Posts Tagged ‘cost of living’

The world according to Brûlé, part 2

June 18, 2013

(c) Fischli & Weiss

Tyler Brûlé is in trouble again. Monocle have published their annual ‘global quality of life’ index, and as editor he has received a good deal of flak from FT readers for his latest column. Some people dislike his choices; others his methodology; others his attitude. That’s understandable: ‘For readers in Chicago, yet again your appalling homicide rate knocked you out of the running’, says Tyler at one point.

I’ve got some sympathy with attempts to rank cities against each other – after all, everyone loves a league table. But it’s very hard to do this in a way that has much general meaning – especially if, like Tyler, you’re a high-maintenance frequent flyer who rarely seems to be anywhere for more than a few days.

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Here’s what I said a while back:

First, let’s remember what we’re trying to do with city rankings. All of this is – very loosely – trying to achieve what urban economists call ‘spatial equilibrium’. This is where people and firms sort themselves across space, trading off economic, social and environmental pros and cons so that everyone finds their best place to be.

… Indexes are usually commercial products aimed at specific users. In Monocle’s case it’s globe-trotting cosmocrats  with Japanese friends; for Cushman Wakefield’s Cities Monitor it’s developers and property investors; for the Economist and Mercer, CEOs. So policymakers – who have to think beyond single interest groups – should approach with caution.

Second, actually measuring the ‘real cost of living’ is very hard to do. No-one has the definitive answer. I’ve been helping on a SERC project looking at these issues – the best work is from the US, where government economists have access to price data on thousands of items at very local level (like this paper by Bettina Aten). But even here, the researchers don’t go near the kind of soft measures Monocle is using.

Third, we need to remember that this is all about tradeoffs. In spatial equilibrium, actors are balancing economic, social and physical welfare. The main sources of urban growth and vitality – critical mass, big labour markets and ideas flow – tend to have a flipside, namely congestion, pollution and expense.

For that reason, the most liveable cities – where people might want to be – aren’t necessarily the ones where people need to be. This is why it feels odd that places like London, NYC, Hong Kong and Los Angeles don’t rank higher on the liveability rankings. In these global cities the pull of place is very strong. As Jared Diamond points out, in many ways cities like LA are terrible places to live, but millions of people still choose to be there.

Monocle readers may well live in one place and work in another – so this matters less to them. Tellingly, Brûlé eventually reveals that having tried Zurich for a few months, he moved back to much less ‘liveable’ London. His compromise is to be based in the UK and flit between Zurich (winter), Copenhagen (summer) and Tokyo (business trips). Nice work if you can get it!

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‘Poor Tyler Brûlé, condemned to orbit the earth like some kind of 21st century Flying Dutchman‘, says one FT detractor . Ouch! I guess he can take some comfort from being the star of his own, uncannily accurate parody site. And, of course, persuading people to keep paying for his business class chat.

Londonism

May 3, 2011

 Die Zeit has just published a big feature on London as high-powered, on-trend, chaotic world city. There’s a quote from me, plus a cinematic passage in which the journalist and I wander around Hackney Wick before stopping off for a latte.

Also featured are Boris Johnson, Mark Kleinman from the GLA and a grumpy-sounding Hanif Kureishi. You can read the whole thing here. Or for non-German speakers, there’s Google Translate.

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ps more fame: in case you missed it, the Guardian have done a nice writeup of my Munich / Silicon Valley report.

The Triumph of the City

March 20, 2011

The Ed Glaeser roadshow has rolled out of town. Last week the great man spoke at LSE, ippr, Demos, Centre for Cities and Policy Exchange, also finding time for a Guardian podcast, CfC video and an FT op-ed. Phew! He didn’t even change blazer – here he is on the Daily Show wearing it again (at about 14:30).

Until now Glaeser has been a bit of an academic’s academic. With his new book, The Triumph of the City, he’s making a bid for public intellectual territory. Saskia Sassen, Peter Hall and Richard Florida have had this space to themselves for the past decade, so it’s good to see someone else step up.

 Here’s the podcast and video of his LSE lecture. Below, my quick notes.

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 1) Cities still matter because they’re ideas engines. In a knowledge-driven economy, products and services are getting progressively more complex. Cities help manage this by bringing people face to face, helping ideas spread, and cross-pollinating new ones. As the returns to skills increase, cities help people get smarter.

This is actually a very old argument, dating back to Jane Jacobs (1970) and Alfred Marshall (1918). Glaeser brings it to life with some terrific examples of ‘urban ideas chains’ – such as the birth of Detroit’s auto industry from shipbuilding (engines) and carriage works (wheels and bodies), and the growth of financial services in NYC.

2) Technology is making cities more important, not less. Rather than killing distance, social media and the internet are producing more immersive, interactive urban environments. Again, plenty of evidence (Bill Mitchell, Castells) says that online and offline are complements, not substitutes. Glaeser rightly plugs this into the development of smart cities and the internet of things. Adam Greenfield’s incoming book will tie a lot of this together.

3) We need to build cities up, not out. Glaeser thinks Jane Jacobs was right about cities, but wrong about neighbourhoods. Long term, planning controls in urban cores tend to price poorer people out of the city. Similarly, high density cities tend to be greener, but if they restrict space, people relocate to lower-density, car-dependent communities. The answer is to allow denser development and more high-rises. 

4) In the West, urbanisation is basically done. The cities of the future are happening elsewhere. 50% of the planet now lives in cities – but the biggest urban transformations are happening in South and East Asia. This is also where the need for sustainable urban development is highest. LSE’s green cities project for UNEP echoes much of this.

5) Cities are good for poor people. But we shouldn’t save failing cities. Agglomeration economies benefit everyone. Like Stewart Brand, Glaeser sees slums as hives of enterprise – but where public infrastructure and planning has failed. Glaeser also argues that in declining cities, policy should focus making the population more skilled and mobile – rather than improving decaying urban environments. 

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A few reflections. First, is there anything bad about cities? At LSE, Glaeser suggested diminishing returns don’t really matter. I’m not so sure. Above is a classic urban economics ‘net wage’ curve. Up to point B, agglomeration effects rise with city size. Diseconomies like congestion and pollution then start to kick in. At point C, in theory, everyone leaves. In practice, this doesn’t happen – but plenty of real world cities are probably between the two (Bangkok, Lagos, LA?).

Second, Glaeser’s prescription for struggling cities might be internally robust, but in the real world it’s a very hard sell – as he found out when encouraging the US Government to move people out of New Orleans post-Katrina. Glaeser’s right that declining places can’t be preserved forever. But as I’ve argued, it’s the job of elected city leaders to make these choices – not national government. 

Which brings me to devolution. Glaeser was surprisingly lukewarm on this. He argued that when central government is weak (e.g. in a failing state), then devolution is essential. But only central government can handle redistribution, or economies of scale in service provision. This chimes with my reading of the literature. Devolution doesn’t translate directly into economic growth – although it helps indirectly, by allowing city leaders more flexibility and room to innovate. As the Coalition pushes localism ever further, Ministers should keep these caveats in mind.

Getting ahead in the countryside

July 7, 2010

The big city’s the place to find fame and fortune, wouldn’t you think? Not according to the Commission for Rural Communities, whose new report claims ‘rural areas have more entrepreneurs’. This seems odd – aren’t cities supposed to help ideas flow, with banks to lend money, and customers to sell to?

All the evidence suggests innovation is heavily urbanised, for example. So what on earth’s been going on in the British countryside? Is the fresh air good for the brain?

The report’s here. It’s nearly 200 pages long, so to save you reading it I’ve done some digging. The relevant findings are:

1) A survey of bank lending finds that in 2008 and 2009, rural areas had more start-ups per working-age population than urban areas (p131)

2) GEM survey data for 2004-2008 finds higher rates of ‘entrepreneurship activity’ in rural areas than urban areas. Strikingly, the survey suggests rural entrepreneurship rates are ‘as high as inner London’ (p133).

The report uses good definitions of ‘urban’ and ‘rural’, based on this DEFRA typology. But there are questions about which rural areas we’re talking about – more on that in a moment.

Let’s start with start-ups. First, there’s not much urban-rural difference in business birth rates – 13.9 per thousand people in rural areas, 12.7 in urban areas. Second, in absolute terms there are far more start-ups in cities than the countryside – hardly surprising since c.80% of the English population live in urban areas.

Third, there’s noise in the data – the survey in question covers 93% of all bank lending, which is pretty good, but doesn’t adjust for the rest. If 80% of those loans were to city firms, a reasonable assumption, the urban-rural difference is less than one percentage point.

‘Entrepreneurship’ is a slightly more nebulous concept, and it turns out the GEM data needs a big pinch of salt. For one thing, the survey is based on just 43,000 firms across the UK – which might risk sampling error if you’re looking at small rural areas.

More seriously, GEM actually measures something called ‘total early-stage entrepreneurial activity’ – which is a weighted index including ‘nascent business activity’. This could include things like writing a business plan, but not actually doing anything with it. (I’ve also no idea how the Index is built because GEM doesn’t say.)

In the CRC small print, GEM concedes it’s tracking ‘propensity to be entrepreneurial’, rather than *actual* entrepreneurs. It’s hardly convincing.

So, case not proven – on the basis of these numbers. However, let’s suspend disbelief and assume there is a new generation of rural whizz-kids. What might explain this?

It could be a lifecycle effect – people downsize or move their families out of the city, starting new businesses in the countryside. Migration data suggests there could be something in this – young single people move into cities, older people with partners and children move out. Other studies suggest people gain skills and learning in cities, taking these with them when they leave.

There could also be a technology effect. The CRC’s start-up figures suggests that most loans go to business services like accountancy and consulting, a lot of which can be done by phone or online (anecdata – my accountant operates out of deepest East Sussex).

That implies a third point – many of rural areas are actually around the edges of big urban areas. In the jargon, they’re ‘peri-urban’ – pleasant, leafy communities with decent schools and public services, and good links into the urban core. Not surprisingly, these neighbourhoods tend to come near the top of ‘best place to live’ surveys.

In turn, that suggests some final lessons. Don’t overspin your data. The city and country have more in common than you might imagine. And ultimately, enterprise is less about place than about people.

Geography and social justice

May 20, 2010

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.

The world according to Brûlé

June 14, 2009

bagel

This weekend’s FT has a fascinating feature by Tyler Brûlé on the world’s most liveable cities. Brule is possibly the world’s most high-maintenance man – he edits current affairs / style mag Monocle, set up Wallpaper* and details his globe-crossing exploits in his regular FT column.

It’s easy to mock – see this insightful piece on Kim Jong-Il’s terrible dress sense – but the amount of glossy ads in his magazines suggests he’s on to something.

So, what does Brûlé have to say about good places to live? Monocle’s Index of 25 ‘Most Liveable Cities’ is pretty distinctive. Zurich comes out top, followed by Copenhagen, Tokyo, Munich and Helsinki. Paris is eighth, Sydney 13th, Barcelona 15th. There are lots of esoteric choices – Auckland, Fukuoka, Kyoto. And surprisingly, there’s no sign of any British or US cities at all (except for Honolulu).

Brûlé doesn’t say exactly how all this was done. But he does say that his team spent as much time looking at quality of life issues – levels of tolerance and openness, local media standards and cultural vitality – as standard economic and social performance measures, like wages and quality of public services. He also points out that other liveability surveys by the Economist Intelligence Unit and Mercer give similar results (although EIU and Mercer‘s cost of living surveys also rank these cities as very expensive).

City leaders tend to worry about these kind of rankings. Should they? I think there are a few points worth making here.

First, let’s remember what we’re trying to do. All of this is – very loosely – trying to achieve what urban economists call ‘spatial equilibrium’. This is where people and firms sort themselves across space, trading off economic, social and environmental pros and cons so that everyone finds their best place to be.

That means we need to be pretty careful about a simple ‘league table’ approach. Indexes are usually commercial products aimed at specific users. In Monocle’s case it’s globe-trotting cosmocrats [pdf] with Japanese friends; for Cushman Wakefield’s Cities Monitor [pdf] it’s, developers and property investors; for the Economist and Mercer, CEOs. So policymakers – who have to think beyond single interest groups – should approach with caution.

Second, actually measuring the ‘real cost of living’ is very hard to do. No-one has the definitive answer. I’ve been helping on a SERC project looking at these issues – the best work is from the US, where government economists have access to price data on thousands of items at very local level (like this paper by Bettina Aten). But even here, the researchers don’t go near the kind of soft measures Monocle is using.

Third, we need to remember that this is all about tradeoffs. In spatial equilibrium, actors are balancing economic, social and physical welfare. The main sources of urban growth and vitality– critical mass, big labour markets and ideas flow – tend to have a flipside, namely congestion, pollution and expense.

For that reason, the most liveable cities – where people might want to be – aren’t necessarily the ones where people need to be. This is why it feels odd that places like London, NYC, Hong Kong and Los Angeles don’t rank higher on the ‘liveability’ rankings. In these global cities the pull of place is very strong. As Jared Diamond points out, in many ways cities like LA are terrible places to live, but millions of people still choose to be there.

Monocle readers may well live in one place and work in another – so this matters less to them. Tellingly, Brûlé eventually reveals that having tried Zurich for a few months, he moved back to much less ‘liveable’ London. His compromise is to be based in the UK and flit between Zurich (winter), Copenhagen (summer) and Tokyo (business trips). Nice work if you can get it!

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