Are we achieving the outcomes we want?

The housing crisis, clean energy, ESG, and dentists.

Next:Economy Newsletter AI generated image created with Adobe Firefly   Apologies to any dentists in the crowd Here's an admittedly "random" take from pundit Matthew Yglesias: "The dental industry is significantly under-regulated and under-scrutinized in regard to its science and ethics." (Yglesias has been riding this hobbyhorse for at least a decade , so maybe not actually that random.) Yglesias isn't against oral health—he notes that a public healthcare option would be the most "rational" (yet "politically unrealistic") policy. Instead, he maintains that public health is being encumbered by regulation that, among other things, unfairly enriches dentists by limiting the care dental hygienists (who already do the lion's share of regular cleanings and X-rays) can provide. It's an interesting read that gets at the burdens regulations can create—and what happens when incentives are out of sync with the outcomes regulators want to achieve.   The housing crisis is a symptom of stagnant regulation One area fraught with regulatory burden: the housing industry. Restrictive zoning laws, labyrinthine bureaucracy, and review policies that make it easy for even a single person to delay a project all contribute to a lengthy development process—and discourage new development from taking place. And as Noah Smith explains, the impact reaches beyond simple affordability: blue states " are driving people out. . .by refusing to build enough housing," and they're losing seats in the House of Representatives as a consequence. "If blue states are going to thrive in the 21st century," Smith declares, "they need to relearn how to build, build, build." And that means contending with overly restrictive land-use permitting and ineffective tax policy that fails to incentivize growth. Matthew Yglesias argues something similar in a post on housing reform in Maryland. Taking Gov. Wes Moore and housing secretary Jake Day's plan to "address the housing crisis" as his starting point, Yglesias considers the trade-offs between radical regulatory reform such as ending single-family zoning (which has a lower chance of success and would undoubtedly incite a backlash) and smaller, more moderate proposals that actually get implemented . While applauding the vision behind Moore and Day's proposal, Yglesias advises that effective housing reform would do better to focus on making a "practical impact"—that is to say, "actually add housing." As he notes, The state doesn't need an affordable housing policy, it needs an economic growth policy. And the key to growth in a state like Maryland is reducing regulatory barriers to the creation of market-rate housing. That doesn't mean you totally ignore political reality, but it does mean that growth has to be your focus and "how many extra units will this generate?" is the question you should be asking. . . .Because if you're not adding housing, it's not really worth having a big abstract conversation about the sanctity of single-family zoning. + Housing regulations cover not only where you can build but how. Modular housing has the potential to upend the industry. So "why do we build houses in the same way that we did 125 years ago?" asks the New York Times' Binyamin Appelbaum. (Spoiler: "the idiosyncrasies of local building codes" are one thing holding us back.) + Effective tax policy can also encourage growth. As Vox's Rachel Cohen reports, Detroit is experimenting with a plan to replace property taxes with a "land-value tax" that "tax[es] land at a higher rate than any buildings or amenities on the property"—with the twin goals of discouraging owners from holding on to vacant lots and boosting growth by incentivizing development. + Another take on tax policy: last year Los Angeles implemented a "mansion tax" on real estate sales over $5 million, the proceeds of which are meant to fund "affordable housing projects, tenant protections and homelessness prevention efforts." It's been on the books for nine months. Bloomberg's Sarah Holder explores the results so far. + More from Bloomberg: "Can a National Zoning Atlas Chart a Way Out of the US Housing Crisis?" + While disagreements over housing reform are often framed in terms of NIMBYs versus YIMBYs, sometimes the most opposition occurs between groups that share the same goals but have competing visions for putting them into practice. The Atlantic's Jerusalem Demsas explores the fallout of Minneapolis's plan to completely eliminate single-family zoning among the city's broader "environmentalist" community.   We need smart reform None of this is to suggest that we toss all regulations and simply leave things to the market to sort out. Effective regulation ensures that our airplanes are safe, our communities are protected from pollution, and even that our raincoats are free from toxins . But as UC Davis law professor Christopher Elmendorf argues in the Atlantic, when crafting regulation, lawmakers must also consider the "downside of too much legal review." Examining the recently proposed Clean Electricity and Transmission Acceleration Act, Elmendorf worries that for all its benefits, the act also institutes "environmental-review and public-participation rules enacted by left-leaning cities and states [that] empower objectors to sue over minor procedural matters"—and that these will inevitably hinder development. He reasons: No doubt this was done with the best of intentions: to hear from the public, to mitigate projects' adverse effects, and above all to avoid repeating the mistakes of the past, when disadvantaged communities were bulldozed for interstate highways or to cure "blight" via so-called urban renewal. Responding to this history, the Democrats' bill adds a host of new requirements for additional studies (backed by rights to sue) if a project may affect a disadvantaged community. The impulse is all to the good, but the law needs to distinguish between projects that present serious, demonstrable health risks and projects that may offend someone's aesthetic sensibilities or trigger unwarranted fears but pose no real risk of injury. . . . The question raised by the Clean Electricity and Transmission Acceleration Act is whether the Democrats and the environmental groups within their coalition can find a way to hang together without giving more power to clean-energy opponents. To do its part in addressing the climate crisis, the U.S. should be passing laws that defang local obstructionists rather than sharpen their teeth. Regulation isn't the issue in and of itself. As I argued in WTF? What's the Future and Why It's Up to Us, "Perhaps the real problem is that we just have the wrong kind , a mountain of paper rules, inefficient processes, and little ability to adjust the rules or the processes when we discover the inevitable unintended consequences." Elmendorf reminds us that environmental reviews and public participation rules are well-intentioned, but in practice they aren't (or at least aren't adequately) protecting communities or giving them a voice. So reform may be in order to ensure that we're actually solving for the outcomes that will move society forward, not simply protecting the interests of a single group. And if we aren't, we should rethink those regulations. + Here's the Institute for Progress's "Grand Bargain for Permitting Reform." + And here's more from Elmendorf in Mother Jones: "How Major Environmental Groups Ended Up on the Wrong Side of California's Housing Crisis." + "Cutting red tape" won't be enough. In "A Progressive Take on Permitting Reform: Principles and Policies to Unleash a Faster, More Equitable Green Transition," Johanna Bozuwa and Dustin Mulvaney argue that permitting reform won't solve all the problems that clean energy developers in particular are facing—and may increase the likelihood of "negative impacts such as air or water pollution, economic burden, or biodiversity loss." As an alternative, they propose a number of policies to "enable more coordination and planning," "enhance community participation and consent," and "empower a just transition."   But regulations should address real problems This all presumes that our regulations were created in good faith. But what about punitive regulations dreamt up to protect special interest groups or to exact revenge for otherwise popular policies those regulators may disagree with? At the moment, for instance, there's a growing cottage industry of local politicians working to ban green technology, even when doing so cuts against their economic interest! (One piece of good news from the Associated Press: "States are seeking to upend the decision-making process by grabbing the power to supersede local restrictions and allow state authorities to approve or disapprove locations for utility-scale projects”—just the kind of regulatory reform Elmendorf calls for above.) And now disingenuous lawmakers have dragged ESG into the mix. In his Money Stuff newsletter, Matt Levine considers a Republican-sponsored bill in New Hampshire "that would prohibit the state's treasury, pension fund and executive branch from using investments that consider environmental, social and governance factors." As Levine points out, the whole is "so stupid" because "'ESG' is essentially about considering certain risks to a company's financial results. . . .But if you make it a crime for investors to consider certain financial risks then you get too much of those risks." The outcome probably won't be more pollution, Levine argues—just good old-fashioned grift. And that isn't something any of us should want. (And the New Hampshire House agrees.) If every investor tomorrow said "okay we don't care about the environment," most companies probably wouldn't ramp up their pollution: Their executives probably don't want to pollute unnecessarily, polluting probably wouldn't help the bottom line, and many companies just sit at computers developing software and couldn't pollute much if they wanted to. But if every investor tomorrow said "okay we don't care about governance," then, I mean, "governance" is just a way of saying "somebody makes sure that the CEO is doing a good job and doesn't pay herself too much." If the investors don't care about that, then a lot of CEOs will be happy to give themselves raises and spend more time on the corporate jet to their vacation homes. + Here's Bloomberg columnist John Authers's take on the topic. (You'll have to scroll about halfway down the page.) + London Business School professor Alex Edmans argues that the goal of ESG—“to create long-term value"—is sound. But as the proposed law above illustrates, the term may be carrying around too much baggage to be of use. Edmans suggests "rational sustainability" as an alternative.   —Tim O’Reilly and Peyton Joyce This message was sent to alexvarboffin.abbb@blogger.com. You are receiving this because you've signed up to receive email from us. 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