New members of Parliament undergo a mandatory orientation program covering House of Commons procedures, financial resources, administration, ethics, and disclosure. They also likely receive diversity, equity, and inclusion training to guard against systemic ills. However, William Watson argues that MPs need instruction in basic economics to prevent systemic policy malpractice.
The Case for Economic Literacy
Watson, while not a fan of compulsory adult education, suggests that if such training is inevitable, economics should be a priority. Non-economists often view economics as overly technical, but Watson contends that the core principles are simple: understanding incentives and how people respond to them.
He points to rent control as a prime example of a popular but economically flawed policy. New York's new socialist mayor, Zohran Mamdani, plans to reintroduce rent control, despite its historical failures. Renters initially benefit from lower rents, but over time they stop moving to retain the subsidy, leading to reduced turnover. Landlords, unable to raise rents, cut costs by deferring maintenance, reducing painting, cleaning, and plumbing repairs.
The Long-Term Consequences
The long-term result is a decline in the supply of rental units. Investors avoid building new rentals when they cannot adjust prices. This shift contributed to the rise of condominiums over apartments in many cities. Watson emphasizes that while quantifying the exact effects requires sophisticated econometrics, the direction of the impact is clear: less turnover and lower supply.
Watson's article underscores the need for MPs to understand basic economic principles to avoid policies that cause more harm than good. He argues that economic education could prevent the repetition of such mistakes.
