August 21, 2005

Storage Trailers

In many areas, Wal-Mart doesn't have the right to keep temporary buildings on its property, but it finds the additional storage valuable during the holiday season. This brings to mind a simple question: how much is the marginal storage trailer worth to Wal-Mart? Another: Should Wal-Mart pay for the right to keep storage trailers on its property during the holidays? If so, who should it pay. And, who does it pay?

The three Wal-Mart stores in Macon and Bibb County want to use up to 20 storage trailers at each location during the holiday season to store layaway merchandise.

The company is requesting conditional use permits for the temporary trailers at its stores at 1401 Gray Highway, 6020 Harrison Road and 5955 Zebulon Road.

Wal-Mart also is seeking permission to use a vacant Wal-Mart building at 2525 Pio Nono as an off-site warehouse.

Wal-Mart's violated the terms of approvals before, to unknown consequences.

Let me state at the outset that I don't know anything specific about the approval processes; I talk in general theoretical terms here, not specifics about any local government. I assume that real local governments will give thumbs-up or thumbs-down on these uses of property. But the exchange context is actually pretty interesting.

From the public-choice economic point of view, local regulatory bodies are not filled with impartial judges, but greedy utility maximizers. They know that the right to have trailers is NOT owned by Wal-Mart OR adjoining landowners, but instead is actually owned bythem, the land-use board members, who cannot profit directly from the sale or lease of such rights.

A Posnerian judge would decide this approval process based on maximization of net wealth: find out how much Wal-Mart benefits, and find out how much adjoining land-owners are affected by the storage units. The process should make sure that the benefit to Wal-Mart is greater than the harm to others, and the number/size of storage trailers permitted should maximize the difference.

How do planning boards actually rule on such matters? Some just give a green light, and others a red light, because of ideological reasons or political power of constituents. I presume that many try to minimize noise, and set workable rules for storage trailer use. More importantly, I think many will try to get funds from Wal-Mart for personal or public use. A tidy donation to the local school or charity would appear to benefit both local politicians and Wal-Mart. (I have no idea how much Wal-Mart contributes to the election drives of local politicians).

But notice who is not compensated: those who are potentially harmed, adjoining landowners. That the process cannot not be used to compensate landowners for harm imposed by Wal-Mart, but can be used to compensate politicians, is just something that we have to live with if we want political exchange to dominate market exchange.

Posted by Kevin on August, 21 2005 at 10:23 AM