Residential zoning laws may be preventing natural economic evolution

The “convergence” theory suggests that poorer states like Mississippi should have caught up to richer states like Connecticut over time. This economic projection held true in America’s history until about 1980, and some researchers blame overbearing residential zoning laws. More from the Boston Globe:

During the 100 years of high convergence, Americans moved in droves from poorer states to richer states in search of higher wages. As more people crowded into richer states, average wages there began to fall in response to the relative oversupply of workers; meanwhile wages in the poorer states began to rise for the relatively few workers who remained behind, creating a kind of economic balancing effect between American regions.

Theoretically this process should have continued until Mississippi and Connecticut were more or less equally desirable places to work and Shoag and Ganong propose a three-step explanation why it did not: Convergence stopped because labor migration stopped; labor migration stopped because housing prices in the richest states grew so out of whack that low-skilled workers could no longer afford to move in; and housing prices skyrocketed in response to zoning laws written in the 1970s that artificially restricted the amount and type of housing that could be built in richer locales.

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  • http://www.facebook.com/max.bucher.92 Max Bucher

    Name one instance of “natural economic evolution.” Economics isn’t natural. By its nature, it’s shaped by human decision making – including decisions to establish a government, and whatever comes from that, including zoning laws.

    • http://www.facebook.com/profile.php?id=1414890499 Matt Jacob

      I disagree. Economics is natural in the evolutionary development of the human psychology. Human nature as it were. Whether it follows the same linear evolutionary path is however debatable, but we started by gathering food, then trading food, then trading other things like tools, and eventually we had an economy. If that’s not a natural evolution then I don’t know what it is.

      So if zoning is artificially increasing prices, then what incentive is there to take them away? Sounds like a hard sell to me to reduce people’s property values voluntarily. And by that logic, wouldn’t a less restrictive form of zoning like form-based codes decrease prices as well(but by a lesser degree than no zoning at all)?

    • http://www.facebook.com/profile.php?id=2309211 Eric Douglas

      Any influence would be caused by the developer moreso than the zoning official. The main cost to a tract subdivision developer that would be passed on to the homeowner are capital improvements and cost of land. In many cases a developer will exceed minimum lot size requirements because then they can sell the lot for more then. So it’s a balance between how can I limit the amount of roads/sewer I have to put in while maximizing the amount of large, estate lots I can market.

  • http://www.facebook.com/profile.php?id=2309211 Eric Douglas

    That’s an idiotic premise. Labor migration is relative to the big 3 and other large industrial companies hiring needs. Transplants can always rent temporarily when taking a job out of state and tract housing is going to be manufactured in reaction to what people can afford.

    • http://www.facebook.com/profile.php?id=21405087 Neil Clingerman

      But think about what rents are in CT or the Bay Area. I interviewed for a job in CT out of college, and did research on the rent, and the Bay Area I know because of the tech industry.

      We are talking about $1000+ rents, unless you want to live in an unsafe neighborhood in either Bridgeport CT or Oakland CA in addition to a downpayment when you first move, which is also over $1000. Renting in these areas is not cheap either.