Sunday reading 29 March 2015

Every week we read more than we can write about on the blog. To avoid letting good commentary and research fall by the wayside, we’re going to publish weekly excerpts from what we’ve been reading.

Chris Parker, “Auckland Economic Quarterly March 2015“, Auckland Council Chief Economist Unit:

The price of land is driving high house prices

As Figure 1 shows, it is the price of land that has ballooned relative to incomes, not rents, nor construction costs. Rents as a fraction of income has been largely unchanged, whereas the ratio of section prices to income has doubled since 1998.

As Figure 2 shows, the price of land is highest on the isthmus and south-eastern parts of the North Shore.

High prices are not evidence of the failure of markets or public policy

Very generally, even well-functioning competitive markets can experience extreme price spikes. It can be a market’s ‘call to arms’ for people to invest, innovate, and repurpose resources (in this case land) to meet unanticipated or emerging needs. The economic issue is whether or not there are barriers that prevent a market from making the adaptions that it needs to make to moderate prices.

Joseph Stromberg, “‘Roads were not built for cars’: How cyclists, not drivers, first fought to pave US roads“, Vox:

From our vantage point in 2015, it seems like the dominance of cars was the natural, inevitable way transportation would evolve. But there are some good reasons to believe that may not be the case, Reid says.

One is that private, powered road vehicles came along and failed several times before they finally took off in the early 20th century. In the 1830s and 1860s, in particular, inventors in Britain, the US, and Canada came out with steam-powered carriages, based largely off the technology developed for railroads, as well as electric vehicles.

But these early cars failed for a few different reasons. There were few roads that were smooth or hard enough for them. But more important, Reid says, “There was no push for them. There was no group of people interested in popularizing them.”

Graeme Birkhead, “The New Auckland: A radical rethink“, ArchitectureNow:

Housing crises are cyclical yet there is very little planning, vision or innovation evident from leaders in this field. Successive governments and indeed many developers have responded only when we’re in a crisis, leading to higher costs, fire-fighting and inadequate planning. In short, we’re always playing catch-up.

[…]

We shouldn’t be building state houses or mixed private-public housing developments in the boom time. It is far too expensive for everyone involved. We should be building in the lulls, like in the seven-year lull we’ve just experienced. Planning smoothes out the bumps in the building industry’s cycles, doing away with housing crises and helping to make what we build a little more affordable.

The Australian Government is particularly good at this. In the quiet part of the building cycle they ramp up residential building subsidies to stimulate housing construction so not only are there houses being built, the prices are cheaper and the boom-bust impact is mitigated a little.

Dita De Boni, “Kiwis hoodwinked over state housing“, NZ Herald:

A more honest response would be the Government isn’t worried yet – it needs to find a convenient non-profit cover for the inevitable transfer of public housing stock to private concerns.

If that sounds harsh, consider how Bill English and John Key have described the performance of Housing New Zealand over successive years. As far back as 2013, Mr English was describing it as performing poorly, and saying the nationalised housing industry was a “disgrace”.

Shortly thereafter, Housing New Zealand beat six Australian social housing providers to scoop a major prize for “leading innovation”. No matter. What was said could not be unsaid, and changes were afoot.

@BicycleAdiago, “Not a parody but an actual @VicRoads advert for the introduction of Victoria’s helmet laws in 1990. HT @AusCycle”:

John Lavey, “Street trees, and streets without trees“, Community Builders:

Dan Burden eloquently described the value of street trees this way:

“Indeed, street trees so well establish natural and comfortable urban life it is unlikely we will ever see any advertisement for any marketed urban product, including cars, to be featured without street trees making the ultimate dominant, bold visual statement about place.”

[…]

What if our street trees WERE gone? What a better way to see the framing of public streets than to remove the very objects – trees – that enhance the space. So I put together a few GIFs that illustrate the before & after. Seeing them, I hope, will help you renew your appreciation for our arboreal friends.

Paul Krugman, “Charlatans, cranks and cooling“, New York Times: A nice discussion of how omitted variable bias can lead to failures in policy analysis:

The rise of the US sunbelt can be understood largely as a response to the emergence of widespread air conditioning, which made places that are warm in the winter attractive despite humid, muggy summers. […]

Now, these states have several things in common besides high temperatures. They’re all very conservative. And all of them that were states before the Civil War were slave states. These commonalities are, of course, all interrelated. Hot states had slaves because they were suitable for planation agriculture; and today’s red states are, pretty much, the slave states of 150 years ago.

Now, all of this raises some interesting problems for the assessment of economic policy. Because they’re politically conservative, hot states tend to have low minimum wages and low taxes on rich people. And someone who is careless, cynical, or both, could easily take the faster growth of these states as evidence that conservative economic policies work. That is, charlatans and cranks can, all too easily, end up claiming credit for economic and demographic trends that are actually the result of air conditioning.

Nine to Noon, “Why some of our cities and towns are so ugly“, Radio New Zealand National:

Many New Zealand cities and towns are spartan, ugly and makeshift – designed with little regard to the natural world around them, urban designer Garth Falconer says. […]

Mr Falconer said Europeans came with ideas of how to design towns and cities based on what they already knew. This included the Protestant colonies of 16th century Northern Ireland and penal settlements of 18th century Australia.

But New Zealand’s terrain, ecology and climate conspired to frustrate the end results…

New Zealand Herald, “Editorial: Tunnel vision ignores real traffic needs“:

The truth is, the existing harbour bridge is not a bottleneck. Traffic generally flows over the bridge more smoothly than it does on the motorways north and south. The moveable barrier installed on the bridge some time ago has added a lane for commuter traffic at peak hours, the construction of the northern busway has removed some cars from the road, and the Victoria Park tunnel has doubled the capacity of the motorway at its previous worst choking point. All these developments have taken pressure off the bridge, as will the Waterview tunnel in a year or two.

Meanwhile, the Government remains unconvinced that a rail tunnel under the central city would be worth the cost when compared with the roading projects competing for the funds it is allocating for Auckland transport.

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