The economic argument in this case is: when the market selects for the lowest price at the present time, without taking into account long term trends, you get big box stores which are more sensitive to boom and bust economic cycles than locally owned small businesses are.

So we must look at a longer time horizon than most financial firms or public companies do. Because society works on longer time horizons than public companies. We as a society should decide we want many retail and restaurants that keep an area strong over decades, rather than a few big box stores that can go out of business as the business cycle changes (in part because they are more dependent on high debt loads and low margins). If that's what a society wants, it cannot depend on a totally unregulated market, which in practice has a short-term view - a negative externality of not considering long time horizons.

Strong Towns is saying 10% lower prices today in exchange for higher uncertainty and stability in the medium and long run is not what society should want. It's also saying society should not subsidize big box stores and malls by paying upfront costs for roads and utilities to those malls, because maintenance costs are much higher than for dense downtowns.

Those are all good economic arguments.

That's not the argument. The argument is that more smaller businesses might reduce existential risk for the town even if the risk of individual business failure is larger.

To give a concrete example, let's say you have the choice between 10 small businesses and 1 large business. Let's assume that during a recession the large business has a 10% chance of failing and small businesses have a 20% chance of failing.

Now say you go through 20 recessions. With the 10 small businesses, 2 fail during every recession; new ones come in to replace them during the intervening expansions. During the recessions, you have to deal with the reduced tax revenue and the somewhat higher unemployment.

With one large business, there's an 88% chance that it will fail during one of those 20 recessions. And if it does, you (as in the town the business is based on) have nothing to fall back on to tide you over until the following expansion. As a town you trade off being pretty sure that your revenue will drop by 20% during a recession and just planning for that to having it not drop at all sometimes and drop to 0 other times. If the latter happens, your town dies.

All of this, of course, is a matter of what scale you look at things at. Maybe we should be OK with some towns dying and their residents moving to other towns. But in that case we need to actually plan for that instead of being all surprised when it happens.

There's cursory evidence in either direction.

The unfortunate truth is that free trade naturally results in income/wealth inequality, on individual and geographic levels, because it highly incentivizes economies of scale. Rather than 30 different widget makers selling widgets at $5 each, you get one widget maker selling widgets at $4.80 each, because it's more efficient (less overhead per widget). Everybody gets more/cheaper widgets, but the communities containing those other 29 widget makers may lose significant portions of the money coming into their communities - while the community with the remaining widget maker becomes wealthier than ever. And instead of 30 small business owners becoming wealthy, you may get one extremely wealthy widget business owner along with slightly wealthier stockholders.

When this happens to all industries all at once, it increases mean economic wellbeing, but decreases median economic wellbeing - and because goods become more efficient to produce due to economies of scale, it also puts downward pressure on wage labor, increases public spending on social assistance, etc.

That mostly applies to industry as opposed to retail, but to me that's the other half of the story: most communities aren't able to keep bringing as much into their community because of the consolidation/outsourcing of industry. And then the corporate retailer model increases the rate at which money leaves the community too.

I know someone who took a couple introductory economics courses will want to chime in "but trade makes everybody better off on average, because it allows economic participants to specialize at what they're already good at". But in the real world, when someone loses their job or small business due to big-industry consolidation/competition, they may no longer be able to get a job doing what they used to do, because now less people are needed to do that job, as it was made more efficient. So now they need retraining, or they go on social assistance - and the cost of that retraining or social assistance may not outweigh the economic benefits of consolidation.

Perhaps the solution to an individual is to move, but that can cause a community to enter a death spiral if enough people leave and the cost-per-person of public services increase. The community needs investment so that a new industry can bring in money, but if all the small businesses died, there may not be local investors with capital to invest, and bigger investors may not see investment in a new industry in small community as optimal because there aren't enough people able to work in that industry - a chicken/egg problem.

I'm not arguing that trade itself is bad, but it's not the unequivocal good that many perceive it to be. There are externalized costs and negative butterfly effects that can come from the type of consolidation that free trade enables - and those are harshest at the local level. Sure, widgets may be cheaper, and on average (mean) the economy improves (assuming the externalized costs are less than the improvement in efficiency - which they may not be). But that improvement means little if the resulting wealth/income go to a small number of people, with many more people losing their smaller amounts of wealth/income, all so people could save $0.20 on a widget.

Because govts subsidize building roads, but not maintaining roads, this gives a big advantage to new malls, which get built more cheaply than they should be. To the disadvantage of existing downtowns, which have high maintenance costs which the government does not subsidize.

So a core of the Strong Towns argument is a real economic argument. It's just a more complex economic argument than merely calling for a totally unregulated market. It's an economic argument that takes into account externalities, distortion through road building policies, and societal-level timescales (3 decades, not 3 years.)

what do you mean that "governments subsidize building, but not mainteenance"?

who pays for maintenance?

In the failure case, no one.

That is, government funds get assigned to building new roads in preference to maintaining existing ones.

The owners of big box development put 5% or less down on the property, and the sustainability of the property is mostly based on arcane tax and accounting rules. That’s why these developments rise and fall so quickly — after 15 years, the write offs for interest payments and depreciation are less valuable.

Additionally, in most cases the locality eats significant capital costs and indirect costs from storm water management, to water and sewer, to roads and traffic signals. Larger infrastructure costs like highway ramps, etc are paid for by the Federal government. There’s a vicious cycle as the big box development gets less valuable (and tends to fail) just in time for the maintence expenses associated with the infrastructure to start spiking.

That development model only works for large enterprises. Your small retail chain has to tie down real capital to lease or build, and has to pay higher taxes because they need the clustering effect of a business district to function. But they don’t get the subsidies — Congress isn’t building an access road to a small company parking lot.

The key political question could perhaps be stated as, how do you balance the median vs. the mean? A society which focuses on maximum efficiency will almost certainly have higher inequality, but also higher average wealth.

I think it's up to each region/nation to navigate this tradeoff. I do worry that the current political climate in the US really underweights the gains from trade, though. We've had 30-40 years of the most open trade regime in human history and it's raised the US standard of living immensely. I hear people all the time saying, well the median income isn't going up, but that ignores (a) how many things are free today (e.g. Gmail) and (b) how much healthcare prices have escalated (which is paid by firms, absorbing cash that might otherwise flow directly to employees as wages). I think people today actually have it quite good. I'm afraid we might take for granted what got us here and shoot ourselves in the foot with all this protectionist sentiment.

I do wonder if the disconnect between policy and many of the negative effects I outlined in my previous post is due to the fact that decision/policy makers are disproportionately likely to be the ones benefitting from this trend. And for us as developers, especially so in the US, we're the ones directly benefitting from an industry that naturally lends itself to extreme consolidation in certain cases (e.g. a team making software for thousands of people may not need to expand that much to serve millions or even billions of people. See: whatsapp) and living in the countries with a competitive advantage in this industry. And we also mostly live in large cities with multinational corporation headquarters, so we're insulated or even benefitting from what's happening to smaller communities.

I grew up in a non-coastal city that is neither doing well nor poorly. It doesn't have a lot of wealthy people to "bootstrap" itself into success by means of capital, nor is it an attractive enough investment opportunity for outside investors (low education with brain-drain chicken/egg problem), but it has a few competitive industries and is somewhat of a local resource and business hub. But once you go into the smaller communities in the region around the city, you really see the phenomenon I'm talking about. A big way money enters most of these communities is through farming or other resource extraction (if they're fortunate enough to have these), but the main way is through social security payments. These places would be perfect for low-medium cost manufacturing because they have large numbers of unemployed, working class people who are down to earth enough to take pride in that kind of work.

Those communities are often forgotten when it comes to policy, likely because they are individually small, not culturally important, have some opinions we would consider backwards, and most importantly because they have no wealthy/powerful people to vouch for them. But outside of big cities and regional hubs, where decision makers do reside, this is what a pretty large portion of America consists of.

This is a totally false history. The Reagan administration "granted more import relief to U.S. industry than any of his predecessors in more than half a century" (Secretary of the Treasury James Baker), with non-tarrif barriers (NTBs) that were "three times those of other leading countries."[1][2]

[1] https://chomsky.info/199705__/

[2] See also Chomsky, Noam. "Industrial Policy for the Nineties." World Orders, Old and New. New York: Columbia University Press, 1994. 106-119. https://www.amazon.com/World-Orders-Old-Noam-Chomsky/dp/0231...

If anyone wants to learn more about why economists almost universally, on both the right and the left, oppose barriers to trade, I'd recommend two things:

1) Learn how to calculate the deadweight loss due to trade barriers. There are a dozen good videos on YouTube explaining this. It's an elegant proof, but may take a few times through to really get: https://www.youtube.com/watch?v=zhD--UeRiOI

The distributional effects are generally acknowledged in any class discussing this, often including seques into trade assistance programs and how those work. In general though, focusing on local job losses tends to skew our intuitions, which are naturally bad at realizing the sheer magnitude of potential benefits. One way to grasp that is (2)...

2) Read a few of the countless studies on the cost per job saved of protectionist measures. Usually we ask consumers to spend hundreds of thousands more, sometimes millions more, for each job earning $30-60k per year.

Here's a table listing some of them: https://www.forbes.com/sites/timworstall/2017/01/24/sure-pro...

Textiles, tires, there are a bunch of great studies that transparently lay out their methodologies, written by people who have taken more than just a couple econ classes.

Again, completely agree that there are distributional impacts within a country (although it's important to note that, taken globally, trade generally reduces inequality, transferring capital to poorer countries). But of the distributional impacts within a country, if you just taxed the category of good half of the savings to consumers, you would generally be able to pay everyone in the affected industry a lifetime severance equal to their salary (often double it), and still raise the purchasing power of everyone in the country. That would make literally everyone better off while hurting no one, if we just had the stomach for it.

We need the biz owners to have skin in the game, and benefit from growth, not from strip-mining the wealth from an over-financialized model.