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A
Good evening, ladies and gentlemen. Good to see you here. I'm Vernon Henderson. I'm a professor of Economic geography here at lse. I want to welcome you to this event, which is sponsored by the International Growth Center. Our speaker tonight is going to talk, who I'll introduce in a minute. He's going to talk for about 45 minutes, then there'll be a question and answer period. During the question and answer period, there will be attendance with mobile mics. If you want to ask a question, please wait until you have the mic so we can all hear you. And secondly, please ask a question and don't make a speech. This event is being recorded. Your mobile phone should be on silent. The Twitter hashtag is on the screen here behind me. So. Ed Glazer is the Fred and Eleanor Glimk professor of Economics at Harvard University. He's a prolific and innovative leading scholar in economics whose primary work is in urban economics. He displays and communicates an incredible love of cities and curiosity about cities, starting with his hometown of New York City. I'm sure he loves London, too. He is the author of numerous papers in the best scientific journals. He's author of the book Triumph of the city, published in 2011, which has received widespread attention. Ed is going to talk tonight on cities and global globalization. Please join me in welcoming him here to Ellis.
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I'm really, really happy to be here. I do love London very much, and I'm very, very honored and grateful that you would decide to spend your time with me for the next 90 minutes talking, arguing, thinking about cities. I'm very grateful to the IGC for arranging this, and I'm particularly grateful to Vernon. Vernon has been a giant mother of economists for 35 years, and I have certainly learned a great deal from him over the decades, and I continue to continue to learn a great deal from him. Let me start to move the visual A's around. The beginning. Gandhi, of course, famously said the growth of the nation, meaning India, depends not on cities, but on its villages. But with all due respect to the on this one, he was completely and totally wrong, because in fact, the future of India is not being based in its villages. The future of India is in cities. It's in Bangalore, it's in Delhi, it's in Volkhand, and it's in places that are both full of tremendous challenges, but also offer the best pathway that we know of out of poverty and prosperity. In 2007, as we all know, humanity became 50% urban, at least according to the United Nations. And it's hard not on Net to think that that's a good thing. Because when we compare those countries that are more than 50% urban to those countries that are less than 50% urban, the more urban countries have on average incomes that are five times higher and infant mortality levels that are less than a third. But it would be foolish, it would be unwise, it would be ignoring the barefax reality to suggest that there aren't incredible challenges that involve the shift of billions of human beings into urban areas. One way to see this, and I have to apologize for this, all of my stuff that has to do with wealthy countries is going to have much better production values than all of my stuff that has to do with the developing world. Now try not to read anything symbolic into it. It's actually just to do with the developing country. Work is newer rather than older. So this is less production values. But what this is is a graph across countries. Urbanization in 1960 and urbanization in 2010. And the red line is the 45 degree line. So the gulf between the point and the red line shows you how much the urbanization of the country has gone up over 50 years. And for many of these countries, the with very low levels of urbanization, the transformation is just amazing. I mean, Botswana essentially was non urban, almost completely non urban, just half a century ago. Yeah, bond 20%. Now it's over 80%. An amazing transformation of humanity during this time period. And of course it's one that I do believe has tremendous good in it, but it's not one that's easy or sure to function smoothly. Another way to think about this tremendous transformation is the relationship between urbanization and income. This is the connection between urbanization and income in 1960. It's a fairly robust positive relationship. And one thing in particular that you should notice about it is there are no such things as poor countries that are largely urban in 1960. Take a look at the graph. Right. So these are countries that are under 5,000. So I've excluded all the rich countries. But you see no countries that have incomes of less than $1,000 in 1960 that have urbanization levels of, let's say, about 20%. This is something that did not exist then. This is the relationship today. Same selection criterion. Notice this particular area. This is the change. This flood of poor countries that are now largely urban was not there. Is there now? Now what are these places? So these are the poster children for them. These are Kinshasa, Harare, Bamako, Port Au Prince, Karachi, Dakan. Right. These are cities that are huge and they are Full of. And these are the cities that in fact in some sense are the greatest challenge of globalization. It's a challenge that involves not just economics, but politics. It's a challenge that calls on engineering, but institutional change as well. It's a challenge that requires confronting the demons that have always come with density in trying to make these places less hellish. Because in fact, the natural reaction that so many people have to seeing the horrors of Kinshasa is just to say, wouldn't it be better if they stayed home on the farms? And the answer is almost surely not that there is no future of rural poverty. And the same political conditions that led to these disasters are unlikely to change if we continue with these rural areas. Another way to think about this is this is urbanization over time. In the U.S. the GDP per capita minor dollars. The U.S. became 50% urbanized in the 1920s, when our per capita was about $7,500. That can be contrasted with 330 purchasing power. Adjusted for Kinshasa, the U.S. was 20 times wealthier when it became richer. This is itself a puzzle. Why is it that urbanization is proceeding so quickly? But given how powerful wealth and good governance are for dealing with the demons of density, it reminds us of why these places are so difficult to deal with. Since Port au Prince, which I think is particularly striking. And this is an issue that comes up when we think about climate change, right? Natural disasters, like the natural disaster they did Port au Prince, the damage that these are done, the work of Matthew Kahn shows decisively is tied to the wealth and the competence of the government bomb. You can compare. During exactly the same time period, similar disasters strike Chile and strike Haiti. One of them, the damage is limited, localized Chile. The other, it's catastrophic. Again, the more that you think that these disasters are in humanity's future, the more important it is to make our cities safer. Now. There are of course, cities of the past that are poor. This is one list of cities that have at one point in time reached a million people prior to 1900. These numbers are all debatable. What population number from 800 AD could possibly be non debatable? But the per capita income numbers, which are also of course, highly debatable. The per capita income numbers show numbers that are much lower than, let's say the US in either 1875 and New York reached a million people in the 1920s. But there's a difference. Notice one thing about every one of these Cities prior to 1800, they were the capital of a vast empire. Every large city prior to the 20th century, every million person city was the capital of the most competently governed empire in its age. These empires didn't happen by law. They couldn't sustain themselves without bureaucracies. So even though the Roman Empire may have only had earnings of $1,400 per capita, Julius Caesar could clear the streets and wheeled vehicles during the daylight if he wanted to, because the Romans were functional in this. This is not the case in many of the poorer countries in the world. One way to think about why this has occurred is it's the child of globalization. And that's why I'm going to connect us to cities of globalization. I don't think it's an evil child of globalization, but it's a necessary byproduct in a world of closed economies. Cities needed to be fed by the country that housed them. Cities needed grain, they needed transportation. The process of actually making American cities grow was one of quite enormous amounts of economic development. The same thing is true in the UK as well. This is no longer true in Port au Prince. Right. Port Au Prince doesn't feed itself. American rice groves feed Port au Prince. They export some natural products. They export things that are unrelated to their own domestic GDP in a large extent. They often rely on external aid. And these things don't mean that they can become urban without relying on local development. This also, by the way, changes the relationship between local wealth and urbanization. Historically, increasing agricultural productivity has been a necessity for cities to grow. Some people, in fact, argue that the Black Death created enough agricultural surplus for the remaining people. They enabled the urbanization of the 15th century. I want to make it clear on the record that I'm not advocating the Black Death. I want to make this very clear. But when you have an open economy that's actually reversed, and agricultural productivity actually pulls people out of cities rather than pushing them in. And that's exactly, I think, what we, what we've seen now. Now, the reason for urbanization, the reason why I think it's so hard for us to think about a future that doesn't involve urbanization, is the connection between urbanization and productivity is remarkable, particularly in the developing world. Right. This is the relationship for the US India and China between density and earnings across metropolitan areas. In these three areas, the US has a nice, positive, robust factor calling these agglomeration economies in economics. I'll come back to them in a second. But, but the blue is India, the saffron is China. Boy, did I spread that one out right. The saffron one being India have a much stronger link with density than the US does. This shows up over and over again. Life satisfaction. This is actually more dramatic. This is across the world. Many people look at the wealth of cities in the developing world, think climax. They're rich, but they're miserable. They're miserable. These are horrible places. No one would want to live there. I grant that relative to your life, these places are miserable. But it's not the right comparison. The right comparison is the rural northeast of Brazil. The right comparison is whatever area sent these people. And most of the time their decision to migrate looks perfectly sensible. Most of the time, the differences in disease and nutrition and wealth look like they do favor the cities. And indeed this is across the world. The relationship between urbanization and life satisfaction happiness. And that's robust and positive, controlling for income. This is within countries and this is the gap. Every time you see it positive, that's the gap. Favoring urban areas, you'll notice it's a straight negative line with income. The places that are poorest are the ones that have the biggest gulf between urban happiness and rural happiness. Meaning India. Right. Our poster child in many cases for urban dysfunction is the place in the world that has the largest self reported life satisfaction gap where urbanites say that they're happier relative to rural residents. It's not that many of these cities aren't problematic, it's just that the rural alternatives also worthless. In fact, in the U.S. for all of my love in New York, New Yorkers actually typically don't say that they're happy at all. It's something self respecting New Yorkers just don't do. Now the other reason that I want to be somewhat careful about is if you look at poor countries, this is the relationship between urbanization in 1960 and per capita growth over the next 50 years. There are many reasons to be highly dubious about long run growth regressions like this one. But given such a positive robust relationship, be wary about embracing policies that say we're going to shut down urbanization. Be wary about saying policies that say that we're going to force people not to come to urban areas. And in fact, I think the positive effect that cities can potentially have on growth is one of the reasons why we should embrace quality of life strategies to actually deal with crime, contagious disease, congestion and the other things that make cities so hellish. Indeed, in many cases the best economic development strategy is to attract and retain smart people and then get out of their way. But that is not a rest of the laissez faire. And in the case of developing World cities. That requires an enormous amount of effort to make the cities, the developing world, far more livable than they are now. I'm going to take a slight detour back to the US for a bit because I think it's helpful for understanding the broad trends in how localization is working. And this is a map of the us I'll call it a map and make it clear. I have absolutely no aesthetic sense whatsoever. But what I've done is I've taken the 3,000 odd counties in US and I've divided them up on the basis of their density level. Because cities at their heart are the absence of physical space between people and firms. Cities are density, proximity, closeness. And what you see when you group these points, look at the bottom line, is the relationship between per capita income and density. The densest tenth of America's counties have incomes that are 50% higher than the least dense half of America's counties. And remember, that relationship is stronger in India and China than it is in the United States. The top line shows something that is slightly more remarkable, which is the relationship between population growth between the years 2000 and 2010 and population density as of the year 2000. So whereas Americans at the start of the 19th century, we're leaving their dense enclaves on the eastern seaboard of the US to populate the empty spaces between the oceans at the start of the 21st century, we're spreading, we're clustering in instead of spreading out. And of course, we're in London, one of the most successful cities of the world. And we see this, of course, in London's vastly outsized role in the economy. And we also, of course, see it in the unbelievably high prices that people are willing to pay for the space. Now, America has just been through this incredible housing price tsunami. It is normal, it is normal for housing prices to go down if they go up over a five year horizon. So every dollar that an area in the US sees as prices go up between year one and year six, it goes down typically 32 cents between year six and year 11. So anytime a real estate agent tells you to buy now, prices are sure to go up in the future. This is when you should run for the hills, because historically they've been reverted rather than going up over longer time horizons. This figure shows the growth between 2001 and 2006. On the growth between 2006 and 2011, this coefficient is not 32 cents, it is 95 cents. This was a storm that came and left, leaving the financial wreckage in its way. Notice there is a city down here which really is off the regression line. Poor Detroit is the one city that managed to miss the boom and still experience the bust. But one thing does correlate with if you take the boom and bust together, it does correlate with price growth over the whole time period. And that's density. So the places that were this is from the least dense to the most dense metropolitan areas between 1996 and 2012. The price growth in the most dense fifth of those counties is about four times higher than the least dense fit. I want to make it clear that I'm not predicting increasing housing price appreciation in London in the years ahead. I want to make this very clear. Nor am I predicting that dense areas in the US are going to go up in prices in the future. I'm not in that business. But I am in the business of retrospectively noting that the the past 20 years have been very, very good ones for urban resurgence. And indeed, when I was making all sorts of claims about how the advantages of cities were not disappearing in an Information Age in 1993, I looked a lot crazier than I do now. I think they may be even making this claim. This is showing the price growth between distance to the city center between 2008 and again, price growth is from the highest, close to the city center, away from the edges. Now, in some sense, this is a paradox. We live in an age in which distance is dead, in which we could effortlessly telecommute to whatever silk and spot appeals to our biophilia. And yet in so many ways, in so many cases, we choose the inconveniences of urban life. We choose it in Bangalore, we choose it in Delhi, we choose it in London, we choose it in Chicago, we choose it in Paris. Why is it that the cyber seers and techno novels who predicted the death of distance would kill off face to face contact in the cities that enable that contact? Why hasn't that come about? Why haven't cities done. I'm going to return to that, but I want to sort of go back a little bit further and note how this triumphant view of cities is so at odds with the New York City of my youth. For those of you who are over, who are under the age of 30, you may not remember these glorious days of the 1970s in New York, but you can look at mean Streets if you want, or rent some old Kojaks if you want to get a certain feeling about the place. These are two iconic images from the age. So this is President Ford didn't really tell the city to drop dead. But some people think that he meant it. He was denying the request of the city for a federal bailout. And indeed, in those days, it didn't just seem as if President Ford. It seems that history itself was telling all of America's over Culver cities and to a lesser extent, but still there, London as well, that they were headed for the trash heaps of history. That their age had come and gone. Right. New York had lost hundreds of thousands of manufacturing jobs over a five year period. The the largest industrial cluster in the US in the 1950s was not automobile production in Detroit. It was garment production in New York. And it was hammered by globalization. On top of that, you had increasing social distress, you had crime that had gotten out of control and you had a fiscal situation at the city level that seemed unhealable. That was why they were asking for money. Dealing with the social problems had collided with an inability to raise revenues. And it really seemed that. Here's Jimmy Carter wandering through the wasteland of the South Bronx had become. It really seemed as if the weeds were going to come up from the soil and reclaim the building. And it felt as if some future where the Statue of Liberty was going to come poking out of the sand like at the end of Planet of the Apes. It felt like that was a real possibility. Now it's not just obviously about New York. It's about a whole model of urban living that seemed doomed during this time period. These were the 10 largest cities in the US as of 1950. This is what happened to them. Over the next 60 years, some of them have stabilized. New York is one of the only two that actually grew over this entire time period. The other ones that did well are Boston to a certain extent, Chicago, Washington D.C. and then there's Cleveland, Detroit, St. Louis, each of which have lost more than 50% of their population. In some sense they declined because their whole economic model seemed like it became. These are cities that have grown up as nodes on a transportation network. Like Liverpool, for example, on the other side of the pond. Every One of America's 20 largest cities in 1900 was on a waterway from the oldest, typically where the river meets the sea, to the newest, Minneapolis, on the northernmost navigable point on the Mississippi River. They were there for a natural reason. It cost as much to ship goods 30 miles over land in 1816 as it did to ship them across the entire Atlantic Ocean. There was such an advantage of water borne transport for goods. And of course, of course, industries grew up around these nodes in the Transportation network. Chicago was a great. The linchpin of great watery arc that went all the way from New York to New Orleans. And of course it had the stockyards, which were part of the endemic problem of moving corn, which America is fantastic at growing, even without utterly benighted agricultural subsidies. Wait a minute, is this even corn? I've said it before. Even without unwise agricultural subsidies, we'd be raided on corn. The problem with corn is it's costly as shit, right? It's a low value per ton product. So you've got to transform it into something. The early farmers of Pennsylvania transformed it into that portable, durable, and often tasty product of whiskey which was moved, of course across space. And then the farmers of the Ohio river valley would transform it into pan salted pork. Pigs are of course corn with meat. And then of course the farmers of Iowa would transform it once farmer figured out how refrigerated rail cars would transform it into dressed beef. Refrigerated beef which would be shipped across. New York's three dominant industries in 1962 were all children's import, printing and publishing, the garment trade, sugar refining, oil, all of which came out of globalization of its era. I should mention by way of an apology, New Yorker's apology to London right now, that of course the reason for printing and publishing being in New York was the big money in 19th century printing and publishing in America was in pirated English novels, right? No Asian thief of American copyrights had anything on hard boys in the 1820s who were ruthless at expropriating the hard work of Charles Dickens or Sir Walter Scott. But of course there's no percentage in having the 8th pirated edition of Girl with a Dragon Tattoo. You've got to publish the thing first. And the advantage of being in the great port is you got the proof of stays before you could show up in the hands of your Philadelphia competitors carrying anything to flood the market. Detroit, another great England port des trois. And of course it would have industries like Detroit Drydock, a firm that specialized in creating cutting edge ships that plied the Great Lakes. Then as now, cities are forges of human capital. And Detroit was a place where young farm boys could come and learn about engines. When you look at wages today, when you see people come to cities, they don't experience the full wage probability in a city overnight. What you see is year by year, month by month, you see their wage growth go up. And that's I think very much this vision of cities being forged of human capital. Places where we get smart by being around other smart people. That's exactly what happens to Ford, who comes to Detroit, works on engines at Detroit Drydock, goes to work for Thomas Al by Edison, learns something about invention and then joins the great American race in producing a chief mask produced Kong. Detroit in the 1890s is a lot like Silicon Valley in the 1960s. It's a cluster of genius. It's about the Dodge brothers, the Fisher brothers, David Dunbar, Hewitt Grant, Simeon Bowles, Billy Durant in nearby Flint. Right. There's a genius on every street corner. All of which are stealing each other's ideas, stealing each other's thoughts, plying each other with parts, with information, with knowledge, competing and cooperating in ways they do marvel. This has been going on for millennia, since Socrates and Plato bickered on an Athenian street corner. It's what cities do best. It's our most important contribution you get from it. And this is what made Ford so great. The problem was that this was Ford's genius. This plant, the River Rouge. A vast vertically integrated plant with an automated assembly line producing thousands and thousands of black Model Ts. Now, in a static sense, at a point in time, this is fantastic technology. This made it possible for ordinary Americans to buy cheap cars to move around employed workers who had never seen wages this high before at five dollar days. Unbelievably effective idea in the short run, probably making Detroit the most productive plan placed on the planet in 1950. But in terms of the long run health of the city, this is a disaster. This vertically enclosed plant doesn't need the city, it doesn't give to the city. It isn't part of the. And when cost calculations change, you just move the plant somewhere else. It's exactly what happened. Successful cities at the start of the 20th century, start of the 19th century were very similar to successful cities at the start of the 21st century. They're marked by three things. Smart people, small firms and connections to the outside world. Small firms need each other, they need part of this ecosystem. These big employers are great in terms of short run productivity. They're very bad in terms of meeting the city or adding crystal and runner generation now. So Ford's cars left. The process of building. The automobile, of course, also accentuated the process of de urbanization of industry. This is not just a US feature, but manufactured goods were sensible to produce in cities in 1900 because you had access to those rail lines, because you had access to those ports. By the time you built the highway system after 1947, it became completely irrelevant. It became completely unnecessary to house these factories in the cities. And so they de urbanized, so they left low cost areas. The work of Nathaniel Vam, Snow, Fern's colleague, who's a wonderful urban and transportation company, finds that each new highway that cut into a metropolitan core after World War II reduced the central city's population by about 18%. As transportation costs fell, firms moved to lower cost locales. Work with Tom Holmes because counties on different sides of crazy versus pro business state boundaries in the US and finds a huge tendency of manufacturing firms to move to the lower cost pro business side of the line. It's a decline of cost of moving goods moving a ton of mile by rail. One way to think, see what happened is in every country that we've looked at is it moved towards temperate climates. There's no variable that better predicts metropolitan area growth during the 20th century in the US than January temperature. Right. One way to view this is that instead of locating a few places where where firms had a productive advantage, locations next to coal mines outside of Pittsburgh and locations next to the waterways, they moved to places where people wanted to live. And it turned out what those western midwesterners really wanted was a somewhat milder winter. And you know, that's one of the things when you compare Detroit with Manchester or Birmingham or Liverpool, you think about its prospects. The climate of troubled UK cities is not substantially different from the climate of London. The climate of Detroit is wildly different from the climate of Atlanta as well as the distances being vastly higher. So I think as you think about the prospect of regenerating urban decline in the US it's much tougher to imagine this happening well than in the uk. Just as we rebuilt our spaces around sun, we rebuilt them around sprawl. We've always built our cities around the transportation technology that was dominant in the era in which the city was crafted from the oldest pedestrian cities with narrow winding blocks, short streets to the cities built around wheeled traffic and the grid to of course the cities that are built around the car. The right way to view the Phoenixes and Blant as of America is not that they are edge cities, but that they are car cities. And they are built around a structure that enables point to point contact with the car and doesn't require any walking. Unlike all of those older forms of transportation, we shouldn't be surprised that Americans chose the car. The average commute by car in the US is 24 minutes. The average commute by public transportation is 48 minutes. Because there's a 15 to 20 minute time fixed cost of going to It. But we still should rail about policies that artificially subsidize the automobile, like using general tax revenues to pay for automobile infrastructure or that fail to charge for the negative externalities associated with cost. As cities decline, they often veered into chaos. Riots are an ongoing urban phenomenon. It really seemed in the 70s as if in the 60s and 70s as if the age of the city had gone. Often the US government followed policies that were not particularly helpful. The US followed, as many urban builders do, a Temkin Miller's strategy of building things that were physically obvious but not particularly useful. In the 50s and 60s this meant urban renewal, building houses where housing weren't needed. After the Federal Highway 8 Act 1973 it meant building public transit systems. The hallmark of declining cities is they have an abundance of structures and infrastructure relative to level demand. More than 90% of the homes in central city Detroit costs substantially less than construction costs. Right? And it is easy to get around Detroit. Look at those streets. They are empty. You don't need a monorail to go above empty streets. It's crazy. That being said, Detroit has a certain myth of transportation and maybe that had something to do with it. But it's easy to screw up with transportation projects just like it is easy to screw up with large scale infrastructure projects. And it is not that I'm trying to make the case that all monorails are bad. I'm quite fond of the one at Disney World, for example, or that there's any particular right answer about transportation infrastructure. But it is always the right answer to be focused on cost benefit analysis. And there was no cost benefit analysis that made sense, that justified this. Now, Sydney did not come back because of large scale infrastructure projects, but they did come back. Many of them did. Seattle, of course, now just looks like a wild success story. It's easy to Forget that in 1971 two jokers put up a sign on the highway leaving the city, asking the last person to leave the town, please turn off the lights. Because Boeing, Seattle's signature employer, had been reducing its employment. Just as no one could imagine a Detroit with a smaller General Motors, no one could imagine Seattle with a smaller Boeing. Before Amazon, before Microsoft, before Costco. Starbucks is just a faint smell in somebody's nostrils, right? All of these things change. They change because of entrepreneurs who didn't exist there. Boston, of course, is marked by universities. And the work of Enrico Moretti has shown quite conclusively that one government policy that's had a huge impact on which areas do well and poorly is the presence of A Land Grant college, meaning a federally subsidized research university in the area prior to 1940. Big impacts on population growth, big impacts on wages as well. Boston's Land Grant college is a little place called the Massachusetts Institute of Technology, which is a Harvard professor, I'm very embarrassed to say, has Almost surely done 5, 10 times more stuff to aid the local economy than we have in the longer term. Debt. This is also being recorded. Again, I'm going to deny that it's the lack of sleep, President Fast, that caused me to say that, but certainly MIT has been accepting this guy. Here in particular is Vannevar Bush. He's the father of Raytheon, one of the pioneers of moving the academy into business circles. He also is a great statesman and the mentor. Fred Turman, who would return back to Stanford to find the Stanford Industrial park and very much make the Silicon Valley around this vision that was pioneered by Vannevar. New York, of course, like London, is dominated by a single great industry. To a certain extent, even more so than London is rent, because there's no government in the same level. It's financed 42%. At the time, 43% of the payroll on the island of Manhattan in 2007 was in finance and insurance. It stabilized at 40%. Right now, it's not surprising. As worrying as it is, and I share the terrible of everyone about having one industry town which feels like it's a very bad model. There's no surprise that it's there. Because if you think that the great advantage of cities today is to enable the transmission of information is that the same density that once got hogsheads on the clipper ships now enables us to get smart from learning to each other. There's no industry where you can get richer faster by knowing more than finance. There's no industry that pays you more to have just a little bit more knowledge. So it's not surprising that all the industries in the world, the one that is willing to pay top dollar for the advantage of proximity is finance. The finance story in New York is also one about chains of innovation. Cities have always had this remarkable ability to enable one smart person to learn from another and do something miraculous. But in the past, these chains were sort of a sideline. Florence in the 15th century was a city built on wool and banking. It wasn't making its money on art. But Brunelleschi figures out the basic mathematics of linear perspective. He passes along to Donatello, who puts low sculpture, who passes along to Masaccio, who's from the Brancacci Chapel. A marvelous picture of St. Peter finding a silver coin in the belly of a fish. Pass it along to Betty Leslie Montfranath Libbalippi. Pass it along to Botticelli and so forth. A chain of genius. Each person riffing on each other's ideas, each person doing something marvelous. Now, in the fear of undoing all the goodwill that I've made by showing my fealty to Renaissance artists, I'm now going to compare these guys to investment bankers in New York. So I want you to watch this while I completely undo this. But in fact, New York also has a chain of genius that starts with an ability to think more seriously about risk and return. Comes out of places like the Social Science Building at the University of Chicago with the work of Jimmy Savage and Milton Friedman. Gets passed along to Harry Markowitz Sharp, who then make it more sophisticated. That gets carried and bodied by people like the young Fisher, Black and Jack tweeners of Wall Street. That ability to think about risk and return that enables the young Michael Milken to sell high yield debt. That high yield debt that enables the young Henry Krabs to engage in larger and larger leveraged finance. The securitization revolution is part of this. And so is Michael Bloomberg's terms. So are Michael Bloomberg's terms, which are part of a way of dealing with a more quantitative data approach to financ. Part of a chain of innovation. Bloomberg is interesting because he also illustrates Jane Jacobs point about Citi's great ability to enable cross industry leaps in fertilization. He's not a financial billionaire, he's an IT billionaire. But he's able to succeed in IT in a way that. No, because he has skills that no one living in Atherton or Silicon Valley could possibly have. Because he'd run the trading for the Salomon Brothers. Because he's run their tech operation. And when he got pushed out, he could start his own firm. And he knew what the traders of Merrill lynch wanted. He knew what the guys at Barcos needed because he had done them. And that enabled him to do that, enabled him to leap from one idea to the other. The real reason I like this is just the physical layout. It's the bullpen at City hall, of course, which is based on bullpen at Bloomberg llp, which is based on the trading fort at Solomon Brothers. On one level there's something really puzzling about this physical layout. Why is it that you would have a trading fort when you have some of the wealthiest people on the planet who any role the horrible industry would sit ensconced in vast offices, protected by large open desks, enjoying all the perquisites of privacy that their wealth has made possible. And yet here they are. They're getting guacamole on each other, they're sweating on each other, they're uncomfortable. Why are they there? They're there because knowledge is more important in space. They're there because what globalization and new technologies have done is they've made this world, a world that is information intensive. And we are a social species. We get smart by being around other smart people. This is the answer to the paradox with which I began. What globalization and new technologies have done is they created tremendous returns to innovation, a tremendous increase in complexity, a tremendous return in the rise to skill, which we've seen in literally hundreds of studies, probably even thousands by this point in time. The more complicated an idea is, the easier it is to get lost in translation. The more there's an advantage of being in the same room and communicating. Anyone who's knows the hard part about teaching is not knowing your subject. It's knowing whether or not anything you're saying is getting through. We have evolved over millions of years to have these wonderful cues for communicating comprehension and confusion that are just lost when we're not in the same room. If you're dealing with something really important, isn't it worthwhile paying the cost to actually be close to one another? And of course, because you can innovate on the outside of the world, because you've been making things on the other side of the world. I was struck when I was doing research, wandering through the slums of India, a ubiquitous for the signs for James Cameron's movie Avatar. You couldn't escape them. This is what globalization and fraud. This is innovation created in Hollywood, creative London and so forth. We're a social species. It's our greatest asset. It's our ability to come out of the womb about information from our parents, from our peers, from our siblings, the education from our teachers. This is what cities do. This is why the cyber security and the technocrats who predict decline in New York were wrong. Doesn't mean that all cities will survive. Means that those cities that focus on skills will survive, but the other ones don't. And I think many new technologies make cities better. So this is Zipcar, right? Zipcar, like Uber, is one of those technologies that are actually making cities function better. This just enables you to pay a small price and share a car. And lots of young urbanites tend to think that this is a great deal. They talk about it. As the rising sharing economy said, this is something new. Cities have always been sharing economies is the nature of a restaurant. To have a shared dining room and a shared kitchen is the nature of a park is to have a shared backyard Grouping together we share. But what technology means is that we can share more stuff. Because let me tell you, you have a Zipcar in New York in 76, some guy who looks like De Niro is going to have destroyed it by the first weekend right now because of technology. You know who the guy is. It's done. You can monitor the whole thing. We can share more things because of this. Now, as I said, the success of cities is not universal. In most parts of the world, the comeback has been associated with skills. And the relationship between skills and urban success is even stronger again in India than it is in America. This, this is the relationship between population growth across counties and shared the population with a college degree as the year 2000. Very profound difference between the most educated counties and the least educated counties. And again, this holds. I wouldn't. I'm not showing you anything that doesn't hold. Controlling for 57 other things that doesn't have T statistics at 10 on them. This is a relationship between and Jim Rouse and Enrico Moretti have mostly been associated with shared population with college degrees as the year 2000 at earnings. This is a the thing that economists call human capital externalities, which is that being around skilled people tends to be associated with much higher earnings. The typical fact is that the share of adults with a college degree in your metropolitan area goes up by 10%. Your wages go up on average by 8% holding your years of schooling constant. This is the fact that goes with this vision of cities as being learning machines. And those effects have been rising steadily since the 1970s. The advantages of having skilled people around you have gone up. There are all sorts of fancy instrumentation things of dealing with the exogeneity. One of my favorite, one of my favorites for looking at this stuff and I'll just say one thing about it because it is supposed to be about the developing world is one of the great things about China is we have evidence on education from the main period because we know who passed various tests to go into government bureaucracies. And that proxy for education from 700 years ago or so still ends up being very strongly associated with earnings and success today. So you can go way back in history and actually continue to find them. This is China, India, US you notice, you saw that very positive US but it's dwarfed by the Indian relationship. Again, I'm going to skip over that. That just shows that the skip over that. And then of course the relationship across countries between PISA mass scores and earns, you know, countries earns based on skills that are in their children's heads. And I feel like I should be like Cato at this and just repeating that truth over and over again every time I have a possible chance to Certainly more uplifting than Belinda Khan for the last so this is the percent of students getting advanced level math. This is the UK which is doing reasonably well, still far below some of the high flyers on this. The UK is above every US state however, except for Minnesota and Massachusetts. So it's worthwhile. So there's a whole bottom tail that you're missing here. So just so you understand, which doesn't mean that you should sit on your laurels. But I would be more worried if I were the U.S. now, the skills that matter in cities are only slightly, only possible only somewhat. Those skills that are learned in school. In fact, I'm always somewhat amazed that anything I have to teach has any practical relevance whatsoever. The skills that surely make the most difference for long time urban resilience are the talent and inclination to be an entrepreneur. Fifty years ago, the economist Ben Chinitz compared New York and Pittsburgh and noticed that New York appeared to be more resilient than Pittsburgh did even then, which he ascribed to a culture of entrepreneurship in New York, a residual of New York's garment industry, which I've already discussed. Now, New York had garments, Pittsburgh had steel. And there's a big difference between these two industries. The returns to scale in steel are huge and negligible in garments. So as a result, the garment industry had tons of small little firms. It was a mother of entrepreneurship. And many of those entrepreneurs would go on to do something totally different. They'd leap from making garments to building skyscrapers or to starting Hollywood studios or doing any number of things. By contrast, U.S. steel trained common men. And those guys were great in the short run, efficiencies in making steel production. But let me tell you, when that company faltered, they would not have any idea of what else to do on this thing. They wouldn't be starting an electronic greeting card company that specialized in I don't. Whatever would actually sell. Don't look at me, I'm a company man now. It is amazing, given the mediocrity of our proxies for entrepreneurship, they do such a good job of predicting urban resilience, mostly for employment. Employment growth, not for earnings growth. One of them is the share of employment in startups in initial time period. Another one is average firm size. This is again across metropolitan areas, between the areas with the smallest average firm size and the largest average firm size. This is true within areas, this is true within regions of the country. It's a very, very robust fact. Those places with small lots of small firms have done much, much better in terms of employment growth than those places with a few big firms. We've also tried to deal with the causality issue basically by using Shinitz's insight, which is Shinitz's view was that steel came out of coal or other natural resources that produced company men because it was a high returns to scale industry which led to large firms. By contrast, New York support had garments. So Bill Kerr and I have actually used the location of mineral deposits in 1900 to try and see whether or not that predicts whether or not some places have big firms are not 40 or 70 years later. And we find that it does. And it also predicts urban decline, even controlling for everything else about the area, even looking at industries unrelated to natural resources. Now, when you look at entrepreneurship itself, this is a map of small tech entrepreneurship. One of the things that we notice, this is a Boston map. The blue areas are the areas which have the preponderance and there are two basic clusters. And the clustering of tech entrepreneurship is very, very obvious in many parts of the world. I think it's obvious because these places understand the valley be nearer to the other areas. But what's interesting is here you can have two areas coexist. This area is dense, built around public transportation. It's built around MIT though, But it's built in a model that looks very much like cities 100 years ago. This is the Route 128 area that is built entirely around a highway and if anything, high education suburbs that house the workers who go there. Those are the two models that anchor these. But they are very much clustering again is pointing out that new technologies are not making faces in any sense obsolete. Of all the companies in the world that should be able to do long distance working, it's Google, right? What do they do? They build the Googleplex. They build, they buy a million and a half square feet in downtown Manhattan. And Ristab Meyer at Yahoo puts a ban on, puts a ban on working from home. Now, while entrepreneurship is critical, it's less obvious what to do with that from the public policy point of view. Boston has an innovation district which was bound to succeed because it's pricey downtown real estate In a prime location, it's much less obvious that we know how to micromanage this process. So I often think the best process is to train and attract smart people and then get out of the way. In the developing world, this is particularly not a recipe for any kind of assay faire because in fact, retaining talent in India, in sub Saharan Africa requires a totally different quality of life being produced than is being produced today. For indeed, the most entrepreneurial place I have ever been on the planet is the Dharavi slum of Lumbar. You wander through the streets and you see someone creatively recycling plastics or turning old boxes around so they can be resold, or someone. So you think you're in the Lower east side of Manhattan in 1905, or there's a small ceramics cluster and they're so proud of the little products, they weren't even taking money from them. And then of course, you walk outside, you see the streets aren't paved and kids defecating in them. The electricity is intermittent. And it reminds me that managing cities is hard, that there are demons that come with density. And if someone's close enough to give you an idea face to face, they're also close enough to give you a contagious disease. And if someone's close enough to sell you a pot, they're close enough to take your pocket, right? And dealing with the demons of density, contagious disease, crime, congestion, high cost of living in property is one of the great challenges of the 21st century. We're going to make these cities livable. We've got to deal with these problems now. Some of them, the biggest problem, the largest problem of urban government, as Ed Mills, the great urban economist, wrote in his textbook, is clean water because of cholera, kills people a lot faster than any crime would. A boy born in New York in 1900 could expect to live seven years less than the national average in the US just like a boy living in Tudor London. Seven year gap that has largely closed. And d life expectancy right now is three years longer in New York. The lower death rates in the young are particularly associated with lower levels of motor vehicle accidents and lower levels of suicide. Sort of a funny thing that, that while New Yorkers say that they're miserable, they actually don't kill themselves. So interpret that as you want, but this didn't happen cheaply. American cities and towns were spending as much on clean water at the start of the 20th century. Federal government was spending on everything except for the post office and the army. And it didn't Happen easily. Right. It was a path that was strewn with difficulties. I think. As much as I am enthusiastic about the promise of many public private partnerships, I think Eduardo Engel has a book that's coming out from Cambridge University Press about which also highlights the tremendous downsides of these. And I think it's important to remember that the government is not strong enough to manage a construction project on its own. It's probably also going to screw up the relationship with a private provider as well. And we have plenty of examples of failures of this form from our own history. In the 1790s in the US in the wake of the Yellow Fever, academic cities realized that they needed to have some form of new water production. They of course, didn't understand anything about germs or bacteria or anything like that. They somehow thought they needed clean water. Philadelphia went a public route with Latrobe and the Philadelphia Water Works. New York came up with its own public private partnership courtesy of this duo. Two greats in American history. This guy is Aaron Burr, Vice President of the United States, a New York politician, Democratic Republican. This fellow was a federalist. His enemy, Secretary of the Treasury Alexander Hamilton. Burr would of course later shoot Hamilton on the shores of Hudson, but before he shot Hamilton, he hired him to be his lawyer. And Burr's scheme was that Hamilton would help convince his Federalist buddies that they would have a public private partnership of its day. A company that would provide clean water would be subsidized with the ability to do banking because banking wasn't free in that era. So you would have a water company come bank and all these good things would happen, all with avoiding burdensome taxes. That's exactly Hamilton's words. In words that are redolent of modern political debates in the US you would avoid those burdensome taxes. Now, Economics 101 tells you what's going to happen. You've got a provider that's supposed to create something that is not lucrative, that's highly socially valuable, like clean water, and you're going to subsidize them. The ability to do some completely unrelated activity that's incredibly lucrative, like banking. What do you think this company's going to do? Well, here it is. It's JP Morgan Chase, which was the Chase Manhattan bank, which is the bank of the Manhattan Water Company. It is a falsehood, as you will read in Wikipedia, that that octagon is the cross section of the water pipe. It is not. It's a dream that came out of a Don Draper of their era that came up. It helps to remind you of this. And again, just like infrastructure, there's not a one right answer on PPPs. But don't think that they're a panacea, because our own history reminds us of how easily PPPs, particularly when governmental institutions are weak, can be subverted and can subvert the government. Now, water required an immense engineering solution, vast amounts of money to be spent on these things. Other problems like congestion, you can't build your way out of traffic jams, okay? Because there's something called the fundamental law of highway highway congestion, which is identified by Gilles Grantemps and Matthew Turner. What they found is that highway miles traveled increased roughly one for one with highway miles built. If you build it, they will drive. This is an old puzzle that shows up in Robert Caro's description of Moses the bridge builder in Bridge Builder in New York, not the guy who led the chosen people out of Israel, that when he would build bridges, the old buildings wouldn't go down because there was a flood of new people who were driving into the city. This is exactly what During Turner found that you can't change this. This is a ubiquitous phenomenon. You can't actually go. You've got to do. Economists have been saying since Bill Bickley dreamed this thing up in New York 55 years ago, which is you gotta charge people when you've got a valuable asset. You can't do what the Soviet Union tried to do with groceries, right? And give away valuable assets for way below market prices and expect the market to work. The result is long lines and stop lines. Well, that's what an urban traffic jab means. And we certainly know London move this way a while ago. Now, London system is of course not as good as Singapore's because you have pesky issues of checks and balances and things like that which make it difficult to implement an unregulated economy stream. But the electronic road pricing system charges people more at different times of day. And it means that the second densest country in the world has roads that move effortlessly during prime hours. Now, I think that this doesn't mean that we can't have unhealthy urbanization, that there aren't cases in which urbanization is unfortunate, in which urbanization isn't created by natural disasters. And I don't find any sense to suggest that it doesn't mean that in some cases that we have governments which build artificial political cities, imperial cities in the sand. I'm not particularly advocating that either. That's not what we're talking about here. But when cities work well, they can be places of remarkable pleasure as well as productivity. And that's true, as true in the developing world as it is in the developed. It's hard to think of a city as urban space that works as wonderfully as part of Shanghai. The older part built in high density walking space, the other part on the other side of the river, built with monuments to architects, with open spaces around the skyscraper just does not. Which reminds us that while there are things that Jane Jacobs got wrong, she was right that architecture needs to plan on an urban scale and needs to be focused on the needs of everyday consumers. What she was not right about was that when cities make it too difficult to build, they risk becoming boutique towns affordably wealthy. And that is even more of a curse in the developing world than it is in the developer. And I'm specifically talking about engaging what America has done over the past 50 years New York has done is they've made an increasingly difficult to build with more and more regulations that make it difficult to add in new structures. Now the case for preservation of historic buildings is a difficult case. I'm the son of an architectural historian. I believe that our older buildings are treasures. But not all of them are treasures. Certainly not all of them in New York are treasures. And every time you say no to a new project, you say no to families that would like to move into the area, you say no to affordability in the area. There's a trade off. There's never one right answer. Jane Davis is wrong about this. Jane Jacobs looked at old buildings and new buildings and noticed that old buildings were cheap and new buildings were expensive. Which led her to conclude that the way to preserve affordability was to make sure that no one built any new buildings on top of old buildings. Right. This is not how supply and demand works. And you don't need to look any further than her own area, Greenwich Village that she fought so hard to preserve in her historic preservation district to see that this doesn't work right. Because townhouses now which were once affordable to ordinary Americans like herself, townhouses now start at $8 million and you have to be a hedge fund manager to apply. That doesn't, you know, that doesn't mean that the preservation is wrong. It just means that when attractive cities try to freeze themselves and don't allow the added density that can possibly save demand, they're making sure that middle income people are not going to be able to afford to live there. Mumbai's particularly person that's floor area ratio one and a fourth. Right. Average height of one and a fourth for most of the post war period catastrophe in terms of pushing the city too far out, of failing to develop the density and livable space that the Johnson means. I will end on this anecdote. I will say one more thing about it. But one of the reasons why we should want cities to develop themselves properly, to build up when appropriate, to not to hold them back, is that actually cities, which are often depicted, and I call this Lorax fallacy, as the enemies of the environment actually aren't. Because it is certainly true that as countries get wealthier, they use more energy, they use more carbon. But no one can imagine a future or could possibly wish for a future in which China and India should stay poor. This is not a world that we can imagine. The difference is between living at high densities and living at low densities. And in that comparison, cities have a sided edge. And I'd like to illustrate this with a story about a young Harvard column graduate. On a beautiful spring day in 1844, went for a walk in the woods outside of Concord, Massachusetts, and he did a little fishing. And the fishing was good because there hadn't been much rain lately. But when he came to cook the fish into a chowder, the wind flicked the flames the nearby dry grass. An inferno started and spread. By the time it was done, it burned down more than 300 acres of prime woodland. In his own day, this young man was cast as an enemy of the environment. The convict Freeman called him a flibberty Jew, which I think was pretty bad for 1844. And indeed they were surely right. I can't think of anyone who did as much damage to the environment as this character did in 1844 when I was living in Boston. New York. Of course, Oddly is now revered as the secular saint of American environmentalism. He is Henry David Thoreau, whose book Walden appears to preach the gospel. What a wonderful thing it is for us to live surrounded by nature. But it may or may not be wonderful for Thoreau soul or for your soul, or for my soul. I'm an economist. Luckily that isn't on my docket. But it certainly wasn't wonderful for nature. Because if Thoreau cared about nature, it would have done a lot of good by staying home in Cambridge instead of going out and cooking chowders in the middle of the woods, destroying it. The real lesson of Thoreau's life is not that living around nature is such a wonderful thing to do. It is that we are a destructive species and often we do the least damage to nature, not by spreading ourselves out to be around nature. But by I clusterly set myself in to minimize the scope of that dam. My work with Mandy Kahn has examined carbon emissions associated with different parts of the country. We find substantial differences between people who live in dense areas holding income family size constant with people who live in lower density areas. I know this personally because when I started acquiring small children about eight years ago, I moved from about here where I was nice and having a small house and not driving very much down here where I started doing about as much damage to the environment as well road himself what with the heating in the Massachusetts winter and the driving distances. One way to think about this is that the great growing economies of India and China see their per capita emissions rise to the level of seen in the sprawling United States, global carbon emissions go up by 130%. If they stop the level of seen at whale food and hyperdense Hong Kong, global carbon emissions go up by less than 30%. It doesn't mean that density is the only solution, but it does mean that it's part of thinking about this I will end with. As difficult as these areas are, I cannot help but fundamentally be optimistic about this. As troubled as Kinshasa, Karachi, Mumbai is the track record of our species over the past 4,000 years. When we've been connected with each other, when we've learned from each other, when we've had the genius of cities to help us make each other better is just remarkable. We have done incredible things over the last 5,000 years. And I remain very, very, very hopeful that as difficult as these problems seem to be, whether they're climate change or problems of disease or problems of natural disasters in cities, I remain hopeful, not confident that the genius of humanity shows it most clearly when we learn from each other in cities that that genius will continue to prevail. Thank.
- [53:27]
A
So I told you that Ed loves cities and very enthusiastic and he's demonstrated that. He's also thrown a lot of ideas at you. A lot of things to think about. So ask questions right here.
- [53:53]
B
Thank you. Fantastic presentation. Needless to say, I'm also clear whether there's a version of successful cities where the land use density is low. I think you gave an example around Boston where there were two variants of successful classroom. One which is kind of high density urban and the other low density kind of freeway basis. Are there versions of this success which is low density but still clustered or is it centrally around people per hectare and other businesses? So right now I think certainly the question is whether or not car based versions of, you know, of this density, are they long run sustainable? So the most famous example, of course, is the Silicon Valley, right? Which is both a place traditionally tremendously fertile intellectual exchanges, but it's built fundamentally around the corner. Right now, certainly right now, Silicon Valley remains to be thriving. One downside of the Silicon Valley model is that it is a model that involves very much dominance by a single industry, much more so than traditional higher density areas. So the guys in MIT are much more likely to interact with people outside of their tech cluster than the guys in Route 128 is. Jacob has certainly argued that that diversity is very, very important in terms of long run resilience. My own work on diversity and urban resilience tends to sound some mildly positive things, but I think it is much less robust, let's say, than the small firm employment growth effect. So I am less certain. And look, Silicon Valley also is something else. It's sort of like building on prime real estate in downtown London, right? I mean, it's got the nicest climate. Unless things radically change, it's got the nicest climate in the US and it's got, you know, a lot of other nice things. So I wouldn't be betting against Silicon Valley anytime soon. But I do think, you know, and I should actually make this point more general. While it is clear that I sound like purely an advocate of the city, and I certainly believe that in policy circumstances, particularly in the US cities get a very bad shrift in lots of lows. So I believe that quite strongly. But it is often seen as if I am some other advocate that you should live in a city which makes people then think that I'm a hypocrite. Because in fact, as I just told you, I do not, although I'll blame my wife for that, but in fact I don't. As an economist, the approach to the economist, which is fundamentally different from the approach of the architect often or the approach of the planner, is to believe that the virtue is in choice. The virtue is in having lots of different opportunities of where to live if people are paying for the social cost of their actions, right? It's not that we're trying to push someone to shoehorn someone into some particular area. And indeed, I think it's great to be in multiple types of these arrangements because we're going to see which one does better. We're going to learn something by having this competition. You're going to be able to move back and forth between the two. So I think the fact that you can accommodate different people at different densities is a blessing in terms of this. So. And I think actually I also believe that successful cities are, and there are archipelagos and neighborhoods that are offering plenty of choice in terms of what type of area you want to live.
- [56:54]
C
Thank you for the talk. I've been trying to keep up. I work with the European City Networking program. So my question to you is how can cities learn from each other and not make these mistakes like building the monorail in Detroit, getting congestion systems. It's, it's a problem because often city leaders want to have something that another city has, but that might be a solution from the past and not the future.
- [57:18]
B
Yeah, I think cities are reasonably good at, and I think it's networks like the ones you mentioned that actually help them. They're reasonably good at borrowing things that look like success. I think that the lacuna is actually often hard nosed analysis of the thing. So you have a thing which looks, so you have an innovation district in Boston. The innovation based district looks great, right? It's in prime real estate, prices are going up. But you know, it's Boston, it's in a city that's fairly constrained in terms of its growth. It's got a lot of very educated people. There was no way this thing was going to fail. So what you're worried about is somebody in Detroit says, look, Boston's got this innovation district. What we need here is our innovation district, right? We need to spend a billion dollars on having some shiny buildings on the water and we'll call that an innovation district. Right? So that idea will get across and it's dangerous almost. Right? Because it's not bad that they learn that they don't have the back and forth, you don't have the pro and con. And one of the, that I've always tried to stress to city leaders is you've got to get better at having the con team on every new idea. You've got to get better at having someone who's actually running the numbers and saying whose job it is to find the stupid things about your plan. And that's sort of my best advice on this. But I think I'm saying some partners, I do think cities are doing a fairly good job of actually learning from each other, but they're not doing a great job necessarily figuring out why that doesn't work for them or why that wouldn't work for them.
- [58:41]
C
Thanks, that was a great talk. I'm just wondering if there are ever instances when it's okay to let a city die rather than just pumping resources into it.
- [58:51]
B
Oh, I'VE gotten a lot of heat for suggesting that over the years. I'm not sure how much I want to review the joys of my discussion of Buffalo or Detroit. I rarely got as much hate mail on such topics. The I think the basic starting point I'm just going to start with this is Stan as being the. It's the economist viewpoint, right? It's that our job is to help poor people, not poor places. Right. And we focus on places primarily because it could be a major input into people. But it's not the job of the federal government to make sure that there are employment rooms in the foothills of the Rockies. It is not the job of the federal government to make sure that the population of Detroit rises back to 1.85 million people. It is the job of the federal government to make sure that the children of Detroit have a decent education and have safety and have some form of opportunity. But that doesn't necessarily mean that they will necessarily get jobs in Detroit. I mean, just once I want to hear an American mayor said, yeah, the population of my city declined 100,000 on my watch. You know, my kids got great education and they got great jobs in Atlanta. Right. There's plenty to be proud of in actually doing that. Now I will, and I alluded to this, but I think the US and the UK cases are somewhat different. Which is not to say that I would still, you know, when you get in all these fractures debates, I would still be against doing, you know, I would still be favorably more on people and less on place based aid. But it's more nuanced because there's less space in the uk there's less distance between the major cities and there's much more of a prospect of many of these cities actually. I mean, there's also less mobility. Right? I mean, saying that Americans are just going to. Americans leave and form places on a dime. We've been doing it for 200 years. It's in our culture. That's obviously much less true in Europe, particularly in the continent where they all have to go either during August or during the full time of year, they all have to go back to the same village where their grandfather lived 100 years ago. It's a very different model. And the more rooted you have, the more case there is for at least some stuff. But be very careful about this. I mean, the thing about place based thinking is it's precisely that place based thinking that leads to monstrosities like the monorail. If you get involved in the magic that says, look, this thing is going to cause Detroit to come back. And all of a sudden you're out $300 million and you don't even know what you did and you got nothing for it. So the important thing is, whatever you're doing is to really apply some rigorous cost benefit analysis towards it and be really focused on whether or not you're getting value for your dollar on it. And then the ultimate thing, no matter what you're thinking, is not building a shiny tower in downtown Detroit and saying, look, we're back. It's whether or not the kids of the area are finding a better life. And you got to stay focused on that. That's what drives me crazy about the monorail, is the fact that that money could have been about children in the future instead of some idiotic piece of infrastructure.
- [61:37]
C
Good evening. My name is Nada Nurova. I'm a researcher at center for Cities. I have a question. If you're the mayor of one of the cities in the developing country with aging infrastructure, straight urbanization, what would be the first thing you would do?
- [61:55]
B
Well, it depends a lot on where the city is, right? So we're talking about, we're talking about the developing world. So I think I primarily focus on externalities and education. So I think the two key things are. The thing is it's all, I mean, all the steps institutionally given, right? If you're talking about a mayor in America, you're always talking about school systems, right? It's always big. If you're talking about the mayor of London, this is not his business, right? It's not his job. But in terms of the long run success of the city, I would certainly be focused on schools and I'd be focused on externalities, from the worst to the best, right? So I'd start with clean water, make sure that's okay, and then move up the sewage pipeline towards congestion in the streets. One of the things that is really, really clear is that you are at a non democratic stage. The time to impose congestion pricing is now. Once you actually go democratic and once you get a larger share of your population in this stuff, it's never going to happen. In the US the only chance we have of congestion pricing is on new roads. You do it on new roads. But we couldn't, you know, we don't have anything. We have more checks and balances than you guys do. In essence, we can't even get Manhattan. Nevada needs it. Because even if the mayor, and even if every citizen in downtown Manhattan wants to impose this thing, you've still got the State legislature which represents Queens, which has the ability to say no. Right. So it's, you know, you need to do that stuff, that stuff early. But education and then focusing on these basic quality of life stuff and now very much focused on cost benefit analysis for infrastructure additions. Focus on behavioral side. And that's part of the lesson ingestion pricing is there's some things you can't just actually build your way out if you want to be smart about behavioral adjustments.
- [63:44]
C
Thank you for the presentation. I'm currently as geography student and I had a question. Do you think the growing number of X cities due to self urbanization is sustainable?
- [63:56]
B
What do you, what do you mean.
- [63:58]
C
By sustainable economically and environmentally?
- [64:02]
B
Okay, it's a great question. It's a hard word because it's come to mean so many things to so many different people in different ways. I'm not a climate scientist. I'm not gonna, you know, I'm an economist in a sense. I have one big belief about climate change is that guys should pay for the social cost of their actions. And I'll leave it to Nicholas Stern to tell me what those social costs are. Right. I mean, so I'm happy to be engaged in various attempts trying to make this, make this work better, but I can't tell you how disastrous it's going to be. My own. When we've looked at the numbers in terms of the US Moving the US around in various feasible ways makes very little difference at this point in time to global warming. One way in terms of carbon emissions, the big action is all in the developing world in terms of this stuff. So when you say in terms of the US stuff, I don't know whether the current carbon emissions are sustainable, but anything that I can imagine the US doing is just not going to make that much of a difference to global carbon emissions whatsoever. Which doesn't mean I will continue to argue for carbon tax in the US I will continue to argue for getting policies in shape. But let's be clear, the big numbers are going to come from India and China in part because they're starting in so much of a lower base and there's so much flexibility in terms of how they're going to build and what they're going to do. So the best I can say in terms of environmental sustainability is again confessing my ignorance to the foothold when you just look at the plausible carbon emission numbers. If China and India start looking like the US does in terms of edge cities, I don't know way in which not. I can't be Scared about that. I don't know a way in which I can't be worried about that. Again, confessing fully my ignorance about the full extent of that economically. Look, I think there are problems and good things about farm based living in the American excerpts. I think there are certainly the traditional downtown, the dense area, particularly in the middle of any remarkable ability to come back. That being said, Americans are still moving to edge cities because it's cheap and offers a relatively decent quality of life to his middle income Americans. Right. It's a remarkable thing that places like the Woodlands in Texas have done by mass producing enormous amounts of housing around the automobile that they have enabled better than any highly progressive state on the east or west coast, better than most European countries. They have enabled mass production of ordinary housing for middle and competing and done so in a way that we actually should be trying to imitate in high density living rather than being embarrassed at. Because we actually think what part of America has dealt with affordable housing best in terms of making it widely available and inexpensive? The answer is clearly Texas. Clearly Texas has actually done this on a vast scale successfully. So there are many things not to like about the Texas model. And I'm not, you know, again, different choices, good thing, all that business and indeed constantly advocating the need to price externality. But we shouldn't miss what actually is successful about this area and we shouldn't think that these cities are somehow rather doomed to, doomed to failure because no one wants cheap housing and driving a car to work. I don't see any sign of people. There aren't plenty of Americans who don't want cheap housing and driving a car to work. So I wouldn't, you know, I wouldn't count on this thing being in any sense ruled out. The environmental question, again, I don't know. I think it's more the point. It's rather that in some sense the way I would look at the triumph of the city, it's not the depth of something, it's the fact that these areas, these cities that once looked doomed have come back remarkably well. That's how I would look. And gazing to the future, I think we can easily imagine a mixed model for the world. It's a mixed model both in terms of the way some people live, in the sense that people live in cities and commute to suburbs or vice versa. And it's a mixed model in terms of having places have different options. And as long as you're charging people for the social cost of their actions, as long as you're actually making people pay for the political. I think that's a model we should be okay with.
- [67:50]
A
Question over here.
- [68:01]
C
Hello, I'm Amy Tower and I heard you say something that I thought was very odd. I think you said that democracy would stop these things happening. Presumably you would think would apply to these developing cities. Can I just say that the congestion charge vote happened in London because people voted for it and there are lots of ways we can explain that. I think that famines in developing world are much less likely in democracies than in non democracies.
- [68:39]
B
And this feels like you're asking me to make it clear that I'm not in favor of Black Death either. Right. Obviously I am pro democracy, but there are policies that become, from my own American perspective, it is clear that policies become harder to get through and indeed we know that history of the true.
- [68:55]
C
But I just think you're being a bit glib and I'd love you to respond to, for example, the fact that women's education, which is a hugely democratizing thing, happens in cities and actually is the strongest force for limiting families, increasing prosperity, allowing women to progress and work and improve health and a lot of the things you're advocating about cities in John Democracy. I just wonder if you should maybe just copy by bonus a little bit what you say.
- [69:26]
B
All right, let me just, let me just clarify. I believe very strongly in democracy. I believe in freedom. I believe very much in that we are and that cities in fact are part of that history. I will spare English sensibilities by not rehearsing the role that Boston played in our little self, in our little separation from the Hanoverian masters. But it is certainly true from, you know, the age of Paris in 1789 to Tavriere Square, that cities have been a remarkable force for creating change, for empowering people, for both, for actually toppling dictatorships, but often for organizing the good government movements, the collective groups that are responsible for actually making institutions stronger. In fact, one of the reasons why I'm so wary of putting the brakes on urbanization in the developing world is because I believe the only way that we're going to get better government in these areas, including, let me stress, more democratic government, is in fact by is in fact bi urbanism. I just don't see a track record of rural areas creating the sort of combinations. And let me also say, in case my 7 year old daughter is watching this, I could not believe that anything's more important than women's education, particularly that she does her math tonight just in terms of emphasizing it. But of course you're right. The legacy on women's education being absolutely crucial. I think we still aren't sure about the particular role that women play in terms of being part of one of the Putnam's hypothes. Sort of, you know, women's role in social capital is also extraordinarily high. But of course I believe in that. I mean, of course I would have thought that that would go that same. That being said, given that I occasionally am asked to write columns for the People's Daily in Beijing, I will not apologize for writing those columns and trying to urge policies that I think will make people's lives better off than in Beijing. If one of those things includes saying you might as well put congestion pricing now and it will be easier because we don't have 60% of the people driving. I will not apologize for saying that. I will stand behind that comment and I will say it gladly again. But I hope it should be clear that that does not mean that I have any mixed feelings about democracy and freedom and the role cities can create. Thank you. I'm a councillor in Tottenham, which is one of the most deprived boroughs in London. And I was kind of curious from your book that you're quite pessimistic about the ability to regenerate an area on a district level and you don't go into too much detail in book. Listen to your book. So it's quite interesting to know whether you're kind of. I buy your diagnosis of a city and your optimism, but does that also follow through for kind of poor and right distribution? They're kind of doomed forever, the kind of same way that Detroit seems to be. No, but the whole key is Tottenham is not Detroit. Okay. They're very, very different places. Right. I mean, I'll go further. Liverpool is not. I mean, I sort of make it clear that Liverpool is not Detroit, that Detroit has a unique share of really tragic things that are both true about it. And that happened to him. Right. In various ways. And I mean, Detroit is of course extreme even within the US context, but it is very, very far away. And let's take some closer areas, perhaps less explosive. There frequently was discussed Buffalo was going to rise, like Birmingham as a back office place for New York City. So what's the problem with that? There are hundreds of miles of empty space between New York City and Buffalo. Right. There's no sense in which. If you were going to try to put chink back office stuff in Buffalo, you could put it in White Plains, you could put it in any number of places. There are convenient road to this. What we know from urban regeneration is that proximity really matters both to downtown and other and other wealthy areas. So the areas that are close in to places that things are happening have just a much better track record of coming apart the tyranny of the US the problem with Detroit thing is it's really to a certain extent an issue of just distance. It's also compromised by the education level. Right. One in Detroit, adults with college degrees close to more than 50% of the residents of Seattle for example. So I wouldn't, you know, I wouldn't think that any London area neighborhood is in any sense doomed. I mean this is, this housing prices here are such that demand for space in this area is astronomical. Right. So I don't think that that's. I would not plump any area within.
- [73:58]
A
What's the.
- [73:59]
B
Right, what's my number? 100 miles of London. I would not. Any area within 100 miles of London within areas of the American Rust belt. And the degree of difficulty of actually so keep on fighting. That's the lesson here.
- [74:13]
A
Another question back up there.
- [74:16]
C
I'm down here too.
- [74:21]
B
You've talked a lot today about the.
- [74:22]
C
Importance of education in the long term.
- [74:25]
B
Growth of the city.
- [74:26]
C
Do you have any specific advice for.
- [74:27]
B
Urban education leaders about what they can.
- [74:29]
C
Do to make their systems thrive?
- [74:32]
B
Well, education like other governmental institutions have very different institutions in different parts of the world. I mean and the right approach to those institutions is actually, you know, the right approach to education differs on the institutions. One thing that we know quite clear, which certainly generalizes is the incredible importance of teacher quality. Right. And that's, that's, we've known this on test scores for a long time. We've had various randomized experiments where you put teachers in and you see things, you see big improvements. And we know from the work of my colleague Raj Chetty that the teachers don't just have impacts on test scores this year. Those test scores actually appear to fade out after two or three years. But they have impact on earnings at age 27. Right. That actually good teachers make a huge difference. So anything that is focused on improving teacher quality, both involved in getting good people into the system and getting rid of those who are more productive in other occupations is probably too good. Now in the US I would be arguing much more about, about the evidence on charter schools, some of which are very, very good. But there are institutions like charter schools in the UK for a long time. So it's not at all a comparable, it's not at all a comparable discussion. So I'm going to restrict myself to an area where I think we haven't figured out the right answer and that's electronic technology. One of my, I said on the advisory board at the Gates foundation, which has made a major investment in this area for the year. So that's I guess a disclosure, although I certainly have no financial interest in any of these things. But I think, I think that electronic technology, we just don't know how capable it is to change things around and how it will look. So I think actually what we need in places that are relatively successful, if we're talking about ndi, we talk about future attendance, just to be clear, we'd be talking about a different set of problems, we'd be talking about getting guys to show up. But if we're talking about London or New York, at least one of the main things we should be talking about is how to figure out how to get electronic technology to be really earth shattering. This and I think this needs a constant culture of innovation and evaluation and randomization. Too many of the evaluations of electronic technology I see are done by the providers themselves and I think these are no more reliable than when pharmaceutical companies tell you how promising their own patent medicines are. Right. So we need actually a culture of introduction of various things and trying to see if this works. And in fact what may be most powerful about technology is they've made for the example, change the way that we have face to face teaching. So one model that I think is attractive is particularly with, let's say, you know, trouble kids, you move away from classroom one on ten teaching to more one on one teaching and then you fill in the extra hours with doing tasks on electronic stuff. So we've known since the 1970s from the education research that there's a powerful impact of having one on one tutoring, particularly on troubled kids relative up to, you know, eight people or 12 people in a class. To the extent to which electronic technology can be merged with one on one tutoring, the better off we are. I think that just view that electronic technology on its own sort of. You just plop guys in front of Manga High or Khan Academy and you expect wonderful things to happen. I think that's clearly cool. You continue to need an electronic and human interface in terms of teaching kids and making stuff happen. There are lots of other education research is incredibly exciting right now. So lots of things that we're learning, but I think the things that I would be focused on our teacher quality and electronic innovation right now in terms of stuff, but again not suggesting we know where we're going to end up with electronic innovation, but knowing that we need to have a process of evaluation and experimentation. You've been waiting very long.
- [78:00]
C
I work for the Local Government Association. I spend my days dealing with cabinet ministers who want to dictate how often city governments pick up bins from residents and pick up the trash. So I was wondering, given that the states has a less centralized. Too many lessons from how city governments are positioned in that space that allows them to foster innovation in enterprise.
- [78:21]
B
So I have, I mean, I've occasionally written on this issue. I tend to have a fairly nuanced view of the values and the costs of decentralizing power to localities. I think there are clear pluses of it, and clear negative is bad. So the pluses are, indeed, you can get lots of local government innovation. Indeed, you can get a certain amount of catering to local needs in various ways. All of this is true, of course. If you try to do redistribution activities at the local level, it's a disaster. Right? Because if you try and tax the rich and firms at the local level, then the rich just leave. So we've seen that example, and that's going to be very interesting to see how this plays out, because both de Blasio, both New York and Boston are both elected progressive mayors. It is very clear that Boston's mayor is highly pragmatic and it's not going to be very much along the same. I'm a fan. We're working with him for the Institute, but it's clear that he's not. He's not going to do anything that fits. Radical. But Blasio's language is much more radical, and it's going to be interesting to see how constrained he is by the situation that he's in. Right. So even though mayors are powerful, they're constrained both by the mobility of. Of firms and they're also often constrained by state law. So Bloomberg wanted to impose congestion prices to state. That made it impossible for him to. For him to do this. So I think there are indeed substantial pros and cons. One of the advantages of having local control is you do have this virtual competition in various ways, but you also have, you know, we've got 351 cities and towns, all of which have duplication of local services. In Massachusetts, there's a lot of waste involved in that as well. The plus is we have a degree of local control, really local. I mean, we govern by town meetings. So anyone who wants to come in and complain about something can come in and complain about it and complain about something. So that's both monumental wasteful time in many ways, but also ensures a fair amount of local control over stuff. So there's a nuanced answer, I will say in terms of like statistical stuff. If you try to sort of compare those metrical areas in the US that are more fragmented with those that are less, there's very little difference in long term growth. So I don't think, you know, there's value I think for tinkering around these institutions around the edges. But the view that there's clearly a right answer and you want to devolve all the power to cities, is it clearly a right answer and you want to have regional mega governments that, that take all power away from cities. I think that's the answer surely lies in the middle and is less likely to be as revolutionary. That being said, just telegraphs and way all to stop bugging you at the bids.
- [80:48]
C
And just before you mention property prices which have been continuously rising in London along with living cost and I was wondering if you could envisage a scenario where a city practically prices itself out, makes itself less desirable, for instance to young people or extraordinary people trying to get by and that prices itself out of the market.
- [81:19]
B
Well, certainly, I mean there's a global market for property. If you don't, if you are in front of incredibly attractive successful city and you don't build new supply, then prices can get very high and you can become boutique town, affordable only to the wealthy. I think absolutely that's something that we all. I mean the reason why I've long advocated for less restrictive building changes both in the UK and the US is not because I'm not because I've got some ganzine buildings come up. It's because I think that it's important that we actually. Or affordability for these great cities. I mean if you love cities, you want people to be able to afford them and come to them and live in them. Right? I mean it's not. And if we have regulations that make that impossible, that's a problem. Now that being said, London is a gem of the city. There's many, many beautiful things about London. But that doesn't mean that you should be able to restrict building everywhere except for County Wharf. Right? I mean it means that there should be more possibilities for building that. And certainly I advocate this in New York, I advocate this in Boston and California. And I think actually it needs to be understood that every time you say no to a new building, you're making sure that the city is Less affordable, it's less inviting, it's less inclusive, it's less diverse. And that's the downside of doing too much restrictiveness. So I believe you're a strong man.
- [82:46]
A
Somebody up there is waiting patiently way up there at the back.
- [82:52]
B
Hi, my name's David. I'm just a civilian. Just come to spending a year in Dubai, working out there and how was it? It's awesome. And you know, really what it is is you have just a bunch of shakes. We keep congratulating them, still support. I think you meant it a wheel in terms of urban planning and when that comes out. But you really do claim to have kind of like come up with the ultimate model. And so my question to you is, I think very much my question to you is, is there really something to learn from the city, sort of like Dubai, without being, you know, Singapore, Bahrain and Qatar in terms of things that are city successful. So I certainly believe in learning a lot from Singapore. Singapore, I don't have as much. You know, I spent little time. I mean, there were two cities in my book that I wrote about that I hadn't been to. And I felt very guilty about both of them, but my editor forced me to do it, one of which is Dubai and the other is Kinshasa. I feel guiltier actually about not visiting Kinshasa, but I do actually want to visit Dubai as well. So I think I'm not well positioned to talking about what I think I can learn from Dubai. But it's also hard because the economics of these things are often so murky. Trying to you look at the actual numbers of these things, it's very hard to figure out Singapore for sure. I mean, Singapore is a place that went from being poor to being wealthy in 50 years. It's a place that is remarkably orderly, remarkably well structured in various ways. It's too orderly for a messy New Yorker like myself in lots of ways. So, you know, and I like a little more argument, perhaps in lots of ways. But it's, you know, I mean, Sinquel was my of congestion pricing. I think they've also embraced height in lots of ways. There are lots of things about the air quality is significantly better than Hong Kong's, which they deserve credit for. So I think there's a lot that Singapore can be. But I think above all, Singapore deserves credit for such a strong focus on education. And it's ultimately the human capital that's critical. They've done smart things in infrastructure as well. Oh, boy.
- [84:56]
A
We got time for maybe four more questions. Try.
- [85:01]
B
You should Be brief or just give yes, no answers.
- [85:08]
A
Right. Okay, thank you.
- [85:10]
B
Professor, I'm a student from China and.
- [85:13]
A
I have a question that now there, you know, China is experiencing the urbanization progress and I want to know there are two points. The first is to to set up a small town besides the farmers. The second is to set up some huge cities like more than 3 million or 5 million people in the city. Do you think which method is better for the whole process?
- [85:42]
B
I don't think it's the right answer on either, on either way. I think in fact China needs a variety of different options moving forward. There are things to deeply admire about the way that China is doing its process and there are things to be troubled by in terms of the way that China is doing the process. I think that China's basic bet on urbanization is one I believe in. Although it's more complicated than when bets occur purely through free choices of individuals. Right? It is slightly more complicated. I would like to see the Hukou system reform, for example, in terms of allowing more internal migration and in terms of China law, you alluded to the fact that I find much of Beijing and half of Shanghai too monumental in terms of the way that I think the cities have proceeded in terms of not building space as much. The one area in which I'm particularly interested in China is the issue of land expropriation and the land appropriation process. This is actually an area in which I think almost surely I would favor centralization. That actually the conflict of interest between localities that actually want the land and take it and actually the interest of actually taking care of the person who's taking the land. Taking away from the is such that I would rather have it done by centralized figures in Beijing than I would have them done at the local level. So just to get it, not to say that I want it, but there are nuanced answers to this. But China is great and fascinating and it's the future. So it's amazing to look and learn from it in various ways.
- [87:14]
C
Question.
- [87:18]
A
Right there.
- [87:29]
B
What do you think would be the.
- [87:32]
A
Most influential things that could happen to.
- [87:34]
B
Them is right now living sort of revival or not compared to Shanghai, but new towers, new buildings, Crossrail, trying to get another airport in. We still have very narrow streets and one way roads and not quite fairly congested on the streets. But there are a new Imperial College campus, one that's supposed to be built in ucl, a new IT city in.
- [88:04]
A
China and so on.
- [88:05]
B
But what do you think would make a city value? What could make one has to figure out how you can deliver significantly more numbers of housing units without destroying. That's what I want. I want you to do it because you actually have some sense of how to do it properly rather than having any contest to come up with one of these monstrosities from the 50s or the 60s. Lots of block towers in the middle of the Thames. Right? But this is the great failure of London is not. I mean it's a place of wonderful cultural diversity. It's a place of wonderful charm and beauty and lots of other areas. And it has this wonderful international aspect. And that's sort of the most striking and joyous thing about London, even relative to New York, which is also a wonderful international city. But this sort of sense of London as being a truly global capital, it's extraordinary, it's magical. But what London does not have is a cheap place to lay your head down. Right? That is what London does not have. And the whole thing, all of those benefits are denied to people unless you figure out how to actually provide a lot of housing units for a lot of people that are within walking distance of the downtown, that don't destroy the city's battery. So you got to do it. And that's what we really work.
- [89:22]
C
Thank you very much for very interesting talk and questions. My inquiry question is is there a limit to the growth of the city? To what extent can we expect cities to grow? What factors determine the size of the city? Is there a role density?
- [89:49]
B
So you know, there are these downsides of density that are offsetting the agglomeration benefits and they both show non simultaneously densities grow to the point where they become unlivable or unaffordable because of those things now. But the point of size differs a lot on how competent the government is and how well the country is. Right. So when we think about the limits of Kinshasa, we worry a lot about contagious disease. We worry a lot about things like aids, which was an incubator for AIDS in the early days. We don't worry about. When we think about the growth of the Stockholm metropolitan area, we don't worry about the spread of contagious disease because the Swedes pretty much have that one more or less under control. The Swedes have a lot of things more or less under control. So it's. There's places with very competent government and plenty of money. There's no natural. The only barrier to Stockholm is there are guys who live in another area of Sweden. There's no sense in which there's death. But the higher poverty the area, the more difficult it is. But there's no one right answer on this. There's no one right city size, there's no one right limit on this. They're just forces that go in two different directions. One increasing productivity and the other one. And in some sense the job of getting, getting city government better is to try and make it almost possible. The prediction that would happen is the more livable we make cities, the more improvements we make on delivering housing supply, improving the quality of roads, congestion pricing more through delivering on better water, the larger the cities will get. That will be the inevitable impact of that as the cities, the cities will grow and that outer limit of what makes cities habitable will expand. So I am sorry that I can't give you a one right answer, but I push back against. I just don't think there is one right answer and there shouldn't be.
- [91:37]
A
So Ed has given his third talk today and he flew in last night. He's given us a great talk. Give him a break.