Tyler Cowen links to a piece in Dissent that criticizes the growing movement of anti-NIMBYism. The piece is specifically critical of Hsieh and Moretti’s research, which I previously wrote about here. While it generally attempts to be serious, my alarm bells go off anytime someone deploys the phrase ‘neoliberal agenda’.
The Dissent author’s chief argument here, beyond some nitpicking that’s not really that important, is this: markets do not provide enough affordable housing because it doesn’t get the rate of return that other investments do, therefore government must subsidize the creation of low rent housing.
Of course, this argument could be true under certain conditions…such as an excessive regulatory burden on land use development! If only a few new housing units can be added, of course developers will build to get the highest return, which will be more expensive housing. But even then, the new, expensive housing of today is tomorrow’s older cheaper housing; and when new units are built, yesterday’s housing becomes a little less desirable and a little cheaper, all else constant.
But of course, that’s not what this author, or others on the left critical of the anti-NIMBY movement, have in mind. Really it’s a baffling argument; imagine applying this logic to other areas of the economy:
Markets do not provide enough affordable coffee because it doesn’t get the return that artisinal coffee does, therefore the government must subsidize the creation of cheap coffee.
Markets do not provide enough affordable jackets because capital can get a higher return investing in Uggs, therefore the government must require jacketmakers to sell some jackets at a loss making price.
Or a another example: I remember reading someone argue awhile back, during one of the news cycles about the increases in pharma drug prices, that this was prime evidence of the failure of the market. Look, the argument went, this crucial lifesaving drug produced by a private firm, that actually only costs a few cents to manufacture, has had its price increased by hundreds of dollars! The free market is killing us!
But it’s not! The pharmaceutical market is under heavy government regulation that makes it very difficult for new firms to enter. If the pharmaceutical market were truly open and competitive, it would be trivial for a new firm to step in and start manufacturing that drug at its ‘true’ cost. That’s simply not possible under current FDA regulations; that isn’t to say such regulations are ‘bad’ (there’s an argument for quality control, for example) but to imagine they don’t have any costs or side effects is flawed reasoning.
The housing market is rife with such regulations, and to imagine that this has no effect on the nature of the housing supply is just crazy. Even something as seemingly banal as minimum room size has a distortionary effect: surely there are some people who would, at some price, prefer a 60 square foot room to sleeping on the street; but they will be forever priced out of the market because regulation forbids building a habitable room that small.
Maybe what this gets at, and this is something on the left that often bothers me, is this idea that there is a minimum standard of whatever that everybody is entitled to. For instance, everybody should have, at least, a room of a certain size with private bath and kitchen. Everybody deserves a phone with at least 8 GB of RAM, because it’s just a better experience! But of course, some people don’t want all of that, and would rather have had something else with the resources that were wasted. If it’s part of the neoliberal agenda to better align people’s wants with what is available to them, then sign me up. I would rather have more people living in ‘poor quality’ housing in a city with better job opportunities than living in higher quality housing in a place with less desirable jobs.