Revive Construction, Not the Rust Belt

My dear friend and colleague Don Boudreaux keeps arguing with national conservatives like Oren Cass who want to use industrial policy to revive American manufacturing. Unsurprisingly, neither Don nor any other free-market economist has convinced Cass of the error of his ways. The more I read these debates, the more convinced I am that both sides are overlooking common ground that reaches all the way to the horizon.

What common ground could that possibly be, you ask?

National conservatives yearn to help non-college domestic workers, especially men who feel out-of-place in the modern service economy. Like my dissertation advisor Anne Case and her Nobel laureate husband Angus Deaton, they plausibly attribute much of the opioid epidemic to the lack of meaningful work for non-college males.

Meanwhile, free-market economists have spent years talking about a big policy reform that would create millions of well-paid, meaningful jobs for non-college males: housing deregulation. While few give this reform the top priority that I do, almost every economist I know now recognizes that housing regulation has been strangling housing supply for decades, especially in the richest areas of the country. I’ve nearly finished my book, Build, Baby, Build: The Science and Ethics of Housing Regulation, popularizing the leading research on the topic. Long story short: Housing deregulation is the greatest domestic deregulatory opportunity in America and throughout the First World. If government just gets out of the way, we can build many trillions of dollars of precious new housing.

Now let me ask my fellow free-market economists a leading question: Why spend so much time telling national conservatives that their Big Idea won’t help non-college males, and so little time telling them about a different Big Idea that will help non-college males?! Dale Carnegie would not approve.

What makes me so sure that housing deregulation would be great for non-college males? Because non-college males build almost all our housing! Over 80% of all construction jobs are non-college already - and almost 90% are male. Via the U.S. Department of Labor Statistics:

While you’re looking at the second figure, notice that there are already over ten million construction workers in America. That’s only modestly below the nation’s total manufacturing employment!

Upshot: We can credibly do everything national conservatives hope to do for America’s non-college males via deregulation. Even modest relaxation of existing regs could swiftly create one or two million more well-paid working-class jobs. The radical housing deregulation I champion could easily double the size of the construction industry for decades.

Just imagine all the honest toil required to demolish those silly two-story homes in San Francisco and replace them with skyscrapers.

Unrealistic? Well, adding millions of construction jobs is vastly more realistic than adding millions of factory jobs. Even if you give Trump’s protectionism 100% credit for all the manufacturing employment increase during his administration, that’s only about 400,000 jobs total. And that’s a crazy assumption because the growth rate was virtually the same during the last seven Obama years. See for yourself:

To create millions of new factory jobs would require truly draconian protectionism. Why? Because you’re fighting against not just global competition, but technological progress itself. Technological progress in agriculture has given us so much food that we no longer need many farmers. Technological progress in manufacturing has given us so much stuff that we no longer need many factory workers.

The same is not true for construction, because this industry has been suffocated by regulation for the last half century. Instead of being near-satiated, we have massive pent-up demand. Americans hunger for cheap, spacious, homes in desirable locations. We have the technology to build these homes. We have millions of working-class males hoping for better jobs. All we lack is government permission to let them do the work.

When national conservatives bemoan the plight of the residents of America’s declining regions, free-market economists often scoff. Off the record, I’ve heard more than a few joke, Marie Antoinette-style, “Let them move!” One of the top lessons of research on housing regulation, however, is that moving to opportunity ain’t what it used to be. In the past, heading to the big city was a reliable way to raise your standard of living. In today’s America, sadly, extra housing costs often eat up more than 100% of the wage gains of relocation. Why? Again, because of strict housing regulation, especially in high-wage regions. Housing deregulation isn’t just good for the constructive workers of the future; it’s good for all the people eager to pull themselves up by their own bootstraps.

The punchline, again, is that free-market economists ought to be more careful and more constructive. If national conservatives complain about social ills we know how to mitigate, why not just tell them the solution, instead of belittling their concerns?

Rich countries are falling far short of their potential, and they are excluding non-college males from some of their most productive options in today’s high-tech world. Sure, let’s keep spreading the word about the folly of protectionism and industrial policy. But let’s replace these false hopes with a positive vision for action. Build, baby, build!