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What you're talking about is the idea that economics shouldn't apply because there are a lot more emotions involved in house than in most other markets. Do I need to point out that that is silly, or is it sufficiently self-evident that economics applies anyway?

The real answer tends to be building enough housing for everyone. That also tends to be politically unpalatable, because the people with all the emotional attachments want their neighborhoods frozen in amber. So low-income people get pushed out by increasing rent and high-income people move in.

Pick your poison, really.



Economics is not value-free. Actually, economics already has a way of dealing with exactly the problem GP cites: externalities.

Taking away someone's home involves potentially massive negative externalities (emotional and otherwise). Therefore, if you want to maintain the political theater that says capitalism is designed to benefit everyone, you have to accept that it may be preferable, optimal in fact, to incur some deadweight loss. Rent control is one strategy that does just that: as long as a person lives in a place, the rent can't go up.

Is it naively optimal? Nope. But it is (or can be, if you get the implementation right) actually optimal. It is a guarantee that a house can be a home, if the tenant so chooses, and it could be used to balance the aforementioned negative externalities.

Does it? Who knows, maybe, I'm not familiar enough with San Francisco's housing laws. Just because they implemented it poorly doesn't mean the concept is unsound or irrational and it doesn't mean that anyone in favor of the concept is "silly" or deserves to be condescended.


Rent control wouldn't be such a problem in SF if it didn't also lead to NIMBY-ism preventing the addition of more housing.

I didn't call anyone silly. I said the idea that economics cease to apply because strong emotions and italic fonts are involved is silly.


Even without NIMBY-ism, rent control keeps new housing from being built, because it makes the return on investment for new housing uncertain. People generally don't build apartment buildings out of the kindness of their hearts.


"Externality" means something more than "thing I don't like."


That's a bit of a snarky way to put it, but this is correct; the parent comment is abusing the term "externality". The consequences of rental contracts for tenants in a free housing market are not an externality; the tenant is a party to the transaction.


In this case, the tenant isn't a party to the transaction, the tenant can't afford to be a party to the transaction at $8,000+ per month, that's my whole point.


Housing prices and displacing people from their homes has an obvious effect on the local labor market, which is an externality.


Given that they are displaced by other people, presumably with higher incomes and skill levels, I'm not sure how obvious an effect that is.


A city's inhabitants aren't fungible even in SF and in any case replacing employees costs a company a lot of money.


No, but there are serious externalities involved when classes of people are driven out of communities.


They perhaps they should consider building more housing. With the bonkers prices there, I bet even with a portion dedicated to low income housing, stuff would still get built, as long as the rules were clear.


In theory, yes. In practice, local activists tend to demand new buildings be 100% affordable, and the result is generally gridlock where nothing at all gets built.


The funny thing is that he has a Masters in Economics. You'd think he knows what the word means.


I wonder if economics could in some way factor in emotions besides greed.


It does. When you choose to pay a price or not, every emotion you feel is factored in.

Is a place "home" to you? You're probably willing to pay for it. Don't like a place much? You'll be less willing to spend.

This runs out after a point, though. Warm fuzzies are great, but I can't eat them, wear them, or sleep under them. I also can't trade warm fuzzies for any things I can do those with.




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