Institutional Design Matters a Lot

(cc photo by steve snodgrass)

This blog doesn’t endorse candidates for office, but this Greater Greater Washington endorsements post raised an issue of general applicability:

When Five Guys wanted to open a patio on an empty sidewalk in an area with vacant lots across the street, [incumbent Bob] Siegel opposed the idea unless Five Guys would make a donation to other community initiatives.

GGW sees this as an error of policy analysis:

This exemplifies a common problem with ANC 6D as well as some others around the city, which don’t see new retail and sidewalk cafes as a benefit on themselves but demand contributions to other projects in exchange for permission to exist.

I think that’s a misdiagnosis. We’re seeing an error of institutional design. Advisory Neighborhood Commissions don’t have very much power or very much responsibility. But they do have a lot of power over liquor licenses, sidewalk cafes, and zoning variances. ANC members, however, have views on things other than liquor licenses, sidewalk cafes, and zoning variances. So the most reasonable way for them to achieve a diverse set of policy goals is to adopt a very stringent attitude toward liquor licenses and sidewalk cafes, and to support very restrictive zoning rules that increase the value of variances, and then to trade permission to do business for other kinds of favors.

If a fixed portion of retail sales taxes raised in a given ANC were put into a neighborhood fund controlled by the commissioners, then I bet commissioners would suddenly be less interested in swaps of these sorts and more interested in attracting businesses to their area. But instead we’ve set up ANCs in a way that encourages them to be systematically biased against just saying “yes” to local retailers. What’s more the districts are so tiny that people don’t think about the systematic consequences of their actions. One itty-bitty neighborhood with 4 eateries instead of five doesn’t seem like a huge difference. But a citywide 20 percent “restaurant gap” encourages high prices, mediocre food, needlessly elevated unemployment, etc.