Commentary

Criticism aside, New York City mayoral candidate Zohran Mamdani deserves credit for identifying the high and rising cost of living as an important concern. But while his diagnosis is spot on, his prescription is unsustainable.

Over the long term, the best ways to make life more affordable are through innovation and competition rather than regulations and controls.

Affordability is a concern that transcends the five boroughs of New York City. The Federal Reserve reports that 37 percent of Americans identified “inflation and prices” as their main financial challenge in 2024, compared with just 8 percent in 2016.

But not everything is getting less affordable. For example, apparel prices today are, on average, about the same as they were in 1992. Meanwhile, average wages have almost tripled over the past 33 years, making clothing three times more affordable.

Communications provide an even more extreme case. In 1983, a five-minute telephone call between New York City and Los Angeles cost $2.70. Today, such a call is essentially free and can include video as well as audio. Streaming technology has also eliminated the need to visit record stores to purchase albums at an average price of $5.97 in 1985.

The cost of talking to friends and family around the world and of accessing audio and video content has cratered because of technological innovation. Clothing has become more affordable because of increasing world trade, with low-cost countries such as Bangladesh and Vietnam becoming major suppliers.

While innovation and competition tend to push prices down, government often restrains these forces. Tariffs restrict our ability to buy low-cost products from overseas and make it easier for domestic producers to raise prices.

Pharmaceutical patents, which some drug companies have been able to extend for decades, forestall competition from low-cost generic alternatives. Restrictions on interstate telemedicine inflate the cost of obtaining health advice for the benefit of in-state doctors. At the local level, land use regulations drive up housing costs just as the old system of taxi medallions previously drove up the cost of hailing a ride.

But rather than deregulate and allow market forces to gradually lower the cost of living, many politicians follow the democratic socialist template of using restrictions and wealth redistribution to achieve quicker results.

Controlling rents, eliminating bus fares, and opening government-run food stores will save New York voters money in the short term, but these policies do not address the costs of providing housing, operating public transportation, or supplying food. Rent restrictions will ultimately result in less, lower-quality housing as landlords take apartments offline and stop maintaining the ones they keep renting.

The money needed to subsidize food and transit will have to come from somewhere. If the city tries to get it from Wall Street companies and employees through higher taxes, more will relocate to Florida, worsening New York’s fiscal challenges. Maintaining the subsidies will then require raising broader-based levies such as property and sales taxes, making the city less affordable for most residents.

Although trade and technology may not be able to achieve the affordability miracles in housing, transportation, and groceries that we have witnessed in communications and apparel, they can nonetheless hold costs down. Relying more on manufactured housing, including the 3D printing of homes, can reduce building costs, as can reducing tariffs on imported steel and cement. Driverless bus technology, now being widely tested around Japan, can lower transit costs by reducing the need for labor.

But building homes off-site and using autonomous transit vehicles run counter to the interests of construction and transportation unions, respectively. And, like domestic manufacturers, labor unions often resist reforms that improve affordability. To provide long-term affordability, political leaders should resist these special interests and open up the economy.

It is generally known that capitalism has lifted billions of people from extreme poverty in recent centuries, but how it did so is less well understood. By allowing and encouraging innovation, free markets encourage the development of cost-saving technological improvements, and by fostering open competition, they reward low-cost providers.

Given its tremendous track record, we should not abandon capitalism in favor of socialism, which, in its purer forms, has failed repeatedly. Instead, let us unshackle producers and consumers to develop and use lower-cost goods and services.