Yesterday’s editorial, “State Capitalism,” made the point that state and city government in New York have somehow gotten into the real estate business so thoroughly that it seems that all major projects take place at the whim of the politicians. It turns out that the situation was so bad that even Alexander Hamilton’s old paper, the New York Post, is losing sight of its free market principles. Catch this from yesterday’s Post editorial: “Think about it: Within two years after the 1991 Gulf War, Saddam Hussein had rebuilt nearly all of the 134 bridges hit in the war, hundreds of miles of roadway and railway track, numerous electrical grids, oil wells and military facilities. New York, by contrast, has built a temporary PATH station and is finishing its first building, 7 WTC. (And that speaks only to the dedication of developer Larry Silverstein.) That’s it.”

The difference between New York and Saddam Hussein’s Iraq, for those who might not have noticed, is that Saddam’s Iraq was a totalitarian society, while New York is, at least theoretically, a free economy based on the capitalist system. So while in Iraq the government is in charge of building things, in New York, at least lip service is paid to the idea that it is private companies that build things, particularly things such as office buildings that are supposed to be commercial assets. Before the September 11 attack, Governor Pataki made a big show of privatizing the World Trade Center. Larry Silverstein won the bidding for a 99-year lease. If Mr. Silverstein is having a difficult time negotiating with the city and state now over the site, it is just one more sign that the governor should have gone all the way at the outset, with an outright sale of the land and the buildings rather than a lease.

Surely the paper founded by Hamilton comprehends that the problem with New York’s real estate business isn’t that it isn’t enough like Saddam Hussein’s Iraq. The problem is that it is swaddled in statist politics, so that even free-market types can sometimes fall into the trap of imagining that the governor of the state should be the one personally responsible for constructing office space downtown. New Yorkers in and out of the real estate industry would be best served were the governor, the mayor, and the other politicians to just stop subsidizing the construction of office space anywhere in the city, and then create a low-tax, low-regulation environment where businesses have normal profit incentives to operate. In those conditions, the market will meet the demand for office space better than even the most well-intentioned politician could.