Urbanism without government

Asking, “But who will build the roads?” is a cliched response to proposals for a more libertarian political system. However, it leads to the interesting historical question of “Who has built the roads in anarchic societies?” Colonial America provides a few examples that answer this question. Perhaps the best known example of anarchism in American history was in Rhode Island, or “Rogue’s Island,” founded by Baptists fleeing Massachusetts. The stateless Baptists founded the cities of Portsmouth and Warwick.

Unlike the Baptists, William Penn didn’t intend to create an anarchic colony, but Pennsylvania was, in fact, without a government from 1684 to 1691 as evidenced by Penn’s failure to successfully levy any taxes during that time. It’s difficult to know much about street building from this time period in part because of how much time has passed and in part because, as Murray Rothbard writes, “The lack of recordkeeping in stateless societies — since only government officials seem to have the time, energy, and resources to devote to such activities — produce a tendency toward a governmental bias in the working methods of historians.” However, we do know that Philadelphia’s neighborhoods near the Delaware River were growing during this time.

One of the country’s oldest continually occupied streets is Philadelphia’s Elfreth’s Alley. It was dedicated in 1702, shortly after this period of complete anarchy and served  as a route to connect local merchants’ property with the already thriving Second Street. As the society dedicated to the alley’s preservation writes:

Elfreth’s Alley — popularly known as “Our nation’s oldest residential street” – dates back to the first days of the eighteenth century. Twenty years after William Penn founded Pennsylvania and established Philadelphia as its capital, the town had grown into a thriving, prosperous mercantile center on the banks of the Delaware River.

Philadelphians had abandoned Penn’s plan for a “greene countrie towne” and instead created a cityscape similar to what they remembered in England. Wharves stretched out into the river, welcoming ships from around the world. Shops, taverns, and homes crowded the area along the river. Philadelphians made and sold items essential to life in the New World and to the trade that was a part of their daily lives.

Two of these colonial craftsmen, blacksmiths John Gilbert and Arthur Wells, owned the land where Elfreth’s Alley now sits. In 1702, each man gave up a portion of his land to create an alleyway along their property line that connected their smithies near the river with Second Street, one block away. By that date, Second was a major north-south road, connecting Philadelphia with towns north and west of the city and the frontier beyond.

Photo by C. Ridgeway

Photo by C. Ridgeway

Gilbert and Wells donated their land both to benefit their businesses and to improve the city’s transportation network in keeping with the Quaker tradition of voluntarism. Their actions demonstrate the power of cooperation for mutual gain, but it’s also notable that streets built with donated land are likely to be narrow, as Elfreth’s Alley is. As the article explains that William Penn envisioned Pennsylvania as a “countrie towne,” but without the ability to raise any taxes needed to enforce his vision, he couldn’t prevent Pennsylvania residents from developing the sort of dense and mixed-use development that supported their growing industries in Philadelphia.

Victorian England provides another example of rapid urban growth under very limited government. Decades after the construction of Elfreth’s Alley, urban development absent any city planning, government infrastructure, or building codes swept across London and other English cities. Neighborhoods including the West End and Nottingham were developed during this period of hands-off government policy, relying on the private sector for providing all infrastructure, from streets to streetlights to drainage.

In both cases of laissez- faire urban development, we see very narrow streets, as landowners are making the trade between providing easements for accessibility and developing land for profit. Unlike colonial Philadelphia’s period of total anarchy, London had a system of Private Acts, which required developers to seek permission from Parliament to implement any significant land use changes. After development was in place, some neighborhoods used covenants to enforce upkeep of common goods such as lighting and even to enforce design standards for builders. In his chapter in The Voluntary CityStephen Davies explains that landowners did not place covenants on all land and that the stringency of covenants varied widely. Because covenants tended to increase both the quality and price of housing, this variation allowed builders to serve both low- and middle-income residents, depending on where they built:

Developers were able to tailor the extent of their providing “public goods” via covenant to the nature and scope of local demand, as well as account for other factors such as land and building costs. This is in marked contrast to the rigidity and fixity of state attempts to supply these goods through public planning, zoning laws, and the like. The flexibility also extended to the enforcement of covenants. Landlords and developers would often not enforce the building clause in a lease when demand for land was slack, as long as the rent was paid.

While colonial Philadelphia and Victorian London saw road building under different legal institutions, both cases demonstrate that urban infrastructure can be provided without government. Perhaps the free market would never create the interstate highway system, but it’s proven itself capable of facilitating the creation of charming, functional streets that endure centuries.

 

 

 

 

Potential for Voluntary Infrastructure

Last fall I visited Budapest and learned some interesting history of the city’s beautiful Chain Bridge. Before 1849, the small cities of Buda and Pest were connected by a temporary bridge that was only viable during warm months. In the winter, the bridge had to be taken down due to ice, making it impossible to cross the Danube between the two cities if the ice wasn’t solid enough to walk on. Count István Széchenyi, a Hungarian statesman who traveled extensively throughout Europe, made it his mission to secure financing for a bridge to improve economic growth opportunities and Budapest’s standing on the world stage. His experiences in rapidly modernizing cities like London taught Széchenyi the importance of mobility for economic growth.

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Legend has it that Széchenyi was motivated to build a bridge between Buda and Pest because ice on the Danube prevented him from getting to see his sick father before he died, but it’s unclear to me if this is an accurate history. The bridge was the realization of both a politician’s ambitions and a private financiers goal to profit from tolling the bridge and by increasing the value of his landholding in Pest. While the bridge lost money during its financier’s life, it ultimately began turning a profit in 1860. It’s impossible to understand Széchenyi’s motivations for securing the bridge centuries later, but it seems he was likely motivated by a combination of profit seeking, nationalistic pride, and philanthropy. The Chain Bridge joined a slew of other privately built bridges and other infrastructure around the world, built either by people who hoped to profit from providing transportation services or who sought to increase their land value by providing mobility.

While a voluntarily built bridge seems exceptional from today’s vantage point — when a public private partnership or contracted toll road management seems like the “free market” alternative to government built and managed infrastructure — this is because government policies have radically transformed infrastructure provision. As Adam has pointed out previously (along with David Levinson and others), transportation is a private good, not a public good that carries a strong rationale for government provision. History demonstrates that absent government provision and given a legal market that supports it, individuals and firms in the free market will provide infrastructure. While some argue that mobility has positive externalities, the presence of positive externalities doesn’t mean that a good should be provided by the government, or even subsidized. Beautiful architecture has positive externalities for the neighborhood around it and smaller positive externalities for passers by who enjoy it, but this doesn’t make it a good idea for the government to take over building design or for the government to subsidize property owners who choose good design.

The general growth of government beginning in the 19th century along with many discrete policy decisions have led to the decline of voluntary transportation infrastructure, but technological and economic changes should make non-government infrastructure more attainable than ever. Large corporations from Wal Mart to Apple have huge interests in ensuring that their products reach their consumers in a timely manner. It’s not difficult to imagine that corporations could play a large role in providing infrastructure in world without government crowd out. Given that private infrastructure prevailed in a time when making infrastructure excludable was more costly, technology today has only made voluntary infrastructure more attainable.

 

Car and Driver(less) Link List

1) A reader pointed out this post at Volokh Conspiracy arguing that personal cars give us freedom, citing the example of automobiles helping African Americans boycott segregated buses in the 1950s. Sasha Volokh writes:

Let’s think back to 1955, when African Americans stayed off segregated buses in Montgomery, Ala. During the year-long boycott, 325 private cars, some owned by African Americans, some by whites, some by churches, picked up people at 42 sites around the town.

I don’t think that it works to think of technologies as something that can increase our freedom, per se. While cars give some people greater freedom of mobility, for those who can’t drive or refuse to drive for whatever reason have worse freedom of mobility in cities that are built for automobiles. Rather government spending and regulations that favor one type of transportation over another impede the freedom of those who don’t prefer the favored mode. And in this case of cars presenting an alternative to segregated buses, Volokh explains that drivers picked up passengers at defined stops. They were using their cars to implement a voluntary community transit system, using cars beyond their purpose as personal automobiles.

2) Many people have written about the potential of driverless cars to enhance freedom of mobility and to improve automobile safety, but Meagan McArdle points out that car manufacturers will likely face greatly increased liability when driverless cars reach the roads. Do you think driverless cars are in our near future? I’m sold on their potential to cut back on parking in city centers.

3) My colleague Eileen Norcross writes at US News on Governor Bob McDonnell’s proposal to move to funding transportation with a sales tax rather than a gas tax in Virginia:

The governor is right to note that the gas tax suffers from multiple problems as a revenue source. As cars become more fuel-efficient and motorists choose to drive alternative fuel vehicles, the gas tax doesn’t go the same distance it once did. Also, Virginia hasn’t indexed the gas tax to inflation since 1986; otherwise the tax would be 36 cents per gallon by now.

However, switching from a user-based tax to a broader source of revenue for roads violates the principles of user-pays and transparency in taxation. The merit of the gas tax is that drivers pay for road improvements—at least in theory. In reality, the gas tax is a second-best option as a user-based source. Drivers don’t pay directly for their individual road use, as is the case with a toll-based system.

Also see the debate between Randall O’Tool and the Tax Foundation on this issue.

4) At New World Economics, Nathan Lewis applies Warren Buffett’s “Innovators, Imitators, and Idiots” theory of investment to real estate and suggests that new suburban greenfield development is in the “Idiots” stage as the patterns of new developments are no longer profitable:

1) New developments are too far from anything, and often imply commute times of an hour or more each way
2) Homes are too large for people to afford
3) Waaaay too much strip-mall type development, plus the realization that it is horrifically ugly
4) Land use patterns that are dominated by Non-Place (parking lots, roadways, and “green space” to make it all a little less hideous), i.e. “sprawl”

 

 

 

DC Office of Planning releases an underwhelming study of proposed new streetcar network

Last week the DC Department of Transportation DC Office of Planning released a Streetcar Land Use Study describing the impacts that the proposed DC streetcar network will have for the city. Greater Greater Washington accepts the study as proof that the streetcar will be great for DC. The report is full of the feel-good economics that really bothers me about Smart Growth in general, and I think that this sort of treatment of the trade offs of public policy hurts the urban agenda in the long run.

The study finds that the streetcar will pay for itself by raising the property tax base. From a Smart Growth perspective, though, this is a problem because it will make housing less affordable. The study suggests that inclusionary zoning will provide the necessary affordable housing after the streetcar raises property values. Current zoning laws require new multifamily buildings with 10 or more units to comply with inclusionary zoning requirements for low-income housing. As Stephen has pointed out before, inclusionary zoning is just a more complicated policy that ultimately has many of the same unintended consequences as rent control or subsidized housing. Subsidizing the cost of housing for a select group necessarily makes it more expensive for those of all income levels who are not lucky enough to secure this subsidy. Forcing developers to provide this subsidy does not change its economic impact on those who are left paying market rate.

DDOT  The Office of Planning predicts that by far the greatest gains in real estate value will accrue to property owners within one quarter of a mile of the stops along K Street (see graph on page 24 of the study). It’s important to note that the vast majority of these gains will be realized in higher per-square-foot prices rather than new square footage since that area is just about built up to what the Height Act will allow. Are K Street building owners really a group that we DC taxpayers want to be subsidizing? If in fact this project would create over $3 billion in value for these property owners by raising the value of existing buildings and spurring new development, the Downtown DC BID should be clamoring for the opportunity to build it. This should present an opportunity for the city to lease the rights to the BID to construct and operate a streetcar that would be profitable, benefit downtown transit users, and raise the property tax base as a result. The study does allude to potential opportunities to seek financing help from developers, but it’s shy on specifics. Additionally, private funding for a public project carries the risk that the project will take on the “monstrous hybrid” characteristics of a public private partnership that Jane Jacobs warns against in Dark Age Ahead, benefiting private interests at public expense.

In lower-income areas where private funding will not likely be available, this public investment amounts to picking winners and losers among neighborhoods; what makes H Street more deserving of the first line over other transit-starved neighborhoods? By allowing private streetcars to determine the placement of lines, we can be sure that better incentives are in place to determine where these lines will be most useful, and the profit and loss mechanism will provide feedback along the way.

The study emphasizes DC’s history with streetcars that operated from the 1800s through 1962 but downplays that these lines were operated by private companies that were gradually regulated out of existence. A new publicly operated system represents a significant break from this history. Privately operated streetcars internalize the risk and reward of this investment, whereas a publicly funded project disperses the risk among DC taxpayers.

Conspicuously missing from the study is any evaluation of DDOT’s performance in building and running streetcars thus far. The H Street line is currently way behind schedule, and the project’s Buy America requirement is complicating even the procurement of the cars. The years long construction project was welcomed by many along the H Street corridor as it has resulted in private investment pouring into the neighborhood; however, if streetcar construction experiences such extreme delays on K Street or M Street in Georgetown, two of the most congested streets in the city, public opinion could easily turn completely against the project.

I certainly think that the District can support improved transit options, especially in light of growing frustration with WMATA. However, I’m not convinced that DDOT is a more competent bureaucracy based on the H Street results. If the study’s predictions of the economic impacts that a streetcar could have are correct, this project represents an opportunity for DC to really turn back to its transit roots in the form of private streetcar companies operating profitably.

NYC Taxi Reform Doesn’t Go Far Enough

This post originally appeared at Neighborhood Effects, a Mercatus Center blog where we write about the economics of state and local policy.

Via Flickr user Ian Caldwell

Next week, New York Governor Cuomo is likely to sign a bill that will marginally increase competition in the NYC cab market. The new rule will allow passengers to hail some livery cars in outer boroughs and add 2,000 additional medallions for yellow cabs with wheelchair access.

The auction of these medallions  is projected to raise $1 billion. This figure might seem outlandish, but last month two medallions sold at auction for over $1 million. That’s right, it costs $1 million for the right to drive a cab in NYC, not accounting for any of the costs associated with owning and operating the vehicle.

The price tag of these medallions that are sold to the highest bidder demonstrates that in a free market, many more drivers would enter the cab industry. Artificially constraining the supply hurts both consumers and those who are not able to drive a cab because they are unable to purchase a medallion.

Unsurprisingly, the Metropolitan Taxicab Board of Trade remains strongly opposed to this bill. The increase in the supply of medallions will lower the value of the medallions that cab drivers and larger medallion companies already own. Their lobbying efforts reflect their desire to profit through the political system.

While this increase in the number of medallions available for yellow cabs and allowing some livery cars to be hailed represents a small improvement for New Yorkers, the reform does not go nearly far enough. For real reform, Mayor Bloomberg should look to Indianapolis.

Before Stephen Goldsmith was elected as the city’s mayor in 1991, the number of cabs permitted in Indianapolis was limited to 392. Goldsmith created a Regulatory Study Council whose first project was to reform taxi regulations. The RSC recommended eliminating regulatory barriers to entry and allowing cab drivers and companies to determine their own prices. In a case study of regulatory reform in Indianapolis, Adrian Moore writes:

The main resistance came from existing taxi companies, and initially much of the city and county council sided with them in the name of the “public interest.” However, the support for reform by seniors, the inner city poor, minorities, the Urban League, and the disabled soon brought many of them over to the RSC’s side. The RSC expected little support from Democrats on the council, but the strong support for deregulation from that party’s traditional constituents turned the tide.

Some price controls remain in the Indianapolis taxi market, but the city has seen an increase in supply, a decrease in fares, and an improvement in service. Indianapolis and New York City are of course very different, but the laws of supply, demand, and rent-seeking are the same everywhere. By phasing out the medallion system, New York City would benefit consumers and allow many more people to make a living driving cabs. Medallion owners who have invested in some cases over $1 million in the current system would need to be compensated in some way, but not by continuing to profit at the public’s expense.

Alon Levy on the Suburbanization of Poverty

Over at Pedestrian Observations, Alon Levy has a typically well-written and researched post on the gentrification of poverty. He explores the well-researched trend that low-income Americans are increasingly moving to the suburbs as gentrification is driving up rents in inner cities. He hypothesizes that this “current” trend has really been happening for the past fifty years:

Both the inner and the outer limits of poverty are pushed outward. What we saw last decade was just a tipping point in which the expansion of the gentrified core was by itself enough to offset the wealth loss coming from the expansion of the ghetto.

Levy suggests that this trend is largely due to the typical pattern of poverty moving outward in a “donut” pattern, but today the center of the donut is in the suburbs. He writes:

In general, a similar story played out in the first-ring suburbs of many Rust Belt cities, especially in ill-favored quarters: the places that people used to flee the city to are now cities that people flee.

His post sparked two thoughts:

1) Could part of the reason that wealthy and middle income residents are moving to inner cities have to do with the demand for time? As we as a society are becoming wealthier, the value of time — the ultimate finite resource — is increasing. So as the price of free time rises, people may be moving to places where their commute times are shorter. In many cases, they are trading off quality of public schools and public safety to enjoy shorter commutes. When they move to Jacobian mixed-use neighborhoods, they could enjoy the added benefit of shorter travel time when running errands and seeking out entertainment. I think this pull toward inner cities helps explain gentrification, in addition to the push away from suburbs that are no longer as desirable as they used to be.

2) In DC with its uniquely terrible height restriction, the city has never achieved the typical inner city growth pattern with the tallest buildings and densest office space is in the center. Instead, skyscrapers have to be built in parts of Silver Spring, Roslyn, Tysons, and other suburbs. Is this development pattern shaping gentrification in these areas?

Transit Oriented Development in Chevy Chase

In Chevy Chase, MD county planners have revised plans for the Chevy Chase Lake Sector from high rise, mixed-use development to low-rise, primarily residential buildings. The trigger to allow for higher-density development will be the arrival of the Purple Line, a proposed light rail that would stretch across Metro’s Red Line.

The light rail would connect Bethesda directly to New Carollton. Construction is scheduled to be completed by 2020, but I for one am not betting on a light rail by that time. For one, no funding has been secured, and for another reason the project is met with considerable opposition to NIMBY-ists in Bethesda and Silver Spring. The town of Chevy Chase has been the most vocal opponent of the project.

Personally, I could see the Purple Line being very well-used, and potentially coming closer to profitability than the “cherry blossom” line. However, waiting for the arrival of transit to permit Transit Oriented Development creates a chicken and egg problem. When high-density development is not allowed where there is demand for it, the restriction limits potential for other viable transit options. For example increasing density along the proposed Purple Line could allow for a Circulator or increased MTA routes to provide service in the meantime. And opposition to the light rail is likely to remain strong as long as residents don’t see the clear value of mass transit in their municipalities.

 

New funding for roads in Georgia

The Georgia Department of Transportation recently approved $102 million in projects to improve the state’s infrastructure. The department gave the go ahead on these projects as the state is in the midst of a debate over a new proposed one percent sales tax to help fund infrastructure.

Highway supporters often argue that fuel taxes fund road construction and maintenance, but this is simply not the case, leading to the need for other dedicated transportation funding, like the Georgia sales tax. Improvements slated to benefit from the new fund include highways, bridges, and public transit. Metropolitan Planning Organization Coordinator Corey Hull said, “We … want them to know this is our only option right now. The state does not have a plan B for funding transportation and infrastructure.”

Clearly, the fuel tax is not meeting the funding requirements for the states’ drivers, so the funding is being drawn from the wider state population, including non-drivers. Currently, this may be a small distinction in Georgia, though, where only 2.7% of residents take public transportation to work. Like road improvements, public transportation projects in Georgia are funded by the broader tax base rather than the constituents that actually rely on the service.

Perhaps the number of Georgians who take public transportation to work will grow with the proposed expansions to Atlanta’s light rail. However, it’s hard to imagine that such marginal improvements to public transit will create meaningful change to transportation in a city like Atlanta, which was was largely designed around the highway system.

As a result of low demand for transit in Atlanta, the city hopes to cover only 20 percent of the operating costs of a new streetcar system with fares. Rail has many clear advantages over buses — these systems are typically faster and easier for riders to navigate. However, in a large, low-density city like Atlanta, geography simply does not allow many people to use a reasonably sized rail system. Without major reforms to density and parking regulations, Atlanta’s light rail is likely to largely run empty.

Rather than attempting to force a Smart Growth vision on their residents, Atlanta policy makers should take a step back and allow the market to guide transportation resources. In a city built around highways and cars, buses and bus rapid transit make much more sense for environmentally friendly, cost-saving public transit. They have a shot at paying for themselves, or at least necessitating fewer tax dollars than street cars, particularly if the state does not continue policies that subsidize driving. Light rail should not be built without the repeal of anti-density policies.