low-income housing economics
Went to David Barker's office hours and was almost seduced by his clean free-market arguments among the sharp clean lines and bright sunshine of his business-school office, it's so frustrating because the things he says clearly have some innate wrongness to them, (I think?) but I have trouble finding the logic to defeat them. Economic arguments I think must be defeated on their own terms, you have to really find things that prove the model insufficient- basically unnoticed externalities, or public goods- otherwise honestly the model is correct and you just happen to feel icky about its implications.
So what he said was basically maybe we shouldn't have regulations that disallow a certain level of mediocrity in housing, because they force a particular allocation of resources on the poor, because cutting out the mediocrity simply cuts out the least expensive housing, better housing costs more. So having minimum housing standards requires people to spend a fairly high percentage of their income on rent, instead of being given the freedom to choose- perhaps they want to spend more money on their kids' education and instead they're forced to put it into rent. If people really wanted those better housing standards, they would have paid for them in the first place, the better housing did exist; the fact that they're paying for the crummy housing is proof that they value housing less than other things, and we're just actually reducing consumer satisfaction with these regulations.
My first reaction to this is- no, no, there's got to be something wrong with that.
What might it be?
Well...some of the arguments against it boil down to paternalism, which one is supposed to recoil at, but I'm not always sure that I do. For instance: people will waste their money on things that aren't actually as important to their well-being as housing, but they just don't know it.
(I guess in the case of regulation, as opposed to subsidy, I agree that's hard to justify. However, I don't go for the economists' "if we believe in equality why don't we give everyone money because they'll allocate it to where it brings the most happiness, instead of giving food stamps or public housing?" I sort of believe in equality, but no, I don't actually feel everyone is entitled to a certain income, its more that I feel we have the duty to make sure basic needs are met, that people in our society aren't dying or suffering severely constantly; thus I'm ok with government funding of housing and food, but I don't think there's any reason we'd be obligated to give people random amounts of money to pay for whatever they want- say, a tv, or drugs. I guess that's paternalistic, maybe, but I think society has a right to be somewhat paternalistic if people are coming to them for money...)
Another argument I thought of- is it entirely accurate that with regulation, the lowest levels of housing just get more expensive all of sudden? Do the majority of the costs of the regulations simply fall on the consumer? If we talking about the poorest of the poor, maybe their price elasticity is pretty high (i.e., if the price goes up, their demand drops off a lot), so they wouldn't be able to pay for the housing at all if it got too much more expensive...so maybe with regulation low-income housing simply becomes a bit less profitable but doesn't cost that much more, as producers eat a lot of the costs. (Although- that could drive people out of the business, of course, which may be what has occured. I don't know.) Another way of thinking about this: it's possible that the slightly-better housing was more expensive in the pre-regulation days than the post-regulation days, and now more people can afford it. Because of this price elasticity issue; these consumers clearly won't be perfectly inelastic consumers of housing, right (i.e., if prices go up, they won't just purchase the same amount)?
The whole argument (of Prof. Barker's) sounds to me an awful lot like the old "liberty of contract" argument. I would like to read an intelligent, coherent explanation of what creates the fallacies in these arguments. Perhaps Roscoe Pound wrote one? Because it just seems so obvious that in both of these situations, the poor get shafted because they simply have to accept whatever is given to them...but I can't quite explain why this isn't fair.
More later, maybe...
So what he said was basically maybe we shouldn't have regulations that disallow a certain level of mediocrity in housing, because they force a particular allocation of resources on the poor, because cutting out the mediocrity simply cuts out the least expensive housing, better housing costs more. So having minimum housing standards requires people to spend a fairly high percentage of their income on rent, instead of being given the freedom to choose- perhaps they want to spend more money on their kids' education and instead they're forced to put it into rent. If people really wanted those better housing standards, they would have paid for them in the first place, the better housing did exist; the fact that they're paying for the crummy housing is proof that they value housing less than other things, and we're just actually reducing consumer satisfaction with these regulations.
My first reaction to this is- no, no, there's got to be something wrong with that.
What might it be?
Well...some of the arguments against it boil down to paternalism, which one is supposed to recoil at, but I'm not always sure that I do. For instance: people will waste their money on things that aren't actually as important to their well-being as housing, but they just don't know it.
(I guess in the case of regulation, as opposed to subsidy, I agree that's hard to justify. However, I don't go for the economists' "if we believe in equality why don't we give everyone money because they'll allocate it to where it brings the most happiness, instead of giving food stamps or public housing?" I sort of believe in equality, but no, I don't actually feel everyone is entitled to a certain income, its more that I feel we have the duty to make sure basic needs are met, that people in our society aren't dying or suffering severely constantly; thus I'm ok with government funding of housing and food, but I don't think there's any reason we'd be obligated to give people random amounts of money to pay for whatever they want- say, a tv, or drugs. I guess that's paternalistic, maybe, but I think society has a right to be somewhat paternalistic if people are coming to them for money...)
Another argument I thought of- is it entirely accurate that with regulation, the lowest levels of housing just get more expensive all of sudden? Do the majority of the costs of the regulations simply fall on the consumer? If we talking about the poorest of the poor, maybe their price elasticity is pretty high (i.e., if the price goes up, their demand drops off a lot), so they wouldn't be able to pay for the housing at all if it got too much more expensive...so maybe with regulation low-income housing simply becomes a bit less profitable but doesn't cost that much more, as producers eat a lot of the costs. (Although- that could drive people out of the business, of course, which may be what has occured. I don't know.) Another way of thinking about this: it's possible that the slightly-better housing was more expensive in the pre-regulation days than the post-regulation days, and now more people can afford it. Because of this price elasticity issue; these consumers clearly won't be perfectly inelastic consumers of housing, right (i.e., if prices go up, they won't just purchase the same amount)?
The whole argument (of Prof. Barker's) sounds to me an awful lot like the old "liberty of contract" argument. I would like to read an intelligent, coherent explanation of what creates the fallacies in these arguments. Perhaps Roscoe Pound wrote one? Because it just seems so obvious that in both of these situations, the poor get shafted because they simply have to accept whatever is given to them...but I can't quite explain why this isn't fair.
More later, maybe...