ABSTRACT
The preceding considerations have introduced us to the world of urban land markets, which we need to examine more carefully in order to understand how the segregated city is developed. We have portrayed housing markets as a single entity, with winners and losers, and this is precisely how they work. This stands in contrast with the popular (and, unfortunately, quite influential) view among neoclassical economists, who see housing markets as a world of “choice”, in which households bid for space in the city according to their “tastes” and purchasing power, thus producing in the process a market in “equilibrium”. In this view, households engage in tradeoffs that produce “rational”, rather than unfair, outcomes. Usually, this approach relies heavily on the work of economist Charles Tiebout, who popularized this view of urban space as a supermarket of sorts, which could in theory offer different possibilities to a diverse population of households with different housing or neighborhood “preferences”.1 Tiebout saw as positive the U.S. system of metropolitan governance that, due to its extreme decentralization, produced municipalities with very different service standards. Because each municipality obtained its revenues mostly from the property tax, those with more expensive properties could provide better services and schools. The resulting regional disparities thus allowed, in this view, for the exercise of “choice” among households seeking where to live.2 The centrality of the concept of “choice” in these types of analyses is well expressed by an urban economist: “I believe that every correlation or regression investigated by an economist should be justified, if only in the economist’s head, by some kind of formal model that starts with decision-making agents”.3
