The Economist this week takes a look at urban land economies, admitting that, while “the history of economics has been, among other things, a story of learning to care less about land,” this story seems now to be controverted by the intense competition for housing in cities with booming economies.
Unsurprisingly, the magazine lines up with the argument laid out by a wide swathe of conservatives and New Centrists: land-use regulations are the market-distorting force which drives up housing prices, and they should therefore be drastically relaxed to promote a wave of new construction. It is the “build, baby, build” theory of land economics.
It’s not wrong … but it’s not really right either, and it betrays a naked ideological glee in rolling back the regulatory state in all of its forms. The article itself points out that “the spread of land-use regulation is not hard to understand,” given the nightmarish living conditions of nineteenth-century cities (and plenty of unregulated twenty-first-century cities, too). But it breezes by this acknowledgement in a breathless rush to lay out the waiting free-market utopia of loft apartments rising above ground floors filled with boutique groceries and brewpubs. Why we should expect this, rather than squalid tenements, to be the outcome of bonanza capitalism this time around, the article does not say. Surely Lucy will hold the football in place this time.
Towards the end of the article, we learn that there are two other possible political solutions: a Georgist land-value tax and a commitment to new transportation infrastructure. Both of these are brushed off as political nonstarters that threaten moneyed interests. Here we come to learn how the Economist determines whether or not a given solution is a practical, tough-minded smashing of old dogma or a naïve suggestion by doe-eyed idealists. If the dogma being smashed is market regulation, and the smasher comes in the form of financial power aiming at yet more power, then the former label applies. If the reverse is true, then the latter label applies.
The argument that urban land-use regulation is often captured by comfortable members of a community in order to keep their lives comfortable at the expense of newcomers is, as I’ve said earlier, not wrong. But the Economist’s dream of a perfect market in housing is a transparently utopian fantasy far out of line with the reality of how people choose where to live. It requires planning—not protectionist planning but far-sighted planning—in order to build a decent environment for a nation of 320 million (never mind a planet of seven billion). Simply releasing developers to do whatever they like according to whim and profit may lead to a few chic neighborhoods populated by the kinds of people who write for the Economist. But it will never reliably produce homes and communities which are fair, healthful, and beautiful for everyone. To do that, communities must come together through the state, that flawed institution which is nevertheless the only one which represents them all, in order to decide how they wish to live and what they must do together to accomplish it—that is, to plan.