Ask The Right Questions
While scanning through my Economics book the other day for a class, I discovered a line that has stuck in my mind since.
"…almost all economists believe that rent control adversely affects the availability and quality of housing and is a very costly way of helping the most needy members of society. Nonetheless, many city governments choose to ignore the advice of economists and place ceilings on the rents that landlords may charge their tenants."[N. Gregory Mankiw, "Principles of Economics", 2004]
On a quickly scanned run-through you might be tempted to exclaim "Ah ha! Finally, someone to blame for the plight of the homeless and the high cost of housing — It’s those damned Economists!" No, unfortunately we haven’t found our scapegoat quite yet.
There are several factors at work here we might think about:
Economics is the study of how society manages its scarce resources.
The prime motivator or driver in an economy is the Marketplace.
For those of you just joining, that would be — Corporate America.
That said; let’s look back at my quote for a minute. If we look at the answer we can work back towards what the question must have been. That seems to have been clearly "What affect would rent control have on the economy?" The economists then after developing the appropriate model and extrapolating the results came up with the statement. Apparently a resounding thumbs down.
The interesting thing about economists, or for that matter any scientist, is that when presented with a problem they will look at every nuance, ramification, and permutation until they develop a reasonable solution. If we ask an atomic physicist how many grams of plutonium it would take to blow a half-mile crater in the moon, they might study gravity, composition of the moon, temperature, etc., and come up with the number of grams. Economists would have gone through the same thought process in answering the above economic question. They are focusing on a reasonable answer to your specific question.
It occurred to me that with all the brain and think tanks we have around the world, perhaps solving the plight of the homeless shouldn’t be such a heavy task. Maybe the problem is that we as a society just aren’t asking the right questions of our scientists.
If we presented our physicist with a half mile crater and ask him what it would have taken to put it there, he probably would have given us all the other factors in addition to the number of grams of plutonium.
What if we asked our economist what we would need to do economically to solve the homeless problem?
Just some food for thought.
DB