mmmurf

For renovation, it's not just stainless steel appliances, it's little things over time. In 1 or 2 years it's not really noticeable but over 5-10 years it starts to take a toll. Even the building I used to live in used a large tarp on the roof rather than fixing some leaks that would drip through the ceiling of my apartment and cause bubbles in the drywall when we had heavy rain.

In the mission, I would prefer if a subsidy was just given to the poor via tax dollars. Say it's a $200 per household subsidy. Maybe it makes sense for that family to pay it to the landlord, but maybe it makes sense to find a cheaper apartment and spend it on a TV. If it turns out that the TV was the chosen decision, that helps drive down the price of rent b/c maybe the landlord will have a slightly harder time raising rent prices. If, on the other hand, the tenant chooses to allocate the money to housing, it will help drive up housing prices. The upside of driving up housing prices is that it now becomes more worthwhile for someone to convert their house into apartments, which in turn increases supply and would tend to help keep prices affordable.

I agree that the item you mention is not a particularly strong argument, but I wanted to mention some examples of how rent control blocks a price signal that might even be useful for the beneficiary of rent control. I think it's uncontroversial that it blocks the price signal to renovate the buildings and to build new affordable housing as discussed above.

But if you agree on the major point that the social engineering geared at getting people to live/work in one place for a long time is on the wrong track, then our differences seem focused on rent control.

I should mention that in my last building in SF there was a guy who had lived there in a rent controlled apartment since the 1970s. After the first year I lived there, a letter arrived in the mail informing me that rent would increase by exactly 1.5%, the maximum increase allowed by law, and that the landlord was pushing for "utility cost pass-through", a rent-control exception that allows slightly bigger increases in cases of utility price jumps. So I was a beneficiary of rent control.

Back to the guy. His apartment had a view of the bay and golden gate bridge from every window, including the bathroom. It could probably be rented for $3500+/month because of the amazing views. He was a wealthy lawyer, arch-enemy of the landlord and heavily involved in the tenants union, and completely not in need of any help paying rent. With rent control he was probably paying under $1000/month for his apartment and had been for years. He will probably live there until the day he dies.

I'd have been far less skeptical of rent control if there had been an immigrant family living in that apartment or someone who worked at the local Walgreens.

The idea of breaking up a problem into manageable mini-steps is the essence of Getting Things Done:

http://www.davidco.com/what_is_gtd.php

Fair enough. On a slightly tangential note, I think that the idea of "uprooting from homes" is a bit of an unfortunate cliche. In reality, it is home ownership that shackles people to jobs they hate, etc. If you rent, you can move whenever you want. If you own a home, you can't move if the job market declines or you find a better offer elsewhere unless you hire a Realtor and go through a major home sale project... and if the local economy is in decline, you're probably not the only person trying to sell your house and so you may end up selling it at a big loss (as was the case in post-industrial Flint, Michigan).

I realize that landlords have been vilified in the past, but who is really benefited by suppressing the mobility of the population? It's businesses (whose workers can't leave), it's politicians (who don't have to worry as much about people packing up and leaving in response to bad policies, corruption, etc.), and it's banks -- most people pay at least the value of their home in mortgage interest, and are effectively enslaved to the bank, an unrelenting landlord who can inflict the equivalent of modern-day debtors prison in the form of foreclosure credit destruction and confiscation of any equity earned since purchase.

How many people are tremendously afraid of losing their job because they might lose their house (their biggest investment)? How many people put up with unfulfilling, soul-sucking work just to make that house payment?

Consider how this has all changed -- how many more debt slaves were created -- when the housing market tanked. Home ownership is not the American dream, nor is being part of a community for the long term, nor is having the same job for 30 years and then retiring with a gold watch and a pension.

True freedom is in being able to take a better offer and being able to reinvent one's self whenever one wants. But our entire financial system, it seems, was based on the idea of encouraging long-term debt (mortgages) and the stasis that accompanies it.

So I think the ideal that you are striving for with not uprooting people from their rental apartments is not only illusory but destructive. Price changes contain information, and preventing price changes simply hides information, keeps people in the dark, etc.

Maybe being uprooted will (metaphorically) allow the plant to catch flight and land somewhere better... Maybe rental real-estate prices are so high because tons of rich people are moving in and they all plan on sending their kids to private school, leading to the destruction of the public schools -- this is the case in SF where most people with money would never send their kids to SF public schools even though it costs $2K/month to rent a dumpy 1BR apartment and so objectively it's a "rich" area.

Do you happen to have a list of these?

Only unprofitable if you decide that everyone deserves the latest, greatest, cutting-edge medical care.

Healthcare prices have come way down in the past two decades, the issue is that nobody wants 1990 level care, which could be administered at a fraction of the price of delivering all of the latest advancements.

The "healthcare costs are rising" meme is false. It's like saying "the price of supercomputers is rising". In non-inflation-adjusted dollars, the top-end supercomputer from IBM costs more than the top-end supercomputer from IBM cost 10 years ago, but the price per unit of computation has gone way down.

Healthcare prices have done the same thing, but everyone wants the best possible at all times.

(I want this too, but at least I try to appreciate that what I'm getting today is significantly better than 10 years ago)

I have no problem with a program designed to subsidize housing for people with tax dollars. If the democracy decides that people with attributes x, y, and z deserve a $2000/month housing subsidy, that's fine. It's no different than the subsidy given to mortgage debtors (tax breaks), parents (the child tax credit), electric car owners (tax credit), student loan debtors (student loan interest deduction), farmers (direct subsidy), etc., etc.

But consider how paternalistic any of these programs are compared to simply giving the person cash to spend on whatever he/she wants.

Also, the above programs are taxpayer subsidized so the burden is distributed across all taxpayers. Rent control, on the other hand, screws over the building owners only, effectively making a single building owner personally provide a $1000+ subsidy to a hundreds of people. Compared to a broad, taxpayer-subsidized program, this is equivalent to a 70% additional tax just on landlords, this is on top of that person's fair share of income and payroll tax already being paid!

The biggest problem, though, is the distortion caused by rent control... which causes all of the problems in my above post.

To make obvious the issue of price controls leading to shortages, consider this: During the 1970s when Nixon instituted price controls on gas at the pump, there were massive lines outside gas stations. This was not due to the "evil Arabs" withholding gas. It was due to the price controls: People who would have decided to carpool or walk if the price had been at market price decided to buy gas at Nixon's price. This led to huge lines.

What would an actual libertarian position be? How would it be argued? What regulation (and what bailout(s)) would it favor?

The point is that rent control (over time) drives up the price of rental dwellings, a phenomenon which greatly harms the poor. Here's why:

In many cities, new buildings are exempt from rent control if they are "luxury" buildings. So the supply of luxury housing increases. Meanwhile, the incentive to build non-luxury buildings is greatly diminished b/c those buildings fall under mandatory rent control. Also, there is a bigger incentive to turn buildings into condos, etc., to avoid having to deal with rent control. Not sure where you heard that new properties are exempt in most cases. This may be due to the fact that most are luxury buildings.

So there is a finite amount of rent-controlled housing, and since it's such a great deal, the landlords have little incentive to improve the fixtures, furnishings, etc. They will rent the place without improvements, so there is no reason to spend the money on them. Thus the places deteriorate over time and begin to become more and more slumlike.

Rent control also encourages over-consumption of housing space. My 3br apt example above explains one example.

Without rent control, supply and demand can function properly. Maybe this means that cheaper housing is located a bit further from the highest rent area of a city. More likely, if there is demand for cheaper housing, someone will figure out a way to build it. The huge number of condemned buildings in major cities is evidence of the resources that have been completely wasted b/c nobody had the incentive to improve the places enough to make them liveable!

If you rent, it's not a permanent home. This has many advantages -- if you get laid off you can easily move with a month's notice. You don't have to worry about long term upkeep, you don't have to worry about hiring a realtor or trying to recoup your investment if the market dips. The other side of the coin is that sometimes prices change to reflect other realities. An increasing price probably means that the area is thriving and (surprise) the space is actually worth more. Once you get into declaring that things should be priced by public officials rather than based on the market price (what they are actually worth to someone else who's willing to pay for them) you are stepping onto a very slippery slope.

True. I don't think anyone would object to helping the 1% of people who are actually in that category. The problem is that interest groups hijack the programs in order to win handouts for those who don't really need the programs.

Do you think people should be allowed to smoke? Should they be allowed to eat Doritos? Should they be allowed to skydive?

How does opposing the automotive bailout and the financial bailout constitute being a shill for big business? I'd say it's quite the opposite!

Immigration: I don't think you really disagree with Cato. Arguing that immigration restrictions should be eliminated does not necessarily entail that one believes the restrictions should be lifted all at once.

Rent Control: Rent control causes higher prices for everyone except those who happen to have a rent-controlled apartment, because it discourages improvement of existing properties and discourages building new properties. It also encourages over-buying. Someone may pay $2000/month for a 3 bedroom apartment that has been rent controlled since the 1970s, but only use 1 of the bedrooms. That person could find a 1BR apartment within budget w/o rent control, and someone (maybe 3 room-mates paying $1500 each) could share the 3BR place. Overall this is a more efficient distribution of resources, the benefit of which occurs immediately. I don't really feel sorry for someone getting a huge apartment for way below market price.

Interest Rates: I'm not sure I understand what you mean, since interest rates vary based on unpredictable Fed action and unpredictable market forces all the time. Banks (lenders) hedge against this by buying/selling instruments to even out their Fed risk and by buying insurance to hedge against many of the other risks.

American Auto Industry: What makes you think there would be a chaotic "all at once" situation? That is part of the fearmongering on the part of the firms seeking rents (and the politicians they have bought). Recall how Dubya told everyone that if the US didn't invade Iraq there was an "imminent threat to US national security"? The automakers used that exact strategy to obtain a bailout.

Stability is an interesting concept. It's the essence of "conservatism", wanting to preserve the status quo. Marx warned about this in his manifesto. Anyone who has managed to get a leg up will fight to preserve it at the expense of productive change.

In today's world, this includes the people who thought they were investment geniuses because the value of their home increased 40% the year after they bought it, it includes the overpaid workers who convince themselves that a hard working person immigrating to the US is somehow unamerican, it also includes the politicians who enjoy the huge donations they have been getting from the financial services industry and don't want to see endangered.

So if you put aside the "I want to keep my small advantage at all cost" conservatism, and you do away with the Bush-style fearmongering about imminent threats to "stability", what you find is that the world really isn't all that scary, and often times the meddling that is done to try to prevent "instability" actually does far more harm than good. The Iraq war is a case in point.

Note that "stability in the middle east" is the motto of those who want to go and turn it upside down with bombs and nation building! The same applies to domestic policy.

Examples of how Cato has been discredited?

Roads are about 1% of all taxes... Your tax dollars are paying for a massive war and a massive bailout.

That's a superb analogy :) Zed's a great hacker, but he seems to thrive on bitchy rants. He also seems to relish personal grudges, etc. I think it's entertaining and usually read his rants with a smile, though this seems to be his most immature yet.

So the only reason small companies succeed is because Uncle Sam prevents them from being gobbled up by cruel larger firms who want to pay their founders lots of money? Hmm...

Don't underestimate the entrepreneurial spirit that is going on in China.

It's just political propaganda that China is oppressive and thwarts entrepreneurship. Sure there are some problems, but China's human rights issues are about on par with Gitmo.

No I'm sure it came about because of a tax increase!

(if taxes don't matter to investment decisions, then why not raise them to 99%?)

If you believe current taxes are right at the "sweet spot", why do you believe that?

The purpose of mark-to-market exceptions are to allow temporary price volatility not to drastically impact a firm's balance sheet. The FASB rule specifies that it's an acceptable practice to suspend mark-to-market in "fire sale" conditions.

But the real issue is the flawed risk ratings on the MBSs. If your asset is AAA then it really shouldn't matter whether you are marking it to market or not, as it's supposed to be quite liquid, by definition, as there is supposed to be extremely little risk that its price will fall.

The reason the MBSs weren't liquid is because the ratings were incorrect and the market knew that -- perverse incentives from ratings agencies had led to this, as had the widespread belief (taken as an assumption by many foolish risk-managers and codified into pricing formulae) that housing prices could not fall.

If the MBSs had been properly rated, then mark-to-market would not have caused the firms holding them on their books to become insolvent, as capital adequacy requirements are based on the riskiness of the assets.

So while mark-to-market may have sped up the failure of those firms, the firms were already weakened due to their treatment (thanks to bad ratings) of risky debt as AAA.

In fact, a few months before things got really bad the SEC sent out a memo advising that the fire-sale provisions of the FASB rule regarding mark-to-market were not to be used, a decision which suggests either that the SEC was OK with some firms failing in the near future (unlikely) or that it believed that the ratings were generally accurate (even more unlikely). I've been told by some Wall Street experts that everybody knew that the ratings were BS. Hence the SEC's decision to send the memo was probably just intended not to telegraph the possibility of a future problem to avoid spooking the market in hopes that the problem would go away.

A few things to note: The regulatory trend is moving toward BASEL II which relies heavily on both mark-to-market accounting and third party ratings agency ratings. So the big regulatory question is, how can the perverse incentives that arose and led to the inaccurate ratings of MBSs be restrained? So far everyone is talking about banning the trading of x, y, and z and of limiting bonus pay, executive salaries, etc., but nobody is talking about the actual concrete perverse incentives (pressure on ratings firms to issue inaccurate ratings) that fed the whole mess.

So true.

I'm still waiting for aggregation of update messages so that I can follow way more stuff, but github is one of my favorite sites on the net already...

This hasn't been true for me at all. For me, leaving my 20s has been a great motivator to try/do all kinds of new and different things.

He's right. Derivatives are nothing but mathematical relationships between other things. If those other things have prices, then the derivative has a price in relation to them.

Derivatives are useful when you want to design an instrument with specific risk/return characteristics.

In the case of the derivatives that everyone is blaming for the financial crisis, they were considered low risk. But only because everyone thought that housing prices would not dip more than a few percent.

There is nothing "riskier" about such a derivative than there is about someone buying a house, also thinking that housing prices wouldn't dip more than a few percent, yet nobody is suggesting that home purchases be banned.

There is also the issue of flawed ratings given by Moody's, which resulted in derivatives whose risks were not accurately calculated and thus not accurately priced.

tremendously

I agree. I can never really get into IRC as there are always three condescending comments to every helpful one and it's like a high school clique with password protected rooms and inside jokes.

I also agree about HN, it seems to have managed to avoid a lot of that.

Very interesting, thanks!

I would imagine that someone could also sign up for PayPal's merchant processing account and just use the virtual terminal in the iPhone browser.

PayPal also typically approves small merchants for much higher limits than authorize.net resellers.

What would be cool is if you could capture the buyer's signature via the touch screen and snap a digital photo of the back of the card and have it store that stuff somewhere along with the transaction ID.

(such as hellocreature.com) :)

True, that and the fact that it takes a while before ISPs begin to trust your IP addresses, so if you need delivery to occur right away it's good to go with someone whose IPs have established trust.

I should also add that we use separate IPs for one-off emails that are not really bulk email (such as signup confirmations, emails you send via our API). This is hugely important for deliverability.