The Triumph of the City

My review of Ed Glaeser's excellent Triumph of the City is in today's Christchurch Press, but not online. Here it is.

Fixing the City

Anybody wanting to throw the book at Christchurch Council should consider the hardback edition of Professor Edward Glaeser's "Triumph of the City". It has two distinct advantages. First, at a bit over 300 pages, it'll be hefty enough to make for a satisfying throwing experience - neither too heavy to lob, nor so light as to be brushed off. Second, Christchurch's city planners really ought to read it; throwing this particular book at them might improve outcomes.

For the last fifteen years, Professor Glaeser has been figuring out what makes cities work. The Triumph of the City is more than just the culmination of that work; it's a passionate defence of the city as the best mechanism for human flourishing. When we live together in well-functioning cities, we are more productive, healthier, and, perhaps surprisingly, more environmentally friendly.

Cities are our engines of creativity and innovation. Chance interactions among smart, productive people in complementary lines of work that can happen in dense urban environments occasionally create "miracles of human creativity." And, as cities get larger, the process accelerates.

Bigger cities make it easier for entrepreneurs to strike it out on their own; failing in a bigger city gives you more opportunities to transition back to the salaried workforce, so innovators can be more comfortable in taking risks. Bigger cities also make it easier to find new niches in the intersections of different industries. Businesses are willing to locate in big cities, where costs are higher, precisely because cities facilitate productivity.

Glaeser also forces us to take a broader perspective when thinking about local "green city" regulations. Cities are already very green - and especially so where Councils have placed fewer constraints on building up. He points to smart growth regulations in California that have done a great job of preserving local green spaces and increasing property prices, but have helped push people away from California and towards Las Vegas, where the sweltering environment means more electricity use and where more people live in automobile-intensive suburbs. As Glaeser puts it, "we must recognize that if we try to make one neighbourhood greener by stopping new building, we can easily make the world browner, by pushing new development to someplace far less environmentally friendly."

Where cities have myriad paths to success, city failure usually involves bad planning. Sometimes, bad policy comes when Councils grasp at straws in the face of events outside of their control, like Detroit's push for grand infrastructure projects as response to auto industry deline; their white elephant monorail only drained city resources as it rolled above empty streets. But failure can come too for growing cities when regulatory measures slowly strangle entrepreneurial activity and make it too expensive for families to choose to live there. When something bad happens, these cities are not well placed to adjust.

We can take a few lessons for Christchurch, and for New Zealand, from Glaeser's work. If Council continues making it too hard for developers either to build up or to build out, section prices will remain too high and we will continue giving our graduates strong reason to seek higher salaries abroad. For all of Council's protestations against urban sprawl, it has released surprisingly little land for dense development within the city. We were more than a little surprised when we moved here eight years ago that we could not rent an apartment by the beach at New Brighton; zoning had made it illegal to build them. Council's having strangled land supply before the earthquake made it impossible for developers to respond after the earthquake. Building fancy stadiums or light rail systems will be far less important for recovery than fixing infrastructure and getting land use policy right. Other cities would do well to fix their policies before their earthquakes come to visit.

More broadly, while early pundits reckoned that the internet would bring the death of distance, the evidence now suggests that information technology is increasing distance's relative cost: it's making New York better faster than it's helping Auckland. Cities have long exhibited what economists call "agglomeration effects" - the city is greater than the sum of its separate parts were those parts scattered across the country; fast broadband seems to be accentuating these agglomeration effects. We are more likely to phone and email people who live and work near us; US patent data shows innovators are more likely to draw on other patented work that happened to be created near them. While we can all email potential colleagues in New York, we're not likely to find serendipitous meetings with them on FourSquare. If we want our cities to be more than support centres for the dairy industry in the longer term, we need to let them grow.

Leaving the farm

Bill Kaye-Blake says there's not much that can be done about long-term trends towards rural depopulation. And he puts rural New Zealand especially on the wrong side of broader trends:

Technology isn’t going to be the saviour of rural New Zealand. We’ve been hearing for years that new communications technologies (will) allow us all to work from home, the cafe, and the beach. We do that to some extent. A few people do build business empires on the back of broadband. But we also spend lots of time in our offices, seeing and talking with our co-workers. One of the interesting economic geography arguments I’ve seen is that technology is making face-time more valuable. As a result, work that requires us to spend time with each other is becoming more highly paid, and work that can be made routine and parceled out in bits and bytes is becoming less valuable. New Zealand is on the wrong side of that trend, and rural areas even more so.

Let's take the agglomeration economic geography arguments as starting point. Tech is more a complement to big cities than they are a substitute for face to face interactions. Who gets the strongest benefit from this in a world that's mostly free-trading? Big global cities, not Auckland. Our small size makes us, over time, less competitive in sectors that compete with international big-city industries; our comparative advantage then pushes farther towards agricultural production.

This is already happening too: it's not crazy to see the "Dutch Disease" stuff as just being international markets telling us to put resources into the sector where we have a comparative advantage (dairy, ag production), abandon the ones where we don't, and build non-traded services around the sector where we have the comparative advantage. Our cities would then wind up doing more to provide domestic support services for the ag sector than building innovative non-agricultural products for international markets. And then it's a bit of a race between productivity increases in domestic agriculture pushing down needed labour and relative prices pushing towards intensified agricultural production yielding migration flows to the countryside.

Best counterargument: Peter Thiel is investing heavily in the NZ tech sector, seeing here perhaps a comparative advantage in sane regulatory approaches (albeit one that's eroding).

I still favour strongly increased immigration coupled with fixing urban land use policy to make our cities more internationally competitive. And who knows - maybe some of those migrants would then decide they'd prefer to live out in the countryside. It is ridiculously beautiful out there.

Grow for it!

New Zealand, population 15 million. That's the target for 2060 in a new NZIER working paper making the case for substantial New Zealand population growth.

A population target of 15 million by 2060 (2.5 times that now projected) is not only “feasible”, it is also likely to be sufficient to achieve the benefits from scale. It would allow four main cities with a population of three million or more each. This would foster competition within New Zealand to create conditions amenable to building local firms that can foot it internationally. It would bring New Zealand’s population into close proximity of the Netherlands (but still nowhere near the population density of that country).

There's an awfully good case to be made for growth. Ed Glaeser's recent book makes a compelling argument that ICT is far more a complement to than a substitute for density - it makes everything better, but it makes New York better faster than it improves New Zealand. Australia will continue to benefit from agglomeration effects; stagnation relative to Oz fuels out-migration and worsening outcomes. Bill Kaye-Blake says we're doing fine given our distance - and he's right.

This changes the tone of the policy recommendations. It isn’t about claiming that the institutions (the tax system, the science system, the education system) are messed up and need to be fixed. Instead, it is about recognising that we’re pushing this economy uphill and asking what tools might help.

I think increased immigration should be on the policy agenda as a tool that can help in that context.

New Zealand is shifting immigration priorities to de-emphasize the family route and pull in migrants from higher up the income ladder. TVHE reminds us of the harm we do to poor foreigners abroad by such moves; we also do harm to ourselves to the extent that lower skilled workers are complements to high skilled labour - I'd certainly appreciate lower-cost domestic help.

The best counterargument is that there are potential external costs from lower-skilled immigration if we expect that income correlates with intelligence, intelligence is heritable, and intelligence matters for the long-term quality of policy in a democratic system and for overall productivity. Here's Garett Jones on how IQ matters.

So it's not crazy on the face of it to try to encourage high skilled immigration to New Zealand if we care about outcomes here rather than overall global welfare (I care about the latter, but that's me). But I would note that income will be a poorer proxy for IQ or skill differences if we're looking at individuals in a pooled international cross-section than within countries. Moreover, there's no real "lump of migrants" beyond which we can't accept more people. Why not make it easier for high income, high skilled people to move here while keeping the current family immigration route?

Potential policy moves that encourage immigration, and especially higher-skilled immigration? First on my list would be immediate permanent residence for any foreign student completing a Bachelor's degree at one of the New Zealand universities. This will not only boost foreign student enrolments (helping to cross-subsidize domestic students) but also provide a nice selection mechanism for those who are most likely to really make a contribution. We could also draw in high skilled American migrants by not losing our comparative advantage in civil liberties and sane copyright legislation.

Complementary to increased immigration would be fixing local land use policy that forces up housing prices, but that's also well worth doing for its own sake.