Price, wage, rent controls

[jack]

I have the idea that things like price, wage, rent controls are very useful to correct imbalances in bargaining position or imbalances in bargaining information -- eg. employers and landlords often have more power in the short term, and can use that to impose unreasonable contract terms, if they were not stopped, and the same could apply to prices.

But that they don't usually work to change the value long-term, because if the "official" value doesn't reflect the market for a long time, it distorts the market and the problems bubble up elsewhere: eg. either black markets (if prices are significantly too high) or bribes (if the prices are significantly too low). And often "bribes" are really inefficient, eg. the school catchment area system is supposedly fairer than paying for education, but leads to people overpaying for houses to get to the right catchment area, which can lead to everyone living somewhere that's less efficient for them.

And if the changes are short-term or not-too-large it works because it's not worth anyone's while avoiding the official answer. And sometimes we don't have a better solution, and using the only tool we have available and hoping the side-effects are not too bad is better than ignoring the problem. But it would be better if the demand could be addressed directly (either by meeting it or ameliorating it) rather than pretending it can be legislated out of existence.

Is that right? I'm not sure I'm thinking about this the right way.

It's painful for me to say so, because there's lots of things I wish were distributed "fairly" rather than on the basis of "who can pay a ridiculously extortionate sum", from education to concert tickets. But I'd rather everyone were taxed a lot more and then things were priced according to demand, rather than trying to fix individual unfairnesses piecemeal.

Comments

[lavendersparkle]

I think another problem with rent and price controls is the quality is another variable that is of interest to both parties in a transaction and is difficult to take into account in your controls. I think this may be a particular problem with rent controls. In my experience the main unknown and source of unequal power is not the level of the rent, which is about the only thing that you do know up front when you rent somewhere, but other things like whether the house has damp, whether the landlord is going to fix things if they break, whether the landlord is planning to verbally abuse/suddenly evict you. Ultimately, the main deterrent to a landlord being awful is that the tenants will move out and they'll have to find new ones. When there's an upper limit on the level of rent, the cost to the landlord of finding new tenants is lower because they're likely to fill the property more quickly and the amount of rent over the period the flat is empty is lower. So my main concern about rent control is that it would make rental properties much less likely to be kept in good repair.