Land Use Regulation and Income Inequality

I don't have time to comment or peruse the study in depth, but this looks interesting.  From Randal O'Toole:

Harvard economists have proven one of the major theses of American Nightmare, which is that land-use regulation is a major cause of growing income inequality in the United States. By restricting labor mobility, the economists say, such regulation has played a “central role” in income disparities.

When measured on a state-by-state basis, American income inequality declined at a steady rate of 1.8 percent per year from 1880 to 1980. The slowing and reversal of this long-term trend after 1980 is startling. Not by coincidence, the states with the strongest land-use regulations–those on the Pacific Coast and in New England–began such regulation in the 1970s and 1980s.

Forty to 75 percent of the decline in inequality before 1880, the Harvard economists say, was due to migration of workers from low-income states to high-income states. The freedom to easily move faded after 1980 as many of the highest-income states used land-use regulation to make housing unaffordable to low-income workers. Average incomes in those states grew, leading them to congratulate themselves for attracting high-paid workers when what they were really doing is driving out low- and (in California, at least) middle-income workers.

As Virginia Postrel puts it, “the best-educated, most-affluent, most politically influential Americans like th[e] result” of economic segregation, because it “keeps out fat people with bad taste.” Postrel refers to these well-educated people as “elites,” but I simply call them “middle class.”

I have not read the study, but I think the word "proven" in the first sentence likely goes to far.  Economic systems are way too complex to absolutely show one variable among millions causes another.  I am convinced that the way we have regulated the housing market and promoted home ownership has reduced labor mobility.

  • Mark2

    It is interesting that the place I grew up in, in CA was a middle class community. But now 40 years later, even with a decent income there is no way I could afford to live there.

    I am not suprised that land restrictions have something to do with this. Now in CA, they have a law that pretty much prevents anything but high density housing which should, if possible be constructed next to rail lines. If the town doesn't construct rail lines fast enough, the state fines them. San Diego is being fined right now. My town close to San Diego doesn't have rail access, but the city needs to devote any city land to low income housing, which is also high density.

    This all means that the standard .2 acre lots are limited in supply and won't be expanding, so the type of property most desirable for raising a family will be further pushed into the realm of unaffordability.

  • http://harries@free.fr blokeinfrance

    I haven't read the book, but offer this:
    The Thatcher government liberalised Docklands (East London, derelict) and a swarm of promoters moved in. Close to the City, and without the zoning and height hassles.

    The City of London, seeing Docklands about to eat their lunch, relaxed their planning regs. (Sight lines to St Paul's Cathedral from Hackney marshes etc).

    Docklands nearly went bust.

    Now London has two big centres of finance, both thriving / sucking on the public teat (take your pick).

  • http://didnitellyou.blogspot.com/ JC

    Seriously. Harvard economists? That's supposed to be a joke, right? Really? Please? Pleaeeeese?

  • deadcenter

    Thomas Sowell makes a similar point(s) in his book Basic Economics.

  • IGotBupkis, Legally Defined Cyberbully in All 57 States

    >>> promoted home ownership has reduced labor mobility.

    Indeed, owning a home does tend to reduce one's willingness to move. It adds an entirely new level of complexity to chucking it and going elsewhere to try again.

    >>> Seriously. Harvard economists? That’s supposed to be a joke, right? Really? Please? Pleaeeeese?

    While I share your general disrespect for Haaaaavad men, I'd point out about the old saw regarding the broken analog clock. Moreover, I think wholly discounting without evidence something solely based on the source is defactor ad hominem argument. For all you know, these could be THE only competent economists at Haaaaavad. ;-D

  • IGotBupkis, Legally Defined Cyberbully in All 57 States

    "defactor"=="defacto"

    Duh! and Doh!

  • http://www.ianrandom.com Ian Random

    Why is it that people that care most about income inequality are the ones that cause it? I guess they pointed out the obvious, when is paying too much for anything a good idea?

  • Don

    Ian, two words:
    Seen and Unseen

  • MJ

    I read some of the paper, enough to get a sense for how it was done. The authors use some clever empirical strategies to try to identify causal effects. But I agree that using the term "proven" to describe the results is probably a bit strong.

  • nuclearcannoli

    Seen and unseen, yeah. As long as all the cultural and economic diversity they want remains unseen to them, they're good. It's standard liberal doublespeak, everyone else has to abide by their standards, as long as they don't have to. We dealt with that in my neighborhood growing up, a nearby town run by liberals was always 'shaming' us in the newspapers etc. when our town was opposed to a halfway house or drug rehab center. Turns out for roughly the same land area and population we had well over five times as many such places as they did. It is ALWAYS "Do as I say, not as I do" with these people. No different than the hypocritical right wing religious nuts who turn out to be serial philanderers or gamblers. The holier than thou types always end up exemplifying the worst of their own standards.

  • http://scef.org.uk Mike Haseler

    Strange how whenever we get a big story our email packs up! So, we are posting this to a few sites:

    This from twitter:

    @ScotClimate: Scottish Government found to have lied on key figure. Is the Scottish Climate Bill dead?. Will the minister resign? http://bit.ly/OwkVl1

    The Scottish government lied to politicians about key financial data which was central to the argument for the bill when they passed the Scottish Climate Change Bill. The government citing Stern said that the economic cost of a 2-3°C rise would be “between 5-20% of GDP”. In fact Stern suggests there may not be any net economic harm quoting figures of 0-3%

    The figures are so key to justifying the bill, that it really is difficult to see how this bill could withstand a legal challenge.

    … but the scandal gets worse. The Scottish paper (The Courier) which broke this story seems to have been lent on to remove the story. Presumably by someone in government.

    This is about as bad as we can get. It appears the world’s most enthusiastic government for climate change is now embroiled in lies & cover-up.

  • TXJim

    In the 70s & 80s, increasing land restrictions in Europe resulted in a huge influx of Dutch folks moving to the south west USA. For many years all new money coming into dairy and farming was mainly Dutch. A few Germans but mostly Dutch. I was curious why they thought farming and ranching in hard scrabble was more attractive than the (compartitivly) more temperate climes of Europe, they always said the same thing - over here we can cut down a dead tree, build a barn or build a pond without asking the govt for permission. Upfront costs (land, cattle, equip, labor) actually cost more a bit more here but the fact they could run their own show meant they could react to markets without jacking around with govt nannies.

    I worked for those guys and loved them because they were hard working and always paid their bill. They are still here and their warnings to me in the 80s are coming true. They warned if we don't stop it, our country will end up in the control of a cabal of beauracracies that will not see you as a "customer" but a target.

    FWIW, I couldn't help but notice the key to their success, at least as compared to the USA farmers they replaced, hinged on their embrace of crop and cattle subsidies. Those dudes may have been average farmers/ranchers, but they knew how to file their govt paperwork to get a subsidy. Their contradiction in behaviour was never something I could accept. I told them their participation is the scam would ensure the system they warned of would become inevitable. Good people can't be just a "little" corrupt.

  • IGotBupkis, Legally Defined Cyberbully in All 57 States

    >>> Good people can’t be just a “little” corrupt.

    A "little" corrupt is like a "little" pregnant.

    Or, as others have put it:

    Integrity is like a balloon. One little hole lets it all out.