Does Houston have Zoning Laws?

by Levi Russell

Since 2013 I've done plenty of driving in the major Texas cities: Houston, Dallas, San Antonio, and Austin. Doing so always reminds me of the land use portion of my transportation and urban economics course back in college. My professor brought up Houston and its status as one of the few major cities in the US without any zoning regulation. The funny thing is, Houston looks a lot like all the other cities in Texas: big and sprawley. I came across a Rice University blog post from last year about that very issue.

It turns out that Houston has plenty of zoning laws that simply aren't called "zoning laws." Specifically, the author notes that Houston has deed restrictions, density regulations, tax increment reinvestment zones, zoning laws around its 3 major airports (thanks to federal laws), buffering ordinances, historic preservation, and lot size regulation. So there you have it: a popular myth busted in one short blog post. I recommend you read the whole thing.

The author laments that there is no "comprehensive plan" to this de facto zoning regulation. As you might expect, I'm skeptical that such a comprehensive plan would solve the problems Houstonians (?) face. City planners have to wrestle with much the same problem politicians and bureaucrats face when trying to impose a top-down order on a complex system like a city.

This brings to mind a site I heard about recently on a Cato Institute podcast called The Antiplanner. On the site, run by independent scholar Randal O'Toole, there are no shortage of posts providing counterargument to the typical justifications for urban planning, public transportation, and other such topics. I like to point out websites that oppose the conventional wisdom and O'Toole does a fantastic job. Here, here, and here are some recent posts I found interesting.

Just to be sure there's an ag component in this post, I recommend Virginia farmer Joel Salatin's book "Everything I want to do is Illegal" which chronicles some of the practical problems of land use regulation from the first-hand perspective of a farmer and this Farmer Hayek post from last year for something more academic.

Potpourri

David Widmar at Agricultural Economic Insights has some interesting maps showing the run-up in ag land values from 2004-2014. Check it out!

The folks at the Pro Market Blog (a new blog associated with the Stigler Center at U Chicago) use survey data to show Americans' concerns about the influence campaign donors have on candidates. Trump and Sanders are seen as the most removed from these concerns.

Here's a short podcast interview with Bill Easterly (NYU) who works in international development. Easterly is famous for his skepticism of the benefits of foreign aid.

Don Boudreaux, in his characteristic style, criticizes Krugman for his support of trade protectionism. (here and here)

James Pethokoukis blogs about Deirdre McCloskey's work on economic history and what made the west prosperous.

Cooperation Between Environmentalists, Oil, and Agriculture

A recent Twitter conversation with the folks at the Property and Environment Research Center (PERC) pointed me to some interesting examples of cooperation between environmentalists and oil interests, farmers, and ranchers. Some of them involve artificial markets for conservation credits while others are simply payments to land owners to help preserve environmental amenities. I don't specialize in environmental economics but I think it's important to bring up theses issues from time to time on the Farmer Hayek blog. On a related note, I want to be clear that I don't take a position on these issues personally since I haven't studied them carefully.

One example concerns the decline of monarch butterfly habitat. A blog post last week at the Environmental Defense Fund gives the details:

Farmer Hayek at the 2016 Southern Ag Economics Association Meetings

Four of us will either be presenting at the SAEA meetings next week or are authors on papers and posters. Here's a list of titles with links to abstracts and full papers!

Levi Russell

Price Impacts of Brahman Influence in South Texas

Profitability of Beef Cattle Best Management Practices in South Texas


Michael Langemeier

The Challenges of Precision Agriculture: Is Big Data the Answer?

Economic Threshold for Dynamically Optimal Late Blight Management


Gregg Ibendahl

Kansas Farm Profitability Persistence: Do Top Farms Remain Top Farms? (also with Terry Griffin)


Terry Griffin

Defining the Barriers to Telematics for Precision Agriculture: Connectivity Supply and Demand

Value of Internet Connectivity Uptime for Multiple Vehicles Using Automated Section Control

Applying Data Envelopment Analysis Methodology to Site-Specific Precision Agriculture Data

Farmers' willingness to pay for farmland based on machinery and precision technology adoption

Whither the Young Farmer?

Much is made about the average age of the American farmer. USDA Secretary Vilsack was once quoted as saying, "We have an aging farming population. If left unchecked, this could threaten our ability to produce the food we need – and also result in the loss of tens of thousands of acres of working lands that we rely on to clean our air and water." That's serious stuff, but a more careful analysis reveals that the situation isn't so dire after all.

Analysis by Carl Zulauf indicates that farmers are aging no faster than the general public. Additionally, we would expect, he says, that farmers would be older than the average business owner because modern agriculture is so capital intensive. Todd Kuethe breaks down farmer age by number of farms, acreage, and income, and notes that

The largest share of the income of the sector is captured managers between the age of 45 and 64. Just over half of Illinois' primary farm operators are between ages 45 and 64 (51.5%). This group, however, represents 60% of Illinois' agricultural land and 62.9% of the state's farm income.

Zulauf's observation that capital intensive industries are likely to have older sole proprietors on average is especially interesting given the current land price environment. As Brent Gloy and David Widmar note, land values are currently quite high, but a combination of low returns and rising interest rates could pave the way for a downward correction in land values. I made a similar argument about land values in Texas last October. The potential for a decline in land values may open up opportunities for younger farmers to buy in.

Another potential driver of the increasing age of the average farmer is increased regulation. As I've documented in the past, regulation by the EPA has increased almost continuously over the last 4 decades. Now more than ever farmers are burdened by the cost of regulation by the EPA. This increased regulatory cost creates economies of scale which might serve to hinder entry into the industry.


There are likely many causes of the increase in the average age of the American farmer, but it seems the worst thing that will happen is consolidation. If land values correct and young farmers are able to maintain access to credit, the trend of the aging farmer may at the very least slow down.

Potpourri

Brent Gloy and David Widmar at Agricultural Economic Insights revisit the issue of declining farmland values and come to roughly the same conclusion they did earlier this year.

Farmland values and cash rents in the Corn belt continue to come under downward pressure. When current cash rents are compared to current farmland values, the outcome is a capitalization rate of around 3%. This value is reasonable given current longer term interest rates. However, the bigger question is whether cash rents can be sustained at current levels in this economic environment. 

When one considers the returns that would be generated by a farmland owner-operator relative to current farmland values the rate of return is very low. This means that farmland values and cash rents are likely too high to be justified given the current economics of crop production. This low rate of return can be addressed through farmland values and cash rental rates falling and/or the row crop income situation improving.

Jayson Lusk points to an interesting article that he says should be filed under "Unintended Consequences."

Researchers find that a ban on bottled water on the University of Vermont campus (presumably to cut down on waste) led to more plastic bottles being shipped to campus and to more soda consumption. 

Marian Tupy and Chelsea German at HumanProgress.org tackle Akerloff and Shiller's recent op-ed in the Washington post on the effects of markets on our well-being.

Arnold Kling provides some wisdom on proper critiques of economics. My favorite bit:

A bias toward “engineers” rather than “ecologists.” That distinction comes from Greg Ip’s new book, Foolproof. The engineer is like Adam Smith’s man of system, who ignores evolution, both as a factor that may permit markets to over come their own failures and as a factor that may cause government “solutions” to become obsolete.

Continuing this theme, Steve Forbes provides a critique of economic theory. I enjoyed reading the first page, but lost interest on the second.

Don Boudreaux points to Gene Epstein's response to some of Bill Gates' comments in an interview.

Study: Farmland in a Tech-Boom-Sized Bubble

A recent article (older, ungated version here)published in the American Journal of Agricultural Economics and co-authored by one of our contributors, Michael Langemeier, discusses long-term trends in agricultural land values nationwide. The paper draws on data from 1911 to 2012 and measures the risk, returns, as well as relationships between land values and inflation.

Much discussion in recent months (years?) has centered on the possibility of a bubble in land values. While the results of this paper suggest that ag land provides a hedge against both expected and unexpected inflation and is a relatively safe investment, the authors find that “the farmland P/rent ratio has reached historical highs and is currently at the level of the P/E ratio of the S&P 500 during the tech bubble.” The P/E ratio is the ratio of the price of a stock to its earnings or profit. A comparable ratio for ag land is the ratio of land price to cash rent (P/rent).

The Continuing Land Price Decline

A recent article on agrimoney.com summarizes a couple of the causes of the continuing slump in land prices. In this post I'll expand a little bit on the article and discuss some possible scenarios going forward.

As the article indicates, the recent strength in the dollar has put downward pressure on crop prices (and, of course, oil). Part of this is due to an expected decline in exports. As the dollar strengthens, foreign buyers of US commodities will have to pay more in terms of their own currencies to purchase US products. If we expect crop prices to be low, we would expect land prices to fall especially if we expect interest rates to rise (For a full discussion of this issue, see this article.)

Over the last week, the financial press has been abuzz with news of the Fed's removal of the term "patient" from its guidance. The question was whether the Fed would remain "patient" and put off raising its federal funds interest rate target. Since asset prices are an inverse function of interest rates, an indication that rates would rise sooner would probably have pushed down the major stock indices.

Some Economic Wisdom on the (Forecasted) Decline in Farm Income

Brent Gloy and David Widmar have a new post up on their blog Agricultural Economic Insights entitled "Declining Net Farm Income; The Story with Two Possible Headlines." The post has, quite deservedly, gone viral. This sort of level-headed commentary serves to counteract a lot of the doom and gloom one typically reads when negative forecasts come out.

The gist of their article is that, while the decline in income seems dramatic when considering the last five years or so, it fits very well into the long-run picture. In terms of inflation-adjusted net farm income, 2015 is projected to be very close to the long-run average. The correction we're likely to see in 2015 will be painful for many, but Brent and David show that this is really just a correction from a high profit period to a period of normal profits.

Brent and David also discuss the percentage changes in net farm income over the long run. The changes we've seen recently and are likely to see for 2014 and 2015 are right in line with the variability we've seen since at least the 1970s. As they point out, the projected decline in profits for 2015 is similar to the declines we saw in at least 3 of the last 15 years. None of this is intended to minimize the difficulty many communities will endure, but it's important to keep these things in perspective.

Like everything else I've read on Agricultural Economic Insights, the post is certainly worth a read as Brent and David do a very good job fleshing all this out. 

Potpourri

Jayson Lusk added some interesting questions to the January 2015 Food Demand Survey. The responses are pure gold.

Elise Hilton discusses new technology for reducing the amount of trash that ends up in landfills. Markets generate conservation behavior when the benefit of reusing or recycling a given resource is greater than the cost. Entrepreneurs are agents of change who create these opportunities.

The Cato Institute Blog has a brief roundup of posts around the blogosphere regarding the "common sense" of a carbon tax.

Jeffrey Dorfman at UGA has some suggestions for budget cuts for the new bicameral Republican majority in congress.

Brent Gloy and David Widmar of Purdue discuss 2015 economic issues related to producers and ag bankers.

Don Boudreaux explains why supposed generous behavior by established firms regarding the minimum wage is likely to limit competition.

Matthew Turner of Brown University discusses the economics of land use regulations in an article at PERC.

Bob Murphy's insightful analysis of the Fed's role in recent oil price moves.

Don Boudreaux links to an interesting graph of world-wide incomes in 1820, 1970, and 2000. This graph shows that increases in income and in income equality can happen simultaneously.

Where Will Yellen Take Land Values?

A few months ago I wrote about the then-current state of land values in Texas (and linked to a similar post about the Midwest) and the prospects for land values going forward. In that article, I noted that low interest rates over the past several years have lead to a massive run up in land values. Further, I indicated that careening crops prices didn't offer much help for land rents in the near future, indicating that land values will likely start to fall.

Since then, crops prices have moderated, at least a little bit, and the Federal Reserve Bank (the US Central Bank) dropped a veritable bombshell with its monetary policy statement back in mid-December. The bombshell was simply the removal of the phrase "considerable time" from its Federal Funds target rate projections. That may not sound like much, but it provided more than a shudder for financial markets.