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The Only Way is Up

Harvard economist and author of The Triumph of the City, Edward Glaeser makes the economic and environmental case for building denser, higher cities

Great disciplines, including architecture and economics, develop powerful worldviews, and habits of language and thought. These conventions are convenient among our own kind, but can lead to unnecessary conflict when disciplines come together to discuss issues of mutual interest, such as land use policy within a city. What should architects know about how economists think?

Modern economics is rooted in the Scottish Enlightenment, in Glasgow and Edinburgh, during the time when James Craig was planning Edinburgh’s New Town. During that era, about 50 years after Scotland was relatively forcibly incorporated into the United Kingdom, Scotland’s thinkers focused on freedom.

Adam Smith, and his friends like David Hume, keenly understood that the interests of the sovereign and his people were not one and the same. Smith saw the benefits of individual initiative, and prescribed policies that cultivated choice. His intellectual heirs continue that focus on liberty, which is also embedded in the US constitution, and another legacy of the Scottish Enlightenment, brought by émigré John Witherspoon to his Princeton University students, such as James Madison.

This perspective may help to explain the different approach that economists and architects take towards building a new skyscraper on Manhattan’s Madison Avenue. The architect may ask whether the building will be beautiful, on its own or in its neighbourhood; he may ask whether the structure’s form is true to its function, or whether it will inspire or depress.

None of these questions − or any like them − will occur naturally to the economist. Indeed, the economist will ask not whether the skyscraper should be built, but rather whether the government should allow the skyscraper to be built. Economists have no business judging the aesthetics of the proposed structure, any more than it is our business to ask whether people should buy long or short skirts, or read Proust instead of Joyce. For an economist, being pro-skyscraper does not mean believing that builders must erect higher structures or that people should live in elegant eyries. When an economist is pro-skyscraper, he or she thinks that public policy shouldn’t excessively bar height.

Of course, economics does not automatically imply that developers should be free to choose the height they prefer for either financial or aesthetic reasons. When an action, such as building a skyscraper, imposes costs upon third parties (which economists call externalities), there is a case for public regulation or taxation. For example, many economists, including myself, believe that energy-users should pay a carbon tax roughly proportional to the environmental damage they cause. Our theorems and proofs only suggest that freedom achieves good outcomes when individuals pay for the full social costs of their actions, and a carbon tax is a way of making sure that drivers pay those costs.

Skyscrapers may also impose costs on third parties. Some views may be blocked. City streets may become congested. An older building, which brings delight to millions, may be destroyed by new development. One approach to these costs, which are not naturally paid by the building’s developer, is to impose impact fees, as in some places in California. Typically, regulation has been used to achieve the same ends, because it is simpler and easier to enforce.

While many economists, including myself, agree that some building regulation is necessary and appropriate, at present, I believe that many cities regulate too much, by restricting land use or by preserving historic areas that aren’t all that historic or all that beautiful. Economic theory suggests that the costs imposed by regulation should be roughly equivalent to the costs that builders impose on third parties. My work with Joseph Gyourko and Raven Saks on New York City found that regulations appear to increase costs in Manhattan by about 100 per cent, which is at least twice as high as a reasonable regulatory tax on that island, according to our estimates.

Economists specialise in understanding the larger implications of any given policy, and when it comes to land use regulations, blocking building in one area can have far-reaching consequences. Every building blocked in New York or London means that fewer families get to enjoy living in the city, and that the people who do have to pay more for their housing.

Moreover, the larger environmental costs of local regulation can be high and overwhelm any local benefits. While the activist may look at a successful campaign to stop new local development and see a triumph for Mother Nature, the economist may see a different picture because less building there means more building somewhere else.

The rate of building in the US follows roughly the national rate of household formation. Local activists can’t significantly slow the rate of building nationally; they can only ensure that new construction will not be in their backyard. If we do not build in coastal California, then we will build in Las Vegas, Texas or Phoenix, and consequently do far more harm to the environment.

Coastal California is the US’s most naturally low carbon area because of its moderate climate, whereas Houston is one of the most naturally high for the same reason. When local land use regulations move construction from Berkeley to Houston, they ensure that the US will use more carbon. Dense urban centres are less energy-intensive than far flung exurbs, because urbanites drive less and inhabit smaller housing units. When we restrict heights in the city centre, we encourage more sprawl and that also leads to more energy use.

Behind the economists’ frequent fondness for freedom lies a respect for the wide diversity of human tastes and scepticism about the perfect benevolence of the government. While great architects can change the way the world sees buildings, economists take tastes as given, and try to accommodate them.

Economists don’t typically think that the government should be forcing people to embrace more beautiful building, in part because we don’t trust the tastes of our elected policy-makers. Some kings and emperors have been patrons of genius, but others have not. Does the track record of public architecture in the US really suggest that our policy leaders are preternaturally gifted judges of great building? Even when respected architects get to make decisions, the results can often be distinguished buildings that are despised by locals, such as Kallman, McKinnell & Knowles’ Boston City Hall. That outcome is hardly ideal.

Ultimately, architects and economists have complementary, not competing, sets of skills. The economist is meant to help create the policy conditions in which great architecture can thrive. The economic approach to policy-making should give architects the freedom to take risks and to produce spectacular buildings that are among humankind’s great achievements.

My father was an architectural historian, who through my childhood was a curator at the Museum of Modern Art. I never inherited one-twentieth of his aesthetic gifts, but I continue to have a healthy admiration for them and for the genius of great architects. When economists like myself weigh in against restrictions such as excessive historic preservation or barriers to building upwards, we are ultimately championing the rights of future architects to build the structures that enrich our lives and shape our civilisation.

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