Cities, Ideas and Housing Edward L. Glaeser Harvard University

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.

Urbanization Across the World

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.

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.

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)

The Problematic 20 th 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.

The Decline of the Costs of Moving Goods

The Move to Warmth

City 1950 Pop Pop. Change Change New York 7,891,9578,008, % Chicago3.620,9622,896,016-20% Philadelphia2,071,6051,517,550-27% Los Angeles 1,970,3583,694,820+87% Detroit1,849,568951,270-52% Baltimore949,708651,154-32% Cleveland914,808478,403-48% St. Louis 856,796348,189-60% Washington802,178572,059-29% Boston801,444589,141-26%

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

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 doesn’t. Birmingham reinvents itself (it always was an intellectual polis); Manchester doesn’t.

Population Growth in the Northeast and Midwest

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 aren’t 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.

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 isn’t great.

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

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.

When are high real wages bad?

Declining Real Wages and the Rise of the Consumer City

The Rise of Reverse Commuting

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.

Prices and Permits across Larger Metropolitan Areas

Metropolitan statistical area Change, 2000 to 2006 NumberPercent Atlanta-Sandy Springs-Marietta, GA890, Dallas-Fort Worth-Arlington, TX842, Houston-Sugar Land-Baytown, TX824, Phoenix-Mesa-Scottsdale, AZ787, Riverside-San Bernardino-Ontario, CA771, Los Angeles-Long Beach-Santa Ana, CA584, New York-Northern New Jersey-Long Island, NY-NJ-PA495, Washington-Arlington-Alexandria, DC-VA-MD-WV494, Miami-Fort Lauderdale-Miami Beach, FL455, Chicago-Naperville-Joliet, IL-IN-WI407, Las Vegas-Paradise, NV401, Orlando-Kissimmee, FL340, Tampa-St. Petersburg-Clearwater, FL301, Sacramento--Arden-Arcade--Roseville, CA270, Austin-Round Rock, TX263, Charlotte-Gastonia-Concord, NC-SC252,

Prices and Permits in Manhattan

The Declining Height of Manhattan Buildings

Density and New Construction

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.

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 don’t tax carbon properly, this means that there are too few people in cities. The environmental consequences of environmentalism.

Sources of CO2 Emissions Private Gasoline Consumption (Cars) Public Transportation Emissions Home Electricity Home Heating: Natural Gas and Fuel Oil

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.

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.

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 everyone’s responsibility. Anti-urban bias # 2: failure to correct environmental externalities Anti-urban bias # 3: failure to let cities grow.