The Unassuming Economist

From Works In progress:

“There’s a pattern that we frequently see in the development of a new technology. Initially, the practical functionality is limited by the technology itself – what’s built and used is close to the limit of what the technology is physically capable of doing. As the technology develops and its capabilities improve, there’s a divergence between what a technology can physically do and what it can economically do, and you begin to see commercialized versions that have lower performance but are more affordable. Then, as people begin to build within this envelope of economic possibility, capability tends to get further constrained by legal restrictions, especially if the new technology has any (real or perceived) negative externalities.

Cars and speed limits provide an illustrative example. The first production car, the Benz Velo, was also the fastest car, with a top speed of about 12 miles per hour. The technology quickly improved, and by the 1940s the fastest production cars were capable of traveling over 100 miles per hour, with specially built test cars achieving nearly 375 miles per hour.

“Economic” speed lagged behind this – the maximum speed of the most popular car of 1952 (the Buick Roadmaster) was 91 miles per hour. And because traveling at high speeds has negative externalities (excess crashes, pedestrian safety, etc.), states began to enact speed limits as car speed increased that further capped how fast cars would be allowed to travel. The first speed limit in the US appeared in Connecticut in 1901, limiting speed in cities to 12 miles per hour (the most popular car sold that year, the Oldsmobile Curved Dash, topped out at around 20 miles per hour).

Construction technology also shows this dynamic, with engineering, economic, and legal maximums diverging. The economic height of buildings is lower than what’s physically capable of being built, and once that economic height rises high enough we will start to see legal restrictions spring up that further limit building height.

A brief history of building height

Civilization has been putting up buildings for long enough that we find buildings hitting their economic and legal limits even in ancient history. Roman builders were capable of constructing buildings over 150 feet (48 meters) in height, or about 13 modern storeys – the Colosseum is 159 feet (48.4 meters) tall, and the Pantheon is 141 feet (43 meters) tall. Economic height lagged behind this – textual evidence suggests that Roman residential buildings (insulae) maxed out at around 7 or 8 storeys, with 5 or 6 storeys being more common. Legal limits were sometimes even lower: to reduce the risk of collapse (which was apparently not uncommon) various emperors issued edicts limiting the maximum building height. Augustus limited the height of buildings to 70 Roman feet (slightly greater than an imperial foot), which was then further restricted by Trajan to 60 feet.”

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