Tag government

corruption, Economics, Free-market impostors, Transportation, Urban[ism] Legends

Urban[ism] Legend: Positive NPV Infrastructure

As Washington debates how many hundreds-of-billions of the nearly trillion-dollar stimulus will go towards infrastructure or to other spending/tax cut schemes, pundits claim that spending billions on “shovel ready” public works projects can effectively create jobs that will lead to recovery. As readers probably know, I am skeptical that the anticipated spending could be activated so quickly. As Bruce Bartlett put it: Despite claims by the Conference of Mayors and the transportation lobby that there is as much as $96 billion in construction “ready to go,” the fact is that it takes a long time before meaningful numbers of workers can be hired for such projects. As a recent Congressional Budget Office study explains, “Practically speaking … public works involve long start-up lags. … Even those that are ‘on the shelf’ generally cannot be undertaken quickly enough to provide timely stimulus to the economy.” The prospects for unconventional projects such as alternative energy sources are even worse. The CBO calls them “totally impractical for counter-cyclical policy” because they take even longer to come online… Finally, the impact of increased public works spending on state and local governments cannot be ignored. Most federal transportation spending goes for projects initiated by them. When they think there is a chance that the federal government will increase its funding, they tend to cut back on their own spending in hopes that the feds will foot the bill. A study by economist Edward Gramlich found that the $2 billion appropriated by the Local Public Works Act of 1976 postponed $22 billion in total spending as state and local governments competed for federal funds and actually reduced GDP by $30 billion ($225 billion today). Meanwhile, proponents of infrastructure spending claim that Congress should sift through the shelved projects to identify those projects that will be economically […]

Adam Hengels
January 12, 2009
2 Comments

Economics, parking, Transportation

Irrationality Towards Shortages

Brendan Crain at Where tipped me off to a great post by Ryan Avent at The Bellows. Here’s a little snippet of Shortage: For whatever reason, we’re not built to naturally internalize negative externalities. When riding on a crowded highway, no one (no non-economist, at any rate) curses the government for not making the road more expensive; they demand more capacity — fewer traffic lights, higher speed limits, more lanes, more roads. And when free parking results in no available parking, no one demands market pricing for spots; they ask why the lot’s so small and the garages so scarce, and they get angry about those two new developments that just went in, bringing new residents who unsurprisingly use the valuable, yet free, parking spots when they’re open. We see a shortage of a public good, and we think more, not more expensive. And as a result, the failure to price public goods appropriately leads to an inefficient use of existing resources, and an inefficient allocation of new resources. We don’t use existing roads well, and we spend too much valuable capital building new roads. We don’t use existing parking well, and we spend too much valuable capital building new parking OR we allow shortage concerns to undermine good investments. This type of anti-market bias which seems to be the natural default in humans creates unhealthy positive-feedback loops such as the highway -> development -> congestion -> widen/extend highway, etc. loop. But in that light, we should be glad modern society has been able to overcome so many of its anti-market biases such as making profits, charging interest, and trade between strangers. Hopefully, as society adapts to deal with issues of scacity of land, resources, and time, it will overcome the unhealthy biases it needs to shed to sustain growth. […]

Adam Hengels
December 8, 2008

Economics, housing

Glaeser: Let Housing Prices Fall

Ed Glaeser gives three compelling reasons why the government should end their infatuation with high housing prices. (Nonetheless, some of the same politicians speak through the other side of their mouths about promoting housing affordability): Why We Should Let Housing Prices Keep Falling There is a superficial attractiveness to policies that seem to promise an end to falling housing prices, but there are three reasons why these proposals don’t make much sense to me. First, the government has no business trying to make housing less affordable to ordinary Americans. There is no reason to hope that middle-class Americans should pay more for any basic commodity, whether that commodity is coffee or oil or housing. Government should be fighting to reduce supply-side barriers and make housing cheaper, not trying to inflate prices artificially. Second, most of these proposals seem likely to be expensive failures. The government just doesn’t have the tools to rewrite the laws of supply and demand. If the cost of building a home in Las Vegas is $150,000, and there are no restrictions on building, then all the credit policies or bailouts in the world aren’t going to permanently keep prices above $150,000. Finally, these policies all have the common feature of getting the government further entrenched in the operation of the housing market, and this creates all sorts of long-term market problems. I would have thought that recent events at Fannie Mae and Freddie Mac, for example, would have made Americans recognize the costs of having government-sponsored enterprises play mortgage lender to the nation. I would have hoped that the history of public housing would have made us wary about spending huge amounts of tax dollars to get into the business of public property management. The current crisis may imply a need for more federal regulation of […]

Adam Hengels
October 8, 2008

Economics, housing

Russell Roberts on Government Intervention in Housing

Russell Roberts of George Mason University, CafeHayek, and Econtalk wrote of series of Cafe Hayek posts on the various federal interventions in the housing market: Housing markets without the benefit of hindsight Fannie reaches its goals–sort of Zero Down! Fannie and Freddie’s other mission Section 8 Bill cared too Affordable equals “subprime” Calm down And don’t forget Andrew Cuomo Shiller and fundamentals The role of the CRA It’s not the CRA No money down, revisited Bear Stearns, the CRA, and Freddie Mac Stiglitz on the crisis

Adam Hengels
September 23, 2008

Environment, Urban[ism] Legends, video

Urban[ism] Legend: Density is Bad for the Environment

This is a topic I want to cover more thoroughly, but for now I present a one hour documentary video on green buildings for you leisurely viewing. I came across the snagfilms website from a recent Wall Street Journal article. Most of the documentary videos lean towards “progressive” tastes, but hopefully they’ll add some free-market content such as Friedman’s “Free To Choose” videos. Through quick browsing, this video seemed to be the only one that had relevance to Market Urbanism. I think it does a decent job dispelling the Urbanism Legend that high density is bad for the environment. However, some of the commenters seem to fall for the myth that further government intervention will somehow solve the problem. They all seem to forget that progressive government meddling in transportation and land use has done much to cause the problems of sprawl and auto-dependency that modern progressives are now trying to fight with more intervention. [Watching it a second time, I wanted to point something out. One commenter stated that European and Japanese developers plan for a 50 year life-cycle of buildings, while in the US only 12 months. This is absolutely false. Developers usually use a 10-year discounted cash flow model, but still incorporate a sale value of the property based on projected incomes in the 11th year. That sale value could be calculated on the cash flow of the next 10 years and so, on, but they usually use a more simple calculation for the 10th year sale. They could use 50 year models, but they wouldn’t give much better information than the standard 10-year model. European developers use the same methods as the US. Anyone who says otherwise is trying to decieve you.]

rent control, Zoning

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 […]