Market Urbanism

Liberalizing cities | From the bottom up

“Market Urbanism” refers to the synthesis of classical liberal economics and ethics (market), with an appreciation of the urban way of life and its benefits to society (urbanism). We advocate for the emergence of bottom up solutions to urban issues, as opposed to ones imposed from the top down.

Must Read: The Demand Curve for Sprawl Slopes Downward

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Sandy Ikeda’s latest article at FEE’s “The Freeman” is a great summary of the libertarian sprawl debate.

There has been a lot of Internet chatter lately about what libertarians ought to think about urban sprawl and its causes, including pieces by Kevin Carson, Austin Bramwell, Randal O’Toole, and Matthew Yglesias. The title of Ben Adler’s post basically sums it up: “If You Love the Free Market, You Should Hate Mandated Suburban Sprawl.”

Sandy includes a mention of the ongoing minimum parking debate. Sandy concludes that the more the government subsidizes items related to low-density development, the more low-density development we’ll get.

But the bottom line is that the law of demand still holds – other things equal, the cheaper you make something the more of it people will want to buy, and that includes low-density development. You’ll get more of that, too, if those direct and indirect subsidies make it cheaper for people to get it. Government intervention has done just that, and it’s hard to understand how you can argue, whether you’re a proponent or (especially) an opponent of Smart Growth, that the free market alone is responsible for the amount of sprawl that we actually have.

This doesn’t mean, of course, that Smart Growth regulations are the place to begin. Instead, if you think sprawl is a bad thing, it would seem logical to first remove the vast array of interventions that over the decades have pushed it along.

On this, I would have thought all market urbanists could agree.

Well said!

  • How do you no-minimum-parking folks address the externality argument?

    Imagine a brownstone neighborhood (so no driveways) in a place where the jobs are spread out enough that almost everyone effectively needs a car to get to work (so basically every “city” in the U.S. aside from Manhattan, Chicago and maybe a couple others). With current density, there’s basically enough on-street parking for everyone — but there are plans to build a high-rise apartment building that will add 1,000 units to a single block.

    The Libertarian argument says the builder should be able to choose whether to include a parking garage that would have enough spots for all residents (and whether to include said parking in rent or charge separately) because the market will force him to make the right choice for his neighborhood (i.e. if he omits the parking in an area that really needs it, people won’t move in).

    But what about the people who already live there? If he fails to build parking, or tries to charge separately rather than including it, then hundreds of people from the new apartments will park on the street. Older neighbors who had always been able to park comfortably no longer will be able to do so. (Basically, people who happen to work on later schedules will get screwed, whether they are old or new).

    That’s an externality as clearly as poisonous smoke coming from a factory and the guy who is building the building has absolutely no reason to factor it into his building plans — unless there’s a law with parking minimums. His freedom will lead him to make life worse for neighbors.

    I’m not sure that the negatives of that externality outweigh the negatives of forcing the subsidization of parking, but I’ve never really seen the libertarian side address that in any meaningful way. Thoughts?

  • Andrew,

    This is a fantastic point.

    Ultimately it is a problem of “the commons”. The problem is that the commons in your example (on street parking) has been adequate for some time and the users take it for granted that they can use something that they don’t own. So, when new users begin to use the commons which original users are accustomed to using, shortages arise.

    My libertarian opinion is that it was irresponsible to allow the street to be owned by the commons in the first place. It worked adequately at first, but not in the long run. Some other form of ownership should have dictated the use of those spaces rather than socialism. Perhaps the owners of the property could have also owned the space in front of their home. Perhaps some sort of neighborhood association could have owned the streets and decided democratically how to allocate the spaces. I don’t know what would be ideal for each situation, but I know that if the current users of those spaces claimed a legitimate property right to the spaces, they would enjoy the appreciated value resulting from development-induced scarcity. So, they would actually benefit to the upside from new development, rather than resent their new neighbors who would lay claim to the once-abundant spaces.

    Ultimately, these types of “commons” situations breed animosity among neighbors and newcomers, and an unhealthy type of NIMBYism that stunts growth and urban vibrancy. But if property rights were actually allowed to allocate scarce resources, a more cooperative, inter-dependent society could flourish.

  • I wish we had more than intuition and theoretical arguments to go on here because it’s a reasonably important point.

    Lacking that, my intuition says that parking requirements reduce NIMBYism because they reduce negative externalities associated with new construction. If you abolish them, new buildings will force older residents to pay for private parking or spend half an hour every day looking for parking. Either of those alternatives is incredibly bad. Where I live, parking costs about $350 a month, after tax, so you have to earn $700 a month to pay for it. Thus, the construction of a new building would force most people to surrender more than 10 percent of their gross incomes or spend maybe 150 hours a year looking for parking. Either way, that’s a massive externality, the prospect of which will convince many people to lobby for all they’re worth to block construction.

    Now it may well be correct, in theory, to say that this is not a true externality because the construction of the new building did not stop existing residents from using their own properties. It simply hindered their ability to use an a once-abundant but now scarce public resource, on-street parking. You could also argue that the city could eliminate parking shortages by increasing the cost of parking permits enough to eliminate over-crowding. Indeed, this could bring valuable revenue to the city and (if developers knew in advance that the city would do this and thus raise the value of parking inside the building) encourage developers to add some parking without requiring it. You might even be able to demonstrate with models that the benefits (increased revenue to the city, decreased traffic congestion, etc.) might outweigh the costs.

    But to make this sale to people, you’re going to need compelling studies that very clearly show the benefits outweigh the costs. Residents will not take kindly to the argument that public resources do not actually belong to them personally. They will not take the loss with good grace. They’re simply going to see that the addition of a new building will effectively cut their pay by 10 percent (or whatever) and they will fight like hell — unless you’ve got a very compelling demonstration that they should not fight like hell. Barring such evidence, I’m not sure real-world politics gives you a choice between new construction with or without parking mandates. I think the choice is new construction with parking mandates (and thus car subsidies) and almost no new construction (and thus far higher living costs for everyone who does not already own property in a neighborhood).

  • epar

    The more I think about the role of the free market in place building, the more I realize how complicated an issue it is. Unfortunately, the economists’ usual knee-jerk response – remove government interventions and things will get better – just isn’t very useful. Why? Because while most Americans love the concept of the free market in the abstract, when it comes to what can get built next door they’re local tyrants. It’s just one of the frustrating contradictions about our politics: We hate government spending, but love the things that government spending provides; congress consistently has an approval rating below 30% but we re-elect incumbents over 95% of the time; and we want to build whatever we want as long as we can decide what our neighbor can build, too.

    This means that while most people would probably find fault with the status quo development model, they would resist any incremental change to it as well, for example by relaxing zoning codes mandating single-use and low densities. The sad truth is that in many cases this NIMBYism is completely understandable – because under our model, more people living nearby only means more cars, more bland subdivisions, and more crass commercial strips. So of course existing residents will seize upon local government powers to frustrate free market tendencies, only further perpetuating destructive land use patterns. Given these circumstances, can any libertarian honestly say they wouldn’t, either?

    Now a good deal of the anti-market sentiment that gets exercised at the local level is due to policies coming from higher levels of government – mostly glaringly subsidies for auto use. But not all of it. I believe that the market cannot and should not be the only guiding force behind our built environments. The most loved places, from urban to rural, are also manifestations of cultural values. Whether those values are formalized into law is almost irrelevant; what matters is that systems of communal control have always had a role in place building. Take zoning, for example. To some extent, people should have the right to a degree of predictability over their proximate physical environment. Homes comprise the largest financial asset for the vast majority of people and their willingness to invest in and improve their properties is dependent on a reasonable, but by no means absolute, degree of communal control over their local context. Of course, the questions of what’s reasonable, of who comprises the communities and the geographic area over which it has jurisdiction are difficult. And I would completely agree that the way most municipalities answer these questions, namely through Euclidian zoning, is overly coercive and wrong-headed. But that doesn’t obviate the need for some communal response. Ultimately, I think that its impossible to find “optimal” solutions to regulating land use, in the sense that economists and the physicists they are enamored of find optimal solutions to equations. But this is precisely where normative values, expressed in the confines of a constitutional democracy, must enter the picture. Not coincidentally, this is also the point where libertarians have nothing more to add to the conversation.

    Which isn’t to say libertarians can’t contribute to a productive dialogue in city planning. They’re very good at explaining the consequences of government interventions, I’ll admit that. But I encourage them to show up at the next planning board meeting and tell all in attendance that their town should abolish all zoning and subdivision regulations. See how far they get!

    Instead, what we need to work towards (Smart Growthers and libertarians alike), is a policy framework for land use and transportation decisions that better accommodates growth – particularly denser growth in a more urban context. As I mentioned before, NIMBYism, which both restricts individual freedom and leads to destructive outcomes, is often motivated by legitimate fears over development impacts that existing residents bear but the new residents don’t pay for. Urban environments, by contrast, have the potential to turn growth, which in suburban contexts is a negative externality, into a positive externality – more people in a city means better transit, more exciting street life, a greater variety of nearby destinations, and ultimately higher real estate values (I should credit Christopher Leinberger for this observation). With the impacts of development reduced, existing residents and businesses would be willing to cede more freedom to newcomers, plus have more leeway themselves to modify or expand their own real estate. The result is both a process that enhances freedom and an outcome of better urban places.

    This is why it frustrates me for a site called Market Urbanism to bash Smart Growth and its cousin, New Urbanism. The principles behind these movements, which are already trickling up to federal policy, hold out a lot of promise for creating a freer and fairer development process. Yet because they are government policy, libertarians instinctively reject them. It’s a missed opportunity, if you ask me.

  • Residents will not take kindly to the argument that public resources do not actually belong to them personally. They will not take the loss with good grace. They’re simply going to see that the addition of a new building will effectively cut their pay by 10 percent (or whatever) and they will fight like hell — unless you’ve got a very compelling demonstration that they should not fight like hell.

    They are justly concerned that what was, in many regards, their property (in commons) will be opened up to a larger market. I think forcing a new development to do something is a more arbitrary and indirect, less just solution, because it is impossible to measure the results.

    For example, at the condo I own in Chicago, there was plenty of street parking when we first moved in. The developer was required to provide a certain number of spaces, yet many went unsold. Many new buildings have been built, and the street parking will never be adequate for the ones who chose not to buy the space.

    Anyway, my quick answer is that we should not deal with the theoretical parking that doesn’t yet exist, but recognize that the current users of the “commons” have the most legitimate claim to the already existing parking spaces. I would rather make their legitimate ownership claim legal and official before forcing developers to do something less direct that doesn’t ultimately solve the problem.

    It’s a very complex topic, and hopefully I can address it in more detail.

  • To keep my response succinct, I think I just need to address this statement:

    This is why it frustrates me for a site called Market Urbanism to bash Smart Growth and its cousin, New Urbanism. The principles behind these movements, which are already trickling up to federal policy, hold out a lot of promise for creating a freer and fairer development process. Yet because they are government policy, libertarians instinctively reject them. It’s a missed opportunity, if you ask me.

    Let me know if I don’t address it thoroughly enough.

    At one time in the past I agreed with New Urbanism and Smart Growth, because philosophically I was along the lines that “the ends justify the means.” However, the more I reflected on it, studied the subject more in-depth, and approached it from a more rigorous philosophical standpoint, I cannot help but approach things from “the means justify the ends” morality.

    So, I see the moral aspects of libertarianism as primary over the policies that might attempt to mimic the results of the market through coercive means. Does that relegate the ideas to the sidelines of the city planning dialogue? Pretty much. But I can’t help but hope that the consistently principled approach will prevail in the end. This side of the argument needs to be voiced or forever be ignored in the “ends justify the means” debate.

    Let me know what you think.

  • Simon

    I don’t think it’s true that “almost everyone effectively needs a car to get to work”, even in the cities you refer to. There’s always a significant number of households that are without cars, and it’s those households that will be most attracted to the development in question. In fact, virtually no car-owning person would even consider living in a new 1,000 unit apartment block that had no off-street parking.

    The new development will also hasten the development of local trade, commerce and jobs, so it neatly incorporates the solution to the problem (as you see it it).

  • Dudley Horscroft

    The question is: Who owns the street outside the private houses? Is it owned by the city, which has been allowing householders to park their cars for free on a city-owned space, or is it owned by the individual householders.

    If it is owned by the city, then there should be no complaints that a previously free service is no charged for as demand has exceeded the supply. Charging for the service is the economically sound arrangement, and result in revenue to the city. If it is the householder, then there should be no obstacle to the householder putting a parking meter(s) in his space or spaces and charging others for the use of it. And at times when he wishes it for his sole use, ‘hooding’ the meter, with a tag indicating that when hooded the only vehicle permitted to be parked as that with registration ‘xxxxx’.

    In default of either of these options being adopted, the second best is surely “Smart Growth” arrangements.

  • That’s a good point.

    I would argue that the government nominally (not legitimately) “owns” the street, and thus claims the right to allocate its use to whomever it choses. However, just like any other case of central planning, it fails to allocate usage effectively. The ones who use a good or service are disconnected from the ones who allocate it, which forces disputes like these to be resolved on the political battlefield, with the more politically connected party usually winning. Whereas the parking situation has peaceful, rational solutions that can be arrived at through market mechanisms.

    Thus, although cities claim ownership of the parking, we can clearly see that they have failed in their roles, and they should transfer the property to those who actually put it to use and can maintain it.

  • marcotico

    Ultimately this is one of the valid criticisms of libertarianism. It disregards the time it takes the market to achieve equilibrium, and the short term loss to actors in the meantime. There is no such thing as a perfect market. In the example above the developer has no financial interest in the happiness of the existing residents, they only care about maximizing the profit on the building. In a completely free market they will provide only enough parking to lease up their property, and then they will probably walk away from the property.

  • Charlie

    Suburban sprawl would seem to have been primarily related to the big push for “free”-way expansion in the 1950’s and 1960’s – with no costs to consider for developers, single family land use found the cheapest land, at the periphery – if the market had been ‘forced’ to pay to extend roads and services, the result might have been more compact development. Although libertarian, I’m for urban-growth bounds, which seem necessary perhaps as an intermediate solution to promote higher density.

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