William A. Fischel

An Economic History of Zoning and a Cure for its Exclusionary Effects

The paper outlines the 20th-century history of American zoning to explain how home-owners came to dominate its content and administration in most jurisdictions. Zonings original purpose was to protect home-owners in residential areas from devaluation by industrial and apartment uses that had been made footloose by trucks and buses around 1910-20. Completion of the interstate highway system around 1970 made jobs and employees so mobile that suburbs adopted growth controls to stem the tide. If zoning is indeed a substitute for home-value insurance, it seems worthwhile to investigate the possibility of home-equity insurance to reduce the demand for exclusionary zoning.

Why Are There NIMBYs

An owner-occupied home is an unusual asset because it cannot be diversified among locations and because it is the only sizable asset that most owners possess. Among the uninsured risks of homeownership is devaluation by nearby changes in land use. Opponents of landuse change are called NIMBYs (“Not In My Back Yard”). This article submits that NIMBYism is a rational response to the uninsured risks of homeownership. It explores the possibilities and drawbacks of providing an insurance market to cover such risks. It concludes that some progress is being made towards developing such markets. (JEL R52)

A constitutional choice model of compensation for takings

Governments in the United States and in many other countries are compelled by constitutional strictures or social understandings to compensate their citizens when private property is taken for public use (Garner 1975). Economists and legal scholars influenced by economics have argued that compensation requirements promote economic efficiency (Epstein 1985, pp. 3-6, 199). Failure to require compensation would induce government to undervalue the cost of private resources and excessively expand the size of the public sector (deAlessi 1969). The insecurity of possession against expropriation would, in turn, induce such anxiety among landowners that they would plan too little investment on their land (Michelman 1967, p. 1214). In challenging the conventional wisdom, Lawrence Blume, Daniel Rubinfeld, and Perry Shapiro (1984; henceforth BRS) showed that it was inefjcient to pay compensation when the government destroyed private capital to provide a public good. In their model, compensation for takings is analogous to unconditional payments for hurricane damage, which induce seaside property owners to inefficiently discount predictable weather losses. Any guarantee of compensation induces the moral hazard of ignoring the probability that the government may take one’s land and destroy the capital on it in the process of supplying a valuable public good. The counterintuitive result is that compensation for takings may induce private landowners to place too much private capital on their land. In part because they regarded the BRS theory as having undermined the traditional economic rationale for paying compensation, Blume and Rubinfeld (1984) in a separate paper advanced a theory based on the idea that “just compensation” serves as a form of insurance for risk-averse property owners. On this view, Blume and Rubinfeld argued that compensation should be based on an inquiry of

Determinants of voting on environmental quality: a study of a New Hampshire pulp mill referendum

Abstract A local referendum on a proposed pulp mill in eight New Hampshire towns provides a particularly apt sample for examining preferences on environmental issues. Interviews with 359 voters are examined to test various determinants of voting behavior. A utility maximizing model is tested using multiple-regression logit techniques. Significant variables are respondents location, income, occupation, and education and the initial environment of the community. There is a brief discussion of public policy issues which these results may illuminate.

Zoning and the exercise of monopoly power: A reevaluation

Abstract One reason for excessive zoning restrictions is said to be the desire of existing residents to raise the value of their homes. This strategy will be more successful if their community controls a large fraction of the land in a metropolitan area. This study critically examines this “monopoly zoning” hypothesis in a property rights framework. A re-examination of current empirical evidence for monopoly zoning and an additional study cast some doubt on the existence of such motivations.

Making the Grade: The Economic Evolution of American School Districts

School districts have more influence on home buyers’ choices than any other local-government unit, yet hardly anyone knows why they exist. “Making the Grade” explains the development of American school districts and advances an economic argument for their continued existence. In the nineteenth century, almost all districts governed a single, one-room school, which provided an “ungraded” education. There was no annual progress from one grade to another. Students instead worked their way through textbooks with others who shared the same level of knowledge but not necessarily the same age. This method was desirable because it allowed for part-time education in an era when most children worked on farms. By the twentieth century, age-graded education, which had annual promotions and a standard curriculum, became the national norm because it smoothed the road to high school. The ungraded method of one-room schools became obsolete. By 1970, 200,000 one-room schools had consolidated into fewer than 20,000 districts. This book argues, contrary to received wisdom, that school-district consolidations were the product of local voters’ consent rather than the political power of education leaders. Rural residents voluntarily gave up their beloved one-room schools because their children were deterred from attending high school and because potential buyers of their property were put off by nonstandard schools. Districts that were not “making the grade” were penalized in the real estate market. The continued concern by twenty-first century homeowners about local school quality remains a positive force in American education. Voters support local education not just because it enhances their property values, but because local schools are the most effective source of “social capital” for their communities.

Why Voters Veto Vouchers: Public Schools and Community-Specific Social Capital

This article explains voters‘ attachment to public education the public benefit of local schools accrues to adults, not children. Having children in local schools increases parents’ “community-specific social capital.” Through local school connections, parents get to know other adults in their community better, which in turn reduces the transaction costs of citizen provision of local public goods. Vouchers would disperse students from their communities and thereby reduce localized social capital. Empirical evidence supporting this also explains the rise and fall of Robert Putnam’s national indicators of social capital, which have moved in lock-step with the number of children per household.

The offer/ask disparity and just compensation for takings: A constitutional choice perspective

Abstract The offer/ask disparity, also known as the endowment effect, has been used to urge compensation exceeding market value for takings of property by eminent domain. The usual framing of the issue neglects the consideration that greater compensation itself “takes” other property by requiring more taxation and fewer public works. A better way of framing compensation issues is in a constitutional context. Historical evidence suggests that American constitution makers did balance the benefits of greater compensation against foregone benefits from public works. The constitutional choice approach implies that the offer/ask disparity may undermine welfare economics less than is usually supposed.

Comment on Carl Abbott's “The Portland region: Where city and suburbs talk to each other—and often agree”

Abstract The Portland, OR, areas urban growth boundary is an idea whose benefits to the region may depend on a willingness to expand the boundary occasionally. The parable contained in this comment suggests that the declared unwillingness to expand the urban growth boundary could have contributed to Portlands recent sudden increase in housing prices. It further suggests that an inflexible attitude toward the boundary could cause long‐run losses in employment in the Portland region, with few if any offsetting environmental benefits. Other regions should be aware of the potential drawbacks of installing such a boundary.

An evaluation of proposals for metropolitan sharing of commercial and industrial property tax base

Abstract This paper examines proposals to withdraw taxing authority over commercial and industrial property from municipalities and confer it on a metropolitan government to be taxed at a uniform rate. A theory which suggests that local tax payments by firms represent compensation for their external effects is used to show that such proposals could reduce the efficiency of land use in the metropolitan area. Empirical work indicates that the proposals would not necessarily be progressive, and in any case they are inferior in this respect to metropolitan taxation of all property.