I agree with you, of course. But this is an obvious side effect of problems we have willingly ignored for way too long: wealth inequality, rampant rent-seeking, elites behaving badly with little repercussion, tax laws highly favorable to the wealthy etc etc. If elites want to gather ever-more wealth they should be cognizant of their public image and police themselves. Instead they do the opposite.
I think the authorities made a mistake with the eviction moratorium. I think the mistake occurred because the authorities (CDC) thought that we would see mass evictions when people stopped paying their rent. This thinking should have raised the question: Since landlords use evictions to limit the loss from non-payers, How could they limit this loss when many if not most in some markets would not have the ability to rent the apartment made available by the eviction? Landlords have costs when evicting a tenant. These costs would occur with out new revenues from new tenants to cover them. Thus, landlords would have some incentives not to evict.
Given these incentives, the landlords and their tennants could negotiate a new rental agreement with higher rents covering some, perhaps a very small portion of the losses, after some period of tim I can conceive lots of different arrangements that would satisfy both landlord and tennant. The imposition of the moratorium simply eliminated the possibility of these negotiated settlements.
Once the moratorium ends, these negotiated aggreements may still happen. However, the bargaining power of the tennants may change in ways they will not like. In addtion rents may become higher than they would have if negotiations had taken place earlier. Its not clear that landlords will regain the losses they suffered under the moratorium nor is it clear that the higher rents and possibly other new onerous provisions in new rental agreements will off set the gains ther renters received from the moratorium. I think its safe to say that total welfare will be smaller because of the moratorium.
This loss in welfare is enough to dislike and see the moratorium as a mistake. Although one could decry the moratorium as theft, that position will not allow a discussion of possible other actions during a crisis.
"There are officially no laws, but you already knew that already."
Yes, Arnold, it's time to acknowledge that the barbarians have grabbed power in your country, and the relevant question is what you are planning to do to eject them.
I would rank the eviction moratorium up there with the election "anomalies" as examples of the marked decline in rule of law in the USA. If the regime's solution to an acute problem is to expropriate the property, semi-randomly, of landlords...well what will they think of next?
People are holding US assets, relying on US contract law, as though the strength of the US legal system will be Denmark-tier in 2030, when there's a substantial risk it will be Argentina-tier. There's a potential stampede out of US assets in the works, depending on events. This is why I advise people to hold more Bitcoin and Ether than they dare.
This seems like a very deontological ethical argument and I think two big problems with deontological ethics are that they're 'brittle', in the sense that any violation of the relevant axioms or assumptions logically 'invalidates' the argument, and that they directly ignore consequences.
With respect to 'brittleness', it's NOT obvious to me that 'rental contracts' DO reasonably cover ('widespread') 'emergencies', e.g. a pandemic, or a war (like WW2). It's _also_ the case that contracts are somewhat routinely broken and the underlying 'contract context' (e.g. laws, regulations, and the practical administration of both) DOES provide mechanisms to handle that. In practice, the U.S. seems to be relatively better than other countries in being more flexible in the working of those mechanisms, e.g. personal bankruptcy.
Consequentially, it's very much NOT obvious that landlords or mortgage lenders being _able_ to evict their tenants or foreclose on mortgaged properties would have been of any practical benefit to themselves (as general classes). Widespread evictions and foreclosures would have also been impractical and very likely detrimental _because_ of the pandemic.
Your description of your alternative proposal:
> Could we stem this liquidity crisis by allowing folks to overdraw their checking accounts temporarily, with the government promising the banks to make up any losses that result?
Wouldn't that be an instance of the government breaking 'banking contracts' and thus stealing from banks? Why is that any more moral or ethical than imposing a moratorium on evictions or foreclosures?
I thought Ayn Rand had a very interesting 'workaround' to these issues – namely by qualifying her own very-deontological-like ethics as only 'applying' in 'non-emergencies'.
I was a bit more disappointed that _commercial_ real estate was also bailed-out. That seemed like a _far_ weaker case than for residential real estate. But, plausibly, it may 'pass' the same 'reasonable context' and 'consequential' tests I outlined above too.
More generally, it seems like 'macro-economic' phenomena often run into implicit 'transaction budget cost ceilings' – it's reasonable for individual contracts to be re-negotiated, or for the relevant parties to process an instance of a contract being broken, but it's a very-much qualitatively different matter to do the same thing for MANY contracts at the same point, and effectively impossible to do so in any kind of reasonable manner beyond a fairly low threshold. There's just no effective (and reasonably affordable) mechanisms to do that kind of thing on a big (and 'correlated') scale. All of our mechanisms implicitly assume a generally stable (macro-)economic environment and large-scale emergencies (or disasters) _easily_ break those assumptions.
Kenny: You missed the point - why are landlords singled out to take the brunt of the economic damage of the pandemic? If, as suggested, the government allowing banking overdrafts and promising to make up losses to the banks as a result results in society (US taxpayers) as a whole absorbing the losses as opposed to a specific group (landlords). It is clear that the Federal government has done a miserable job in getting aid (dollars) to those (renters) who have suffered illness or job loss as a result of the pandemic and what Mr. Kling is suggesting would have been a far more efficient and equitable solution to a difficult situation.
I don't think I missed the point – I just disagreed with somewhat and, more accurately, offered some other points I thought should be considered as part of the context.
I'm not sure landlords _were_ "singled out". There have been programs to help them too.
But the government "allowing banking overdrafts" sure seems like it would 'single out' banks. And it's very unclear how exactly that work. A moratorium on evictions might allow some unscrupulous people to refuse to pay rent, even when they could. But allowing anyone and everyone to overdraft a banking account is _much_ more open to abuse. Surely the extraordinarily higher risk and likely incidence of moral hazard in that hypothetical situation should be a consideration, no?
But even without the official moratorium, who would have _performed_ the evictions? I don't think it's legal in any U.S. jurisdiction for landlords to perform them themselves and it certainly seems reasonable to me that the relevant authorities might have refused to perform them regardless.
And even were there no moratorium on evictions, and the relevant authorities had been both willing and able to perform them, and the benefits of all of that outweighed the costs in terms of the pandemic, it's still far from clear to me that that would have benefited landlords very much, or really at all. Maybe _some_ landlords would have benefited, but then someone could paint that hypothetical as 'singling out' the landlords that got hammered. Where I lived – in NYC – lots of units remained vacant for extended periods; even when the tenants had abandoned them.
Something that Tyler Cowen inspired me to think about, early in the pandemic, was along the lines 'What should we be doing _instead_?', i.e. how should we, ideally, have rearranged our economy (and society more generally, including politics) in light of the pandemic? I'm very libertarian, so I would prefer that any such re-organization be entirely private and voluntary, and I wouldn't trust governments to do any better, or not do a _terrible_ job, for lots of reasons. But it still seems to be the case that 'we', or lots of us, found ourselves stuck in 'patterns of specialization and trade' that _turned out_ to be very bad for living during a pandemic. I still think it's worth thinking about ways for us to avoid such 'nominal rigidities'.
I agree with you, of course. But this is an obvious side effect of problems we have willingly ignored for way too long: wealth inequality, rampant rent-seeking, elites behaving badly with little repercussion, tax laws highly favorable to the wealthy etc etc. If elites want to gather ever-more wealth they should be cognizant of their public image and police themselves. Instead they do the opposite.
I think the authorities made a mistake with the eviction moratorium. I think the mistake occurred because the authorities (CDC) thought that we would see mass evictions when people stopped paying their rent. This thinking should have raised the question: Since landlords use evictions to limit the loss from non-payers, How could they limit this loss when many if not most in some markets would not have the ability to rent the apartment made available by the eviction? Landlords have costs when evicting a tenant. These costs would occur with out new revenues from new tenants to cover them. Thus, landlords would have some incentives not to evict.
Given these incentives, the landlords and their tennants could negotiate a new rental agreement with higher rents covering some, perhaps a very small portion of the losses, after some period of tim I can conceive lots of different arrangements that would satisfy both landlord and tennant. The imposition of the moratorium simply eliminated the possibility of these negotiated settlements.
Once the moratorium ends, these negotiated aggreements may still happen. However, the bargaining power of the tennants may change in ways they will not like. In addtion rents may become higher than they would have if negotiations had taken place earlier. Its not clear that landlords will regain the losses they suffered under the moratorium nor is it clear that the higher rents and possibly other new onerous provisions in new rental agreements will off set the gains ther renters received from the moratorium. I think its safe to say that total welfare will be smaller because of the moratorium.
This loss in welfare is enough to dislike and see the moratorium as a mistake. Although one could decry the moratorium as theft, that position will not allow a discussion of possible other actions during a crisis.
A reader of your post in your blog writes
"There are officially no laws, but you already knew that already."
Yes, Arnold, it's time to acknowledge that the barbarians have grabbed power in your country, and the relevant question is what you are planning to do to eject them.
I would rank the eviction moratorium up there with the election "anomalies" as examples of the marked decline in rule of law in the USA. If the regime's solution to an acute problem is to expropriate the property, semi-randomly, of landlords...well what will they think of next?
People are holding US assets, relying on US contract law, as though the strength of the US legal system will be Denmark-tier in 2030, when there's a substantial risk it will be Argentina-tier. There's a potential stampede out of US assets in the works, depending on events. This is why I advise people to hold more Bitcoin and Ether than they dare.
This seems like a very deontological ethical argument and I think two big problems with deontological ethics are that they're 'brittle', in the sense that any violation of the relevant axioms or assumptions logically 'invalidates' the argument, and that they directly ignore consequences.
With respect to 'brittleness', it's NOT obvious to me that 'rental contracts' DO reasonably cover ('widespread') 'emergencies', e.g. a pandemic, or a war (like WW2). It's _also_ the case that contracts are somewhat routinely broken and the underlying 'contract context' (e.g. laws, regulations, and the practical administration of both) DOES provide mechanisms to handle that. In practice, the U.S. seems to be relatively better than other countries in being more flexible in the working of those mechanisms, e.g. personal bankruptcy.
Consequentially, it's very much NOT obvious that landlords or mortgage lenders being _able_ to evict their tenants or foreclose on mortgaged properties would have been of any practical benefit to themselves (as general classes). Widespread evictions and foreclosures would have also been impractical and very likely detrimental _because_ of the pandemic.
Your description of your alternative proposal:
> Could we stem this liquidity crisis by allowing folks to overdraw their checking accounts temporarily, with the government promising the banks to make up any losses that result?
Wouldn't that be an instance of the government breaking 'banking contracts' and thus stealing from banks? Why is that any more moral or ethical than imposing a moratorium on evictions or foreclosures?
I thought Ayn Rand had a very interesting 'workaround' to these issues – namely by qualifying her own very-deontological-like ethics as only 'applying' in 'non-emergencies'.
I was a bit more disappointed that _commercial_ real estate was also bailed-out. That seemed like a _far_ weaker case than for residential real estate. But, plausibly, it may 'pass' the same 'reasonable context' and 'consequential' tests I outlined above too.
More generally, it seems like 'macro-economic' phenomena often run into implicit 'transaction budget cost ceilings' – it's reasonable for individual contracts to be re-negotiated, or for the relevant parties to process an instance of a contract being broken, but it's a very-much qualitatively different matter to do the same thing for MANY contracts at the same point, and effectively impossible to do so in any kind of reasonable manner beyond a fairly low threshold. There's just no effective (and reasonably affordable) mechanisms to do that kind of thing on a big (and 'correlated') scale. All of our mechanisms implicitly assume a generally stable (macro-)economic environment and large-scale emergencies (or disasters) _easily_ break those assumptions.
Kenny: You missed the point - why are landlords singled out to take the brunt of the economic damage of the pandemic? If, as suggested, the government allowing banking overdrafts and promising to make up losses to the banks as a result results in society (US taxpayers) as a whole absorbing the losses as opposed to a specific group (landlords). It is clear that the Federal government has done a miserable job in getting aid (dollars) to those (renters) who have suffered illness or job loss as a result of the pandemic and what Mr. Kling is suggesting would have been a far more efficient and equitable solution to a difficult situation.
I don't think I missed the point – I just disagreed with somewhat and, more accurately, offered some other points I thought should be considered as part of the context.
I'm not sure landlords _were_ "singled out". There have been programs to help them too.
But the government "allowing banking overdrafts" sure seems like it would 'single out' banks. And it's very unclear how exactly that work. A moratorium on evictions might allow some unscrupulous people to refuse to pay rent, even when they could. But allowing anyone and everyone to overdraft a banking account is _much_ more open to abuse. Surely the extraordinarily higher risk and likely incidence of moral hazard in that hypothetical situation should be a consideration, no?
But even without the official moratorium, who would have _performed_ the evictions? I don't think it's legal in any U.S. jurisdiction for landlords to perform them themselves and it certainly seems reasonable to me that the relevant authorities might have refused to perform them regardless.
And even were there no moratorium on evictions, and the relevant authorities had been both willing and able to perform them, and the benefits of all of that outweighed the costs in terms of the pandemic, it's still far from clear to me that that would have benefited landlords very much, or really at all. Maybe _some_ landlords would have benefited, but then someone could paint that hypothetical as 'singling out' the landlords that got hammered. Where I lived – in NYC – lots of units remained vacant for extended periods; even when the tenants had abandoned them.
Something that Tyler Cowen inspired me to think about, early in the pandemic, was along the lines 'What should we be doing _instead_?', i.e. how should we, ideally, have rearranged our economy (and society more generally, including politics) in light of the pandemic? I'm very libertarian, so I would prefer that any such re-organization be entirely private and voluntary, and I wouldn't trust governments to do any better, or not do a _terrible_ job, for lots of reasons. But it still seems to be the case that 'we', or lots of us, found ourselves stuck in 'patterns of specialization and trade' that _turned out_ to be very bad for living during a pandemic. I still think it's worth thinking about ways for us to avoid such 'nominal rigidities'.
And solemn oaths had to be broken.
https://theotherclub.org/2021/08/how-many-divisions-has-brett-kavanaugh.html