Lyman Stone: In Defense Of Downward Sloping Urban Housing Demand Curves

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Will Truman

Will Truman is the Editor-in-Chief of Ordinary Times. He is also on Twitter.

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5 Responses

  1. Avatar Richard Hershberger
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    says:

    Interesting piece, but the claim that industrial age cities sprung up as dormitories for factory workers seems incomplete. The argument is that the workers had to be close to the factories because transportation technology wasn’t advanced enough for the workers to commute from afield. OK, but why do the factories need to be clustered together?

    Factories need access to transportation to ship their products to market, but this need not imply being clustered together. Back in the day, this could mean stringing the factories along any plausibly navigable river. Then once you get railroads, all bets are off. I have seen a pattern in rural Pennsylvania where out in the middle of nowhere surrounded by woods or farmland there will be about two blocks of houses close together, often set back from the nearest country highway. Why are they there? Because at some point there was a factory and the owner built them to house his workers. He probably owned them, and perhaps a country store. There might also be a church. While the factory owner did not technically own it, he paid for it and the preacher’s salary. This is a sweet deal all around for the factory owner. He has complete control of the situation. Talk of unionizing? Boot the troublemakers out of those houses and bring in new workers. If he owns that store he even can turn a profit from the wages he pays. This also scales up nicely. If the operation is bigger than two blocks and a store, the whole operation can be expanded.

    So why deal with a city? Why isn’t the company town the standard industrial model? It might be that suitable locations for company towns are limited, but this seems unlikely once we enter the railroad era. There must be something more going on: some reason why factory owners choose, at least some of the time, to locate in cities.Report

    • Avatar Guy in reply to Richard Hershberger
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      says:

      For one thing, the company town was the standard model in several industries (especially mining, if I remember right) before it fell to the automobile. Second, if you’re starting a factory with lots of heavy machinery, you probably don’t want to pay for it to be transported very far, so you’re going to want it to be near the place where you source it. The same logic applies to repairs and replacements further down the line. If you’re a merchant looking to do transportation, you probably want to be as close to the source of whatever your transporting as you can be. Then any new entrants in the industry suddenly want to be in the same place, for ease of access to the existing merchant network, as well as skilled labor to poach. Keep going with these feedback loops and you’ll get a city pretty quick.

      This is mostly a just-so story, of course, but it looks plausible.Report

    • Avatar PD Shaw in reply to Richard Hershberger
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      says:

      A few points:

      Many factories also need cooling water to remove heat from machines and as a component of whatever good is being manufactured, not just transportation. That means rivers and lakes are still important,or a readily available groundwater supply. The cheaper the inputs the better.

      River transportation is still cheaper than rail for a lot of purposes. Big issue in the Mississippi River valley is the necessity of expansion of barge capacity on the locks.

      Businesses like to locate where there is plenty of labor to ensure that the jobs will have plenty of qualified potential employees and to depress wages.Report

      • Avatar Michael Cain in reply to PD Shaw
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        says:

        Businesses like to locate where there is plenty of labor to ensure that the jobs will have plenty of qualified potential employees and to depress wages.

        Sometimes placing the period at the end of “qualified potential employees”. The Colorado Front Range got the Vestas facilities (spread out over most of a hundred miles) because they could offer a work force (and facilities) for all of software, electrical/electronic assembly, large-scale composite assembly, a sufficiently-scaled specialty steel mill, and rail capacity to bring all the parts together before they got shipped out to someplace close to the turbine sites.Report

  2. Avatar Marchmaine
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    says:

    Well, that confirmed a lot of my hunches… perfectly reasoned.Report

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