The economics of skyscrapers
Figure 4: the US GDP growth rate
we also have to consider the time lag factor across all periods, which still show a very unhealthy correlation.
This data is limited to the GDP growth rate of the United States but du decade, skyscrapers have become common worldwide. Therefore a true worldwide correlation is difficult to demonstrate. ring the period of the modern
What are the reasons for this correlation?
The reasoning behind this, published by the business press in 199 regards to the framework of the relating to the monetary policy that reinforce the theory of a valid skyscraper index. Business Cycle Theory. Mark Thornton (2005) 196
9, has been further researched with
listed three effects
Firstly, a decline in interes inversely related.
t rates at the onset of a boom drives up land prices as they are
•
• Secondly, a decline in interest rates allows an increase in the average size of a firm, increasing demand for larger office spaces. Thirdly, low interest rates facilitate developers to break earlier records. All three factors peak at the end of a period of growth, encouraging the growth of skyscrapers. However, some critics have dismissed the skyscraper index as an unreli I recession, recession of 1937 and the breaking projects. In addition, there are external supply and demand included in the evaluation of the index e.g. the 1973 oil price shock following conflict in the Middle East. investment to construction technologies that enable able tool: the early 1980s recession were not associated with any record -side shocks which are not post-World War - • In ‘normal’ times when the value of resources is predictable, performance of a building project can be estimated reliably through well- times, it changes consumer behaviour usually associated with higher business and consumer confidence which means rational pricing gives way to irrational buyers' behaviour; buyers bet on ever increasing demand and rents and are willing to pay more than they would normally. Willis said that tested formulae such as the net present value of the project. In boom -
196 Thornton, Mark (2005). Skyscrapers and Business Cycles. 51–74.
The Quarterly Journal of Austrian Economics
8 (1):
92
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