Wednesday 16 March 2011

Ed Glaeser at the LSE

Ed Glaeser spoke at LSE on Monday night as part of a tour plugging his new book, Triumph of the City. With his slightly ship's-captainy appearance, extravagant gestures and SUDDEN CHANGES IN VOLUME, Glaeser makes for an entertaining speaker and a great salesman for cities, which seems to be the role he has settled on.

His talk was focused on the central message of his book, i.e. the benefits of dense urban areas and the costs of anti-density policies. On the benefits side, he made a convincing argument that better communications technology makes cities more rather than less attractive places to work, because by making routine communications easier they increase the returns to the much richer face-to-face form of communication. This is more true in some industries than in others, and one in particular: Glaeser says "There is no industry in which knowing a little more is worth a lot more than in finance", so for better or worse we shouldn't expect financial services to lose their dominant role in New York or London any time soon.

Another key benefit of density, which after all is just proximity in another guise, is that it allows people to save on transport costs. This, said Glaeser, is the main reason why you tend to see so many poor people in big cities. Their housing costs may be high but their transport costs are low, on top of the greater economic opportunities on offer. So maybe the high measured levels of inequality in cities isn't such a bad thing: in fact, Glaeser declared that there is "more of a problem in the artificial equality of suburban areas than in the inequality of urban areas", which is certainly something to chew over.

The economic benefits of agglomeration have always favoured cities, but high population densities can bring significant costs, most notably in terms of disease, congestion and crime. Life expectancies and general health used to be much worse in cities like New York and London than in the countryside, but thanks in large part to huge public investment in sanitation (and, I would argue, transport improvements that reduced overcrowding in the very centre) the gap has closed and in some cases reversed. Public health is still a huge problem in some of today's megacities, but Glaeser is convinced that similar investments can make all the difference.

Cities in rich countries are today generally much safer places than they used to be, with crime levels having fallen in most countries since the 70s and 80s. Glaeser noted that workers used to effectively get a 'real wage premium' for enduring New York's awful conditions, but now it is the other way around, with people willing to pay huge prices for the privilege of living in formerly bohemian areas like Greenwich Village.

At this point Glaeser had some criticism for Jane Jacobs, who he thought was unduly hostile to densification in her Greenwich Village neighbourhood and places like it. When Jacobs lived there the Village was an attractive, human-scale, organically 'mixed community', and Jacobs wanted it to stay that way. But Glaeser contends that a lack of sufficient new housing supply meant prices in nice, central places like the Village went through the roof, with the result that it is now a profoundly un-mixed community where only hedge fund multi-millionaires can afford to live.

I've got a few comments on this last issue, as I think it's fairly critical for cities like London which are trying for economic growth without excluding the poor and middle classes. The first is that it seems to be more or less impossible to preserve both affordability and the existing neighbourhood built form in the face of strong housing demand: you've got to choose one or the other.

The second point is that the relationship between the two is unstable - after all, if the reaction to a big increase in demand for housing in, say, Islington is to build a huge number of flats, then it isn't the same place it was before and a lot of that demand may disappear, potentially leaving you with a supply overhang and a less attractive environment. That's probably an extreme example as housing supply is never that responsive, but the point is that economists don't seem to me to have a good handle on these interactions as yet.

Lastly, it's fine to argue that places like Greenwich Village shouldn't have made the mistake of restricting new housing supply, but that doesn't answer the question of whether it is possible to undo the 'damage' now that it has become an enclave of the super-rich. Is there really any chance of persuading such a group of local residents to accept major structural change to the area they have paid so much to live in? This matters because if the answer is no then new supply won't be in areas like the Village but in less desirable places, probably more distant from where people want to be. If that's the case, then the very attractiveness of cities may undermine some of their economic and environmental benefits.

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