A Conversation with Edward Glaeser

Originally published in The New York Times

February 15, 2011
David Leonhardt (Columnist, The New York Times)

Edward L. Glaeser is a professor of economics at Harvard and a weekly contributor to this blog. I mention his new book, "Triumph of the City," in my column this week about Egypt. The current issue of The Atlantic includes a version of his chapter on skyscrapers, and The Economist and The New York Times have reviewed the book. The Times Magazine profiled Mr. Glaeser in 2006. Our conversation follows.
Q.You suggest that education is the single best strategy for making a city prosperous. Atlanta, Boston, Minneapolis, Milan and Singapore are all examples. But producing an educated population obviously takes a long time. So let’s stipulate that a struggling city today, like Detroit, begins immediately taking steps to improve its schools. What else should it do to improve its prospects of success — especially over the next few years rather than only the next few decades?
Mr. Glaeser:Education levels can change far more quickly at the city level than at the nation level because of migration. A city can attract skilled, entrepreneurial people in much less time than it can produce them and, unfortunately, a city can also lose important parts of its human capital base with astonishing rapidity.
I believe that the best local economic development strategy, at whatever time frame, is to work on attracting smart, entrepreneurial people and then, more or less, get out of their way. But attracting smart people is never easy, especially for a troubled city like Detroit. Here are a few strategies.
Be a Consumer City:In the 19th-century, cities thrived because they had access to productive natural resources like a coal mine or a river. But today, production is pretty perfectly mobile, and cities thrive by attracting workers with quality of life and excitement. This leads to a focus both on bread-and-butter urban issues — like safe streets and short commutes — and on eliminating any barriers to innovation in the entertainment sector, like overregulation of restaurants, bars and my personal pet cause: the food truck.
Make Entrepreneurship Easy:Regulations are a direct deterrent to new business, and as cities age, they acquire layer after layer of regulation like the grime that can rest on older structures. Like those structures, local restrictions, on everything from construction to taxicabs, need a good cleaning every few years, and I would urge every older city to set up a task force charged with making sure that their town is about the easiest place in the world to open a new start-up. Better rules don’t just empower Detroit’s existing entrepreneurs; they also attract other entrepreneurial people.
Get Physical:Detroit’s physical footprints — its buildings and roads — were designed for a different age. The city has plenty of inexpensive real estate, but much of it is poorly structured for the 21st century. Declining cities shouldn’t be building new structures with public funds, but they should make sure that private developers who want to remake urban spaces have a relatively easy time of it. They should also work to ensure that unoccupied structures are turned into more attractive and usable urban space. Youngstown was an early mover in the shrink-to-greatness trend.
Straighten Out Your Books:Almost every city in the U.S. has some form of long-run fiscal problem associated with public-sector pensions and health care that looms like a guillotine over urban revival. The best way toward local fiscal sanity is to follow the private sector and replace defined benefit retirement plans with defined contribution plans, which will increase transparency and make it far less attractive to increase compensation with underfunded pensions.
And finally, don’t forget that better schools can reward a city more quickly than they can graduate students, by attracting skilled parents. They are America’s most important investment in the 21st century, and the linchpin of urban success.
Q.On the other end of spectrum is your hometown and mine, New York. You point out that New York, like several other coastal cities, is a great city that isn’t all that great for many middle-class families, because of the cost of living. Thinking specifically about New York, what do you think it could do to become more hospitable to the middle class? Where should tall new apartment buildings be built? Should rent control be scrapped? (And how, most fairly?) What else?
Mr. Glaeser:New York is a great place to be a billionaire and a good place to be a striving, but poor, immigrant. But it’s a pretty tough place to be middle class, and that’s why New York is one of the most unequal places in the country. Two of the biggest reasons that middle-income parents flee the city are high housing prices and the problems in public schooling. I’m going to dodge the question of improving urban schools in this response and focus on reducing the high cost of housing.
There are lots of things about housing prices that we don’t understand all that well — like the great boom-bust cycle of the past decade — but supply and demand do pretty well at explaining longer-term price patterns. Places like New York City are expensive because they have plenty of demand and relatively limited new supply.
Demand for housing in New York is high because of the city’s economic and social successes, like reduced crime rates. As long as plenty of people want to work and play in New York, demand will remain strong, and that’s a good thing.
Yet demand can be satisfied if there is enough supply. New York built over 100,000 units a year during the early 1920s, and prices stayed reasonably affordable. Chicago’s cranes are pretty active on Lake Michigan, and that city remains far friendlier to middle-income residents.
New York has limited supply, in part, because of the lack of land. Building up is just never as cheap as building out. Still, New York City could do a better job of being a more affordable, inclusive place. If New York rethought its regulatory barriers to construction, new construction could make the city more inclusive.
The great urbanist Jane Jacobs was correct about so much in cities, but she got housing prices wrong. She noted that old housing was cheaper than new housing, and so she thought that restricting new development could keep prices down. That’s not how supply and demand works. Abundant supply is the only way to reduce prices in really high-demand areas. Manhattan will get more affordable only if it permits a lot of really high structures.
What are the big barriers to building? New York City has an extremely tough zoning code that micromanages any new construction in the city. Preservation districts dot the city. The beautiful reminders of our past need to be preserved, not undistinguished postwar glazed brick buildings.
Where would I put the new skyscrapers? I would focus on easing restrictions where demand is highest. Downtown Manhattan is the most valuable area, where less regulation is likely to generate the largest supply response. The Gehry tower rising on Spruce Street seems like a great example of really vibrant new architecture in the heart of the city.
Rent control creates a particularly thorny problem. Artificial price ceilings deter building, and that’s bad for supply and widespread affordability. Yet I’m not crazy about making housing all that much more expensive for existing renters who have less income. My own preferred rent-control exit strategy is to create a better buyout process, where landlords can get existing units out of the stabilization system with cash transfers to current residents. And I think that new renters should be outside the system. New York needs more rental housing, and that means less regulation and free market rents.
Q.You point out that government policy today discriminates against cities. The biggest examples seem to be the mortgage interest deduction (which benefits suburbs and rural areas, where renting is less common) and roads that drivers don’t have to pay for (which encourages sprawl). I wonder if we can ever hope to get rid of this anti-urban bias, given our political system. After all, the five million residents of Montana, Wyoming, Alaska, Vermont, Delaware and the Dakotas claim 14 United States senators among them. The 37 million residents of heavily urban California have just two. And of course it’s not just California. The residents of New York, Washington, Boston, Atlanta, Dallas, Houston and Chicago, among others, are also underrepresented in our democracy. Any ideas?
Mr. Glaeser:There are three big anti-urban policy biases: pro-homeownership policies that push people from urban apartments into suburban homes, the subsidization of transportation infrastructure in low-density areas and our system of local schooling that pushes so many parents away from big-city school districts. The first two problems could easily be solved if the politics were right. The third problem is the great challenge of our era.
The easy, technical answer for homeownership is to start reducing the home mortgage interest deduction by lowering the upper limit on deductible mortgages. Raising the fees required by Freddie Mac and Fannie Mae for insuring mortgages also makes sense. Both ideas were proposed this week by the Obama administration, but the politics is tricky. As long as a majority of Americans are homeowners, there is going to be plenty of support for pro-homeownership policies.
My own quixotic hope is that a progressive-libertarian alliance comes together to support these changes. Certainly, progressives should dislike both the regressive nature of the home mortgage interest deduction and its anti-urban bias. But libertarians should also oppose federal attempts to socially engineer America. People should be free to choose whatever housing works for them without the federal government trying to shoehorn a particular policy, and I’m hoping that libertarians will support that.
The easy, technical answer on transportation is that investments should be made following rigorous cost-benefit analysis and paid for as much as possible by user fees. As you say, politics pushes against that, and in this case, I have no hope for a federal solution. I can’t even muster the unjustifiable optimism that that I have about homeownership.
I’m led to a state-level approach to infrastructure, especially local infrastructure. After all, the Erie Canal — which may well be the country’s most successful infrastructure investment ever — was done at the state level. For bigger problems, states will clearly need to coordinate, but I just don’t see why we’ve come to see the federal government as the solution for local transportation problems.
In the case of schooling, the politics isn’t so hard, but we don’t really know how to fix everything. We’ve seen brave people fight for urban schools for years with only moderate success, and there is no obvious easy solution. On one level, the establishment of a public monopoly for schools eliminates the urban advantages of competition and innovation. For that reason, I’m hopeful about charter schools, especially in urban areas. Fixing America’s schools is the country’s most important job, but we don’t yet know how to get it done. Both our cities and our nation depend on making wise investments in human capital.
Q.And a final question: What’s the city on the cover of your book?
Mr. Glaeser:It’s Chicago — superstretched.