The Commanding Heights

Marin Civic Center
Marin Civic Center

Reihan Salam at NRO questions the Kotkin hypothesis, asking: “Are people choosing low-density metropolitan areas — or did rising prices in high-density metropolitan areas [like Marin County, in the Bay Area pictured -ed.] drive the population shift?”
What is cause, and what is effect, is not immediately obvious. There are trade-offs. High-density areas are naturally more expensive (due to greater demand, otherwise they would not be high-density). High-density areas are also typically formed by physical constraint, meaning less supply. They are also more regulated due to their higher density. Density naturally produces more regulation because density naturally produces more externalities [See tomorrow’s post]. Even expensive metro areas have inexpensive housing in places, it just tends to be either lower quality, or in less desirable neighborhoods.
I wrote Height limits produce a positive externality recently, to which the technology/urbanist/libertarian blogger Timothy Lee tweeted (but I took more than a month to respond to, since I don’t live on Twitter), and I replied (this is reformatted for presentation, but I think captures what was said in the right sequence)…:

You don’t think there’s a shortage of space near multi-line transit stops like Metro Center and Gallery Place/Chinatown?

The higher you build there, the shorter you build elsewhere. There is plenty of land in DC that could be denser at less than 10 stories.

why does taller buildings one place mean shorter buildings elsewhere? There is a region-wide housing shortage.

Regional demand is largely fixed. Someone who can’t get in block X will be far more likely to locate in block Y than Charlotte.

you don’t think real estate prices affect migration between metro areas?

not much. People have jobs before they migrate. Firms locate for lots of reasons, but a shortage of hsg in a small dtwn no.
there is plenty of moderately priced real estate in metro DC, SFO and elsewhere, how else could poor people live there?
Only if the savings on the labor costs outweigh the savings on economies of agglomeration. This indicates few e of a.

I recommend…

I read Avent and Glaeser, I believe they overstate e of a. The more important point is full social costs. New dev. should pay.

Firms move to save on labor costs (which are connected to housing costs) all the time.

If everyone paid full social cost, (and compensated losers) build away. In the absence of FSC pricing, we regulate.

Clearly Twitter is not a good way to have an academic discussion. Blogs are much, much better. There are several points wrapped up in this:

  • Empirical questions about Intra-urban vs. Inter-urban migration
  • The rights of the property owner vs. the rights of the community
  • Economic productivity (positive externalities?) vs. Pollution/Congestion etc. (negative externalities)
  • Empirical questions about the scarcity of land
  • Empirical questions about what constitutes good urban form
  • Empirical questions about the need to be downtown or simply in the metro area [plenty of suburbs even in DC would be happy to accommodate growth]
A Political Economy of Access: Infrastructure, Networks, Cities, and Institutions by David M. Levinson and David A. King
A Political Economy of Access: Infrastructure, Networks, Cities, and Institutions by David M. Levinson and David A. King

In short, I think height limits are not the dominant issue in any US metropolitan areas. This is not to say that regulation does not matter at all, as there are lots of regulations beyond height limits, but that its effect is limited. I discussed this previously in Zoning and Externalities.
If there is value, where are the side payments from otherwise rejected developers? My perhaps cynical view, ‘No side payments, no evidence of super-normal social profits, no evidence of huge value being lost’. While the developer may be losing potential profits, society is not, as those who are negatively affected are not being given compensation to offset the negative effects they would receive were the project to go forward. I realize there are transactions costs limiting the ease of implementing side payments, but surely some institution could arise to facilitate this.
I also wrote on the Limits to agglomeration, suggesting that agglomeration economies arguments are overstated, and in fact it is agglomeration externalities that create density, not (or not so much) vice versa.
DC and New York are both edge cases, being political and financial capitals respectively, both of which at least historically generated important economies of agglomeration.
One of the critical problems here, as with much research is the difference between marginal and average effects. E.g. Clearly transportation matters. If there were no transportation there would be no economic activity. However, that does not mean that a marginal increase in transportation supply will have a significant, or even positive, effect on economic activity, that depends on context. The network is mature, the marginal returns to new investment now are much lower than the historical average returns. Similarly, the marginal returns to density might be much smaller than average returns. Cities exist for a reason. That reason is economies of agglomeration in various forms. That said, where cities are continuing to grow, those economies must be valuable. Where suburbs are growing, the daily face-to-face inter-firm interactions emerging from the classical 19th and early 20th century transit-based downtown has declined relative to the need to be within auto-commuting distance of places that are to be dealt with on a short-term basis. When new cities grow, new patterns of economic activity are forming, and these may be more valuable than incremental changes to mature cities.
All of which is to say cities and their economies are dynamic, and the first order factor is the underlying market economics, while regulations (which are themselves the product of political market preferences) are second order effects.

Equity of Evolving Transportation Finance Mechanisms

Equity of Evolving Transportation Finance Mechanisms

TRB Special Report 303: Equity of Evolving Transportation Finance Mechanisms addresses the equity of alternatives to current transportation finance mechanisms, notably mechanisms based on tolling and road use metering (i.e., road pricing). The committee that developed the report concluded that broad generalizations about the fairness of high-occupancy toll lanes, cordon tolls, and other evolving mechanisms oversimplify the reality and are misleading. The fairness of a given type of finance mechanism depends on how it is structured, what transportation alternatives are offered to users, and which aspects of equity are deemed most important.

The committee identified the various dimensions of equity important for public policy debates about evolving finance mechanisms, proposed specific issues for policy makers to consider when evolving mechanisms are proposed, and identified areas where future research is needed for a better understanding of the equity implications of such mechanisms.

To move beyond superficial analysis, the report calls on policy makers to insist on well-designed studies of transportation finance that yield reliable information about the likely distribution of burdens and benefits, and that facilitate comparison of a given finance strategy with alternatives. In addition, public policy makers who wish to promote equity should engage their constituents and other stakeholders early and often when considering the use of new or unfamiliar transportation finance mechanisms.

The report calls on researchers to explore further how people modify their use of the transportation system in response to changes in prices and services and the consequences of these responses. It also recommends the development of a handbook for state and local governments describing procedures for conducting equity analyses of transportation finance policies.

To inform the development of its report, the committee commissioned four papers. Links to the papers are below:
• The Incidence of Public Finance Schemes
• The Empirical Research on the Social Equity of Gas Taxes, Emissions Fees, and Congestion Charges
• Remediating Inequity in Transportation Finance
• Equity, Pricing, and Surface Transportation Politics

I served on the committee that helped TRB draft the report and learned a lot from colleagues and those who presented to us. Online now is the pre-publication version of the report.