Urbanization as a Path to Prosperity

Chris Wellisz. Credit: Porter Gifford

By Chris Wellisz
WASHINGTON DC, Jan 29 2020 (IPS)

Growing up in New York City in the 1970s, Edward Glaeser saw a
great metropolis in decline. Crime was soaring. Garbage piled up on
sidewalks as striking sanitation workers walked off the job. The
city teetered on the edge of bankruptcy.

By the mid-1980s, it was clear that New York would bounce back.
But it could still be a scary place; there was a triple homicide
across the street from his school on the Upper West Side of
Manhattan. Glaeser was nevertheless captivated by New York’s
bustling street life and spent hours roaming its neighborhoods.

“It was both wonderful and terrifying, and it was hard not to
be obsessed by it,” Glaeser recalls in an interview at his office
at Harvard University.

Today, that sense of wonder still permeates Glaeser’s work as
an urban economist. He deploys the economist’s theoretical tool
kit to explore questions inspired by his youth in New York.

Why do some cities fail while others flourish? What accounts for
sky-high housing costs in San Francisco? How does the growth of
cities differ in rich and poor countries?

“I have always thought of myself as fundamentally a curious
child,” Glaeser, 52, says. Rather than “pushing
well-established literature forward,” he seeks to comprehend
“something that I really don’t understand when I start
out.”

While still a graduate student at the University of Chicago,
Glaeser made his mark as a theorist of the benefits of
agglomeration—the idea that dense and diverse cities are
hothouses of innovation, energy, and creativity that fuel economic
growth.

In the years since, his work has ranged across a breathtaking
variety of subjects, from rent control and real estate bubbles to
property rights, civil disobedience, and carbon emissions.

“For a couple decades now, Ed has been the leading thinker
about the economics of place,” says Lawrence Summers, a Harvard
professor who served as director of the National Economic Council
under US President Barack Obama. “And the economics of urban
areas are increasingly being seen as central to broad economic
concerns.”

Glaeser and Summers are collaborating on a study of the
hardening divide between well-educated, affluent coastal regions of
the United States and islands of economic stagnation in what they
call the “eastern heartland,” the interior states east of the
Mississippi River.

There, in cities like Flint, Michigan, the proportion of
prime-age men who aren’t working has been rising—along with
rates of opioid addiction, disability, and mortality.

How can policy help? Traditionally, economists have been
skeptical of the value of place-based policies like enterprise
zones that offer tax breaks to investors, saying it is better to
help people, not places.

People, they assumed, would move to where the jobs were. But
labor mobility has declined in recent decades, partly because of
high housing costs, partly because demand for relatively unskilled
factory work has diminished.

Breaking with economic orthodoxy, Glaeser and Summers say that
the federal government should tailor pro-employment measures, such
as reducing the payroll tax or increasing tax credits to low
earners, to fit the needs of economically distressed areas such as
West Virginia. They also make the case for boosting investment in
education.

As a Chicago-trained economist, Glaeser is a strong believer in
the magic of free markets and opposes measures that distort
incentives. “I have always been against spatial redistribution,
taking from rich areas and giving to poor areas,” he says.
“That doesn’t mean that you want the same policies
everywhere.”

Urban economics seemed like a natural pursuit for Glaeser. His
German-born father, Ludwig, was an architect who taught him how the
built environment shapes people’s lives. His mother, Elizabeth,
was an asset manager who introduced him to economics. Glaeser
recalls how she used the example of competing cobblers to explain
marginal cost pricing.

“I remember thinking what an amazing and fascinating thing it
is to think about the impact of competition,” he says. He was 10
years old.

In high school, Glaeser excelled at history and mathematics. As
a Princeton University undergraduate, he considered majoring in
political science before choosing economics, seeing it as a path to
Wall Street.

But dreams of a career in finance ended with the stock market
crash of 1987, just as he started job interviews. So he opted for
graduate school, because “it didn’t seem like I was cutting off
many options,” he says.

“Then I got to Chicago, and that was when I really fell in
love with economics.”

Glaeser keeps a framed photograph of himself with Gary Becker,
the Chicago economist and Nobel prize laureate. Becker taught him
that the discipline’s conceptual tools could be used to explore
topics that had once been the domain of fields like sociology or
anthropology—topics like racial discrimination, fertility, and
the family.

“It was that sense of the creative side of economics that
could work on a virtually unlimited canvas and try to make sense of
any problem that you thought was important—that was the part that
was so exciting to me,” Glaeser says.

At the time, Chicago economists Robert Lucas and Paul Romer were
developing the so-called endogenous growth theory, which focused on
the role of innovation and the exchange of ideas in economic
development.

As Glaeser recalls it, Lucas pointed to cities as places where
knowledge spillovers occur—meaning people can benefit from other
people’s ideas without paying for them. Think of a city like
Detroit early last century, where Henry Ford used his experience as
chief engineer at the Edison Illuminating Company to start his
automobile business.

That concept inspired a groundbreaking 1992 paper, “Growth in Cities.”
Glaeser and three co-authors set out to use cities as a laboratory
in which to test the new growth theories. Using 30 years of data
covering 170 US cities, they found that local competition and
diversity, rather than specialization, are the prime motors of
urban growth.

The paper instantly made Glaeser a star and earned him a job
offer from Harvard.

Glaeser “showed that urban variety, not specialization in one
particular thing, was a big driver of employment growth,” says
Joseph Gyourko, a professor at the University of Pennsylvania’s
Wharton School and a longtime collaborator. “It was Ed’s first
really well-cited article, so it did start him on his path.”

Gyourko and Glaeser started working together in the early 2000s,
when Glaeser took a year’s sabbatical at Penn. They wondered why
some cities, such as Detroit, declined so slowly, and why so many
people stayed instead of moving elsewhere. They hit upon a simple
answer: housing is durable, and as cities slump, it becomes cheaper
to live there.

That insight prompted a related question: Why is housing so much
more expensive than the cost of construction in cities like New
York and Boston? The answer: land-use restrictions limit density,
curbing the supply of housing and driving up prices. It was basic
economics, yet until then, urban economists hadn’t focused on the
role of regulation.

Glaeser argues that excessive regulation is destructive of the
very essence of urban life—density. Cities thrive on the
creativity that occurs when people living cheek by jowl exchange
ideas and know-how. Sunbelt cities like Houston have grown because
an easy regulatory environment keeps housing inexpensive.

To economists like Glaeser, building and zoning regulations are
a tax on development. Some level of tax makes economic sense,
because construction imposes costs on residents in the form of
noise, congestion, and pollution.

But overly stringent regulation, often pushed by residents who
want to keep out newcomers and protect their property values, can
make housing unaffordable for most people.

Glaeser is similarly skeptical of historic preservation rules,
to the dismay of followers of Jane Jacobs, the legendary critic of
urban-renewal projects who celebrated the lively street life of New
York’s old ethnic neighborhoods.

Glaeser is a big Jacobs fan—he owns an autographed copy of her
1961 classic, The Death and Life of Great American Cities—but
argues that her efforts to oppose development in Greenwich Village
were at odds with her support for low-income housing.

“I believe that many of our oldest buildings are treasures,”
he says. “But don’t simultaneously pretend that that’s a
route toward affordability. Affordability is created by
mass-produced cheap housing or mass-produced cheap commercial
space. And you might not like it aesthetically, but that is the
affordable route.”

In 2000, Glaeser published “Consumer City,” a paper
he wrote with Jed Kolko and Albert Saiz. In it, he took the concept
of agglomeration a step further, arguing that people are drawn not
only to the opportunities that cities offer, but also to amenities
such as theaters, museums, and restaurants.

“We know that cities can attract the disproportionately young
and innovative,” says Richard Florida, a professor of urban
studies at the University of Toronto. “Ed was identifying the
factors driving that, this whole idea that cities are not only
places of production, but places of consumption.”

Glaeser laments policies such as the mortgage interest
deduction, which encourages people to buy homes rather than rent
apartments; highway subsidies, which make it easier to drive to the
suburbs; and a school system that disadvantages inner-city
students.

Such policies, he argues, not only are antiurban but also
contribute to climate change, because city dwellers, who live in
smaller homes and use mass transit, consume less electricity and
gasoline than their suburban counterparts.

Surprisingly, he and his wife, Nancy, who have three children,
decided to move to the suburbs of Boston several years ago. To
Glaeser, it was a perfectly rational decision: the suburbs offer
more living space, better schools, and a reasonably fast
commute.

Already well known in academia, Glaeser started to reach a
broader audience with the publication in 2011 of his bestselling
book, Triumph of the City, a lively study of urbanization from
ancient Baghdad to modern Bangalore.

His eloquence and enthusiasm make him a sought-after speaker at
academic forums and TED Talks. Invariably, he is impeccably attired
in well-pressed suits and preaches the gospel of urbanization in
crisp, rapid-fire sentences.

Despite his celebrity, he takes teaching seriously. Rebecca
Diamond, who attended his advising sessions as a graduate student,
said he was generous with his time. “He taught me perspective and
not to get too stuck in the weeds,” says Diamond, who now teaches
at Stanford University and stays in touch with Glaeser.

Developing-world cities are his latest passion. True to form, he
sees them as relatively uncharted territory, neglected both by
urban economists, who focus on advanced-economy cities, and
development economists, who concentrate on rural areas. They are
also growing fast, and their physical and institutional
infrastructure are works in progress, so economists’ policy
advice can have an impact.

“The ability of economists to make a difference by getting
engaged is just very large,” he says. “So, I think it is the
new frontier.”

It also takes him to interesting places. His latest research
project, with Nava Ashraf and Alexia Delfino of the London School
of Economics, took him to the markets of Lusaka, Zambia, to study
barriers to female entrepreneurship.

They found women are more likely to go into business if the rule
of law is strong enough to help overcome inherently unequal
relations with men.

Like Jane Jacobs, Glaeser is big believer in observing what he
sees around him. “You don’t really understand a city until
you’ve actually walked in the streets,” Glaeser says.

“That’s what makes Ed a first rate applied theorist,” says
Gyourko. “You’ve got to get your hands messy in the data.
Sometimes data is just walking around.”

While researching Triumph of the City, Glaeser explored places
like Mumbai’s Dharavi quarter, which was a “completely magical
experience.” Among the world’s most densely populated places,
Dharavi hums with entrepreneurial energy, with potters, tailors,
and other craftsmen working side by side in cramped, ill-lit
quarters.

At the same time, unpaved streets, polluted air, and open sewers
are reminders of the downsides of density. But Glaeser doesn’t
bemoan the poverty of such places; on the contrary, he says cities
attract the poor precisely because they offer opportunity. For the
developing world, urbanization is the best path to prosperity.

“For all of their problems, amazing things are happening in
India and sub-Saharan Africa and Latin America,” Glaeser says.
“And things obviously don’t always go the right direction, but
cities have been working miracles of collaboration for thousands of
years, and whenever I go to a developing-world city, it is obvious
to me that the age of miracles is not over.”

Opinions expressed in articles and other materials are
those of the authors; they do not necessarily reflect IMF
policy.

The post Urbanization
as a Path to Prosperity
appeared first on Inter Press Service.

Source: FS – All – Ecology – News
Urbanization as a Path to Prosperity