optimal subsidies and see how they compare to current policies such as impact fees on new development. Here are a few words about optimal subsidies: There are several interesting implications of the optimal tax in City 1. First, if there is only one neighborhood, then optimal decisions get made for the whole city, and there is no need for a subsidy. Second, the larger the number of neighborhoods, then the larger the subsidy...must be. If there are a large number of jurisdictions able to make their own decisions about development density, then the private market outcome is likely to be farther from the optimum, and any subsidy will have to be larger. However, even with large numbers of neighborhoods, it is possible to offer a subsidy to the neighborhoods that will make each better off. One of the interesting things about development decisions is that community outreach and discussion is often focused at a very local level. Hearings are held in the neighborhood, only the local ANCs (here in DC) are asked to weigh in, and the local Councilmember is given particular deference in forming a decision to approve or deny or amend a development plan. But this strategy makes life much easier for NIMBYs than would a decision process oriented at the city-wide level. Yglesias often argues that one way to address local residents opposing development because they're worried about, say, parking, is to simply guarantee those residents parking -- say that they can have on-street parking permits which