The behavioral economics of Mexican central heating

By Felix Salmon
December 30, 2010

I love Damien Cave’s dispatch from Mexico City (elevation: 7,350 feet), which gets very cold in the winter, inside and out:

In expensive restaurants, in grocery stores and museums, in the homes of the poor, middle-class and even the wealthy, a small space heater is often the only thing breathing warm air.

Why is this? Cave has two theories. The first is cultural:

Deep in this country’s Aztec roots, there is admiration for submitting to the elements, and it seems to re-emerge every winter with force.

The second is economic:

Mexican builders and homeowners have simply grown accustomed to construction without central heating, and with single-pane windows that are especially porous to heat and cold. As a result, insulation materials are profoundly expensive here.

Sadly, Cave doesn’t put numbers on the cost of insulation materials or central-heating systems in Mexico, compared to elsewhere in the world, so it’s hard to tell what he means by “profoundly expensive.” But I suspect that it’s not that expensive:

Fernando Sandoval, an architect who used to work for Anderson Windows, the American chain, said that given such prices, double-pane glass and central heating could eat up a sixth of the total cost of construction. Few seem to bother. Even the most modern apartments here, with stainless-steel appliances and granite countertops, are often devoid of radiators or thermostats.

“They all say, ‘I’d rather have hardwood floors,’ ” Mr. Sandoval said. “Or, ‘It’s only going to be cold for a month or a month and a half, I’d rather buy a really nice Italian cashmere sweater.’ ”

In most countries, I suspect that people would consider central heating a much higher priority than hardwood floors. Especially, as Cave notes, since the Mexico City winter is not only a few weeks long: it lasts from November to February.

There are three things going on here, I think, which might explain what’s going on.

First is good old-fashioned path-dependency: it’s pretty clear that the overwhelming reason why any given Mexico City dwelling doesn’t have central heating is that other Mexico City dwellings don’t have central heating. It doesn’t really matter why or how it got this way, or whether there’s a reason at all: once it’s gotten there, it’s very hard to change.

Secondly there’s the question of relative, as opposed to absolute, cost: it’s not that central heating systems and double-glazed windows are expensive, so much as that everything else, when it comes to Mexico City house prices, is cheap. A $10,000 central heating system seems much more expensive when your house costs $50,000 to build than it does if you’re spending $250,000 on it. This works the other way, too: when I closed on my New York apartment in 2005, I went out and bought a ludicrously expensive keyring to put my hard-won keys onto. I’d never normally drop that kind of money on a keyring, but in the context of the sums I was spending on the apartment, it felt like nothing.

Finally, there’s mortgages—or the absence thereof. Mortgages, or any kind of long-term local-currency debt instruments, are relatively new animals in Mexico, which means that historically homes were paid for in cash, and often took years to build. In that situation, keeping construction costs as low as possible becomes very important: adding a central heating system could mean delaying moving in for an extra year.

Put the three together, and you don’t need ludicrously expensive heating systems or romantic notions about what might be lurking “deep in this country’s Aztec roots” to explain why we all start shivering when we visit Mexico City in the winter.

For the time being, extra demand for housing in Mexico City is being met by extra supply. At some point, however, that’s going to stop, supply won’t be able to meet demand, and prices will start to rise. And that will be the point, I suspect, at which we’ll see people starting to install central heating.

Update: Paul Krugman sees parallels with English food. And Derrida, in the comments, sees Jevon’s Paradox at work:

Maybe it is true that the best way to reduce energy consumption is to make devices like heating and air conditioning less efficient, instead of more. Not having cheap double panes, etc. seems to make central heating less appealing in the DF, resulting in a great deal less energy use than efficient but wide-spread central heat.

Comments
22 comments so far

New Delhi is the same way. Somewhat shorter winter but still cold enough to need room heaters. No central heating anywhere. IMO the reasons are entirely economic. Something that costs a lot of money but is used only 3 months of the year will be anathema to a middle class India. I have affluent friends here in the Bay Area who were sweaters indoors and keep the thermostat at 65. Wearing a sweater is OK. Wasting heat (and causing global warming) is not. Though Delhiites are probably not thinking about saving the world, just money.
Space heaters are also less wasteful than central heating. You put it in a room or two in the evenings only when even a sweater won’t be enough. At night you sleep under thick quilts and don’t need the heater.
I also don’t think builders in Delhi are going to put in better insulation or central heating in anytime soon. I actually think (contrary to your point above) that when demand outstrips supply, they build flats with standard spec. They minimize costs because the flats sell off quickly anyway. At least the bulk of the flats sold to the middle class, where the volume is. Things might change when average incomes rise, but that will take time.

Posted by BasabPradhan | Report as abusive

I suspect Mr. Cave of exaggeration. As best I can tell from the Weather Channel data, average lows in Mexico City never dip below 43 F (6 C). There will, of course, be days and weeks where the low is below freezing, but it isn’t THAT severe as long as the daytime highs are in the 50s. A well-insulated house with passive heating design can be quite comfortable under those conditions. A poorly-insulated house built of concrete may need occasional sweaters and heating pads during the coldest weeks, but no more than that. I bet even the space heaters don’t get much of a workout.

Until recently, central air was unusual in the Northeast for the same reasons that central heat is unusual in Mexico City. If you are only going to need it occasionally during a three month period each year, the added expense is hard to justify.

Posted by TFF | Report as abusive

It seems counter-intuitive but in economies that are inefficient, costs of many things can be much higher than in efficient economies such as our own. Many things are surprisingly cheaper in America than in much poorer countries for this reason.

In fact that central air system which costs $10,000 in America may actually be more expensive in Mexico. In Mexico, this may be a luxury good that does not reach the critical mass needed to bring the price down a lot.

Posted by DanHess | Report as abusive

DanHess@2:52: Haven’t been to Mexico for twenty years, but on the basis of travels to many other second world countries, I suspect the real reason is oligopolies/monopolies in whole industries/sectors: How in the world could the richest man IN the world be a Mexican citizen (Carlos Slim-owner of TelMex). Ditto the offspring of Soeharto in Indonesia. Malaysia, Phillipines, Thailand; examples abound……

Posted by crocodilechuck | Report as abusive

This comes as no surprise. Having lived in Johannesburg South Africa for two years, very few people have central heating, though it get’s into the 30′s in the winter. Nor do many have central air conditioning, though it get’s much hotter in the summer. Room air conditioners are more common, but that’s besides the point.

Expectations have a lot to do with what gets built. If people have never lived with central heating, it’s a very tough challenge to convince them it’s worth paying for.

As someone from England, you must have seen this also. London can get quite hot in the summer, yet few businesses and even fewer homes have central or any air conditioning.

Why would you think Mexico City would be different from London?

Posted by ameyer32 | Report as abusive

Are @DanHess and @crocodilechuck onto something and this is a good example of Jevon’s Paradox at work? Maybe it is true that the best way to reduce energy consumption is to make devices like heating and air conditioning less efficient, instead of more. Not having cheap double panes, etc. seems to make central heating less appealing in the DF, resulting in a great deal less energy use than efficient but wide-spread central heat.

Posted by Derrida | Report as abusive

The last paragraph of the post makes no sense. Virtually all cities in the southern United States manage to meet additional housing demand by adding to the size of the city. The degenerate practice of the NE US and California – increase regulatory burden on homebuilding for the purpose of aiding mortgage speculation and financial fraud – need not be exported to Mexico.

Posted by johnhhaskell | Report as abusive

Maybe Mr. Salmon just needs to toughen up? On the other hand, New Delhi is freaking cold in winter, regardless of what the thermometer says… nobody believes me when I tell them to pack a good winter coat.

New Delhi doesn’t have central heat because there is insufficient natural gas infrastructure, petrol is dear, coal would choke the city, electricity is unreliable, and it’s almost as warm as Mexico City in the winter. What’s the point of central heat when the power goes out 4 hours a day?

I bet that Mexico City doesn’t have a whole lot of natural gas either. Which supports the path dependency hypothesis: a natural gas infrastructure doesn’t exist because it doesn’t exist. In the U.S. and Canada, the only appreciable electric heating is sourced by cheap hydroelectric power–once you’re burning fossil fuels for power, you have to heat with gas.

Posted by Newalgier | Report as abusive

I think that Mr. Cave’s 2nd explanation satisfies Fr. Occam’s requirements (The second is economic: Mexican builders and homeowners have simply grown accustomed to construction without central heating, and with single-pane windows that are especially porous to heat and cold. As a result, insulation materials are profoundly expensive here.) best. But, I think, that explanation doesn’t go quite back to square one.

Back in the 70′s of the last century, I lived for 4 years on the Costa de La Luz, near Cadiz in Spain. At least two of Columbus’ voyages left Europe from this area and, I guess, most of the missions of Spanish conquest did the same. I’d wager that much of the very early European influence in Mexico would find its origin from there also.

One of the things I remember was that the winters could get quite cold there, to the point that ice would form on puddles in the winter. It was also very damp. Even so, of all the houses I remember, whether new or old, expensive or poor, none had any kind of built-in, dedicated central heat, instead making do with little, portable butane heaters.

The only houses bearing evidence of anyone making an attempt at addressing the comfort problem was the installation of vented kerosene heaters…and in every case it was some other American who had paid to have it done.

People tend to continue to do as they have done in the past and sometimes the roots of that go very far.

Posted by Caegheorde | Report as abusive

Sydney, Australia gets about as cold as San Francisco in winter and while most shops and offices have central heating, most houses/apartments do not. (Central air is also not standard in housing). I find the houses are not particularly well insulated either, meaning it is freezing in winter without space heaters. It is a bit mind-blowing considering Australia is a wealthy country, but I suspect it just never became standard and therefore people are used to living without central heating.

Posted by Jamesie | Report as abusive

The average high in the D.F. year-round is in the 70s. The average low in the coldest month is still in the mid-40s.

For perspective, the average winter daytime high temps in New York City are colder than the average overnight lows in Mexico City.

Yeah, you might get a brisk night and need a sweater. No, the houses aren’t built to 2010 California efficiency standards. But it’s just not a cold place by any rational standard. A beautiful climate, actually, though the pollution ruins it.

Posted by BruceRoss | Report as abusive

@Caegheorde. I lived in Costa de La Luz at the same time you did (courtesy of the US Navy) and would add that the butane heaters required the equivalent of an open window for ventilation to avoid what they called butane poisoning.

The manor houses, or whatever they were called, had infrastructure for central heating. These were the homes that the British built and lived in when they owned the sherry bodegas around Jerez. Friends of mine lived in one and I was vey impressed with the cast iron grate over the vent. But my friends did not take advantage it. Most of these houses were empty.

Posted by bidrec | Report as abusive

ameyer32

London: almost all offices (except very old ones) now have air conditioning (old converted 19th century offices tend to have room air conditioners). That’s a given now. Most are glass boxes, and they heat up like greenhouses on a sunny day (we can wind up running the AC in mid winter, it gets so hot).

The problem in London theatres is they weren’t built with air conditioning in mind, and it would be expensive to retrofit (or impossible) and they are generally now listed buildings, and they are privately owned by 2-3 theatre companies.

Cinemas are air conditioned, new ones, and so are stores (new ones and refurbished ones) although not to American tastes. Part of the problem is no 2 layer entry doors as are pretty universal in North America (if you leave the doors closed, you lose customers: people assume you are not open).

Homes are not, although the latest homes are (with the very hot summers we have been having)– it’s a growing trend and in fact official government publications anticipate that 50%+ of London houses may have air conditioning post 2050.

Rest of the UK generally it’s not hot enough for long enough in summer to have air conditioning for homes, although some new houses at the executive end do. Remember forced air heating is almost unknown, here, so you’d have to build or add a separate air cooling system.

So I would conclude the main barriers to air conditioning in the UK are:

- absence of forced air heating (which could easily be made double purpose) except in modern shops and office buildings (which tend to have AC)

- absence of experience of really long humid N. American style summers (which would create a home demand)

- a North American would generally perceive UK air conditioning (and home heating) as inadequate by American standards== the specs are lower

Note that UK housing (and building generally) insulation and air tightness standards are well known for being poor. The latest building regs have not quite caught up to the Swedish 1975 standard (I am not joking). Until the 1990s, there were no Building Regulations regarding insulation AFAIK.

Posted by valuethinker | Report as abusive

Felix

If you’ve ever tried to source materials ‘out of standard’ in a building industry part of the economy, you’ll learn just how expensive expensive can get. Then find someone to install it– even harder.

That’s certainly true of the UK. If the builders don’t know the technology, it will cost you a fortune to install it.

Since it’s not a competitive advantage in homebuilding to provide heating in Mexico, I suspect it is just not offered. The customers don’t value it, so it’s not provided.

I know from friends in the USA that in places that ‘don’t have a winter’ (Arizona, Florida, Alabama) there can be a complete lack of insulation (the US unusually has no national building codes, apparently) and of any form of central heat (at least in very low income housing and rental housing, eg student accomodation). So you can see the same phenomenon.

As you do in Johannesburg, which is plenty cold in winter, and is an elevated plateau. Even in middle class housing.

There is enough commercial expertise in AC now in the UK to mean that it’s possible to get a residential installation. And there is cheap Japanese kit of decently high quality (Japanese and Korean– I’ve not seen any American AC kit, I suspect because the US equipment just did not optimize efficiency, and electricity is twice as expensive here on average). Air Source Heat Pumps (probably the predominant form of US HVAC) are just beginning to have an impact here.

So I think we’re down to path dependence in the case of Mexico. That perhaps and low incomes.

The UK broke path dependence on Central Heating (rare in the UK before 1963) that winter of 1963 when the freezeup was so bad it suddenly became middle class OK to have central heating. The mentality of post war austerity was thrown off beginning at that moment, to the point now where c. 80-90% UK dwellings have central heat (about 65-70+% of all housing uses natural gas for heating and water heating– that switchover was achieved by national programme by the then state-owned British Gas, when North Sea gas was discovered in the late 60s).

Interestingly the mean UK living room temperature has risen by 4 degrees C since 1990 (?1980)- quite a testament to the income effect.

Posted by valuethinker | Report as abusive

ValueThinker, the US does have a national code for manufactured homes on chassis’ (known as mobile homes prior to 1976).

“A manufactured home (formerly known as a mobile home) is built to the Manufactured Home Construction and Safety Standards (HUD Code) and displays a red certification label on the exterior of each transportable section. Manufactured homes are built in the controlled environment of a manufacturing plant and are transported in one or more sections on a permanent chassis.

….
Manufactured homes are constructed according to a code administered by the U.S. Department of Housing and Urban Development (HUD Code). The HUD Code, unlike conventional building codes, requires manufactured homes to be constructed on a permanent chassis.

The “HUD code” is a set of manufactured home industry standards. Published and maintained by the U.S. Department of Housing and Urban Development (HUD), the code establishes the required standards for design and construction, strength and durability, fire resistance, energy efficiency, transportability, and quality control. It also sets performance standards for the heating and air conditioning, plumbing, thermal, and electrical systems.”

http://www.energysavers.gov/your_home/de signing_remodeling/index.cfm/mytopic=102 20

Posted by bidrec | Report as abusive

The situation in San Francisco is very similar, though modern or renovated construction typically features insulation and central heating.

My home is from 1950. It was completely uninsulated when I moved in, and had a single inefficient gas heater in the middle of the main floor. The interior temperature ranged from about 53 degrees in the winter to 97 degrees in the summer. I insulated the attic, which reduced the range to approx. 60-87, and added a weak radiant heating system that runs roughly 100 days per year.

Posted by Mark94131 | Report as abusive

Maybe 10 million manufactured housing units nationwide? It isn’t common practice here either (more typical for rural areas where housing values are too low to justify more expensive construction practices).

I’m not sure why we would WANT national housing standards. Standards that are appropriate for New England might not make much sense in Florida. Those that are designed to withstand a California earthquake aren’t sensible in Iowa. National housing standards make more sense for countries that are the size of a small US state.

Posted by TFF | Report as abusive

bidrec

Manufactured housing is almost unknown here. At a guess, it’s 10% US housing market? UK is probably sub 1%.

So it would appear that the US does indeed have no national housing standards? (except for the mfrd housing subsector)?

Canada I think it is entirely at the provincial level.

Posted by valuethinker | Report as abusive

TFF

National housing standards can adjust for degree days etc.

The reason to have these things is because the additional cost, if built in at the start cost a fraction of what they do to retrofit.

And the efficiencies (or inefficiencies) last essentially forever. A house will last at least 50 years (my last one was 190 years old and that’s not uncommon here).

Studies show homeowners want a 30-40% discount rate on energy saving.

Build it into the house and you can get a discount rate equivalent to the cost of the mortgage.

Posted by valuethinker | Report as abusive

valuethinker, I’m not opposed to housing standards, and I’m definitely in favor of energy efficiency in new construction. But why must they be managed at the national level? It seems to me to be something that is appropriately left to the states.

One area that merits greater attention is “passive efficiency”. Once upon a time, houses were built with large south-facing windows, window/porch overhangs, strategically planted shade trees, and so forth. These days it seems most builders work from stock plans, without any thought to orientation or landscaping.

Posted by TFF | Report as abusive

TFF

You then have the EU problem. The EU has to have a rule that legislation adopted at the EU level is reflected in local national legislation.

So to achieve national standards on housing (remember AFAIK some states do not even have housing codes) the US Federal Government would have to enact legislation requiring a certain level of energy efficiency in housing.

The states could then be left to the actual implementation *but* there would have to be some penalty for states that failed to effectively implement/ didn’t inspect properly.

Otherwise you get a ‘race to the bottom’ with some states, responding to lobbying for cheaper buildings (in purchase cost, not necessarily Total Cost of Ownership or Lifecycle cost) just don’t implement.

You can’t get to an improvement in national energy efficiency without centralized regulation of some form. A similar problem was encountered in almost any pollution regulation (although cars are easier to sell across state boundaries, and industrial effluent like acid rain moves across state boundaries). Of course things like appliances you have to have national standards for the same reason.

Passive efficiency is something you can write into a building reg– I think California does.

Posted by valuethinker | Report as abusive

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Posted by gasheating | Report as abusive
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