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Rent Control Papers. Some of your creative headlines. Some of your creative headlines. There’s No Such Thing as a Free Lunch. Some of your creative headlines. There’s No Such Thing as a Free Lunch Out of (Rent) Control!. Some of your creative headlines.
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Some of your creative headlines There’s No Such Thing as a Free Lunch
Some of your creative headlines There’s No Such Thing as a Free Lunch Out of (Rent) Control!
Some of your creative headlines There’s No Such Thing as a Free Lunch Out of (Rent) Control! No Vacancy
Some of your creative headlines There’s No Such Thing as a Free Lunch Out of (Rent) Control! No Vacancy Much Less for Much More
Remember Definition of Econ • “Economics is a study of the cause-and-effect relationships in an economy. Its purpose is to discern the consequences of various ways of allocating scarce resources that have alternative uses.”
Remember Definition of Econ • “Economics is a study of the cause-and-effect relationships in an economy. Its purpose is to discern the consequences of various ways of allocating scarce resources that have alternative uses.” • “It has nothing to say about social philosophy or moral values…”
Systemic Interactions • Involves complex, reciprocal interactions rather than one-way causation
Systemic Interactions • Involves complex, reciprocal interactions rather than one-way causation • In turn, systemic interactions reduce the role of individual intentions
Systemic Interactions • Involves complex, reciprocal interactions rather than one-way causation • In turn, systemic interactions reduce the role of individual intentions • Example: rising prices attributed to “greed”
Systemic Interactions • Involves complex, reciprocal interactions rather than one-way causation • In turn, systemic interactions reduce the role of individual intentions • Example: rising prices attributed to “greed” • Such explanation ignores the role of prices
Systemic Interactions: Higher prices in poor neighborhoods • Often blamed on “exploitation,” “greed,” “gouging” and “discrimination”
Systemic Interactions: Higher prices in poor neighborhoods • Often blamed on “exploitation,” “greed,” “gouging” and “discrimination” • Systemic interactions explain higher prices
Systemic Interactions: Higher prices in poor neighborhoods • Often blamed on “exploitation,” “greed,” “gouging” and “discrimination” • Systemic interactions explain higher prices • Delivery costs, insurance costs, security costs, vandalism costs, smaller transactions
Systemic Interactions: Higher prices in poor neighborhoods • Often blamed on “exploitation,” “greed,” “gouging” and “discrimination” • Systemic interactions explain higher prices • Delivery costs, insurance costs, security costs, vandalism costs, smaller transactions • Profit margins often lower in poorer neighborhoods even with the higher prices
Systemic interactions: 2010 Health care reform (aka ObamaCare) mandates changes to private insurance policies... no lifetime max, kids can stay on parents’ policy until age 26, new benefits such as “free” preventive care
Systemic interactions: 2010 Health care reform (aka ObamaCare) mandates changes to private insurance policies... no lifetime max, kids can stay on parents’ policy until age 26, new benefits such as “free” preventive care No surprise: prices for private policies rising sharply despite stated intentions to lower costs
Systemic interactions: 2010 Health care reform (aka ObamaCare) mandates changes to private insurance policies... no lifetime max, kids can stay on parents’ policy until age 26, new benefits such as “free” preventive care No surprise: prices for private policies rising sharply despite stated intentions to lower costs No surprise: HHS Secretary Sebelius blames increases on “greed”
Why not understanding systemic interactions causes problems “Rent control appears to be the most efficient technique presently known to destroy a city – except for bombing.”
Basic Economic Principle Department “Incentives matter because most people will usually do more for their own benefit than the benefit of others”
Scarcity and Competition • One option to distribute SRTHAU: Those who hold political power decide how resources should be allocated to different uses and the resulting products
Scarcity and Competition • One option to distribute SRTHAU: Those who hold political power decide how resources should be allocated to different uses and the resulting products • Happens in socialist, communist and even in free market economies
Scarcity and Competition • One option to distribute SRTHAU: Those who hold political power decide how resources should be allocated to different uses and the resulting products • Happens in socialist, communist and even in free market economies • Political decision making tends toward ‘categorical priorities’ – making one thing more important than another
Scarcity and Competition • One option to distribute SRTHAU: Those who hold political power decide how resources should be allocated to different uses and the resulting products • Happens in socialist, communist and even in free market economies • Political decision making tends toward ‘categorical priorities’ – making one thing more important than another • Examples?
Subsidies and Taxes • Competition is distorted when special taxes are put on some products or resources but not on others
Subsidies and Taxes • Competition is distorted when special taxes are put on some products or resources but not on others • Also distorted when some products are subsidized while others are not
Strange but true • Ostrich feed, tickets to the ballet, bottled water, bait for crab traps, skybox rentals, deep sea charters and 240 more items/services are exempt from Florida sales tax
Remember our politicians… • However, politicians to win votes do special favors for special interests by putting taxes on whomever or whatever might be unpopular at the moment… and removing taxes on buddies
Remember our politicians… • However, politicians to win votes do special favors for special interests by putting taxes on whomever or whatever might be unpopular at the moment… and removing taxes on buddies • There are more ill-conceived economic policies based on treating prices as just nuisances
Basic Economic Principle Dept Making anything artificially cheap usually means that it will be wasted, whatever that thing might be and wherever it might be located
Scarcity and Competition • Option 2: Let individuals compete for scarce resources… a price-coordinated economy
Scarcity and Competition • Option 2: Let individuals compete for scarce resources… a price-coordinated economy • Such self-rationing means less social and political friction and more economic efficiency
Scarcity and Competition • Option 2: Let individuals compete for scarce resources… a price-coordinated economy • Such self-rationing means less social and political friction and more economic efficiency • Incremental substitution: oranges and tangerines
Scarcity and Competition • Option 2: Let individuals compete for scarce resources… a price-coordinated economy • Such self-rationing means less social and political friction and more economic efficiency • Incremental substitution: oranges and tangerines • Under a price system, people ration themselves
Margaret Thatcherism “The problem with socialism is you eventually run out of other people’s money”
Assignment for September 28 Pick up one section Wall Street Journal
Assignment for September 28 Pick up one section Wall Street Journal Select one article for analysis: make it a juicy one!
Assignment for September 28 Pick up one section Wall Street Journal Select one article for analysis: make it a juicy one! Write a 250-paper analyzing the story in terms of what we’ve learned so far about economics. Clip out your article and attach to your paper.
