Charter schools sadly remain a niche product, so pushing for their expansion—and for greater school-choice options more broadly—is necessary. Another alternative that could open up new education opportunities would be vocational training that bypasses the school system entirely. Washington could pay for programs inculcating marketable skills—from plumbing to computer programming. These programs could be competitively sourced, meaning that labor unions and community colleges and for-profit entrepreneurs could compete to offer them. But providers would get paid only if students learned real skills.
…The Social Security system should also be made friendlier to the young. The payroll taxes that fund Social Security could be eliminated for those under 30 and phased in later in life. Younger workers and their employers would initially pay nothing into the system. That shift would eliminate a large tax-related barrier to hiring the young and make it more financially attractive for young people to work. That reform would reduce revenues, true; but raising the age of retirement could offset the lost funds.
. . .The best way to preserve our vital small-business ecosystem is not to throw money at every struggling business but instead to make it as easy as possible for new businesses to open after the pandemic has passed.
If a state isn’t allowing any construction in high-demand areas, shouldn’t the federal government reduce its infrastructure support? Use money to nudge states—and let states nudge communities.
Yes, we know that these are all non-starters politically. But if we’re going to indulge in fantasies, they may as well be good ones.
It was only in 1926 that the Supreme Court upheld property zoning in a split decision, with one of the “justices” gratuitously asserting apartment buildings should not parasitically intrude on his single-family detached neighborhood.
Could this decision be reversed?
Why not phase out the Department of Agriculture? Labor, HUD? Education?
Eliminate the VA, give exit bonuses.
Could colleges go to four-year undergrad business and law schools, and dispense with the graduate programs?
Yes, pie in the sky….
Bill deBlasio recently declared that the mission of the NYC public schools is “wealth redistribution.” I wish that he meant to equip students to thrive in a capitalist economy. But it will accomplish moving more high-earning families to other states.
If we’re going to indulge in fantasies, let’s treat Social Security like the welfare program that it is, and stop its regressive and employment-deterring tax system.
1) Re: education:
The key is to separate taxpayer finance and educational production (‘human capital formation’) with a radical voucher system. Experiment with vouchers valid across schools, apprenticeships, internships (work exposure) — any program, public or private, any size, that will prepare youths for either the labor market or credible higher education.
Glaeser wisely emphasizes outcome-based finance.
Bryan Caplan argues that the key is to reduce subsidies (taxpayer funding) — starve the beast. However, I conjecture that experimentation with systematic choice (radical vouchers), at current subsidy levels, would be more politically feasible. A more flexible, open version of Milton Friedman’s approach.
2) Re: zoning (obstacles to construction):
Robert C. Ellickson has a major new empirical research project about property law and residential mobility. The project is organized around case studies of Silicon Valley, greater Austin TX, and greater New Haven CT. He has posted several working papers from his project at SSRN — sort by ‘date posted, descending’ to find these papers at the link below:
https://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=102257
The gist of Ellickson’s preliminary findings and policy ideas:
a) Covenants that generate value when enacted, turn into major drags over time.
“Lawmakers should recognize that covenants commonly have value while in their teens, but not in their dotage.” (Stale Real-Estate Covenants)
b) Zoning is a straight-jacket, but can be disrupted by creation of new transit nodes.
“[…] local zoning politics typically freezes land uses in an established neighborhood of detached houses. […] The Article marshals a variety of evidence to prove that the zoning strait-jacket exists. It also discusses possible exceptions to it. The most plausible is proximity to a newly opened transit node, an event that may transform zoning outcomes, even in a neighborhood of houses.” (The Zoning Straight-Jacket)
c) Municipal zoning bites deeply. Federal Government initiatives would backfire, but States might have suitable incentives and levers to reduce zoning harms.
“Municipal zoning, shockingly, may be the most consequential regulatory program in the United States. The Article develops metrics for measuring the extent to which a locality’s zoning practices are exclusionary, that is, limit the possible construction of least-cost housing. It applies the metrics to actual zoning ordinances and zoning maps, materials that legal scholars have seldom closely appraised. [… .] Federal initiatives would be risky because mistakes, if made, would be national in scope. Many Beltway lobbyists likely would urge Congress to enact massively wasteful policies, such as a National Housing Trust Fund or mandatory inclusionary zoning. […] In 1922, Herbert Hoover, a Stanford graduate and then Secretary of Commerce, appointed an Advisory Committee on Zoning. The Committee quickly published a Zoning Primer, and in 1924 issued the Standard State Zoning Enabling Act. Hoover’s support helped fuel the spread of zoning in the United States. The Committee’s work was based on a potentially sound premise: the risk that unregulated real estate markets produce too many nuisance-like land uses. Since the 1920s, however, many local governments have learned to use zoning powers to inflict new negative externalities. Silicon Valley localities do this, for instance, when they limit the housing opportunities of non-residents, and prevent their metropolitan area from enjoying the many benefits of greater density. It is time for state legislators to take notice. […] To counter neighborhood NIMBYism, state legislatures should either preempt local discretion over what can be built, or reward localities that allow denser housing.” (Zoning and the Cost of Housing)
2. Why the obsession with greater density? Urban growth borders, mostly imposed at the state level, are a major factor in limiting housing construction, could be eliminated without eliminating local zoning, and housing would replace farms. You can have more housing without higher density. We never hear about doing away with the green belt norm though. And why can’t cities that want high density simply condemn and take the property that they want to be rezoned at higher density, and then contract for high density housing? At least the original homeowners would be compensated for their loss. The anti-zones seem trapped in a moralistic loop and won’t be happy until homeowners are punished for the sin of wanting safe and pleasant neighborhoods.
> Urban growth borders, mostly imposed at the state level, are a major factor in limiting housing construction, could be eliminated without eliminating local zoning, and housing would replace farms.
That won’t help in the worst affected housing markets in the US, like SFBA, NYC, LA or Seattle. They simply have nowhere to expand to for geographical reasons, or they have already expanded so much that additional expansion would make commute across metros not feasible.
> You can have more housing without higher density.
Sure, but more housing in Gilroy does little to help with housing prices in San Francisco.
> And why can’t cities that want high density simply condemn and take the property that they want to be rezoned at higher density, and then contract for high density housing?
Why would they need to condemn anything? They can just upzone, and if they actually wanted to, they could do so any time they please.
That won’t help in the worst affected housing markets in the US, like SFBA, NYC, LA or Seattle.
Oh, it appears that there are long-term, integrated state-level programs make these places less and less attractive, thereby reducing density and housing prices, and lately these efforts appear to be bearing fruit. I’m not sure how much we’re going to have to worry about housing prices in those particular cities into the future.
Snark aside, though, isn’t a world where many high-earning knowledge workers are no longer tethered to particular cities and metro areas likely to be less dense and less prone to absurdly inflated housing prices in particular areas?
Sure, but more housing in Gilroy does little to help with housing prices in San Francisco.
At this point, more housing in Reno (and Austin and Phoenix, etc) is helping with housing costs in San Francisco. Perhaps that trend will turn out to be just a temporary phenomenon of the pandemic, but I doubt it.
Oh stop your whining. Biden won and he is going to deliver on libertarians’ top three priorities. One of his top priorities is the libertarian obsession with flooding the labor market with immigrants. The labor supply will be perfectly mobile at least entering the USA. The working class will soon all be forced into accepting subsistence wages, so a great libertarian triumph is in store.
Second, Biden shares the libertarian phobia of average people living in nice neighborhoods and acquiring wealth through mortgage payments. Under Biden, local zoning authority will be severely reduced and local governments will be coerced into providing cheap slum housing in every neighborhood. Millions of mortgages will go underwater and millions will flee their current neighborhoods for the safety of fortress communities. Another libertarian priority accomplished.
Finally Biden’s judicial appointments will usher in a new age of unchecked and unbalanced judicial review. The model of government most libertarians is centered upon the ideal of unchecked and unbalanced judicial review suppressing the democratic will of the little people. We will be seeing that in abundance so yet another great libertarian triumph.
Libertarians won. They handed the election to Biden. Now they deserve to get exactly what they asked for.
One of his (Biden’s) top priorities is the libertarian obsession with flooding the labor market with immigrants. The labor supply will be perfectly mobile at least entering the USA. The working class will soon all be forced into accepting subsistence wages, so a great libertarian triumph is in store.—edgar
The above may be true, but the Bidens will never overturn local property zoning.
The modern Donk party represents corporations and wealth, and embraces free market only when convenient.
Anti-zoning doesn’t get very far because (empirically) people with money do want safe and pleasant neighborhoods and will pay through the nose to get them. This goes for both Republican and Democratic voters, at least after they marry and have families. The state being unwilling to do much about crime and squalor itself, having outlawed restrictive covenants, and constantly pressuring neighborhoods with Section 8 and similar initiatives, pushing up property prices through local property zoning is almost the only tool left to keep neighborhoods safe and pleasant. Small wonder people use and defend it.
Exactly. Which is why it’s immensely frustrating to read typical criticism of “NIMBY” attitudes, which seems to me to be either naive, unfair,or borderline fraudulent.
The dynamic is always the same. People want the state to uphold certain standards important to their legitimate personal interests. Even something as simple as enforcing a contract, like a lease. But standards produce disparities, and the state’s religion is anti-disparity (not democracy, which must always in the long run take a back-seat to anti-disparity religious requirements).
So the state eventually but inevitably refuses to uphold the desired standard, at least, directly. So people look for coping mechanisms, circumventions, alternative arrangements, or substitutes which are still legal.
Now, they can’t stay legal forever, because fundamentally they preserve unholy disparities, but certain contexts have higher natural inertia and are harder to change fast without very radical measures likely to make constituents very upset.
But like all circumventions, these coping mechanisms have a cost and produce unwanted side-effects as the price one simply has to pay to protect one’s interests when the state refuses to do so.
But now imagine some group of people who don’t like those costs start arguing against the coping mechanisms but without even acknowledging the reason behind their existence?
A good analogy could be what just happened in Minneapolis. The city stopped protected businesses from burglary, looting, vandalism, and arson. So business owners in desperation tried to install bars on windows or security shutters. As it happens, to rub salt in the wound, the city would not allow that either.
But imagine if the city had allowed it, and a group of angry historical preservationist photographers started arguing against businesses doing this, because it spoils the tradition aesthetic of the neighborhood, and makes it look like ‘blighted’ like a crime-ridden area.
Then imagine it was punishable heresy for the business owners to respond that the neighborhood was now indeed blighted with crime and without police there was nothing else they could do about it, and that they had a natural right to protect themselves, which should also be a legal right.
So instead the business owners have to fight with one hand tied behind their backs and obey this gag order issued by the court of elite opinion, and must also cope with that by telling BS lies about their genuine motivations and the real state of affairs. “Um, see, the bars or shutters help protect the birds, who otherwise get confused by all the clear glass and crash into the windows. Poor birds, and we all love and want to protect birds, right?”
It would be refreshing to read a typical anti-NIMBY-ite argue honestly, “Yes, by relaxing zoning restrictions and allowing property owners to build whatever they want, many aspects of the quality of life in your neighborhoods will indeed get much worse because the state won’t do anything to help, and there’s nothing any of us can do to fix that, but that *nevertheless* it is still worth doing, because (insert argument that isn’t just ramming the state’s religion down people’s throats again).”
One small point:
The areas of Minneapolis and St Paul that need shutters and fences for stores are not on the radar for preservationists. The East Lake and University Avenue areas are pure 1950’s strip mall territory, and have been for years.
Bob, when I attended UMinn in 1967-70 I lived in U-housing St. Paul Campus and rode the bus to the Minn Campus. My last visit there was in 1990, and little had changed. Have the old Coffman Union Student Center (where most of the War protests took place) and Dinkytown (where I used to have lunch) been preserved?
My mentors there were Leo Hurwicz (econ theory) and Vernon Ruttan (applied econ).
–“The Social Security system should also be made friendlier to the young. The payroll taxes that fund Social Security could be eliminated for those under 30 and phased in later in life. Younger workers and their employers would initially pay nothing into the system. That shift would eliminate a large tax-related barrier to hiring the young and make it more financially attractive for young people to work. That reform would reduce revenues, true; but raising the age of retirement could offset the lost funds.”–
This isn’t a great idea. This would essentially encourage the reverse of what we are trying to tell people as a society, which is to save while young so that you are prepared for retirement. Instead, we’d have the government increasing consumption among the young so that retirement would have to be pushed back to something like 70.
I can’t imagine there’s a lot of employers out there who are champing at the bit to hire large numbers of younger workers if only it weren’t for that pesky 6.2% Social Security payroll tax, or a large number of younger would-be workers who would throw themselves into the labor market if only they could get that 6.2% payroll tax back. You might get a few hundred thousand new young workers at the cost of over $100 billion in tax revenue, an expense of several hundred thousand dollars per job created.
Here’s another idea.
1. Eliminate the payroll tax. Finance existing social security obligations with a land value tax.
2. Replace with mandatory savings of 5% employee and 5% employer, which goes into an account which buys something like VTI. Redirect 25% of existing 401k and IRA balances into this account.
3. Slowly reduce Social Security retirement age back to 65 by 2045, and transition to a universal benefit worth 150% of the poverty line for each individual.
4. Accounts will be transferred into inflation adjusted annuities using the current 20 year TIPS rate as a discount rate upon retirement. People can retire as early as 55 so long as their annuity is > 150% of the poverty line. Annuities can be structured with survivor benefits.
5. If a person’s annuity doesn’t generate at least 150% of the poverty line by age 65, the government will make up the difference.
6. A person can go online and check the status of their annuity at any time. They can opt to lock in a certain annuity value, to protect against a falling market, by giving up half of their upside. For example, say a person is 56 years old and his annuity is worth $40,000/yr. He wants to work until he’s 60. He can lock in his $40,000/yr. If there’s a market crash and his annuity is only good for $28,000/yr when he turns 60, he’s protected. If his annuity value went up to $50,000/yr, he’ll only receive $45,000/yr.
7. When most people are effectively financing their own retirements, the land value tax can go to reduce deficits or reduce income taxes.
How does taxing young people encourage them to save?
I like the idea of making it more directly a forced saving program, but am puzzled why you want to move the retirement age down rather than up?
Good question.
The forced savings is set high enough so that account balances should create an annuity that allows most workers to fully fund their retirements by age 65, assuming equity returns on the low end of historical experience.
Life expectancy is strongly correlated with income and if you’re unable to save enough to cover your own retirement, you’ve been low income for most of your life. The retirement age is brought back down to 65 as a goodwill gesture to those who have low incomes for most of their lives.
Why single out real estate for heightened taxation? It is already taxed. The value of virtual land such as URLs could just as easily be taxed.
In theory, land value taxes are the most economically efficient (aside from pigouvian taxes on bads) as land supply is fixed and cannot be reduced by the presence of taxes.
Sorry, Arnold. I’m glad that EG writes about his ideas although they are non-starters for politicians, bureaucrats, and phony intellectuals. I like his article and fully agree with his last sentence: “The cause of freedom will need to present itself as a radical break with the status quo to win the hearts and minds of a new generation.” Indeed, a radical break with the status quo in both the U.S. and in all other countries.
Thanks to the failed U.S. foreign policies of 2001-2016, the world’s political (dis)order has entered into a new cold war. This time, however, the two bands are dividing the U.S. and the allies in the first cold war (pay attention to what is going on in Australia). Yes, the Chinese government can rely on the D-Party’s rot and corruption to control those that are still embracing the cause of freedom. Far away from the U.S., we are facing the same challenge: how to stop the domestic factions financed and supported by the Chinese government and other foreign organizations.
Note: I suggest reading Sean Patrick Cooper’s article in today’s Tablet.
If you want to know what he means by what’s going on in Australia.
Thanks for the reference. When I lived in Beijing (1994-96), just one block from the Australian embassy, I met several Australian diplomats and businessmen (in addition, our children attended the same International School). That was a time in which we believed that in two or three generations China would be integrated into the free world. The Australians were very much sold to the idea that this integration could be accelerated.
“…The Social Security system should also be made friendlier to the young. …[P]ayroll taxes… could be eliminated for those under 30… Younger workers and their employers would initially pay nothing into the system. That shift would eliminate a large tax-related barrier to hiring the young and make it more financially attractive for young people to work.”
This wrinkle for Social Security taxes also would be a more efficient alternative to minimum wages – in effect subsidizing (or not taxing) young, low income workers, encouraging more rather than less job creation and labor supply, and allowing for a differential wage net of taxes for young, inexperienced workers vs. older, more experienced workers.
Granted, “if we’re going to indulge in fantasies, they may as well be good ones”; but why indulge? It is unrealistic to think of oneself as an influential adviser to a potentially benevolent despot, or as a participant in a small-scale committee meeting. For an economist, there is always a chance that his policy fantasies will eventually gain some traction. But, with few exceptions, the chance is too slim to justify this indulgence: he should spend his time on more practical projects.
Trump named K-12 school choice as his leading agenda item for his second term. Betsy DeVos was a big school choice proponent.