Economist Milton Friedman co-authored one of the earliest papers on the folly of rent control, finding that it caused apartments to be so scarce in 1946 San Francisco that only the lucky or well-connected got one.
Friedman and co-author George Stigler had no doubt rent control regulations were the problem, although they couldn't compare the San Francisco rental market with tight limits on rental rates to San Francisco without them. How were they supposed to do that?
It took a while, but researchers have figured it out.
A few years ago economists also wrote about the San Francisco rental housing market, after a change in quirky city rules started treating similar units built before and after 1980 differently. They found far better data to underscore that Friedman and Stigler were right about rent control.
For this real-world approach to how real people are faring, we can thank the economists who mastered an approach called the natural experiment. Three of them just won this year's Nobel Prize, David Card of the University of California, Berkeley, Joshua Angrist of the Massachusetts Institute of Technology and Guido Imbens of Stanford University.
Had the rules permitted it, the prize could've been split with a fourth economist, the former chair of the White House Council of Economic Advisers, Alan Krueger, who died in 2019.
Their approach is called a natural experiment. As it sounds, you don't have to concoct anything in a lab. Just notice two groups of similar people treated differently and watch what happens to them.
Business people might wonder what the fuss is about, as they experiment like this all the time. Marketers routinely send one version of an email pitch or webpage to a group of potential customers and a different version to another group, then carefully track which worked better.