Capitalisn’t: Did NIMBYs Kill the American Dream?

Yoni Appelbaum: The NIMBYs are trying to kill the American dream, but I’m not willing to give up the fight just yet.

Bethany: I’m Bethany McLean.

Phil Donahue: Did you ever have a moment of doubt about capitalism and whether greed’s a good idea?

Luigi: And I’m Luigi Zingales.

Bernie Sanders: We have socialism for the very rich, rugged individualism for the poor.

Bethany: And this is Capitalisn’t, a podcast about what is working in capitalism.

Milton Friedman: First of all, tell me, is there some society you know that doesn’t run on greed?

Luigi: And, most importantly, what isn’t.

Warren Buffett: We ought to do better by the people that get left behind. I don’t think we should kill the capitalist system in the process.

Bethany: The saying is so ingrained that most of us don’t even stop to question it: Homeownership is the American dream.

In fact, according to a 2023 survey, the vast majority of Americans believe owning a home is a greater achievement than raising a family, getting a college degree, or having a career.

Luigi: In the global financial crisis, homeownership, or at least housing, became not the American dream but the American nightmare. You would think that the housing crash would have made housing affordable.

Instead, it has become increasingly unaffordable. According to the Black Knight Home Price Index, the average seasonally adjusted US home price increased nearly 80 percent from April 2015 to April 2023.

Bethany: Wow, 80 percent. There are a lot of reasons for this, but the essence is that supply hasn’t kept up with demand. Freddie Mac estimates it would take another 3.8 million units just to adequately house our current population. Now, with mortgage rates higher than they’ve been in a long time, it’s increasingly hard for first-time home buyers.

According to the Urban Institute, there isn’t any near-term fix for this. They write, “Current and projected housing trends suggest many Americans may never achieve homeownership or may have to rent for long periods before transitioning to it.”

I worry that this has become a huge societal issue, not just an economic one. I think people’s inability to purchase a home impacts their faith in capitalism, the belief that the world is going to provide them with opportunity.

Luigi: The ability to buy a home has become very important and a bit too salient, because in Germany, a lot of people don’t own their houses, but Germany seems to be working fairly well as a capitalist economy.

There is a bit of an American myth that you need to own a house to start a family and to do anything. That houses have been such a huge source of increase in value for most Americans has become too important in the grand scheme of things. I’m more concerned about the side effects of lack of mobility, rather than the fact that people cannot buy a home.

Bethany: When we heard about Yoni Appelbaum’s new book, which is called Stuck: How the Privileged and the Propertied Broke the Engine of American Opportunity, we thought it could be a perfect way to explore this.

Appelbaum argues that, actually, we don’t have an affordability crisis, because in many places in America, housing is quite cheap. He has a really contrarian view. It’s just that it’s expensive in the places where there are opportunities. His argument is that we have a mobility crisis.

Luigi: In the 19th century, perhaps as many as one in three Americans moved each year. By 1970, it was one in five, but in December, the government announced last year’s numbers. Last year’s number was only one in 13.

Appelbaum argues that mobility, or lack thereof, is the source of all our problems. He writes that fewer Americans start new businesses or switch jobs, that more Americans end up worse off than their parents, that membership in churches and groups is falling. Even the birth rate is steeply down, and people don’t trust each other. All of these things that seem not very connected are, in his view, due to our loss of mobility.

Bethany: He also argues that those we thought of as local heroes, the Jane Addamses and the Ralph Naders, who have pushed for all sorts of local zoning laws, in some ways, actually became the villains.

Then, of course, there are the other villains or the hypocrites: the wealthy. Lots of people may remember that incendiary New York Times piece from a few years back about all the Silicon Valley moguls, including Mark Andreessen, who give all this money to affordable housing and make a big deal about how important it is, but then try to keep it out of where they live.

The Andreessens wrote, in opposition to multifamily housing in the very wealthy town of Atherton, where all the Silicon Valley elite live, “More than one residence on a single acre of land will massively decrease our home values, the quality of life of ourselves and our neighbors, and immensely increase the noise pollution and traffic.”

It’s interesting, Luigi, what you said about homeownership and Appelbaum’s argument, because even though I think I know a lot about housing, or at least housing finance, I was really surprised to learn that this notion of homeownership by the numbers isn’t as ingrained in America as I thought it was.

I found this stat that until the Federal Housing Administration was established in 1934 and introduced the 30-year, fixed-rate mortgage during the Great Depression, only one in 10 Americans even owned a home.

Back to your point, this did make me start to wonder, is it homeownership that’s the real issue, or is it affordable housing, whether it’s renting or owning? If treating a home as an investment—which many of us do—means less mobility, is that the right thing for society?

Luigi: That’s exactly the question that Appelbaum raises, and it’s a very interesting one. What have we done with this American dream of owning a house, and all those policies designed to subsidize this? In his view, it’s not something to be subsidized. The next question is, what are we trying to go back to? Are we trying to go back to homeownership or trying to get back to mobility, or both?

Bethany: Here’s Yoni Appelbaum, the author of Stuck and a deputy executive editor at The Atlantic. Before joining The Atlantic, Appelbaum was a lecturer on history and literature at Harvard University. He is one of the few and the proud to make the transition from academia to journalism, ha, Luigi.

Luigi: Is it the ascent to journalism or the descent to journalism?

Bethany: Fine, fine, fine.

One of the things that struck me about your work is that I’ve always thought of homeownership as synonymous with the American dream and something that has been with us since the beginning, but you write that a home was once less a long-term investment—most people leased—than a consumer good to be enjoyed until the next model came within reach.

Is this story of homeownership as a core American value wrong?

Yoni Appelbaum: Yeah, I think it really is. I think the core American value is aspiring to better things than you were born with, and to give your children better opportunities, too.

Homeownership is one path to that, but it really comes in, in the early 20th century, as much as anything as a means of assimilation. It is seen as a way to promote a set of values that native-born Americans are afraid that the immigrant communities don’t share. It gets promoted as the American dream, sold as it, but I don’t think it always was.

I own my own home. I love it. I’m very happy to live there. It’s not the only housing arrangement I’ve used at different points in my life. I’ve rented; I’ve had a roommate. At different points, there were different solutions that met my needs.

That’s really how I think about this, that rather than being prescriptive and saying to people, homeownership is something that we are going to strongly incentivize, essentially pay you to go and pursue, what we’re going to do is allow you to find the housing options that work for you, because different people will have different needs, and that work for you at different stages of your life.

Renting can be a very powerful tool. It allows people to move more readily, to pursue opportunities, to pull up roots a little more easily. For some people, that’s exactly what they need.

Bethany: I think it is such a conflict in my brain, because I’ve thought of homeownership as being this thing that encourages community and connection and trust in other people, and that mobility is not, perhaps, forming this durable skein of social connections that we would want. How did you come to decide that that wasn’t true, that it was the other way around?

Yoni Appelbaum: I think you can go back to Tocqueville, who arrives here and is gawking at these strange Americans. He has two sharp observations in his work. One that he’s famous for is he says there’s this mania for association, and he marvels at it, the civic vitality of the United States, and so do most other European visitors in the 19th and early 20th centuries. They come over here, they’re like: “Wow, what is with all these groups? What’s with the vibrant communities?”

Yet he also says: “Americans have this major character flaw. They are restless in the midst of perpetual abundance.”

It’s a marvelous phrase, that they’ve got everything they want, and instead of being content with it, they pick up and they go someplace else and seek something better. He diagnoses this as a national neurosis.

Other European visitors to the United States make the same two observations. They don’t connect the two. They don’t pause for long enough to think, “Huh, if there are these two very peculiar aspects of American society, maybe there’s some relationship between the two.”

That was really what I zeroed in on. What you find, when you start looking at the research on this, is that it’s about suffering habit. You land someplace new; you don’t know anyone; you’re lonely. Loneliness is a productive emotion. It spurs you to do things that you would otherwise avoid, to place yourself in uncomfortable situations.

Maybe you go to church that Sunday, even though you haven’t attended church in years. Maybe you go to the bar, and you actually turn and talk to the stranger sitting next to you because you’ve got nobody to talk to.

As long as Americans were moving, if you match up the graphs of the peaks and valleys of our national mobility against the peaks and valleys of our community, of our civic engagement, what you find is that they match more or less perfectly: in periods where we’re not moving, these things atrophy, and when we all start moving around again, the movement itself generates the civic vitality.

Bethany: How did you separate the thinking from causality and correlation as you wrote your book? You write this: “More and more Americans end up worse off than their parents, membership in churches and groups is falling, the birth rate is steeply down, and we’re less likely to trust one another. These seemingly unconnected changes all trace back, at least in part, to our loss of mobility.”

You’ve also included entrepreneurship, innovation, growth, social equality. How are you sure that it’s lack of mobility that is causing these things, rather than lack of mobility being correlated with these other problematic developments?

Yoni Appelbaum: I wrote the book in part in the hope that researchers would dive in here. I don’t think that we’ve got perfect causal links in every case here. I think the evidence is strong and suggestive, and I think there’s a lot more work to do.

We’ve had these 50-year declines that coincide with the 50-year decline in mobility. Then, to look at more specific research in each of these categories that I laid out, with entrepreneurship, we know that people are likelier to start new businesses when they move.

They’re severing the bonds of their employment, and they’re starting someplace else. Sometimes entrepreneurship is something you do out of necessity—you don’t have that job—or something that you do when you have less to lose.

It can be tough if you’ve got that office job that you’ve had for years and you kind of hate it, but it sends you a paycheck every two weeks, and you don’t want to give it up. Then you can still say: “All right, I’ve moved anyway. I don’t have that office job. I’ve got nothing to lose at this point, and I might as well start a business.”

When you look closely at each of these categories, I think you can both construct a reasonable causal story and find some research that suggests that may be at least a very big part of what’s going on there. I think that mobility has not been enough on researchers’ radar, and so, I actually wish that there was a more robust literature around some of these things.

Luigi: I think you are way too modest, because you cite Raj Chetty, and Raj Chetty’s work is really showing that the ability to connect people with opportunity is very important for young people to have a future and a career.

It shows that immigrants do better because they are more willing to go where the opportunities are, versus the other people who stay behind, and mostly stay behind because their cost of moving is too high. In part, it is because their current house is worth much more than the place we are going to move to.

There is a friction there that really keeps people in place. The causal relationship is never proven to a full extent, but I think it’s closer to reality that you make it out to be.

Also, you are modest because you have done some research. I know you’re a historian by training, and your thesis is on the so-called Gilded Age, but with a pun on the term “gild.” Why don’t you tell us how your earlier research has influenced this work?

Yoni Appelbaum: Those are both points that are really well taken, and I’d also point listeners to Leah Boustan, an economist at Princeton—

Luigi: Whom we had on a podcast as well.

Yoni Appelbaum: Oh, terrific. She’s done this wonderful matching study to look at what gives immigrant kids success in the US. Location is essentially 100 percent of it.

My doctoral work was on voluntary associations, so it’s something I’ve been thinking about for a while. Across many of the groups that I looked at in the 19th and early 20th centuries, they had a steady rate of decline and a variable rate of accession. Maybe they were losing 7 percent of their membership a year.

They were losing 7 percent of the membership during periods of rapid growth, and they were still losing 7 percent of the membership during periods of decline.

The difference was how many new members they were signing up every year. If you read the accounts, the minute books of these organizations, when they go into decline, they obsess over why they’re losing people. They go talk to members who have left, they try to document it, because there’s something very visible about the loss.

What’s actually changed is not how much they’re losing. What was really changing was how many new people were coming in. I didn’t see it at the time until I started working on this project, but a big driver of how many people are coming in is how many new arrivals that there are in town. Are there people moving into your community who are seeking out the things that the voluntary associations have to offer?

Where mobility goes down, there are fewer new arrivals. Fewer people are joining the groups. The groups hollow out. They cease to be as much fun, even for the longtime members.

Bethany: Another contrarian part of your book is that most people who think about development opportunities think, create opportunities in places where the housing is inexpensive, and your argument is the other way around, which is, bring the people to the areas where the opportunities are plentiful. Is that a fair way of summarizing it?

Does your argument then become one for a more concentrated world, that concentration of people is likely to lead to more vibrancy, and that these emptying-out rural spaces perhaps should continue to empty out?

Yoni Appelbaum: God, it’s such a good question, and I guess I’d put a slight twist on it. What really shifted my view was taking a look at this from the level of an individual.

Some place-based policy in the United States amounts to going to individuals and saying, “Maybe you want to move someplace that’s prosperous, that has a lot of opportunities, but we are going to come in and provide you with a lot of incentives to stay where you are,” despite Raj Chetty’s research on place, which says that place has this dispositive role in how your kids will do.

If you think of it that way, then you can sort of flip the frame and say, “Well, I don’t actually know where the right place for somebody to live is, or where they should be raising their kids, and I am wary of predictions.”

I write about Ohio in this book. If you were moving anywhere in the United States in 1820, Ohio was a great place to go. It was rapidly opening up. People are flooding into the state; the towns are competing for residents.

By the 1840s, Ohio was the first place in the United States to experience hollowing out, total population loss. Everyone’s moving further west, and Ohio is a terrible place to be.

By 1880, 1890, Cleveland is the wealthiest city in the country. You’ve got the Rockefellers and other industrial barons. Ohio is a terrific place to be. I don’t think any of those shifts would have been predicted in advance. In general, when people try to predict where the right places are to tie people down, they get it wrong.

We work best with the aggregate of individual decisions. Markets have a lot of flaws, but this is something markets are good at. If you let people have the agency to steer their own destinies, instead of trying to say centrally: “We would like to tie more people down to these communities. We don’t want them to move over there,” you just say, “OK, we’re going to change policy to enable people to pursue their own dreams, to live out their ambitions, and see what the collective aggregate consequences of that are,” knowing that the places that win this decade may not be the winners in a decade or two, that there will be dynamism, and dynamism requires both decline as well as rise.

Then I think you end up with an American economy which is more like the one that existed prior to 1970. Many of the things that we think of as distinctively American . . . I think we’re premised on mobility. At the moment, we are starting to marry European levels of geographic mobility to American levels of welfare parsimony. That doesn’t work very well.

In the United States, the presumption was you don’t stretch as strong a safety net beneath people. Because they can relocate toward opportunity, you want to incentivize them to do so, and the state doesn’t need to step in to the extent that it does.

If you’re living in a society where people move a lot less . . . You lose a job in Stuttgart, you don’t expect that people of Stuttgart to relocate toward some other part of Germany or some other European nation. You put in place more robust employment protections and accept a higher level of stasis.

The United States is caught between those two systems. We don’t seem to have the political will to live as a society in stasis and provide the kind of welfare that would necessitate, but we also seem to lack the political will at present to restore our dynamism and mobility.

Most people I talk to want to have all of the fruits of mobility. They’re just not quite willing to have the apartment down the block.

Luigi: Now, you blame the restrictions on a very interesting history of racism, that basically all the zoning laws in the United States have a racial origin, and more recently on the NIMBYs or these community organizers who try to block development at a local level.

It seems to me that you’re not blaming the excessive protection of property rights enough. At the end of the day, one of the reasons why we have such restrictions on building is because people want to be protected against the building of other buildings nearby, to exclude certain activities from the neighborhood.

There is clearly a racial history behind that, but in addition, there is the fact that people want to choose who they live with. What I get from your book, which is a very interesting idea, is this protection, at the end, is negative because it prevents mobility, and it prevents a diffusion of ideas and opportunities.

Yoni Appelbaum: It’s a great question. One of the most uncomfortable parts of this book for me is that . . . There was a good study of California that looked at this. For every 10 points a city went up in the share of votes it was giving to liberal candidates, the number of housing permits it issued went down by 30 percent.

If you look at a map of the United States, where housing has remained relatively cheap is mostly red states, red jurisdictions. Where it’s getting very expensive because of excessive regulation is mostly progressive areas, blue states and blue cities.

In Republican areas, conservative areas, there’s something of an ethos, which has held back some of the regulation, of letting people what they want to do with their property. If they want to build on it, maybe you don’t interfere.

In progressive areas, there’s a whole set of positive goods that people are pursuing. They want to protect the environment, they want to preserve the character of their neighborhood, and they want not to have its history leveled. But in aggregate, all of the protections that they piled on have made it very, very hard to build.

You’re right, that goes beyond racism, and it’s a natural aversion to change. It’s an aversion to change, by the way, that I share. I would not be thrilled if my next-door neighbor knocked down the single-family home that she lives in and put up an apartment building.

I also know, having researched the book, that although each of those individual objections may make sense, in aggregate, they produce this outcome which is that in the places where opportunity is now most tightly concentrated, it is hardest to build.

I do think that there’s something about the regulatory layering in blue jurisdictions that really has produced a very different set of outcomes, and it’s not just about property rights. The Americans who most emphatically emphasize property rights seem to be a little bit more open to things getting built.

Bethany: I couldn’t help thinking as you were talking, if you don’t let them build it, they won’t come. That should be in there.

Yoni Appelbaum: Right. That’s a great line. I wish I’d had that.

Bethany: How does all of this change your thinking about human nature, philosophically speaking, given that you have people who set out to do something good, perhaps for themselves, but maybe for the neighborhood, arguably for the community, by preserving community, democracy with a small d, local people doing what local people think is best for them, and yet writ large, it’s had this destructive impact?

Yoni Appelbaum: Yeah. I thought a lot as I was reading through old hearing transcripts and essays that people published advocating their views, testimony before various government bodies, and you can see that many of the people who are testifying have a blend of self-interest and good intention.

It’s not simply a story of discrimination and the pursuit of private profit. That’s an element of it, but many of the rules that have been most destructive in their impact really did come from people who meant well.

It has made me think a lot about political philosophy that I’d had less interest in, about the dangers of empowering people with a negative veto, the ability to block what others do, and the importance of restoring some sense of agency to people’s lives.

If you give local communities the power to set the terms of membership in those communities, they will abuse it. I can’t look at the historical record and come to any other conclusion. Even more unsettling, the people who will abuse it most are those with the greatest time, money, other resources, education.

You can create a set of protections thinking: “I’m going to protect this historically disadvantaged community. I’m going to safeguard the environment,” but it’ll twist on you. If you put those rules out there and empower local individuals . . . which is the legal change we made in the 1970s. You no longer need a stake in the matter. You can step forward and go to court over anything. If you empower them to do it, they will do it.

The California Environmental Quality Act was pitched as protecting open space. Almost none of the uses of the CEQA are about open space. It’s almost all about multifamily housing in wealthy areas.

Change is uncomfortable. I think that’s one of the things that I came to in the book. Moving is uncomfortable. I’ve never wanted to move. I’ve moved lots in my life, and I’ve never been excited about it, but there are lots of things that we do that are uncomfortable.

Exercise is uncomfortable. At least, I find it that way. I don’t want to get up off the couch and go for a jog, but I know that if I do go and exercise, I’ll end up better off for it. I know that if people do move, they’ll end up better off for it. I know that if communities open themselves to new arrivals, we’ll all end up better off for it.

Luigi: Your point resonates a lot with me. As I’ve said many times in this podcast, I think that the United States is more and more resembling Italy, but unfortunately, the bad aspects of Italy. This lack of mobility due to incredibly high prices of real estate is something that was very common in the early ’90s in Europe, but particularly in Italy. It now has reached the United States. The question, of course, is why that’s the case.

You mentioned, of course, these local associations. There is another important lobby that you have not mentioned in your book, which is the real-estate broker lobby. We know that, collectively, they are one of the biggest sources of lobbying and campaign financing in the United States. Until recently, when the Supreme Court broke their cartel, they were charging an outrageous 6 percent for every transaction, which is very, very large. Have we given too much power to real-estate brokers?

Yoni Appelbaum: Yeah, it’s a great question. If you build a homeownership society in which you strongly incentivize people to buy their homes, and then you raise the transaction cost of leaving one home and getting another, now you are creating really strong financial incentives for people not to move.

It’s been interesting to see what’s happening now that we do have some regulatory change. There has not been an enormous surge in mobility yet. Maybe it’s just delayed; maybe it needs to filter through.

Mortgage rates clearly play a role there, too. It’s very hard to afford the housing at all. The transaction cost is part of that. Homeowners insurance in some states is part of that. Mortgage rates are part of that. Fundamentally, I think the biggest driver is housing scarcity. The lack of supply just dwarfs all of the other causes, even in combination.

If we could get the supply problem under control, it would go a long, long way, and then we could focus on some of the other impediments. I’m not sure that it’s simply the 6 percent transaction cost that is holding people back amid all of those other barriers.

Luigi: Sorry, it’s not just the 6 percent transaction cost. It is the power of influence of the real-estate brokers that is funded by the 6 percent.

Bethany: Yeah, but they would get paid more if people moved more. In a sense, Luigi and I both have our things we’ve come to know. Luigi’s is the 6 percent brokerage fee. Mine is anything to do with private equity.

Yoni Appelbaum: Right. You can blame private equity for some of this, too.

Bethany: Exactly.

Yoni Appelbaum: They are coming into some markets and snapping up real estate, and they’re a part of this bigger problem, but private equity is smart. They have noticed that the government has created an artificial cartel, that it is limiting supply and allowing them to come into some markets, snap up enough of the supply to actually drive up prices.

They’re only too happy to do that. You can take that on by tackling private equity directly, or you can just change the market conditions so that it’s no longer an appealing investment for them.

Luigi: In your book, you cite Henry George, but I think you don’t give him enough credit both for the analysis and, in my view, for the proposed solution. His proposal, which I think is very clever, is to tax the land, not the value added to the land.

For the listeners, this will really penalize single-family homes, because they have a lot of land and not a lot of build-up, and not penalize the people who build high rises, because they use very little land.

I think the proposal is very clever. Of course, this is done at the local level, but if I were president of the United States or, actually, head of Congress, what I would say is you can deduct your property tax from the federal income tax only if your tax is on the land, not on the value added on the land. Only if you have a Henry George kind of tax. What do you think about this idea?

Yoni Appelbaum: I think it’s great. Good luck getting it passed.

I write in the book about this moment when New York City has two simultaneous commissions running. One is looking at zoning as a solution to its various problems, and the other is essentially looking at a Georgist land tax. It’s looking at and implementing the ideas of Henry George.

The zoning solution says to the wealthiest people in New York: “We’re going to grandfather you in. Whatever you’ve done with your property, you can keep, even if it’s now noncompliant. You don’t have to change anything. In fact, to the extent that you own a lot of property, you can get richer, because it’s going to be a lot harder to build anything like what you have anymore.”

The Georgists said to the wealthiest people in New York: “That single-family mansion that you have on Fifth Avenue is going to get prohibitively expensive for you to keep, because we’re going to tax the land so it can get put to a higher use.”

The beauty of Georgism as a proposal is that it would move society toward equity. The downside of it is you are specifically penalizing the wealthy at the expense of the working classes, which is always a tough political proposition in this country.

Bethany: It is actually an interesting thought, though. I was back in the town I grew up in this summer, a mining town in northern Minnesota. One of the things that enabled the mining town to have an absolutely beautiful high school was that one of the founders of the town figured out how to make the mining companies legally pay for the value of the land even when they weren’t mining. It wasn’t that the mine’s in use and in production; therefore, we pay taxes. It’s, no, you own this land, and you pay taxes on this land.

One thing that struck me as I read your book: I wonder if you’re too nice. You have this view that we would all want this society, and therefore, people would be willing to do this. People say they want a more dynamic society, and so, therefore, people would be willing to do this.

Time and time again, and most profoundly or recently, you have the example in Silicon Valley, where you have all these billionaires giving all this money for housing, and yet when it came to their own backyard, they said, “Absolutely not.”

I worry about your solutions, because I think you might be too optimistic about human nature.

Yoni Appelbaum: Wow. I’ve been doing a lot of interviews, and it’s the first time I’ve been accused of being too optimistic.

It’s a great question. This gets back to your earlier question about what I learned about human nature as I wrote the book. I think we all want to live in a society like that. If you empower people to decide whether or not it should happen on the lot next to theirs, they will almost always say no.

The great mistake of zoning was that states delegated this power through enabling statutes down to municipalities. They’d never had it. Before about 1916, no local municipality anywhere in the country really had the right to zone.

I think if you can get action at the state level, because you’re no longer talking about one particular road or one development or one community, you can get people in aggregate to agree that the state needs this.

There are lots of states that are really struggling, that want to do things that they can’t do because of housing prices. You can get that kind of collective action. At that level, I have a lot of faith in human nature.

At the level of delegating those powers down to communities, I have no faith. I think the communities will always and forever wall themselves off from newcomers, will always privilege the incumbents against the new arrivals.

Really, what I’m saying is, we can decide collectively at the national, at the state level, what kind of society we want to live in. If we want to achieve a more equitable society, it means taking those powers away from local communities that were delegated to them a hundred years ago.

Luigi: I think that the strength of this coalition, anti-building more houses, comes from the fact that it’s a combination of the famous Puritans and the bootleggers. You’re describing a lot the part of the Puritans, not enough of the bootleggers. Have you seen the movie The Apprentice?

Yoni Appelbaum: Yes.

Luigi: It’s a fantastic movie. For those of you who have not seen it, I strongly recommend it. It describes how real estate really works in the United States. It is a corrupt business in which municipalities give away zoning favors to the worst people.

Actually, the message of the movie, which I liked very much, is that Donald Trump is not a Martian who landed in the United States. He is actually a product of the local crony capitalism in real estate.

Yoni Appelbaum: Look, that’s a great point, and we had an enormous reform movement in this country around Prohibition. People often forget that the driving impetus, more than anything else, behind Prohibition was the promise to end municipal corruption, because liquor licenses had become the most important thing that was at stake in any state or local election. Enormous amounts of liquor dollars flowed in to bribe politicians to secure those licenses.

We have the same thing with zoning. When zoning is put out there, it starts as a standard set of rules. Edward Murray Bassett, who comes up with the scheme, builds in a safety valve. He says, “There needs to be a zoning board of appeals for that rare circumstance in which we need to waive the rules.” You need that safety valve if you’re going to get people to buy into the system because if it’s too rigid, they just won’t go for it.

He builds it in, and it’s supposed to be the rare exception. It is now the rule. In most American cities, 30 percent, 40 percent, 80 percent of the city couldn’t be built today. It is noncompliant with the current zoning. If you want to alter it, if you want to change it, if you want to replicate it, you’ve got to go to some sort of body and get extraordinary approval.

It is an inherently corrupt process. Sometimes it is corrupt but legal, and it’s a way to legally blackmail developers into handing over all kinds of community benefits.

Often, it is corrupt and illegal, and things pass under the table, and the authorities who are in charge of these things, building inspectors, they take bribes, they take other kinds of emoluments in exchange for granting approvals.

I can see no way to solve that system other than by vastly simplifying the rules, so that you have just a handful of zoning categories instead of the hundreds of overlays that some cities have now, and by vastly simplifying the process so that people, as long as they believe that they are in compliance with zoning, should be able to build as of right.

That is to say, they can just go and put the shovel in the dirt and build the building, and the municipality can come and bring an action against them if they believe they’re not compliant. If you switch that, you’re not just fixing American mobility, but you can fix this bootlegger effect, which, as you’re pointing out, has led to some of the worst tendencies in American government. I thought about this a lot.

After college, I worked for the city of New York, and it was a real education. I had studied government; I knew American politics. Working at a high level in a municipal government is an education in what actually gets things done and where the power lies. Seeing that clearly convinced me that if you create a system which is intended to do all these good things layered on top of each other, what you’re actually doing is opening up infinite avenues for corruption.

Luigi: The Trump administration is really trying to introduce deregulation everywhere, even with the Doge department, and so on and so forth. How optimistic are you that they are going to start to deregulate the real-estate sector?

Yoni Appelbaum: Not terribly optimistic. One of the executive orders that Trump signed on that first day in office called for this kind of deregulation, cutting local rules to increase housing production. On the other hand, Trump has also talked about the terrible progressives who want to come into suburban communities and let people build there, and how he’s going to stop that.

You can see these dueling impulses where, on the one hand, he hates government. On the other hand, he hates even more the idea of people coming into these privileged communities who don’t resemble the existing inhabitants and changing the character.

I’m not terribly hopeful that we’re going to get huge regulatory change out of this administration. I hope they prove me wrong.

Luigi: Can we say that the American dream has been destroyed by the NIMBYs?

Yoni Appelbaum: They’re giving it their best. Right now, you see an awful lot of angry Americans who no longer feel as if they’ve got a sense of agency in their own lives, and they no longer feel like the American dream is attainable.

This is a really recent change, and this is the reason for optimism. It’s one reason why I love studying history, because history is actually not a path of inevitabilities. It’s a series of contingencies, sometimes fairly random and often unintended.

We made many of the changes that have killed the American dream over the last 50 years. Mostly, they were unintentional changes, or at least their effects were not intended by those who made the changes. To me, that says they’re reversible. If you have a society which has a consistent feature over many centuries, and that’s the thing you need to change in order to solve its problems, that’s a really hard problem.

If you have a society that recently made a set of changes, didn’t intend them to have the effects that they did, and is now worried about those effects, that’s a relatively easy problem to solve. The NIMBYs are trying to kill the American dream, but I’m not willing to give up the fight just yet.

Bethany: I still do think he’s a little too optimistic, not just about human nature, although he did have his line in the podcast that people, if asked to put multifamily housing next door to them, they will always say no, even if they want the society that comes with that.

I think he is not quite as Pollyannaish as I might have thought, but he does have this line that we can just put housing where we want it to be. I fear that the time for that has passed. I think about where I’ve lived in New York and where I live in Chicago, and there isn’t any land.

In some of the more crowded parts of the country where there already are a lot of people, like in New York City, if you wanted to redo it, you would have to rip down buildings and put bigger high rises in their place. You would actually have to kick out the people who are there, because it’s not as if there’s undeveloped land.

In other words, people aren’t saying in places like that, in urban Chicago, “You can’t come here because there’s lots of land and I’m not going to let you build.” There simply isn’t land.

Luigi: I understand, but it’s hard for me . . . Because I’m an Italian, I’m always attached to old monuments, et cetera. But at some level, what’s wrong with tearing down some houses? Unless those are particularly beautiful houses or monuments that we need to celebrate, tearing down houses and building up relieves a lot of the issue.

I think that that’s one of the many reasons why I like this idea of Henry George’s tax, because it’s really pushing people in that direction that is very ecological.

It saves space, it’s very environmentally conscious, it is very economically profitable, and it gets around this problem of expensive housing that is a tax on innovation and creativity. Why should the guys living next door to the lab make so much money out of the innovation of the lab?

Bethany: I’m not sure you can get there from here. In other words, if you told me that after the money I’ve put into owning a house, you were going to come and take it away from me, and I was going to be left with nothing, and you are going to tear it down and build multifamily housing in its place, I think I would fight tooth and nail not to have that happen.

I’m not money-conscious, but that would feel very unfair to me. That might have been the ideal way to do things in the first place, but to get there from where we are now requires appropriating people’s homes that they’ve worked for and paid for. I think that gets complicated.

Luigi: Wait, wait. I’m not talking about expropriation of anybody. You are young, Bethany, but the day you retire, and somebody approaches you to buy your house when you move to Florida and pays twice as much because they’re going to build a high-rise in place of that house, you’re going to love that.

At the moment, they cannot do it because zoning laws prevent people. I am against expropriating people but in favor of creating the incentives to actually build up.

The moment you have a Georgist tax, you will sell a little bit earlier because it’s expensive to maintain. To some extent, we are not taxing your benefits. You are taking advantage, but I am the same. I don’t want to make it personal. We are taking advantage of this piece of land, and we’re not fully paying the cost of this piece of land. When we’re not developing up, we are taxing everybody else, and we are benefiting without paying the appropriate tax. The Georgist tax is the right way to go.

Bethany: I can understand that. I do need to look back to my hometown and the way the taxation policy on the mining lands was done, because I think there is something very instructive in that. I also think, though, that it is hard to get from here to there on this aspect of homeownership.

When I was working on my little book about Fannie Mae and Freddie Mac, a housing advocate said to me about the idea that Americans should just rent more, “Let them eat rent.”

It’s true that housing policy has been dramatically unfair, but it still has been a huge means of building wealth for people and for providing for people in retirement. If you change that, you’re really fundamentally changing the system, in other words. I think that might be Yoni’s argument, that we do need to fundamentally change the system to get back to this era of more entrepreneurship and opportunity.

The changes go very, very deep. If you’re going to make homeownership less central to Americans, then you also need to provide more support for people later in life. It does increase the need for more social systems.

Luigi: You are absolutely right, but there is this issue of political economy. It’s a bit like the taxi medallions. Most of the people who owned the medallions did not get them for free. They paid somebody else. The moment the taxi-medallion value got reduced by the introduction of Uber, they were massively penalized.

The reason why the taxi lobby was so strong in the past was precisely because it looked unfair to expropriate those people who paid that cost. A lot of the owners today did not make gigantic capital gains. They paid a gigantic price to get that house. Seeing the value reduced would be very painful.

Bethany: Yeah. I loved his answer about this common thread in his work, because people are fallible, but human intentions are also fallible. You can set out to do this beautiful and good thing for a neighborhood, as Jane Addams did, and as Ralph Nader did, and you can discover that it can be misused in these ways that people never intended. I really liked his musings on the fallibility of people and process. That was also incredibly thought-provoking.

Luigi: You’re right. Lobbying also does require a powerful idea. Nobody really lobbies saying, “I want to give more money to the rich people.” It doesn’t sound good.

The nobler the idea, the more dangerous the lobbying is. Very often, legitimate ideas are misappropriated by lobbying and used in a negative direction.

Now, if the person is still alive, they can complain and try to distance himself or himself from this. In the case of Jane, I don’t think that she can.

Bethany: Yeah, I was also thinking about this. We talk so much about the wisdom of crowds, and yet when it comes to these political decisions that are made based on his description, it’s exactly the opposite of the power of the crowd.

The decisions matter more to the crowd, but the crowd is so diffuse that it can never defeat the self-interest of the person who is monomaniacally focused on this particular outcome and has the power to reach politicians.

There’s something in there that I’m playing around with that is the opposite of the wisdom of the crowd. That is the lack of power of the crowd or the diffuse power of the crowd. I don’t know. It’s like a cloud versus a dagger.

Luigi: Yes. What I learned from this book that I thought was really, really interesting is that the problem arose the moment states delegated this power to the local authorities. It’s not necessarily a problem of the wisdom of the crowd. It is the mismatch between the power and the impact.

If you are giving to the authorities in Palo Alto the power to control entry into Palo Alto, you are giving it an enormous amount of power that is mismatched with the benefits and the consequences of this decision. A little more regulation at the higher level rather than at the lower level would be very beneficial.