The wisdom of Arnold Kling (a Kamala Harris parable)

Here is the opener of my Bloomberg column:

One of the worst tendencies in American politics is to restrict supply and subsidize demand. (The phrase is from the economist Arnold Kling.) The likely result of such policies is high and rising prices, restricted access and often poor quality. If you limit the number of homes and apartments, for example, but give buyers subsidies, that is a formula for exorbitant prices.

That is what makes early accounts of Senator Kamala Harris’s economic plans so disappointing. There is still room for course corrections as she campaigns for president, but too much of what is being bandied about seems designed to annoy Arnold Kling.

Do read the whole thing.


When they find out she was not progressive on law and order as she claims to be?

The base of the democratic party now demands absolute purity on all things politcally fashionable. This includes criminal justice.

1 out of 5 stars. I'm all for a good politcal dismissal but I found this ranty, hingy, but not edgy. Do put in a better effort next time around and I will award a better score.

Buying votes costs money. What's a socialist to do but raise taxes, right?

No, we can pay for it with tax cuts like we paid for the Iraq war.

No, that's what bad Socialists do.

If it pisses off Arnold Kling then she's off to a good start. #populism #WeThePeople

Curing cancer with blood letting. Go populism!!!

Updated Orwell: "If you want a vision of the future, imagine a high heeled pump stamping on a human face - forever."

Refuse to kowtow to crazies. Trump 2020.

2 out of 5 stars. I like a good Orwell quote so stars are awarded here for a strong start. Conclusion is surprisingly weak and lacks good follow-through. Seriously, refusing to "kowtow to crazies" .... by kowtowing to a known crazy. Stars are lost on this rather weak point.

How about four stars for the Orwell edit and one for the "kowtow" thing?

I'm going with 3.5 stars!

1 star for a coherent point
1 star for Orwell quote
1 star for the high heeled pump paraphrase
0.5 stars for the implicit irony of the "Refuse to kowtow to crazies. Trump 2020."

If that was mean't to be ironic it should be upgraded to 5 stars.

The british and goal keepers, who knew?

I'm shocked - SHOCKED - to find out that a democratic presidential candidate has an economic plan like this. Everyone...this is my SHOCKED face....

0 out of 5 stars. Yikes, this is worse than the "progressive mob" guy. Using "dad humour" is the lowest of lows. Also, use a thesaurus. You used "SHOCKED" 3 times which bores the reader and quickly wears out the point. Will not read again.

"Will not read again."

Thank you very much.

Moot point.
We are not taking our chances with a California politician, nor a Texan. They cause enormous government volatility by making government programs work in small states the way they work in humongous states, like Florida, Texas and California. Small states to not have the intermediate bureaucracy, the Californians do not get the problem, so I think we just blanket reject any California candidacy.

N only the size mismatch, but California politicians all believe in the Venezuelan form of government, roundly rejected all around, except California. The bigger problem is all the obligations left behind in California which we cannot pay. What happens then, who will bail out the eight largest economy in the world. No one is taking a chance on that.

As a Trump skeptic, I hope you are right. But I am not so confident. The far Left sees the chance of a lifetime at the moment. As in 2016.

And hey, don't even worry, we'll pick up the tab. Think what Big Sur would be worth to a developer! Or SLO? *sob*

Interesting that Ty would trash her right out of the gate. I wonder which Dem he wants to win it all? Most likely he has a (different) woman in mind, based on this early attempt to discredit Harris. Is he really dumb enough to support the fake Indian?

I thought you of all people would go for the obvious answer, the one you've been annoying us all with these days. Hillary.

That drunk book tour lady that failed Tyler in 2016? No way he falls for that again. The wounds are too deep.

Tulsi Gabbard is definitely a Hindu. That's not a nice thing to say.

You don't have to laugh or wear your mask
meanwhile, its enough to say, to so to speak, to humor

the wry laughs with unsure wiggles and outdoor shrugs, and sinecures, and sinewaves, and getting stuck in one place and another, sometimes, for a long overdue stay.

You don't have to watch the hourglass as it goes now, away from how it once was. You can stare, just in case, and glower and gaze and rest assured the hourglass is not as discontented with you, as you might by of something else, in its entirety.

From my earlier comment on Cowen's post: Cowen's latest in Bloomberg is a criticism of Senator Harris's proposal for tax credits to renters who earn less than $100,000 per year and pay more than 30% of their income in rent and utilities. The point of his criticism is that the proposal will make matters worse (i.e., higher rents) because it will increase demand but not supply (and induce renters to seek higher priced housing). To increase supply, Cowen supports the proposal in California that would take the N out of NIMBY. Cowen is correct in his economics, but not his politics. The current tax bidding war aimed at low to moderate income taxpayers is in large part a response to the tax bidding war aimed at upper income taxpayers in the last Congress, a war that the upper income taxpayers won. Critics of Senator Harris would have more credibility if those same critics had taken a similar stand against the tax bidding war aimed at upper income taxpayers, a bidding war that bequeathed another $2 trillion in debt on future generations making it that much harder for future generations to solve other problems bequeathed to them (e.g., global warming). I suspect that the current tax bidding war aimed at low to moderate income taxpayers will be lost for the same reason all such wars are lost: there's not enough money it it for the friends of upper income taxpayers. In the meantime, what's the solution to the housing "crisis" in California? Convergence. Move. Paradoxically, solving the housing "crisis" in California is counter-productive.

This comment has a poor signal to noise ratio.

Jesus, tell me about it. Twenty lines of utter Babel. If you’re going to refute Cowen, spend some time actually refuting his claims, not go off on some inane tangent about tax wars.

Not a refutation, but an agreement with the economics, and then some long winded whatabouttery.

"The likely result of such policies is high and rising prices, restricted access and often poor quality. If you limit the number of homes and apartments, for example, but give buyers subsidies, that is a formula for exorbitant prices"

Why isn't this a "shout it from the rooftops"? Seems like a more universally accepted truism in Econ than taxes, and would probably sway a lot of policy makers. Must be the fee-fees.

See also health care and higher education.

Not just higher education.

This is pretty much what Trump is doing with the tariffs. Limiting supply and subsidizing demand.

Found the poetry major.

Tariffs are idiotic and an impeachable offense.

But it’s clearly limiting supply.

Trump's bailouts to farmers as a result of the tariffs I'm sure counts as subsidies.

This seems to be a specific application of the general principle that people tend to want to respond to problems with more government action, even when those problems are caused by government action in the first place.

For example, once restricting supply and subsidizing demand causes exploding prices, look for politicians to advocate price controls instead of repealing the supply restrictions and demand subsidies.

Someone noticed!

They used to call it Rube Goldberg after the cartoonist who created he mechanical contraptions. I am surprised economists do not study the phenomena, piling on with the price fixes and automatic adjustments and more subsidies to fix an issue with whatever the previous program was doing..

Hey now, the Ptolemaic system makes valod astronomical predictionz if you pile up enough epicycles on epicycles. Let's take an epicycle on our fixed gear bike down to the Kamala Harris fundraiser

In practice, it's also a formula for crushing the middle class, who usually don't receive said subsidies.

&2 to u
and the bloomberg column

Also, the primary thing the middle class works and saves for is to be able to afford a place away from the lower classes and their dysfunctions. It's a purely zero some contest.

But hey, we already have something like a 100% tax incidence on people earning the media income. Why not increase that up the income stream a bit more. Only when the first $100,000 of household income faces a 100% effective marginal tax incidence can we all be equal.

"You know what will fix this problem of high marginal taxes for the middle-class? More welfare programs that phase-out at middle-class incomes."

Depends on the middle class. The ones that work for oil, Wall street, medical insurance, pharma, auto industry, farmers, etc all get their subsidies and outright bailouts. Its the politically unconnected middle class that get nothing.

Is it kind of magical thinking that rent subsidies do not create demand among builders of such units?

The critical point is that we're subsidizing something we're restricting.

"One of the worst tendencies in American politics is to restrict supply and subsidize demand."

Subsidizing will create a greater supply, it's just unlikely to be a linear price adjustment in a restricted area. So, it will likely lead to even higher price inflation.

I see YIMBY accelerating right now, rather than the reverse.

Not to worry. We will make rent increases illegal. This will not harm the ability to receive housing at all: a committee will be formed to make sure rent increases are only the result of fair conditions, not artificial things like "increased demand" or "market price."

Someone could also do a riff on how vouchers, the market friendly replacement for public housing, are now off the table.

Leaving cardboard boxes on the sidewalk? Do better, Cowen.

Love the rebranding from lower case to upper case.

Unfortunately the lack of logical thought is the brand.

The government approach is restrict supply and subsidize demand.

Your objection is that subsidizing demand is “like, good.” So like, subsidizing demand is a, like libertarian policy.

Sure, compared to the government seizing land against the will of owners and building public free housing, vouchers are less horrifying. But the liberal approach is entirely to eliminate any supply increase and subsidize rent. There’s no logical train of thought.

On brand “anonymous” don’t let us down.

Here's the thing. I don't think Tyler is actually stupid enough to think that Kamala Harris, or any presidential candidate, has fine control over zoning and growth in Seattle.

So what is he up to?

Is it just a test of his ability to do internet mobs in the comment space?

Because obviously if he were writing seriously or for a better audience he would contrast Kamala Harris' plan with other levers actually available to the president or the congress.

FDR knew it was a reach when he got the "gold clause ban" legislation passed to to ensure the dollar devaluation worked in 1933.

The next President should just say "interstate commerce" and get rid of all state/local restrictive zoning.

It does bug me to do so, but there appears to be no other way to get the ball rolling.

By the way, when you use the words "The government approach" you identify yourself as exactly the audience Tyler is talking down to.

Is there any way the Washington Post and you can make an arrangement that lets you post links to WaPo articles that non-subscribers can read?


Open in incognito mode.

Unsurprising. And I’m sure her views on most other issues are as bad or worse.

It’s really an amazingly toxic set of candidates.

At least she has an interest in actually running her wing of the government, unlike Orange Shutdown.

"One of the worst tendencies in American politics is to restrict supply and subsidize demand. (The phrase is from the economist Arnold Kling.) The likely result of such policies is high and rising prices, restricted access and often poor quality."

American healthcare in a nutshell. And then people wonder why the US spends so much of its GDP on healthcare.

Check out -

Prices not really responsible for US healthcare costs, but high consumption. Increasing supply may bring down prices a little bit, though possibly at expense of quality, but won't "solve" American healthcare. (Nor is it so clear what is to be solved, if high spend driven mostly by high consumption).

Isn’t pushing up prices a feature, not a bug, from her perspective? For the same reasons that the Federal Resesrve is still supporting home prices by holding $1.6 trillion in MBS, a decade after the crisis?

Zoning and construction permits are issues of local governments. What can a president do? A new federal law that overruled the local ones?

I'm sure there's something in the commerce clause that covers it.

Yea, if that seasonal wet spot in the back 40 is subject to regulation as a “navigable waterway”, I wouldn’t count on lack of any actual legitimate authority as much of a barrier.

It seems to me that this is the crux. Different levels of government may compete with housing subsidies and growth restrictions, for that reason they are not really alternatives to each other. The two ideas are already in competition.

If you want to fault a presidential candidate for local growth restrictions, I think you damn well better show exactly how a president could change local law. Legally. Constitutionally.

And of course, points off if on other days you believe local law should supersede Federal.

Yeah, the collective wisdom of Cowen, Kling and other libertarians thwarted by how the world actually works.

@anonymous: "American politics" is a terrible simplification of "different levels of government". So, Sen. Harris proposal may increase demand, the 100K boundary seems a bit high, but there's no relation to restricting supply at all.

About Prof. Cowen disconnection of the life of most people, I chuckled at this part:

"Recall that the subsidies kick in only when rental plus utilities costs exceed 30 percent of income. And say you are a renter choosing between a place that costs 26 percent of your income and one at 33 percent. Given the available subsidy, you might opt for the bigger and better place."

It's now clear that Prof. Cowen has not used a vacuum cleaner or a mop for a long time, maybe never. Also, not worried about the electricity or heating bills, larger floor area, larger bills. Poor people have to do the cleaning themselves and worry about bills......the horror!. So, opting for the bigger and better place is not the default option when subsidies are available. Incentives matter =)

"So, opting for the bigger and better place is not the default option "

I would say the post WW2 American experience strongly indicates that bigger is the default option.

I don't see the point of pretending that Senator Harris has anything deserving of the name "economic plan".

Indeed. All the Democratic candidates are going to promise the moon to the liberal base (single payer, 70% marginal tax rate, UBI, replacing the constitution, etc.)

Yes the Reps are so different that way (repeal Obamacare, balance the budget, massive manufacturing employment gains, no more trade deficits, no more immigration)

Well you made the opposite point you were trying to. The 70% marginal tax rate alone is an order of magnitude larger than anything the Republicans were talking about.

Though if you mentioned Military spending you would have been spot on.

From the Washington post article:

"Harris, by contrast, is expected to run on both a single-payer health program projected to cost more than $30 trillion, as well as tax benefits that would significantly reduce federal revenue. Supporters say that reflects her willingness to try to use different solutions to solve big problems."

What's wrong about quoting costs with a specific time interval, and standardize that interval to one year?

"If you limit the number of homes and apartments, for example, but give buyers subsidies, that is a formula for exorbitant prices."

But the alternative, hiking taxes to pay workers to build transportation that provides access to vacant land, and also pays worker to build the complementarity assets of water, sewer, high speed fiber internet, schools, police, etc cost too much and kill jobs.

It would be ideal if legislatures declared the space 20 feet below ground public "land" with easy options to obtain easements for basements, home water wells if no public water to use this space.

Then building infrastructure would be simple to approve, merely a matter of reviewing existing basements, wells, then granting easements for very low fees, and encouraging paying lots of money to workers to build tunnels for all forms of transportation services: people, cargo, cars, trains, water, sewer, power, telecomm, ...

But people in Kling's circles oppose paying workers to work in ways that respect the rights of existing property owners. Kling justifies the government land clearance policies that created lots of high density housing in Victorian England and later in New York, Chicago, etc such as Robert Moses slum clearance to build a modern NYC, during mostly Truman and Eisenhower, projects like Cabrini Greens that provided low cost housing to Italian immiigrants and their children.

After all, existing land and property owers should not be allowed to decide the kinds of housing on their land, nor decide who can live on their land. Only by declaring existing housing slums and then seizing it so corporations can build housing for profit can housing be provided.


Or is Kling a free lunch political economist, blaming government for granting property rights which prevent corporations from making profit on land owned by individuals, and then when government takes property rights and gives land to corporations for profits, blames government for taking property from individuals for corporate profits.

Was Edith Macefield a hero to Kling, or a villain? Vera Coking? Wu Ping? Michael Forbes, the Scottish farmer? Landowners refusing to allow corporations, especially Trump, from building on their land for profit, and failing to reap huge windfall profits from selling their land. Each lost about a million dollars for their beliefs.

Tyler Cowen is correct in his column but shows the regrettable timidity of American libertarians.

The solution to tight housing market is to end property zoning.

Is this timidity? Or is discretion the better part of valor?

Absolutely. End the zoning. Theres a failing golf course in the middle of a bunch of republican mcmansions in town. It could really use a hog farm and seweage ponds instead.

Bring the popcorn

When a person uses plausible scenarios, it is always so good at winning confidence in their argument.

Well i could have said multi story low income rental housing, but what fun is that.

Still waiting for a California politician to call for the repeal of Prop. 13.

Harris' proposal seems to be aimed mainly at winning Democratic primaries, not the general election. People earning less than $100K and paying more than 30% of their income on rent generally live in urban areas in solidly blue states, not Michigan, Pennsylvania, Wisconsin, etc.

Funny how out of all these comments nobody so far has pinpointed the biggest problem in Tyler's post. It is his (and I guess Arnold's) claim that Harris is supporting policies to "restrict supply" (presumably of both housing and healthcare). I am unaware of her doing so beyond not proposing to undo existing policies that restrict such supplies. This is a misleading characterization.

As it is, I would support policies that would increase those supplies, such as something like Wilkinson's proposal on housing or Dean Baker's call to relax restrictions on immigration of foreign physicians (really on licensing them without making them do US residencies), the latter not supported by any politician of either party.

As it is on housing, all those talking about zoning policies are out to lunch as those are indeed locally controlled. Harris can be criticized for not having in the past supported relaxing those in SF and California more broadly, but, again, it does not appear that she is proposing any policies that would further restrict the supply of either housing or healthcare beyond how they are currently restricted.

Is it a given that subsiding rent will increase rents? I am not so sure.

Subsidizing rent will increase demand for rentals, because renting becomes an attractive option for more households. But what would those households have done in the absence of the tax incentive? Answer: own a house. Seems like this policy affects both the demand and supply of rentals to the market. The net effect on rental prices may come down to elasticities.

Perhaps Tyler has labor mobility in mind? Tax incentives cause people to sell their house in Atalanta and move to San Franscisco, leading to higher rents in SF and lower in Atlanta? Or else there is some kind of market imperfection?

sex shop

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