Noahopinion has a good piece on NIMBY’s, and how their view of the economics may be flawed.
He’s riffing off a particular NIMBY, who doesn’t want new dwelling built, but here goes. He sees two flaws that economists need to deal with.
The first thing to note is that NIMBYs think that a house's price is defined when it's built - almost as if the price is built into the walls. Price writes:
[N]ew high-rise apartments are going in that have hundreds of apartments each, typically with a rent of $4000 – $8000 per month. If you let a developer build “market rate” apartments, that’s what they’ll build.These numbers are a bit exaggerated, but that's not the point. What Price seems to ignore is the impact of construction on all the non-new units.
By this view, additional nice things are bad, because they make typical prices higher. There’s no sense that you might have more than one market mixed together. If that’s the case, when you shift out supply in one market, you get a movement down and to the right along the demand. That’s easy. But what you also get is a shift of demand in the other market inwards. This causes a movement down and to the left along supply in that market, reducing prices. This is huge: shifting supply in one market reduces prices in both markets. That’s good, and NIMBY’s don’t seem to get it.
NIMBYs do seem to recognize this on some level. So they intuitively turn to a phenomenon called "induced demand" (though they may not realize it's called that). The theory is that if you build more housing in SF, you encourage people to move into SF, preventing prices from going down, or even pushing them up.
The flaw here is with asymmetric thinking. If the position in the quote is correct, then if you destroy houses people will move away from San Francisco. Do you really think that would happen? Or is San Francisco so desirable that people would just pay more for what was still available?
I’m adding both of these ideas to my toolkit.
Via Marginal Revolution.
Comments