How Rent Control Drives Out Affordable Housing | Hacker News Reader

How Rent Control Drives Out Affordable Housing

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As someone in Boston, I can tell you that rent control was terrible here. The rent controlled units went to people with high incomes and political power (including mayors and those sitting on the Supreme Judicial Court). Most rent controlled units were simply taken off the market in one way or another. If you're getting well below market rent, you tend to look for other ways to use the property and some just allowed relatives or friends to use it rather than bothering with renting, but a lot converted them into condos. The effect was the same - people had to move.

Even the Boston Phoenix (the leftist alternative paper akin to New York's Village Voice) came out against it.

The fact is that when you put price controls in place, who gets something is determined by factors other than what you're willing to pay for it. In housing, that means:

1. Will you bribe people? Will you bribe the landlord renting the apartment with, say, an extra $200 per month? Will you bribe the current resident of the apartment with $2,000 to vacate and give it to you all the time claiming to the landlord that they haven't left?

2. Are you willing to live in a slum? Landlords don't improve properties when they can't charge more for those improvements. Unsanitary conditions? Screw you! They can rent it to plenty of other people willing to live in that squalor. Properties just deteriorate until they are uninhabitable (or barely habitable) and it removes more properties from the market. With tenancy at will, landlords are able to evict anyone without reason with 30 days notice. Should you complain, you're out and unlikely to find another place.

3. Will you even be able to find a place? No one is willing to move because they won't be able to find another place. People hang on for dear life.

Price caps create shortages. The remaining people get to fight like shoppers at a Best Buy at Christmas for one of those Nintendo Wiis.

The first thing to go is anyone renting a room in their house because, for the limited rent they could get, they could use it better for themselves as a guest room or something. Next is anything that can be converted to condos. Remaining rental places are kept abysmally and many eventually become uninhabitable. Any little brightness in this situation is hoarded by a lucky few who tend to be those with political or economic power (doctors, lawyers, mayors, and judges) and you can't even pry those places from their cold dead hands.

Economics finds an interesting balance a lot of the time. If you force landlords to rent for pennies, they don't maintain their property until it's in a state that wouldn't command more than pennies in rent. If you are forcing tenants to not pay more than $x in rent per month, they'll give under the table for anyplace that's nice.

The easiest way to drive down housing prices is to increase the amount of housing. Landlords don't want vacancies and lower their prices to fill. The problem is that, in some cities, there are more people who want to live in them than there are housing units available. So, prices rise until some of those people decide they'd rather spend less and live in a less desirable area.

Other than price, what else should determine who gets in and who doesn't?

Aside from anecdotes, do you have access to any data that substantiates the claim that "The rent controlled units went to people with high incomes and political power" -- can you put a figure on it (50%, 60%, higher?).

My grandparents lived in rent controlled apartments in NYC that they could not have afforded to stay in -- moved there in the 30's in neighborhoods that filled with gang violence -- but gentrified around them and became very expensive. There are anecdotes both ways.

Indeed. I live in a rent-controlled apartment in San Francisco, and it is not squalid, the landlord is not crooked, and neither I, nor the other tenants, are politically powerful.

I heard a lot of horror stories about rent control before I moved here, but so far the stories haven't approximated the reality. Perhaps the problem lies the details of the rent control policies in question, and not with the concept of rent control itself.

I also live in a rent-controlled apartment in SF. I'm not sure what the particular policy in Boston is, but here they can increase the rent by 3%/year (I think) while I live there. After I leave, they can reset it to whatever they like.

So, in principle, if market rents increase a lot, the landlord has an incentive for me to leave. I think there's another side to this though: I've been a great tenant for a while and always pay on time -- if I leave, he runs the risk of getting a scammer who just won't pay and will take a year to evict.

Also, since I've locked in a nice rate, I have an incentive to stay and even make minor improvements (like clearing all the dead growth from the patio, etc.)

I think rent control probably is not a great idea in many places, but in SF it seems to work. My pet theory is that the boom-bust cycle here is much more severe and without rent control the city would have no stable population.

The question for both of you is how did you get the rent controlled apartment? I bet it wasn't through craigslist. Everybody I know in the city who lives under rent control (which, admittedly, is not very many) found their places through friends.

Not that it's a bad thing, but it supports the idea that you have to be "connected" to get a place. Maybe not a lawyer or a judge, but having been around the city helps.

I got mine through craigslist. So did the other people I know who live in rent-controlled places.

I lived in a rent-controlled apt in SF that I found through craiglist. It wasn't cheap, nor squalid - Similar to what the other people say. My experiences over 20 years of renting also say - landlords treat good tenants like gold - if you don't make noise, don't sell drugs, and pay on time, they generally are happy to not raise your rent.

It was through Craigslist... the deal is that every building in San Francisco built before a certain year (I don't remember which year) is rent controlled, so you don't really need a connection. The year cutoff is, I assume, to encourage developers to build new rental properties.

There was a proposition to ban rent control in California, which failed to pass.

Interesting. I've had trouble finding a rent controlled apartment through craigslist. I'll have to look harder in the future.

My grandparents lived in rent controlled apartments in NYC that they could not have afforded to stay in

This is selection bias. Suppose the government raised the federal minimum wage to $50/hr. This would cause massive unemployment (and, no doubt, a thriving black market for labor), but some lucky low-income workers would keep their jobs. You could then point to one of those workers and say, "Hey, I know someone who has a high-paying job that wouldn't exist but for the new minimum wage." But this ignores the damage done to everyone else through unemployment and higher prices. And so it goes with your lucky grandparents.

You can avoid these sorts of errors by consistent application of the following rule:

The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

-- Henry Hazlitt, Economics in One Lesson http://jim.com/econ/contents.html

Okay, fine, but the op that he's replying to suffered the same flaw by pointing to cases of politically connected wealthy people in rent-controlled apartments. Where's the proof that rent-control inflicts large systemic damage across all groups? It's certainly not in the topic's article (see my other post).

I gave a counter-example to show how ridiculous it is to talk about this through anecdotes. Yes, it's selection bias -- the entire top-rated comment on this thread is full of anecdotes are data arguments. Thanks for the pointers on avoiding this error in the future -- sheesh.

> My grandparents lived in rent controlled apartments in NYC that they could not have afforded to stay in [...]

This is how rent-control can create shortages.

Under rent-control, older people who would otherwise downsize have no incentive to do so. Younger people who might still be able to live with their parents instead rent separate apartments.

The fundamental problem is there's not enough housing for everyone to get as much of it as they want. So, there's a need to economize.

The additional problem is that your residence is not a commodity to you. Being forced, by the market, to move out of your place is very traumatic, even if it could be better used by someone else.

The point of the anecdote was to show how anecdotes aren't a good way to argue. The anecdote doesn't show anything -- not my point, and not yours either.

Their specific story is not the point -- my point was that if you want to cherry-pick anecdotes of a program not working, one can always counter-argue with other anecdotes.

Either you believe that it is in the public interest to have some availability of low-income housing or you don't. I do think it's in my interest and I accept that I will pay more to have it be available.

Is rent-control the best way to achieve that goal -- I don't know -- this isn't an area of my expertise (judging from this thread, it isn't any HNer's) -- I haven't heard anyone propose something better -- just complain about it based on hearsay.

> Is rent-control the best way to achieve that goal -- I don't know -- [...] -- I haven't heard anyone propose something better -- just complain about it based on hearsay.

What if rent control is actually causing shortages were there's no physical scarcity? We can mostly agree on intent, but sometimes, collectively, we enact plans that cause the opposite of what we want.

It happens that I'm just reading Thomas Sowell's Basic Economics. In the chapter on price controls, he argues that rent control (and price controls, in general) cause shortages where there is no scarcity of the underlying commodity.

As you point out, I'm not an expert, and FWIW I haven't read the original sources. I have some problems with his analysis of medical care price controls, but I'll get to that later.

Here are some quotes and his cites...

All the quotes are from:

Sowell, T. (2007). Basic Economics. A Common Sense Guide to the Economy. 3rd ed. New York: Basic Books.

"Before rent control was imposed in Sweden, less than one-fourth of all unmarried adults there lived in their own separate housing units in 1940, but that proportion rose over the years until just over half did by 1975." (p.41)

... from the article, "The Rise, Fall and Revival of Swedish Rent Control", in the book Roofs or Ceilings? by Milton Friedman and George Stigler.

"In San Francisco, a study in 2001 showed that 49 percent of that city's rent-controlled apartments had only a single occupant, while a severe housing shortage in the city had thousands of people living considerable distances away and making long commutes to their jobs in San Francisco." (p.41)

... from p.21 of San Francisco Housing DataBook, commissioned by the city, and produced by consultants Bay Area Economics, in 2001.

"Meanwhile, a Census report showed likewise that 48 percent of all households in Manhattan, where most apartments are under some form of rent control, are occupied by only one person." (p.41)

... from page A2 of the September 3, 2005 issue of the San Francisco Chronicle, title: "Census: More Americans Living Alone."

"A study published in 2001 showed that more than one-fourth of the occupants of rent-controlled apartments in San Francisco had household incomes of more than $100,000 a year." (p.48)

... not sure where he got this -- I need to get back to coding -- if you care, check out his Sources chapter.

Without looking further into the issue, I'm reasonably convinced that rent control drives up rental prices, and creates housing shortages (at the artificially low price levels).

BUT ...

What this doesn't consider is that my home is not a fungible or liquid asset for most people. You may be able to change residences easily, but it will take time for your new residence to become your home.

It's a lot easier to consume a bit less power, produce a bit less garbage, or spend a little less money in response to changing market conditions.

Because of this, people feel very strongly about holding on to their homes, even if by this hoarding, they're harming others.

Here's the Phoenix coming out against rent control: http://thebostonphoenix.com/boston/news_features/editorial/d...

It's not at all an endorsement of the naked free market like Cato would want to see.

I have never lived anywhere to see rent control in action, but its an interesting demonstration of economics when you fix one variable.

Also - how to doctors have political or economic power? (do you mean they earn enough to bribe?)

"Although rent controls are widely believed to lower rents, data I have collected from eighteen North American cities show that the advertised rents of available apartments in rent-regulated cities are dramatically higher than they are in cities without rent control."

Uh... no shit? Why would a city with low rents have any impetus to impose rent control?

"There can be no doubt that rent control creates housing shortages. For almost 20 years, national vacancy rates have been at or above 7 percent--a figure generally considered normal. Cities such as Dallas, Houston, and Phoenix, where development is welcomed, have often had vacancy rates above 15 percent."

Yes, but these are also sprawling shitholes. And: ridiculously high vacancy rates are a good thing now?

"Young people who migrate to New York or San Francisco usually must settle for paying $600 a month to share a two-bedroom apartment with several other people or commuting from a nearby city. Crowding is a manifestation of rent control."

It has nothing to do with NYC being an island and SF being a peninsula. And we'll ignore that if you consider an area the size of Houston around both of these cities, you start seeing affordable housing again - commuting 5 miles from another city is a bad thing, but commuting 20 miles from the same city is awesome.

"The goal in getting rid of rent control should be to allow the curve of housing prices to return to the elegant symmetry of the free market."

Ah, so it's an aesthetic concern.

This is just a ridiculous article. There are 3 cities cited as suffering from the supposed ill-effects of rent control, New York, San Francisco, and San Jose (and Boston has "overtones of the rent-control effect at the upper end", whatever that means). The data that illustrates the supposed terrible effects of rent control is the price of apartments on the market on one weekend, completely ignoring the entire point of rent control, which is to allow people to stay in their homes (which the article perversely tries to twist into people becoming "prisoners of their own apartment" - because people in great locations in NYC and SF would otherwise really want to move if only their apartments weren't so damn cheap). There's never any attempt to prove that rent control actually drives out affordable housing, there's only the "no shit, that's the point" observation that newcomers to an in-demand city with rent control pay more.

I moved to San Francisco last February, and I'm moving to New York in a month, so I'm not exactly a fan of rent control - I know my price is much higher than my neighbor's because of it. At the same time, though, I recognize that it's really shitty that I could take my programmer's salary and use it like a club against the people who were already living in the city. Why do I want to move to these places? Don't the people who were living there before me get some credit for making it desirable enough that I want to move there? Maybe I should be okay with subsidizing them.

Great points. I love how people think that because they heard of someone abusing rent control, that that's the norm. There is no system that isn't gamed in some way -- sure it's unfair, but is the net effect better?

Since CATO can obviously afford to do a proper study of the effects of rent control -- I can only assume that they know it won't support their idealogical position.

"It has nothing to do with NYC being an island and SF being a peninsula."

It's not just that. NYC is not built up the way it should be, and most of the buildup of recent years is condos. For many years, there was a ridiculous incongruity in NYC: sky high rents and abandoned buildings. Why renovate when you can't charge rents commensurately? These days it's mostly a Harlem/Inwood phenomenon.

By the way, why is "allowing" people to stay in "their" homes (fine print: homes which are not really theirs) a good thing? Are unskilled workers somehow more deserving of a house in Manhattan than skilled workers? Do retirees deserve to live close to young workers jobs more than the young workers do?

A guy with a family has a very good reason to pay more for a house close to his job.

Rent stabilization in NYC isn't mandatory for new construction, so new buildup being condos is not a response to rent control (unless it's a response to the threat of future rent control). Also, you'll need to explain how "sky high rents + abandoned buildings" corresponds to "Why renovate when you can't charge rents commensurately?" - if landlords can't charge rents commensurately, where are the sky high rents coming from?

The argument that rent control prevents owners from maintaining their buildings is pure bullshit. There's not a rent-control law in existence that doesn't allow annual increases sufficient for maintenance. Buildings aren't maintained because the owner sees the opportunity for dramatically increased profits if the current tenant leaves and lets the building fall to shit in an effort to drive them out.

As for why allowing people to stay in their homes is a good thing (and forgive me for being sentimental, but these are their homes, even if other people own the buildings - they do live there): there a few things that bother me about the free market religion:

1. The belief that all things with value have been priced appropriately.

2. The belief that ownership is the only form of risk that should be rewarded by society.

Neighborhoods don't just magically become expensive to live in. I won't claim that the only reason is because good, noble people moved in when things were cheap and turned things around, but it's ridiculous to suggest that the people living in a place have nothing to do with that place becoming a desirable place for wealthier people to live.

As for whether unskilled workers are somehow more deserving of a house in Manhattan than skilled workers: no, but then again, they don't deserve to be run away from their jobs and families simply because some rich asshole can price them out, either. You're making an emotional appeal for a guy with a family to have a right to be close to his job - that cuts both ways, you know.

"Buildings aren't maintained because the owner sees the opportunity for dramatically increased profits if the current tenant leaves and lets the building fall to shit in an effort to drive them out."

You say this as if it's not a side effect of rent control itself.

Helping people avoid being priced out of their neighborhoods is desirable, but rent control has so many side effects that it's not worth it in my opinion. It's basically taxing people when they move to or within a city to pay the rent for people who have stayed in the same place. There are probably better ways to achieve that goal.

Of course it's a side effect of rent control, but it's not a necessary side-effect of rent control. Rent control laws do allow for increases to cover maintenance, so the money is there. It's not like doing away with rent-control would have a better outcome from the POV of the tenant - instead of living in a gradually deteriorating building, they'd just have been kicked out.

BTW, I'm not a necessarily a fan of rent control, I just like its goal. I really don't know enough about the issue to make an informed policy decision either way. My main point originally was just that this article was terrible - stupidly reasoned and completely lacking in meaningful evidence that would let me make an informed policy decision.

"Rent stabilization in NYC isn't mandatory for new construction,"

In NYC, future crazy regulations are always a worry. Most new construction IS rent controlled. My previous apartment (built to be condos, but the owner was unable to sell) was. To evade various ridiculous NYC taxes (which make a lot of new construction unviable), you need to submit to rent control.

"if landlords can't charge rents commensurately, where are the sky high rents coming from?"

Sky high rents come from current demand. Rent control provides a disincentive to long term investments like new construction or major renovations to rental buildings.

Incidentally, neither of the "things that bother you about the free market religion" are actually part of the free market ideology. 1) only applies to efficient markets (like the rental market, with many buyers and sellers, and good information) and 2) is closer to the Clinton/Bush/Dodd/Obama ideology that ownership is something to encourage.

"Neighborhoods don't just magically become expensive to live in. I won't claim that the only reason is because good, noble people moved in when things were cheap and turned things around, but it's ridiculous to suggest that the people living in a place have nothing to do with that place becoming a desirable place for wealthier people to live."

In some cases the people are completely unrelated. The main attraction to living in Harlem is the 1-6 trains. Having tried to get a sublet for my old place, I discovered that the people living there make it less desirable to live in.

"You're making an emotional appeal for a guy with a family to have a right to be close to his job - that cuts both ways, you know."

As far as who "deserves" to live on some place, it's a wash. So lets not favor any particular group over the other. As far as emotional appeals go, I'm not casting any group of people as assholes.

"To evade various ridiculous NYC taxes (which make a lot of new construction unviable), you need to submit to rent control."

Agreeing to not displace people to cash in on temporary market swings seems like a better tax shelter than some others I've heard of.

"Sky high rents come from current demand. Rent control provides a disincentive to long term investments like new construction or major renovations to rental buildings."

This doesn't make any sense. Without the current rent-control laws, the incentive would be to keep the housing supply low and spike rental rates. New construction would still be difficult (because it's NYC), plus current owners would spend their political capital on preventing it from happening to keep their incomes up.

"Incidentally, neither of the 'things that bother you about the free market religion' are actually part of the free market ideology. 1) only applies to efficient markets (like the rental market, with many buyers and sellers, and good information) and 2) is closer to the Clinton/Bush/Dodd/Obama ideology that ownership is something to encourage."

Maybe I should be more clear, my fault. My first point has less to do with pricing efficiency than with the basic idea that certain things with value can be priced at all (a person's contribution to the appeal of a neighborhood, for instance). My second point was that there are other kinds of risk (living in a bad neighborhood for its cheap rent) that should be rewarded by society over ownership (the windfall that the owner of a slum stumbles into as the neighborhood appreciates in value).

"In some cases the people are completely unrelated."

Of course, I never implied otherwise. My next sentence after the one you quoted was that I wouldn't claim such a thing. As for Harlem, I was almost going to use that to illustrate my point. Prices there are a lot cheaper there right now than the location would suggest they should be, and (despite your experience) tons of people are starting to look that way. Assuming living in the city stays cool, do you really think it's going to be as cheap as it is today in five years? And everyone who's moving there right now, who are going to make it that super-desirable place to live? They'll be priced out (see: SoHo, parts of Brooklyn, Hell's Kitchen, etc., etc).

"As far as who "deserves" to live on some place, it's a wash. So lets not favor any particular group over the other."

I disagree, let's favor the particular group that was already there, that's already established the place as their home.

"As far as emotional appeals go, I'm not casting any group of people as assholes."

Really? I've got some rental agencies to introduce you to.

"This doesn't make any sense. Without the current rent-control laws, the incentive would be to keep the housing supply low and spike rental rates."

Only if there were a monopolistic housing provider. Absent rent control, the incentive for any individual housing supplier would be to build more houses and cash in.

By your logic, dell should (in the absence of computer-price control laws) cut back on computer production to spike prices. Of course, that's ridiculous; HP, Asus, Everex and others will pick up the slack and Dell will lose money.

As for other landlords engaging in rent seeking, that's a problem, but a separate one.

"My second point was that there are other kinds of risk (living in a bad neighborhood for its cheap rent) that should be rewarded by society over ownership (the windfall that the owner of a slum stumbles into as the neighborhood appreciates in value)."

Living in a bad neighborhood is rewarded; the reward is cheap rent.

"Prices there are a lot cheaper there right now than the location would suggest they should be, and (despite your experience) tons of people are starting to look that way."

Prices are a lot cheaper than they should be precisely because newcomers don't want to live near Harlem natives. High prices elsewhere are driving people here, but the locals are not helping things. As an example of the issues, several of my female visitors have been hassled on their way home. So if you argue for subsidizing hip locals who make a neighborhood attractive, do you also want to penalize disagreeable locals? If not, why not?

"Only if there were a monopolistic housing provider."

Come on, man, housing isn't a commodity. If you're an owner charging whatever crazy price you can get in the LES as passive income on top of doing whatever you do as a day job, you're not interested in going out and spending the energy on amping production of more housing units. Plus, maybe you live in the neighborhood yourself, and you'd hate to see soulless apartment blocks go in, and if they did go in, all the charm and neighborliness that makes it so great and desirable in the first place disappears, and prices collapse. You really don't think that guy is spending his political capital on preventing new apartment construction in his awesome neighborhood? I know that's how it happens in the Mission in SF, where I'm living now.

"Living in a bad neighborhood is rewarded; the reward is cheap rent."

Until the rich people see you living there happily and drive up prices trying to be your new neighbor - hence, rent control.

"So if you argue for subsidizing hip locals who make a neighborhood attractive, do you also want to penalize disagreeable locals? If not, why not?"

I said subsidize the people who make the neighborhood desirable to live in. It's pretty cynical if you think that's just the hip locals who moved in only a little before the rest of the wave. Harlem is a little rough today in parts, but I fucking love that part of town. Crime hurts everyone; people who are less well-off have just as much right to live in a crime-free neighborhood as everyone else. Squint a little, and maybe you can see it another way: how much does it suck that the rich white people have to move in before a neighborhood gets policed properly?

"If you're an owner charging whatever crazy price you can get in the LES as passive income on top of doing whatever you do as a day job, you're not interested in going out and spending the energy on amping production of more housing units."

So basically, you believe landlords/builders are 1) greedy when it comes to raising rents 2) not greedy when it comes to building more houses. And superpowerful, able to prevent any other greedy people from building housing and renting it for a profit.

They sound like the villain in a poorly written movie. (I should be more specific; it's not all builders, since condos do get built. I guess these problems only apply to the rental market.)

"Until the rich people see you living there happily and drive up prices trying to be your new neighbor - hence, rent control."

It's probably not very bad by this time. Why should I continue to get the reward?

"I said subsidize the people who make the neighborhood desirable to live in."

Yes, and the flip side of that is to tax the people who make it undesirable to live in. Why is this bad policy?

And I'm not just referring to criminals, but also people who lower the quality of life. You want to live near the hipster. But what about living near people who insist on talking at 2AM outside your window, or people who just need to take a shower?

As for police protection, I don't believe I ever advocated reducing it for the poor. I just see no reason to subsidize the stationary at the expense of the mobile.

"So basically, you believe landlords/builders are 1) greedy when it comes to raising rents 2) not greedy when it comes to building more houses."

Yes. Believe it or not, there are a ton of people who don't act exactly how economic theory says they maybe should.

"And superpowerful, able to prevent any other greedy people from building housing and renting it for a profit."

When you're out of new land to build on (NYC or SF, for instance; interesting how those are the two cities we keep coming back to, isn't it?), and other greedy people would have to buy your land or building, then yes.

"Why should I continue to get the reward?"

Because it was your sweat-equity that made it not very bad. It's not like you're paying the same amount that you used to - rent does still go up in rent-control environments - you're just not getting your ass thrown to the street because of a market fluctuation.

"Yes, and the flip side of that is to tax the people who make it undesirable to live in. Why is this bad policy? And I'm not just referring to criminals, but also people who lower the quality of life. You want to live near the hipster. But what about living near people who insist on talking at 2AM outside your window, or people who just need to take a shower?"

I don't get what you're saying here. Who are we taxing? The thugs hassling your friends walking home? Homeless people? Are they reliable taxpayers? And as for people who insist on talking at 2AM outside your window, there are noise laws in most places...

"As for police protection, I don't believe I ever advocated reducing it for the poor. I just see no reason to subsidize the stationary at the expense of the mobile."

You said that people don't move to Harlem because they don't want to get hassled by the undesirable locals. I was just saying that those undesirable locals are probably just as undesirable for the current locals as well. I assumed you meant criminal, since the example you gave was your friends being threatened on their walk home - nobody should have to put up with that.

"I just see no reason to subsidize the stationary at the expense of the mobile."

Because you're a caring human being? Because those wealthy enough to enjoy a mobile lifestyle can fend for themselves?

"Believe it or not, there are a ton of people who don't act exactly how economic theory says they maybe should."

All it takes is a few people to behave greedily. And again, how come the condo market in NYC doesn't have these problems?

"Because it was your sweat-equity that made it not very bad."

I think you've got me confused with the cops. I did nothing to improve Jersey City or Harlem, I just live here.

"...you're just not getting your ass thrown to the street because of a market fluctuation."

I think you misspelled "be forced to move to a cheaper apartment in the next 30-60 days".

"I don't get what you're saying here. Who are we taxing?"

The locals that make a place undesirable to live in. You advocate rewarding certain stationary locals who create positive externalities ("make the neighborhood worth living in"). The flip side of that is to punish negative externalities.

It's something along the lines of rewarding the creators of public art (who create positive externalities), while punishing polluters (who create negative externalities).

"Because you're a caring human being? Because those wealthy enough to enjoy a mobile lifestyle can fend for themselves?"

If subsidizing the needy is your goal, then why not target neediness directly, rather than using mobility is a (very poor) proxy?

Using mobility, you hit (non-wealthy) guys like me. I moved once to be close to my job (underpaid postdoc), once to be close to my live-in girlfriend's job, and again last month because she became my ex-girlfriend. Stuff like that is uncorrelated to wealth.

"All it takes is a few people to behave greedily."

A few people acting greedily forces an unwilling owner to sell out? That makes no sense.

"And again, how come the condo market in NYC doesn't have these problems?"

I didn't address this before because it sounds like something you're pulling out of your ass - and you said it yourself, your building was built for condos but used for rent b/c the market for condos wasn't there. What, exactly, do you want me to argue against here?

"I think you've got me confused with the cops. I did nothing to improve Jersey City or Harlem, I just live here."

Did you mug anyone? Sell drugs? Piss on other people's porches? Litter? Pay your rent on time? Spend money in the local stores? Occasionally smile at your neighbors? Call the cops when you saw someone breaking into a car? You don't have to be a hero to make a part of town a better place.

"I think you misspelled 'be forced to move to a cheaper apartment in the next 30-60 days'."

Cute. 30-60 days, that does make things way easier. Gives people plenty of time to find a place they can afford that's really far away from their current job, so they spend less time with their family, or maybe even need to get a new one. Any local support systems? Churches that sometimes helped with groceries, trusted neighbors to help with babysitting, etc, all gone.

"The locals that make a place undesirable to live in."

Okay, you come up with a way to enforce it, I'm all for it. Rent control is easy, and it has roughly the same effect in upwardly-mobile neighborhoods.

"If subsidizing the needy is your goal, then why not target neediness directly, rather than using mobility is a (very poor) proxy?"

Subsidizing the needy isn't my goal. My goal is not kicking people out of their homes because rich people would rather have them.

"Using mobility, you hit (non-wealthy) guys like me. I moved once to be close to my job (underpaid postdoc), once to be close to my live-in girlfriend's job, and again last month because she became my ex-girlfriend. Stuff like that is uncorrelated to wealth."

So, wait, hold on: you want to kick people who are even worse off than you financially out of their homes so that you can afford a bit cheaper apartment now that your girlfriend broke up with you?

"A few people acting greedily forces an unwilling owner to sell out? That makes no sense."

You think ALL property owners in NYC are unwilling to sell? You think ALL builders/landlords are unwilling to build investment properties, and are unwilling to sell to those who will?

"I didn't address this before because it sounds like something you're pulling out of your ass - and you said it yourself, your building was built for condos but used for rent b/c the market for condos wasn't there. What, exactly, do you want me to argue against here?"

You claim that builders are not greedy enough to create new housing in response to market demand, or that there are other monopolistic factors preventing this.

Yet for some reason, they build new condos. Why don't these same factors prevent condo construction?

"Cute. 30-60 days, that does make things way easier. Gives people plenty of time to find a place they can afford that's really far away from their current job,..."

And someone else is now close to their current job and gets more time with their family. Why do the stationary deserve that more than the mobile?

"Subsidizing the needy isn't my goal. "

In that case, why try to equate mobility with wealth? The two are not very strongly related, if at all.

"You think ALL property owners in NYC are unwilling to sell? You think ALL builders/landlords are unwilling to build investment properties, and are unwilling to sell to those who will?"

No, when did I say anything that implied that?

"You claim that builders are not greedy enough to create new housing in response to market demand, or that there are other monopolistic factors preventing this.

Yet for some reason, they build new condos. Why don't these same factors prevent condo construction?"

No, I claimed that the removal of rent control would incentivize some owners to oppose new construction, and that current rent control doesn't disincentivize new building.

"And someone else is now close to their current job and gets more time with their family. Why do the stationary deserve that more than the mobile?"

Seriously? You're seriously claiming that the person who just moves into an area has equivalent roots in the area as the person who has lived there since 1971? Come on, be serious.

"In that case, why try to equate mobility with wealth? The two are not very strongly related, if at all."

Yeah, people moving into expensive areas and bidding up rent prices generally aren't wealthy, my bad.

"Yeah, people moving into expensive areas and bidding up rent prices generally aren't wealthy, my bad."

My impression was that in a housing market without rent control, people are displaced by periodic, incremental yet substantial increases in rent, not a one-time multiplication of rent. If that's the case, then it's not an issue of the poor being displaced by the wealthy. It's people being displaced by others who are a rung or two above them on the economic ladder.

You're also not taking into account poorer people who want to move every once in a while instead of staying in the same place. They end up having to pay the rent control tax each time they move just like the "wealthy." Taxing mobility is rife with unintended consequences.

You're right, I'm not taking the poorer people who want to move into account. I'm not an anti-market housing zealot. The only thing I'm saying is that the human cost of displacement seems to me to be large enough that we should be willing to sacrifice market rents for people who have been living in an area that's becoming expensive to live in. The people who create the value should have the first shot at enjoying that value, it shouldn't be arbitrarily handed over to the wealthy.

To my mind the word "greedy" suggests people who put their own interests above those of others, very often employing the coercive powers of the government to serve themselves and to the detriment of everyone else.

This certainly includes many among the rich and powerful, but I don't think this brush can be applied to developers in general. What is their goal in places where there is no more land to build on, like NY and SF, but to reconfigure it and make it more available (affordable) to more people? Of course they seek profit and some people are substantially inconvenienced in the process, but in the broad perspective it creates value. Whatever its flaws, Manhattan offers more to more people now than it did 100 years ago.

Are they not greedy, those who are renting their spots in these desirable locations and who are using the government's guns to keep others out? As a voting constituency they're leveraging the force of government to serve their own individual interests, seemingly unconcerned about the consequences for everyone else.

I find it ironic that they wield the term "greed" with immunity.

How does letting a person stay in their home in the face of wild market fluctuations work to the detriment of everyone else, exactly? Wealthier people have to pay more for non rent-controlled apartments or commute a bit further - this hardly seems like a great cost to bear to avoid uprooting the families and communities that made these locations desirable in the first place.

Based on your other comments, I don't think wild market fluctuations are really the issue here, are they? If they somehow disappeared, would you yield rent control to accommodate broad market trends?

Rent control only exists in places where wild market fluctuations were displacing people.

Is that a "yes"?

Why would I yield something that doesn't exist? But, sure, okay, yes, I would be willing to yield rent control in the situation where it wasn't necessary to prevent displacement. I guess I miss your point?

I asked if you would yield price controls, which certainly do exist, and I was curious whether wild market fluctuations were pivotal to your position. I'm assuming this is why you haven't addressed the essence of my point.

I haven't addressed the essence of your point because I don't know what it is.

Rent control only really exists in large cities that have experienced wild market fluctuations (in the form of surging rent prices) that displaced renters.

If there weren't surging rents displacing people, why would there be rent control? In that case, I would yield them... but in that case, they wouldn't have existed in the first place. So I still miss your point.

Wild fluctuations != rising prices.

Rising prices are a subset of wild fluctuations. The other part is falling prices. Rent control isn't really necessary for the latter, is it now?

No, wild fluctuations are wild -- your adjective -- continual change up and down. May I suggest a dictionary?

fluc⋅tu⋅a⋅tion [fluhk-choo-ey-shuhn] Show IPA Pronunciation –noun 1. continual change from one point or condition to another. 2. wavelike motion; undulation.

This does not subsume longer-term trends.

EDIT: I want to know if your issue is simply with rising prices. If it is -- and it seems pretty clear that it is -- don't use misleading/distracting/inaccurate verbiage like "wild fluctuations".

Dude, come on. Your contribution to this conversation is really going to be latching onto my use of 'wild fluctuations' instead of 'large price increases' as somehow disingenuous?

[undent]

By my count you've used the term "wild fluctuations" or "wild market fluctuations" in four assertions / reassertions, and this started with my question to you based specifically on your use of this term. Its actual meaning and your intended meaning are certainly relevant to the conversation.

I didn't realize it was such a loaded technical term. I thought it was glaringly obvious from my explicitly expressed concern about whether or not people were being displaced that I was referring to price increases. My bad.

You win the argument over the semantics of two words... congratulations?

It's not a technical term to my knowledge and if it's a loaded term, I believe that would be by your choice ("wild"). This is not about the semantics of two words but about the proper approach to conversation about serious matters. Say what you mean and mean what you say. Be precise. Avoid exaggeration and equivocation. This matters far more than any particular subject under discussion.

So... the proper approach to conversation about serious matters is to harp on someone for using terminology you don't like even though its blatantly obvious from context what they mean?

And honestly, I only ceded the point about the terminology because I thought it would prompt you to finally make your on-topic point. "Fluctuation" can certainly mean "movement from low to high" without being in error - read your own definition. I guess you really don't have anything to contribute, though.

> The main attraction to living in Harlem is the 1-6 trains.

One thing I've thought about is who is paying for the new light rail in Seattle and who will be receiving the benefits of it. It won't be in my current area until 2030, but I'll be paying taxes for it for 21 years. People who move her then get it for free, and since we could say they've been living cheaper elsewhere by not paying for this light rail, they can now bid more for the same area, driving up prices. So the laws should force newcomers to pay up their share of past costs. Otherwise, there is a disincentive to improve our area.

In summary, maybe the current residents shouldn't get rent control, but you new residents should pay plenty on top of rent.

"The argument that rent control prevents owners from maintaining their buildings is pure bullshit. There's not a rent-control law in existence that doesn't allow annual increases sufficient for maintenance. Buildings aren't maintained because the owner sees the opportunity for dramatically increased profits if the current tenant leaves and lets the building fall to shit in an effort to drive them out."

Read that paragraph slowly and see if you can find the causal relationship between rent control and buildings not being maintained. It's easier to find than Waldo...

While true that it doesn't prevent them by force of law from maintaining the buildings, the natural profit-seeking motivations will cause a sharp increase in deferred or eliminated maintenance and improvements, as the landlord wins either way: either they save 1-2% in current expenses or they get to reset the rent to market rents if the tenant gets too sick of their shithole. Seems pretty far from "pure bullshit" to me...

Your comment has exactly the same information, that owners are not prevented but are disincentivized from maintaining their properties in a rent control environment, as the snippet of text you quoted from me. How did you manage to be a sarcastic prick about restating exactly what I said?

Anyways, from the POV of the tenant who is faced with eviction or a gradually deteriorating building, which do you think is the preferable option?

Clearly living in a deteroriating building is better than being evicted.

However, eviction is not the alternative to rent control. Being evicted is different from having your rent raised to market rates, and is different from having your lease not renewed. It may be a legal consequence of tenants deciding not to leave and/or not to pay a higher rent, but it's not like the choice we're debating is eviction vs rent control.

As to my restatement, you claimed that argument X is "pure bullshit" in a short paragraph that shows you clearly understand that argument X is much more accurate than inaccurate. If quoting that paragraph and asking you to observe that contradiction makes me a prick, so be it. (I'll admit to being sarcastic; if you want to call me a prick on the internet over it, I'll still sleep OK.)

I intended 'prevent' to mean, you know, prevent, which is pure bullshit, given that all rent control laws explicitly allow maintenance increases. I'm obviously aware that it still creates the disincentive, seeing as how I pointed it out the very next sentence.

Eviction is the alternative to rent control in the cases where rent control matters - if the tenant can't afford market rates, then they get evicted.

Or, in hopefully more common cases, they do the responsible thing and move out themselves at the end of the lease term, without going through the legal process of eviction.

Okay, fine. They still get displaced.

Markets interpret social engineering as damage and route around it.

I agree, assuming it is a reasonably efficient market where everyone has access to the relevant information.

Many government policies could be seen as "social engineering", be they farm subsidies, tariffs on imports, spending on things like highways, subsidized communication networks like the postal system, education for people other than those born wealthy, meals for poor kids so that they have something in their stomachs at school and can actually try and think, and so on.

And, yes, some of them get 'routed around'. Other policies, whether you agree with them or not, affect the market more than the other way around. For an extreme example, see Cuba, where social engineering routed the market, with results that are disastrous in many ways. Other social engineering experiments, such as universal education up to a certain age in most western countries, seem to have been a net positive for society, even if they are imperfect.

Also, I think that some "social engineering", such as keeping people from starving to death, and ensuring they don't freeze to death for want of a warm place to sleep, at a minimum, should not be routed around.

I meant social engineering in the form of manipulating markets.

Import tariffs and subsidies are direct market manipulation, and the market doesn't really route around them. Rather, they tend to wreck markets, which is one reason many developing countries continue to press the US and Europe to end farm subsidies - it's wrecking their export markets and hurting their farmers.

Governments, when they want to, are perfectly capable of interfering with markets and even destroying them. I am not a libertarian and do not believe that all intervention is harmful, but disagree with your thesis that markets are able to route around governments. Yes, in some cases, but I think that governments have the upper hand: they have guns and police and stuff, like the libertarians love to say.

I think the "law of unintended consequences" is perhaps more solid ground with regards to governments and market manipulation.

Tarrifs are actually a particularly good example of markets routing around government interference. Routing around tariffs is called smuggling, and has been a huge business as long as there have been governments.

I wasn't claiming, incidentally, that markets were totally immune to government interference-- just as networks are not immune to damage. Just that markets will always find whatever room you give them.

I'd bet that smuggling is a tiny trickle compared to what the market could provide with many commodities (wheat, cotton, corn, stuff like that, not diamonds and rhino horns), meaning that the market is not effectively routing around it at all.

False.

In Colombia, 4.5 kg of coca paste, which will yield about one kilo of cocaine, fetches about $4,500. On the streets of the United States, selling this kilogram of cocaine will earn between $200,000 and $600,000. (http://www.colombiajournal.org/colombia150.htm)

Claritin 10 mg Consumer Price (100 tablets): $215.17 Cost of general active ingredients: $0.71 (http://www.rense.com/general54/preco.htm) normalized to 1 kilo ... cost $71,000, value $21517000.00

what did we bet again? :)

Huh?

Your math is off by a few orders of magniture. 100x10mg = 1g, so 1 kg should be 1000x$215.17 = $215,170.00, for an ingredient cost of 1000x$.71 = $710.

Also, I can buy 100 x 10mg Clarityn for $65, but I won't, because I can get 100 x 10mg Mildin (exact same active ingredient) for $35.

Edit: Oops, forgot to add a point.

Your point holds true, your calculations are just for 100 kg instead. Thing is, medicine isn't invented, manufactured sold or bought in a free market. Another difference between Clarityn and coke is that there is a very elaborate framework in place to make sure your pills are good - if your dealer dilutes your coke with flour or ratpoison, you're screwed and nobody cares. If there was no demand/requirement for that protection, I'm sure we could get our pills for around $1.

Ticket scalping also involves equally fun acts & regulations. Luckily the laws are changing (for the better) which is one reason why it was a good idea to invest in us :-D.

Ticketing has been a weird market. There is a strong expectation among consumers that there is a 'fixed price' (face value) and that anything else is 'unfair'. Demand is constrained completely by a venue's capacity leading to all the obvious problems for over-subscribed events.

We deal with this every day. An interesting trend is that we've seen more people buying from ticketmaster (since events are selling out & season ticket sales are down) even when tickets on the secondary market are cheaper and "below face".

It's ridiculous how obsessed people are with face value even when it's arbitrary and doesn't really mean anything; it gives them a sense of fairness.

Also, venues have incentive to sell out as higher margins are associated with concessions, alcohol sales and merchandise. Teams might tell the newspapers they hate the secondary market, but in reality, the majority of them love it. Some even cater to it.

That is incredible. I knew the feeling was strong but to actually influence buyers to pay face value over a discount wasn't what I expected. I guess I was more cynical but the instinct is very strong. It is probably a remnant from when there was no other reasonable option. Why ticket reselling became so vilified I always put down to fan enthusiasm (and therefore irrationality).

This is an important point that the author of the article seems to have not noticed. His whole argument is based on the idea that rent control leads to a decrease in supply, with a resulting hike in price due to unmet demand. But I wonder just how many apartments can really be built in Manhattan? Or in intra-muros Paris, or in the City in London...

Manhattan could have 3x the number of apartments by increasing average building size, granted transportation would become an even larger problem. However, when you increase the cost to live somewhere you decrease the number of people who want to live there so it's probably not a problem.

IMO rent control is best when it limits how much above inflation you can increase rent per year. At 3.5% over inflation you can basically double the real cost over 20 years, but people can plain ahead and know they will not be forced out next year. The major problems seem to occur when rent suddenly goes up 20 percent with little notice or fall significantly below market.

PS: London and Paris are less developed than Manhattan, but they seem to want to maintain their historic look which limits growth. DC has started building down because they can't increase building height which is extremely expensive.

Given that there are 113 cities in the world with greater population density than NYC, I'd say it would be possible to build more housing. http://www.citymayors.com/statistics/largest-cities-density-...

But rent control is probably not the whole story. I'm not familiar with NYC laws but I'm sure there's a lot of regulatory red tape besides rent control that keeps housing scarce and expensive.

Don't make the mistake Manhattan or NYC with the New York Metro area (used in your link).

Manhattan: 1.6M people, 23 sq mi, ~70K/sq mi (more than double #1 on the list)

NYC: 8.3M, 305 sq mi, ~27K/sq mi (would be #2 on that list)

NY Metro: 17.8M, 8700 sq mi, 2K/sq mi

So while NY Metro could definitely use more housing, you're talking about CT farmland, the Poconos, Hudson county, etc.

Tarifs are indeed an excellent example. Another great example is how too much red tape forces businesses underground in the developing world.

The economist Hernando De Soto http://ild.org.pe/en/home has done studies in many different countries proving this and theorizes that this is one of the main reasons poor countries stay poor.

> For an extreme example, see Cuba, where social engineering routed the market, with results that are disastrous in many ways.

Disastrous for whom? Compared to what? Cubans have a high literacy rate, high life expectancy, low numbers of extreme poor, etc. Indeed, the country has done much better than similar Caribbean/Latin American states which followed different political paths over the past few decades. The government's actions shouldn't be whitewashed, but nor should Cuba's accomplishments be dismissed with vague platitudes about the glories of the market.

Low numbers of extreme poor? You have followed a bit too much propaganda and not enough reality it seems.

The only country that is worse off in the entire region is Haiti. Probably more than 90% of the population is in extreme poverty. Worse than this Cubans was actually better off than most Europeans before Castro. They may have more doctors per capita now a days, but there is no food and no medicine.

> The only country that is worse off in the entire region is Haiti. Probably more than 90% of the population is in extreme poverty.

This is completely false. Haiti is indeed much much worse off than the rest of the region, but Cubans have higher purchasing-power parity than Jamaicans, Guatemalans, Nicaraguans, Hondurans, Salvadorans, and perhaps a few others, and the country is generally much more equal most Latin American countries, so the bottom couple of quintiles in Cuba do better than their counterparts in Costa Rica, Panama, etc. (or I believe than poor Mexicans, for that matter)

It's still overall a poor country, and has many social, economic, and political problems—attributable to many factors, including ineffective leadership, widespread corruption, the US trade embargo, etc.—but the claim that all of Cuba's problems are the fault of the turn away from markets is so oversimplified as to just be wrong.

> Cubans was actually better off than most Europeans before Castro

This is bullshit. In the 50s, Cubans did a bit better than Southern and Eastern Europeans, but were significantly behind Western Europe.

Most Cubans were were not very well off in the first half of the century, and incomes (and equality particularly) rose substantially between 1960 and 1989. Then after the fall of the Soviet Union, there was a precipitous economic decline in Cuba between 1989 and about 1993 or 1994, which took 12 years to fully recover from. Present-day Cubans have higher real incomes than they ever did in the past, however.

Listen, I don't really want to have a protracted he-said-she-said about the state of the Cuban economy or the precise definition of "extreme" poverty. My point was merely that davidw's off-hand remarks about the topic were trivializing and unproductive.

Cubans do not have higher purchasing power parity that Jamaicans, Guatamalans and all the others you mentioned. This might be true if there was anything to purchase but there isn't. If I start paying myself with wads of Monopoly money I will also have higher income than I have ever had before, it is still monopoly money that doesn't work outside board game.

No one is starving in Jamaica and most other countries in the region. (While I have not had the pleasure of living in Cuba, I have lived in Jamaica and Panama and travelled extensively in the region. Both have very high levels of education, health etc.)

Cuba was according to 1960 ILO (The International Labour Organization) number 8 world wide for industrial salaries and number 7 for agricultural salaries. While there was not full literacy it had very high rates for the region. Health was also amongst the best in Latin America. For more about this see http://www.fiu.edu/~fcf/cubaprecastro21698.html

Castro has done a great job of selling his miracle revolution. Most of what you hear in hollywood movies and popular press is fabrication and never questioned. Don't believe it.

I think this applies if the definition of "markets" includes dishonest and corrupt behavior, which may well be a something you cannot remove easily. In the case of rent control, corruption occurs in both the market and the social engineering.

I agree completely. Unfortunately the outcome is normally very different when the market has to route around it.

Rent control here in SF only affects people in older buildings. One of many unintended consequences of this is the ridiculous state of Tenderloin. Back in Denmark where I own an apartment, rent control forces me to only be able to rent it out as a corporate apartment to foreigners. The official rent would pay less than quarter of the mortgage. No wonder it is hard to find a good apartment in Copenhagen.

An example is the market response to the generations of social engineering started as the New Deal, which eventually led us to the very distorted issues we now see in the financial markets.

Another example are the costs of health care in the US, that were caused directly by the deductions for employers created in the 40s.

Instead of an efficient market, where people picked the most efficient insurance for their situation, it became an arms race of who could offer more benefits together with a bureaucracy to make sure their insured (who don't pay directly) don't abuse the system.

Let Richard Branson or any other smart entrepreneur at the health system without the handicap of social engineering and it would be fixed within a year. Rather than fixing it all signs at the moment point towards further regulation and thus further distortion.

The market will always route around social engineering no matter to what limits the regulators attempt to control it. The outcomes are rarely as good as if the market was just left to do its job. Of course when this happens like it has so obviously in the current crisis, people talk about it being the fault of the market run wild and want to bring in more regulation, when the regulation it self was what caused it to go wild in the first place.

> Let Richard Branson or any other smart entrepreneur at the health system without the handicap of social engineering and it would be fixed within a year.

Where "fixed" means that unprofitable/poor people die of or are crippled by easily and cheaply treatable diseases. That's what a pure market solution would do. Once you start including those people, it's "social engineering".

Health care is no different than any other service. If you are able to increase the availability as well as lower the price it helps everyone. Including the poor.

There's always going to be a cutoff point, though, where people are unprofitable. Introducing some market oriented reforms might improve things, but you simply can't get around the fact that in a purely profit-oriented system, some people are not worth the money it would cost to save their lives or reduce their suffering.

There are plenty of products where the market drives prices down, but doesn't make them free or available to everyone, and in most cases that's just fine. Some people and some societies take the view that in some way or another, things like food, shelter, and yes, at least basic health care ought to be available to everyone, even if it is not profitable. That's "social engineering".

True. I don't think anyone would object to helping the 1% of people who are actually in that category. The problem is that interest groups hijack the programs in order to win handouts for those who don't really need the programs.

Where does this 1% come from? As a back of the envelope calculation, I would guess that almost all senior citizens are unprofitable to insure -- that's way more than 1%. Even if I'm off by a lot, it's still way more than 1% -- and I haven't addressed the rest of the population.

Only unprofitable if you decide that everyone deserves the latest, greatest, cutting-edge medical care.

Healthcare prices have come way down in the past two decades, the issue is that nobody wants 1990 level care, which could be administered at a fraction of the price of delivering all of the latest advancements.

The "healthcare costs are rising" meme is false. It's like saying "the price of supercomputers is rising". In non-inflation-adjusted dollars, the top-end supercomputer from IBM costs more than the top-end supercomputer from IBM cost 10 years ago, but the price per unit of computation has gone way down.

Healthcare prices have done the same thing, but everyone wants the best possible at all times.

(I want this too, but at least I try to appreciate that what I'm getting today is significantly better than 10 years ago)

Take a look at a list of what is considered an uninsurable condition for personal health insurance. That alone would hit more than 1% of the population.

Do you happen to have a list of these?

I think it is state by state, but quite possibly varies from company to company. I found this list (which is similar to ones I've seen before), which is for Ohio: http://www.healthcarereform.ohio.gov/HCRDoc/RepresentativeLi.... Some of the ones on the list are pretty shocking and many of them are hereditary.

Health is very different from other services, profit should not be the goal. Business does not attempt to help people, but to maximize profit, which does not necessarily mean increasing availability or lowering prices at all. It might be more profitable to dump the lower income people and jack up the prices on those who can afford it.

Unlike other industries, getting service is often a literal life or death issue, you have to pay or you might die; morally this makes health care very different from other industries.

I agree with you, but it's not that black and white. Insurance companies are usually the ones paying, not the individual. As such, they have a lot of control over the price (especially in the case of medicare). While it might be life or death for the individual, it's not for the insurance company.

Which is a big part of the problem, we've put an entity between doctor and patient who's motive is profit rather than helping the patient. Insurance companies figured out a long time ago that the best way to profit was to deny claims and avoid paying in any way they can.

An entire sub-industry has popped up around coding claims correctly because doctors have figured out what they can and can't get paid for, the effect being the insurance companies now basically dictate treatments rather than the doctor. Frankly it's extremely fucked up and it's caused entirely by companies seeing the most profit.

Can't argue with that.

Profit is the world's way of signaling that you are doing something in an efficient, effective, and long-term sustainable way.

So, given that health care is one of the most fundamental individual needs, profit most definitely should be the goal.

But health care is not the most fundamental need -- that would be food. I find it puzzling that people don't apply the same arguement to this need. Why not say that profit shouldn't be the goal of the food industry? And that supermarkets are immoral for making a profit at the expense of hungry people? Well, because it's clearly nonsense, of course.

But I wonder if it would seem like nonsense if we lived in a world where there was no free market in food supply. We might worry that greedy corporations would only be interested in serving expensive foods to rich people.

The problem with that viewpoint is it assumes people are inherently good; they aren't. When profit is the goal, people suffer. I find the idea that seeking profit automatically creates the best good rather naive and idealistic.

Of course people don't apply the same argument to food, food isn't scarce for most of us and few have problems acquiring it and the ability to produce it can't be easily collected in the hands of a few, anyone can grow their own food.

Anyone cannot operate on themselves and perform some life saving operation, and while those who can certainly deserve to be compensated greatly for that ability they walk a fine moral line knowing their product, or the refusal to provide it, will directly kill people. Doctors are much more like firemen and policeman that businessman. Society has certain expectations of them serving the greater good of the community and helping people when they're in need.

The free market is not the cure for every ill and seeking profit is not, and should not be the goal of every job. Greed is not some inherently good moral trait.

In almost all cases profit helps us all. A free exchange benefits all parties. You have something I want, I have something you want.

When this situation gets distorted through monopoly or other forms of regulations it is generally speaking bad for everyone.

Greed is good. My greed is good for you and your greed is good for me. This is the most fundamental philosophy of entrepreneurship albeit said using a word most people through years of indoctrination think is bad.

This is also why I don't like the term social entrepreneurship. Any entrepreneurship that isn't kept a live through some sort of corruption or force is good for society as a whole.

The world isn't that simple and by the way, monopoly is a natural outcome in a free market system exactly because it doesn't always work. It breaks down, that's why we regulate it. The only place the free market actually works is in libertarians imaginations because they think Atlas Shrugged somehow reflects reality.

You do live in a strange world very distant from the one that most of us readers of Hacker News lives in.

Name me one real monopoly that isn't enforced through "social engineering". A free market may have ocasional dominant market leaders like IBM and MS in their time and Google today. None of them are or were monopolies as better technologies and startups will always (lets repeat that word ALWAYS) come around as long as they are allowed.

True monopolies like the telecoms monopolies in many countries are not outcomes of free markets, but rather more or less corrupt deals between governments and a little group of businesses. Most often the monopoly is argued as a way to protect the consumer.

The free market works wonderfully in many different places in the world and in many different aspects of our daily life. Banking, telecoms and health care are not examples of this as they are heavily regulated. Most of us readers of hacker news are doing what we are doing because of the wonders of the free market.

If not we would be marching fists held up high to Washington demanding the creation of the National Department of Internet Services, to give us lifelong employment. Yet we aren't doing that. The free market works great even though our chosen field has been hit by many different bubbles and failures. The market has picked right up with no real government interference (except for financial and gaming fields) and will continue to improve.

Spare me the old marxist marching chants (I should know what they sound like as I used to be one).

No, I live in the real world where unrestrained free trade is bad because people seeking profit are not inherently good when they acquire too much power. See Standard Oil, John D. Rockefeller and some history about why we started trust busting in the first place.

Your view that the free market works wonderfully if left alone is simply naive. The real world is simply more complex than that.

In fact, your belief that there even is such a thing as a free market is naive and ignores the very real fact that corruption is inevitable and businesses seek out regulation to protect themselves from competitors destroying the very free market they so claim to love. Any truly free market is simply a temporary state of existence destined to die as soon as corruption takes hold, which it always does.

You yourself just answered why regulation can't ever work correctly: "The real world is simply more complex than that."

As a programmer you should know that extremely complex systems like the world can not ever be managed by a small group of super clever beings.

This has been the fallacy of each and every of "I'm smart you're not, I'll run things" philosophies originally invented by Plato and perfected by Marx.

The world is a complex system managed by 6 billion autonomous beings. Together these 6 billion autonomous beings for an extremely smart mega intelligence. While you, I and our "leaders" may be smarter than the vast majority of these individuals. Together though is another story.

I agree with your point about corruption as long as we assume the presence of a regulating entity. Corruption is essentially the markets way of calculating a price on overcoming social engineering.

But without regulators in the first place it would not exist and would simply be just other transaction between two or more parties.

You've got it backwards -- the very reason that food is plentiful is that there is profit to be made in growing and selling it.

Your statement:

"food isn't scarce for most of us and few have problems acquiring it and the ability to produce it can't be easily collected in the hands of a few, anyone can grow their own food"

is directly contradicted by the millions who starved to death when food production was collectivised under various profit-hating communist regimes.

A statement I'm making about us in the present, is not contradicted because at sometime in the past in some other country under totally different conditions it wasn't true.

That may serve as a counter example, but it doesn't contradict what I said. America is not Russia and just because it went down that way for them does not mean that's how it'll play out for us. Knowing some history is one thing, trying to predict the future from it is another.

You seem to be hung up on extremes, that's not the real world. If I say the free market isn't the solution to every problem it doesn't imply I think it's the solution to no problem and suddenly I'm a communist.

Don't worry -- I didn't call you a communist. I can cite counter-examples without name-calling.

I have sympathy for your point of view. But I worry that attempting to remove the profit motive from healthcare could result in potential doctors choosing different professions.

A problem with society having "certain expectations" of doctors - or anyone else - is that extra expectations (above "do a job so that trading with you helps the world") are a disincentive from getting into that profession.

All that said, I suspect that a purely free-market healthcare system would be worse for the very poor than a socialist one like England (unless the culture had a particularly enthusiastic charitable ethic. Maybe that would develop? Does government charity crowd out private charity?).

One possible solution would be to create a free market system, with some government guarantees for those who are unable to pay themselves. That has some problems of its own, but it at least attempts to capture the good bits of a free market system, while not leaving the poor to die in the gutters. Of course, this is more complex than the comment I originally replied to about "just let some entrepreneur take care of it".

You have to be kidding. Regarding food production, go read the Omnivore's Dilemma, go read up on issues with food patents, go read up on the costs of raising meat (which, in effect, only the wealthy can afford to eat). You are in a deep, delusional fantasy if you think the world's food industry is a paragon of efficiency, effectiveness, and long-term sustainability.

"the costs of raising meat (which, in effect, only the wealthy can afford to eat)"

I guess the 99 cent hamburger must also be part of my delusion, then.

Yes, it is, actually. It's amazing that you would cite McDonald's while arguing against a form of government subsidies. Seriously, go read the Omnivore's Dilemma.

I wish I could upvote this comment more than once -- I think it is dead on.

Profit is the creation of value. If there's no profit, then there's no value added.

Profit works great for food, shelter, clothes, heat, and most every basic human need.

I think what really messes up the healthcare market is that the more that technology progresses, the more sophisticated and expensive treatments we discover. The cost and effectiveness of treatments are both soaring, yet people whose means are not rising as fast feel entitled to the best health care no matter what. I think as technology advances, things will only get more distorted until we realize that everyone should only get what they pay for (or what their insurance that is correctly priced by the market will cover and pay for.)

> Profit is the creation of value. If there's no profit, then there's no value added.

I hope you mean profit in the non monetary sense then. ie profit meaning to increase someones standard of living?

Charitable workers don't make any money and I'd say they add alot of value to other peoples lives.

Health is no different than other services in 99.9% of the cases. We should not optimize the entire system for that 0.1% of cases. The market optimizes everything for the better if it is allowed.

For the exceptions, use exception handling also known as charities such as non profit hospitals and health centers who already donate health care to the poor.

The increased efficiency and lower cost of a non regulated approach would benefit all and make it easier and cheaper to provide good care to everyone.

> The market optimizes everything for the better if it is allowed.

Baloney. This is a belief, not a fact.

It is a fact that any transaction between two people that is not distorted in any way by outside parties will leave both parties better off.

No, it isn't. You're making the huge assumption that both parties are equal in the exchange and one party isn't using force on the other. Again, typical libertarian fantasy assumes everyone is nice, wake up, they aren't.

It doesn't require anything you name here except the absence of force. No libertarian thinks or assumes everyone must be nice and no libertarian thinker has ever predicated his argument on such.

You know, there actually have been some highly intelligent and thoughtful libertarian thinkers, far from whatever fantasy you may have.

> The market optimizes everything for the better if it is allowed.

Such as financial products? I think we have enough evidence right now that people are not mature enough for a totally free market.

You are talking about one of the most highly regulated markets in the US. It's been at least 100 years since the financial markets where free in the US.

You do realize that this whole thing came crashing down because of the very lightly (if any) regulated CDO's right?

You don't think the mortgage market had anything to do with it? As far as I know, the problem is not that CDOs trade at a discount to their underlying value; it's that the underlying value has dropped.

It's a bit more complicated than that: http://www.portfolio.com/news-markets/national-news/portfoli...

I am pretty sure that was implicit in my comment. I have read the Lewis piece, which is a great way to get an overview from the perspective of the half-dozen folks willing to give Lewis an interview. I'm not saying that this was entirely due to government intervention -- just that the giant tax incentives, aggressive government market manipulation, and $100B+ portfolios long mortgages and short puts created by government agencies.

I seriously doubt that the situation in the Tenderloin can be blamed squarely on rent control. There's only a small part that's genuinely scary, and that seems almost institutionally embedded at this point. Rent control or not, you're going to have a hard time convincing the affluent to move in next to the SRO's, liquor stores, porn shops, homeless centers, and methodone clinics. I think geography is to blame more than anything - it was completely destroyed in the 1906 earthquake, it's not downtown, not on a hill, and not near the bay (where the wealthy wanted to be), but it was close enough to all these things that the lower class that worked for and entertained the wealthy could set up. Throw in the flight to suburbia that hit most cities after WW2, and it's pretty understandable why that part of town is like it is.

Perhaps, but the rerouting has a cost, which often lands on those least able to bear it; in the case of rent control, the cost lands preferentially on poor tenants in the form of higher rents. And even costs that land on the rich make us all poorer in the long run.

Because of the harm done, it's still worth noting that rent control and other "pro-tenant" law is rarely good for tenants, or indeed anyone other than sometimes well-meaning but economically illiterate busybodies.

Yes, with all sorts of things.

The same can be said of workplace safety regulations, minimum wage laws, child labor, drug safety, environmental laws, and on and on.

The article seems to ignore one thing: rent control helps people stay together, and in doing so helps communities stay together. The examples they give of communities with rent control and higher rents are places I'd want to live in. They have real community fabric. This counts for something, though I'm not sure how much.

While I'm sympathetic to the goals of empirical studies of this type, I doubt their utility: if they find that rent control increases rents, the evidence is right; if they find that rent control does not increase rents, the evidence is wrong.

The reasons for this apparent rejection of empiricism are simple:

(1) Empiricism, so successful in the exact sciences, relies on clean evidence and controlled experiments, but evidence in economics is necessarily messy, and controlled experiments rare.

(2) Given extremely reasonable and general assumptions (buyers tend to buy more of something if its price goes down, producers tend to produce more of something if its price goes up), the connection between rent control and rents is a theorem, not a conjecture. (See any introductory economics text for a proof.)

Doing an empirical study to test the statement "Rent controls increase rents" is kind of like measuring the length of ladders leaning against buildings to test the Pythagorean Theorem. You're likely to find that Pythagoras was right, but if you don't it's probably a flaw in your measurements rather than a mistake in the proof.

I have a vagrant living in my NYC apt building that pays $75 a month in rent and eats out of the garbage. He has no electricity or running water. When he opens the door to his apt in the summer the rest of the building gags. There are two other units that pay $75 dollars; a nice old couple and a loony chain smoker with bad BO.

At a 7.5% annual increase from 1971, they would have originally been paying just over $5/month (that's about $25.34 in today's dollars). I'm not an expert in NYC rent prices in the early 70's, but that seems absurdly low. Maybe it's that cheap for some other reason?

The rent amount is gossip from the super. The other stuff is first hand, and probably adds a little "control" to my rent as well, but believe me not that much.

It isn't hard to think of many solid, rational reasons to oppose rent control. That is, until the wealthy bid up the cost of living in your neighborhood.

I have a friend who says: "Hell will be full of landlords."

She is a master's degree holding architect who rents.

As the son of a former small-time landord (teachers by day, landlords of 1 single family and 1 duplex house), I can assure you that those landlords will have PLENTY of tenants to rent to down there!

Rent control is one of the many well-intentioned Government projects that doesn't achieve its goals.

Government needs to focus more on 'social technology' (Karl Popper's term) -- on how to achieve the goals it aims for -- and less on arguing what the goal should be and then assuming that making it happen will be the easy part.

To those who disagree, I would appreciate to hear why.

Rent control does more in New York. It means that if you are in a rent controlled apt they will increase your rent to the maximum allowed! Always! And they reject people if they don't earn enough money to actually have their rent go up by the maximum amount (rent cannot exceed 20% of your annual income).. And poof In fact I've been hearing that in non-rent-controlled apartments in NY the inflation rate for rent is smaller than for rent controlled apartments.

I'm not real clear on why a 1997 article from a routinely discredited right-wing think-tank on this issue is Hacker News....but since we seem to be playing "cite old biased articles", here's the sordid history of how unregulated landlord greed drives out affordable housing:

http://www.tenant.net/Community/history/hist-toc.html

Routinely discredited? Right-wing? Cato is clearly libertarian. I suppose that tends to the right, but it's not "right wing" in the traditional sense.

socially liberal & fiscally conservative != right wing

you are correct sir, if you have two variables, you get a whole plane of possibilities, not just a line ;) I guess its too late to teach basic math to the masses though.

When the squares actually visit LineLand though, who do they hold their noses and vote for? My guess is that they generally vote Republican (like, for instance, Milton Friedman), or did at one time. Perhaps that's changing?

Cato actually has done some studies on the libertarian vote. It went overwhelmingly for George Bush in 2000, but swung about 20 points democratic in 2004. I'm not sure that they've updated the study for 2008, but my gut (and surveys of self-identified well-known libertarians) tell me Obama won the vote.

If you like market economics, don't care if your neighbor is gay, and don't feel like occupying countries on the other side of the world, there is really nobody pandering to you. You tend to move around.

Edit: Here's the paper comparing the 2000 and 2004 elections that I mentioned

http://www.cato.org/pub_display.php?pub_id=6715

Kerry did 18% better than Gore among libertarian voters, despite not having a libertarian bone in his body. Bush won the demographic in both elections, but lost 13% between 2000 and 2004, for a 31 point net swing.

Interesting. It would be fun to have numbers for the past, too, to see how much 'bouncing around' there was, and what it could be correlated with.

http://www.cato.org/pubs/pas/html/pa580/pa580index.html

page 13

Keep in mind that these are "soft libertarians", people that consider themselves economically conservative and socially liberal, but don't necessarily go around trolling message boards with anarchist philosophy.

2004 seemed to be unusually bad for the republican percentage of the libertarian vote. The only worse year was 1992, when Ross Perot, Clinton, and Bush I all got a third (well, I think 2008 will be bad, too).

I don't see that "libertarian" entails "anarchist" or even "trolling message boards."

Examples of how Cato has been discredited?

Cato tends to be a little simplistic in their models. For example, with immigration they say it has no ill effects. Well, in the long-run I'd probably agree with them (save for the fact that natural resources are being split among more people which I think would be made up for in other ways that they cite). In the short term, it takes time for economies to adapt to changing tastes, changing spending patterns, essentially the changing makeup of the marketplace. And that does cause friction in the short term.

Likewise, as much as I defended the abolition of rent control in MA in my earlier comment, it caused a lot of short-term friction that was really chaotic. A better plan would have been to phase market rent in. Landlords had been under rent control for so long that when it was lifted, prices could double or triple. BAD! If you, however, say for the next 10 years you can raise prices by up to 15% per year and then in the 11th year you can charge whatever you want, you avoid the friction that occurs when sudden changes happen.

I'm not someone who thinks we should defend dying industries or mess with pricing a lot, but market economies don't do well with instability. Instability randomly reallocates money from some to others. For example, if you lend me money at a 20-year fixed rate of 7%, the future could randomly reallocate money between us. If interest rates drop, you get lots of money. If interest rates rise, I save a lot of money. Heck, if inflation reaches 9%, you're loosing tons of money! Random reallocation is a bad thing and stability ensures that random reallocations are kept to a minimum.

I dislike the American auto industry, but I'd like to see its death be a lot slower than those who are strictly libertarian. What do you do with a million workers? Well, plenty, but you don't do it fast. However, if the number is in the thousands of workers per year, its easier to find ways to employ them as new industries get created. Heck, even other companies might want to buy pieces of the American auto industry, but can't afford the whole thing. Honda and Toyota might see this as an opportunity to get a new plant or two. Tesla motors might be able to raise the capital in a few years to do more. But an all-at-once situation just creates friction and chaos.

Maybe Cato is right and I'm wrong, but I appreciate stability. I appreciate knowing that everything isn't coming to an end even if I'm loosing out on 5% for that stability. Discredited (as the original author claimed) is harsh, but I think economics is a little more nuanced than any pure philosophy.

I see that you disagree with their viewpoint, but I don't think that you "discredit" them.

Immigration: I don't think you really disagree with Cato. Arguing that immigration restrictions should be eliminated does not necessarily entail that one believes the restrictions should be lifted all at once.

Rent Control: Rent control causes higher prices for everyone except those who happen to have a rent-controlled apartment, because it discourages improvement of existing properties and discourages building new properties. It also encourages over-buying. Someone may pay $2000/month for a 3 bedroom apartment that has been rent controlled since the 1970s, but only use 1 of the bedrooms. That person could find a 1BR apartment within budget w/o rent control, and someone (maybe 3 room-mates paying $1500 each) could share the 3BR place. Overall this is a more efficient distribution of resources, the benefit of which occurs immediately. I don't really feel sorry for someone getting a huge apartment for way below market price.

Interest Rates: I'm not sure I understand what you mean, since interest rates vary based on unpredictable Fed action and unpredictable market forces all the time. Banks (lenders) hedge against this by buying/selling instruments to even out their Fed risk and by buying insurance to hedge against many of the other risks.

American Auto Industry: What makes you think there would be a chaotic "all at once" situation? That is part of the fearmongering on the part of the firms seeking rents (and the politicians they have bought). Recall how Dubya told everyone that if the US didn't invade Iraq there was an "imminent threat to US national security"? The automakers used that exact strategy to obtain a bailout.

Stability is an interesting concept. It's the essence of "conservatism", wanting to preserve the status quo. Marx warned about this in his manifesto. Anyone who has managed to get a leg up will fight to preserve it at the expense of productive change.

In today's world, this includes the people who thought they were investment geniuses because the value of their home increased 40% the year after they bought it, it includes the overpaid workers who convince themselves that a hard working person immigrating to the US is somehow unamerican, it also includes the politicians who enjoy the huge donations they have been getting from the financial services industry and don't want to see endangered.

So if you put aside the "I want to keep my small advantage at all cost" conservatism, and you do away with the Bush-style fearmongering about imminent threats to "stability", what you find is that the world really isn't all that scary, and often times the meddling that is done to try to prevent "instability" actually does far more harm than good. The Iraq war is a case in point.

Note that "stability in the middle east" is the motto of those who want to go and turn it upside down with bombs and nation building! The same applies to domestic policy.

Just addressing the on-topic portion of your comment (not that the rest wouldn't be worth commenting on, just not enough time or energy) - I really don't understand your criticism of rent control.

"It causes higher prices for everyone not under rent-control."

Yes, but that's almost the whole point of rent control - people aren't being displaced by the folks bidding up the price of all the other apartments to absurd levels. The article makes it sound like without rent control everything stabilizes into this beautiful bell curve with housing for everyone, but it doesn't actually provide any evidence for this (other than showing less populated and geographically confined cities without rent control).

"Discourages improvement of existing properties"

Because the properties are certainly more important than the people living in them, right? I mean, our goal as a society should be as many improved properties as possible.

"Discourages building new properties"

This one baffles me: new properties aren't subject to rent-control in the vast majority of cases. It seems like rent-control is almost a direct stimulus to build new properties.

"I don't really feel sorry for someone getting a huge apartment for way below market price."

What about feeling sorry for someone who has made their home somewhere for 20+ years and is now getting shoved out because they made a tv show that was set in the neighborhood and a bunch of young overpaid professionals want to play cool for a couple of years?

The point is that rent control (over time) drives up the price of rental dwellings, a phenomenon which greatly harms the poor. Here's why:

In many cities, new buildings are exempt from rent control if they are "luxury" buildings. So the supply of luxury housing increases. Meanwhile, the incentive to build non-luxury buildings is greatly diminished b/c those buildings fall under mandatory rent control. Also, there is a bigger incentive to turn buildings into condos, etc., to avoid having to deal with rent control. Not sure where you heard that new properties are exempt in most cases. This may be due to the fact that most are luxury buildings.

So there is a finite amount of rent-controlled housing, and since it's such a great deal, the landlords have little incentive to improve the fixtures, furnishings, etc. They will rent the place without improvements, so there is no reason to spend the money on them. Thus the places deteriorate over time and begin to become more and more slumlike.

Rent control also encourages over-consumption of housing space. My 3br apt example above explains one example.

Without rent control, supply and demand can function properly. Maybe this means that cheaper housing is located a bit further from the highest rent area of a city. More likely, if there is demand for cheaper housing, someone will figure out a way to build it. The huge number of condemned buildings in major cities is evidence of the resources that have been completely wasted b/c nobody had the incentive to improve the places enough to make them liveable!

If you rent, it's not a permanent home. This has many advantages -- if you get laid off you can easily move with a month's notice. You don't have to worry about long term upkeep, you don't have to worry about hiring a realtor or trying to recoup your investment if the market dips. The other side of the coin is that sometimes prices change to reflect other realities. An increasing price probably means that the area is thriving and (surprise) the space is actually worth more. Once you get into declaring that things should be priced by public officials rather than based on the market price (what they are actually worth to someone else who's willing to pay for them) you are stepping onto a very slippery slope.

New properties are exempt at least in NYC and SF, the main cities the article harps on. I don't know about elsewhere.

A place deteriorating over time happens, but from the POV of the tenant whose alternative is getting booted to the curb, this seems like a reasonable tradeoff, doesn't it?

The over-consumption of housing space is a pretty lame argument, and it's contradicted by the point that other people are making about a black-market rising up for illegal subletting & etc.

"Supply and demand functioning properly" is a bit heartless in this context, don't you think? I mean, we don't exist so that some theoretical system can work in a way we can easily describe. When people get kicked out of the place they live, that has a cost - even if we haven't figured out how to put a price tag on it yet. I'm more than happy to say "screw the newcomers" in favor of the established citizenry.

As for rent control being a slippery slope: this is bullshit (sorry). Despite free-market dogma to the contrary, reasonable government policy is not the enemy of the good. See: the recent credit crunch. What would something similar look like for a community? Let's see: an area of town becomes trendy, young folks with lots of disposable income bid up the prices like mad, all the old tenants leave, an economic downturn hits or the neighborhood loses its trendiness, all the young folks who have no real ties leave, and then...

I have no problem with a program designed to subsidize housing for people with tax dollars. If the democracy decides that people with attributes x, y, and z deserve a $2000/month housing subsidy, that's fine. It's no different than the subsidy given to mortgage debtors (tax breaks), parents (the child tax credit), electric car owners (tax credit), student loan debtors (student loan interest deduction), farmers (direct subsidy), etc., etc.

But consider how paternalistic any of these programs are compared to simply giving the person cash to spend on whatever he/she wants.

Also, the above programs are taxpayer subsidized so the burden is distributed across all taxpayers. Rent control, on the other hand, screws over the building owners only, effectively making a single building owner personally provide a $1000+ subsidy to a hundreds of people. Compared to a broad, taxpayer-subsidized program, this is equivalent to a 70% additional tax just on landlords, this is on top of that person's fair share of income and payroll tax already being paid!

The biggest problem, though, is the distortion caused by rent control... which causes all of the problems in my above post.

To make obvious the issue of price controls leading to shortages, consider this: During the 1970s when Nixon instituted price controls on gas at the pump, there were massive lines outside gas stations. This was not due to the "evil Arabs" withholding gas. It was due to the price controls: People who would have decided to carpool or walk if the price had been at market price decided to buy gas at Nixon's price. This led to huge lines.

That's a fair point, though I disagree about the parallel to gas prices (housing isn't a commodity, and rent control only applies to existing tenants). I've been in the position of defending 'rent control' on this thread, but really all I'm committed to are the ideas that the op was a terrible article that proved nothing, and that not displacing people from their homes is a worthy societal goal. If there are better ways to accomplish that than rent control, I'm all for them.

Fair enough. On a slightly tangential note, I think that the idea of "uprooting from homes" is a bit of an unfortunate cliche. In reality, it is home ownership that shackles people to jobs they hate, etc. If you rent, you can move whenever you want. If you own a home, you can't move if the job market declines or you find a better offer elsewhere unless you hire a Realtor and go through a major home sale project... and if the local economy is in decline, you're probably not the only person trying to sell your house and so you may end up selling it at a big loss (as was the case in post-industrial Flint, Michigan).

I realize that landlords have been vilified in the past, but who is really benefited by suppressing the mobility of the population? It's businesses (whose workers can't leave), it's politicians (who don't have to worry as much about people packing up and leaving in response to bad policies, corruption, etc.), and it's banks -- most people pay at least the value of their home in mortgage interest, and are effectively enslaved to the bank, an unrelenting landlord who can inflict the equivalent of modern-day debtors prison in the form of foreclosure credit destruction and confiscation of any equity earned since purchase.

How many people are tremendously afraid of losing their job because they might lose their house (their biggest investment)? How many people put up with unfulfilling, soul-sucking work just to make that house payment?

Consider how this has all changed -- how many more debt slaves were created -- when the housing market tanked. Home ownership is not the American dream, nor is being part of a community for the long term, nor is having the same job for 30 years and then retiring with a gold watch and a pension.

True freedom is in being able to take a better offer and being able to reinvent one's self whenever one wants. But our entire financial system, it seems, was based on the idea of encouraging long-term debt (mortgages) and the stasis that accompanies it.

So I think the ideal that you are striving for with not uprooting people from their rental apartments is not only illusory but destructive. Price changes contain information, and preventing price changes simply hides information, keeps people in the dark, etc.

Maybe being uprooted will (metaphorically) allow the plant to catch flight and land somewhere better... Maybe rental real-estate prices are so high because tons of rich people are moving in and they all plan on sending their kids to private school, leading to the destruction of the public schools -- this is the case in SF where most people with money would never send their kids to SF public schools even though it costs $2K/month to rent a dumpy 1BR apartment and so objectively it's a "rich" area.

I agree with basically everything you've said here, except the conclusion that all this means allowing people to avoid being uprooted from their homes is destructive. This is mainly because I don't think that the argument that "rent control traps renters in their low-rent apartments" holds any water - the alternative would have been displacement from the increased rent, and the tenant still wouldn't have been able to find a place in the same area (this terrible articles assertions aside). Also - price changes contain information, sure, but how is that information being hidden in a rent-control environment? With increase-on-vacate and no rent-control on newly constructed units, it seems like it's pretty rare that rent-controlled units would be so highly concentrated in an area to mask the true market value.

I agree that the item you mention is not a particularly strong argument, but I wanted to mention some examples of how rent control blocks a price signal that might even be useful for the beneficiary of rent control. I think it's uncontroversial that it blocks the price signal to renovate the buildings and to build new affordable housing as discussed above.

But if you agree on the major point that the social engineering geared at getting people to live/work in one place for a long time is on the wrong track, then our differences seem focused on rent control.

I should mention that in my last building in SF there was a guy who had lived there in a rent controlled apartment since the 1970s. After the first year I lived there, a letter arrived in the mail informing me that rent would increase by exactly 1.5%, the maximum increase allowed by law, and that the landlord was pushing for "utility cost pass-through", a rent-control exception that allows slightly bigger increases in cases of utility price jumps. So I was a beneficiary of rent control.

Back to the guy. His apartment had a view of the bay and golden gate bridge from every window, including the bathroom. It could probably be rented for $3500+/month because of the amazing views. He was a wealthy lawyer, arch-enemy of the landlord and heavily involved in the tenants union, and completely not in need of any help paying rent. With rent control he was probably paying under $1000/month for his apartment and had been for years. He will probably live there until the day he dies.

I'd have been far less skeptical of rent control if there had been an immigrant family living in that apartment or someone who worked at the local Walgreens.

Maybe I should have been more clear. I agree that social constructs designed to chain people to a given location are bad; I disagree that rent control is one of these constructs. It might be true that people tend to hang on to apartments that they otherwise wouldn't because they're getting a great deal, but this is a voluntary choice, not the company store. The bit about "allow[ing] the plant to catch flight and land somewhere better" seem like a little bit of movie logic. Many people do derive real value from being established in a community, and would be hurt by being forced to move.

Why does the debate always veer back to renovation of the buildings? Do you really think that adding stainless-steel appliances to an apartment is a more desirable goal than not displacing established residents?

As for your personal experience with the wealthy lawyer, here's the balancing anecdote: I live in the Mission, a part of town where rents are rapidly increasing (I'm sure I'm guilty of driving up prices). There are plenty of people down here who can only afford to stay in their homes because of rent control, and stories of tenant intimidation are plentiful.

For renovation, it's not just stainless steel appliances, it's little things over time. In 1 or 2 years it's not really noticeable but over 5-10 years it starts to take a toll. Even the building I used to live in used a large tarp on the roof rather than fixing some leaks that would drip through the ceiling of my apartment and cause bubbles in the drywall when we had heavy rain.

In the mission, I would prefer if a subsidy was just given to the poor via tax dollars. Say it's a $200 per household subsidy. Maybe it makes sense for that family to pay it to the landlord, but maybe it makes sense to find a cheaper apartment and spend it on a TV. If it turns out that the TV was the chosen decision, that helps drive down the price of rent b/c maybe the landlord will have a slightly harder time raising rent prices. If, on the other hand, the tenant chooses to allocate the money to housing, it will help drive up housing prices. The upside of driving up housing prices is that it now becomes more worthwhile for someone to convert their house into apartments, which in turn increases supply and would tend to help keep prices affordable.

Of course it's not just stainless steel appliances - the thrust of the argument is that it's silly to think of buildings as more important than the people inside them.

Direct payment like you're advocating is a political non-starter. As paternalistic as it is, taxpayers don't like the idea that their money could be spent on anything, they want it to go only to the things they approve of.

Well, the extreme case of non-upkeep is the vacant buildings in NYC, etc. When nobody can make a profit from a building, it gets abandoned. This isn't an overnight process. It starts by using a tarp on the roof instead of fixing the roof, and it ends when the building is abandoned and nobody has to pay any rent or fix any broken pipes, etc.

I agree that the public would rather "force evil landlords to do x" than achieve the social goal in a minimally economically distortionary way. It similar to how politicians give handouts to people who drive hybrid cars while at the same time fighting a hugely expensive war to prevent oil prices from increasing to the point where people would just buy electric cars because they were cheaper!

Oh my. Two minutes of web search:

http://www.accuracy.org/article.php?articleId=51

http://www.cato-unbound.org/2008/11/12/matthew-yglesias/poli...

http://davidbrin.blogspot.com/2006/05/cato-hypocrisy.html

http://www.socsec.org/publications.asp?pubid=325

http://www.sierraclub.org/sierra/200207/thinktank.asp

http://www.acsh.org/publications/pubID.498/pub_detail.asp

http://www.no-smoke.org/pdf/catoinstitute.pdf

http://www.fair.org/index.php?page=1409

http://www.iwpr.org/pdf/CATORIB.PDF

http://www.exxonsecrets.org/html/orgfactsheet.php?id=21

http://www.allacademic.com/meta/p_mla_apa_research_citation/...

http://yglesias.typepad.com/matthew/2005/01/im_friends_with....

http://www.businessweek.com/bwdaily/dnflash/dec2005/nf200512...

http://legacy.library.ucsf.edu/tid/vdh56a00

http://www.nationalreview.com/comment/comment-fonte050902.as...

http://www.skepdic.com/refuge/junkscience.html

http://en.wikipedia.org/wiki/Steven_Milloy

http://web.archive.org/web/20011122034255/http://www.tnea.or...

http://www.pkarchive.org/global/swedenomics.html

http://www.atimes.com/atimes/Asian_Economy/EG12Dk01.html

Trying to pretend that Cato in practice is anything but a shill for big business (including, in particular, the fucking tobacco industry) and the greedy is moronic.

How does opposing the automotive bailout and the financial bailout constitute being a shill for big business? I'd say it's quite the opposite!

The right is inherently anti-union (hence not supporting automakers in this case) and pro-corporate. And all of Cato's positions about "personal responsibility" vs. government regulation (of tobacco, or oil, or whomever else pays them) is obviously a tactic to influence public opinion against regulation under the guise of being pro-individual. It's total bullshit. They're about as libertarian as my left nut.

What would an actual libertarian position be? How would it be argued? What regulation (and what bailout(s)) would it favor?

Their defense of the tobacco industry has always been centered around the rights of the individual. Just because Phillip Morris pays a few dollars to keep the institute running does not mean Cato's arguments are unfounded. All think tanks have financial backing from some faction or another, and (surprise!) it's usually the people who agree with the think tank's point of view.

Just because a think tank accepts money does not make their arguments wrong. As an individual, it's up to you to research both sides and decide on which makes the more compelling case.

"Just because Phillip Morris pays a few dollars to keep the institute running does not mean Cato's arguments are unfounded."

lol

"As an individual, it's up to you to research both sides and decide on which makes the more compelling case."

Yup. If you don't give equal time to paid shills you're not being Fair and Balanced.

What source is not a paid shill? Everybody has to pay the bills. Sure there are organizations that don't pay or pay very little, but they don't get the best and the brightest and they can't spend money to keep their people informed.

Do you think people should be allowed to smoke? Should they be allowed to eat Doritos? Should they be allowed to skydive?

Do I think people should be able to have a burning stick in their mouth that increases their risk of getting cancer (which will drive my insurance costs up as well, potentially) and even more so to people who are unfortunate enough to be stuck in an enclosed area with them (e.g. waiter/waitress in a non-smoke-free resturant/club)? No, not at all. If governments didn't make so much money off the cigarette taxes, I'm sure they would be illegal by now.

Eat Doritos? Until they're shown to be poisonous or something, sure.

Skydive? Sure, just not over houses or heavily populated areas.

I'm a liberal and don't fully agree with the argument that rent-control is necessarily and uniformly bad-- although New York's 1940s rent control system sucks-- but I thought it was a well-written and interesting article.

I think economic articles on HN are fine, because economies are systems, and hackers have an innate interest in systems that are not always silicon-based.

The problem is that economics turns into politics, and that attracts a wide range of people who are not hackers, and don't really care about it. And of course, yes, it's a system, but it's a big, hairy complex one that is also impossible to do repeatable experiments with in many situations. Even lots of good economics blogs, by real, serious, respectable economists are full of stuff like "my view is that... " or "I feel that ..." or "I think...".

I'd really like pg to comment on this in a definitive way, though. I'll start posting my own economics articles if it's deemed to be ok, and we'll see what happens.

I think that if it doesn't involve political parties or politicians, it might work.

I mean, it's going to be hard to have a board about startups without talking about market theories, techniques of persuasion, economic trends, role of government in the creation of wealth, distribution of wealth, rational versus irrational buyers, etc. All of these are both economics and politics. We have to be able to talk theory, or the board is just going to be technical fluff, like who's got the best SCM system or what famous author X says about Facebook.

I'm really interested in why things work (or don't).

I'd say if it's directly related to startups, it's probably ok. This article isn't about startups at all. Neither are most other economics articles. Some are, and the ones that are are pretty evident.