The economics of skyscrapers
‘height is a barometer of boom’, ‘the tallest buildings generally appear before the end of a boom, their height driven up by the speculative fever that affects both developers and lenders’, citing cyclically inflated land values as the principal factor for increases in building height, but did not elevate this fact to become an ‘index’. Further study has been conducted by Barr, Mizrach and Mundra in 2011, in which they published a paper entitled ‘Skyscraper Height and the Business Cycle: International Time Series Evidence’ 197 aims to see if there isa correlation between skyscraper height and economic growth. The authors find that height cannot, in fact, be used to predict changes in GDP. However, GDP can be used to predict changes in height. In other words, the study suggests that extreme height is driven by rapid economic growth, but that height cannot be used as an indicator of recessions. The writing, so to speak, would seem to be already on the ‘glass curtain’ wall. For if history proves to be right, the current building boom in China and India could be a reflection of a misallocation of capital which may result in an economic correction for two of Asia’s largest economies in the coming five years. In conclusion, I have accessed what could be considered three of the major factors involved in the construction of skyscrapers: Economies of scale, Price discrimination and the business cycle regarding the skyscraper index. In order for a successful construction economically speaking, there must be flexibility built into the planning of a skyscraper for a diversification of clients (different land use) in the knowledge of uncertainty in the economy, there must also be contingency financing to survive a downturn in the business cycle if recession is foreseeable. These planning is facilitated easily by large firms being able to exercise their economies of scale whilst smaller firms may suffer during a recession. Clearly there are other factors, agents and concerns which will affect the construction of skyscraper; green issues, political objectives, regulations to name a few. However, without employing considerable amount of resources to address these issues, a construction project can very easily go over budget and left unfinished. Conclusion
197 Barr, Jason, Mizrach, Bruce, and Mundra, Kusum (2011). Skyscraper Height and the Business Cycle: International Time Series Evidence .
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