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In this week’s Grumpy Economist Weekly Rant, John Cochrane examines the growing political demand for government action to make everyday life more affordable. A recent Wall Street Journal poll shows broad support across party lines for price controls, rent caps, higher minimum wages, and subsidies. But Cochrane argues that these popular proposals often overlook a basic economic reality: government cannot make costs disappear. It can shift them to someone else, often making the underlying problems worse.
From zoning restrictions and tariffs to subsidies and barriers to competition, he argues that many of the costs Americans face are reinforced by existing policies. Rather than adding new interventions, Cochrane makes the case for removing regulatory barriers, expanding competition, and allowing markets to bring costs down.
Transcript
Hi, I’m John Cochrane, senior fellow here at the Hoover Institution, and welcome to my Grumpy Economist Weekly Rant.
Today, I’m gonna rant about affordability. Affordability’s in the news. People left and right want the government to do something. I’ve been gently ignoring most of this economic nonsense, but a Wall Street Journal survey really brought it to my attention.
Populist policies are hugely popular among Democrats, Republicans, and independents. Cap credit card interest rates at 10%: 78%, 83%, and 76% are for it. Limit rent increases to 5% above the rate of inflation: 65% overall like this. Raise the minimum wage to $20 an hour: 57% overall.
As you probably know, because you listen to my rants, price, wage, and rent controls have led to rationing lines, black markets, and corruption every time they’ve been tried. Here we go again.
Require health insurance companies to cover services and medicines prescribed by doctors: 96%, 82%, and 86% are for it. Because, of course, there’s a magic pot of money out there, and said companies wouldn’t possibly just raise premiums.
Restrict large institutional investors from buying large numbers of single-family homes: 77%, 77%, and 69% for it. Because, of course, those investors just love to buy houses and leave them empty. Why don’t we get rid of used car dealers, stockbrokers, and all of eBay while we’re at it? And large institutional home builders.
Cap childcare costs for working families: 90%, 61%, and 67%. Even the question invokes magic. Who does the capping, and how? Massive subsidies, price controls, and then how do you get childcare workers to show up?
Run a government website that offers discounted prices for prescription drugs: 76%, 75%, 63% for it. Oh yeah, let’s see. Like the Obamacare website, and remember how student loans cut out the middleman and lowered costs?
More bad ideas abound. Export controls, price controls, and subsidies are all in vogue. Does anyone remember the charming 1970s?
The only clunkers in the poll: open government-run grocery stores that sell food at discounted prices, 37%. It seems people do remember the last trip to the DMV. Send Americans $5,000 checks if Republicans maintain control of Congress: 23% in favor.
Now, as I hope you know, the government can’t, by taxing, spending, borrowing, or regulating, make anything more affordable overall. All it can do is try to make someone else pay for it, and then often give you something you don’t really want and lose half the money along the way.
Subsidies against fixed supply, like energy and housing, just drive prices up even more.
Those $5,000 checks are interesting. Yes, it’s a terrible idea overall and simple enough that Americans can see that the money has to come from somewhere. But actually, it’s a whole lot better than all the other ideas. If you want to give Americans $5,000 more purchasing power, it’s a lot better just to give them cash than to put in price controls or subsidies for particular goods. Well, it’s unpopular anyway.
Now, what could the government do to make things affordable? As always, start by getting out of the way.
A lot of policy and regulation deliberately make things more expensive. The biggest price rises are in education, health, and housing, exactly where the government already intervenes the most. When you’re in a hole, stop digging.
Housing? Let’s get serious about zoning and permit reform. Allow portable mortgages. Remove rent controls forever. Allow people to rent rooms.
Gas? Let’s get rid of ethanol requirements. They add about 30 cents a gallon to diesel. They drive up corn prices, and they don’t do anything for the environment.
Abolish the Jones Act, which restricts shipping between states to US-manned and -made ships and has driven up transport costs as it’s destroyed the US shipbuilding industry.
Eliminate all the tariffs. Let Americans buy Chinese cars at about half the price of domestic cars. Yes, with data controls. Washing machines assembled in Mexico don’t threaten national security.
Allow automated ports. Get going on environmental permit reform. End agricultural price supports and quotas. Free up labor markets. Remove unneeded occupational licensing. Stop subsidizing higher education with basically free student loans. Open up healthcare and insurance to competition.
I could go on, as you can probably tell. As Pogo said, “We’ve met the enemy, and he is us.” As Aesop advised, “Doctor, heal thyself.”
Thanks for listening. And if you liked my Weekly Rant, please click to subscribe.
John H. Cochrane is the Rose-Marie and Jack Anderson Senior Fellow of the Hoover Institution at Stanford University. An economist specializing in financial economics and macroeconomics, he is the author of The Fiscal Theory of the Price Level. He also authors a popular Substack called The Grumpy Economist.