I'm a student of Urban Planning at the University of Southern California. I
find myself increasingly skeptical about nearly all of the interventionist
policies they present to us as good ideas ("smart growth", zoning, etc.). I
think given the right institutions, externality and public goods problems
can largely be solved by markets.That said, I'm still puzzled about a tough argument one of my professors posited. The argument went something like this: Markets do very well at allocating goods like coffee or gasoline or clothes in the short term because of their flexibility in response to short term preferences. They don't do well in things like supplying housing in proper configurations and locations because housing is a durable good that once sold is relatively permanent (30-100 years or more). He had some statistics to argue that only a very small number of people purchase new homes and apartments. These people have strong preference for living in only *new* residences. Since they won't be living in the places more than 5 or 10 years they don't care if the place is ugly to most people or shoddily constructed. This leaves the rest of the population with only ugly and shoddy houses to choose from when they eventually need to move. Thus planners are needed to insure pretty neighborhoods, adequate transportation resources, etc. Related to this is the famous prisoner's dilemma. Consider the landlords of a declining neighborhood who must decide whether they will improve their property or invest their money elsewhere. If one landlord improves her property and none of the others do, the others reap short term windfall gains when rents uptick slightly and then go back into decline. But she could also free ride and let everyone else invest and reap the benefits. In reality, nobody invests and the neighborhood continues its downward spiral. So how can markets deal with the problem with infrastructure like housing, roads, etc. that respond to demand over decades rather than months or days? Is infrastructure doomed to be chronically underinvested in (a Marxist [ugh!] criticism of free markets, I think)? Or is this a problem like Landsburg says of not enough markets? Could a market be set up where lovers of well-built housing "with character" could pay the lovers of cheap, shoddy housing to spend a little extra for nice neighborhoods? Regards, Ben Berry University of Southern California [EMAIL PROTECTED] <mailto:[EMAIL PROTECTED]> p/ 213.764.1912 I cannot become modest; too many things burn in me; the old solutions are falling apart; nothing has been done yet with the new ones. So I begin, everywhere at once, as if I had a century ahead of me. --Elias Canetti
