My First (semi-)Fisking!

So. This started out as a response to a comment on a post at Left2Right, an excellent blog. However, this particular comment was not quite so excellent; and when I went to respond to it, I got a bit carried away. The response was much, much too long to post in the comments thread, so I decided to post it here instead. So, without futher ado:

Caligreen:

Why should wealthy conservatives or established agri-businessmen (anyone who says "farmers" has never driven through a few nearly county-sized corporate "farms" in say the Central Valley of California or Midwest) support planning when it most likely threatens to diminish their profits?

I don't know what to tell you; you're completely wrong that farmers dislike planning. Farmers love planning. Specifically, they love plans based on the claim that what we as a nation really need is to give lots of money to farmers. This is why we spend nearly $20 billion a year giving money to farmers—it's all in the plan! For a number of reasons, central planning tends to benefit the already powerful (who have access to the machinery of power) at the expense of the not-as-powerful (see Kelo v City of New London; Pork-Barrel Spending; and Welfare, Corporate). Giving the government more power is in many ways asking for trouble.

The agri biz (or oil) and its party the GOP are not for planning any more than they are for restrictions on construction or real estate prices.

Excuse me? The GOP not in favor of government planning? I'll have to go tell my friends—they've spent Bush's entire presidency complaining about how inclined he is to engage in large handouts, economic protectionism, and all-around corporate welfare. You're certainly right that the Republicans (much like the Democrats) are mostly in bed with corporate special interests. That's why I don't vote for them.

Yet if there are in some OK town 10,000 tenants who want (or who would at least benefit from) rent control and only 50 landlords opposed to it, perhaps a vote might be in order.

I agree it may appear that rent control benefits the poor, but that happens in the short term only, at best. Rents are actually a perfect example of my argument, which you kindly quoted. When rents get really high, that's a strong signal to landlords and construction workers that people want housing in a given area; the prices they're willing to pay tells landlords how much they want housing. If the price is enough to cover the costs of providing housing (including the purchase/construction of new housing units), landlords have an incentive to provide that housing.

If the rent isn't enough to cover the costs of providing housing, that tells our prospective landlord that society values those resources more for doing something else. It may be worth $10000 a year to people to get the housing those resources could produce; but maybe it's worth $11000 for people to get the food, clothes, computers, and whatever-else those same resources could produce if they're not used for housing. So the landlord profits if and only if he's using those resources for a use that society values more than it values the next-best use.

Rent controls screw up this dynamic. If, for instance, the commission in charge of setting rents says you can charge $9000 a year, not enough houses get built. Landlords think people only have $9000 of desire for housing, when they actually have $10000 of desire. Housing that costs $9500 a year to provide doesn't get built, even though it would benefit both the landlord and the people. Similarly, if rents get set at $11000 a year, landlords think people want housing more than they actually do. Landlords flock to the city and build lots of houses, only to find that no one wants to live there and they've just wasted a ton of resources that could have been better spent.

"Ah, but that's only the landlords' filthy profit motive! If we put the city in charge of deciding how much housing to produce, we can solve all that and still charge a fair rate!" That's nice, but that's exactly the claim Mises and Hayek refuted (convincingly enough that the socialists of their day had to fundamentally change their arguments—the critique was so powerful that it couldn't be ignored). The number of factors that go in to deciding how much housing to build is unimaginably vast. How much housing do people want? How much glass, brick, steel, copper wiring, insulation, plastic, etc. should we use in each house? What are all the other things those materials could be used for, and how much do people want each of those things? How could anyone, or any group, process that much information?

Prices. When we set things out in a market, people bid on stuff to show how much they want it; in general, the more use you can get out of something, and therefore the more valuable it is to you, the more you're willing to pay for it. Resources get sent to the places where they produce the most value to society as a whole, because that's where people are willing to pay most for them.

Oh, and that adjustment that the socialists of von Mises' day made? They agreed that a planning commission couldn't work on its own, and that a socialist state would have to regulate its economy by setting prices, and raising and lowering prices to equate supply and demand, just like people do in a market. Only, really inefficiently, because the central planning commission has to keep track of all the prices on everything, not just the prices on the relatively few things any one corporation sells, and prices just aren't adjusted fast enough to keep everythign working smoothly. But even this system it works, it's not really a planned economy any more: it's a market economy with only one employer—the State—and only one producer—the State. Oh, and this one giant company also owns all the guns. Good luck with that one. (A fuller discussion of these issues can be found here).

Vegas too: nothin' but effectiveness there

Vegas is actually great, because it's one of the few places in the world that actually gives people what they want. That's how they make all that money. Of course, it's also very instructive, because when you see what people want, you learn that most of it is really, really stupid. But that doesn't mean they don't want it. And most of them think my desire to spend an hour writing a critique of central planning theory in response to some guy online is really, really dumb. I figure I'll let them do what I think is dumb if they'll let me do what they think is dumb. If you want to put someone in charge of what people are allowed to like and do, you're walking awfully far down the Road to Serfdom.

( of course the water may be dried up in a few years, except for millionaires who might have hoarded it for their golf courses).

Yeah, the West has lots of problems with water. They seem to be consuming way more than they should. Wanna guess what generally causes that?

Who collected all the data to build Malibu's $1 million a half acre enclave over the last 30 years? There's little to no democracy or "everyone putting in data" in the LA or SF housing markets: there's some real rich guys and brokers who "got in early" as they say who now parcel the land out for millions to a few
ueberrich entertainment or professionals.

Yeah, houses in some places sure cost a lot, don't they? There are a few reasons for this. I can throw back at you the fact that governments in those areas generally restrict the number of homes that can be built there, artifically restricting the supply and driving up the values of the houses already built (this benefits people who own houses there already—and thus vote—at the expense of people who don't, and so don't). This is another example of how housing messes with the market and keeps people from getting what they want.

But more fundamentally, prices are that high because lots of people really want to live there. People will only a buy million-dollar house if it's worth a million dollars to them to live there. So this is another good example: high prices signal that people want to live there a lot. The prices first of all, make sure that the people who most want to live there get to (I might want to live there, too, but only enough to spend $200,000 on a house. The guy willing to spend $1,000,000 values living there more). The high prices also signal that finding ways either to let more people live there, or to let people live in areas that resemble those areas, is a good idea—it will fill a desire that lots of people have that can't be met yet. Thanks for all the help; I'm way too lazy to dig up good examples like that on my own.

Oh, and one last thing: your post (especially the first paragraph) is a perfect example of what Arnold Kling calls a "Type M" argument. Rather than responding substantively to my arguments, you effectively accuse me of being a shill for the wealthy, and lying about both my motivations and the quality of my arguments. This is stupid both because you have no way of knowing what my actual motivations are, and because my arguments are equally good whether or not I'm advancing them in a bid to seize more wealth for myself. I happen to think that a relatively more market-oriented society will benefit me. I also think it will benefit most of the readers of this blog, and of Left2Right; and I think it will benefit most members of society generally. If this be "self-interest and protectionism on the part of the of the wealthy," make the most of it.

Update: the Left2Right site moderator has determined that Mr. Caligreen, to whom I was responding, is a troll, and all of his comments were deleted. The link that previously linked to his comment now links to the thread on which it appeared (which is well worth reading; most of the people over there are sensible, and the conversation was extremely interesting). However, one of his comments, at least, is preserved in near-entirety: I quoted almost his entire post in this response.