To return to the original question, Seth, the conventional rent control argument that Krugman parrots assumes that new construction will be controlled. But in actually existing schemes like SF and NY, it isn't. So the argument falls apart in its own terms, even before empirical tests -- there is no reason *if housing were a normal market* that new construction shouldn't be booming under such schemes. Higher rent should be causing more construction should be bringing down unregulated rents.
Brad says such limitation might be caused by a legal limit on density. Even granting that, it's got nothing to do with rent control. Abolish rent control, the limit still stands. Abolish the limit, and its effect take hold even under the current system.
The fallacy lies in treating urban housing as if it were a perfect market where more can always be produced to meet demand. In reality, it's an obdurately limited supply which yields a monopoly rent. Saying, as Krugman does, that deregulating such a market would necessarily bring prices down seems . . . well, just as economically illiterate as he seems to be smugly accusing everyone else of being.
Michael
__________________________________________________________________________ Michael Pollak................New York City..............mpollak at panix.com