How So Many Bad Ideas Manage To Win On Election Day
Every other year, the run-up to election day reminds me of an irony about the “wonders of democracy” rhetoric that peaks then - that is also when the misrepresentations poured into voters’ ears, undermining the likelihood of achieving those wonders, also peak.
The reason is well-captured by a quote from Jonathan Swift, in 1710: “Falsehood flies, and the truth comes limping after it.” At the last minute, lies, damned lies and statistics, not to mention unsupported claims, rumors, innuendo, etc., can have their greatest power, because there is not time for serious thought, research, and effective rebuttal before voters must cast what will therefore be far more misinformed ballots.
What struck me most as an example this year was “Rent control could spur more building,” by Gary Painter, in the Los Angeles Times (10/31). It was written in favor of California’s Proposition 10, which would have re-enabled majority-renter communities to vote themselves large benefits from others’ pockets by imposing new rent control laws (currently banned by state law).
While many studies have shown that rent control reduces construction, Painter offered an alternate theory to convince voters who oppose rent control for that reason. The core of his argument, which he intimated was a standard Econ 101 lesson (despite over 90% of economists expressing disagreement with his conclusion), was:
Price controls can actually spur an increase in supply. When housing developers have too much power in the market, they can maximize profits by raising rents on the apartments they already own. But if rent control limits that option, developers have to go to Plan B if they want to make more money: Build more units.
The core of Painter’s argument was that the consolidation of the homebuilding industry due to the great recession (the number of builders was approximately halved from 2007 to 2012) and further subsequent concentration in the industry, had given builders monopoly power, which they were using to reduce construction. Consequently, he argued that imposing rent control would be able to tame their monopoly power to increase rents, and leave them with building more rental housing as their sole means to higher profits.