New evidence on integration and economic mobility

It’s unusual to flag an economics article as a “must-read” for general audiences: but if you care about cities and place, and about the prospects for the American Dream in the 21st Century, you owe it to yourself to read this new article by Raj Chetty, Nathaniel Hendren, “The Impacts of Neighborhoods on Intergenerational Mobility: Childhood Exposure Effects and County-Level Estimates.”  (The Executive Summary is just six pages long—you can download it here.)

This work strongly confirms the growing belief that the kind of community you grow up in has a huge impact on your lifetime economic opportunities.  Specifically, the Chetty-Hendren study shows that some communities do a much better job of helping kids from low income families achieve economic success than do others.  And these communities tend to be ones that have low levels of economic and racial segregation, better schools, less violent crime, and fewer single-parent families.  An important part of how we assure opportunity to all hinges on how we build communities.

Seattle ranks as one of the most mobility-friendly metropolitan areas. Credit: Jonathan Miske, Flickr
Seattle ranks as one of the most mobility-friendly metropolitan areas. Credit: Jonathan Miske, Flickr

This study is remarkable for a number of reasons:  it’s clearly and simply presented, based on an extraordinarily large and powerful database, provides detailed findings (down to the county level), and provides strong evidence that its findings are cause-and-effect, not mere correlation.

One of the big bugaboos of economic research is that, unlike other scientific inquiries, economists are not generally allowed to run random selection controlled experiments on human beings—which we would all probably agree is a good idea.  Economic research, like most social science, typically must rely on statistical inference from sample data often gathered for other purposes, with its attendant margins of error.  And secondary statistical data make it especially difficult to make definitive cause-and-effect statements: For example, did a community’s environment cause children to have particularly high levels of economic mobility, or did the unseen choices of some parents to move in and out of particular neighborhoods lead “natural” high achievers to locate in some places and “natural” low achievers to locate elsewhere.

Using the combination of a massive, long-term longitudinal data set (created from anonymized tax return data), and data from the Federal Government’s quasi-experimental “Moving to Opportunity” program which gave low income families vouchers to enable them to move to non-poor neighborhoods.

It’s highly unusual in the world of economics to use the word “causal” to describe one’s reported findings, but in this new report you’ll see this term used early and often to describe the findings.  The use of data on siblings and exploiting the differential effects for boys and girls is clever and impressive.  One of the criticisms levied of other work is that it can’t control for the fact that intergenerational mobility for some families may represent selection effects: the most energetic, ambitious families are more likely to move away from worse environments and to better ones.  It is very rare in social science to be able to make this kind of strong claims about causality.

And New Orleans ranks as one of the worst. Credit: Chuck Coker, Flickr
And New Orleans ranks as one of the worst. Credit: Chuck Coker, Flickr


The great thing about the Chetty-Hendren research is that you can drill down to the county level to see what impact the local community has on economic outcomes for kids.  And the measure of success couldn’t be clearer: they show how much each additional year spent growing up in a particular neighborhood is likely to influence a child’s income as an adult.  As they explain in their report:

Every extra year spent in the city of Baltimore reduces a child’s earnings by 0.86% per year of exposure, generating a total earnings penalty of approximately 17% for children who grow up there from birth.

The differences among metropolitan areas are substantial: a poor child growing up in Seattle would be expected to earn about $29,000 (about $3,000 or 12 percent more than the national average for children in the bottom quintile of the population), while a poor child growing up in New Orleans would be expected to earn a little more than $22,000 at the same age, ($3,800 or almost 15 percent less than the national average.)  You can see data for individual counties and for commuting zones (metropolitan areas and their surrounding hinterlands) at the New York Times website.

To provide a quick snapshot for large metropolitan areas, we’ve created a graphic showing the Chetty-Hendren estimates for central counties (the county that includes the first-named city in a metropolitan area) and for the surrounding commuting zone.  These data show how much more (or less) than the national average a child in a family in the lowest quartile of the income distribution growing up in the central county or commuting area would make at age 26.  (Orange dots represent commuting zones; blue dots represent central counties.)

A couple of patterns are apparent: in general, central counties have lower rates of economic mobility for poor children than in commuting zones.  Central counties tend, on average, to have more concentrated poverty, lower-performing schools, and higher rates of single-head households—all of which are correlates of low economic mobility.

In a companion paper, Chetty and Hendren and Harvard Economist Larry Katz re-examine an important, and previously discouraging set of findings from the Moving to Opportunity (MTO) project.  MTO was a federal project that gave poor families vouchers to move from poor neighborhoods to middle income neighborhoods.  The previously reported results found that the moves produced little economic improvement for adults, and modest results for children.  In their re-analysis, Chetty, Hendren and Katz, show that when children moved made a huge difference:  those who moved as very young children (under age five) showed significant gains, while those who moved at an older age showed few if any gains.  Consistent with their larger analysis of inter-neighborhood moves, the gains to moving to better neighborhoods were directly correlated to how long children were exposed to better conditions.  (For a more detailed review of these studies and their import, it’s worth reading Justin Wolfers’ commentary.)

At City Observatory, we think these findings are the strongest evidence yet that addressing neighborhood and urban development is critical to promoting equal opportunity for all.  As Chetty and Hendren conclude that while the evidence shows that some children can gain opportunity by moving to a new, better neighborhood that this isn’t a scaleable solution for everyone; as a result:

. . . one must also find methods of improving neighborhood environments in areas that currently generate low levels of mobility. . . our findings provide support for policies that reduce segregation and concentrated poverty in cities (e.g., affordable housing subsidies or changes in zoning laws) as well as efforts to improve public schools.

Baltimore’s problems belong to 2015, not 1968

In the wake of violent protests against yet another apparent police killing in Baltimore, variations of this meme spread rapidly in certain corners of social media. Their message went something like this: Pundits and politicians may think Baltimore’s crisis began with the first brick that hit a window at CVS, but we – the people who live there – know the crisis goes back much further, and much deeper.

With this in mind, there’s some irony to the spate of columnists warning that the disturbances in Baltimore mark a return to the “bad old days” of the mid-to-late 1960s, when a series of violent protests in America’s black neighborhoods held the nation riveted. Those riots, too, were treated as a crisis by pundits who had not applied the term to decades of housing discrimination, or illegal violence on the part of police officers and white civilians.

But using violent protests as a point of analytic departure – rather than the underlying crises that provoked them – doesn’t just (unintentionally) reveal one of the similarities between 1968 and 2015. It also misses a lot of the major differences.

At the Washington Post, Radley Balko has covered some of the ways in which things are much better now. For one, the wave of violent crime that plagued American neighborhoods – and especially ones whose residents were predominantly low-income and black or brown – has receded, even if it remains far too high. Balko reminds us that the U.S. saw 500 fewer murders in 2013 than in 1969, despite the fact that there were over 100 million more people.

In other ways, things are much worse. As we’ve covered here at City Observatory, concentrated poverty has exploded since 1970, with three times more neighborhoods with poverty rates of at least 30 percent in 2010. And even as crime has declined, the incarceration rate – particularly among black men – has skyrocketed, disrupting millions of lives and leaving communities across the country with millions of “missing” men.

From our "Lost in Place" report.
From our “Lost in Place” report.

But especially when it comes to the role of cities, the comparisons to 1968 miss the very, very different trend lines of that era. In the 1960s, America was decades into – and had decades remaining in – a period in which wealth, and anyone who had enough of it, was moving as far as it could from urban centers.

For a variety of reasons, those trends have now reversed. The geography of metropolitan wealth is now double-peaked: downtowns and surrounding neighborhoods are catching up to rich outer suburban neighborhoods, and the ring of poverty that separates them is moving further out into outer city neighborhoods and inner-ring suburbs.

Houston shows a typical pattern, with growing wealth in the center and an economically shrinking middle ring.
Houston shows a typical pattern, with growing wealth in the center and an economically shrinking middle ring.

Importantly, this movement of middle- and upper-income people and jobs back to center cities has taken place despite the presence, and growth, of intensely concentrated poverty within those very same cities. That is, the prediction of people like Joel Kotkin that the problems of poor neighborhoods in Baltimore will hold back this trend just doesn’t appear to match the evidence.

It is true, of course, that so far reinvestments in places like Baltimore’s Inner Harbor have mostly not translated to meaningful improvements in the lives of residents in struggling neighborhoods. But we believe that the return of wealth to America’s inner cities at least provides a valuable opportunity to make those improvements.

That’s because broadly speaking, the built form of cities – defined as anything from a dense Manhattan neighborhood to the “streetcar suburban” communities in Midtown Memphis – really is a better arena for seeking social justice than most automobile-oriented suburbs.

For one, urban neighborhoods tend to offer a larger proportion of public, rather than private, space. This can take the form of anything from public parks, libraries, and civic centers, to simply a sidewalk. For people who are low-income, that means access to services, amenities, and cultural life that might be denied to them in the suburbs: think of the difference between a city with public pools and a suburb where people only go swimming in their backyards, private athletic centers, or a shared private pool in a gated community.

Second, because urban neighborhoods tend to offer a wider range of transportation options – including walking, biking, and public transit – transportation costs are much, much lower. In a city, you can save thousands of dollars a year by not owning a car – money that would be better spent on higher-quality food, your kids’ education, or retirement savings, but which in a typical suburb would instead go to insurance and gas. Even where a family doesn’t want to give up car ownership entirely, moving from one car per adult to one car per household can mean significant savings.

As you move away from the heart of metropolitan areas, transportation costs skyrocket. From the Center for Neighborhood Technology's "H+T Index."
As you move away from the heart of metropolitan areas, transportation costs skyrocket. From the Center for Neighborhood Technology’s “H+T Index.”

Finally, urban neighborhoods tend to be located in larger municipalities. (This isn’t always true, of course – there are urban neighborhoods in small suburbs and very “suburban” neighborhoods in large cities – but for historical reasons, it generally is.) That means city services can draw on taxes from both high-income and low-income neighborhoods – as opposed to smaller suburban municipalities, where high tax revenues from rich areas feed back into high-quality services for the wealthy, while low-income municipalities struggle to fund services for their poorer residents.

The return of wealth to central cities has the potential to enhance all three of these factors: balancing tax rolls in historically disproportionately poor cities allows those governments to provide better public services and amenities, while creating jobs in central cities, rather than suburbs, allows more people to get to work via affordable transit. On top of that, attracting middle class households back to cities that have gone decades without them creates the possibility of more economically integrated neighborhoods – which, as recent research shows, can lead to more social mobility for low-income residents.

So far, of course, we’re very far from realizing that potential. But that’s a very different failure than the situation cities like Baltimore found themselves in fifty years ago.

Fake city, flawed thinking

There’s little question that technology is important to cities.  Without elevators and electricity, for example, it would be almost inconceivable that we could have dense urban centers.  So thinking about how advances in technology are likely to affect city success is critically important.  And while technology captures our imagination, sometimes we become so fixated on the technical details that we lose sight of the ultimate value of technology, which is that it should make people’s lives better.  A recent story illustrates that point.

Last week, the Atlantic reported that plans were afoot to build a $1 billion dollar fake city in the New Mexico desert. The purpose of the city – which will have no human residents, but will have buildings, roads, sewer and water lines, electricity and telecommunications – will be to serve as a facility for testing new technologies. Hence its name, “The Center for Innovation, Testing and Evaluation,” or CITE.

Big city coming here. Credit: Andrew E. Larson, Flickr
Big city coming here. Credit: Andrew E. Larson, Flickr


The proposal is actually a warmed over version of a project originally announced four years ago – with a $200 million price tag – which has apparently never made it past the press release stage.

There are so many problems with this story, it’s hard to know where to begin. First, there’s simply a question of the credibility of the project itself: the project is proposed by a company called “Pegasus Global Holdings” – a corporate moniker that sounds like it could have been drawn from a Roger Moore-era James Bond movie. The company’s website indicates that its management team has been active in trying to develop satellite-based communication systems, but it’s not clear how this expertise will  translated into building a billion dollar city in the New Mexico desert.

What’s equally surprising is that none of the journalists at the Atlantic apparently bothered to examine whether Pegasus Global Holdings has the financial or technical capability to carry out such a project. While Pegasus has some big dreams, there’s little evidence its tackled anything of this scale or complexity. According to the Department of Defense contracts database, Pegasus General has received 2 contracts to provide radio jammers for the Navy, one for $37 million and another for $7 million.

It’s also questionable whether the market for the kind of testing that would go on in a fake city would ever cover the rent on a $1 billion investment (or even a $200 million one). In 2011, a journalist who asked about likely customers for the facility reported: “Pegasus Global did not immediately respond to our request for comment about whether specific companies and organizations have already expressed interest in using the facility.” And the city manager of the first town expected to host the project told the Atlantic: “When we started pressing for details, that’s when they decided to look elsewhere.”

But there’s a far deeper problem here. A city without people is certain to perform poorly at helping us solve real world problems.

In fact, many of our urban problems stem directly for optimizing cities for technology, instead of people. For example, we’ve long prioritized rapid movement of vehicles on city streets–with devastating consequences for pedestrian and bike safety and urban livability. Nationwide, adopted engineering standards require that we make wide, gently curved suburban streets. Ostensibly, these standards improve safety by minimizing conflicts, improving visibility and eliminating obstacles – but they actually make streets less safe by encouraging faster driving.


Unsafe at high speeds. Credit: Google Streetview
Unsafe at high speeds. Credit: Google Streetview


Ultimately, cities are about people. We have to think about how urban spaces make living and interaction easier and better for people – not for technology and inanimate objects. It’s tempting to view the city as just a collection of pavement, pipes, wires and buildings, but to do so misses the real social and human characteristics that underpin city success.

Cities are created by and for people. Viewing urban problems in narrow technical terms and crafting policies and solutions to achieve engineering efficiency, with no regard to how this will affect humans – and how human behavior will change and adapt in response – is a recipe for failure. Which is why, at City Observatory, we think there’s a lot more to be learned from the experience of real cities that can be a guide to how we harness policy, technology, markets and people towards achieving the goal of making more successful cities.

Gentrification: The state of the debate in 2015

Gentrification continues to command an enormous amount of attention in the media, and several prominent publications – from The Economist to The Week – have made provocative arguments on the subject since our previous roundups in December.  Here’s our take on what’s being said.

We worry too much about gentrification

1. “Bring on the Hipsters,” says one of the anonymous writers (hi, Ryan Avent) at The Economist. The British magazine argues that gentrification is a blow against the much more serious scourge of segregation and concentrated poverty, citing our study in the process.

2. Evan Horowitz at the Boston Globe makes a similar argument, pointing to studies that suggest that gentrification causes less displacement than is generally believed, and that rising home prices are actually a good, wealth-building trend for low- or moderate-income homeowners. He also notes that gentrification is unlikely to happen to poor, non-white neighborhoods.

3. In the Chicago Sun-Times, Marisa Novara points out that the vast majority of Chicago’s neighborhoods are experiencing growing poverty, not rapidly climbing property values.

4. Another Chicagoan, Natalie Moore, calls gentrification “the least of Chicago’s worries” at Grist. She points out that not only are most neighborhoods in economic decline, but even signals of gentrification, like an announced Whole Foods in the Englewood neighborhood, don’t actually seem to be having much of an effect. She calls for renewed investments in retail corridors and vacant properties in struggling neighborhoods.

…or maybe we don’t

5. Megan McArdle, at Bloomberg View, points out that even if rising home values are good for homeowners, and falling levels of segregation are good for society as a whole, and civic leaders and urbanists love to see inner-city neighborhoods get an infusion of retail and building renovations, gentrification will still have its victims. In particular, people who rely on the social capital of their communities – their location-based networks of friends and family – can be in serious trouble if rising rents push them, or their contacts, out of touch.

6. Gothamist takes a look at The Economist‘s unabashedly pro-gentrification arguments and is not convinced. “We’d love to hear some of the Southside’s Puerto Rican and Dominican locals’ thoughts on that,” they write.

Concentrated poverty, concentrated affluence

7. Alana Semuels at CityLab writes up a report from the University of Minnesota about where all the rich people who don’t live in poor neighborhoods are hiding themselves. The Detroit area, for example, though a symbol of urban poverty, also has 55 “racially concentrated areas of affluence,” which are at least four times wealthier than the average neighborhood in the metropolitan area and are just 1.1 percent black.

Liberals are urban egalitarians, so why have they failed so miserably on housing policy?

8. At The Week, Ryan Cooper takes the left to task for its inability to come up with a coherent agenda on affordable housing and, relatedly, gentrification. He says Democrats in well-to-do cities like Washington, DC, are under the influence of affluent residents who may support redistribution in theory, but are unwilling to allow housing construction in their own neighborhoods that might relieve pressure in the market – let alone spend the money for a “massively expanded” public housing program.

How we got here

9. At the blog of the Economic Policy Institute, Richard Rothstein reminds us that the patterns of racial segregation that gentrification (occasionally) disturbs were not formed simply by a desire for African Americans or Latinos to live together. Rather, they were created through racist housing policies and violence that enforced separation.

So what do we do?

10. In the New York Times, Héctor Tobar suggests that we ought to embrace the potential gentrification carries for desegregation, observing the changes that have happened in his own Los Angeles neighborhood. Acknowledging the potential for displacement, however, Tobar endorses rent control to prevent housing price increases from pushing out older residents and resegregating along higher-income, whiter demographics.

11. But Ben Adler at Grist responds that this is doubly wrong. He argues that gentrification is as much a threat to integration as a friend. But Adler also believes that rent control, as an anti-displacement policy, is counterproductive, offering no assistance to people who don’t already have an apartment in the affected neighborhoods, and ultimately raising uncontrolled rents by distorting the market. His preferred policy solution involves the construction of more market-rate housing to satiate demand and keep overall prices down, coupled with co-operative ownership structures that can shield residents somewhat from the dangers of rising costs.

Policy takeaways

One of the things that makes gentrification such a contested subject is that there is little consensus about exactly what it is, how it works, and what its ultimate results are – subjects of much of the debate in the pieces we’ve posted here. But it’s also worth jumping past those arguments to look directly at the policy responses people have proposed, what they’re intended to do, and what the evidence suggests that they might accomplish. In a follow-up piece, we’ll do just that.

Undercounting the transit constituency

By far the most common way to measure transit use is “commute mode share,” or the percentage of workers who use transit to get to their job. For the most part, this is a measure of convenience: it’s the most direct way the Census asks about transportation, which means it’s the easiest way to get consistent data from any city or metropolitan area in the country.

But it also has a lot of problems. For one, the vast majority of trips – about 84% – aren’t simple home-to-work commutes. And it’s not just that people who work also go to the grocery store, restaurants, or friends’ homes. Lots of people don’t work at all, and those people – largely students, the elderly, or people with disabilities – are disproportionately likely to use transit for all or almost all of their trips. Finally, plenty of people who do work might drive three or four days a week and take transit the other one or two. But since the Census only asks about what they do most of the time, they’ll show up as “drivers.” All of these things will tend to undercount a place’s reliance on public transit.

People take transit for lots of reasons! Credit: Juliana Swanson, Flickr
People take transit for lots of reasons! Credit: Juliana Swenson, Flickr

Recently, a handful of people have proposed their own measures to try to correct for some of these problems. One of the best came from Reuben Fischer-Baum at FiveThirtyEight, who ranked American cities based on annual transit trips per capita. That has the advantage of counting all trips, whether they’re work-related or not. It can’t, however, tell you much about the distribution of use across people: maybe a place scores highly because 10% of people use transit a lot, or 40% of people use transit occasionally.

In the spirit of this work, City Observatory would like to offer our own measures of transit use, based on data from the Census’ American Housing Survey. (The 2013 AHS includes just 25 metropolitan areas, which is why many larger cities are left out of our list below.) And these measures suggest that, indeed, commuting mode share dramatically understates Americans’ reliance on transit.

The first, more restrictive measure is the percentage of households that report using transit to get to school or work “sometimes, most of the time, or always” (leaving out people who reported “once in a while” or “never”). The second, broader measure is the percentage of households that report using transit for any purpose.

These measures have two big advantages over commute share. First, like Nate Silver’s index, they include a broader sample of trip destinations than just work. Second – just as importantly – they recognize that transportation decisions are usually made at the household level, not individual. Consider a couple who both work outside the home.  That is, if a man takes the bus to work, then his wife or husband also depends on that transit service, even if they usually drive. After all, if the bus stops running, they’re going to have to figure out a way to carpool, or even buy another car – a major logistical or financial burden for many families. The same is true for parents of children who take transit to school, or adult children who live with elderly parents who rely on transit to get to social services or other activities.

That means that these figures better demonstrate the number of people with a direct stake in transit service, whether or not they themselves ride it on a regular basis. (Of course, lots of people who “have a stake” in transit are still left out, including people who would like to use transit but can’t because the service isn’t good enough, or people who drive but benefit from reduced congestion because of transit, or employers whose employees wouldn’t be able to show up for work without transit.)

And that matters because the people who make decisions about transit investments – politicians – look at how many of their constituents benefit from a given service as a major component of whether they benefit politically from supporting it.

And if they’re just looking at commute share, they’re looking at too few people. Even transit-rich metropolitan Boston doesn’t look so great by that metric: only 12% of workers there usually take transit to their jobs. But 29% of households include someone who regularly takes transit to school or work, and fully 56% of households use transit for at least some of their trips. In sprawling Houston, just 2% of workers commute with transit – but more than twice that proportion of households use transit for work or school, and more than one in ten households use transit for some of their trips. That’s still not great, but it’s much more significant than the minuscule commute numbers. It also suggests that even in one of the most transit-hostile regions of the country, a remarkable number of people find public transit useful for certain trips, forming a toehold for better service to produce even more ridership.

Where transit is convenient enough, people take it - even in Houston. Credit: wordjunky, Flickr
Where transit is convenient enough, people take it – even in Houston. Credit: wordjunky, Flickr

Of course, critics of these measures will point out that using households rather than individuals will make the proportion of car use increase, too, since a large number of households use both transit and private automobiles. But that’s really the point: people’s transportation behavior is much more diverse and flexible than the simple commute numbers suggest, and we ought to be giving as many people as possible as many choices as possible so they can determine what makes the most sense for a given trip.

In the end, the fact that transit use is broader than we think is evidence of its usefulness, and evidence that where service is adequate, many people will recognize that usefulness. But the case for better transit service goes beyond that. It’s about connecting people with opportunities in an affordable, efficient way, whether that’s a job or a cultural event. It’s about giving people the freedom to access what their own city has to offer. Everyone ought to have that choice.

City of ideas, and the idea of cities

Credit: Galería de Faustino, Flickr

Notes from your far flung correspondent, in the shadow of the Acropolis.

Though the local economy is still in turmoil, Athens is still awash in the steady tramping of tourists.  Compared to your correspondent’s last visit to this city three decades ago, the distinguishing mark of tourism is no longer the long lines of foreigners looking to exchange deutsche marks, yen, pounds and travelers checks for drachmas, but rather the parade of latter day Narcissus, with smart phones appended from selfie-sticks dutifully capturing the ancient sights as backdrops of a digitized odyssey.

As ever, the Parthenon looms over the city, a visible reminder of the sublime accomplishments of the Ancient Greeks.  The building is a ravaged remnant of its former self, but is nonetheless majestic, and its image, like so much of what the Greeks created is still deeply imprinted on our collective conscious—which is probably why the city remains such a compelling destination.

The Greek original seems so familiar because it has been so widely copied. In my own American hometown, as in countless others, the headquarters of the local bank copies in proportions, details and material the design of the Parthenon—it is the temple of money.

But the imprint of Greek culture on current life, of course, runs much deeper than architecture.  So many of the concepts that guide or define modern life were either devised or at least given names here:  our notions of democracy, the polity, the agora, as well as enduring contributions to art, science and mathematics.  And Greece was fundamentally structured as a series of city-states.  The Greek nation was a purely modern invention; Ancient Greece was always a constantly shifting, often warring set of cities, occasionally–but always temporarily–welded together by invading empires (or the threat of invasion).

As Ed Glaeser says in Triumph of the City, cities are mankind’s greatest creation.  And much, though certainly not all, of what we treasure about cities can trace its routes to the city-states of this region, most notably Athens.  But there was a flowering of cities in this part of the world two to three millennia ago.

Some of the earliest known human settlements trace their roots to this region, in fact.  As Jane Jacobs famously relates in her book The Economy of Cities, the excavation of one particularly ancient settlement Catal Huyuk, in Asia Minor—modern day Turkey—provides a compelling insight into the importance of cities to civilization.

The generally received wisdom about cities is that urbanization and permanent settlements were the accidental, or perhaps incidental by-product of improvements in agriculture:  that our hunter-gatherer ancestors stumbled upon or made some advances in crop raising that led them to settle permanently in some locations, and that as agricultural productivity improved, people had more time for alternate pursuits and managed to develop other skills.  Jacobs turns this agriculture-led creation myth on its head.

In her imaginative tale of how things could have happened, Jacobs describes the development of a settlement she calls New Obsidian, which begins as a place of assembly for nomadic groups where bartering of diverse commodities and crafts, leads to the establishment of a permanent settlement. The settlement then becomes a place, not just for trade, but also for animal husbandry, inadvertent cross-pollination of grains, the refinement of crafts and tool making, and ultimately increasingly sophisticated production. In Jacobs’ story, the creation of “new work” in cities leads to higher productivity in agriculture and stimulates development.

Ultimately, that process of developing more advanced technology, more complex economies, successively larger cities and the institutions needed to organize and govern them led to the city-states whose remnants we see today, in places like Athens. And that process continues apace today.  Cities are even today steadily creating the “new work” that propels economic growth and improves our standard of living.  There’s little reason to believe this process has reached its culmination.

As Paul Romer provocatively argues, we should be thinking about new cities as a way to tackle the problems of improving the living standards of the billions of people who still lag the most advanced nations. In his proposal for “Charter Cities” Romer argues for innovative institutional arrangements that would allow for experimentation with policies to deal with development, transportation, criminal justice and global warming.  Romer comes to cities from an interesting perspective:  in the 1980s, he authored two seminal papers on “New Growth Theory” that pointed to our ability to continually create new ideas as the driving force behind long term economic growth.  In recent years, he’s turned his attention to cities as the venue for devising new institutions that can easily give rise to and apply new ideas.  You can read a recent interview with Romer here.

There’s much glib talk of “Smart Cities” with an excessive focus on how new technologies – from the so-called “Internet of Things” to autonomous vehicles will reshape city life.  It is likely that these things will emerge, evolve  and be applied in cities.  And it will be the cities that bring people together, that promote the free flow of ideas, that exhibit a certain democracy in their affairs, that are likely to be the most successful in realizing these technologies.  And while the technologies would amaze the ancient Greeks, the kind of values that such a community would embody would not seem unfamiliar to them.

There’s no such thing as a Free-Way*

(*  with apologies to Donald Shoup)

A new report from Tony Dutzik, Gideon Weissman and Phineas Baxandall confirms, in tremendous detail, a very basic fact of transportation finance that’s widely disbelieved or ignored: drivers don’t come close to paying the costs of the roads they use. Published jointly by the Frontier Groups and U. S. PIRG Education Fund, Who Pays for Roads exposes the “user pays” myth.

Screen Shot 2015-05-12 at 3.32.45 PM

The report documents that the amount that road users pay through gas taxes now accounts for less than half of what we spend to maintain and expand the road system. The shortfall is made up from other sources of tax revenue at the state and local level. This subsidization of car users costs the typical household about $1,100 per year – over and above what they pay in gas taxes, tolls and other user fees.

While recent congressional bailouts of the Highway Trust Fund have made the subsidy more apparent, it has actually never been the case that road users paid their own way. Not only that, but the amount of their subsidy has steadily increased in recent years. The share of the costs paid from road user fees has dropped from about 70 percent in the 1960s to less than half today, according to the study.

There are good reasons to believe that the methodology of Who Pays for Roads, if anything, considerably understates the subsidies to private vehicle operation. It doesn’t examine the hidden subsidies associated with the free public provision of on-street parking, or the costs imposed by nearly universal off-street parking requirements, that drive up the cost of commercial and residential development. It also ignores the indirect costs that come to auto and non-auto users alike from the increased travel times and travel distances that result from subsidized auto oriented sprawl. And it also doesn’t look at how the subsidies to new capacity in some places undermine the viability of older communities (a point explored by Chuck Marohn at length in in his Strong Towns initiative.)

These facts put the widely agreed proposition that increasing the gas tax is politically impossible in a new light: What it really signals is car users don’t value the road system highly enough to pay for the cost of operating and maintaining it. Road users will make use of roads, especially new ones, but only if their cost of construction is subsidized by others.

The conventional wisdom of road finance is that we have a shortfall of revenue: we “need” more money to pay for maintenance and repair and for new construction. But the huge subsidy to car use has another equally important implication: because user fees are set too low, and because, in essence, we are paying people to drive more, we have excess demand for the road system. If we priced the use of our roads to recover even the cost of maintenance, driving would be noticeably more expensive, and people would have much stronger incentives to drive less, and to use other forms of transportation, like transit and cycling. The fact that user fees are too low not only means that there isn’t enough revenue, but that there is too much demand. One value of user fees would be that they would discourage excessive use of the roads, lessen wear and tear, and in many cases obviate the need for costly new capacity.

And these subsidies to car travel have important spillovers that affect other aspects of the transportation system. There’s a good argument to be made that part of the reason that subsidies to transit are as large as they are is that motorists are being paid not to use the transit system in the form of artificially low prices for road use and (thank you Don Shoup) parking.

Credit: David Gallagher
Credit: David Gallagher

There’s another layer to this point about roads not paying for themselves: Most of these calculations are done on a highly aggregated basis, and look at the total revenue for the road system, and the total cost of maintaining the road system. What the study doesn’t explore is whether particular elements of the road system pay for themselves or not.

Think about air travel for a moment. Airlines don’t simply look at whether their total revenue from passengers (fares and all those annoying fees) covers the total cost of jets, crews, and fuel (although the stock market pays attention to this). Airlines look at each individual flight and each route, and examine whether the number of travelers and the amount of fares that will be paid cover the cost of providing that service—when not enough passengers use a route, they discontinue air service (as many small market cities know too well). While this calculus is routine and well-accepted in air travel and the private market, it’s unknown for public roads.

The Frontier Group/US PIRG study also significantly understates the economic cost of the transportation system. Their analysis looks only at how much we are actually spending to maintain and expand the current system. This is problematic for two reasons. First, there’s abundant evidence that we’re not spending enough to keep the system in repair, and there’s a growing hidden cost in higher future repair bills from the added deterioration of the system. These hidden costs are accumulating and not reflected in what users pay now. Second, we’re doing nothing to recognize the economic value of the existing road system: the replacement cost of the current road system –what it would take to rebuild the existing asset—is likely on the order of tens of trillions of dollars. Current road users get free use of that inherited, paid for (but depreciating) asset. Again, this is unlike other forms of transportation: just because United Airlines may have long since paid off the purchase price of the 737 you are riding in, doesn’t mean that they don’t charge you for the capital value of using that asset.

The real question for transportation public finance is whether new roads—additional capacity—pays for itself. Does the volume of traffic using a new bridge or additional lanes of freeway capacity pay for the road they use in their road taxes? New projects are so expensive–$100 million or more for a mile of urban freeway–that the road users who pay the equivalent of 2-3 cents per mile of travel in gas taxes (depending on the tax rate and vehicle fuel efficiency) never contribute enough money to recoup the costs of the new capacity.

Credit: Richard Masoner,
Credit: Richard Masoner,

The surprising evidence from road pricing demonstrations (tolled HOT lanes) is that the revenue gathered from tolling often fails to cover the costs of collecting the tolls and operating the toll collection system: they never come close to paying for the roadway. (To be sure, tolling improves the efficiency of use of the freeway—traffic flows more smoothly, capacity is increased—but the tolls don’t pay for constructing, or even maintaining the pavement).

But again, the highly visible toll collection mechanism, like the very visible gas tax, creates the illusion that user fees are paying the cost of the system.

As the Transit Center demonstrated in its recent report, Subsidizing Congestion, the $7.3 billion federal tax break for commuter parking costs encourages additional peak hour car commuting which has the effect of causing greater congestion.  The systematic under-pricing of roads has the same effect, with the result that taxpayers subsidize car use through higher taxes, and also face greater congestion than they would if road users paid their way.

To be sure, these same questions can, and should be raised about transit, biking and walking projects.  And for transit projects, close financial scrutiny is far more common than for roads.  A key difference with these other forms of transportation is that they arguably have big net social benefits–lower congestion, less pollution greater safety, and they support important equity objectives by making transportation available to those who don’t own or can’t operate a motor vehicle.  The problem with hidden subsidies is that often that they’re hidden:  if we made them explicit, and considered our alternatives we would likely choose differently and more wisely.

The problem of pricing roads correctly is one that will grow in importance in the years ahead. Its now widely understood that improvements in vehicle fuel efficiency and the advent of electric vehicles is eroding the already inadequate contribution of the gas tax to covering road costs. The business model of companies like UBER and LYFT likewise hinges on paying much less for the use of the road system than it costs to operate. The problem is likely to be even larger if autonomous self-driving vehicles ever become widespread—in larger cities it may be much more economical for them to simply cruise “free” public streets than to stop and have to pay for parking.

As we’ve pointed out before, the root of many of our transportation problems is that the price is wrong.  Puncturing the widely held myth that cars pay their own way makes this report required reading for those thinking about transportation finance reform.

How we measure segregation depends on why we care

Last year, NYU’s Furman Center hosted a roundtable of essays on “The Problem of Integration.” Northwestern sociologist Mary Pattillo kicked it off:

I must begin by stating that I am by no means against integration…. My comments are not to promote racial separatism, nor to argue that people of the same “race”–-and we must always signal just how time- and place-specific “race” is–“naturally” want to be around each other….

Instead, my point is simply to identify the following conundrum of integration politics: Promoting integration as the means to improve the lives of Blacks stigmatizes Black people and Black spaces and valorizes Whiteness as both the symbol of opportunity and the measuring stick for equality.  In turn, such stigmatization of Blacks and Black spaces is precisely what foils efforts toward integration. After all, why would anyone else want to live around or interact with a group that is discouraged from being around itself?

I thought of this problem, and this roundtable, while reading about FiveThirtyEight’s fascinating metric for residential racial segregation in American cities. By creating “diversity indices” at both the metro area level and neighborhood level, Nate Silver was able to distinguish between two relevant kinds of racial makeup, and – by subtracting one from the other – create a segregation statistic that takes into account the fact that Salt Lake City’s overall population does not look like Atlanta’s. In doing so, Silver came to the (perhaps not so surprising) conclusion that more diverse cities also tend to be more segregated.

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But another number jumped out at me from this analysis. Or rather, the lack of one: New York City did not appear on the “most segregated” list. Why was this? After all, on what is probably the most-cited measure of segregation, the dissimilarity index, metropolitan New York City ranks as the third-worst city in the country for black-white segregation (behind only Detroit and Milwaukee), and second-worst for Hispanic-white segregation (behind only Los Angeles).

(New Yorkers, of course, are frequently surprised to hear that their city is so divided. Then again, they only recently discovered that Los Angeles has art galleries, so.)

The answer, of course, has to do with the difference between Nate Silver’s segregation index and the dissimilarity index. Silver’s measure looks at whether people of any racial or ethnic group live in neighborhoods where they’re as likely to run into people of other groups as they would be in their metropolitan area as a whole. That is, you get a really bad score for having neighborhoods that are made up overwhelmingly of a single racial group.

On that measure, New York is clearly less segregated than, say, Chicago, to take the worst city by Silver’s count. Here, for example, are the areas in New York where 90% or more of the residents are black:

And here it is in Chicago:

In New York, this kind of single-race neighborhood is relatively rare, while in Chicago it’s almost the norm on the South and West Sides. Why, then, does the dissimilarity index suggest that New York is so segregated?

It’s because the dissimilarity index asks not just about any racial mixing – it usually asks specifically about whether blacks and whites, or Hispanics and whites, live in the same neighborhoods. And if that’s the question, then New York looks much, much worse. In fact, if you look for places where both blacks and whites make up at least 10% of the population, it turns out only a small minority of New York neighborhoods meet that criteria. (New York City overall is about 35% non-Hispanic white and 25% black.*)


So which measure is “right”? Both of them, of course – they just answer different questions.

But to bring us back to the Furman Center’s roundtable, I think at this point it’s useful to ask why we think segregation matters. If the answer is that we think that our lives are enriched by being in proximity to – and, hopefully, forming meaningful friendships with – people of other backgrounds, then Silver’s index makes sense.

But one of Furman’s respondents, the sociologist Patrick Sharkey, suggested another, perhaps weightier reason. Segregation is important not just because it troubles our dreams of a country where people of different backgrounds can all get along, Sharkey wrote; it matters because segregation is how deep racial inequalities get reproduced from generation to generation:

Living in predominantly black neighborhoods affects the life chances of black Americans…because black neighborhoods have been the object of sustained disinvestment and punitive social policy since the emergence of racially segregated urban communities in the early part of the 20th Century. Residential segregation has been used consistently over time as a means of distributing and hoarding resources and opportunities among white Americans and restricting resources and opportunities from black Americans. Racially segregated communities provide one of several mechanisms through which racial inequality is made durable.

That is, it’s easier to send black children to inferior schools if their schools are all on one side of town, and white schools are on the other. It’s easier to target housing and mortgage discrimination against blacks – one of the most important causes of the wealth gap – if all the black-owned houses are in one area. It’s easier to unleash abusive policing and incarceration practices on black communities without disturbing – or even attracting the attention – of whites for decades if whites and blacks don’t live in the same neighborhoods.

The New York Times‘ visualization on how the neighborhood a child grows up in affects their future earnings reinforces this idea. As Yonah Freemark pointed out, a map of counties where social mobility is worst looks pretty similar to a map of counties with large black – or Native American – populations.

And that includes the large black populations in the New York metro area.

If this is why we care about segregation, then Silver’s measure – which doesn’t care which racial groups are mixing, as long as there is some mixing going on – is less useful. What matters then isn’t just integration: what matters is that privileged groups live in the same places as traditionally oppressed groups, so that place-based discrimination is made more difficult. In the United States, that means whites and people of color living in the same neighborhoods. Where that doesn’t happen – even if an area is integrated with, say, blacks and Latinos – then place-based discrimination is still viable, and it will be much easier to reproduce racial inequality.

This is also at least a partial resolution to Mary Pattillo’s concern that wringing our hands about the problem of segregation could, effectively, be implying that black people and their neighborhoods are inferior. Instead, focusing on place-based discrimination underlines that segregated neighborhoods aren’t inferior – they’re just more vulnerable to discrimination from more powerful groups whose members don’t live there. That, of course, is not the end of the story, and there are other tradeoffs involved in integration. But focusing on this rationale provides some clarity both to conversations about, and measures of, what continues to be one of the defining traits of the American city.

* Here, for the sake of convenience, I’ve switched to city, rather than metro-area, numbers, but I promise it looks pretty much the same at the larger scale, too.