I am sort of confused about the economics of city building, maybe on of you could help me out.
Let's say a city is worth X. X is probably a pretty big number considering all the infrastructure and revenue a city produces. Then Y is the amount of money it would cost to rebuild that city. Y can also be seen as "how bad do you really want it?" Obviously if Y is greater than X you just scrap the city and start over somewhere else. It also seems to indicate (to me, at least) that the value of the city is X+Y or the "actual" value of the city plus "how much do you really want it?" As it appears that no one is really talking about scrapping New Orleans just yet, which would indicate that cities are hugely undervalued. If there is enough capital to rebuild the entire city from scratch (almost) then the New Orleans market was hugely undervalued for all those years that it was not underwater (and thus every other major city). Is the "market" on N.O. that off-base or has it really been accounting for this risk all along?
Blackbird singing in the dead of night
13 years ago
7 comments:
Especially when the market gets flooded.
'Then Y is the amount of money it would cost to rebuild that city. Y can also be seen as "how bad do you really want it?" '
zev, i am going to swallow my general distaste for this sort of everything-has-a-simple-number business for just long enough to point out that, as far as i can see, "how much do you really want it" is part of X, not of Y. if the whole point of setting a number of these two is to compare them and see if X > Y, then how much people want the city should be on the X side (mitigating for building), no?
good shabbos.
"Let's say a city is worth X."
Sure, Jerusalem is worth X and I'll build my homeland in Uganda, given the right financing package, of course.
Actually, there is speculation about scrapping N.O. but maybe not folks who feel it's home.
For more economics, check out the Business Week editorial at my site. good shabbes,
Against my better judgment, look at:
Should New Orleans be rebuilt?
Your welcome (?), ;>
K
Thanks Kaspit, Rachel Soloveichik also blogs about the same issue.
I guess my question is, where does the money come from to rebuild? Has there just been a surplus of cash lying around waiting to rebuild after a disaster?
Sarah, in deference to Sam I will just talk about one house for the moment. If you buy a house for $100, but are willing to pay another 100 to rebuild doesn't that mean that your house was undervalued (i.e. you were willing to pay more)?
But if you lose the candy bar before you eat it and buy another, then you would have been willing to pay $2 at the onset.
ummm... in my infinite ignorance on all things economical, i believe the phrase we are all dancing around is "sunk costs are sunk."
anyhow, zev:
if you lose the candy bar/house/whatever, it doesn't turn out that you were willing to pay $2 for the candy bar. rather, somehow you were tricked by fate to spend $1 on nothing, you feel like an idiot about it for a few seconds, and now you are faced with exactly the same initial decision: to buy a candy bar for $1 or not. the only difference is that you are now $1 poorer.
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