Monday, May 24, 2010

Examples of Why Price Controls Are Evil

1. "Preventive confiscation" of 120 tons of food in Venezuela to allegedly "avoid the phenomenon of empty shelves at grocery stores," which are actually caused by the price controls Chavez imposed in 2003. 

2. Rent Control Is a Vanishing New York Treasure -- "Outside of prime neighborhoods, the restricted rents are not such a great bargain, in many cases barely cheaper than what the apartments could fetch on the open market. These deteriorating low-priced apartments still exist partly because landlords have little financial incentive to make renovations or apply for rent increases." 

Maybe rent control isn't really such a "treasure" after all.  And maybe, just maybe, and I could be wrong here, but maybe the food shortages and empty shelves in Venezuela, and the shortage of affordable apartments in NYC are actually caused by price controls?

10 Comments:

At 5/24/2010 1:39 PM, Anonymous Anonymous said...

Confiscation is the least of shopkeepers worries. Some are facing jail time.

http://www.businessweek.com/ap/financialnews/D9FD1KD01.htm

http://www.npr.org/templates/story/story.php?storyId=126618664

Also money exchangers since the official dollar rates are out of whack.

http://laht.com/article.asp?ArticleId=356976&CategoryId=10717

 
At 5/24/2010 4:17 PM, Blogger Marko said...

No no, the lack of supply is clearly a market failure that requires more government regulation! Markets fail to adequately supply public goods, and externalities and stuff like that! Worker unite! Fair Trade! Social Justice!

(At least that is how things look to the governments involved, I am sure. Fortunately, it seems the unwashed masses are not so sure . . . )

I just saw Mary Landrieu respond to the accident and resulting impending disaster assuring people they will get "justice". These people have truly flipped a lid. It is like a paramedic arriving on the scened of a huge multi vehicle accident and trying to figure out, as a primary concern, who is at fault for the accident!

 
At 5/24/2010 7:46 PM, Blogger sethstorm said...

In New York:
Establish a minimum standard of maintenance & cleanliness, then vigorously enforce it.

 
At 5/24/2010 9:17 PM, Blogger Ron H. said...

This comment has been removed by the author.

 
At 5/24/2010 9:49 PM, Blogger Ron H. said...

sethstorm, most landlords already have such standards for acceptable levels of care and cleanliness that they expect their tenants to follow, and they do enforce them.

 
At 5/25/2010 12:16 AM, Blogger Marko said...

Yes sethstorm - as usual the answer is for the government to waive its magic wand of regulation and all problems disappear. Funny how it hasn't worked out like that though, despite substantial housing regulations.

One problem is that what amounts to requiring land lords (property owners) to pay more for upkeep while not allowing them to charge more in rent doesn't work for some reason. They either sell the property, go bankrupt, secretly charge more in rent (take bribes for the rent controlled property) or just fail to follow the regs. Those are really the only choices they have.

The other problem with increasing enforcement is that most government employees (in jobs like building inspection anyway) are lazy - they don't have the same incentives to do a good job as private sector employees. Especially if they are in a union. So they don't do a good job enforcing the law, or in the case of New York, they take bribes. Really.

 
At 5/25/2010 8:54 AM, Blogger Junkyard_hawg1985 said...

I remember several years ago reading about an apartment complex in New York that was foreclosed upon. The property taxes for the apartment complex were higher than the rent allowed by rent control at 100% occupancy. Sethstorms solution to this problem is: "Establish a minimum standard of maintenance & cleanliness, then vigorously enforce it."

 
At 5/25/2010 1:13 PM, Anonymous Anonymous said...

We tax and restrict something, and are then we are surprised to have a shortage?

People respond to incentives.

If you want more supply there must be an incentive to provide it.

 
At 5/25/2010 4:54 PM, Blogger Methinks said...

Marko,

While most NYC inspectors are lazy and partial to bribes (people respond to incentives - every student should be forced to repeat that mantra until they dream it, so valuable is the lesson), they couldn't enforce anything in rent controlled apartments if they tried.

The yearly rents of the controlled apartments in the story would only cover a small fraction of the yearly maintenance and financing costs for the apartments. It's cheaper to pay the city fines than to fix them.

The part that got irritated me most was the whining from one of the entitled rent control dwellers that he poured thousands of dollars into fixing up his own place. Duh. That's what happens when you live somewhere practically for free.

 
At 5/31/2010 12:28 AM, Anonymous Anonymous said...

re: rent controls in nyc. NONSENSE!!! 1st of all, nyc, and manhattan in particular, is not capable of being a free market as there is limited space and limited units. this ain't phoenix or l.a. or even chicago. any space that crosses the $2k a month threshold and is put in the category of "fair market value" is generally given a cheap, quick "renovation" with the lowest price materials and appliances available and put on the market. tiny apartments are shared by 2 and 3 college students or overpaid for by attorneys and wall streeters (if there are any left) until they buy their own space. for the disappearing middle class, they are either fortunate enough to have a rent stabilized unit either through length of residency or by grandfather or else they live outside the city. the "free market" has never resulted in adjustments of nyc rents in any of the downturns during the 22 years i've lived here and most landlords are more than willing to sit on their overpriced apartments and storefronts for months or even years than to drop the rent. now that the illustrious joe bruno, who almost singlehandedly did away with nyc rent laws, is in jail can we restore proper rent regulation so that people who earn less than $100k a year can live here?

and btw, landlords are still granted a rent increase each year as determined by the rent guidelines board. it's in the vicinity of 4-6% on 1 yr leases and 6-9% on 2 yr leases and they have not eased up during the last 2 years.

if they are so burdened, so unable to make ends meet then they don't have to do it, do they? they can sell their buildings. but they don't.....

whoever is commenting on this thread has absolutely no idea what it is that they are speaking of.

" landlords already have such standards for acceptable levels of care and cleanliness that they expect their tenants to follow, and they do enforce them."

really? you should see most of the public hallways in the buildings in the east village.

and marko and methinks? you are either landlords yourselves or have never gotten closer to nyc than the west bank of the delaware river. rent controlled apartments are almost nonexistent. only people who lived in their apts pre 1971 have rent control. some of us are lucky enough to still be rent stabilized.

turn off glen beck and read:

http://en.wikipedia.org/wiki/Rent_control_in_New_York

 

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