[The Economics of Curbing Home Prices] People Matter More Than Place

Korea is a small country. Chongqing, China, has an area of more than 80,000 km2 and a population of 30 million. The total area of South Korea is about 100,000 km2, with a population of 48 million. The entire country is nearly the same size as the single municipality of Chongqing. Considering advances in transportation and communications, it is no exaggeration to say that the whole country is one city. By plane, it takes only one hour to fly from Seoul to Jeju Island, the southernmost part of the country. In such a country, discussing balanced regional development is not very different from discussing balanced development between Yeongdeungpo-gu and Gangbuk-gu within Seoul. Rather than preventing Yeongdeungpo-gu from developing in order to develop Gangbuk-gu, it is more efficient to allow Yeongdeungpo-gu to grow and let some people from Gangbuk-gu move there in search of jobs.

In the 1960s and 1970s, the world of geography once debated whether the goal should be “the prosperity of regions” or “the prosperity of people.” The question was whether it was right, as we are doing now, to make underdeveloped regions the target of support, or whether those resources should instead be used to help poor people regardless of region. The conclusion was clear: if you have money to help a region, use it to help poor people. The reasoning was that money intended to help underdeveloped regions was highly likely to flow to the influential people in those areas, so poor people should be helped directly.

The same is true of job creation. Blocking investment in the Seoul metropolitan area will do little to redirect investment to the provinces. That is because when entrepreneurs choose where to invest, they are not deciding between Seoul and provincial cities in Korea, but among foreign cities such as Beijing, Shanghai, Qingdao, and Hanoi. If the spillover benefit the provinces gain from regulations on the Seoul metropolitan area is 1, the benefit lost in the Seoul metropolitan area will be 10. A considerable portion of that 10 is something people from the provinces could also enjoy by moving to Seoul. What matters is people, not regions.

The congestion problem in the Seoul metropolitan area can be left to the people there to deal with. And if regulations on farmland and greenbelts are eased and authority is handed over to local governments, congestion would be far less severe than it is now, even if the population increases.

Beijing, with a population of 11 million, uses as urban land an area 50% larger than the entire Seoul metropolitan area, which has a population of 20 million, and the Los Angeles metropolitan area, with a population of 13 million, uses more urban land than the entire Seoul metropolitan area. That is why such cities can accommodate large parks and allow people to live more spaciously. If we, too, relax land-use regulations and abandon our fixation on balanced regional development, the people of this country will be able to live more prosperously and with more space.

Original title: [집값잡기의 경제학 ] 지역보다는 사람이 중심이다

Author: Center for Free Enterprise (CFE)

Date: 2006-12-14

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=column&pn=20&idx=10687