Weekend Reading: Jane Jacobs, Agglomeration, Farms, NIMBY Songs

During my early college studies in Architecture and Urban Design, I became loosely familiar with the ideas of Jane Jacobs, one of the most celebrated urbanist intellectuals. Sanford Ikeda’s FEE lectures [mp3] have inspired me to learn more about Jane Jacobs from a Free Market Urbanism point of view. Here’s an article by Professors Ikeda and Gene Callahan I added to the links page: Jane Jacobs, The Anti-Planner

Jane Jacobs is one of those intellectuals who seem ever on the periphery of the libertarian movement. Her book, The Death and Life of Great American Cities, can be found on the shelves of many a libertarian, though often unread. Perhaps this is because her name tends to be associated with leftish intellectuals who decry the rise of the suburbs and the decline of the downtowns, even though Jacobs strongly resists being labeled by any ideological movement, left, right, or other.

What is not commonly known, however, is that her works are full of arguments and insights on the economic nature of communities, on central planning, and on ethics that libertarians would find original and enlightening.

In the works of Jacobs, the order present in a well-functioning urban area emerges as the result of human action but not human design. It arises from a myriad of individuals each pursuing their own interest and carrying out their own plans, within a framework of rules that encourages peaceful cooperation over violent aggression.

I have added Jacobs’ The Death and Life of Great American Cities
to my list of books to read. In fact, I bumped it to next in line. Hopefully her ideas will inspire a series of fresh blog posts.
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Mathew Kahn tipped us off to proceedings from a conference on The Economics of Agglomeration edited by Harvard Urban Economist Ed Glaeser.
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Economist – An Arable Parable: Is Farmland Undervalued?

With many financial assets in the doldrums and markets spooked by the twin spectres of economic weakness and rising inflation, is it time to head for the hills? Barton Biggs, an investment guru, famously suggested that those wishing to preserve their wealth in times of turmoil should consider buying an “unostentatious farm”. And rural land has long been seen as a good inflation hedge.

But now may not be the most opportune time for investors to swap their wingtips for wellies. After more than two decades in the mire, the value of farmland has soared over the past few years on the back of strong prices for agricultural commodities, low interest rates and urban sprawl. It has become so fashionable that some wonder if it is a bubble waiting to burst.

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Brian J. Phillips – NIMBY Songs

The real issue is how to resolve such issues. More and more often, the home owners run to government and seek some law that will prohibit the proposed project. They reject the concept of property rights and seek to impose their values upon the rightful property owner. They reject voluntary, consensual interactions between individuals and seek to substitute the coercive power of government.

Skyscrapers as Economic Indicators

Ever hear of interesting economic indicators such as the correlation beween the economy and length of skirts?  Here’s one urbanists should appreciate: the skyscraper index, which shows strong correlation between the completion of world’s tallest buildings and downturns in the business cycle.  Mark Thornton discusses the skyscraper index in his article, Skyscrapers and Business Cycles [or mp3 read by the author], which was originally published in the Quarterly Journal of Austrian Economics:

Burj Dubai, Worlds Tallest Building under construction

Burj Dubai, Worlds Tallest Building now under construction [flickr israel_is.live

The skyscraper is the great architectural contribution of modern capitalistic society and is even one of the yardsticks for 20th-century superheroes, but no one had ever really connected it with the quintessential feature of modern capitalistic history — the business cycle. Then in 1999, economist Andrew Lawrence created the “skyscraper index” which purported to show that the building of the tallest skyscrapers is coincidental with business cycles, in that he found that the building of world’s tallest building is a good proxy for dating the onset of major economic downturns. Lawrence described his index as an “unhealthy 100 year correlation.”

While macro business cycle theory is beyond my core strength in economics and the scope of this blog, this is a particularly interesting topic to me as I am an economics enthusiast with a passion for tall buildings.  The basic premise is that construction of worlds tallest buildings has strong corelation with economic downturns.  Construction of these buildings begin during times of economic expansion towards the peak of business cycles.  However, by the time the buildings are complete, the market has taken a turn for the worse.  Could the Burj Dubai be an indicator that tough times are ahead?

The common pattern in these four historical episodes contains the following features. First, a period of “easy money” leads to a rapid expansion of the economy and a boom in the stock market. In particular, the relatively easy availability of credit fuels a substantial increase in capital expenditures. Capital expenditures flow in the direction of new technologies that in turn creates new industries and transforms some existing industries in terms of their structure and technology. This is when the world’s tallest buildings are begun. At some point thereafter, negative information ignites panicky behavior in financial markets and there is a decline in the relative price of fixed capital goods. Finally, unemployment increases, particularly in capital- and technology-intensive industries. While this analysis concentrates on the US economy, the impact of these crises was often felt outside the domestic economy.

Thornton tells us three main effects of the business cycle on skyscrapers.  First, looking at the fundamentals of the economics of land development and interest rates:

When the rate of interest is falling, the land best suited for the production of the longer-term, more capital-intensive, and more roundabout methods of production will increase in price relative to land better suited for shorter term, more direct methods of production. …  Simplified, higher prices for land reduce the ratio of the per-floor cost of tall vs. short buildings and thus create the incentive to build buildings taller to spread the land cost over a larger number of floors. Lower rates of interest also reduce the cost of capital, which facilitates the ability to build taller. Thus, higher land cost leads to taller buildings.

Second, lower interest rates enabling larger firm sizes:

A lower cost of capital encourages firms to grow in size and to become more capital intensive and to take advantages of economies of scale. Production and distribution become more specialized and take place over a larger territory.

The third being improved technology as a result of investment in research and development of taller buildings:

Buildings that reach new heights pose numerous engineering and technological problems relating to such issues as building a sufficiently strong foundation, ventilation, heating, cooling, lighting, transportation (elevators, stairs, parking), communication, electrical power, plumbing, wind resistance, structural integrity, fire protection, and building security.

Beyond the mere technology it takes to build the world’s tallest building, every vertical beam, tube, or shaft in a building takes away from rentable space on each floor built, and the more floors in the structure, the greater the required capacity of each system in the building, whether it is plumbing, ventilation, or elevators. Hence, there is a tremendous desire to innovate with technology in order to conserve on the size of building systems or to increase the capacity of those systems. Therefore, as the height of construction rises, input suppliers must go back to the drawing board and reinvent themselves, their products, and their production processes.

 

diagram from the article

diagram from the article

An office building is a capital good that is used to bring a variety of consumer goods to market in the sense that production in the office building involves the decision-making process over all aspects of the firm. Its use is ubiquitous in “big business” and is totally absent in small businesses such as family farms, hot dog stands, plumbing services, auto body repair shops, etc. The office building is a critical capital good in very roundabout production processes that represent virtually all modern production and all cutting-edge goods and service production. The modern economy is inextricably linked with the large office building or as Carol Willis (1995, p. 181) put it: “Skyscrapers are the ultimate architecture of capitalism.”

The skyscraper is not just a large version of the office building. Skyscrapers can be used to house the offices of a single corporation, the central offices and branch offices of multiple corporations, hotel and residential living space, commercial space, convention space, a wide variety of personal service businesses, and specialized tenants such as stock exchanges, theaters, and television studios. The skyscraper can serve as a much larger and more advanced office building (being both more productive and producing a higher-quality service). It can even take on the status of a business community or specialized form of privately controlled marketplace. Naturally, greater amounts and diversity of production are possible in larger skyscrapers. The world’s tallest building, past and present, also adds the status of a distinct address.

An interesting fact to consider is that the Burj Dubai is the first world’s tallest to be residential and not office.  Does it reflect the unique market cycle we are now in where the credit bubble resulted in a world’s tallest building with a non-commercial primary use?  Is it somehow telling that the Burj Dubai is not a skyscraper directly meeting the needs of big business?

Of course, the skyscraper index is not perfect, but Thornton examines the main counterexamples to the index, such as New York’s Woolworth Building.

Block on Road Socialism

For quite some time, Economist Walter Block has been one of the more radical thinkers when it comes to advocating free market solutions. Many of his writings on roads and rent control are featured in the Links to Articles, Academic Papers and Books page.

Today’s Lew Rockwell Podcast features an interview with Professor Block discussing Road Socialism. The interview begins with a discussion of the fact that certain socialist institutions exist in our supposedly free-market society, and Block mentioned that when he debated Milton Friedman, he accused Friedman of being a “Road Socialist”. Friedman eventually admitted, “Yes, I am a road socialist.” The discussion turns to deaths on highways, competition, congestion pricing, some history of private turnpikes and transit, eminent domain, and homesteading.

Many of Block’s thoughts and ideas are highly controversial, but make for fantastic conversation. I can’t say I always agree with his point of view or ideas, but I like the unique perspective he brings that is always thought provoking and sparks interesting debate.

I encourage readers to listen to the podcast and discuss their thoughts on the podcast. Also, check out his recent lecture at FEE on Privatizing Roads and Oceans, and articles on rent control and highways.
[flickr user: Atwater Village Newbie]

Housing + Transportation Affordability Index

affordability in the LA area

affordability in the LA area

affordability in NYC
affordability in New York City

Play with the HUD-Brookings Institution’s new index maps here:

The Housing + Transportation Affordability Index, developed by CNT and its collaborative partners, the Center for Transit Oriented Development (CTOD), is an innovative tool that measures the true affordability of housing. Planners, lenders, and most consumers traditionally measure housing affordability as 30 percent or less of income. The Housing + Transportation Affordability Index, in contrast, takes into account not just the cost of housing, but also the intrinsic value of place, as quantified through transportation costs.

I enjoyed playing with the maps to see the interplay of accessibility and affordability. In New York, some very accessible places are not-so affordable, such as many areas of Manhattan. Same goes for upscale parts of Chicago. At the same time, very affordable housing locations in exurbs become less affordable when considering transportation costs.

I plan to spend more time investigating how they produce the index.

[tip of the hat to Peter Gordon]

Glaeser: State of the City

I’m a little slow picking up on this one, but the Wall Street Journal recently interviewed Harvard Urban Economist, Ed Glaeser. Here are some excerpts from State of the City:

THE WALL STREET JOURNAL: What effect will higher gasoline prices have on urban planning in the U.S.?

MR. GLAESER: I would be very surprised to see a wholesale change in the nature of American urban development. We should certainly see changes in the short run, [such as] a slight decrease in demand for housing that’s particularly far away from city centers and dependent on long drives. That [type of housing] won’t be abandoned entirely, but it will certainly be cheaper.

WSJ: What about the idea of having the government purchase foreclosed homes and convert them into affordable housing? Would that be good for the economy?

MR. GLAESER: The government’s track record as a property owner is not so great. I am less enthusiastic about the government getting into this business. If we want strong policies towards taking care of the least well-off in our society, we should make sure supply is unfettered and continue working on the Section 8 [low-income housing] voucher program — that’s the right strategy.

Glaeser discusses Chicago’s success:

MR. GLAESER: I think Chicago has been remarkably successful in lots of ways. The city has managed to stay pretty affordable and Mayor [Richard] Daley has been extremely pro-growth.

Chicago, for many years, has had a relatively pro-growth environment, at least relative to California and New York — especially [before current Mayor Michael Bloomberg]. The climate in Chicago is, of course, far less pleasant than San Francisco and wages are lower than New York.

Still, it is somewhat remarkable that condo prices in Chicago [a median $232,000 in 2007] are less than those in Trenton, N.J. [$248,000], and not that far above Philadelphia [$197,000].

Over the past two years, Chicago has permitted around 14,000 units per year. Los Angeles permitted less than 10,000 units in 2007 and 14,500 units in 2006. Yet Los Angeles has almost twice the land area and over 50% more population. It is substantially less dense than Chicago, and there is substantially more demand for Los Angeles, yet Chicago is building more.

Bringing more units to market — think of all those cranes along the lake — explains in some part of why Chicago is more affordable. The absence of land-use controls [means] prices for condos will tend towards construction costs. After all, you can always build taller buildings.

Unfortunately, some local politicians have begun pandering more to NIMBYs. It hasn’t gotten out of control like coastal big cities, but I wouldn’t be surprised if the development climate changes once Daley retires.

New York City is a great place to be really rich and not a terrible place to be really poor, but it’s a pretty hard place to live on $60,000 a year. You don’t experience anywhere near the basic standard of living you would in Houston on the same income.

After living in NYC vs Chicago, I concur…

Dealing With NIMBYs

NIMBYism is the biggest obstacle to the evolution of vibrant urban communities, but the incentives for some to use public forums to impose restrictions on neighboring properties are great. Local politicians often bow to the most vocal residents, often with minority opinions, to avoid making waves, but their impositions are at the expense of the overall community (and the environment).

In a recent ULI post and on his own blog, Rob Goodspeed discussed NIMBYism:

NIMBY (Not In My Back Yard) activism is as bad as ever and getting worse, according to startling new statistics from a consulting company that specializes in overcoming opposition to development.

The third-annual Saint Index, a gauge of public opinion on urban development, found one-quarter of Americans say they or a family member have actively opposed a development project. That means Americans are twice as likely to oppose development than support it. Among the findings, 78 percent of Americans think there should be no new development in their community, 44 percent oppose new apartments or condominiums (up from 34 percent in 2006), and 69 percent say their local government is doing a fair to poor job on planning and zoning.

In his blog Rob discusses varying definitions of NIMBYism:

The key to understanding NIMBYism comes from political science, not the technicalities of zoning. NIMBYism occurs when a politically unrepresentative minority exacts unreasonable costs on the larger community, up to and including blocking otherwise supported developments. This definition comes from a provocative article by Morriss P. Fiorina titled “Extreme Voices: A Dark Side of Civic Engagement” that appears in this text.

Rob discusses strategies and solutions for dealing with activists. I tend to agree that as much as we would like to just ignore them, they don’t just go away. The best strategy is to be transparent and educate the community about the benefits. A vocal minority will have a more difficult time making waves when well-informed neighbors are brought into the discussion along with them.

The bottom line here is that people serious about changing the status quo in American cities must have a robust understanding and strategy for handling NIMBYism. Thanks to rapid changes in the mechanics of planning — the goals of written plans and character of the zoning — higher density, pedestrian and transit-oriented neighborhoods are increasingly legal again. What remains is the public engagement strategy to minimize the size and ranks of the vocal minority and convince American communities they’re the right form of development for our communities.

Links and Weekend Listening

I’ve been swamped in my day job, but want to share the following:

The blog, Agents of Urbanism recently gave praise to Market Urbanism. Thanks Matthew! Please check out Agents of Urbanism and Life Without Buildings, who followed up on Agent of Urbanism’s praise. I enjoy both blogs.

Carl Close wrote How “Urban Renewal” Destroyed San Francisco’s Fillmore District for The Independent Institute’s blog, The Beacon.

And finally, I came across some fantastic lectures at the Foundation for Economic Education, by Sandy Ikeda. I highly recommend listening to the MP3s during your free time this weekend. He discusses Jane Jacobs, urbanism, history, sprawl, economics, and most things of interest to readers of Market Urbanism:
Urban Planning
Private Cities