Wednesday, February 24, 2016

Land use

Today's WSJ reports "Companies Pay Workers to Live Close to the Office: Subsidies help firms attract new hires to high-rent areas, such as New York City and Silicon Valley." High growth places will prompt high costs unless housing markets are allowed to function. Workers may try to keep costs down via longer commutes but this has downsides -- as the story explains.

Restrictions on development are serious in places like New York and California. But supply and demand cannot be denied. So there are consequences (and costs). The political process we have is not likely to be of any use. Places like California and New York will have to accept growth (and well being) below what they might otherwise enjoy. That will also have consequences. But these will most likely be more of the same -- which will only make matters worse.

Progressive Era thinking gave us the idea of municipal zoning. Land uses would generate externalities and top-down wisdom was required to get land use right. The Coasian idea that externalities could also prompt private bargains had not yet come along. And once there is a top-down rationale, it has staying power. Politicians (and their private cronies) and the greens love it.

But Jane Jacobs, among others, recognized that the clustering of land uses can be amazingly complex. The nature of possible knowledge spillovers between different projects and different lines of work cannot be grasped or implemented top-down.

The complexity story also suggests that many urban economists and planners are wrong. It's not simply one number, density. Ideas are essential and many successes come from knowledge-sharing. But knowledge-sharing is also mysterious.

Here are the latest U.S. commuting data. Which occupation has the longest commute? Construction workers do not work at a single site and some job sites can be out of the way. But which occupation is in second place?  Computer science and math. Many of these people exchange code electronically. Perhaps they economize on housing (and commuting) costs by living further away and going to "the office" fewer times. They can be connected from wherever. So much for just simple density. So much for the idea that any of this is simple. Admitting this and retreating from heavy-handed and restrictive land use controls would help.