After I began to put in writing this text, I used to be able to blame Krugman for not discussing this much more necessary financial restriction. Then I did some analysis. Analysis is most helpful when it adjustments your thoughts, and my analysis did change my thoughts. It seems that Krugman has been excellent at laying out the big prices to the financial system of creating housing artificially costly. Caplan, in Construct, Child, Construct, quotes the next from Krugman:

Excessive housing costs in slow-growing states additionally owe lots to insurance policies that sharply restrict building. Limits on constructing top within the cities, zoning that blocks denser growth within the suburbs, and different insurance policies constrict housing on each coasts.

Krugman additionally notes, “In the meantime, looser regulation within the South has saved the availability of housing elastic and the price of dwelling low.”

Many economists, to their credit score, criticize these restrictions on constructing. However they’re, on common, much less outspoken in opposition to these extremely damaging restrictions than they’re in opposition to the much less damaging restrictions on worldwide commerce.

 

The above is from my most-recent Hoover article, “Housing Restrictions Hit More durable Than Tariffs,” Defining Concepts, June 5, 2025.

Learn the complete factor.