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Wednesday, August 27, 2014

Why Conservatives Always Accuse Krugman of Lying and de Blasio's Natural Experiment on Housing

     He said that this piece he did on the so-called 'Texas Miracle' of Rick Perry brought out a lot of the haters. In it he argues that the main reason so many are leaving big cities and states like NY for small states with conservative governors like Rick Perry is not because of low taxes and regulations on rich people and rich companies but lower housing prices.

     "But why are housing prices in New York or California so high? Population density and geography are part of the answer. For example, Los Angeles, which pioneered the kind of sprawl now epitomized by Atlanta, has run out of room and become a surprisingly dense metropolis. However, as Harvard’s Edward Glaeser and others have emphasized, high housing prices in slow-growing states also owe a lot to policies that sharply limit construction. Limits on building height in the cities, zoning that blocks denser development in the suburbs and other policies constrict housing on both coasts; meanwhile, looser regulation in the South has kept the supply of housing elastic and the cost of living low."


      "So conservative complaints about excess regulation and intrusive government aren’t entirely wrong, but the secret of Sunbelt growth isn't being nice to corporations and the 1 percent; it’s not getting in the way of middle- and working-class housing supply."

      "And this, in turn, means that the growth of the Sunbelt isn't the kind of success story conservatives would have us believe. Yes, Americans are moving to places like Texas, but, in a fundamental sense, they’re moving the wrong way, leaving local economies where their productivity is high for destinations where it’s lower. And the way to make the country richer is to encourage them to move back, by making housing in dense, high-wage metropolitan areas more affordable."

      "So Rick Perry doesn't know the secrets of job creation, or even of regional growth. It would be great to see the real key — affordable housing — become a national issue. But I don’t think Democrats are willing to nominate Mayor Bill de Blasio for president just yet."

      http://www.nytimes.com/2014/08/25/opinion/paul-krugman-wrong-way-nation.html?ref=opinion

       What makes conservatives so crazy over Krugman in a piece like this? I think it's conservative economists in part like Sumner and his readers who hate such pieces and after reading it declare him a 'liar.' I recall Mark Sadowski-not to pick on Mark just he's an example I recall, there are many such complaints-saying that what bothers him about Krugman is that 'he knows better.'

       There is a feeling that he sells out his knowledge for his personal ideology. To me this always seems a little convenient-conservative economists evidently don't believe that conservative economists ever prostitute their knowledge for political reasons but if true this is hard to square with what we saw from Greg Mankiw and Glen Hubbard during the 2012 race when they were in the pay of the Romney campaign.

         To be sure, a lot of what is believed by mainstream economists is considerably more conservative than what laypeople believe-think about things like the minimum wage-the average person bought into the MW in the 30s-in any case they elected FDR who put in place, then they continued to elect him and others like him who also believed in it. Or take 'price gouging'-most people think it's wrong for say a gasoline company to raise prices sharply during a hurricane-as a few did during Hurricane Sandy on Long Island, though most to their credit didn't.

         Most economists don't have a problem with such 'gouging' they chalk it up to the workings of supply and demand. Indeed, they would go on to argue that such 'gouging' has a salutatory effect as it prevents shortages.

          In any case, what ended the problem of long lines in Long Island was when the government imposed 'odd-even' days where some could only get gas on even days, some could only get it on odd days, so in this case, government was  the answer.

          Similarly with rent control. I saw in the comments that Krugman was criticized for not mentioning rent control. To make matters worth he praised de Blasio's agenda for low housing prices-no doubt many economists would complain that this is unlikely to be Pareto optimal.

           http://www.nyc.gov/html/housing/assets/downloads/pdf/housing_plan.pdf

           The de Blasio plan is about all the things conservatives hate-if prices are too high it must be because of rent control; get rid of that and prices will be nice and low after supply is back at it's equilibrium level.

           It is true, that in Krugman's recent textbook with his wife and fellow economist, Robin Weil, he criticizes rent control. So this is probably the sort of thing these conservative economists have in mind.

            If nothing else, though, economists should welcome de Blasio's '10 year plan'-no doubt this will be compared to Lenin and Mao's plans-as it gives them what they always tell us they need so dearly but so rarely get-a natural experiment. 

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