McKinsey on zoningSince we're already off the usual posting schedule this week, I'm going to do another short pass-along tonight and a normal post tomorrow. This is a short McKinsey Quarterly note on improving citizen welfare that references the deleterious effects of zoning. For those who aren't familiar with McKinsey, they are a prestigous management consulting firm that works with top companies all over the world. They also have an institute that studies government policy globally.
As I've said before (here, here, and here), Houston is lucky to have avoided the zoning tax.
Putting consumers first
The most effective way for countries to improve the economic welfare of their citizens, a McKinsey study shows, is to increase the productivity of their companies, primarily by encouraging competition. Consumers benefit because when more productive companies gain market share, less productive ones must close their doors or become more efficient. Either way, consumers get better goods at lower prices. India's government, for instance, abandoned many limits on foreign investment in the country's automotive industry during the early 1990s. Prices fell, demand for cars exploded, and output nearly quadrupled.(The graph doesn't seem to import into Blogger well. See it here.)
Yet in many poor nations, government policies—such as zoning laws, investment regulations, tariffs, and tax codes—continue to limit competition. For more on how policy makers can remove barriers to economic progress, read "The power of productivity."