Tuesday, 29 September 2015

The Economy in Microcosm

'A Long History of a Short Block'

 by Brian Bamford

IN a recent essay in the FT Weekend Magazine Tim Harford, the undercover economist, wrote that 'the nation state is a political unit, not an economic one', and while 'national authorities can impose a common interest rate, tax rates and regulations' through which political policy influences the economy, it can be argued that the natural unit of macroeconomic analysis is not the nation state, but the city, the region, and the surrounding areas.   

In posts on this NV Blog Les May has argued about the necessity of a National Health Service and national, if not international, standardisation of electrical supply such as equal voltages.  John Desmond has argued that a more local system would be possible in certain circumstances referring to Spanish sources  (see below Review of Anarchist Voices by Les May and other related posts).
New research by three development economists, William Easterly, Laura Freschi and Steven Pennings has produced a paper 'A Long History of a Short Block' in which they examined the economic development of a single 486ft. block of Greene Street between Houston and Prince Street in downtown Manhattan.  Easterly is well known for his scepticism about how much development can ever be planned, and how much credit can political leaders and their so-called expert advisers claim when things go well. 

William Easterly argues:

'Here's a block where there is no leader; there's no president or prime minister of this block', and Greene Street, he says, offers us a perspective on the more spontaneous, decentralised features of economic development.   

The study of the history of Greene Street offers a series swift and surprising changes.  The Dutch colonised Manhattan in 1624, but decided to cede what is now New York to the British in 1667, in exchange for guarantees over the possession of what is now Suriname in Latin America.  At that time this sugar-rich region looked a good thing, but now New York City's economy is a hundred times bigger than Suriname's. 

In 1850, Greene Street was a prosperous residential district with some households that would be millionaires by today's standards.  Two large hotels and a theatre opened, and prostitutes started to  move into the area.  By 1870, the middle-classes had shifted, and the block became the heart of New York City's largest sex-work districts. 

Towards the end of the 19th century, perhaps because property values in the red-light area were low, entrepreneurs came in to build large cast-iron stores and warehouses for the garment trade.  Then Greene Street's luck ran out when this industry moved uptown after 1910, and property values collapsed.  Urban planners in the 1940s and 1950s suggested bulldozing the area and starting again, but a campaign by the neighbourhood successfully resisted this.  Property values revived as artists began to colonised Greene Street enticed-in by the low priced large and airy spaces.   

As a lesson of this Tim Harford suggests that getting the 'basic infrastructure right –  streets, water, sanitation, policing – is a good idea', but 'aggressive planning, knocking down entire blocks in response to temporary weakness, is probably not.'   In this sense central planning and predicting the process of economic development at a local level is 'a game for suckers'. 

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