Here’s a link to my recent interview.
Archive for June, 2008
The New York Times reports that the suburban model may have reached a tipping point:
Suddenly, the economics of American suburban life are under assault as
skyrocketing energy prices inflate the costs of reaching, heating and
cooling homes on the distant edges of metropolitan areas.
Across the nation, the realization is taking hold that rising energy
prices are less a momentary blip than a change with lasting
consequences. The shift to costlier fuel is threatening to slow the
decades-old migration away from cities, while exacerbating the housing
downturn by diminishing the appeal of larger homes set far from urban
More than three-fourths of
prospective home buyers are now more inclined to live in an urban area
because of fuel prices, according to a recent survey of 903 real estate
agents with Coldwell Banker, the national brokerage firm …
like an ebbing of this suburban tide,” said Joe Cortright, an economist
at the consulting group Impresa Inc. in Portland, Ore. “There’s going
to be this kind of reversal of desirability. Typically, Americans have
felt the periphery was most desirable, and now there’s going to be a
reversion to the center.” In a recent study, Mr. Cortright found
that house prices in the urban centers of Chicago, Los Angeles,
Pittsburgh, Portland and Tampa have fared significantly better than
those in the suburbs. So-called exurbs — communities sprouting on the
distant edges of metropolitan areas — have suffered worst of all, Mr.
And here’s the money quote from Phil Boyle, a Denver-area suburbanite: “Before it was ‘we spend too much time driving.’ Now, it’s ‘we spend too much time and money driving.’ ”
UPDATE: Over at Freakonomics, economist Daniel Hamermesh reports on his recent research on the topic of time versus money:
The average human being will be substantially richer in 50 years,
just as the average American today has a real income three times what
it was in 1955. But the average human being will not have much more
time in 50 years than today; and life expectancy has increased by only
10 percent in the U.S. since 1955, so for most people time has become
relatively scarce compared to money … So the next time you hear a wealthy person complaining about having
no time, tell him/her that there’s a simple alternative — give away
money. Of course, a person who does that will then complain that
his/her income is insufficient. Time or money: one or the other is
always relatively scarce and always generates complaints!
The paper is here. Seems to me location is a critical piece in balancing the time-money equation and will become even more so in the future.
This new report from the AeA, ranks high-tech metros. Some key findings:
- The leading metro areas by high-tech employment in 2006 were the New York Metro Area (316,500), Washington, DC (295,800), San Jose/Silicon Valley (225,300), Boston (191,700), and Dallas-Fort Worth (176,000).
- Seattle led the nation in net tech job creation in 2006, adding 7,800 jobs.
The next largest net gains in tech employment between 2005 and 2006 occurred in the New York Metro Area and Washington, DC, adding 6,400 and 6,100.
- On a percentage basis, Riverside-San Bernardino saw the fastest job growth
in 2006 at 12 percent.
- San Jose/Silicon Valley leads the nation in concentration of high-tech workers in 2006, with 286 high-tech workers per 1,000 private sector workers.
Hmmm … that puts the Bos-Wash mega-region at roughly four times the number of high-tech jobs of Silicon Valley, overall. Before anyone gets into it, I’m talking quantity here, not quality.
Robert Shiller on the real estate bubble and more n the Atlantic Monthly:
Many culprits have been fingered for the housing crisis we’re in
today: unscrupulous mortgage lenders, dishonest borrowers,
underregulated financial institutions. And all of them played a role.
But too little attention has been paid to the most fundamental cause,
the same one that was at the root of the many booms and busts that
Sakolski chronicled years ago: the contagious optimism, seemingly
impervious to facts, that often takes hold when prices are rising.
Bubbles are primarily social phenomena; until we understand and address
the psychology that fuels them, they’re going to keep forming. And
unless we apply that understanding to the bubble we’re trying to
recover from, we risk calamity.
Bubbles are a lot like epidemics. Every disease has a transmission
rate (the rate at which it spreads from person to person) and a removal
rate (the rate at which those individuals recover from or succumb to
the illness and so are no longer contagious). If the transmission rate
exceeds the removal rate by a certain amount, an epidemic begins. Speculative bubbles are fueled by the social contagion of boom
thinking, encouraged by rising prices …
There’s another, more urgent
reason to focus on the idea of social contagion today. Like booms, many
busts are magnified by group thinking. And once busts become severe
enough, they prompt changes in the national mood that ramify well
beyond economic affairs. … We recently lived through two epidemics of excessive financial
optimism. I believe that we are close to a third epidemic, only this
one would spread irrational pessimism and mistrust—not exuberance. If
that happens, our economic problems will become much worse than they
need to be, and our social problems will multiply. Only if we heed the
lessons of the boom can we keep the bust from causing lasting damage.
The great pendulum of American economic outrage moves back and forth
over time between anger at big government and anger at big business.
For almost thirty years, big government has been the target – starting
with Ronald Reagan’s admonition that government is the problem, not the
solution; through Bill Clinton’s declaration that the era of big
government is over; and George W. Bush’s hands-off brand of free market fundamentalism.
I recall sitting in a seminar on globalization at MIT circa 1996 and Ray Vernon basically said: “I’ve seen it time and time again. Now everyone believes in the “market.” Just wait, the backlash is coming.”
I do think Reich is right in his capsule political history. It’s been one big trickle down approach. The right has done what it is more or less supposed to do – make the case for unbridled markets. The great failure of our times is a failure of progressive forces to make a case for a more inclusive, broadly based and inclusive, while market-driven, creative economy. In its absence, we have seen the rise of social conservatism and populism.
Can new political forces stem the tide?
Felix Salmon makes the very interesting and powerful case:
City-dwellers, as such, have almost no say in national politics, and invariably
end up subsidizing the increasingly-anachronistic lifestyles of their rural
compatriots … While
cities are nominally democratic, in reality the party-political makeup of their
legislatures almost never changes: the national parties have effectively
hijacked the local political process by using the power of their strong national
brand … Given the
opportunity to elect mavericks who will push creative and innovative policies in
the face of apathy from national political parties, the citizens of great
metropolises like San Francisco, Chicago, New York, Toronto, London, Paris,
Miami and Berlin have been very happy to elect maverick politicians as mayor.
But even the most powerful and imaginative mayor tends to find a lot of party
political opposition, both nationally and locally …
In the absence of an urbanist political party, then,
city-dwellers will probably never be the political force that they can and
should be … If you live in a big city, you
will probably find yourself more in agreement with your neighbors—or even with
city-dwellers on the other side of the world—than you will with rural members of
your national political party. The big political parties are very wary
about immigration, for instance; big cities live and thrive on immigration, and
support it strongly.
Cities are also vastly ahead of the rest of the
world when it comes to gay rights; they’ve elected far more than their fair
share of openly gay prominent politicians, and act as the safe haven to which
young gay people flock whenever they feel persecuted in their small towns. A
high density of gay people in turn feeds creative industries and increases the
number of people interested in revitalizing the urban centers which were bywords
for poverty in the 1970s and early 80s, and which are now the one part of the
overheated housing market which seems likely to survive the property
crash. There are lots of other policies, too, on which city residents
would tend to agree. They are generally “greener” than the population as a
whole: more environmentally aware, more willing and able to implement
eco-friendly initiatives from cycling to recycling. While they might support
local farmers, they have no time for big subsidies to agribusiness. They are
much more likely to support efforts to build and strengthen educational
institutions, especially at the university level. And in general they love
heterogeneity and freedom: they’re skeptical when politicians talk about social
norms or try to impose any kind of censorship.
The whole story is here. Can it actually happen?
UPDATE: Arnold Kling weighs in:
I think that there is a general misfit between our political institutions and the
direction of technology. Our institutions are still in the middle of the
twentieth century, centralizing power, putting more and more resources into the
same number of political hands. See my essay on the wealth controlled by
here. Meanwhile, the rest of society is in the 21st century, featuring what
Chris Anderson calls The Long Tail (I just finished Kindling the book.
Much of its message seeped out before and after the book appeared, but it’s
still worth reading.)
Salmon is correct to suggest that urban voters are not well served by the
current institutional setup. Perhaps a “horizontal network” of urban voters
would have more in common than a territorial entity that embeds a city inside a
province or a nation-state. But to me that is an argument against giving
territorial monopolies to government units, and my guess is that Salmon didn’t
mean to go there.
UPDATE II: Ryan Avent joins the conversation:
I think the constituency is there, but creating a political identity that
will resonate at the ballot box is more difficult than simply identifying a
majority with shared interests. What’s needed is a catalyst, which might
fundamentally shift the way that suburban voters think of themselves.
One candidate is high gas prices. Expensive gas will likely produce an inward
migration sufficient to place a larger share of households in explicitly urban
areas. It may also align the interests of suburban and urban voters on a number
of important issues–transportation and infrastructure funding, for example.
But the real game-changer may be the candidacy of Barack Obama. I’m reminded
of the fundamental shifts in voter identification that took place under Richard
Nixon and Ronald Reagan, who solidified southern Democrats and suburban anti-tax
voters, respectively, in creating large new political voting blocs. Sometimes, a
compelling politician is just a compelling politician, who comes and goes
without altering the underlying political landscape. But sometimes, a compelling
politician can facilitate the consolidation of new political identities.
He certainly has the constituency. The question is, even if he wins, can he heal the deep, deep split in the US on this issue? The geographic divide is also a class divide. Can the party of a single class, that amounts to say 30-35 percent of the workforce, effectively govern a polarized America? Seems to me the core issue is how to begin to mend the divide?