The Growth Factor

Responding to Dana Goldstein’s Janet Sadik-Khan profile, Ryan Avent makes the point that amidst growing interest in the environmental and social benefits of well-executed urbanism, one shouldn’t miss the fundamental point that getting land use right is important to economic growth and prosperity. I think that point tends to fade out of view when you’re talking about New York City and Sadik-Khan because NYC is already such an outlier in terms of density and wealth creation.

But at the end of the day, the economic benefits of sound land-use and transportation policy come from the same source as the environmental benefits. It’s all about efficient use of natural resources. When it comes to something like natural gas or uranium people generally understand that it’s important economically to be using scarce resources in an efficient way. It’s environmentally beneficial, of course, to do so but it’s also just important to the basic functioning of the economy. Reducing waste has huge benefits.

And space is a natural resource.

But while we’re somewhat accustomed to thinking of farmland or forest as a kind of natural resource, by far the most valuable form of space is space located near economically valuable activity. Consequently, try to buy up some land in Washington’s central business district or somewhere in San Francisco or Boston and you’ll find that it’s tremendously expensive. And even in cheaper places like Detroit or Baltimore you’ll find that land is much more expensive in certain choice central districts — often located near nodes for transportation to other cities — than it is in outlying areas. And of course whenever you’re near big cities you’ll find roads — the Long Island Expressway, the 10 — where space during rush hour is extremely rare and therefore valuable. The way our current policies work, these resources are not being used in their optimal way. There are too many cars on the roads at peak times for the roads to function properly. And there are too few square feet of usable housing, retail, and office space in the most valuable locations. Changing that would generate an enormous amount of value. But it requires more efficient ways of moving people around than everyone taking single-passenger car rides for all of their trips. That means a mix of “complete streets” that are friendly to cyclists and pedestrians, higher-quality bus services, and investments in high-capacity rail alternatives. Some of that stuff is expensive to do. But road pricing and denser building would both generate large amounts of revenue that could be applied to the task.


And the payoff would be large in terms of enhancing growth in an environmentally friendly way. Or creating a more sustainable planet in an economically viable way. Whichever way you want to look at it. The point is that whenever you can increase the efficiency with which resources are used, you create a lot more winners than users. And ensuring that we use our valuable urban and suburban spaces more efficiently is a set of huge potential gains that are just sitting on the table thanks to decades of postwar planning policies that have mandated inefficient uses.