Is San Francisco a Failed State? (And Other Questions You Shouldn’t Ask the Mayor) - Freakonomics Radio

Summary

Freakonomics Radio: "Is San Francisco a Failed State? (And Other Questions You Shouldn’t Ask the Mayor)"

Released January 22, 2025

In this compelling episode of Freakonomics Radio, host Stephen Dubner delves into the intricate dynamics of San Francisco's governance, economic challenges, and the broader implications of technology on society. The live recording at the historic Sidney Goldstein Theater features insightful conversations with San Francisco Mayor London Breed and esteemed economists Coleman Strumpf and Eric Brynjolfsson. This summary captures the essence of their discussions, highlighting key points, notable quotes, and profound insights.

1. Assessing San Francisco’s Status with Mayor London Breed

Media Perception vs. Reality

Mayor London Breed confronts the pervasive narrative portraying San Francisco as a "failed state." She emphasizes that while media often showcases the city's most challenging aspects, the reality is far more nuanced.

[08:38] Mayor Breed: "A lot of people think of San Francisco as kind of a failed state. Not quite Haiti or Libya, but the stuff they see, they see the worst of the worst. That's what the media does."

City’s Recovery and Initiatives

Breed highlights the city's proactive measures post-COVID, including closing down streets for night markets and creating entertainment zones to rejuvenate community spirit. She proudly states the success in reducing homelessness by over 20,000 and achieving one of the lowest homicide rates since the 1960s.

[08:46] Mayor Breed: "This city has been more fun than it has been in a long time... We have helped over 20,000 people exit homelessness... one of the lowest homicide rates since the 1960s."

Challenges and Perception Management

Despite tangible progress, Breed acknowledges ongoing challenges and the struggle against negative perceptions. She urges both residents and visitors to share their positive experiences to counterbalance the media’s focus on adversity.

[09:40] Mayor Breed: "The biggest thing that we do struggle with is the perception. So we need people to come to San Francisco or people who live here to tell their own story of San Francisco."

Economic Resilience Amidst Population Changes

Addressing concerns about population decline, Breed asserts that venture capital investment remains robust, with significant funding flowing into AI companies within the city. This influx underscores San Francisco's enduring appeal as a hub for innovation and success.

[14:19] Mayor Breed: "70% of the new office space is by new companies. And AI people are coming back to San Francisco because they know this is where they're going to be successful."

Leadership and Political Challenges

In reflecting on her tenure, Breed discusses the financial and bureaucratic hurdles she faced, including substantial campaign spending aimed at unseating her. She takes responsibility for slower-than-desired policy implementations post-pandemic but remains optimistic about future advancements.

[10:39] Mayor Breed: "Things were not happening as quickly as people wanted to see them happen. And that is something I take full responsibility for."

2. Exploring Illicit Markets with Economist Coleman Strumpf

Investigating Illegal Activities

Economist Coleman Strumpf provides a deep dive into the economics of illicit markets, particularly focusing on sports betting and the cannabis industry. His research uncovers the prevalence and operational strategies of illegal weed shops in major cities like Los Angeles and San Francisco.

[28:06] Strumpf: "I've done some work on cannabis... How can you tell an illegal from a legal weed shop, let's say, in California?"

Data Collection on Illicit Operations

Strumpf explains his methodology for differentiating between legal and illegal cannabis stores, utilizing platforms like Weedmaps and public records to identify discrepancies in licensing and operational legitimacy.

[29:22] Strumpf: "They either make up a number, go down the street, look at the legal store, take a picture of that and use that number. Or sometimes they just put up stuff that isn't even a valid number."

Economic Implications of Legalization

Discussing why illegal shops persist despite legalization, Strumpf attributes it to insufficient political will for stringent enforcement and the complexity of differentiating legal from illegal operations amidst growing demand and social acceptance.

[31:22] Strumpf: "The illegal people are pretty sophisticated. So... demand is probably much higher."

Historical Context of Illicit Markets

Strumpf draws parallels between current illicit operations and historical examples like Prohibition-era alcohol smuggling, highlighting the enduring nature of black markets despite regulatory efforts.

[32:40] Strumpf: "The wake of Prohibition? Actually, you did see things like that for 15 years through the 1950s."

Impact of Social Norms and Demand

Strumpf emphasizes that evolving social norms and increasing demand for cannabis contribute to the resilience of illegal markets, even as legal avenues expand.

[34:14] Strumpf: "There's the social norm... demand is probably much higher."

3. Rethinking Economic Measures with Eric Brynjolfsson

Introducing Human-Centered AI

Eric Brynjolfsson, Senior Fellow at the Stanford Institute for Human-Centered AI, discusses the paradigm shift from viewing AI as mere imitations of human intelligence to leveraging it as a complement that enhances human capabilities.

[44:07] Brynjolfsson: "We want to look for ways that machines can complement humans, not simply imitate or replace them."

Critique of Traditional GDP and Introducing GDPB

Brynjolfsson critiques Gross Domestic Product (GDP) as an incomplete measure of economic welfare, advocating for GDPB (Gross Domestic Product Benefit) which accounts for consumer surplus—the value consumers derive beyond what they pay for goods and services.

[50:11] Brynjolfsson: "GDP measures basically everything that's bought and sold in the economy... a lot of household productions aren't there."

Methodology of GDPB

He outlines the methodology of GDPB, which involves surveying consumers about their willingness to forego certain goods and services, thereby quantifying the consumer surplus. This approach aims to provide a more accurate representation of economic well-being.

[53:21] Brynjolfsson: "If I were to do a survey... the area under that curve, we call that consumer surplus."

Implications for Policy and Regulation

Brynjolfsson connects GDPB to regulatory frameworks, particularly antitrust legislation, suggesting that a more nuanced understanding of consumer value could influence how mergers and acquisitions are assessed.

[55:13] Brynjolfsson: "The GDPB gives us a set of measures... if you measure the value that people are getting, there's far more value that French citizens are getting from these services than what they're paying."

Human-Centered AI and Economic Innovation

Discussing the global influence of Silicon Valley, Brynjolfsson underscores the cultural and economic significance of the Bay Area's innovation ecosystem. He advocates for policies that enhance economic efficiency, such as congestion pricing and targeted taxation, to address systemic issues like housing affordability.

[60:30] Brynjolfsson: "I'm a huge fan of congestion pricing... why not tax pollution. Why not tax congestion."

Balancing Innovation with Social Responsibility

Brynjolfsson emphasizes the importance of balancing technological advancements with social accountability, ensuring that innovation translates into tangible benefits for society at large.

[59:02] Brynjolfsson: "There's just a whole wave of innovations... It's been a tremendous engine of creativity and wealth creation."

4. Concluding Insights

This episode of Freakonomics Radio offers a multifaceted exploration of San Francisco's current state, the persistence of illicit markets, and the necessity for evolving economic measures. Mayor London Breed provides a grounded perspective on the city's recovery and resilience, countering negative media portrayals with concrete achievements and ongoing challenges. Economists Coleman Strumpf and Eric Brynjolfsson broaden the discussion to include the complexities of illicit economies and the imperative to refine economic metrics to better capture societal well-being. Together, these conversations illuminate the hidden layers of urban governance, economic innovation, and the evolving impact of technology on human life.

Notable Quotes:

Mayor London Breed at [08:46]: "This city has been more fun than it has been in a long time... We have helped over 20,000 people exit homelessness... one of the lowest homicide rates since the 1960s."
Coleman Strumpf at [31:11]: "They either make up a number, go down the street, look at the legal store, take a picture of that and use that number."
Eric Brynjolfsson at [50:11]: "GDP measures basically everything that's bought and sold in the economy... a lot of household productions aren't there."
Eric Brynjolfsson at [53:21]: "If I were to do a survey... the area under that curve, we call that consumer surplus."
Eric Brynjolfsson at [60:30]: "I'm a huge fan of congestion pricing... why not tax pollution. Why not tax congestion."

This episode provides listeners with a deep understanding of the socio-economic fabric of San Francisco, the enduring nature of black markets, and the critical need for more comprehensive economic indicators. Through expert interviews and candid discussions, Freakonomics Radio unpacks the hidden sides of complex urban and economic issues, offering valuable insights for policymakers, economists, and engaged citizens alike.

Transcript

Stephen Dubner (0:00)

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London Breed (0:59)

Hey there, Stephen Dubner.

Stephen Dubner (1:01)

Every once in a while we get out of our recording studio and take Freakonomics Radio on the road. We recently put on a live show in San Francisco at the historic Sidney Goldstein Theater. If you were in the audience that night, thank you. We had a blast. Hope you did too. If you were not there, this bonus episode is for you. It is a recording of that show edited down to podcast length. We have got another live show coming up in Los Angeles on February 13th. LA has been through so much with the wildfires. So much destruction and death and fear. All of us who love that place are eager for its recovery and we are hoping to do our tiny part.

London Breed (1:42)

Just by showing up.

Stephen Dubner (1:44)

A portion of our ticket sales will go to relief efforts. I hope you'll join us if you can. You can get tickets@freakonomics.com liveshows one word. That's Thursday, February 13th, in Los Angeles. One of our guests will be the inimitable Ari Emanuel. Okay, here now is what happened in San Francisco. As always, thanks for listening.

London Breed (2:36)

There are so many of you. This does not seem like a fair fight. There's one of me and all of you. I'm sure it'll work out okay, but you're smart. Okay. Yeah. The hecklers begin. Okay, so in case it's not clear, this is not what we typically do. I assume most of you know Freakonomics Radio. You wouldn't be here otherwise. The show that we make is the opposite of a live show.

Coleman Strumpf (3:06)

Show.

London Breed (3:06)

Okay. The show we make is really. I'm a writer and it's a writer's show. We come up with an idea, we do a bunch of research, we figure out what kind of people to interview, then we prepare for the interviews. We Do a lot of interviews. We start to put together a script, a draft script. We rewrite it, we start to mix. The tape takes many, many, many, many hours to make one episode. And, you know, that's the way we like it. Tonight we've got like an hour and a half or two hours. That's it. We have no pause button. We have no reconsideration. It's just us here together. So if you're up for that, I think we're going to have a very good time together. That's the intention, at least. When I was a kid, I was very shy. I still am, truthfully. I had another problem in addition to shyness, which was that I really was curious. I wanted to find out stuff. In the old days, it took a lot of effort to find out stuff. You'd have to go to the library or you would have to ask an adult. And when you're shy, asking a stranger questions was not so easy. My solution to all of that was to become a journalist where you're okay. I've never heard journalism applauded before, so thank you. So, you know, becoming a writer, becoming a journalist really solved both problems. Because all of a sudden you have permission to ask anybody any question and you're getting to find out stuff all the time now. In the old days, writing for newspapers and magazines and I wrote books for a while. It was old fashioned, fun, physical analog labor. You'd go out with people, might be writing a piece about one person over many weeks or months. You'd follow them around, might be a whole scene, and you'd come back after those weeks or months with a whole bunch of cassette tapes that you would then transcribe yourself as a writer. That's how you got to really know the material. You'd come back with all these notebooks full of stuff, and then you would sit down to sift it and sort and write. And I loved it. I loved every single piece of it. I still have all my notebooks. I still have all those cassette tapes. It was very, very labor intensive, but it was wonderful labor. And my favorite part of it was always just the hanging out with the people. A lot of it honestly was really boring. But the parts that were exciting were so exciting. When you really learn something, it makes me think of what the physicist Richard Feynman, who's been a hero of mine for a long time, what Feynman called the pleasure of finding things out. And it was just so pleasurable that I never stopped. What we do now with the radio show may Seem different because it's audio and yada yada, but it's really the same thing. Coming up with ideas, putting yourself in position to have interesting conversations with people who are smart or weird or maybe all of the above. You know, I think if we were to go back 20 or 30 years to when digital everything was really starting to explode, I don't know if any of us would have thought that we'd have so much communication as we do and so little conversation. I feel like because everyone is able to publish and be their own bullhorn, that in a way, we've sort of forgotten how to talk to each other by now. I've probably interviewed, I don't know, 5,000, 10,000 people in my life, and I can't think of a single one where afterward I didn't feel like my brain grew a little bit or my heart grew a little bit. It's an unbelievably valuable human trait that we overlook this ability of ours to have language and have a conversation where we can learn about each other, move each other and so on. And so really, tonight, that's what I want to do. I just want to have some good conversations. We've lined up some people I think are going to be excellent for you and me to hear about. So we'll get started. Does anyone have any complaints before we begin? I get your emails. I know who you are. All right, so we're gonna have some good conversations. Our first one I think you will enjoy quite a bit. Would you please welcome our first guest. She is the mayor of San Francisco, London Breed. How's things?