Build, Bryan, Build!

We are now over two years in the process of getting a permit to build a house in Florida. Small house, different structure type, difficulty getting the required “professional” input, etc.

A good way of viewing what Ed Stringham and I refer to the Wooden Triangle, the policy that aligns the interests of local politicians, bureaucrats, and existing residents in making new building more expensive to increasing the wealth and prestige of the actors at the expense of outsiders.

Slave owners did attempt secession when “deregulation” that severely undermined the value of their “properties” was enacted. It didn’t end well for them.

The Lucas critique amounts to saying that “deregulation of sector X will be unsuccessful because the interest groups negatively affected by it have the political means and power to oppose it, as evidenced by their past success in influencing Xing regulation.” This argument has a certain tautological appeal. However, if it were entirely true, significant deregulation would never occur or have occurred.

In the case of housing regulation, as with slave owners, it is worth attempting deregulation despite the potential opposition.

Caplan (and his devotees) would have us believe that a radically deregulated housing market left to its own devices would usher in the cornucopia of benefits alluded in my previous comment.  If, by radical deregulation, he intends a complete dismantling of the regulatory framework governing the industry, that’s economics completely divorced from reality.  This would expose the lower socio-economic classes to the vagaries of the free market, which inevitably produces negative externalities that cannot be mitigated by transactions between buyers and sellers alone.  There are building codes, zoning and land use restrictions, and environmental regulations that need to be taken into consideration.  It’s true that competitive markets provide the most efficient means for allocating resources to their best use, but properly vetted regulations ensure that government interventions, where necessary, achieve their intended goals while minimizing the adverse consequences that accompany poorly designed and overburdensome regulations.

The physiocratic ideal of a market totally disconnected from government oversight with completely open borders is unsustainable.  Polanyi:

The 19th century demonstrated the weakness of the self-regulating market as a ruling social principle. The true criticism of the market is that it is based on self-interest and is therefore an unnatural foundation for a society. The institutional separation of politics and the economy bought a peculiar form of freedom, but did so at the costs of justice and security.

Alternatively, politicians working in tandem with market forces to promote the beneficial effects of competition, coupled with clearly defined and enforced borders and property rights is the best path towards a commitment to free markets and limited government.  Brink Lindsey:

When we see that markets work best, not in the absence of government but in the presence of good government, we are able to see the ideals of free markets and limited government in a new and clearer light. Freeing those vital principles from the misunderstandings created by libertarian ideology, we can reconceive them so that they serve, rather than undermine, the cause of effective government on which our freedom and prosperity depend.