“In the department of economy, an act, a habit, an institution, a law, gives birth not only to an effect, but to a series of effects. Of these effects, the first only is immediate; it manifests itself simultaneously with its cause - it is seen. The others unfold in succession - they are not seen: it is well for us, if they are foreseen.” 1
The above paragraph, written in 1850, is the introduction to Frederic Bastiat’s dissertation That Which is Seen and That Which is Unseen, a collection of ideas that seem good – the seen – but devolve into unintended consequences – the unseen. Idea number one is “The Broken Window,” a fable about a child who breaks a window in his father’s bakery shop. The baker’s neighbors tell him that his purchase of a new window will put money in the glazier’s hands, the glazier can buy new goods, and the whole neighborhood economy will profit. Bastiat reminds us that the unseen consequence is that the baker, who was planning to purchase a new suit, now does not have money to do so, and the tailor misses out on money with which to buy more goods.
Paul Krugman, Nobel Prize winner and New York Times columnist, would side with the baker’s neighbors. He wrote in his opinion piece of September 14, 2001, “Reckonings After the Horror,” “Ghastly as it may seem to say this, the terror attack -- like the original day of infamy, which brought an end to the Great Depression -- could even do some economic good…Now, all of a sudden, we need some new office buildings. As I've already indicated, the destruction isn't big compared with the economy, but rebuilding will generate at least some increase in business spending.”2 Break some windows, improve the economy. We will see if the rubble left behind by protesters in Baltimore this week will do wonders for the region’s economy.
Some in the press have blamed another broken window theory for the deaths of black men at the hands of police. The Economist article “What Broken Windows Policing Is” says, “In July 2014 an unarmed black man named Eric Garner died at the hands of a police officer after allegedly resisting arrest. Garner’s presumed crime was selling ‘loosies’, or untaxed cigarettes, on a street corner in Staten Island… Some say the problem is ‘broken windows’ policing, an approach to law enforcement based on the theory that cracking down on minor crimes helps to prevent major ones.” 3 Based on broken windows (plural) policing, New York instituted “stop and frisk,” under which mostly black and Hispanic men are stopped and searched without probable cause, creating a great deal of animosity and distrust between neighborhoods of color and police.
The article quoted above goes on to say: “The term ‘broken windows’ refers to an observation made in the early 1980s by [George] Kelling, a criminologist, and James Wilson, a social scientist, that when a building window is broken and left unrepaired, the rest of the windows will soon be broken too.”
The new factories and machines of the late 19th century changed the world forever. Craftsmen became obsolete and farmers left the land to work in cities. Predictably, as cities became crowded with potential workers, conditions in factories deteriorated. Fourteen-hour work days were common, as was child labor. In this environment, workers organized, formed labor unions, and eventually won improved working conditions.
Unions continued to obtain real benefits for workers well into the 20th century. Sally Field’s character in the 1979 movie Norma Rae, when she held the sign UNION, did what thousands of workers must have done since the 19th century.
However, what worked so well in the past, might not be working so well now. National participation in labor unions has decreased steadily. In 1990 16% of employed workers were union members. The percentage in 2014 was 11.1%. Perhaps market conditions changed as deeply in the 21st century as they did in the 19th century, but unions and their supporters have failed to adapt.
Therefore, unions continue to make the same old demands, while businesses avail themselves of new options: outsourcing work to cheaper and less restrictive markets, developing technologies to replace human workers, locating businesses where non-union workers can be hired, or contracting with flexible companies.
San Francisco Mayor Ed Lee wants to resolve the high cost of housing in San Francisco by promising 30,000 residential units by 2020, that’s five years from now. How realistic is that promise? Let’s review.
June 2014: Voters approved Proposition B requiring developers to seek voter approval prior to construction of any project on land under Port Authority jurisdiction that exceeds current heights limits.
February 2015: Calle 24, a group of Mission District businesses, nonprofits and residents, proposed a moratorium on market-rate development projects in the district. Supervisor David Campos, who represents the Mission, indicated he will propose legislation to achieve this objective.
March 2015: Aaron Peskin, one of the backers of the No on Washington 8 campaign, declared he is in the race for Supervisorial District 3.
April 2015: On April 7, the Board of Supervisors spent time deciding whether to side with the owner-builder of a duplex in District 8 or side with the challenger under CEQA, a next-door neighbor living in a very similar duplex. The owner’s initial plans were denied by the Planning Commission last November (duplex too big and out of neighborhood character). After a number of modifications and approval by the Planning Commission, the project was stopped again by the neighbor. The Supervisors approved the project, but there is no guarantee that the neighbor will not now bring a legal suit.
During the Board meetings’ public input period, a member of the LPSF asked the obvious question: How long will it take for Mayor Lee to build 30,000 residential units when it takes seven months just to obtain approval to start the building of one little building intended to be owner occupied?
Calle 24 dubbed a projected market-rate 10-story building in the Mission District “Monster in the Mission,” and stopped it cold. We are assuming Calle 24 would prefer that high-income newcomers to the City buy up currently affordable old buildings and renovate them as luxury residences.
SF Bay Area Renters’ Federation has made good use of the image that common sense brings to mind when visualizing the Monster in the Mission.
The Libertarian Party of San Francisco, host of “Tax Day Symposium 2015: Housing for All – The Supply, The Planning and The Realities,” wishes to thank everyone who gave freely of their time to help make this event a success.
Panelists Randal O’Toole and Sonja Trauss, as well as moderator Starchild, kept the audience totally engaged throughout the two hours of presentations and audience participation. The audience was still going strong with questions and comments all the way up to closing time. We are immensely appreciative to our audience, who came in spite of the rain and in spite of the fact that we had no choice but to hold the event on a week that is traditionally reserved for family gatherings.
Much appreciation also goes to two of our partners in liberty who posted the event on their websites and sent out announcements to their group members: Bay Area Citizens and Golden Gate Liberty Revolution.
Our panel discussion was not intended to be an echo chamber, but a forum where divergent views would be expressed, since out of divergent views often comes consensus and eventual solutions. Some of the principal ideas presented by panelists and guests were:
*The Bay Area does not have a housing problem. It has a zoning problem.
*People prefer to live in single-family homes rather than tall buildings.
*High multi-purpose buildings provide for good live-work-recreation spaces.
*Technology has reduced harmful emissions.
*We can implement inexpensive local and intercity buses.
*Water allocation without pricing mechanisms encourages waste.
*Farmers overuse water rather than lose their allocation.
*Density is the solution. Only 5% of California land is used for people.
*Density destroys quality of life and produces dangers.
*We live in earthquake territory.
*The current push for density is the result of the UN Agenda 21 mandate.
*Dense population corridors arose in early American urban planning.
In spite of all the seeming contradiction, the objective of creating livable -- and pleasant -- space by making more realistic land-use policy and by developing technology able to build safe multi-use high buildings seemed to win the day.
Lots was discussed, but so much more was left to discuss, such as the specifics of how we can modify current land-use policy (Plan Bay Area, for example) to allow for more realistic outcomes.
Written by guest poster Phil Berg
It's the money, stupid
There are two things involved in any transaction, the stuff and the money. It used to be that gas was five cents a gallon. Now it's three bucks. It's still the same old gas. So what has changed? The bucks have changed. The same goes for housing--more bucks chasing a fixed housing stock.
Let’s follow the money. But before I continue, I should say that almost everybody thinks that money is too complicated. It is much easier to make an emotional decision to just throw up your hands and blame greed. Blaming a broken market on greed is like blaming an airplane crash on gravity. Of course gravity is to blame, but the other reasons need to be investigated.
Following the money
One source of more money chasing housing is mortgages. The cash for mortgages largely comes from banks. Now, most people think that banks just recycle money from depositors. OK, this is right where most people stop listening and change the topic. But right here is the crux of the problem.
It is a little complicated. This is largely because we like to think that things work in a logical way. Honesty works in a logical. Fraud is more complicated. The machinery for creating more money for mortgages, or any other credit, is a fraud. That is a strong statement, but please just entertain the idea. Think about it for a while after you read this.
You will not be alone in being dazed by what I am about to write. No less a famous liberal economist, John Kenneth Galbraith, said that, “The mind is repelled by the notion of how money creation works.”
So here goes
We will start with a car loan, so as not to be distracted by the complications of real estate.