When Cochrane Gets It Right

The Case of Monetary Policy vs. Price Controls

John Cochrane is a prominent american conservative economists—a sharp analyst, prolific blogger, and unsparing critic of interventionist economic policy. Yet his track record reveals an instructive paradox: on monetary policy during the Trump era, Cochrane was mostly wrong, defending untenable positions.

On price controls, however, his recent critique of rent control advocacy is perfectly correct. Understanding why illuminates both the strengths and limitations of ideological commitment in economic analysis.

Fast forward to November 2025, and Cochrane is in his element, eviscerating a New York Times op-ed by his Stanford colleague Neale Mahoney advocating “temporary, targeted” price controls. Here, Cochrane deploys basic economics very effectively, and he’s absolutely right.

The Budget Constraint Reality

Cochrane’s first and most fundamental point cuts through the policy fantasy: “Every dollar of ‘relief’ for one party is a dollar of ‘burden’ for another, plus the inefficiencies of redistribution.”

This is Economics 101, yet it’s the elephant in the room that price control advocates invariably ignore. Rent control doesn’t make housing more affordable for society—it just redistributes who gets it.

The money doesn’t come from some magical “policy” fund; it comes directly from landlords, who are often not wealthy corporations but individuals funding retirements through rental income, or pension funds investing for workers’ futures.

If you want to help struggling renters, Cochrane correctly notes, tax society broadly and send checks. Don’t create a hidden tax on the specific people who happen to own rental properties. This is economically inefficient (distorts investment decisions) and morally arbitrary (why should landlords bear the burden rather than society generally?).

Cochrane rightly demolishes the notion that rent control is somehow different from demand subsidies. With fixed supply, both rent control and demand subsidies do the same thing: change who gets the existing units. Neither increases the number of people housed. Indeed, rent control reduces supply by deterring maintenance and new construction.

The real solution—and here Cochrane is perfectly on point—is to increase supply. Not through “government investment” (California’s $1 million homeless units are his devastating example) or “tax incentives” negotiated between developers and politicians, but by getting government out of the way.

Remove zoning restrictions. Eliminate density and height limits. Stop requiring dozens of separate permits. End labor restrictions that inflate construction costs. Allow people to rent spare bedrooms in single-family homes. Eliminate capital gains taxes on home sales (which trap older people in too-large houses). Make rent contracts portable. Remove restrictions on short-term rentals.

This is supply-side economics at its best: identify government-created barriers and remove them. Cochrane is correct that if these barriers were removed tomorrow, new housing could materialize before the next presidential election. Nothing needs to be “built” through massive government programs—just allow the market to use existing resources more efficiently.

Cochrane’s point about incentives is crucial and often overlooked by price control advocates. When you give benefits to “existing tenants,” you create massive incentives for people to remain existing tenants—even when moving would be better for them and would free up housing for others. When you target benefits to “low-income households,” you create incentives for them to remain low-income.

Rent control’s biggest victims, Cochrane correctly notes, are exactly the people progressives claim to care about: the young, the mobile, the ambitious, immigrants, people without cash. If you want to move from Maine to New York for opportunity, you need rentals. Rent control means they’re not available, locked up by existing tenants benefiting from below-market rents.

This is the cruel paradox of progressive housing policy: policies intended to help the disadvantaged actually freeze existing advantages in place, creating a two-tier system where insiders benefit and outsiders are locked out.

Perhaps Cochrane’s most devastating point is historical: “New York put in ‘temporary’ rent controls in WWII. 80 years ago.”

Every price control regime in history has promised to be temporary and targeted. Every single one became permanent and expanded. Mahoney and Ramamurti acknowledge this risk, then airily dismiss it with promises of “sunset clauses” and “policymaker” vigilance.

Cochrane is right to scoff. Once a constituency receives benefits, they mobilize to preserve them. Politicians face immediate pressure to expand coverage (”fairness”) and zero incentive to let controls expire. The “temporary” ACA subsidies during COVID became the casus belli for the recent government shutdown. “Temporary” is a fantasy.

The Argentina Example

Cochrane notes that when Javier Milei ended rent control in Buenos Aires, rent went down. Instantly. Nothing had to be built. This is the smoking gun that rent control advocates can never answer: removing controls increased supply (by making rental profitable again) and decreased prices (by allowing market clearing).

The same pattern appears everywhere controls are removed. The supply response is immediate—not from new construction, but from better utilization of existing stock.

Apartments left vacant because rehabilitation costs exceeded controlled rents suddenly become available. Homeowners convert basements. Empty bedrooms get rented. The housing stock is the same; the availability explodes.

Why the Difference?

What explains Cochrane getting price controls so right while getting monetary policy mostly wrong? Several factors:

1. Ideological Comfort Zone

Price controls fit Cochrane’s ideological priors perfectly: government intervention distorting markets, progressive policies with perverse effects, supply-side solutions. He’s in his element. Monetary policy is trickier—it requires accepting that government (via the central bank) must actively manage something (nominal spending), which sits uncomfortably with small-government instincts.

2. Theoretical Clarity

Price control economics is straightforward: supply and demand curves, deadweight loss triangles, clear predictions. Monetary economics is counterintuitive: low interest rates can signal tight money, QE works through expectations not just quantities, the zero lower bound is a misconception not a constraint. It’s easier to get confused.

3. Partisan Pressure

Cochrane faced pressure to defend “his side” on monetary policy—not endorsing Trump’s specific Fed-bashing but being skeptical of monetary activism that might validate criticisms of the Fed. On price controls, he’s attacking a progressive policy idea, so partisan pressures align with economic correctness.

4. Empirical Obviousness

The failures of price controls are stark, visible, and historical. You can point to 80 years of New York rent control, Detroit’s decline, Venezuela’s collapse. Monetary policy counterfactuals are harder to see—we can’t observe the NGDP path that would have occurred under better Fed policy.

The Broader Lesson

Cochrane’s split record teaches us something important about economic analysis: even brilliant economists can be led astray by ideological commitments, institutional loyalties, or partisan pressures. The key is whether the economics or the ideology is doing the driving.

On price controls, Cochrane lets the economics drive. He doesn’t care that he’s attacking a colleague’s New York Times op-ed or challenging progressive housing policy orthodoxy. He simply deploys basic supply and demand analysis and lets the chips fall where they may.

On monetary policy, ideology seems to have clouded his judgment. His general skepticism about government demand management led him to underweight monetary factors and be insufficiently critical of the Fed’s post-crisis performance.

There’s a delicious irony here. Cochrane rightly criticizes Republican economists who twist themselves into knots defending Trump’s tariffs because they want influence in the administration. He writes: “If you want a job in the current Administration, or just influence in today’s dominant Republican circles, you better have written nothing critical of tariffs.”

Yet Cochrane himself did something similar on monetary policy—not as crudely as tariff apologists, but by allowing his fiscal policy skepticism and establishment Fed sympathies to override clearer thinking about monetary determinants of nominal spending.

The tariff analogy is particularly apt because both tariffs and price controls are economically similar: government intervention that redistributes resources, distorts price signals, creates inefficiencies, and persists far longer than promised.

Yet conservative economists (rightly) savage price controls while many defend or soften criticism of tariffs. Progressive economists do the reverse.

Conclusion: Economics Over Ideology

Cochrane’s price control critique is masterful. Every point is correct:

• Budget constraints are real; relief for tenants is burden for landlords

• Rent control reduces supply and hurts the most vulnerable

• The solution is removing barriers, not adding controls

• “Temporary” controls become permanent

• Political economy dooms well-intentioned design features

His monetary policy skepticism, in contrast, represents ideology overriding evidence.

The lesson is that good economics requires intellectual honesty regardless of political implications. Cochrane achieves this on price controls, where he’s willing to eviscerate colleagues and challenge progressive orthodoxy. He fell short on monetary policy, where ideological commitments seem to have clouded his judgment.

We should praise Cochrane’s price control analysis precisely because it demonstrates what economists should do: apply basic theory rigorously, follow the evidence wherever it leads, acknowledge historical failures honestly, and resist political pressure to provide cover for bad policy.

If only he—and economists generally—applied the same ruthless clarity to monetary policy analysis that he brings to price controls. Then we might have avoided both the slow Great Recession recovery and the current debates about whether central banks or fiscal policy drive aggregate demand.

The good news is that Cochrane’s price control piece shows he’s capable of such clarity when ideological blinders don’t interfere. The challenge is achieving that same clarity across all policy domains, even when it cuts against partisan sympathies or establishment loyalties.

On price controls, Cochrane is a model of clear economic thinking. We need more of that Cochrane, and less of the monetary policy skeptic who let ideology override evidence.