Friday, January 16, 2009

The High Cost of Subsidies

This interesting article by Stacy Mitchell discusses the rise and fall of suburban big box retail stores. Her prescription for preventing this problem in the future implicitly identifies the cause on a lack of strict local government land-use regulations.

The only way to ensure that the coming wave of deserted stores and shopping centers does not become a persistent blight on the landscape and a drag on local economies for decades to come is for cities, working together across metro regions, to sharply limit what can be built on undeveloped land.

Mitchell makes it seem like the problem this whole time has been lazy local governments who, if they were only more vigilant, could craft perfect little cities. What Mitchell ignores, however (but which a commenter to the article points out), is the very active role that local governments played in subsidizing just the type of development she decries. Walmart alone has received over $1 billion in subsidies, and it's not uncommon for a big box development to benefit from some sort of tax break or even some unethical use of eminent domain. Talk about distorting the market...

The problem isn't lazy local governments, but rather overly-active local governments.

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