Friday, 29 January 2016

Clever scientist understands and explains agglomeration...

… but fails to draw the obvious conclusion.

From the NY Times, h/t Pablo:

In essence, they arrive at the sensible conclusion that cities are valuable because they facilitate human interactions, as people crammed into a few square miles exchange ideas and start collaborations.

“If you ask people why they move to the city, they always give the same reasons,” West says. “They’ve come to get a job or follow their friends or to be at the center of a scene. That’s why we pay the high rent. Cities are all about the people, not the infrastructure.”

Having established what creates rental value, why not ask whom it belongs to? To say it belongs to landowners is like saying that fireplaces give off heat. They don't. It's the burning fuel that gives off heat.

As an aside, this further undermines the view that particularly high rents and prices in London are caused by shortage of supply. They are not. They are caused by the presence of large numbers of people and businesses (and the appropriate infrastructure to support it).

If you build more buildings, will you get more people and businesses or fewer..? Continuing the fireplace analogy, you can't cool down a fire by throwing more dry twigs on it.


James Higham said...

Too allegorical for my brain at this hour.

mombers said...

I like the FB LVT group one about how California has admitted that building more roads makes traffic worse. Similar effect. If you build it, they will come. Of course, building doesn't always raise rents - just look at ghost estates. But if you build where people clearly want to be, i.e. high rent areas, bang. Same with a road - you can build a road to nowhere and get no extra traffic, but build a bigger road between two thriving settlements and it will create more traffic.

Mark Wadsworth said...

JH, you have said often enough that you wouldn't want to live in London. Most people would say they like a bit of open space.

But on the whole, evidence shows, people prefer large cities. Not because the environment is that nice, but because it is more interesting and wages are better. And the more people you have 'trading' with each other, the higher wages are. The problem is that all those extra wages just go on higher rents.

M, yes, I suppose it is the same underlying thing with roads and traffic. People's desire to travel is limitless, so roads will always be used to capacity (provided they go somewhere).

And even if you built a motorway from a large city out into the middle of nowhere, then you would find that people and businesses accumulate round the junctions.

Whether you spend half an hour driving 30 miles into town at 60 mph on the motorway or half an hour crawling 2 miles through the suburbs at 4 mph makes no difference - the journey is the same (half an hour between the centre of town where you work and your home where you live). Or something.

benj said...

Good old Geoffrey West. I think we embedded his appearance on that BBC Maths documentary a couple of years ago. Every time a city double in size, everything gets 15% bigger etc, etc.

I'll try to embed his Google lectures "from cells to cities" next week.

Lola said...

It's the 'supply preceding the demand' thing again, is it not?

Mark Wadsworth said...

BJ, ta.

L, yes, that is part of it. With agglomeration it's difficult to say what comes first, it all moves in step. more buildings => more people =>better transport => higher wages => more demand for buildings > more buildings etc.