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More government spending on city centres needed?

Pretty much everyone hates suburban sprawl.  Politicians rail against it and vow to control it, and environmentalists egg them on. City bohemians despise their bourgeois neighbours in the suburbs.   Even the bourgeois neighbours, who like their views of the surrounding countryside, feel aggrieved or guilty as they drive their cars into work in the morning and see green fields given over to other people’s housing development.  

Surely it would be better for people to live near the centres of cities, and closer to their workplaces.   They would have shorter commutes, and cheaper more frequent public transport.  They would cause less car pollution, and waste less land on suburban roads and car parks.   Increased population density in the city might even result in better facilities there; better restaurants, sports centres etc.  

There’s only one problem.  Real people prefer the suburbs.   They don’t just say they prefer them.  They really do.  They prove it by paying more to live there, by letting good townhouses fall into neglect or get turned over to low price multi-occupancy flats, while the rich move out into the country. 

I used to think there were three possible political responses to urban sprawl, but a recent paper has just suggested a fourth.  Here they are.  The new fourth possibility is last. 

1. Do nothing.  I call this the economic response.   An economist would say that people’s preference for the suburbs is rational, and when all the costs and benefits are taken into account our present level of sprawl is the economic optimum.  According to this line of argument the benefits of living in the country to those who do so, the views, the fresh air, and the status, just balance the inconvenience of the extra commutes, and the extra fumes etc. that the town dwellers and the rest of us have to tolerate.   Unless there is some external cost, which the suburbanites are imposing on the rest of us without paying for, this should be the correct response. 

2. Stop those pesky middle class people going out and living in the country.   This is the present political response.  It is the policy of Labour, Liberals and Conservatives to regulate and limit the building of new houses on green field sites.  They argue that suburban dwellers are imposing the costs of their pollution on the rest of us and therefore we should limit their freedom to move there.  In England local councils do this with planning restrictions and the imposition of “green belts” round cities.  The problem is that such detailed interference in people’s lives is inefficient, encourages corruption, and ends up providing windfall profits to those farmers and developers who are lucky enough to get planning permission to build on their land.  It’s no coincidence that most local councillors in England are builders.  Local politicians love this sort of detailed regulatory approach because it gives them power and status.  It’s difficult to know how else most of them would fill their days if not for planning applications.   

3. Make suburb dwellers pay for the externalities they currently pass on to the rest of us.  I call this the iGreen solution.  The idea here is that foolish government intervention in the past has meant that suburb dwellers do not pay the full cost of their choices.  Government over provision of free roads is the most florid example.   The rural subsidy does not consist of just the cost of building them.  Private commuter roads would be extremely difficult to build in most cities without compulsory purchase orders enforced by the council.  If commuters had to rely on private roads built with private money on land purchased at the market price from city dwellers, sprawl dwellers would be encouraged to stay near the centre.   Government subsidy of rural post offices, and rural bus routes also make it just that little bit cheaper to move to the country.  This then is the iGreen solution.  Don’t dictate where people can live, but remove the subsidies that encourage them to live in the country. 

4. The new idea is contained in an unpublished paper by Philip Graves, an economist at the University of Colorado.  It is available here http://spot.colorado.edu/~gravesp/Suburbanization.htm.  Graves argues thus.   He agrees with iGreens that urban sprawl partly results from suburb dwellers not paying the full cost of their choices, but he also says that there are some genuine public goods, which local councils under provide in the city centre. 

Now I don’t like that type of argument.  It sounds like yet another piece of special pleading for more government spending.  I wonder if Graves has shares in a street lighting firm in Boulder, and is trying to persuade the council to extend its contract!  

Only joking Philip!  Graves has a real economic point to make.  He says that we systematically under provide such public goods as policing, street lighting, noise control, and air pollution, for the following reason.  Since public goods are by definition available whether we personally pay for them or not, we have no incentive to work hard to earn the money to pay for them.  Instead we spend our time in leisure pursuits.  Imagine that if the optimum amount of a public good, say policing, was 10% of our salary of £1000 per month.  We vote in a council that spends £100 per month on police.  Those people who want a more policing might be prepared to work a little harder to get a bit extra security.  However in a public system this does not pay.  Even if they earned an extra £100 per month and spent it on the police they would see no noticeable difference.  So instead they sit down and read the paper. 

Graves argues that this line of argument means that government under funds many public goods.  This matters a lot for urban sprawl because moving to the suburbs might be a way to get a substitute for the public good that people can’t buy in the city.  On this argument people move to the suburbs to live in a safe area because the council does not spend enough on urban policing. 

Thus far I’m convinced but I still have a problem with bunging more money at city councils to stop urban sprawl.  Are there not other reasons why council provided urban public goods are less good than they should be?  Could it be that salaried government policemen are more interested in going on counselling courses than on fighting street crime?   Are streetlights really a public good?  They may make the streets safer at night and stop people tripping over curb stones, but they use energy, and encourage more night time activity than would otherwise take place.   Would it not be better still if we got up a little earlier in the morning and used Gods good light instead?   I only ask.  

Personally I’m interested in Graves’ idea but when I next get the chance I’ll vote for a councillor who promises to spend less on roads rather than more on the police.  However click here to read Graves’ paper and make up your own mind. 

Jim Thornton Leeds 3 March 2002

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Last modified: February 11, 2006