Economic development is usually analyzed at the national level, but the literature on creative destruction and misallocation suggests the importance of understanding what is happening at much smaller units. This paper does a development case study at an extreme micro level (one city block in New York City), but over a long period of time (four centuries).
Urban planners are often suspicious of spontaneous order, associating it with chaos and anarchy. Though top-down design is indispensable for the construction of city infrastructure, it too often imposes excessive regulatory standards, which make housing unaffordable to the poor. In rapidly urbanizing countries, poor migrants from the countryside are especially hard hit. Subsidized housing provided to low-income households by governments rarely helps, as often this housing is too limited in scope.
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At what scale level should top-down planning progressively vanish to allow a spontaneous order to emerge? And what local norms are necessary for this spontaneous order to result in viable neighborhoods that are easily connected to a metropolitan-wide infrastructure? Examples from Southeast Asia show that an equilibrium between top-down designed infrastructure and neighborhoods created through spontaneous order mechanisms can be achieved. Spontaneous order ignored or persecuted by government results only in slums.