Helping Adam Smith's Invisible Hand
Author(s): Alexander Garvin
Source: Bulletin of the Association for Preservation Technology, Vol. 13, No. 2, Regulating
Existing Buildings (1981), pp. 27-30
Published by: Association for Preservation Technology International (APT)
Stable URL: http://www.jstor.org/stable/1493956
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HELPINGADAM SMITH'S INVISIBLEHAND1
by AlexanderGarvin*
such buildings were unfit for human habitationand passed a
New Tenement Lawthat required one water closet per apartment, replaced the airshaftwith court yardsprovidingnatural
light as well as ventilation,and limited lot coverage to 70%(see
Figure2).
Finally,in 1929,a new StateMultipleDwellingLawprohibited constructionof tenements in New YorkCity.The 1929Law
required that every building with three or more apartments
have a water closet and bath and that every room for cooking
have a sink with runningwater. It also mandated light and air
for every room by meansof at leastone window opening directly on a street, court, or yard. Regulationsspecified an adequate size for these courtsand yards.Insteadof the 28-inchair
shaftsof the Old LawTenementsand the 4-foot wide courts of
the New LawTenements,buildingscompleted after1929hadto
open on inner courts measuring at least 30 by 36 feet if
completely enclosed or 20 by 30 feet if on a lot line.
With the invention of the elevator and the railroad
(whether surface,elevated, or underground)cities soared into
the airand sped into the countryside.Regulatingconditions for
the tenant was no longer sufficient. Pedestriansalso needed
adequate light and air. Neighborhoods needed community
facilities and municipal services sufficient to support the
population for which the privatesector had supplied housing.
Propertyowners needed to be sure they wouldn't be put out of
business because of the adverse impactof incompatibleneighboring landuses. In1916,New YorkCityenacted America'sfirst
Zoning Ordinance regulating height, bulk, land use, and
density. Today every major American city, except Houston,
also has zoning regulations.
Charles Dickens called the slums of New York a "world of
vice and misery ... hideous tenements which take their name
from robbery and murder"2. The hideous tenements had been
built by landlords seeking to maximize profit by stuffing their
properties with as many tenants as they could get away with.
The State Commission which had established New York
City's rectalinear street grid, in 1811, envisioned a very different
result: handsome, airy neighborhoods with blocks separated
every 200 feet by 60 foot wide East-West streets and divided at
intervals of 350 to 800 feet by 100 foot wide avenues. The blocks
were to be subdivided into 25 by 100 foot lots on which developers were expected to build a rectangular doughnut of one
family house with spacious rear yards (Figure 1). All the rooms
in these buildings would receive light and air either from the
wide streets in front or the ample yards in back. Instead, developers combined four 25 foot lots to fit 5 buildings; three lots to
fit four buildings 18 feet 9 inches across; there was even an
eight foot wide building. Instead of fifty foot deep row-houses
with a room in back and another in front, tenements were
routinely extended almost the full depth of the lot and 6,7, and
8 stories into the air, creating a cramped series of walk-through
rooms without natural light or ventilation.
Children suffocated in fires that sucked the oxygen from
their rooms. Thousands died from tuberculosis, cholera, smallpox, and a variety of infectious diseases that spread easily in
overcrowded tenement slums. At Gotham Court, a "model
tenement" built in 1851 for the express purpose of rescuing the
poor from such noxious conditions, "a sanitary official counted
146 cases of sickness ... including 'all kinds of infectious
diseases' from smallpox down, and reported that of the 138
children born in it in less than three years 61 had died, mostly
before they were one year old"3.
Why Intervene
The lesson of this history is clear. By itself, Adam Smith's
"invisible hand" had been unable to insure "a decent home
Government Intervention
and suitable living environment for every American family".4
Conditions grew so bad that, in 1867, New York State
There are three reasons that government has had to provide a
the
first
Tenement
House
Act
which
at
least
passed
provided
helping hand: (1)to avoid the structuralfailuresof the marketthree square feet of transom window for each room (provided
place, (2)to protect irreplaceableresources,and (3)to provide
the window opened onto another room which had a window
victories for those who would lose in a pure marketstruggle
providing access to an air shaft), one water source in the house
but whom society would rather have win.
or yard, and an approved fire exit. This law, also known as the
"Old Tenement Law", was amended in 1879, to insure a winThe two marketfailureswhich require government interdow opening directly onto a 28-inch air shaft and minimum
vention are external diseconomies and public goods. An exterroom sizes of 60 square feet. In 1901, the State decided that all
nal diseconomy is a situation in which a citizen is not forced
* Alexander Garvin is an urban
and
real
estate
planning
development consultant in New York City. A graduate architect and
planner, Mr. Garvin has worked with the New York City Planning Commission, and Housing and Development Administration
and for many years has been an Adjunct Professor at Yale University.
27
! I
TYPICALNEW YORKCITYBLOCK
I -*
600'-800' typical
jj=7
I
III
_
v~-li
I
LL
East-WestStreet
??0^p:-TT
100'
c
0
U,
'C
0
I
UIILILm
i'-I
z
mF IIT1I
11111111111
ri
'
I
Rowhouses
Figure 1. Typical New York City Block (1811 Grid)
the tree in front of his living room window he gained a spectacular view. Today, after tens of thousands of his neighbors have
done the same, that spectacular view has been lost.
by the market mechanism to pay for the harm he causes others.
For example, imagine a row of attached wood frame houses. A
fire breaks out in one of the buildings and is not put out until all
the others have been destroyed. No market mechanism can
adequately protect ajoining owners from damage. Regulation
can.
Finally, faced with competing demands, society may
choose a specific result not likely to be produced by the private
market. In fact, that is how zoning started. Manufacturers in
New York City had always located near the stores they supplied. As the population grew and moved north, the stores
followed and so did the manufacturers. However, the
merchants who serviced the carriage trade (Arnold Constable,
Lord & Taylor, Tiffany ...) objected to the workers and delivery
trucks mixing with their customers. To prevent reoccurrence of
the pattern when they made their next move, they joined the
fight for zoning. Today, there are no manufacturers on the side
streets along Fifth and Madison Avenues. The merchants succeeded in zoning the manufacturers out.
Dicken's "world of vice and misery" is long gone. Today,
instead of a proliferation of tenements we have a proliferation
of regulations. They have, in turn, created a proliferation of
costly bureaucrats to enforce the regulations and a proliferation of even more costly professionals to interpret and avoid
them.
A public good is one which must be provided by society as
a whole and cannot be withheld for failure to pay. A zoning
envelope which guarantees sunlight and adequate pedestrian
space is an example of a regulation established to provide
public goods: light and space.
Protection of resources is necessary because "economic
man" acting in his perceived self interest may not act in the
interest of the community as a whole or of generations yet
unborn. The resources are gone forever.
It may be rational for a man to build in the flight path of a
future airport runway which he is unaware of. By regulating
construction in the area, society can avoid the problem and
conserve the flight path.
Regulation can also prevent rational but anti-social action.
For example, it is in the interest of a manufacturer on a
crowded street, facing the possibility of losing a major client
unless he meets a scheduled delivery, to double park his truck,
blocking traffic and making it impossible for others to use the
street for deliveries. Policemen can be stationed on the street
to prevent double parking. Society ends up paying the policeman's salary. Requiring all manufacturers to build plants with
adequate space for off-street loading retains the street for
- at the manufacturer's cost rather than
everyone's use
society's.
An action may be rational, informed, and not harm the
- but be short-sighted. When the first home
general interest
builder in the hills surrounding Seattle's waterfront cut down
Regulation has brought new problems. Where the
regulation is discretionary there is the problem of potential
inequity and graft. Even where the regulation is non-discretionary the time lost in processing and the cost of that processing are often not worth the result. So it is appealing to call for
deregulation. However appealing, to undo a century and a half
of government intervention is a mistake. There were good
reasons for the regulations and good reasons remain. Rather
than deregulate, we should cut back to those regulations which
are essential and which are worth the price and time required.
Then government shall have given Adam Smith's invisible hand
just the assistance it needed.
28
TYPICALAPARTMENTLAYOUTS
TENEMENT
AFTER 1850
OLD LAW TENEMENT
OLD LAW TENEMENT
1880-1887
EARLY NEW LAW TENEMENT
"DUMB-BELL"
OLD LAW TENEMENT
EARLY NEW LAW TENEMENT
Figure 2. Typical Tenement Apartment Layouts
29
Notes
1. Adam Smith (1723-1790) was a Scottish economist who first propounded classical market economics. He wrote in Inquiry Into The Nature and Causes of
the Wealth of Nations (1776), "Every individual endeavors to employ his
capital so that its produce may be of greatest value. He generally neither
intends to promote the public interest nor knows how much he is promoting
it. He intends only to secure his own gain. And he is in this led by an invisible
hand to promote and end which was no part of his intention. By pursuing his
own interest he frequently promotes that of society more effectually than
when he really intends to promote it".
2. Charles Dickens, American Notes for General Circulation, London, 1842.
3. Jacob Riis, How The Other Half Lives, New York, 1890.
4. "A decent home and a suitable living environment for every American
family," has been a national policy objective since the Housing Act of 1949.
30