The Supply of Urban Space

Summary

In this video script, Edward Glaeser explores the supply of urban space in Gotham, starting with the assumption that all homes are identical from a buyer's perspective. He explains that builders face varying costs for different building sites, leading to a supply curve that starts with the cheapest sites. The script then broadens the discussion to include various methods of adding living units, such as single-family homes or high-rise apartments, emphasizing that the supply curve always slopes upward as cheaper units are built first. Construction costs are highlighted as a key factor influencing the supply curve's position, with higher costs shifting the curve upward and lower costs shifting it downward.

Takeaways

• 🏙️ The discussion focuses on the supply of living space in a city, specifically Gotham.
• 🏡 It's assumed that from the buyer's perspective, all homes are identical, but from the builder's perspective, building costs vary by site.
• 📈 The supply of space is visualized by ordering building costs from lowest to highest, creating a supply curve.
• 🌐 The supply curve represents the cost of building additional units, starting with the cheapest and moving to the most expensive.
• 🔄 The supply curve is influenced by the number of potential building sites, which is assumed to be 2 million in Gotham.
• 📊 The supply curve is initially depicted as a series of bars representing individual building costs, which are then 'smooshed' together to form a continuous curve.
• 🏢 Different types of living units, such as single-family homes, second stories, or high-rise apartments, are considered part of the supply.
• 💲 The supply curve's position can shift based on construction costs; higher costs lead to an upward shift, while lower costs shift it downward.
• 🏗️ The script simplifies the building process by ignoring complexities like the necessity of building lower stories before adding upper ones.
• 🌟 The supply of urban space is ultimately a function of construction costs, which can vary greatly depending on the location and regulations.

Q & A

What is the primary focus of the discussion in the script?

The primary focus of the discussion is the supply of living space in a city, specifically Gotham, and how it is influenced by the costs of building on different sites.

Why does the script suggest thinking of the city as being built all at once?

The script suggests thinking of the city as being built all at once to simplify the concept of supply by assuming builders deliver exactly the number of homes that will find buyers, although it acknowledges that reality is more complex.

What does the script imply about the perspective of buyers and builders regarding homes?

From the buyers' perspective, the script implies that all homes are identical, while from the builders' perspective, different sites have different building costs.

How many possible sites for homes are mentioned in the script?

The script mentions that there are 2 million possible sites for homes in the city.

What is the significance of ordering building costs from cheapest to most expensive?

Ordering building costs from cheapest to most expensive helps in visualizing the supply curve, as it logically follows that cheaper, easier sites will be developed first.

What does the script refer to as the 'supply curve'?

The 'supply curve' in the script refers to a graphical representation that shows the relationship between the cost of building and the quantity of housing units supplied, starting from the lowest cost sites.

How does the script address the variety of housing types in a city?

The script acknowledges the variety of housing types by considering different ways to add living units, such as single-family homes, second stories, or additional floors to high-rise buildings.

What assumption does the script make regarding the addition of housing units?

The script assumes that the price for each possible additional housing unit can be determined without worrying about the complications in building, such as the necessity of building lower floors before adding higher ones.

Why does the supply curve always go up according to the script?

The supply curve always goes up because it reflects the logical progression of development, where cheaper units are built before more expensive ones.

How does the cost of construction in Gotham affect the supply curve?

If construction costs are higher in Gotham, the supply curve will shift upward, indicating that more expensive sites are needed to meet the demand. Conversely, if costs are lower, the supply curve will shift down.

What does the script suggest about the relationship between construction costs and the supply of housing?

The script suggests that the supply cost is a function of construction costs, and that changes in these costs will affect the position of the supply curve, influencing the types of housing that are economically viable to build.