Cities, Ideas and Housing

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Cities, Ideas and Housing

• Edward L. Glaeser
• Harvard University

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The Central Paradox

• Why is it that in an era in which transportation
  and communication costs have virtually vanished,
  cities have become more important than ever?
• Urban resurgence is visible in high income
  levels, robust housing prices, and a
  concentration of innovation in urban areas.

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Urbanization Across the World
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The Hypothesis

• One major effect of globalization has been an
  increase in being smart.
• You become smart by being around other smart
  people we are a social species.
• Cities, like Boston and New York and London and
  Bangalore make that possible.
• The same death of distance that did so much to
  hurt Detroit helped NYC.

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The Urban Role in Civilization

• Start with the basics clothing and food.
• By the time you get to our own country, it is
  cheap enough to ship food that you get food
  cities, but 1,000 years, cities like Bruges and
  Florence were clothing cities specializing in
  wool.
• Urban density enabled markets to work and spread
  human capital and shared machines.

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The Gifts of Urban Density

• Art in Flanders (van Eycks, Campin, Memling)
• Commercial patrons and learning
• Religion
• The Brethren of the Common Life (Adrian IV,
  Erasmus, Martin Luther)
• Education and Literacy
• Caxton and Gutenberg
• Political unrest and democracy (Coninck)

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The Problematic 20th Century

• The Automobile made public transportation
  oriented cities seem somewhat obsolete.
• The truck freed manufacturing from needing to
  cluster around ports and rail stations.
• Declining transport costs created a rise in
  consumer cities over cities oriented around
  productive advantages like waterways.

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The Decline of the Costs of Moving Goods
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The Move to Warmth
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The Rebirth of Boston, NYC

• Idea-oriented industries rose in places that were
  once centers of manufacturing.
• Finance in New York and an urban chain of ideas
• Understanding risk and return with data
• The sale of riskier assets (Milken)
• The use of risky assets to restructure companies
  (KKR)
• The nationwide sharing of risk (Ranieri and MBSs)
• The sale of data tools (Bloomberg)
• Finance, management consulting, computers,
  biotech in Boston

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What Do They Make in Bangalore?

• The quintessential example of the flat world is
  actually a hotbed of learning via proximity.
• Milan thrives and Turin fades.
• Minneapolis excels and Cleveland doesnt.
• Birmingham reinvents itself (it always was an
  intellectual polis) Manchester doesnt.

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Population Growth in the Northeast and Midwest
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What is good about urban poverty?

• Cities tend to contain a large number of poor
  people, but that reflects urban strengths more
  than urban weaknesses.
• In places like Boston, there is opportunity,
  ethnic networks, and life without cars.
• Cities arent making people poor, they are
  bringing them in.
• Policies that are good to poor people in cities
  will attract more of them and that is o.k. the
  really problem is the artificial equality of
  suburbs.

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Why are so many people still in the rustbelt?

• The rustbelt was built on manufacturing around
  the waterways.
• Erstwhile creative hubs like Detroit evolved into
  goods producing machines, but declining transport
  costs led manufacturing to move.
• Now there is little obvious comparative advantage
  to these places and the weather isnt great.

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Should we be trying to fight history?

• There are good economic reasons for these places
  declines, government policy is ill equipped to
  undo them and is often counter-productive.
• Do we really want to push people to stay in
  declining areas?
• Often place-based efforts look much less
  productive than people-based efforts (head start

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The Rise of the Consumer City

• While clusters of genius are more important than
  ever, they are no longer tied down by productive
  amenities
• Increasingly, cities have formed in places where
  people want to live.
• At the same time, more attractive older cities
  have become increasingly attractive to people who
  like density.

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When are high real wages bad?
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Declining Real Wages and the Rise of the Consumer
City
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The Rise of Reverse Commuting
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Are some cities becoming gateless gated
communities?

• Over the past 40 years, there has been a
  revolution in property rights regarding
  development, some of this is good, some is bad.
• Suburbs, not cities, are the center of this.
• Still, a large number of cities are increasingly
  making it harder to build.
• This is where Jane Jacobs was wrong.

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Prices and Permits across Larger Metropolitan
Areas
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Prices and Permits in Manhattan
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The Declining Height of Manhattan Buildings
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Density and New Construction
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What is good about sprawl?

• While some cities are thriving, Americans are
  still moving to the car-oriented sunbelt and for
  understandable reasons.
• While cities do well for the rich and the poor,
  car-based cities provide faster commutes, cheaper
  homes (and goods) for middle income Americans.
• Cities must do better in competing for this
  segment of the population.

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Green Cities

• Urban residents are much less likely to drive
  than their suburban counterparts.
• Urban residents live in smaller homes that use
  less energy.
• Since we dont tax carbon properly, this means
  that there are too few people in cities.
• The environmental consequences of
  environmentalism.

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Sources of CO2 Emissions

• Private Gasoline Consumption (Cars)
• Public Transportation Emissions
• Home Electricity
• Home Heating Natural Gas and Fuel Oil

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A Few Caveats

• We are not including anything about industry or
  workplace.
• We will use a 43 dollar per CO2 ton cost this is
  highly debatable (about ½ Stern Report).
• Scale it up or down as you like.
• Average vs. marginal homes matter, especially in
  heating efficient.

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City-Suburb Differentials

• For each metropolitan area, we can also calculate
  the difference between urban and suburban energy
  usage.
• Calculate gas usage by central city vs. suburb.
• Convert public transit by ridership using census
  figures.
• Calculate energy spending using the IPUMS for
  central city vs. suburb.

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Towards a Level Playing Field

• Cities are important and while they should not be
  subsidized, they do deserve a level playing
  field.
• Anti-urban bias 1 caring for the urban poor is
  expensive and should be everyones
  responsibility.
• Anti-urban bias 2 failure to correct
  environmental externalities
• Anti-urban bias 3 failure to let cities grow.