the porous city

Markets are built of regulations
I've been simmering on this point for ages, waiting for someone to speak my mind for me. Regulations are not just an imposition on markets - the choice is not between free markets and regulated markets. Markets are constructed by multiple sets of regulations, beginning with property rights. The regulations we choose have consequences for who can enter markets, how those businesses can operate, and on what market outcomes are.

Whenever someone argues for de-regulation, they argue for removing a small piece of this whole edifice. They aren't arguing for truly free markets, they're arguing for a specific rule change that will have (usually clearly identifiable) winners and losers. These same people will often later be found to be advocating for greater regulation in some other area, in the name of punishing wrongdoers.

My first economics class made the simple point that rent control artificially limits the supply of housing, creating shortages. What was never mentioned in that class was that that in many cities regulations make building houses, especially low-income housing, nearly impossible. Ending rent control without making it possible to build more housing means that we are choosing to make housing more expensive, period.

That's why it's so laughable when banks kindly request the government to stay out of their business. Financial markets above all grow out of the regulations that define them.

read what sparked this rant at rortybomb

last modified: 14:32:09 23-Nov-2011
in categories:Commerce/Macroeconomics, Other/Politik





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