Despite being the main metropolitan area in the state, the City of Manchester’s zoning ordinances are surprisingly hostile to the construction of new multifamily housing. As a review of the city’s zoning ordinances championed by former Mayor Joyce Craig continues, aldermen are considering three relatively small changes unanimously approved by the Planning Board and brought forward by new Mayor Jay Ruais. 

These proposed amendments to the city’s zoning ordinances would represent a small but important step in the long-term effort to make the city’s zoning rules more friendly to new housing development. 

“Specifically, these amendments would help to make the construction of a few types of housing easier in the city by reducing regulatory barriers and by speeding up the permitting process,” Jeff Belanger, director of Planning and Community Development, told aldermen at a recent public hearing. 

The first change would allow four-unit housing to be built on lots currently permitting three-unit housing.

“The ordinance today establishes minimum lot sizes for developing multifamily or townhouse buildings with three dwelling units and then requires additional lot area for each additional dwelling unit,” Belanger explained. “The proposed amendments would change the minimum number of units that could be built on a lot from three to four, meaning that there could be an additional dwelling unit built on the minimum size lot.”

But for these changes to have any meaningful effect, the amendments also address parking requirements, reducing the required number of parking spaces for multifamily housing from 1.5 spaces per unit to one space per unit. 

“The proposed amendments for housing units would not be at all effective really if we didn’t also make adjustments to parking requirements,” Belanger said. “Parking requirements can really limit housing construction because parking takes up land area and adds costs. That’s especially true when it comes to three-family and four-family dwelling units because of the current parking requirements in the zoning ordinance.” 

In zoning districts that require 1.5 parking spaces per unit, the result is that three-family buildings need to set aside five parking spaces and four-family buildings need six parking spaces. And having that fifth parking space triggers an additional regulatory burden. According to Belanger, lots with at least five parking spaces must have a landscaped buffer around them, which costs time, money, and land area. 

Dropping the required number of parking spaces to one per unit would allow four-unit housing to be built on what is now the minimum lot size for three-unit housing, as three-unit and four-unit buildings would only need three and four parking spaces, respectively, keeping them below the five-space threshold. 

The third change would eliminate the need for property owners to receive a conditional use permit from the city’s Planning Board before building accessory dwelling units (ADUs) on their property, bolstering a property owner’s right to build an ADU.

“The benefit of exempting ADUs from Planning Board review is that it makes them faster and cheaper to permit,” Belanger told the aldermen. “Planning Board review usually takes about a month for an ADU application and there are fees associated with it. Both the delay and the fees would be eliminated with this proposal.”

Removing this red tape would help accelerate the construction of ADUs in Manchester, increasing the supply of units in the city and putting more people in homes. 

Interestingly, the Manchester Planning Board unanimously supports all three amendments, though they would take power away from the Planning Board itself. That is a sure sign of how pressing the need is for these types of reforms in the city. 

According to the New Hampshire Zoning Atlas, Manchester permits two-family housing on 23% of its buildable land and three-family, four-family, and five+-family housing on 21% of its buildable land as of 2023. 

That puts Manchester behind seven other cities in the state with respect to duplexes and six other cities with respect to larger multifamilies. (See our breakdown from last year of Manchester’s hostility to duplexes and other multifamilies here.)

“Manchester’s proposed zoning amendment is a modest but meaningful change that will probably result in a few dozen more apartments being built in scattered locations,” said Jason Sorens, senior research fellow at the American Institute for Economic Research and the principal investigator of the zoning atlas. “The city could go even further, especially since some of the changes merely bring the zoning in line with existing densities, but this change would start to chip away at the housing shortage in the city without causing noticeable changes in density at the neighborhood scale.”

There’s more the city can do to free up the supply of housing, such as further rolling back parking minimums, addressing minimum lot sizes, streamlining the permitting process for all types of construction, and opening up more buildable land for duplexes, just to name a few. But these proposed changes before the city now would start the much-needed process of reducing development costs and protecting residents’ property rights. 

“The proposed zoning amendments are not going to fix every housing problem in the city, but they are intended to at least help get at the cause of the housing crisis, which is a lack of supply,” Belanger explained. “They are intended to reduce regulatory barriers to housing production, while respecting the character of neighborhoods.”

State lawmakers are considering a slate of housing bills that would effectively override many municipalities’ zoning codes. And while some view such actions as constituting threats to local control—which New Hampshire rightfully cherishes—inaction on the part of local governments to loosen their own regulations may leave the state with no other choice. 

That is, unless cities like Manchester act first on these kinds of zoning amendments. 

 

Imagine you own a small entertainment venue in New Hampshire. What’s the value of an aisle seat in Row 37 on a Wednesday night in April?

Let’s say you printed the date, the time and a price of $100 on the ticket. Would that make the ticket worth $100? How about $200?

No idea, right?

You don’t have enough information to answer that question. You first have to know: 1.) Who’s playing that night, and 2.) How much are people willing to pay to sit in that seat in that venue at that time for that artist?

The number of people interested in renting that seat for two hours on a Wednesday night would vary along with the popularity of the artist. That number would be lower for a Dead Kennedy’s show than for a Dua Lipa show. (Yes, we know who Dua Lipa is. Kind of.)

Everybody understands that the value of sitting in that particular seat for any given two-hour period is not fixed. It depends on who is on the stage, when, where, for how long, etc. In other words, the value depends entirely on demand. It doesn’t matter what price you print on the ticket if that price doesn’t reflect the actual demand for that seat at that time. 

So why do so many lawmakers (and consumers) assume that ticket prices set by venue operators reflect actual market value?

Venues have a lot of information that helps them set ticket prices. But ticket prices are not the same as ticket values. And extensive research into ticket prices has shown that venues and artists routinely underprice tickets relative to their market value for many reasons, including the desire to encourage sellouts (which maximizes concessions revenue) and avoid annoying fans.

“To maximize profits a promoter wants a sell-out as this maximizes complementary revenues and introduce the ‘crowd effect,’ meaning that consumers who believe a concert will be a sell-out are more attracted to the event and demand for tickets will intensify,” Hofstra University music industry professor Terrance Tompkins wrote in the International Journal of Music Business Research in 2019.

Industry professionals confirm what researchers have found.

“Average secondary ticket prices remain close to double that of a primary ticket, continuing to show the extent to which concerts and other live events remain priced below market value,” Music Business World, an industry publication, quoted Joe Berchtold, Live Nation’s President and Chief Financial Officer, as saying in a recent earnings call.

That huge gap between the retail price of event tickets and their market value drives the growth in the secondary market. People and policymakers like to hate on “scalpers.” But there wouldn’t be much of a secondary market if retail prices better reflected market value.

Concert ticket prices have risen dramatically in recent decades, reflecting a rise in demand and a rise in disposable income among the concert-going public. But generally speaking, retail prices often remain below market value, particularly for the most popular shows.

Senate Bill 328 would try to address this gap between price and value by imposing a price cap on the secondary market. Deceptively presented as a bill to ban deceptive resale practices, its last section forbids the resell of event tickets above face value.   

That’s a price cap, and price controls are bad. Banning the resale of tickets for more than face value won’t change the actual market value of tickets for popular events. It will create shortages in legitimate secondary ticket markets and stimulate a separate black market for event tickets. 

The Federal Trade Commission looked into ticket reselling in 2019 and organized a presentation by University of Chicago economist Eric Budish, who concluded, as so many other researchers have, that this market was driven by low retail ticket prices. 

“The structural economic issue is artists/teams sometimes want to ‘underprice’ their tickets relative to what the market will bear,” Budish concluded. “This creates an incentive for rent-seeking behavior.” (That means it creates an incentive for people to buy tickets at their obviously low prices and make a profit by selling them at the market price.)

The FTC suggested that only three ticket-selling options exist:

1. Set a market-clearing price in the primary market.

2. Set a below-market price in the primary market. Much of the “real” allocation will happen in the secondary market.

3. Set a below-market price in the primary market + ban resale.

Option 2 describes the current market, which is obviously not ideal. 

Option 3 describes the market as imagined in SB 328. This is also not ideal, as it would not solve the underlying problem but would expand the unregulated black market for tickets. It also likely would do little to curtail high markups in the secondary market, as law enforcement agencies rarely waste valuable officer time pursuing ticket resellers, which resellers know. 

The best option is Option 1: setting a market-clearing price in the primary market. There’s research to show that this has highly positive effects.

Budish, the Chicago economist who presented to the FTC in 2019, later worked with Bank of America economist Aditya Bhave to study Ticketmaster’s short-lived experiment in auctioning a portion of tickets for concerts in the early 2000s. In a study published last year, they compared set prices and auction prices in the primary market to the prices for comparable tickets to the same shows in the secondary market. 

Not surprisingly, they found that auctioning tickets instead of selling them for a set, below-market price all but eliminated the gap between retail and secondary market prices. And instead of scalpers collecting the difference between the set price and the market price, the artists did. 

When fans paid the market price directly to the venue, rather than to a reseller, “artist revenues roughly doubled,” they found.

The auctions allowed fans to find the market-clearing price before resellers could, which “eliminated or at least substantially reduced potential resale profits for speculators.”

Unfortunately, Ticketmaster discontinued its auctions. Fans, unaccustomed to paying market prices at the retail level, didn’t like it. And so the secondary market continued to grow, and resellers, rather than artists, enjoyed the benefits of selling tickets for their true market value.

Auctions would be the most efficient way to find the true market value of an event ticket, but venues could get close to that value in other ways. They could raise prices for the most valuable seats at the most popular shows, charge significantly higher prices when tickets first go on sale to discourage mass reseller purchases, or delay sales until closer to the show date. 

Venues also could choose to ban resales and require purchasers to show a photo ID at the door. But this doesn’t go over well with fans. It’s much easier to demand that lawmakers prevent resellers from making a profit. 

Lawmakers certainly can pass laws making it illegal to sell tickets at market prices. But they can’t ban the laws of economics. People will find ways to sell tickets at market value. It’s better that venues do this in the primary market. If they choose not to do this, ticket purchasers will–even if legislators tell them not to. Moving market-priced tickets from the legal market to the black market isn’t good for anyone and would be the worst of all options.

As pressure builds for local and state policymakers to address New Hampshire’s severe housing shortage, some activists and lawmakers are again blaming developers rather than regulators for the state’s high rents. 

Developers are building “too many” apartments for higher-income renters, some claim. This raises rents, hurting the poor, so government must intervene to make builders reserve a certain percentage of new construction for lower-income households, the argument goes. Some also want the state to give subsidies to low-income renters. 

The idea that building more apartments raises rents has achieved the status of conventional wisdom in some activist circles. It’s done so despite it being untrue, and confirmed untrue by growing stacks of economic evidence. 

Even academics repeat the claim. A California political science professor, in a February opinion column for New Hampshire Bulletin, wrote that “construction in the high-end ‘luxury’ rental market, which drives up rents for everyone else, remains in an upward trend.”

In fact, building more market-rate apartments reduces rents for middle-and lower-income households. This has been well established in academic research for years. And recent studies have provided more detailed confirmation of the effect.

A review of recent research on the subject finds:

  • Researchers at the Upjohn Institute and Federal Reserve Bank of Philadelphia found in 2019 that new market-rate apartment buildings “decrease nearby rents by 5 to 7 percent relative to locations slightly farther away or developed later.” They made a point of stating that the evidence ran against common complaints about market-rate apartment construction. “Contrary to common concerns, new buildings slow local rent increases rather than initiate or accelerate them,” they wrote.
  • A 2020 study by the National Multifamily Housing Council Research Foundation found that a “substantial flow of new construction apartments, largely targeted to middle- and higher-income groups, has enabled the ‘filtering’ process to create affordable housing opportunities for low-income households,” as a summary of the report put it. 
  • NYU researchers in a 2018 paper sought to answer claims that building market-rate apartments raised rents. “We ultimately conclude, from both theory and empirical evidence, that adding new homes moderates price increases and therefore makes housing more affordable to low- and moderate-income families.” They also noted that housing shortages are caused by regulations, not new construction. “Despite the arguments raised by supply skeptics, there is a considerable body of empirical research showing that less restrictive land use regulation is associated with lower prices. The evidence takes many forms. A large number of cross-sectional studies show that stricter (less strict) local land use regulations are associated with less (more) new construction and higher (lower) prices.
  • A 2021 UCLA review of recent studies on the effects of building market-rate apartments found overwhelming evidence that new construction of market-rate units lowers rents. Referencing the NYU paper cited above, the authors wrote: “Since that article came out two years ago, at least six working papers have been released that examine the connections between market-rate housing production and affordability at the neighborhood level. Four of the papers conclude that market-rate development makes nearby housing more, not less, affordable. The fifth paper looks at rents across entire cities rather than at the  neighborhood level, but finds that new development causes rents to fall for units across the income distribution. Findings in the sixth paper are mixed, and offer some reason to think new development makes nearby housing more expensive. Although the papers await peer review, and readers should bear that in mind, the importance and near-unanimity of their findings makes discussing them worthwhile.”

Building luxury or higher-end apartments draws higher-income renters out of yesterday’s luxury apartments and into the new luxury apartments. Increased vacancies in yesterday’s luxury apartments attract higher-income residents who’ve been living in mid-level apartments. As new construction creates more vacancies, rents come down. That effect filters throughout the housing supply, lowering rents all the way down. Economists call this “filtering,” and it’s an effect thoroughly established in academic and industry studies of rental housing markets. 

There’s no doubt that filtering occurs when enough new apartments are built. It can’t occur, though, if government prevents developers from creating those new high-end apartments. The problem in recent years has not been the creation of too many high-end apartments, but too few.

Harvard’s Joint Center for Housing Studies pointed this out in 2020: 

“What is different about the recent dynamic is that new construction is accommodating a growing number of high-income households, but just barely. Indeed, despite the relatively high rents, the number of new apartment units being added each month is scarcely keeping up with growth in units rented out, or ‘absorbed’ by new renters. When new construction is only just meeting demand from new high-income renters, it means that, in effect, new high-end units are being rented out by new, high-income renters, rather than by current high-income renters trading up to a newer unit, and therefore fewer old units are left to ‘filter down’ to a lower-income renters.”

In other words, when developers are allowed to build more market-rate apartments, rents come down for everyone. When they aren’t, rents stay high. 

Legislators are again considering a proposal to raise the state’s minimum wage through a series of automatic annual hikes. The House of Representatives will vote Thursday on House Bill 1322, which would institute an immediate 31% increase in the state minimum wage, then compel additional increases over the next five years.

HB 1322 would require employers in the state to pay their employees no less than the following wages, or the federal minimum wage (currently $7.25 an hour), whichever happens to be higher at the time:

  • $9.50 an hour starting September 1, 2024
  • $11.00 an hour starting January 1, 2025
  • $12.50 an hour starting January 1, 2026
  • $14.00 an hour starting January 1, 2027
  • $15.50 an hour starting January 1, 2028
  • $17.00 an hour starting January 1, 2029

The bill further requires that the minimum wage be adjusted starting January 1, 2030, according to the increase in the cost of living per the Northeast Consumer Price Index put out by the Bureau of Labor Statistics in the U.S. Department of Labor. (This means, in all likelihood, the minimum wage would only keep increasing.) 

New Hampshire doesn’t have its own minimum wage. The state defaults to the federal minimum wage of $7.25 per hour. Nineteen other states either have not adopted their own minimum wages, have a minimum wage set below $7.25, or default to the federal minimum wage. All said, the federal minimum wage applies in 20 states, while 30 states and D.C. have adopted minimum wages above the $7.25 federal minimum.

With HB 1322, New Hampshire would join those 30 states and D.C. But the consequences would not be as rosy as supporters suggest.

How to make an $18 Big Mac

California and Connecticut are two of 22 states celebrated by advocates of higher minimum wages for setting high wage floors this year. It’s only February, and Californians are already bracing for their fast-food prices to jump thanks to a bump in the minimum wage to $20 an hour for fast-food workers. Business Insider reports, “To compensate for the extra cost of labor, restaurants like McDonald’s, Chipotle, and Jack In the Box plan to raise menu prices at their California stores.”

On January 1, Connecticut’s minimum wage was raised to $15.69 per hour and will adjust annually according to the federal employment cost index. Just three days later, Yahoo! Finance reported, “The recent uproar over a McDonald’s location in Darien, Connecticut, charging $18 for a Big Mac combo meal has sparked a nationwide debate on the escalating prices in the fast-food industry. Sam Learner’s viral post on X showcasing the exorbitant prices, including $19 for a Quarter Pounder meal and $17 for two cheeseburgers, has raised questions about the sustainability of such pricing in the industry.”

A 2021 New Hampshire Employment Security, Economic and Labor Market Information Bureau study found that raising the state’s minimum wage would generate similar increases in food prices here. Increasing the minimum wage to $15 an hour would lead to price levels rising by 7% in the food services and drinking places industry and 3.4% in the retail industry, the study found. 

When the government makes the cost of labor more expensive, employers have to compensate in the form of raising prices for consumers. And as prices increase at fast-food restaurants, grocery stores, and retail chains, the most vulnerable consumers are the most negatively affected. 

Who earns the minimum wage?

According to Bureau of Labor Statistics data, only about one million workers, or 1.3% of all hourly paid workers in the country, earned wages at or below the federal minimum in 2022. Unsurprisingly, minimum-wage workers tend to be young and just starting out, as workers under the age of 25 make up roughly 45% of those paid at or below the federal minimum wage, despite accounting for only 20% of all hourly paid workers. 

Proposals to raise the minimum wage typically incorporate the assumption that all workers currently making the minimum wage are stuck there for life. Given that most minimum-wage jobs are entry-level, however, it’s hardly surprising that two-thirds of minimum-wage workers earn more within a year of employment, according to the Heritage Foundation and the National Bureau of Economic Research

In 2022, according to BLS data, 1,000 Granite Staters made the federal minimum wage (almost certainly all service industry employees earning tips or individuals with severe disabilities who can’t reach productivity levels employers would typically demand). Another 4,000 made below the minimum wage. Federal law allows certain employees, such as vocational education students and full-time students working in certain fields, to be paid below the federal minimum wage. These 5,000 workers amounted to just 0.5% of the New Hampshire workforce and 1.2% of all hourly paid workers in the state. 

This small group is highly atypical in today’s job market. According to the New Hampshire Employment Security, Economic and Labor Market Information Bureau, the average entry-level hourly wage in the state is $15.36 as of June 2023. What’s more, among the bottom 10 wage-earning occupations in New Hampshire, the lowest-paying jobs are dining room and cafeteria attendants and bartender helpers, earning an average of $11.69 as of May 2022. 

The story of the minimum wage in New Hampshire is the same as it’s been for years, which is that the market has done what legislators wanted to do: lift wages in the lowest-paid occupations. In other words, raising the minimum wage in New Hampshire is the epitome of a “solution” in search of a problem. 

Increase in unemployment

Fundamentally, minimum-wage laws are a form of government-mandated price controls, which have real consequences on supply and demand. Just as price ceilings in the form of rent control lead to a decrease in the supply of housing but an increase in demand, price floors in the form of minimum-wage laws lead to an increase in the supply of labor but a decrease in the demand for it. 

As economist Thomas Sowell put it in Basic Economics, “By the simplest and most basic economics, a price artificially raised tends to cause more to be supplied and less to be demanded than when prices are left to be determined by supply and demand in a free market. The result is a surplus, whether the price that is set artificially high is that of farm produce or labor.” 

And a surplus of labor inevitably means higher unemployment. Of the 20 states (plus D.C.) with the highest unemployment rates, 16 of them have adopted minimum wages that are higher than the federal minimum wage. When the U.S. Congress was considering a bill to raise the federal minimum wage to $15 an hour in 2021, the Congressional Budget Office estimated at the time that 1.4 million workers nationwide would be put out of a job as a result. 

Such a strong correlation makes sense when you remember that a government’s edict doesn’t change basic economics. In the case of a minimum wage, just because the government forces employers to pay a certain amount of money for an hour’s worth of work doesn’t mean that the employer magically has enough money to pay all his or her employees that new government-imposed wage, nor does it mean that all his or her employees’ productivity is even worth that new wage.

The most disadvantaged workers—employees who were gainfully employed before the government made it illegal to pay them below a certain amount—are the most negatively impacted by raising the minimum wage. That’s an unavoidable tradeoff of a policy that forces employers to decide which employees he or she can afford to keep.  

High minimum wages also favor big corporations, which have deeper pockets, over small businesses. They also limit all employers’ abilities to create entry-level jobs by making it more expensive to hire lower-skilled workers.

New Hampshire boasts the lowest poverty rate (7.2%) and the sixth-lowest unemployment rate (2.5%) in the country, but those figures would worsen if the state makes it more expensive to hire. This was demonstrated by the state’s own study just three years ago. 

The state’s 2021 study on the effect of a $15 minimum-wage hike concluded that raising the minimum wage to $15 an hour would have significant negative effects. A $15 minimum wage would, by 2031, cause employment in New Hampshire to be 5,847 lower, New Hampshire’s GDP to be $800 million lower, and the state’s population and labor force to drop by 9,630 and 6,023 people, respectively, due to fewer job opportunities, than if the minimum wage had not been increased. 

The same study found that such an increase would cost employers $1.08 billion over 2019 wage costs—a 3.1% increase throughout the New Hampshire economy—borne heavily by an 18.6% increase in wage costs in the leisure and hospitality industries and a 20% increase in the food services and drinking places industry. The end result is that the lowest-wage workers would experience the highest number of job losses, concentrated mostly in the food services and drinking places, leisure and hospitality, and retail trade industries. Such reductions in employment would all but offset the mandated wage increase, as any immediate aggregate increases in personal income would eventually cancel out and begin declining due to job losses.

So, when considering raising the minimum wage, state lawmakers should ask themselves the following: What’s preferable for an employee, a job that pays less than $15 (or $17 or $20) an hour, or no job at all?

The NH Coalition to End Homelessness (NHCEH) recently released The State of Homelessness in New Hampshire Annual Report 2022, and the results are understandably concerning. 

According to annual Point-in-Time (PIT) counts, statewide homelessness grew from 1,382 people in 2019 to 1,605 in 2022, a 16% increase. 

While sheltered homelessness (people living in shelters) increased by about 3% over those four years, both chronic and unsheltered homelessness increased by a whopping 71% and 125%, respectively. 

According to data collected throughout the year using the state’s Homeless Management Information System (HMIS), the numbers are equally startling. The state’s homeless population grew by about 32% from 4,554 people in 2020 to 6,031 in 2022. 

“The rate of homelessness in New Hampshire increased from 330.6 per 100,000 residents in 2020 to 432.3 in 2022, reflecting a rate increase of 30.8%,” the report states. Over those three years, chronic homelessness rose by 30% and unsheltered homelessness rose by 41% using HMIS.

Homelessness is undoubtedly a multivariate problem—an issue involving a handful of variables where not one single “solution” will eliminate the problem entirely. But a severe shortage of rental housing is a major factor in New Hampshire. 

“There is simply not enough available housing to meet the need,” the NHCEH states in its report. 

A state’s rental vacancy rate is the percentage of residential rental units in a given area that are currently available. A statewide vacancy rate of 5% is emblematic of a balanced market (supply meeting demand). 

New Hampshire’s vacancy rate is 0.8% for all units (0.6% for two-bedroom units), according to the New Hampshire Housing Finance Authority

The state vacancy rate has been under 1% for four out of the last five years. The last time it was at least 5% was 2009–2010. Six of New Hampshire’s 10 counties (Belknap, Carroll, Hillsborough, Merrimack, Rockingham, and Sullivan) have vacancy rates below the statewide figure of 0.8% this year.

Our research has established that local land-use regulations are the main culprit holding back the supply of housing in the state. Parking requirements, minimum lot sizes, exclusionary zoning, and other constraints are examples of land-use regulations that choke the supply of housing by making it more costly, difficult, or impossible to build. Municipal restrictions on rental housing can be severe in some locations.

Multifamily housing is greatly restricted in many of the state’s 13 cities. Here are the percentages of buildable land on which multifamily housing is allowed in each New Hampshire city in 2023, according to the New Hampshire Zoning Atlas:

2-Family 3-Family 4-Family 5+-Family
Berlin 82% 40% 40% 40%
Claremont 87% 5% 5% 5%
Concord 22% 36% 36% 36%
Dover 82% 65% 65% 65%
Franklin 7% 7% 7% 7%
Keene 8% 9% 7% 7%
Laconia 28% 28% 28% 28%
Lebanon 14% 6% 6% 6%
Manchester 23% 21% 21% 21%
Nashua 57% 58% 58% 58%
Portsmouth 28% 30% 30% 30%
Rochester 72% 10% 10% 10%
Somersworth 14% 8% 8% 8%

Eight cities allow duplexes on 30% or less of their buildable land. Another nine allow multifamily housing of three units or more on 30% or less of their land. And these are after some zoning improvements were made over the last year. 

With a current shortage of more than 23,500 housing units, building more multifamily housing is critical to addressing homelessness. But prohibitive zoning laws in many municipalities get in the way. 

Reducing homelessness means increasing rental housing. Increasing rental housing means relaxing the local land-use regulations that severely restrict the development of rental housing. 

It’s no coincidence that as the state vacancy rate has consistently remained below 1%, rents—and homelessness—have increased. 

Median monthly rent for a two-bedroom apartment in the state has increased by 59% since 2014 to $1,764 in 2023. Rents have increased by 31% since 2019 alone.

Again, housing supply isn’t the only factor driving the increase in New Hampshire homelessness. Municipal officials also point to increases in substance use, addiction, and mental illness. But a larger supply of lower-priced homes and apartments would put housing within reach for many who struggle to stay off the streets. 

Illustrating the connection, research by the Pew Charitable Trusts found a strong connection between high rents and high levels of homelessness between 2017 and 2022. That study was consistent with findings from previous studies.  

One policy often proposed as a remedy for both homelessness and high rents is the government imposition of rent caps. For the second year in a row, state lawmakers have filed a bill to authorize municipalities to implement rent control measures.

House Bill 1362 would enable municipalities to enact ordinances limiting how much rents can be raised over a 12-month period. It’s pitched as a way to “stabilize rent increases.”

Price controls like this may be politically seductive, but they are economically harmful. Instituting rent control would have the same deterring effect on developers that burdensome zoning regulations already have. By reducing profitability, rent control would further reduce the supply of rental housing. So, instead of solving the state’s shortage of rental housing, it would only worsen the shortage. This would lead to increases in New Hampshire’s homeless population. 

It’s well established, as we’ve pointed out, that rent control laws reduce the supply of rental housing and tend to push market rents even higher. Rent control is not a solution. 

“[T]he people who are asking for rent control are very angry when they discover there is a shortage of apartments and a shortage of housing,” wrote economist Ludwig von Mises in Economic Policy: Thoughts for Today and Tomorrow.

The problem with housing in New Hampshire isn’t “greedy” landlords or developers. It’s government policies that prevent or discourage landlords and developers from increasing supply. Get those regulations out of the way and the market will step in to meet the need. 



New Hampshire is the most economically free state in North America and in the United States, once again edging Florida to top every Canadian province, U.S. state and Mexican state as ranked by the Fraser Institute, Canada’s free-market think tank. 

The Fraser Institute’s 2023 Economic Freedom in North America report, released in partnership with the Josiah Bartlett Center for Public Policy, measures government spending, taxation and labor market restrictions using data from 2021, the most recent year of available comparable data.

New Hampshire surpassed Florida as having the highest level of economic freedom in the U.S., having scored 7.96 out of 10 in this year’s report. Rounding out the top five freest states are Florida (2nd), Tennessee (3rd), Texas (4th) and South Dakota (5th). Puerto Rico came in last with 2.85. The least free states were New York (50th), California and Vermont (tied for 48th), Oregon (47th) and Hawaii (46th).

The Granite State also topped the list of all states in North America, scoring 8.14 out of 10, followed by Florida (8.07), South Carolina (8.06), and then Idaho and Indiana, tied for fourth (8.05). Alberta is the highest-ranking Canadian province, tied for 31st place with a score of 7.90. 

“New Hampshire is proof for all of North America that economic freedom creates maximum opportunity and prosperity,” Josiah Bartlett Center President Andrew Cline said. “The formula is proven, and anyone can follow it. Even Vermont, if it wants to.” 

“The freest economies operate with comparatively less government interference, relying more on personal choice and markets to decide what’s produced, how it’s produced and how much is produced; as government imposes restrictions on these choices, there’s less economic freedom and less opportunity for prosperity,” said Fred McMahon, the Dr. Michael A. Walker Research Chair in Economic Freedom at the Fraser Institute and report co-author.

The report includes an all-government ranking, which adds federal government policy to the index and includes the 50 U.S. states and the territory of Puerto Rico, 32 Mexican states, and 10 Canadian provinces.

Taking into account both federal and state policies, U.S. economic freedom declined from 2003 to 2011, began to recover, and then declined again after 2017. The last two years have seen the lowest levels of measured economic freedom in the U.S. in the last two decades. And while the U.S. remains more economically free than Canada, the gap is relatively small.

“The evidence is clear—lower levels of economic freedom are associated with less prosperity, slower economic growth, less investment, and fewer jobs and opportunities,” said Dean Stansel, economist and research associate professor at Southern Methodist University and co-author of the report.

The Economic Freedom of North America report, also co-authored by José Torra, the head of research at the Mexico City-based Caminos de la Libertad, and Ángel Carrión-Tavárez,  director of research and policy at the Instituto de Libertad Económica in Puerto Rico, is an offshoot of the Fraser Institute’s Economic Freedom of the World index, the result of more than a quarter-century of work by more than 60 scholars, including three Nobel laureates.

See the full report at www.fraserinstitute.org/economic-freedom.

New Hampshire’s cores in key components of economic freedom (from 1 to 10 where a higher value indicates a higher level of economic freedom):

  • Government spending: 8.25
  • Taxes: 7.68
  • Labor Market Freedom: 7.60

About the Economic Freedom Index

Economic Freedom of North America measures the degree to which the policies and institutions of countries support economic freedom. This year’s publication ranks 93 provincial/state governments in Canada, the United States and Mexico. The report also updates data in earlier reports in instances where data has been revised.

For more information on the Economic Freedom Network, datasets and previous Economic Freedom of North America reports, visit www.fraserinstitute.org. And you can “Like” the Economic Freedom Network on Facebook at www.facebook.com/EconomicFreedomNetwork.

Download the entire report here: EFNA-2023-US.

 

It seems like it’s every week that there’s some new concerning statistic about the New Hampshire housing market.

This time it comes from CoreLogic’s U.S. Home Price Insights. At 9.4%, New Hampshire saw the highest home price growth in the country from August 2022 to August 2023. 

The top 10 states with the highest year-over-year increases in their home prices include four other New England states. The rest of the top 10 are Maine (8.9%), Vermont (8.9%), Rhode Island (8.4%), New Jersey (8.1%), Connecticut (8.1%), Wisconsin (7.0%), Missouri (6.7%), Indiana (6.6%), and Ohio (6.0%).

Nationally, from August 2022 to August 2023, home prices rose by 3.7%, which means that New Hampshire home prices increased by more than double the national average so far this year.

Not every state saw a jump in home prices over the last year. States like Arizona, Idaho, Montana, Nevada, New York, Texas, Utah, and Washington saw some of the largest year-over-year drops in their home prices. 

Many states in the Western U.S.—the three states along the Pacific Coast, as well as all Mountain states but New Mexico—saw annual declines in home prices.

Is this a coincidence? Hardly.

Several of those states happen to be building the most homes. According to an analysis of U.S. Census data by RubyHome Luxury Real Estate, Texas (22.5%), Utah (20.65%), Idaho (20%), Nevada (16.74%), and Colorado (16.30%) all rank among the top 10 states with the highest rate of new homes built (as a percent of their total housing stock) from 2010 to 2022.

Another analysis of U.S. Census data by Construction Coverage found similar results. By new housing units authorized per 1,000 existing homes, Mountain West states like Utah (26.7), Idaho (24.2), Arizona (19.4), Colorado (19.2), Nevada (15.3), and Washington (15.1), as well as Southern states like Texas (22.2) and Florida (21.1), were among the top builders of new housing in 2022. 

This spring, Montana’s legislature passed a slate of zoning reform bills to speed up home construction

Towards the bottom of the list are many of those states that experienced the highest year-over-year increases in their home prices, including New Hampshire. At 7.4 new housing units authorized per 1,000 existing homes, the Granite State ranked 38th in housing development in 2022. 

Similarly, Rhode Island (2.8), Connecticut (3.7), Ohio (5.9), Vermont (6.8), Missouri (7.5), and Wisconsin (7.7) all ranked in the bottom half, while Maine (9.5), Indiana (9.6), and New Jersey (9.8) were middle of the road. 

The U.S. Census Bureau’s Building Permits Survey (BPS) tracks the number of new privately owned housing units authorized by state each year. Before 2022, Arizona and Utah each saw 11 consecutive year-over-year increases in the number of housing units authorized, and Idaho saw 10. In total, Colorado, Texas, and Washington each had 10 year-over-year increases in the number of units authorized.

New Hampshire, meanwhile, saw seven total year-over-year increases in units authorized, the longest consecutive stretch being the four increases from 2012 to 2016.

New home construction is one of many different factors that play a role in determining home prices. But at a minimum, there’s a strong correlation between states that have higher rates of home building and states that have seen recent drops in their home prices (or relatively minor increases compared to many states in the Northeast). 

As we’ve shown, New Hampshire municipalities have made housing development very difficult with onerous land-use regulations that restrict supply and inflate home prices.

If Granite Staters want lower home prices, we can follow the lead of many Western states and build, baby, build!



Just five days after we published our review of what happens when states ban or levy high taxes on tobacco products, reporting out of California confirms what we already knew: Bans and high taxes fuel black markets.

California banned the sale of menthol cigarettes in 2021. And needless to say, it hasn’t gone according to plan. From the Orange County Register

When policymakers made the decision to prohibit menthol cigarettes, their aim was to reduce the supply of these products in the market. However, an underground market was ready to ensure a steady supply and continued use of these products.

How does the author, retired police officer and La Mirada, Calif., Mayor Pro Tem Andrew Sarega, know this happened? Researchers started dumpster diving. 

By analyzing the contents of trash in California, researchers began discovering the emergence of a menthol cigarette brand “Sheriff.” In fact, they figured out that “Sheriff” is the fifth-most popular discarded brand in the state. 

This inexplicable prominence, coupled with the cartel’s association with it in Mexico, strongly points towards their involvement in disseminating these illicit menthol cigarettes across California.

Moreover, California’s ban on menthol products has led to the emergence of other new cigarette products being sold across the state. 

Also, shortly after the ban took effect, other new cigarette products entered the market. These cigarettes looked just like traditional menthol products, with blue and green packaging, but somewhere on the pack is a designation that they are “non-menthol.” This was clearly meant to confuse menthol cigarette smokers to continue lighting up, and it appears to be working, with the study showing roughly 7% of discarded packs were these menthol “work-around” products.

The bottom line, as the reporting demonstrates, is that when the state uses the force of government to ban a multi-million-dollar product, that doesn’t eliminate the demand for the product. And as long as that exists, another actor—criminal networks—will work to supply it. 

In addition to the Mexican cartels, the Golden State has seen another actor emerge to fill the void and benefit from California’s prohibition. Illicit flavored vaping/e-cigarette products from China have also poured into California as a result. 

The survey unearthed another staggering statistic—98% of discarded vapes featured flavors, despite the FDA’s lack of approval for flavored e-cigarettes. Highly flavored brands like Elf Bar, Flum, and Funky Republic, mostly originating from China, should not even be on the market and are banned at the federal, state, and often local level. Yet these illegal products remain readily available across California.

Now, if these are the effects at the state level, just imagine the unintended consequences of this kind of policy on a national level. 

It’s no secret that the U.S. Food and Drug Administration’s federal menthol cigarette ban would be a gift to the black market.

 

Manchester is often seen as the center of multifamily housing in the state, while smaller cities and surrounding towns are viewed as less hospitable. But Manchester’s land-use regulations are unusually hostile to one relatively popular form of multifamily housing: duplexes. 

Two-family housing is permitted on only 18% of Manchester’s buildable area, according to the New Hampshire Zoning Atlas, created by the Center for Ethics in Society at Saint Anselm College. 

That puts the Queen City smack in the middle of New Hampshire’s cities when it comes to permitting duplexes. 

Here are New Hampshire cities ranked by the percentage of buildable land on which duplexes are allowed:

Claremont: 86%

Dover: 57%

Rochester: 56%

Berlin: 45%

Nashua: 42%

Laconia: 19%

Manchester: 18%

Portsmouth: 17%

Concord: 15%

Lebanon: 14%

Somersworth: 10%

Keene: 6%

Franklin: 5%

Besides Bedford, the municipalities surrounding Manchester are much friendlier to duplexes:

Goffstown: 74%

Londonderry: 63%

Litchfield: 59%

Merrimack: 55%

Auburn: 31%

Hooksett: 21%

Manchester: 18%

Bedford: 1%

“I was a little bit surprised about how restrictive Manchester is toward duplexes, but it makes sense when you think about it,” Jason Sorens, senior research faculty at the American Institute for Economic Research and the principal investigator of the New Hampshire Zoning Atlas, said. 

“The very fact that Manchester has had a lot of blue-collar housing near the center in the past has made single-family neighborhoods, particularly in the North End, very protective of their status. And at the same time, business and commercial districts in the city sometimes (not always) allow multifamily development but restrict one- and two-unit buildings. 

“It seems to me the latter problem is easy to fix: There’s no constituency for keeping small-scale housing out of commercial districts. Mixed-use and planned unit developments should be lawful across everything that is now zoned commercial or business.”

On small lots (less than one acre), only 1.9% of Manchester’s buildable area is open for duplex development. 

“Even in the single-family districts, legalizing duplexes is a small step, because ADUs are already legal under state law,” Sorens said. “All you have to do is remove the maximum size requirement (currently 750 square feet), and duplexes are then effectively lawful.”

Manchester is slightly more hostile to triplexes than duplexes. On only 17% of Manchester’s buildable land is three-family housing allowed. 

Opposition to multifamily housing typically arises from fears that large apartment buildings will be erected next to single-family homes, changing the character of residential neighborhoods. But the Zoning Atlas shows that municipalities, including the state’s largest city, can add to the state’s housing stock just by reducing restrictions on duplexes. 

Making it easier to build duplexes and multifamilies in Manchester would make homes and apartments more affordable. The median home price in New Hampshire is up to $490,000, according to the New Hampshire Association of Realtors (NHAR).

These monthly median prices have been increasing for 43 consecutive months (since February 2020). And for the second straight month, the affordability index sat at 59—both an all-time low and a 15% drop from one year ago.

Monthly median gross rent for two-bedroom units in the state is $1,764

Duplexes and triplexes offer options for both homeowners and renters. They can be great starter homes that double as investment properties for young couples and individuals. 

To get more of them, municipalities will have to change their land-use regulations, not just to allow more duplexes and triplexes, but to reduce secondary regulations that prevent them from being built. 

“Beyond duplexes, you really have to look at how the zoned density compares to the existing density,” Sorens added. “On much of the West Side, multifamily development is allowed, but tight floor area ratios, low maximum heights, and inappropriate parking minimums have made it impossible to increase density there at all. The strict regulations haven’t gentrified these neighborhoods despite rising rents; instead, they’ve helped create a homelessness problem downtown.”

Though Manchester has allowed the construction of more large apartment buildings, its burdensome restrictions on small multifamily options keep the city’s housing supply artificially low, raise prices, and limit options for city residents. 

New Hampshire Attorney General John Formella has joined 16 other state attorneys general in the Federal Trade Commission’s (FTC) lawsuit alleging that “Amazon is a monopolist” that engages in illegal anti-competitive behavior.  

But a close read of FTC Chairwoman Lina Khan’s suit reveals a confused and ultimately unconvincing case that Amazon (a) is a monopoly player and (b) has harmed consumers. 

If the FTC prevails in this legal case, it appears likely that consumers and small businesses, including the 4,500 small-to-medium-sized New Hampshire businesses that sell on Amazon and the many thousands of Granite Staters who shop online, will be harmed, not helped.

The lawsuit makes two primary claims. The first is that “Amazon is a monopolist.”

Therefore, the first test of the lawsuit’s merits is whether this statement is accurate. 

Monopoly

In a free, competitive market, not all competitors succeed or survive. Innovators regularly surge past existing players to gain large market share, becoming temporarily dominant. Though this is a natural function of a competitive market, some see this simple economic fact as evidence that a particular market is not competitive, confusing competition with the actual number of competitors at a given point in time.

This misunderstanding is at the heart of the FTC’s lawsuit against Amazon. 

“Monopoly exists when a specific individual or enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it,” Nobel-winning economist Milton Friedman wrote in Capitalism and Freedom. Amazon clearly is not a monopolist under Friedman’s definition. What about the FTC’s definition?

The FTC’s website offers guidance outlining the legal steps required under U.S. antitrust law to prove that a company is a monopolist

As a first step, courts ask if the firm has ‘monopoly power’ in any market,” the FTC explains. “This requires in-depth study of the products sold by the leading firm, and any alternative products consumers may turn to if the firm attempted to raise prices.”

To be a monopolist, the FTC must prove that the company has (1) “monopoly power” in a market and (2) achieved or held onto its leading position in the market through “improper conduct.” 

Even if a company has a large market share (typically over 50%), that market share has to be durable and has to preclude competitors from entering or, once entered, offering products and services at low prices. 

The existence of competitively priced alternatives readily available to consumers in the market would be one way to demonstrate that a dominant player is not, in fact, a monopolist.

Amazon clearly does not exert monopoly control over the U.S. retail marketplace. In 2022, only 14.5% of all retail sales in the United States were online. The rest (85.5%) were done in brick-and-mortar stores. 

Walmart, not Amazon, is the top American retailer, with a nearly 17% share of the retail market, followed by Amazon’s 14.28% share, CVS’s 8.96%, Costco’s 6.51%, and Home Depot’s 4.37%. 

So, Amazon is hardly a retail monopoly.

What about online commerce? Amazon is the number one e-commerce company in the world. Does that make it a monopolist? 

Amazon accounted for 37.8% of all online sales in the United States in 2022. E-commerce data company PYMNTS pegs its share of e-commerce spending in 2023 at 48%. That’s a lot, but a monopoly it does not make. 

Walmart, Apple, eBay, and Target round out the top five online U.S. retailers. Despite Amazon accounting for the greatest share of e-commerce sales, Walmart.com, eBay.com, and AliExpress.com are the three most visited e-commerce websites. Etsy.com, Samsung.com, PlayStation.com, and BestBuy.com remain popular sites as well.

Though Amazon is the largest player (at the moment), it faces real competition. Before the FTC lawsuit was filed, Supermarket News reported this summer that Walmart’s share of online retail sales grew from 5.7% to 6.7%—a 17% increase—in the first quarter of the year. Amazon’s share grew from 43.7% to 47.9%—a 9% increase. Walmart’s comparable e-commerce sales grew by 27%. In the second quarter of this year, Walmart’s global e-commerce sales were up 24%

If Amazon has achieved an illegal level of market dominance, one would expect its competitors to be losing revenue and market share. But its largest competitor, Walmart, posted $573 billion in revenue in 2022 versus Amazon’s $514 billion. And Walmart’s share of online retail commerce is growing, not shrinking. Its stock is up 13.5% this year. For an alleged victim of an illegally dominant monopoly player, it’s doing extremely well. 

The FTC clearly understands this fundamental issue with its case, which is why the agency very carefully alleges that Amazon has a monopoly over “the online superstore market and the market for online marketplace services.” 

As these are two innovations that Amazon pioneered, it’s to be expected that the company maintains a large lead in these areas. That in itself is not a violation of U.S. antitrust law. But defining Amazon’s market in such a novel, limited, and arbitrary fashion is the only way the FTC can possibly claim that Amazon holds monopoly power. 

As Peter Jacobsen at the Foundation for Economic Education writes: “Notice how important these words are for the FTC. If you remove the word ‘online’ then clearly Amazon has no monopoly. There are lots of superstores. If you remove the word ‘superstore,’ again there is no monopoly. Amazon does not have a monopoly on online stores.”

That’s precisely why the FTC asserts that “brick-and-mortar stores and online stores with a more limited selection are not reasonably interchangeable with online superstores for the same purposes and are thus properly excluded from the online superstore market.” 

That’s a neat trick. The FTC deliberately excluded the markets where most American retail transactions occur so it could articulate the existence of a completely separate market ruled by Amazon. But the “online superstore” market is not a meaningfully distinct market. It’s just one part of a broader American retail market.

The FTC’s attempt to invent a distinct online superstore market is undermined by actual consumer behavior. PYMNTS reports that 28% of U.S. consumers have used a cell phone to assist with shopping while in a brick-and-mortar store, with 9% comparing the in-store price to prices offered by other merchants. 

The FTC might consider online superstores a distinct and separate market, but consumers do not.   

It’s not even clear precisely what an “online superstore” is. The Merriam-Webster dictionary defines “superstore” as “a very large store often offering a wide variety of merchandise for sale.” The FTC devotes several pages to attempting to define “online superstore.” It concludes by claiming that online superstores are so attractive that consumers won’t even shop at other types of online stores, even if they offer lower prices. 

“Even though such stores may price certain items comparably with online superstores, shoppers do not seriously consider those stores as reasonable alternatives to online superstores for a significant portion of their shopping needs.”

Again, real life contradicts the FTC’s claim. The Internet is full of online retail outlets that aren’t superstores and yet somehow manage to have customers. In 2022, the fastest-growing e-commerce site was not a superstore, but a clothing store. In fact, 10 of the 15 fastest-growing e-commerce sites last year were not superstores. Consumers do not always prefer superstores, either online or in person.  

Online stores that sell unique, can’t-get-anywhere-else products will always have an edge over the mass-produced goods you find on Amazon,” e-commerce services provider Shopify notes, further undermining the FTC’s case. 

The FTC supports its narrow market definition by arguing that “[o]nline superstores are distinct from, and not reasonably interchangeable with, brick-and-mortar stores. From start to finish, online superstores provide a vastly different shopping experience from physical stores.” 

The fact that online superstores provide a different experience for shoppers is an inherent feature of a competitive retail market.

Anti-competitive practices   

The FTC attempts to buttress its claims by asserting that Amazon has engaged in “anti-competitive” practices. It does this primarily by making a case against certain requirements and practices deployed by Amazon to govern its own Amazon Marketplace. However, the FTC doesn’t conclude its case with a convincing demonstration of consumer harm. 

A study by Profitero of about 15,000 products sold online found that Amazon had the lowest online prices compared to 13 other major retailers in the United States. In fact, Amazon’s prices were, on average, 13% below rivals like Target and Walmart.

If Amazon offers consumers low prices, then what’s the FTC’s beef? The agency claims that Amazon leverages its Amazon Prime service to attract more consumers and to coerce sellers who choose to sell on Amazon Marketplace to use its fulfillment service, Fulfillment by Amazon (FBA). The agency deems this to be anti-competitive behavior.

But Amazon cannot compel anyone to use its marketplace. It offers incentives instead. For consumers, a wide variety of low-price products delivered quickly is the appeal. For sellers, access to a huge market of engaged customers is the appeal. 

Amazon’s fulfillment service is valuable to sellers because it lets them outsource services such as warehousing and packaging to Amazon directly, saving time and resources on the back end. 

FBA also offers access to Amazon’s Prime delivery service. Prime is valuable to sellers because it provides value to consumers

The FTC claims that “the Prime subscription fee makes subscribers feel as though they must make the subscription fee worth it by making more purchases on Amazon.” 

In other words, incentivizing subscribers to purchase more products on its platform as opposed to shopping on competitors’ platforms is anti-competitive and monopolistic. So, creating value for consumers is…anti-competitive?

Many retailers use similar rewards systems. Big-box stores such as BJ’s and Costco have up-front membership fees similar to Amazon’s Prime fee. Coffee shops, fast-food restaurants, and many other retailers offer rewards points and programs to encourage customer loyalty. Rewarding repeat business with discounts or enhanced services is not unique to Amazon.

“Forcing sellers to use FBA to obtain Prime eligibility impedes competition and the growth of independent fulfillment providers,” the FTC claims. 

The FTC is complaining that Amazon wants to control the packaging, warehousing, and delivery of products offered under its own branded loyalty program on its own website. But ask any restaurant owner about their experience with Grubhub or DoorDash, and it’s easy to see why Amazon would want to control this end of its business. It’s the only way to ensure quality. 

Amazon can have a perfectly legitimate business reason for not allowing another company to offer fulfillment services under the Amazon Prime brand. The FTC pretends that the only possible outcome of such a policy is to reduce competition, when in fact an obvious outcome is that Amazon can maintain a consistent, quality experience for both consumers and sellers. 

And, again, Amazon doesn’t force sellers to use its fulfillment service. But if sellers want to take advantage of the Amazon Prime brand, as many do, then Amazon has every right to couple FBA with its Prime service, as they go hand-in-hand.

Offering Prime as part of FBA is a chief way in which Amazon distinguishes itself from other independent fulfillment providers. If these competitors’ survival depends on how well they compete with Amazon Prime, how is that anti-competitive behavior on Amazon’s part?

The FTC also argues that “Amazon raises sellers’ costs by forcing them to split their inventory to sell across multiple sales channels.” What the FTC means is that a retailer who wants to sell on Amazon Marketplace, as well as Walmart or eBay marketplaces simultaneously, must divide its inventory among separate warehouses and fulfillment services. 

It neglects to mention that it’s the seller’s own choice to split inventory in order to access Amazon’s extensive consumer base while also selling through other channels. No one has to sell on Amazon Marketplace. It’s a choice, and that choice comes with tradeoffs. If retailers don’t think the tradeoff is worth it, they have many other options.

Contrary to the FTC’s assertions, Amazon doesn’t force sellers to use its fulfillment service or split their inventories. Rather, sellers do it because of the value added.

As the lawsuit makes clear, the FTC envisions an imaginary “perfect” market where every company that enters can survive and thrive by selling similar products for similar prices while not one competitor tries to gain a competitive edge over the others. But no such fantasy market exists. And if one did, its consumers would be harmed by the absence of aggressive competitors who seek dominant market share.

“Throughout the history of anti-trust prosecutions, there has been an unresolved confusion between what is detrimental to competition and what is detrimental to competitors,” economist Thomas Sowell writes in Basic Economics. “In the midst of this confusion, the question of what is beneficial to the consumer has often been lost sight of.”

Sowell’s point applies to the FTC’s lawsuit. There’s no disputing that Amazon is a giant corporation. But big doesn’t automatically equal bad. What’s important is identifying consumer harm. The FTC has failed to do this.

The agency fails to demonstrate that Amazon is a monopoly or that its alleged anti-competitive practices have, on net, harmed consumers or sellers. 

The changes to Amazon’s practices that the FTC wants to see would likely raise prices and reduce service quality and consistency—all in order for the company to be deemed “competitive” in a made-up market that the agency invented.  

It’s a disappointment that New Hampshire has joined a lawsuit with so many obvious flaws and with so many potential downsides for consumers.