A Policy Wishlist for Summer 2021, Initially Composed While Stuck in Traffic

With summer upon us, it’s a good time to think about the little things we can do to make the world a better place and that might, perhaps, move us in that direction. Here are a few ideas.

1. Do A Better Job Pricing Driving. I knew I was making a mistake when I offered to go pick up dinner. The kids wanted takeout from Saigon Noodle House for their birthday dinner, and since the location nearest us was replaced by yet another barbecue restaurant, our only option was the original location. Against my better judgment, I decided not to pay for delivery but to drive to get the food. During rush hour. On Highway 280. If you’ve spent much time in Birmingham, you know just how spectacularly bad an idea this is. An hour after we left the house, my older son and I picked up the food and then, since we were going against traffic, zipped home in a matter of minutes. As befits an economist, I spent a lot of our time in the car thinking about how much I and so many other devotees of the dismal science wished road access were priced so that we pay to use the road by forking over some cash instead of sitting while our time ticks by and our gas burns. It’s important to remember that a price of $0 does not mean a cost of $0, and the evaporation of real resources (in this case, time and gas) without an offsetting benefit is a cruel irony of rationing-by-waiting. If you’re concerned about this imposing a disproportionate burden on the poor, couple it with a cash rebate.

2. Get Out of Innovators’ Way. It’s 2021. Weren’t we promised flying cars? We don’t have flying cars–or at least drones delivering takeout pho and spring rolls–because as Deirdre McCloskey and I argue, the Bourgeois Deal basically says “Leave me alone to let me buy see low, sell high, and innovate, and by the time all is said and done, I will have made you rich.” The economist Thomas W. Hazlett has referred to the interaction between innovators and regulators as a game of “Mother May I?” A regulatory regime that stands between innovators and consumers shouting “Stop!” or “Slow down!” or “Not without my permission, you won’t!” about things like delivery drones or ridesharing or at-home rapid Covid testing is a government failure that impoverishes all of us in the long run.

3. At the Very Least, Shift the Burden of Proof So That What Is Not Explicitly Forbidden is Permitted. It might surprise some people to learn that regulators are human beings, and human beings respond to incentives. Regulators have an overwhelming incentive to be too cautious because the damage that comes from authorizing something “unsafe” is visible while the damage that comes from not authorizing something “safe” is not. I put “unsafe” and “safe” in quotes because these are in the eye of the beholder–defined in the process of their emergence, as it were–and not objectively-existing attributes of goods and services that regulators can readily figure out. While it might not be perfect, I think shifting the burden of proof from the regulated to the regulators would be a step in the right direction. Instead of requiring an innovator or entrepreneur to show that they should be allowed to do something by clearing different regulatory hurdles and getting permission and permits from various departments before allowing them to operate, they should simply be allowed to operate until the health department or another regulator makes a compelling case that they should be shut down. Let’s replace “Do you have a permit for that?” with “Here’s proof beyond a reasonable doubt that you have injured or defrauded your customers” and make it so that the regulators have to extend their imagination a little bit before shutting people down. 

4. End Exclusionary Zoning. Housing is expensive, in short, because the law requires it. This isn’t necessarily an intended consequence of US housing policy, but it is a consequence nonetheless. The logic is pretty straightforward: when you make it hard for people to build housing, they don’t build as much housing. When the demand for housing is rising rapidly and the supply of housing isn’t, prices go up. Furthermore, a regulatory burden changes the composition of the housing stock. Suppose you could build a luxury home for $500,000 or an affordable home for $50,000. Building a luxury home for $500,000 costs the opportunity to build ten affordable homes for $50,000 each. Now suppose you add regulations that add $50,000 to the cost of a new home whether it is a luxury home or an affordable home. Now each luxury home only costs 5.5 affordable homes. Relative to affordable housing, regulation makes luxury housing cheaper. Relative to luxury housing, regulation makes affordable housing more expensive. Builders will substitute away from affordable housing and toward luxury housing.

Exclusionary zoning laws limit what can be built where; they include “minimum lot size requirements, minimum square footage requirements, prohibitions on multi-family homes, and limits on the height of buildings.” As economists from the Council of Economic Advisers point out, exclusionary zoning laws “are seemingly non-discriminatory on their face but still negatively affect many families of color, especially Black families.” The answer? As Bryan Caplan will argue in a book he is writing for the Cato Institute, it’s Build, Baby, Build–and before you object that you don’t want an apartment complex or a hog farm in your “backyard,” get your property surveyed and make sure you mark your property lines. I think it’s pretty unlikely that anyone is proposing a housing development in your literal backyard. Might that new development impose an externality on you? Perhaps, but you should be prepared to argue that prohibiting new construction won’t cause even worse problems. Besides, if you were that concerned about having to look at ugly buildings (the loud part) inhabited by ugly people (the quiet part), you could have bought a place in a gated community with a vigilant homeowners’ association.

These may not be very likely, but a man can dream, can’t he–especially when he’s stuck in stop-and-go traffic? If, by some miracle, some of these actually happen, we can move on to other improvements when Fall rolls around.

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