Marx on McMansions, and "No One Makes You Shop at Wal-Mart"

A house may be large or small; as long as the neighboring houses are likewise small, it satisfies all social requirement for a residence.  But let there arise next to the little house a palace, and the little house shrinks to a hut.  The little house now makes it clear that its inmate has no social position at all to maintain, or but a very insignificant one; and however high it may shoot up in the course of civilization, if the neighboring palace rises in equal or even in greater measure, the occupant of the relatively little house will always find himself more uncomfortable, more dissatisfied, more cramped within his four walls.

That's Marx from Wage Labour and Capital, as quoted in Tom Slee's No One Makes You Shop at Wal-Mart.  McMansions evidently were getting people worked up as far back as 1849.

By the way, if you want an enjoyable, leftist-ish critique of markets, I recommend Slee's book.  It's an attack on "MarketThink," his vaguely Orwellian term for the belief that markets and consumer choice always produce the best result.  (The title of the book is ironic -- the people who say such things are his targets.)  His main point is that everyone's choices are tangled together, so that each person's choice affects everyone else.  As a result, there's no guarantee that even perfectly rational individual choices will make you happy.

Slee sets up his share of straw men.  Still, his book is a clean, elegant exposition of different types of market failures.  Some of them are almost trite, such as the "tragedy of the commons"-type market failure that causes congested roads and littered parks.  Others are fresher.  When buyers can't get reliable information about product quality until they buy the product, low-quality products may drive high-quality products out of the marketplace.  This, he claims, explains why fast-food restaurants, with their predictable but mediocre food, drive higher-quality local restaurants out of business.  Network effects may force consumers to choose sub-optimal products -- e.g., business people use Microsoft Word because everyone else uses it, not because it is necessarily very good word processing software. 

He uses McMansions to illustrate wasteful "arms races."   Over a certain size, he argues, homes are "positional" goods -- the only purpose of building a bigger house is to signal higher status (hence the Marx quote).  A homeowner who replaces a small home with a larger home triggers an arms race among his neighbors.  If the neighbors want to maintain their relative status, they must also replace their small homes with large homes.  They must do so even though they would not otherwise be willing to pay for the extra space.  Everyone is worse off.  (I've covered this argument before.)

The problem with this argument, of course, is that a larger home is not merely a positional good; there is real utility in having extra space, at least for many homeowners.  If you concede that, and you believe that status anxiety causes significant disutility, then replacing all of the small homes with larger homes may be the most efficient outcome, with the small homeowners who don't care about the extra space selling to buyers who do.  (I don't think this is true, but then I don't think status anxiety is a sound justification for regulation.)

The book's main flaw:  Slee argues that market failures justify "collective action," but he doesn't offer specifics, much less acknowledge that collective action comes with its own baggage.  For example, collective action through regulation tends to be captured by special interests.  When a Wal-Mart moves to town, the local shop owners have a large incentive to campaign against Wal-Mart.  The vast majority of the citizens may benefit from the Wal-Mart, but not enough to make a political fight worth their time.  Politicians may pander to the minority even when the vast majority would benefit more, on balance, than the small minority would lose.   

Further, collective action may fix short-term problems but freeze out better long-term solutions.  A Wal-Mart might inflict harm on a downtown in the short run, causing it to empty out.  It is possible, though, that the cheap space will provide an incubator for quirky stores or antique shops.  In the long run, the downtown may be revived as a vibrant environment, but this time populated with stores that do not compete with Wal-Mart.  The citizens may get to have their cake and eat it, too. 

Of course, this might not happen.  It is impossible to tell in advance.  What we do know is that freezing the status quo into place guarantees that better solutions won't evolve on their own.

Comments

[M1EK]

In towns small enough for Wal-Mart to kill downtown, I have never ever (not even once) seen the downtown recover. It always, 100% of the time, ends up being a monoculture of Wal-Mart and nothing but.

There are many many reasons to oppose RG4N and support the Lincoln plan. But this isn't one of them - Wal-Mart _is_ dangerous, just not for _us_ (we're big enough that there's room here for Wal-Mart and enough other choices that the monoculture will never take root).

[AC]

This isn't an RG4N v. Lincoln post, or even a Wal-Mart post. This is about the best way to handle public goods problems. The reflexive solution is regulation, but there's also an argument that it's sometimes better to let things work themselves out.

As for Wal-Mart, I bet I've spent a lot more time than you have in small towns -- I spend a lot of time in small-town courthouse squares, and I grew up in a small-town state (Mississippi).

The more vibrant a downtown is to begin with, the more likely it is to bounce back after a Wal-Mart opens. Places that really had something to begin with (e.g., Oxford Miss.) took a hit but then recovered and now are doing even better. The downtowns in Oxford, Wimberly and Fredericksburg are true examples of "public goods" that people want to protect, but they are the places that can weather (or at least recover from) a Wal-Mart just fine.

Most small towns did not have much pre-Wal-Mart, and no one would ever think of calling their downtowns a "public good." Post-Wal-Mart, they usually have more attorneys' offices and land title companies. If a county seat, a diner/cafe. They're not "vibrant" but they weren't "vibrant" to begin with.

[DSK]

I think it's difficult to generalize one way or another. I'm sure some towns end up the way AC describes, but some others don't. My totally empirical observation is that Wal-Mart can kill off much other downtown activity, but usually in towns that were having serious economic problems anyway. In these cases Wal-Mart triggers a sort of phase transition. A town that comes to mind is Ticonderoga, NY. Not the greatest economy beforehand, and when Wal-Mart came in it easily outperformed existing competitors. Now, the question is, how much of this is really Wal-Mart's fault? I imagine the argument Wal-Mart would make is that the town was going downhill anyway and Wal-Mart if anything helped out some struggling people. Unfortunately you can also see the result in these cases as a sort of neo-feudalism.

[AC]

I didn't mention my own hometown (McComb, MS). The experience there was similar to what you describe, DSK.

I moved to McComb in 1973. The downtown was already in decline, mainly because discount stores, banks and grocery stories had set up in strip malls on the arterials leading out of town.

In 1974, the town somehow wrangled money from the federal government to convert downtown to a pedestrian-only outdoor mall (optimistically named "Sunshine Square.") It flourished briefly -- helped out by an F4 tornado in 1975 that wiped out the strip malls on the western side of town.

But downtown resumed its decline and by the mid-1980s was populated by empty stores, lawyers & accountants' offices, big churches, a very cool library. Oh, and an old icehouse that had been converted to shops and restaurants. (That didn't last too long; too high-end.)

We got our first Wal-Mart in 1986. I'd already started college, but I really appreciated it when I was home. Until then, we'd been stuck with discount stores like Roses and Fred's and the Sears catalogue store (where I worked one summer).

Wal-Mart had a pronounced effect on the town: It devastated the discount stores that had set up in the strip malls. It emptied them out over the space of a few years. No one grieved for them, though.

Downtown continued its decline -- a decline that pre-dated and post-dated Wal-Mart -- but experienced a resurgence in the late 1990s. The last time I was in downtown McComb four years ago, there were some stores, a bar, and a handful of inhabited second-floor apartments. Not a rocking scene by any stretch, but certainly better than the '70s or '80s.

If we'd gotten the Wal-Mart in the 1970s, I'd have said that the Wal-Mart destroyed downtown. But downtown was being destroyed by new development patterns; the brand didn't really matter.

[heyzeus]

Has there been any study done correlating McMansion-type ordinances with factors of sprawl and exurban development? Particularly ones like Austin's, which inhibit the construction of garage apartments?

[M1EK]

Obviously Wal-Mart is just the biggest example of discount-store-on-strip-mall-kills-downtown. But many of the example survivor towns you're giving are big enough that I know of them, which puts them in the category of "big enough to survive".

And this isn't precisely just the natural order of things either. The large discount store in strip mall on arterial at edge of town pays far less in city/county taxes compared to services used than do the downtown businesses they destroy - in a fairer taxing regime, Wal-Mart's prices might have to be a bit higher, and we might see some shift at the margins.

[AC]

No.

[AC]

My "no" was in response to Heyzeus's question.

M1EK, in a small town, the difference between what a strip mall on the edge ought to pay and what it does pay is probably very small, and unlikely to affect costs much.

The bigger point -- and the one Slee really focused me on -- is that unless the downtown is a "public good," Wal-Mart's lower prices don't generate externalities by putting downtown businesses out of business. Just pretend the only store downtown is a chain discount store like Fred's. Wal-Mart opens and puts it out of business. There's no difference between that and if Fred's had been in a strip mall.

There is an externality only if people get additional enjoyment out of shopping downtown. In small towns, with tiny downtowns, that will often not be true.

[M1EK]

Again, I disagree - you're not looking at the public cost part of the equation. Fred's downtown costs the city/county a lot less in services than does Jim's out on the edge of town.

This of course argues that we should have more discount stores in spots where services are cheaper to deliver (i.e. Northcross).