Economic Theory

Anti-gentrification protests: the economics of coolness

Last Saturday, several hundred anti-gentrification protesters attacked a ‘hipster’ café in Shoreditch, throwing paint bombs against the windows, and trying to throw a smoke bomb inside. Riot police dispelled the crowd before it went any further. The Guardian, obviously, immediately gave some column space to one of the protesters, so that he could explain why they really did it out of love for the poor:

“[S]ome paint and cornflakes were thrown at the [café] which received a lot of attention, while the issues at the heart of the protest – inequality and social cleansing – were largely ignored. […] the petty vandalism that occurred pales in comparison to the brutality of the gentrification that is destroying the lives and demolishing the homes of some of London’s most vulnerable people.”

Anti-gentrification sentiments are nothing new, and they are not limited to Shoreditch, or, for that matter, to London. They are also unlikely to go away anytime soon, if ever. This is because gentrification causes two different sets of problems, one of which could be solved, and one of which is unsolvable.

Let’s start with the solvable part. If a group of relatively well-off people move into a relatively poor area, they change demand patterns and raise the local price level. This is probably inevitable, but the magnitude of this effect can vary hugely. It is a vastly greater problem in a city where there is a general shortage of residential and business premises, and where rents and house prices are already soaring across the board.

For a while, I lived in a mildly gentrifying borough of East Berlin, where the property market was quite relaxed, and quite able to accommodate the newcomers as well as the businesses catering to their tastes. You would hear the occasional grumble from ‘indigenous’ residents about how their neighbourhood was no longer what it used to be, but life went on. Alternative-styled bars opened next to more traditional workmen’s pubs. Wholefood stores and artisan shops opened next to tanning studios. The newcomers would talk about smashing neoliberalism, the settled residents would talk about more practical matters. Did the two tribes mix much? Of course not. But it was a peaceful coexistence.

So to some extent, the problem is not gentrification per se, but inelastic housing supply. The solution, then, is to flatten the housing supply curve by making it easier to build upwards and densify popular urban areas.

Would gentrification cease to be an issue if those issues were addressed? Absolutely not. Anti-gentrification protests also occur in places where the property market is fairly relaxed. (They are also a massive issue in Berlin: my old borough was a bit atypical in that respect). There is a second, and arguably more important layer to those protests, which is not about hard economics, but which can nevertheless be explained using economic logic.

It is important to note that anti-gentrification protesters almost never have deep roots in the neighbourhood where they now want to pull up the drawbridge. They are an earlier wave of newcomers; more precisely, they are people who moved to the area before it became popular. They are what marketing folks call the ‘early adopters’.

It usually works like this: A few trendsetters – e.g. artists – move to an area which is uncharted territory for almost everybody in their social circles, because it is run-down, scruffy, and suffers from high crime rates. The presence of these trendsetters then gives the area an air of ‘coolness’, which attracts the early adopters. A cool area, however, is like a secluded beach: We cannot all go there. By definition. If we all go to the secluded beach, it ceases to be secluded, and if we all move to the cool area, it ceases to be cool. Coolness is about distinction. What makes an area cool is the fact that it is off the well-trodden paths, it is different from elsewhere, it is a bit adventurous, it is edgy, it is non-mainstream, it is – well, cool.

When looking for a place to live, most people concentrate on factors like local amenities and transport links, but some also use their postcode as a marker of social status. “I live in Mayfair” does not just mean “I live in Mayfair”, it also means “I have money; probably a lot more than you.” In the same way, a couple of years ago, “I live in Shoreditch” did not just mean “I live in Shoreditch”, it also meant “I am cool; probably a lot cooler than you.” But at some point, every Tom, Dick and Harry began to move to Shoreditch, thus eroding the coolness effect. If coolness is about distinction, it is inherently scarce. Sure, more people can acquire a coolness signal, like a Shoreditch address, but that just makes the signal less and less powerful.

So call me a cynic, but when anti-gentrification protesters claim that smashing up shops is an expression of love for the poor and vulnerable, I don’t take it at face value. I am more inclined to see them as a group of early adopters who once acquired a powerful status signal, who have seen the value of that signal steadily eroded, and who now try desperately to restore some of its value. (You can also explain Political Correctness along the same lines.)

If that interpretation is correct or correct-ish, it means that we will still see anti-gentrification protests in ten, twenty or thirty years’ time. But not in Shoreditch, obviously, which will by then be seen as boring, bourgeois and middle-class.

Dr Kristian Niemietz is the IEA’s Head of Health and Welfare.

Head of Political Economy

Dr Kristian Niemietz is the IEA's Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).

3 thoughts on “Anti-gentrification protests: the economics of coolness”

  1. Posted 30/09/2015 at 11:05 | Permalink

    Where does the poor and original tents get pushed off to? What area becomes the new ghetto for the unartistic?

  2. Posted 30/09/2015 at 16:33 | Permalink

    The problem we’ve had with high rise apartments in the UK is they’ve been in the wrong locations, and targeted at the wrong people (central planning failure). While London does benefit in many ways from its relatively low skyline, I cannot see how very high quality high rise development in the right areas can be anything but good. It would certainly be better than the inefficient, wasteful and unnecessary development of green sites. The CPRE might agree. What we need is a holistic approach, that treats causes, not symptoms. That means getting an optimally efficient market first BEFORE we de-regulate ie an LVT. This solution would reconcile the desires of both the CPRE and the anti-planning brigade.

  3. Posted 01/10/2015 at 09:19 | Permalink

    “It is important to note that anti-gentrification protesters almost never have deep roots in the neighbourhood where they now want to pull up the drawbridge.”

    I think that’s true. But any cause attracts those from outside – much like you are blogging on the subject now.

    I also think you are right about housing supply, although that’s more an observation than a solution. The trouble is that the artists you mention have been faced with inflation-busting rent increases to stay in the area, and artists almost by definition have little money and little power too.

    I know the IEA wouldn’t advocate rent controls. So what message to these iconic artists? Its not enough to stand by and say to people: Well, that’s just the market doing its thing. Because that’s what starts revolutions. It’s currently like a game of Monopoly and someone with money from Mayfair has just bought Whitechapel and built a hotel on it. The other players can pay up for a while but eventually they decide to tip the board over!

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