Some of the results in this new article by Zeljka Buturovic and Dan Klein in Econ Journal Watch (a peer-reviewed journal of economics) are startling:
- 67% of self-described Progressives believe that restrictions on housing development (i.e., regulations that reduce the supply of housing) do not make housing less affordable.
- 51% believe that mandatory licensing of professionals (i.e., reducing the supply of professionals) doesn’t increase the cost of professional services.
- Perhaps most amazing, 79% of self-described Progressive believe that rent control (i.e., price controls) does not lead to housing shortages.
Note that the questions here are not whether the benefits of these policies might outweigh the costs, but the basic economic effects of these policies.
Those identifying as “libertarian” and “very conservative” were the most knowledgeable about basic economics. Those identifying as “Progressive” and “Liberal” were the worst.
It would be hard to find a set of propositions that would meet with such a degree of consensus among economists to rival these propositions–which boils down to supply restrictions raise prices and price controls create shortages. These are issues on which economic theory is exceedingly clear, well-confirmed over decades of empirical support, and with a degree of unarguable consensus among trained scholars in the field. Apparently the existence of a “consensus” among trained scholars on certain policy issues is less important on some issues than others.
DG says:
Those on the far left think that their desires and good intentions replace economic realities.
May 6, 2010, 8:28 pmHarryEagar says:
I guess Wall Street banks and investment companies should stop hiring all those Progessives and hire economically-literate ‘very conservatives,’ then.
May 6, 2010, 8:34 pmHarryEagar says:
I guess Wall Street banks and investment companies should stop hiring all those Progressives and hire economically-literate ‘very conservatives,’ then.
May 6, 2010, 8:34 pmShelbyC says:
Paul Krugman had an article a few years ago about how almost all economists on all sides of the spectrum agreed that rent control was bad, and free trade was good, but that nobody listened to them.
May 6, 2010, 8:34 pmShelbyC says:
Aren’t the folks on wall street all rich, and able to get the government to hand them billions of dollars to boot?
May 6, 2010, 8:36 pmMalvolio says:
Isn’t that the essences of Progressivism, that the laws of economics don’t really apply?
“Rent control won’t lead to housing shortages, well, because landlords will still want to make some money, so somehow it will all work out.”
I always laugh when liberals call Republicans “anti-science”. Some right-wingers aren’t big on, for example, evolution but there’s nothing I’ve noticed that’s inherently anti-scientific about conservativism; the economic aspects of liberalism are sheer fantasy.
May 6, 2010, 8:38 pmJeremy says:
A large part of the conservative philosophy is rooted in the free-market economy so it’s not surprising that conservatives have been well educated on the aspects of economic philosophy that support their viewpoint. Even worse, the denial of those economic realities harms the credibility of anyone trying to push an agenda that has effects that tend to restrict free market movement.
May 6, 2010, 8:39 pmMichael Risch says:
But don’t these views reflect on assumptions about the world works as much as basic economics?
1. If you think there’s already too much housing (a glut) then restricting development doesn’t make housing less “affordable.” Indeed, if one considers the externalities of overdevelopment, then added housing becomes far less affordable, even if the price of any given home goes down. Then there’s the issue of sprawl, such that restricted development in one area just means houses will be built somewhere else, and people will find housing at a price point that ties to location.
2. When you consider the cost of malpractice, then mandatory licensing might well reduce the overall cost of professional services. Additionally, licensing provides a signal function that might reduce the search costs of finding a qualified professional.
3. If rent controls are imposed after the fact in fully built areas. Imposing them shouldn’t affect the supply of housing at all for that area. Furthermore, given high demand in such areas, the demand might still exceed supply. Take California during boom times – no rent control, but many people who could not find a house. If houses were artificially kept at lower price levels, there would still have been a shortage.
Granted, these play with the word definitions a bit and may even stretch things, but they still reflect assumptions about the world that are consistent with basic economics. Indeed, I think the questions themselves could reflect a simplification of economic thought that’s problematic.
May 6, 2010, 8:45 pmUVA 2L says:
Maybe the title should be “The Less You Know About Economics, the Further Left You Are.”
May 6, 2010, 8:45 pmERH says:
our simple eight-question test is merely a baseline and does not gauge the heights of economic enlightenment; and (4) a concern about response bias (namely, that less intelligent people would be less likely to participate in the survey)
And if you read the questions themselves I believe you will agree that the answers are far from clear cut.
May 6, 2010, 8:55 pmMonkeyesq says:
Their survey seemed to take the following form:
1. Pick 8 liberal positions that have a questionable economic basis;
2. Ask people whether they “agree” or “disagree” with the statements;
3. Find that liberals are more likely to support liberal positions;
4. Claim that liberals don’t understand economics.
I’m sure that you could conduct a similar experiment and get opposite results with a little work.
Also, of their eight statements, you picked the 3 that were the least controversial. The others statements include:
1. “Overall standard of living is higher today than it was 30 years ago”
2. “A company with the largest market share is a monopoly”
3. “Third-world workers working for American companies overseas are being exploited”
4. “Free trade leads to unemployment”
5. “Minimum wage laws raise unemployment”
These statements employ terms with vague meanings outside of economic literature (e.g. “standard of living” “monopoly” and “exploited,” are poorly worded (e.g. “Free trade leads to unemployment” is true for some people, even if it is generally good) or are actually somewhat controversial in practice (e.g. while a higher minimum wage should cause more unemployment in theory, there is a good deal of literature that argues that it does not in practice [as well as literature that argues that it does]).
By the way while I think this survey is horribly flawed, I actually agree with the “right” answer to each of these questions.
May 6, 2010, 9:03 pmKR says:
Now there’s a big surprise. I think I’m going to have a heart attack and die from that surprise.
May 6, 2010, 9:04 pmTweets that mention The Volokh Conspiracy » The Further Left You Are the Less You Know About Economicsr -- Topsy.com says:
[...] This post was mentioned on Twitter by Dodd, The Volokh Conspirac. The Volokh Conspirac said: The Further Left You Are the Less You Know About Economicsr: (Todd Zywicki) Some of the… http://goo.gl/fb/soJOa [...]
May 6, 2010, 9:08 pmSteve says:
I’m always skeptical about the conclusions drawn from a politically-charged social science study based on survey data. Unless, of course, the conclusions serve to “confirm” what I already believe…in that case, I swallow them hook, line, and sinker.
In all seriousness, I agree that many of the popular economic philosophies of the Left disregard the realities of human incentives and behavior, demonstrating an appalling degree of economic ignorance. After all, when it comes to government policy, the stated INTENTIONS of the policymakers (like providing affordable health insurance for all) seem more important to my left-wing friends than the likely EFFECTS of their actions (like a health care reform package that expands and galvanizes the perverse incentives that got our health insurance system into such a mess in the first place).
That being said, this study is crap. My “bias radar” went off like crazy all the way through that article.
May 6, 2010, 9:08 pmRandy says:
Malvolio: ” the economic aspects of liberalism are sheer fantasy.”
As are the economic aspects of conservatism. A recent article in the New Republic argues that supply side, Laffer curve-ism is still alive in well in the best circles of the conservative elite, despite no evidence that ‘tax cuts lead to more tax revenue”. Read it here
Thus proving that idiocy is found on both sides of the political spectrum. Pick your poison.
May 6, 2010, 9:10 pmOpenVolokh says:
The key phrase is “basic economics.”
I tend to think that basic economics leads one to less wisdom about policy, not more. Too often, economics 101 textbooks offer canned policy solutions rather than careful analysis. As the field of behavioral economics shows, the policy conclusions one might gravitates based on a basic economics need to be modified.
So, I am not sure which is worse. Not knowing basic economics, or knowing basic economics but not understanding its limitations.
Also, the idea that rent control leads to housing shortages is very contingent. If heavy zoning regulations are in place, rent control might not lead to any decrease in housing. Imagine the following scenario. Due to zoning, only X units will be developed. If the supply for new housing would be X + Y with rent control and X + Y + Z without it, then rent control is not going to affect the supply of housing. In either case, the number of new units developed will be X.
This just goes to show how you still have to use your brain and not merely rely on canned solutions one would arrive at based on abstract models. Economic models that show that the supply of new housing will decrease in response to rent controls do not take into consideration limitations based on zoning regulations or whether building new housing is very physically feasible or not anyway.
Even though I have an extremely good grasp of economics 101, I might have answered no to the question of whether rent control decreases housing supplies. If the survey asks yes or no, but the real answer is “it depends” then it seems that either yes or no is a fine answer.
May 6, 2010, 9:14 pmOpenVolokh says:
As someone on the left, I realize that this is true about me. All that matters to me is intentions. Thank you for this! Now I have become a conservative. Thank you for showing me the light! Oh wise one.
May 6, 2010, 9:16 pmAlanDownunder says:
What Monkeyesque and Randy said. This blog could do with less vapid slanted right wing cheerleading. Its relative absence used to be a feature.
May 6, 2010, 9:17 pmD.E. Wittkower says:
The authors themselves admit that they asked questions where economic reality went against liberal ideology, but not questions where economic reality went against conservative ideology. Although I would expect there to be a difference here overall, but not necessarily because economic understanding leads to conservative views. It’s much less contentious to assume instead that those with conservative views are going to be more likely to devote more time to studying markets.
May 6, 2010, 9:26 pmAngus says:
You could easily put together a similar 8 question survey that showed conservatives just as clueless as liberals. You can start with:
“Tax cuts always pay for themselves in increased revenue”
On top of which, I just noticed they based their entire paper on one of the worst pollsters in America — Zogby.
May 6, 2010, 9:29 pmOpenVolokh says:
Let us imagine that I owned the entire earth and each country had to pay me rent.
Would rent control limit the supply of earths? =)
May 6, 2010, 9:31 pmOpenVolokh says:
Oh, imagine the following policy. Rent control on housing older than X years old, but no rent control on new housing.
Assume zoning regulations prevent existing housing stocks from being converted to any other use. Does rent control decrease the supply of housing? Why or why not?
May 6, 2010, 9:35 pmMichelle Dulak Thomson says:
I don’t think that writers who want to be appreciated outside the circle of people who already agree with them really ought to label answers to their survey questions “enlightened” and “unenlightened.” I happen to agree with their eight “enlightened” answers, but the snark is counterproductive, to say the least.
And I must agree with Monkeyesq that you (TZ) did pick the three questions of the eight about which there’s the least serious empirical dispute. The other five have more space for quibble-maneuvering.
I wish they had used a survey instrument more like that American government/history/economics quiz that was all the rage a little while ago … where is it … Oh, yes, here. I think the econ questions in there, like everything else, really do have unambiguously right answers.
May 6, 2010, 9:35 pmfrankcross says:
This reminds me of the study showing that conservatives were much more ignorant about Iraq (WMDs, etc.) But they only asked questions where the more conservative ideological position was false. You can’t give someone credit for being knowledgeable about something when they simply express their ideological views.
Conservatives are generally right on these questions, but don’t ascribe knowledge to them. I suspect there is great ignorance on both sides of the spectrum.
May 6, 2010, 9:39 pmMichelle Dulak Thomson says:
Angus,
You could easily put together a similar 8 question survey that showed conservatives just as clueless as liberals. You can start with:
“Tax cuts always pay for themselves in increased revenue”
Angus, do you consider this a “conservative blog”? I mean, do you feel yourself to be surrounded by conservatives here?
If so, sit back a minute and consider carefully. How many people commenting here (or posting here, for that matter) do you imagine actually agree with that statement?
Your Honor, I rest my case.
[Before anyone rushes in to point it out, of course that's specious argumentation. Even if Angus does think the VC a conservative blog, the VC readership is a damned poor representation of "conservatives" generally. So much the worse for conservatives generally, if I do say so myself, but still ...]
May 6, 2010, 9:43 pmElliot says:
Who here thinks rent control does not lead to housing shortages?
May 6, 2010, 9:44 pmjiffy says:
A question for Zywicki: Do you really believe that this survey says anything meaningful about the relative economic knowledge of liberals and conservatives? The answer would help your readers know whether to take you seriously.
May 6, 2010, 9:47 pmRandy says:
Can you define “housing shortage”? We need to know what the goal posts are *before* they are moved.
May 6, 2010, 9:50 pmAngus says:
You are having reading comprehension problems. I have not called VC a “conservative blog.” I know you think it is easier to score points by just making shit up and claiming someone else said it, but it really makes you look terrible.
I’m referring to the slanted study in the original post (did you see the post by TZ before you waded into the comments?) that explicitly contrasted “progressives” with “very conservative” individuals.
May 6, 2010, 9:51 pmOpenVolokh says:
Michelle,
I could quibble with the rent control assertion.
Imagine the extreme situation where San Francisco zoning regulations forbid the building of new housing and forbid the conversion of existing housing for any other purpose.
Would rent control decrease the amount of new housing developed?
The obvious answer is no. No new housing is going to be developed, regardless.
Rent control decreases the amount of housing that would be developed, assuming no other restrictions.
So, assume no restriction. WIth no rent control you might have X + Y + Z new units of housing developed. With rent control you would have a smaller number X + Y developed.
But, if your zoning regulations limit new housing units to X anyway, rent control doesn’t matter.
That assumption that nothing else matters ceteris paribus is a REALLY big one in economics. And it often is not true.
May 6, 2010, 9:51 pmOpenVolokh says:
Excellent point. Remember, just because under free markets don’t provide for everyone, you don’t call that failure to provide a “shortage” as long as the market is cleared.
The lay definition of shortage (i.e. not enough for everyone who needs something) is, I think, a much more useful definition than the economic one.
May 6, 2010, 9:55 pmOpenVolokh says:
I think you can tell that Zywicki takes the survey seriously. Look at the title of the post and the lack of humor in his comments.
May 6, 2010, 9:57 pmq says:
Agreed with frankcross and others; most people on either side of the spectrum are fairly clueless when it comes to economics, or sociology, or law, or environmental science, or anything really.
I agree with the overall tone of this passage, but the Laffer curve as a theory is generally accepted by economists. Most simply acknowledge that we aren’t at that point where tax cuts lead to more revenue.
That would be an odd answer in light of the first bullet point about “restrictions on housing development.” Regardless, there is essentially no question of this type that is 100% true or false, but it seems like a cop out to say either answer would be fine.
“Does trading an apple for an orange increase the wealth for both traders?” It depends, maybe one of them isn’t rational! Or maybe one of them has a gun and is threatening to use it. But if you said “no,” I would still give you a strange look.
Yes, it’s true rent control won’t decrease housing supplies if the price is set below the clearing price. But it’s more reasonable to assume for such a simple question that the price is above the clearing price. After all, what would be the point of rent control otherwise?
May 6, 2010, 9:58 pmMichelle Dulak Thomson says:
frankcross,
That’s true enough; pick the right questions and you can make people of any political inclination look silly. But not on any random subject; just on the ones that are their peculiar vulnerabilities.
And I must say that I hate, hate, hate these “strongly agree”-to-”strongly disagree” questions. They seem to be much in fashion now — the surveys large companies use to evaluate potential employees always seem to have them — but they’re maddening to answer, because half the time you want to challenge the question, and that’s the one thing you can’t actually do. I gather employers get some sort of meta-data out of that kind of quandary, but if you simply want to know what a swath of the public actually thinks about anything, how can it possibly be useful?
The quiz I linked above seems to me a much more useful gauge of what people actually know. As with any multiple-choice test, you can always guess; but the wrong answers here are rather more cunningly designed than they are in most such tests. I didn’t miss anything, but my economic knowledge is admittedly sketchy, and once or twice I was a little nervous.
May 6, 2010, 9:58 pmdave h says:
OpenVolokh, I think your argument is circular. You’re saying that if the government dictates the price, then it does not necessarily have an effect on supply, if the government also dictates the supply.
May 6, 2010, 10:02 pmMac says:
Well, I do believe Greece is giving Liberals, at least in Greece and other parts of Europe, a dose of reality. Now, will they learn from it? I doubt it. The most common refrain I hear being quoted from the Greek citizen is that the austerity measures are “not fair”.
I am not sure what is “fair” about expecting the German worker, etc. to pay for the Greek’s ability to retire at age 50 and high wages and benefits for public sector employees and so on. I heard today that a hairdresser can retire even earlier as he/she has a high risk job due to working with chemicals. And, the idea that the Government is going to raise taxes is also unfair.
They seem to be devoid of reason. How long do they think they can spend more than they make and it will all be fine and dandy? How many people do they think a non-public sector working stiff can support? Too bad their Government lied to them about the debt. Now, that they know the truth, they still don’t want to make any adjustments. I can’t believe they would have if they had known the truth either.
Our Government is lying to us as well. Fannie and Freddie and their future liabilities are all “off the books” as are so many other expenditures. I just wonder if we will be like Greece when we can’t pay our bills and reality sets in.
Speaking of reality, Japan is not going to be buying any more of our debt. What do we do when China refuses to as well?
May 6, 2010, 10:03 pmMichelle Dulak Thomson says:
Angus,
You are having reading comprehension problems. I have not called VC a “conservative blog.” I know you think it is easier to score points by just making shit up and claiming someone else said it, but it really makes you look terrible.
I did not say that you called VC a “conservative blog.” I asked whether you thought it was one. And went on to say that by that, I meant, did you think most of the posters and commenters here were conservative?
My point was that if so, you were in fact surrounded by “conservatives.” All of whom would laugh out loud at the idea that revenues “always” go up when tax rates go down.
Sorry to have been unclear. But “reading comprehension” in dialogue is a two-way street kind of thing.
May 6, 2010, 10:05 pmMac says:
OK. I should not pick on Greece and leave out California. I don’t want to pay their debt either and will be really ticked off if any Federal official suggests a Federal bailout. It appears that their public sector unions and entitlements are as bad as Greece’s. However, I don’t think their debt was ever “hidden” as the Greek’s claim was done there and as our Government is doing to us. If Congress had to operate under the rules governing business, they would all be in jail. They make Madoff and Lay look like pikers.
May 6, 2010, 10:08 pmOpenVolokh says:
dave h,
How is that circular? Very strict zoning happens to describe reality in many large cities. I think you might argue that this is undesirable (which would go to your normative assessment of the costs and benefits of particular zoning regulations), but that isn’t the same thing as saying the logic is circular.
Also, nothing is mentioned about the nature of the rent controls. In general, controlling the price of a fixed resource is not going to affect the supply if no substitute uses of that resource are possible.
What if rent control applied only to large units, but not to those same units if divided into smaller units? This would give owners the incentive to divide their large units into smaller units and increase the quantity of housing units. Sounds like a paradox. What if rent control only applied to old units, but not new units and zoning prohibited the old units from being converted to any other purpose?
My point here is that what you learn in economics 101 is a beginning, not an end. You have to think about all the limitations that exist in the real world.
Also, in the real world, what often matters is not merely whether supply increases or decreases. What matters is HOW MUCH supply increases or decreases. Economics 101 level logic combined with an awareness of the limits of theory when applied to reality will give you a sense of the direction of effects, but not necessarily the magnitude.
May 6, 2010, 10:17 pmAngus says:
Here are some of the questions that the “scholars” asked, but ended up discarding from their study:
4.Poverty causes crime.
5.Business contracts benefit all parties.
7.More often than not, employers who discriminate in employee hiring will be punished by the market.
13.Consumption grows the economy.
15.Economic development makes things more affordable.
16. Foreign aid helps economic growth of recipient countries.
Why exclude these? Is it perhaps because these survey results did not fit into their argument? Or is it just that some of them are laughably vague and don’t have a real “correct” answer. On many of them, the correct answer is: it depends on specific details of each situation, or how you define the terms.
May 6, 2010, 10:18 pmJoseph Slater says:
I love polls that suggest that liberals or conservatives are smarter, more compassionate, more knowledgeable, have better family values, or etc. They always lead to enlightening discussions. Almost as good as the threads about whether races or genders are smarter or otherwise better.
May 6, 2010, 10:20 pmAngus says:
Michelle,
May 6, 2010, 10:21 pmNo, I do not think VC is a conservative blog. Nor have I at any point in the 6 years I’ve been reading/commenting here (though I took a year long break from commenting). However, the original study did not limit itself to comparisons of Libertarians, but also conservatives. I expect if you posted on Hot Air or another prominent conservative site that statement and asked people to agree or disagree, you’d get overwhelming agreement that tax cuts pay for themselves in revenue increases.
OpenVolokh says:
Yeah. Tell me about it.
But Mr. Zywicki has to preen confident in the sense of the intellectual superiority of his own tribe, because his nemesis Elizabeth Warren is so much more influential than him.
May 6, 2010, 10:24 pmbyomtov says:
The Further Left You Are the Less You Know About Economics:
Lovely way to introduce the post, Zywicki. It’s probably true that the further left you are the less inclined you are to accept Chapter One as stating the final and irrefutable principles of economics, but that doesn’t mean you don’t understand the subject.
I do sympathize, though, since so many at GMU, definitely including Klein, think that’s the only chapter worth reading.
By the way, does Klein ever do any actual research aside from his stupid polls?
May 6, 2010, 10:25 pmMichelle Dulak Thomson says:
OpenVolokh,
No economist, me, but I will quibble back.
If your hypothetical city positively forbids new development, and also has rent control, then if no one is allowed to leave the city, yeah, there’s no impact on development, because there is (by hypothesis) no development within the city, and no movement out of it.
But if your city has rent control and no development and people can leave, well, they’ll leave, that’s all. Except it would be better to say that they won’t be able to come in, yes? The children of residents will either leave or stick around until they can inherit their parents’ leases. Everyone else will basically have to wait for a current tenant to die. Or, of course, live somewhere else.
If your city has no rent control and still no development and people can still leave, the main difference is that leaseholders are more likely to leave, yes? Their tenancy isn’t the precious thing it is in the previous scenario. So there is more turnover. I would think there’d also be more development just outside the no-development zone.
May 6, 2010, 10:25 pmdave h says:
Well OpenVolokh, imagine this trivial example. The question is: will forcing landlords to rent all apartments for $1 affect supply? If you follow your logic, the answer might be no, because perhaps the government also dictates that enough people continue to offer apartments for rent. But I contend “no” would still be a pretty ridiculous answer.
On second thought, maybe this is just a big difference in how liberals and conservatives view the world. To a liberal, the government can take a particular action without having its usual economic effects, because the government can always take more and more actions until they’ve fixed all the problems. Conservatives consider this a fool’s errand.
May 6, 2010, 10:25 pmAngus says:
I’m not an economist, but this study should raise major flags. That is, if the journal itself (as an online only publication) has any reputation in the field. It appears shoddily constructed, the authors abandon half their measurement instruments without much explanation, and one of the authors just happens to be the editor of the journal in question. I looked in vain for any mention of whether the journal is blind peer reviewed, but all I could see was references to “referees.” Blind peer review is an essential element in ensuring that the article is judged on the merits rather than on the influence or prestige of its author. Hard to vote down the editor of a journal you are asked to review for.
May 6, 2010, 10:29 pmOpenVolokh says:
dave h,
Of course if the government tried to force landlords to rent out their property at $1, then landlords would just leave the property vacant rather than incur the liabilities of having tenants.
And as far as your assertion concerning the wisdom of such policies, that is an entirely separate issue. The question is will rent control decrease the number of units of housing.
May 6, 2010, 10:31 pmMichelle Dulak Thomson says:
Angus,
[T]he original study did not limit itself to comparisons of Libertarians, but also conservatives. I expect if you posted on Hot Air or another prominent conservative site that statement and asked people to agree or disagree, you’d get overwhelming agreement that tax cuts pay for themselves in revenue increases.
I really do apologize, you know. I didn’t realize that the quotation marks would make you think I wanted everyone else to think I was literally quoting you.
But if you think most of the commenters here would label themselves libertarians, I think you’d be surprised if there were a poll. I certainly couldn’t call myself a libertarian in good conscience.
I really don’t particularly want to go post something on Hot Air just to satisfy your intellectual curiosity. But if you don’t want to do it yourself, I will.
May 6, 2010, 10:34 pmdave h says:
OpenVolokh,
Maybe not, because the government could forbid landlords from leaving their property vacant.
May 6, 2010, 10:34 pmOpenVolokh says:
I don’t disagree with this at all Michelle. We are just using a different definition of supply. My definition of supply is the number of units of housing regardless of who occupies it. Your definition is the number of units of housing that is vacant and available for someone moving to the area to occupy. Which definition is most useful depends on your purpose. If you are concerned for maximizing the number of housing units used by humans, then my definition is more useful in that context. If you are concerned about the availability of housing for someone moving into an area, your definition is more useful in that context.
But, the point is, you cannot just say that rent control decreases the supply of housing where the supply of housing is defined as the number of housing units occupied and used as housing in this context.
May 6, 2010, 10:39 pmSteve says:
Ok, I’m with Michelle, there are no conservatives who believe that tax cuts pay for themselves.
Anyone believe that illegal immigration has a significant downward effect on wages in this country? Anyone?
May 6, 2010, 10:47 pmOpenVolokh says:
True. Which supports my point. You have to make certain assumptions about the policy context in order to predict the affect of rent control. That is exactly my point. Embedded in the theories of supply and demand are important assumptions. It is important to keep these assumptions in mind when applying these theories to the real world.
As far as policy goes, I never said that I would favor extreme zoning regulations or this sort of policy forbidding landlords from keeping their property vacant. I am not looking at this normatively, but instead purely positively.
May 6, 2010, 10:49 pmfnook says:
We gauge economic enlightenment based on responses to eight economic questions.
Please. I think this post reflects poorly on the professor. It’s one thing to be a proud right winger on economic issues, but this smacks of desperation. Guess that “bankruptcy reform” guru bit is wearing thin these days?
May 6, 2010, 10:59 pmRicardo says:
In at least two senses, yes. People in rent controlled areas tend to live in one place much longer than people in non-rent controlled areas. This decreases turnover and effectively decreases the options a person who is new to the area has (the “flow” measure decreases while the “stock” measure may stay the same).
Additionally, landlords have very weak incentives to maintain rent controlled properties above some absolute minimum threshold because it is a seller’s market. In some sense the supply of acceptable or livable housing would decrease because of rent control.
And you can use regulations to try to increase the minimum standards for rental property but then, we know building inspectors are notoriously corrupt in some cities and landlords can play interest group politics just as effectively as tenants can.
May 6, 2010, 11:01 pmJasmindad says:
It’s one thing to be conservative, and quite another to be unreflectively and kneejerkily so. Zywicki seems to belong to the latter category. I grant that a lot of liberals don’t understand Economics 101, but I bet I can construct a similar set of questions on which many people who call themselves conservative would fail. Examples: tax cuts always increase revenue. Regulation is always bad. Free trade always and everywhere and in everything is good.
Todd, if you want to become an effective conservative, develop a habit of some degree of skepticism about the ideology, and some degree of respect to the other side, since you might have noticed that a lot of very smart people can be found on either side. The skepticism doesn’t have to be a lot, just a bit will do. That will stand you in good stead when the ideology requires adjustment to reality as it inevitably will, because reality has no ideology.
May 6, 2010, 11:01 pmbyomtov says:
MDT,
My point was that if so, you were in fact surrounded by “conservatives.” All of whom would laugh out loud at the idea that revenues “always” go up when tax rates go down.
Not so. In fact, many conservatives are quite fond of this notion, at least if we substitute “often” for “always.” And even those who know better would hardly laugh, because they would be drummed out of the tribe.
May 6, 2010, 11:02 pmfrankcross says:
OpenVolokh, you do not have to make assumptions. The reasonable interpretation of the question is simply one of today’s world. You are right that in hypothetical worlds, the liberal answer could be correct. However, that analysis is only valuable if you showed that those circumstances applied, as a matter of fact, in today’s world. And I don’t think they do.
May 6, 2010, 11:08 pmRicardo says:
I agree with your criticisms of the other questions but question 2 is straightforward Econ 101. It simply goes to the definition of “monopoly.” A monopoly is a firm with 100% or close-to-100% market share. Defining the relevant market over which you calculate market share is a problem (e.g. are cigarettes and cigars part of the same tobacco products market or are they each separate markets?) but since market share is simply a given, the question has a right and a wrong answer.
The way the question is phrased, if someone answers “yes” they are saying that a firm with 8% market share is a “monopoly” if the next largest firm has 6% and it declines from there. That is simply wrong. This answer gets no credit on the Econ 101 final exam.
May 6, 2010, 11:10 pmRicardo says:
As far as Econ Journal Watch is concerned, there are often interesting articles there but it has always been understood as a place where scholars can publish more opinionated reflections or commentary than mainstream journals. It’s not really a place where original research gets published (like American Economic Review, Quarterly Journal of Economics, Journal of Political Economy, etc). It’s peer-reviewed to keep the comments up to a minimum standard but the whole point of the journal is to allow commentary and discussion that generally gets excluded from the more prestigious journals.
May 6, 2010, 11:18 pmMichelle Dulak Thomson says:
Jasmindad,
I grant that a lot of liberals don’t understand Economics 101, but I bet I can construct a similar set of questions on which many people who call themselves conservative would fail. Examples: tax cuts always increase revenue. Regulation is always bad. Free trade always and everywhere and in everything is good.
But here we are again. No one believes the first. (Literally no one; lower a tax from 1% to 0%, and the most hidebound ideologue will concede that revenues from that tax aren’t going up.) The second and third might find a few — a very few — takers among hardcore libertarians, but they don’t generally (well, ever, really) call themselves conservatives.
I think what you could get near-universal “conservative” agreement on is the soft conditional restatement of these. (There must be a nice term in logic for what I’m doing, but I’m afraid I don’t know it.)
“Raising taxes doesn’t always raise revenue. Regulation isn’t always good. Free trade, most of the time, is good for both the buyer and the seller.”
May 6, 2010, 11:19 pmdave h says:
OpenVolokh, my point is that this is a fairly nonsensical way to look at the question. Say you ask someone how long a train traveling at 60 mph will take to get to a destination 30 miles away. You might say the question is unanswerable, because it could get in an accident. But I think the reasonable answer is still half an hour.
May 6, 2010, 11:21 pmMonkeyesq says:
I know that, but the term monopoly is used much more loosely outside of economic textbooks. In every day speak, a monopoly is a company with a large enough market share that it is hard to meaningfully compete against them. Microsoft (in the 1990s at least), Walmart, and Starbucks are all commonly referred to as monopolies, despite having competitors. Each of these companies, while not a monopoly in the Econ 101 sense, can, to a certain extent, exercise “monopolistic” powers by doing thing such as driving competitors out of business by basically throwing money in that direction.
While the statement “A company with the largest market share is a monopoly” isn’t a perfect description of this, its close enough that someone may “agree” with it if they didn’t read it closely, or if, say, their options were only “strongly agree” agree” “disagree” or “strongly disagree.”
May 6, 2010, 11:26 pmdave h says:
Put another way, the questions aren’t (as far as I can tell) asking if rent control will always decrease supply, under all possible circumstances. So I think you should be answering the question in the general sense. And generally, it does decrease supply, except if there is additional severe government interference, which I think begs the question (did I use that right?)
Anyway, I stand by my comment that this is less a test of economic intelligence, and more an insight into a way of thinking. And with that, off to bed.
May 6, 2010, 11:27 pmAnon314 says:
The paper notes that IQ is correlated with economic knowledge. In order of least to most incorrect: Asian/Pacific, White, Other, Arab American, African American. This does fit into previous findings on IQ and race. It looks genetic.
May 6, 2010, 11:29 pmA. Zarkov says:
* Rent control does not make housing more “affordable,” because housing must always be affordable to someone, otherwise it ends up vacant.
* Does rent control actually keep rents down when the supply of housing is fixed? Officially yes, but actually no. With rent control a “shadow market” gets created that serves to increase rents. These increases show up as “key fees,” and other clandestine costs that push up the true as opposed to the apparent cost of rental. Anyone who has lived in a tightly controlled market such as Berkeley or Santa Monica knows this. It’s simply the classic black market that develops whenever price controls are in place. Ask anyone who has lived under communism to get a detailed explanation.
* Rent control leads to an inefficient use of housing stock. At one time, in New York City, some rent controlled apartments were used for storage. While the tenant moved out for more space or other reasons, he would keep the apartment because it was so cheap. Later rules were enacted to require residency, but you still have inefficient use because many people will stay in an over sized apartment.
There are many other examples of why rent control does not work, but so-called “progressives” can’t seem understand the concpets.
May 6, 2010, 11:36 pmMichelle Dulak Thomson says:
byomtov,
In fact, many conservatives are quite fond of this notion [revenues always go up if you lower the tax rate], at least if we substitute “often” for “always.”
I am “quite fond” of the notion that if I put my hand into my wallet and count the bills there, I will find more money than I thought I had. And, indeed, I occasionally find it actually happens. Not enough to be “often”; still, sometimes.
But if anyone were to suggest that the difference between my expecting “often” to find more money in my wallet than I thought I had and my expecting “always” to find it there was a trivial detail, I’d say they had … spent too much time reading the comments at VC, maybe.
May 6, 2010, 11:36 pmrpt says:
Me. There are always more factors involved.
May 6, 2010, 11:38 pmRicardo says:
This is the No True Conservative Fallacy. Bill Kristol and Dinesh D’Souza immediately come to mind as two conservative individuals who are apologists for, if not full-blown advocates of, the Laffer Curve. Bruce Bartlett (someone who variously worked for and affiliated with Jack Kemp, Ronald Reagan, the Heritage Foundation, the Cato Institute and National Center for Policy Analysis) used to be a believer until evidence smacked him over the head: he’s now persona non grata in conservative circles because of his harsh attacks on President Bush. The Wall Street Journal Editorial Board often flirts with supply side economics as well.
You don’t classify these individuals and institutions as conservative?
May 6, 2010, 11:39 pmSay What? says:
Walmart is a monopoly? Starbucks is a monopoly?
WTF?
May 6, 2010, 11:42 pmrpt says:
But then he will be excommunicated.
May 6, 2010, 11:43 pmCornellian says:
51% believe that mandatory licensing of professionals (i.e., reducing the supply of professionals) doesn’t increase the cost of professional services.
This isn’t obviously wrong if you factor in the overall cost of harm done by incompetent professionals. Licensing increases the cost of being a professional, and thus the cost the professional must charge, but the idea is there are fewer incompetent professionals (not zero, just fewer) causing economic harm. Maybe the savings isn’t worth it but that’s not something one can conclude a priori.
For the other two, obviously rent control makes housing less affordable overall, though I suspect many of the people who are answering are thinking from the point of view of the person in the rent controlled apartment. Obviously rent control does help him, at the price of making it harder for people looking for apartments.
It wouldn’t be difficult to compose a few rightward leaning “ignorant of economics” lines either. Ask a local tea party whether tax cuts always result in increased government revenues, or whether immigration is, overall, good for the economy.
May 6, 2010, 11:43 pmMonkeyesq says:
Please read my whole comment. My point is that these companies are considered monopolies based on a loose definition of monopoly.
May 6, 2010, 11:46 pmMichelle Dulak Thomson says:
Ricardo,
I don’t think any of the people you name would agree to “always.”
May 6, 2010, 11:47 pmA. Zarkov says:
The Laffer Curve.
The Laffer Curve is of course nonsense except at the extreme end points where no economy functions. While the Laffer Curve was mostly just propaganda to sell tax cuts, I’m sure some idiots take it seriously, perhaps even Laffer himself. Conservative economists such as Feldstein don’t take it seriously.
Liberals did take the equally loony Phillp’s Curve seriously until it crashed and burned under stagflation. How did the Phillips Curve work? The theory said that workers won’t anticipate higher prices and therefore as inflation drives down the purchasing power of money their real wages drop leading to an increase in employment. You have to be pretty naive to believe such a thing because workers catch on quickly and demand inflation protection by way of extra wages and indexing. Some liberals will believe anything.
May 6, 2010, 11:51 pmDG says:
{ DG: Those on the far left think that their desires and good intentions replace economic realities.
OpenVolokh:As someone on the left, I realize that this is true about me. All that matters to me is intentions. Thank you for this! Now I have become a conservative. Thank you for showing me the light! Oh wise one.}
I’m not a conservative – more of a classical liberal or a soft libertarian. And I think you miss the point – I am ascribing the best of intentions to the left, in terms of economics. I think they truly mean well and want to solve real problems, and, in many cases alleviate human suffering. The problem is that they (you?) try to work against both human nature and economics to make those good things happen.
I’m sure you could come up with numerous examples of ostensible conservatives doing similar things, in terms of social or economic engineering.
May 6, 2010, 11:57 pmOpenVolokh says:
These are moving towards policy arguments and away from the basic empirical question. Will rent control decrease the quantity of housing units occupied as such in a city. Whether there as many units available for transfer, which goes to Michelle’s different use of the term supply, is another question.
It could be pointed out that as tenants gain what is essentially an “ownership” interest in a rent controlled property, they gain an incentive to maintain it for their own consumption. Obviously, their incentive to improve the property is somewhat limited, since they do not get the value of the improvements when the property changes hands.
I am not defending rent control normatively. I think that discussion is complicated. I am just asserting that rent control is not always going to decrease the number of housing units provided to someone in a city. You cannot assert that someone is wrong if they say that rent control does not decrease the supply of housing on a survey, because they could have these thoughts in mind.
May 7, 2010, 12:00 amOpenVolokh says:
Except that strict zoning regulations are a very powerful force actually limiting supply in the real world.
May 7, 2010, 12:04 amDG says:
{This isn’t obviously wrong if you factor in the overall cost of harm done by incompetent professionals. Licensing increases the cost of being a professional, and thus the cost the professional must charge, but the idea is there are fewer incompetent professionals (not zero, just fewer) causing economic harm. Maybe the savings isn’t worth it but that’s not something one can conclude a priori.}
Idea is not reality. There are several professions where licensing is designed as a specific gatekeeper to control the supply of “professionals”. Either that, or its just a tax. Either way, costs increase for the ultimate consumer. Beauticians, anyone? Athletic trainers, hearing aid dealers, hypnotists (yes, really), chiropractors (a certification in pseudoscience), realtors, massage therapists…
May 7, 2010, 12:05 amElliot says:
Who commonly refers to them as monopolies? Where? When? This is so far off base, I would really like to know where this is common. I spend half the day reading economic and market material, and I have missed this. If it is common, I’d consider it flawed, but important, because markets move on perception even if it is wrong.
Does anyone know?
May 7, 2010, 12:11 amOpenVolokh says:
If an unlicensed person who knows nothing about surgery performs surgery on you, are they still providing something that is sensibly classified as medical service? What if they kill you?
Does licensing really increase the cost of professional services? This depends on your definition of service. If you think that anyone who performs an action and calls it surgery is in fact performing the service of surgery, then maybe. But if you believe that surgery must be of a certain quality before it is called a service instead of a fraud, then maybe not.
If we didn’t have licensing, consumers would have to spend a lot more time investigating the reputation and credentials of the professionals they received services from. It seems to me the cost of such searching is properly added onto the cost of the service. So, even if the provision of surgery by unskilled individuals drove down the price of surgery by skilled individuals, the cost might still be higher when you consider search costs.
I would once again say the “right” answer to this question is ambiguous.
May 7, 2010, 12:12 amA. Zarkov says:
Walmart a monoply. Look at their competitors here. Note this only includes competitors that are publicly traded companies. All those private retailers and small stores don’t appear on the list.
Walmart is big, but hardly a monopoly even in the sense you defined it.
Starbucks is even a crazier example. Peets competes with Starbucks. Go to Yelp and type in “coffee houses” and any big city, like New York. Look at the list that comes out. Starbucks has fierce completion.
There’s a big world outside your head.
May 7, 2010, 12:15 amMonkeyesq says:
Honestly, type “walmart monopoly” or “starbucks monopoly” into Google. You get 500,000 result and 4,500,000 results respectively.
May 7, 2010, 12:16 amOpenVolokh says:
*snark*
Could I? You seem to think that those on the left are extremely stupid. I don’t based on your previous assertions that you really believe I would be smart enough to identify such conservatives, even if they existed.
*snark off*
When you realize that you are going to have to try much harder to make an argument than assume that liberals are simply stupid dolts with good intentions, you will be a more effective advocate for your point of view.
May 7, 2010, 12:18 amOpenVolokh says:
What about heart surgeons?
May 7, 2010, 12:20 amElliot says:
You’re right. It’s gross economic illiteracy, but it looks like they are real. Be interesting to see if they have any market effect.
It reminds me a bit of the front page of the NYT where they didn’t know the difference between revenue and profit.
May 7, 2010, 12:25 amMonkeyesq says:
Please try actually reading my comment, you apparently did not as I explicitly stated that these companies are “referred to as monopolies, despite having competitors.” My point is that the term “monopoly” has a different, looser meaning outside of economics textbooks.
May 7, 2010, 12:27 amOpenVolokh says:
For those of you doubting the more informal use of monopoly, think of the technical economic term “monopolistic competition.”
People tend to talk about “tending towards monopoly” to refer to limits on competition.
No one said that a company like “Starbucks” can be referred to as a monopoly in a technical sense. But someone might informally refer to it as such.
And, in some sense, Starbucks is a monopoly. That is where the term “monopolistic competition” comes from. It is, after all, the only firm that can sell Starbucks branded coffee, which does have attributes that distinguish it from other coffee.
Obviously, Starbucks is not a true monopoly, in the sense of being the only provider of coffee shop services. But, it all depends on how narrowly or widely you conceive of your market. For example, some people would refer to a local power company as a monopoly. But, the fact is, there is a substitute, namely solar panels which you could install on your house. So, is calling the local power company a monopoly correct or incorrect if it is the only power company serving your area? That depends on how you define the relevant market.
May 7, 2010, 12:27 amMidlantan says:
Todd – I would ask if you actually read the paper (because the conclusions are laughable), but I assume you only post the link and its dubious conclusions in order to elicit a rise out of people (i.e. the predictable gloating of rightwingers who think their views are validating by the study, and the complaints of the left).
Look at the actual questions. The binary format of answers makes actual intelligent responses all but impossible. Some may be relatively easy: Mandatory licensing increases the price of those services? Sure. (Unless we also count the cost of errors in such services, which might outweigh the increased upfront costs. But that probably doesn’t count in the “price.”) Overall, the standard of living is higher today than it was 30 years ago. I say yes, and a variety of governments and NGOs do too. But there are some who make some serious and colorable arguments for why conventional measures of “standard of living” are wildly inaccurate in one direction or another).
Some questions are nearly so simple: Third-world workers working for American companies overseas are being exploited. The survey says that agreement with that statement is “unenlightened.” Huh? I guess we’re supposed to assume that the statement means “all third-world workers,” and so those who agree are ignoring those third-world workers not being exploited? Of course, that’s not what the statement says. Does anyone seriously question that some third-world workers are being exploited? Seriously?
“Minimum wage laws raise unemployment.” The textbook says they do, and theory says they should. But actual empirical evidence of actual minimum wage laws often doesn’t demonstrate the theoretical effect. I get why one might deem the correct answer to be “agree,” but how is it “unenlightened” to be aware of empirical studies showing that minimum wage laws in practice (that is, within certain political and economic constraints that keep a minimum wage from being $20/hour, and in the presence of transaction/opportunity costs) don’t actually increase unemployment? How is an economist supposed to answer this? “I know what actually happens in the real world but I’ll give the theoretically correct answer because I want to appear enlightened?”
And the enlightened answer to “Free trade leads to unemployment.” is to disagree? Are they f-ing kidding? I’m all for free trade, but even its biggest cheerleaders among actual economists acknowledge that free trade does frequently lead to unemployment. It’s temporary, and a result of shifting of labor from one specialization to another, and in the long run, free trade ought to increase employment, but to dismiss (as “tendentious and churlish” no less) those who would point out the (at least temporary) spike in unemployment that often results from a shift from protectionism to free trade is absurd.
Zogby polls are bad enough. Those who try to use them, and their questionable methodologies, as a dataset for serious inquiries into complex topics (hell, even simple topics) ought to be peer reviewed right out the door on their asses.
May 7, 2010, 12:42 ameasy says:
The main thing this post demonstrates is how desperate Mr. Zwicki is to score some points for what his side.
I mean, remember folks, this is a guy who repeatedly stated that lay away plans were a form of “credit” so – obviously – we’re dealing with someone whose grasp of financial concepts is less than secure.
May 7, 2010, 12:45 amA. Zarkov says:
I understand that some people refer to Starbucks as a monopoly in some loose sense. My point is that sense is too loose. So loose it makes no sense. For some reason, a lot of people don’t like Starbucks, so calling it a “monopoly” is just a way of insulting the company.
If Starbucks is a monopoly because only it sells “Starbucks” branded coffee, then virtually everyone is a monopoly. Apple is a monopoly because only Apple sells Apple computers. Ford is a monopoly because no other company sells exactly the Ford car.
BTW Costco sells Starbucks branded coffee.
May 7, 2010, 12:51 amRicardo says:
It’s not my area, but the empirical question appears to have been answered by Olsen (1972) “An Econometric Analysis of Rent Control” and other later papers. Not to quibble, but the question you asked was a theoretical one. Accordingly, I gave a theoretical answer: I can indeed imagine supply contracting in some sense even when the government tries its best to stop it. Do you have empirical evidence to the contrary or a real-world example in mind?
May 7, 2010, 1:12 amOpenVolokh says:
Ricardo,
I should be more clear. I am not talking about statistical evidence. If you gather such evidence, the question arises to what extent it is generalizable. So, if you have an empirical study that shows rent control decreasing housing quantity, that only shows that rent control decreases quantity under that particular policy regime. It does not show that it decreases quantity under other policy regimes.
What I am talking about is the empirical reality of whatever policy background rent control is implemented in. In a world with very severe zoning and land use regulations that prevent most housing anyway and regulations that prevent existing housing stocks from being converted to different uses, the effect of rent control on the quantity of houses supplied in a city could be non-existent.
So the thing that is empirical that I am talking about is that policy that is “out there” outside of the economic model that shows that if you have a price control on rent, the supply will decrease. I am not talking about what you would call “empirical studies” gathering data or doing statistical and econometric analysis, although I recognize that use of the word empirical tends to bring such an image into mind for some individuals.
In general, the concept of “empirical” means anything that is “factual” and “out there.” One need not be referring to an econometric study to use the word properly. Also, another thing one might talk about is a “hypothetical empirical.” That is, if you ask me a question that doesn’t consider X, I would say that it depends on X. To illustrate and increase your understanding, I might provide a hypothetical. If X had attributes A, B, C, then the X will turn out differently than you expect. Of course, my hypothetical is theoretical, as I am not talking about a real thing that has attributes A, B, and C. However, I will use the term “empirical” to say that the answer to your theoretical question about rent control depends on the empirical reality of whatever policy regime is in effect. So the answer to the question is, in principle, an empirical one or in other words contingent on facts that exist “out there.”
And I agree that supply would likely decrease in the “sense” of the number of units available on the market at a given time. But under a different “sense” of the total number of units of housing occupied as such in a city, it may not.
Also, as I mentioned before, one could even imagine rent control increasing the quantity of housing. For example, in such a strict environment where the effect on development that would otherwise occur was overwhelmed by zoning and land use regulations, a regulation granting full or limited exceptions to rent control for existing dividing fewer larger units into more smaller units could increase the number of units of housing in the city. One could also imagine a policy where rent control was relaxed for converting property dedicated to commercial uses to housing in areas zoned for both residential and commercial. The very existence of rent control would give policy makers something they could relax in order incentivize results that would not otherwise occur.
Here is the issue. If you have a survey that says that “supply will decrease under rent control” then I think you can only say that YES is absolutely the only right and “enlightened” answer if it will decrease under all senses of supply and under all policy regimes. Otherwise, the correct answer would be “it depends.” The most natural definition of supply, I think, is the total number of units of housing provided by a city, regardless of who occupies them and whether they are actively advertised for new occupants or not. Although I think one could focus on just those that are on the market for newcomers and call that “supply” if you want — even though this has some problems, since a determined newcomer who was rich enough could probably convert the vast majority of properties that are not currently advertised “for sale” into properties that are for sale with enough money. (Assuming rent control statutes allow owners to displace tenants if the owner is going to occupy the property.) Further note that this latter definition of supply would lead to perverse conclusions. Such as, in a society with no eminent domain protection, the mass forced eviction of all residents and then actively advertising and renting out of their properties would then be said to be an “increase” in supply, even though all you are doing is shuffling occupants.
The bottom-line is that if the question was asked of me “does rent control decrease the supply of housing” I would probably answer NO. The reason being because I would tend to interpret this as “does rent control ALWAYS decrease the supply of housing.” And the answer to THAT question is no.
May 7, 2010, 1:53 amRicardo says:
OpenVolokh, it’s also important to note that “decrease available units” is different from a “housing shortage.” A “shortage” is when there are lots of people who want to buy a certain item at the going market price and have the means to do so but cannot because there is not enough to go around. That’s a weaker claim than a decrease in the stock of rental housing and it is certainly true.
Your objection seems to be based on the following line of reasoning:
1. Imagine a world where the stock of rental housing never decreases.
2. Government imposes rent control.
3. Under assumption #1, the stock of rental housing does not decrease.
Q.E.D.
I’m just not sure what real-world relevance assumption number 1 has. Indeed, as an “empirical” matter (that is, based on observation and evidence rather than a priori reasoning) we can’t be sure this has ever been true anywhere. And it certainly doesn’t say anything about the possibility of a housing shortage which can occur even without a decrease in available rental housing.
May 7, 2010, 2:32 ambbbeard says:
In the example you give, burdensome zoning restriction reduces the quantity of housing units available. Ceteris paribus, this in turn will reduce the equilibrium price, because fewer suppliers are needed, so prices do not need to be as high to induce suppliers to join the market (this is not how zoning restrictions typically work, BTW… see below). [You can draw this on a P-vs-Q diagram, the supply curve slopes from lower left to upper right, the demand curve runs from upper left to lower right, intersecting at the free market equilibrium point... your constraint is like a constant Q line below the equilibrium quantity.] In this case, rent controls have no effect on the supply only in the case that they have no effect on the price; i.e. if the rent-controlled price is above the depressed equilibrium price, then you are correct, the rent control will have no effect. But if the rent control price is below even the depressed equilibrium price, the quantity will be further reduced. But this is pretty obvious, isn’t it? You might as well skip the zoning argument and just say, “Rent control doesn’t always reduce the supply of housing, because sometimes the equilibrium rent is below the controlled price.”
Now, as I mention above, this is not how zoning restrictions typically work, that is, zoning boards do not usually say, “only enough room for X beds will be allowed in this community”. Instead, they say, “in this section of the county, only single-family homes with a minimum square footage of 4000 ft2″. This has the effect of shifting the supply curve, you can think of it as either upward in the price direction or downward in the quantity direction — same thing — which is a different constraint than Q=constant. In this case the new equilibrium is at a lower quantity and a higher price than the free market equilibrium. Now, if you impose rent control on top of the draconian zoning laws, you can choose to set the rent controlled price above the new “zoned” equilibrium, or below. If above, sure, no effect, but it’s not really rent control. If below, then the quantity drops below the zoned equilibrium. So again, we see that your now-modified example reduces to rent control above the market price.
Somehow I’m not convinced you really do have “an extremely good grasp” of econ 101.
BBB
May 7, 2010, 2:43 ambbbeard says:
And what the study authors found is that that “looser” (i.e. incorrect) meaning is deployed not by uneducated people, but by leftists. People who claim “Walmart is a monopoly” are not the “high school or less” population, who might be forgiven for their imprecision, but by propagandists who aim to undermine successful corporations. The fact that leftists like to abuse economic language does not make their usage correct.
May 7, 2010, 2:48 ambbbeard says:
You changed the question. The statement was “Mandatory licensing of professional services increases the prices of those services.” Your critique tries to shift to the more general question of “costs” rather than “prices”. Do you not understand the difference, or are you just being disingenuous?
May 7, 2010, 2:56 amOpenVolokh says:
Yes. But this isn’t necessarily THAT important. The bad effect is that someone who has a really high paying job downtown might have to commute instead of living closer. One might think that the greater economic diversity that is created is worth such a cost. And anyway, there are plenty of low-income jobs downtown, so SOMEBODY probably has to commute. And I don’t see any reason I should care who that somebody is.
But even if I grant that this is a distortion, it isn’t the only reasonable definition of the word “supply.” Remember, we are saying that people who answer NO are ignorant unenlightened neanderthals. Not merely that they are using a different definition of supply than you happen to favor.
Once again, I want to emphasize that I am not making a normative argument in favor of rent controls. I did not say that they do not involve any market distortions.
Exactly! There is no reason to think that this will not sometimes be true. Well, except that the claims are too broad. How about this:
1. Imagine a city (not a world, a city) where the increase in the stock of rental housing is regulated such that it new housing is limited to much less than suppliers would wish to supply in the absence of those regulations. That is, absent the policy you would have X + Y + Z new units of housing built. But due to the backlog in the policy review process, only X new units will be approved.
2. Imagine a policy (such as rent control) that disincentivizes developers. So in the absence of those regulations they wouldn’t want to produce X + Y + Z new units of housing, but rather X + Y units.
3. The affect of the disincentive (rent control) will, in this case have no effect. Whether the disincentive exists or not, there is an incentive to build more than X new units, but the existing regulations are going to limit that to X.
It doesn’t strike me as that implausible, given land use regulations.
Note the shift in language to a housing “shortage” where shortage is defined in a very technical way. To the lay person, if there are N + M people who want something, but only N widgets, there is a shortage no matter what. To an economist, there is a shortage ONLY if some of the people in group M could actually afford the widget. May I suggest that the economists definition of shortage is missing something that is normatively important? That is, just because you say that there isn’t a shortage, that doesn’t mean that no one is being deprived.
Anyway, I digress, the survey is about supply, not shortages. I do not dispute that meaningful rent control will (not can, but will) cause a “shortage” whether or not there was an impact on the number of units of housing. I would say that most people would care more about the number of units of housing rather than who exactly gets them. And that when you talk about “supply” I believe the number of units of housing within a city is a reasonable meaning. I will further assert that rent control “can” cause not only shortages according to your technical definition, but also decreases in the number of units at time T + 1 than would otherwise have been in existence.
I will go farther and say that your point that there “can” be a housing shortage is weak. The claim that there “can” be a decrease in supply is also weak. I agree with both of these claims. I will even go farther and say that not only are such things possible, but there have in fact been historical instances of them happening.
A much stronger claim is that rent control ALWAYS leads to a decrease in the supply of housing (supply being defined as the total number of units in a city). That is a claim that I doubt is true.
May 7, 2010, 3:07 ambbbeard says:
Out of all your objections, I find this is the most superficially plausible. Can we analyze this? First, the only category of respondents which aligned with your interpretation in the majority were self-identified as “progressive” (60.8%). Even the “liberal” bloc only sided with you 45%. Overall, the large majority of respondents (about 2/3) understood the meaning of the question.
Second, what would you think would be the “correct” response to “Increased productivity leads to unemployment”? In the Michael Moore world-view, which I would hazard a guess that most progressives share, the answer is “Agree”, but the rational understanding is to think about the net effect on the economy “in the long run”, which is to increase the standard of living, which leads to more wealth, which leads to more consumption, and to more jobs, so the correct answer is “No”. Now, free trade increases wealth through nearly the same mechanism, and this has been understood for hundreds of years.
Still, I understand your objection. Some of the questions on this test have that maddening “Pick the best answer” flavor that made high school standardized tests hell. Still, that doesn’t change the fact that there is a best answer, and progressives didn’t know it.
May 7, 2010, 3:18 ambbbeard says:
Perhaps you could try a little harder to come up with questions that parallel the study questions. None of the study questions asked respondents to judge an economic effect “good” or “bad”. None of the study questions tried to slant the response by using absolutes like “always” or “never”.
Several commenters have claimed it would be easy to come up with equivalent economics questions that would trip up conservatives. The fact that such equivalent questions have not been forthcoming is further proof that economics is Greek to you. Not only can you not answer the questions correctly, you can’t even formulate exam questions of your own….
May 7, 2010, 3:30 amOpenVolokh says:
bbbeard,
Of course, if you have ineffective price controls that are higher than the market price, they will have no effect. That is obviously not what I am saying.
What I am saying that a market might be so desirable that there is a huge desire to increase supply in the future. Say that developers want to build D numbers of houses from time T to time T + 1. Further, let D = A + B + C. Say that the city government has decided to limit the number of new units to A in the time period T to T +1. Perhaps they are concerned about the congestion and the local community is not particularly wishing for new development. So even though developers would ideally like to build D units, local government will only allow them to build A units.
Enter price controls. Moderate price controls aren’t going to necessarily discourage all development. What if the price control were only a penny below the market price that developers planned to charge anyway? This would hardly discourage development at all. Let us assume it is higher than that. Well, developers would react by supplying fewer units. Let us say that price controls are set such that the profit maximizing number of units to develop would be A + B, or C less. This fits into supply and demand perfectly. Before rent control, developers wanted to supply A + B + C units. After rent control, they only want to supply A + B units. A price decrease leads to a decrease in the number of units suppliers wish to supply, per economics 101.
Well, in this case, they can only supply A units anyway. So, at the end of the day, the rent control has absolutely no affect on the number of units of housing provided. Before rent control, A new units will be built (even though developers would have preferred to supply A + B + C units). After rent control, A units will built (even though developers would have preferred to supply A + B units). I am also assuming that rent control is not so severe that it causes anyone to convert existing housing stock to other uses (which may not be possible anyway due to zoning) or leave it vacant.
Well, the fact that I set the curve in an honors-level economics course above the econ 101 level at a major university would lead me to think otherwise.
May 7, 2010, 3:31 amOpenVolokh says:
Wow. You really are a hack. Guess what. Just because a definition isn’t the one used in a particular context does not make it incorrect. The term “monopolistic competition” could be said to be “incorrect” (before it became part of the canonically vocabulary used by economists).
People use the term “monopoly” informally to describe firms perceived as having significant market power. There is no doubt that Wal-Mart exercises such power to some degree with its suppliers, or that Starbucks exercises such power to some degree with coffee drinkers who prefer their brand.
Yeah, they aren’t a monopoly under the most reasonable market definitions.
You need to get over your hatred of progressives. At the end of the day, your dislike of people with differences of opinion is only going to give YOU stress.
May 7, 2010, 3:40 ambbbeard says:
The statement “Third-world workers working for American companies overseas are being exploited” is certainly problematic.
Here’s one dictionary’s definition of “exploit”:
Any of these definitions would likely be true in many circumstances. Note (2) is a “positive” definition of “exploit” and (1) is arguably value-neutral. Even (3) can be construed as value-neutral if the workers are presumed to want as much income as they can stand to work for.
May 7, 2010, 3:42 amOpenVolokh says:
Do people who claim to know what they are doing but do not providing a “service.” If you get surgery from an unlicensed surgeon and you die as a result, did you receive surgery services?
This isn’t even an economics 101 issue. Licensing decreases search costs for consumers. And search costs, rightly considered, are part of the “price” that one pays to get a service.
May 7, 2010, 3:43 ambbbeard says:
Wow. You really are data-resistant.
May 7, 2010, 3:44 amOpenVolokh says:
bbbeard,
What is your issue with the word exploit. That it isn’t value neutral?
May 7, 2010, 3:46 amOpenVolokh says:
I was referring to your ridiculous attacks on people who are on the left-wing side of the spectrum. They make you sound like a hack.
Data resistant? Make an argument that is worthy of me changing my mind and I will.
As far as my argument concerning rent control, it is pretty much rock solid and in conformance with economics 101. You have posited a more subtle limit on supply than I have, but there are instances where communities are going to want to limit the number of new units built to limit over-crowdedness and congestion, not merely things like lot size.
Yeah, by switching the nature of the zoning regulations, the analysis changes. And that is my point. It all depends on the nature of the regulatory regime.
May 7, 2010, 3:51 ambbbeard says:
Fascinating. Is it safe to assume you would self-identify as either “liberal” or “progressive” on the Buturovic-Klein study scale? Because you are providing further evidence in support of their hypothesis.
To be honest, my initial impression was that this study was flawed (albeit the authors explicitly acknowledged most of the flaws in their report). But as I sift through the responses posted here, and inferring some of the posters’ political predispositions, there certainly seems to be something to the hypothesis that leftists just don’t “get” economics.
May 7, 2010, 4:08 amRicardo says:
Good, because that is what the question actually asked: “4. Rent control leads to housing shortages.” The fact that you have had to tie yourself up in knots, rephrase the question, redefine key terms, make ad hoc assumptions and slip in normative considerations (e.g. “this isn’t necessarily THAT important”) to get to a certain conclusion actually argues quite well against that conclusion.
May 7, 2010, 4:12 ambbbeard says:
Umm, no, the point is that it is value-neutral, or at least some dictionary definitions allow for that, and even for some positive meanings. This suggests that there shouldn’t be as large a discrepancy between liberals and conservatives on this question as are actually observed — the authors measured something like 80% of progressives but only 30% of libertarians agreed with “exploit”.
But I must be over-analyzing this particular question. The authors intended, I think, for the respondents to consider whether the worker-company relation is mutually beneficial even in the third world. I think they should have just asked that, instead of using the tendentious and ambiguous word “exploit”. After all, absent slave labor, economists would agree that corporate workers in the third world find their wage and working conditions agreeable or they would not work. By using the word “exploit”, the question became a measure of propaganda, not about the actual economics. Leftists want to say low prevailing wages, long hours, etc. are evidence of “exploitation” in the negative sense, while an economic analysis would elaborate the factors that drive working conditions to a different equilibrium in the third world than in Tennessee. Nonetheless, the survey participants discerned the meaning of the question and responded appropriately.
May 7, 2010, 4:24 amOpenVolokh says:
Do you want to actually make an argument, or do you only know how to engage in name-calling.
May 7, 2010, 4:25 amOpenVolokh says:
The definition of “shortage” used by economists is slightly retarded. And of course, the vast majority of people of whatever ideology are not going to be able to define it according to that definition.
Guess what. In the normal use of the term, there will always be housing shortages. Because not everyone who needs housing will be able to access housing. If you are going to do a survey on the general population, you had better us the lay definition and not a technical definition used by economists.
I would say that is a no brainer.
If you did a survey of people and asked them the definition of shortage, the vast majority of people will not reply with the same definition used by economists. Who is tying themselves into knots interpreting a survey given the general public and not economists again?
Instead of asking people whether rent control causes shortages, the question should be this:
define shortage -
I would really be interested in the number of people who do so using the economic definition.
Guess what, the economic definition is not “right.” It is just the definition used by economists. Duh.
When normal people talk about something causing a shortage, they mean causing less of something to be available than otherwise would be.
As far as arguing against a conclusion, to do so you actually have to argue against it. My definition of shortage is superior to yours, because it is the one that ordinary survey participants would have had in mind when answering the question.
I find your attempt to avoid actually engaging in argument ridiculous. “Oh, you have a different definition than I do! Oh, you use the same definition as people taking the survey! But of course, we should NEVER use the same definition that people doing the survey would use! That you are using the same definition must mean your argument is wrong!”
Yeah, right. You truly are an idiot.
May 7, 2010, 4:37 amOpenVolokh says:
Another point. I never depended on this normative judgment to get to any conclusion. It was a side comment. But you apparently aren’t smart enough to recognize when a comment is central or logically necessary to an argument or not. It sucks to be you.
May 7, 2010, 4:41 amA Shocker! | Little Miss Attila says:
[...] The further left you are, the less likely you are to know anything about economics. [...]
May 7, 2010, 4:51 amGuy says:
Reminds me of something my undergrad Econ 1 professor said, “So, does reducing tax rates increase tax revenue? Well, it’s an empirical question, you have to try it and find out if it works. We tried it. It didn’t work.”
May 7, 2010, 4:53 amRicardo says:
OpenVolokh, your personal attacks are quite cheap, petty and out of place here. Bye.
May 7, 2010, 5:29 amOpenVolokh says:
Ricardo,
Your insulting an argument rather than addressing it is quite cheap and out of place. Especially when your own argument is lacking in logic.
If someone makes a deductive argument of the sort:
(1) A -> B
(2) B -> C
(3) Say something normative about B that isn’t logically necessary.
Conclusion: A -> B
Then the normative thing that they say about B is not part of the argument. Obviously. It is not my problem if you are not smart enough to figure that out without being told explicitly.
So, you go and attack an argument for being too complicated, suggest that it depends on something normative when it doesn’t, all because you are too much of an intellectual lightweight to actually address it.
And then you go cry about being attacked. You are so lame. You poor thing. If you are going to go attack someone’s argument without addressing the substance, don’t be such a wimp when someone resorts to attacks that don’t address the substance of your argument.
If you can’t stand the heat, get out of the kitchen. What goes around comes around. Punk.
That said, I actually did address the substance of your “argument.” I explained why my definition is better than yours.
May 7, 2010, 6:12 amMac says:
Really? When did it not work? During the Great Depression of 1921? Oh, you never heard of it? Maybe, that is because it only lasted 6 months because tax rates were drastically reduced from 75% to 25% on the top wage earners and the economy was roaring along again in about 6 months.
Also, when did Keynesian economics of increasing government spending ever get anyone out of a recession or depression? I have looked at that in some detail. The only place I can find that it worked was in post-WWI Germany after Hitler came to power and he had no problem imposing strict wage controls and even using slave labor which greatly helped his economy.
We are trying it, and it isn’t working.
May 7, 2010, 8:02 amDavid M. Nieporent says:
Actually, all it goes to show is that one has to interpret statements reasonably in order to respond to them. I mean, imagine the following scenario: a high school student hacking into a government computer starts a global thermonuclear war which wipes out all life on earth. Would rent control lead to housing shortages then? No! See? It’s contingent! Therefore Econ 101 is wrong!
Or imagine that a rent control law is passed that says that no apartment can rent for more than $1 billion dollars per year. Would that create a housing shortage? No. See, once again it’s contingent! (Ah, but what if those dollars are actually Zimbabwean dollars? In that case, it would lead to shortages. So it’s doubly contingent!)
Or, alternatively, imagine that when one says, “Will rent control lead to housing shortages,” there are implied basic assumptions in there that we’re talking about ordinary circumstances.
May 7, 2010, 8:38 amDG says:
Interestingly, we do license physicians, but we don’t license heart surgeons or any other type of specialist – board certification is a private, non-state process. Perhaps this is a model?
May 7, 2010, 8:47 amgray says:
I was going to dive in and say that anecdotally at least, most conservatives I read on the internet claim lowering taxes increases revenue but poster “mac” has made my basic point much more emphatically.
BTW Mac what jurisdiction had a 75% tax in 1921?
May 7, 2010, 9:37 amrobc says:
Yes. Because in some cases, doing nothing with the land will be more beneficial than renting it at the rented controlled price. Also, in the real world I will be able to bribe the zoning commission to grant me an exception to build my stadium for the Nets. Or whatever.
May 7, 2010, 9:41 amjukeboxgrad says:
michelle:
You’re making a big fuss about the word “always,” but you’re missing the point, especially because your words (“no one”) are wrong. He shouldn’t have said “always,” and you shouldn’t have said “no one.” Extreme statements like that tend to fall apart.
Notice the commenter elsewhere who said this: “Tax cuts always increase revenue because they promote greater economic activity.” And a commenter somewhere else said this: “At the national level, tax cuts always increase revenue. It is simply an economic fact.” And a blogger somewhere said this: “tax cuts always pay for themselves.” And a commenter somewhere said this: “Tax cuts always pay for themselves with increased revenue.” Mike Griffith (one of the top commenters at hannity.com) said this: “Tax Cuts Pay for Themselves and Actually Increase Revenue.”
And GWB said this: “You cut taxes, and the tax revenues increase.”
In four of these statements, the “always” is explicit, and in the other two it’s implied. So your “no one” is quite wrong.
Contrast those statements to these statements, quoted by Sen. Conrad during a congressional hearing:
A serious survey would probably not fall into the trap of using the word “always” in a question like this. Imagine a survey asking the question like this: ‘do tax cuts generally lead to increases in government revenue.’ I think many or most conservatives would say yes, even though “there’s no credible evidence that tax revenues rise in the face of lower tax rates.”
mac:
One more time: “there’s no credible evidence that tax revenues rise in the face of lower tax rates.”
May 7, 2010, 11:10 amToday's Tom Sawyer says:
OOOOO, that makes you such an authority on Econ 101. I was the Best Economics Major in College of Liberal Arts and Outstanding Economics Student for the School of Business in a private liberal arts university with a kickass Econ dept., so QED your honors econ course means nothing, and if you are basing your econ credentials on it, you know nothing about economics. And as for setting the curve, I invite you to take one year of law school, and you will find out that being at the top of the curve means that you actually don’t *know* anything, you’re just less lost than other people on the curve. I see arguing with you about rent controls is pointless, and others are handling it pretty well as is, just thought I would correct your systemic errors in thinking you know Econ.
May 7, 2010, 11:16 amShelbyC says:
I never understand why people continue to criticize the Laffer curve. Are people suggesting that there isn’t a laffer like curve (Zuch once pointed to the neo-laffer curve), or that a tax rate of 100% (or 99%) would yield more revenue than a rate of 50%? Isn’t the only dispute which side of the peak we’re likely to be on?
May 7, 2010, 11:27 amShelbyC says:
Or to put what I just said another way, by suggesting that the Laffer curve is “idiocy” Randy may have inadvertently strengthened Todd’s case. Sorry man. :-)
May 7, 2010, 11:33 amDan Weber says:
Back when Reagan was president, he didn’t say “tax cuts pay for themselves.” The conventional wisdom was that “tax cuts aren’t as bad as they look, because increased economic activity makes up for some of the lost revenue.” Not all of it.
Over the past 30 years, party-line conservatives found that too hard to remember and shortened it to “tax cuts raise revenue.”
There are quite a few honest conservatives who have pointed out the logical problems of the last few decades of the economic policies of popular conservatives. They don’t get invited to parties.
May 7, 2010, 11:52 amjukeboxgrad says:
I never understand why apparently intelligent people continue to be taken in by the dangerously simplistic stupidity of the Laffer curve, which is nicely explained here:
And here:
May 7, 2010, 12:06 pmShelbyC says:
Sure, I mentioned the “neo-laffer” curve in my above comment. Why do you think it matters whether the middle region takes a smooth course?
May 7, 2010, 12:12 pmbyomtov says:
MDT,
if anyone were to suggest that the difference between my expecting “often” to find more money in my wallet than I thought I had and my expecting “always” to find it there was a trivial detail, I’d say they had … spent too much time reading the comments at VC, maybe.
Of course there’s a big difference between “always” and “often.” My point is that it doesn’t even happen often despite the widespread conservative belief that it does.
May 7, 2010, 12:26 pmbyomtov says:
OpenVolokh,
Give it up. Rent control causes a shortage of housing. It’s not just a theory. The eveidence supports it. The consequences are various: black markets and bribes, poor maintenance of the existing housing stock, etc.
It’s a terrible idea.
May 7, 2010, 12:31 pmgeokstr says:
Randy, as much as I disagree with you on nearly everything, your comments are usually well-thought out and articulately expressed, and I enjoy reading them. This clearly dismissive one about the “Laffer curve” though, makes it seem you like you are just following the leftwing criticism without understanding what it is in the first place.
All it says is that there are two tax rates which pretty much guarantee zero tax revenue – 0% and 100%. Somewhere in between there is a rate that maximizes the tax revenue. Conservatives believe that we are already above that optimal rate, and the periods when rates were cut have over time led to considerable increases in tax revenues (not immediately since it takes a bit of time to realize the effects in the marketplace.) Liberals, OTOH, believe that we are not yet at the tax rate that maximizes revenues, but their projected increases in revenues based on static analysis are pretty much never realized from tax rate increases.
This extent of this anti-common sense belief from liberals is illustrated perfectly by an interview question Obama answered during the campaign. He was asked if he would still raise capital gains tax rates even in the face of evidence that it would cause a reduction in revenues. His answer was that it was irrelevant, he would raise the rates anyway in the interests of “fairness”.
May 7, 2010, 12:51 pmElliot says:
It might be easier to deal with the rent control question if we suggested rent control is a downward pressure on housing supply.
That way people are free to add whatever upward pressures they want so they can do an analysis on multiple variables.
May 7, 2010, 1:11 pmElliot says:
Oh yeah? I got a gold star on history test in fifth grade.
May 7, 2010, 1:18 pmHarry Eagar says:
Somebody threw Sowell’s ‘Housing Boom and Bust’ over the transom, and I have been reading it, in short segments, because it makes my sides hurt from laughing.
Apparently, you can get a cushy job by claiming that lenders don’t care what color your skin is, only the color of your money.
I haven’t finished the book yet, but already I have found at least 20 such howlers.
Like Randy, who noticed that ‘Laffer curve-ism is still alive in well in the best circles of the conservative elite,’ I find the idea that conservatives know more about economics than some other group hilarious. We New Dealers have been cleaning up their messes now for 80 years.
My current favorite of libertarian idiocies was Greenspan’s assertion that no oversight of financial markets was needed, because counterparty surveillance would ensure that the paper was honestly described.
May 7, 2010, 1:23 pmElliot says:
“Apparently, you can get a cushy job by claiming that lenders don’t care what color your skin is, only the color of your money.”
Do you contend skin color trumps stable employment, good credit, and down payment? Do lenders turn away people who qualify for a loan on these items because of skin color? They refuse to take their money? The loan officer or mortgage broker gives up a commission because of skin color?
Can you tell us how you know this and where it happens?
May 7, 2010, 1:29 pmShelbyC says:
You think it’d be worthwhile for me to write a letter to banks asking them to send any money from folks whose skin color they don’t like to me?
May 7, 2010, 1:34 pmDougInSanDiego says:
You prove the point of this study, in spades.
Of COURSE one can postulate a fictitious fantasy-land in which the basic truths of science, economics, or global warming differ (note I did NOT group ‘global warming’ in with either science or economics, as doing so would be quite literally illogical).
And that, no doubt, is precisely how uber-leftists reach the somewhat comical conclusions that drive their daily lives.
But, you see, things like ‘science’ and ‘economics’ (though we may refer to them or parts of them, as “laws”) are approximations that allow us to better understand and predict outcomes IN THE REAL WORLD.
Perhaps in your Walden Pond existence communism, or socialism seems ever so nice and kind and fair and pure. Yet, that is diametrically contradictory to every group of peoples who have tried to implement it in the REAL WORLD – where the universal result has been economic distress, human tragedy, and collapse. Real world vs. fantasy-land.
So – yes – you can conjure up some Pandora in which uber-leftist notions hold true. but the rest of us are more concerned with THIS planet.
May 7, 2010, 1:49 pmandrew graham says:
I’m not quite sure whether this piece of research seeks to attack progressives or liberals, or if it considers the two terms as synonymous.
Of course, the two words mean different things. I’ve encountered many people who self-identify as progressive when, after getting to know their political leanings, are clearly not progressives at all but rather liberals; I bet the same phenomenon happened among the respondents to this piece of research. It would have been nice for the researchers to vet their language more completely.
May 7, 2010, 1:59 pmDan Weber says:
It’s kind of sad that each side, in talking about its own crazy untrue beliefs, spends more energy talking about the other side’s crazy untrue beliefs.
There is significant economic ignorance on each side. Fix the beam in your eye first and all that.
May 7, 2010, 2:05 pmMichelle Dulak Thomson says:
Harry Eagar,
Apparently, you can get a cushy job by claiming that lenders don’t care what color your skin is, only the color of your money.
The thing is, as economic theses go, this is about the most easily testable in history. If lenders are applying more exacting standards to black borrowers than to white ones — in the sense that they’re overestimating the risk of lending to blacks vs. whites — you should see two things.
The first is that white defaults should (percentagewise) exceed black defaults on loans at that institution, because the black borrowers have been held to irrationally high standards by their racist lenders. No one seems to have been able to show an effect like this.
The second would follow on the first if the first had actually happened: Someone would notice that credit-worthy black folks were being stiffed by racist lenders, offer more favorable terms to them, and make a mint.
May 7, 2010, 2:17 pmmattski says:
Thank you.
I don’t know if conservatives know more about economics than liberals, I just know that conservatives know more about driving the economy into the ditch than liberals.
May 7, 2010, 2:46 pmbyomtov says:
ShelbyC,
I never understand why people continue to criticize the Laffer curve.
Let me help.
What happens at 0% and 100% is not helpful in figuring out what happens at 30-40%, and we don’t know what things look like in normal ranges. We don’t even know the shape of the curve, or that it has only one local maximum, so we can’t draw conclusions.
Government revenues are a function of many things, not just tax rates. Obviously, for example, if you have a recesion, and tax rates are unchanged, revenues will drop. So the Laffer curve, revenue as a function of the tax rate, changes its shape as overall economic conditions change. And what does “revenue as a function of the tax rate” mean? Which tax rate? The highest marginal rate? The average rate? The modal marginal rate? Who knows? You can’t even call it a function until you define what you mean by “tax rate.”
Given all that, I’d say the notion is ridiculed because it’s useless as guide to policy, and yet conservatives continue to advance it as a scientific sounding argument in favor of cutting taxes to deal with any economic issue whatsoever.
May 7, 2010, 2:52 pmDougInSanDiego says:
See – the fact that you don’t even KNOW that you don’t know is the most troublesome. This is why you think right wingers driving the economy into a ditch is bad, but fail to recognize the=at the targeted grand canyon of the uber-leftists is, in fact, more of a problem.
The ditch may hurt.
Flying off the road into the canyon – as we have seen in the most recent 17 months – is a bit more painful.
If you could at least recognize your limitations, you could backstop yourself with those who can fill in the void (as opposed to nudgers and tax evaders).
May 7, 2010, 2:54 pmjukeboxgrad says:
shelby:
True, fair enough. But I thought it would be a good idea to also explain what it means, since I think most people have no idea.
Because if the middle region doesn’t take a smooth course, and we make decisions as if it did, we will be making poor decisions. And the pro-Laffer crowd does indeed view the middle as smooth. For example, that assumption is embedded in what geokstr said here.
The middle region is the part that corresponds to the reality in which we actually live. The lovely, smooth, predictable edges do not. They correspond to a reality that doesn’t much exist outside of a laboratory. Because the middle region is where we actually live, it’s the part that’s relevant to the policy decisions we’re trying to make. (This is essentially what byomtov also said.)
Staring at the edges of something does not make me an expert about what’s happening in the middle. Understanding the economic behavior of the world’s richest person and the world’s poorest person tells me quite little about the behavior of average people. Knowing how a material behaves at absolute zero and at 10,000 degrees F tells me not much about the behavior of that material at room temperature.
This is all just common sense. The Laffer curve is all about pretending otherwise. Einstein said that everything should be made as simple as possible, but not simpler. The Laffer curve is all about ignoring those last three words.
==============
doug:
It takes a special kind of delusional innumeracy to believe that Obama’s fiscal behavior is somehow fundamentally “more painful” than GWB doubling the national debt, or Reagan tripling it. 77% of our national debt was accumulated under three presidents: Reagan, Bush and Bush. The GOP strategy for 30 years has been to run up the debt when they’re in office, and then when they’re out of office they suddenly make a big deal about the debt. This is based on the Two Santa Claus Theory. The GOP figured out 30 years ago that if raising spending is a great way to buy votes, then an even better way to buy votes is to raise spending while cutting taxes. So that’s exactly what they’ve done, and the rubes are still falling for it, just like they’re falling for Laffer’s silly pseudoscientific curve.
Modern conservatives are definitely in favor of small government, except when they’re running the government.
May 7, 2010, 3:12 pmjukeboxgrad says:
mattski:
Actually what ‘conservatives’ are good at is creating an economy that’s great for them and rotten for everyone else. “Income inequality in the United States is at an all-time high, surpassing even levels seen during the Great Depression.” Link, link, link, link, link.
That wacky Marxist Alan Greenspan has said this:
May 7, 2010, 3:34 pmHarry Eagar says:
Eliott, yes, I am saying that. Not only did banks — contra Adam Smith — care more about skin color than money color where I grew up (Deep South), so did real estate agents, who would refuse to offer houses to dusky shoppers.
The laws were changed to forestall such behavior.
Michelle, people did try to start banks to lend to dark Americans who were turned away by conservative bankers. Problem was, capital in those days was harder to come by than it is now, expertise as well. Like many other thinly capitalized enterprises (think, Bear Steans), many, probably most, of these ventures failed. But you are right. Here and there, people did make money by providing banking to people denied entrance to the dominant system.
Even if we accept that you are (partly) right, Smith was still wrong.
May 7, 2010, 3:36 pmMichelle Dulak Thomson says:
Harry Eagar,
You leapt over my first point to my second. Have you any explanation for the fact that no one seems to have been able to see a pattern of black borrowers defaulting less frequently than white borrowers did? That’s the normal, expected, statistically-all-but-inevitable result when you put higher hurdles in front of a subset of borrowers for reasons unrelated to risk of default.
May 7, 2010, 4:12 pmmattski says:
So, Doug, let me see if I understand you. You think the global financial crisis is a result of Leftist policy?? If not, please share your insights into its causes with us. I can’t wait.
I don’t really understand your remarks about “recognizing my limitations.” But what I’ve seen of your commentary here has been unimpressive to say the least.
May 7, 2010, 4:16 pmmattski says:
Speaking of wacky Marxists, how about the Leftist Loons who came up with this:
May 7, 2010, 4:20 pmShelbyC says:
Of course, your criticism applies equally to folks who argue that increasing tax rates increases revenue. And since, as byomtov points out, circumstances change year over year, it applies to the notion that we should hold rates constant was well. But keep in mind, since we don’t know where the peak is, the middle of the Laffer curve is not predictible, contrary to what folks on either side seem to imply. The suggestion that the middle is predictible is not a problem with the curve itself, but, as you point out, with folks who make policy assuming they know more about the shape of the curve than they do.
And since the curve models unpredictibility, it doesn’t matter whether the curve has one peak or many, the results of a change in tax policy are equally unpredictible no matter how you draw the curve.
May 7, 2010, 4:21 pmLeft Coast Dan says:
So apparently among the better-informed are frequent Wal-Mart shoppers and NASCAR fans. And the Progressive media always said they were less intelligent. Hmmm…
May 7, 2010, 4:26 pmDougInSanDiego says:
Yeah, I’m sorry, I forgot to add, “Mao said, “blah blah blah..”, and of course as Lenin so clearly demonstrated, “Mao said, “blah blah blah..”. Hope that helps.
Yes, Matt, your limitations. You see, success more frequently comes because all weaknesses have been compensated for and by the miracle works on one or a few stellar individuals (but with other areas fatally weak). Since you see only that “those darned, persnickety wingnuts” are evil personified, you are blind to the obvious (to others) weaknesses of the left. The result of this is a failure to compensate for the weaknesses, and inevitable (most times) failure. Our current administration has demonstrated this better than any other example I can think of.
Happy to.
First, we have the socialist wealth equalization credo. In THIS country that led to “mortgages for all”, as trumpeted by Barney Frank, Herb Moses, Chris Dodd, and (for foot soldiers making sure banks ascended) ACORN and their imitators. Specifically regarding Greece (though this is hardly constrained to that country, which is the reason all are so very worried) there is the union demands for lifetime employment, pensions that are unsustainable, socialized medicine (though Greece had agreed, as part of their entry into the European collective, to privatize at least the majority of their bloated health care system) —- all financed with phony money (international borrowing). The failure of that system is about as surprising as a 1-leg stool falling over.
Now – the reason this localized (intra-Greece) collapse is worrisome is: (a) the US – lender of last resort – is equally imbalanced and racing toward its own collapse; (b) the unions in Greece (communists) are clearly demonstrating to the world they would rather destroy their country than back off on insane entitlements; (c) Portugal, Spain, Italy and Ireland are not far behind and have similar social dynamics (well, less so in Ireland); (d) Intractable socialist forces like ‘cap and trade’ have such a death grip on competitive production that recovery is quite questionable.
Now, note these forces are pretty much the exclusive domain of your exalted revolutionary radicals. One would have thought that the collapse of most all collective governments would be a lamplight to others who hold fantasies about forced wealth equality. Seems not.
May 7, 2010, 4:40 pmDougInSanDiego says:
It is indeed odd that you see in those words something about forced equality of wealth.
May 7, 2010, 4:41 pmNot Shocked says:
Have you ever listened to Progressives talk? If so, this is still surprising to anyone?
May 7, 2010, 5:41 pmbyomtov says:
By the way,
new article by Zeljka Buturovic and Dan Klein in Econ Journal Watch (a peer-reviewed journal of economics) are startling:
Gee, someone reading that might think the article had passed a somewhat rigorous review. That is, if they didn’t know that Dan Klein himself is the editor of that journal. I think if TZ is going to try to impress us by telling us where the article was published, he just might mention that quite relevant fact.
May 7, 2010, 5:53 pmDan Weber says:
The housing bubble is neither Right nor Left. Everyone loved it; at least, while it was going on.
This doesn’t fit into a nice narrative about how those people messed everything up, though.
May 7, 2010, 6:07 pmGekkobear says:
No worries. Once the liberals on the new deficit commission enact their proposed “pro-growth tax increases” we’ll be on economic easy street again, and we’ll have more economic understanding.
http://hotair.com/archives/2010/05/03/deficit-commission-dems-start-talking-about-pro-growth-tax-hikes/
You know, those tax increases that promote economic growth. Like… um… well they say they’ve got some anyhow. I hope they raise taxes enough to really help the economy.
Maybe when they;’re done with that they can send me my unicorn.
May 7, 2010, 6:25 pmmattski says:
You must be talking about this prominent Socialist.
May 7, 2010, 6:41 pmmattski says:
Doug, I know I’m wasting my breath (keystrokes?) here, but I didn’t say anything about “forced equality of wealth.” Don’t put words in my mouth, unless you want to come across as a silly person. That applies DOUBLE to your insensate references to Chairman Mao. Are you completely batty??
May 7, 2010, 6:45 pmmattski says:
Dan, I’ve read your comments and you’ve impressed me as an intelligent person. You’re right, everyone loves a bubble. Rubin, in the Clinton years, was totally in cahoots with Greenspan. That’s true, and we should acknowledge it.
But, by the same token, it was the Reagan-era philosophy of “government is the problem” that paved the way for the financial crisis. Our culture changed. In the wake of the Great Depression banks were regulated and the financial system was stabilized. Very successfully.
Starting with Reagan’s election the laissez-faire ideology made a comeback. Now government was viewed as a problem. Regulation was viewed as a problem. “Free markets” were the solution.
OK. Now we’ve seen with our own eyes where markets-gone-wild will lead. What do you say, Dan?
May 7, 2010, 7:09 pmHarry Eagar says:
Michelle, I jumped over your first point because you were asking me to compare something to a null set. Back in the days of redlining, people didn’t get loans, period.
Well, in some cases they did, but not through the commercial banking system. It would be interesting to see how they fared, but I don’t know how you would do it.
Statistics for recent years are skewed by the fact that the government has tried to make lenders act contrary to their past habits — in a way, the leftist approach has attempted to make capitalists behave like Smithians.
Any way you cut it, the silly story Smith tells about how our bread and beef arrives on our tables was a fantasy.
May 7, 2010, 7:32 pmElliot says:
The claims of discrimination based on skin color were never demonstrated when income, credit, and down payment were controlled. Blacks received fewer loans of any given value because they didn’t qualify on the numbers at the same rates other races did.
Those who expect the same percentage of blacks and whites to get loans of any given value must also think blacks and whites are equal in income, credit history, and down payment availablity. Are they?
Where you grew up in the deep south, did the black and white populations have the same income, credit, and down payments?
May 7, 2010, 7:33 pmJD says:
“well-confirmed over decades of empirical support”
That’s a laugh. Furthermore, there are plenty of models that predict that a well-regulated and licensed market will under many circumstances reduce costs. Just because economics as it’s currently practiced subscribes to certain theoretical (and ill-supported) dogmas doesn’t meant that to think otherwise is a factual error.
Yes, there are plenty of mathematically sophisticated scientists out here who believe — gasp — that much of the economics literature is systematically flawed. And many of us believe such things for reasons that are, basically, similar to the reasons untrained progressives think so.
May 7, 2010, 7:36 pmElliot says:
So? What’s the problem?
May 7, 2010, 7:39 pmDougInSanDiego says:
Just trying to make a connection, Matt. Just trying to make a connection: “Speaking of wacky Marxists, how about the Leftist Loons who came up with this: We the People of the United States,…”
Now: what part of your Marxist nirvana does NOT include ‘forced equalization of wealth?”
Matt – you seem to find solace in your Waldon Pond World View by saying there are republicans also bad – heck, maybe even AS bad. I don’t see the argument.
I would NEVER argue that socialism is good or bad simply because Bush was good or bad. I had high hopes for the guy, but he (and the Republican majority until 2006) certainly were as drunken with spending and bloating the government as has been any administration. Perhaps they DID attempt to rein in Freddie Mae in 2004, but drew back simply because barney Frank, who did NOT at the time represent the majority, objected, saying, “Freddie & Fannie are fine. They should NEVER have permitted Barney et al to continue down the path. Then, during the last 2 years Bush was in office, the Republicans did essentially nothing to stem the economic destruction wrought by congress’ spending.
So – I certainly agree there are republicans whose hands are dirty as hell. How on earth, though, does that make the socialists reinvention plans more sensible? How does the lack of restraint on the part of republicans make the “hire everyone as a federal employee” goal of the leftists become sound economic (or even moral) policy?
Can’t WAIT for a response containing actual arguement.
May 7, 2010, 7:54 pmMichelle Dulak Thomson says:
Harry Eagar,
Michelle, I jumped over your first point because you were asking me to compare something to a null set. Back in the days of redlining, people didn’t get loans, period.
Black people never got mortgages?
Well, in some cases they did, but not through the commercial banking system. It would be interesting to see how they fared, but I don’t know how you would do it.
You would think someone, somewhere, would be interested in finding out.
Statistics for recent years are skewed by the fact that the government has tried to make lenders act contrary to their past habits — in a way, the leftist approach has attempted to make capitalists behave like Smithians.
Harry, I don’t know what “statistics in recent years” show. I haven’t sought them out. I was puzzled, rather, that people who allege lending discrimination hadn’t. What I said (again) was that if lenders were discriminating irrationally against black borrowers (or any other group, for that matter), you’d expect to find that group’s default rate lower than average, as it had been held to a higher standard of creditworthiness.
Are you saying that now that the government has stepped in and “skewed” things, if I were to investigate I’d find that the black and white default rates are now equal? That would be good news.
May 7, 2010, 8:33 pmRandy says:
First off, if anyone argues the Laffer Curve, they should read what it actually is. You can read it here, from Arthur Laffer himself. As you can see, the notion isn’t about the extremes, but about the middle. He himself never says that lowering tax rates will always pay for themselves in higher tax revenue. Anyone who does simply isn’t arguing the Laffer curve, but something more akin to magic than sound economics.
However, as most people realize, even his fairly narrow contention, that in some circumstances, done in the right manner, just so, can result in more economic activity, which might lead to more taxes over a long period of time, is highly debatable and lacks much evidence.
May 7, 2010, 8:34 pmElliot says:
Contributing to that evidence is the phenomenon we see of high tax states having economic problems, while lower tax states are prospering more. However, in making such comparisons, we should also recognize differeing levels of government services and employment.
One valuable exercise might be to go back year by year and look at state budgets, services provided, and tax sources and rates. When were things in balance, when did they work, when did they get out of balance, and what is the difference?
May 7, 2010, 9:14 pmDuracomm says:
mattski said,
Interesting thought but spending data does not support the idea that regulation of the finance sector was decreased after the reagan years.
Is This What Deregulation Looks Like?
May 7, 2010, 9:21 pmOpenVolokh says:
A reasonable point.
However, the survey question would be better if it said ordinarily or usually.
May 7, 2010, 9:30 pmShibujiro says:
You don’t see anything inherently anti-scientific about
May 7, 2010, 10:05 pmnot being big ondenying evolution? You don’t see very well, do you? As long as the proudly anti-scientific religious right is under the conservative tent, conservatism is inherently unscientific.Elliot says:
Denying evolution is indeed anti-scientific. It’s also anti-scientific to insist different population groups with different natural selection pressures, cannot have developed genetically based IQ differences.
It appears both the liberal and conservative tents shelter the anti-scientific. In this case it’s interesting because they are both having a problem with the same evolutionatry mechanisms.
So, is liberalism inherently unscientific?
May 7, 2010, 11:06 pmMidlantan says:
Not sure if you mean this one is most superficial, or most plausible. But you don’t seem to be actually disagreeing with the notion that free trade does result in unemployment. I don’t mean to put words in your mouth, or to pretend that I don’t understand the long-term benefits of free trade to the economy overall, or that in the long term (and in some cases perhaps, even in the short term), freer trade will generally result in fuller employment. I do understand those things. But that doesn’t change the fact that free trade can and does, in fact, result in unemployment for some.
You (and Todd, I guess) want to call out the self-identified progressives and liberals who answered this Zogby survey for their ignorance of basic economics. But the Zogby poll didn’t measure basic economics. It asked questions that have complex answers. The answers that the study’s authors (and you, and Todd, apparently) deem to be enlightened are those answers that are consistent with your own views of basic economic theories as simple, immutable rules, with simple, immutable answers. To the extent that those theories have proven not to work so smoothly in practice, the study’s authors suggest (indeed, require) as a prerequisite to “enlightenment” that participants ignore those practical realities. In essence, you’re asking that participants respond according to theories rather than (or in spite of) actual facts. That’s what I mean by the conclusions the study attempts to draw being absurd.
Again, I don’t mean to suggest that the underlying theories have no merit, or even that they are “wrong.” It’s just that many of the survey questions are not amenable to binary answers. Most of the questions can be answered both “yes” or “no” depending on the time horizon and level of abstraction used to assess them. You’re calling out the progressives or liberals (or rather, larger percentages of these groups than for conservatives) for providing answers to the questions that are inconsistent with what the “correct” answers would be to similar questions that you think the survey meant to ask, but didn’t. It’s sort of like asking students whether a bowling ball and a feather will fall at the same speed, then castigating those who say “no” for their ignorance of Newtonian physics. (“Of course the question assumes they are falling in a vacuum!” you would say.) Or asking participants whether both the feather and ball are solid, then assuming all who disagree are merely ignorant of the concept of phases of matter, when in fact (a) some participants who said “no” really are ignorant, (b) some participants who said know embraced some unreasonably obscure notion about whether a feather is “solid,” given its gossamer construction, and (c) some participants assumed the question was asking whether not whether the objects were “solids” but instead took the question at face value, and having some additional knowledge about concepts like molecules, atoms, and subatomic particles, were responding that no, those objects aren’t solid — they’re mostly empty space. The problem with the survey isn’t that you’re “wrong” and group (c) is “right,” or vice versa. It’s that the way the survey (and thus the study on which it is based) has no way of distinguishing between groups (a), (b), and (c). So it’s not a meaningful measure of actual understand of, well, anything.
But hey, if a study based on deeply flawed application of one field of social science provides a useful excuse to lambast another group for its own supposed ignorance of another social science field, why not use it? I mean, who could find irony in that?
May 8, 2010, 12:25 ammattx42 says:
what is the purpose of rent controls? The “intentions” as alluded to above? The purpose is to provide affordable housing to people on the lower end of the economic scale. Without them, one could argue that rampant gentrification will destroy the economic viability of the city itself and people would leave in droves, thereby freeing up a lot of units! are people willing to live in a city where no garbage is picked up, no lattes prepared, no hairs cut, no floors mopped? probably not anyone who can afford the huge increase in rent prices we’ve seen in most US cities. Yes, rent controls get abused and a black market develops (but does not envelop). like any human endeavor, imperfection abounds, with or without rent controls.
May 8, 2010, 1:57 amSam says:
Here is a highly respected empirical paper that finds discrimination in the labor market. I do not think it is far-fetched to imagine similar discrimination in the credit market. I am pretty sure I can get empirical papers from top journals that show the extent of discrimination in the credit market.
“Are Emily and Jane More Employable than Lakisha and Jamal? A Field Experiment on Labor Market Discrimination”, Bertrand, Marianne and Mullainathan, Snedhil; American Economic Review (2002)
http://www.economics.harvard.edu/faculty/mullainathan/files/emilygreg.pdf
So how does this fit in with the neoclassical framework? Shouldn’t discriminating firms (in either the labor or the credit market) find themselves out of business due to smarter non-discriminating competition?
The answer is we don’t have perfect competition in any of these markets. A few systematic bad decisions will decrease profits no doubt, but often the decrease won’t be big enough to cause shutdown.
May 8, 2010, 2:30 amhmmmm says:
Restrictions on housing development make housing less affordable:
Depends what you mean by affordable. Also this could increase the expected resale values of houses which would make buying a house in a sense more affordable. And what do restrictions mean? Did not allowing asbestos or lead paint to be used in new construction make housing less affordable?
Mandatory licensing: I would imagine this closely resembles fixed costs and should not affect prices in standard models. Unless there’s limits on the number of licenses granted I don’t imagine it would reduce supply much. If people no longer had to buy tabs every year would you expect a substantial increase in the number of drivers?
Standard of living: This is a completely subjective question, although I would tend to agree. We can’t say that people’s preferences about the world they’d prefer to live in are incorrect.
Rent Control: This takes into account an oversimplified idea of what rent control is. Rent controls have largely been adapted to address the classical arguments against it. In modern day practice it seems to be mostly intended to prevent price gouging. After somebody moves into an apartment, the landlord has some monopoly power over them since there are costs to moving, and rent controls seek to get rid of that. Also housing shortages is different from fewer apartments; and rent controls often exclude new construction.
Largest Market Share = Monopoly: They certainly have some monopoly power, and they have a monopoly over their own product. What’s the arbitrary line for considering something a monopoly versus not?
Third-world workers: It seems pretty clear to me that some of them are. Depends what you mean by exploited, but I think that firm’s are exploiting the lack of other opportunities and the poverty of many third world workers.
Free trade leads to unemployment: It definitely does, there’s no disagreement about this among economists. Trade creates winners and loser; some people will lose their jobs leading to unemployment. Overall, in the long run, unemployment probably shouldn’t increase much if at all – but that’s not what the question asks.
Minimum wage laws: There’s a fair amount of empirical evidence that they don’t, so the jury is definitely still out on this one.
May 8, 2010, 3:27 ampoul says:
no, not really. it’s a plausible hypotheses, but so used to be a flogiston (google it up).
what’s interesting is that if you bring up intelligent design to liberals, they tend to scoff; but if you replace “god” with “aliens”, most liberals nod approvingly. it’s quite comical.
May 8, 2010, 5:43 ampoul says:
here’s a video:
May 8, 2010, 5:51 amhttp://hotair.com/archives/2008/09/29/video-democrats-insist-nothing-wrong-at-fannie-mae-freddie-mac-in-2004/
poul says:
citation needed. i haven’t seen one since the fall of the soviet union.
May 8, 2010, 5:57 amDuracomm says:
Shibujiro,
Another example of the left being unscientific is their approach to genetically modified seeds.
Left and right both have anti-science elements.
What the right does not have is any help from the media in pointing out the lefts anti-science elements.
On the other hand the left often has media support in furthering its anti-science policies.
May 8, 2010, 8:59 ammattski says:
Life is too short, Doug.
I’m a liberal, not a communist. I know you may find this incredible, but there is a difference. Your preconceived ideas about what I believe reveal you as a person of extremely limited capacity.
That’s all I’ve got for you today.
May 8, 2010, 10:42 ammattski says:
Dollars spent on regulation don’t necessarily buy effective regulation, especially when a culture of laissez-faire is ascendant. For example, we paid for an SEC, but what did we get for our money?
May 8, 2010, 10:50 amB-Rob says:
The top post is a perfect example why answers to short questions are a poor basis to make a broad sweeping generalization about such a large group of individuals, such as “liberals.”
Let’s start with this:
“67% of self-described Progressives believe that restrictions on housing development (i.e., regulations that reduce the supply of housing) do not make housing less affordable.”
The obvious question you would want to as next is “why do you believe this”? Do ALL regulations restrict the supply of housing? Hardly. Do all regulations drive up the price of housing? No. Some do and some don’t, because some regulations are so marginal as to be inconsequential. Likewise, what is the effect of restrictions on new housing development where there is no demand anyway? If you moved to “restrict” new development in Vegas right now, does anyone REALLY think that will drive up prices when there is no demand? If you go to rural unregulated California, real estate costs more than in some urban sections of regulated Dallas. Why? DEMAND. All of these reasons make the author’s “conclusion” even more nonsensical, that “liberals don’t understand economics” when, in reality, you really need to ask WHY liberals believe that housing development restrictions do not/will not/may not increase prices.
May 8, 2010, 11:00 amThe Economics of Progressives: 79% of self-described Progressive believe that rent control (i.e., price controls) does not lead to housing shortages. « Economics Info says:
[...] Source [...]
May 8, 2010, 11:02 amDuracomm says:
mattski says:
That shows government incompetence, not under regulation.
May 8, 2010, 11:25 amAaron D says:
the methodology on this study is insane. This:
“We acknowledge a shortcoming about the set of economic
questions used here, and a corresponding reservation. None of the questions challenge the economic foibles specifically of “conservatives,” nor of “libertarians,” as compared to those of “liberals”/“progressives.” It would have been good, for example, if a question had asked about negative consequences of drug prohibition, or the positive consequences of increased immigration from Mexico. We doubt, however, that any partisan aspect of the questions much upsets our interpretations—for reasons to be discussed once the findings are laid out.”
Is explained by this:
“Here again we should acknowledge that none of the eight questions challenge typical conservative or libertarian policy positions, and that had some such questions been included, the measured economic-enlightenment means by ideological groups may well have been somewhat different.Nonetheless, we think that the measurement as-is captures something real.
At least since the days of Frédéric Bastiat, many have said that people of the left often trail behind in incorporating basic economic insight into their aesthetics, morals, and politics. We put much stock in Hayek’s theory (Hayek 1978, 1979, 1988) that the social-democratic ethos is an atavistic reassertion of the ethos and mentality of the primordial paleolithic band, a mentality resistant to ideas of spontaneous order and disjointed knowledge. Our findings support such a claim,
all the caveats notwithstanding.”
In other words, ‘We asked a set of 8 questions that an ignorant conservative expressing their gut feeling is much, much more likely to get right than an equally ignorant liberal would. Of course, the fact that the conservatives’ responses are going to be correct more often means absolutely nothing about any knowledge of economics applied in answering these questions, but we’re going to go ahead and pretend it does. In fact, the opposite could be true. The fact that an early 19th century economist existed means we can pretend this is science!’
I’d take this one with a big grain of salt. Idiotic pretend-science like this exists on both sides so people have something to talk about in their echo chambers and feel superior, but we can do better than this…
May 8, 2010, 11:31 ammattski says:
“Government incompetence” is the desired result of the industries subject to regulation.
When Reagan-worshipping politicians and bureaucrats conspire to implement laissez-faire then “government incompetence” is the result.
May 8, 2010, 11:58 ammattski says:
**Duracomm,
I recommend this film. You might like it.
May 8, 2010, 12:45 pmnoahp says:
Why are progressive policies failing?
Why did the progressive favored luxury tax on yacht construction result
In fewer yachts being constructed? Straightforward econ 101 predicts(ed) what would happen. So after several years of real economic damage (actual harm to real people) the tax was repealed.
“Good” intentions are not enough.
Progressives maintain that their welfare state programs are good and should not be repealed even tho we are broke and no program is offered to remedy the situation that we find ourselves in.
In the conservative alternative history of the last 80 years I find myself failing to imagine how we could be worse off than we are.
May 8, 2010, 3:34 pmDuracomm says:
mattski,
Progressives / liberals believe that if the right people are elected government will work fine and magical unicorns will make sure everybody is happy.
Those of us in the reality based community realize the right people are never going to be elected.
The reality based community realizes the solution to the problem is to limit the size and influence of the government. This accomplishes two things electing the right people never will.
1. It limits the damage government can do.
2. It limits the ability / need of the corporations to meddle in government affairs. Either through rent seeking or regulatory capture.
May 8, 2010, 4:33 pmBemac says:
After six years of living in Philadelphia, where the leftist id is free to run wild without constraint, I have no uncertainty about the level of economic enlightenment among the political Left.
May 8, 2010, 6:25 pmPatrick says:
The truth of the matter is that most everyone is “economically unenlightened”. This particular survey focuses on the economic foibles of the progressives, but there is plenty of economic ignorance in conservative politics. As others have noted, immigration, even illegal immigration is largely believed by economists to be beneficial for the economy. Although most conservatives disagree with this proposition.
A second example. This is one of the questions they ask to that leads them to their conclusion about liberal politics and economic knowledge: “Third world workers working for American companies overseas are being exploited” I don’t agree with this statement, but it is pretty obviously a value judgment. I’m not sure how this says anything about “economic enlightenment”
This survey is painfully biased.
May 8, 2010, 6:34 pmHarry Eagar says:
I’m pretty sure that repeal of Glass-Steagall counts as ‘less regulation.’
Sam makes an excellent point, but when I said that where I grew up bankers and real estate agents would refuse to take the money of black people, I was not relying on statistical studies but on the statements to me by bankers and real estate agents.
The newspaper I worked for wrote dozens of stories about it back in the ’70s. It was an electoral issue: block-busting.
May 8, 2010, 6:34 pmmattski says:
That is evidence that you don’t inhabit the reality-based community.
Try this: liberals believe that if you elect people who believe in the value of government, government will serve the public better than if you elect people who do not believe in the value of government.
Also notice that there is a high correlation between those who don’t believe in the value of government and those who represent monied interests.
Under your program large corporations and the rich make the rules and the rest of us do their bidding or eat crow.
May 8, 2010, 8:38 pmDuracomm says:
Mattski said,
Note the single point of catastrophic failure in your belief.
Electing the wrong person means the system fails.
Unfortunately for you eventually the wrong type of person is always going to be elected (eight years of George Bush for example).
You keep believing and the system keeps failing. Entertainingly enough the large corporations do better under your system than they would in mine. They have the money,time and motivation to game a large system to meet their needs.
The larger the government the more opportunities there are for regulatory capture and rent seeking.
It does not even take what you would call the wrong type of person to be elected to see this dynamic in action.
Look at how much taxpayer money Obama threw at politically connected wall street banks like Goldman Sachs.
Obama took money from less wealthy taxpayers and gave it to exceedingly wealthy wall street bankers.
May 8, 2010, 9:01 pmBloix says:
In my experience, rent control generally applies to existing house stocks, not to new building. It serves to prevent landlords from charging economic rent that has no social utility. New buildings are either not rent-controlled at all or the landlords of such buildings are allowed to charge rents that realize a market rate of return.
So no, rent control generally does not lead to a shortage in supply of overall housing. It does lead to queuing for the rent-controlled units, which are cheaper than newer units. But that’s not the same as a shortage in housing.
May 8, 2010, 9:13 pmJP says:
Calling “Econ Journal Watch” a “peer reviewed” publication is a pretty generous reading of the term “peer-reviewed”.
The journal looks like a publication put out by a bunch of college Republicans with funding from mom and dad (or Koch Industries — same thing).
Of course the survey is done as a joke, and reads like a joke, and perhaps that’s part of the joke. Pretty impressive research work for an econ. prof from a 3rd tier university!
May 8, 2010, 9:45 pmJP says:
As a side note, like many elements in the questions, many of the “Truths” are at best highly contingent “truths”.
Rent controls in theory could lead to housing shortages. If the ceiling that local authorities establish falls below what the market price would be otherwise, it can serve as a disincentive for people living in the units to move, and for developers to build more properties.
In the case of Washington, DC, rent control come into play for owners who own multiple-units (e.g. the restrictions didn’t apply only to existing housing stock — it applied to the number of units held by an owner regardless of construction date. Any owner who owned 5 or more units was subject to rent control; any investor with 4 or fewer limits was not. The rules may be different elsewhere). In the 1980s and 1990s the rules served as a disincentive for owners to renovate existing properties in rent controlled buildings. However, if you wanted to rent a property in DC in the 1980s and 1990s there were still plenty of available properties. Additionally, the lack of competition from major developers likely would have had the effect of lowering prices for prospective home buyers looking for a primary residence and not a rental or investment property.
Even if someone looks at this issue from a 100 level without taking real world situations into account, the factor that would reduce the availability of supply is not rent control in and of itself. The factor that would theoretically reduce supply occurs when local authorities establish a ceiling on rents below what the price would be in a competitive market.
If the upper limit for the maximum rent in a rent controlled building was above what you could get on the open market the impact of the rent control would be negligible.
May 8, 2010, 10:34 pmElliot says:
Glass-Steigel wasn’t repealed. Sections were changed. However, we haven’t had problems with holding companies having both independently capitalized commercial and investmant banks.
If you want more bang for your buck on deregulation look at how the CFTC plans to regulate credit default swaps were strangeled by Clinton. in 1996(?)Brooksley Borne, chairwoman of CTFC, correctly predicted what would happen and proposed regulation similar to what was in place for futures. In fact, it was very similar to what the regulation experts are advocating today. It’s a great story.
I’m sure it was block busting. However, bank examiners repeatedly failed to duplicate the work of your newspaper when they controlled for stable employment, credit history, and down payment. Perhaps your newspaper was in an area where there was no difference in income, savings, and credit histories for blacks and whites?
May 8, 2010, 11:09 pmElliot says:
In a rent controlled environment, where does the market rate come from?
May 8, 2010, 11:15 pmElliot says:
Where do you get the data for that calculation? What’s the correlation for non-monied interests?
May 8, 2010, 11:19 pmThe further left you are the less you know about economics - PersonalityCafe says:
[...] among trained scholars on certain policy issues is less important on some issues than others. The Volokh Conspiracy The Further Left You Are the Less You Know About Economics: Economic Enlightenment in Relation to College-going, Ideology, and Other Variables: A Zogby Survey [...]
May 9, 2010, 12:55 amJP says:
De-regulation is usually coincident with a lot of money from the effected industry going into the campaign coffers of sympathetic politicians in order to weaken or eliminate regulatory oversight.
The converse with respect to heightened regulation usually involves more votes than money.
The legislative history of Glass-Steagall is one example. The industry wasn’t bankrolling politicians in the 1930s to impose new restrictions. However, the public uproar over the Depression provided the political will to get the measure put into law. There wasn’t a public uproar over demolishing the final remnants of Glass-Steagall; however, there was a lot of financial money flowing to politicians during the period in which the law’s repeal was under consideration.
Here’s one view on the issue:
http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/weill/demise.html
More recently, the decision not to require the installation of remote switches on oil wells in the Gulf of Mexico probably had more than a little to do with the fact that the money on the side of less onerous rules far outweighed any political giving by environmental groups pushing for greater protections (it’s probably no accident that Brazil and Norway which require the installation of these switches also have a controlling interest in the oil companies that do much of the off-shoring drilling off their own coasts).
That’s not to say that there aren’t proponents of small “g” government who are “non-monied” interests. I think it is pretty safe to say though that no politician would listen to these proponents if it wasn’t for the fact that their views happened to be coincident with big industries who actually serve to benefit from less vigorous oversight.
May 9, 2010, 12:56 amElliot says:
That is an example of specific lobbying for an organization’s specific interests. I agree those with an interest expend more effort lobbying than those without an interest. That applies to industry, labor, and non-profits.
However, lobbying for a specific interest tells us nothing about views on the value of government.
Do moneyed interests contend the government has no value in keeping the peace, and enforcing property and contract rights? I’d suggest they see great value in that.
May 9, 2010, 1:33 amJP says:
It’s oversimplifying to suggest that those with an interest expend more effort (money) than those without an interest.
When you’re talking about financial regulations, the impact for consumers and smaller players in a market may be diametrically opposed to the loosening of regulations. It’s not that the other side of an issue is a disinterested party. They have a stake in the outcome. What they don’t tend to have is the same level of organization, or the same amount of excess capital to devote to fighting for robust consumer protections.
e.g. rules that allowed for the merger of commercial banking, investment banking, and insurers nominally benefited consumers in the sense that they’d be able to do “one-stop-shopping”. However, it’s clear now that the consolidation within the industry limited consumer choice, increased consumers costs, and it ultimately ended up dumping some massive costs on taxpayers. The overwhelming share of the benefits accrued to the parties who had the time and money in the first place to purchase more opaque and less restrictive rules governing their own activity.
When you talk about rules governing consumer safety there are often competing interests. One set of interest may be less concentrated, and more diffuse, but I don’t understand that to mean that they have no interest in the outcome.
Of course they do, although in some of those cases, opposing sides may not see the importance of those rights in the same light, because their interests are diametrically opposed.
The Orwellianly named “Consumer Protection and Bankruptcy Act” is a case in point (the act had nothing to do with “Consumer Protection” — in fact it weakened the protections of most consumers).
Commercial banks spent over a decade pumping money into the political system trying to weaken bankruptcy protections for their customers.
The consumer advocacy groups on the other-side of the issue didn’t have the financial power to preserve the balance — even though their position reflected the interests of a much larger number of citizens.
The impact of the rule changes associated with the legislation closed the door on the ability to renegotiate the principal on their mortgage on a primary residence in the event of bankruptcy. Oddly enough the protections on investment properties and seasonal homes remained under the rule changes. i.e. the punitive aspects of the rule change insulated the wealthiest of the wealthy from the full impact of the rule changes. If someone falls behind on the payment on a rental property or seasonal property they have the ability to renegotiate the principal on that mortgage.
Additionally, the rules retroactively changed the terms of contracts created before 2005. It’s not really clear to me how this is “protecting” contract rights of all citizens. The rule changes tilted the balance in a such a way that reflected the interests of creditors at the expense of borrowers. The side with excess money purchased a set of rules that ensured them even greater returns and the ability to extract the equivalent of an even higher back-door-tax on their customers.
One side with plenty of excess capital to devote to things like political lobbying understood exactly what the rule changes entailed. The other side, which likely didn’t even know what hit them, had neither the luxury of time to understand what was happening, nor sufficient capital reserves to purchase the same level of access and sympathy from legislators.
With respect to the set of interest groups that you noted — industry, labor unions and non-profits — it’s worth nothing that labor unions and non-profits generally tend to push for greater oversight and federal regulation.
Industries tend to push for less. So I’m not really sure that this point disproves the notion that “monied” interests tend to push for greater de-regulation.
We saw this pretty clearly recently with respect to mine safety. The Mining industry tends to fight for weaker oversight and less onerous regs; the labor unions tend to fight for more vigorous safety standards. Historically though, the money has been with the industry — not the union. And the legislation governing that particular industry has followed accordingly.
May 9, 2010, 2:39 amDuracomm says:
JP says:
You ignore how often regulations are used to prevent competition, protect wealthy groups, and take from the less well off and give to the powerful.
Steel companies and labor unions force regulations to keep imported products (steel, tires) out of the US market. This helps them but hurts consumers who buy products containing steel and tires.
The use of condemnation to take land from the less politically connected and give it to politically connected developers is yet another example of this. The Kelo and camden yards cases are examples of this.
Licensing is another example of how politically connected groups use regulations to crush the competition and harm consumers. Examples of this are restrictions on craft beer production, restrictions on brew pubs, licensing for interior designers and in Louisiana licensing for floral designers.
Do some digging there are abundant examples of regulations being used to protect powerful interests, prevent competition and harm consumers.
May 9, 2010, 9:01 ammattski says:
No. Electing people who don’t believe in the serving the public means the system won’t work as well it would otherwise.
What is truly weird is that conservatives have a strong tendency to vote for people who are going to sell them out. IOW, the GOP makes hay out of the ignorance of common people. And Fox News does its part to manufacture more ignorant people. Democrats are far from ideal, but as a rule they’re a step in the right direction.
If you don’t like government why don’t you move to a paradise like Somalia? The rain forests of Brazil might do as well. (Speaking of catastrophic failure of belief, there is nothing in history to support your faith in marginal government… beyond tribal society perhaps.)
May 9, 2010, 9:51 ammattski says:
So did George Bush. Why do you think that is? Why do you think there was a consensus between conservative Republicans and moderate Democrats that we had to bail out Wall St?
May 9, 2010, 9:55 amJP says:
I’ll gladly concede that regulations are not always used to the exclusive benefit of the population. There are also cases where well-intentioned laws might have ill-effects (rent control being one case); alternatively some regulations could be applied in a smarter more efficient manner.
With respect to the examples that you provide — in the case of international trade — things tend to get murkier. The removal of trade restrictions might be done precisely to circumvent the costs associated with local regs. The benefits might accrue in a small way to consumers generally and in a big way to the largest shareholders of firms — with the domestic trade-offs almost uniformly borne by workers and communities who suddenly find their wages redistributed up the income chain.
In the case of steel manufacturers, personally, I think a quasi-tariff should be imposed on all Chinese goods. The benefits of removing the restriction in the near term might accrue to consumers in the U.S. and some industries in the form of lower cost goods — although even here there are trade-offs in terms of wage impacts on the not-exactly-monied-interests. On the other hand, Chinese currency manipulation is at the heart of those competitive advantages currently.
If the Chinese let their currency free-float, then maybe it’s worth revisiting American steel protectionism.
I think you’d have a stronger argument in this vein in the case of sugar imports.
Licensing is another one of those cases where the argument cuts both ways.
Perhaps it would be more accurate to say that well-financed interests will always try to fix and use rules in order to accrue more benefits toward themselves and dump more of the costs on everyone else. In a period of extreme economic inequality, they will tend to be more successful at fixing the rules than at times where there is greater cohesion and solidarity (which sometimes comes about after a major crisis event like the Great Depression).
With respect to the financial sector, when people talk about “de-regulation” it usually means weakening consumer protections to the benefit of a wealthy few.
With respect to environmental and consumer regs, when people talk about the need for “de-regulation” it usually means weakening consumer protection to the benefit of a wealthy few.
In other industries and sectors of the economy this might not always be the case.
May 9, 2010, 11:05 amDuracomm says:
mattski says:
Lobbying by well connected wall street banks sure helped the process along. Much of the bailout money to AIG went directly to prop up foreign banks who were insured by them.
Not sure it is very progressive policy to take money from american taxpayers and give it to banks that are far wealthier than they will ever be.
But we have seen plenty of that from obama.
May 9, 2010, 3:11 pmMostlyRight says:
No it wouldn’t…but this is more a monopoly question. With rent control vs. free markets, there is no static. Old owners get replaced by new owners. Zoning can change. Competition from neighboring towns or states have an effect. Economies change. You central planners never truly appreciate complexity and contradiction, though you like to think you do. Thank God you don’t own the whole earth.
May 9, 2010, 5:16 pmJP says:
Of course, that particular view is revisionist. The bailouts did not originate under Obama. The first batch of supports to AIG did not originate under Obama.
More importantly the housing bubble, the changes to net capital rules — the underlying conditions that created the mess — preceded Obama by several years.
If you preserve TBTF you really only have one of two options in the event of an economic failure of one of the big firms — provide emergency support, so that money still flows through the economy; or stand by and watch as the cascading effects collapse the economic structure.
Obama’s policies definitely haven’t been as robust as I’d like to see. With the financial regs he’s not going to go as far as he needs to — in part because there are at least 35 GOP votes in the Senate that will always align behind the Big Banks; and there are probably another 15 to 20 Dems who will join them.
It’s no accident though that major investment banks gave at a 2 to 1 clip to the GOP in Feb. and a 3 to 1 clip in March.
May 9, 2010, 5:44 pmLee says:
1) Markets respond to a glut by reducing production. If there are more houses in a particular area than there are people to live in them, production will decline or cease until this imbalance is resolved. When the decline in demand is permanent, such as it is in Detroit, then housing will be torn down so that the land can be put to better use.
2) Malpractice costs are a product of lawsuits as a money-making enterprise for lawyers and pure barratry. The solution is tort reform. Licensing of doctors is necessary to guarantee competence in a life-and-death matter, but this does drive up the costs.
3) Rent controls in fully built areas may not affect the quantity of housing available, but it will affect the affordability of the housing that is there. If I have three houses and I’m forced to rent out two at below cost, I will shift the costs to the other house. This is why rent in NYC is astronomical. I live in a modest 2 bedroom condo in Phoenix, AZ. I found an apartment in NYC with virtually the same layout as mine. The price was $1,200,000. The price for my home was $93,000. Do the math.
The economic reality is that free markets are the best mechanism as they result in the most efficient distribution of resources. The old Marxists adage: From each according to his ability to each according to his need, is the pure essence of the free market. Those who can produce do so and what they create is exchanged with others who produce something else of value. The value that is created is greater than the sum of its parts.
Attempts to interfere with this process under the notion that the market is “unfair” because it rewards the capable and punishes the useless, only results in perversions of the market that make things worse for everyone. Winners take their ball and go elsewhere, leaving only the losers behind. Unless of course they’ll be shot for trying to do so. The Berlin wall was not built to keep the west out after all.
May 9, 2010, 5:46 pmElliot says:
Of course it’s over simplified. Everything we blather on about on blogs is oversimplified.
My point is that one can find great value in government while still supporting or opposing various regulations. Opposing FCC proposals on broadband net nuetrality does not mean one sees no value in government. Note the huge moneyed interests arrayed on both sides of that one. It’s like a sumo match.
May 9, 2010, 8:06 pmElliot says:
How do we value the contribution of media to opposing those banks? I’d say each side in these issues uses very powerful and valuable tools.
May 9, 2010, 8:12 pmElliot says:
“So did George Bush. Why do you think that is? Why do you think there was a consensus between conservative Republicans and moderate Democrats that we had to bail out Wall St?”
Government was in bed with Main Street, Wall Street, Fannie Mae, consumers, and community organizers. Everybody was making out and everybody loved what was happening from 1990 to 2006. All these brilliant folks telling us what went wrong and how greedy folks were? Where were they? They were dancing naked around the Maypole, too. Democrats, Republicans, liberals, conservatives… all of them… all of us. (The senate voted 95-0 to exempt credit default swaps from regulation.)
The 2008 TARP bailout? I’d say everyone was terrified. The party was over and the tent was on fire. I think everyone got on board because they didn’t have a clue what else to do. It was only after TARP that everyone got so smart about how it should have been handled.
May 9, 2010, 8:30 pmDougInSanDiego says:
Well, see, we are ALREADY in a country founded under a rampant suspicion of and dislike for government. You know – those pesky FOUNDERS, who wrote that darned Constitution.
May 9, 2010, 9:53 pmJP says:
What media coverage? I remember seeing a Washington Post house editorial about the issue in 2005, but by and large there wasn’t a huge amount of media focus. To the extent that there was it was provided in the form of advertising directed towards the rule change (by the financial services lobby). In terms of political giving — direct contributions to candidates, political parties, and PAC — there was absolutely no comparison. The industry spent over $100 million dollars lobbying the issue over 8 years. The consumer interests groups didn’t have $100 million to spend on the issue — at most they were able to ante up $10 million — there’s no way that they had $100 million in free media either.
Community organizers and “main street” were diametrically opposed to the positions of Wall Street on issues related to financial reform. The legislators picked and chose winners in the fight (based largely on the side that anted up the most money).
This idea that all sides have equal influence isn’t really supported by the content of the legislation or patterns of political giving.
I guess if you believe that everyone has equal influence and equal access and that a $10 donation will get you the same amount of access to a legislator as a bundled set of contributions totaling $100K, then maybe you’ll believe those kind of things. That’s not reality.
May 9, 2010, 10:41 pmElliot says:
Our memories differ. Media specifically supported the idea that people should not be responsible for maxing out credit cards in the weeks before filing bankruptcy.
But, in general, surely you recognize some issues where media takes a vocal position. How do you value that?
I’m not answering a question about reform here. I’m responding to Mattski.
“This idea that all sides have equal influence isn’t really supported by the content of the legislation or patterns of political giving. ”
I said nothing about equal influence. ???
May 9, 2010, 11:11 pmJP says:
“Media” is an overly broad term in my view. There typically is no single “media” position. Media outlets include print, television, cable, radio — and today blogs — and each of these has its own ownership interests and its own reporting standards. Each form of media also has its own strengths and weaknesses.
e.g. On complicated issues, most mass market outlets aren’t going to devote the time and detail that viewers need to get their heads around an issue. For visual media, the tendency is to spend less time on topics that lack compelling visual footage (e.g. a natural disaster or war can keep eyes glued to a TV, discussing arcane features of bankruptcy law usually doesn’t, so even though it may be consequential issue, it won’t receive coverage over more visually compelling stories).
My recollection is that the debate over the bill and the bills passage only received cursory coverage — it didn’t even rank in the top ten lists in 2005 based on Top 10 “News” story lists (the legislation was overshadowed by Terri Schiavo, Iraq, and other issues).
With respect to the actual content of the legislation, it had no bearing on whether or not a person could run up debts before filing for bankruptcy.
The legislation provided a higher burden for filing for Chap. 7 with stricter means testing and higher filing costs. Additionally, it removed protections available to debtors by limiting the types of debts that the borrower could discharge in Chap. 7.
The bill was literally written by the industry for the benefit of the financial services industry.
(e.g. legislators literally included provisions that had been supplied to them by K Street industry lobbyists as written by the lobbyists).
With respect to “media” impact, I’d look at the audience reach and the target audience (e.g. some audiences are more politically engaged than others; some outlets have audiences that are closer to the centers of political power).
Media coverage can have an impact on the political debate as it did with the Dubai Ports decision a few years ago, or the immigration debate.
For the most part though media coverage has less impact on the legislative process than a well-financed lobbying shop near Capitol Hill.
On most complicated issues, it’s a lot more instructive to look at where the money is flowing (from which sources and to whom). Most mass media outlets have only a marginal impact on 99 percent of the business undertaken in Congress. Big issues get coverage, but even in those cases, the focus on the content of legislation tends to be minimal, so they have only a marginal impact on the substantive content of legislation.
May 10, 2010, 12:17 amnhrpolitic13 says:
Ahh, yes. Foolish liberals.
And yet: lawyers are in no short supply, and the bottom has dropped out of the housing market.
So much for the conclusions here.
Maybe what this really shows is that liberal/progressives have a more nuanced grasp of the fact that there are, or at least may be, wide differences between pure economic theory in the abstract, and application. I’ll be the first to admit, for instance, that the Laffer Curve is perfectly reasonable in theory — but I challenge anybody to tell me – in a useful manner – where we are [at any points other than 0 or 100% taxation] at any specific point in time.
May 10, 2010, 1:18 ampoul says:
aaaaaand, if you like government so much why don’t you move to a paradise like cuba or north korea?
see, this argument is not very bright either way it’s used.
May 10, 2010, 2:00 amNeil B says:
Uh, less knowledge of “basic economics” on the left? Maybe so, but “basic” economics can be misleading because it’s simplistic and doesn’t take everything into account. For example, re rent control etc: Simple supply and demand would say, reduces “the” supply of housing. But does it really reduce the entire supply much, or does it rather shift supply more to the lower end which is allowed? Say (to make simpler, ;-) ) there was a law disallowing sale of house over $1M (and with grandfather clause.) Would many fewer houses actually be built at all – or instead, would builders just not build the ones they could have gotten over $1M for? They still have plenty of incentive (maybe more now, from market reallocation) to build the houses they can get <$1M for. After all, that transaction works the same as before. And so on.
May 10, 2010, 9:40 amGreg says:
Conclusions made based on these questions are really meaningless. I bet that if response time was measured, progressives probably spent more time because they tried to think about it. The fact is, for any conservative, any mention of raised taxes or regulations or controls sparks an immidiate reaction of something horrible. Know or not know that would be a reaction in 99% of time. But I bet none could explain why. This is pure ideology of anything with government is horrible. This is the only explanation.
May 10, 2010, 10:25 amDan Weber says:
It wasn’t just a lack of regulation that caused the bubble. Government wasn’t regulating where it should have, but it was also encouraging the bubble. Freddie and Fannie had stayed out of the bubble, refusing to deal with sub-prime borrowers. But their masters in Congress were concerned that they were losing market share and ordered them in full-tilt. (Part of the reason FM and FM got hit so hard was that, like the last level of a pyramid scheme, they got none of the gains but still got the full brunt of losses.)
If we want to have regulation to stop this from happening again, it needs to be someone who can “take away the punch bowl” just when the party is getting going. This is very very hard. Who wants to be the most hated guy in the room? Surely not elected officials.
How could one stand up to this? Anyone in Congress disparaging the Obvious Truth that real estate always goes up would have been voted out on their ear. Democracy doesn’t deal well with long-term problems, because voters are short-term thinkers.
Maybe it should be the Fed, although we ask a lot of them already, and we need a good explanation for why they would better see the next bubble as compared to the previous one. If the problem was “well, people got greedy and selfish” last time, we are still in trouble, because people will still be greedy and selfish for the next bubble.
May 10, 2010, 11:51 ambbbeard says:
Thanks for your thoughts. Actually, I’m not trying to damn progressives using the results of this study. The study itself is problematic, as numerous commenters have pointed out. What I do see is that the apparent progressives among the commenters have mounted such a poor defense of their side of the argument that they ironically provide support for the Buturovic-Klein study.
I’m still trying to wrap my head around the meaning of the BK study. Despite the flaws in the study, they measured something. And that something happens to accord with what conservatives have noted for decades — that central planners do not understand the economic consequences of their policy proposals. And frankly, it is remarkable to me how stark the BK results were. These results weren’t “55-45, outside the margin of error and therefore significant”. For some of the questions, the contrast was literally “90-10″. What does this mean?
One interpretation that I mulled is that persons who sympathize with the left are not very good with “pick the best answer” kind of questions, perhaps because their nature or training motivates them to
obfuscate“seek complexity”. But I find this is an unlikely explanation — how could our academies be filled with such people, who no doubt test poorly?I’ve also toyed with the analogies with physics. To preface, I should point out I have a doctorate in physics. One of the things I learned in graduate school is that undergraduate physics is largely “toy” physics, that is, it equips you with some simple and elegant paradigms, but real physics is more complicated and mathematical. Nonetheless, it is useful to be able to discuss simple principles as idealizations.
So, as a quondam teacher of quantum physics, I could imagine formulating a “true/false” test that would include statements such as “Energy is conserved” or “Electric fields accelerate charged particles”. Now, the “right” answer to these T/F questions is “T”. Similarly, I could imagine several different students coming to me to appeal their grades. Student A protests that mechanical energy is not always conserved, because of dissipation and the second law. Student B explains they read about a really cool perpetual motion machine on the Internet. Student C explains that we don’t conserve enough energy and that I need to install CFLs in my office. Student D says that oscillating electric fields will not affect charged particles inside a Faraday cage. Student E tries to point out that gluons have “color charge” and do not interact with the electromagnetic field. Student F says that there are no particles, only waves.
They’re all wrong. Well, some may have a point, but in the context of the examination, there was a best answer and it was “T”. Does this mean that I am unable to handle complexity? I doubt it; you should see what I do in my day job.
Now, suppose I went through this exercise but I also asked the students to place themselves on a scale of 1-10 of sympathy with the environmental movement. And suppose that 90% of those getting the questions wrong were “Greens”. What would this mean? Would I be entitled to suspect that Greens don’t understand physics as well as non-Greens? Perhaps not. But it would be an interesting result, wouldn’t it?
May 10, 2010, 2:35 pmbbbeard says:
You know, I don’t find this logical at all. You are asserting that the ability to “serve the public better” is correlated with a “belief in the value of government” (Is it fair to take this to mean a belief in the value of expanded government? I believe in the value of government in exactly the way Thomas Paine did: “that government governs best which governs least”….)
You seem to believe that consequence follows intention, but that is exactly the issue that the B-K study tried to assess. Economic consequence will not follow economic intention when one is ignorant of economics. One of the hoariest shibboleths of modern liberalism is the conservatives “don’t care” about poor people. In fact we care enough to fight tooth and nail against policies that create permanent poverty — despite the best of intentions.
May 10, 2010, 3:10 pmPA says:
Piffle. That’s all pre-Obama era Economics. The rules are different now.
May 11, 2010, 2:10 pmRandy says:
I took the time to actually look at the study, and pull down the data set and test it. First off, Zogby’s questions are simply biased to favor conservatives. It’s a list of economic questions liberals are more likely to be wrong about. I could generate an alternative list of questions conservatives were more likely to be wrong about and produce the same result. You think going to Walmart, going to Church, and going to Nascar are really strong indicators of economic intelligence? Or maybe, just maybe, they’re simply correlated with being conservative.
On top of this, the data presented in the study itself is wildly inaccurate. The coefficients they present are all single-variable regression: that is, they generate them without holding ANY of the other variables constant.
It turns out the truth is far simpler than conservatism being correlated with economic intelligence: the people who put together the study are incompetent.
May 11, 2010, 6:37 pmsherlock says:
I am probably not the first in this thread to observe that the title of this piece could be a couple of words shorter, and remain a valid statement.
May 12, 2010, 3:15 pmNation of Cowards » Blog Archive » I Tend To Trust The Good Common Sense Of The American People! says:
[...] I believe this would count as a counter-example? Segnala presso: [...]
May 12, 2010, 9:02 pmBen Kalafut says:
Most physical or biological sciences journal articles are not “blind peer reviewed”, either. Why should economics be special?
Remember, peer review is only a BS check, determining whether or not the article is worthy of publication. It is not an endorsement of the content of the article.
May 12, 2010, 9:43 pmAnna Keppa says:
On the supposed conservative belief in the Laffer curve, a recent article in “National Review” has both Laffer and his interviewer agreeing that tax cuts alone do not increase revenue. So much for for the alleged idiocy of the right: we, at least, deal in empiricism and reality. The Left? Not so much.
May 13, 2010, 4:42 pmwooga says:
OpenVolokh: Licensing decreases search costs for consumers. And search costs, rightly considered, are part of the “price” that one pays to get a service.
Setting aside economic theory (which OpenVolokh molets), but looking at reality, the result is even clearer. In California, per Bus.&Prof.Code 143 (and particularly 7031(b)), anybody doing work for which a license is required – without actually having that license – cannot recover compensation for the work. For the most part, this means “unlicensed work is FREE to consumers.” I.e., if you hirer an unlicensed contractor to remodel your kitchen, you are legally entitled to stiff him on the bill. Thus is it indisputably false to claim that licensing decreases consumer cost.
May 14, 2010, 6:25 pmJerry H says:
I am sure it is tempting for many to conclude that liberals are, therefore, stupid. But my experience as a conservative surrounded by liberal family and friends is just the opposite: most of my liberal friends are well educated and many are very bright and successful people.
So…why the failure to understand or acknowledge this relatively simple and inarguable concept in economics? It must be ideological.
June 3, 2010, 1:10 pm