City Hall Forbids Developer from Giving Consumers What They Want

bird's eye view photo of gray road

Lee Friday – October 7, 2019

Politicians habitually promise us greater economic prosperity, but their official policies usually contradict their promises. And if you dare to point out this contradiction, you will be ignored, as happened recently in London, Ontario.

First, let’s consider the source of economic prosperity.

Economic Prosperity is Driven by Entrepreneurs and Consumers

John, an entrepreneur, leases a building, buys materials, and hires workers to produce washing machines. If he is profitable, this means he has taken various factors of production – labour, raw materials, land (the building) – and combined them in such a manner that they are worth more as washing machines than the sum of their parts i.e. more than what he paid for them. He has created wealth. The new washing machines raise the standard of living of his customers. Profits are the market’s way – the consumers’ way – of telling John to continue doing what he is doing. He is using resources efficiently. Economic prosperity rises.

In contrast, losses mean that John has taken these various factors of production and combined them in such a manner that they are worth less as washing machines than the sum of their parts i.e. less than what he paid for them. He has destroyed wealth. Losses are the market’s way – the consumers’ way – of telling John to stop doing what he is doing. He is wasting resources.

Thus, economic prosperity flows from the efficient allocation of resources as determined by consumers in an unhampered market.

Economic Prosperity According to Government

In contrast, politicians believe the most efficient way to allocate resources is with arbitrary political edicts. Case in point: City Council in London, Ontario refused a request to amend a zoning by-law to extend the Temporary Use of a developer’s (Bradel Properties) downtown property as a commercial parking lot.

City Hall’s report emphasizes “efficient use of land and resources” and says continued use of the parking lot discourages future development. Acceptable downtown development, according to City Hall, includes “retail; service; office; institutional; entertainment; cultural; high density residential; transportation; recreational; and open space uses.” However, “transportation” does not include parking lots because (report p 6):

The long-term use of the subject property as a commercial parking lot encourages vehicle trips to the downtown, which is inconsistent with the aforementioned PPS policies.

Accommodating cars is inconsistent with the government’s policy of promoting “transit-supportive” development, based on concerns about climate change. Whether you agree or disagree with the government, it is clear that these policies do not encourage development, nor do they make the most efficient use of land and resources.

In most cities, cars are a far more efficient mode of transportation than the government’s public transit system. If development does not accommodate cars, development will be slow or non-existent. According to one major developer:

The most important reason London has 700,000 sq. ft. of vacant office space in the downtown is because we do not have enough convenient parking,” said Shmuel Farhi, a top core property owner. “Every spot lost means one less potential new downtown worker.

Moreover, John Fleming, London’s bureaucrat in charge of planning, admitted:

It would be a lot easier if we knew that once parking lot permission is withdrawn, somebody would by default develop the land. We know that that’s going to take some time, and in that time, we’re going to potentially have a vacant piece of land that’s not being used.

Exactly! Fleming’s comment reveals the ignorance of City Hall’s claim that continued use of the parking lot discourages future development. Developers are always highly incentivized to identify superior opportunities. They do not need the government to encourage them. If Bradel believed an opportunity was available to better satisfy the preferences of consumers (i.e. higher profits than the parking lot), the property would have already been developed accordingly.

Forbidding the parking lot (a) penalizes consumers, and (b) restricts further capital accumulation (parking revenue) by Bradel, which, contrary to Council’s plan, may hinder future development, and (c) does not magically create other opportunities in the marketplace. As Patrick Clancy (Bradel’s lawyer) told the Planning & Environment Committee (video 1:09:20): “To this point, the market has not dictated redevelopment of that property.”

The committee ignored Bradel’s assessment of the market, choosing instead to remind Bradel that City Council had previously notified them there would be no more temporary extensions for the parking lot. Councillor Maureen Cassidy (1:14:25): “We made our preference very clear.” Councillor Stephen Turner (1:15:05): “This shouldn’t come as much of a surprise.” The following week, Council unanimously rejected Bradel’s request.

Apparently, since Council feels they gave Bradel sufficient notice, any discussion about the realities of the marketplace is irrelevant. But as downtown parking facilities become scarce, so too will the profits of downtown merchants. Perhaps, sometime in the future, as they witness the last car leaving the downtown area, City Council will celebrate the fact that they presided over the transition of the downtown to a ghost town. As developer Shmuel Farhi said: “The market drives development, not hopes and wishes.”

Can You Plan Your Own Life?

The pinnacle of economic prosperity is achieved only when consumers and entrepreneurs are free to plan their own affairs through voluntary, unfettered association. Any manner of government intervention in these affairs is economically regressive. As George Reisman wrote (p 137–38):

The overwhelming majority of people have not realized that all the thinking and planning about their economic activities that they perform in their capacity as individuals actually is economic planning. By the same token, the term “planning” has been reserved for the feeble efforts of a comparative handful of government officials, who, having prohibited the planning of everyone else, presume to substitute their knowledge and intelligence for the knowledge and intelligence of tens of millions, and to call that planning. This is an incredible state of affairs, one which implies the most enormous ignorance on the part of the great majority of today’s intellectuals, from journalists to professors.

The profit motive ensures the most rational and efficient allocation of capital and of every type of labor and material among its possible alternative uses, and makes the economic system respond to changes in economic conditions in the most rational and efficient manner possible.

The attitude of Councillors Cassidy and Turner reflects the paternalistic attitude of most politicians, which is that the rest of us are far better off by acquiescing to their expertise, as well as that of their comrades in the bureaucracy. However, as economist/historian/philosopher Murray Rothbard points out:

… the proponents of government intervention are trapped in a fatal contradiction: they assume that individuals are not competent to run their own affairs or to hire experts to advise them. And yet they also assume that these same individuals are equipped to vote for these same experts at the ballot box.

Image source: Robert Ruggiero on Unsplash

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