Night Life Clusters

I've always been fascinated by the way businesses cluster, even retail stores.  You tend to get multiple clothing shops, home improvement stores, and so forth in a relatively small area, especially when there's high population density--New York City has an entire area that's just chock full of lamp shops.  

If you just did a quick intuitive gut check, you would not necessarily assume this would be the case.  Why would a lamp shop want to be located next to a whole lot of competition?  Wouldn't it be better to be the only lamp shop in the area?

No, because clustering allows them to specialize.  Sure, you'll lose some customers because they can just go next door when you don't have a lamp they want.  But you'll also gain customers from other stores.  Having a big cluster means that when folks in the know want a lamp, they'll head to your district; with such high traffic, the spillover effects more than make up for the disadvantages of not having a captive audience. 

As with lamps, so with bars.  Unfortunately, as Matt Yglesias notes, this tends to upset the neighbors:

Street noise is a very real issue in large swathes of Manhattan and I think it's perfectly understandable that people prefer not to have lively nightlife scenes located directly outside their windows. So when I read Sarah Laskow's long and excellent account of liquor license battles in the East Village, I'm not-unsympathetic to the incumbent residents' concerns. But as she observes at the end, there's a real cost to this attitude:

At the meeting with Kao, the locals gave him the same reason for opposing him that they had given Warren, when he wanted to open a burger bar in the space: according to the current license, the only type of business that should be selling liquor at 200 Ave. A is a bookshop. With rent set at $10,000 in the East Village Party District, that's as unlikely as it sounds.

The broader issue, as she explains, is that cities are driven by agglomeration:

Academics have a word for what the neighborhood has become: a nightscape. Bars and restaurants were once peripheral to the main drag's primary economic drivers: supermarkets, coffeehouses, boutique shops, record stores. But in post-industrial cities, nightlife has grown into an industry in its own right. As in any industry, shop owners tend to cluster. A century ago, that meant the creation of a Garment District. Now it means the creation of a Party District.

Basically the East Village really "wants" to be full of nightlife establishments just like Qiaotou, China wants button factories. Restricting the creation of new button factories in Qiatou will help incumbent button makers (and alleviate neighborhood concerns about factory smoot) but it's hard to call a bar scene into existence that way. Similarly, making it hard to open a new bar in the East Village isn't going to create a button factory. It's going to create an underutilized space. That means somewhat more unemployment in the city, somewhat less tax revenue in the city, and thus at the margin higher tax rates and fewer social services for everyone.

Ryan Avent adds an important observation:  attempting to restrict the crowds at bars may actually increase the noise problem.

 London, like cities and towns across the British Isles, is filled with pubs. They vary in type, quality, and clientele. I was very lucky this time around to find a near-perfect gastropub just a five minute walk from my flat. It was quiet and well-maintained with a great menu, and while there were always people there, there was also always a free seat. Kids were welcome during the day, as were dogs. Every time I went I thought to myself how great it would be to have such a place close by back in Washington. And every time I thought that, I immediately reminded myself that such a place, back in Washington, would be perpetually packed and fairly unpleasant. In the Washington area, you can't have a place that's both really good and quiet in a neighborhood-y sort of way.

That's largely because it's very difficult to open new bars. And the result is a pernicious feedback loop. With too few bars around, most good bars are typically crowded. This crowdedness alienates neighbors, and it also has a selecting effect on the types of people who choose to go to bars -- those interested in a loud, rowdy environment, who will often tend to be loud and rowdy. This alienates neighbors even more, leading to tighter restrictions still and exacerbating the problem.

Sadly, this is the kind of dynamic that's very difficult to change. No city council will pass the let-one-thousand-bars-bloom act, and neighbors can legitimately complain of any individual liquor license approval that it may lead to some crowded, noisy nights. It's interesting how often these multiple equilibrium situations turn up in urban economics. In general, they seem to cry out for institutional innovation. It's a little surprising, for instance, that we don't see more "private club" type bars, that restrict entry by price or membership, in order to preserve the quiet along with the quality. Or maybe we do, and I've just not been invited to join them.

I don't want to push this argument too far--London has a sizeable population of obnoxious drunks, many of whom decide to get into fistfights outside their local pub.  (An editor at the Economist who had recently moved to the United States was asked how he had enjoyed his first New Year's in New York.  "It made me quite homesick," he replied.  "All those drunks throwing up in the subway were like a breath of London.")

But it is true that London also has more quiet pubs New York--and New York, in turn, has more of them (outside of the East Village) than DC does.  And this does make bars and cafes noticeably more unpleasant for the neighbors, as well as the customers.  Which in turn causes residents to fight like hell to keep out any business that might attract a late-night crowd.

One possible solution is upzoning--neighborhood bars aren't so obnoxious when you're ten floors above them. But of course, the local residents tend to fight that as well.