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Tuesday, February 28, 2006


At What Cost Suburbia?

In an article from the Federal Reserve Bank of Boston:

So, Maine's planning office is working on expanding available choices. Their goal is to use better urban design to address the issues that are pushing people out of built-up areas by promoting the construction of what they call "Great American Neighborhoods. "Based on traditional towns and villages, these neighborhoods ideally will be relatively dense — a ten-minute walk across — and will be built around a civic core such as a library or a school. They will include open space, such as a town green, and small-scale commerce. They will also have a decidedly Maine slant. "We are talking probably of lower densities than what would be acceptable in Atlanta, and the neighborhood has to have linkage to nature," says Della Valle.

Such development would help to limit sprawl — without limiting growth — by promoting more compact developments while addressing some of the lifestyle concerns people are worried about." (emphasis mine)

I found this article to be very informative, covering a lot of aspects of the subject of sprawl concisely and evenly. The negative aspects of sprawl are addressed, along with counterarguments. The question of externalities is covered, not only with the topic of higher taxes on fuel and car ownership to reduce the negative effects of increased air pollution (and a possible residual effect on lessening a demand for suburban housing), but also addressing the arguments that suburban development is subsidized (indicating that there is a perceived positive externality) by the absence of these higher taxes on fuel and the home mortgage interest deduction. In addition, a stated viewpoint is that unless local governments assess exaction fees against developers, "other people bear part of the expense of the new suburbanites location decision."

It is the last item that makes me feel uncomfortable if the result is to slow economic growth. If exaction fees are levied against developers, the price is passed on to the consumer and in this way some of the externality of additional tax burden or the effects of a decreased budget that would be borne by other consumers would be internalized by those that could afford to pay the price, thus allowing for economic growth and the freedom to choose (for those that could bear the cost). I'm okay with that. What I would worry about is whether those exaction fees were so high as to prohibit economic freedoms - and from what this article states, it is very hard to put a dollar amount on the "lifestyle concerns people are worried about". So who would be in charge of quantifying these things and then assigning a dollar value? I think there is too much leeway for politics there.

I'm also a little queasy at the thought of the type of planned development outlined above. I see subsidized building as backward-thinking. If we're so in love with the idea of subsidizing something, why not subsidize existing area businesses to operate in the urban areas? If there really is competition between urban and suburban areas, wouldn't this approach make more sense?

You note a concern for exaction fees. Why don't you take another look at exaction fees by considering the application of the club model?

What I have in mind pointing out is that for an efficient club, there are three conditions that need to be met: (1) the utilization of the club good, (2) the quantity of the club good provided, and (2) the number of members in the club. In economic terms, for an efficient club, we would want to think about charging a separate price for each of these three conditions.
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