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China’s “Planned Capitalism” Kills Wealth

  Sometimes, prosperity is an illusion. The massive building boom in the People’s Republic of China is creating outer signs of affluence, but there isn’t enough demand to put residents in the new homes. As in many similar urban projects across the country, the Chinese government has been pouring billions of dollars into Gansu Province to build a new city called Lanzhou New Area. The Washington Post reports, This city is supposed to be the “diamond” on China’s Silk Road Economic Belt — a new metropolis carved out of the mountains in the country’s arid northwest. But it is shaping up to be fool’s gold, a ghost city in the making. Lanzhou New Area, in Gansu province, embodies China’s twin dreams of catapulting its poorer western regions into the economic mainstream through an orgy of infrastructure spending and cementing its place at the heart of Asia through a revival of the ancient Silk Road. Hundreds of hills on the dry, sandy Loess Plateau were flattened by bulldozers to create the 315-square-mile city. But today, cranes stand idle in planned industrial parks while newly built residential blocks loom empty. Streets are mostly deserted. Life-size replicas of the Parthenon and the Sphinx sit surrounded by wasteland, monuments to profligacy. Spontaneous Cities China’s central planners haven’t even begun to appreciate, let alone practice, the lessons of the great urbanist Jane Jacobs, who viewed cities and the socioeconomic processes that go on in them as largely the result of spontaneous, unplanned entrepreneurial development. As an economist quoted in the Washington Post article points out, Urbanization and modernization are processes that naturally take place.… You can’t force it to happen or have 1,000 places copy the same model. Construction of these so-called ghost cities is likely financed by artificial credit expansion. In other words, people […]

Market Urbanism MUsings December 2, 2016

1. This week at Market Urbansim: Private Neighborhoods And The Transformation Of Local Government by Sandy Ikeda In Private Neighborhoods and the Transformation of Local Government, Robert H. Nelson effectively frames the discussion of what minimal government might look like in terms of personal choices based on local knowledge. He looks at the issue from the ground up rather than the top down. Thoughts On Today’s Emily Hamilton Vs. Randal O’Toole Cato Discussion by Michael Lewyn O’Toole said high housing prices don’t correlate with “zoning” just with “growth constraints.” But the cities with strict regionwide growth constraints aren’t necessarily high cost cities like New York and Boston, but mid-size, moderately expensive regions like Seattle and Portland. 2. MU Elsewhere Emily Hamilton wrote Rules that wreck housing affordability for the Washington Times, analyzing the White House report on housing affordability President Obama deserves credit for recognizing a serious economic problem that is escaping our attention. What’s happening in Takoma is happening in every expensive city in the country, resulting in lost opportunities for the people who need them the most. Reforms to city land-use regulations would not only improve the lives of local renters, but could also improve economic growth for the whole country. Emily‘s debate with Randal O’Toole is also up at Cato 3. Where’s Scott? Scott Beyer is in Los Angeles, and this weekend will be hanging around the California beach towns of Santa Monica, Venice Beach, Manhattan Beach, Long Beach and so on. His three Forbes articles this week were: ‘Friendsgivings’ Are A Growing Urban American Tradition…Could The Fair Housing Act Be Used To Abolish Restrictive Zoning?…and Nativism: The Thread Connecting Progressive NIMBYs With Donald Trump These and countless other examples show the cognitive dissonance of some urban progressives, who blast Trump supporters for their supposed xenophobia and racism, while practicing their own brand of […]

Thoughts On Today’s Emily Hamilton Vs. Randal O’Toole Cato Discussion

Because of work obligations, I listened to only about a third of today’s Cato Institute discussion on urban sprawl.  I heard some of Randall O’Toole’s talk and some of the question-and-answer period. O’Toole said high housing prices don’t correlate with “zoning” just with “growth constraints.”  But the cities with strict regionwide growth constraints aren’t necessarily high cost cities like New York and Boston, but mid-size, moderately expensive regions like Seattle and Portland. He says that if land use rules raise housing prices they violate the Fair Housing Act.  Maybe this should be the case, but it isn’t.  Government can still regulate in ways that raise housing prices, but just have to show reasonable justification for those policies under “disparate impact” doctrine. He also says cities would be less dense without zoning.  Is he aware that most city regulations limit density rather than mandating density? O’Toole says growth constraints are why American home ownership rates are lower than in Third World countries and that the natural rate of home ownership is 75 percent.  But why are home ownership rates so low in sprawling Sun Belt cities? For example, metro Houston’s home ownership rate is about 59 percent – higher than New York or San Francisco, but lower than Philadelphia or Pittsburgh.  The highest home ownership rates are in Rust Belt regions like Akron, I suspect because of low levels of mobility. Some things he gets right: 1) public participation in land use process is harmful because it leads to more restrictions, not less; (2) the mortgage interest deduction doesn’t make much difference in home ownership rates.

Private Neighborhoods And The Transformation Of Local Government

Urban Institute Press • 2005 • 494 pages • $32.50 paperback In Private Neighborhoods and the Transformation of Local Government, Robert H. Nelson effectively frames the discussion of what minimal government might look like in terms of personal choices based on local knowledge. He looks at the issue from the ground up rather than the top down. Nelson argues that while all levels of American government have been expanding since World War II, people have responded with a spontaneous and massive movement toward local governance. This has taken two main forms. The first is what he calls the “privatization of municipal zoning,” in which city zoning boards grant changes or exemptions to developers in exchange for cash payments or infrastructure improvements. “Zoning has steadily evolved in practice toward a collective private property right. Many municipalities now make zoning a saleable item by imposing large fees for approving zoning changes,” Nelson writes. In one sense, of course, this is simply developers openly buying back property rights that government had previously taken from the free market, and “privatization” may be the wrong word for it. For Nelson, however, it is superior to rigid land-use controls that would prevent investors from using property in the most productive way. Following Ronald Coase, Nelson evidently believes it is more important that a tradable property right exists than who owns it initially. The second spontaneous force toward local governance has been the expansion of private neighborhood associations and the like. According to the author, “By 2004, 18 percent—about 52 million Americans—lived in housing within a homeowner’s association, a condominium, or a cooperative, and very often these private communities were of neighborhood size.” Nelson views both as positive developments on the whole. They are, he argues, a manifestation of a growing disenchantment with the “scientific management” of […]

Market Urbanism MUsings November 25, 2016

  1. This week at Market Urbansim: The Urban Origins of Liberty by Sandy Ikeda Only in the commercial society of the cities, which then as today attracted the ambitious, the talented, and the misfit, did liberty have a real meaning and substance. Only if you can “vote with your feet,” leave the manor or village to pursue your dreams, or simply travel (and have a reason to travel) from place to place, are you really free. One Reason Why Subsidies Aren’t the (Only) Solution by Michael Lewyn The policy paper points out, however, that HUD’s existing project-based and housing choice vouchers could serve more families if the per-unit cost wasn’t pushed higher and higher by rents rising in the face of barriers to new development.” 2. MU Elsewhere Just another reminder to catch Market Urbanist Emily Hamilton debate Cato’s Randal O’Toole on November 29th in Washington, DC, on the question “Should Urban Areas Grow Up or Out to Keep Housing Affordable” (event details) 3. Where’s Scott? Scott Beyer spent his second week in Los Angeles. He wants before leaving on December 11th to organize a dinner party for the area’s many pro-housing activists, so PM him if you’re interested or know someone who is. He published two articles this week–a 5k-word white paper for the Center for Opportunity Urbanism about San Antonio (pg. 40 of this pdf); and one for Forbes titled Globalism — Not Nativism — Is What Made America’s Cities Great Along with the 1 million undocumented immigrants in L.A. County, there is an estimated 500,000 in New York City, 500,000 in the Bay Area, 400,000 in the Houston area, and 260,000 in greater Miami. Impose mass deportation upon these—some of the nation’s most economically dynamic—metros, and the federal government would be ripping out huge portions of their workforce, customer base and entrepreneurial ecosystem. Scott […]

One Reason Why Subsidies Aren’t the (Only) Solution

I was rereading the Obama Administration’s surprisingly market-oriented policy paper on zoning and affordable housing, and saw one good point that I had never really thought about. One common anti-development argument is that government should subsidize housing for the poor instead of allowing the construction of upper-class housing that might eventually filter down to the poor (or cause older middle-class housing to do so).  The policy paper points out, however, that “HUD’s existing project-based and housing choice vouchers could serve more families if the per-unit cost wasn’t pushed higher and higher by rents rising in the face of barriers to new development.”  In other words, high market rents make subsidies more expensive, which in turn means that government can subsidize fewer units with the same dollar. In other words, high market rents make it harder, not easier, for government to subsidize housing.

The Urban Origins of Liberty

In The Road to Serfdom, F. A. Hayek tells us that intellectuals and governments in the twentieth century tragically abandoned the road to liberty in pursuit of collectivist utopias.  That road stretched at least as far back as the democratic polis of ancient Greece, but it was not always straight and unbroken.  Once, it was completely lost, only to be rediscovered centuries later. The idea of liberty emerged in the struggle between the forces of collectivism and individualism. It is the idea that each of us has a rightful sphere of autonomy in which we may be free from aggression.  In politics this manifested itself as liberal democracy, in economics as market competition, and in the broader social realm as scientific advance, artistic expression, and religious tolerance. In his concise masterpiece, Medieval Cities: Their Origins and the Revival of Trade, the Belgian historian Henri Pirenne explains just how, long after the fall of the western Roman empire, the liberal idea gradually reemerged and how this was directly tied to the birth of the modern city. The Decline of Cities and Civilization Between AD 400 and 900 cities virtually disappeared from Europe.  Even in Rome, which at its height had a population of one million, the population fell to mere thousands – most of whom were either Churchmen or those who served them.  Bishops and clerics dominated urban life, while princes, who had little reason to spend time in dreary medieval towns, focused attention on protecting their feudal estates, earning tribute from their vassals, and exploiting the labor of their serfs. Then as now, nobles followed wealth, and in the Middle Ages, as trade among cities dwindled, the basis for wealth went from money to land.  Money, liquid and essential for commerce, became superfluous, while control and acquisition of land became […]

Market Urbanism MUsings November 18, 2016

  1. This week at Market Urbansim: America’s Progressive Developers–The Uptown Gateway Council by Scott Beyer San Diego, too, may be subject to this downzoning trend. Like California’s other destination cities, San Diego has both a fast-growing population, and restrictive land-use regulations that keep housing supply from meeting demand. But rather than reforming their laws in a progressive direction, they’re doing the opposite. The Psychological Consequences Of Rent Control by Sandy Ikeda Fewer cities today practice the sort of rent control Hayek wrote about in the mid-twentieth century. But government meddling in housing continues in the United States and elsewhere. America’s political leaders are fond of proclaiming a citizen’s “right to housing,” the manifestations of which have been Fannie Mae, politically driven subprime lending, and (at times) expansionary Federal Reserve policy. The macroeconomic results have been obvious and disastrous. But let’s not forget Hayek’s “micro-social” consequences. 2. MU Elsewhere On November 29, Emily Hamilton will debate urban housing issues with Randal O’Toole of the Cato Institute and Gerrit Knaap of the National Center for Smart Growth in Washington, DC (event details) 3. Where’s Scott? Scott Beyer completed his first full week in Los Angeles. He will spend Thanksgiving weekend studying in nearby Riverside, one of California’s fastest growing metros. Much of the growth within this Inland Empire region results from poorer people getting priced out of L.A. and San Diego. 4. At the Market Urbanism Facebook Group: Lyman Stone wrote “Appalachia is Dying. Pikeville is Not. Deep in Kentucky’s Appalachian Mountains, a Small City Finds Success“ Michael Lewyn wants a YIMBY conference in NYC Tobias Cassandra Holbrook is curious about the impact of charter schools on urbanism via Asher Meyers, “A leading light of market urbanism? Herman Mashaba – the new mayor of Johannnesburg.” via Chris Kaz Wojtewicz,  Does infrastructure investment lead to economic growth or economic […]

The Psychological Consequences Of Rent Control

The University of Chicago Press has published a “definitive” edition of F. A. Hayek’s The Constitution of Liberty under the editorial guidance of long-time Hayek scholar Ronald Hamowy. Given my interest in urban issues, it’s a good time for me to focus on chapter 22, “Housing and Town Planning.” It has several insights that I really like, but given the constraints of this column, for now I’ll talk about Hayek’s take on rent control. I must confess that it was several years after I became interested in the nature and significance of cities that I learned that Hayek had written anything on what we in the United States call “urban planning.”  (Well, that’s not quite true; I did read The Constitution of Liberty as a graduate student, but in those days I didn’t appreciate how important cities are to both economic and intellectual development, so it evidently made no impression on me.)  The analysis has a characteristically “Hayekian” flavor to it, by which I mean he goes beyond purely economic analysis and points out the psychological and sociological impact of certain urban policies that reinforce the dynamics of interventionism. The Economics of Rent Control Hayek’s economic analysis of rent control sounds familiar to modern students of political economy perhaps because it’s so widely (though not universally) accepted.  This was hardly the case in 1960, when his book was first published.  Hayek points out that despite the good intentions of those who support it, “any fixing of rents below the market price inevitably perpetuates the housing shortage.”  That’s because at the artificially low rents the quantity demanded exceeds the quantity supplied. One effect of the chronic housing shortage that rent control produces is a drop in the rate at which apartments and flats would normally turn over.  Instead, rent-controlled housing becomes […]

Market Urbanism MUsings November 11, 2016

  1. This week at Market Urbansim: Preservation At The Expense Of Liberty by Sandy Ikeda Using political power to preserve any cherished way of life — trying to stay the uncertain dynamic that washes through social institutions, norms, and conventions — is not only futile but ultimately destructive of liberty. That goes for preserving a historic community as much as preserving current marriage practices; keeping the natural environment pristine as much as maintaining age-old religious practices; or freezing a particular income distribution as much as insisting on keeping certain “undesirables” outside our borders. 2. Where’s Scott? After flying back from San Antonio, where he gave a speech, Scott Beyer relocated to Glendale, a nearby suburb of Los Angeles. This morning he was the feature cover story (paywall) for the San Antonio Business Journal, which described his cross-country trip and upcoming economic report on the city. 3. At the Market Urbanism Facebook Group: Emily Hamilton published an op-ed about her new Mercatus research on smart cities, privacy, and transparency. “Not all smart city innovations are so benign. City governments increasingly have the ability to collect and use their residents’ data.” Bjorn Swenson asks “what’s the Market Urbanism strategy going to be under the Trump administration?” Bjorn Swenson writes a post reflecting on the election considering the disconnection of transportation between the rust belt and coastal areas Michael Hamilton spotted a California NIMBY billboard in his feed Ahmed Shaker asks, “Is what he (Robin Hanson) says about high-rises being less expensive to construct true?”: Why Aren’t Cities Taller? via Rocco Fama: Does New York need another Robert Moses? via Adam Hengels: While You Weren’t Looking, Donald Trump Released a Plan to Privatize America’s Roads and Bridges via John Morris: The Ghost Tenants of New York City  “People underestimate the role informal, “black markets” play in providing housing in severe shortage areas.” […]

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