Charter Cities Podcast Episode 40: Urbanization and Urban Governance with Ed Glaeser
Today’s guest is Ed Glaeser, a Professor of Economics at Harvard University, and he joins us to talk about urbanization and urban planning. Ed has written, or co-authored several books, including The Triumph of The City, and more recently, Survival of the City: Living and Thriving in an Age of Isolation, published this year with David Cutler.
Key Points From This Episode:
• The lessons to be learned from Latin America’s urbanization regarding transport and more.
• Countries that have become urbanized without being industrialized.
• The connection between urbanization and moving out of poverty.
• Perspectives on manufacturing versus service-led paths toward transformation.
• Whether there is a distinction between urban migrants who arrive due to ‘pull’ versus ‘push’ factors.
• Ed’s thoughts on whether secondary cities can be as productive as primary ones.
• The contrast between entrepreneurship and poor living conditions in Mumbai’s Dharavi slum.
• Under which conditions private provision (PPP) works best and worst.
• What we can learn from large urban infrastructure projects built in the 1970s.
• Whether there are examples of cities that are good at combatting vetocracy.
• The leaders behind cities that have experienced massive urbanization.
• Why Ed thinks the 15-minute city is a dead-end concept but agrees with some aspects of it.
• How to push back against environmentally damaging status symbols for the newly rich as a planner.
• The factors that contribute to suburbanization and whether China is headed that way.
• How to deal with the rising carbon emissions that come as developing countries urbanize.
• Why large cities in the US are failing on the schooling front and Ed’s thoughts on a solution.
• Ed’s thoughts on a land-grant university model in developing countries.
• How to grapple with current COVID-related supply chain challenges.
• Productivity after social distancing in light of the connection between density and productivity.
• Why London and New York are still the only truly global cities.
• Whether charter cities are a way of experimenting with pro-entrepreneurship institutions.
Mark: Hello and welcome to the Charter Cities Podcast. I’m your host, Mark Lutter, the Founder and Executive Director of the Charter Cities Institute. On the Charter Cities Podcast, we illuminate the various aspects of building a charter city, from governance to urban planning, politics to finance, we hope listeners to the Charter Cities Podcast will come away with a deep understanding of charter cities, as well as the steps necessary to build them.
You can subscribe and learn more about charter cities at chartercitiesinstitute.org, follow us on social media, @cci.city on Twitter and Charter Cities Institute on Facebook. Thank you for listening.
Kurtis: Our guest for today is Ed Glaeser. Ed is a Professor of Economics at Harvard University. He's the foremost urban economist in the world, with his work focusing on cities, housing, segregation, obesity, crime, and innovation, among many others. Ed leads the Urban Economics Working Group at the National Bureau of Economic Research. He co-leads the city's program at the International Growth Center. He's a member of the American Academy of Arts and Sciences. Ed’s written, or co-authored several books, including The Triumph of The City, and more recently, Survival of the City: Living and Thriving in an Age of Isolation, published this year with David Cutler. I hope you enjoyed the conversation.
Kurtis: Hi, Ed. Thanks so much for coming on.
Ed: Oh, I'm so happy to be on with you.
Kurtis: Okay, first question. I wanted to start with a recent review paper that you wrote with a couple of co-authors called Cities of The Developing World. Broadly, much of the developing world is urbanizing rapidly, especially certain parts; India, Sub-Saharan Africa, in particular. The only comparable rural to urban migration in this scope and scale in recent memory is China for the last 40 years. Here's my question. What are the main lessons that rapidly urbanizing regions today can learn from China's urbanization since 1978?
Ed: I would also throw in urbanization in Latin America here. In the 1960s, there was a whole literature that was wondering about how it was that Latin America had urbanized without industrializing, and why it is that Latin America had become majority urban, but was still reasonably poor. Mexico becomes 50% urban in 1960. Brazil, I think, in 1964, and they're still reasonably poor places. Latin America is now one of the most urbanized places. It's more South America is more urbanized than North America.
As we think about, and I think in fact, in some sense, Latin America is just a more natural comparison with India and Sub-Saharan Africa than is China. I mean, China is so unique in terms of its public sector control, in terms of its public sector capacity, which is just at a totally different scale than most of the developing world.
Kurtis: Feel free to use Latin America as the competitor then.
Ed: Absolutely. One of the things that that is worthwhile learning from this is that the Latin American story is while they urbanize, while they were still poor, and remember, I mean, America didn't become 50% urban until 1920. When our per capita income in modern dollars is over $8,000, which is vastly higher than most Sub-Saharan African countries, or India for that matter.
In the past, of course, you couldn't have a majority urban society until you were reasonably rich, because you needed agricultural surpluses to pay for all those people who did not agricultural things. Today, in both the agricultural sectors in the developing world are much more productive. The backdrop for Mexico City's vast rise was the Green Revolution of the 1950s, which generated those agricultural surpluses, which made it a reasonable thing to move into cities.
Also, they can be fed from the developed world. Haiti can be fed with rice shipped out of New Orleans. Even though, even though these countries urbanized, and they were poor in the 60s, they eventually got rich. Even if it looks where they got middle income, they got richer than they were. I think, the first lesson is always to resist the image to say – it resist the urge to say, look, they're all these poor people crowded together and cities. Isn't this horrible? We should stop the growth of cities. I think, that's always my most important lesson is that I know of no path out of poverty into prosperity that does not run through city streets.
This does not mean that we should ever artificially subsidize cities, or that we should push people into cities. It is hard to look at whether or not we look at the cross-sectional correlations, or the relationships within country, or Mushfiq Mobarak's experiments, where he gives people money and enables them to move to urban areas. It's hard to look at any of these and think that urbanization is something to be fought against. But it is something to be improved. The cities in the developing world desperately need things that will make them more humane.
Now, in some cases, this is about the economic side. Certainly, most of the urban economics that has been written in the developed world is of course, focused on the upsides of cities in the economic realm. Focused on the reasons for agglomeration, economics, and so forth. In the developing world, I think, we have a larger contribution in terms of fighting the downsides of density, in terms of dealing with crime, contagious disease, high housing costs and traffic congestion.
Now, what are the things that we could learn from Latin America? Well, one thing is as been learned worldwide, which is the bus rapid transit. Latin America embraces bus rapid transit, that starts in Curitiba. Colombia has made it its own with the TransMilenio. This is a much less expensive alternative to rail. It runs a dedicated lanes. It's more flexible than rail. There's a lot to like about buses. In fact, there's an old joke that 40 years of transportation economics at Harvard can be boiled down to four words, bus good, train bad. That in some sense, was the intellectual background for bus rapid transit.
Similarly, in terms of another – the other transportation thing, I think, really comes out of Singapore, not Latin America. Singapore embraces congestion pricing in 1975, when it is still a poor city and its streets still move much more quickly than any comparable city in the world that I can think of. Because it charges people for the social cost of their actions.
Now, the second thing to think about in terms of Latin America is how they built up. There's a lot of Latin America that's now pretty high. That makes things somewhat easier. Tall buildings can be harder to defend, particularly public housing projects can be harder to defend. Height is a way to provide affordability on a narrow amount of space. It's a way to make transportation easier as well. At least, thinking twice about regulations that make it difficult to build up is an important thing. This is, I think, more important in the Indian context, than for much of Africa.
A third issue is around crime. Now, Latin America still has some of the most ferocious crime problems in its cities in the world, but there have been successes. I mean, Colombia is where I would look above all, but also Monterrey and Mexico, where there have been particular groups that have been effective at fighting crime. Sometimes this involves alliances between the business community and the government. They actually provide extra resources. Sometimes it involves other forms of intervention.
The fight against crime is another one where we can look to Latin America for assistance. Now, contagious disease. Really, if we want to go back to contagious disease, I think, the more natural parallel is the US in the 19th century, where in fact, we were poor then and we fought very hard for hygiene, or Europe in the 19th century. I do particularly like, and I think it's particularly important to have these south-south communications. I think, that's a very rich range. I am always in favor of encouraging more linkages between Latin America and Sub-Saharan Africa, or India.
Kurtis: Okay. I'm going to pick up on, because you mentioned urbanization without industrialization in your answer. I'm going to pick up there. A lot of urbanization in both India and Africa is happening without industrialization. This type of industrialization is accompanied historical urban transitions of now rich countries. We have the work of Remi Jedwab and others. Dani Rodrik has written about premature deindustrialization. The worry here being that pretty much, no rich countries today have become rich without going through manufacturing. The issue is that manufacturing usually requires some baseline level of institutional development. It requires transport, infrastructure, inputs, like power, industrial scales. Do you worry as much about this as the Jedwabs and the Rodricks? Or do you think, there's a viable alternative path to prosperity outside of manufacturing?
Ed: I worry about it. I'm not sure that manufacturing at all exists is a viable path. I guess, I have more hope that there will be alternative paths. I have very little confidence about any of this, Kurtis. You're certainly right. It's certainly true that it's hard to do manufacturing without good infrastructure, without available power, without functioning ports that work well, without institutions that protect investors who put down large significant amounts of fixed capital.
Even in the best-case scenario, is it obvious that private, non-subsidized manufacturing in Sub-Saharan Africa can beat out Chinese, or other East Asian equivalents, in a world in which manufacturing has just become vastly more capital intensive? That's my worry. I take this word more generally, both about the wealthy world and the poor world, is I believe that the future for less skilled workers in the US all involves urban service work; all involves the 32 million Americans who prior to COVID labor did leisure, hospitality and retail trade. Those service jobs are dominant in developing world cities as well.
It's less clear what will be the thriving export industry for these areas, although exporting some service is possible. In a world in which just machines make so many of our ordinary goods, I just have trouble seeing a world in which the sole advantage of low-cost labor will enable any country, even with better institutions, even with better infrastructure. In the level, I'm both more pessimistic even, than Rodrik and Jedwab. I'm somewhat more hopeful in that I, at least, hold out some possibility that there could be a service, or some other innovation led path towards transformation.
Kurtis: I guess, the tech sector in India is one example of that. Historically, most urbanization, you could argue, I think, plausibly was due to pull factors, with opportunity in cities, drawing folks in from the hinterland from the rural areas. Today, I think you could argue a lot of urbanization is a result of push factors. Things are just so bad in rural areas that a lot of folks are just fleeing, or for exiting in search of any alternative, even if there's not much of an opportunity in terms of jobs.
I guess, when I think about this, I'm surprised at how little this is talked about. Because one could argue, these are two fundamentally different kinds of people. We have one that self-selects themselves into urban life, in search of opportunity in the big city. They seem to be entrepreneurial. They seem to have expected that they're going to meet some strangers, and they're okay with that, that tends to, I guess, be of higher trust people. They're more weird in the Joe Henrik sense of the word.
Then you have on the other hand, someone who's just fleeing these rural areas, that hasn't necessarily gone through that same weird transition. They're a little less weird. Maybe more Kim-based, maybe a bit lower trust. Do you buy this distinction between, we could call it pull urbanization people and push urbanization people?
Ed: I'm not sure the difference is as big as you think. Boston's two dominant ethnic groups throughout most of the last 150 years were the Brahmins, the Yankees and the Irish. I don't know by what definition the Irish Boston were pulled. I think of them as very much pushed by a famine that slaughtered their kinsmen. They seem to have, within a couple of generations have done pretty well, leading not only the city in politics, but pretty shortly putting a president into the White House, as well as producing a lot of titans in a variety of different areas.
It's less clear to me that the selection of different types of migrants is – I mean, I think we correctly worry about the selection of migrants in our regressions. Just because we were worried of that in our regressions, doesn't mean that we think that you think that these people are wildly different. Most of the time, I think that people are similar, in particularly, in basic drives and so forth. Now, there's no question that the poor parts of the world are different culturally. I think, the ability of cities to absorb different cultures is fairly remarkable.
What goes on now is then. I guess, I'm less sure that the case – that there is any case made that European culture is so great relative to African culture in terms of anything. I know and like Joe, but I'm not so sure that this is – I mean, we had a lot of other advantages going for us as well, including guns, germs, and steel. My own view is that whenever I'm in an African city, I'm just amazed by the amount of entrepreneurship and creativity that I see around me.
Kurtis: You've done some research on primate cities. Today, we've seen lots of countries across the globe that self-adopt plans for so-called secondary cities, to attempt to stem some of the mounting pressure on their primary cities. Are you sympathetic to these secondary cities’ plans, or not so much?
Ed: I'm sympathetic to the idea that we understand that politics artificially bloats particular cities, which might be a good reason to limit the tendency to throw rents to people who live near the leader. I can see a good reason for either decentralizing some power, or even within the current power structure, figuring out some checks that limit that tendency.
Secondary cities feel very dangerous to me, in the sense that like all plan from the start, top-down cities, they can easily go awry. I tend to like my cities to be fairly organic and ground up. Well, I certainly, I think gridding is a great thing, and I'm certainly in pro-gridding. I think, it's pretty hard to actually be all that confident that we can build a secondary city that will be anywhere near as productive as our primary cities.
Kurtis: You visited the Dharavi slum in Mumbai. What were the main things that you learned from that visit, that experience?
Ed: Well, it was just an amazing time for me. I was both awed by the level of creativity and entrepreneurship. There was just these clusters of talented people that were just one level, there were guys who are sewing undergarments, and you felt like you were in the Lower East Side of Manhattan in 1906. There was this ceramics cluster. This woman was so proud of the pot that she gave me, she wouldn't even take any money for it. Then there were these guys were recycling plastics. This is one of these things where like, how in the world did they learn that there was money in recycling plastics? Totally amazing. That's all fantastic.
Then you see a kid defecating in an unpaved road, and you know the electricity is intermittent and you know the water isn't safe to drink. It reminds you of just how you have this combination of private dynamism and public failure, and how cities require help in terms of managing and monitoring these demons that come within. That's at least, what I took away from Dharavi, is just enormous confidence in entrepreneurship, even of the poorest Indians, but enormous frustration with how difficult it is proving to provide the core public services that every urbanite deserves.
Kurtis: Yeah. Again, this is a good segue into a few questions on urban governance. Given urban governance, institutional development are low in many developing world cities. Naturally, alternative ways of providing services to citizens other than through this weak public sector are needed. This is where private provision, or PPP provision comes in. There's a mixed record here. Angles get to this and others. In your view, for which services and under what conditions does privatized, or PPP provision work best, and on the other side work worst?
Ed: The big problem with private provision, at least, as I see over the long 200-year time period that I know its history, is the tendency of private providers to subvert the government. You have a highly incentivized, highly capable, cash-rich entity that is quite capable of either legally, or illegally subverting the government. Bribing it, if it's government is subsidizing it, the entity figures out how to trick the subsidized subsidies. If there is a well-defined bid to establish a very low return on investment for water provider, you can bet that two years later, they will have renegotiated that contract, and it will go from a 2% return to a 9% return. These things routinely happen.
You really need a robust public structure to actually deal with this. Because otherwise, it just gets just totally taken over. There are other forms, of course. There's the possibility of an independent public entity, as well as pure public provision. An independent public entity, however, only works if you have a person at the top who has a global reputation to lose, or at least a national reputation to lose.
Whereas, if you just have parastatal enterprise that's run by a crony of the leadership, a political leadership, then it becomes a way for the political leaders just to hide the blame, and to put the blame on someone else. I think, that's somewhat problematic. Across sectors, it's not obvious that you have any clear winners and losers, right? Hart Shleifer and Vishny would tell you that, purely public provision is more valuable, when you don't want cost-cutting incentives that will then cut away quality. That would be the HSV view. That seems right. That's probably relevant for things that you can't measure the quality on.
We would worry more about that on water, if it's not worth it. In fact, it's actually pretty easy to measure water quality on some regular basis. As long as you have a public sector that's willing to measure it, and you cannot write a contract where you penalize the water company for not providing clean water.
Kurtis: Okay. You mentioned a lot of these private provision, or PPP provision going to renegotiations frequently. I think, the example Angles used is actually his own – Chile did quite good at introducing with a PVR. What does it stand for? Present Value of Revenue contracts to help address this renegotiation problem. Is there anywhere else doing this really well?
Ed: Chile is extremely good at this. There are some parts of the US, which seemed to have had a long the Chilean model, relatively effective PPP highways. Typically, this is monitored at the state level. Places that have relatively competent state governments tend to be the good ones. In terms of other places where we think we have PPPs that are quite good, we know from Angles and work that Sub-Saharan Africa tends to be a complete disaster. That much we know. I think, there are other Latin American places that are reasonably good, possibly Colombia.
Kurtis: This is related, but what can developing world cities today learn from the way big urban infrastructure projects were financed and built in in the 19th century?
Ed: Certainly, my experience with things like, the European private toll roads has been positive as a driver. I cannot tell you that I've looked into the data on, whether or not these contracts were good for the governments themselves, that I'd have to leave to answer on this. In terms of the history of paying for infrastructure, for the institutions that wrap around infrastructure, there's a lot to like about user fees in most cases. There's a lot to like about making sure that the person who's using it is paying for it. Sometimes that's not possible.
In the case of clean water, you may just have a situation in which a straight-out feed is too much discouraged use. In that case, you either need to subsidize, or you need to engage in some kind of a Pigouvian tax associated with not using. In the case of New York City, the way that they solved the last mile problem that afflicted the Croton aqueduct and the waterpipes was to find tenement owners who didn't connect to the water system.
Kurtis: Okay. Okay. I guess, you mentioned governing structures, or institutions around infrastructure provision, so this folds in with that. Government, often comes up against what? I think, it was Larry Summers called it the promiscuous distribution of veto power, or Fukuyama called it a vetocracy, or something like this. You and your co-author of this new book, David Cutler, write about this tangentially in survival of the city, about the power of incumbents to block building, or block new entrants. How do cities get over this vetocracy and nimbyism? I know, they're distinct, but they're related. Are there examples of cities that are particularly good at combating these?
Ed: There is a question as to whether they're not democracy is they're pretty good in battling that. Certainly, for example, your case of China, one doesn't feel as if every neighbor has the right to veto every project. In general, I think East Asian economies tend to be – East Asian policies tend to be somewhat better on this. It may be just more deference to government. Anglo Saxon countries tend to be – the common law countries tend to be the worst in terms of just having hyper-empowered neighbors on everything, or even in some cases, there are principles that came out of British Town and Country Planning that worked away into Indian land use regulation, but also feel they're empowering neighbors to say no to everything.
Kurtis: Like the garden city plans of the UK.
Ed: Right. Howard and the views, which feel they're very empowering to neighbors. Typically, the stronger, if you're going to go along the political continuum, the stronger the executive, usually, the more easily you can say no. Because legislators, particularly playspace legislators are very sensitive to constituent concerns. They tend to empower those concerns. That's where I would look for the remedies of this, is some form of a strong, central leadership to push back on this.
Kurtis: Okay. I guess, in terms of strong-willed leaders, in your work on developing world cities, I'm curious, have you come across this Robert Moses figure, whether good or bad, somebody that's able to really effectively overcome political constraints to building and by do so, transforming the city?
Ed: Well, Lee Kuan Yew certainly qualifies as being Robert Moses on steroids in a sense. He transformed the whole society. Not just building some bridges and parks. I don't know the full story of the transformation of Seoul, or Tokyo. Those stories are more opaque to me than they should be. Clearly, they had those figures at various points in time. Clearly, they were able to build on a massive level. Whereas, there's no European city, which has since Baron Haussmann in Paris in the 19th century, been willing to completely run roughshod over the existing community. It's certainly not a European feature. The East Asians seem to be the ones who have done it most.
Kurtis: We've talked about infrastructure a bit, so I have to ask. There's an infrastructure bill before congress. What does it get right and what does it not get right?
Ed: I'm glad that we've got to focus on infrastructure. I wish there was more of an embrace of cost benefit analysis in this. I mean, I take a very strong view that economics doesn't do a very good job of telling you what's the right number. I mean, should it be 1.5 trillion, or 3.5 trillion, or 0.5 trillion? We've got an approach. Approach is to add up the benefits, both direct and ask ancillary benefits from infrastructure. Then, we try and compare these with the costs. Then we say, we want to do it when the benefits handily exceed the cost. There's very little of that in our infrastructure plan.
Now, to a certain extent, for some forms of particularly, maintenance, when it comes to repaving old roads, I'm pretty comfortable to do them with that. To do that without a cost benefit analysis for every repaving. That would be an insane thing to do. For any large scale, big projects that should be enshrined as a big part of our approach to infrastructure. That was something of a hope, with the idea of an infrastructure bank that had been floated during the late Obama administration. It was less clear to me that that bank was going to manage to do that. That was certainly a hope.
An alternative is there could be some form of cost benefit analysis that's required for all large infrastructure projects that come afterwards, but it has to be done by an independent entity. I mean, the California High Speed Rail cost benefit analysis was done by Parsons Brinckerhoff, which was the contractor that was going to make a significant amount of this thing. I mean, that's not a viable possibility for this.
Kurtis: Okay, so moving onwards, this notion of the 15-minute city is being taken up by a lot of urban planners. It's favored right by Paris's Mayor right now. You've written that it's a dead end. Why?
Ed: The 15-minutes city is, there are elements in the 15-minute city with which I have a great deal of sympathy. One of which is pedestrian walkability. Economists, by and large, shouldn't take strong roles and having a favorite mode of transportation. It's not really what we should do. I'm a big fan of walking. I think, probably we subsidize the car too much historically. It's a perfectly reasonable thing for us to have an increased focus on walking.
There's another aspect which I'm even more enthusiastic about, which economists should have a strong view on, which is thinking about the regulatory barriers to small scale entrepreneurship in every neighborhood to make that neighborhood more livable. I think, that's an absolutely appropriate thing for us to think about. That's one element of the 15-minute city.
What I dislike is the idea that we should think about our cities as fragmenting into different enclaves, that are distinct from one another. I dislike the idea of thinking that you're not going to view the entire metropolis as being your home, as being a place in which you're comfortable going. Because another way of thinking about a city that's broken into 15-minutes cities is it's a city of segregation. It's a city of ghettos. It's the city of enclaves.
For me, at least, I think the whole point is that we need to figure out ways to get our poor, particularly children who are living in these areas to connect with the entire city. Not to be siloed into their own particular area, but to have the ability to travel throughout the place.
Kurtis: You mentioned walkability, so it brought up this conversation in my head I had with a developer in Kenya, the other day. He basically said, walkability won't work here in Kenyan towns and cities, because he said, newly wealthy, or newly upper-middle class people, they want to show off their wealth. It’s a status signal to drive a car, because humans are status-seeking creatures, you're going to have a tough time as a developer, if you basically outlaw cars. This is, in a way, I guess, it's analogous to things like meat consumption, too. As wealth increases, meat consumption increases, in part, because it's a bit of a status signal, and so too, with cars. I guess, is there a way to push back against this? Because I guess, if newly wealthy Chinese, or Indians all used cars, we're screwed, aren't we?
Ed: We are screwed. That's quite right. There is a certain amount of Western urban development, Western town planning that can feel very precious from a developing world point of view. It's hard to think that the most important thing in Johannesburg is bike lanes. I've seen a lot of empty bike lanes in Johannesburg. I've seen a lot of empty bike lanes in highly hilly spots in Sao Paulo. Yet, this is what you get from a lot of western, high-end people. Bike lanes are a wonderful thing for Amsterdam. pushing back, or Stockholm. There are great things in some parts of the world.
You really need to be focused on what's what the area needs. Now, that doesn't necessarily mean that you can't have more walkability. I think, most importantly, it's worthwhile pushing back on the car, right? I mean, it’s whether or not it's too congestion pricing, or appropriate oil taxes. Cars are a big pain. Now, most of the time, in the developing world, at least poor people aren’t actually taking cars. Poor people are taking, whether it's jeepneys, or some form of formal public transportation.
You probably will keep them more in public transportation longer than in a car. If you tax gas, your tax road use more. You can also do more with land use planning, right? The Mumbai floor area ratio restrictions means that when you do have height, and you do have height, it tends to be surrounded by green space. Now, that's a very unproductive thing, because they're just trying to deal with their for area ratio needing to be an average of some fairly low number.
I mean, a good model for Mumbai is something that looks like Manhattan, or Shanghai, where you have a lot of tall buildings right next to each other, and people can walk around it. Unless, you embrace density, you're not going to be able to get that. You're not going to be able to get that, unless you have the zoning that allows you to embrace density. It's also related to issues in property rights, which makes this hard as well. The way that the West developed was wealthy apartment owners, apartment builders, bought up land that previously had had low-density dwellings. They invest in significant amounts of capital, and then they rent it out.
There are lots of barriers to doing all of those things in the developing world. There are barriers against building tall towers. There are barriers against renting, such as various rent control limitations that exist. There are barriers which may make you feel uncertain about sinking that level of capital, because you're not sure whether or not you get to keep it. All of those things are barriers to this, that kind of transformation. They make it harder to develop the tall towers next to each other, which are the natural model for walkability.
Kurtis: Okay. We chatted a bit about cars, a bit about infrastructure, about walkability. These all relate to suburbanization in a way. Now, obviously, post-World War II, the US went through this period of intense suburbanization centered around the car. Is this suburbanization a trend you foresee in China's near future? China's just rapidly urbanized over the last 40 years. It's built an unprecedented amount of infrastructure. Its car usage is obviously increasing. Is suburbanization what we should now expect in China? How do you think it will maybe both differ from the US experience, or be similar to it?
Ed: It's a great question. Suburbanization in the US was in a sense, completely understandable. It reflected that the enormous appeal of the car, plus a certain amount of federal subsidy. It was the fact that the car just – the average commute by car in the US is about 24 minutes. The average commute by public transportation is 48 minutes. That's because of this 15 to 20-minute time fixed cost that's involved in going to the subway stop, waiting for the subway to arrive, and then having the subway take you to where it's eventually going. Then getting off and then walking at the at the end.
That's avoided with a car, because a car is point to point. It’s not hub and spoke. It doesn't involve all these ancillary trips. We shouldn't be surprised that public transportation took off. We shouldn't be surprised that we rebuilt our cities around the car. I mean, we have always built our urban spaces around the transportation technology that was dominant when they were being built. Our earliest cities are built with the short blocks and narrow alleyways that are associated with walking. Our 19th century cities, which were associated with wheeled transportation, like street cars were built with larger blocks, often more gridded.
Then our late 19th century cities were built around rail cars, that ran either above, or below the ground. It's not surprising that we did that, but it is a very different urban form, because all of those other urban forms involve some walking, either at the beginning, or at the end. They always had have a certain amount of clustering that wasn't there in car-based cities. Now, what should we expect about China? China puts a lot of barriers on driving, and they're likely to continue doing that. I think, we should expect a certain amount of urbanization, a certain amount of suburbanization. I think, it's likely to be more limited.
Secondly, China has built – has been more committed to building high-rise urban space. Families tend to be smaller. Even with the end of the one-child policy, the families are still small. The push to large suburban homes is not going to be as big. Moreover, there's no sense in which you have a system that creates this natural segregation into suburbs, because of the school districts. There's just nothing in the education system of China that leads you to think that we're going to see these suburban enclaves that people form.
They're really anchored by the fact that you have a public system that's really more like a private school system as you do in the US. For all those reasons, do I expect it to be some interest in car-based living in China? Yeah, sure. Some of it already occurs, and more will occur as well. I don't see it as being anywhere near as explosive as the US. I suspect also, it won't be, because I don't think the Chinese central government is particularly wants to see that developed, either. They're quite wary about their own dependence on fossil fuels that need to be imported. They're not particularly eager to turn themselves into a massive consumer of gas through cars.
Kurtis: Yeah. I guess, this discussion relates to environmental concerns. My question is, is the environmental Kuznets curve, pretty much a universal path that cities have to go through? If that's the case, what are the implications for negotiations at COP 26 this month, especially for rapidly urbanizing, developing countries?
Ed: Yeah. I mean, I'm with Thomas Schelling on this. It's really hard for a nation that drives SUVs to tell a nation of bicycle drivers that they can't get on motorized bikes. It's really hard for the US to really have any degree of moralsuasion here. Basically, all that I can say on this is that I – I agree with your sentiment. I agree that it is hard to imagine that the poorest parts of the world will not see higher levels of carbon emissions as they become somewhat richer. I can't imagine that. I certainly would ever watch a decree that anyone has to get through an Indian summer without air conditioning.
Yet, that millions of Indians don't have any form of air-conditioning right now, and they will surely want some, and that will be a whole lot more energy use. We both face this cardinal imperative of trying to do something about our carbon emissions, with the fact that the poor world will surely want. It's hard for us to say no, that they should want things, which involve more carbon. I think, we just need to help run the edges and to try and push them to – perhaps, this is also an area, which you can engage in more cash for cash for good behavior kind of things. There's a bit of a win-win situation there.
Kurtis: Okay. Moving, I guess, on to topics more directly addressed in your new book, Survival of the City, so one is education, right? You write a lot about how critical education is in the book, as well as in your broader writing. I was speaking to now ex-city manager in the US. He’d been in the position for 40 years. We were chatting about what attracts people in businesses to cities. He basically said, he has this model in his head of three questions that people answer when they were thinking of moving to a place.
One is, where will me and my spouse work? The second is, where will my children go to school? The third is, where will I let loose on a Friday night? With that, why are large cities failing so badly on that second question about schooling?
Ed: It's a very US related thing. I mean, it is certainly – the US data is positively shocking. I mean, in terms of how bad our upward mobility is in cities. This really became crystal clear from the opportunity, Atlas data that Raj Chetty and his co-authors have put together, right? I mean, it is density, is negatively associated with upward mobility both across cities and within cities. There's a decided regression discontinuity at the edge of big cities, central city school districts, both in terms of upward mobility and a big jump downward, and your probability being incarcerated as an adult.
There's a strong positive gradient, as you move further and further away from the city center, you actually have higher upward mobility. All of these things suggest the degree to which cities are failing their children. It's hugely important. I don't know, really, I mean, in terms of what the reform path is, should be for these big city school districts. I think, it's a combination of things, I mean, in terms of how we got there and why they're failing. I mean, one of which is just the selection process that occurred that the earliest car drivers, the earliest commuters tended to be wealthier.
Our suburbs formed with morally, parents. Then, they became attracted morally, parents, who then moved for the schools. It's probably also true that our big city school systems have had management problems in many areas that have made them function, underperform. Many of the virtues of cities are related to competition and innovation, which tend to disappear when you replace that with a large public monopoly, which is one of the reasons why I like things like – well, I like charter schools, too. I like things as we propose in the book, vocational training, which is competitively sourced, and funded with a fee-for-service model, which is something you can't really do with charter schools, with normal schooling, because we're so amorphous about what our goals of what public schooling is.
If you're trying to teach someone to be a plumber, or a programmer, you know whether or not they've learned that skill at the time that they've done. You can actually just not pay the provider if they fail to deliver the skills. I think, we need to do things and involve more innovation and more competition in our cities. We certainly have failed to do so, so far.
Kurtis: In terms of higher education, a lot of countries across the global south, they lack high quality universities. That means, so many of their best and brightest end up going to Europe, or to North America for their education. Lots end up staying away. What are your thoughts on moral land grants act for countries in say, Sub-Saharan Africa, using the land grant college model to quickly establish a ecosystem of higher quality universities?
Ed: I don't know. I don't have a strong view about it right out of the post. I haven't thought that much about it.
Kurtis: Just to give maybe context, I say this because this is a proposal of Jonathan Gruber and Simon Johnson of MIT in their book, Jumpstarting America.
Ed: That's an American hypothesis. Not a not a developing world hypothesis.
Kurtis: I mean, feel free to speculate. Basically, using the dynamic duo of a high-quality university complemented by, you could call it a science park, or innovation hub that can commercialize new ideas and bring these to market. What are the parts you disagree with, or agree with?
Ed: In the US, I certainly like the idea of I mean, I wrote a review of that book. I certainly got myself all gummed up about how great it would be for America to have more money spent on R&D, thanks to their highly charismatic writing of this thing. I'm not at all sold on the idea that you want to do anything regional about that in the US. In the sense that I think, most of our attempts to have regional NSF, regional NIH, most of that is fairly unsuccessful.
Now, that's different than the land grant colleges, which as we know, from the work of Enrico Moretti, really have had a long-term impact. It is true that Daniel Patrick Moynihan had this clip, if you want a great city, build two world-class universities and wait 50 years. It's certainly true that complementarity and density are highly – that skills and density are highly complementary theory with each other.
I just don't see that the US regional things will necessarily lead to world-class universities. I think, the most important thing in terms of biotech research, let's say, finding preemptive vaccines, which will ward off the next pandemic, the most important thing is not using these as tools to rebuild Appalachia. It’s to actually make sure we fight the next pandemic with the disease. That's my US context view on this.
In the developing world, I think it's more difficult. I think, there's certainly is a lot to like about more education in the developing world in many ways. I am a little bit worried about a track record that has very large federal funding for tertiary education at the expense of primary and secondary education. I remember in some Chilean constitution, I think in the late 60s, there was a number built into the Constitution that no less than 8% of government spending, or no less than 8% of GDP could be spent on tertiary education, which seemed it was a really big matter of transfer to upper middle-class children at the expense of the poorest Chileans.
That being said, I think, we certainly need to be open on this. I think, it's certainly a great thing for philanthropy in the developed world to be focused on, is how to create, I mean, universities in the developing world as well, or how to do more to fund the existing universities in the developing world. I think that's, and certainly, the track record of Indian educational institutions is amazing. I mean, many of them are older, and many of them are great.
Kurtis: Okay. I get on the topic of good university, because I asked Matthew Khan this question back when he was on the podcast, and you two are co-authors, and I think went to the University of Chicago together. I'm going to ask you as well. This goes back to urban governance, which is often plagued, as you know, by misaligned incentives. These incentives often encourage short-termism. Cities are often a stepping stone to higher offices, so mayors want to get these quick wins. Election cycles are often short. This neglects the long-term.
If you look at Chicago, which where you went to school, is it the exception that proves the rule, because it had only two mayors, the two Daileys, Richard Daley and his son that served for a really, really, really long time. I think, it's over 40 years or something in the post-war period. Long time horizons. Chicago has done quite well relative to other Midwestern cities in the post-war period. Do you think there's something to this story? Or is this just random correlation?
Ed: No. The Daley dynasty has some unattractive elements, but it has many attractive ones as well, as you say. They certainly had a long-term vision for the city. They were very good at limiting nimbyism. I mean, Chicago has stayed much more affordable, partially because it unleashed the cranes near on Michigan, on Lake Michigan. I mean, all that stuff is good. These were very pragmatic leaders.
Now, they also have also engaged in short-termism. I mean, the famous privatization of the meters in Chicago, which was basically, I mean, there's privatization that makes some sense, which is about actually getting real cost advantages from having a public provider. Then there's privatization, which is just entirely appealing to the short-termism of the mayor, which is we're going to front load you these revenues that your city was going to get over the next 50 years. You're going to like it, only because we're front loading it to you. The younger Daley did that. I don't think he deserves a lot of credit for it. Suggests that maybe even he wasn't as long-term as you would have liked him to be.
Kurtis: Okay. Going on to COVID and city related questions, which is the second, I guess, big theme of the new book, Survival of a City. A few questions. First, a major pressing problem today is the huge pressures on global supply chains, the backlog at ports in various cities, largely induced by the way the pandemic has played out. What are your thoughts on how best to grapple with these supply chain challenges right now?
Ed: Our cities are these nodes on the global lattice of travel and trade. It's not obvious. I guess, that's the way that I actually look at this, that we have been through an unprecedented global shock. This thing has been absolutely, stunningly unlike anything we expected. The fact that we've had some supply change problems, and they're significant. I'm not trying to understate them. It's, and some said, completely expected. I think, my basic view is that our supply chains tends to do fairly unbelievably well most of the time.
Now, we could probably do more with border controls related to goods. We can probably speed that up a bit. I mean, obviously, we need some degree of checking on this stuff. My guess is that there are too many buses waiting online in the Canada-US border. To a certain extent, this is just inevitable. We should do what we can around public action. I don't think I have any silver bullet.
Kurtis: Another COVID in cities question. In theory, cities are supposed to – they're supposed to have a bunch of positive spillovers from people and firms co-locating together. People are supposed to spread ideas quicker, learn better, have higher productivity through their closeness to others. You could say that social distancing is the opposite of closeness. Then, we expect to see things like, decreasing productivity. In fact, we saw just the opposite during COVID. What's underlying this?
Ed: Well, so I've spent some time with the productivity numbers. It's not quite as rosy as it appears. I mean, there was a – it depends on which quarters you take, or don't take in terms of making things look great. To a certain extent, in some fields, we just had the number of people declined a lot. That often makes per worker productivity look really good, if you just let workers go like crazy.
I think, there's no question that there are a number of occupations in which remote work has been just fine. My own view is that for many simple jobs, or even not so simple jobs, we can do it long distance. If we lose these dynamic benefits that come from being close to one another, and you really see this in the work of Nick Blum and then Natalia Emmanuel and Emma Harrington, that looks at call center workers who are sent home. In Nick's case, it's through an actual randomized control trial.
What you see is in the short run, there is no impact whatsoever on productivity. In fact, in Nick's work, they get more productive by being sent home. In both papers, you see a decline in probability of being promoted to a upper level person, an upper level call worker by more than 50%. At least, the way I see this, is I think this is because what you need to do to be promoted is you need to be someone that your boss can trust you, to actually handle more difficult calls. How would your boss learn that you're good at this stuff if your boss never sees you? How would you learn to do it if you never see anyone else?
The dynamic benefits that come from being around other people, by being amidst a maelstrom of economic activity, that is lost when we're not in the same room with one another. It's also true, of course, that the work on learning in schools that we've seen, and we have some very high-quality surveys on this, I call the studies on this – Remote school has been somewhere between disastrous and counterproductive. There's also the sharp decline in the number of hires for these tech jobs, for jobs that can be done remotely. This comes to the work of Jose Ramon Morales and Ian Carlos Kurtis: Okay. I guess, zooming out a higher-level question. Despite the really profound impacts of globalization, why are London and New York still the only truly global cities?
Ed: I don't really disagree with this statement. Although certainly, there are French who would argue about Paris, and there might be Japanese who would argue about Tokyo. They both been capitals of very dominant countries, dominant in a way that no other country has been. They’re both capitals of fairly open societies, which I think makes in general, easier. I don't know if we want to say that their cultures are necessarily more open. The world has had to accommodate themselves to those cultures. A lot of people speak English, so that has certainly helped.
Of course, they both built massive amounts of infrastructure, which enables them to connect to the world. There's no other countries that had the global sway that the UK did in the 19th and early 20th century, or the US did in the second half of the 20th century. I think, that the fact that they're both essentially the commercial capitals of these large, mega powers for the time is what's going on. We just don't have any other country that's held that degree of global connection.
Certainly, well, the rise of China has been remarkable. Of course, in the late 20th century, that was a second superpower. Moscow was not a global city. It was it was a closed country. It was a totally different model of society. I would be skeptical if Beijing will ever feel as open as New York or London do.
Kurtis: This is the Charter Cities Institute, so I have to ask a charter cities related question. Don't let who you're speaking with bias your answer. In your book, you write, and I'm quoting you. “Cities across the world should experiment with pro entrepreneurship institutions.” Could you see charter cities as one way to do this?
Ed: Sure. Why not? Absolutely. Look, the idea of charter cities is great. I mean, I don't have any problem with the idea of having some entity that can guarantee a better set of economic institutions, can guarantee openness, can guarantee more rule of law. There's certainly a lot to like in the cities of the world that have played charter city-like roles throughout history.
I just think it's very hard for countries to commit, not to – if the city ends up being as successful as it will to actually not grab it. I think, the hard part is the Pollak political side of it. I think, this is also a question as to how you think. When I think about Paul Romer myself, I tend to have a much more ordinary economist mind than Paul, in the sense that when I think about things, I think immediately of, well, if I think of a new idea, I immediately start thinking, well, what are all the reasons why the private sector doesn't do this already? What are all the limitations on this?
That's a perfectly good instinct for an ordinary economist like myself to have, but it tends to limit your ability to be a successful entrepreneur of new ideas. It tends to be, because you see that – you're focused on why it was an equilibrium that – why the current equilibrium we have is an equilibrium. Whereas, Paul tends to have a more – it's just hyper-creative, entrepreneurial mindset. That's why in some sense, he's able to push ideas like this and run with them. I think, that's exciting, and I think that's good. I mean, the more ideas that we have in the urban mix globally, the more visions that we have for different ways that cities can evolve, the better off we are.
Kurtis: Okay. Last question. You write in the book that you and your co-author, you say, “Much as we wish it were otherwise the two of us have made our share of mistaking claims and prognostications.” With that, what assertion or claim have you written about, or made in the past that you've changed your mind on most, whether that's completely reversing your past stance, or just significantly updating your priors?
Ed: I think, I radically underestimated the downsides of global trade to certain American regions, pockets of American society. I think, I’m hardly alone in that. If I think 20 years ago, if I had any idea that openness to China would have had the impact that it had on certain regions in the US, I don't know that I would have been against it, but at least, I would have given more pause. At least, I would have thought about this is being something that's really risky that we're going to do. I don't think I focused on that at all.
I would say that I was quite clear that house prices in Las Vegas and Phoenix were going to correct in 2006. 2005. I mean, I'm on the record on saying this on CNBC. I was blind to the impact that that would have on the larger financial system. Completely blind. I mean, I thought, “Well, it's overpriced right now. Thank goodness. We'll come back down to normal equilibrium prices, which are close to supply costs. That's great.” We'll have more affordable housing. I just totally whiffed on that one.
I think, those are the ones that I'm most conscious about in terms of large-scale public policy things that I've gotten wrong. I will say, there are other things like, the standard errors in my 1992 JP paper growth, and cities are all wrong. None of us knew about spatial correlation in those days. There was no Tim Connolly corrected standard errors. That's one of the more scientific interest. Most of the cases, like the T-statistics are six. The T-statistics should be four. That's okay.
Kurtis: I mean, you mentioned high prices. This was back in the global recession. I have to ask the inflation question today, what are your – Is it transitory or not?
Ed: You're asking me a macro question that I'm not comfortable giving a prognostication on that. I think, it would not surprise me. It would not at all surprised me, if we had significant price correction response to massive deficit spending. That's not out of character with past history of this. I would not be surprised if this ends up being more permanent going forward. I'm not going to state a very strong opinion on it. I will also not be surprised if it ends up being more temporary. We are in a very strange time period. I think, it's very hard to read, for example, about what the future is for housing prices in cities based on what's happened over the last 14 months, just because the housing markets are so disrupted, and so screwed up because of it.
Kurtis: Well, that's all the questions I had for today. Ed Glaser, thanks a lot for the great discussion. I appreciate it.
Ed: Thank you for having me on, Kurtis. This has been fun.
Mark: Thank you for listening to the Charter Cities Podcast. For more information about this episode and our guest, to subscribe to the show, or to connect with the Charter Cities Institute, please visit chartercitiesinstitute.org. Follow us on social media, @cci.city on Twitter and Charter Cities Institute on Facebook. I’m your host, Mark Lutter and thank you for listening to the Charter Cities Podcast.