Rent Control, Car Crash Economics

P J Manning

Rent-control

If you support the idea of rent control maybe you hate the poor, or you are too stupid to care about the damage a policy that Swedish socialist & economist Assar Lindbeck described as “next to bombing…in many cases to be the most efficient technique so far known for destroying cities” will create, or you work for certain homeless organisations for whom such damage would be a never-ending raison d’etre.
Lack of supply has meant Dublin rents have increased by over one fifth in the last three years, at a time when the incomes of renters have either stayed static or fallen. The mismatch of supply and demand has the commentariat slavering for disastrous government intervention in the form of statutory rent control.

rentcontrol

The outcome of rent control is less homes for rent, at greater cost, and lower quality. Fewer apartments are built, less space becomes available and what space is rented declines in quality over time. Rent control creates homelessness by destroying the supply of rental housing. When government decrees a price lower than the market would provide, scarcity is the inevitable outcome. Rent Control is fascist economics: property is ostensibly left in private hands but the corporate state controls and mandates its use.
Rent control benefits those with existing tenancies at the cost of future housing requirements of renters. With existing tenants staying in their rent controlled apartments because they have no incentive to trade down to a smaller space, young families and poor are hurt most as rented accommodation fossilises.
The destruction and fossilisation of rental housing under rent control has a woeful effect on labour mobility, opportunity and life quality for young workers. When homes cannot be rented, as is always the case under rent control, long commutes or unemployment will be the stark choices for those most in need of the chance to start work and accumulate human capital. The essence of the rental market is mobility and flexibility, a quality that rent control destroys.
Every single city that has tried rent control has had similar bad experience. New York lost an estimated 300 000 housing units the eleven years 1972-82 as apartments & buildings were abandoned as being uneconomic and new supply was not created. While San Francisco experiences a decades long housing crisis, just half of the rent controlled housing has a single occupant. Housing makes the cost of living in the city one of the most expensive in the US. Santa Monica, also part of the late seventies wave of activist inspired rent regulation, is now known colloquially as the Homeless Capital of The West. The commentariat cannot point to a single example of rent control success anywhere , ever. Price control has never worked.
Nothing is as permanent as a temporary government programme particularly one which creates a group of voters (those with existing tenancies) who see a loss from its abolition. The very existence of rent control, however horrible its consequences, creates a fear of its abolition; rent control introduced to deal with a temporary problem becomes a permanent fixture.
Bad ideas, particularly bad economic ideas never die. Refuted by argument and exposed by history, the worst and most damaging ideas become zombies, impermeable to sense or reason, trudging on eating brains.
In Kenny’s reshuffle we have been unexpectedly lucky in one regard: new Housing Minister Alan Kelly has not had his brain eaten, he is opposed to rent control. How long can Kelly’s surprisingly sensible stance that supply is the problem, be maintained in the face of a tide of journalistic ignorance, bias and laziness?
Dublin’s housing price inflation does demand action but it is not the action that the commentariat want. Only by allowing the market to respond to price incentives can supply and demand be balanced.
“Planning”, that insane idea that a bureaucrat in an office knows better than the rest of the citizenry, must be reduced to a speedy mediation of private property rights. Regulations that restrict building height, demand an average size above 85sq metres and windows on two sides are a war on the poor and the young, allowing the building only of apartments which they cannot afford. Such daft regulations should be abandoned, allowing the market of buyers and investors to guide apartment size far better than government minister or bureaucrat ever will.

Rent Control2
The consequences of having government mandate a price for a durable good like housing are a slow motion car crash, destruction of housing and possibilities over decades. Since most journalists seem to respond like six year olds to instant emotional stimuli (and accord advocacy organisation spokespersons the deference Catholic Curates once accorded Archbishops) the time scale is the equivalent of geological and a single emotive story outweighs any amount of evidence or rational argument.
The rest of us should view those calling for rent control as viciously ignorant, evidence-ignoring useless idiots with an agenda to make housing scarcer and the poorest worse off. That would help to make their stupidity less fashionable.

As good as Gold.

schumpter_yyfresembsmaAn ‘automatic’ gold currency is part and parcel of a laissez-faire and free-trade economy. It links every nation’s money rates and price levels with the money-rates and price levels of all the other nations that are ‘on gold.’ It is extremely sensitive to government expenditure and even to attitudes or policies that do not involve expenditure directly, for example, to foreign policy, to certain policies of taxation, and, in general, to precisely all those policies that violate the principles of [classical] liberalism. This is the reason why gold is so unpopular now and also why it was so popular in a bourgeois era. It imposes restrictions upon governments or bureaucracies that are much more powerful than is parliamentary criticism. It is both the badge and the guarantee of bourgeois freedom—of freedom not simply of the bourgeois interest, but of freedom in the bourgeois sense. From this standpoint a man may quite rationally fight for it, even if fully convinced of the validity of all that has ever been urged against it on economic grounds. From the standpoint of etatisme and planning, a man may not less rationally condemn it, even if fully convinced of the validity of all that has ever been urged for it on economic grounds.

—Schumpeter, History of Economic Analysis

The War to end all wars.

Michael_O'Leary_WWI_poster

 

 

Michael Dwyer 

 

 

The nineteenth century ended on the fourth of August 1914. In one of those small ironies of history it expired only fifty miles from the battle field of Waterloo where it had begun. With it ended an extraordinary period of material, scientific and political progress unmatched in human civilisation.

It had seen an unprecedented expansion in wealth creation which would lift tens of millions of people out of poverty. It was imbued with the optimistic spirit of the English, Scottish and Virginian enlightenments ; which spirit would drive the expansion of democracy and its institutions across Europe and North America. For the first time the children of the poor would learn to read and write. Their parents would vote. Social and economic mobility meant that for millions their beginning would not necessarily be their end.It was killed off by a war whose savagery, duration and aftermath were without precedent or prophet.

That terrible war which would birth the twentieth century is being more widely commemorated and discussed in Ireland than it has been for decades. That we should remember our dead is a natural and wholesome instinct. However it is to do a disservice to ourselves and those who fell to romanticise the war in which they died.

Why and how Europe stumbled into the Great War is still debated. The reasons why individual Irish men chose to risk death were hugely varied. Some surely went out of a sense of idealism, some went to keep the union intact while others went to further the national cause. Many went because it gave them a wage and way out of poverty. What we can say with certainty is while the genesis of the war is unclear its outcomes were catastrophic.

The twentieth century was poisoned by the conflagration which was quickly to be known as the First World War. It is impossible to overstate the evil that it gestated and the misery that would flow directly from the bloodied soil of Flanders. The former optimism in the inexorable progress of liberal democracy and the Market economy was shattered. Across Europe young democracies faltered and failed to be replaced by ideologues and Strong men. Russia falls to the Bolshevik revolution. Lenin will lead to Stalin and from there the virus of tyranny will spread across the Globe. Pol Pot , Mao and Ceaucescu all have their roots in the Great War.

Contrary to folk myth and idiots, war can do nothing but harm to the wealth of nations. It devours humanity and treasure with equal ease. The damage done directly to the economy of Europe was tremendous. In the short term it led to chaos in Germany and created the political space necessary for Nazism to establish a real political presence. The road to Auschwitz is built in 1914.

Not one of the protagonists on the eve of war had any inkling of the carnage that would unfold over the next four years. Certainly none of them could have dreamt of the political landscape that would be the result of their going to war. Had they I cannot but believe that even at the last minute the unstoppable would have been stopped.

If there is a lesson for today’s leaders to learn then that is it. We cannot know the future. To believe that we can engage in war and confidently predict the outcome and the consequences is hubris. And hubris will destroy us.

It is estimated that the total cost of the United States involvement in prosecuting the wars in Iraq and Afghanistan will be between four and six trillion dollars. To put an Irish perspective on it, that would cover more than one hundred bailouts. That is the cost to the USA alone. And can we say that money has purchased the world a greater degree of security or the people of those blighted nations better lives.

It is no longer acceptable to wage wars to win territory, capture slaves or plunder treasure. Now we are invited to kill in the name of the Good, The Right, The Weak, The Oppressed. The media create good guys and bad guys without really understanding the place, the people or the conflict.

The world is a mess. But it always has been. What we endure is the burden of knowledge. What once would have gone unknown and unreported now we see images of live and direct from the scene. Our grandparents would have learned about a genocide in central Africa as fait accompli, a distant historical tragedy. We saw it via satellite. Inevitably this provokes a human response.
We feel when faced with horrors on our tv screens the need to Do Something. That impulse is noble but very dangerous.

Two of the requirements for a just war in the philosophy of Thomas Aquinas are a reasonable chance of victory and that the war is not a cause of greater suffering than the evil it seeks to overcome. When we look to the Middle East and elsewhere and see the consequences of war can we honestly say that they are not worse than the horrid peace.

Moreover how can we say that the chances of victory are reasonable when we struggle to define what a victory might actually be? Does this mean that we should never go to war? Should we be passive in the face of evil and insensible to the suffering of people enduring desperate oppression? I don’t know. What I am certain of is hubristic belief that we can change cultures over night and parachute in our values along with the ammunition is disastrous for the west, for the men we send to fight, for our economies , for wider peace and often for the poor benighted people we decide liberate.

graves

And never believe them when they tell us the boys will be home by Christmas. Many of the boys will never come home at all.