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Month June 2008

Somin: Prop 98 Likely to Fail, 99 to Pass

Ilya Somin at Volokh: Polls on California Eminent Domain Ballot Initiatives Show Prop 98 Likely to Fail and Prop 99 Likely to Pass: In a recent Field Poll cited in the article, Proposition 98 was losing by 43 to 33 percent among “likely voters,” while Proposition 99 was ahead by 48 to 30 percent. A slightly earlier poll conducted by the Public Policy Institute of California has similar results. If, as is likely, Proposition 98 is defeated, it will probably be a result of the combination of the sponsors’ tactical error in combining the popular anti-eminent domain measure with a far less popular phaseout of rent control (a mistake I criticized in one of my earlier posts), combined with the presence of the deceptive Prop 99 on the ballot. The latter probably led voters to believe that they could protect property rights against takings without simultaneously attacking rent control. Keep your fingers crossed….

Thank you Lynne Kiesling

Yesterday, Lynne Kiesling of Northwestern University encouraged readers of her popular economics blog, Knowledge Problem to visit Market Urbanism. The link generated the highest day of traffic to date. I hope visitors find Market Urbanism interesting and return often. Thank you for visiting Market Urbanism. Adam

Happy 125th, Chicago’s L

Stephen Smith at rationalitate picked up on a Wired article and posted Thomas Edison builds the first el: today is 125th anniversary of the debut of Thomas Edison’s elevated electric railway demonstration in Chicago. The project was financed with $2 million in private funds, through the newly-incorporated Electric Railway Company. It’s enough to make you nostalgic for the days when the government wasn’t so involved in transportation and regulating land use, and that it was actually possible for the market to come up with transportation solutions We’ve come along way in destroying transit by government over-spending since the good ol’ days…. photo by flickr user harshilshah

Over 200 Illegal Hotel Buildings in NYC

From AMNY: Report: 200 illegal hotels exist in the city There are more than 200 apartment buildings in the city that have been illegally converted to hotels, according to a report released Sunday, significantly reducing the number of rent-stabilized units available. … Illegal hotel operators frequently take advantage of tax loopholes designed to encourage the construction of residential units, according to Raskin. … Advocates are calling for increased penalties and changes in the zoning laws to clarify where hotels can and cannot operate. And today’s Sun: Crackdown Sought on Illegal Hotels in the City What does this tell us about the housing/hotel markets? It seems to me that tax structures (and probably zoning) favor housing, while there is significant unmet demand for hotel rooms. Nonetheless, there is definitely a shortage of built space in NYC, which could be better accommodated by loosening zoning restrictions on new development. Any other thoughts?

Mixed Incentives and the True Costs of Driving

From the Freakonomic Blog – Mixed Messages on Auto Use: We wrote not long ago about the various negative externalities produced by driving — congestion, pollution, accident risk, etc. — and how pay-as-you-drive insurance might help impose the true cost of driving on each driver. … And here’s another case of mixed messages on auto use, or at least mixed incentives: The U.S. Department of Transportation has issued a press release saying that Americans have started to drive considerably fewer miles than before. And here’s another case of mixed messages on auto use, or at least mixed incentives: The U.S. Department of Transportation has issued a press release saying that Americans have started to drive considerably fewer miles than before. This post and the comments made me think about how little people actually think about the full costs of driving. People don’t typically think about the wear and tear on their car or the depreciation as they put on miles. The IRS’ mileage rates are intended to reflect these costs on top of the costs of gas, but many people think they are getting reimbursed extra for their mileage. Sure, if you are driving an older, fuel-efficient car, you’ll make money on your business travel… What if drivers were to pay the full costs of the roads they use? Would they start to look at the full cost of driving choices?

Market Incentives to Conserve Resources

The economics blog, Knowledge Problem on how prices effect individuals incentive to conserve: Conservation of resources: Prices change everything Steven Stoft, at the EU Energy Policy Blog, observes that market driven conservation is a slow process: Conservation is the main way consumers respond to high market prices. When price goes up, consumption comes down–but it takes a while for the full price effect to play out. The market eventually shifts demand in the long run, as individuals adjust their behaviors in reaction to higher prices. To what extent will sustained high gas prices cause people to shift their location preferences towards a less gas-dependent urban lifestyle? (assuming high prices are here to stay) How long will it take for us to see a difference in where people prefer to live? Graph from the NY Times

Rent Control Part 4: Conclusion and Solutions

Welcome to the final post in the series discussing the consequences of rent control. Thank you to the subscribers who have patiently awaited each new post. I hope everyone found it enlightening. If you haven’t read the entire series, you can catch up with these links: Rent Control Part One: Microeconomics Lesson and Hording Rent Control Part Two: Black Market, Deterioration, and Discrimination Rent Control Part Three: Mobility, Regional Growth, Development, and Class Conflict Conclusion Rent control is not just a simple price control setting the price at which willing renters and landlords are permitted to do business, it is much worse.  It is a coercive act that gives landlords no legal option, but to rent to a tenant against his will, often at a financial loss.  Rent control adds a non-voluntary burden to landlords which deepens over time because landlords do not have the option to rent to a tenant at below market rates.  Not only does rent control cause huge distortions in the housing market, but the burdens fall disproportionately on the poor and underprivileged people it was intended to benefit. Although particular people are able to live with the comfort of low rent payments, even those renters will see their living conditions deteriorate as landlords neglect repairs and maintenance. As the situation gets worse, middle class residents are able to move away, leaving behind the poorest residents who have become reliant on the reduced rent. In effect, rent control grants property rights to renters, that originally belonged to the original property owners. Rent control becomes a redistribution of wealth to rent control tenants away from apartment owners, market apartment renters, and newcomers to the area. Nonetheless, over time the quality of life decreases for all residents of a city where rent control is imposed. Solutions So, it […]

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