On Wednesday, April 25, 2007, Professor Anup Malani delievered a Chicago's Best Ideas talk on "Valuing Laws as Local Amenities." Professor Malani thinks we go wrong in trying to determine the value of a law only by its direct effects - he argues that by looking at the effect that any given law has on wages and property values, we can determine the relative value of all laws. This allows us to treat laws just like any other community amenities, such as the fixing of potholes or the building of a swimming pool. Listen to the talk here, and read the full blurb after the jump.
The conventional approach to evaluating a law is to examine its effect on proximate behavior. To evaluate a criminal law, for example, this approach would look to its effects on the crime rate. In this lecture, Professor Malani argues that laws should instead be judged by the extent to which they raise housing prices and lower wages. The logic is that the value of a law, much like the value of a lake or a public school, is capitalized into local housing and labor markets. Desirable laws increase housing prices and decrease wages because more people want to live in the relevant jurisdiction; undesirable laws have the opposite effects. Evaluating laws in this manner has several advantages. It employs a more direct proxy for what economists call “utility.” Moreover, it accounts for all the effects of a law, including hard-to-measure outcomes, unintended consequences, and enforcement costs.