Resentment Against Luxury

by Llewellyn H. Rockwell, Jr.
by Llewellyn H. Rockwell, Jr.

It's wonderful to have visions and dreams, but thoroughly evil and destructive when we seek to have government accomplish them on our behalf. The means, not the dream, is the problem. It ends up taking away liberty and creating unanticipated forms of destruction. This is the great lesson that economics has to teach us, but it is evident that the message has not stuck.

Let me give an example from my own hometown. Ten years ago, Auburn, Alabama, was the home of retail commerce and student housing, while our neighboring community of Opelika was a place of family residency with a falling rate of growth.

Then retailers discovered a use for the vast land, low prices, and low taxes in Opelika, and began to build huge commercial centers. Opelika now thrives, and what has happened to Auburn? The retailers and low-priced student apartments are being displaced by luxury condos.

Who directed this? Who planned this? Not the respective city councils nor planning commissions. It happened because the resources found new and more economically efficient uses, as a reflection of the decisions made by entrepreneurs over which consumers stand in judgment every day in their buying decisions.

No one can stand aside and say: this is economically wrong or this is economically right. The use of resources and the production of economic goods and services are reflections of human valuations expressed through market activity. The entrepreneurs deserve the praise. If you don't like the result, your argument is with the consuming public who makes it all work. Your argument is with your fellow citizens who are voting for economic outcomes with their own money.

Now let me tell you of a popular shirt in Auburn. It says: "No More Luxury Condos." Yes, there seems to be some movement afoot to change market trends and outcomes. Some people think that land should be used for retail shops and student housing, and that the developers should go away. And what are they doing to back this judgment? They aren't buying up land and developing it. They are buying t-shirts and lobbying government to do something.

Now, let us think about this.

There is nothing to prevent students from buying luxury apartments. They are perfectly free to do so, even if it means giving up their cars, laptops, cell phones, 5 nights out per week. But if students or their parents are willing to spend the money, they too can live in them. But they are unwilling to do so.

So what the t-shirt wearers are really calling for is lower prices. The prices are higher than some people want them to be because the land is more valuable than it used to be. The bidding up began as an effort to consider these human valuations in the allocation of resources.

What can government do to bring about lower land prices? It can control rents, but then no one will develop buildings, not those with low rents any more than those with high rents. Why? Because the entrepreneurs will still have to pay high prices for land.

So that means that government will also have to control the prices of land and say that such and such a lot can only sell for $5000 an acre. Now the government controls not only rents but also land prices. But then there will quickly emerge a shortage of such land, and the rents will not reflect that fact because they are being controlled.

The result will be a shortage of low-rent housing, and no new buildings will be built. There will be a long line to rent the existing apartments, and then a market will develop among sub-renters, which the government will have to crack down on.

Then there will be brokers, and high-priced ones, that help a person get on and stay on the waiting list, unless those too are banned. Once students get these apartments, they will never let them go if they can help it, so the government will have to impose term limits on how long you can live there. This will impose frustrations on the owners, who might just decide to put their resources elsewhere, unless government prevents them from leaving.

This waste and even chaos will continue until the government has controlled every aspect of the market for housing. It might as well just nationalize the land and build the houses themselves.

But what student will want to live in government housing? The places will become dilapidated and not be well serviced. There will be strict rules. You will have to navigate the bureaucracy. Eventually, the entire area will become like all public housing, an island of socialism that no one will want to inhabit.

So we can see that the government initiative to make the area hospitable to students will fail, and there is nothing that the government can do to stop this. When they fight economic law, economic law will eventually always win.

Yes, that means student housing will have to be further away from campus. That much is true. If they are unwilling to spend the money on high rents, they will save money and spend it on their cars, cell phones, laptops, and maybe they can even have their 5 nights of partying per week.

And let us not forget about those who will buy the luxury apartments. They are mostly aging graduates of the university who come into town for football games and other sports events. They give fantastic amounts of money to the university to provide sports complexes, buildings, and many amenities that are enjoyed by students too. They make a huge contribution that is, I dare say, more substantial than the complaining students.

Mostly, under a market system that distributes property according to public need, we can preserve our liberty and property rights. That's a better system than serfdom.

May 2, 2007

Llewellyn H. Rockwell, Jr. [send him mail] is president of the Ludwig von Mises Institute in Auburn, Alabama, editor of LewRockwell.com, and author of Speaking of Liberty.

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