Formal versus Informal Allocation of Land in a Commons: The Case of the MacArthur Park Sidewalk Vendors

Abstract

Sidewalk vendors are becoming a more common presence in cities in Latin America and the United States. Vendor demand for the best sidewalk vending spots increasingly exceeds supply, making necessary a system to allocate space in what is essentially an open access commons. This paper presents an empirical study of two very different systems of allocation that have been adopted in the city of Los Angeles, California, a formal one imposed by the city on legal vendors when they were unable to come up with one on their own, and a second that was embraced by illegal vendors across the street on an informal basis. The fact that illegal vendors were able to adopt any system at all, while a handful of legal vendors were unable to when given the same opportunity, is not what would have been predicted by social norms scholarship. Nor can it be attributed to the activities of local street gangs. Instead the respective success and failure of these two groups of vendors are best explained by Robert Sugden's game theory of spontaneous order. Turning to their relative merit, the illegal vendors' system of space allocation is superior, enjoying as it does a number of efficiencies. By contrast, the city's formal system suffers from a number of costs. It seems intent less on benefiting the community as a whole than on protecting storefront merchants from legitimate competition.

Keywords: spontaneous order, norms, sidewalk, vending, gangs, property, commons

JEL Classification: K11, K42, C70