Ep. 12 Krugman Wants Less Regulation; Our Podcast Is Wearing Him Down

5 December 2015     |     Tom Woods     |     17

Krugman correctly identifies one of the reasons housing is so expensive in New York. What else could the explanation be if not the salutary influence of Contra Krugman?

Krugman Column

Inequality and the City” (November 30, 2015)

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Books Mentioned

The Housing Boom and Bust, Revised Edition, by Thomas Sowell
The Death and Life of Great American Cities, by Jane Jacobs

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  • Craig

    You forgot to link to Jane Jacobs’ great books!

  • Krishan Madan

    Donald shop’s “the high cost of free parking” is also an excellent book on the impact of zoning laws on walkability, housing affordability, and the environment

  • Josh

    The best book on this, and I have to say I can’t imagine a better title, is called “Scarcity by Design” by Peter Salins.

  • http://economicsdetective.com/ Garrett Malcolm Petersen

    For people interested in Jane Jacobs’ life and work, here’s my interview with Pierre Desrochers on the subject: http://economicsdetective.com/2014/11/jane-jacobs-as-spontaneous-order-theorist-with-pierre-desrochers/

  • Lucien

    I think the podcast is developing rather nicely.

  • Lucien

    Tom what is your book going to be on?!!

  • Levi Russell

    Man, the Kansas bashing was heavy in this one! I guess the coast vs flyover country divide transcends politics.

    My home state of KS may not have the “amenities” of the northeast, but at least one doesn’t live under the arbitrary rule of Emperor Cuomo and his lackey de Blasio.

  • wrothbard

    Woods and Murphy return triumphant to the sceptered isle, promising “deregulation in our time”.

  • John Small

    If you are interested in Urban regulation look at Reason Foundation and Institute for Justice many law suits to free urban people. Reason Magazine February 1972 Jitney destruction closed millions of small businesses in transportation.

  • Bob_Robert

    Bored with Kansas? FREE STATE PROJECT!

    It’s time, Tom. Do it!

  • Giuliano Millan

    I am so glad Woods mentioned Sowell. Before I had ever even heard of the Austrian School I would enjoy watching interviews with Sowell. I would love to see him in one of your shows. Keep up the good work with the podcast. Love listening to it while I work.

  • http://www.economicmanblog.com Roger Barris

    Good job as usual, but I really think that you missed a couple of opportunities here.

    The first is to point out how land use regulations are, in fact, an egregious example of “crony capitalism” and how they have very significantly contributed to inequality. They represent crony capitalist “rent seeking” because there is plenty of evidence that incumbent householders use these laws to restrict supply and therefore increase the value of their properties. This is a huge contributor to inequality through at least three transmission mechanisms:

    1. The direct impact, since real estate is a major source of wealth and income. Inflating the value of RE through supply restrictions, therefore, directly contributes to wealth and income disparity because RE ownership in disproportionately concentrated in the wealth. So, by restricting supply, the government directly makes the rich richer. (I have even seen research that identifies RE as the major or exclusive source of the growing wealth disparity allegedly identified by Piketty — with much of this coming from land use restrictions.)

    2. High RE prices and rents reduce labor mobility, which also contributes to inequality (as well as inefficiency) since it prevents workers from seeking out higher paying (and more productive) jobs.

    3. There is ample evidence that RE prices are higher in areas with good quality schools. Therefore, combined with the absurd public school system and its even more absurd method of financing, high RE prices restrict access to good quality schools, especially for minorities.

    The second missed opportunity was to use this segment to talk about “network effects.” You frequently mentioned the desirability of living in a major city resulting from greater access to amenities, but you never mentioned greater access to high-paying and interesting jobs, very often due to network effects. Since you used the episode primarily as a springboard for teaching general economics, including subjective value theory, you could have taken this a step further by discussing network effects.

    Finally, you should note that this is not the first time that Krugman has acknowledged the negative role of restrictive land use regulations. He also talked about this in a 2014 article that I dissected in a piece entitled “Wrong Way Krugman” (http://www.economicmanblog.com/2014/09/06/wrong-way-krugman/). What Krugman never acknowledges, however, is that these policies are an integral part of the statist approach to politics and the economy, of which he is one of the foremost proponents.
    Roger

  • Rose McConnell

    You should know that I was able to make almost immediate use of this podcast by sharing the link on Parlio. Here are some musings from a progressive posting about why or why San Francisco doesn’t have affordable housing. As Paul Simon warned us “when I think back on all the crap I learned in highschool….” Enjoy the following: How is that this city can imagine a solution to the pressing questions of today (such as making topical information easily accessible and connecting distant peoples in ways previously unimaginable), but it cannot house everyone?

    Possibly this pressing issue would inevitably require political action. Thus endless opposing ideological opinions, or disenchantment from politics, or corruption could be getting in the way.

    Maybe the ongoing belief in meritocracy prevents people from empathizing with people who have been dealt an unfortunate hand: a layoff at financially pressing times, absence of a support system, sky-high medical costs.

  • Kathryn Muratore

    The Reisman quote is great. What is the source?

    • http://www.TomWoods.com Tom Woods


      The Tom Woods Show: Shredding the 3×5 card of conventional opinion. http://www.TomWoods.com
      My latest book: *Real Dissent: A Libertarian Sets Fire to the Index Card of Allowable Opinion*
      http://www.RealDissent.com

    • http://www.TomWoods.com Tom Woods

      It’s more of a paraphrase than a quotation, and unfortunately I don’t know where he said it. Just that I heard him say it in a talk at the Mises Institute.

  • Eileen

    Having lived in San Francisco and owned property there briefly, that city is unaffordable because of rent control. Contrary to progressive brainwashing, rent control benefits the landowner because it intentionally creates scarcity where there wouldn’t exist before. This is not to suggest that SF would be affordable without it – just that not everybody who works there would have to live across the bay. When I was there, my guess is that Rent control added several hundred dollars to the monthly rent.

    Rent control drives up the cost of the land, building and any residential unit. Their rent control law did allow landlords to go out of business and as long as they STAYED out of business for one year, the dwelling would be controlled at the new market rate. So lots of landlords opted to take advantage of this, which drove rents higher and higher.