Those slow-moving near-invisible market crashes ....

"Trump’s tariff mayhem has crashed stock markets across the globe. ... Doing nothing would have been far better than doing what he did. ... [When the stated policy risked a sovereign downgrade from Moody’s and probably kicked off a small recession, reversing course is indeed a win for all Americans, much in the same way that surviving a self-inflicted gunshot wound is a win.]

"[But consider.] Are there any pre-2025 policies that have already done damage on the scale that Trump is now inflicting on the global economy?

"While you might object, 'If any such policies existed, we would have noticed,' you shouldn’t. Imagine Trump imposed his current tariffs gradually over the course of the year, while constantly reassuring the world that he had no intention of raising overall tariffs. The total damage of this would ultimately be about the same as what we’ve seen. The visibility of the damage, however, would be far lower. ...

"Once you accept the possibility of pre-existing massive wealth-destroying policies, plausible candidates are easy to find. Here are [two]:

"1. The near-ban on international trade in labour. Raising tariffs from around 3% to around 30% crashed the market. But the effective tariff on foreign labor ranges from about 250% to 1500%. Indeed, that understates the damage, because arbitrary non-tariff barriers are a greater burden than precisely-defined tariffs.

"2. Draconian regulation of construction. Existing regulations roughly double the price of housing, imposing a massive burden on not only consumers, but any business requiring offices, factory space, and so on. ...

"We recently got to watch a horrific spectacle of policy dysfunction unfold before our eyes. Tariffs spiked; markets crashed. But after seeing this crash with your own eyes, you shouldn’t merely acknowledge that ... one mistake. You should open your mind to the possibility that ... for every major market crash heralded on the news, there could easily be a dozen invisible crashes — policies that wantonly but stealthily destroy trillions of dollars of value. Immigration, housing, and nuclear power are only my top candidates.

"A further deep lesson: ... We’re habituated to their harm ... to the point that few of us realise how much wealth we’ve lost, how much wealth we’re losing, and how much wealth we and our descendants will continue to lose for decades or centuries to come.

"[P]opulists [like Trump] do immense harm blatantly. Traditional politicians, in contrast, favour stealth. When they inflict immense harm, they do it gradually. And in the face of blatant opportunities to to make the world dramatically better, they yawn. ... But once you learn to see the invisible crashes, you won’t be able to unsee the ugly truth ... "

~ Bryan Caplan from his post 'The Invisible Crash'

People in the past were right to believe that the future could easily outshine the past. In this guest post, an excerpt from, his new graphic novel 'Build, Baby, Build' Bryan Caplan, asks why shouldn’t we believe the same?

The History of the Future: Build, Baby, Build on Historic Preservation

by Bryan Caplan

One of the most crowd‐​pleasing rationales for preventing development is historic preservation – i.e., preservation of "old" or "character" buildings. [Planners in Wellington and Auckland councils in particular have raised this objection to avoid intensification in those cities.]  Critics often ridicule the rationale’s abuse. New York has an historic parking lot, and so does Washington, DC. Rarely, however, does anyone challenge the principle of historic preservation. My new book Build, Baby, Build: The Science and Ethics of Housing Regulation does precisely that.

I first decided to address historic preservation while reading Triumph of the City by Ed Glaeser, chair of Harvard’s Economics Department. He is unquestionably a hero of Yes In My Backyard (YIMBY). He’s probably the greatest YIMBY hero in academia. But to my ears, Glaeser still praises historic preservation with faint damnation:

In cities and suburban enclaves alike, opposition to change means blocking new development and stopping new infrastructure projects. Residents are in effect saying “not in my backyard.” In older cities like New York, NIMBYism hides under the cover of preservationism, perverting the worthy cause of preserving the most beautiful reminders of our past into an attempt to freeze vast neighborhoods filled with undistinguished architecture.

This passage inspired a Build, Baby, Build scene where I invite Ed for a ride in my time machine. First, I take him back to 1928 and show him the original Waldorf‐​Astoria Hotel. The hotel was undeniably gorgeous.

But in the late 1920s, regulators didn’t try very hard to “preserve the most beautiful reminders of our past.” So about a century ago, developers were able to demolish the hotel.

And then… they built the iconic Empire State Building in its stead! Take a look.

On reflection, there is a widely‐​ignored trade‐​off between preserving past greatness and creating new greatness. Almost every beloved building stands on the footprint of an even older building. If historic preservation had existed throughout history, many more truly ancient structures would still be standing. But everything more recent would, at best, be less conveniently located. Many wouldn’t exist at all! After all, there’s little point in building the Empire State Building anywhere other than a city centre.

Without historic preservation laws, profit‐​maximising developers would still consider historic value. Tenants and buyers like historic stuff, so they’ll pay a premium for it. Developers like good publicity, so they have an added incentive to loudly proclaim their enduring eagerness to keep history alive. Philanthropists may even buy historic buildings and turn them into museums, or partial museums.

I say these free‐​market forces deliver all the historic preservation a reasonable person would ever want. I know, many of my fellow economists will hail the so-called "positive externalities" of doing even more. But we shouldn’t give them the time of day. Much of what mainstream economists credulously call “positive externalities” is just Social Desirability Bias — our all‐​too‐​human tendency to voice pretty lies.

“History is priceless” is a lovely yet absurd slogan. A few architectural historians aside, people barely care about 99 percent of protected buildings. When was the last time you smiled at a random structure built before your birth? What’s your tenth favourite building in Paris, never mind Auckland, Wellington or Tauranga?

But even if you take the positive externalities more seriously than I do, we’re not choosing between positive externalities and nothing. We’re choosing between the positive externalities of the buildings we have, and positive externalities of the buildings we could have instead. 

People in the past were right to believe that the future could easily outshine the past. Why shouldn’t we believe the same?

* * * * 

Bryan Caplan is an American economist and author. Caplan is a professor of economics at George Mason University, research fellow at the Mercatus Center, adjunct scholar at the Cato Institute, and former contributor to the Freakonomics blog and EconLog. He has published in the American Economic Review, the Economic Journal, the Journal of Law and Economics, Social Science Quarterly, the Journal of Public Economics, the Southern Economic Journal, Public Choice, and numerous other outlets. His book, The Myth of the Rational Voter: Why Democracies Choose Bad Policies (2007), was published by Princeton University Press and named "the best political book this year" by the New York Times. 

Bryan posts frequently at his blog, Bet on It. His post first appeared at the Cato at Liberty blog.
Buy his comic book at Amazon in both paperback and e-book.

HOUSING: "What regulation has ruined, deregulation can repair."

"Government regulation has raised housing prices far above the physical cost of land and construction.
    "And what regulation has ruined, deregulation can repair.
    "It's tempting to look at America's [and New Zealand's!] most expensive addresses and repeat the top three principles of real estate: 'location, location, location.' But this glosses over the artificiality of today's locational scarcity. Since the dawn of the skyscraper [or even just of the Georgian terrace house or Manhattan brownstone], technology has allowed vast populations to simultaneously enjoy the world's top locations. The government response, in turn, has been to make building skyscrapers [or terrace houses] in desirable places nearly legally impossible.
    "Indeed, U.S. [and New Zealand] regulators view almost all multifamily housing with deep suspicion. That's why they zone a supermajority of residential land for single-family homes. [See Auckland council for example.] But even the single-family supply is heavily restricted, because governments routinely set high minimum lot sizes to force builders to waste most of their land. Physically fitting six mansions on an acre is easy, but legally you're lucky [in some areas] to get a green light for one.
    "Averaging over the whole U.S., a conservative estimate is that regulation has doubled the price of housing. [No reason to think it's any less here — and given the outrageous price of building materials here, is more likely much more!] It's much worse in places like the Bay Area and Manhattan, and a minor issue in the countryside. But as a recent paper by Gyourko and Krimmel shows, regulation raises prices almost everywhere that lots of people actually want to reside.... As a matter of arithmetic, then, halving the price of housing would [at minimum] cut the cost of living by 10%, raising the standard of living by 11%. (As you may recall, 1.0/.9≈1.11).

    "Even better, deregulation will deliver these gains beyond a reasonable doubt. Laissez-faire in housing is not a futurist Libertopia. A hundred years ago, U.S. housing markets were close to laissez-faire [as they were here in NZ before the first Town Planning Act in 1928], and the least-regulated regions of the U.S. are still close to laissez-faire. Furthermore, we don't have to blithely assume vigorous competition will arise, because vigorous competition in the construction industry already exists. The total number of builders is immense, and even in our regulated world, many are champing at the bit to expand.
    "Indeed, the construction industry could revolutionise our lives for the better if it simply were free to deploy the technology of a century ago! Work on the Empire State Building started in 1930, and was complete just 410 days later. [Likewise, work on Auckland's Grafton Bridge, the longest reinforced concrete-arch span in the world at the time, started in 1908 and was completed just over a year later!] Imagine what industry would accomplish if we combined the light regulation of the past with the advanced technology of the present.
    "Almost all political thinkers like to keep up with the news cycle — to talk about the latest, most salacious topics. I've indulged this temptation myself more than once. But if your worldview has merit, you can do so much better than opine on the scandal of the century of the week. Housing deregulation realistically promises to enrich humanity by trillions of dollars. And all government has to do to make this happen is stop preventing it."

~ Bryan Caplan, from his article 'Trillions' — promoting his new 'graphic novel' Build, Baby, Build

"You're free to build, but ..."

 

The National-led Coalition boasts that it will "fix housing" by bringing in rules requiring councils to zone enough land* on which land-owners are free to build sufficient housing to allow for the next thirty years of demand.**

Doesn't that sound great, you think. "Free to build," you say! 

The National-led coalition's housing honchos are either stupid, naive, or they think that we are.

As should have been obvious from Auckland council's passive-aggressive resistance to government diktats on the Medium-Density Residential Standards (MDRS), telling councils to "free up land" only works if councils are so inclined. If they are already so inclined, ministers wouldn't need to tell them. And if they aren't so inclined then, well, as Bryan Caplan points out in his new "graphic novel" Build, Baby, Build: The Science and Ethics of Housing Regulation, councils can hinder construction in dozens of other ways ... if it's so inclined. (And it is.)

For starters it could ...

Go tell Minister Bishop. (Or send him a copy of Bryan's book.)

* * * * 

* Zoning is a restriction on land telling owners that the planners know better than the owner (and would-be buyers) what should go there. How is it a restriction, you ask? If the planners' zone allows what the owner would do anyway, it's not needed. If it disallows it, it's not wanted.

** This presumes that the grey ones would even know, to any standard of meaningful proof, what demand would look like over the next thirty years. I mean, it's not like there's any thirty-year stretch in recent history they could point to and say "look, we got it right."

Bastiat’s Buildings: "But will unplanned development be *beautiful*?"

Why are housing prices so high? 'Supply and demand' is true but misleading, because draconian regulation drastically constricts housing supply. In his exciting new nonfiction graphic novel, economist Bryan Caplan makes the economic and philosophical case for radical deregulation of the housing industry. Deregulation turns out to be a bona fide panacea: a large rise in housing supply would raise living standards, reduce inequality, increase social mobility, promote economic growth, reduce homelessness, increase birth rates, help the environment, and more. Combining stunning visuals and careful interdisciplinary research, 'Build, Baby, Build' takes readers to a world where people are free to build―and shows us how to get there.

But many NIMBys will still say 'there are beautiful old neighbourhoods we need to protect,' or 'valuable coastlines that we shouldn't pollute with any building.' In this excerpt, Caplan notes that today’s governments strictly regulate skyscrapers — but the beloved skyline of New York City was largely built under near-laissez-faire conditions. And that today’s planners strictly protect historic buildings, but deny us any chance at something new and unthought of (and instead mandate places like Albany and Manukau, while living in the leafy unplanned inner-city suburbs they now write rules to protect ... )

Bastiat’s Buildings: Why I Wrote a Graphic Novel about Housing Regulation

by Bryan Caplan

The Cato Institute has just published my Build, Baby, Build: The Science and Ethics of Housing Regulation. The book is a non‐​fiction graphic novel. Think of it as the comic book equivalent of a documentary. Together with illustrator Ady Branzei, I combine words and pictures to give readers a tour of housing regulation, with a focus on how government restricts the construction industry, and what would happen if the restrictions were lifted.

About fifteen years ago, Larry Gonick’s Cartoon History of the Universe opened my eyes to the high potential of graphic non‐​fiction. Gonick’s books capitalise on the adage that “a picture is worth a thousand words” to teach history quickly. They use beauty and humour to hold readers’ attention. And though they look like comic books, they’re carefully researched.

In Build, Baby, Build, I try to emulate Gonick’s virtues. The book distills a vast empirical literature into a few critical lessons. Lessons like:

• US housing regulation roughly doubles the cost of housing.
• Besides making housing much cheaper, deregulation would increase productivity, equality, social mobility, environmental quality, fertility, and safety.
• The standard arguments in favour of regulation are both overstated and one‐​sided.

But what finally convinced me to make this book a non‐​fiction graphic novel was my realisation that what drives much, perhaps most, support for housing regulation is aesthetics. Economists focus on cost‐​benefit analysis, but normal people are more likely to ask themselves, “Will development be beautiful?” — then confidently answer, “Absolutely not.”

Faced with such attitudes, economists tend to facepalm in frustration. My reaction, though, is remember 19th‐​century French economist Frédéric Bastiat’s classic essay, “What Is Seen and What Is Not Seen.” Writing in 1850, Bastiat explained that people focus on the obvious direct benefits of government, while ignoring the severe yet non‐​obvious harms. When government subsidises universities, for example, people rarely ponder, “What else could have been done with the money?” When government denies permission to build, similarly, we never actually see what would have been built if permission were granted. This makes it easy for critics to visualise the ugliest possible outcomes.

The epiphany that convinced me to write Build, Baby, Build: Instead of trying to argue people out of their aesthetic pessimism, I should use the graphic novel format to fight aesthetics with aesthetics — to show readers the beautiful unseen world that government forbids. And that’s why the fifth chapter of the book resurrects the great Bastiat as a co‐​narrator. After we explore his classic insight on “the seen versus the unseen,” Bastiat joins me on a guided tour through a deregulated world. Which lets me showcase a world that is not merely richer than the status quo, but more aesthetically pleasing as well.

For example, regulators often forbid construction in areas famous for their natural beauty. But why assume that construction would tarnish natural beauty rather than amplify it? Take a look and see for yourself:

To my eyes — and hopefully yours — the bottom panel is more, not less gorgeous than the top panel. And while you can fairly point out that these are fantasy drawings, they are inspired by real life. Who really aesthetically prefers the largely desolate California coastline to the awe‐​inspiring towns of Italy’s Amalfi Coast?

Or the decidedly pleasant but anadorned Bear Run River to the same river with a house by Frank Lloyd Wright showcasing its beauty, and now hosting hundreds of thousands of visitors every year.

The same lesson holds for so many of forms of housing regulation. Today’s governments strictly regulate skyscrapers. But the beloved skyline of New York City was largely built under near‐​laissez‐​faire conditions. Today’s governments strictly protect historic buildings. But construction of these historic buildings often began with the demolition of an earlier beloved building. The original Waldorf‐​Astoria Hotel really was destroyed to make room for the Empire State Building. That’s what I call building “the history of the future.”

Built in 1936

In a critique of my first book, philosophers Jon Elster and Hélène Landemore accuse me of being willing to use almost any rhetorical strategy to get my points across. While they overstate, they’re on to something. Once I’m convinced that my arguments are sound, I strive to sell them. Straightforward logic and evidence are fine, but so are thought experiments, appeals to common sense, humor, and beauty. 

False modesty aside, I think Build, Baby, Build is a beautiful book. If you like the visual samples I’ve shown you, I think you’ll agree.

* * * * 

Bryan Caplan is an American economist and author. Caplan is a professor of economics at George Mason University, research fellow at the Mercatus Center, adjunct scholar at the Cato Institute, and former contributor to the Freakonomics blog and EconLog. He has published in the American Economic Review, the Economic Journal, the Journal of Law and Economics, Social Science Quarterly, the Journal of Public Economics, the Southern Economic Journal, Public Choice, and numerous other outlets. His book, The Myth of the Rational Voter: Why Democracies Choose Bad Policies (2007), was published by Princeton University Press and named "the best political book this year" by the New York Times. Bryan posts frequently at his blog, Bet on It.

His post first appeared at the Cato at Liberty blog.

Buy his comic book at Amazon in both paperback and e-book.

Why are housing prices still so unbelievably high, especially in the country's most desirable locations? The superficial answer is “supply and demand,” but the deep answer delivered by a new comic book―the reason supply is so low―is a regulatory system that treats developers like criminals. In this excerpt from his new comic book Build Baby Build,  economist Bryan Caplan argues in this guest post that "we" (by which I mean you lot and the governments you vote in) have been fighting poverty the wrong way. Want to help the poor? Then stop making housing harder ...

[Launched overnight in the U.S., Caplan hosted an 'Ask Me Anything' at his blog to help launch it, with plenty of challenging questions.]

Housing Deregulation as Poverty Policy

by Bryan Caplan

“How should government fight poverty?” It hardly seems like a loaded question, but it contains a strong sequential insinuation. Namely: Prior to government lifting a finger, a severe poverty problem exists. Then a helpful government arrives on the scene to fight this pre‐​existing problem. Which swiftly leads to a debate about the best way for government to play the hero. Should it provide education and job training? Tax the rich and take GST off food? Or just hand out cash?

To avoid this sequential insinuation, we have to rephrase the question. In lieu of “How should government fight poverty?” I propose: “How should government change policy to reduce poverty?”

This question remains open to standard redistributive responses. But changing the wording also allows for the possibility that existing government policy is a major cause of poverty. If so, the simplest way for government to reduce poverty is to stop making it worse. Talking about “fighting poverty” pre‐​anoints government as the hero of the story when the truth could be quite the reverse.

My new comic book Build, Baby, Build: The Science and Ethics of Housing Regulation highlights one of the main ways that modern governments do in fact sharply increase poverty. Namely: By slashing the supply — and thereby raising the price — of the basic necessity of shelter.

A wide range of regulations make it hard for developers to build tall buildings, multi-family housing, and even dense single‐​family housing. While this means more expensive housing for everyone, the poor suffer extra, for two reasons.

First, the poor spend a larger share on shelter. For the richest quintile of New Zealanders, it’s just 13 percent. For the poorest quintile, it’s a whopping 41 percent. (Compare this to the U.S, where the figures are respectively 18 percent and 25 percent.)

Second, renters are generally much poorer than owners. To be clear, lower housing prices aren’t always bad for owners; after all, they may hope to upgrade to nicer place, or want their kids to be able to afford to live in their vicinity. But cheaper housing is almost automatically good for renters.

The preceding two arguments boil down to simple arithmetic. If you dig deeper, you’ll find two more ways that housing deregulation helps the less fortunate.

First, as Nobel laureate Angus Deaton and Anne Case point out in their Deaths of Despair and the Future of Capitalism, non‐​university-trained males in the U.S. have been doing especially poorly in recent decades. One common remedy has been to use protectionism to revive U.S. manufacturing, but the numbers just don’t add up. But housing deregulation is a far more realistic remedy here because (a) a large majority of workers in construction are university-trained maless, (b) 11 million people already work in this industry, and (c) most people would gladly upgrade to a bigger home if the price were right. Even modest housing deregulation would therefore create millions of new well‐​paid jobs for non‐​college males. The argument differs here only in the numbers. 

Second, building off the work of Peter Ganong and Daniel Shoag, Build, Baby, Build shows that housing regulation also reduces the upward mobility of the poor. Decades ago, when housing prices were much lower — and more nationally uniform — poorer people had a clear path to a better life: move to a higher‐​wage part of the country. Steinbeck’s Grapes of Wrath notwithstanding, this strategy worked well. Now, however, poorer people who try this route typically find that the extra housing cost in high‐​wage regions eats up more than 100 percent of the wage gain. Lifting yourself up by your own bootstraps is still possible, but used to be quite a bit easier.

Five years ago, I had a debate on poverty policy with my friend, economist David Balan. He broadly agreed with me on the merits of housing deregulation and acknowledged that high housing prices were especially bad for the poor. Yet Balan insisted on purely semantic grounds that housing deregulation doesn’t count as “poverty policy.” Unless you favour government redistribution, your preferred poverty policy is, perforce, no policy at all.

My reply: Anything that reduces poverty counts as poverty policy! Indeed, if you want to help the poor, Effective Altruism 101 urges us to start by adopting all of the policies that cost less than nothing. Shackling construction is a prime example of such a policy. After all, housing regulation hurts the poor by burning taxpayer resources to impede wealth creation. Harm fuelled by waste and more waste.

Housing deregulation isn’t just one sort of poverty policy. It is the best sort of poverty policy. Instead of letting government tax the rest of society and hoping that the benefits exceed the costs, housing deregulation shows government a mirror. “You’re not the hero of this story," it says: "At best, you can become a repentant villain. Want to help the poor? Then stop hurting them.”

* * * * 

Bryan Caplan is an American economist and author. Caplan is a professor of economics at George Mason University, research fellow at the Mercatus Center, adjunct scholar at the Cato Institute, and former contributor to the Freakonomics blog and EconLog. He has published in the American Economic Review, the Economic Journal, the Journal of Law and Economics, Social Science Quarterly, the Journal of Public Economics, the Southern Economic Journal, Public Choice, and numerous other outlets. His book, The Myth of the Rational Voter: Why Democracies Choose Bad Policies (2007), was published by Princeton University Press and named "the best political book this year" by the New York Times. Bryan posts frequently at his blog, Bet on It.

His post first appeared at the Cato at Liberty blog.

Buy his comic book at Amazon in both paperback and e-book.

"The real problem with democracy ... "

"The real problem with democracy is not that special interests frustrate the will of the people. It is, rather, that people are smart as consumers but stupid as voters.... The problem with government policy is not that the majority is right and ignored, but that it is wrong and heeded."

~ Bryan Caplan, from his post 'Intellectual Autobiography of Bryan Caplan: Part 1: 1988-2003'

'Abusers Give Vice a Bad Name'

"The difference between me and normal observers: I don’t consider extreme abusers or 'addicts' to be victims. I consider them victimisers. They aren’t a symptom of a greater social problem. They are the greater social problem. Abusers have and continue to make evil choices. Granted, it logically possible to end up on Fentanyl Row through tremendously bad luck. Empirically, however, everything I’ve read on poverty convinces me that the root cause of such residence is almost invariably extraordinarily irresponsible behaviour. (Even a mild dose of the Success Sequence will keep you off the street: Read Adam Shephard’s 'Scratch Beginnings' for a blueprint.)
    "Abusers don’t just mistreat their families, friends, neighbours, and passersby. Even worse, they give vice a bad name."

~ Bryan Caplan from his post 'Abusers Give Vice a Bad Name'

NIMBYs are economically illiterate

cartoon from Bryan Caplan's forthcoming
housing-economics comic book 'Build Baby Build'

"What ideology urges us to make housing as expensive as possible?! ...
    "My top explanation is sheer economic illiteracy. Much of the public flatly denies that housing deregulation would make housing more affordable. For them, supply-and-demand is the 'ideology' - and popular complaints about the downsides of new construction are 'common sense.' 
    "I have ... evidence that economic illiteracy is the foundation of draconian housing regulation.... When Clayton Nall, Chris Elmendorf, and Stan Oklondzija test[ed] for economic illiteracy in other markets, they detect[ed] it. But the economic illiteracy is especially egregious for housing...
    "[I]t’s good news ... If the problem is economic illiteracy, however, at least we don’t have to change human nature to dramatically change policy. Perhaps we can just repeatedly hit the public over the head with a friendly sledgehammer of economic education.
    "A friendly sledgehammer like… a non-fiction graphic novel on housing regulation."

~ Bryan Caplan, from his post 'NIMBY is economic illiteracy'

"Enticement to desert should be a standard part of military strategy, but hardly ever is..."

"Ukraine is offering amnesty plus five million rubles to anyone who deserts from the Russian army and agrees to go to a Ukrainian prison. That’s about $48,000, probably several years’ pay for a young Russian worker.
    "On the surface, this sounds like a sweet deal, but on reflection, it’s anything but....
    "I admire the creativity of the Ukrainian proposal. Enticement to desert should be a standard part of military strategy, but hardly ever is. But let me propose a Version 2.0 to better fulfil the intent of the original offer.
    "Version 2.0: The EU, in cooperation with Ukraine, offers $100,000 plus EU citizenship to any Russian deserter. Russians can either go directly to the EU, or surrender to Ukrainian forces for speedy transport to the EU border.... 
    "How much of a burden is this on the EU? Chump change, really. Even in a magical scenario where all of the roughly 200,000 Russian troops in the vicinity take the deal, $100,000 per soldier is a mere $20 billion. That’s less than one-fifth of what Germany now plans to spend on defense in 2022 alone...."
          ~ Bryan Caplan, from his first third post at his new blog: 'Make Desertion Fast'

Politics... "making your friends happy by making their enemies suffer."

Image by Scott McCloud

"Cruelty is the main emotion that politicians pander to. And cruelty is what every politician strives to deliver. They don’t want to make everyone happy. They want to make their friends happy by making their enemies suffer."
          ~ Bryan Caplan, from his post 'Politics is Cruelty'

Why is local government so bad?

Councils are currently under attack here in at least two areas: their performance in delivering water, and their non-performance in allowing the delivery of housing.  There's still argument about their delivery of the former (and long may that argument continue), but their performance in the area of housing could only with great generosity be even called "dysfunctional." (A better term might be "disastrous.")

This non-performance is not unique to Enzed. Nor to the particular jobs they're asked to do. It's worldwide, and universal -- which poses the question: how come local government everywhere is always so dysfunctional? Bryan Caplan argues that the answer is structural:

First, as I’ve argued before, non-profit competition is weaker than for-profit competition, even if the number of competitors is vast. Why? Because no one is trying very hard to win. As I’ve explained before:

Tiebout implicitly assumes that non-profit competition works the same way as for-profit competition. It doesn’t. If a business owner figures out how to produce the same good at a lower cost, he pockets all of the savings. If the CEO of a publicly-held corporation figures out how to produce the same good at a lower cost, he pockets a lot of the savings. But if the mayor of a city figures out how to deliver the same government services for lower taxes, he pockets none of the savings. That’s how non-profits “work.”

With non-profit incentives, neither the number of local governments nor the ease of exit lead to anything resembling perfectly competitive results. The “competitors” simply have little incentive to do a good job, so they all tend to perform poorly.

Second, voters are deeply irrational, even at the local level. Most people [for example] childishly refuse to grant that allowing more construction will reliably make housing more affordable.

Yes, you can point to my book Myth of the Rational Voter and object, “How can voters be so irrational even though the expected cost of voter irrationality is especially high at the local level?” Reply: Even at the local level, the probability of voter decisiveness is so low that the expected cost of voter irrationality is approximately zero. If you have more than a hundred voters, “Your vote doesn’t count” is basically correct.

To reiterate, I am not arguing that local governments have two little blind spots. I am arguing that local governments have two main jobs – and they’re awful at both.

 

"Economic freedom, personal freedom, and cosmopolitanism are Very Good Things, and (b) Western elites are at least less opposed to all three Very Good Things than the deeply authoritarian Western masses." #QotD

"On average, I do trust Western elites more than Western masses. My main reason, though, is not that the modern world is too 'complex' or 'interconnected,' but that (a) economic freedom, personal freedom, and cosmopolitanism are Very Good Things, and (b) Western elites are at least less opposed to all three Very Good Things than the deeply authoritarian Western masses. Back in 2012, I described the median American voter as a 'moderate national socialist,' and subsequent events have reaffirmed my doleful perspective."
        ~ Bryan Caplan, from his post 'Open Borders in the New Yorker'
.

Literally speaking, of course, it is never 'businesses' that prosper or suffer, but business *owners*, which includes virtually everyone with a retirement account.

"Literally speaking, of course, it is never 'businesses' that prosper or suffer, but business owners, which includes virtually everyone with a retirement account."
        ~ Bryan Caplan, in his post 'Open Borders in the New Yorker'
.

"Open Borders Are a Trillion-Dollar Idea"

In his new comic book Open Borders, best-selling author and economist Bryan Caplan argues that "tearing down all barriers to migration isn’t crazy—it’s an opportunity for a global boom."

To ignore the opportunity, he says, is like failing to pick up a trillion-dollar note you see sitting on the footpath.

To see the massive missed opportunity of which I speak, consider the migration of a low-skilled Haitian from Port-au-Prince to Miami. In Haiti, he would earn about $1,000 per year. In Miami, he could easily earn $25,000 per year. How is such upward mobility possible? Simply put: Human beings are much more productive in Florida than in Haiti—thanks to better government policies, better management, better technology, and much more. The main reason Haitians suffer in poverty is not because they are from Haiti but because they are in Haiti. If you were stuck in Haiti, you, too, would probably be destitute.
    But borders aren’t just a missed opportunity for those stuck on the wrong side on them. If the walls come down, almost everyone benefits because immigrants sell the new wealth they create—and the inhabitants of their new country are their top customers. As long as Haitians remain in Haiti, they produce next to nothing—and therefore do next to nothing to enrich the rest of the world. When they move, their productivity skyrockets—and so does their contribution to their new customers. When you see a Haitian restaurant in Miami, you shouldn’t picture the relocation of a restaurant from Port-au-Prince; you should picture the creation of a restaurant that otherwise would never have existed—not even in Haiti itself.

    The central function of existing immigration laws is to prevent this wealth creation from happening—to trap human talent in low-productivity countries. Out of all the destructive economic policies known to man, nothing on Earth is worse. I’m not joking. Standard estimates say open borders would ultimately double humanity’s wealth production. How is this possible? Because immigration sharply increases workers’ productivity—and the world contains many hundreds of millions of would-be immigrants. Multiply a massive gain per person by a massive number of people and you end up with what the economist Michael Clemens calls “trillion-dollar bills on the sidewalk.”

But, but, we'll be overwhelmed!

Even the largest countries cannot absorb hundreds of millions of immigrants overnight. True enough, but no reasonable person expects hundreds of millions to come overnight, either. Instead, immigration usually begins slowly and then snowballs. Puerto Ricans have been legally allowed to move to the United States since 1904, but it took almost a century before Puerto Ricans in the United States came to outnumber the population left on the island. Wasn’t the European migration crisis an unmanageable flood of humanity? Hardly. Despite media outcry, total arrivals from 2014 to 2018 came to less than 1 percent of the population of the European Union. Many European countries—most notably West Germany during the Cold War—have swiftly absorbed much larger inflows in the past.

But, but, East Germans weren't really foreigners were they!

While West Germans welcomed millions of East German migrants, a much lower dose of Middle Eastern and African migration has made the whole EU shiver. Aren’t economists who dwell on economic gains just missing the point? ...
    Let’s start with readily measurable cultural and political effects. In the United States, the most common cultural complaint is probably that—in contrast to the days of Ellis Island—today’s immigrants fail to learn English. The real story, though, is that few first-generation immigrants have ever become fluent in adulthood; it’s just too hard. German and Dutch immigrants in the 19th century maintained their stubborn accents and linguistic isolation all their lives; New York’s Yiddish newspapers were a fixture for decades. For their sons and daughters, however, acquiring fluency is child’s play—even for groups like Asians and Hispanics that are often accused of not learning English.

But, but, they'll all vote for [insert whichever party which the objector is opposed]!

Who knows how vast numbers of new immigrants would vote? Indeed, shouldn’t we expect people from dysfunctional polities to bring dysfunctional politics with them?
These are fine questions, but the answers are not alarming. At least in the United States, the main political division between the native- and foreign-born is engagement.   Even immigrants legally able to vote are markedly less likely than native-born citizens to exercise this right. In the 2012 U.S. presidential election, for example, 72 percent of eligible native-born citizens voted versus just 48 percent of eligible immigrants.  Wherever they politically stand, then, immigrants’ opinions are relatively inert.
    In any case, immigrants’ political opinions don’t actually stand out. On average, they’re a little more economically liberal and a little more socially conservative, and that’s about it. Yes, low-skilled immigrants’ economic liberalism and social conservatism are more pronounced, but their turnout is low; in 2012, only 27 percent of those eligible to vote opted to do so. So while it would not be alarmist to think that immigration will slightly tilt policy in an economically liberal, socially conservative direction, warning that “immigrants will vote to kill the goose that lays the golden eggs” is paranoid.

All these arguments and many more have for a long time been addressed in my own fumbling way here at this blog, and in almost point-by-point detail by Jason Krupp at the New Zealand Institute and Alex Nowrestah at the Cato Institute. Caplan's main point is the positive one: that allowing peaceful people to cross borders and work freely for whichever employer wants them, wherever that employer might be, is ultimately good all round.

This is ultimately how I see the case for open borders. Denying human beings the right to rent an apartment from a willing landlord or accept a job offer from a willing employer is a serious harm. How much would someone have to pay the average American to spend the rest of his or her life in Haiti or Syria? To morally justify such harm, we need a clear and present danger, not gloomy speculation. Yet when we patiently and calmly study immigration, the main thing we observe is: people moving from places where their talent goes to waste to places where they can realize their potential. What we see, in short, is immigrants enriching themselves by enriching the world.

What else does he talk about? Almost everything. The answer to all the following is "YES!"

5. Do you talk about global apartheid?
6. Do you talk about the level of illegal immigration?
7. Do you talk about human smuggling?
8. Do you talk about the effectiveness of immigration law at preventing and deterring illegal immigration?
9. Do you talk about immigration as a civil right?
10. Do you talk about whether the plight of the immigrant is our problem?
11. Do you talk about whether there is a right to immigrate?
12. Do you talk about whether this right is absolute?
19. Do you talk about the benefits of immigration for immigrants?
20. Do you talk about the benefits of immigration for natives?
21. Do you talk about how much immigration actually helps immigrants?
22. Do you talk about why immigration helps immigrants?
23. Do you talk about how much a trillion dollars of gains really buys?
29. Do you talk about what open borders would really look like?
34. Do you talk about brain drain?
35. Do you talk about what good for places versus what’s good for people?
36. Do you talk about zombie economies?
37. Do you talk about how immigration’s fiscal effects vary by immigrant skill?
38. Do you talk about whether open borders and the welfare state are compatible?
40. Do you talk about how welfare states prioritise the old versus the poor?
41. Do you talk about the cost of educating immigrants’ children?
42. Do you talk about the effect of immigration on the sustainability of retirement systems?
51. Do you talk about the value of Western civilisation? 

69. Do you talk about the cultural benefits of immigration?
70. Do you talk about immigrants’ desire for freedom?
71. Do you talk about immigrants’ disdain for freedom?
72. Do you talk about the danger that immigrants will vote to “kill the goose that lays the golden eggs”?
84. Do you talk about the effect of immigration on national IQ?
85. Do you talk about whether you’re virtue signalling?
92. Do you talk about restricting immigrants’ eligibility for government benefits?
93. Do you talk about requiring immigrants to learn English?
94. Do you talk about requiring immigrants to acquire cultural literacy?

Answer to all the above: "YES!"

There are answers for everyone, even for the antediluvians:

52. Do you talk about the cultural dangers of admitting non-Western immigrants?
53. Do you talk about terrorism, mass rape, human trafficking, Sharia, and the decline of English?

95. Do you talk about the dangers of Islam?
96. Do you talk about Muslim bans?
97. Do you talk about keyhole solutions for the dangers of Islam?

Answer: Yes.

Q: What's a "keyhole solution" for the dangers of Islam?
A: Read the damn book.  Or this summary. Or listen to a podcast interview here.

Q: Do you need to embrace every answer?
A: "No," says the author. "My immediate goal is more modest: I’d like to convince you that open borders aren’t crazy. While we take draconian regulation of migration for granted, the central goal of this regulation is to trap valuable labour in unproductive regions of the world. This sounds cruel and misguided. Shouldn’t we at least double-check our work to make sure we’re not missing a massive opportunity for ourselves and humanity?"

He has a point. And it's a good one.
.

"Opening all borders would swiftly create unprecedented prosperity”

The author writes:

This just in: Open Borders: The Science and Ethics of Immigration, has made the New York Times Bestseller List! The one line summary – “An economics professor argues that opening all borders could bolster the global economy” – is an bizarre understatement. Far better to say, “An economics professors argues that  or better yet “An economics professor argues that immigration restrictions are an economic and moral disaster.”
Still, I’ll take what I can get!

And you can get your local copy here. Or here.