Policy-based evidence making

Heads up: on 30th May I’ll be in Warwick to help give an advanced training session on  ‘Knowledge for Policy, Knowledge of Policy’, organised by the university’s Centre for Interdiscplinary Methodologies.

Evidence-based policymaking was a central trope of New Labour’s time in office.  The idea’s gone in deep: the Coalition is regularly taken to task for ideological policymaking – perhaps one reason  why the Cabinet Office has just announced a major network of ‘What Works’ Centres.

One immediate objection to evidence-driven policy is that evidence doesn’t tell you what you ought to do.  Political values and judgements – even ‘ideology’ – have their place, especially if the alternative is the apolitical solutionism that Evgeny Morozov has been taking to pieces recently.

There’s also an important role for an experimental state which builds an evidence base where none exists.  Sometimes this is pretty uncontroversial, as in the small nudges being tried out by the Government’s Behavioural Insights Team. It’s tougher to make the case in bigger areas of policy – such as devolution to local govt and communities, which has  never been seriously tried in the UK, where the risks of failure are massive, and where there are limits to what we can learn from abroad.  Here, the need for careful piloting is running up against Ministerial enthusiasm for transformational change.

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What does this mean for researchers, especially academics? It’s important to have a clear sense of the policymaking process,  especially the invisible work which goes on between formal consultations and policy events; how policymakers treat different  kinds of evidence and actors in those processes, and the shifting positions of academics and think tanks in the ideas market.

I’ve co-founded a think tank, worked in central government and am now working in academia, so I’ll be bringing some of  these experiences to the seminar.  Also speaking will be Dave O’Brien (City University) and Will Davies (Warwick), who’s organising the session.  Both have similarly heterodox experiences, so it should be a fascinating day … see this post by Will, for instance.

Details here.

High Speed Two, cities and the North-South divide

The Government has just unveiled the route map for the UK’s high speed rail network. So will HS2 help the cities on the line? Will it narrow the North-South divide, as some Ministers claim? And what about places left out?

Here’s what I wrote back in 2010, when the detailed modelling was done, and drawing on the international evidence. The punchlines are:

So what does HS2 mean for cities? Urban firms and travellers are the big winners, which is good news for cities if more productive businesses raise wages or employment. Some cities get the kudos of being on the line, and may get a regeneration boost from new stations – although that could turn into a windfall gain for developers. But fairly few firms will relocate, and agglomeration impacts will be pretty small.

On this basis, HS2 isn’t likely to fundamentally change the UK’s economic geography. Rather, it will speed up the economic geography we already have.

… Those who gain from HS2 (business, core cities, those in ‘the North’) are strongly in favour; those who lose (communities and homeowners along the line) are vehemently against. Local opponents of HS2 are hardly irrational – quite the opposite. So rather than handing a windfall gain to business by pegging HS2 fares to conventional fares, HS2 tickets should be pricier – at least in first class.  That provides another way for taxpayers to recoup some of the initial outlay. … The agglomeration benefits for Phase 2 (Manchester and Leeds) seem much larger than Phase 1 (London to Birmingham). Why? Rather than connecting two relatively distant cities, Phase 2 links a lot of nearby places (e.g. Sheffield/Meadowhall to Leeds in 20 mins), and provides indirect access to big cities not on the line (e.g. from Manchester to Liverpool). The fact of HS2 thus strengthens the case for complementary investments like the Northern Hub, which will bring Liverpool, Manchester, Sheffield and Leeds closer together.

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Two other points. First, as John Tomaney argued on radio 4 this morning, the evidence suggests HS2′s economic impacts are pretty complex, and the net effect isn’t clear. Like him and others, I’m basically an agnostic.

Second,  to repeat – it’s crucial to spend money on better links between Northern cities and more London-centric high speed lines. As Richard Leese suggested in the same piece, for policymakers this is not an either/or. Thankfully Ministers agree, and are feeding cash into boring but important investments like the Northern Hub, as well as the bigger and shinier HS2.

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Update, May 2013: The National Audit Office has published its own report, which echoes many of these points.

Bigger, more urban, more diverse

The latest Census data confirms three things we already knew. First, Britain is becoming a bigger and more culturally diverse society. Second, net migration is one of the main drivers. Third, this diversity is largely urbanised – especially in London.

Beneath these headlines are many complications. Diversity is shifting across a number of dimensions at once – country of birth, ethnicity, religion and language. Official ethnic groupings are increasingly inadequate to capture what’s going on: see the huge growth in ‘other white’ and other ‘other’ categories.

Many of these trends will continue, with Leeds University researchers projecting a 20% minority ethnic population by 2051. But there is no obvious evidence that diversity is eroding national identity – 91% of residents identify with at least one UK national identity.

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These demographic changes are among the most profound of our lifetimes. So what are the economic and social impacts of these shifts?

My research is taking first steps towards answering the economic questions. European Urban and Regional Studies have just published this piece, which gives you a nice overview.

There is more detail in these working papers on the economics of super-diversity, the long term impacts of migration in cities, ethnic inventors, and diversity, entrepreneurship and innovation in London firms. This last piece, joint with Neil Lee, is coming out shortly in Economic Geography.

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We’re only beginning to understand some of these long term, dynamic channels. So it’s an exciting – and important – time to be working in the field.

Many of the key people will be in the UK in April for the 2013 NORFACE Conference. If you’re around, I’d encourage you to join us.

Olympic Economics

Back in the spring – remember? – a lot of people were getting annoyed by the Olympics.

For Londoners, Dan Hancox wrote, “it’s as if someone else is throwing a party in our house, with a huge entry fee, and we’re all locked in the basement.” Roll forward to September and it feels as if a gigantic, city-wide, four-week bender has finally petered out. Everyone had a good time, and nobody fired any missiles.

As the weather turns, though, more sober assessments of the Games are appearing. The Centre for Cities has published a careful five-point legacy plan. And the Economist Intelligence Unit has put out Legacy 2012, a collection of essays on the summer’s economic and social repercussions.

You can download it here. I’ve got the lead piece, written pre-Games, which (post-Games) now seems a bit grumpy.

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Here are the headlines, and some reflections with the benefit of hindsight:

First, the direct economic benefits of 2012 to London are pretty small. This is the overwhelming message from the economic evidence, and the experience of past Games. Predictions of a hit to local retail and tourism also turned out to be correct.

Second, the major hard gain is the physical regeneration of the Olympic site. We can argue about whether winning the Games ‘created’ this, or just accelerated it. But some Londoners (homeowners, certainly) got more out of it than others.

It’s telling that the Centre for Cities suggests a ‘separate’ employment and skills strategy is needed for East London – so what positive effect did the Games have on local people’s employment chances?

Third, the indirect economic effects on the UK may be pretty big – as they have been for Korea, China and Spain. Hosting the Olympics is a massively powerful policy signal, and the Games are a platform from which to tell a story about the UK’s place in the world.

Work by Rose and Spiegel, published in the Economic Journal, suggests that on average, Olympic host countries get a whopping 20% trade boost. (Amazingly, even losing bidders pick up some positive trade effect.) The host city stands in for the nation at Games time, so that London effectively was the UK for foreign viewers. Boris clearly understood this before David Cameron.

More prescient than he knew, Tony Blair is fumbling for the political economy argument in this Vanity Fair interview (thanks to Will Davies for the spot):

For a country like Britain, it’s a great thing for us to have the Olympics here. We can afford to do the Olympics. We’re Britain. We’re not some Third World country.

For countries like Korea and China the story is ‘we’re arrived’. For Britain, perhaps – ‘we’ve still got it’?

So perhaps we’ve all been looking in the wrong place. If the message is the legacy, the biggest economic impacts of 2012 may be the long term boost to British soft power.

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The other takeaway  is that economists vastly under-estimated the intangible benefits from the Games. Pre-Games analysis suggested the ‘willingness to pay’ was dwarfed by the £9.3bn budget, but our medal hauls in both Games have clearly changed the calculus.

Perhaps we should have spotted this coming – Goldman Sachs suggest that host countries typically win 54% more medals than usual. That sporting success doesn’t come for free, as Will points out here. But Team GB’s glorious performances are likely worth several billions in – fleeting? – goodwill.

Planning reform

The past few months have seen furious public debate about planning reform in England. Here [pdf] and here [pdf] are two new papers on the economics of planning, written by me and SERC Director Henry Overman. Versions were also submitted to the National Planning Policy Framework (NPPF) consultation last month.

The papers pull together SERC research on planning, alongside wider evidence (paper 1) and assess the Government’s proposals for planning reform (paper 2). Henry and I don’t agree on all of this – I’m certainly more pro-brownfield than he is – but we both felt that important pieces were missing from the recent public conversation.

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The key messages are:

1) The job of planning is to balance environmental, social and economic welfare. This means tradeoffs, so all planning systems have costs and benefits.

2) Planning’s economic effects, especially the costs of the status quo, have been underplayed in recent debates. We summarise evidence strongly showing current rules increase house prices and volatility, increase office rents, probably lower retail productivity and lower employment in small independent shops.

3) Paradoxically, land restrictions in the most popular areas have led to some truly unsustainable development – such as selling off school playing fields for housing. Similarly, brownfield-first policies have delivered some positive benefits for cities like Manchester, but aren’t a panacea.

4) The draft NPPF needs to be much clearer about sustainable development, potential tradeoffs and how practical decisions might be made (for example, using the National Ecosystem Assessment).

5) We agree with the National Trust and others that there’s a basic tension between Government’s desire for localism and some important national objectives. Ministers need to be clearer about what trumps what, or (more in keeping with localism) provide stronger incentives to align interests.

6) The presumption in favour of sustainable development that is consistent with the plan should be retained. But local authorities need time to adjust to the new rules, and the Government should introduce the change gradually.

7) Current incentives to ramp up housebuilding, such as the New Homes Bonus, are probably too weak and need to be strengthened. And one-size land restriction policies (such as town centre and brownfield first) don’t work well in practice. Rather, we suggest Whitehall sets the appropriate framework to try to encourage particular patterns of development but then allows local authorities to develop their own land use restriction policies.

How did London get away with it?

A lot of people predicted London would be hit hard during the recession. In fact, London did better than the rest of the UK. Why?

Henry Overman, Director of SERC, delivered the answer at the first LSE Works lecture last night (with some help from me on numbers, trends and jokes). In case you couldn’t make it, here’s a post on LSE’s Public Policy blog which gives the main story.

LSE should be putting up a podcast in the next couple of weeks. Watch out for that here. Meanwhile, the next event in the series is CEP Director John Van Reenen, on ‘Where is Future Growth Going to Come From?’ That’s on 17 February.

In March we have both Lord Stern (on the low carbon economy) and Bruce Katz from Brookings Metro Program (on the ‘next urban economy’, some joint work with me and colleagues at LSE Cities).

Super-diversity

Worries about multiculturalism go way back: in 883, fearing unrest, King Alfred banished the Danes from London. So when Leeds University researchers suggested that by 2051 a fifth of Britons would be from an ethnic minority, the reactions were predictable. The Daily Express’s full-page headline was ‘One in 5 Britons will be Ethnics’, complete with picture of women in burquas. Daily Mail readers also excelled themselves – ‘the only effective way to combat this situation is to vote BNP at every opportunity’ etc etc.

Let’s try and dig a little deeper. I’ve now read the (long and complex) report [pdf], so here’s a few thoughts. I’m not a demographer, so I’m focusing on the implications rather than the detailed modelling.

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Britain has a long, often hidden history of multiculturalism. And as the report makes clear, Britain is already getting more culturally diverse. Immigration is a major driver, as is ‘natural change’ – variations in birth/death rates across social and cultural groups. The first tends to feed the second, since a share of migrants tends to settle.

British diversity is also heavily urbanised. People mix is greatest in and around cities, especially major urban centres (with big labour markets and good transport links) and ex-industrial places (which had lots of jobs in the past).

In some urban neighbourhoods we’re seeing ‘super-diversity’ appearing – with dozens of new communities alongside established minority groups. Conversely, recent migration from Eastern Europe was less urban [pdf] – partly because many people were doing agricultural work.

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The researchers make three major predictions about Britain in 2051.

First, the UK will be both bigger and more diverse. Under their favoured model, the population grows to 77.1m, from around 60m today. Black and minority ethnic populations rise from 8% to 21%.

Second, diversity looks different. Essentially, super-diversity will be more common. The ‘other ethnic’ population will be 350% higher, with various mixed ethnic groups increasing by 148% to 249%. Chinese communities will over 200% larger, ‘Black African’ communities  179% larger, and the main South Asian groups 95-153% bigger. The model’s held back a bit here because UK Census categories are so crude.

Third, diversity will be more spread out. The researchers predict that people in minority groups will shift from more to less deprived areas, which (very roughly speaking) will take them from inner city to more suburban locations, and from larger cities to smaller towns and rural areas. That continues a long term historical trend – London neighbourhoods like Spitalfields have historically housed new migrants, who progressively shift to outer London suburbs as they become established in the UK.

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The bigger question is what the economic and social impacts of a bigger, more diverse Britain will be. There’s some evidence, particularly from sub-Saharan Africa, that fragmented countries are prone to conflict and poor governance. Conversely, diverse societies may be more inventive and productive. Given ‘where the diversity is’, a lot of the action will be happening in urban areas.

My academic work is looking at these questions in detail, focusing on British cities.  Here’s a recent working paper which fills two major gaps. First, with help from UCL’s Pablo Mateos, I’ve developed some new descriptive analysis, including a ‘Super-diversity Index’ which is more powerful than the categories used in the Leeds model.

Second, I’ve looked at the links between people mix, wages and employment in urban areas. I find some positive connections between super-diversity and my economic performance measures, suggesting higher diversity might be an economic good for British cities. Other papers and current research take a closer look at what’s behind this – more on those in the coming months.

Geography and social justice

This is the first of two posts on ‘shrinking cities’, or as civil servants might put it, ‘places with a long history of economic underperformance’. In the UK, this means cities like Hull or Stoke-on-Trent with low average incomes and higher-than-average deprivation rates; abroad, places like Leipzig, Cleveland or Detroit.

The politics of improving life for people in under-performing places is extremely sensitive, as Policy Exchange discovered when they appeared to suggest moving people out of ‘failing’ Northern cities. Recently there’s been more interest, via LSE’s ‘Phoenix Cities’ book, Julien Temple’s ‘Requiem for Detroit?’ and from the Centre for Cities (see Dermot’s helpful summary, and my thoughts from last summer).

Why now? First, during the 2000s a lot of economic development funding went into cities. But this has not always improved residents’ overall welfare. As the business cycle turns, city leaders are looking for new ways forward. Second, there’s now less regeneration money around. Between 2011 and 2015, central government departments like CLG may face 20-25% spending cuts. So Whitehall policymakers are looking hard at if, where and how to spend.

At the recent AAG Conference in Washington DC, Michael Storper offered some helpful thoughts on all of this.

Spatial disparities exist, Storper argues, because there are benefits of clustering economic activity, and these persist over time. Agglomeration economies help explain why cities exist, and why they still matter. Theory and real world experience also suggest that long term convergence is unlikely.

So agglomeration leads to disparities between places. At the same time, increasing returns to skills lead to disparities between people. And because higher-skilled people tend to sort into more successful cities, we often get poorer people concentrated in poorer places.

The question for policymakers is what, if anything, we should do about this? Storper outlines three responses.

We could aim for ‘spatial equity’, compensating people and places who lose out. This feels appealing – but what does it really mean? Is holding successful places back fair to their residents? And how do we actually equalise outcomes? Even the UK’s very centralised public services haven’t got rid of postcode lotteries.

Another view is that we invest in poorer places. This is the traditional regeneration perspective. Structural economic change has long term impacts that markets won’t deal with – physical decay, poverty, crime. And there are efficiency costs to this – not least higher spending on benefits. Area-based policies tackle these externalities, get markets working again and places back on their feet.

This has been pretty much the UK approach for the past two decades. It’s given many cities a public makeover – and has made them nicer places to live. But most evidence suggests that improving places doesn’t easily translate into improving outcomes for people. Trickle-down regeneration works about as well as trickle-down economics.

People can move, and it’s hard to assess area-based initiatives if some recipients leave the area. ‘Regeneration thinking’ also doesn’t say how to balance limited resources between helping poor places recover, and helping growing places do better. CLG’s Regeneration Framework has a go, but isn’t completely convincing.

A third view comes from urban economics, especially Ed Glaeser (and now, Richard Florida). In its simplest form, this says we should focus on people, not places. People are mobile; investing in their mobility and human capital improves their economic prospects. Investing in immobile places does not, especially as convergence is unlikely.

To me, this feels like the right starting point for policy. This view is also increasingly fashionable in UK policy circles, and partly explains the bad press traditional regeneration has been getting. But as Storper points out, it’s more complicated than it looks to implement. There are three big policy points.  

First, it’s not clear everyone is truly ‘mobile’. People are free to move; but less skilled people have less information or resources to migrate between cities. Policy interventions might improve mobility, although we don’t have strong evidence here – increasing choice in the social housing system could help, also expanding housing supply in more successful places. Research and experiments should look to fill this gap.

Second, it implies we maximise economic welfare. But we know people think beyond money. Some local responses to Policy Exchange’s report reveal people happy to live in ‘failing’ Newcastle and Liverpool – because they like being there. At an LSE screening, critics of Julien Temple’s film similarly pointed out that nearly a million people still live in ‘failed’ Detroit.

Urban economists explain this in terms of spatial equilibrium. People sort by economic prospects, and prefer different kinds of communities. Low wages get traded off against low cost of living and/or better amenities. In spatial equilibrium local labour, housing and ‘quality of life’ markets all clear, so that real wages equalise across all places. Ongoing SERC research finds some UK evidence for this.

The spatial equilibrium approach implies we don’t need to worry so much about disparities in nominal income. But in some poorer places, especially given mobility barriers, we may want to adopt measures (better quality housing, tackling crime) which will improve residents’ wider wellbeing – and thus raise real incomes.

Finally, national politics and local delivery are both critical. The UK is generally less tolerant of inequality than the US. Our politics is steeped in notions of fair play and universal standards: we’re a long way from accepting apparently large income disparities on the basis of hard-to-explain equilibrium concepts.

British over-centralisation also makes it politically difficult to do anything about managing decline: London policy apparatchiks seem to be telling other cities what to do (which they are). This is one reason why the Housing Market Renewal programme has often been so painful, why Policy Exchange got in trouble, and why the Coalition’s emphasis on localism is important. In future, devolution and actually doing managed decline need to go hand in hand. I’ll explore these ideas further in the next post, and take a look at some international experiences along the way.

… and we’re back on the air

As Government resumes, so does this blog. Ministerial Facebook and Twitter accounts are also back in action after purdah – Eric Pickles was very quick off the mark this weekend.

I’ve a bit of catching-up to do, so the next two posts will cover my US trip last month. Both offer food for thought for policymakers here, and Coalition Ministers in particular. More shortly.

Personal purdah

I’ve been working away on PhD stuff for a couple of weeks, preparing for conferences, and now I’m taking a few more weeks off.

Why? Well, the Civil Service Code‘s Election Guidance states that during campaigns, ‘the basic principle for civil servants is not to undertake any activity which could call into question their political impartiality or could give rise to the criticism that public resources are being used for Party political purposes. This principle also applies to non-civil servants working in Departments.’

I’m not a civil servant, but as someone working in CLG I clearly fall into the second category. My blogging isn’t overtly political, but I do often talk about a) Government policy and b) the parties’ stances. Talking to CLG colleagues, the precautionary principle feels the right way forward.

Appropriately, the Guidance now contains several paragraphs on social media. Ministerial and departmental blogging is out during purdah, as is updating Facebook and Bebo (!?) profiles. Factual use of Twitter, however, can proceed as normal.

See you all next month!