ACCORDING to Says Law, supply can create its own demand. This must be the justification for the decision made by the village of Storrs, Connecticut to build a town. Storrs is a small village in the town of Mansfield that happens to be home to the main campus of the University of Connecticut. Despite containing a university with a student body of more than 20,000 the village lacks any retail centre. Thus, to make students happier and attract more visitors they are planning to build an entire retail and residential area will be built on the edge of the campus for about $175 million.
On first glance this plan makes some sense; there is a potential market. There are not only all those students, but also the legions of fans attracted by the University's highly successful basketball team. However, it seems likely that if the market were so great, some entrepreneur in the one-hundred and twenty-six year history of the university would have seen the potential for profit and started a successful business. In fact, some have tried, but their restaurants and shops have historically failed to generate a profit. Students seem content to rely on the meagre offerings of on-campus dinning, and both students and town folk’s primary resource for local retail shopping has been the University book store. This is why the wardobes of so many of the town's inhabitants are disproportionately composed of items emblazoned with the name of the university.
There is a limited demand for quality housing because the university provides it to undergraduates, and graduate students don’t have enough money to pay for anything other than cheap apartments. Storrs is isolated by not being on a major roadway or near a city. Thus, most of the residents work at the university or in agriculture.
Retail centres have traditionally grown out of residents demanding the products of the merchants in a convenient, central location, while merchants like to be central in order to maximise their customer base. This virtuous cycle has never developed in Storrs. In a recent article in the Chicago Tribune, Cynthia van Zelm, executive director of the Mansfield Downtown Partnership, commented that she could think of no previous example of such a project.
It could be possible that the merchants of Storrs are caught in a sub-optimal equilibrium, in which a single store cannot attract a large enough market, but a group might. Building a downtown centre with many retailers may lift them out of this by having enough businesses to generate spillover effects. But it is unlikely; it seems that if the demand really existed to support such a thing, the town would already exist.