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You're right in one sense -- all government (in)actions should be considered, not an "interference" per se, but a choice made with at least some understanding o
by xapata 10y ago
You're right in one sense -- all government (in)actions should be considered, not an "interference" per se, but a choice made with at least some understanding of the consequences on society.
As for the problem of interfering with the market... One issue is that a well-functioning market depends on the idea that price captures all information. This is central to the idea of the "invisible hand" guiding individuals to arrive at the correct level of supply to optimally satisfy demand. When government actions set prices, the market participants no longer receive the correct information. In turn, the market will arrive either at too much supply (and waste) or too little supply (and unsatisfied demand).
In the case of housing, the government usually takes action to set prices for some homes lower than what market forces would arrive at. Therefore, the market will under-supply and some folks who want housing will not have it. The answer is to either allow prices to move without intervention or for the government to subsidize the supply of housing.
- tbihl 10y agoI agree with you on all the theory, but I'd add that if you take the subsidy option, you'll forever have to clamp down harder and harder as the effects of the distortions amplify. I'm actually open to the idea that the government option could work; I just find it entirely antithetical to the ethos of the US.
- Terr_ 10y agoRight, and there are also other externalities the government "captures" and turns into inputs for homo economicus. For example, the "cost" of dumping toxins in a river, or assassinating a competitor's CEO.