ECONOMICS UNIQUENESS

34 ■ THE ECONOMICS OF UNIQUENESS
less so. Th erefore, the social benefi t ΔH + ΔV does not increase much. Because it
remains below the social cost C for any extent of renovation, economic returns
are maximized when R = 0, as shown by the bold vertical line in the fi gure. Th e
optimal decision is to ignore cultural aspects when designing the project and just
do standard urban upgrading. Figure 2.4A thus corresponds to a standard project,
in which no attention is paid to cultural issues.
At the other end, in fi gure 2.4C, “saving” the landmark results in a substantial
increase in the heritage and property values of the area, whereas the cost to society
of renovating the landmark is not that high. Th e sizeable gains from “saving”
the landmark are refl ected in the large “jump” of the B function; the relatively
modest increase in cost translates into a smaller jump of the C function. Moreover,
renovating some of the properties with architectural character adds to the
overall value of the area but remains aff ordable. As a result, the gap between the
benefi ts to society and the project cost keeps growing as more buildings with
architectural value are renovated, implying that the optimal economic decision
is to “save” all of them.
In between these two extremes, the intermediate fi gure 2.4B assumes that
“saving” the landmark still leads to large gains to society, but renovating other
buildings with architectural value only contributes marginally to the overall
value of the area. Th e panel also assumes that project costs (included the induced
investment decisions by the private sector) would increase substantially as more
and more buildings with architectural value are preserved. In the example chosen
for this panel, the gap between the social benefi t function B and the social cost
function C is widest when k buildings with architectural value are “saved” (0 < k
< n). In this case, which might be the most relevant in practice, partial renovation
is the socially optimal decision.
It is worth noting that the main diff erence between fi gure 2.4B and fi gure 2.4C
does not lie on the intrinsic historic or architectural value of the buildings but
rather on the shapes of the cost and benefi t functions. As fi gure 2.4B shows, it
could be worth preserving only some of the buildings with character (apart from
the landmark), even if they were all strictly identical from an architectural or
historic point of view. Conversely, fi gure 2.4C shows that under certain circumstances
it could be justifi ed to preserve all of the buildings with architectural or
cultural value, even if none of them were extraordinary on their own.
Rationale for Public Intervention
Whatever the socially optimal preservation decision is, externalities from private
sector investment imply that decentralized decisions may not be suffi cient
to implement it. When designing an urban upgrading project with a cultural