions without - to use your earlier term - juxtaposing it with the worst actions of businesses. This juxtaposition is appropriate as union power grew as a response to bad employment conditions.
For example, yes, striking coal miners destroyed property and attacked the National Guard in 1912. Bad coal miners - very naughty indeed. Oh, wait, it was after the National Guard, along with business guards, machine-gunned the strikers' tent city. Does the freedom of contract justify those murders? Clearly, no.
You asked "Do you really believe that unions were no less powerful before the advent of labor laws? Have you seen the unionization rate statistics?"
You know that's a rather odd question, right? Of course unions can be more powerful if there are laws to support the unions. Just like businesses can be more powerful if there are laws to support businesses. Try getting rid of the laws which isolate shareholders from legal liability, and see what happens to corporate power.
Unionization rates were higher before Taft-Hartley was passed. Since my argument is that unions are legally prohibited from exercising their full power as they would in a free market, then that means unionization rates should decrease because people aren't going to pay money for something that doesn't help them.
Which is why the WV teachers had a wildcat strike - illegal actions were more effective than being in a union.
[1] Personally, I think it's more an example of Brandolini's law than a Gish Gallop - https://en.wikipedia.org/wiki/Bullshit#Bullshit_asymmetry_pr...
>>But you cannot point to the worst actions of unions without - to use your earlier term - juxtaposing it with the worst actions of businesses.
Your characterization of the general behaviour of unions compared to businesses is disingenuous. It's a lie invented by unions and their beneficiaries to deceive the public.
Union workers commonly beat and murdered "scabs" who crossed their picket lines, which resulted in replacement workers being intimidated into not crossing those lines. The hiring of private security (e.g. the Pinkertons) was primarily in response to the threat of violent actions like this by unions, and the violent confrontations that did occur were primarily because unionized workers refused to desist from threatening replacement workers and violating the rights of the property owner to their own company premises by trespassing and blockading it.
That was the general reality of the late 19th century, and not your out-of-context anecdotes that you trot out to pull at heart strings.
And the violent and illegal actions of unions were justified by their supporters, who used the same class-warfare narrative and false characterizations you're trotting out now to justify the current bevy of anti-contract-freedom-laws.
>>You know that's a rather odd question, right? Of course unions can be more powerful if there are laws to support the unions.
You didn't even answer the question. You responded to a strawman. I asked if you think unions are more powerful now than they were in the late 19th century when contract liberty was less restricted by labor laws.
What you don't want to plainly admit to is that a return to a free market would greatly reduce the power of unions.
>>Unionization rates were higher before Taft-Hartley was passed.
Changing the subject. I didn't ask about Taft-Hartley. I asked about the late 1800s, before drastic interference by labor laws to limit contract freedom, and how unionization rates compared then to now. I'm not suggesting we keep Taft-Hartley. I'm suggesting repealing all of the labor laws instituted since the 1880s relating to how companies and unions may interact.
Your evasive propagandizing is quite typical any time the subject becomes unions and their dependency on the government limiting the contract liberty of employers.