Blog o’ Burns

It seems such a waste to let this little section of cyberspace go unused. How fortunate then that I’m in the market for a forum on which to vent, reflect upon, and bounce off ideas for a potential senior thesis.

Last fall, I took a political science course on the problems, tools, and policy choices of local governments in facilitating economic development and increasing tax revenue. The “keys of the castle” so to speak include property taxes, public schools, and zoning. A change in any one of these factors will impact the other two. Local governments try to manipulate these variables to attract wealthier residents and keep less affluent populations out.

That same semester, I enrolled in Law and Economics, which emphasized the role that laws play in promoting cooperation in advantageous contracts. Rules, laws, and property rights in general emerge because, as the value of resources and goods increase, the benefits of employing enforcement mechanisms exceed their cost. This theory behind the relationship between institutions (particularly governments) and economic growth has been extended by my current Comparative Economic Systems course. As populations increase, people become less likely to have continuous, repeated interaction. Thus, reputations become less widely known, creating uncertainty as to how potential trading partners will behave. Finding out information about buyers and sellers is a very costly activity. If the costs of finding out whether a buyer or seller is honest exceed the benefits of the exchange, the risk of making such transactions increase and trade is less likely to occur. Governments enforce agreements by punishing people who choose to cheat– this makes cooperation more likely to occur, which is mutually beneficial to all parties involved. Essentially, governments structure interaction to reduce the costs of uncertainty.

How do these classes all relate to each other? If the above theory applies to all institutions, local governments should be no exception. In particular, I’ve always been interested in zoning, which is a powerful tool that makes semi-permanent specifications for land use. Homes are not only a place to live, they are also an investment. Should a factory be built in a neighborhood, the noise and pollution that it produces will not only decrease the utlity residents get from their houses but they will also reduce the value of that property, because demand for homes in that neighborhood will go down. Zoning reduces uncertainty by ensuring that undesirable activity does not enter a community.

However, zoning can and does change. Why? Zoning laws are intentionally difficult to alter, so under what conditions does it become worthwhile for local governments to alter land uses?

This question has bugged me for a while, and even though the theory behind institutional change provides some good guidance, providing empirical evidence will be a difficult task. You might find issues of zoning mundane and dry, and you wouldn’t be wrong! Its execution and legal foundation inspires little excitement especially when compared to national issues as extreme as war, poverty, and market collapse. However, I’d be hard-pressed to find any policy that has greater implications on people’s everyday lives. Everything from public school funding to traffic patterns to local law enforcement to where we choose to live (and the list goes on) is impacted by how localities choose to allocate land uses. In a world in which people have more liberty to relocate more easily, the very survival of communities may depend on the tools they employ to induce economic growth. Zoning is possibly the most powerful of those tools.