Wednesday, September 14, 2016

Annotating an Interview With Pittsburgh Mayor Bill Peduto About Uber

I'm commenting on this interview with Pittsburgh Mayor Bill Peduto in the Washington Post, "Inside Pittsburgh’s driver’s-seat move on Uber’s autonomous-car testing." I'll post the question asked and then annotate Peduto's answer using the lens I helped to develop in "From Metal to Minds: Economic Restructuring in the Rust Belt."

Q: Pittsburgh will be the first U.S. city to have commuters riding in self-driving cars. How did it happen?

Burgh Diaspora Comment: Why did Uber think of Pittsburgh as the site of a contemporary Manhattan Project? What's the attraction? Pittsburgh is one of "five significant cities in the world" with an artificial intelligence knowledge cluster. Uber already has a presence in one of them, the Bay Area. The other three are Boston, Zurich, and Beijing. Recently, professor Ruslan Salakhutdinov left the University of Toronto for Carnegie Mellon University (located in the City of Pittsburgh) because the machine learning program at CMU, as he put it, is "a huge powerhouse." If Uber is a moth, then CMU knowledge production is the flame.

Q: Then what happened?

Comment: The relationship between Uber and Mayor Peduto evolved very quickly, over the course of a year. Both the City and the State of Pennsylvania have been accommodating, forming what the Washington Post characterized as, "Pittsburgh might be the exact environment that innovators love to leap into — a legal void that can be defined by technologists, not bureaucrats."

This attitude of deregulation is a product of the political familiarity with university research at both the city and state level. Before serving as Pittsburgh's mayor, Tom Murphy helped to create the Ben Franklin Technology Partnership as a state legislator. This experience would serve him well while guiding Pittsburgh through its early stages of economic restructuring in the wake of the steel industry implosion in the 1980s. Murphy said the following at a conference I attended last April:

The first person I have ever heard to mention the idea of the university, as the steel mills are collapsing, that universities could be the economic driver of Pittsburgh was Doctor Cyert, who was the president of CMU.

As I have learned, Richard Cyert is the person most responsible for Pittsburgh's economic transformation that Mayor Peduto enjoys today. As Stanford birthed the powerhouse of Silicon Valley, so has CMU lured the likes of Google, Disney, and Uber. I used to think the talent produced in Pittsburgh was the main attraction. Almost exactly a year ago, the New York Times Magazine set me straight:

Carnegie Mellon’s experience is a familiar one in the world of high-tech research. As a field matures, universities can wake up one day to find money flooding the premises; suddenly they’re in a talent war with deep-pocketed firms from Silicon Valley. The impacts are also intellectual. When researchers leave for industry, their expertise winks off the map; they usually can’t publish what they discover — or even talk about it over drinks with former colleagues. In the long run, raids can generate symbiotic relationships; researchers who return to academia years later bring their real-world experience into the classroom and can draw on their network of wealthy industry contacts to fund university research. But as Carnegie Mellon’s roboticists are finding, reaching that end point can make for a bumpy ride.

The robotics knowledge produced at CMU matured to the point where it would interest Uber. The group of applied scientists could converse with basic researchers and a market-facing tech company such as Uber. The National Robotics Engineering Center, founded in 1995, would serve as the translator between "early-stage inquiry" and the making of "commercial products". Uber poached the workers the Engineering Center, not the scholars at the Robotics Institute (created in 1979).

Basic research isn't of much use to anyone without these translators. Without them, the Industrial Revolution wouldn't have spread from Britain to France. Without them, Mayor Peduto is managing decline instead of serving as a model for Rust Belt revitalization.

Q: What was the agreement? Do they assume all the risk if there’s an accident?

Comment: Peduto states, "There is no formal agreement." Many researchers simply moved from CMU to Uber, a matter of blocks not time zones. Uber's CEO is on the Mayor's turf, not the other way around. When he was a member of the City Council, Peduto represented the East End where CMU is located. He doesn't have to trust Travis Kalanick. He can visit with a robot scientist in his own backyard.

Q: Why is Pittsburgh a good place for this experiment?

Comment: The short answer to this question, even in Peduto's words, is Carnegie Mellon University. He also references another knowledge cluster in addition to AI/robotics, cybersecurity. Somehow overlooked, CMU's Software Engineering Institute (a legacy of the Cyert era) might receive over $1.7 billion from the Department of Defense during the next 10 years for cybersecurity R&D. After World War II, economic development concentrated in places with federal labs and/or top-tier research universities. Pittsburgh is blessed with both. Uber in Pittsburgh is no accident, some 60 years in the making. Peduto doesn't forget Pittsburgh's former industrial prowess, uttering "advanced manufacturing", which is a buzz term used by margin-challenged producers to keep the subsidies coming. The region continues to deleverage from manufacturing employment, much for the better.

Q: Uber has been a job creator in Pittsburgh by providing work for drivers. Now, the city is poised to become a leader in building a technology that could make those jobs obsolete. Does that concern you?

Comment: In some ways, Mayor Peduto throws advance manufacturing under the bus in this answer. The future economy concerns autonomous vehicles, not drivers providing a service. Even the cars as a thing have ceased to be a commodity of value. The car isn't an item for purchase. It's a service and a data collector. I'd reckon that even the service takes a backseat to the data produced.

Key quote, "Pittsburgh is one of the only cities that has traffic signals that can learn." The reason for that, once again, is CMU. The new jobs, the ones we can't imagine today, will show up in Pittsburgh because of Carnegie Mellon, not because Rust Belters make things.

Q: But people are upset. Kalanick has said he hopes to replace all of Uber’s human drivers with technology.

Comment: Peduto quips, "We would hope to replace drivers lost with advanced manufacturing jobs." Pittsburgh won't be a hub of making autonomous vehicles. I would bet that ends up in Mexico. Pittsburgh will make the tech that allows autonomous vehicles to operate everywhere. Human drivers will have to take advantage of new industries that stem from the presence of autonomous vehicles. Cybersecurity looks good.

Q: Still, there could be blowback.

Comment: I love Peduto's response. He recounts his journey from Rust Belt shame to Rust Belt chic. The key to revitalizing urban manufacturing centers is to transition from the psychogeography of managing decline to managing growth. From "The Robots That Saved Pittsburgh":

“The big challenge now is figuring out a way to disseminate the city’s new prosperity to all of its residents, not just the high-tech guys,” says Peduto, 49, who just ran and won the mayor’s job on a promise to create “the first progressive administration for a Rust Belt city in America.”

Paradoxically, all the urban poverty and blight is still there. Pittsburgh still has major Rust Belt problems. Yet the main issue is inequality and displacement. Peduto will be judged on how well he manages the renaissance.

Q: Is there an application for self-driving cars in public transit?

Comment: Peduto describes Rust Belt demographics in one sentence, "Think about someone who is elderly who lives a mile away from the bus stop." Among shrinking cities struggling with an aging population, Pittsburgh is exceptional. The exodus from the region in the 1980s blew a giant generational hole in the birth rates that still hobbles the economy (and municipal finances) in 2016. This unique experience allowed Peduto to imagine the benefits of autonomous vehicles for his constituents, more so than anywhere else.

Q: This is coming quickly. Like all of a sudden — boom, driverless cars! How can that be?

Comment: Peduto doesn't answer the question. Earlier this month, the head of CMU's National Robotics Engineering Center did:

Robotics is exploding, and the adoption curve, the tech disruption curve—these are getting steeper and steeper. I’ve been doing robotics for two decades, and if you look at the progress made between 1995 to 2005, in the past couple years we’ve seen more progress than in that whole decade.

Not only is the place right, so is the time. Pittsburgh as "Roboburgh" is old hype without much substance. Many regional watchers are still waiting for the supposed startup boom. Attracting part of Uber or Google doesn't count as a success story. Pittsburgh doesn't have Microsoft or Facebook (both companies were founded somewhere other than where they are headquartered now) to call its own. I don't know if that will change. It could change along with the acceleration in robotics. The knowledge cluster is two years old, not thirty seven years old.

Q: Have you taken a ride in a self-driving car?

Comment: "The day they announced, [Kalanick] picked me up from work and took me home," said Mayor Peduto. Again, I would stress Peduto's familiarity with CMU as critical to this relationship. The trust was there before Uber existed.

Q: A lot of people are scared of self-driving cars. Have you talked to Kalanick about that?

Comment: Peduto name drops, "I had dinner with him one night. One person at the table was the guy who created Google Maps, and the other person is the reason you don’t see the fail whale on Twitter anymore." 20 years ago, such a story wouldn't have been odd in Pittsburgh. This is old hat because CMU links the city to Silicon Valley.

Q: It sounds like they were sidestepping the issue.

Comment: Great line from Peduto, "we didn’t make steel, we made the middle class." From the cradle of robber barons, income equality was born. Pittsburgh doesn't make robots. It makes the upper middle class.

Wednesday, June 01, 2016

The New Geopolitical Significance of Pittsburgh, Pennsylvania

I'm celebrating an anniversary. Thursday, June 1st, 2006, I wrote my first blog post. What you are reading now is my 3000th pithy effort. But enough about me and onto my muse, Pittsburgh. In 2006, the city and the region were a Rust Belt basket case. In 2016, Pittsburgh is the blueprint for Rust Belt urban revitalization. What happened?

Poetically (not ironically), one of Pittsburgh's failures is its greatest success. In the mid-1980s, the Software Engineering Institute (SEI) was supposed to put Pittsburgh on the new economy map:

"It`s Silicon Valley for chips, it`s Boston for electronics and it`s going to be Pittsburgh for software", predicted Dr. Angel Jordan, provost of Carnegie-Mellon, the intellectual pivot of this turnaround.

That's a great article written by one of the greatest journalists ever to cover economic development and globalization, Richard C. Longworth. He captures Pittsburgh's Andrew Carnegie-like ambitions at a nadir of the steel collapse. Pittsburgh was in a tailspin that continues to haunt the region's demography to this day (read Null Space by Chris Briem, who had his own decade anniversary a few weeks ago). Fair to say, the SEI didn't pan out for Pittsburgh. Or, did it?

I've talked to a few people who know better than I do that SEI didn't save, as the fish the did, Pittsburgh. In the late 1990s, the policy powers that be accepted that fate. I accept that fate then and now. Software landed in Seattle.

The SEI couldn't fly. This turkey would prove to be a feast. What the SEI looked like last summer:

Carnegie Mellon University's Software Engineering Institute will continue research and development work for the Department of Defense thanks to the extension of a contract that could reach $1.73 billion.

The contract ensures that SEI, the only federally funded research and development center dedicated to cybersecurity and software engineering, will continue work under the Office of the Under Secretary of Defense for Acquisition, Technology and Logistics for at least the next five years, with an option to extend an additional five years.

Burgh Diaspora drops the mic.

Monday, May 30, 2016

1960, Peak Cohabitation for Young Adults in the United States

If the 1950s were peak city (in terms of population) in the United States, the decade also represented peak cohabitation for young adults (18-34 year-olds). "For First Time in Modern Era, Living With Parents Edges Out Other Living Arrangements for 18- to 34-Year-Olds":

Dating back to 1880, the most common living arrangement among young adults has been living with a romantic partner, whether a spouse or a significant other. This type of arrangement peaked around 1960, when 62% of the nation’s 18- to 34-year-olds were living with a spouse or partner in their own household, and only one-in-five were living with their parents.

Back in the 1880s, an agricultural economy tipped industrial. In the 1950s, a blue collar economy tipped white collar. In the 2010s, a white collar economy is tipping white coat. These economic shifts are reflected in the household composition changes for young adults.

For women, the trend since 1960 is one of increasing labor market share. For men, it is a steady fall from a zenith of economic power. One important result is a dearth of two young adults sharing a one bedroom apartment in a city.

Those couples sharing a bed are likely college-educated and well remunerated, thus punishing young adults requiring solitude for slumber in the urban rental market. Bottom line, the same number of people in 1960 would require more city rooms in 2014. The sun will shine on two couples, all four working, sharing a two bedroom flat. They will have the pick of the real estate litter.

The social arrangements during peak city (1950s) define today's housing cost challenges. Why pack into tenements when inner ring suburbs drown in affordable single family housing? Immigrants have figured this out. The native born would rather pay the cool city price or move back in with mom and dad.

Saturday, May 28, 2016

The Middle Class in the United States Is Dying

A successful real estate developer demanded we get to the bottom of a Rust Belt paradox. Why is there no land for housing when the population is so much smaller than it was during the 1950s? As decades go, the 1950s remain a zenith for many US cities. That trend provides a clue for those who see the world through demographic goggles. A typical household might have six residents with five dependents (four children and a stay-at-home mom). In 2010, that same typical household will have one resident, who is a dependent. Welcome to grandma's house. She isn't leaving her urban digs until the paramedics take her out on a gurney. For the time being, her home isn't vacant. But the population under the roof is 5/6 smaller than it was in 1950.

In the hands of a dilettante, albeit an expert real estate developer, population change obfuscates more than it illuminates. If he has seen one population boom, he hasn't seen them all. Rural-to-urban migration brings with it a birth rate dividend. Those who would have been field hands crowd tenement buildings. Whereas the boom of suburban brats in urban chic may never yield children within city limits. Without immigration, the 1950s won't happen anywhere in the United States. The birth rates are too low.

When in doubt, dig into the data. Interrogating the struggling middle class in the Federal Reserve Bank's Ninth District:

Here’s a simplistic example to illustrate the effect of household composition changes. Suppose there are 10 people (five men and five women) each making $34,000 per year, and together they make up six households: four married couples with household incomes of $68,000, one male- and one female-headed household, both with income of $34,000. The middle income observation for these six households is $68,000, the income of a typical married couple.

The next year, one of the married couples is divorced. That leaves three married households and four single-headed households—two headed by men and two headed by women. Now let’s say every person gets a 10 percent pay raise. Is everyone better off? You certainly could argue that. But because of the compositional shift, the median for these seven households plummets to $37,400 because the middle-ranked observation (with the raise) is now a single-headed household.

This example exaggerates the actual decline in married couples, but it demonstrates why the overall household median can be misleading. In the district, every state saw a decline in married households roughly in line with the national trend.

The "compositional shift" is just one example of how the median income metric (like population change) can distort our understanding of how the middle class is doing. Everyone gets a raise. The median income goes down. I see this mistake all the time in arguments about how to address affordable housing. Experts and dilettantes alike abuse the data to score ideological points. Misleading traps abound.

Remember rule 1: When in doubt, dig into the data. Rule number 2 concerns disaggregation. The Fed's Ninth District shows how:

Chart: Percent Change in Median Income By Household Subgroup, 1979-2006, 2006 Dollars

Simply put, the Fed controls for the household compositional shift problem. What is good for median income is good for population, particularly in Rust Belt cities. Over long time periods, a household is anything but a constant. Don't be fooled.

Monday, May 16, 2016

Flat World of Finance

Whether global (more recently) or national, the location of certain professional services have defined the urban hierarchy. At the top are cities with F.I.RE. (finance, insurance, and real estate) industries. Finance in particular has come to define the latest era of globalization, with a few large cities dominating the sector. No more, FIRE is dying:

Forget the bright lights and fast pace of living in two of the world’s greatest metropolises, city living for a new generation of financial workers is now more Jacksonville in Florida and Warsaw in Poland than New York and London.

Instead of serving to attract top talent, New York and London price out financial firms in search of fatter bottom lines. High-end banking is no longer tethered to the strictures of the urban hierarchy. The world is, effectively, flat. Convergence defines the economic geography.

If FIRE is dying, then what kind of proximity logic is taking its place? What kind of industries are economically divergent? ICE:

New York is reinventing itself once again, drawing on a different source of advantage, the unique assets that, regardless of the FIRE sector's future, will sustain it as a world city. Our intellectual, cultural and educational (ICE) strengths—already among the world's greatest—are becoming the essence of New York's global identity. The creative economy of New York is once again a gateway economy, as ICE assets originate here to influence and shape our world.

The hub of ICE ("intellectual, cultural, and educational") is the urban research university. White coats replace white collars. Private industry will flock to be near knowledge production, like a moth to a flame.

New York City does not dominate this world as Boston does. Cambridge's Kendall Square makes Manhattan look bush league by comparison:

Speaking in one of his shiny new labs on the banks of Manhattan’s East River, André Choulika, chief executive of Cellectis, says he is a “big Boston fan”, but that the cut-throat competition for talent there would make it tough for a small company like his.

“In New York, you don’t have your employees hired when they go to buy their sandwich from the food truck, like in Boston,” he says.

For biotech, New York is to Boston as Jacksonville is to New York for finance. The city has enough assets to be a player. But it isn't the top dog in this ICE industry. It's the Small Apple.

Sunday, May 15, 2016

Is the World Still Spiky?

Richard Florida insists the world is spiky. Geography still matters. Blah, blah, blah, blah. Touting that geography still matters is a straw man. Geography matters whether or not the world is spiky. Spiky is one pattern (economic divergence). The flat world pattern (economic convergence) is another. Urbanists fawn over Richard Florida's normative spiky geography. Denser cities are the best way to organize space. Sprawl (flat world) is bad. If the world is more spiky (spikier?), urbanism is winning. Suburbanism is losing. Urbanism is dying:

It’s been dubbed the e-change movement, where people move from the city to the country, using the internet to make a living. Garlick is not alone in making the move. The recent Super Connected Lifestyle Locations (SCLL) report identified more than 600 “lifestyle towns”, from Kiama in NSW to Ballarat in Victoria. With the rise of silicon suburbs in regional areas outside our capital cities, demographer Bernard Salt says, “We are witnessing a quiet lifestyle revolution in suburban Australia.”

Since I own the nauseating X place is dying meme, I get to explain. There is no zero-sum game between urban and rural. There is no zero-sum game between urban and suburban. Spiky and sprawl are not mutually exclusive geographic patterns. Sometimes, the world is flatter because it is so spiky. London is flatter because it is so spiky:

I’d expect future London émigrés to consider the European sunbelt, which stretches from Lisbon to the delightful Albanian coast. The Mediterranean is the perfect place to live as long as you aren’t part of the local economy. London is the opposite: the ideal is to be part of the economy without living there. The logical thing to do (presuming Brexit doesn’t happen) is to arbitrage the two: live on the Med and work for a London company. This will be an obvious decision for the next generation of knowledge workers, for whom the concept of a daily commute to an office will probably seem baffling.

For the next generation of knowledge workers, it will be dubbed the e-change movement. Work in London, live in Lisbon. Technology will make today's daily commute seem baffling. The world is flat for workers who have a remuneration connection to spiky London.

One can't arbitrage London unless one lives and toils there. The world is spiky. To live and toil in London is to desire escape. The world is flat.

The Rust Belt is spiky. The Sun Belt is flat. The spiky Rust Belt made the flat Sun Belt possible. For African-Americans, Atlanta is Chicago sprawl.

Friday, May 13, 2016

The Sun Belt's Broken Promise

Ah, the allure of the Sun Belt. Air conditioning conquered the climate. The federal government papered over racism. State governors shifted oppressive tactics from African-Americans to unions. Most significantly, the warmth of other suns offered the anarchy of sprawl. Legacy costs were a Yankee problem.

Rust Belt shamers such as economist Edward Glaeser and journalist Richard Longworth seized on this new narrative. Whatever the wealthy manufacturing states did wrong, the greenfield South did right. Population change told the tale of the tape. Ohio is dying. North Carolina is thriving. A contemporary mesofacts migration:

For decades, Raleigh and other cities in the US Sun Belt have lured workers from fading industrial centres in the north and midwest, promising jobs and a lower cost of living. But as Mr Perry’s experience shows, even success stories like Raleigh are showing signs of economic malaise.

How now brown town? Eventually, every region will have Rust Belt problems. China has Rust Belt problems. Don't get me started on Japan and the 1980s movie, "Gung Ho." This kid born in Erie, Pennsylvania has seen a litany of would-be economic champions come and go. The Sun Belt has joined the long line of suitors for Penelope.

Most industrial centres, such as Pittsburgh, are done fading. Relative to Pittsburgh, how does Raleigh look now? Like a failure.

US Middle Class

Concerning population, Glaeser's preferred metric of success, Raleigh towers over Pittsburgh. Concerning income growth, Pittsburgh towers over Raleigh. You can have your population victory lap, Sun Belt.

Like China, the Sun Belt basked in cheap and easy growth. Now the game gets harder. Sun Belt boom towns are too busy touting corporate headquarter poaching victories to care.

Wednesday, May 11, 2016

Naturally, Collision Density Explains the Start-Up-Ness of a City

I believe people develop, not places. I think people develop, not places. Which sentence comes across as more convincing? The first sentence is wishy-washy. The second sentence executes a binding contract with the reader. If I think something is true, then I'll have to prove it to you. I can believe in whatever I like and I don't expect anyone to care. From the density cult:

So, I believe that startup cities are those that amass a significant amount of potential to facilitate collision density between different kinds of thinkers. Collision density is naturally much higher in cities than in suburbs and suburban tech parks because cities house a much higher rate of diverse actors in smaller, more compact spaces. As the tools of innovation are becoming more democratized, and cities are increasingly home to dozens, if not hundreds, of accelerators, coworking spaces, fab labs, and the like, combined with proximity to artists, designers, schools, and users, entrepreneurs are able to regularly mingle with and create mashups of ideas, some of which may turn into commercializable innovations.

Emphasis added. The words "believe" and "naturally" act in tandem in this non-argument. Naturally, everyone believes collision density is higher in cities than in suburbs because Jane Jacobs didn't like sprawl. That's how the paragraph reads to me.

For geographers, the use of the term "natural" or "naturally" will set off the alarm of environmental determinism. Many geographers believe that environmental determinism is bad. The perspective is an academic taboo, like geopolitics. Naturally, Nazi Germany should do something about that Czechoslovakian knife sticking in the side of the Vaterland and keep going until lebensraum is restored.

Because of greater collision density, the increasing democratization of the tools of innovation will increase the commercializable innovations in cities. What does that even mean? Put a bird on it and present the model at the next International Economic Development Council conference.

The United States has a long, recent history of successful innovation and commercialization in the very places where, naturally, collision density is lacking. Believing in Jane Jacobs density won't change that fact. But democratization will? Excuse me while I pursue my manifest destiny.

Monday, May 09, 2016

Bathtub Model of Migration: African American Exodus From San Francisco?

African American San Francisco is dying. Conflating population change with migration, community leaders declare exodus. However, are blacks really fleeing the city? Recall the bathtub model of migration:

The simple metaphor of a bathtub is widely used to capture these dynamic relations within human migration.  The level of population in a city is like the level of water in a bathtub, held steady by an inflow from the faucet and an equal outflow from the drain. A rising water level could be evidence of faster inflow, or it might be that the drain has been clogged. Similarly, a falling water level might be attributed to an inflow made slower, signifying a weakened preference by human movers to arrive, but it just as well could be due to a more open drain.

Relatively normal outflow combined with weak inflow into San Francisco would also result in a demographic decline of African Americans. Residents living in these neighborhoods wouldn't notice the lack of blacks moving into the area. They would notice those who left.

Blaming out-migration for population loss is rational. Expecting zero out-migration is irrational. People leave every city, no matter how cool and economically vibrant. Save some sort of acute crisis, lack of in-migration is the typical reason for dwindling numbers (leaving out deaths and births). Turns out, San Francisco is no exception:

The story of San Francisco’s declining black population is characterized more by a lack of in migration than an unusual amount of out migration. Just about 1 in 10 African Americans who live in San Francisco leave the city every year. This is not much greater than for Whites or Hispanics. This out migration is in some ways positive, in part representing an ability to leave the city that was not possible in the days of stronger housing discrimination.

If San Francisco is a bathtub, then the flow out the drain for African Americans is similar to other groups. The flow into the basin is unusually low. Mystery, or what should have been a mystery, solved.

"The flip side of this out-migration issue is: Why is there no in-migration?" [James McCray Jr., director of the Tabernacle Community Development Corp.] continued. "Why are there no African Americans or Latinos coming here to contribute to this great city?"

I'm surprised that someone would ask such a question. I wish more people would engage in this kind of inquiry instead of fixing up a place in order to keep residents from leaving. Out-migration happens. Nicer cities wouldn't have put the kibosh on sprawl. But they could have encouraged more newcomers. The concern about out-migration is misplaced, a misreading of the facts. The tub tells all.

Thursday, May 05, 2016

Urban Agglomeration Externalities: Inferring Causality From Correlation

In the realm of magical urbanism, cities make people more productive. In the realm of social science, cities positively correlate with greater human productivity. Magical urbanism mashed up with social science:

Sprawl probably reduces productivity. When people cluster more tightly together, they become more productive -- this is known in economics as an agglomeration externality. This explains why the same person will produce more economic output in New York City than in a small town. Here is a picture of the correlation between city size and productivity ...

... Size gives an approximation of density, though some cities sprawl more than others. In fact, density itself is correlated with productivity, even holding size constant. So there is a big opportunity for the U.S. to take better advantage of agglomeration: increase urban density by making it easier for people to move into big cities.

I linked to the picture instead of reproducing the image here. Over the last three years or so, I've read a number of papers trying to make sense of the correlation between city size and productivity, as well as density and productivity. Suffice to say, the causal links remain contested.

Click on the "correlated" hyperlink and check out "Productivity and the Density of Human Capital." I've tracked the evolution of these literature reviews, which test the theories of Alfred Marshall and Jane Jacobs (to name two). I see two lines of inquiry. The first, and more popular, refines the correlation between city and productivity. Most people don't bask in the glow of the density dividend unless one is highly skilled and engaged in nonroutinized work. It gets even more specific than that, but I'll hold that thought for Pacific Standard magazine. The second line of inquiry tries to figure out how, exactly, bigger and denser cities boost productivity. I would like to see economists figure out the productivity paradox before trying their hand at geography.

To be diplomatic, we don't know if reining in sprawl and increasing urban density will juice productivity. Maybe it will. Maybe it won't. I doubt it will. But I can't prove my case.

Throwing diplomacy out the window, sprawl probably doesn't reduce productivity. Sprawl can be very dense, like Los Angeles. Highly skilled, nonroutinized labor can live in Connecticut and work in super dense Manhattan. Take a gander at the top 20 productive metros and draw your own conclusion:

Wednesday, May 04, 2016

Bathtub Model of Migration

The United States reached peak millennial in 2015. Demographer Dowell Myers takes this simple fact a step further and predicts a stronger outflow of young adults from the urban core:

The simple metaphor of a bathtub is widely used to capture these dynamic relations within human migration.  The level of population in a city is like the level of water in a bathtub, held steady by an inflow from the faucet and an equal outflow from the drain. A rising water level could be evidence of faster inflow, or it might be that the drain has been clogged. Similarly, a falling water level might be attributed to an inflow made slower, signifying a weakened preference by human movers to arrive, but it just as well could be due to a more open drain. Demographer Ken Johnson is the most prominent to have voiced the view that postrecession population gains in cities are due to a clogged outflow rather than a stronger inflow (Johnson, Winkler, & Rogers, 2013).

In urban affairs, far more attention is paid to the inflows because they are much more visible and researchable. Those newcomers are present to be interviewed, whereas the departed outflow has disappeared to other, unknown destinations. Thus, for these reasons, many times urban analysis is subject to inflow bias: our interpretations are blind to the equal effects of the unobserved outflow. However, if we survey today’s residents about their future intentions, we might learn about their intended outflow, and yet we cannot ask future incoming residents about their intentions, about their intended inflow. Accordingly, surveys of intentions have an opposite interpretative error, one of outflow bias.

I like this bathtub model of migration, which forces the analyst to disaggregate the flows and consider how bias might be distorting the picture. In the Rust Belt, most assume brain drain is driving the population loss (outflow bias) when the data often reveal weak inflow. Residents don't think about newcomers failing to show up in their neighborhood. They notice the people who leave. As for city revival narrative, stronger inflows receive all the ink. That too makes sense. Something not happening hides behind something that is happening. Why would anyone consider the possibility of a clogged outflow?

The specter of inflow bias and outflow bias puts coverage of population dynamics in a different light. Now, all I see are bathtubs. Demographic hysteria in the Bay Area:

More than one-third of Bay Area residents say they are ready to leave in the next few years, citing high housing costs and traffic as the region's biggest problems, according to a poll released Monday.

Hey Dowell, what does the bathtub say about San Francisco dying? "[S]urveys of intentions have an opposite interpretative error, one of outflow bias."

The headlines say nothing about a collapsing inflow. How could we conduct a survey of future intentions to move to the Bay Area? Furthermore, we don't know if those who intend to leave will actually move to another region. This story suffers from outflow bias.

Monday, May 02, 2016

Urban Renewal and Innovation Districts

Do legacy cities birth innovation districts or do innovation districts sow the seeds of revitalization in legacy cities? I think legacy cities beget innovation districts. What Harvard economist Ed Glaeser thinks:

There’s an overwhelming error of urban policy over the past 75 years which has been to follow a Potemkin village strategy of urban revitalization that acts as if what you need to do to get a city going again is to build more stuff ... Innovation districts are … a hypothesis; they’re not a proven strategy at this point in time. I think they’re as sensible a hypothesis as any one out there, but they’re merely a hypothesis ... It’s very hard to imagine how you can have anything that can be plausibly called an innovation district if 10 percent of your adults have college degrees ... It’s all about having smart people who are connected by urban density and who learn from each other and work with each other.

All of the above are Glaeser's words. If you know his work, you aren't surprised. Cities should get smarter before building innovation districts. Don't build innovation districts to get smarter. In that regard, Glaeser and I are on the same page.

"[A]ll about having smart people who are connected by urban density and who learn from each other and work with each other" is a hypothesis, too. The positive correlation between urban density and innovation may support Alfred Marshall's hypothesis, but doesn't prove it. In this regard, Glaeser and I are on different pages.

Glaeser is a market ideologue. He makes the facts fit his a priori conclusions. An overwhelming error of urban policy over the past 15 years has been to follow a Jane Jacobs East Village strategy of urban revitalization that acts as if what you need to do to get a city going again is to build denser stuff. Denser makes it better. Marshall told me so. Enough said.

We are to question the innovation district, but not the density hypothesis. Instead of cities building more stuff, cities should cram into small spaces more smart people. Both approaches offer to put more of something into a given space. Stand back and then let the market magic happen. Color me skeptical.

Sunday, April 24, 2016

Pointless Urbanism: YIMBYs Are The New Yuppies

We need bigger cities because suburbs are bad. The only people who know suburbs are bad lived there with silver spoons in their mouths. The folks who poo-poo suburbs have a geographic choice. Damn all ye working class African-Americans dreaming of a green lawn and a white picket fence but redlined urban for decades.

In light of such a legacy, which land use morphology makes sense? What is geographically just? A rich world defined by arcs of urban epochs:

In 19th-century Paris, photographers rushed to document the last moments of medieval streets and intimate alleys. In London, most urban construction today is perceived as a nuisance rather than a sign of progress, greeted not with nostalgia for the old but frustration in the moment: a closed Tube station, a road diversion, a racket. As the capital grows, it goes through waves of rebuilding, each purporting to address a dominant issue. In the late 19th century it was slum clearance; after the second world war it was the rebuilding of a city devastated by bombing as a physical expression of a new welfare state; in the 1980s the rebuilding was an effort to revitalise the city as a global financial centre. And now — what exactly?

What exactly, indeed. Today's rationale is real estate development as economic development, with the young white, college-educated elites leading the charge. Where oh where will the well-born millennial find the safe suburban in the urban jungle at an affordable price? In the same place where the career banks of boomers find attractive, that's where. The sons and daughters of one big generation fight their dads and moms over urban space. Once again, the privileged decide the fate of the city, as they always have done.

Today's affordable urban hood is yesterday's slum clearance or new financial district. Make way for the YIMBY, today's version of the YUPPIE. Tiny houses cater to the millennial ego the way cooperative living appealed to the boomer sense of social justice. Both approaches made shelter affordable to poor (for the time being) idealists.

As the Yuppies became reviled, so will the YIMBYs. Both groups shout, "gentrification beats concentrated poverty!" Boomer and millennial work together. They sound the same. Both can win as long as everybody else loses.

In the gap generations, the same is true. The impact isn't felt because the demographics are small by relative comparison. The beats and the slackers worked together to monopolize the crumbs of urbanism left over from the boomers and millennials. The same silver spoon critique applies. The numbers fail to add up.

Thursday, April 21, 2016

The Geography of Market Innovation

Government shouldn't pick winners. Deregulate and unleash the market. Taxes distort the economy. Why aren't my free market friends shouting down noncompete clauses?

So the argument goes, without noncompetes, innovation suffers. California mocks that position. California discourages noncompetes. Silicon Valley innovates just fine and thank you. Squash noncompetes and don't worry about innovation. The defense [department] could rest right here.

The obvious rationale for banning noncompetes seems lost on libertarian-leaning Republicans. California is a high-tax state. Fight high-tax states. Since California is tax and spend liberal, banning noncompetes must be bad. Never mind that Silicon Valley anything disproves any devolution fantasy. Big Government birthed Big Tech. Without nonprofit Stanford, the private market chases the diminishing returns of manufacturing.

Noncompete contracts serve the interests of big business. As Ben Chinitiz once wrote, serving the interests of big business hurts the regional economy. Competition is good.

What's good for the goose is good for the gander. How competition saved New York, competition for talent could save the United States. Make America great again. Stop subsidizing captive labor for lazy industry.

Wednesday, April 20, 2016

Before Suburbs, When Cities Were Great

Once upon a time, there were cities with Daniel Hudson Burnham ambition. Published in 1890, the great Alfred Marshall wrote:

When an industry has thus chosen a locality for itself, it is likely to stay there long: so great are the advantages which people following the same skilled trade get from near neighbourhood to one another. The mysteries of the trade become no mysteries; but are as it were in the air, and children learn many of them unconsciously.

I love the smell of urban agglomeration in the morning. The very air of the city promises innovation, prosperity, and productivity. Why oh why would we kill the goose laying the golden eggs with sprawl? Proximity, dammit, that's the ticket.

That air the children smelled to learn a trade smelled like dirty, filthy trash. But if the godfather of cluster theory says it is magic, who am I to quibble? Before the automobile, cities used to be so awesome:

There are some photographs taken for Harper’s Weekly, before and after photos of street corners in New York in 1893 and then in 1895. And the before pictures are pretty astonishing, people were literally shin-high or knee-high in this muck that was a combination of street gunk, horse urine and manure, dead animals, food waste, and furniture crap.

Good times. Why would anyone want to leave? Talk to anyone who has a living memory of working in a city manufacturing mill and you'll know. It's like exile in the rural hinterlands. From day 1, everyone tells you to get out of the city as fast as you can. But don't run far. Baba still wants to play with her grandchildren. To complicate that narrative, James Parton (1966):

There is one evening scene in Pittsburg which no visitor should miss. Owing to the abruptness of the hill behind the town, there is a street along the edge of the bluff, from which you can look directly down upon the part of the city which lies low, near the level of the rivers. On the evening of this dark day, we were conducted to the edge of the abyss, and looked over the iron railing upon the most striking spectacle we ever beheld ... It is an unprofitable business, view-hunting; but if any one would enjoy a spectacle as striking as Niagara, he may do so by simply walking up a long hill to Cliff Street in Pittsburg, and looking over into -- hell with the lid taken off.

The city was terribly beautiful. The terrible part is the legacy of the passage. It was terrible. It was beautiful.

The anti-sprawl crowd celebrates the beautiful without acknowledging the dead horses in the street illuminated at night by the blast furnaces. My wife's father grew up in urban Pittsburgh. My father grew up in urban Erie, in poverty. Neither one ever told me to go back to the city. Both were proud they escaped. Fear the city. That's how I was raised.

Today, I don't fear the city. I love the city. I went through some years hating my suburban upbringing, feeling ashamed. I love the suburbs, too. The rural? That was my geography of rebellion. I ran off a few times and did the off-the-grid commune. I felt the Bern. Been there. Done that. Celebrate your normative geography of choice.

Early in the 20th century, the geography of choice:

Following World War I, as the United States grew into a more industrial, urbanized country with a diverse immigrant population, this pastoral ideal became associated with places where the white upper classes would go to retreat from the realities of the city. “Eventually,” Mozingo says, “it became associated with middle-class values, turning the single-family house in the pastoral suburb into an aspirational American object. It’s still quite powerful.” At the time, most corporate offices were still in large skyscrapers near a city’s central business district or in a nearby industrial zone alongside the company’s manufacturing facilities. “Executives were often cheek by jowl with their blue-collar workers,” Mozingo says, “even though they were in generally a nicer building of some kind.”

The migrant is passive, duped into leaving the urban for the suburban. Don't forget, following World War I, the city sucked. For most of time, the city sucks. For most of time, being alive sucked. Let's not get all warm and fuzzy about the romantic rural of the 19th century. Let's be aware of how the romantic rural impacted migration.

The migrant isn't passive. She's the agent of globalization. The world turns on her education. The world turns on her migration.

The move from the urban core to the suburban greenfield wasn't some grand conspiracy concocted by Dwight D. Interstate. People wanted out. Some could. Most could not. To this day, African-Americans desire the suburban dream. Make their suburban dream come true.

Monday, April 18, 2016

Why New York City Is Dying

Population growth is a negative economic indicator. I'm serious, unlike when I write some city is dying. In the United States, the largest metros with the weakest population growth do much better in terms of prosperity than the largest metros with the strongest population growth. Such "dying cities" can and do perform better than "thriving cities". The boom in Reading's (Pennsylvania) population came with a dramatic climb in poverty rate. Last time I checked, a higher poverty rate was a negative economic indicator. Setting population growth as a policy goal might be the pinnacle of idiocy. I'm happy to leave such concerns to economist Ed Glaeser.

After I have turned population growth on its head, Luke Juday (Demographics Research Group, University of Virginia) does me a solid and turns net positive domestic migration on its head:

While domestic migration is still a good indicator of demand and growth in most counties, it’s less helpful in counties that specialize in a particular age group. Dense cities with limited ability to grow may attract young migrants, causing them to have high natural increase, which in turn pushes out older migrants, lowering the city’s death rate. Conversely, many rural and exurban counties that have become retirement havens are experiencing the opposite effect. Loss of (and inability to gain back) a young adult population has left them with chronically low birth rates and an aging population. This results in rapid natural decrease and population loss, which is then offset by a constant influx of older adults and retirees taking advantage of the low cost of living and slow pace of life.

Because New York City is a magnet for the young and well-educated, it is dying (net outmigration). Every community wants to attract and retain young adults with college degrees. But without robust immigration, succeeding could inform demographic decline. That's right. Plugging the brain drain will cause your town to start dying.

A better way to stop brain drain is to stop educating residents. Less educated young adults are less likely to leave home. Have brain gain cake and eat it too without fear of population loss. Hooray!

In the case of New York, domestic outmigration indicates economic vitality and success. If the population of college grads started going down, I would get concerned. For now, there's the deep talent pool of NYC and then there is everywhere else. Dying never looked so good.

Wednesday, April 13, 2016

Exceptional Texas Cities Join the Rust Belt in Legacy Cost Hell

As Chicago grapples with its Detroit moment of infamy, a larger and more structural problem emerges nationwide. Yes, both the City of Chicago and the State of Illinois struggle with pension funding. They have company that includes a few surprises:

The Stanford study found that the states of Illinois, Arizona, Ohio and Nevada, and the cities of Chicago, Dallas, Houston and El Paso have the largest pension holes compared with their own revenues. ...

... Several cities and states, including California, Illinois, New Jersey, Chicago and Austin, would need to put at least 20 per cent of their revenues into their pension plans to prevent a rise in their deficits, while Nevada would have to contribute almost 40 per cent.

What's up with the debt mess in Texas? Dallas, Houston, and El Paso are in the same league as Chicago concerning the "largest pension holes". Greenfields are the new brownfields. The Sun Belt looks great until legacy costs catch up with the boom towns. The Texas Triangle may soon resemble one gigantic Rust Belt inner-ring suburb.

The Sun Belt boom is larger scale sprawl, moving where the land is cheaper. The land is cheaper because the politics are nascent. An old favorite of mine, "China's Golden Cities":

Being near the coast is a help in China, because of access to external ideas and because coastal areas were permitted to experiment with reform first. An intriguing pattern is that governance is best in coastal cities that had very little industry when reform began in 1978. Shenzhen now has the highest per capita GDP in China. The same holds in Jiangmen, Dongguan, Suzhou--all were industrial backwaters in 1978, and responded to China's opening by creating good environments for private investment and learning from outsiders. Cities that already had industry tended to protect what they had and reform less aggressively.

To repeat, "Cities that already had industry tended to protect what they had and reform less aggressively." In some ways, Houston is like Shenzhen. Economic life was elsewhere. Texas was a backwater. Meanwhile, the Rust Belt already had industry and tended to protect what it had. Remember Lee Iacocca and the Chrysler bailout. Detroit kicked the legacy cost can down the road. Houston responded by creating good environments for private investment and learning from outsiders.

Now the tables have turned. Rust Belt cities must respond by creating good environments for private investment and learning from outsiders. Houston, and other Texas cities, protects what it has and reforms less aggressively. Greenfields are the new brownfields.

Tuesday, April 12, 2016

Consumer Vs. Producer University and Urban Real Estate

Students consume higher education services. Universities also produce knowledge. An urban campus promotes the consumer university, but restricts the producer university. The city as an amenity attracts patrons from outside of the regional market, effectively exporting college. Whereas the city serves to confine the producer ambitions (see the excellent "Cities of Knowledge"). London modelling the trend:

A number of high profile moves and plans for expansion suggest, however, that the role of universities in London’s urban form is beginning to change. For many of London’s institutions, building up or out is simply not an option. As a result, a number of universities are expanding beyond the sector’s traditional central London heartland, often to areas where land is cheaper – or at least more readily available – thanks to industrial restructuring, land assembly, and public intervention.

By way of example, Imperial College London’s new White City Campus is planned as a centre for research, innovation and the translation of pure research into practical applications. On the other side of London, UCL and the University of the Arts London are joining Loughborough University in opening new facilities in Queen Elizabeth Olympic Park: all this is part of the mayor’s “Olympicopolis” vision for a new cultural and educational quarter in Stratford.

Many of these developments are taking place despite – or perhaps even on account of – a greater emphasis on student-based university funding. The lifting of the government cap on student numbers, coupled with tuition fee increases and students’ increased expectations of high-quality facilities, means that universities are now competing more strongly to attract students.

London is a boon to the consumer university. London is a drag on the producer university. Of course, the Cult of Jane Jacobs insists that uber dense, global London will stoke the fires of innovation. Anyone who knows just a bit about the history of the university will recognize the absurdity of such an assertion. Research has long been more monastic than social. On the other hand, the draw for deep-pocketed undergraduates is undeniable.

In the Rust Belt, "land is cheaper – or at least more readily available – thanks to industrial restructuring". Cities such as Pittsburgh are well-positioned to grow the urban producer university. The "translation of pure research into practical applications" attracts private firms such as Google, which in turn can dangle the city as an amenity to prospective employees. Such an arrangement gives the illusion that urban density begets knowledge production. But Uber would chase Carnegie Mellon University robotics talent out into the rural hinterlands, if need be.

Demographics define the ceiling of the consumer university approach. More and more regions face a decline of local high school graduates. Which means, more and more universities will rely upon exporting higher education services. This zero-sum game benefits the biggest brands in a winner-take-all economy.

The producer university approach enjoys a positive-sum game. Knowledge is non-rivalrous, benefiting a growing number of people in a world increasingly experiencing demographic decline. The downside is that research universities are "anchored" to a community that has grown around it. Expanding the footprint is politically difficult and economically expensive.

Sunday, April 10, 2016

Chicago: Where Globalization Fears to Tread

Almost a decade ago, I spoke with someone who helped shape Chicago into (in the Saskia Sassen sense of the term) a global city. I was bullish on Pittsburgh. He tried to curb my enthusiasm. No way, no how could Pittsburgh pull a Chicago. Luckily for Pittsburgh, he was right.

Pulling a Chicago carries a different connotation these days. It's much closer to Rust Belt failure than Rust Belt savior. It's more Detroit than Pittsburgh. Could Chicago pull a Pittsburgh? I doubt it.

Chicago went all in on its global self with massive expenditures on world class amenities. By every account I am aware of, the gambit worked. Globalization had its way with the urban core. The crown jewel of the Rust Belt, the city sucked up all the talent in between the coasts. Middle America could be cosmopolitan, too.

Chicago ... you have a Houston problem. Chicago is no longer the only global game not on the Atlantic or Pacific seaboard. The Texas Triangle beckons Iowa college grads. Regional hubs such as Minneapolis or Kansas City offer a step up from Des Moines. Heck, even Des Moines offers a step up from Des Moines just a decade ago. Cut Chicago out of the migratory loop, lose nothing in the experience.

To be sure, the talent still streams into Global Chicago. But this influx doesn't scale. Those still moving there are chasing yesterday, the 1990s. The region has hit peak globalization:

"Until a year and a half ago, Chicago's rates of home price appreciation were comparable with the rest of the US," Stiff said.

But since early 2015, "Chicago has slowed down significantly," he said, suggesting that the area's slow job growth has been a drag on the housing market's recovery.

In the global core, Chicago still looks good. But that global core no longer can carry the region, let alone the state. The architects of Global Chicago sold the city's soul for a magic Bean that benefited a few and left most others behind. Globalization didn't trickle down. It moved on.

Thursday, April 07, 2016

What Density Dividend?

All hail Texas exceptionalism. Because business friendly tax policies as well as general deregulation (e.g. lack of zoning), the state thrives. This meme gets trotted out by boosters whenever there is a demographic data dump or some company moves its headquarters from a place such as tax and spend liberal California. The celebration glosses over the massive subsidies Texas has to dole out in order to win the day. Business friendly isn't good enough. Texas isn't exceptional, save for large public expenditures.

All hail urban density exceptionalism. I can trace the greater-density-begets-more-innovation back to Jane Jacobs and then Alfred Marshall. While in graduate school during the late 1990s, I noted that Jacobs and Saskia Sassen were very popular among urban geographers. This was new to me because I received the tradition discourse of urban geography as an undergrad, von Thünen and the like. I eagerly digested the seminar readings and didn't think much about them (save Sassen) after the semester ended. I was at the University of Colorado to learn about globalization and democratization. Jacobs didn't apply, or so I thought (geographer Peter Taylor says otherwise).

Whatever your stance on Jane Jacobs, Richard Florida has done a great deal to popularize her ideas. Florida now stands at the forefront of a movement that insists that dense cities are best suited for innovative (i.e. creative) activities. Last November, Florida promoting an urban agenda to the incoming Trudeau regime:

Over the past few years, however, venture capital and high-flying tech startups have undergone a fundamental urban shift that works to the advantage of Canada’s big cities. The locus of venture capital and entrepreneurial innovation has shifted from Silicon Valley’s sprawling suburban campuses and office parks to vibrant urban neighbourhoods in San Francisco, New York and London. These dense, diverse, urban neighbourhoods are home to the great research universities, key industries and consumers, and the top tech and creative talent that power innovation.

I argue that wherever you find great research universities, urban localities be damned, you can find a concentration of venture capital and innovation. All I hear is Jane Jacobs when I read "dense, diverse, urban neighbourhoods". Her prescription is Florida's. Thus, the shift of venture capital away from suburban sprawl to dense urbanity is rational.

More recently, Florida applies the Jacobs template to explain the migration of General Electric from suburban Connecticut to urban Massachusetts (Boston):

General Electric is the latest company to give up the suburbs for the city. News of GE’s move from its 1970s-style corporate campus in suburban Fairfield, Connecticut, to downtown Boston’s Seaport District has urbanists like me swooning. After all, it confirms much of what we’ve been saying for years: a massive corporation is moving to a dense, vibrant, walkable city center with abundant transit, lots of talent, superb universities, and great quality of place.

The basic geographic facts are irrefutable. But the rationale of the move is up for debate. Whatever the supposed density dividend is, GE moved to Boston thanks to bribery:

City Hall initially developed a property tax abatement valued at $8 million to $12 million in mid-November, according to documents the Walsh administration released Wednesday in response to a public records request from the Boston Globe. Over the next several weeks Boston officials increased the upper limit of the abatement to $15 million, and then again to a $20 million offer that was included in a memo addressed to a GE official dated Nov. 30.

The amount was subsequently increased to as much as $25 million over 20 years.

The urban revolution will be heavily subsidized. Like Texas exceptionalism, turns out that urban density exceptionalism isn't so exceptional after all. “We didn’t want them to walk away...At the end of the day, we wanted to make sure we closed the deal.

Sunday, April 03, 2016

Exploring Vertical Urban Geography

Along the usual horizontal plane, I see a big shift in the rationale for urban geography. Since human capital is the most important scarce good, a downtown locale might bestow a competitive advantage in the war for talent. Well, what about the vertical? Stuart S. Rosenthal:

As you move up in a tall building, the cost of accessing the space increases. What we observe and document for the first time is a positive rent gradient. Once you get up above the 2nd floor, rents rise, and they rise at an increasing rate.

The only way that can happen in a commercial office building that is populated by for-profit companies is if there's something about being high up off the ground that is valuable. One possibility is the amenity effect: Workers value the spectacular view from the 50th floor. Another possibility is a signaling effect. Anecdotally, we've heard if you're anybody, you want that office high up. It's more impressive.

My take, the horizontal and the vertical demonstrate rational choice in the same way. Worth noting, Rosenthal takes pains to run the reader through urban geography 101 before exploring the altitudinal variation. The old rules don't seem to apply going up at the same point of latitude and longitude. Such a disconnect raises a red flag. This 3-dimensional view of urban geography is incoherent.

Lots of land value in the urban core where we find high densities thanks to tall buildings results from, concerning Rosenthal's research, the amenity and/or signalling effects. Above the second floor, real estate prices do not rise as a result of enhanced productivity and the other supposed density dividends. At the very least, the 2-dimensional view overstates the benefits of laboring in the city.

Poking another hole in the innovation district boondoggle is Jed Kolko's latest effort to debunk the urban revolution propaganda. The rather popular narrative touts the move back to the city, where ideas more readily have sex and workers are more productive. That sounds great save for the fact that this bit of population dynamics is going in the opposite direction. Bummer.

Lastly, the suburbs have been the dominant geography of innovation for many decades. Wherever talent wants to go, R&D firms will accommodate. It's a war for talent, not greater productivity. Perhaps telling, as the world has become more urban in recent history, productivity "slumped". The hype works wonders for real estate development, but not economic development. Most importantly, it's nothing more than hype.

Thursday, March 31, 2016

Why Would a Company Build an Iconic Skyscraper in Philadelphia?

What's the why of the where? Such a classic geographic question excludes how and when. The "when" of a skyscraper in the urban core is my subject. The why of the when in downtown Philadelphia:

“If you go to Silicon Valley, you continually hear that they’re busing in a ton of people who want to live in San Francisco,” Gattuso says. “That’s where the technologically skilled talent wants to be, in the cities.” Given that, he says, it makes sense to actually put a tech campus in the heart of a vibrant urban core such as Philadelphia’s Center City. “This area is one of the great secrets of American cities. We’ve got a core with a growing population of 150,000, and a lot of arts and culture. When you place this technological focus in the middle of it, it fits into a larger vision to attract and retain this type of talent.”

True or not, that's what the company investing in the real estate project believes. The intent defines the urban geography in a way that wasn't true as early as a decade ago. If yesterday's company sought productivity in expensive real estate, today's company beckons human capital.

I'm going against the flow. The likes of Edward Glaeser insist that productivity dictate high end rents. Save they don't. I wonder how long they haven't. Forever?

If forever is post-WWII, then I'm correct. The defining economic geography of the United States during the Cold War and post-Cold War is talent attraction. Build a work palace where the smartypants want to be.

If a high density urban environment fomented high value innovation, then we wouldn't have a Google Bus. Live urban, work suburban undermines Richard Florida's entire creative class paradigm. The city, for the affluent, is a residential space. The city is no longer a work space.

Monday, March 28, 2016

Moving to Yesterday

Is New York City dying? Is it already dead? Yes and yes. No and no. Kings and queens come and go. The crown rules for centuries. Long live New York:

I think that New York is built a great deal on the nostalgia of the period that [one] just narrowly missed, and I think that's what attracts people to coming there—the mythic notion of what New York has been. I hesitate to say, "Oh, it used to be great, and now it's not good anymore," but I think that there's no question that it has become a city defined in part by how expensive it is, and expensive cities become less diverse and less interesting, because the interesting stuff tends to be the stuff around the margins.

Writer Susan Orlean makes the cliché migration from too expensive NYC to the greater creative spaces of LA. However, her restraint from shoveling dirt on the more legendary destination is well met. Her New York may be dead. But your New York, young writer, is busy being born right now. But you aren't moving there for what will be. You are moving there for yesterday, like Woody Allen's paean to the golden eras of Paris.

In this sense, migration is a lagging indicator. You go where you know. You go where the buzz is (was). The social human is risk averse.  No one rolls the dice on a place that might, or might not, become.

For Rust Belt cities, this disposition is a burden. Yesterday's Pittsburgh lacks appeal. Furthermore, social media celebrates a Census release like a harbinger of things yet to be, but sure to happen. Yesterday's numbers portend tomorrow's boom town.

"[T]he interesting stuff tends to be the stuff around the margins." - Susan Orlean

Orlean's assertion is as true for geographers as it is for writers. Buried beneath the headlines of booms and busts, at the edges of the data dump, lurks hidden trends yet to entice the young and geographically fickle. The Rust Belt is dead. Long live Pittsburgh.

Wednesday, March 16, 2016

The New Urban Geography

The following is a pithy primer on the evolution of urban geography as an academic discourse. Circa 1994, I learned urban geography from a professor who had a long and distinguished career behind him. I consider myself lucky. Specialized labor worth travelling for defined a region and its urban hierarchy. The biggest city sported goods and services found nowhere else in the region. Such models predated the deregulation of banks in the 1980s. The CBD was on F.I.RE (finance, insurance, and real estate). The rents for the urban core were set regionally.

Along comes Saskia Sassen (around the same time I'm wrapping my head around traditional urban geography). Regional urban hierarchies get recast as global hierarchies. The learned leap over the national scale. Cities are sexy again. Young geographers rush to the alter of Jane Jacobs. Even economists, such as Paul Krugman, get on the bandwagon. Why should a firm locate in the CBD? Agglomeration economies. Productivity gains justify the steep rents. Perhaps they did at one point. That's no longer true:

“The C-suite types want to be in a big downtown urban location, but they don’t want to bring the entire corporate headquarters location because the real estate there is way more expensive,” said David Collis, a Harvard Business School professor. “It’s OK for Jeff Immelt, but he doesn’t want IT people sitting there.”

To be in the CBD of a global city doesn't provide a productivity or innovation  advantage. It provides a marketing advantage. The address helps to attract executive talent. The address doesn't make the company run better. The company cuts the best deal it can and amasses subsidies to justify the economics of the move. Being in downtown Boston helps General Electric attract talent globally to places not Boston.

Tuesday, March 15, 2016

Pittsburgh Is Dying...Again

That's right. You heard it here second. Pittsburgh is dying. Again. Richard Florida (who else?) with the dirty details:

At the other end of the scale, the metro with the lowest retention rate is Phoenix with 36.3 percent, followed closely by Providence. Hartford is third, and Austin—a leading tech hub—is fourth. Rochester, Virginia Beach, Salt Lake City, Buffalo, New Orleans, and Pittsburgh round out the ten metros with the lowest grad retention rates. ...

... On the flip side, the bottom ten metros include Phoenix (with a paltry 18 percent retention rate), Hartford, Virginia Beach, Providence, and New Orleans, with Rochester, Buffalo, Sacramento, Austin, and Oklahoma City completing the top ten. Baltimore (44 percent), Washington, D.C. (44 percent), and Pittsburgh (43 percent) also have modest retention rates. My own research was spurred by the outmigration of my former Carnegie Mellon students from Pittsburgh.

The first hall of shame concerns both two-year and four-year college grads. The second hall of shame focuses on the four-year cohort, which aligns with the usual educational rate cited in the ubiquitous brain drain hysteria. It's a rough proxy for the coveted creative class.

I wouldn't make too much about such pap save for Florida's unambiguous confession about patient zero, Pittsburgh. The malady? Talent was leaving the campus of Carnegie Mellon for, wait for it ... Austin:

I asked the young man with the spiked hair why he was going to a smaller city in the middle of Texas, a place with a small airport and no professional sports teams, without a major symphony, ballet, opera, or art museum comparable to Pittsburgh's. The company is excellent, he told me. There are also terrific people and the work is challenging. But the clincher, he said, is that, "It's in Austin!" There are lots of young people, he went on to explain, and a tremendous amount to do: a thriving music scene, ethnic and cultural diversity, fabulous outdoor recreation, and great nightlife. Though he had several good job offers from Pittsburgh high-tech firms and knew the city well, he said he felt the city lacked the lifestyle options, cultural diversity, and tolerant attitude that would make it attractive to him. As he summed it up: "How would I fit in here?"

Are you giggling yet? You should be. Revisit the bottom 10 lists for both categories. If Pittsburgh is bad, Austin is arguably worse. Has tolerance there gone to shit? Perhaps.

Or, catering to the creative class has nothing to do with talent retention. This June, I will have studied brain drain for ten years. The only thing I know for sure is that Richard Florida doesn't have a clue about how to keep people from leaving a region.

Thursday, March 10, 2016

Repackaging the Innovation District Boondoggle

Does innovation need to be in the city? Is innovation better off in the city? Is there a density dividend for innovation? Perhaps. Perhaps not. We don't know.

I'm waiting for a good argument as to why we should build innovation districts. Bruce Katz of Brookings is the #1 booster. His latest attempt to sell real estate development as economic development:

Midtown Atlanta is an example of the growing trend of companies relocating major research facilities to be near urban universities that provide mixed-use amenities, lively places, and a high density of firms. For example, Pfizer recently moved one of its largest research centers to Kendall Square in Cambridge, blocks from MIT, and Google now has its machine learning research hub in Baker Square in Pittsburgh, near Carnegie Mellon University.

Companies are relocating major research facilities to be near universities regardless of whether they are found in urban, suburban, or even rural areas. In fact, Silicon Valley exists because of Stanford University. This is an old trend dependent on the quality of the research university. It had, still has, nothing to do with where the university is located.

Well, that's not entirely true. It used to have something to do with where the university was located. Back in the day (50s and 60s), innovation blossomed near universities that enjoyed a wealth of greenfield development potential. The university could expand with little to no political controversy. Such impediments weighed on the urban campus of Penn.

Today, brownfields are the new greenfields. Universities such as Johns Hopkins have become major players in urban redevelopment. Hence the trend Katz notes. But the history he offers to explain the geographic shift is erroneous.

Tuesday, March 08, 2016

Sharing Economy Boondoggle

If the powers that be in Austin regulate the sharing economy, innovation will suffer. If the powers that be in Raleigh regulate the sharing economy, millennials won't live there. If the powers that be in Albany regulate the sharing economy, it "is an obstacle to progress in general." Yield to the sharing economy or die.

Such claims strain credibility and belong in the same category as sports stadium boondoggles. Owners prey upon regional doubts about being good enough to run with the big dogs. Every city, it seems, has an inferiority complex. Civic pride makes for bad policy choices.

Fueling the young adult bravado, more and more places buy the idea that jobs follow people. Only quality amenities will allow for talent retention and attraction. Throw cold water on Airbnb or Uber at your own peril. Food trucks are the new symphony orchestras.

Furthermore, if we could retroactively build great urban spaces, then sprawl wouldn't have happened. Once again, quality of place drives migration. I'm dealing with such speculation in Cleveland. The aim is to spark infill. How? A big report will tell you.

There are two problems with these recommendations. Actually, there's a third problem. But I'm too angry to write about it. First up, infill is happening without doing anything that must be done. Macroeconomics explain the ironic flow. Macroeconomics explain the sprawl. There's a bit more to it than that. But macroeconomics merit consideration when discussing migration. Second, examples are lacking of how sound planning have proven to drive infill. What I see, considering actual migration analysis, is a demographic convergence of infill across places regardless of policy. This is a national trend, like sprawl, without a full embrace of the sharing economy.

Sunday, March 06, 2016

Policies Promoting Innovation

Two popular approaches to promoting innovation, deregulation and densification, don't work. The latest boondoggle on the deregulation front comes from Austin, Texas:

The City Council is telling the entrepreneurial community that if you would like to innovate and potentially disrupt an existing industry, you should do it elsewhere.

The City Council dares to impose some regulation on Austin's sharing economy. The disruptors claim that doing so will make the sky fall. At stake isn't innovation, but a regulatory environment that favors the startups over established businesses. The capital rich get richer at the expense of labor. Uber is as old as dirt.

Regulating the sharing economy might be a bad idea. But the supposed crisis of innovation is a red herring. More likely, HomeAway and others are squawking about innovation because they cannot marshal a good argument against the proposed laws. Weak tea.

As for densification, I've spent years mocking the supposed benefits of urban planned knowledge orgies. At best, the density dividend for innovation is a positive correlation without a proven causality mechanism. Google wondering about collaboration and productivity:

The company’s top executives long believed that building the best teams meant combining the best people. They embraced other bits of conventional wisdom as well, like ‘‘It’s better to put introverts together,’’ said Abeer Dubey, a manager in Google’s People Analytics division, or ‘‘Teams are more effective when everyone is friends away from work.’’ But, Dubey went on, ‘‘it turned out no one had really studied which of those were true.’’

The short version of a long article, cramming a bunch of smart and talented people into a room doesn't predictably lend itself to innovation. Turns out, the quality (not the quantity) of the interactions is the magic sauce. Urban or suburban, with or without innovation districts, innovation depends on the social dynamics of the team. Density doesn't matter.

Thursday, March 03, 2016

Capital Rich, Labor Poor

Let's share. Do my taxes and stay at my seaside mansion. I don't have to do my taxes. You don't have to pay for a vacation place you can't afford. Deal.

The deal is this. My capital steals your work. I pay you spare capacity. La la la la la La.

All you have is labor. I own all the capital. My capital returns more than your labor. If I have enough capital, I don't need your labor.

Well, truth be told, I need your labor. You can't have my capital. Fuck you.

Sharing economy.

Tuesday, March 01, 2016

Globalization and African-American Neighborhoods

An effective way to map globalization is to track foreign-direct investment flows. Inside the United States, an effective way to map globalization is to track real estate developer investment flows. Where investment fears to tread marks a devastating dearth of global jobs. Employment is sporadic and wages are low.

Within a city or metro region, Richey Piiparinen identifies two types of neighborhoods: core and gap. He's employing a geopolitical model developed by Thomas Barnett. Core countries are well globalized. Those in the gap suffer from a lack of globalization. Usually, globalization is framed as benefiting some at the expense of others. This zero-sum Marxist view misunderstands the geography.

Disconnected people reside in disconnected countries and neighborhoods. Only the people who stay put suffer from the lack of globalization. Richey explores such places in Baltimore and Cleveland. Even in shrinking Rust Belt cities, globalization is unleashed. In much of Cleveland, such a claim is obviously ridiculous. However, in Pittsburgh, community development practitioners recognize that vacancy and blight live cheek by jowl with gentrification. Every city has some core neighborhoods and a lot of gap.

How can we address this divide? People living in the gap can be connected to global jobs (transit) and investment (e.g. better schools). While such changes are necessary, they are insufficient. Globalization is a product of migration. Macroeconomic forces follow people. The Fullbright program has a diversity problem:

The Fulbright program, run by the U.S. Department of State’s Bureau of Educational and Cultural Affairs, is widely seen as a prime opportunity to add international experience to one’s résumé. Despite the bureau’s increased efforts to diversify the pool of grantees in recent years, though, the program also has a reputation of being overwhelmingly white.

International experience helps make a person into an agent of globalization, a harbinger of investment. The State Department could be a major playing in addressing Cleveland's core-gap disparity. The Fullbright program should seek only minority applicants living in gap neighborhoods as way to connect isolated communities with global prosperity.

Sunday, February 28, 2016

The Slow and Stubborn March Away From Tech Transfer

As a specific, tech transfer might as well be generic. Take local inspiration and zap it with the magic of Zeus. Unicorns bound forth and the region prospers as the next Silicon Valley. The tech transfer puzzle is a bit more interesting than that, but not much. A tech transfer office at a university is supposed to be Zeus. Instead of lightening bolts, the world hears farts and the startups stink.

In the wake of the oil bust, Canada has this unicorn lust. Nationalists want the massive valuation. Big egos measure innovation in this way. Zero-sum aspiration:

We need to compete by generating wealth from Canadian ideas and commercializing them globally—from Canada...That starts with a proper innovation strategy, something we haven’t had in 40 years.

The sovereignty of ideas is a losing proposition. Measure Canada by within borders, the map looks unimpressive. Measure Canada abroad, an artificial intelligence powerhouse revealed.

The world isn't waiting for your AI startup. The world is desperate for your AI knowledge and talent. Canada does very well on that score.

But Canada doesn't have a clue how to leverage that AI knowledge and talent because the country spent a decade drunk on China's commodities binge. As resource curses go, yesterday was too late.