[onequestionwonder]

Exactly what it says.

There are more wrinkles in this question than may be obvious I think. Some things may be cheaper in a big city. I was once told by someone from NYC that if you shopped around "everything is cheaper, except a place to live."

I understand why real estate is larger in big cities. But shouldn't things like a 6-pack of beer or electricity be cheaper than in a rural town far from the nearest power station in Nevada?

Sometimes I think things are truly priced on a what the market will bear basis. You aren't going to sell many 8$ 6-packs in a small town in Alabama. They won't blink an eye in Washington DC.

If cities have energy efficiency advantages, shouldn't we see some of it in prices?

Any insight is appreciated.

[Fergus]

$this->bbcode_second_pass_quote('onequestionwonder', 'E')xactly what it says.

There are more wrinkles in this question than may be obvious I think. Some things may be cheaper in a big city. I was once told by someone from NYC that if you shopped around "everything is cheaper, except a place to live."

I understand why real estate is larger in big cities. But shouldn't things like a 6-pack of beer or electricity be cheaper than in a rural town far from the nearest power station in Nevada?

Sometimes I think things are truly priced on a what the market will bear basis. You aren't going to sell many 8$ 6-packs in a small town in Alabama. They won't blink an eye in Washington DC.

If cities have energy efficiency advantages, shouldn't we see some of it in prices?

Any insight is appreciated.

[platinum]

This is actually a very interesting question!

If one looks at this question on a purely logical basis one comes to the conclusion that many/(most?) things should be cheaper in big cities due to economies of scale and sharing of resources. Gasoline should be cheaper because of economies of scale. There is more sharing of streets, electrical wires, phone wires and many other things and this should lead to lower prices in a host of areas.

Large buildings are fundamentally more energy efficient with respect to heating than smaller buildings due to volume increasing via a cube and surface area via a square. Same goes for larger animals (easier to keep warm). As a building (or animal) gets bigger the volume increases faster than the surface area and that means larger things retain heat better. Water use is more efficient in big cities also - less distance to transport and less loss in transport. The list goes on and on.

It seems obvious that city living is fundamentally less expensive in a number of ways than suburban or rural living.

But now lets switch to the emotional level. It's just obvious that city living is *more* expensive than suburban or rural living isn't it? - just look around! Here in Chicago the price of gas increases as you get closer to the city center and decreases as you go outward. Same for food and just about everything else. Every other city that I know of is the same way. If you think to dinner table conversation you would be at risk of making a fool of yourself if you posited that things are "fundamentally less expensive" in big cities because it's so obvious that things are not. You get a gut feeling/emotion that *of course* things are more expensive in big cities, that if you venture into one or live in one you better be prepared to pay more for everything.

And this gets us to the crux of this dichotomy. Here is my opinion - human territorial instinct is so powerful that it trumps the economies of scale and sharing benefits of city living. The common idea that cities are expensive because "lots of people want to live there" is not really right: cities are expensive because the people who build and inhabit them are willing to pay a high price to keep others out and protect their investments. Numero uno in protecting their investments is keeping real estate prices high. It's a hell of a lot harder to put up a building or any kind of real estate in a big city than in a suburb. You face *much* more opposition in a big city! - more territorial humans fighting new development than in a suburban or rural environment.

A classic case of this is the "Westway" project in New York City which was proposed in the mid 60's as a way to address the severe shortage of middle class housing in that city. It was fought tooth and nail by interests linked to the wealthy and was ultimately defeated. Middle class schoolteachers, accountants, bus drivers and so forth are exactly the *last thing* that the super wealthy in NYC wanted moving in right next door - those kind of people would diminish the value of their investment. They wanted to keep that section of the city the exclusive preserve of CEO's, investment bankers, Hollywood stars and so forth - and they did.

This is not a bash on NYC. Looking at prices worldwide one can see this is pretty universal - Tokyo, Moscow, Berlin, Buenos Aires, and on and on. It's pretty much the same thing in all of those places: the movers and shakers occupy the best spots in these cities and pay a steep premium to keep the prols out.

In a nutshell city living is more expensive because territorial humans require a steep toll to be part of the club.

[Fergus]

$this->bbcode_second_pass_quote('platinum', 'T')his is actually a very interesting question!

If one looks at this question on a purely logical basis one comes to the conclusion that many/(most?) things should be cheaper in big cities due to economies of scale and sharing of resources. Gasoline should be cheaper because of economies of scale. There is more sharing of streets, electrical wires, phone wires and many other things and this should lead to lower prices in a host of areas.

Large buildings are fundamentally more energy efficient with respect to heating than smaller buildings due to volume increasing via a cube and surface area via a square. Same goes for larger animals (easier to keep warm). As a building (or animal) gets bigger the volume increases faster than the surface area and that means larger things retain heat better. Water use is more efficient in big cities also - less distance to transport and less loss in transport. The list goes on and on.

It seems obvious that city living is fundamentally less expensive in a number of ways than suburban or rural living.

But now lets switch to the emotional level. It's just obvious that city living is *more* expensive than suburban or rural living isn't it? - just look around! Here in Chicago the price of gas increases as you get closer to the city center and decreases as you go outward. Same for food and just about everything else. Every other city that I know of is the same way. If you think to dinner table conversation you would be at risk of making a fool of yourself if you posited that things are "fundamentally less expensive" in big cities because it's so obvious that things are not. You get a gut feeling/emotion that *of course* things are more expensive in big cities, that if you venture into one or live in one you better be prepared to pay more for everything.

And this gets us to the crux of this dichotomy. Here is my opinion - human territorial instinct is so powerful that it trumps the economies of scale and sharing benefits of city living. The common idea that cities are expensive because "lots of people want to live there" is not really right: cities are expensive because the people who build and inhabit them are willing to pay a high price to keep others out and protect their investments. Numero uno in protecting their investments is keeping real estate prices high. It's a hell of a lot harder to put up a building or any kind of real estate in a big city than in a suburb. You face *much* more opposition in a big city! - more territorial humans fighting new development than in a suburban or rural environment.

A classic case of this is the "Westway" project in New York City which was proposed in the mid 60's as a way to address the severe shortage of middle class housing in that city. It was fought tooth and nail by interests linked to the wealthy and was ultimately defeated. Middle class schoolteachers, accountants, bus drivers and so forth are exactly the *last thing* that the super wealthy in NYC wanted moving in right next door - those kind of people would diminish the value of their investment. They wanted to keep that section of the city the exclusive preserve of CEO's, investment bankers, Hollywood stars and so forth - and they did.

This is not a bash on NYC. Looking at prices worldwide one can see this is pretty universal - Tokyo, Moscow, Berlin, Buenos Aires, and on and on. It's pretty much the same thing in all of those places: the movers and shakers occupy the best spots in these cities and pay a steep premium to keep the prols out.

In a nutshell city living is more expensive because territorial humans require a steep toll to be part of the club.

[jaws]

$this->bbcode_second_pass_quote('onequestionwonder', 'I') understand why real estate is larger in big cities. But shouldn't things like a 6-pack of beer or electricity be cheaper than in a rural town far from the nearest power station in Nevada?

[green_achers]

Jaws beat me to it. Real estate costs are the key. It's hard to find a half-million square feet for a big box in Manhattan.

[rwwff]

NYC is a very atypical situation. Physically very cramped, highly regulated, very expensive land.

In Houston, the movers and shakers live not but a couple miles from big box discount stores; and shop there without hesitation. Prices are largely the same, within the margin of the price games that retailers use to try and attract customers. But Houston has no physical boundary, nor even zoning, it just sorta piddles out around the edges.

[jaws]

$this->bbcode_second_pass_quote('rwwff', 'N')YC is a very atypical situation. Physically very cramped, highly regulated, very expensive land.

In Houston, the movers and shakers live not but a couple miles from big box discount stores; and shop there without hesitation. Prices are largely the same, within the margin of the price games that retailers use to try and attract customers. But Houston has no physical boundary, nor even zoning, it just sorta piddles out around the edges.

[rwwff]

$this->bbcode_second_pass_quote('jaws', 'Y')es but on the other hand, everyone wants to live in NYC, nobody wants to live in Houston.

[vision-master]

$this->bbcode_second_pass_quote('', 'S')ometimes I think things are truly priced on a what the market will bear basis. You aren't going to sell many 8$ 6-packs in a small town in Alabama. They won't blink an eye in Washington DC.

[Tyler_JC]

Y'all don't seem to understand how important rent is to a retailer.

If rent costs you more money, you must charge more for your product.

Not only must you pay more rent, but your employees demand higher wages.

Not only that, but the minimum wage of an urban area is sometimes higher than the minimum wage outside of the city. Also, states with large urban populations have higher minimum wages than states with mostly rural population.

Not only do the store clerks cost more money to hire, but think about the janitors, managers, etc.

Everyone involved in the business will demand higher wages than if that business was located in a cheaper place.

Take a look at the map of the various states' minimum wages. Urbanized states have higher wage requirements.

[onequestionwonder]

Something seems horribly circular about this whole thing.

People in cities get paid more because things cost more.

It's cheaper to ship goods to one location. Because it's cheaper to do this the land it's shipped to costs more.

Because of both of these facts things cost more and it is more expensive to live in a city. Even though it is more energetically efficient to to live in a city.

I'm tired and don't want to get another one of these political/economic arguments started. But it looks like to me the deadweight is in the property owners.

I once was computer admin at a commercial real estate firm that managed properties. I was talking to one of the accountants about the rent businesses paid for our properties and he said that "all of our businesses would be better off if they didn't have to deal with us." You could bring up maintenance of the property but businesses that owned their own sites didn't need us to take care of it, so why should our renters have been different?

Maybe it was a speculative venture, and they didn't want to pony up their own cash or couldn't get financing, but they didn't get any other benefits from us. Or they didn't have any choice since good retail sites don't grow on trees, and we weren't selling one unless there was something wrong with it.

What productive purpose do landowners serve? Is someone that owns an acre in New York City innately more productive than someone who owns an acre in North Dakota? And if they aren't, why is the owner in New York compensated so much more by what is supposed to be an efficient market?

You might say it is all luck. But the past century saw cities emerge that have no reason to exist. Los Vegas for one. If casino gambling had been legal in California I doubt anyone but a long haul trucker would have ever heard that name.

There is more to it than this though. There have been other economic systems, and I think (my opinion only) that the same pattern has been true, that it is more expensive and profitable for some to live in a city. Moscow and St. Petersberg were always the center of Russia even in the communist days. I'm sure the same cost pattern prevails in Europe, and always has. Ditto for the rest of the world and historical eras, though I'm definitely not doing any statistical research on this.

Maybe cities just innately concentrate the "profit" of any society's economic life.

[jaws]

$this->bbcode_second_pass_quote('onequestionwonder', 'S')omething seems horribly circular about this whole thing.

People in cities get paid more because things cost more.

[rwwff]

$this->bbcode_second_pass_quote('', 'W')hat productive purpose do landowners serve?

[platinum]

"NYC is a very atypical situation. Physically very cramped, highly regulated, very expensive land.

In Houston, the movers and shakers live not but a couple miles from big box discount stores; and shop there without hesitation. "

I think you are wrong. I think NYC is more typical and Houston the exception. Think Europe. Think Mexico City. Think East coast of US (Boston, Philly, Baltimore), think San Fransisco, Chicago.

Back to my point above: I think cities would be less expensive in almost every way if not for the (irrational, animalistic) territorial instinct in humans.

[platinum]

My opinion:

If humans were rational (they aren't) then almost everything would be cheaper in cities than in rural areas or suburbs.

One exception/clarification: real estate per acre would of course be more expensive but cost per square foot for apartment, condo space would be less. Most people in cities live in multi-story buildings - many high rises. If people were rational a 1500 sq ft condo would be less in NYC than in suburban Omaha. But people are far *far* from rational, they are very territorial and for this reason cities are artificially expensive.

[jaws]

$this->bbcode_second_pass_quote('platinum', 'M')y opinion:

If humans were rational (they aren't) then almost everything would be cheaper in cities than in rural areas or suburbs.

One exception/clarification: real estate per acre would of course be more expensive but cost per square foot for apartment, condo space would be less. Most people in cities live in multi-story buildings - many high rises. If people were rational a 1500 sq ft condo would be less in NYC than in suburban Omaha. But people are far *far* from rational, they are very territorial and for this reason cities are artificially expensive.

[cube]

I think Jaws is onto something here. It's not the job of an economist to decide how much "value" something has. That is a decision that rests upon an agreement between buyer and seller.
1) how much is a seller willing to sell something
2) how much is a buyer willing to pay for it

However an economist can certainly dictate the "financial" costs and consequences of an action.

Personally I would not drop a $million into a condo even if I had the money. But that's just me. I'd rather just rent.

[Narz]

There's been this argument for years on here about how cities are gonna have it worse than less urban areas as things continue down their merry way towards peakoil & climate change.

I think Sandy has helped debunk that. While NJ residents dealt with rationing & waited in 3-4 hour gas lines (often recieving no gas after stations ran out) and suffered electricity outages that still continue is some place Manhattan has been back up & running for days.

Cities are simply much, much more efficient. Simple as that. City residents don't depend on liquid fuel to get around day to day. Cities are much easier to keep essential goods & services coming to. NJ, Staten & some of the outer-boroughs lanquish but Manhattan can & will be taken care of. Whenever stuff gets bad incoming traffic into Manhattan will be limited & suburbanites will suffer most.

If you're living up in the mountains & growing 100% of your own food with tankers of excess fuel no worries. If you're going to live on the outskirts of a large city though you're better off being in it.

There simply isn't enough energy to maintain the suburban American lifestyle. However certain large cities (Washington, NYC) will be maintained by any means necessary.

Did anyone really expect differently?