Tim Harford answers more of your crazy economics questions

Tim Harford answers more of your crazy economics questions:

Olly asks: What if your tax bill was discounted by the distance you lived from the centre of London (eg if you lived in Kingsway, you paid the full amount; if you lived in Shetland, you would pay no tax)?

I suppose the aim here might be to encourage people to move away from London and into less populated areas. If this policy was a success, the likely outcome would be a damaged environment (with more driving and less travel by efficient methods such as trains, bicycles and elevators) and a much less dynamic economy (since cities are where most innovation takes place). I am reminded of the great urbanist Jane Jacobs’s sarcastic description of “a nice, even smear of mixed economic activity”, which seems so plausible from behind a bureaucrat’s desk, and which would be such a disaster in practice. Fortunately, this tax would make less difference than you think. In response to these tax incentives, some people would be minded to move further away from Kingsway and closer to Shetland. The mere temptation for this mass exodus to occur would prompt both rents and property prices to adjust, offsetting the tax. Owners of London property would suffer, while owners of property far from the charms of Kingsway would prosper. Not many people would actually move. Thank goodness.

See also Tim’s excellent answer on what would happen if we made inflation illegal?