Tag Archives: Rent Controls

American Homicide Rates: Which America?

12 Thursday Oct 2017

Posted by in Discrimination, Gun Control, Immigration

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A heterogenious society and the successful assimilation of minorities are two very different things, as much as we might wish otherwise. Two populations within a region will come into contact, but conditions promoting real assimilation are complex. (I’m avoiding use of the term “diversity” because it has come to imply the successful assimilation of distinct groups.) While cultural differences can enrich the lives of both populations, sharp economic gaps between minority and majority populations (and even some cultural differences) will tend to slow the process of assimilation. This is often associated with social dysfunction, such as high crime and homicide rates, especially among the minority group. This is a fairly common phenomenon in countries with racial and ethnic minority or immigrant populations, as Ryan McMaken writes in a recent piece on international differences in heterogeneity and homicide rates.

Heterogeneity In the West

Countries in the Western Hemisphere tend to have relatively high immigrant and minority populations, as McMaken describes:

“… when considering the Americas, … nation-states are in most cases frontier states with populations heavily affected by immigration, a history of conflict with indigenous populations, and institutionalized chattel slavery that lasted until the 19th century. The factors are significant through the region, and the United States cannot be held apart in this regard from the Caribbean, Brazil, Colombia, and other states impacted by all these factors. 

Importantly, these factors also make the Americas significantly different from Western Europe and other areas — Japan and Korea, for example — where the present situation is marked by much higher levels of cultural uniformity and quite different recent histories and current demographic trends.“

Homicides

McMaken questions popular theories of cross-country differences in homicide rates based on the degree of gun control and gun ownership rates. Homicides and violent victimization have been declining in the U.S. for many years even as gun ownership has soared. Furthermore, international comparisons are traditionally plagued by arbitrary country classifications and exclusions, as well as inconsistent definitions of homocide and gun ownership. However, McMaken points to other explanations for violent crime found to be fairly robust in the academic literature: poverty and population heterogeneity:

“… these factors contribute to lower levels of social cohesion, and thus higher levels of criminality and other socially-undesirable behaviors.“

McMaken cites research involving ethnic minority populations of Slavs in Germany, Italians in Argentina and the U.S., and Arabs in Europe, all of whom had crime rates far exceeding those in their countries of origin. The connection between heterogeneity and crime might have nothing to do with particular ethnic groups, though it seems all too easy for observers within individual countries to blame specific “others” for crime. It is a symptom of alienation from the majority as well as economic desperation and vulnerability to opportunities and threats arising from the underground economy. Illegal activities might truly provide the best alternatives available to low-skilled, minority job seekers. Needless to say, underground economic activity, such as the drug trade, involves high risk and often violence among users and between competing factions. This is an important source of the high crime and victimization that typifies many minority communities.

Despite declines since the 1970s, the U.S. still has a higher homicide rate than many other industrialized countries. Beyond the weakness cited above, such comparisons fail to control for other confounding effects, including the degree of heterogeneity across countries.

Policies

Heterogeneity poses a problem in the context of involuntary and often voluntary segregation of sub-cultures. If you don’t believe the “voluntary” part, take a close look at the different clusters of individuals in the cafeteria at almost any “diverse” university or corporate office. Judge for yourself. Differences in language, fertility, demographics, religion and cultural traditions may be noteworthy, but where crime is associated with effectively segregated minorities, there is usually a gap in economic status and mobility relative to society at large.

What policies can mitigate these conditions and their impact on crime? It would be nice to approach this question strictly from the perspective that heterogeneity is a given, but the degree of heterogeneity is, to some extent, an endogenous outcome. Restrictive immigration policies might leap to mind as a way of restraining heterogeneity, and there is little doubt that illegal immigrants are less likely to assimilate (many contend that their crime rate is low). Policies allowing less restricted flows of legal immigrants tend to be salutary if they are based on domestic economic need, economic potential, or compassion for those seeking asylum or a haven from political oppression. A legal immigrant receiving a welcome on new shores is more likely to assimilate successfully than an illegal immigrant, all else equal. Citizenship and language education are avenues through which assimilation might be encouraged. And there could be ways to improve sponsorships and even temporary visa programs so as to encourage assimilation.

What can be done to encourage more effective assimilation of all minorities? And what can be done to reduce the crime associated with unassimilated populations? One major corrective is a strong economy. Policies that encourage economic growth will lead to greater participation in markets and society, with consequent interaction and mixing of sub-cultures. Growth policies include low and non-distortionary taxes and light regulation.

The war on drugs also accounts for a major share of homicides, and that war interacts with non-assimilation in perverse ways. It is crippling to disadvantaged communities precisely because it creates risky “opportunities” in the underground economy. It also produces high levels of incarceration and dangerous forms of “cut” contraband. As I’ll discuss in my next post, ending the war on drugs would reduce violent crime and lead to safer drugs in relatively short order.

A short list of other policies that would foster assimilation and economic mobility would include: improved education: school choice and apprenticeship programs; better labor market outcomes: reduce the minimum wage or create sub-minimum wage categories to enhance opportunities to gain experience and skills; better housing: eliminate rent controls.

Assimilation is always more effective when it occurs “organically”. Affirmative action and forced diversity initiatives often fail to achieve effective assimilation. Beyond the obvious infringement on liberty, these policies may sow resentment among those who suffer reverse discrimination, and among those who witness it, to the probable detriment of efforts to eliminate bias. Even worse, these policies often put their intended beneficiaries into vulnerable, un-winnable situations: jobs or programs for which their skills are not adequate. There are undoubtedly excellent candidates among those placed in positions under quotas, but there is a likelihood that many will be unsuccessful in their roles.

Conclusion

The anti-gun left is eager to attribute differences in homicide rates to the impact of gun control policies, but a close examination of the facts reveals better explanations. A prominent factor contributing to differences in homicide rates is the degree of heterogeneity across countries. Those with more homogeneous populations tend to have lower homicide rates and vice versa. But the problem is not merely heterogeneity, but the difficulty of economic and cultural assimilation of minority populations. These factors appear to lead to greater crime within many minority populations. The U.S. is not unique in its experience with high minority crime rates, but it is a relatively heterogenous nation. This is an important factor in explaining why the homicide rate tends to be higher in the U.S. than in other industrialized countries. To close, I’ll offer something cogent from Bretigne Shaffer’s On the Banks blog, in which she offers this quote from an individual named Michael Owen (the soccer player?):

“... we don’t really have a single America with a moderately high rate of gun deaths. Instead, we have two Americas, one of which has very high rates of gun ownership but very low murder rates, very comparable to the rest of the First World democracies such as those in western & northern Europe, Australia, New Zealand, Canada, Japan, South Korea. The other America has much lower rates of gun ownership but much, much higher murder rates, akin to violent third world countries.“

How We Hinder Mobility

06 Monday Feb 2017

Posted by in Labor Markets, Mobility

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moving

 

 

 

 

 

 

 

A plethora of regulations and subsidies established by governments at all levels is making it more difficult for Americans to move, especially from one state to another. Yale Law Professor David Schleicher identifies these barriers to mobility and writes that they compromise the nation’s ability to match jobs with workers. Thus, these laws beget economic immobility as well. His paper, “Stuck in Place: Law and the Economic Consequences of Residential Stability“, describes a number of the barriers:

“Land-use laws and occupational licensing regimes limit entry into local and state labor markets; differing eligibility standards for public benefits, public employee pension policies, homeownership subsidies, state and local tax regimes, and even basic property law rules reduce exit from states and cities with less opportunity; and building codes, mobile home bans, federal location-based subsidies, legal constraints on knocking down houses and the problematic structure of Chapter 9 municipal bankruptcy all limit the capacity of failing cities to ‘shrink’ gracefully, directly reducing exit among some populations and increasing the economic and social costs of entry limits elsewhere.“

To get a sense of the magnitude of declines in mobility over the past three decades, see Figure 3 in this discussion about mobility by Richard Florida at CityLab. The percentage of homeowners who move declined from almost 10% annually in the late 1980s to about 5% in 2016. The biggest declines occurred during the periods of economic weakness in 2001 and 2008. For renters, the percentage of movers declined from just above 35% in 1988 to less than 24% in 2016.

Workers who might otherwise migrate to jurisdictions with better economic opportunities often cannot do so. Schleicher notes that low-income workers suffer the most from these obstacles, which he divides into entry and exit barriers. Most of the obstacles he cites are compelling, though at times his emphasis veers toward enabling more effective government management of the macroeconomy, which is very unappealing to my libertarian instincts.

Entry Barriers

Schleicher emphasizes two major ways in which entry barriers are created. One is the spread and severity of land use restrictions such as zoning and construction laws, which have become so severe in some areas of the country that they have led to drastic inflation in housing prices. In a review of Schliecher’s paper, Ronald Bailey at Reason.com illustrates the disparities created by this process:

“According to the Trulia real estate market analysis, the median house price in San Francisco is $1.2 million, with a median rent of $4,100 a month; in Youngstown it’s $93,000, with a median rent of $650. In other words, a Youngstown worker who sold his home for full price would receive enough money to rent a place in San Francisco for 22 months.“

The contrast in the economies of these two cities is stark. The San Francisco Bay Area has experienced vibrant job growth over the past several years, while Youngstown has been struggling for decades. Given the difference in housing prices and rents, it would be almost impossible for a worker from Youngstown to pursue an opportunity in the Bay Area without a accepting a severe decline in their standard of living. Joel Kotkin makes a similar point in discussing the high cost of housing in some areas, but his focus is on the difficult prospects for economic mobility and homeownership among Millennials.

The second major entry barrier discussed by Schleicher takes the form of occupational licensing laws. They differ across states but have multiplied since the 1950s. According to Richard Florida (linked above), the share of American workers subject to some form of licensing requirement rose from just 5% in the 1950s to 25% by 2008. Schleicher cites low rates of interstate mobility among professions that typically require a license to practice. Veterans of those occupations tend to have an established book of business, however, so it’s reasonable to expect fewer distant moves. Nevertheless, the cost of obtaining a license in a new state and differing licensure requirements are likely to inhibit the mobility of licensed professionals.

Exit Barriers

One of the most interesting sections in Schleicher’s paper is on exit barriers. Locations are always “sticky” to the extent that local ties exist or develop over time, both between people and between people and local institutions. But some institutions create ties that are severely binding. For example, state and local government employees are often enrolled in defined benefit plans with lengthy vesting periods. Remaining in one system throughout a career can be a huge advantage. Other exit barriers involve differences in eligibility and levels of aid under federal programs managed by states such as Medicaid, Temporary Assistance to Needy Families (TANF), and the Supplemental Nutrition Assistance Program (SNAP — food stamps). Beyond the actual benefits at stake, administrative costs and delays in re-enrollment might hinder a needy family’s attempt to make an interstate move.

Local and state law on property transfers can also impinge on mobility. Real estate transfer taxes in some states certainly create an incentive to stay put. Also, while tax reassessments occur with regularity in most jurisdictions, some impose limits on the amount of the annual change in valuation, requiring a full tax revaluation on resale, so a seller must forego such a tax discount. Rent controls reward renters who stay in place, creating another exit barrier. And rent controls prevent entry as well, as they invariably reduce the supply of quality housing, thereby inflating the rents of vacated apartments available to new residents.

Finally, federal policies designed to encourage homeownership create exit barriers across the country. Ownership of a residence increases the “stickiness” of any locale, but the loss of a mortgage interest income-tax deduction adds to the sacrifice of a move to a rental unit in a more expensive location. So does the interest rate subsidy inherent in the implicit federal guarantee against default on mortgages securitized by Fannie Mae and Freddie Mac. Finally, when local economies are in a state of decline, home prices usually follow. Consequently, owners are likely to suffer reduced or negative equity in their homes and may be “locked in”, unable to pay off their mortgage on a sale, and therefore unable to leave their current residence.

Rent Seeking and Good Intentions

Some of the policies discussed above are the handiwork of those powerful enough to enlist government power in their own self-interest. That includes zoning laws, by which property owners can prevent land uses they deem undesirable. It also includes occupational licensing, a political avenue through which established business interests limit competition by new entrants. Of course, licensure is typically sold to voters as consumer protection, a claim that is often dubious.

Other policies that hinder mobility can be characterized as well-intentioned, like the old-style, defined benefit plans still in use by many state and local governments, or federal subsidies for homeownership. Many such policies are, or have been, promoted on the basis of the obvious gains they create for individuals, with little thought given to the “unseen” but damaging economic consequences. Rent controls fall into this category as well, but are very damaging in the long-term.

The Labor Market Ossified

All of the mobility-limiting policies discussed by Schleicher have a detrimental effect on the performance of labor markets. Workers tend to get stuck in depressed areas, where their value as human resources is diminished even while employers in other markets face limited supplies of qualified labor. This leads to higher structural unemployment, lower growth in output, and more difficulty for the private sector in meeting the needs of consumers than otherwise be possible.

I haven’t dealt with one other national policy dealing explicitly with geographic mobility: immigration. Restrictions on legal immigration and the issuance of green cards are often sought by interests hoping to protect Americans from competition for jobs. Suspending competition is never a good idea, however, as it leads to higher prices and undermines consumer interests. To the extent that businesses face a shortage of qualified talent to fill particular jobs, as is often the case, such restrictive policies are unequivocally damaging to the economy for the same reasons as barriers to interstate migration. Liberalized immigration allows more foreigners with peaceful, productive and often entrepreneurial intent to contribute to the country’s ability to create wealth.

Prescriptions

What can be done to promote interstate mobility? Here is a list that is undoubtedly incomplete: encourage state and local governments to end rent controls; liberalize zoning laws; reevaluate construction restrictions; liberalize occupational licensing; reduce real estate transfer taxes and smooth the timing of tax revaluations. Governments should also transition from defined benefit to defined contribution benefit plans, a step that would also allow them to avoid persistent overoptimism about their ability to meet future pension obligations. As long as states manage federal aid programs and have leeway in setting eligibility requirements and their share of benefits, there will be exit barriers to low-income recipients. Perhaps states should be required to coordinate benefits, with strict time limits, when recipients move interstate to pursue employment opportunities. Finally, subsidies encouraging homeownership should be phased out, including the federal tax deduction for mortgage interest and full privatization of Fannie Mae and Freddie Mac. A neutral stance with respect to homeownership would allow the market to seek an optimal balance in residential property ownership without creating excessive locational anchors.

Schleicher devotes a large part of his paper to the implications of reduced mobility for macroeconomic stabilization policy. In particular, he contends that measures intended to stimulate the economy cannot be as effective when labor supplies are inflexible. That might be true, but I’m loath to endorse Keynesian activism. Still, there is no doubt that geographic stasis of the kind described by Schleicher contributes to immobility in incomes as well. The main conclusion I draw from his paper is that governments ought to be very cautious about interfering in market transactions, even when convinced that their cause is noble. The law of unintended consequences has a way of foiling the best laid plans of social engineers.

Leftist Ad Hominid Species Screams “White Racists!”

03 Wednesday Feb 2016

Posted by in Discrimination, Equality, racism

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Lately I hear that all white people are racists, and I feel compelled to examine the intellectual grounding of such an inflamatory claim. Consciousness of race is not racism, as some would suggest. Indeed, solutions to racial division offered by activists usually require that we bear race in mind as a primary differentiator. Insofar as one must consider the worth of another person in any context, people of good faith simply do not care about a person’s race. Rather, they care about traits that count, such as honesty, skills, work ethic and perhaps affability. Should they somehow care more? What would vindicate them?

Inflammatory Claims

There are probably several motives for the charge of universal white racism. On one level, it represents political agitation. Posts carrying the charge on social media always involve a measure of “virtue signaling” to like-minded friends, or perhaps before the Gods. (I’m sure the posters will be forgiven.) Such posts might represent acts of social contrition to allay deep-seated feelings of guilt. The posters might fancy that they are raising the consciousness of others, proudly imagining the important lesson they are teaching. The bad news for them is that most people of good faith are rightly skeptical of proselytization like this. In fact, the agitation probably does more to breed skepticism than anything else.

Voluntary Sorting Behavior

What some view as racial division is often an innocent consequence of voluntary sorting based upon the shared subcultures most compelling to individuals at a given time. There are many subcultures into which a person might fit: work, school, profession, sports, music, religion, politics, hobbies, geography, ancestry, ethnicity and race. And there are micro-cultures within all of these categories. These cultural segments differ in many respects, and they may overlap in many cases. The extent of sub-cultural overlap may be viewed as a gauge of assimilation.

In any given context, people tend to voluntarily sort themselves into the sub-culture they find most compelling. This voluntary sorting does not yield a fixed social distribution of individuals across groups. Individuals can choose to associate with different sub-cultures to which they belong on a day-to-day basis.

There is a pronounced tendency for sorting to occur within larger “populations”, such as cafeteria-goers in a large office or in a large school. People from particular work groups might sit together: there is some sorting by age, by gender, and by race. African-Americans often sit together. There is mixing of members of these subgroups as well. People are brought together by work or school, but the shared work or school culture is frequently less compelling to individuals in their choice of a lunch table than other sub-cultures to which they belong.

Isolation or Assimilation

Assimilation does not mean that cultural differences must disappear, but it does mean that subcultures must at least be tolerant of others. A key question is whether one subgroup would welcome a member of another subgroup to join them. There might be reasons to refuse in some circumstances, such as a group of accountants who wish to avoid economists. Lol. However, a group of Caucasians who prefer to remain exclusive, making African Americans feel unwelcome, are guilty of racism, and vice-versa. As for the converse, an African American individual who prefers not to join a group of Caucasians, and vice versa, there is usually a good rationale for presuming the individual to be innocent of racism: they are simply choosing a more compelling sub-culture.

Certain sub-cultures may be especially amenable to selection from across sub-groups. For example, team sports often foster racial mixing, as do music and various professions. Religion and economic stratum can be powerful shared sub-cultures, drawing members across racial groups. In other words, mixing of sub-cultures will occur when a compelling sub-culture is shared. That is a form of successful assimilation.

When voluntary sorting takes place, the parties seek commonalities. That’s a form of discrimination that may be quite healthy and not racist in any way. On the other hand, accepting diversity implies respect for other cultures and subcultures. Voluntary sorting allows those cultures to function, but it does not necessarily imply exclusion of others who might be curious and wish to learn and take part in a culture’s traditions, or who might even wish to become a part of a different community.

Counterproductive Compulsion

The insistence that racism is widespread is often an expression of support for compelled remedies or paying reparations of some kind to alleged victims. In a free society, the kind of voluntary sorting discussed above will always be a reality; any attempt to prevent it would require extreme coercion. Reparations for historical injustices, legal or economic, raise ethical questions about the treatment of those who must bear the costs. They also carry high administrative costs and tend to breed resentment and division. There are well-known downsides to quotas in hiring and in school admissions. Not only do quotas lead to reverse discrimination, they also can place the intended beneficiaries into situations of vulnerability to failure.

Markets Are Not Racist

Then there is the allegation that private markets are a source of “systemic racism”, having “disparate impacts” on certain minorities. However, it should be noted that the market mechanism tends to penalize racism. A consumer who chooses to avoid sellers of a different race will tend to pay a higher price for the privilege. An employer with a “taste for discrimination” must choose from a smaller labor pool and may lose the opportunity to hire the best talent. In other words, racists must pay for their preference. They also forego the creative benefits that diverse organizations tend to enjoy.

Certain minorities have struggled to achieve success in the private economy, but there are much better explanations for that difficulty than market forces, which provide the best opportunity for growth and assimilation. There is no question that institutional obstacles have had extremely harsh effects on groups starting from lower rungs of the socioeconomic ladder. A few examples: the failed public education has been especially burdensome for urban and rural minorities; various public policies have effectively excluded minorities from markets, including Jim Crow laws, the minimum wage and the Davis-Bacon Act; the so-called social safety net is rife with features that penalize work and reward fragmentation of families, making it as much a trap as a net; the drug war creates illicit market opportunities which present catastrophic but unappreciated risks for both the participants and their families; rent controls, zoning laws and restrictions on new construction limit the stock of affordable housing; heavy regulation makes starting a business difficult for those without the financial and legal resources to deal with it; and the ugly tradition of cronyism tends to reduce social mobility by entrenching privilege rather than rewarding economic value. The deck is stacked in many ways against economic mobility by public policy, and racial minirities have borne much of the burden.

Immigration Hotspot

Another controversy is whether racism is manifest in the negative views of many Americans toward immigrants. These claims allege ethnic and religious discrimination, including the hatred of Muslims. No doubt there are Americans who harbor racist attitudes toward immigrants. Some of this is grounded in unreasonable economic fears. There are also fears that terrorists may be among new immigrant populations, especially refugees, but that fear is hardly unreasonable given the recent experience of Europe and the difficulty of establishing reliable background information on some of these individuals.

Sharing Freedom

Racism still exists and it will never go away entirely. However, our dedication to freedom compels us to protect speech as long as it is not threatening. Racial discrimination by participants in markets can be difficult to detect, but racists must pay an economic price imposed by the market mechanism, and there are often legal remedies if racial discrimination in markets can be proven. Fortunately, racism today is not as widespread as the agitators would have you believe. The best policy for assimilation and acceptance is to promote a shared culture of freedom and economic opportunity.