Monday, 27 January 2014

Shifting a whole town, part the manieth.

Part of an occasional series, previous instalment.

From The New York Times:

LAGO ENRIQUILLO, Dominican Republic — Steadily, mysteriously, like in an especially slow science fiction movie, the largest lake in the Caribbean has been rising and rising, devouring tens of thousands of acres of farmland, ranches and whatever else stands in its way.

Lago Enriquillo swallowed Juan Malmolejos’s banana grove. It swamped Teodoro Peña’s yucas and mango trees. In the low-lying city of Boca de Cachon, the lake so threatens to subsume the entire town that the government has sent the army to rebuild it from scratch on a dusty plain several miles away...

This is one of those extreme thought experiments being played out in real life.

The lake is rising for whatever reason (being the NYT they blame it all on Climate Change, go figure). So the existing town has to be evacuated.

And that town was laid out in a certain way, people live there, there were probably good areas and bad areas etc. And inevitably, some people will have owned the more valuable plots, some people owned less valuable ones and some will be tenants.

Whether the town is flooded or not, if enough people leave, the value of land in that town will plummet (see also: Detroit). Those who owned land have lost the lot, that's just tough.

So what happens if the government builds a carbon copy of the existing town, street for street and house for house somewhere out of the flood risk area - if everybody relocates to the new town, then once everybody has settled in, those land values will come back to life, they will be $ for $ the same as in the previous area. While physical dry land/buildings have been lost, the land values haven't.

The question is: to whom does the resulting total land value belong?

This is easily answered by first asking: who creates and sustains the land values? And if that is too difficult, imagine that the government drags its heels and takes so long to build the new town that everybody just abandons the old one and goes elsewhere on the island and it remains a ghost-town with land values of £nil (see also: China).