|
|
By Opalesque: The latest economic analysis by Howard Marks , co-chairman of Oaktree, examines how government attempts to override market forces through regulation and policy interventions often produce unintended negative consequences, using three major examples to illustrate this principle.
Rent Control: The Housing Market Paradox
Marks begins with rent control, where governments limit rent increases to help existing tenants afford housing. While this benefits current residents and pleases politicians, it creates broader problems. Landlords stop investing in properties and remove units from the market, while developers avoid building new housing due to poor return prospects. This reduces housing mobility, deteriorates the housing stock, and ironically makes it harder for new residents to find apartments. The policy essentially picks winners (current tenants) and losers (landlords, developers, and prospective renters) rather than allowing market forces to allocate resources efficiently.
California Fire Insurance: A Regulatory Disaster
The most dramatic example involves California's fire insurance market. State regulators, seeking to help homeowners, prohibited insurers from using forward-looking catastrophe models to set rates, requiring them instead to base premiums on 20-year historical averages. This became problematic as wi...................... To view our full article Click here
|
|
RSS
