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Why are skyscrapers so short?

Summary:
Brian Potter has a delightful primer on the physical, economic and regulatory barriers to building height beginning with the Great Pyramid of Giza and running to today. He concludes that the limit today isn’t technological–we could build much higher–but regulatory: …we can estimate the magnitude of building height restrictions by comparing the cost of rent to the marginal cost of adding an additional floor. When Glaeser et al. 2005 did this for Manhattan, they found that the cost of rent was approximately twice the marginal cost of an additional floor, concluding, “the best explanation for why [developers] do not take advantage of this opportunity is the reason they tell us themselves: New York’s maze of building regulations effectively cap their building heights.” Cheshire et al.

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Why are skyscrapers so short?Brian Potter has a delightful primer on the physical, economic and regulatory barriers to building height beginning with the Great Pyramid of Giza and running to today. He concludes that the limit today isn’t technological–we could build much higher–but regulatory:

…we can estimate the magnitude of building height restrictions by comparing the cost of rent to the marginal cost of adding an additional floor. When Glaeser et al. 2005 did this for Manhattan, they found that the cost of rent was approximately twice the marginal cost of an additional floor, concluding, “the best explanation for why [developers] do not take advantage of this opportunity is the reason they tell us themselves: New York’s maze of building regulations effectively cap their building heights.” Cheshire et al. 2007 found similar magnitudes of rent-to-cost ratios in a variety of major European cities. When Glaeser et al. tried to estimate the size of building height externalities in New York, they concluded it was nowhere near the magnitude of the rent/construction cost difference, suggesting current height limits are far stricter than necessary.

These building height restrictions make us all poorer – not only do they cause a deadweight loss by artificially restricting the supply of available building space where it’s needed the most, but they also screen off the potential agglomeration benefits that accrue from increased density. This makes workers and businesses less productive and innovative than they could be, which not only hurts them, but everyone else who would benefit from cheaper and better goods and services.

The upshot is that there’s a lot of low-hanging fruit in building taller buildings. We don’t need to invent any new technology for pushing the boundaries of what’s possible to build, we just need to stop getting in our own way.

I concluded the same thing when I looked at building height in Mumbai, India. This video also contains a very nice explanation of the Floor Space Index also known as the Floor Area Ratio.

The post Why are skyscrapers so short? appeared first on Marginal REVOLUTION.

Alex Tabarrok
Alex Tabarrok is Bartley J. Madden Chair in Economics at the Mercatus Center at George Mason University and a professor of economics at George Mason University. He specializes in patent-system reform, the effectiveness of bounty hunters compared to the police, how judicial elections bias judges, and how local poverty rates impact trial decisions by juries. He also examines methods for increasing the supply of human organs for transplant, the regulation of pharmaceuticals by the FDA, and voting systems.

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