The Rent is Too Damn High

March 9th, 2012  |  Published in Political Economy, Politics

I’m quite upset that Matt Yglesias came out with an ebook called The Rent Is Too Damn High before I had a chance to use that title for one of the iterations of my rentier-capitalism arguments. That aside, the book condenses a number of themes that will be familiar to regular readers of Yglesias’ blog—in particular, his advocacy of the virtues of urban density, and his condemnation of the thicket of local regulations that bias the United States away from dense development. Mike Konczal has a bunch of interesting things to say about it, which I’ll try not to repeat. (Though on his last point, regarding the state’s role in gentrification, I’d add that Neil Smith’s work is worth a look.) In lieu of a full review, here are two things that struck me as I read the book.

All that is solid melts into air

Mike criticizes the limitations of Yglesias’s analysis of rent control, and points us to JW Mason’s great post on the subject. The basic point is that rent control isn’t just about prices, it’s just as much about stabilizing neighborhoods and reducing turnover. But it doesn’t surprise me that Yglesias misses this, because the omission is symptomatic of a larger weakness in his style of analysis.

Toward the end of the book, after recounting the virtues of allowing new, high-density development, Yglesias remarks that:

In the real world, of course, people tend to resist change and want to use whatever levers are at their disposal to resist it, oftentimes disregarding the greater costs to society at large. Fortunately, state and federal officials have tools at their disposal to counteract this tendency.

The problem, here as elsewhere, is that in the tradeoff between social stability and aggregate material prosperity, Yglesias appears to assign stability a value of zero. If people “tend to resist change”, then this is simply an obstacle to be overcome by “state and federal officials”. The ideal type of society that’s evoked here is a perfectly frictionless world of market transactions, one that fully realizes Marx’s comment that under capitalism, “all that is solid melts into air”.

This is the utopia I find to be implicit in Yglesias’s writing in general—not just on urban development, but also on unions, or on occupational licensing, for example. It’s the basis for a particular version of left-neoliberalism, in which a perfectly efficient and deregulated market exists alongside a very redistributive social democratic state, but a state which only moves money around ex post rather than penetrating into the concrete workings of either production or exchange.

That vision assumes that it’s desirable to subject all of life to the whims of the market, in return for a higher standard of living. But whether or not such a tradeoff is politically or economically feasible, there’s no a priori reason to say that the desire to have a stable, predictable life or job or neighborhood is less valid than the desire to maximize economic growth. It’s not that Yglesias’s line of critique is totally wrong—I agree that NIMBYism and fear of change is often an impediment to desirable policies, and I agree that people with generally Left politics often betray a confusion about these issues. But while it’s not desirable to just freeze our current cities and neighborhoods as they are, it’s unreasonable to simply dismiss the desire for stability out of hand. To take this to its reductio ad absurdam, I don’t think most people—or probably even Matt Yglesias—would want to live in a world where we all had to change jobs and move to new apartments every few weeks, even if such an arrangement would make us materially richer.

Mutations of the property form

The other thing that caught my eye was a brief remark Yglesias makes about our evolving understanding of property rights. I’ve written on this topic repeatedly in the context of intellectual property law, noting how the concept of property that forms the basis for IP is very different from the one that applies to physical property. Following the economists Michele Boldrin and David K. Levine, I emphasize the way that physical property rights are supposed to be about what you can do with property in your physical possession, while intellectual property rights entail the ability to tell other people what they can or can’t do with their copy of some general pattern or idea that you own the rights to. But as Yglesias notes, the politics of urban development suggest a related evolution in or attitude to property rights in real estate:

. . . over the past several decades, there’s been a revolution in our understanding of what property rights entail. We’ve switched from a system in which owning a piece of real estate means you’re entitled to do what you want with it, to one in which owning a piece of real estate means you get wide-ranging powers to veto activities on your neighbors’ land.

There’s evidently a formal resemblance here, but I’m not yet sure whether it reflects some deeper connection. The parallel is suggestive, however, since it was the classical economists’ treatment of property in land that gave rise to the theory of rent, which would later be applied to intellectual property. This relates to something else Mike Konczal brought up, harking back to his and my earlier speculations about the increasing importance of rentiers in a post-industrial economy.

I don’t have anything very thought out to say about this yet, but it’s interesting that both in both its landed and immaterial guises, the rentier form of property seems to give rise to this post-individualist conception of property rights. The connection, perhaps, could come from the notion of oligarchical wealth defense. Both land use regulations and intellectual property protections tend toward conserving not just one’s ability to use a plot of land or a piece of information, but to maintain its economic value.