INTERVIEW: Ari talks with Jack Nicastro from Reason

Summary

Podcast Summary: Tangle – Interview with Jack Nicastro from Reason

Episode Information:

• Title: INTERVIEW: Ari talks with Jack Nicastro from Reason
• Host: Ari Weitzman
• Guest: Jack Nicastro, Assistant Editor at Reason
• Release Date: March 25, 2025

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1. Introduction to the Guest and Topic (00:00 - 04:25)

Ari Weitzman welcomes listeners to another episode of Tangle, introducing Jack Nicastro as today’s guest. Jack, a recent college graduate with a background in economics and philosophy, currently serves as an Assistant Editor at Reason based in Washington, D.C. He previously worked as an editorial intern for the National Review in New York City. The conversation is set against the backdrop of the devastating California wildfires, with both Ari and Jack sharing a personal connection to the impact of such disasters.

Notable Quote:

• Jack Nicastro (02:17): "My heart goes out to those Californians who have lost their homes. I mean, it's a, for me as a New Yorker, literally an unimaginable tragedy."

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2. Understanding Wildfires: Environmental and Policy Factors (04:25 - 12:16)

Ari and Jack delve into the multifaceted causes of the California wildfires, exploring both natural and human-induced factors. Jack acknowledges the severe environmental conditions, such as the Santa Ana winds and low rainfall, which exacerbate wildfire risks. He emphasizes that while natural factors play a significant role, government policies and market forces also contribute to the increasing frequency and intensity of these disasters.

Key Points:

• Wildland-Urban Interface (WUI): Jack defines WUI as areas where human development meets undeveloped wildlands, increasing flammability and vulnerability to wildfires.
• Zoning Laws: Los Angeles’ predominantly single-family zoning (78% of residential land) limits housing density, pushing development into more fire-prone areas.
• Environmental Regulations: Acts like NEPA (National Environmental Protection Act) and California’s CEQA (California Environmental Quality Act) delay vital actions like controlled burns, which could mitigate wildfire risks.

Notable Quote:

• Jack Nicastro (07:29): "The WUI is the zone of transition between unoccupied land and human development, where structures intermingle with undeveloped wildland or vegetative fuels."

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3. The Impact of Zoning and Taxation Policies on Housing and Wildfires (12:16 - 25:04)

The conversation shifts to how specific policies influence housing distribution and exacerbate wildfire dangers. Ari highlights Proposition 13, a taxation policy in California that caps property tax increases, indirectly discouraging the development of higher-density housing by keeping property values artificially low.

Key Points:

• Proposition 13: Limits property tax increases to 1% of assessed value with a cap on annual increases, discouraging property owners from selling or developing land to avoid higher taxes.
• Zoning and Affordability: Strict single-family zoning coupled with Proposition 13 results in a lack of affordable, high-density housing options, forcing people to live in vulnerable WUI areas.
• Market Forces vs. Government Intervention: Jack argues that government-imposed price controls and zoning restrictions hinder the housing market’s ability to respond to disasters by limiting supply and keeping prices artificially low.

Notable Quotes:

• Ari Weitzman (14:22): "Old tax policy, Proposition 13, ... incentivizes people to hold on to their properties more. That's sort of the viewpoint that I've developed over time."
• Jack Nicastro (15:47): "If you're being taxed more based on acreage rather than added value, I am disincentivized from adding value to land."

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4. Price Controls and Disaster Response (25:04 - 39:12)

Ari introduces the topic of Governor Newsom’s anti-price gouging laws enacted during emergencies, questioning their efficacy in disaster response. Jack explains how these price ceilings prevent the market from accurately reflecting the scarcity and demand for essential goods, such as housing post-wildfires.

Key Points:

• Anti-Price Gouging Laws: Intended to protect consumers during emergencies by capping price increases on essential goods.
• Economic Implications: Such laws disrupt the natural price signals that indicate scarcity, discouraging suppliers from increasing supply in response to heightened demand.
• Insurance Market Challenges: Stringent regulations prevent insurers from adjusting premiums based on actual risk, leading to inadequate coverage and increased financial strain on homeowners.

Notable Quotes:

• Jack Nicastro (20:38): "Effective price ceilings do not magically make more housing. They just change how housing is allocated in the instant, in the here and now."
• Ari Weitzman (35:18): "...it may feel cruel to have an answer to a person who lives in a community that is at risk for natural disaster, that the best way to prevent that risk is to relocate."

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5. Insurance Markets and Future Policy Recommendations (39:12 - 43:21)

Ari expands the discussion to include insurance market dynamics in the face of increasing natural disasters. Jack critiques policies like California’s Proposition 103, which restrict insurers from passing reinsurance costs to consumers, arguing that such restrictions hinder the ability of insurance markets to accurately price and manage risk.

Key Points:

• Proposition 103: Prevents insurers from fully adjusting premiums based on reinsurance costs, leading to underpriced insurance and potential insolvency.
• Risk Communication: Properly priced insurance premiums serve as critical signals to consumers about the risks of living in disaster-prone areas.
• Deregulation Advocacy: Jack expresses optimism about upcoming federal deregulation efforts, believing they will lower costs and increase market efficiency, ultimately benefiting lower-income populations.

Notable Quotes:

• Jack Nicastro (29:14): "The information that prices convey allows human beings to make well-informed decisions without having to be experts."
• Jack Nicastro (43:21): "Deregulation actually tends to be progressive, because the more regulations that exist, the higher the cost of compliance."

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6. Looking Ahead: Policy Changes and Deregulation (43:21 - 45:15)

As the interview concludes, Ari queries Jack about his expectations for the incoming administration's policies, particularly regarding deregulation and tariff adjustments. Jack shares his enthusiasm for potential deregulation, positing that reducing regulatory burdens will lower costs for consumers and promote a more equitable economy.

Key Points:

• Federal Deregulation: Anticipated to reduce compliance costs for businesses, fostering competition and lowering prices for consumers.
• Tariff Policy: Jack remains critical of tariffs, viewing them as a form of regressive tax that disproportionately affects lower-income individuals by increasing the cost of goods.
• Economic Equity: Emphasis on deregulation as a means to support working-class populations by making essential goods and services more affordable.

Notable Quotes:

• Jack Nicastro (40:32): "Net deregulation is good, and it is good in a progressive way that helps poorer people."
• Ari Weitzman (43:21): "It’s always a pleasure to speak with somebody who is eloquently libertarian."

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7. Conclusion and Final Thoughts (45:15 - 46:26)

Ari wraps up the interview by expressing appreciation for Jack’s insights and encouraging listeners to follow his work through Reason. The episode concludes with brief acknowledgments of the production team and additional sponsor messages.

Closing Remarks:

• Jack Nicastro (44:05): "You can read everything I write for Reason just by typing Jack Nicastro into the search bar on reason.com."
• Ari Weitzman (46:26): Promotional messages for sponsors and information on supporting the podcast.

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Final Thoughts:

This episode of Tangle with Jack Nicastro offers a comprehensive analysis of how market forces, government policies, and regulatory frameworks intersect to influence housing markets and wildfire management in California. Jack's libertarian perspective provides a critical lens on current policies, advocating for deregulation and market-driven solutions to address the complex challenges posed by natural disasters and housing affordability.

For listeners interested in understanding the intricate balance between government intervention and free-market principles in disaster response and housing policy, this interview provides valuable insights backed by economic theory and real-world examples.

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Stay Connected:

• Follow Jack Nicastro: Read his articles at reason.com.
• Podcast Website: Visit readtangle.com for more episodes and newsletters.

Transcript

[Ari Weitzman]

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[Jack Nicastro]

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[Ari Weitzman]

Good morning, good afternoon, and good evening. This is Managing Editor Ari Weitzman with Tangle. With another episode of our Tangle podcast. I'm joined today by somebody with an interesting perspective on not just the California wildfires, but land use and government policy regarding land use and taxation in general as well as other things. And that is Jack Nicastro. Jack, how are you doing today?

[Jack Nicastro]

I'm doing well. Thanks so much for having me, Ari. And my heart goes out to those Californians who have lost their homes. I mean, it's a, for me as a New Yorker, literally an unimaginable tragedy.

[Ari Weitzman]

It is really devastating to watch the images coming in from the east coast where we both are, but also as a New Yorker and maybe you can take a little opportunity to tell us a little bit about your your background here as I ask you about this, but we've experienced some wildfires here as well. Not as directly as they're experiencing in California, but with some wildfire smoke coming in from Canada just to our north. It's something we're starting to get a little bit more familiar with whether we live next to those forests or not. So I think we both kind of are coming from it with a little bit of a shared perspective. And maybe you can tell our listeners a little bit about that perspective that you have and your background here.

[Jack Nicastro]

Sure. So I am by no means an expert in anything. A professional dilettante, you could say. But I just graduated from college where. A generalist. Right. Where I studied economics and philosophy. And I was born and raised in Brooklyn, New York. Two summers ago, summer of 2023, I was writing for National Review. I was an editorial intern there. And their office is near the Chrysler Building in midtown Manhattan. And there were some days where it actually looked apocalyptic without. I have some photos on my phone that would substantiate that. And I'd look out the window at the Chrysler Building and there'd be this orange, like in no uncertain terms, this orange haze cloaking the city due to those Canadian wildfires. So that was a little crazy. Now I'm no longer in New York City. I live outside D.C. and I'm speaking to you from Reason's D.C. office, where now I'm an assistant editor. And I largely cover economic policy, antitrust, trade, and some 14th amendment concerns.

[Ari Weitzman]

Right. And we've seen some of your articles that you wrote in Reason, especially as we were preparing to cover the California wildfires. One of the perspectives that I thought you did a really good job of articulating was this philosophical viewpoint that the free market in general is something that is guiding a lot of the way that this destruction's unfolding in California. It's very easy for us to see giant failures in the public eye as government responsibility. Anything that affects this many people feels like it's going to be the government's responsibility to prevent or respond to. But something that you wrote was that people are generally responding to market forces when it comes to where they're building their houses. And where they're building their houses, it's putting them in the line of fire to be an artful with how I'm phrasing that. So I just wanted to see if you could break down that argument a little bit for us. What are these market forces that are creating dangerous situation for the people who are losing their homes in these California wildfires?

[Jack Nicastro]

Yeah. That is not inarticulately expressed, and I'll do my best to respond. But before I do so, I just want to acknowledge something that my colleague and friend Christian Britchke wrote very well about For Reason. He was explaining how, yes, there are policy failures here and I'll explain how those interact with market forces and consumer preferences. But really there was a conflagration of, of natural factors. There were the Santa Ana winds, low rainfall. So even without the California Environmental Quality act or MEPA or the Coastal act or all of these things that get in the way of doing clearing and controlled burns that wouldn't really stop embers from getting picked up by these hundred mile an hour Santa Ana winds in one place and flung across greater Los Angeles to burn other homes and flammable structures. So I just want to upfront acknowledge the environmental factors because as much as I am a libertarian and am prone to seeing government being at fault for all sorts of things, usually unintentionally. Usually unintentionally. Almost everyone, whether they're in the private sector or public sector anywhere else, has pure motives. Unfortunately, you know, the road to hell is often paved with good intentions. And I will use that to segue into how government policy incentivized on the margin, the creation of homes close to the wildland urban interface, which is a particularly flammable environmental zone. So first I should probably define what that means.

[Ari Weitzman]

That was going to be my question to you too. Before we move on. Let's just define the terms because that can be really helpful when we're having any conversation. And then also right after we do that, we can go back and describe what you mean when you're talking about laws like NEPA and policies that could have been affecting the outcome of these wildfires.

[Jack Nicastro]

Yeah, absolutely. So, and I'm quoting from the US Fire Administration here, this is not my definition. The WUI is the zone of transition between unoccupied land and human development, where structures intermingle with undeveloped wildland or vegetative fuels. So included in the definition is the increased flammability of this zone. And much of greater Los Angeles in the hills abutting the city proper is against this flammable wui, including Pacific Palisades and Altadena, where the Palisades and Eaton fires spawned. And back to the question you asked. Can you hit me with that again?

[Ari Weitzman]

Yeah. So you had just when you were giving your preface to your answer, we're talking about policies in California that you think had a, had a hand in the wildfire. And one of the things that you said was nepa. So I just wanted to give you the chance to define what that is. Right.

[Jack Nicastro]

So this is the National Environmental Protection act. And this is one of the things that contributes to controlled Burns and cutting back of vegetative fuels takes so long because, you know, burning vegetation releases carbon dioxide. It's a significant action to exert on the environment. And it needs to be approved at both the state and national levels. And that can take between five to seven years. Again, there's been good reporting on the impact of ceqa, the California Environmental Quality act and NEPA and the Coastal act by Christian Britchke Oprah Reason. So I recommend your listeners to read his great work and he's also the housing policy expert. But here's the big problem with LA housing policy. And this is going to get into not in my backyard policy versus yes, in my backyard policy and zoning. So Los Angeles, like we, we said in the beginning, we're from New York City. It is a sprawling urban area. But Manhattan itself, you know, New York, New York is tall and dense, whereas Los Angeles, there's Los Angeles county and there's, you know, Los Angeles, the city proper. And both are expansive. And Los Angeles is one of the most expensive and expansive cities in the U.S. right. It has low population density compared to a city like New York, for example. And one of the things that exacerbates this expanse, right, is zoning law. So to put some numbers on this, 78% of residential land in Los Angeles is zoned for single family houses. That's a problem if you want to house many people in a surface area that doesn't expand. Right. Los Angeles is not getting any bigger. The land mass is, the land area is what it is. And if you want people living in a more concentrated portion of that area, you need to build up. And zoning legally prevents that from happening. Now, at the same time, people would be living in the Pacific Palisades, for example, Right. It's an incredibly expensive neighborhood. People are not living there because they can't afford to live elsewhere in la. It's because their preferences are such that they're willing to pay that much for the views the community, you know, whatever is so nice about the Pacific Palisades, but other people, especially after the fires that will now probably have their demand for housing that exists in the wui, no matter how independently beautiful or otherwise attractive that area is, are legally prevented. They are artificially priced out from taking whatever money they can from the insurance payouts of their destroyed homes and putting that towards, towards, you know, a condo or an apartment closer to the city center in la, because those apartment buildings simply do not exist in the quantities required to now, like rehouse these Angelenos who have lost their homes and I.

[Ari Weitzman]

Think actually I might even be able to do you one better with your argument here. As you're talking about how these zoning policies are encouraging people to not build up, but build out. We're talking about this area in Southern California which is naturally very beautiful, where there's natural, in a literal sense, incentives for people to want to build in those areas. When you compare also Los Angeles to another Californian city place where I lived for four years, which is San Francisco, San Francisco is very constrained. It's also a gorgeous natural area, but it's a city that's about a 4 by 6 mile box and you still don't see a lot of building up. And I think a lot of the reason that I see, as somebody who's lived in California for a while, not currently, but learned a bit more about what incentives exist in that area, I started to understand that this is a little bit of an interplay, not just of policy for zoning, which I think we agree in that case encourages people to build in this wui the wildlife urban interface, but also of taxation policy. And one of the things that influences that in California is this old tax policy, Proposition 13, which states that real estate taxes are going to be 1% of your assessed property value and it caps the amount that they can increase year over year, 2% or inflation, whichever is lower. Which means these property values go up and up. They can't be taxed at a rate that's similar, which incentivize people to hold on to their properties more. And I think that incentivizes less building. That's sort of the viewpoint that I've developed over time. I know you're coming at it from a libertarian perspective where you're somebody who's probably less prone to want to see taxation. So I'm wondering how you would square that. Do you think that there's something there with that incentive or do you think that there's some other. Some other thing we should be looking at first?

[Jack Nicastro]

Yeah. So the libertarian position on taxation of land is actually rather nuanced. But I will avoid the philosophical diatribe about Henry George and all of that. And I do think I see it a little bit different than you. I think that if land. I'm just kind of appealing to price theory here and microeconomic principles generally. If you're going to be taxed more the higher your based on a percentage of your property assessment then that. And correct me if I'm missing something here, but that would seem to discourage people from making their plot of land and whatever is on it more valuable. So I'm strongly incentivized to build, let's say a high rise apartment building on my, I don't know, I'm making numbers up 10 acres of land. If I'm then going to be making rents of, you know, $10 million a year and being charged the same amount by the government just based on the acreage rather than the added value on the margin, I am disincentivized from adding value to land. If I am going to be taxed commensurately more, does that make sense?

[Ari Weitzman]

It does. And that's where I think there's some interplay here with zoning policy. Because obviously if I just own a single unit on some parcel, I can't automatically turn it into a high rise without there being some change in the zoning. But it does discourage me as a landowner to want to see those zoning policies go through. I might be incentivized to vote for people that would vote down such policies because my property values could be high, but the zoning can stay where it is and my taxation can stay low. And that will allow me to do things like rent out my $10 million home at some rate that's going to allow me to live somewhere else or have two or three or four properties that I'm just renting out that are single dwelling while being able to really profit because those rents can be responding to market forces in a way that the taxation rate is less responsive to. So that. That's my argument.

[Jack Nicastro]

Yeah, no, I think that's. That's an interesting perspective. Let me recast it to make sure I understood it. So basically you're saying that the relationship between NIMBYism and zoning in the current paradigm under Prop 13 is like this. Say I have some expensive single family house on a property, it's being taxed a lot less than it Otherwise would without Prop 13 on the books, which allows me as the property owner to basically afford to not have to sell this house to somebody who will use the land more profitably than I am right now with like my house, my single family house on it.

[Ari Weitzman]

Yeah, that's pretty much the, pretty much the point. Or can turn it into a duplex rather than a single unit. Or can have people in there that would vote for policies that would be more. You mentioned, yes, in my backyard versus no, not in my backyard. Policies that are more emb is that are saying, yes, let's rezone, yes, let's try to get more high density housing so that. That's part of it. Yeah, yeah.

[Jack Nicastro]

Well, I think that makes a lot of sense.

[John Wilson]

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[Jack Nicastro]

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[Ari Weitzman]

Applies to online activations, requires port in and auto pay. Customers activating in stores may be charged non refundable activation fees. Okay, well look at us finding common ground already. But we can continue to talk about things the way that policy is shaping the response to these wildfires because it's not just about housing policy as you talked about, and it's not just about market forces, but a little bit of pricing law. So another thing that you wrote about was Governor Newsom's anti price gouging law that went into effect after the governor declared a state of emergency. So how do you think these kinds of laws can help or maybe even hinder the response to a disaster like we saw with the LA wildfires, where a huge amount of available housing suddenly disappears?

[Jack Nicastro]

So this one I think I can respond to a lot more succinctly because all I have to appeal to here is, is price theory. But I still want to be sensitive. Basically, what effective price ceilings do is prevent the market from reflecting the scarcity of a good and demand for it. So unfortunately, Californians just experienced a massive supply shock in housing units because thousands of them burned to the ground. Again, this is a catastrophe. This is a good that people need to survive. And now there's less of it. Price controls do not magically make more housing. They just change how housing is allocated in the instant, in the here and now from whoever can afford it, whoever has the highest willingness and ability to pay. And I think that the ability to pay part is what makes people want to impose effective price controls. And I understand where that impulse comes from. There does seem to be something unsettling about somebody who is wealthier than another. But let's say in less need of housing is able to afford the now $5 million property that was $100,000. Those are just totally toy numbers and it's like a reductive ad absurdum. But I think it makes the point and people see that that is something that can happen again in the static picture when you allow allocation of resources to be done voluntarily, which is just another way of saying by market forces, by suppliers and purchasers. So again, big caveat, a catastrophe happened. There's a supply shock. There's not enough of this very important thing that people need. And now with Governor Newsom's declaration of a state of emergency and his invocation of this anti price gouging law that is on the books until 2026, I think it's January or February 2026 for housing and other goods. But since we're talking about housing for housing specifically is included in this preventing the equilibrium price of housing, the market clearing price of housing from increasing, however much it would increase clearly above 10%. Maybe it's 50%, maybe it's 25%. I don't know. And in fact, now we can't know. And actually this is the whole point. Suppliers don't know. They don't know what the market will bear. They don't know how much surplus exists for them to bid away from others by entering the market and supplying more of this good. So after a disaster when the goods at stake are so necessary and vital to life and enjoyment thereof like housing, that's actually when you really need the state to not impose effective price controls in this case an effective price ceiling through anti price gouging laws. Because this will delay from happening what is actually needed to really solve the problem which is shifting supply rightward again and further rightward than it was even before the fires. Because you know LA housing was notoriously unaffordable even before this catastrophe. Wildly reduced housing stock. And I can put some numbers on that. 59% of Angelenos of renters. The amount of income that they spent on rent was deemed unaffordable by the Department of Housing and Urban Development. That does. It doesn't need to be that way. It's that way because producers, in this case contractors, construction workers, developers are legally coercively prohibited from responding to this pent up demand which would naturally and voluntarily drive prices down and give consumers more surplus. Which is just an econ nerdy way of saying that they retain more dollars than they are willing to spend and right now are spending on housing. So that's my long winded response.

[Ari Weitzman]

Well let me do a bit of a Jack Nicastro then and recast what I think you're saying back to you to make sure that I understand it please. So what you're telling me basically is what we're seeing in the wildfire response right now is just the expression of some forces that were already present which is we're seeing control of a market necessity or good, but I'd argue more of a necessity here in housing that is restricting the ability for people to get accessible affordable housing. And that's not something that you're saying is going to be on government to fix by setting prices, but something that you think the government can fix by allowing more policies to provide for housing stock to go rightward. By which you mean to the right on the X axis as in more of not rightward politically. And that's actually where I see a lot of overlap with some people like I love to read Jerusalem Dempsis in the Atlantic who's I wouldn't say she would think of herself as a libertarian, but there's a lot of overlap with those policies that you're. That you're espousing and that somebody like Dempses is espousing which is just build more. Build more housing stock. That's the way that you solve this So I just want to make sure I'm understanding that right and seeing if you think that that overlap is real.

[Jack Nicastro]

You've perfectly summarized my position and thank you for clarifying that. By rightward I mean right word in terms of quantity, not right word. Politically, I like a good libertarian, see myself off that axis. And yeah, I and a lot of free marketeers describe this overlap with people of more left wing ideologies and politics as progressives who are pro abundance. And yes, there is real overlap there because ultimately the end is the same. Call it a good, call it a need, I don't really care. I agree that it's a necessary good. And if we want more of it. Again, effective price controls are exactly antagonistic. They are precisely the opposite of what you need. If you want abundance, if you want more quantity of something. And when there is more quantity of something, when the aggregate quantity of some good or service is available to purchase, unless it is controlled, all of it is controlled by one firm. And that's, that's another conversation. The price goes down and that's what we want to happen. And by the way, before the, before the catastrophic Los Angeles fires, 44% of the housing stock in LA was rent controlled. And again, so 44% was rent controlled. Meanwhile, 59% of Angelenos are spending an unaffordable amount on housing. If that doesn't show that rent control and government imposed prices don't solve the problem of scarcity and making sure that, you know, working class, middle class people can afford those things that they need, then I don't know what does.

[Ari Weitzman]

That's a very succinct and compelling argument. I think, taking that, let's think about moving forward here. So we've seen in recent months. Sorry, I just said let's move forward. But I'm going to talk about recent months first. We've seen more natural disasters in the U.S. not just in California, Obviously we're thinking about the hurricanes in the Southeast, hurricanes Helene and Milton, which themselves had impact on housing in a different way in a very different part of the country. Some of the interplay that we're seeing here, I think is going to involve the way that insurance markets are operating. We saw some insurers flee California. Insurance prices are really high in parts of the Southeast, especially Florida, states that are going to be vulnerable to natural disasters and of a whole different set. Not wildfires, but more hurricanes and floods and flash storms. So broadly zooming out, if we can, what kinds of lessons do you think policymakers should be taking from These events when they're thinking about ways to mitigate the impact of future disasters.

[Jack Nicastro]

So as disasters become more and more common in certain regions, it becomes increasingly risky to own assets. In this case homes, condos, et cetera. In those places, the profit margins for insurance companies are in the single digits, okay? They do not have a lot of wiggle room and they conduct actuarial science. And there are enough of them to make sure that they are again, to insure those small margins. It's not like they have these wild surpluses that they are getting by charging the people who they insure higher than necessary premiums to cover the cost of replacing homes. In expectation, okay? So in expectation, as disasters become more and more common, I'm sure anthropogenic, that's the word, right? Anthropogenic climate change has a large role in that. But frankly, the reasons as far as insurance is concerned about why these disasters are more common is immaterial. They're more common. And if people want to have insurance and they want those insurers, then the insurers need to be able to continue operating. And they're only going to be operating if they have, if they're not losing money insuring people. So I think that several weeks before the fires, Newsom actually reversed course on Proposition 103, which was passed in 1988 and prohibited insurers from passing the cost of reinsurance onto consumers again in the year, you know, in 1988. I'm sure that homeowners were very happy that their insurance premiums weren't going up. But what that does is two things. One, it prevents homeowners or prospective homeowners from being able to make well informed decisions, right? Most of the average person is not a climate scientist or an expert in the risk of the climatological risks of certain areas. But insurance companies employ people that are those things so that they know that they are making profitable investments. And then all of that expertise and human capital and information is conveyed to, let's say, prospective homeowners or renters, et cetera, in the form of insurance premiums and just generally the cost of insurance. But things like proposition 103, they prevent that information from getting to people living in California who are at risk of their homes burning down or people living in Florida who are at increasing increasingly high risks of, of flooding. And so again, just like with this is analogous to why the anti price gouging law is bad and why free markets and private property are. So forget about. I'm not even making Lockean, you know natural rights claims here. It's just really epistemically important. The information that prices convey allows human beings to make well informed decisions without having to be expert on anything involved in explaining the price. And so when you get between the price and the consumer or the decision maker, you prevent rational or largely rational, more rational decisions from being able to be made in the first place.

[Ari Weitzman]

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[Ari Weitzman]

Now I think I'm going to try to read between the lines a little bit and cast a conclusion that maybe is unfair, but maybe you can tell me push back on me either way here. When it comes to insurance rates giving good feedback to consumers making their choices, it seems like the implication is that one of the decisions that you could be making with that feedback is don't live here anymore. So is that the answer we want to give to people in Florida? Your insurance rates are going to go up. You have to move. California? Your insurance rates are going to go up, you have to move. Does that feel like a correct implication to draw? And if so, is that fair? Is that fair to those people? Is this an area where we think maybe the libertarian answer is insufficient, or is that exactly what it should be? Just a couple things that I'm wondering here as we're thinking about how will the interplay of price and policy work if we're going to actually price these things effectively? Might feel A little cruel to tell people, yeah, sorry, that you're in a flood zone, you should move. But is that the answer? Is this kind of what you're getting at?

[Jack Nicastro]

So that's very fair. And the fact of the matter is that this is not an answer that I want to give. And it does, it does sound cruel. But what's crueler is distorting prices such that people made decisions that they couldn't afford to make in the first place. And now insurers have canceled insurance policies because they weren't allowed to increase the price on thousands of homes in Los Angeles. And those Angelenos who are uninsured, they're not uninsured. They're insured through California. But California's insurer of last resort, and excuse me for forgetting exactly what it's called right now, only pays out a certain amount. And I'm sure even the amount that it pays out is going to contribute to, you know, producing a huge deficit and contributing to the state debt, which is unsustainable in the, you know, I'm not sure if the long run is the right way to say it, but, but over time, so again, as, as disasters become increasingly common, it becomes increasing to live in certain places. And just like with other goods and services, even necessary ones. Yeah, not, not everybody can afford certain things. And if you can't afford to live in, you know, in the Pacific Palisades or even in Altadena near these flammable zones, and you can't afford to assume that risk, that sucks, but it doesn't give you a right to impose the cost of that decision on, on other people. But again, I took a while to respond to your question, your latest question at the beginning, because what I'm trying to communicate is, is the real injustice that's. That's happening is not the insurers being unable to insure homeowners because they're prevented from increasing premiums and the price of insurance. The real injustice and the responsibility does not lie with the homeowners who made these unwittingly misinformed decisions. It's really the state's fault. It's the state's fault from preventing insurers from signaling to people information that in the form of a price, but that basically communicates this, hey, this is a really dangerous area. The likelihood of your home being destroyed and costing you and us millions of dollars or hundreds of thousands of dollars or whatever the case may be is high enough that you have to be able to afford to pay us this on a monthly basis. To live here. And that does mean that people who were artificially enabled to live there for the time being wouldn't have. And by the way, it would have also ensured that those people didn't move there and then had their houses burned down and now are not going to receive the payout that they need to move and live somewhere else. So, no, we live in a fallen world where the problem of evil exists, forces mature for which nobody is responsible, devastate people's lives. Luckily, we have a whole industry that is dedicated to consumption smoothing, to basically assuming and aggregating risk in such a way that it costs us on a monthly basis, you know, 50, 100, however many hundreds of dollars instead of $3 million when our house is destroyed, or a million dollars or 10,000, whatever expensive somebody's house is, depending where it is. And that's a really good thing. It is unfortunate that disasters are becoming more frequent. I will add, and maybe this is opening a whole other can of worms, that California preventing certain energy sources from being used or making everybody drive electric cars is not going to reverse this trend. So I'm not sure that those policy decisions are wise. But I digress and I'll leave it there.

[Ari Weitzman]

Well, let me try to put maybe 90% plus of that answer into a nutshell, if I can, which is to say it may feel cruel to have an answer to a person who lives in a community that is at risk for natural disaster, that the best way to prevent that risk is to relocate. But the thing that is the most cruel is to let that person live there under the false assumption that there is a safety net for them that does not exist. And that the way that we can try to make sure that does not happen is by leaning into the system we have for that, which is the insurance market. Is that reasonable?

[Jack Nicastro]

Thank you so much for summarizing in two sentences what it took me paragraphs to explain.

[Ari Weitzman]

Poorly.

[Jack Nicastro]

That's.

[Ari Weitzman]

It was a very complicated sentence, though. I think the sentence diagram is why their hands full with it. But let's move on to. I've just got one last question for you, Jack, which is, as we are entering the new administration year, the new president, new set of governing principles and priorities, what are some things that you're looking forward to or just keeping tabs on with the Trump administration? I know that last week you wrote about tariff policy, but I'm just curious to hear your perspective in general about what you're watching for the new administration.

[Jack Nicastro]

Yeah, I'm excited about federal deregulation. I'm excited about deregulation in general, because deregulation actually tends to be progressive, because the more regulations that exist, the higher the cost of compliance. And the producers, the firms, the actors, the economic actors that can afford increasing fixed costs, in this case, their fixed costs in the form of compliance, are the large incumbents. And so if you want to arbitrarily grant pricing power to firms, a great way to do that is through regulation, which is why there's this whole concept of regulatory capture that libertarians like myself love to harp on. But it also nicely explains why large companies, corporations, et cetera, spend tens of millions of dollars on buildings and lobbyists in D.C. most often not to prevent regulation, but to tailor it and advance it such that it is effectively a barrier to entry to compete with them. That is coercive. It is immoral in my view. And what it inarguably does is it increases prices. And you know who bears the, who really feels higher prices? The little guy. The guy who's not making millions of dollars a year, frankly, I'm one of these little guys. You know, I don't make six figures, right? I don't, yeah, knock on wood. But, you know, I, and so many Americans really feel it when the cost of housing, technology, capital goods, consumer goods, whatever, increases. And, and so regulation plays a large role in that. And I think anything that decreases regulation is almost, and this is, I guess, a paradox, I guess you can't say almost invariably. So I won't say that. I will say that on balance, net deregulation is good, and it is good in a progressive way that helps poorer people. So that's what I'm excited about. And because you brought up tariffs, by the way, it's kind of another regulation, really. It's a tax, and it's a tax on, on Americans. It's a consumption tax. And again, consumption taxes increase the prices of goods and those disproportionately as a percentage of income. Really, I will not swear they mess over people who have lower incomes. So really, really bearish on tariffs and really bullish on deregulation, both insofar as they either benefit or detriment the quality of life of working class people.

[Ari Weitzman]

All right, so Jack Nicastro, looking forward, you're looking at the Trump White House, hopefully is something that's going to institute more or actually institute fewer regressive policies that are going to impact people that are disproportionately lower classes and hopeful that the tariffs don't end up being as impactful as it seems. They may be well, we'll keep our eyes on that too. It's always, always a pleasure to speak with somebody who is eloquently libertarian. I always find myself a little bit envious of the cohesive worldview, so it's nice to have an opportunity to hear somebody express that a bit. And if our listeners want to keep up with you, where, where can they do that?

[Jack Nicastro]

Yeah, you can read everything I write for Reason just by guess typing Jack Mac Castro into the search bar on reason.com and it's totally free. There are very limited ads on our website. I really love the user interface. It's a pretty website. And again, I'd just love to shout out Christian Britchke not just on the LA wildfires and his coverage. Much better coverage than mine of everything exacerbating them. You know, climate wise, nature wise, policy wise. But he's also just the go to my go to guy on housing policy. JD to Chile and Joe Lancaster also wrote some great stuff for Reason. Really informative about the Los Angeles wildfires and I would like to thank you Ari for being such a fair and open minded host. You did a really great job representing the arguments that I was at least trying to make.

[Ari Weitzman]

I think you made them very well and I appreciate you taking the time to talk to us. So Jack, thanks so much for coming on. Looking forward to talking to you again sometime soon.

[Jack Nicastro]

Likewise. Thanks so much.

[John Wilson]

Our podcast is written by me, Isaac Saul and edited and engineered by John Wilson. All the script is edited by our managing editor, Ari Weitzman, Will K. Back, Bailey Saul and Sean Brady. The logo for our podcast was designed by Magdalena Bokova, who is also our Social Media Manager. Music for the podcast was produced by Diet75. If you're looking for more from Tangle, Please go to readtangle.com and check out our website.

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