Jordy Blog

Allan Young plugged my last post in a piece he wrote about the potential of arson as a scapegoat of housing-bubble hardships.

His post reminds me of a similar report of arson, this time related to government rent control.  In Thomas Sowell’s excellent book, Basic Economics – A Citizen’s Guide to the Economy, he explains that in places where the government puts price ceilings on rent to make housing more affordable, rental properties often suffer major losses, and many owners end up torching their own properties to avoid suffer ongoing losses.  This trend is well-documented, by the way.  Introduce rent control in a city, and you can bet the level of arson in that city will increase.

So a socialistic program intended to make housing more available will actually make it less available; and because artificially low rents ensure that existing housing is filled while reducing profit incentive to build more housing, renters who might have a place to live under a free market system are forced to flee to another city without rent control, or become homeless.

Yes, it’s just another example of the way the perverse incentives of socialism love to backfire.

Anyway, the arson connection is interesting.  The Government should look at the real-world incentives of policies it creates, which often trigger results exactly opposite of those it intends.  The incentives leading to crash of the housing market demonstrate the exact same principle, but I’ll cover that tomorrow.

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