Pages

Sunday, July 23, 2017

Urban Economics in the New York Times

While the Sports Section doesn't have any new NBA news, the NY Times has published two really interesting pieces related to major themes in urban economics. One focuses on the garbage problem in the NYC subway and the other examines the challenge of high property tax payments (as a function of current market value) in Detroit due to falling home prices combined with "sticky" earlier property value assessments.

Subways and the Tragedy of the Commons -- some cities such as Washington DC ban food eating on the subway.  This imposes private costs on busy commuters but offers social benefits as the common space is less disgusting.  In NYC, "anything goes".  The NY Times ignores one point here.  The article highlights that "industrial" vacuum cleaners are expensive but it fails to note that due to aggressive public sector unions that garbage workers are also expensive ($144,000 is good money).  It is possible that the city doesn't hire as many garbagemen as it would had it been able to pay market (i.e lower) wages for this help.   Read our 2015 NBER paper on public sector bus driver compensation and my 2017 California paper.  

Detroit --- The New York Times tells a behavioral economics story.   Poor people who are home owners in Detroit aren't aggressive in having their home re-assessed due to inertia and this anchoring has caused them to pay "too high" property taxes.  Permit me to explain.  Suppose your home is assessed at a value of $80,000 and you face a 1% property tax so your annual payment to the city is $800.  Now market forces lead the price of your home to fall to $50,000.   If your home isn't reassessed, then you are now paying 800/50,000 > 1% while more "with it" individuals will have their homes reassessed.  The NY Times author is arguing that this process should be automatic.  This is an interesting economic incidence point that those who are slow to demand reassessment are stuck with a larger % of the tax bill as prices fall.   This would be a nice future research topic for those who study behavioral economics and public finance.