

How Rent Control Drives Out Affordable Housing - time_management
http://www.cato.org/pubs/pas/pa-274.html

======
mdasen
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?

~~~
loumf
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.

~~~
mhartl
_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>

~~~
loumf
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.

------
calambrac
"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.

~~~
yummyfajitas
"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.

~~~
calambrac
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.

~~~
yummyfajitas
"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.

~~~
calambrac
"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.

~~~
yummyfajitas
"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?

~~~
calambrac
"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?

~~~
yummyfajitas
"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.

~~~
calambrac
"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?

~~~
yummyfajitas
"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.

~~~
calambrac
"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?

~~~
yummyfajitas
"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.

~~~
calambrac
"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.

~~~
natrius
_"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.

~~~
calambrac
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.

------
pg
Markets interpret social engineering as damage and route around it.

~~~
davidw
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.

~~~
pg
I meant social engineering in the form of manipulating markets.

~~~
davidw
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.

~~~
pg
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.

~~~
davidw
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.

~~~
jfoutz
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? :)

~~~
mseebach
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.

------
DaniFong
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.

------
mhartl
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.

------
jason
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.

~~~
calambrac
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?

~~~
jason
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.

------
asciilifeform
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.

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

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

~~~
sokoloff
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!

------
qqq
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.

------
GrandMasterBirt
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.

------
logjam
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>

~~~
mmmurf
Examples of how Cato has been discredited?

~~~
logjam
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://www.cato-unbound.org/2008/11/12/matthew-
yglesias/politics-compromises-the-libertarian-project/)

<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://www.allacademic.com/meta/p_mla_apa_research_citation/1/9/0/5/9/p190590_index.html)

[http://yglesias.typepad.com/matthew/2005/01/im_friends_with....](http://yglesias.typepad.com/matthew/2005/01/im_friends_with.html)

[http://www.businessweek.com/bwdaily/dnflash/dec2005/nf200512...](http://www.businessweek.com/bwdaily/dnflash/dec2005/nf20051216_1037_db016.htm)

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

[http://www.nationalreview.com/comment/comment-
fonte050902.as...](http://www.nationalreview.com/comment/comment-
fonte050902.asp)

<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://web.archive.org/web/20011122034255/http://www.tnea.org/pages/comm/taxref.htm#Cato%20report)

<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.

~~~
jmtulloss
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.

~~~
eyeraw
"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.

~~~
jmtulloss
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.

