Tuesday, July 29, 2014

The absolute advantage fallacy in land use planning

If there is one thing in which I agree with Paul Samuelson, that would be that comparative advantage is the most important but also most misunderstood concept in economics. We know that this concept is not well understood by trade policy designers. That's not a surprise. But, what I came to realize today is that this concept is poorly understood by our land use planners as well.

Land use planners argue that "prime agricultural land" should be zoned for agriculture. But, "prime agricultural land" may also be even "primer" land for commercial buildings or some other purpose. This land may have a comparative advantage as commercial space, despite it being the best agricultural land.

Similarly, even though I may be the best heavy duty industrial cleaner in southwestern Ontario, my comparative advantage is not in heavy duty cleaning but in economic research and teaching. Just because I am a "prime industrial cleaner" does not mean that I have to be legally required to be an industrial cleaner. Just because some land is "prime agricultural land" does not mean that this land has to be legally zoned as farmland.

No comments:

Post a Comment