In a recent Bloomberg column, Tyler Cowen We discussed the difficulty of rolling back regulations.
The fundamental contradiction is that government regulation is embedded in a large, unwieldy, complex system. To dismantle it or significantly reduce it would take many National Capability –that is, state power. But deregulation advocates are skeptical of increased state power, because it could lead to increased state regulatory action. Think of it this way: if someone told a libertarian-leaning government efficiency expert that in order to reduce state power, we would first need to give it more power, that expert would probably run screaming.
Tyler focused on the regulatory role of the federal government in a recent Twitter thread. Brian Hanlon Similar issues are occurring at the state level.
Imby’s attempts to boost housing construction have proceeded along two different dimensions: deregulation and mandates. In Tyler’s words, if someone had asked me about local housing mandates five years ago, I “probably would have run screaming.”
I’m still not sure this is a good idea, but I do see some logic to this approach. State governments are working to deregulate housing markets, and local governments continue to offset that movement with increasingly onerous regulatory barriers. Mandates are obviously not the best solution; it would be better if local governments put up fewer barriers to homebuilding. But mandates are one tool that might actually force action on this issue.
For example, most state governments do a lot of revenue sharing. They might make the amount of local grant funding proportional to the amount of new housing built. Because NIMBY policies create negative externalities for the rest of the state, financial penalties for onerous regulations would force local governments to bear at least some of the costs of barriers to new construction. This would motivate local governments toward policies that allow more housing construction.
To be honest, I’m not at all convinced this would work in the real world. In states like California and Massachusetts, state governments might mandate union construction or that a certain percentage of housing be “affordable.” By the time the bill makes it through the legislature, it’s unlikely to resemble the idealized concept that policy experts have sketched out. That said, there are worse things out there than housing restrictions, and I suspect they’re already in place in some parts of the US.
