Friday, March 27, 2009

Economist's Notebook: The White Stag Sign Redux

Randy Leonard has suggested that the city condemn the "Made in Oregon" sign and take ownership of it to prevent the University of Oregon from changing the wording of the sign. I have blogged about the public goods nature of the sign before: there are good economic reasons for public control over the sign as it is something that affects all Portlanders.  Bravo to Commissioner Leonard for being a good public steward and boo to the U of O for being a bad citizen.  Their hubris is unbecoming and unhelpful.  

The O suggests that this is a strategic ploy to come to some sort of compromise.  I hope not, the sign should either be a public property or it should go away. 


Jacob Grier said...

Bravo to Commissioner Leonard? For offering to buy the sign and then threatening to take it by force when the owners refused to sell? Nice racket, sign me up for his job.

Since you're advocating that the sign become public property, you ought to at least be clear about how you want that to come about. There are several options. It could be:

1) Purchased by the city at a mutually agreed upon price

2) Forcibly taken for public use with just compensation, as a literal reading of the Fifth Amendment would compel

3) Forcibly taken for public use without just compensation, as governments have been allowed to do under the precedent of Penn Central v. NYC

There are big differences between the three. Aside from the matter of justice, under option 3 there is likely to be abuse of takings. Think of it in economic terms: Eliminating the requirement for just compensation is like setting a price ceiling near zero for declaring something a historic landmark; as with any effective price ceiling, this will lead to an excess of takings.

That appears to be exactly what is happening here. The cost to the city of seizing the sign is very low and will be spread out among all residents. The costs to the University of Oregon are highly concentrated, as are the benefits to politicians like Randy Leonard who will reap the rewards of spearheading the taking. It's easy to predict who has the advantage here, and it's not U of O.

We can legitimately disagree about the public value of the sign. I don't find the case for it very compelling, but apparently many people do. I would, however, like to see people being a little less cavalier about simply taking it from its current owners.

Jacob Grier said...

I see now in the article that the city would pay $500,000 for the taking, an estimate of fair market value. This would fall under 2, and I guess is what you would support? I would still be curious to see where you stand on regulatory takings for public goods like this.

Robert said...

I must be missing something. The sign was changed to read Made in Oregon in 1997, even by the short history of the Western US surely 12 years is not long enough to justify the sign as historic and a public good worthy of protection through government ownership? Public pressure should be sufficient to persuade UofO to leave it alone, and if not then let it change. As for the "Porno Palace" risk, surely anyone could put that sign up next door, regardless of this one!

Patrick Emerson said...

To clarify, regardless of what the sign says or will say, I think it is now a large enough public good that the governement has an appropriate role in governing it.

Any new business that wants to have a sign would have to meet whatever code requirements and restrictions the city currently imposes (which, presumably, would prohibit the creation of such a sign).

Thus any new buisness that wants to change the sign, in my view, should not have the immediaste right to do so. I would be happy with it going dark, but even more pleased if the Convention and Visitors Bureau wanted to change it to read "Portland Oregon" as this is a neutral iconic part of the Portland cityscape.

My objection is to private interests controlling public goods without oversight, just as I woudl object to someone being allowed to create such a big and imposing sign today that says...whatever it might say.

Robert said...

I think it is your use of the concept of a public good that is mistaken in this case.

The landmark sign is optional and not all residents benefit from it. In addition it is possible for those that benefit from it to identify themselves and pay for that benefit, if they choose. Yes there is a risk of free-riders, but is that enough to create a public good?

I can see that the City of Portland might perceive that the total benefit of the sign remaining a promotional landmark is greater than the benefit to UofO of the sign being personalized.

The cities solution implies that there is no other option than government intervention. It is possible for those with a greater financial link to the sign (tourism related business and UofPortland perhaps) to group together and attempt to make a contract with UofO to control the use of the sign. With this solution the outcome will bring maximum utility at minimum cost, and with no government intervention.

The added benefit of this solution is that the resident who does not make use of the sign is not obligated to pay for it.

Private interests have control of many aspects of the Portland cityscape. Fostering the impression that the city may decide that your piece of it has become too important to change could easily become a negative factor in property renewal/investment decisions. Alternatively it could start a market for the creation of Portland icons to sell to the city!

Patrick Emerson said...

Just to be clear, my definition of a public good is the economic one: non-rival and non-excludable. My enjoyment of the sign does not leave any less for anyone else and does not prohibit anyone else from enjoying it.

My argument is pretty basic. This is a sign that could not be built today without city permission. It is my understanding that the Made in Oregon lettering was an effort to save what was seen as an iconic sign from going dark in a way that did not benefit a narrow interest. Relettering the sign for such an interest is essentially creating a new sign of a size and type that would not be allowed under current rules. Thus I think it should not be allowed.

I don't particularly like the "Made in Oregon" lettering but at least it was an attempt to come up with something for all Oregonians. Personally, I do like the sign, it is a civic icon to me, so I support efforts to save it in the public domain. But I would rather it go away than to become private again - it is too big and obtrusive for that purpose in 21st century Portland.

Robert said...

It sounds like you are arguing against a 'public-bad' rather than for a public good. You are happy for the sign to stay or go away, but not to become ugly.

This suggests that you see no inherently desirable attribute to the sign: one that must be provided by government if the market underprovides. Thus there is no public good problem or market failure that would justify public ownership.

What you don't want is a blot on the landscape - an issue that (rightly) is addressed by city code: A non-conforming sign can remain or be removed, but to change it requires a public hearing with the Adjustment Committee.

Robert said...

In the case of this sign, it will be reviewed at a Landmarks Commission Public Hearing.

Patrick Emerson said...


I suppose you are right. I think it is inappropriate for a sign like this to be changed to serve a narrow interest precisely because it is a public good. Doesn't matter if it says UO, OSU, PSU or "Al's Meats"

But I don't think there is a market failure in the sense that there should be a city provided sign if one did not already exist.

My understanding is that the Historic Landmarks Commission believes it can only adjudicate design issues and not wording.

Robert said...

Sorry to belabor the point, but billboards usually serve a narrow interest and are intentionally public goods, so it can't be the public good aspect that makes the proposed change inappropriate.

Patrick Emerson said...


Not at all, it is probably because I am not perfectly clear in my own mind.

Anyway, bilboards are public goods which is why the government regulates their placement, size and content - and appropriately so.

This is an odd case and there is no call for public ownership of bilboards per se. But a billboard such as this would not be permitted now, so I think the city is right to impose itself on the outocome of the signs message. I'll go that far. Is it appropriate for the city to buy it and operate it as landmark? I dunno...

Patrick Emerson said...

I am still not being clear. Yes private billboards exist, but they are regulated precisely because of the public goods aspect of them. This is an extreme case - it is huge and prominently displayed – making government intervention particularly appropriate.

I think a legitimate public interest case can be made for not allowing any such billboard and I assume that this would be the case if this was a new billboard. This one has survived because of its special status. We should not let it slip back into serving a narrow commercial interest when we would not allow such a sign to be built now – for good reason.

The puzzle is what is the governing authority to do in this case? In general the city has the remedy of condemnation to serve the public interest. It can be the case of a house to build a highway, a building to build a park, etc. It is not a new thing. This is one remedy – get rid of it entirely. But the owners of such properties are entitled to compensation for the seizure of private property, so if you are going to do that you might as well preserve the sign that people love as long as it does not serve a narrow commercial interest.

Now the rub: is it worth $500,000 to do all of this? Depends on how people feel about the sign. That is harder to evaluate and part of what could tell us the answer is what economists call contingent valuation. Ask people how much they would be willing to spend if… But this is impossible to do credibly as answers to a hypothetical are erratic.

But I do think Leonard has a point. If the people who bought the building and refurbished it were Al’s Porno Palace and they wanted to change the sign to advertise their business, people would not stand for it and demand government action. Just because the commercial interest is something many people support does not alter the basic argument about having a display like this serve a narrow interest. It does change the economics however.