To save capitalism we need radical land-use reform

Socialism is not the answer, but the status quo isn’t working.

A new development is seen under construction in Los Angeles. (Photo by Frederic J. Brown/Contributor via Getty Images)

I did a panel with Adam Gray and Tom Suozzi at WelcomeFest where they outlined their Promise to America, an effort to put some meat on the bones of the general idea of moderation. One of the things they say is “we are capitalist, not socialist,” which is definitely a sentiment that I agree with.

Suozzi said on the panel, very correctly, that market economies have dramatically outperformed the competition and delivered, while not perfect societies, certainly the greatest levels of material prosperity that we see anywhere on Earth.

This is all totally correct, but I think that people who know that it’s correct need to think more about why, despite its correctness, it has become so unfashionable for young people to embrace capitalism.

I think one really important reason is that if you look at what people spend money on, you know housing and health care are the two most important sectors by far. Young people consume far below-average amounts of health care, though, meaning that their consumption is really dominated by housing. A large share of the population consumes housing in the form of renting a home from themselves, so they are somewhat insulated from the ups and downs of the housing market.

But those people are mostly old.

If you’re young, your experience of the economy is dominated by the housing situation. And the housing situation in the United States is not very good. So I think for most young people “capitalism” means something like “the status quo system,” and they perceive the status quo system to be pretty bad because they are super exposed to the single most dysfunctional element of the status quo economic system.

Now, in my capacity as a lawyer for capitalism, I am happy to point out that not only is housing the most dysfunctional element of the status quo economy, but it’s also the element that is run in the least capitalistic way.

Far and away the number one thing that could improve young people’s living standards in America would be to embrace more market-oriented housing policies. But for anyone to understand that, those inclined to tout the virtues of capitalism need to embrace that idea. As a political pragmatist, I don’t really blame Suozzi for blasting efforts to foist zoning reform on his constituents on Long Island a few years ago since his district is a wretched hive of NIMBYism. But younger people’s lived experience of “capitalism” is of central planning and massive shortages of the single most important item they consume. So of course if people tell them the alternative to the status quo is “socialism,” a lot of them are going to want that.

America’s slow-motion housing crisis

Of course, on one level, housing in the United States is very capitalistic. The overwhelming majority of it is constructed with private capital and sold or rented for profit. Most homes are also privately owned — mostly by owner-occupants but with a significant sector of small-time landlords and a handful of large-scale ones, too. Public and nonprofit housing do exist in the United States, but they are a relatively small niche. The result is a housing sector awash in private capital and profit-seeking.

What it lacks is much in the way of free markets.