The Price of Everything - Eduardo Porter [4]
The ebb and flow of immigration will continue to be determined by potential immigrants’ measuring the prospect of a minimum-wage job—perhaps a first step up the ladder of prosperity—against the costs imposed by the harsh border. The price may occasionally be too high. As joblessness soared following the financial crisis of 2008, many potential immigrants decided to stay at home. The Department of Homeland Security estimates the illegal immigrant population dropped by 1 million from its peak in 2007 to 10.8 million in 2009. But this will prove to be no more than a blip in the broad historical trend.
PRICES RULE
Considering the capacity of prices to shape people’s choices, it is rather surprising that governments do not use them more often to steer the behavior of the governed. For instance, public-health campaigns might be a nice way to educate people about the risks of certain behaviors, such as smoking and drug abuse. But they are nowhere near as effective as prices when it comes to making people stop. Four decades after President Richard Nixon launched his “War on Drugs,” drug abuse remains stubbornly popular. Between 1988 and 2009, the share of twelfth graders who admitted having done drugs in the last month increased from 16 to 23 percent. The share of teens who had smoked a cigarette in the same period fell from 28 to 20 percent.
This is a paradox. Though it is illegal for minors to purchase cigarettes, adults can readily get them. Drugs, by contrast, are illegal for everybody. Being caught with even a smidgen of cocaine in the state of Illinois can lead to one to three years in jail. Yet the difference is less paradoxical considering how the price of these vices has evolved. A battery of city, state, and federal taxes has roughly doubled the price of a pack of cigarettes since 1990, to about $5.20 on average. On July 1, 2010, the minimum price of a pack of cigarettes in New York City rose $1.60 to $10.80—of which $7.50 are taxes. By contrast, the retail price of a gram of cocaine on New York’s streets cost $101 in 2007, about 27 percent less than in 1991. The price of heroin collapsed 41 percent to $320 a gram. Falling prices reflect the failure of policies to stop the supply of illegal drugs into the American market. But it also suggests a potential solution: at a sufficiently high price, teens would cut back. Compared with a failed drug war, legalizing, regulating, and taxing drugs might be the more effective route to curtail abuse.
Consider what we could achieve by tinkering with the price of gas. In the United States, cheap gas allowed people to move to bigger homes farther from work, school, and shopping. Just in the last decade or so, Americans’ median commute to work rose from nine to eleven miles. The typical home grew from 1,750 to 1,807 square feet.
Europe rarely sprawled so. Its cities were constrained by history. They were built hundreds of years ago, when moving long distances was costly in time and effort. During the French Revolution, it took King Louis XVI twenty-one hours to flee 150 miles from Paris to Varennes. Modern sprawl was contained by gas taxes. Europeans pay two to three times as much as Americans for gas. That’s partly why Houston in Texas has roughly the same population as the German port city of Hamburg but 2,500 fewer people per square mile.
For all the differences between the configuration of American and Western European cities, they are both strikingly different from development in the Soviet bloc, where market prices played little or no role in allocating land. Seventy years of communist allocation by bureaucratic fiat produced an urban scene pockmarked by old factories decaying on prime locations downtown while residential housing becomes denser farther from the center, through rings of Stalin-era, Khrushchev-era, and Brezhnev-era apartments.
A study by World Bank urban planning and housing finance experts