I was prompted by a post of Cian's to consider the question of who, precisely, pays the cost of corruption. Cian sets out what I'd say is a fairly widely held view:
When the developers got their hands on West Dublin up went the endless acres of houses, nominal services were put into the areas. Small central villages were supposed to support huge numbers of people. The developers cared not one wit, nor the councillors who operated so cosily with them.
Now, this might feel intuitively right: The inner circle of favoured developers undoubtedly benefitted. While the people who now live in these areas undoubtedly have gripes about the place. But are these directly linked? I'd say that the closer you examine this, the intuitive link evaporates.
Firstly, consider that the estates in question consist of private, not public housing. To get to a "harm" or "cost" imposed on the residents of such housing, who, after all, have voluntarily chosen to rent or buy there, it will be necessary to make a case for a market failure. Let's say that everyone who lives there would like, say, a playground and a local pub within walking distance but for whatever reason the market fails to provide them. Now, I'm generally skeptical of market failure arguments and think that there are often much better explanations for phenomena lazily labelled as market failures but for the purposes of argument let's go with this particular flow. The problem is that it is hard to see how this problem is connected to corruption per se.
Let's imagine two estates. One by a corrupt developer - Kickback Close and one by a developer who played by the rules - Honest Alley. Now, if we are going to claim that buyers or renters have no way of signalling their willingness to pay a premium for additional services, playgrounds and the like, there is no particular reason for the developers of Honest Alley to offer anything to residents over and above that offered by the developers of Kickback Close. One might excoriate the council for failing to insist that corrupt developers include such amenities but the fact is that they have also failed to insist that incorrupt developers include such amenities. The corruption such as it existed, related mainly to the rezoning of certain tracts of lands at the expense of others and not to insufficient regulation of the quality of resultant estates (Note also that this not about corrupt allocation of public contracts whether for housing or infrastructure).
Then if the "cost" borne by residents of such areas may be attributable (assuming the market failure argument to be correct*) to insufficient oversight by planning officials, rather than corruption per se, who does bear the cost of corruption, or why is it wrong? Well, people primarily affected by a corrupt system are not the end-punters who generally get what they paid for - a house they liked at the time in an area they wanted to live in at the time - but rather the adjoining landowners and competing developers who played by the rules and didn't bribe politicians or planning officials. Secondly, the cost of corruption is borne by the overall economy - it is a deadweight cost and there is a well established (inverse) correlation between corruption and economic activity.
Why does this matter? After all, if corruption is wrong, do we really need to determine why it's wrong to counter it. I'd say, yes, particularly if you are concerned about possible remedies for the wrongs you attribute to corruption or seek to prevent them from occuring in the future.
* The alternative explanation is that there is no market failure, that each developer knows too well that the punter, however much he might gripe about their absence now, or however much he might gratefully accept them for free, doesn't actually prize such additional amenities sufficiently to pay a premium he would quite happily discharge for, say, a Plasma screen TV.
It may not have seemed it from my post but i dont entirely hold the developers responsible. Their line of business is building and selling as many units as possible, at a time when very few people were sloshing about with money.
They were in a position to take advantage of an institutional culture which opted to facilitate their aims over and above some of those of their constituents which ought counterbalance the worst excesses.
good post tough, ill be thinking and responding.
Posted by: Cian | June 29, 2006 at 08:49 PM
I don't particularly mean to defend (corrupt) developers. My main thing is to try and identify
a) the real harm associated with corruption which isn't really to do with the design standards of housing estates but rather impacts on the economy as a whole and landowners whose land is (artificially) restricted to agricultural use while favoured landowners's is zoned for housing land (the price for which, incidentally, is artificially inflated due to the restriction on supply of alternative land)
and
b) to look closer at how such estates ended up being "substandard". I'm not going to rule out the market failure argument a priori - it's possible that the people who chose to buy or rent in such areas were willing to pay a premium for additional services but had no way of signalling that willingness. But my suspicion is that there isn't really an empirical basis for this - there are always alternatives - and that the sprawling estates aren't particularly substandard at all but were prety close to what the punters actually wanted and were willing to pay for.
Posted by: Frank McGahon | June 29, 2006 at 09:51 PM
Oh, and also;
opted to facilitate their aims over and above some of those of their constituents
You see, I think this is where the confusion starts in that it sketches out a zero sum game whereby the gains by the developer occur at the expense of the constituents. But the interests of the developer and the (future*) constituents aren't exactly opposed and in the case of zoning-more-land are actually aligned. My point is that in the land zoning zero sum game, the corrupt developers gain at the expense of unfavoured landowners and developers.
* - any existing constituents who would prefer surrounding land remained unzoned, thus artificially inflating the value of their property and keeping new constituents out might have interests opposed to future constituents.
Posted by: Frank McGahon | June 29, 2006 at 11:05 PM
A fundamental difference between a playground and a plasma screen tv is that the former requires some group co-ordination whereas the latter is an individual action.
The political process is (arguably) the means by which the group expresses itself. The corruption of this process limited the ability of the group to co-ordinate and promote the common interests of its members.
I think 'Tragedy of the Commons' applies here (literally even, except for the sheep maybe).
Also the market of competent politicians available for election was severely distorted. Corrupt payments were fed into election war chests giving an unfair advantage to those who favoured the interests of developers over those of the residents. The politician who promoted playgrounds was at a serious disadvantage when it came to getting elected.
I don't think you can isolate the effects of corruption to individual planning decisions. I think it had a huge effect on the political process. Part of the reason that "buyers or renters [had] no way of signalling their willingness to pay a premium for additional services" was because their means of signalling this through the political process was compromised.
Posted by: Mark Waters | June 30, 2006 at 03:06 PM
A fundamental difference between a playground and a plasma screen tv is that the former requires some group co-ordination whereas the latter is an individual action.
I don't know if it counts as a "fundamental" difference, but I do recognise the distinction which is why I outlined the "market failure" argument. The plasma screen remark was intended to illustrate that even if the co-ordination problem was overcome, people still might choose to spend the money on a plasma instead of a premium towards a playground. One reason for my suspicion that this is the case, (apart from the popularity of plasma screens!) is that I don't think the co-ordination problem really bears too much scrutiny. No matter how bad things got, there was never a developer with a monopoly and they had to compete with other developers (corrupt and otherwise) *and* with existing secondhand building stock. There are always alternatives and it's not too hard to determine what people are and aren't willing to pay a premium for. The estimation of such developers was that what people wanted were by and large "traditional-looking" 3 bed semi-detached houses. As a modernist architect, I would love to believe that there was a market failure which prevented punters signalling their desire for contemporary houses but the fact was, there wasn't - the main reason these estates have the character they do, however dreary they might be to outsiders, is because that's more or less what people wanted.
The political process is (arguably) the means by which the group expresses itself. The corruption of this process limited the ability of the group to co-ordinate and promote the common interests of its members.
This is a neat theory, the problem is that it falls apart on the first point: The "group" doesn't really decide what type of housing individuals in the group want any more than it decided what types of shoes they want to wear. Imagine all the housing stock in the country was allocated according to what the group decided was appropriate - It would be the same as if everyone was on the council housing list! The other problem which I mentioned above is that the principal vehicle for corruption was rezoning land and as far as that goes, prospective buyers and tenants have interests aligned with developers - they want more land to be zoned so it doesn't really make sense to assume that in this case the corrupt developer gains at the expense of the interests of (all) residents. Now the political process was undoubtedly corrupted and corruption is a grave harm -but it is a diffuse harm to everyone in affecting economic activity and a concentrated harm to non-corrupt and unfavoured landowners and developers.
I think 'Tragedy of the Commons' applies here (literally even, except for the sheep maybe).
I'm not sure if the tragedy of the commons does apply because there is no resource being exploited due to the absence of clearly defined property rights but I can see the co-ordination problem/market failure argument. But if I was going to push this line I would frame it differently - using the smoking ban as an example. Prior to the smoking ban, there was no way for non-smokers to signal their preference for non-smoking premises. Whether it was inertia, conservatism or the complicated natuire of regulation of pubs, publicans never seriously offered this choice. Once the ban is implemented, it's popular with people and perhaps there were quite a few people who didn't realise ethey valued it so much until they had it. The argument goes - until you have a fantasic development with integrated playgrounds, local shops, pubs, restaurants, people don't realise they would value it.
But, again, the market failure argument is separate from corruption per se and to the extent that a market failure is deemed to have existed, it would have held under a non-corrupt system too.
Also the market of competent politicians available for election was severely distorted. Corrupt payments were fed into election war chests giving an unfair advantage to those who favoured the interests of developers over those of the residents.
That's fine up to the "interests of developers over residents" bit. It's not that their interests are always aligned, but they cannot always be opposed. Ultimately, such residents are customers of developers. It doesn't make sense to talk about "the interests of publicans over punters" because they cannot gain at the expense of their customers unless they are in a cartel - punters can always defect to a competitor. This is the zero sum sketch I mentioned above. Where there is a zero sum game is in land rezoning and if the council decide a certain area is to be rezoned, it is usually at the expense of another area.
The politician who promoted playgrounds was at a serious disadvantage when it came to getting elected.
Not really. Promise playgrounds and you will get more votes. As you said, people aren't sheep - no amount of money is going to get someone elected if people don't like him.
I don't think you can isolate the effects of corruption to individual planning decisions. I think it had a huge effect on the political process.
I agree. But not all of these effects are bad - if it encouraged a skepticism about politicians and their hollow promises, that would surely be a bonus!
Part of the reason that "buyers or renters [had] no way of signalling their willingness to pay a premium for additional services" was because their means of signalling this through the political process was compromised.
But you can't really ever signal anything more than broad brush strokes through the electoral process. It's very easy to signal what your own specific needs and wants are under a reasonably free market - you "vote" on your own preferences for food, clothing, entertainment, education etc. several times a day and you get an instant response. In the ballot box, all you can signal is the general direction you would like things to go in.
Posted by: Frank McGahon | June 30, 2006 at 04:02 PM
I think your theory is based on a number of assumptions that don't stand up to close scrutiny.
For example, the idea that the type of development that is built is predominantly influenced by consumer demand is just not true. In an efficient, transparent market with infinite resources it might be possible but in reality it is not. The customer is no more able to indicate to the developer what kind of house they want then they are able to indicate whether they want a playground as part of it. If customer demand had a significant influence then surely we would have seen some variety in the type of houses built in these developments.
The dominant influences on what type of houses are built are costs and government regulation. It is through its assault on government regulation that corrupt payments tilted the market in favour of the developers.
Secondly, you are assuming that it is possible to ring fence corrupt payments around rezoning decisions. But I don't think this is the case. How can a person who accpeted corrupt payments from a developer be expected to enforce planning conditions? The payments were buying the politician not the decision. In the wider scheme of things we see tax avoidance schemes that benefited developers while PAYE workers were faced with an increased tax burden that further limited their influence in the market.
I wonder does the theory hold up if you remove some of these assumptions. It certainly raises alot of interesting questions. It's ruining my enjoyment of the world cup.
Posted by: Mark Waters | July 01, 2006 at 01:27 PM
I think your theory is based on a number of assumptions that don't stand up to close scrutiny.
I don't think that's fair or accurate. For starters, I'm not exactly propounding a positive theory as such, but rather trying to unpick two separate issues which are too frequently conflated. The first one is the baleful effects of corruption and the second one is the quality of much of the built environment from the 1980s in, say, West Dublin. My principle point is that had there been no corruption at all but all other thing being equal, the type of housing you would see wouldn't be an awful lot different to what you see today. My secondary point is that the people directly affected by corrupt land zoning and planning decisions are unfavoured developers and landowners and *not* people who voluntarily chose to buy or rent in these housing estates. My last point is more of a skepticism or suspicion rather than one about which I'm entirely certain - is that the housing delivered by developers was, more or less, what people did actually want. As I note with the smoking ban example above, I think there is a reasonable argument to be made against this, but note again, that this holds whether there was corruption or not.
For example, the idea that the type of development that is built is predominantly influenced by consumer demand is just not true. In an efficient, transparent market with infinite resources it might be possible but in reality it is not. The customer is no more able to indicate to the developer what kind of house they want then they are able to indicate whether they want a playground as part of it. If customer demand had a significant influence then surely we would have seen some variety in the type of houses built in these developments.
Why? This is a circular argument. You're coming out with a very strong statement that developers more or less ignore customer demand. This demands, surely, a stronger supporting argument than an expectation that if they did, you would see some variety For starters, this introduces the problem of how this variety is defined - who is privy to the information about what people "really" want. For all you know, the variety, or lack thereof, that you see is what people really want. That has to be the default assumption until an explanation is forthcoming as to why people would plonk down a lot of their income on something they don't want. The type of argument might be to do with a restriction of choice - if you can only choose 3 bed semis, you're not going to get a chance to signal your preference for a 2 bed townhouse with playground. The problem for this argument is that while choices are constrained, they aren't so restricted as to prevent someone from choosing a smaller or larger house. You still have all the older building stock up to the 1980s as an alternative. Another tack might be to assert that for cultural reasons Dubliners are reluctant to move far from the community where they grew up restricting their choices further, but I don't think this holds up too well.
The dominant influences on what type of houses are built are costs and government regulation.
Well, "costs" is another way of saying "how much the punter is willing to pay" so that doesn't really get you away from customer demand. Government regulation certainly does constrain development, but is generally about mandating things that the customer would want included anyway along with other stuff that she's not that bothered about.
It is through its assault on government regulation that corrupt payments tilted the market in favour of the developers.
Note that I don't deny at all that corruption benefits corrupt developers, that's certainly not the impression I want to give. My point is that in the case of private housing where the customer can always walk away, not buy, or buy somewhere else, this gain is not at the expense of the people who buy or rent such housing (note, by the way that the opposite applies in the case of corruptly awarded public housing and public infrastructure).
Secondly, you are assuming that it is possible to ring fence corrupt payments around rezoning decisions. But I don't think this is the case. How can a person who accpeted corrupt payments from a developer be expected to enforce planning conditions?
It's not that it's possible to ringfence as such, but rezoning is where the real money is. All it takes is one decision, in the development plan and there's a windfall. Once you're into the planning system, you have the possibility of bord pleanala overturning the local authority's decision and having councillors or planning officials in your pocket won't help you there. Plus, in the case of private housing, you still have to attract punters and back then, the housing market was pretty sluggish. Further, in the case of private housing, the purchaser's solicitor will insist on proper title and proper certs of compliance with planning and (in those days) bye-laws for which, again, councillors and planning officials can't really help you.
The payments were buying the politician not the decision. In the wider scheme of things we see tax avoidance schemes that benefited developers while PAYE workers were faced with an increased tax burden that further limited their influence in the market.
Well that's a whole other issue and I'd say I probably agree that it's better to reduce the burden on taxpayers rather than offer such incentive schemes, but they're not directly related to corruption or even developers (they were aimed at investors) - The idea there was that in the bad old days, you wanted to encourage development in rundown areas and encourage investors to buy the resultant properties to offset rental income.
I wonder does the theory hold up if you remove some of these assumptions. It certainly raises alot of interesting questions. It's ruining my enjoyment of the world cup.
Well I'm sorry to hear that! maybe today's games will offer some relief!
Posted by: Frank McGahon | July 01, 2006 at 03:25 PM
You could assume that because I bought a three-bed bungalow, that's the sort of house I want to live in - but you'd be wrong. Prices and demand would indicate most people in the Dublin area want something along the lines of Ranelagh or Sandymount. It's certainly what I want. Oddly enough, developers aren't building any new Ranelaghs or Sandymounts. What could have caused such a market anomaly?
BTW, you beat all comers in argument-by-volume.
Posted by: Jon Ihle | July 04, 2006 at 03:22 PM
You could assume that because I bought a three-bed bungalow, that's the sort of house I want to live in - but you'd be wrong. Prices and demand would indicate most people in the Dublin area want something along the lines of Ranelagh or Sandymount. It's certainly what I want.
So you actually "don't want" to live in the house you live in. So why did you buy it? I'm pretty sure that the answer is going to be something along the lines of "I had good reasons to buy the house I bought and possibly I have good reasons to stay there". Either you were genuinely forced at gunpoint, say, to buy the house (Perhaps the owner blackmailed you!) or you did actually "want" to buy that house, but when you say "It's not the house you want" you mean "it's not my ideal, but this is what I had to settle for". People have to "settle" all the time, it doesn't mean they don't "want" what they voluntarily choose to buy.
Look at it another way. Using your formulation I could say:
"You could assume that because I bought a VW Passat, that's the sort of car I want to drive - but you'd be wrong. Prices and demand would indicate most people want something along the lines of a BMW or a Mercedes. It's certainly what I want."
Oddly enough, developers aren't building any new Ranelaghs or Sandymounts. What could have caused such a market anomaly?
There is no anomaly. Developers are building all sorts of houses and apartments in all sorts of areas and, in Dublin in particular, the quality and variety of development generally has improved considerably since the 1980s. You say that people want something like Ranelagh or Sandymount but they don't want "something like", they want something exactly like Ranelagh or Sandymount, i.e. Ranelagh or Sandymount - there's only one of each and the attraction of either has as much to do with their location, proximity to the town centre and the types of businesses, schools and amenities available as it has the pattern of streets and houses which are otherwise unremarkable (and there are many similar examples in Dublin and other Irish cities which don't attract the same premium). If somebody built a replica of Ranelagh in a field somewhere between Dublin and Balbriggan I'm going to confidently predict that house prices there would not compare favourably to those in its Dublin doppelganger. Which probably explains this alleged anomaly - there isn't so much a market for "similar to Ranelagh" development, as there is a market for "exactly like Ranelagh" development which has been cornered by Ranelagh itself.
BTW, you beat all comers in argument-by-volume.
Whatever.
Posted by: Frank McGahon | July 04, 2006 at 04:06 PM
FWIW, I was marvelling at your output on this topic.
RE: Ranelagh and Sandymount: do you not think we might have had several approximations of these types of neighbourhoods if developers weren't corruptly getting all kinds of land rezoned where they could buy it cheap, thereby encouraging the very sprawl that militates against the kind of core urban living everyone actually seems to like?
RE: my house: I actually don't really want to live where I am, but I've got to live somewhere and this is where I am. If you think houses in the middle-class price range within commuting distance of Dublin for a two-job family with one car (i.e. dependent on public transport) exhibit any kind of variety in terms of style, location, density and street lay-out, you should come down from Louth more often. The sort of neighbourhood I want to live in exists in many places - most of them less corrupt than Ireland - why doesn't it exist here? Could my preferences be that far outside the average?
As you know, I'm normally well disposed to the type of argument you're making, but as another commenter pointed how, it's not exactly possible to make my preferences known in the market if the market isn't giving me sufficient choice to do so. Surely you wouldn't agree that everyone wanted only a black Model T when Mr Ford was making them. (This is the prelude to us agreeing that a less-regulated approach to urban develpment might encourage niche producers.)
Posted by: Jon Ihle | July 05, 2006 at 12:12 AM
Well the first thing I would say is that I do agree with this
a less-regulated approach to urban develpment might encourage niche producers.
Just a few other points:
do you not think we might have had several approximations of these types of neighbourhoods if developers weren't corruptly getting all kinds of land rezoned where they could buy it cheap, thereby encouraging the very sprawl that militates against the kind of core urban living everyone actually seems to like?
I don't think that "encouraging sprawl" follows from "buying it cheap". If someone gives you, say, a VW Passat for next to nothing, you're not going to sell it on cheap just because you got it cheap. You'll sell it for whatever the market price is for that car, especially so if you are a "greedy developer". So, you're going to try and get the best "yield" for that land no matter what it cost you. If it were genuinely true that people abhor lower density semi-d sprawl and prefer higher density, townhouses, apartments, etc. developers would be missing an amazing profit opportunity as you get a much better yield with the latter. I don't think you want to find yourself making the claim that such greedy developers don't know how to make money.
Your last sentence begs the question that "everyone actually seems to like" "core urban living". How do you know this? I'm inferring from your above comments that the evidence for this is that house prices in Ranelagh or Sandymount are high. But this is surely a "niche product". What percentage of Dubliners can afford to buy a house in Ranelagh? Isn't it the case that you are looking at a small and highly priced section of the market and generalising from it? To use the example above, this is like generalising about Irish motorists preferences from the market for prestige German cars.
Further, couldn't it be the case that what they like about Ranelagh has an awful lot to do with its location - perhaps even all those attractive amenities, restaurants, cafes, shops etc.are a function of the relatively wealthy residents selected for by the high prices - and they merely tolerate the facts that their garden is small/nonexistent, there isn't a lot of car parking and they are pressed cheek by jowl with their neighbours.
In any case, there are a number of advantages to a standard 3 bed semi and this is the main reason they remain so popular: You share only one party wall with a neighbour, so potential problems of teenagers playing music really loudly or bickering/fighting couples are reduced by half. Secondly you tend to have a decent sized garden for kids to run around in and plenty of (Irish? maybe this is a cultural thing?) people are more comfortable watching their kids run around their own garden (while they can do whatever they are doing at home) than watching them run around a park. You will usually have two parking spaces.
Now, this is not to "sell" 3 bed semi-ds - personally, I'm not a fan: I've never lived in a semi-d and I don't tend to include them in any residential developments I design - rather to point out that the main reason you see them is that's what a lot of people want.
actually don't really want to live where I am, but I've got to live somewhereand this is where I am.
Who says you have to own the house you live in? Isn't that a decision (another might one car versus two cars or no car) you have made which constrains the choices you have.
If you think houses in the middle-class price range* within commuting distance of Dublin for a two-job family with one car (i.e. dependent on public transport) exhibit any kind of variety in terms of style, location, density and street lay-out, you should come down from Louth more often.
Well, I do get down every now and then and I am quite familiar with housing in Dublin - I do read Irish Architectural magazines and (admittedly idly) flick property supplements in the sundays. But that's not the claim I made. I merely pointed out that there is a much wider range of housing available and it tends to be of better quality than its 1980s counterparts. That's not to say that it is all "affordable". But there is, as you know, a property boom at the moment. It's either a bubble or a reflection of the restriction on supply of new building land and represented by increasing regulation) while there is increasing demand or, more likely, a combination of the two. If it's a bubble, all you need to do is sell your house, rent for a while, wait for the crash and then pick up a Ranelagh pad for a steal, otherwise you'll have to hope for planning, zoning and regulation to be liberalised (which would be a reversal of the recent trend). But note also that the proponents of the type of higher density "core urban living" you prefer tend to argue the opposite - that this can be achieved by further regulation.
it's not exactly possible to make my preferences known in the market if the market isn't giving me sufficient choice to do so. Surely you wouldn't agree that everyone wanted only a black Model T when Mr Ford was making them.
I suppose this is the disagreement which precedes our agreement above. I don't agree that there is insufficient choice, there's always choice (including the choice not to buy) it's just that with the set of preferences anyone might have, when resources are in any way limited, those preferences get ranked and traded off against other preferences. If you have preferences for owning where you live, maintaining a car, a short commute, a garden, a decent school, and a limit on the proportion of your income to go towards mortgate costs, a preference for paying off that mortgage by a certain period. These get ranked, however reluctantly, above your preference for, say, a ten minute stroll into work by the canal. The fact that there is a property boom just means that there are harder tradeoffs, it doesn't mean that there is only one product, one sizefits all for everyone.
* - Incidentally, what price range do you have in mind? I have a funny feeling I'm better informed on this than you are because many commuters live up here and I'd be willing to bet that property prices here are significantly lower than they are in Bray
Posted by: Frank McGahon | July 05, 2006 at 10:29 AM
Just to clarify, when I said I never lived in a semi-d I don't intend to give the impression that I've only ever lived in mansions. I've lived (i.e. for at least a month) in 20 different houses or flats, the smallest of which was a (shared) bedsit.
Posted by: Frank McGahon | July 05, 2006 at 10:35 AM