Once again the new economics foundation fails economics

Nef, the new economics foundation, has a new little campaign running. That there should be affordable rents of businesses working in the railway arches which permeate London. This is to entirely misunderstand the purpose of prices:

In many cases, traders are being replaced by cafes and workspaces designed for people working on laptops.

Of those that remain, many are struggling for survival, as business rates also went up substantially last year for the first time in seven years.

Frances Northrop of the New Economics Foundation says: “Imagine Londonwithout the small businesses of Portobello Road, Brick Lane, Columbia Road and Chinatown. They are being driven out by the cold logic of ever-increasing rents.”

Many small independent businesses are based in railway arches across London, often owned by Network Rail or Transport for London.

As their press pack notes:

This campaign is really important and closely linked to the London Living Wage. If it can be established what a person needs to earn to live in London, it must be possible to establish what a small business can afford to pay in rents and rate.

As we say, this is entirely to misunderstand prices. For that's exactly what they do for us. Tell us how much a business can afford to pay in rent and rates. More than that, railway arches are a scarce resource. There's a limit to the number of them and a larger number of people who would like to occupy them. We thus desire them to be occupied by those who are adding the most value - that will be those who are able to pay the higher amounts in rent and rates.  

The market in property, the associated rent and rates costs, therefore do the job for us - sort through those who will add the most value by occupying a railway arch and also make sure that those who do add the most value do the occupying. Huzzah, job done and all that.

If that turns out to be cafes and workspaces instead of artists then so be it. We might not like what prices are telling us but they don't lie all the same.

All of which is just another instance of that great truth first revealed by Giles Wilkes. Nef stands for not economics frankly.