Wednesday, 11 January 2012

Skyscrapers and financial crashes

I see that the Barclay's Capital Report suggesting that skyscrapers are linked with financial crashes has attraced a lot of coverage. Just as with city rankings it's a little hard to know what to make of these type of reports. Being generous, they at least provide food for thought.

Conceptually, it seems quite possible that there is something in this for the simple reason that most financial crashes follow booms and booms are generally associated with over investment in capital assets - factories, inventories, housing, so why not building height? That said, if someone wanted to seriously assess this claim, they could do worse than start with this wikipedia list of the worlds 250 tallest buildings. The correlation with financial crashes was far less obvious to me as I looked down that list.

Even if there tall building booms do precede financial crashes, it's important to remember that serious research tells us they play an important economic role - in helping make the best use of a scarce resource (land) and in generating agglomeration economies which help make firms more productive. These longer term benefits are likely to outweigh any short run effects so I remain convinced that UK cities (and London especially) could do with more tall buildings not less.