Do Streetcars Promote Economic Development? |

Now at Streets.MN: Do Streetcars Promote Economic Development? :


It is often said that “Absence of Evidence is not Evidence of Absence”, but this is wrong. This is especially wrong in a context were we have motivated people searching for evidence. Consider the example of Bigfoot. Bigfoot is a supposedly big humanoid / primate living in very small numbers (and presumably hiding from humans). There was a fad in my youth for blurry pictures of Bigfoot to appear in weekly tabloids sold at supermarket checkout stands. However, as XKCD points out, cameras are everywhere now, on billions of phones, and yet we have no more evidence of Bigfoot than before.

2 thoughts on “Do Streetcars Promote Economic Development? |”

  1. Here is the simple reality. Concentration of economic activity is not the same as creation of new economic activity. The theory of the relationship between the transportation system and economic land rents (Haig, Alonso, Wingo) desperately needs to be better understood. The more flexible the transport system, the more economic land rents are “diluted”. Automobile based development with true competition, minimises the “gain” over and above rural land values, hence lot prices in affordable US cities are anchored in the cost of rural land plus cost of development plus a modest profit. (Urban growth containment planning destroys this benefit).

    Anthony Downs is one who has pointed out that “planned concentration” gives “monopoly powers of rent extraction” to property owners at those locations unless the property is compulsorily acquired (or targeted by taxes to discourage the owners from “holding out”).

    It is obviously quite wrong to assume that land rent is a proxy for “value created”. It might well be “value transferred”, i.e. as zero sum economic rent. Cheshire and Mills estimated from 1984 data that land at the centre of a UK city was 325 times more expensive than that in a comparable US city. Cheshire and Hilber more recently have pointed out that virtually all cities in the UK have office rents higher than Manhattan. Obviously land rents can be completely unmoored from actual production and income.

    The impact on different sectors of urban economies will vary according to the sector’s requirement for space, and ability to generate income. Planning for compactness and “transit” will be a good match for a city with “global” finance and so on; capital cities and their bureaucracies are another good match. London has both. But the UK economy as a whole is a working illustration of what happens to the nation’s higher-land-requirement, lower-income sectors when land rents are inflated. If they didn’t have London, they would have had to get real about the effects of their urban planning system; and they still do need to get real about it, because the level of extraction of land rent out of production and incomes in the economy is not inconsequential. Socio-economic outcomes are dire.

    Streetcar systems seem to require subsidies of 50 cents or more per passenger mile traveled; commuter rail still seems to require 20 cents or so; buses a bit less. But private car drivers “subsidy” via roads is about 2 cents per person mile traveled. Drivers willingly pay for most of their own costs; the car, the petrol, the insurance, the repairs.

    So in which system is there evidence of value or “consumer surplus”? Oh, I know, the anti-car activists will hunt like Bigfoot theorists for “externalities” that drivers don’t pay for; but are drivers and passengers in cars not pretty much synonymous with the society that bears the cost of externalities? And are there not “positive externalities” for which automobility is responsible, too?

    Colin Clark pointed out in his last book “Regional and Urban Location”, that subsidies to rail and subway systems are subsidies to the owners of certain types of property, for which there are no social justification. For some reason, levies on the property owners, especially in CBD’s that are the focus of transit routes, never seems to get on the political agenda as a means of funding this “infrastructure”. Of course the owners of the property do not mind capturing 80 cents of every dollar of benefit and paying in 20 cents of the several dollars of cost, the balance of which is paid out of taxes on incomes and petrol and non-benefiting property owners.

    So yes, I love the “Bigfoot” analogy, for “looking for economic benefits of streetcars”. We might as well be “looking for economic benefits of muggings”. Of course the muggers “benefit”. But their benefit is theft of someone else’s benefit. Streetcar systems work in much the same way.

  2. Useful journalism on this phenomenon in Portland has been done by Jim Karlock:

    The “monopoly powers” granted to the owners of property at the locations selected by the planners, leads to them holding out even for public subsidies. Under policies of urban growth containment, “intensification” at efficient locations is slowed down because of the sheer cost of the land. Land becomes a speculative commodity held by people who have little or no interest in its efficient use, just as people hold gold. The prospect of capital gains is everything.

    This is why planners in the UK insist there is “not a shortage of land for housing”; there are empty properties all over the place….! The fact that the average age of a first home buyer is now 39 years, or that the price of land is about 300 times higher per square foot than most US cities, does not matter to them.

    This is morally the same thing as an oligopoly in wheat growing leaving some proportion of their productive land fallow because the bottom quartile of the population could not afford bread at all at their asking prices, and claiming that this proves there is no shortage.

    Shlomo Angel et al find the rate of infill of fragmented land to be higher in Houston than in Portland.

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