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Yep. Markets build in response to incentives. Most American production choices are determined by markets, including the choices of investors allocating capital

Yep. Markets build in response to incentives. Most American production choices are determined by markets, including the choices of investors allocating capital. Public institutions build and manage in response to electoral incentives. If we're not prepared, it's because the incentives are wrong. On the market front, once incentives and maybe even insights become opaque at the level of the abstraction of return on investment -- especially on a horizon within which a generation can live and die w/o experiencing a risk event like a pandemic -- then investors will be essentially blind to this. On the public front, we have at least one political movement in the US that generally stands on the idea that government shouldn't do things like this for the common welfare. That movement is a minority, but knows how to use countermajoritarian features of the US political system to maintain control and is determined to do so (demonstrably well past limits of defensible public stewardship at this point). That leaves philanthropy, which is helpful, but often scales poorly and is distributed first by proximity to various privileges on the social graph. And maybe some degree of private capacity to re-think incentives and how long-term value could be structured into short-term incentives in private markets. If anyone is in a position to do the last two, it's someone like Marc, so it's weird to read this as someone who's in a position nothing like his. Perhaps I'm not the audience. Perhaps others in his wealth class and investor circle are.

darawk 7y ago
> Markets build in response to incentives. Most American production choices are determined by markets, including the choices of investors allocating capital. This leaves out the most important problem though: regulatory capture and bureaucratic gridlock. Markets would love to build more housing. But they're prevented from doing so by the regulatory state. Markets would love to build nuclear power plants, but they're prevented from doing so by the regulatory state. Which ultimately comes back to the democratic question of will. We need to elect people who will alter the regulatory state to make way for these things.
- fcarraldo 7y ago
  > Markets would love to build more housing. But they're prevented from doing so by the regulatory state. I'm not certain this is a problem outside of the Bay area.
  - darawk 7y ago
    It's a problem in most major urban centers. I live in Los Angeles, and it's certainly a problem here.
  - lookdangerous 7y ago
    My understanding is the cost of construction has risen dramatically in recent decades, in proportion to an explosion of construction regulation.
    - KirinDave 7y ago
      Are there specific building codes you disagree with?
      - lookdangerous 7y ago
        I have heard people complain that building a house is N times more difficult today than 20 years ago, and as someone who wishes to build a house in the future, these complaints worry me. Perhaps there is no need for worry over second hand mutterings, though. I will see what the situation is like when I actually start building. It seems that usually the legal burden of compliance and regulation forms an efficient service sector that is able to meet it– but in a sort of roundabout way I question the very need for this compliance sector. Thank God for fire safety and non-toxic building materials, but some law is absurd, and represents a process for process' sake when you look at its effect.
      - seibelj 7y ago
        Lot size minimums, frontage, restrictions on height, and on and on...
        7y ago
- KirinDave 7y ago
  > Markets would love to build more housing... But they're prevented from doing so by the regulatory state Interesting claim. Do you want to detail this more? Most of my experience is not with the State itself being an obstacle, but as a tool in the hands of landlords and capitalists to help enforce scarcity.
  - eli_gottlieb 7y ago
    Yeah, there's really very little difference between "the State(TM)" at a city council level and the local property owners as a class, and a class that is overrepresented in electoral participation.
  - darawk 7y ago
    > Interesting claim. Do you want to detail this more? Most of my experience is not with the State itself being an obstacle, but as a tool in the hands of landlords and capitalists to help enforce scarcity. I'm not even sure I really understand your question. Rents in San Francisco are extremely high. What that means is that if you build a new apartment building there you can charge a lot of money for your apartments. Therefore, any halfway intelligent capitalist understands it's a great idea to build apartment buildings in San Francisco. The only reason they are not doing this is that the local zoning laws prevent them from doing so.
    - lnsru 7y ago
      I’m in Munich with skyrocketing prices. And you are wrong about your halfway intelligent capitalist. You see, doing nothing will end in more money earned anyway while doing nothing. So halfway intelligent capitalist can build couple hotels elsewhere. If this halfway intelligent capitalist builds apartment building, it will generate more rent from the new building, but less in total. That is not good for him and he will not build. And zoning laws is an argument to cover ugly truth.
      - darawk 7y ago
        That's not how anything works. You would be right if one person owned the entire city. But that isn't the case. The equilibrium of independent competing actors is for them to build. Yes, if they all colluded together and agreed not to build, they might be able to extract more money (actually they wouldn't in the medium and long term, maybe in the short term). But you'd have to be a complete fool to think that sort of collusion is possible at the scale that would be required. What you do have are developers pressuring regulators to restrict competition. That is a real thing, and it's called regulatory capture. But that is exactly what I said needs to be fixed.
- wwweston 7y ago
  Sure, policy matters. It's important to have people in public leadership who understand it and can work on tuning it to avoid or eliminate unintended consequences. But complaining about either regulation or bureaucracy at a general level is the policy equivalent of approaching software by making general complaints about how terrible existing code is: sure, some of it is probably sub-optimal and should be rewritten, but anyone who's worked in the field for a while knows that the sweep-it-away/ground-up-rewrite impulse is more often wrong than applying Chesterton's fence (make sure you understand why it's there), profiling, and examine potential alternatives against studied outcomes. > Markets would love to build more housing. Sure. And would love to chase the wealthiest end of demand and externalize costs of community displacement or ecological impact. > Markets would love to build nuclear power plants And would love to externalize the costs of risk and waste management. Note that these are not arguments against building more housing or nuclear power. There are many metro areas that do need to build housing. Nuclear power has its merits as well as hazards. They're arguments about specific incentives absent intentional oversight, supporting the general case that it is often irresponsible to believe or advocate that incentives tend towards optimal on their own, and that the primary problem is oversight itself.
  - darawk 7y ago
    > But complaining about either regulation or bureaucracy at a general level is the policy equivalent of approaching software by making general complaints about how terrible existing code is: sure, some of it is probably sub-optimal and should be rewritten, but anyone who's worked in the field for a while knows that the sweep-it-away/ground-up-rewrite impulse is more often wrong than applying Chesterton's fence (make sure you understand why it's there), profiling, and examine potential alternatives against studied outcomes. This is sometimes true, but it certainly isn't always true. Housing policy, for instance, is largely driven by putting the interests of local property owners over those of new entrants and the broader economy. > Sure. And would love to chase the wealthiest end of demand and externalize costs of community displacement or ecological impact. Price the externalities. It's as simple as that. Nobody needs to externalize anything. Housing is plenty worth building to developers even if they fully internalize the ecological impact. And let's not neglect the ecological impact of long commutes when running this calculation. > And would love to externalize the costs of risk and waste management. Of course they'd like to do that. Everyone would like to externalize their costs and risks. The job of government is to let people do things, but force them to internalize the costs. You aren't making an argument against anything I said. > They're arguments about specific incentives absent intentional oversight, supporting the general case that it is often irresponsible to believe or advocate that incentives tend towards optimal on their own, and that the primary problem is oversight itself. Oversight is fine. Kafkaesque bureacracy and cost disease are not. The present state of our regulatory apparatus is abysmal. That isn't an argument for eliminating it, it's an argument for making it better.
- gammarator 7y ago
  Blaming the "regulatory state" for the lack of housing misses the point. Andreeson lives in Atherton, CA, population 7000--not exactly Big Government. Is he pushing the city council to upzone Atherton and allow higher density housing? It would be profitable!
  - darawk 7y ago
    Property developers would be building apartments in Atherton if they were allowed to. It is regulation that prevents it. It is local property owners electing city council members that creates the regulation.
- licebmi__at__ 7y ago
  >Markets would love to build nuclear power plants Sadly, markets would love to build nuclear power plants without paying the external costs, but I pretty much doubt the markets would like to pay all the costs associated with nuclear production. And BTW, I say this in full support for nuclear power, in fact, I think that carbon, gas and oil are so cheap because they markets avoid paying the external costs that nuclear might be the better alternative. But this is because the markets are not great on accounting for this costs that are passed to society as a whole.
- jkachmar 7y ago
  > Markets would love to build more housing. But they're prevented from doing so by the regulatory state. Markets would love to build nuclear power plants, but they're prevented from doing so by the regulatory state. I don’t like it when people anthropomorphize concepts like economic markets, but I _especially_ don’t like it when they do this to make it seem like the anthropomorphization should be a sympathetic character to the reader. Like one of the GPs said, above: the market is something that responds to incentives. Regulation and bureaucracy shape those incentives, sometimes in the ways that you’re describing, but the market is just as “happy” to capitalize on bad housing regulation as it is to capitalize on a lack of any housing regulation at all. The problem of constructing just the right amount of regulatory apparatus is very difficult, though.
  - darawk 7y ago
    > I don’t like it when people anthropomorphize concepts like economic markets, but I _especially_ don’t like it when they do this to make it seem like the anthropomorphization should be a sympathetic character to the reader. > Like one of the GPs said, above: the market is something that responds to incentives. What's your point? The incentives are aligned to build more housing. That's what high prices do, they incentivize supply. > Regulation and bureaucracy shape those incentives, sometimes in the ways that you’re describing, but the market is just as “happy” to capitalize on bad housing regulation as it is to capitalize on a lack of any housing regulation at all. So? A) The point your making is irrelevant to mine. The fact that markets will exploit poor regulation is really neither here nor there. B) The solution to the problem you pose is, just like what I said, better regulation.

darawk 7y ago

> Markets build in response to incentives. Most American production choices are determined by markets, including the choices of investors allocating capital. This leaves out the most important problem though: regulatory capture and bureaucratic gridlock. Markets would love to build more housing. But they're prevented from doing so by the regulatory state. Markets would love to build nuclear power plants, but they're prevented from doing so by the regulatory state. Which ultimately comes back to the democratic question of will. We need to elect people who will alter the regulatory state to make way for these things.

fcarraldo 7y ago
> Markets would love to build more housing. But they're prevented from doing so by the regulatory state. I'm not certain this is a problem outside of the Bay area.
- darawk 7y ago
  It's a problem in most major urban centers. I live in Los Angeles, and it's certainly a problem here.
- lookdangerous 7y ago
  My understanding is the cost of construction has risen dramatically in recent decades, in proportion to an explosion of construction regulation.
  - KirinDave 7y ago
    Are there specific building codes you disagree with?
    - lookdangerous 7y ago
      I have heard people complain that building a house is N times more difficult today than 20 years ago, and as someone who wishes to build a house in the future, these complaints worry me. Perhaps there is no need for worry over second hand mutterings, though. I will see what the situation is like when I actually start building. It seems that usually the legal burden of compliance and regulation forms an efficient service sector that is able to meet it– but in a sort of roundabout way I question the very need for this compliance sector. Thank God for fire safety and non-toxic building materials, but some law is absurd, and represents a process for process' sake when you look at its effect.
    - seibelj 7y ago
      Lot size minimums, frontage, restrictions on height, and on and on...
      - 7y ago
KirinDave 7y ago
> Markets would love to build more housing... But they're prevented from doing so by the regulatory state Interesting claim. Do you want to detail this more? Most of my experience is not with the State itself being an obstacle, but as a tool in the hands of landlords and capitalists to help enforce scarcity.
- eli_gottlieb 7y ago
  Yeah, there's really very little difference between "the State(TM)" at a city council level and the local property owners as a class, and a class that is overrepresented in electoral participation.
- darawk 7y ago
  > Interesting claim. Do you want to detail this more? Most of my experience is not with the State itself being an obstacle, but as a tool in the hands of landlords and capitalists to help enforce scarcity. I'm not even sure I really understand your question. Rents in San Francisco are extremely high. What that means is that if you build a new apartment building there you can charge a lot of money for your apartments. Therefore, any halfway intelligent capitalist understands it's a great idea to build apartment buildings in San Francisco. The only reason they are not doing this is that the local zoning laws prevent them from doing so.
  - lnsru 7y ago
    I’m in Munich with skyrocketing prices. And you are wrong about your halfway intelligent capitalist. You see, doing nothing will end in more money earned anyway while doing nothing. So halfway intelligent capitalist can build couple hotels elsewhere. If this halfway intelligent capitalist builds apartment building, it will generate more rent from the new building, but less in total. That is not good for him and he will not build. And zoning laws is an argument to cover ugly truth.
    - darawk 7y ago
      That's not how anything works. You would be right if one person owned the entire city. But that isn't the case. The equilibrium of independent competing actors is for them to build. Yes, if they all colluded together and agreed not to build, they might be able to extract more money (actually they wouldn't in the medium and long term, maybe in the short term). But you'd have to be a complete fool to think that sort of collusion is possible at the scale that would be required. What you do have are developers pressuring regulators to restrict competition. That is a real thing, and it's called regulatory capture. But that is exactly what I said needs to be fixed.
wwweston 7y ago
Sure, policy matters. It's important to have people in public leadership who understand it and can work on tuning it to avoid or eliminate unintended consequences. But complaining about either regulation or bureaucracy at a general level is the policy equivalent of approaching software by making general complaints about how terrible existing code is: sure, some of it is probably sub-optimal and should be rewritten, but anyone who's worked in the field for a while knows that the sweep-it-away/ground-up-rewrite impulse is more often wrong than applying Chesterton's fence (make sure you understand why it's there), profiling, and examine potential alternatives against studied outcomes. > Markets would love to build more housing. Sure. And would love to chase the wealthiest end of demand and externalize costs of community displacement or ecological impact. > Markets would love to build nuclear power plants And would love to externalize the costs of risk and waste management. Note that these are not arguments against building more housing or nuclear power. There are many metro areas that do need to build housing. Nuclear power has its merits as well as hazards. They're arguments about specific incentives absent intentional oversight, supporting the general case that it is often irresponsible to believe or advocate that incentives tend towards optimal on their own, and that the primary problem is oversight itself.
- darawk 7y ago
  > But complaining about either regulation or bureaucracy at a general level is the policy equivalent of approaching software by making general complaints about how terrible existing code is: sure, some of it is probably sub-optimal and should be rewritten, but anyone who's worked in the field for a while knows that the sweep-it-away/ground-up-rewrite impulse is more often wrong than applying Chesterton's fence (make sure you understand why it's there), profiling, and examine potential alternatives against studied outcomes. This is sometimes true, but it certainly isn't always true. Housing policy, for instance, is largely driven by putting the interests of local property owners over those of new entrants and the broader economy. > Sure. And would love to chase the wealthiest end of demand and externalize costs of community displacement or ecological impact. Price the externalities. It's as simple as that. Nobody needs to externalize anything. Housing is plenty worth building to developers even if they fully internalize the ecological impact. And let's not neglect the ecological impact of long commutes when running this calculation. > And would love to externalize the costs of risk and waste management. Of course they'd like to do that. Everyone would like to externalize their costs and risks. The job of government is to let people do things, but force them to internalize the costs. You aren't making an argument against anything I said. > They're arguments about specific incentives absent intentional oversight, supporting the general case that it is often irresponsible to believe or advocate that incentives tend towards optimal on their own, and that the primary problem is oversight itself. Oversight is fine. Kafkaesque bureacracy and cost disease are not. The present state of our regulatory apparatus is abysmal. That isn't an argument for eliminating it, it's an argument for making it better.
gammarator 7y ago
Blaming the "regulatory state" for the lack of housing misses the point. Andreeson lives in Atherton, CA, population 7000--not exactly Big Government. Is he pushing the city council to upzone Atherton and allow higher density housing? It would be profitable!
- darawk 7y ago
  Property developers would be building apartments in Atherton if they were allowed to. It is regulation that prevents it. It is local property owners electing city council members that creates the regulation.
licebmi__at__ 7y ago
>Markets would love to build nuclear power plants Sadly, markets would love to build nuclear power plants without paying the external costs, but I pretty much doubt the markets would like to pay all the costs associated with nuclear production. And BTW, I say this in full support for nuclear power, in fact, I think that carbon, gas and oil are so cheap because they markets avoid paying the external costs that nuclear might be the better alternative. But this is because the markets are not great on accounting for this costs that are passed to society as a whole.
jkachmar 7y ago
> Markets would love to build more housing. But they're prevented from doing so by the regulatory state. Markets would love to build nuclear power plants, but they're prevented from doing so by the regulatory state. I don’t like it when people anthropomorphize concepts like economic markets, but I _especially_ don’t like it when they do this to make it seem like the anthropomorphization should be a sympathetic character to the reader. Like one of the GPs said, above: the market is something that responds to incentives. Regulation and bureaucracy shape those incentives, sometimes in the ways that you’re describing, but the market is just as “happy” to capitalize on bad housing regulation as it is to capitalize on a lack of any housing regulation at all. The problem of constructing just the right amount of regulatory apparatus is very difficult, though.
- darawk 7y ago
  > I don’t like it when people anthropomorphize concepts like economic markets, but I _especially_ don’t like it when they do this to make it seem like the anthropomorphization should be a sympathetic character to the reader. > Like one of the GPs said, above: the market is something that responds to incentives. What's your point? The incentives are aligned to build more housing. That's what high prices do, they incentivize supply. > Regulation and bureaucracy shape those incentives, sometimes in the ways that you’re describing, but the market is just as “happy” to capitalize on bad housing regulation as it is to capitalize on a lack of any housing regulation at all. So? A) The point your making is irrelevant to mine. The fact that markets will exploit poor regulation is really neither here nor there. B) The solution to the problem you pose is, just like what I said, better regulation.