Sunday, February 12, 2012
A Little More on Rent Control
After posting on this subject a few days ago, I’ve been raked over the coals in the conservative Blogosphere, principally in the Arnold Klingdom. I am accused of thinking I possess a “superior wisdom”, since I disagree with the majority of economists on this issue. I ignore “mountains of data” and base my agnosticism on sheer ignorance. I am really the worst of the worst.
I could rest my case on a simple defense: my post was not about rent control, which I haven’t studied, but on the doctrinaire treatment of the topic by economic textbooks. Even if they’re ultimately right, they’re right for the wrong reasons, and that matters when the issue is how to use economics as a tool for thinking.
But having had my curiosity piqued, I decided to do a quick literature search. Sure enough, there is a large literature out there. I glanced at a few models with their statistical implementations and formed a few reactions. I will spare you here, since it takes more than a couple of hours to know what’s what in a serious field of study. But I noticed that two review essays from the 1990's seem to hold pride of place.
Edgar Olsen, a veteran rent control researcher, wrote one of these in 1998 for Regional Science and Urban Economics. A sample quote:
“Although economists have strongly held views about the effects of rent control, they have provided little convincing empirical evidence in support of these views [Olsen, 1990] and their theoretical analyses typically ignore relevant features of actual rent control ordinances and important responses to them [Olsen, 1988].”
And Richard Arnott asked whether it is “Time for Revisionism on Rent Control?” in the Journal of Economic Perspectives in 1995; his answer was yes.
But of course there was further work in the 00's, and no doubt the subject will look different a few years from now. The one conclusion I can draw at this point is that a sweeping condemnation of rent control derived from elementary supply and demand analysis (in a frictionless market with no externalities) isn’t a very good way to enter the debate.
UPDATE: It's not enough to know the US experience with rent control. I've found out that Germany has had a national system of rent control for decades; it is widely seen as successful, and, as far as I know, no major party has proposed getting rid of it. Maybe German readers of this blog (all three of you?) will want to chime in. Once again, this proves nothing, but it does suggest that simplistic, doctrinaire judgments rendered by economics textbooks are not much to go on. This is not an argument for rent control; it's an argument against the textbooks.