Who Wants Market Regulation?

Who Wants Market Regulation?

“Those who profit from the current situation – and those indifferent to it – will say that the housing market should be left alone to regulate itself. They don’t really mean that,” writes Matthew Desmond in his book Evicted.  In the world that Desmond investigated, the world of low-income housing, the ones who don’t think any government action needs to be taken to regulate or stabilize the market are the landlords and people able to make money from slum housing. The people exploiting market failures and extracting rents say they don’t want any changes in housing policy because they favor a free market, but what Desmond’s quote hints at is that they don’t really exist within a free-market, and they currently profit from existing government action (not just inaction) on housing policy.
The quote from Desmond reminds me of senior citizens who protest changes to Medicare with signs that say “Keep your government hands off my Medicare,” seemingly unaware that Medicare is a government run health program. The line between government and markets is not always clear to people, and what people actually want in terms of government market regulation doesn’t always line up with people’s stated political beliefs or stated beliefs about government intervention. We can have high minded opinions about the proper role of government relative to markets, and we sound better and more impressive when we do, but the bottom line is that we are all likely driven more by our own self-interest than our high minded opinions of governments and markets.
I am currently listening to Ron Chernow’s Hamilton biography on audiobook. I am struck by how our nation’s founding fathers quickly broke down into self-interested policy quarrels that were couched in high minded political rhetoric, but seemed to perfectly back the self-interest of the given founding father. Jefferson in particular seemed to be a master of this kind of deception, arguing that America should have a minimal government and reflect a populist standpoint. However, Jefferson owned slaves and had a vast agrarian plantation and his policies seemed to clearly favor his own lifestyle. His actions can be well understood when viewed through the lens of The Elephant in the Brain by Kevin Simler and Robin Hanson who suggest that most of our behavior is signaling and that we generally (and deceptively) act on self-interest more than we would ever admit.
All of this is to suggest that most people don’t really have any independent and objective views of government regulations of markets. Desmond’s quote about housing markets shows that people are driven by self-interest, that they discount regulations that favor their financial interests, and that they misrepresent government policies that make them better off. When our own self-interest, our own bottom line, and our social status are on the line, we are willing to compromise our high minded positions to adopt the view that is expedient to our own interests. This was true of Jefferson and Hamilton in the first Presidential Administration after the adoption of the Constitution, and it is true today in housing, Medicare, and other government and market areas. Landlords, real-estate agents, and others who currently profit in the housing market are in favor of government tax breaks on mortgage interest, of housing vouchers, and other policies that help ensure people can afford high rents. They view the market as being free without fully acknowledging these interventions and how they benefit from them.
Housing Markets, Rent, and Workers

Housing Markets, Rents, and Workers

I don’t necessarily think that heavy handed government control of the provision of goods or services is the best way to organize our society and our resources, but I do think government intervention has a place. I think markets are great mechanisms for providing goods and services efficiently, but I think it is also clear that markets leave out some individuals and even well functioning markets have their points of failure. I also don’t believe there is some sort of dichotomy between government provided services and markets that cannot be breached. I think there is a need for government action when markets break or where markets fail to address people’s needs. Housing in particular seems to be one of those spaces.
There is not much incentive for landlords to provide low rent housing options to low-income renters. In his book Evicted Matthew Desmond shows how this leads to a limited supply of low rent housing options and how that low supply artificially inflates the cost of those options. Low rent, poor quality housing often isn’t actually that much cheaper than more expensive, nicer units which makes life for those in poverty unbearable. The standard advice to middle income renters or homeowners is to avoid spending more than 30% of your monthly income on rent or a mortgage. For the lowest income people in our society, that idea can be laughable.
Desmond also shows that simply raising wages for low-income individuals is not enough to avoid the high cost of rent. The limited supply of affordable housing options doesn’t exist in isolation. It exists within larger markets and forces, and will respond to other factors in the economy. Desmond writes, “when the American labor movement rose up in the 1830s to demand higher wages, landed capital did not lock arms with industrial capital. Instead landlords rooted for the workers because higher wages would allow them to collect higher rents. History repeated itself 100 years later, when wage gains that workers had made through labor strikes were quickly absorbed by rising rents.”
This dynamic between landlords and the wages of renters demonstrates a market failure. Rents can soar to absorb an increase to a worker’s income. People need a place to live, and even if the conditions are terrible, they cannot pass up housing. But as rents take larger and larger shares of their income, they have less to spend on groceries, utilities, and other necessities or enjoyments of life. The government does help people with food and some utilities, but people can hardly engage in our capitalistic society if an overwhelming amount of income is directed toward rent. Government provided low-income housing seems to be a necessity to correct for these market failures. Clearly large, densely crowded housing projects were not the right solution, but when we look at housing across the country we see a lot of different approaches to housing. Dense housing structures are not the only option, and other alternatives for reasonable and affordable government provided housing need to be attempted to help make the housing market work for more people and avoid eating any increase in wages that people earn as they try to escape dilapidated housing.
Constructive Thoughts on Wellness

Constructive Thoughts on Wellness

There is an argument in the world of public health that the American medical system is too focused on solving problems rather than preventing problems. This argument that is presented in Sam Quinones’ book Dreamland, expressed by Dr. Alex Cahana, “The U.S. medical system is good at fighting disease, … and awful at leading people to wellness.”

 

The difference between fighting disease and leading people to wellness has to do with where you step in to help with people’s health. Our country generally focuses on providing medical care and attention after someone has gotten sick. We ask doctors, nurses, and medical professionals to correct a huge range of problems, many of which stem from bad habits, unhealthy environmental factors, and conditions that are generally beyond the control of an individual, and not open to medical interventions. Attacking the problem once it has already developed, once a set of factors have set in that promote the health problem, makes any real changes expensive and difficult.

 

Wellness requires that we think about medical care, costs, and health further upstream, before anyone ever gets sick. Consider the idea of wellness in the context of car maintenance (I know, I know, I just wrote about the problems with comparing ourselves to cars, but this will be helpful).

 

If you regularly change your oil, rotate your tires, and drive as if your grandma was in the car with you, then your vehicle is going to operate more smoothly with fewer major costs (in general) throughout its entire life. You are making small interventions along the way to make sure your car is operating optimally. The costs of changing your oil and putting in the necessary effort to keep it working well are not trivial, but we know that those costs are less than what we might face otherwise.

 

Failing to maintain our vehicle could lead to a catastrophic engine failure. Driving our car like a teenager that just downed two Redbulls is going to put a lot of strain on the vehicle, wearing out our tires and breaks much faster. When things wear our quicker, when unexpected failures occur, we suddenly have to pay a lot more money to keep the car going.

 

Our bodies are similar, and whether it is our national Medicaid or Medicare systems, or our private health insurance systems, the cost we pay for healthcare is interconnected with where we step in to try to make people healthy. Paying for interventions downstream, once we already have health problems is expensive. It is equivalent waiting until our human check engine lights turn on before we consider doing anything to help our health. The solution that many medical professionals and many public health researchers encourage is moving upstream from the actual health problems that develop to focus on interventions before anyone develops terrible disease. The idea is to focus on wellness first, and hope we don’t have to pay for as much medical care for the prohibitively expensive diseases down the road. Rather than focusing all our effort on solving disease, we can redirect some of the money and effort into improving our environments, finding new ways to help people adopt healthy lifestyles, and finding more ways to connect and help us share in wellness as a community.

Helping Infants Get a Good Start

In his book When, Dan Pink writes about the importance of getting a good start. Timing is incredibly important in our lives, and getting a good start can make a huge difference down the road in terms of the outcomes we want to see (or avoid). I wrote about the importance of getting a good start in a career and matching ones skills with a position that values and rewards those skills, but Pink also addresses the importance of getting a good start in life as a baby. Specifically, Pink writes about programs that send nurses into homes to help low income and often low education families and mothers with caring for newborn children. The policies make a huge difference in getting little ones off to a good start.

 

“Nurse visits reduce infant mortality rates, limit behavior and attention problems, and minimize families’ reliance on food stamps and other social welfare programs. They’ve also boosted children’s health and learning, improved breast-feeding and vaccination rates, and increased the chances mothers will seek and keep paid work.”

 

Programs to help young children are expensive up-front, but have a huge amount of benefit down the road. There is a lot of inequity in our society, and while we like to believe that the outcomes we see are purely the results of our own hard work and effort, that isn’t always the case. Having a caring home with enough nutritious food and positive role models makes a big difference in our early development. Getting a good start is key for building good behaviors and becoming successful down the road. The important piece from Pink’s emphasis with this program, is the social nature of the program and how bringing mothers and families that might otherwise be economically and socially isolated into society helps them ensure their kids get a good start.

 

Pink continues, “Instead of forcing vulnerable people to fend for themselves, everyone does better by starting together.” I’ve written about the importance of social groups for our happiness, and here Pink shows that more social connection and helping create social bonds of support for early mothers leads to the positive outcomes we want to see for young children. There are policies we can put in place that would reward these types of social connections and make them more available, and the studies that Pink highlights suggest that the benefits of those programs would be huge for the children who get a better start in life, and would also flow to the rest of society. The programs might not be obvious at first, and the beneficiaries (in terms of the parents of the young children) might not seem deserving at first, but it is worth remembering that the people who will benefit in the long run includes all of us, and not just those initial families and children who receive the good start.

Sample Bias and Obliquity – Lessons from the Education Model

I studied political science for a masters and focused generally on public health. A big challenge in both areas is that the people who end up participating in our studies or who are the targets of our interventions are often different in one way or another from the general population, and that makes it hard to tell whether our study or intervention was meaningful. We might see a result and want to attribute it to a specific thing happening in society or that we introduced to a group, but it could just be that the people observed already had some particular quality that led to the outcome we saw. Our theory and our intervention may have just been a small thing on the side that didn’t really do what it looks like it did.

 

Another challenge in both areas is accomplishing our goals without being able to directly address our goals. We may want to do something like prevent drug overdose deaths, but public opinion won’t support safe injection sites, legal drug use, or free needles for drug addicts. We can work toward our goals, but we often have to do them in an oblique manner that purports to address one thing, while in the background really addressing another thing.

 

These experiences from my educational background come to mind when I think about the following quote from Kevin Simler and Robin Hanson in their book The Elephant in the Brain. Their example is about education, but it relates to what I discussed above because it shows how our current education system seems to be doing one thing, but really accomplishes another goal in an indirect way. It does so by taking qualities that people already have, and purporting to provide an intervention to enhance those qualities, but runs into the same selection bias I mentioned in my opening paragraph.

 

“Educated workers are generally better workers, but not necessarily because school made them better. Instead, a lot of the value of education lies in giving students a chance to advertise the attractive qualities they already have.”

 

Education can do a lot of things for us, but pin pointing exactly what it does is tricky because the people attracted to school are in some ways different from the population that is not attracted to higher education. It is hard to say that the schooling is what made the big difference or if the people who do well in school had other qualities that set the stage for the difference observed between those who do well at school and those who don’t. This doesn’t mean school is a waste or that we should invest in it less, but rather that we should consider a wider range of schooling options to allow people to demonstrate their unique qualities in different ways.

 

The other piece I like about the quote is the obliquity of schooling and education in our journey to tell others how amazing we are. It is hard to demonstrate one’s skills and qualities, but going through an obstacle course, such as college, is a good way to show our positive qualities and skills. Education is one obstacle we use to differentiate ourselves and advertise how capable we are in a socially acceptable manner. There is something to be learned when thinking through policy from the education example. Direct approaches to policy-making sometimes are impossible, but indirect routes can open doors if they make it seem as though another good is being pursued with the outcome we want to see occurring incidentally.