Keith and Ray, Keith, you certainly started a fascinating exchange of ideas. It has been fun reading them. About cities - and, if I may, a quick primer on Political Economy - which was classical economics and dealt with people. Bear with the length of this bit because it will connect with the WTC disaster.
First, the neo-classical economists discarded people in favor of mathematics. As the 20th century began, they desperately wanted to be considered a "science" - and discussing people seemed to lead to much complication. They preferred to make economics scientific by making it mathematical. This is why this "science of people" has become confusing and esoteric. To make things easier (?) the neos dumped land into the same bin as capital and labelled the bin Capital. (They also called people "human capital" - but we won't dwell on that nonsense now.) It's easy to see that land - which would be here whether people were here or not - can hardly be placed in the same bin as capital which wouldn't be here without people. They are two dissimilar concepts melded together for everybody's confusion. Classical Political Economy rests its strength on clearly seen and mutually exclusive concepts, which are then given names. Two of these concepts are called Land (natural resources) and Capital (man-made products being used to produce other products). Capital is subject to free market forces - Land isn't. Land is actually part of the collectible market. In the collectible market, sales-price is everything - income doesn't matter (note the similarity of the collectible market to the top end of the stock market, where the speculators don't care about earnings, but concentrate on price - thereby extracting bleats from worried analysts). The collectible nature of land means that it's subject to intense speculation. This is why so many valuable sites are vacant or underimproved. The eventual sale at an ever-increasing price encourages landholders to hang on, and on, and on. A New York Regional Planning Report some years ago, found 79% of the usable land of Metropolitan New York - which covers a large area, but is a magnet for people - was unimproved for urban use. Parks, roads, and suchlike were improved. Lots with a billboard, or perhaps a shack, were considered unimproved. Every landholder who can, hangs on - for tomorrow, or next month, or next year, his "pension" will be bigger. Land speculation drives up prices (remember the collectible market adores sales prices, but cares little about income). And - just as with other collectibles - a rising price encourages a holder to hang on with the expectation of yet further increases. So, prices continue to rise as land is held from the market. You'll notice this is the exact opposite of the free market. There, producers rush to market to take advantage of higher prices by being first there. In the collectible market, everyone tries to the last to sell. This is the situation when someone wants to build a skyscraper. You try to build higher to make the high land price economic. Trump wanted to build a big one, was permitted only so many floors - but was asked over $100 million an acre. There was no-way he could build at that price. Actually, there was one way. Another builder had a permit to build so many floors, but didn't use all his allowed stories. So, Trump bought his "unused permissions" used it to add more floors to his building - and was able to pay the $100 million plus. If this sounds like something Alice brought back from Wonderland, you are wrong. It was something that Marshall, Keynes, and the rest of them, handed to us and called it Economics. High priced land drives central city buildings ever higher and makes them ever more costly. If you can't buy "story permissions", you can cut corners on construction - which probably leads into your thoughts on the WTC, Keith. If you can save money by not riveting - perhaps that's the way to go. It's not just skyscrapers. Assessor friends of mine tell me that land prices are often 50-70% of the costs of building homes. When a major cost of building a home is not the materials and labor that go into the effort - but the price that must be paid for the right to build - affordable housing becomes a joke. A top appraiser friend of mine bought an old house in Orange County for $240,000. His appraisal? The house was worth $25,000. The land was $215,000. And so it goes. Harry ****************************** Harry Pollard Henry George School of LA Box 655 Tujunga CA 91042 Tel: (818) 352-4141 Fax: (818) 352-2242 *******************************
