Oregon Legislature Repeals Laws of Supply & Demand
4th March 2016
Hey, if you can dream it, you can do it. Ask Obama.
Like the apocryphal story of the state legislature that passed a law dictating that pi equals 3, the Oregon state legislature has passed two laws that pretend the laws of supply & demand don’t exist. The difference is that, in reality, no state legislature ever did pass a law saying that pi equals 3, but Oregon’s legislature is totally ignoring basic economic principles.
First, earlier this week, the legislature passed a new minimum wage law increasing the minimum to as high as 14.75 per hour in the Portland area by 2022 (with lower minima for other parts of the state). This will supposedly be the highest in the nation, but only in the unlikely event that no other state raises its minimum wage in the next six years. However, after adjusting for the cost of living, Oregon’s new minimum wage probably is the highest in the nation even before 2022.
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Buoyed by its success, the legislature yesterday passed a law legalizing inclusionary zoning, that is, forcing homebuilders to sell a certain percentage of their products below cost. This will also lead them to build fewer homes and to sell the market-rate homes they do build for higher prices to offset their losses on the “affordable” homes. In other words, this law relies on the counterintuitive notion that making housing more expensive will make it more affordable.