New York City Skyline
I have substantial disagreements with New York City Mayor Zohran Mamdani. He is a democratic socialist, and many of his signature proposals rely too heavily on price controls, subsidies and government provision of goods and services.
But good policy should be recognized even when it comes from someone with whom we usually disagree. To my mild surprise, Mamdani has given me several opportunities.
Start with congestion pricing. Mamdani strongly supports New York’s program, which charges motorists for entering the most congested part of Manhattan. After its first year, traffic entering the congestion zone was down about 11 percent while the program generated substantial revenue for mass transit.
This is good economics. Congestion imposes costs on everyone else using the road. Charging for that scarce resource encourages some drivers to travel differently while allowing those who value the trip most to continue making it.
I also like important parts of Mamdani’s approach to housing supply. His administration’s housing plan includes zoning and land-use changes intended to increase production, conversions of existing buildings, accessory dwelling units and efforts to speed construction. This is consistent with CIVPAC’s broader position on housing: New York cannot subsidize its way to an increased supply of housing.
His recent small-business deregulation deserves credit as well. The administration has proposed more than 50 reforms eliminating obsolete permits, duplicative licenses, paperwork and unnecessary fines. Among them is eliminating a second permit for restaurants that already have a food-service permit merely to sell ice cream. Regulatory complexity is a fixed cost that falls particularly heavily on small firms and new entrants. Removing rules that accomplish little makes markets more competitive.
Perhaps most unexpectedly, I find a strong economic argument for Mamdani’s new pied-à-terre tax on New York City residences worth more than $5 million whose owners maintain their primary residence elsewhere.
The usual political justification is that wealthy people can afford to pay more. I find another argument more persuasive.
Like the carbon tax CIVPAC supports, this tax has an attractive either-or quality. If owners respond strongly, some will sell their seldom-used apartments or put them into productive residential use. The tax then partly destroys its own tax base—but increases the effective housing supply. That is success, not failure.
If owners barely respond, their demand is relatively inelastic. The city receives a sustainable source of revenue while creating relatively little economic distortion.
That is close to an ideal tax: either the distortion it creates is beneficial or the distortion is small enough that the tax raises substantial revenue.
Unfortunately, Mamdani does not apply that same understanding of prices and incentives consistently.
His rent freeze is the clearest example. The Rent Guidelines Board, dominated by his appointees, voted in June to freeze rents on both one- and two-year leases covering roughly one million rent-stabilized apartments. Lowering the legal price of an existing apartment may benefit its current tenant. It does not create another apartment. Over time, price controls discourage investment, maintenance and additions to supply—the opposite of what New York needs if it wants more housing.
I am similarly skeptical of municipal grocery stores. Mamdani’s administration plans five city-supported stores offering selected groceries at prices below prevailing levels. But groceries do not become cheaper because government declares a lower retail price. Someone pays the difference. Subsidizing selected government-backed stores also forces private grocers to compete against businesses whose losses taxpayers can absorb.
Nor am I persuaded by fare-free buses or the proposed $30 minimum wage. There can be good reasons to subsidize public transportation because it produces benefits beyond the individual passenger. But zero is not automatically the economically correct fare, particularly when removing fares increases demand while eliminating revenue that could improve frequency and reliability.
And setting wages far above the market wage can help workers who retain their jobs while making it harder for less-skilled workers to obtain one.
There is a broader lesson here.
CIVPAC does not believe a policy should be judged by whether it was proposed by a democratic socialist, a conservative or a centrist. I would rather ask: Who really bears the cost? What incentives does the policy create? What happens to supply? And is the resulting distortion harmful or useful?
Apply those questions consistently and Mamdani gets some surprisingly good answers.
He also gets some very bad ones.
The interesting thing is that the same economics explains both.