[Progressives] tend to favor policies such as New York City’s rent controls, and the new $15 minimum wage being gradually phased in in some western cities. I like to think of these policies as engines of meanness. They are constructed in such a way that they almost guarantee that Americans will become less polite to each other.
In New York City, landlords with rent controlled units know that the rent is being artificially held far below market, and thus that they would have no trouble finding new tenants if the existing tenant is unhappy. So then have no incentive to upgrade the quality of the apartment, or to quickly fix problems. They do have an incentive to discriminate against minorities that, on average, are more likely to become unemployed, and hence unable to pay the rent. Or young people, who might damage the unit with wild parties.
Wage floors present the same sort of problem as rent ceilings, except that now it’s the demanders who become meaner, not the supplier. Firms that demand labor in Los Angeles in the year 2020 will be able to treat their employees very poorly, and still find lots of people willing to work for $15/hour.
Scott Sumner, “How bad government policies make us meaner”, Library of Economics and Liberty, 2015-08-25.
May 9, 2017
QotD: Wage floors and rent ceilings
May 8, 2017
“Have libertarians — and the broader right and/or classical-liberal movement — really lost the ‘culture wars’?”
Nick Gillespie on the outcome of the most recent battles in the culture wars:
Spoiler alert: I think libertarians have already won the culture war in the most important ways possible. Whether it’s businesses like Whole Foods, Overstock, and Amazon; the massive and ongoing proliferation of platforms such as Netflix, YouTube, and Twitter; or gig-economy titans such as Uber and Airbnb, capitalism and entrepreneurship has been recast as an innovative, disruptive, liberatory system that allows us all to produce and consume whatever we want under increasingly personalized and individualized circumstances. What we need to do next to nail down what Matt Welch and I have dubbed The Libertarian Moment is to articulate the ways in which our society’s cultural, economic, and even political operating system has already bought into the idea that decentralization, individualism, innovation, and freedom to experiment.
If the medium is the message (all props to Marshall McLuhan) — if an operating system is more important than any specific content generated within that system — what has been abjured as “late capitalism” for decades has effectively ended all debates about how libertarian policies and mind-sets have freed us from bland top-downism in all parts of our lives. This isn’t to suggest that we are in any way living a utopian dream. It’s simply to point out that even after 15 years of drowsy economic growth and a massive expansion of state (and in many ways, corporate) power, our living standards continue to rise. Add to that huge advances in tolerance and change when it comes to racial, ethnic, and gender disparities and transformative shifts on topics as varied as drug policy, sexual orientation, criminal-justice reform, and gun rights too.
Cultural and political pessimism isn’t just a losing strategy, it’s a misimpression. Again, that’s not to say that massive problems don’t exist and need to be confronted. Will we ever see an actual federal budget again, much less that cuts government spending? U.S. foreign policy remains a shameful, disastrous, and destructive hodgepodge of hubris and stupidity. Speech and expression are under attacks from the right and the left, and the bipartisan turn against free trade and the easy movement of people across borders needs to be beaten back. As the late, great Arthur Ekirch explained in his neglected masterpiece The Decline of American Liberalism, forces of decentralization and centralization — of liberation and authoritarianism, of individualism and collectivism, of choice and coercion — have been slugging out in the United States since before there was a United States. The question is whether we are moving generally in a direction of more autonomy and less restriction on how we live our lives.
May 7, 2017
Canada-US trade relationship, visually
With all the talk (mostly from President Trump) about abandoning existing trade relationships like NAFTA, it’s worth looking at just how closely related the US and Canadian economies are (below the fold, because the graphic is yuuuuuge):
The Importance of Institutions
Published on 2 Feb 2016
In today’s video, we discuss a topic critical to understanding economic growth: the power of institutions.
To better shed light on this, we’re going to look at an example that’s both tragic and extreme.
In 1945, North and South Korea were divided, ending 35 years of Japanese colonial rule over the Korean peninsula. From that point, the two Koreas took dramatically different paths. North Korea went the way of communism, and South Korea chose a relatively capitalistic, free market economy.
Now — what were the results of those choices?
In the ensuing decades after 1945, South Korea became a major car producer and exporter. The country also became a hub for music (any K-pop fans out there?), film, and consumer products. In stark contrast, North Korea’s totalitarian path resulted in episodes of famine and starvation for its people.
In the end, South Korea became a thriving market economy, with the living standards of a developed country. North Korea on the other hand, essentially became a militarized state, where people lived in fear.
Why such an extreme divergence?
It all comes down to institutions.
When economists talk about institutions, they mean things like laws and regulations, such as property rights, dependable courts and political stability. Institutions also include cultural norms, such as the ones surrounding honesty, trust, and cooperation.
To put it another way, institutions guide a country’s choices — which paths to follow, which actions to take, which signals to listen to, and which ones to ignore.
More importantly, institutions define the incentives that affect all of our lives.
Going back to our example, in the years after 1945, North and South Korea took dramatically different institutional paths.
In South Korea, the institutions of capitalism and democracy, promoted cooperation and honest commercial dealing. People were incentivized to produce goods and services to meet market demand. Businesses that did not meet demand were allowed to go bankrupt, allowing the re-allocation of capital towards more valuable uses.
Against that grain, North Korea’s institutions produced starkly different incentives. The totalitarian regime meant that the economy was centrally planned and directed. Most entrepreneurs didn’t have the freedom to keep their own profits, resulting in few incentives to do business. Farmers also didn’t have enough incentive to grow sufficient food to feed the population. This was due in part to price controls, and a lack of property rights.
As for capital, it was allocated by the state, mostly towards political and military uses. Instead of going towards science, or education, or industrial advancement, North Korea’s capital went mostly towards outfitting its army, and making sure that the ruling party remained unopposed.
And now, look at how different the two countries are as a result of those differing institutions.
When it comes to economic growth, institutions are critically important. A country’s institutions can have huge effects on long-term growth and prosperity. Good institutions can help turn a country into a growth miracle. Bad institutions can doom a country to economic disaster.
The key point remains: institutions are important.
They represent the choices that a country makes, and as the Korean peninsula shows you, choices on this scale can have staggering effects on a nation’s present, and future.
May 4, 2017
What’s So Bad About The Galactic Empire?
Published on 4 May 2017
Have you ever really stopped to consider why the Galactic Empire in Star Wars is actually bad?
Welcome to Out of Frame, a new on-going monthly series where we talk about the intersection of art, culture, and ideas from a classical liberal perspective. The goal for this series is to explore the underlying ideas in movies, TV, comics, books, and other media that you may not have thought about before.
We really hope you loved this video and want to see more.
If you do, be sure to subscribe to our channel and come back for the next episode in a few weeks!
May 3, 2017
“Poverty, to be scenic, should be rural”
Daniel Hannan on the contrast between rural and urban poverty, and the attitudes of Westerners:
When I was growing up in Lima in the 1970s, Western visitors were astonished by the shantytowns, the barriadas, as they were known, that ringed that grimy city. Why, they asked, did people leave the countryside to live in these squalid slums? Why swap the pure air of the Andes for traffic fumes and sewage?
It was a very First World question. No Peruvian ever asked why people were quitting villages that lacked electricity and clean water. The barriadas may have been ugly, but they were humming with enterprise. They offered work, access to schools and clinics, a power supply. They were, for most of their denizens, transitional, a staging post between mountain squalor and something better.
In time, I came to realize that Western nose-wrinkling at developed countries was more esthetic than sympathetic. As the Victorian novelist Anthony Trollope put it, “Poverty, to be scenic, should be rural.”
Western attitudes haven’t advanced much since then. My kids’ geography homework is full of stories about evil Western corporations exploiting poor women in Vietnam or wherever. Now, you and I would not want to work in a Vietnamese sweatshop. But we have not spent our lives bending our backs in rice paddies.
Employees of foreign-owned companies in Vietnam earn 210 percent of the average wage. The readiness of that country to open itself to trade and investment has brought huge benefits to the Vietnamese, including those on the lowest incomes. Over 19 years, the West struggled to defeat totalitarian socialism in Vietnam, and failed. Three decades of trade have achieved what 60,000 American lives and over a trillion dollars in today’s prices in military spending failed to achieve: the end of Communism.
Developing countries which open their markets eliminate poverty more quickly than those which don’t. Compare Vietnam to Myanmar, or Colombia to Venezuela, or Bangladesh to Pakistan. A study of developing states since 1980 showed that those which had joined the global trading system enjoyed annual growth at an average of 5 percent, as against 1.5 percent for those which hadn’t.
Softwood lumber, again
Last week, Megan McArdle provided a quick look at the son of the bride of the revenge of the softwood lumber dispute monster:
According to American lumber producers, this is because of the nefarious subsidies the Canadian government has granted to its timber producers. In America, most softwood timbering takes place on private land, and the lumber is priced to recover the full cost of owning and maintaining many acres of trees. In Canada, forest resources tend to be owned by the government, which sets “stumpage fees” (the cost for cutting down a tree, which used to be assessed per stump and is now usually assessed by board feet or cubic meters [PDF]).
The American producers complain that these fees are set too low, providing an unfair subsidy for Canadian timber, especially because British Columbia (which has a lot of timberland) bans the export of Canadian logs, so that American lumber mills are unable to get in on this sweet, sweet deal.
For variety, American producers occasionally also complain that Canada is “dumping” (basically meaning that a country is selling goods in a foreign market below the price at home. Since this is — except in rare cases such as pharmaceuticals — a stupid business practice, accusations of dumping tend to exceed actual instances by a healthy margin.)
[…]
The history of litigation on this is long, rich and arcane. Since the 1980s, the U.S. and Canada have been locked in a cycle whereby the U.S. complains that Canadian softwood lumber is too darn cheap, complaints are filed with various entities, and eventually both sides decide it’s easier to come to some sort of settlement rather than subject everyone to another endless hearing on the minutiae of the lumber industry. Then an agreement expires, American lumber producers say “Now’s our chance, guys! We’re going over the top!” and the magical cycle of birth and death, conflict and resolution, begins once again in the forest lands.
When trade bodies get around to ruling, those rulings are often mixed: “Yeah, okay, maybe there’s some subsidy in there somewhere, but you Americans are wildly overreacting, so cool it with the huge tariffs.” Which was basically my take on the dispute in 2004, when I last covered it. Research does not reveal any good reason to revise that view, especially because Canadian stumpage has evolved somewhat over the years. British Columbia now uses auctions [PDF] in its coastal forest areas, which should tend to drive the price of stumpage there to par with the world market.
We should also note that any subsidy, however bad for American softwood lumber producers, is actually good for the vast majority of Americans who do not work in forestry. This morning, people were throwing wild numbers around about how much a tariff would increase the price of a house or a box spring. I’d take those numbers with a hefty dose of salt, but undoubtedly, they will drive the price of softwood lumber products up somewhat, which means less money in the pocket of you, The Modern American Consumer. So even if American timber producers were completely right and their tariff were warranted, the American consumer would suffer.
May 1, 2017
“100% certainty is almost always an indication of a cult rather than any sort of actual truth”
Jay Currie looks at the reaction to a Bret Stephens climate article in the New York Times:
On the science side the greatest threats were the inadequacy of the climate models and the advent of the “hiatus”. The models entirely failed to project any circumstances in which temperature ceased to rise when CO2 continued to rise. However the hiatus created exactly that set of conditions for what is now looking like twenty years. (Right this instant, last year’s El Nino, broke the hiatus. However, rapidly cooling post El Nino temperatures look set to bring the hiatus back into play in the next six months to a year.)
The economic side is even worse. It turns out that renewable energy – windmills and solar – costs a fortune and is profoundly unreliable. Governments which went all in for renewables (see Ontario) found their energy prices hockey sticking and the popularity plummeting without, as it turns out, making even a slight impression on the rise of CO2 concentrations.
The economics of climate change and its “mitigation” are a shambles. And it is beginning to dawn on assorted politicians that they might have been railroaded with science which was not quite ready for prime time.
Which makes it all the more imperative for the Nuccitelli and DeSmog blogs of this world to redouble their attacks on even mildly sceptical positions. Had the alarmists been less certain their edifice could have easily withstood a recalibration of the science and a recalculation of the cost/benefits. But they weren’t. They went all in for a position which claimed to know for certain that CO2 was driving world temperature and that there was no other possible cause for an increase or decrease in that temperature.
The problem with that position is that it was premature and very brittle. As lower sensitivity estimates emerge, as other, non-CO2 driven, temperature controls are discovered, consensus climate science becomes more and more embattled. What had looked like a monopoly on political discourse and media comment begins to fray. The advent of Trump and a merry band of climate change skeptics in the regulatory agencies and in Congress, has pretty much killed any forward motion for the climate alarmists in the US. And the US is where this battle will be won or lost. However, the sheer cost of so called “carbon reduction” schemes in the UK, Germany and the rest of Europe has been staggering and has shown next to no actual benefit so scepticism is rising there too. China has both embarked on an embrace of climate change abatement and the construction of dozens of coal fired electrical generation plants every year.
April 28, 2017
Words & Numbers: Actually, Life is Pretty Awesome
Published on 26 Apr 2017
This week, James and Antony take a brief departure from talking about the growing national debt, and our absurd tax system to discuss the numerous ways in which more economic and personal freedom has made people wealthier, more equal, and better off all over the world. We’re actually living in pretty amazing times.
Read more:
https://fee.org/articles/actually-life-is-pretty-awesome/
April 27, 2017
“Richard Florida has a new book [that] advises cities on what to do about problems that result from advice he gave them in his previous books”
Chris Selley hits this one out of the ballpark:
Gadabout urbanist Richard Florida has a new book: The New Urban Crisis. It advises cities on what to do about problems that result from advice he gave them in his previous books, notably The Rise of the Creative Class. Stuff your downtown core full of creative types and you shall prosper, the University of Toronto professor advised, and many cities listened. Now some face a “crisis of their own success,” he told a Toronto breakfast crowd at the Urban Land Institute’s Electric Cities Symposium: the blue-collar types who make the creative class’s artisanal baked goods and mind their children have been “pushed” ever further into the suburbs. Economic and geographic inequality results, and Rob Ford/Donald Trump/Brexit-style resentment can build.
Florida’s many critics have long warned this was a flaw in his vision. But now Florida says he finds it “terrifying,” so he’s off on another book tour.
If I sound a bit peevish, it’s because I find him rather insufferable. Critics have poked holes in much of his research, but much more of it strikes me as overly complex analysis and measurement of fairly basic, intuitive phenomena that are common to dynamic and not-so-dynamic cities. While the remarkable urban revivals in recent decades in New York and Pittsburgh, and nascent ones in Detroit and Newark, are all very interesting, I’ve never understood what they have to teach us about Canadian cities. Their cores never “hollowed out” in the first place, necessitating wholesale renewal. When I listen to Florida talk, I hear Lyle Lanley trying to sell Springfield a monorail.
In any event, his prescriptions for the GTA are not exactly visionary: more transit, more affordable housing, densification over NIMBYism and more decision-making autonomy for cities. “The key today is shifting power from provinces to cities,” Florida writes in a Canadian-focused paper linked to the new book. That made it all the more galling to watch his post-speech “fireside chat” with Ontario Premier Kathleen Wynne, whose tires he pumped well beyond their recommended PSI.
“You know this. It’s in your blood,” Florida gushed of her urbanist bona fides.
Well, let’s see. Wynne can certainly claim to have committed many billions in taxpayer money to transit projects. But if there were awards for NIMBYism, Wynne would have one for the nine-figure cancellation of two unpopular gas-fired power plants, during an election campaign of which she was co-chair; and perhaps another for her party’s shameless politicking on transit in Scarborough.
April 24, 2017
Growth Miracles and Growth Disasters
Published on 26 Jan 2016
In previous videos, you learned two things.
First, that there can be large disparities in economic wealth among different countries. And second, you learned that one key factor drives that disparity: growth rate. As we said, it changes everything. But just how transformative is a country’s growth rate?
Take Argentina, for example.
In 1950, the Argentine standard of living was similar to that of many Western European countries. Up until 1965, Argentina’s per capita income was ahead of many of its neighbors.
On the other hand, Japan in 1950 was on the other end of the spectrum. Japan had been ravaged by war and was only just beginning to find its economic footing again. At that time, Japan’s standard of living was roughly the same as that of Mexico.
It was quite poor, compared to the Argentina of the same era.
But look at what’s happened in the past 65 years.
Japan today is one of the world’s most prosperous countries. Since 1950, it has managed to double its living standards about every eight years. Argentina, on the other hand, has stagnated. Once, Argentina had double the standard of living of Japan. But Japan now doubles them today, with a standard of living 10 times higher than the one it had in 1950.
In economic terms, Japan is what we would call a growth miracle. It’s in the same class as other growth success stories, like South Korea and China which have experienced the “hockey stick” of prosperity. (India seems like it may have started on this path as well.)
These countries are proof of one thing: with the right factors, a poor country can not only grow, but it can do so quickly. It can catch up with developed countries at an astonishing rate.
What took the United States two centuries of steady growth can now be achieved by other countries in about one-fifth the time. Catch-up can happen in 40 years — about the span of a generation or two.
That’s the good news.
The bad news is, while growth can skyrocket in some countries, growth isn’t guaranteed at all.
Argentina is an example of this. It grew well for a time, and then it stalled. Even worse than Argentina, are countries like Niger, and Chad, which are the very worst of growth disasters. Not only are these countries in extreme poverty, but they also have little to no growth. More than that, these countries have never experienced substantial growth in the past.
But why does that all matter?
It matters because growth isn’t just about numbers. It’s not just about more goods and services. When a country grows, its citizens often end up with longer, healthier, and happier lives. Conversely, the countries that are growth disasters have citizens in poverty, with shorter and less happier lives.
As bleak as this seems, it’s the plain truth: while growth miracles are possible, growth disasters are, too.
Which leaves us with another question: what causes either state?
What leads to growth, prosperity, health, and happiness? And then, what leads to the opposite situation?
We’re excited to share the answer, but that’s a topic for future videos.
For now, check out this video to get up to speed on growth miracles and growth disasters.
April 20, 2017
Without our sacred supply management, it’d be “Human sacrifice! Dogs and cats living together! Mass hysteria!”
Colby Cosh saddles up old Rocinante and has a tilt at the ludicrous supply management regime in milk:
You remember how Chobani, a hipster yogurt business based in New York state, got a temporary permit to sell the product in Ontario and won over customers. You know how it tried to meet our supply-managed dairy system halfway by making plans for a factory in Kingston. You know how milk processors waged berserker war in court to prevent the permit from being renewed, and closed ranks to deny the company a supply of Canadian milk.
And, most of all, you know how the product disappeared from our shelves, how Canadians still seek it out on cross-border trips, and how slow and confused the dairy cartel was about meeting the new demand for extra-heavy yogurt. None of this is going to be too easy to explain to a four-year-old.
I hasten to add that I am not seriously playing the “Won’t someone think of the children” card so beloved of politicians, newspaper columnists, and other shameless scum. The four-year-old will get over it. She’ll grow up in a free-trade Canada in which she does not have to accept a world of consumer second-bests, simulacra, and make-dos, except possibly in the dairy section. She can have no personal memory of Seventies Canada — never know what it is like to switch from Eaton’s to The Bay just to buy slightly different versions of the same low-quality, unfashionable crap. The question I grew up with was “Why does Canada have seemingly permanent poorer living standards than the U.S.?”; now it is just “Why are the cheese sections in our grocery stores so pathetic?”
So, Mad Max to the rescue? Not if champion protectionist Steven Blaney can stop him:
… supply management froze the world of Canadian dairying at a perfect moment for Quebec, and so the system has become a sacred cow made of other, literal cows. Because economists and intellectuals know that supply management is a transfer of wealth from consumers of all classes to a few thousand affluent farmers, the beneficiaries reinvest a great deal of the profit in hapless, defensive public-relations efforts that only tend to make us loathe them more.
They have even found a political champion in Steven Blaney, the cadaverous oddball from the Eastern Townships who is in the Conservative leadership race to play milk spoiler to fellow Quebecer Maxime Bernier. Bernier wants to retire supply management by buying farmers out of their quotas with a national tax on dairy, lasting for a fixed period.
This is a generous approach to free trade in dairy: it is a buyout of unearned entitlements. Producers who want to leave the industry would do so with an enormous grubstake — the kind of which workers laid off from regular jobs can only dream. Those who hang in there would get to keep something like the present value of their annulled production quotas as they face new careers in an honest-to-God marketplace (which is what some of them very much wish to do).
QotD: Free trade versus freer trade
No trade agreement is necessary for a government to adopt this ideal policy [true free trade]. And because real-world trade agreements universally fail to achieve complete free trade, real-world trade agreements are universally less than ideal. Each such agreement can and should be criticized for failing to achieve an ideal that is economically not only possible, but easily economically possible and immensely beneficial.
But political realities being unavoidable – and freer trade being superior to not-freer trade – freer trade is an acceptable real-world outcome. In my assessment (as in the assessment of many others), most so-called free-trade agreements make trade freer. (A more-accurate name for them would be “freer-trade agreements.”) And for this reason such agreements deserve the support of proponents of free markets if the only plausible option is the status quo of not-freer trade.
For free-market proponents to oppose freer trade because it isn’t fully free trade is akin to opposing cuts in marginal tax rates because the proposed cuts don’t eliminate taxes altogether. It’s akin to opposing legalization of marijuana if not all drugs are legalized. Or akin to a refusal to join with, or to support, those who oppose raising the minimum wage on the grounds that those opponents aren’t actively working for a complete abolition of minimum wages.
It is true that NAFTA, WTO agreements, TPP, and other such bilateral and multilateral freer-trade agreements leave in place many trade barriers and specify the always-too-slow timing of tariff reductions. But these arrangements are no more instruments of “managed trade” than are government policies that prohibit the sale of some drugs, sex, and body organs – and impose taxes on the sales of all other goods, – instruments of “managed consumption.” While I argue for eliminating all of these promotions and taxes, if such elimination isn’t politically feasible, then any move to reduce the number of prohibitions and the rate of taxation will make market freer and, hence, worthy of the support of proponents of free markets.
Don Boudreaux, “Bonus Quotation of the Day…”, Café Hayek, 2016-11-22.
April 19, 2017
A graphical representation of the difference between the US federal deficit and the debt
In USA Today, Jon Gabriel shows why it’s important to know the difference between a deficit and a debt, especially when discussing the US federal government:
It’s an imperfect analogy, but imagine the green is your salary, the yellow is the amount you’re spending over your salary, and the red is your credit card statement. Then tell your spouse, “Don’t worry, dear, I just increased our debt ceiling with a new Visa card!”
The chart is brutally bipartisan. Debt increased under Republican presidents and Democratic presidents. It increased under Democratic congresses and Republican congresses. In war and in peace, in boom times and in busts, after tax hikes and tax cuts, the Potomac flowed ever deeper with red ink.
Our leaders like to talk about sustainability. Forget sustainable — how is this sane?
Yet when any politician hesitates before increasing spending, he’s portrayed as a madman. When Paul Ryan, R–Wis., offered a thoughtful plan to reduce the debt over decades, he was pushing grannies into the Grand Canyon and pantsing park rangers on the way out.
I’m sure that my chart will be criticized. A few on the right will say it’s too tough on the GOP while those on the left will claim it doesn’t matter or it’s all a big lie.
Wonks will say the chart should be weighted for this variable and have lines showing that trend. All are free to create their own charts to better fit their narrative, and I’m sure they will. But the numbers shown can’t be spun by either side.
All the figures come directly from the federal government, and math doesn’t care about fairness or good intentions. Spending vastly more than you have, decade after decade, is foolish when done by a Republican or a Democrat. Two plus two doesn’t equal 33.2317 after you factor in a secret “social justice” multiplier.
And my chart doesn’t mention future projections due to exploding entitlements, which Trump didn’t touch. Turn to the much scarier Congressional Budget Office chart for that.
April 18, 2017
QotD: Rent control
To someone ignorant of economic reasoning, rent control seems like a great policy. It appears instantly to provide “affordable housing” to poor tenants, while the only apparent downside is a reduction in the income flowing to the fat-cat landlords, people who literally own buildings in major cities and who thus aren’t going to miss that money much. Who could object to such a policy?
First, we should define our terms. When a city government imposes rent control, it means the city makes it illegal for landlords to charge tenants rent above a ceiling price. Sometimes that price can vary, but only on specified factors. For the law to have any teeth — and for the politicians who passed it to curry favor with the public — the maximum rent-controlled price will be significantly lower than the free-market price.
The most obvious problem is that rent control immediately leads to a shortage of apartments, meaning that there are potential tenants who would love to move into a new place at the going (rent-controlled) rate, but they can’t find any vacancies. At a lower rental price, more tenants will try to rent apartment units, and at a higher rental price, landlords will try to rent out more apartment units. These two claims are specific instances of the law of demand and law of supply, respectively.
[…]
In the long run, a permanent policy of rent control restricts the construction of new apartment buildings, because potential investors realize that their revenues on such projects will be artificially capped. Building a movie theater or shopping center is more attractive on the margin.
There are further, more insidious problems with rent control. With a long line of potential tenants eager to move in at the official ceiling price, landlords do not have much incentive to maintain the building. They don’t need to put on new coats of paint, change the light bulbs in the hallways, keep the elevator in working order, or get out of bed at 5:00 a.m. when a tenant complains that the water heater is busted. If there is a rash of robberies in and around the building, the owner won’t feel a financial motivation to install lights, cameras, buzz-in gates, a guard, or other (costly) measures to protect his customers. Furthermore, if a tenant falls behind on the rent, there is less incentive for the landlord to cut her some slack, because he knows he can replace her right away after eviction. In other words, all of the behavior we associate with the term “slumlord” is due to the government’s policy of rent control; it is not the “free market in action.”
Robert P. Murphy, “The Case Against Rent Control: Bad housing policy harms lower-income people most”, The Freeman, 2014-11-12
