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♪ [music] ♪

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- [Tyler] Secondary consequences --
simple two words.

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- [Alex] Rent controls are popular
with renters all over the world

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because they appear
to offer lower prices

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with few adverse consequences.

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In the long run, however,

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extensive rent controls
can cause entire cities to crumble.

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You can see that today
in Mumbai, India.

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All of the predicted consequences
of rent control

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can be seen in Mumbai.

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There is a shortage
of rental housing,

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very, very little new rental housing
is being constructed,

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and the stock of old rental housing
is crumbling and falling apart.

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There's a remarkable sign
from the owners.

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Take a look.

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"...portions of the said building
are in ruinous condition,

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likely to fall,

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and dangerous to any person
occupying or passing by the same."

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It's falling apart.
It's beginning to crumble.

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Now, in part, that's a threat
to try and get the tenants to leave,

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but it's an all too believable threat.

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- [TV announcer] Another deadly
building collapse in India.

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A five-story apartment building
fell in Mumbai early Friday morning

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while people were fast asleep.

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It's unknown exactly how many people
are still underneath the rubble.

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Rescuers have been digging
for survivors all day long.

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- [woman] There's really
no incentives for them

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to maintain the existing stock,

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and you see
really bad deterioration

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of the buildings
that are under rent control.

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- [Tyler] So a classic
economic example is rent control.

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You cap the price,
the quality tends to go down.

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I won't go through
the whole analysis,

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but I think it's one
of the key core economic ideas --

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that you need to look
not just at the first stage

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of what happens,
but at later stages.

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It also ties into this idea --

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don't always be so sure
of what you're doing,

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that you can't always calculate
the secondary, tertiary,

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and later consequences.

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Again, very important
economic idea.

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