The Urban Future Ed Glaeser The Central Paradox Why is it that in an era in which transportation and communication costs have virtually vanished, cities have become more important than ever? Urban resurgence is visible in high income levels, robust housing prices, and a concentration of innovation in urban areas. This is even clearer in the developing world. Families: Median family income San Jose Bethesda 80000 Bridgepo Boulder, Ann Arbo 60000 40000 . Nassau-S San Fran Cambridg Lake Cou Washingt Edison, Warren-F OaklandTrenton- Newark-U Minneapo Oxnard-TSeattle-Hartford Essex CoSanta An Boston-Q Rockingh RaleighAnchorag Santa Manchest Camden, Ro Santa Cr Poughkee Napa, CA Madison, Blooming VallejoWilmingt New Have Honolulu HollandNorwichChicagoBaltimor Austin-R AtlantaFort Col Rocheste Monroe, Worceste Appleton Iowa Cit Dallas-P Milwauke Philadel Racine, CorvalliBurlingt LansingIndianap Des Moin Kansas C Portland Charlott Albany-S Charlott Olympia, Cincinna Richmond Salt Columbus Lak Naples-M Santa Barnstab Cedar Ra Green Ba Ogden-Cl Allentow Reno-Spa Rocheste Colorado Omaha-Co Lawrence Ba Sacramen OshkoshSheboyga Bremerto Springfi Durham, St. Loui West Pal Lincoln, Kokomo, Fort Wor San Dieg Janesvil Rockford Grand Ra Reading, Providen Harrisbu Nashvill Portland Gary, IN O Clevelan Wausau, Champaig Fort Way Huntsvil Lancaste San Luis Akron, York-Han Peoria, Tacoma, Kalamazo SiouxPhoenixFaLafayett Atlantic Lexingto HoustonSt. Clou Wichita, Dayton, Ocean CiSpringfi Kennewic Jackson, Fargo, NSalinas, State Co Las Vega Fort Topeka, ElkhartWarner R Syracuse Columbia La Cross Pittsfie Toledo, Flint, MLau WinstonBismarck Jacksonv Santa Fe Provo-Or Davenpor Louisvil VirginiaDetroitGreeley, Bellingh Eau Clai Boise Ci South Be BuffaloColumbia Greensbo Kankakee Tallahas Lebanon, Dubuque, Sarasota Springfi Evansvil Orlando, Bay City Greenvil Waterloo Fort Wal Roanoke, Palm Bay Pittsbur Decatur, Savannah Blooming Midland, Canton-M Battle CLittle Salem, O Stockton Charlest Birmingh Knoxvill Wilmingt Auburn-O Hagersto Duluth,FoRiversid Memphis, Anderson Niles-Be Cheyenne RTulsa, Los Ange Spokane, Dover, D SaginawBurlingt Cape Cor Sioux Ci Port St. Flagstaf Grand O Albuquer Gainesvi Tampa-St Muskegon Binghamt Baton Ro Casper, Missoula Athens-C Vineland Muncie, Spartanb Chattano Eugene-S Mansfiel Montgome ShermanJackson, AugustaErie, PA Oklahoma Billings Lima, OH Modesto, Macon, G Anto HickoryTyler, TElmira,Scranton San Youngsto College Tucson, Pascagou Utica-Ro Owensbor Anderson Amarillo Lewiston Jackson, Decatur, Lynchbur Ashevill Rapid Ci JuMedford, Pocatell Lafayett Victoria Pensacol Tuscaloo Grand Greenvil Fayettev Beaumont Panama C Myrtle B New Orle Punta Go St. Jose Terre Ha Bangor, Lake Cha DeltonaSpringfi Lakeland Waco, TX Rocky Mo Wichita Charlest Longview Williams Gulfport Chico, C Fayettev KilleenColumbus Lubbock, Florence Parkersb Corpus C Goldsbor Redding, Mobile, Clarksvi Shrevepo Houma-Ba Pueblo, Altoona, Florence Yuba CitCumberla Great Fa Abilene, Anniston Yakima, Dothan, Texarkan Monroe, San Ange Bakersfi Albany, Kingspor Madera, Lawton, Wheeling Danville Sumter, Joplin, Gadsden, Jonesbor Hattiesb Fresno, Johnson Merced, Pine Blu Ocala, FSmi Fort Huntingt Jacksonv Odessa, Visalia-Alexandr Yuma, AZ Las Cruc El Paso, Laredo, New York Brownsvi McAllen- 20000 4 6 8 Density 10 12 Urbanization Across the World % population urban 1998, WDI200 Fitted values HongSingapor Kon Belgium 100 Iceland Bahrain Israel Malta Luxembou United K Argentin Netherla Bahamas, Germany, Venezuel New Zeal Chile United ADenmark Australi Saudi Ar Sweden Korea Brazil Gabon Japan Spain Canada United S France Norway Mexico Trinidad Jordan Peru Colombia Turkey ItalySwitzerl Finland Poland Hungary Austria Tunisia Dominica Ecuador Bolivia Portugal Congo Iran, I. Greece Algeria Ireland Philippi Panama Malaysia Cyprus Jamaica MauritanNicaragu Morocco Paraguay Syria South af Honduras Botswana Fiji Costa Ri Cameroon Senegal Cote d'I Egypt El Salva Nigeria Mauritiu Benin Central Zambia Guatemal Indonesi Mozambiq Ghana Guyana Sierra L HaitiPakistan Zimbabwe Sudan Angola Togo Kenya Comoros Guinea Gambia China Tanzania Zaire Mali Madagasc India Lesotho Swazilan Yemen,Chad N Banglade Sri Lank Guinea-B Malawi W estern Thailand Niger Papua Ne Ethiopia Uganda Nepal Burundi Uruguay 50 0 6 8 Log of GDP 1998 10 The Hypothesis One major effect of globalization has been an increase in being smart. You become smart by being around other smart people– we are a social species. Cities, like Boston and New York and London and Mumbai make that possible. The same death of distance that did so much to hurt Detroit helped save Boston and NYC. The Gifts of Urban Density Art in Flanders (van Eycks, Campin, Memling) Commercial patrons and learning Religion The Brethren of the Common Life (Adrian IV, Erasmus, Martin Luther) Education and Literacy Caxton and Gutenberg Political unrest and democracy (Coninck) Chicago History America has an enormously fertile hinterland, but it is extremely expensive to access. In 1816, cost of moving goods 32 miles is more expensive than moving across the Atlantic. The big story of the 19th century is the construction of a transport network– water and rail that allows access to the hinterland. Chicago Continued Chicago is the creation of two canals: Illinois and Michigan and Erie, and then rails. First exporting live beef and salted pig. Pigs are corn with feet, and Chicago is allowing access to high productivity Iowa land (about 50 percent more fertile than Kentucky). Then as transport costs fall (and refrigeration) there is a move to dressed beef and wheat. Buenos Aires Buenos Aires is also a port that moves agricultural products to eastern markets. Starts with lower value, but highly durable goods (hide and tallow trade). Steam and frigorificos make it possible to shift chilled beef and mutton. As rail got more effective, grain came to supplement the animal stocks. Four Differences Wages Schooling Industrialization Politics Income Levels Buenos Aires was rich in 1900, but it was still much less rich than Chicago. Begs two questions. Labor Demand– why were workers more productive in Chicago? Physical capital, human capital technology Labor Supply– why did workers go to Buenos Aires if real wages were lower? Culture, climate (Italians and Spanish) Literacy in the Two Cities • Enrollment data suggest that, after 1884, the issue isn’t education in Buenos Aires. • Part of this is the nature of immigrants. – In 1914, 88 percent of Chicago immigrants could read, but only 72 percent of BA immigrants. • Part of this is still native born. – In 1895, literacy rate of native born in BA is 75 percent; in Chicago it is percent. – Common schools in US vs. ? In Argentina. Industry in the Two Cities In 1914, Capital per worked is 2.25 times higher in Chicago than in BA. Value added per worker is 2.44 times higher in Chicago than in BA. Roughly commensurate with the wage differences that we see. Capital alone does not explain the wage differences. Why Does Chicago Stay Rich and Buenos Aires Decline? Levels of Physical Capital In 1914, Capital per worked is 2.25 times higher in Chicago than in BA; value added is 2.5 times higher Levels of Human Capital In 1895, literacy rate of native born in BA is 75 percent; in Chicago it is 98 percent. Technology Chicago is on the cutting edge (cars, skyscrapers) Political Institutions The Problematic 20th Century The Automobile made public transportation oriented cities seem somewhat obsolete. The truck freed manufacturing from needing to cluster around ports and rail stations. Declining transport costs created a rise in consumer cities over cities oriented around productive advantages like waterways. The Decline of the Costs of Moving Goods Dollars per Ton Mile (Real) .185063 .02323 1890 2000 year Railroad Revenue per Ton Mile The Move to Warmth Fitted values Log Change in Population 1980-2 Las Vega 1 Austin-S Phoenix- Orlando, West Pal Atlanta, RaleighDallas-F Sarasota Bakersfi Sacramen Stockton Fresno, Tucson, Charlott Jacksonv SanTampa-St Dieg HoustonDenver-B SeattleMiami-Fo Salt Lak San Anto Nashvill Portland Los Ange El Paso, Albuquer Minneapo Greensbo Augusta- San Fran Washingt Columbia Richmond NorfolkGrand RaLancaste Greenvil Lexingto Charlest Columbus Oklahoma Knoxvill Des MoinKansas Wichita, Little RJackson,Baton Indianap C Spokane, Tulsa,Memphis, O Ro Mobile, Omaha, N Corpus C Lafayett Allentow Honolulu Cincinna Rockford Boston-W Harrisbu Birmingh Fort Way ChicagoNewJohnson YorkChattano Providen Philadel Hartford New Have St. Loui Milwauke Kalamazo Louisvil LansingRocheste Albany-S Springfi Shrevepo DetroitBeaumont New Orle Syracuse Dayton-S Canton-M Clevelan Toledo, SaginawPeoria-P Scranton Huntingt BuffaloDavenpor Youngsto Pittsbur .5 0 0 20 40 January mean temperature 1980 60 80 Figure 24: 1980-2000 Population Growth and Mean January Tmp. Population Grow th 20-80 2.46159 SAN DIEG Fitted values HOUSTON, JACKSONV EL DALLAS, PASO, LOS ANGE TULSA, O SAN ANTO OKLAHOMA MEMPHIS, WICHITA, NASHVILL FORT WOR COLUMBUS NORFOLK, INDIANAP ATLANTA, FORT WAY YONKERS, DENVER, FLINT, M SAVANNAH OMAHA, N SPOKANE, PEORIA, TACOMA, KANSAS C BIRMINGH OAKLAND, SEATTLE, SOUTH BE EVANSVIL DESORLE MOIN TOLEDO, WASHINGT NEW PORTLAND MILWAUKE KANSAS ALLENTOW C GRAND RA SALT LAK SAN FRAN ERIE, PA RICHMOND DAYTON, LOUISVIL NEW YORK DETROIT, SPRINGFI MANCHEST SIOUX CI ST. PAUL O WATERBUR CHICAGO, ELIZABET CANTON, AKRON, BALTIMOR PATERSON BRIDGEPO SYRACUSE HARTFORD ST. JOSE MINNEAPO CINCINNA DULUTH, PHILADEL WORCESTE ALBANY, YOUNGSTO CAMBRIDG BAYONNE, ROCHESTE NEW BEDF UTICA, N NYLOWELL, NEWARK, TROY, NEW HAVESCHENECT TRENTON, FALL RIV CAMDEN, BOSTON, READING, PITTSBUR CLEVELAN BUFFALO, HARRISBU WILKES-B LAWRENCE PROVIDEN SCRANTON WILMINGT ST. LOUI KNOXVILL -.545373 SOMERVIL JERSEY C 23869.5 947.754 dens20 Figure 8: Density and City Growth 1920-1980 The Rebirth of Boston, NYC Idea-oriented industries rose in places that were once centers of manufacturing. New York’s early industries are sugar refining, publishing (stolen books) and garments Finance in New York and an urban chain of ideas Understanding risk and return with data The sale of riskier assets (Milken) The use of risky assets to restructure companies (KKR) The nationwide sharing of risk (Ranieri and MBSs) The sale of data tools (Bloomberg) Figure 4: Population Growth for MSAs in the Northeast and Midwest 60% Average Population Growth (1970-2000 53% 50% 40% 30% 20% 20% 10% 15% 15% 7.5% - 9.5% 9.5% - 11% 8% 0% 0 - 7.5% Data from the United States Census Percent of Population with a BA (1970) 11% - 15% 15%-31% Fitted values Change Income 1980-2000 .6 San Fran Austin-R Boston-Q San Jose Portland Newark-U Providen AtlantaTampa-St CharlottAlbany-S Jacksonv Philadel West Pal Nashvill Columbus Hartford NewNassau-S York Minneapo Springfi Knoxvill Baltimor Memphis, San Dieg Orlando, Sacramen Oxnard-T Richmond Greensbo BirminghOmaha-Co Columbia Cincinna Fort Jackson, Lau Charlest Tacoma, Dallas-P Little R Kansas C LouisvilSaltIndianap LakHarrisbu San AntoAllentow Ra St. Loui Lancaste Grand ChicagoStockton Spokane, PhoenixSyracuse Honolulu BuffaloWichita, Albuquer Akron,Dayton, O Riversid Tucson, Milwauke Las Vega Rocheste Toledo, Fort Way Clevelan Tulsa, O Pittsbur Baton Ro Oklahoma Los Ange New Orle DetroitCanton-M .4 .2 Youngsto Fresno, Gary, IN Bakersfi El Paso, Washingt Seattle- Houston- 0 .02 .04 .06 1980 Share of Skilled Workers Figure 5 .08 .1 Fitted values Log Wage Residual 2000 New York 10.2 Minneapo Charlott AtlantaWest Pal 10 9.8 Kansas C Indianap Richmond Louisvil PhoenixOmaha-Co San Dieg Columbus Albany-S Las Vega Nashvill St. Loui Grand Wichita, Fort Ra Way Honolulu Salt Lak Columbia Lancaste Greensbo Orlando, Dayton, Harrisbu Toledo, Allentow Tulsa, O Albuquer Tampa-St Syracuse Charlest ChicagoBirmingh Rocheste Canton-M Little R Pittsbur Spokane, BuffaloBaton Ro San Anto Stockton Jackson, Knoxvill Youngsto Tucson, Oklahoma Memphis, Austin-R San Fran New Orle Bakersfi Fresno, 9.6 .05 .1 2000 Share of Skilled Workers Figure 4 .15 .1 Change in Percent with BA 1990-2000 0 .05 .1 .2 .3 .4 Percent of Adults with BA Degree in 1990 .5 Figure 6: Productivity in More Skilled MSAs 90,000 80,583 80,000 74,759 70,000 Output per Worker 64,005 60,000 59,016 55,975 50,000 40,000 30,000 20,000 10,000 0 Less than 125,000 125,000 to 300,000 300,000 to 750,000 750,000 to 1,000,000 Above 1,000,000 Population Units of observation are MSAs where the share of adults with college degrees is greater than or equal to 17.65%. Labor force and population is from the Census. Gross Metropolitan Product is from the Bureau of Economic Analysis. Other Determinants of Economic Success Strong correlation between growth and an abundance of small firms. Detroit goes from being a highly productive city of small entrepreneurs to being stagnant. A weaker correlation between industrial diversity and later growth. Few strong correlations with particular industries (except for healthcare which is -);,m -1 Employment Growth, 1977-2000 0 1 2 3 4 Figure 7: Employment Growth and Average Firm Size, by MSA 5 10 15 Workers per Firm, 1977 20 25 Reinvention in the West In the old world, Milan thrives and Turin fades. Weaving becomes fashion. Chains of ideas (Nino Cerruti, Armani, others). Minneapolis excels and Cleveland doesn’t. Birmingham reinvents itself (it always was an intellectual polis); Manchester doesn’t. And of course, then there is Boston. Technology, medicine, finance. Urban Intercontinental Gateways Athens as importer of ideas from the Greek Diaspora. Anaxogoras, Prodicus came to Athens-> Socrates Baghdad is importer of ideas from India, Persia, and Greece. Jafar is a Barmakid– probably a Brahmin from Kashmir– aided the Abbasid takeover Academy of Gundishapur, Sindhin, Al-Khwarizmi Cordoba, Venice and the transmission west. Bangalore and Others The Most Successful Cities today continue to be gateways across civilizations– conduits for the flow of ideas. Bangalore in India and software services New York-London-Singapore financial nexuses. Hong Kong and the connection to China Singapore and the Pacific. Flat world has increased their importance. What is good about urban poverty? Cities tend to contain a large number of poor people, but that reflects urban strengths more than urban weaknesses. In cities, there is opportunity, ethnic networks, and life without cars. Cities aren’t making people poor, they are bringing them in. Policies that are good to poor people in cities will attract more of them and that is o.k.– the really problem is the artificial equality of suburbs. The Rise of the Consumer City While clusters of genius are more important than ever, they are no longer tied down by productive amenities like rivers and ports Increasingly, cities have formed in places where people want to live. At the same time, more attractive older cities have become increasingly attractive to people who want to live in a dense environment. When are high real wages bad? Declining Real Wages and the Rise of the Consumer City Why are so many people still in the rustbelt? The rustbelt was built on manufacturing around the waterways. Erstwhile creative hubs like Detroit evolved into goods producing machines, but declining transport costs led manufacturing to move. Now there is little obvious comparative advantage to these places and the weather isn’t great. Are some cities becoming gateless gated communities? Many cities have place extreme limits on the ability to build up (Mumbai’s historical FAR was 1.25). In older places, historic preservation joins height limitations. In suburbs, the limits are minimum lot sizes. These limits are supply restrictions that brake the growth of attractive areas. This is where Jane Jacobs was wrong. Prices and Permits across Larger Metropolitan Areas San Fran 600000 San Jose New York 2005 Housing Price Honolulu Santa An OaklandOxnard-T Bridgepo 400000 San Dieg Los Ange Bethesda Nassau-S Cambridg Washingt Newark-U Essex Co Boston-Q Edison Seattle- Sacramen Riversid West Pal Poughkee Fort Lau Providen New Have Worceste Lake Cou Portland Sarasota Chicago- Fresno Hartford Baltimor Tacoma Minneapo Wilmingt PhoenixCamden Portland Springfi Salt Bakersfi Lak Madison PalmColorado Warren-F Virginia Bay Philadel OrlandoTucson AtlantaAlbany-S MilwaukeAllentow RaleighCharlest Jacksonv Tampa-St DeltonaAlbuquer Richmond Austin-R Nashvill Charlott Columbus Clevelan Harrisbu Cincinna Grand Ra Kansas C Indianap New Orle Akron Lakeland St. Loui Gary Dallas-P Louisvil Knoxvill Greensbo Greenvil Birmingh Columbia Omaha-Co DetroitToledo Dayton Baton Chattano Scranton Rocheste BuffaloSyracuse Pittsbur AugustaLittle Ro RMemphis FortHoustonWor Oklahoma San Anto Tulsa Youngsto Wichita El Paso 200000 Las Vega Cape Cor 0 0 .1 .2 Permits 2000-5/Stock in 2000 .3 Difference in Index May 2006 to May 2008 -80 -60 -40 -20 0 Charlotte-Gastonia-Rock Hill, NC-SC Seattle-Bellevue-Everett, WA Portland-Vancouver, OR-WA Dallas, TX Atlanta, GA Denver, CO Cleveland-Lorain-Elyria, OH Chicago, IL Boston, MA-NH New York, NY Detroit, MI Minneapolis-St. Paul, MN-WI Washington, DC-MD-VA-WV San Francisco, CA Tampa-St. Petersburg-Clearwater, FL Phoenix-Mesa, AZ San Diego, CA Las Vegas, NV-AZ Los Angeles-Long Beach, CA Miami, FL 0 50 100 150 Difference in Index May 2001 to May 2006 200 Green Cities Urban residents are much less likely to drive than their suburban counterparts. Urban residents live in smaller homes that use less energy. Since we don’t tax carbon properly, this means that there are too few people in cities. The environmental consequences of environmentalism. Wharton Regulation Index 10 Los Ange San Fran 5 . Seattle- San Jose San Dieg Salt Lak Fort Lau Sacramen New York Boston, Portland Syracuse CincinnaTulsa, O Charlott Birmingh Nashvill Miami-Hi Philadel Pittsbur Akron, O Houston-Memphis, Milwauke Baltimor Minneapo Providen Orlando, New Orle Hartford Columbus Tampa-St Washingt Albany-S Atlanta, Greensbo Detroit, Rocheste Phoenix, Grand Ra Louisvil Indianap Kansas C Oklahoma Clevelan Denver-B San St.Anto Loui ChicagoDayton-S Dallas-F 0 -5 Buffalo- Richmond -10 800 1000 1200 Total Cost from Marginal Home 1400 1600 City-Suburb Differentials For each metropolitan area, we can also calculate the difference between urban and suburban energy usage. Calculate gas usage by central city vs. suburb. Convert public transit by ridership using census figures. Calculate energy spending using the IPUMS for central city vs. suburb. Rank City Electricity Coal LPG Coal gas Car Taxi Bus 1 Huaian 0.879 0.098 0.082 0.016 0.120 0.011 0.023 1.230 0.090 2 Suqian 0.865 0.218 0.117 0.000 0.006 0.026 1.231 0.073 3 Haikou 0.983 0.007 0.176 0.015 0.000 0.006 0.065 1.252 0.124 4 Nantong 1.062 0.036 0.164 0.000 0.007 0.012 1.281 0.080 5 Nanchang 0.978 0.141 0.048 0.000 0.007 0.130 1.305 0.138 70 Yinchuan 0.675 0.059 0.036 0.338 0.034 0.095 2.287 3.543 0.146 71 Qiqihaer 0.765 0.054 0.115 0.000 0.018 0.041 2.620 3.614 0.085 72 Beijing 1.558 0.145 0.049 0.084 0.650 0.018 0.138 1.306 3.997 0.192 73 Mudanj’ng 1.047 0.136 0.081 0.353 0.040 0.017 3.154 4.827 0.107 74 Daqing 0.998 3.719 5.115 0.056 Mean 1.122 1.228 2.177 0.134 0.019 0.093 0.233 0.003 0.000 0.026 0.137 0.102 0.077 0.135 0.016 0.067 Rail 0.049 0.036 Heating Total CO2 Standard error
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