ECONOMICS UNIQUENESS

INVESTING IN THE SENSE OF PLACE ■ 31
2.4, ranges from 0 to n + 1. Th e social cost and benefi t of the project, C and B
respectively, are measured in the vertical axis. Both the cost and benefi t can be
expected to increase as the number of valuable buildings preserved increases, but
the increase is not linear.
Consider the C function fi rst. For simplicity, it can be assumed that the cost
of upgrading urban infrastructure U is independent from the level of spending
on renovation R. Th e latter, in turn, increases with the number of buildings with
architectural value preserved by the project. If no building with architectural
value is preserved, then R = 0. If only one building is preserved, that is by assumption
the landmark, which is presumably an expensive undertaking. Subsequent
increases in R, as more buildings are preserved, should be more modest. If all
the buildings with architectural value (other than the landmark) were physically
identical, it could be argued that in the range of 1 to n + 1 renovation spending R
is indeed a linear function of the number of buildings preserved.
However, renovation also aff ects the level of private investment I in building
upgrading and new construction. Because ΔH _ increases with architectural preservation,
the hedonic price function f(.) shift s upwards, and the optimal level of
spending by local residents and outside developers increases too, as shown in fi gure
2.2. Th is means that private investment I “jumps” as the landmark is renovated
and keeps increasing as more and more buildings with architectural value are
preserved. As a result, even if spending in urban infrastructure U is constant, and
renovation spending R only increases linearly, the total project cost C = U + R + I
is a convex function of the number of buildings renovated (again, in the range
of 1 to n + 1). Th is convexity of project cost is a diagrammatical way to state that
architectural preservation can be an expensive proposition.
Th e social benefi ts B from the project also increase with preservation eff orts,
but they can be either a concave or a convex function of the number of buildings
covered by the project’s cultural component. Much the same as the cost function,
B experiences a discontinuous increase when the landmark is renovated. Th is
is because of the ensuing impact on the heritage value of the area ΔH, which in
turn has a positive impact on the value of properties in the area ΔV. Th is impact
is enhanced by the greater level of private spending in building upgrading and
new construction spurred by the preservation of the landmark, already discussed
above. But from then on, as more buildings with architectural value are preserved,
determining whether ΔV grows (more or less than) proportionally to the
renovation eff ort would require additional assumptions about the hedonic price
function f(.).
Advocates of cultural interventions would, in principle, be more inclined to
believe that the social benefi ts are a convex function of renovation eff orts. A critical
mass of buildings with architectural value may indeed be needed before an
area can be said to have character. On the other hand, those concerned with the