Wall Street Journal columnist Andy Kessler details the high cost of policies promising “affordability.” Two slices:
Economist Mark J. Perry’s famous Chart of the Century shows that since 2000 prices for things that government touches—hospital services, college tuition, textbooks, housing and food—have risen faster than overall inflation. Meanwhile, free-market items like computers, software, televisions and cellphone services (thanks Silicon Valley) as well as clothing, furniture, toys and even new cars (thanks globalization) have dropped in price or rose less than inflation after taking into account the increased value of technology, like 75-inch smart TVs. Try streaming March Madness on your 1980s 50-pound 19-inch Sony Trinitron.
…..
What scares me is that government can mandate affordability anytime it wants. Simply announce price controls. When you fix prices, you get shortages: Soviet supermarkets with empty shelves. Or available apartments in rent-controlled New York. Can’t get home insurance? Many state price caps sent insurers scurrying away, especially in coastal and flood prone areas. Drug shortages are next. And consumer credit if we cap credit-card interest rates.
In sectors with affordability problems, Adam Smith’s invisible hand got smashed by a giant regulatory gavel. Competition and freedom from constraints lower prices.
The Bernies and AOCs of the world complain about capitalism. Naive, but on brand. By invoking affordability, what they’re really protesting, with zero self-awareness, is the socialism-inspired heavy hand of the U.S. government: feds, meds and eds.
Those who yell the loudest about affordability are actually making the case for smaller government. Who wants to tell them?
Brian Albrecht makes clear that “Europe’s rigid labor markets are an economic death sentence.” A slice:
Why has Europe slowed down relative to the US?
I have my hobby horse about tech regulation and horrible antitrust laws, but I don’t think those are THE biggest reason. Instead, I agree with a recent piece by Pieter Garicano that points to labor market regulations. The timing and the magnitude fit much better than for other theories. See also their podcast discussion of it.
Also rightly critical of the ROAD Act is GMU Econ alum Jace White. A slice:
The “large institutional investors” targeted by the proposed housing legislation make convenient villains, but in reality, they collectively own less than 1 percent of the single-family homes across the country. At their peak, large investors purchased just 2.5 percent of homes sold, and their purchasing activity has since fallen sharply. The vast majority of single family homes are owned by individual families and small, “mom and pop” landlords.
That’s part of the reason why, when politicians first began to advocate a ban on “Wall Street buying up homes,” the reaction was mostly one of annoyance from those that hold to the free-market principle that the government shouldn’t be in the business of dictating whom people can sell their property to. After all, there aren’t many political points to score by standing up for a principle that could be caricatured as sticking up for Wall Street over would-be homebuyers . Plenty of pundits criticized the proposed bans, but with more of a groan than an uproar. The problem is that incomplete and misleading views of the world, when left unrefuted, can lead to truly damaging policies.
That’s exactly what happened to the ROAD to Housing Act. The version of the bill that sailed through the Senate includes not just the expected ban on institutional homebuying (which was bad enough), but also a prohibition on investors building single-family homes and renting them out for more than seven years.
Today, roughly 47,000 single-family homes and duplexes per year are constructed by companies that will rent them out to individual families, just as they would rent out apartments or condos. Homeownership is a great thing for many, but families are not being duped or exploited if they choose to rent. Those without a credit history or extensive savings may not be able to buy, and even well-off families may find the math favors renting if they don’t plan on staying in one spot long enough for the benefits of ownership to overcome the high upfront costs of inspections, realtors’ fees, and mortgage down payments.
Scott Lincicome tweets this passage from a piece in The Guardian:
“The majority of all voters (72%) believe Trump’s tariffs have had a negative rather than a positive impact and 67% said tariffs aren’t the right solution for improving the economy.”
