Poor Doors and Rent Control. @RichardAEpstein, @HooverInst.

Jul 14, 2017, 12:00 AM

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One Year Ago: Poor Doors and Rent Control. @RichardAEpstein, @HooverInst. “…As Schwartz acknowledges, private firms (even from egalitarian Norway) recognize the needed degree of differentiation. Yet they also recognize that there are gains from trade by having large facilities that can accommodate multiple tiers of service. There are major economies of scale from running large ships because it allows for improved levels of certain common services, e.g., the engines and navigation equipment that are desired by all regardless of the tier of services they purchase. Thus if #NorwegianCruiseLine decided to move its luxury passengers to a separate ship, the quality of service received by all, rich or not, would be worse. The rich would be consigned to a smaller ship with fewer services than they desire, and the less affluent would also have to pay more for inferior services, since the more affluent passengers would not be contributing their funds to the common facilities. The usual conclusion then holds: forced integration of consumers into a single group would make everyone worse off. “This conclusion should come as no surprise. If the removal of the separate tiers of service allowed for better treatment for all passengers, cruise liners would adopt that approach voluntarily as a sure path to profit maximization. There is no conflict between Norwegian Cruise Line and the passengers who flock to its services. The only conflict is with indignant writers like Schwartz who see something vaguely insidious in relationships that they do not understand. But taking anger and offense into account does not improve the social calculus. The proper view of the problem of class differences is as follows: the greater the deviation between the established practices in voluntary markets and the proposed reforms, the higher the likelihood that forced changes will produce large social losses across the board. “And what’s true at sea is also true on land….” http://www.hoover.org/research/hidden-virtues-income-inequality?utmsource=hdr&utmmedium=email&utm_campaign=2016-05-03