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Old 08-14-2019, 10:28 AM
Corry El is offline
Join Date: Jan 2013
Posts: 3,880
Originally Posted by GreenHell View Post
I'm a little confused about Kobal2's criticisms. Are you attacking free-markets or America? Because, as a student of economics and (not by choice) American, they are not at all the same thing.

I am a free-market apologist, because I believe competition, innovation, and consumer choice yield the greatest good for the greatest number the greatest proportion of the time. The invisible hand of the market does work, in that respect.

However, I am an apologist for the free-market, not an extremist. I think that most of the time, if a person can't afford something, they should go without it. However, to allow people to starve, die of treatable illnesses, etc. because they are poor is atrocious.

To paraphrase Smith: "We do not enjoy our beer, bread, and meat from the generosity of the brewer, baker, or butcher, but from their self interest." However, even within the text of Wealth of Nations, he took the trouble to point out that it was not unbridled greed that made the system work, but enlightened self-interest. That first part is as important as the latter.
To state a little differently, free markets are the best way to most efficiently distribute limited resources, with rare exceptions. But society can always, and modern countries always do, decide to sacrifice efficiency to some degree at the margins in favor of subjectively perceived 'fairness'. It's a judgement call how to do that, but one basic point of disagreement would be whether to do it by interfering with the basic functioning of markets, or to just subsidized people who are deemed to suffer unacceptable outcomes in market competition.

Almost no economists really believe that invasive interference in the basic workings of markets, like setting prices, like rent control, is really the best way to modify market outcomes to what's perceived as acceptable from a 'fairness' POV. The best way would be to tax incomes, property etc and given some of that money to people who can't afford market rents* but are deemed to have a 'right' to live in a very expensive area, [City of] NY for example, rather than just move somewhere where they can afford rents. That would waste fewer resources and create fewer perverse incentives.

The reason not to do that is basically pandemic economic illiteracy. Although simply subsidizing people who cannot achieve 'acceptable' outcomes in market competition is usually the least inefficient way to balance efficiency and fairness, very few ordinary people believe that. It's kind of like ordinary people's tendency to oppose free trade (unless there's some extraneous reason to start supporting it, like Trump is seen to oppose it and they can't be seen to agree with him on anything). The seat of pants sense is that price fixing like rent control doesn't really cost anything, so why do something that does, like rent subsidies? Though actually rent control costs more. Politicians have to live in the real world, and the real choice is whether a known bad policy like rent control is less worse than nothing. Assuming politicians understand rent control is a bad policy that is. Some of the more sophisticated ones must, though others are also economically illiterate and do not.

*keeping in mind, sticking with the example of NY, that 'market rents' would be considerably lower than now if all the Stabilized properties were allowed to rent at market. The 'market' rent is for a marginal subset of properties tenants have to compete for, the market clearing price for the whole of rental stock would be lower. That said, with even a gradual transition to no RS, but no subsidies, some less well off people would have to move out of NY. It's a judgement call which of them 'shouldn't' have to.

Last edited by Corry El; 08-14-2019 at 10:33 AM.