Monday, 24 April 2017

Unintended Consequences

"Unintended" and "consequences" are two words in the English language that we understand pretty well on their own. Further, modifying the noun "consequences" with the adjective "unintended" is pretty simple to understand. But when you see the words "unintended consequences" together, you aren't looking at a noun you understand modified in an understandable way by an adjective you understand. You are looking at technical jargon, and it doesn't mean what you think it means.

Today, Don Pittis wrote a piece for the CBC on the unintended consequences of meddling in the housing market. It spells out various things that could happen if you try to reduce housing prices with government intervention. Everything from popping the bubble to creating a rental shortage. I might stop to point out that popping the bubble is actually the intended effect of the policy, and a rental shortage is something we already have, but as I said, neither "unintended" nor "consequences" mean what you think they mean here.

"Unintended consequences" means, "I'll apply confirmation bias to pretend that any bad outcomes were things I predicted." "Unintended consequences" means, "I've generalized from the fact that government sometimes intervention causes problems to the position that not only does it always cause problems but that the problems are always worse than the problem it was trying to solve." "Unintended consequences" means "at some point in the future, something will go badly, and when it does, we will use our position as experts to retaliate against you for this move by saying it is your fault."

That last one is made explicit in the article, where the Ontario government is essentially threatened that they will lose elections if they intervene in housing markets. Which is a little like predicting Halloween will be on October 31 if they intervene in housing markets, true in classical logic but extremely misleading in English.

The only prediction worth anything on the list is the point that targeting housing prices in Toronto may simply spread the problem to another part of the country, like police cleaning up a notorious drug-buying corner to find that the next block over is the new notorious drug-buying corner. Of course this doesn't argue against intervening, it simply argues against pin-point intervention and for consistent widespread intervention.

If economists used the term "unintended consequences" to mean results that we didn't mean to happen, they might notice that the current problem in the housing market is an unintended consequence of the kinds of markets they advocate for. I don't think it was the intention of any economist advocate of markets that houses big cities would have houses that no one can afford to live in, that literally sit empty because their purchasers don't care if they are put to and use. That's a tremendous inefficiency from any perspective. But it's also an outcome of a system were money takes precedence over things that are actually of use to people - where our metric of well-being has become more important than actual well-being.

But this isn't just a screed against economics. Every time I hear someone talk about this problem I see they've failed to grasp the essential underpinnings of it. The point of capitalism is that people with more money are supposed to have things better than people with less money. People talk about how a family in Toronto can't afford a detached home anymore but they have no idea how much they think that home should cost or how much money that working family should make. People talk about how people should have housing "choices" but they haven't thought through what that means. The market is going to provide you with a choice of this $1.5M home or that $1.5M home, not a choice of whether you have $1.5M to spend.

I like the idea of a vacant home tax because it's an expression of society's interest in land being put to use. I really dislike the idea of a foreign buyers tax because it's an expression of society's idea that it's the non-white people who are to blame.

But if we think it is absurd that a person can decide to sit on homes, leaving them totally unused, as an investment the same way a person might sit on gold or famous works of art, then what we really ought to do is be seizing properties. Not without notice, and not without them being empty for a substantial time, but a vacant home tax is society saying, "You can do that as long as we get a cut," when we should have a law that says, "You can't do that." The "unintended consequence" of this would be a sudden collapse in the value of investment properties, and the "unintended consequence" of that would be that in the future people wouldn't think it was a good idea to invest their money in empty homes. The only way to prevent the spread of the contagion is to make the current investors take a bath.

I've got nothing against Don Pittis who I think does fine work. But I was actually being quite generous when I called "unintended consequences" jargon. Jargon is a term for language that means something specific or technical when used in a particular field or setting. This isn't jargon, it's a coded phrase. Depending on whose saying it, it is either a religious mantra or a veiled threat. It doesn't really mean anything, it is an example of performative language, trying to achieve the outcome of increasing the standing of the speaker.

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