Category Economics

Economics, rent control, video

Rent Control Part 1: Microeconomics Lesson & Hoarding

This post has been released as the first in a four part series: Rent Control Part One: Microeconomics Lesson and Hoarding Rent Control Part Two: Black Market, Deterioration, and Discrimination Rent Control Part Three: Mobility, Regional Growth, Development, and Class Conflict Rent Control Part Four: Conclusion and Solutions Opposition to rent control among economists spans the political spectrum, including over 90% of American and Canadian economists. In fact, Swedish socialist Economist Assar Lindbeck famously said, “In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing it.” (Assar Lindbeck, The Political Economy of the New Left, New York, Harper and Row, 1972, p. 39) Without getting into the morality of restrictions on property rights, I will discuss the more subtle consequences of rent control over a series of posts. Quick Microeconomics Lesson: As stated by the National Multi Housing Council: Rents serve two functions essential to the efficient operation of housing markets: they compensate providers of existing housing units and developers of new units for the cost of providing shelter to consumers; and they provide the economic incentives needed to attract new investment in rental housing, as well as to maintain existing housing stock. In this respect, housing is no different from other commodities, such as food and clothing — the amount producers supply is directly related to the prevailing market price. Those of us who have studied microeconomics understand the near-universally accepted supply/demand consequence of rent-control: a decrease in the quality and supply of rental housing over time. But, for those who need a refresher or quick intro lesson, Professor Alex Tabarrok of George Mason University and the popular Marginal Revolution blog explains the microeconomics of rent control in this video: When you have some spare time, watch this more […]

Economics

Vending Machine Economics in Japan

Tyler Cowen of Marginal Revolution is in Japan, and is fascinated by the number of vending machines. He takes a minute to ponder on the economics of vending machines in Tokyo. First we must look to the shortage of storage space in homes. I suspect few Japanese want to buy big piles of stuff at Costco. So buy smaller “portions” and in the meantime the inventories are stored in the vending machines, where they are more or less at your disposal. I would also look at the storage space for humans in stores. Shops require expensive ground floor space. If you can eliminate the space the human takes up to manage the store and space shoppers use to enter and browse, you can store more compactly. It’s seems a little counterintuitive to think that the storage space could be more valuable than a human occupant… Bill’s comment led me to add this link to an automat in NYC: BAMN!

Economics, Environment

Does Urban Farming Make Sense?

Matthew Yglesias just posted a thought referring to a recent NY Magazine article about skyfarming: Should we build agricultural skyscrapers in-or-near our major cities? It’s certainly a cool idea. I think I’m going to put the notion that this is actually environmentally sound and feasible in my “too good to check” file. More plausibly, green roofs really are an environmentally sound idea, though not something with a good prospect for replacing farms. Check out the article, it’s very cool. Here’s my take: I think this would be really cool, but I can’t imagine this being economically feasible, except under extreme circumstances. 1. To locate this in a dense city would mean it would compete for land with the most expensive office and residential properties, where developers pay huge land prices to build in those locations. They build there because the most productive companies and individuals desire to locate there and can pay for it. The competition from farms, of all things, would drive prices for office and residential even higher. Perhaps, it might make sense to locate on less desirable urban land such as near highways or industry. 2. Construction costs of building vertical are enormous. Especially compared to the construction cost of traditional farms: nearly 0. 3. Labor costs: city labor is much more expensive than rural labor. Perhaps the skyfarm will be fully automated, but you’ll need engineers on site and other staff a typical farm does not require. 4. Traditionally, farms locate on land that is much less productive than agglomerative cities, which is why land is cheaper and farming can become profitable. Add in extraordinary construction costs, and it makes little economic sense. I can’t imagine farms competing with urban offices in productivity or profit per square foot. 5. The skyfarm probably isn’t so good for […]

Economics

University of Chicago Creates Milton Friedman Institute

Crain’s Chicago Business: U of C honors Friedman with $200M center Eventually, the Friedman Institute will be housed in buildings now occupied by the Chicago Theological Seminary on 58th Street between Woodlawn and University avenues. The U of C is buying the buildings and has agreed to build a new home for the seminary at 60th Street and Dorchester Avenue. The seminary is expected to move in 2012 and will lease the building from the U of C for 100 years at a cost of $1 a year. Milton Friedman Institute webpage