Assar Lindbeck, who died aged 90 at the end of August, was a distinguished Swedish economist who at one time chaired the committee that awards the Nobel Memorial Prize in Economic Sciences. He is thought to have influenced the award of the prize in 1968 to James Buchanan, the Public Choice economist.
Lindbeck’s research included work on self-destructive welfare state dynamics, dealing with the moral hazard of state welfare that undermines work and responsibility and leads to dependence of the state.
His was famous for his work on Swedish rent control, which he opposed for decades. The ASI has many times quoted his opinion that “In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.” We have pointed out that it is in fact more effective than bombing because bombing takes out demand as well as supply.
Rent control achieves this because it makes it unprofitable to let out property, leading investors to withdraw property from the rental market and invest in assets that bring better returns. It also leads to poor maintenance and more rapid degradation of property because not enough money is generated from rents to pay for the property’s upkeep.
It achieves these effects everywhere it is tried, and it exposes a weakness of the political system, in that politicians bid for and secure the votes of current tenants, and are gone by the time rent controls wreak their inevitable damage. Lindbeck’s research convinced him that it should be markets, not politicians bidding for votes, that determine rent levels. He was correct.