Prosperity and Safety

Go Don! I've recently noticed how effective your letters are and I hope that more people start writing letters like this. Keep it up.

As my name suggest I am in Chile. I am in Santiago and awoke the other night to a terrible shaking. I am fortunate enough to be staying in a wealthy neighborhood with a Chilean family. The neighborhood suffered little to no damage. The father of the family had the house built with earthquakes in mind. He did not check if it met codes he wanted to have a house to withstand a 10 earthquake for the protection of his family. I am sure this was costly as well as it is a beautiful home as are others in the neighborhood. He and his family are lucky he had the wealth to construct such a place. Much of the devastation you are viewing is of the south which unfortunately is poorer. and people are thinking of putting a roof over their heads as opposed to a strong roof. So thanks to less govt intervention and free markets I was in a secure home from the wealth created in Chile by these concepts. If we can bring the world to have such wealth as of this family, many lives will be saved. The ONLY way for this is less govt and more freedom!

I echo the sentiments expressed by the others. Good to hear you're okay.

I'm happy to hear you are okay, surfisto. Thank you for your first-hand account.

I'm glad that you and the family you're staying with came through relatively unscathed. Best wishes to you.

Milton Friedman saved tens of thousands of lives on Saturday. In the mid '70s Milton Friedman and some of his students played an integral role in bringing freedom and capitalism to Chile. At the time, Pinochet had proved to be a brutal dictator, but he had little or no interest in economics. First Friedman's students, then Friedman himself, pursuaded Pinochet to adopt free market reforms. The left viciously attacked Friedman for even speaking to Pinochet. Eventually those free market reforms undermined Pinochet's power and led to Chile's rapid economic advancement -- just as Friedman predicted. Milton Friedman's principled advocacy for freedom and capitalism saved tens of thousands of lives on Saturday and he deserves great credit for his work.

"Chile has – and enforces – tough building codes because it can afford them." That's only a reflection of the free market in as much as demand influences public policy. Those codes are created and enforced by the government, not by the goods market for housing.

Didn't Richard Epstein do a podcast last year on the rule of law where he argued (pretty convincingly I thought) that zoning laws and building codes are in effect a confiscation of property rights? Certainly not a defense of them.

I'd probably argue that this is an example that Chile is rich enough that the people are willing to accept the confiscation of a modicum of property rights in the form of the government forcing everyone to buy a bit more safety in construction than the market would provide for in order to help avoid the negative externalities that would result from some subset of buildings not being able to withstand earthquakes in a fault zone.

Building codes often prevent us from building safer houses.

1 Permitting adds thousands of dollars to the construction of a home, money that could otherwise be used to build a safer home.

2 Codes also enforce style and prevent people from building safer home styles. Geodesic domes are immensely stronger than rectangular construction, but unlikely to be permitted in most residential areas.

Isn't a building code in itself a way of meddling in the market by manipulating the demand side?

Clearly without government building codes, Chileans would be spending their growing wealth hanging their flat panel TVs on the crumbling walls of their mud brick homes, and parking their BMWs in their grass hut garages.

While it surely is the case that imposing Chilean-level building requirements in Haiti would've meant far fewer buildings in relatively poor Haiti, perhaps a greater factor is that Haiti's last major earthquake was 200 years ago, while Chile had a one just 50 years ago. People tend not to spend their scarce resources on goods that they don't think they will need. For the same reason, I have invested nothing to protect myself from smallpox.

Undoubtedly the Haitian government will step in front of the parade and start imposing more stringent building codes, much to the same effect as American regulators imposing tougher home lending standards after the housing market crash.

This either/or approach bothers me. I think we really need to take a Karl Polanyi approach to the intertwined nature of market development and state involvement.

I'm curious Don - if you could imagine a Chile with the exact same degree of economic development with a history of building code regulations and without a history of business code regulations, which Chile do you think would have fared better through the earthquake? I'm 100% with you on the importance of wealth in the ultimate human toll of natural disasters, but I think you're unnecessarily denigrating the role of regulation and you're ignoring the sense in which markets and the modern state are fundamentally intertwined.

I don't understand why the way you think about the state (or at least the way you blog about it) is so unidimensional: do they intervene or don't they. It's not that Chile intervenes less than Haiti. In many ways and by other metrics I expect Chile probably intervenes MORE. It's the nature of the intervention, not just the degree.

This is the same reaction I had to the "populism and regulation" article you posted earlier from a former student. What is the benefit of talking about regulation as "populist retribution". Obviously populism is relevant to a discussion of regulation, but it seems like a dangerously incomplete and very politically convenient way of understanding regulation.

Government regulation is a recipe for stagnation and solidification of the present. The US building codes are simply the government giving private standards the force of law. Some states follow them, some don't, but they existed before the government adopted them.

99% of the Federal occupation exposure standards for chemicals were adopted verbatim from the private standards that existed in 1970, and have not changed since. The private standards have continued to change with the science. What good is a government enforced standard that is forty years out of date?

Government is not the driving force, private industry is. Government just likes to get involved when there is publicity to be had, and largesse to distribute.

Excellent post - couldn't agree more. However, it's not so much an argument in favor of no regulations as it is about the state of current regulations. Pointing out the problems with current regulations doesn't constitute proof that a lack of regulation would be better (although certainly in a vast number of cases it would be much better).

The problem Danny is that you are def in favor of 80% state/20% market.

Thank you for detailing my views on life for me. I'd be lost without you constantly there to point them out for me.

I can only conclude the 80/20 thing from your 1000s of postings.

No, you conclude it from your inability to listen to anyone that disagrees with you without assuming that they are diametrically opposed to you, completely irredeemable, and not worth listening to. I raised some interesting points in my first comment I thought. Some reasonable ones that advanced the discussion. What exactly did this petty tangent of yours accomplish?

I hope this letter doesn't get published because the concept that building codes and their enforcement are not inherently part of a political process is so far beyond the understanding and imagination of almost everybody (who's not staunchly libertarian), that it makes libertarians look completely out-of-touch, and as a result, severely hurts the libertarian cause.

I keep hoping that one day Don will develop a hint of political understanding, but I have a hunch that hope is in vain.

Bret: I am an economist, not a politician. I confess to having no earthly idea about how to change the world through politics. So I don't try.

Do you expect to have some positive impact if letters like this one are published? If so, what do you expect that positive impact to be? If not, why do it?

It's a great blog post and I completely agree with your points, but a terrible letter-to-the-editor, in my opinion.

Clearly the reason for writing this letter is to educate both the writers at the paper and the public that reads it. Dr. Boudreaux is both an economist and an educator, after all.

Without a clear understanding of cause and effect, I'm not sure how anyone can hope to make (or support) good policy.

Smackdown! I'm so sick of this glorification of government intervention in our lives.

It is as though in the absence of an army-backed extorting monopoly, people would no longer want or pursue safety, security, beauty, transportation, education, water, sewage, power, justice, etc.

In addition to Don's excellent discussion above also see an excellent one in the WSJ:

http://online.wsj.com/article/SB100014240527487...

And chalk it up to what is done to a far greater extent by government in Chile as far as enforcement of private property rights (this is the other side of the coin, I think, of Don's NOT MEDDLING IN THE MARKET point).

http://www.bloomberg.com/apps/news?pid=newsarch...

I think muirduck would agree with me that the earthquake was most likely caused by the Chileans pounding on the earth in their huge copper mines to get copper to feed the need for electrical wires in SUVs.

Not only that but those copper mines are a Dick Cheney plot and George W. Bush knew.

It's AGW, not nature.

Vids,

Over at the Marginalrevolution blog, Tyler Cowen in decrying the reported greater looting going on in Chile relative to Haiti; but I think Tyler misses an important point, namely, that the value of things availble to loot is far greater in Haiti. This goes right along with Don's reporting that Chilian per capital income is 10 times that of Haiti. Muir has missed the point a lot, but it looks as though Tyler missed one regarding relative looting (but there is always the possibility that he missed deliberately to evoke blog debate; I'm told that some blog-czars do this)

More directly to your comment, Muir has been fairly quite since the Cafe was put on notice to reply with greater discretion to his posts.

IJ,

I would contend that Tyler is wrong. In Haiti there was wide spread and violent looting of what was available, and armed gangs of thugs were not just looting facilities, they were looting the meager supplies of common people.

The difference is in reporting is probably that in Haiti it is expected whereas in Chile it is a surprise.

Good points.

Vids,

quiet, not quite above; sorry I'm a bit dyslexic.