Triumph of the City

by Edward Glaeser

  In developing countries, the case against overregulation is even stronger. In rapidly growing places like Mumbai, height restrictions cause enormous damage by forcing people to spread themselves horizontally rather than vertically, which helps to create massive congestion. The last thing that Mumbai or any developing megacity needs is regulation that prevents the construction of good, usable real estate. Cities are the path out of poverty, and preventing urban growth makes developing countries artificially poor.

  The Bias Toward Sprawl

  Over the past century, tens of millions of people have left cities for suburbs. As much as I love cities, I can’t fault their choice. I suburbanized too. But I can fault a system that stacks the deck against cities and creates artificial inducements to leave urban areas. I’ve already discussed the problems that come from expecting cities’ richer residents to pay for the needs of the poorer ones. An antiurban bias is even more obvious in housing and transportation policy, which seems almost intentionally designed to hurt the cities that enrich their countries and the entire world.

  The centerpiece of federal housing policy is the home mortgage interest deduction, which allows home owners to deduct from their taxes the interest on up to a million dollars of mortgage debt. Because more than 60 percent of Americans are home owners, this policy has become politically inviolate, but it is deeply flawed. The home mortgage interest deduction is a sacred cow in need of a good stockyard. It encourages Americans to leverage themselves to the hilt to bet on housing, which looks particularly foolish in the wake of the great housing bust of 2006-2008. Subsidizing home ownership actually pushes up housing prices by encouraging people to spend more. And the deduction’s benefits accrue overwhelmingly to the richest Americans. The average deduction for American families earning more than $250,000 is more than ten times higher than the average deduction for American families earning between $40,000 and $70,000.

  Environmental concerns should push toward a tax policy that encourages thrifty living in modest residences. The home mortgage interest deduction pushes us in the opposite direction, encouraging people to buy bigger homes, which are often suburban. The post-World War II move to enclaves like Levittown and The Woodlands was fueled by pro-home-ownership tax policies. I’m happy for people to enjoy the pleasures of large houses on large lots, but there is little reason why federal tax policy should subsidize those who buy big. A simple way to ease this problem without harming middle-class Americans would be lowering the upper limit on the home mortgage interest deduction to some more modest figure, like $300,000.

  The home mortgage interest deduction is part of a seventy-year-old federal push toward home ownership. Government-sponsored enterprises like Fannie Mae and Freddie Mac long received implicit and now receive overt federal funding to encourage the mortgage market. The Federal Housing Administration and the Veterans Administration have long encouraged Americans to buy their own homes. While there are some social benefits of home ownership, subsidizing ownership hurts cities. Home owners do vote more and get involved solving local problems—and they own more guns. Maybe these things are worth subsidizing, but surely it makes more sense to subsidize any desirable activities directly rather than encouraging people to borrow as much as possible to bet on housing markets. The great housing crash of 2006-2008 well illustrates the folly of pushing people to wager all they have and more on the vicissitudes of property markets.

  The high price of urban land leads naturally toward multiunit dwellings, and 85 percent of such dwellings are renter-occupied. It is possible to have owner-occupied cooperatives and condominiums, but those complex ownership structures create their own difficulties, which is why they remain relatively rare. As long as owner-occupied housing remains disproportionately nonurban, then subsidizing ownership will hurt cities.

  President Obama is the first urban president since Teddy Roosevelt, but the infrastructure component of the 2009 stimulus bill was as stacked against urban America as most of America’s previous infrastructure spending. Per capita stimulus spending from March to December 2009 was twice as high in America’s five least densely populated states as in the rest of the country. Perhaps this fact shouldn’t surprise us, for those five states control 10 percent of the Senate with only 1.2 percent of the population. But that doesn’t make the disproportionate flow of resources to less dense areas any more sensible, especially as this was supposed to be antirecessionary spending and the five least dense states managed to sit out the recession with an average unemployment rate of 6.4 percent, as of December 2009.

  Over the last twenty years, transportation funding for the ten most densely populated states has been half as much, on a per capita basis, as funding for the ten least dense states. In the stimulus package, which uses the old formula, the ratio is the same. We’re using our infrastructure money more to make rural America accessible than to speed the flows of people within dense urban areas. Yet slow commutes are far more likely in big crowded cities than in low-density areas. The average commute in the ten largest metropolitan areas takes 20 percent longer than in the country as a whole.

  As the White House Office of Management and Budget writes of the federal highway program, “funding is not based on need or performance and the program has been heavily earmarked.” In the 1950s, the interstate highway program made it much easier for people to flee cities. By continuing to subsidize low-density areas, transportation spending continues to entice people away from urban America.

  Granted, transportation spending in urban areas is difficult. Large urban projects are extremely expensive. As the famed battle over the Lower Manhattan Expressway between Jane Jacobs and master builder Robert Moses reminds us, building where people already live invariably involves far more community opposition than building in green fields. Moreover, far too many urban transportation projects have gone into declining cities that don’t need more infrastructure. After all, the defining feature of such cities is that they have lots of structure relative to people. We need to build in ways that make increasingly crowded cities more functional. The difference between good projects and follies like Detroit’s People Mover is that good projects create tangible benefits for large numbers of users. Bad projects just create patronage opportunities and rewards for developers.

  People who support the disproportionate flow of transportation money into less dense areas argue that these areas deserve the largesse because they’re paying more in gas taxes, the chief source of federal funds for transportation. If that’s the case, then more dense areas should be better compensated for paying more income taxes. Over half of American income is earned in twenty-two metropolitan areas. If the federal government apportioned money based on tax revenues, big cities would be getting a lot more federal money.

  But unlike the argument for giving cities back more of the money they pay in income taxes, the argument for giving gas-guzzling states more transportation dollars is faulty on its face. One of the primary reasons for the gas tax is to make drivers bear some of the social costs of their road use. Basic economics tells us that if drivers increase pollution and congestion, they should be charged for those costs. But if the gas taxes they pay are then plowed back into highways, thereby subsidizing more driving, then the benefits of the gas tax largely vanish. To give cities a level playing field, drivers should be charged for the pollution their gas usage causes, and they shouldn’t get that money back in the form of more roads.

  To create the right externality-relieving gas tax, we need to know exactly how much damage drivers inflict on other people through pollution, traffic fatalities, and congestion. One recent article added together all of these costs and came up with a figure of $2.30 a gallon, which suggests that current U.S. gas taxes are too low, but European gas taxes may be too high. If America moved toward the European model, certainly more of sprawl’s denizens would start thinking that compact living made more sense. Ending the antiurban bias of federal policies also means charging suburban drivers for the environmental costs of their
actions.

  Even the income tax can be seen as a tax on big-city life. Earnings are higher in big cities because people are more productive there. By taxing higher earnings, we make the simple life of nonmetropolitan areas more attractive. Income taxes essentially make it less attractive to earn more, and people earn more in cities. I am not suggesting that we should do away with the income tax, but it does make sense to limit the antiurban effects of the tax. More tax revenues should flow back to the areas that paid those taxes. Taxing cities to build up rural America is a foolish policy that hurts our urban engines of prosperity.

  Green Cities

  One of the costs of subsidizing sprawl is that America’s carbon emissions are higher than they should be. Cities are green. Living at high densities and walking is a lot more environmentally friendly than living in a low-density suburb and driving everywhere. America’s failure to have a sensible environmental policy that charges people for the environmental costs of their actions also creates a dangerous antiurban bias.

  People who like suburbs should be able to live there, but their choice should be based on the true costs and benefits of suburbanization. Suburbanites use much more energy and emit much more carbon than urbanites. The need to price carbon emissions appropriately is particularly important in places like India and China, whose lifestyle decisions will determine the world’s future carbon emissions.

  The most straightforward way to address climate change is a simple carbon tax. If energy users are taxed for the social costs of their actions, then they’ll use more fuel-efficient cars and live in more energy-efficient houses. They’ll also find energy-conserving big-city life more appealing. By not taxing energy use properly, we are implicitly subsidizing energy-intensive suburban lifestyles and pushing people out of cities.

  Over the next forty years, India and China will continue to urbanize rapidly. Their decisions about land use will have a huge impact on energy consumption and carbon emissions. If they live at high densities and use public transit, then the whole world will benefit. If they sprawl, then we will all suffer from higher energy costs and higher carbon emissions. One important reason the West must shrink its own carbon footprint is to reduce the hypocrisy of telling India and China to be greener while driving our SUVs to the mall.

  Gifts of the City

  Our cities’ gleaming spires point to the greatness that mankind can achieve, but also to our hubris. The recent recession reminds us painfully that urban innovation can destroy value as well as create it. Any downturn challenges the world and its cities. As trade and financial markets contract, urban areas suffer. As tax revenues decline, cities must struggle to provide basic services. Rising unemployment levels burden those services further, especially in the cities that are already poor.

  Yet our urban future remains bright. Even the Great Depression failed to dim big-city lights. The enduring strength of cities reflects the profoundly social nature of humanity. Our ability to connect with one another is the defining characteristic of our species. We grew as a species because we hunted in packs and shared our kills. Psychologist Steven Pinker argues that group living, the primitive version of city life, “set the stage for the evolution of humanlike intelligence.” We built civilizations and culture together, constantly learning from one another and from the past. New technologies from the book to Google have failed to change our fundamentally social nature. They’ve made it easier to learn some things without meeting face-to-face, but that hasn’t eliminated the extra edge that comes from interacting in person. Indeed, since new technologies have increased the returns from new ideas, they have also increased the returns from face-to-face collaboration.

  During the late twentieth century, declining transportation costs eliminated the former production advantages of the great industrial cities. The car moved Americans to suburbs and to car-based cities in the Sunbelt. These events traumatized many older urban areas, yet they did not sound the city’s death knell. The advantages of being close to other humans are just too great.

  China’s leaders seem to understand that high densities will enable their once poor country to become rich. They seem to get the fact that tall towers enhance productivity and reduce environmental costs. If China embraces height rather than sprawl, the world’s carbon emissions will be lower, the planet will be safer from global warming, and China will be less dependent on the oil-producing nations of the Middle East.

  India’s future will also be urban, but the shape of its urban areas is harder to predict. Indian cities have so far embraced the worst aspects of English land-use planning, leading to short buildings and dispersed populations. The costs that this model imposes on India are so enormous that the subcontinent may well be forced to abandon its antipathy toward high-density construction. If India and China both become highly urban civilizations, then American suburbs will begin to look like an exception rather than a prognosis of the world’s future.

  I suspect that in the long run, the twentieth-century fling with suburban living will look, just like the brief age of the industrial city, more like an aberration than a trend. Building cities is difficult, and density creates costs as well as benefits. But those costs are well worth bearing, because whether in London’s ornate arcades or Rio’s fractious favelas, whether in the high-rises of Hong Kong or the dusty workspaces of Dharavi, our culture, our prosperity, and our freedom are all ultimately gifts of people living, working, and thinking together—the ultimate triumph of the city.

  ACKNOWLEDGMENTS

  This book was a collaborative effort, and I am enormously grateful to the many people who helped make it happen. My agents, Suzanne Gluck and Eric Lupfer of William Morris Endeavor, not only encouraged me to write a popular book but also contributed constantly and constructively from start to finish. Several of my favorite phrases in the book are their creation.

  Eamon Dolan of The Penguin Press was a superb editor, who not only polished my prose, but helped sculpt the entire book. He is patient, thoughtful, and wise. If my thoughts have in any way cohered into a unified volume, much of the credit is due to him.

  I also received tremendous institutional support from the Manhattan Institute; its president, Lawrence Mone; and its research director, Howard Husock. With generous and patient support from the Smith Richardson Foundation, they provided financial and intellectual help throughout this project. Several of the ideas in this book were first explored in articles in City Journal, and I am grateful for the guidance provided by its editor, Brian Anderson, and its managing editor, Ben Plotinsky.

  I also received significant institutional and financial support from the Taubman Center and the Rappaport Institute at the Harvard Kennedy School, both of which I have been fortunate enough to direct during the writing of this book. Erin Dea and Heather Marie Vitale provided helpful assistance throughout the project. David Luberoff and Sandra Garron have been good friends and supporters. My dean, David Ellwood, has been a support and inspirational leader.

  Within the Taubman Center, I am particularly grateful to Kristina Tobio, the assistant director, who went over and above any reasonable call of duty and spent hundreds of hours doing research support for the book. She deserves credit for assembling the footnotes and for pruning many of my incorrect excesses. She also led the team of research assistants who worked on this book at various stages, including Elizabeth Cook-Stuntz, Nathan Hipsman, and Sarah Moshary.

  I am also indebted to the many people who helped me to travel through India, Hong Kong, Singapore, and elsewhere to better understand their cities. Above all, I am grateful to M. K. Singh of Mumbai, who was unstintingly generous with his time and wisdom. I am also grateful for the wise guidance of Jyotish Saha in Kolkata, Mahika Shishodia and Guninder Kaur Gill in Delhi, Sabroto Bagchi, K. Kuman, Ruban Phukan, Eric Savage, G. Srinivasan, Murali Vullaganti, and especially K. R. Srikrishna in Bangalore, and Tripty Arya and Sunil Handa in Mumbai. My experience of Singapore was greatly assisted by Peter Ho, Donald Low, and Koh Tsin Yen, and I am grateful
to them as well. Tim Welbes took me around The Woodlands in Texas and shared his insights. Emily Beam gave me a superb walking tour of inner-city Detroit. Many others were also enormously patient as I tried to get a feel of the world’s cities by walking their streets, and I apologize to those whom I have failed to thank by name.

  I am particularly grateful to those people who read the book and provided helpful comments: Joshua Gottlieb, Jesse Shapiro, Andrei Shleifer, Lawrence Summers, and Mitchell Weiss. Neil Levine helped me on the architectural history in the book. Stephen Greenblatt read the section on Shakespeare; his wisdom has been most helpful.

  The broader intellectual debts of this book are enormous. I have been profoundly influenced by my teachers, my colleagues, my coauthors, my students, and the many great urbanists whose work I have long admired. This book’s core thesis—that ideas spread easily in dense environments—was taught to me at the University of Chicago, and I very much saw the process in action, as I learned from Gary Becker, Edward Lazear, Sherwin Rosen, and George Tolley. The ideas in this book are particularly indebted to the early influence of Jose Scheinkman and Robert Lucas.

  I have been blessed by wonderful colleagues at Harvard who have taught me much about cities, including Alan Altshuler, John Campbell, David Cutler, Benjamin Friedman, Roland Fryer, Claudia Goldin, Tony Gomez-Ibanez, Lawrence Katz, and Andrei Shleifer. I am particularly indebted to John Kain and John Meyer, two great figures in the economics of cities who are sadly gone.