Affordability Crisis Glossary of Terms - Part II
Public Policy Pranks
The terms “affordability” and “crisis” are ambiguous. To understand the nature of the problem, it helps to understand its two component parts, how they become integrated, and the fundamental causes.
Obviously, what is affordable to some people is unaffordable to others - depending on current prices relative to available resources. And for events to qualify as a crisis depends on their severity relative to the circumstances that preceded them.
In the previous essay I discussed the fundamental ideas behind these debacles - and here I will address a few of the economic fallacies that are the natural consequence of that “common wisdom.”
Market Inefficiency - This is the bread and butter, the holy grail, the key to the kingdom, and the golden parachute for central bankers, macroeconomists, regulatory agencies, politicians, and dictators everywhere - at least since 1776 when Adam Smith published Wealth of Nations and the Continental Congress published the Declaration of Independence. But in the context of today’s affordability crisis, it is also the justification for everyone’s public policy solutions.
Externalities - Presumably, there are costs to society that cannot be captured in the accounting records of private businesses, and they are not good. These are usually related to environmental effects, and to the government trained economist, they are proof that markets are not efficient. However, there are an infinite number of effects that are not in the books - every transaction that did not occur, plus countless externalities that are positive. The negative externality that matters here is the abusively high costs of housing, medical services, and food that are caused by the regulatory state.
Consumer Protection - The premise is that consumer spending represents 70% of the US economy, that consumers must be protected from the negative externalities of inefficient markets and from the fraud of those rotten capitalists driven by profit motives. However, that premise is what is rotten. All producers are consumers. There is no dichotomy. Production precedes consumption. Supply creates demand. Supply lowers prices. Prices are information. Producers serve customers well or they go out of business. Ultimately, the affordability crisis is solved by free minds and free markets.
Public/private partnerships - Private businesses contribute money and talent, and “public servants” deliver tax credits, subsidized loans and regulatory relief. These deals are typically arranged by city or county Economic Development Agencies. In turn, those are led by political appointees who help businesses navigate the complexity of local regulations that exist to extract indulgences and then repeal them for pet projects that drive up the cost of housing.
Fair competition – In the context of socioeconomic public policy, this package deal evades the meaning of both fairness and competition. In democratic socialist terms, fairness is equality. In economic terms, competition is a pejorative for dog eat dog. To be clear, fairness is the byproduct of equal justice under objective law and competition is the byproduct of productive work with objective rules for voluntary trade. Yet, today’s package dealers impose preemptive law to inhibit productive work that would lower prices.
Equilibrium – This is the macroeconomic measure and justification for economic central planners that proves their fair competition has been achieved. But it requires the fallacies of inefficient markets, externalities, and consumer protection to become a relevant economic concept. And like all authoritarian systems, the fundamental precept of equilibrium is the negation of free will. In this case, the power of the mind for discovery and innovation that will always create disequilibrium. That is a good thing.
Antitrust – The price mechanism of free markets is the only economic equilibrium that matters for a society to prosper in peace - as if there’s any other way. Yet, for central planners to stay relevant, they need a cause, and in this case, public policy measures to repair the damage caused by the public policy measures that degraded the price mechanism in the first place. In turn, this mentality has led to new zoning regulations that demand preferential treatment to home builders that are small, or local, or minority owned - and largely inefficient compared to proven and reliable operators.
Essential services – The economic lockdowns of 2020 offer a multitude of examples of statist abuse and incompetence. That includes the assertion by countless, politicians, journalists, your neighbors – and most of you, that health department bureaucrats and political cronies should decide who gets paid, for what, and which businesses stay open. Regardless of the details and the lingering consequences, the entire episode was based on a vile repudiation of productive work as an existential and spiritual human need.
Resolution
The subtitle of this article is Public Policy Pranks because the eight subjects listed above are economic themes that contribute to the affordability problem. My next article will list eight specific recommendations that will most efficiently lead to prices that will satisfy more young people across America and across the world.
Ultimately, the solution to any socioeconomic problem must begin with individuals, their attitudes, their ideas, and their actions toward their chosen values and goals. That is The Moneyball Method.