What is it?
A paraphrasing of Gresham’s Law, an economic principle proposed in the 16th Century by adviser to Queen Elizabeth I, Sir Thomas Gresham. The law, bad money drives out good, described the devaluation of the precious metal content in circulating coins. When new, low precious metal content coins were issued by the Queen, Gresham observed that older, higher precious metal content coins quickly disappeared: either hoarded by the public as a primitive form of savings, or retained by the government to melt down and create more of the new.
We first came across the principle in 2004 while studying The Political Economy of Design under Professor Paolo Tombesi at the University of Melbourne, a subject and a teacher we recently discussed here. Now only offered sporadically within the Master of Architecture program, the subject “seeks to position and discuss architecture in relation to the world of production, economic interests and community benefits, at a local and global scale”. As evidenced by this article, written nine years after we took the subject, it has imparted lasting influence over our interests and values.
If you are a student at the University of Melbourne and The Political Economy of Design is offered in coming semesters, it would be a crime for you not to enrol in it.
Gresham’s Law may be a simple observation, but it has sophisticated ramifications that describe the devolution of production in almost any corner of industry, architecture included. The analysis that follows owes much to Michael Benedikt‘s excellent article on the subject, Gresham’s Law and the Logic of Efficacy.
Bad architecture drives out good, an illustrated story
A house comprises 1,000 qualities, set N, which collectively enable it to function. These qualities include things like bedrooms, insulation, robustness, waterproofing, solar orientation and timber benchtops. Each quality costs its builder $1,000 to produce, equalling a total construction cost of $1,000,000.
As is true with any product the world over, the purchasers of the house are cognisant of fewer qualities than it contains, set n. The qualities of which they are not aware are hidden from their layperson’s sight, like the thermal mass of its concrete slab, the anti-rust properties of its stainless steel hinges or the acoustic insulation in its internal walls. The precise size of set n varies between purchasers, however in all cases n < N. If there are say 600 qualities the purchasers appreciate, each worth $1,000, they are prepared to pay only $600,000 for the house.
Thus the builder of the house faces a dilemma: the gap between its total and appreciated qualities, N – n, represents a financial shortfall. While the house costs him $1,000,000 to construct, its purchasers are only prepared to pay $600,000.
So how does the builder address the financial shortfall? According to Benedikt, there are two basic solutions.
Builder #1 pursues the first and simplest: the strategy of contraction. This strategy reduces the number of qualities built into the house so as to reduce its construction cost. By eliminating the 400 qualities unappreciated by the purchasers, he need only spend $600,000 in production and will thus recoup all costs upon sale.
Builder #2 pursues the second and more complex: the strategy of education. This strategy maintains the full number of qualities built into the house, but seeks to inform the purchasers of their importance. Once the purchasers appreciate all 1,000 qualities, they are prepared to pay the $1,000,000 production cost and, once again, he will recoup all costs upon sale.
The two strategies do not promise equal success. Contraction enables builder #1 to reduce the cost of production up front, diminishing his financial risk. It also permits his house to be sold more cheaply than the house of builder #2, an easy and effective marketing advantage. In contrast, builder #2 must bear the risk of a more expensive production cost, together with the additional cost of educating potential purchasers. Further, there is no guarantee that once suitably educated, they will indeed purchase his house.
This imbalance is magnified when extrapolated over time. The strategy of education is a long-term approach, with better educated purchasers interested in houses containing all 1,000 qualities at best a distant benefit. The strategy of contraction promises much faster returns: the cheaper house of builder #1 attracts more purchasers more often. Soon enough, the market is saturated by his houses and the better quality houses of builder #2, unable to compete, disappear from circulation.
It doesn’t matter that the purchasers benefit from the 400 discarded qualities, nor are disadvantaged by their absence, only that they don’t appreciate them. Presented with two houses side by side, with nothing discernible to distinguish them, the cheaper house inevitably wins. Ultimately, Gresham’s Law prevails: education is expensive, risky and time-consuming; contraction is cheap, virtually risk-free and fast. Bad architecture drives out good.
What do we think?
Our contemporary built environment has been shaped over recent decades by no force more influential than Gresham’s Law. We see it everywhere. It is the reason volume housing, which represents around 95% of all new housing construction, is of poor quality. It is the reason for down-skilling in young tradespeople. It is the reason that the majority of new building systems and materials substitute quality for efficiency. It is the reason that McMansions exist; that housing estates are filled with poor-performing, flimsy buildings.
A commercial timber window fabricator told us recently that his company abandoned solid timber jambs in favour of finger jointed pieces around 3 years ago when his competitors made the change first. It doesn’t matter that solid timber offers a more uniform finish and superior durability to finger jointing, only that the purchasers not know this. Since the downgrade, not a single customer has complained.
Gresham’s Law is also the reason that architects and boutique builders are incapable of competing with volume housing construction rates. We regularly encounter potential clients who weigh up our bespoke design services with the contracted services of draftspeople or products of volume builders. Despite our strident efforts to explain the unevenness of this comparison (in which we make ample reference to the analogy of the suit), we find ourselves on the losing side of an ongoing and long-lasting battle. One recent potential client was outraged that our proposed fee could possibly be 6 times more expensive than that of a draftsperson. No amount of frank discussion explaining the services we provide could sway them: we missed out on the commission.
Our experience is evidence of the depressing but not surprising truth that the Australian public does not appreciate the value of good architecture. Gresham’s Law has been at work for far too long here, the lure of cheap houses having displaced for decades the benefits of true quality. One need look no further than any of the new housing estates springing up on the fringes of Melbourne to see the truth of this.
Mernda, a Metricon community 30km north-east of Melbourne
Dear reader, can you imagine one of these houses, or any of the thousands like them, serving generations of inhabitants in the way that the worker’s cottages of the early 1900s have? Can you imagine them being renovated and updated for changing tastes through the decades, but being essentially retained? No? How about the idea of them being demolished in 10 years, dumped unceremoniously in landfill and replaced?
This is the legacy of almost 500 years of Gresham’s Law, and it all started when the Queen discovered that a coin with negligible precious metal contact can be worth its face value simply because she said it was. Translating this concept into the realm of architecture reveals that marketing and spin are more important than the truth, that the Australian public desire quantity over quality and precious few can tell good architecture from bad.
What can we do about it?
Opposing the relentless forces of contraction is a time-consuming, expensive and risky undertaking. Asking individual architects to do this within their practices is an almost impossible task. The sheer numbers are against us here: 140,000 new houses are built each year in Australia, but architects are involved with only 7,000, or a mere 5%. One cannot fight cancer one damaged cell at a time.
Gregg Pasquarelli observed in his recent Dean’s Lecture at the University of Melbourne that the most environmentally sustainable action available to an architect is to “create buildings that people love, that don’t get torn down every 10 – 20 years.” This is certainly a significant part of the equation, but it is a philosophy most architects are already practicing. Perhaps in areas of dense architectural involvement, specifically the city and inner suburbs, this has already translated into an appreciation of good design. Such is not the case the further out one travels however. How can we pursue the difficult strategy of education amongst the vast majority of people – from Mernda to Caroline Springs – who are ignorant of architecture and disinterested in its value?
We have three suggestions:
Media advocacy. In public forums and across all forms of media, advocacy provides the opportunity to talk to people about architecture. The Architects radio show on Triple R is a shining example of this approach, as are Houses magazine, Melbourne Open House and the Robin Boyd Foundation. The most striking shared quality of these enterprises is their appeal to laypeople. 70% of attendees at the Robin Boyd open days are non-architects, while the MOH weekend last year recorded 135,000 visits.
As such, a key quality of successful advocacy is accessibility: it is not avant-garde theory or collective back-patting; it is a concerted effort to engage the public with their built environment. Despite its mandate that asserts otherwise, the Australian Institute of Architects is not good at advocacy. It expends great effort in lobbying government but neglects popular media. Every time Jon Faine discusses an issue concerning the built environment, an AIA representative should offer an opinion; daily newspapers should provide more visibility to the AIA and seek quotes as a matter of course; and television shows about design should involve architects more heavily and celebrate them in the way reality-TV cooking shows do chefs.
Beyond design. We came across a blog article recently noting that in the past 50 years only one United States federal politician was an architect. The article associated the marginalisation of the architecture profession with our conspicuous absence from roles of public office and common interest. Having government architects at state and federal levels is a good start, but we need to step up into positions of wider responsibility: in politics, universities, major institutions and company boards. In our practices, we seek creative solutions that are long-term, wide-ranging and socially responsible. If this rare paradigm can work for buildings, why can’t it work for government portfolios?
Perhaps our undoing in this regard is, ironically, our love of architecture. Being an architect is so rewarding that we are not prepared to leave it for elections, committees and policies. Certainly, there is ample evidence to suggest we love the practice of architecture sufficiently to put up with being paid terribly to do it. Nevertheless, public office is a serious responsibility in which we are obliged to take part: more of us need to accept its burden.
School education. Finally, the education of young minds. Every individual in his or her life will engage with architecture more frequently and meaningfully than he or she ever will with calculus, sound waves or organic chemistry. Why then is architecture not taught at school level? Why does every student not graduate from high school with a basic knowledge of sustainability principles, the history of Australian architecture and the innovations of the Sydney Opera House?
A number of years ago, we successfully introduced a term of architectural design into Year 11 Visual Communications and Design at Caulfield Grammar School. Though we are no longer involved, we believe the subject is still running. Looking back on the experience, we realise that an arts subject is not necessarily the best place to learn about architecture: after all, our agenda is not to create more architects but to inspire more interest in architecture. If we are to reignite our teaching involvement at school level, we will aim to do so not just through the arts, but science and history also.
With an entire socio-economic framework founded on the principles of Gresham’s Law, it will be no small task to reverse the status-quo of architectural ignorance. Working as individuals, we cannot afford the time to educate every potential client that walks through the door, nor accept the risk that once educated he or she won’t go elsewhere. If we are to have any success at all, we must work together as a profession. We must also realise that our design work is not in itself sufficient to affect fundamental change. To do that, we’ll have to step well beyond our comfort zones and accept positions of responsibility in the wider community.