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Janie Lazar is the chair of End of Life Ireland.
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Some people have said some things about my level of political insight, thanks to them, even if I don’t
really think it’s that impressive most of the time. Actually, whatever level of insight that I do have, I
think is just down to two habits. One is, when you’re discussing any topic, to clearly define what is
the actual problem that you are trying to solve. The second is, if you think of, or hear of a solution,
you consider if it’s implemented, ‘what happens next?’ or ‘then what?’. Basically try to anticipate the
second-next step, as well as the next one.
Debates on politics and social issues often take the form of saying X is a problem, we should do Y to
solve it. What some people maybe miss out on is, if you solve problem X, or if you take action Y, if
that happens what will happen as a result of that?
I suppose the average person isn’t really required to think out their position on the West Lothian
question or the Congress of Vienna, but there are some topics that are very common in popular
discussion, debated from bar stools and office microwaves up and down country, where people
don’t seem to do that, which is fair enough, but sometimes it seems that our politicians, our
journalists, the people who are actually paid to do this, their debate isn’t of a much better quality.
I was thinking of this listening to Mark O’Halloran on the Mario Rosenstock Podcast a while back, I
mentioned this interview a couple of podcasts ago, it’s worth hearing what he had to say.
That’s not the greatest tragedy that comes out of the housing crisis, but only because there are
much bigger tragedies out there. It does though, I think, bring home to people who don’t have to
think of those difficulties, what it is like if you do; how the other half lives.
A little bit later Mario Rosenstock interjects saying that people like Mark should be given more credit
– literally and figuratively – by the banks.
Now it’s not the job of either Mark O’Halloran or Mario Rosenstock to be experts on macroeconomic
policy, but what they’re saying links in with a theme that can be seen often in social media, and
sometimes in from professional journalists and elected politicians.
Basically saying that someone is being denied a mortgage for what seems like an unfair reason, and
that the banks should be forced to give them the loan if they, for example, have shown that they are
able to pay in rent an equivalent amount to the repayment, or saying that the government should
give or that group a tax break money to allow them to buy a house, or a grant to take account of the
fact that they can’t get help from wealthy parents or whatever.
These might seem like good ideas for the individual, they could potentially allow an individual to buy
a house, but they just don’t work at a society level.
If you pass a law that says that the bank has to give a mortgage to Mary Murphy of 21 High Street,
that might suit her, but you can’t make laws like that, laws apply to everyone, or at least everyone in
a particular position. And if you make a law that says that the bank has to give everyone, or even
everyone in a particular class of person, a mortgage, that doesn’t change the number of houses
available.
All that would do is allow some people who are after a house to outbid some other people who are
after a house. It might change who gets those houses, it might, but it mightn’t, because the original
people might be able to outbid them back. The thing that is certain not to change is that there would
be an equal number of people who need a house but don’t get it. And the one thing that would be
certain to change is that whoever ends up with the house would be paying more for it.
It’s pretty simple supply and demand, more buyers and more money in the market, chasing the same
number of houses means prices go up.
Well, you’d think that it’s pretty simple but the government has sunk almost a quarter of a billion
euro into the Help to Buy scheme. €240,000,000. To help them get a deposit together, the scheme
basically gives up to €30,000 of taxpayers’ cash to each first time buyers, for free. Except it doesn’t,
because the developers, the builders know that that it gives up to €30,000 of taxpayers’ cash to each
first time buyer, so they put their prices up to match.
So it gives €30,000 of taxpayers’ cash for each first time buyers, for free to the developers. Actually,
it’s not that bad. It’s worse. Much worse. Because with that extra €30 grand of a deposit, it means
that homebuyers can leverage it go get a considerably bigger mortgage. So the developers are able
to jack up their prices by far more than €30 grand.
So not only is the taxpayer stiffed for €30 grand on every transaction, the homebuyers end up having
to repay a bigger mortgage, plus interest, for decades, and the developers make hugely inflated
profits.
It’s not that complicated really, but for some reason, our many of our politicians are dedicated to
keeping this scheme, which is currently set to run to the end of 2024. Housing Minister Darragh
O’Brien has said he it extended for another two years. Purely by coincidence, Darragh O’Brien is the
Fianna Fáil TD for the same constituency, and also holds the same ministry as his predecessor, Ray
Burke, who was famously up to his neck in planning corruption and was eventually jailed, not for
taking bribes, but for failing to pay tax on a bribe that he had taken.
Another issue that I think is a bit similar is traffic congestion, and urban planners even have a
sarcastic name for the proposed solution, they call it just one more lane, meaning that if just one
more lane was added to the traffic flow in the street, just one more bypass was built, just one more
motorway, then that would solve congestion.
But it never does. In fact, cities with more car space invariably suffer from more congestion.
The reason is that people come up with this idea, despite all the evidence that it doesn’t work is that
they aren’t defining the problem, and they aren’t thinking of what would happen next. If a bypass or
another lane that might solve the immediate problem for them and a few people around them, but
if you do that at a society level, and devote far more surface area to cars, then everything else is
further apart, far more people have to drive and drive further and the congestion gets worse.
But the first step is to define the problem. What is traffic congestion? Maybe a lot of people haven’t
really given this much thought, but a traffic jam is a queue. People are queuing in their cars.
Queues happen in two circumstances. Firstly, when there isn’t enough stuff. If there is a famine,
you’re going to get queues for food. If there is a very popular musician playing, you’re going to get a
queue for tickets – because the demand for food or concert tickets or whatever exceeds the supply.
The second circumstance where you get a queue is where, even if there is enough supply, the
distribution of that supply is constricted – like a bus queue. Even if there are enough seats for
everyone at the bus stop, there isn’t enough space for everyone to get on and pay or beep their card
at the same time, so people have to queue to do that. So that’s a shortage too, but it’s a shortage of
access to the thing people want, rather than a shortage of the thing itself.
A traffic jam is probably both of these sorts of queue. Lots of people want to drive into, say, Dublin
city centre at the same time, and there isn’t enough road space for them all to do it. The demand
exceeds the supply, and the queues of drivers waiting their turn to use the city centre streets radiate
out on the approach roads to the city. That’s queuing for supply.
Also, drivers must queue for distribution. Those traffic jams on the arterial roads are drivers waiting
their turn to get into the city to use the road space in the first place. This is why the just one more
lane approach always fails. All it does is move the queue; another lane can get you closer to where
you want to be, but it can’t change the fact that supply exceeds demand, there isn’t enough room
for the cars of all the drivers who want to be at the destination.
That fact is totally immutable, because the reason those drivers want to be at that destination is
because it is a place of very dense economic activity. Car drivers just take up more space than exists.
It’s like a bread queue in a famine. If it’s 100 people long, you could make the queue shorter by
getting people to stand in twos, side-by-side. Then most people would be closer to the bakery, the
queue would be only 50 people long, but – and this is the point – that doesn’t mean that there is any
more bread to go around, just like there isn’t more space in the city to drive around because you
make the approach road a four-land motorway instead of a two-lane one.
Economists have a name for this, and it doesn’t sound good – it comes straight from the idea of
famine. The word they use is ‘rationing’. When there isn’t enough of something, be it road-space or
new homes, there has to be a rationing mechanism – basically there isn’t enough to go around, so
there has to be a mechanism to decide who gets some and who doesn’t.
In a market, that mechanism is pricing. If there is more demand than supply, the price goes up until
it is beyond the means of some buyers, and it keeps going up until the number of buyers is the same
as the amount of whatever-it-is that’s available.
That’s what’s happening with housing. There isn’t enough, so the prices keep going up until enough
people are excluded from the market to make the number of buyers equal the number of houses on
offer. All the all the Help to Buy schemes don’t change the number of buyers, they don’t change the
number of houses on offer, they just increase the price point at which enough people are forced out
of the market to equalise the number of remaining buyers and the number of houses on offer.
But with roads, with congestion, with traffic jams, there is no pricing mechanism. There isn’t anyone
putting up the cost that you have to pay to drive into the city centre. But there is still a rationing
mechanism, it’s basically how long are you willing to sit in traffic.
The longer you are willing to sit in your car going nowhere, the more likely you are to get some of
that valuable city-centre road space. Now, that’s not a fixed amount – if more people come along
willing to sit in traffic for longer, then you will have to match their bid, so to speak, or give up trying
to drive there.
These two problems have totally different solutions by the way. The solution to the housing crisis is
to build. Butlid the right sort of houses with the right amenities in the right places. There is one way
to achieve that. Scrap every subsidy to the building industry, and shift the tax burden away from
work and onto property instead, so that people don’t see a house as a miracle wealth-creating
machine, but as a place to live, and tax the bejazus out of undeveloped zoned land, so that
speculators would get poorer, not richer by refusing to develop it.
When there are enough houses, you don’t need to use price as a rationing mechanism.
For traffic congestion, you can’t fix that by building. Not because it’s difficult, because it’s
impossible. Every city that tried it has failed, and it’s for a fairly simple reason. The more land space
you devote to cars, the less there is for everything else, so they have to be further apart, so more
people have to drive, and drive further to get to them, so the more space you need for cars, so
everything else needs to be further apart again, so you need to drive even further and so on.
In this case, the solution is a pricing mechanism. You’ve got to pay a bus fare to take the bus into
town, and you’d have to pay a car fare to take your car into town. And the price of that fare would
be set a level that allowed in enough cars, delivery trucks, whatever to pay that fare without bringing
the city to a standstill.
That might be good value for delivery drivers and tradespeople – the cost could be more than offset
by the extra efficiency, they’d be able to do far more jobs in the day. Other people might think that
the price is worth paying just to drive around freely, but all those fees would create a big pot of
money that could be used to massively expand and improve public transport, so everyone could still
get where they are going.
And it’s at this point that the people who otherwise are hard-line Austrian economist small-
government fundamentalists who want to bring the free market into every aspect of life, make
education and health care into private businesses for fee-paying customers suddenly turn into
bearded socialists flying the red-flag, singing the Internationale and saying that no, no, no the right
to drive on the crowded streets of our cities should be provided by the government, to hell with the
expense, the taxpayer will pay, and the traffic jams will be distributed equally among the masses.
