Tag Archives: Supreme Court

11.30.2012 | Do You Like Rent Control?

Asked if it makes sense to mandate lower rents for some apartments in large cities, many of us say yes. Lower rents facilitate diversity and they enable middle income municipal workers to live close to home. Affordability is good. Yes?

The residents of Cambridge, Massachusetts displayed their support for rent control when they voted to continue it in 1995. However, because the rent control mandate lost in a statewide referendum, Cambridge residents were defeated.

Maybe, though, they really won.

Looking closely at the impact of capping apartment rents on all properties built before 1969 in Cambridge, 2 researchers uncovered a steep downside. Reducing rents 25% to 40% lower than nearby apartments made the value of all housing– controlled and non-controlled–decline. In addition, for rent controlled properties, the peeling paint and loose railings were examples of generally poor upkeep. And, as all econ books remind us, rent ceilings create shortages because, at a lower price, more quantity is demanded than the amount supplied.

After 1995, when the controls were lifted, assessed values rose. For previously controlled properties, they went up approximately 20%. For non-controlled buildings, the increase was even more. Totally, the amount values rose from 1994 to 2004 because rent control ended was estimated as close to $1.8 billion.

Our bottom line: The connection might seem distant but let’s return to a previous post on price gouging. Both rent control and anti-price gouging laws sound like attractive public policies with considerable voter appeal. However, both have negative externalities– a harmful impact experienced by an uninvolved third party–that represent the hidden cost we all pay.

A final fact: There are approximately 1 million rent controlled units in NYC.

Sources and resources: Thanks to Timothy Taylor for the Conversable Economist post that explains the impact of rent control in Cambridge, MA and for his link to the original study. If you want to read more about rent control, here is the story of a challenge in NYC that involved the Supreme Court. For anti-price gouging laws, here is what NJ Governor Christie is enforcing and here is a criticism.

Posted by: adminEcon
Tags: anti price gouging laws, apartment rents, Cambridge, cost benefit, Governor Christie, Harmon v. Kimmel, landlords, Massachusetts, negative externalities, NJ, NYC, politics v economics, price ceilings, price controls, price gouging, shortages, Supreme Court
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10.12.2012 | The Supreme Court, Starbucks and Human Capital

Saying affirmative action was the reason she was rejected from the University of Texas, Abigail Fisher sued. The University responded that it was okay for race to be a part of their admissions process. And Starbucks, Wal-Mart and 55 other prominent US corporations agreed.

On October 10, the Supreme Court heard the arguments.

For some brief background, we can go to 2003 when the Supreme Court referred to the landmark 1978 Bakke case. Permitting race as one of many criteria for college admissions but prohibiting minority quotas, both decisions said that diversity was a valid goal.

Although the case is about education, in a “friend of the court” brief, 57 businesses said they too cared about diversity. As one law professor explained, ”They are looking at the pipeline,…And the university represents their pipeline for building out their workforce.”

In addition to colleges and corporations, the case also takes us to economic growth. Looking at how nations should assess diversity, a soon to be published paper from economists at Williams College and Brown University said there is a connection between genetic diversity and national income. Using the US as one example, their conclusion says balance rather than too much diversity or too much homogeneity is optimal.

Our bottom line: Isn’t all of this about developing the human capital that we need to fuel our GDP?

Sources and Resources: My reading about how Fisher v. University of Texas connected to the business community began with this Marketplace.org report, and then continued with the brief businesses submitted to the Supreme Court and a Washington Post summary of and quote from the case. Meanwhile, a marginalrevolution.com post, a Nature article and the 2 researchers’ paper provided a perfect summary of genetic diversity issues–a topic that is generating considerable controversy.

Posted by: adminEcon
Tags: affirmative action, Bakke, economic growth, Fisher v. University of Texas, GDP, genetic diversity, Grutter, human capital, Starbucks, Supreme Court, Wal-Mart
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06.22.2012 | More Than a Mandate

Yesterday, the odds on intrade were 76% that the Supreme Court will declare the health care insurance mandate unconstitutional.

This started me thinking about Social Security during 1935. Several states had old age insurance and the federal government was feeling the pressure. Advocates of a federal system agreed that means testing had to be avoided because it demeaned those who did not make the cut. The solution was shared employee/employer funding through a payroll tax. Having earned the benefits, rich and poor would feel no stigma when the check arrived in the mail. Perceived as a universal entitlement, Social Security would not be a poverty program.

We could say that Social Security has been successful because it became a “social norm.”

NY Times financial writer Eduardo Porter suggests that the mandate to purchase and receive health insurance in the Affordable Care Act also needs to become a social norm. If it does not, then healthy individuals will figure out ways to sidestep the system. And if they do, funding will be insufficient to support those who need medical assistance. So he says, it does not matter what the Supreme Court decides. The insurance buying mandate will only work when it becomes our social norm. And right now, a CBS News/NY Times poll indicates that close to 70 percent of us oppose it.

Our bottom line: Like Social Security, should a health care insurance mandate become a social norm?

Here, you can check current intrade odds on the Supreme Court individual health care mandate decision. For Social Security history, The Real Deal (1999) by S.J. Schieber and J.B. Shoven and The Predictable Surprise (2012) by S.J. Schieber provide excellent facts, insights, and program alternatives that give Porter’s column relevant background.

Posted by: adminEcon
Tags: Affordable Care Act, Franklin D. Roosevelt, health care insurance mandate, pay-as-you-go, payroll tax, social norm, social security, Supreme Court
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06.15.2012 | “The Broccoli Question”

In 1990 President George H.W. Bush banned broccoli from Air Force One.

”I do not like broccoli, and I haven’t liked it since I was a little kid and my mother made me eat it. And I’m President of the United States, and I’m not going to eat any more broccoli!”

Now again, as we await a Supreme Court health care decision, broccoli is in the news. Called “The Broccoli Question, ” whether we can be forced to buy broccoli has been linked to the Court’s decision. Or, as stated by Justice Scalia, “So you define the market as food, therefore, everybody’s in the market; therefore you could make people buy broccoli?”

When the Court heard the case last March, broccoli was mentioned 8 times–maybe because it brings simplicity to complex issues. Those who oppose a health insurance individual mandate are delighted with the implications it clearly conveys about the potential power of government. Meanwhile, those who support the Affordable Care Act say the market for buying health insurance has no connection to a healthy food mandate. Everyone agrees, though, that the broccoli question was memorable.

You might enjoy this 1990 article about banning broccoli while its “legal” history is here in a recent New York Times article. During March, when the Court heard the oral arguments, APM’s Marketplace looked more closely at how broccoli connected to health care. And finally, here, econ life looked at the case and the Commerce Clause.

Posted by: adminEcon
Tags: "The Broccoli Question, Affordable Care Act, individual mandate, Justice Scalia, President George H.W. Bush, Supreme Court
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03.26.2012 | The Affordable Care Act, the Supreme Court and Line-Standers

If you don’t have 3 days to spare and want to watch the oral arguments for the Affordable Care Act, you can hire a professional line-stander. Charging close to $36 an hour to wait outside the Supreme Court, they started the line last Friday.

There are approximately 400 seats in the courtroom. With each of the Justices allowed 9 people, and the Court staff, certain Congressional leaders, members of the Supreme Court Bar and the media attending, the room fills up quickly. In addition, 60 seats have been allotted to the public for each day’s arguments and another 34 for a 3 to 5 minute peek at the proceedings. With tomorrow (3/27) considered prime because of the individual mandate oral arguments, people might say no for their Monday seat and stay in line for another day.

If you cannot get in, and no radio, no TV, no commercial photos or video, how to be a part of history? Each day, the audio should be available here by 2:00 and you can see the schedule here for the case, formally called Department of Health and Human Services et al. v. State of Florida et al.

You can look at the issues at econlife.

The Economic Lesson

The alternative you sacrifice–your time if you stand in line or your money if you pay a line-stander–is the opportunity cost of the decision. Whatever the Supreme Court decides for Department of Health and Human Services et al. v. State of Florida et al, the opportunity cost will be considerable.

An Economic Question: What is the opportunity cost of a decision you recently made? (Remember that choosing is refusing.)

Posted by: adminEcon
Tags: Affordable Care Act, opportunity cost, professional line standers, Supreme Court
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