The Skyscraper Curse: And How Austrian Economists Predicted Every Major Economic Crisis of the Last Century

Razorbacks are wild pigs that are bulky, strong, fast, and ferocious. They inhabit a very large range in large numbers and are omnivorous and highly adaptable. Wolverines are the largest species of weasel, about the size of a small bear. This fast, muscular carnivore has a well-deserved reputation for strength and ferocity. Do these creatures have anything to do with the skyscraper curse?

No, they don’t, but they did inspire an important article by Greg Kaza.

When I give public lectures on the skyscraper curse, I am inevitably asked whether it can be applied on continental, national, and state levels, rather than just a global scale. For example, would a national-record-breaking skyscraper result in a national curse? My answer to those questions is yes, but that is only based on anecdotal evidence.

Greg Kaza1 examined the Skyscraper Index evidence at the state level in the United States. He chose the states of Arkansas and Michigan. Greg is from Michigan and earned his master’s degree in international finance from Walsh College, in Michigan. He has served as executive director of the Arkansas Policy Foundation since 2001. The team names for the University of Arkansas and the University of Michigan are respectively the Razorbacks and Wolverines.

He used the National Bureau of Economic Research’s (NBER) estimates of economic expansions and contractions in the US economy. He compared that data with data on the tallest buildings in both states. What he found was confirmation of the Skyscraper Index at the state level. According to Kaza:

Michigan’s tallest skyscrapers in the early 20th century, Detroit’s Dime Building and Penobscot Annex, were completed in 1913, a recession year. Detroit’s Guardian and Penobscot buildings were finished in 1928–29 on the Great Depression’s eve. Today, Michigan’s tallest building is the Detroit Marriott at the Renaissance Center, completed in an expansion (1977). Its final tower, however, was finished in the July 1981–November 1982 contraction.2

So the experience in Michigan would seem to confirm the Skyscraper Index. It should also be pointed out that with regard to the Detroit Marriott, the American automobile industry, centered in Detroit, Michigan, was still a vital force relative to the rest of the economy in the 1970s, although that would soon change.

The results were similar in the state of Arkansas. The state is largely an agricultural economy, although that has changed some with the rise of Wal-Mart, which has its headquarters in Bentonville, Arkansas. According to Kaza the state followed the familiar pattern:

A similar effect can be observed in Arkansas. Little Rock’s Pyramid Life Building (1907), Union Life Building (1913), Donaghey Building 2 (1926), Tower Building (1960), Bank of America Building (1970) and Region’s Bank Building (1975) were all completed around NBER contractions. The lone exception, Metropolitan Tower (formerly the TCBY Building) was completed in 1986, a year of expansion.3

The Metropolitan Tower might have been completed during a national expansion of the economy, but such was not the case in Arkansas. As the building was being built, the state of Arkansas was entering a very strong economic contraction. According to Henderson, Gloy, and Boehlje:

U.S. agriculture could not sustain the 1970s prosperity and, similar to the 1920s, U.S. export activity collapsed during the 1980s. After peaking at $96 billion in 1980, real U.S. agricultural exports fell sharply. A weak global economy, world debt problems, a strong exchange value of the dollar and trade barriers — including a Russian grain embargo — cut U.S. agricultural exports (Drabenstott 1983). In 1986, agricultural exports bottomed at $47 billion, half the levels posted five years earlier.4

So the lone failures of the Skyscraper Index in Arkansas and Michigan are really about the difficulties that can arise using national statistics on state-level phenomena.

Kaza raises two other important points. The first point is that the tallest buildings in twenty states were completed in years of NBER contractions. It might be interesting to examine the other thirty buildings to see whether their record-breaking dates, in contrast to completion dates, might have occurred during an economic expansion. The second point is that he found, using NBER dating, that the Woolworth Building, which opened in April 1913, did so in a twenty-three-month-long contraction in the US economy between January 1913 and December 1914. This was a long and severe contraction. However, it was not long enough or deep enough to gain a moniker achieved by other skyscraper-cursed buildings.

While Lucas Engelhardt5 shows that the skyscraper-curse analysis can be integrated into the microeconomic analysis of labor markets and location theory, Kaza6 has shown that it can also be situated into lower levels of geographic analysis.

• 1Greg Kaza, “Note: Wolverines, Razorbacks, and Skyscrapers,” Quarterly Journal of Austrian Economics 13, no. 4 (Winter 2010): 74–79.
• 2Ibid., p. 76.
• 3Ibid., pp. 76–77.
• 4Jason Henderson, Brent Gloy, and Michael Boehlje, “Agriculture’s Boom-Bust Cycles: Is This Time Different?” Economic Review (4th quart. 2001): 88.
• 5Lucas Engelhardt, “Why Skyscrapers? A Spatial Economic Approach.” Unpublished manuscript, 2015.
• 6Kaza, “Note: Wolverines, Razorbacks, and Skyscrapers.”