Value, Prices, and Controls

With a glance towards housing

Subjective Value and the Margin

In as much as we are conscious of our wants and needs, we place a value on the goods available that we expect will satisfy them. In this way, we say the value of a good is subjective in that we assign a value to it based entirely on how well it satisfies our wants. That is not to say certain objective characteristics do not make a good qualitatively better or worse at a specific task, only that the value we confer on the good is not an inherent characteristic of the good itself.

Voluntary Exchange and Price

A voluntary exchange involves at least two parties who value what they receive through trading more than what they must give up. Almost by definition then, exchanges are mutually beneficial at the time they are made, otherwise it would be hard to imagine why exchanges take place at all.¹

Price Controls, a Primer

Price controls have been used by coercive institutions throughout history, commonly placed on markets for food, labor, and housing. While the effects are the same the justifications seem to change to fit the political arena of the time. For example, price controls on grain in ancient Egypt were justified to prevent reoccurring famines⁴, while in 18th century France price controls on grain were justified to enforce a “reasonable price” for bread in the face of rampant inflation⁵ (continually justified, I’m sure, until its official removal 200 years later in 1976).

Housing in Particular

Second only to interest rate manipulation, price controls on housing are likely the most insidious and devastating of the price controls. But much like the examples above, the justifications for rent control (and land-use restrictions in general) have ranged enormously, from a need to overturn conspiring landlords or developers, to prevent the rich from “buying all the housing”, to protect tenants from inflation or “gentrification”, or to make rents “affordable” because they’re considered “too high”.

Aspiring economist and data scientist.