Quotulatiousness

June 8, 2018

The spiritual and aesthetic brutality of Brutalist architecture

Filed under: Architecture, Britain, Government, History — Tags: , , , — Nicholas @ 03:00

In City Journal, Catesby Leigh looks at (and shudders at) some of the best-known examples of Brutalist architecture in the UK:

World War II left Britain in urgent need of rebuilding. The Blitz destroyed 200,000 homes and left another quarter-million uninhabitable. In the severely overcrowded urban slums, often blighted by industrial pollution, families lived without indoor plumbing, and they shared outdoor privies with neighbors. Others found shelter in temporary prefabricated homes produced by the aviation industry. In 1946, the government legislated the creation of new towns that, along with extensions of existing ones, would eventually be home to more than 2 million Britons. Aside from the new towns, a multitude of urban renewal and greenfield-development schemes emerged during the economically vigorous 1950s and 1960s. Housing “estates” erected by city and other local councils, mainly for lower-income residents, sprang up at a vertiginous rate, along with new office buildings, civic centers, shopping centers, parking garages, schools, hospitals, factories, and university buildings. Some 1.5 million prewar homes were demolished in the three decades following the war. Old urban centers were transformed: “Post-war Birmingham rebuilt itself in austere raw concrete, like Kuwait and Hanover and Manila,” Christopher Beanland enthuses in Concrete Concept: Brutalist Buildings Around the World. But by the late 1960s, it was obvious that most Englishmen weren’t keen on the idea of Birmingham looking like Kuwait and Hanover and Manila.

[…]

Park Hill, half-abandoned council housing estate, Sheffield, England
Photo via Wikimedia Commons

Many of the buildings that Harwood’s book covers make you wonder whether it is really about architecture at all. Consider Park Hill (1961), a huge council-housing estate containing nearly 1,000 duplexes and single-level flats that partially replaced a demolished slum overlooking downtown Sheffield — a crime-ridden precinct that, for all its problems, had housed a resilient community. Laid out as four long, interconnected slabs inflected so as to form an utterly antiurban, vermiculated footprint, Park Hill owed an enormous debt to the Unité d’habitation. At every third story, it featured elevated open-air “streets” or “decks” — the Corbusian fetish of the day — that ran indoors and out, connecting the slabs. As at the Unité, the imagery was nakedly industrial, with the apartments stashed in a “bottle-rack” grid of concrete that soon assumed a depressingly drab tincture and also proved prone to spalling. A ruthless rationalism likewise asserted itself in the level height maintained throughout the complex, which ranged from four to 13 stories, despite the irregular, sloping site. Park Hill was less a work of architecture than a huge, strange contraption inflicted on the urban skyline. Visual amenity, such as it was, came in the form of soft-hued brick within the concrete grid.

A typical deck in the Park Hill Flats, Sheffield.
Photo via Wikimedia Commons.

As with many postwar housing projects, Park Hill offered practical amenities that residents had never before enjoyed: indoor plumbing, hot water, mechanical heating, even a sophisticated garbage-disposal system. Harwood mentions that, Britain’s many council-housing catastrophes notwithstanding, Park Hill “stood firm.” This is not true. By 1979, less than 20 years after its completion, Park Hill was an urban basket case — riddled with graffiti, terrorized by hooligans, afflicted with irruptions of black mold and the terrible stench resulting from waste-disposal blockages. Deserted decks and stairways provided criminals with multiple escape routes.

[…]

Local journalist Peter Tuffrey’s Sheffield Flats, Park Hill and Hyde Park: Hope, Eyesore, Heritage — whose title might seem to play ironically off Harwood’s but for the fact that the book appeared two years earlier — allows us to study a map and old photographs of the slum that Park Hill and Hyde Park supplanted. What we see are blocks, courts, and alleys teeming with row houses and low-rise tenements — streetscapes displaying a human scale, much solid construction, and considerable dereliction, all to be swept away by the desolation of the Corbusian superblocks.

Harwood doesn’t trouble herself with the Hulme Crescents (1972), another assemblage of concrete slabs on the vermiculated, “streets-in-the-sky” plan that rose from the blank slate of a demolished Manchester working-class district where 90,000 people once lived — “the human engine-room of the Industrial Revolution,” as Lynsey Hanley calls it in her largely autobiographical and often engrossing Estates: An Intimate History. The Crescents, designed to house more than 13,000, were conceived in emulation of Bath, the gorgeous Georgian city. Things didn’t work out that way.

“Almost immediately, the estate’s infrastructure began to suffer from the same problems that beset Park Hill and Broadwater Farm [a troubled north London estate]: leaky roof membranes, infestations of vermin and insects, uncontrollable damp, deserted walkways, and an endemic feeling of isolation,” Hanley notes. “The flats were so expensive to warm that many tenants never turned the central heating on, and communal areas were so difficult to maintain that the [city] council could not cope. When a small child died after falling off the top-floor ‘access deck’ of one of the Crescents in 1974, families decamped to the outskirts, belatedly following the rest of old Hulme.” The Crescents’ descent into chaos did make it possible for an anarchic punk scene to flourish in an upper-level hangout known as The Kitchen. The party ended with the estate’s demolition during the 1990s.

[…]

Still, the folly of concentrating lower-income populations in tall buildings eludes her, just as it eluded the Tory government that, in 1956, introduced hugely generous subsidies for the construction of high-rises, relative to row houses and semidetached houses. Not only are tall buildings much more expensive to build and maintain than houses; they were not even essential to achieving the residential densities that postwar planners sought. Tall buildings are highly artificial and complex structures housing temperamental machines, like elevators, that require a heightened degree of maintenance, often by highly paid technicians rather than handymen with toolboxes and stepladders, as Hanley observes. Tall buildings also require an elevated degree of social discipline, as well as security features like intercom systems, closed-circuit TV, and doormen or concierges. The tower blocks and high-rise slabs at the Barbican Estate, the carefully developed, elaborately landscaped, intensely picturesque Brutalist “bankers’ commune” in the City of London, have been very successful. The appropriate synecdoche for the Barbican’s low-end counterparts, however, might well be a broken-down elevator littered with trash, defaced by graffiti, and reeking of urine.

June 3, 2018

QotD: Price controls just make things more expensive in real terms

Filed under: Economics, Government, Quotations — Tags: , , , — Nicholas @ 01:00

One of the perennial, and pernicious, political ideas is that if things are “too expensive” then we can fix that by just passing a law to make them less expensive. We see this just about everywhere and its sadly not limited to the more idiot sector of the left. Although of course it thrives there. Venezuela is a complete and total mess because Hugo Chavez and Nicolas Maduro thought they would make life cheaper by limiting prices by law. Payday lending doesn’t exist in certain states because people like Elizabeth Warren insist that interest rates should not go “too high”. Those usury laws mean that interest rates are infinite – as the lending simply isn’t available at all. And yes, people over on the right have made the same sort of mistake – Nixon tried to fix gas prices after all.

Price fixing just always leads to things getting more expensive. As David Friedman explains:

    The result – that price control results in a cost to the consumer, pecuniary plus nonpecuniary, higher than the uncontrolled price – does not depend on the details of the [supply and demand] diagram. Consumers cannot consume more gas than producers produce, so the nonpecuniary cost must be large enough to drive quantity demanded down to quantity supplied. Quantity supplied is lower than without price control, so cost to the consumer must be higher.

Tim Worstall, “Memo For Would Be Price Fixers – Price Controls Always Make Things More Expensive”, Forbes.com, 2016-08-16.

May 5, 2018

What’s Wrong With Wakanda?

Filed under: Africa, Economics, Media — Tags: , , — Nicholas @ 04:00

Foundation for Economic Education
Published on 3 May 2018

Wakanda could never exist in the real world.

Wakanda is frustrating because it perpetuates the myth that an abundance of a really valuable natural resource is all you need to create a prosperous and extremely advanced society. This is simply not true. Matt Ridley, author of The Rational Optimist, wrote about how isolationism actually leads to a regress in technology.

April 22, 2018

How to begin solving the common problems of big cities

Filed under: Australia, Bureaucracy, Economics, Government — Tags: , , , , , — Nicholas @ 05:00

Vladimir “Zeev” Vinokurov is writing about Australian cities in particular, but the same general analysis applies to many Canadian, American, and British urban areas as well:

… our economy and population are growing, and the resulting congestion is costing us thousands of dollars per year individually, and billions to the economy. It isolates us from family, friends and work. But cities can still grow without getting us stuck in traffic, missing increasingly overcrowded and delayed trains, or left unable to afford property. All this is happening because workplaces are too far from residents living in the suburbs, which effectively funnels residents into the inner city for work. It must change.

First, we must unwind planning laws that prevent offices, homes and apartments from being constructed alongside each other and throughout the city. These laws also raise housing prices by hundreds of thousands of dollars. Second, instead of banning cars, charge commuters for using congested roads and trains. Third, stop supporting taxpayer funded ‘road to nowhere’ infrastructure projects. These reforms will cut congestion, grow the economy, cut living costs and reconnect us to family, friends and local communities.

Planning laws cause congestion and social isolation by preventing people from building apartments and commercial offices throughout our city. As a result, rents and property prices become dearer because not enough housing is built to accommodate demand from population growth. Indeed, Reserve Bank economists estimate that planning laws increase average property prices by hundreds of thousands of dollars. This drives residents into the outer suburbs to look for cheaper housing, even as they commute into the inner city for work. If more people lived close-by to their workplaces, commutes would be shorter.

We need multiple CBDs, not just one. Unwinding planning laws that prevent commercial growth outside the CBD will cut housing costs and rents, cut congestion and promote tightly knit, thriving urban communities.

Congestion also occurs because we pay for using roads and public transport with thousands of dollars of time every year, rather than money. Congested public roads or trains cost us no more money to use in peak times, and busier routes cost no more to use than empty ones. As a result, the Grattan Institute think tank estimates that the average Melbournian’s commute to the city is twice as long in peak time. By contrast, Sydney’s trains are less congested, but are used more widely compared to Melbourne’s because its tickets are dearer in rush hour. Congestion charges that reflect market demand for infrastructure will also encourage businesses to open in commercial districts outside the CBD. Reconnecting local commuters with local workplaces will save us time and money overall.

Congestion charges are also a fairer and cheaper way of funding infrastructure projects compared to taxes like fuel tax or stamp duty. Scrapping these two taxes could save property purchasers tens of thousands of dollars or more, and reduce petrol bills by at least a third. If we pay for congested roads and trains with money rather than time and taxes, we may end up paying less.

March 5, 2018

The economic failure of Iain Banks’s Culture stories

Filed under: Books, Economics — Tags: , , , , , — Nicholas @ 03:00

ESR points out the weak spot in the Culture series of novels:

There’s a lot of buzz about Iain Banks’s Culture universe lately, what with Elon Musk naming his drone ships in Banksian style and a TV series in the works.

I enjoyed the Culture books too, but they were a guilty pleasure for me because in a fundamental way they are bad SF.

They’re bad SF because the Culture’s economics is impossible. That ship hits a rock called “Hayek’s Calculation Problem” and sinks – even superintelligent Minds can’t make central planning work, because without price signals and elicited preferences you can’t know where to allocate resources. What you get is accelerating malinvestment to collapse.

This is what happened to the Soviet Union in the late 1980s. Hayek predicted it fifty years in advance. Huge factories in Siberia destroyed wealth by producing trucks nobody needed from resources that would have been better spent on other things – but nobody could know that because there weren’t any price signals. Eventually the SU wore out its pre-Communist infrastructure, fell down, went boom.

The problem is epistemic and fundamental – can’t be solved by good intentions or piling on computational capacity. An SF writer is every bit as obligated to know what won’t work in economics as he is not to make elementary blunders about chemistry and physics. The concept of “deadweight loss” matters as much as “entropy”.

Banks’s lifelong friend and fellow Trotskyite Ken McLeod actually managed not to flunk this. In a long and revealing interview about the genesis of one of his early series (the “October Revolution” books IIRC) he once revealed that for years he read free-market economics on the know-your-enemy principle, then woke up one day realizing he couldn’t refute them. Subsequently his books took a decidedly libertarian turn. This demonstrates that Marxists can clean up their shit; alas, Banks never made it that far.

December 7, 2017

Lawrence Solomon makes his pitch for “most hated by the bike mafia”

Filed under: Economics, Government — Tags: , , , , — Nicholas @ 03:00

This was published last week, but I didn’t see it until it was linked from Instapundit:

Today the bicycle is a mixed bag, usually with more negatives than positives. In many cities, bike lanes now consume more road space than they free up, they add to pollution as well as reducing it, they hurt neighbourhoods and business districts alike, and they have become a drain on the public purse. The bicycle today — or rather the infrastructure that now supports it — exemplifies “inappropriate technology,” a good idea gone wrong through unsustainable, willy-nilly top-down planning.

London, where former mayor Boris Johnston began a “cycling revolution,” shows where the road to ruin can lead. Although criticism of biking remains largely taboo among the city’s elite, a bike backlash is underway, with many blaming the city’s worsening congestion on the proliferation of bike lanes. While bikes have the luxury of zipping through traffic using dedicated lanes that are vastly underused most of the day — these include what Transport for London (TfL) calls “cycle superhighways” — cars have been squeezed into narrowed spaces that slow traffic to a crawl.

As a City of London report acknowledged last year, “The most significant impact on the City’s road network in the last 12 months has been the construction and subsequent operation of TfL’s cycle super highway … areas of traffic congestion can frequently be found on those roads.” As Lord Nigel Lawson put it in a parliamentary debate on bicycles, cycle lanes have done more damage to London than “almost anything since the Blitz.”

As a consequence of the idling traffic, pollution levels have risen, contributing to what is now deemed a toxic stew. Ironically, cyclists are especially harmed, and not just because the bike lanes they speed upon are adjacent to tailpipes. According to a study by the London School of Medicine, cyclists have 2.3 times more inhaled soot than walkers because “cyclists breathe more deeply and at a quicker rate than pedestrians while in closer proximity to exhaust fumes … Our data strongly suggest that personal exposure to black carbon should be considered when planning cycling routes.” Cyclists have begun wearing facemasks as a consequence. A recent headline in The Independent helpfully featured “5 best anti-pollution masks for cycling.” Neighbourhoods endure extra pollution, too, with frustrated autos cutting through residential districts to avoid bike-bred congestion.

Health and safety costs aside — per kilometre travelled, cyclist fatalities are eight times that of motorists — the direct economic burden associated with cycling megaprojects is staggering. Paris, which boasts of its plan to become the “cycling capital of the world,” is in the midst of a 150-million-euro cycling scheme. Melbourne has a $100-million plan. Amsterdam — a flat, compact city well suited to cycling — is spending 120 million euros on 9,000 new bicycle parking spots alone. Where cold weather reigns for much of the year, as is the case in many of Canada’s cities, the cost-benefit case for cycling infrastructure is eviscerated further.

An answer might be dedicated bicycle-only routes, but the usual problem arises: the cost of the land necessary to build and maintain the routes will almost always be far higher than municipalities can afford to pay, and the benefits accrue more to upper-income users while the costs fall on the whole population. That’s just what we need: another way to transfer wealth from the poor to the rich.

November 7, 2017

Le Corbusier

Filed under: Architecture, Books, France, History — Tags: , , , , , — Nicholas @ 03:00

Theodore Dalrymple could never be called a fan of Le Corbusier’s architecture:

The French fascist architect Charles-Édouard Jeanneret, better known as Le Corbusier, was another of this charmless ilk, though cleaner than Brecht (a Marxist, the latter’s decision not to wash was his tribute, albeit not a very flattering one, to the proletariat). Jeanneret’s inhumanity, his rage against humans, is evident in his architecture and in his writings. He felt the level of affection and concern for them that most people feel for cockroaches.

Like Hitler, Jeanneret wanted to be an artist, and, as with Hitler, the world would have been a better place if he had achieved his ambition. Had he been merely an artist, one could have avoided his productions if one so wished; but the buildings that he and his myriad acolytes have built unavoidably scour the retina of the viewer and cause a decline in the pleasure of his existence.

One of Jeanneret’s buildings can devastate a landscape or destroy an ancient townscape once and for all, with a finality that is quite without appeal; as for his city planning, it was of a childish inhumanity and rank amateurism that would have been mildly amusing had it remained purely theoretical and had no one taken it seriously.

A book has just been published — Le Corbusier: The Dishonest Architect, by Malcolm Millais — that reads like the indictment of a serial killer who can offer no defense (except, possibly, a psychiatric one). The author shares with me an aesthetic detestation of Jeanneret, and also of his casual but deeply vicious totalitarianism; but, unlike me, the author both has a scholarly knowledge of his subject’s life and writings, of which the perusal of only a few has more than sufficed for me, and is a highly qualified structural engineer. Mr. Millais is able to prove not only that Jeanneret was a liar, cheat, thief, and plagiarist in the most literal sense of the words, a criminal as well as being personally unpleasant on many occasions, but that he was technically grossly ignorant and incompetent, indeed laughably so. His roofs leaked, his materials deteriorated. He never grasped the elementary principles of engineering. All his ideas were gimcrack at best, and often far worse than merely bad. To commission a building from Jeanneret was to tie a ball and chain around one’s own ankle, committing oneself to endless, Sisyphean bills for alteration and maintenance, as well as to a dishonest estimate of what the building would cost to build in the first place. A house by Jeanneret was not so much a machine for living in (to quote the most famous of his many fatuous dicta) as a machine for generating costs and for moving out of. In the name of functionality, Jeanneret built what did not work; in the name of mass production, everything he used had to be individually fashioned. Having no human qualities himself, and lacking all imagination, he did not even understand that shade in a hot climate was desirable, indeed essential.

October 5, 2017

Out of Frame: The Real Life Wilson Fisk

Filed under: Government, History, Liberty, Media, USA — Tags: , , , , — Nicholas @ 12:00

Foundation for Economic Education
Published on 5 Oct 2017

Wilson Fisk is one of the most terrifying villains in the Marvel universe. Good thing he’s just fictional, right? Wrong!

In this episode of Out of Frame, we explore the real-life Wilson Fisk, a central planner from America’s not so distant past.

Learn more about Robert Moses and his greatest nemesis, Jane Jacobs at FEE: https://fee.org/articles/jane-jacobs/

August 7, 2017

QotD: Communism, competition, and the socialist calculation problem

Filed under: Economics, Quotations — Tags: , , , , — Nicholas @ 01:00

Competition turns out not to be so wasteful; it makes a system resilient. That misunderstanding was a symptom of a larger issue called the socialist calculation problem. We think of prices largely in reference to ourselves, or other individuals, which is to say that we mostly see them as the highest barrier to getting something we want. But as we pull back to look at society, or the globe, we see that they are in fact an incredibly elegant way to allocate scarce resources.

This was best explained by Friedrich Hayek in his essay “The Use of Knowledge in Society.” Some good like tin becomes scarce, perhaps because a large tin mine has failed, or perhaps because there is a new and very profitable use for tin that is soaking up much of the supply. The price rises, and all over the world, people begin to economize on tin. Most of them have no idea why the price of tin is rising, and if they did, they wouldn’t care; they just switch to another metal, or start recycling old tin, finding a way to bring global demand closer in line to global supply. A lot of that is possible only because of price competition.

You can think of this as something like a distributed computer network: You get millions of people devoting some portion of their effort to aligning consumption with production. This system is constantly churning, making billions of decisions a day. Communism tried to replace this with a bunch of guys sitting around in offices, who occasionally negotiated with guys sitting around in other offices. It was a doomed effort from the start. Don’t get me wrong; the incentive problems were real and large. But even if they could have been solved, the calculation problem would have remained. And the more complex an economy you are trying to manage, the worse a job you will do.

The socialist calculation problem is not fundamentally an issue of calculating how to produce the most stuff, but of calculating what should be produced. Computers can’t solve that, at least until they develop sufficient intelligence that they’ll probably render the issue moot by ordering our toasters to kill us so that they can use our bodies for mulch.

Megan McArdle, “Yes, Computers Have Improved. No, Communism Hasn’t”, Bloomberg View, 2015-09-02.

July 19, 2017

QotD: Prices in a post-scarcity economy

Filed under: Economics, Quotations — Tags: , , — Nicholas @ 01:00

The most important piece of information that the price system provides is “How much do I want this, given that other people want it too?” That’s the question that millions of people are answering, when they decide to use less tin, or pay more for tin and use less of something else. Computers are not good at answering this question.

How would a computer even get the information to make a good guess, in the absence of a price system? Please do not say surveys. You know what did really well on surveys? New Coke. Also, Donald Trump, who is not going to be president. We are, in fact, back to some version of the incentive problem, which is that when the stakes are low, people don’t put too much thought into their answers.

In many cases, people are interested in getting rid of prices precisely because they don’t like the signal that it is sending — that the best possible medical care is a scarce good that few people are going to get, or that other people do not value your labor very much. People are trying to override that information with a better program.

But even if we decide that the planners know best, we still have to contend with the resistance that will arise to their plan. Just as Communism’s critics need to remember that money is not the only reason people strive, post-capitalists need to remember that they will be dealing with people — cantankerous, willful and capable of all manner of subversions if the plan is not paying sufficient attention to their needs.

It’s possible that we’ll see versions of a “post-scarcity” economy in things like music and writing, since these are basically versions of activities that people have been doing for free for thousands of years. But when it comes to unpleasant labor like slaughtering animals, mining ore and scrubbing floors, even an advanced society needs to figure out exactly how badly it wants those things done. And so far, nothing beats prices for eliciting that information.

Megan McArdle, “Yes, Computers Have Improved. No, Communism Hasn’t”, Bloomberg View, 2015-09-02.

July 17, 2017

The Bronze Age Collapse – IV: Systems Collapse – Extra History

Filed under: Europe, Greece, History, Middle East — Tags: , , , , , — Nicholas @ 04:00

Published on 15 Jul 2017

It started with famine… and ended with four great civilizations’ utter destruction. The Bronze Age Collapse is still a matter of scholarly debate, but our favorite theory rests on an understanding of Systems Collapse and how societies build themselves to survive disaster.

July 16, 2017

QotD: The value of price controls in World War 2

Filed under: Bureaucracy, Economics, Government, History, Quotations, USA, WW2 — Tags: , , — Nicholas @ 01:00

In World War II price controls [in the United States] were administered by the Office of Price Administration (OPA). I have been present at discussions where serious attempts were made to assess the OPA’s damage to the Allied cause, measured in terms of the equivalent number of German panzer divisions. The estimates tended to be large.

Steven Landsburg, The Armchair Economist, 2012 revised edition.

July 12, 2017

The Bronze Age Collapse – II: The Wheel and the Rod – Extra History

Filed under: Europe, History, Middle East — Tags: , , , , , — Nicholas @ 04:00

Published on Jul 1, 2017

Bronze Age societies built intricate networks of trade, advanced military infrastructure, and hugely organized central governments. But when crucial parts of those systems began to disappear, the societies built on them began to crumble.

July 10, 2017

“Jane Jacobs was fatal to conventional wisdom”

Filed under: Architecture, Books, Bureaucracy, Government, Liberty, USA — Tags: , — Nicholas @ 05:00

In Reason, Sam Staley reviews Vital Little Plans: The Short Works of Jane Jacobs, edited by Samuel Zipp and Nathan Storring, calling it “Jane Jacobs in her own words”:

In her books, articles, and activism, [Jacobs] destroyed the 20th century urban planning groupthink and laid out a radically different way of thinking about cities and society — one that rejected the prescriptive and centralized approach that dominated the planning profession, and one that instead highlighted how decentralized, market-driven decisions lay the foundation for vibrant and sustainable cities.

A journalist rather than an academic, Jacobs worked regular gigs at Iron Age and Architectural Forum and contributed to popular magazines such as Vogue and Harper’s. By the time she took a leave of absence from Architectural Forum to write what remains her most iconic book, The Death and Life of Great American Cities (1961), Jacobs was already starting to acquire a reputation as a fierce critic of conventional top-down planning.

She was not opposed to planning per se. Indeed, she believed small-scale plans were vital to cities’ sustenance. Neighborhood parks were essential to urban vitality, for example, and their location required planning to be successful. But to work, planning — and governance in general — needed to be devolved to the neighborhood level, moving away from large-scale systems that concentrate authority and power. Jacobs was thus an ardent critic of regional planning and regional government. Regionalizing, or “amalgamating,” made city government too far removed from the governed.

[…]

During the 1950s and ’60s, Jacobs used her position at Architectural Forum to examine urban development and redevelopment. Though the magazine championed modernist city planning, Jacobs emerged as one of modern planning’s chief critics during her stint there. Her journey from urban observer to planning critic began, as Zipp and Storring point out, as she examined how buildings, and then cities, worked rather than how they looked or were designed to function.

In the process, she started to develop her critique. “Philadelphia’s Redevelopment: A Progress Report” (July 1955) reviews the city’s redevelopment plans for 10,000 blighted acres. The city avoided large-scale slum clearing — what economist Martin Anderson would call “the federal bulldozer” a few years later — but still targeted large swaths of land for redevelopment using “a busybody concern with what private developers will be up to next.” (It wasn’t all bad, though: She lauded the city for incorporating some neighborhood features that reinforce such institutions as churches, schools, and playgrounds.) Another Forum column discusses the difference between “pavement pounders” — planners who walk around cities and neighborhoods to get a feel for the urban fabric and dynamic — and “Olympians,” those who plan based on maps and statistics. Her appreciation for small businesses as the glue that holds neighborhoods together comes out in “The Missing Link in City Redevelopment” (June 1956), where she laments the tendency to think of businesses merely as storefronts or spaces, not as enterprises that also serve as social centers and community anchors.

May 7, 2017

The Importance of Institutions

Filed under: Asia, Economics, History — Tags: , , , , — Nicholas @ 02:00

Published on 2 Feb 2016

In today’s video, we discuss a topic critical to understanding economic growth: the power of institutions.

To better shed light on this, we’re going to look at an example that’s both tragic and extreme.

In 1945, North and South Korea were divided, ending 35 years of Japanese colonial rule over the Korean peninsula. From that point, the two Koreas took dramatically different paths. North Korea went the way of communism, and South Korea chose a relatively capitalistic, free market economy.

Now — what were the results of those choices?

In the ensuing decades after 1945, South Korea became a major car producer and exporter. The country also became a hub for music (any K-pop fans out there?), film, and consumer products. In stark contrast, North Korea’s totalitarian path resulted in episodes of famine and starvation for its people.

In the end, South Korea became a thriving market economy, with the living standards of a developed country. North Korea on the other hand, essentially became a militarized state, where people lived in fear.

Why such an extreme divergence?

It all comes down to institutions.

When economists talk about institutions, they mean things like laws and regulations, such as property rights, dependable courts and political stability. Institutions also include cultural norms, such as the ones surrounding honesty, trust, and cooperation.

To put it another way, institutions guide a country’s choices — which paths to follow, which actions to take, which signals to listen to, and which ones to ignore.

More importantly, institutions define the incentives that affect all of our lives.

Going back to our example, in the years after 1945, North and South Korea took dramatically different institutional paths.

In South Korea, the institutions of capitalism and democracy, promoted cooperation and honest commercial dealing. People were incentivized to produce goods and services to meet market demand. Businesses that did not meet demand were allowed to go bankrupt, allowing the re-allocation of capital towards more valuable uses.

Against that grain, North Korea’s institutions produced starkly different incentives. The totalitarian regime meant that the economy was centrally planned and directed. Most entrepreneurs didn’t have the freedom to keep their own profits, resulting in few incentives to do business. Farmers also didn’t have enough incentive to grow sufficient food to feed the population. This was due in part to price controls, and a lack of property rights.

As for capital, it was allocated by the state, mostly towards political and military uses. Instead of going towards science, or education, or industrial advancement, North Korea’s capital went mostly towards outfitting its army, and making sure that the ruling party remained unopposed.

And now, look at how different the two countries are as a result of those differing institutions.

When it comes to economic growth, institutions are critically important. A country’s institutions can have huge effects on long-term growth and prosperity. Good institutions can help turn a country into a growth miracle. Bad institutions can doom a country to economic disaster.

The key point remains: institutions are important.

They represent the choices that a country makes, and as the Korean peninsula shows you, choices on this scale can have staggering effects on a nation’s present, and future.

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