Thanks for writing, I love the idea of Coase-ification for rules like small livestock or electricity utilities. Really fun concept for improving a subset of land use regulations, well worth experimentation. And as someone who spends a lot of time reading obscure zoning codes for work, a federal land use map would have clear benefits
However, Coase-ification wouldn’t solve the biggest drivers of NIMBYism against larger-scale development because transaction costs are too high and homeowners often have non-monetary priorities that preclude negotiation. The most commonly cited complaints about externalities from new housing like congestion, noise, views, shadow, and such could all be Coase-ified, but they’d make property rights assembly insanely hard and risky. Developers already mostly avoid projects that involve assembling two adjacent lots bc it takes too long to buy the lots, and if one property owner finds out they can jack up the price. Often comes with high carrying costs. Assembling a set of tradable property rights would be much harder, especially for median or large projects like a mid-rise in a city that would have to negotiate with many neighbors simultaneously. Which gets to the second problem: Oftentimes no amount of monetary compensation will buy out a neighbor. A hypothetical retired homeowner with plenty of savings—maybe the most prominent NIMBY demographic, at least in places like California—will have unlimited value on the most trivial of amenities bc they receive a very low marginal utility from money and don’t want to move
I understand you’re proposing experimentation, not the overnight imposition of all these property rights. Just thinking through the limits of Coase-ification to solve the housing shortage specifically, even in a more efficient digitized land use system
So a lot would depend on how it was implemented, with a pervasive trade-off between (a) more comprehensive definition of property rights in externalities, resulting in more protection but also more gridlock, and (b) less comprehensive definition of property rights, which would facilitate more action but also resulting in more "casualties" where someone would have liked to veto, or get compensation for, a project that harms them in some way, but couldn't because the rights weren't defined in a way that includes them.
I don't want to prejudge the outcomes because part of the beauty of the market mechanism is that we don't *know* what the efficient outcome is, and markets enable a decentralized discovery of it. That said, your comment helps me crystallize a thought that a likely outcome might involve some "leapfrogging," where NIMBY gridlock would still hold back development in some historic city centers, while places where the rights are less dense, or where the holdup problems just don't happen to emerge, would suddenly emerge as new foci of development. Which might actually be optimal... or, if not optimal, might be pretty good.
Modern compute makes Coase-ification viable on a scale that it previously wasn't. But that doesn't mean the emerging markets in Coase-style externality rights will operate with perfect efficiency. Still, capitalism is pretty clever in coming up with creative workarounds, once it's properly unleashed.
Thanks for writing, I love the idea of Coase-ification for rules like small livestock or electricity utilities. Really fun concept for improving a subset of land use regulations, well worth experimentation. And as someone who spends a lot of time reading obscure zoning codes for work, a federal land use map would have clear benefits
However, Coase-ification wouldn’t solve the biggest drivers of NIMBYism against larger-scale development because transaction costs are too high and homeowners often have non-monetary priorities that preclude negotiation. The most commonly cited complaints about externalities from new housing like congestion, noise, views, shadow, and such could all be Coase-ified, but they’d make property rights assembly insanely hard and risky. Developers already mostly avoid projects that involve assembling two adjacent lots bc it takes too long to buy the lots, and if one property owner finds out they can jack up the price. Often comes with high carrying costs. Assembling a set of tradable property rights would be much harder, especially for median or large projects like a mid-rise in a city that would have to negotiate with many neighbors simultaneously. Which gets to the second problem: Oftentimes no amount of monetary compensation will buy out a neighbor. A hypothetical retired homeowner with plenty of savings—maybe the most prominent NIMBY demographic, at least in places like California—will have unlimited value on the most trivial of amenities bc they receive a very low marginal utility from money and don’t want to move
I understand you’re proposing experimentation, not the overnight imposition of all these property rights. Just thinking through the limits of Coase-ification to solve the housing shortage specifically, even in a more efficient digitized land use system
So a lot would depend on how it was implemented, with a pervasive trade-off between (a) more comprehensive definition of property rights in externalities, resulting in more protection but also more gridlock, and (b) less comprehensive definition of property rights, which would facilitate more action but also resulting in more "casualties" where someone would have liked to veto, or get compensation for, a project that harms them in some way, but couldn't because the rights weren't defined in a way that includes them.
I don't want to prejudge the outcomes because part of the beauty of the market mechanism is that we don't *know* what the efficient outcome is, and markets enable a decentralized discovery of it. That said, your comment helps me crystallize a thought that a likely outcome might involve some "leapfrogging," where NIMBY gridlock would still hold back development in some historic city centers, while places where the rights are less dense, or where the holdup problems just don't happen to emerge, would suddenly emerge as new foci of development. Which might actually be optimal... or, if not optimal, might be pretty good.
Modern compute makes Coase-ification viable on a scale that it previously wasn't. But that doesn't mean the emerging markets in Coase-style externality rights will operate with perfect efficiency. Still, capitalism is pretty clever in coming up with creative workarounds, once it's properly unleashed.