Much of your writing is about how most people think deprivation is due to high prices, but actually, it’s because of (unnecessary) scarcity of supply.

Today, after 2 years of most not seeing eye to eye on economic issues, my girlfriend and I finally clarified the real source of our disagreement.

She tends to favor limitations on building, and imposing price controls for education, healthcare, and housing. This is because she’s pessimistic that it’s feasible to expand the supply of these goods enough to bring the price down. She sees the difficulty schools have in hiring teachers, the burnout among nurses and doctors, and the difficulty in hiring contractors to renovate the bathroom, and has a hard time imagining how we could possibly get enough labor to supply all these services. She worries that even if they could be supplied, the quality would suffer: we’d get a lot of crappy new universities, bad healthcare, and parkless slums or soulless Walmart cities.

Being pessimistic about supply increases, she therefore sees economic progress being about making the distribution of current goods and services more fair. If we can’t get more universities, we can at least give the rich and the poor a more equal shot at an education. If we can’t get more nurses, we can at least make sure that everybody has to wait their turn in line. If we can’t get more quality housing, we can at least remove the chance to gate out the poor by imposing price controls.

Furthermore, she thinks that if the government set prices in these areas, it would be able to negotiate the rates down more effectively since it would be the monopoly payer. So the result would be that everybody gets a shot at what services do exist, and the price to the nation is lower because the government can negotiate the prices down.

These aren’t the terms she puts it in, but it’s the position she endorses. She says she’d be open to a very different approach to welfare (ie just give people money and let the market handle the rest), but only if she felt confident that the market could supply large amounts of additional high quality services. Otherwise, she worries that putting a bunch of money in people’s bank accounts would just cause inflation and have no real or lasting effect on affordability.

I think it would be extremely helpful to get some detailed information about how a supply increase in these areas would take place. If we wanted to quadruple America’s housing supply, is there really enough construction capacity to do so in any reasonable timeframe? How would we prevent this from turning into a license to just build a bunch of slums (as the market has, it seems, created in the past)? If we wanted to quadruple America’s medical service supply, where would we source the people to fill those roles? If we wanted to build lots of new universities, where would we find the teachers, and wouldn’t that require a huge tax increase to pay for all the research, tuition subsidies, and teacher salaries?

It’s not so much that she doesn’t believe these things are possible, as that she never hears people describe how this supply increase would unfold in detail. Economists just handwave and say “let the market work,” or “deregulate and the problem solved itself,” and this just doesn’t strike her as plausible.

I do think it’s plausible, but I too have never really heard any YIMBY folks talk about how long it would take to build X units of new housing, or how we’d jam it all into our crowded and high-traffic cities, or where we’d source all the new police and sanitation workers to accommodate the growth. It seems like education and healthcare are heavily government subsidized, so you’d need radical restructuring of how those services are provided go grow their supply, unless you were willing to impose big new taxes to pay for it all.

So I would love to read pieces describing in some detail what it looks like to rapidly increase supply of goods Iike these.

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Excellent article.

This comment sort of falls between this article and the medallion piece. With the medallions in NYC, the holders of the assets are (not PC...) largely lower income immigrants with little political power. I imagine this must be part of the reason their monopoly pricing power wasn't protected.

The rentier class in the coasts are middle/upper class voters with considerable political power at the state/federal level and extraordinary power at the local level. I struggle to see how meaningful and overdue reform, like the ones you described, can be accomplished when the changes directly harm incumbents.

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