This post is part of an ongoing series featured on Market Urbanism called Urbanism Legends. The Urbanism Legends series is intended to expose many of the myths about development and Urban Economics. (it’s a play on the term: “Urban Legends” in case you didn’t catch that)
We’ve all heard it said by some NIMBY activist: “This greedy developer doesn’t care about the people of the neighborhood, he just wants to maximize his own profit.” Are developers the devil?
No doubt, developers usually are self interested, and seek profit. However, just like in any business, profit seekers must try to satisfy the desires of its customers better than its competitors. The successful developer must direct capital towards creating value in the real estate market for potential customers. So, perhaps it seems particularly greedy that a developer who is creating value in a community, cares less about the current inhabitants than newcomers.
But, as Henry Hazlitt wrote in the classic, Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics:
the whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.
Most Urbanism Legends, like most economic myths, rely on looking at policies from the perspective of one group without looking at the effects on other groups and society as a whole. This Urbanism Legend is no different. Looking deeper at the issue, the developer represents the needs of the community in a less visible, yet equally important way. However, it is the needs of those who desire to be in the community who the developer is most interested in advancing, obviously because those people are the only ones from whom the developer expects to earn profit. Thus, through his self interest, the developer is an advocate for those who intend to move to the neighborhood where he is developing.
In nearly all cases, the developer represents “The Forgotten Man”, or the less visible members of a community effected by zoning policies. If a developer is prevented from developing as many units as the market dictates, we do not see the individuals who have to look elsewhere for housing or pay more for housing in their desired location. Yet, we plainly see the existing neighbors who complain that a developer is neglecting their needs. NIMBY activism is a perfect example of lobbying for popular policies that benefit some seen person or persons, at the expense of the unseen persons.
Looked at from the perspective of “seen and unseen” the developer is the voice of the unseen future members of the community, while it is the existing neighbors who make themselves readily visible. The NIMBY seeks to abuse public policy to enhance his own property values at the expense of potential newcomers. (for more on “the seen and unseen”, check out Bastiat’s must-read 1848 essay, That Which Is Seen and That Which Is Not Seen also online here)
According to The American Heritage Dictionary of The English Language, greed is “An excessive desire to acquire or possess more than what one needs or deserves, especially with respect to material wealth”
By this definition, who is greedy? The developer who seeks to earn a profit by satisfying the needs of its customers who are willing to pay market prices for the developer’s product? Or is it the NIMBY, who seeks to halt the progress of people who desire to live in his community, in order to improve his own property value?