This past fall I spent six months studying abroad in Santiago, Chile. I lived with a Chilean host family, and was enrolled at a large private university in the city, the Pontificia Universidad Católica de Chile (PUC). Once I adjusted to the shock of being constantly immersed in the Spanish language, I began to notice other cultural, rather than linguistic, differences between the U.S. and Chile. One difference that became jarringly clear was the fact that the university I was attending had no residential housing. Every building was either for academic, athletic, or dining purposes. Upon making this realization I questioned my host mom, Mary, as to why PUC didn’t provide housing, on-campus or otherwise. Mary, usually quick to answer any questions I had, paused, gave me a perplexed look, and responded, “Why would they?”

And so, I found out that residential housing is simply not offered by the majority of Chilean universities. Most students live at home during university and commute to campus daily. Those who end up attending universities far from home, a small minority, have to rent apartments near their university. Coming from Carleton, where some 75 students are permitted to live off-campus each year, the lack of college-provided housing was genuinely surprising to me. In many ways, however, it made sense. Living and eating at home is a lot cheaper than paying for room and board. Moreover, if the goal of college is to receive an education, why does that require anyone to live on-campus? By the end of my time in Chile, I found myself questioning the logic of the very system I had grew to love during my first two years at Carleton.

Nevertheless, there were certain aspects of the Chilean system that left me thoroughly relieved to be living on-campus this January when I returned to Carleton. Primary among them was the issue of commute time. Santiago is a large city, and my homestay was fairly far from my university. So, each morning I faced a three part commute: first a 10 minute walk to the bus stop, then a 15 minute wait/bus ride to the nearest metro station, and finally a 35 minute subway ride to campus. Time is money, and the opportunity cost (not to mention the actual cost of bus and metro tickets) of the two hours I spent commuting everyday was huge. Comparatively, the longest distance between two buildings at Carleton (the Weitz Center and the Rec Center) can be traversed, on foot, in less than 20 minutes.

Furthermore the American understanding of a college education tends to be more expansive than simply academic. There are certain lessons and experiences that a non-residential college can’t begin to offer. These experiences, many of which have to do with learning to live away from home, are hard to put a price on. Surely though, the cost of room and board at a university is worth the included benefit of gaining a sense of independence.

In this post from Tyler Cowen and Alex Tabarrok’s blog Marginal Revolution, Cowen reports that in Shanghai it is common to find establishments that advertise and offer both foot massages and “other kinds of massages” (prostitution). Cowen refers to the dual offering of foot massages and prostitution as an economy of scope. While an economy of scale is an industry in which the average cost per unit decreases as the scale of the production increases, an economy of scope is an industry in which the average cost per unit decreases when the firm produces two or more products. Cowen explains that a business that offered prostitution and wonder bread would probably not have much success. Not only are these two products unrelated, it is likely that the presence of prostitution would stigmatize the business and discourage consumers who are only looking to buy Wonder Bread. Instead Cowen posits that another economy of scope could be prostitution and cocaine. This illicit economy of scope would likely be the result of an agreement between the business and local law enforcement officials.

Identifying potential economies of scale requires attention to both the  supply and demand of the products being offered together. In terms of demand, the products should have overlapping, but not identical target demographics. In the case of the Shanghai massage parlors, the clientele for both services tends to be male. Most importantly, the products being produced should have overlapping production costs. For example, Ice Cream Sandwiches and Popsicles both require refrigeration, a fixed (refrigerator) and variable (electricity) cost. In contrast Popsicles and French Fries would probably not form an economy of scope, since there is almost no overlap between their production costs. The seller would have to pay both for refrigeration and frying equipment. Cowen notes that the Shanghai massage parlors limit their joint supply costs due to the fact that the same people who are supplying the foot massages are also supplying the prostitution. It seems like the perfect products for economies of scope are complementary goods that do not have entirely distinct supply costs.

This article provides a brief introduction to New York City’s new Department of Parks and Recreation commissioner, Mitchell J. Silver. Nothing about the article is explicitly economic, but Silver’s description of how he is approaching his new position raises some interesting questions about matters of cost and benefit in urban planning. Mitchell, whose background is as a city planner, makes it clear that he as a holistic view of the issue, “Parks are a system within a city. They are connected to culture. They are connected to traditions and memories, the economy, the natural systems. As a planner, I take a very different view of parks, as not just a green space but a public space.”

The economic view holds that parks, like any parcel of land, are goods. Goods that can be bought, sold, “consumed” (enjoyed may be a better verb in this case), and even developed. Importantly, and as Silver makes clear, they are “public” goods. As such they are closed off from the possibilities  entailed by a free market and private ownership. New York City parks, given their location, are very valuable plots of land, and the government could probably profit tremendously from developing the land for commercial and residential purposes. By keeping the parks green and accessible to everyone, some economists would say that the NYC government is failing to realize the full economic potential of the park land. However, others, including Silver, would likely argue that the parks provide their greatest benefit as they are. Their logic being that as parks, this land provides a huge, albeit difficult to measure, amount of benefit to the many people who come to the park. Parks have also have economic value in that they can revitalize urban areas by attracting more people and therefore more commerce to the area. By the same token, parks often raise the real estate value of the surrounding neighborhoods. While it is difficult to determine which use of the land would generate the most profit, given the fact that the NYC government has a certain commitment to, as Silver puts it, “equity and fairness,” it seems unlikely that NYC’s parks will be developed any time soon.