The Political Economy of “Less Is More”

Nemo Incognito writes a great note today on a topic I have spent a fair amount of time wondering about, namely the possibility of a secular decline in “stuff”. He points out that the proliferation of gadgets and appliances that took place towards the end of the 20th century has been replaced by a paring-back and replacement with more general-purpose devices supplemented by services. For example, replacing a desktop + laptop combo with a tablet and a proliferation of paper notes with Evernote. Beyond simply electronics, a car can be supplemented by Uber/Lyft and Zipcar. I’ve written about this in terms of “asset efficiency”.

This trend is unmistakable in American society, with technophiles like Nemo representing the leading edge. The much-discussed trend of Millenials moving to cities is part of this; replacing capital-centric consumption (big hosue in the suburbs) with experiential consumption (New York in September). Even without a truly cornucopian economy, if you assume a certain amount of technologic consolidation along with a slowing rate of population growth, the US economy is likely to need fewer capital-intensive goods in 2033 than in 2013.

In America, who are likely to be the big losers in such a situation? Nemo points to the growing economies of Asia that supply all those capital-intensive goods, which is true as far as it goes. Domestically, it would be the capital-intensive producers. Consumer-goods producers will have to adjust, but the Fords of the world will survive – they have outsourced all of that stuff to smaller contractors who will be hammered until a new equilibrium emerges. The locus of the hurt will probably be large companies who either engage in capital-intensive extraction or production, like the loggers and miners Nemo mentions. If distributed solar truly takes off, the power companies will be the absolute hardest-hit and will be nationalized en masse.

What are the political-economic consequences likely to be? One would expect that the most-affected companies will attempt to fight back by non-market means. Regulatory weapons are powerful, and these producers should be funneling money to opponents of greater density – urbanization is a threatening force to them. Minimum home size and lot size requirements, along with required on- and off-street parking, are the best friends of the power companies, the manufacturers, and the resource-extractors alike. Obviously, rules meant to protect “neighborhood character” should be marshalled against residential solar panels.

Incidentally, these measures are sacred principles of American land-use policy today. So it should be fairly easy to paint rank and odious rent-seeking policies as “American values”. Perhaps that happens today; it should be fairly easy for the Chamber of Commerce to slip just enough dollars into local elections. If they don’t do that, they ought to consider it.

If anti-density measures are also a form of rent-seeking, that might be the best explanation for the higher prosperity of dense metros. Richard Florida and many others suggest that “agglomeration effects” drive this; but it might just be avoiding the deadweight loss caused by all sorts of market-distorting land-use measures. Could be a good topic for research.


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