I often hear people on the right say that the New York Times is a mediocre newspaper. This is not true, because they confuse quality with bias. The NYT is an excellent newspaper that suffers from an unfortunate bias toward left-wing views.
Someone once joked that he wasn’t a libertarian because of “roads.” I suppose I could respond that I’m a libertarian because of “elevators.” Or more precisely, elevators times a thousand.
A recent NYT article does a remarkable job of exposing the glaring inefficiency of the elevator industry in the United States. Due to an extremely complex web of counterproductive government regulations, elevators in the United States cost several times more than in Europe. It’s no surprise that America has far fewer elevators, even for a given type of building. (So it’s not just our preference for single-family homes – even our apartment buildings have far fewer elevators.)
The lesson here is not that the US is worse than Europe: it would be easy to find hundreds of examples where US energy efficiency is higher than Europe’s. The lesson here is that elevators are just one example among thousands of examples where government overregulation leads to inefficiency.
In everyday life, most people don’t think about how government regulations make their lives harder. In almost every case of systematic inefficiency I encounter, the root cause is counterproductive regulation. Free-market businesses sometimes make mistakes, but systematic problems are almost always due to bad incentives created by regulation.
The failure of most Americans to understand the role of regulation leads to a widespread misunderstanding of problems such as stagnant living standards. Ask most Americans why real wage growth has slowed since 1973, and they will cite factors such as “inflation,” “the decline of unions,” “neoliberalism,” “monopoly profits,” “the China shock,” and many other factors.
In fact, the impact of all these factors is insignificant compared to the inefficiency caused by government regulation and subsidies.
1. Health care regulations and subsidies have pushed medical spending in the US to 18% of GDP, compared to 5% in Singapore (or perhaps 9% given US demographics).
2. Government subsidies and regulations have led to dramatically inflated spending on education, which does not result in any improvement in learning.
3. Regulations have significantly increased the cost of new housing, especially in large cities and coastal states.
And yet I doubt that one in a hundred Americans cites health care regulation as a major factor in reducing real wages.
I could cite many other examples, but let’s focus on housing, because it is very important. In less regulated manufacturing sectors, such as clothing, consumer electronics, and appliances, prices tend to rise much more slowly than incomes. Housing is an exception, and given its share of consumers’ budgets, it is an important exception.
The NYT article has the merit of suggesting that the construction problems go far beyond elevators:
Beyond the elevator itself, you’ll discover a byzantine jumble of absurdities and contradictions behind the slow, inefficient, and expensive American construction industry. For example, Americans can’t use the latest heat pumps—a key tool in combating climate change by electrifying heating systems—because of the same kinds of problems. barriers imposed by U.S. regulators. Instead, Americans rely on outdated heat pumps that have no market overseas. And U.S. plumbing codes require an extensive network of vent pipes that has been deemed largely unnecessary in much of the world.
They also discuss the problem of residential zoning, and then point out that zoning reform is not enough. Regulatory barriers are particularly significant for the construction of large multifamily buildings:
Construction costs for single-family homes average around $153 per square footIn America’s most sought-after coastal cities, the cost of building multifamily housing has skyrocketed. subsidized collective housing In California, it can cost $500 per square foot (or more).
A generation of young people, aspiring homeowners and being priced out by skyrocketing property prices, has woken up to this situation. Their first target was a century of tightening land-use regulations, during which existing homeowners got rich by blocking development through restrictive zoning measures. In recent years, the rise of so-called “zoning zones” YIMBY Movement — or “yes in my backyard” succeeded in all but abolish single-family zoning on the west coast.
But as zoning codes have been liberalized, architects and developers have quickly begun to sound the alarm about the obstacles hidden in the details of building codes and standards, as well as other more technical rules.
Here’s What Most Progressives Don’t Understand. Stagnation real income is not an issue income; they concern the “real”. Ultimately, our standard of living depends on our ability to produce real yield. In the short term, workers can be helped a little by redistributing money from capital to labor. But in the long term, this will reduce capital formation and make workers worse off. The dominant factor in real wage developments is productivity. Swiss workers do not earn much more than Bangladeshi workers because of the strength of unions; they earn more because of considerably higher productivity.
What measures could improve the living standards of workers? Reduce health care costs from 18% to 9% of GDP. Drastically cut spending on education. Deregulate the housing market to dramatically reduce house prices. And there are thousands of other small reforms that could boost productivity across the economy.
Elevators may seem like a minor issue, but the elevator industry’s problems are emblematic of why real wage growth slowed after the early 1970s.
I often get frustrated with the NYT, which has a strong left lean. But in all fairness, they have published many excellent articles over the years. I would love to see someone dig up 30 or 40 NYT articles similar to the elevator story I linked to in this article. Then put them together in a book. Title the book:
New York Times’ Case for Libertarianism
