Too much economic development policy is based on a naive analogy to portfolio theory

Cities looking to strengthen their economies should concentrate on building upon and  extending current specializations

One of the most widely agreed upon bits of folk wisdom in economic development is the idea of “economic diversification.” The notion is that your local economy is like a stock portfolio, and if you are invested in just a few industries, then you are more vulnerable to dislocation if those industries decline. Like a prudent investor, if you were more diversified, you’d be less likely to suffer a decline if any particular industry experienced a downturn.

This bit of folk wisdom got a boost a few years back from economist Ricardo Hausmann the author of the Atlas of Economic Complexity, which assembled a clever statistical portrait of how simple or sophisticated a nation’s economy is based on its mix of industries. Hausmann argues that diversification is the key to higher incomes for cities and nations:

Larger cities are more diversified than smaller cities. Among cities with similar populations – say, Salvador and Curitiba in Brazil, or Guadalajara and Monterrey in Mexico – more diversified cities are richer than less diversified cities. They tend to grow faster and become even more diversified, not only because they have a larger internal market, but also because they are more diversified in terms of what they can sell to other cities and countries. What is true at the level of cities is even more applicable at the level of states and countries. The Netherlands, Chile, and Cameroon have a similar population size, but the Netherlands is twice as rich as Chile, which is 10 times richer than Cameroon. Looking at their exports shows that the Netherlands is three times more diversified than Chile, which is three times more diversified than Cameroon.

On its face that seems like a plausible claim, but upon closer inspection, there are five good reasons to question its accuracy and utility as policy advice.

First, Hausman and others note that highly diversified cities (and countries) tend to be richer.  But this is typically because they are bigger and better educated, not simply because they are more diverse.  A New York can achieve scale in more different industries than Des Moines, so its more diverse.  Also, as we know, educational attainment is critical–something these analyses often leave out.  And the cross-country evidence here is misleading:  Chile and Cameroon are poorer than the Netherlands, not because they are less diversified, but because they have much lower levels of education, and are still primarily dependent on resource-based industries.

Second, economies tend to be more diverse if they are richer.  Greater income and wealth create a greater demand for services, which naturally leads to more diversity  The third world village suffices with rudimentary generalist care; large wealthy nations have a diverse assortment of medical professionals.  But the cause of the diversification is the wealth; and not so much the other way around.

Third, its doubtful that this is of much practical application to local economic development policy.  The admonition to diversify your economy is based on a naive analogy to portfolio theory.  If one could change one’s economic base as easily (and cheaply) as one buys and sell stocks, it might make sense.  But its not clear how a city could easily change its mix of industries. Taken literally, the argument to diversify says that it would be a good thing if your biggest industries got smaller (that would make you more diverse).  But would Seattle really be better off if Amazon, Microsoft or Boeing was half the size it is today?

Fourth, the key lesson of clusters is that firms draw competitive business advantage from having other similar and related firms nearby.  By attracting talent, developing specialized suppliers, and promoting intense competition and benefiting from specialized knowledge spilling over, you get stronger, better firms, and a healthier economy.  Specializations are seldom static: one specialization often provides the knowledge base for new specializations: The process of economic development is often about related diversification:  being good in one technology at one time sets the stage to be good at generating the next technology at the next time.  The important thing is this isn’t random:  its path-dependent.

Fifth, the really pernicious thing about simple-minded diversification thinking is that it leads to the fad-of-the-month club style of economic development.  Yes!  We can be the next big biotech hub and that will diversify our economy!  And it leads people to neglect or ignore, or simply take for granted their existing strengths–which are likely to be much more plausible sources of future economic growth. Are you more likely to succeed in a field you know something about, or in a field in which you know nothing?

While there may be advantages to having a more diverse economy and avoiding excessive reliance on one or a few sectors, its far from clear that a city has much leverage to change its portfolio of industries. And pursuing diversity for diversity’s sake may sacrifice opportunities to build on existing strengths.

There’s scarcely any evidence that proximity to jobs matters for escaping poverty.

One of the most popular and persistent theories of urban poverty is that the poor are poor because they don’t live particularly close to jobs. John Kain popularized the “spatial mismatch” theory in the late 1960s, explaining increased and persistent urban unemployment as being a product of poor people of color increasingly concentrating in urban neighborhoods while jobs moved increasingly to distant suburbs. Notwithstanding discrimination or human capital limits, Kain reasoned that the simple distance from jobs was a key reason the poor stayed poor.

That same reasoning underlies much place-based urban development policy. Implicitly, the strategy behind opportunity zones is that it will create more investment and jobs close to where poor people live and arguably, improve their economic opportunities accordingly.

But is distance from jobs a particularly important reason for unemployment? A new paper from UCLA’s Michael Lens and co-authors uses data on the employment prospects and earnings of housing choice voucher recipients to explore the connections between job access and economic success.

Housing choice vouchers are the federal housing subsidies that are portable across locations, allowing recipients to rent private housing, and using the voucher to pay all or a portion of rent.  Lens, McClure and Mast use data on voucher locations to track the residence and movement of low income households.

Lens, McClure and Mast construct an index of job accessibility which measures how close each voucher recipient is to jobs in a region. Importantly, their accessibility measure controls for accessibility relative to labor market competition. So a place scores high in accessibility if their are a high number of jobs relative to the number of workers nearby.

The authors also focus their attention on the lower skill/lower-wage end of the labor market, looking at the availability of lower wage employment (the kind of entry level and modest skilled jobs voucher holders are most likely to qualify for) and the competition they face from other workers with similar skill levels.

The study focuses particular attention on households that see an increase in their incomes, and who move from place to place within a metropolitan area, to better understand the relationship between job proximity and economic success. In general, they find essentially no correlation between proximity to jobs and increased earnings for housing voucher recipients.  If anything, the relationship is negative:  those with increased earnings tend to live further from jobs (or move away from jobs as their incomes rise.  The authors summarize their findings:

. . .work-able housing choice voucher households in the United States are not likely to be any closer to jobs than are not work-able HCV households, which suggests that being near job centers is not a high priority when HCV households in the workforce consider where to locate. Further, we do not find any evidence that an increase in earned income results when HCV households use their vouchers to locate closer to job centers.  . . . These results clearly indicate that earned incomes and job proximity are not strongly related for voucher households. The findings suggest that job proximity is perhaps an overrated concern in policy and research on neighborhood opportunity.

It seems likely, the author’s speculate, that voucher holders who experience increased earnings move to neighborhoods with more amenities (safer streets, better schools), even though such neighborhoods are further from jobs.  This suggests that neighborhood quality, rather than job proximity, is more important to household well-being.

This study adds to a growing body of evidence that within urban areas, the number of nearby jobs is not a particularly important determinant of whether households live in poverty or not.

As we pointed out sometime back, in absolute terms, city residents, the poor and black residents have higher absolute levels of job access than suburban residents, the non-poor and white residents. According to data compiled by the Brookings Institution, despite job decentralization, and the fact that poorer neighborhoods often themselves support fewer local businesses and jobs, the poor residents of the typical large metropolitan area have about 20 percent more jobs within typical commuting distance than do their non-poor counterparts.  The black residents of large U.S. metropolitan areas are have on average about 50 percent more jobs within typical commuting distance than their white counterparts in the same metropolitan area.

The same seems to hold for lifetime earnings of kids growing up in “job poor” and “job rich” neighborhoods.  Raj Chetty and his colleagues used a similar measure to examine the relationship between job proximity and job growth and intergenerational economic mobility. At both the neighborhood and the metropolitan level, they found almost no correlation between job proximity or job growth and the lifetime earnings of kids.

The Lens, McClure and Mast study casts further doubt on the idea of visualizing the spatial mismatch within metropolitan areas as a major contributor to persistent poverty. Just creating more jobs closer to low income neighborhoods is unlikely to reduce poverty.  Without the skills, support systems and personal networks needed to qualify for, find, and hold jobs, especially ones that lead to successively greater opportunity, propinquity is likely to be of limited value.

Michael Lens, Kirk McClure and Brent Mast, “Does Jobs Proximity Matter in the Housing Choice Voucher Program?”, Cityscape: A Journal of Policy Development and Research • Volume 21, Number 1 • 2019
https://www.huduser.gov/portal/periodicals/cityscpe/vol21num1/ch6.pdf

Carbon emissions from transportation in Portland increased 6 percent last year

In the one are where city policy can make the most difference, greenhouse gas emissions are increasing

Portland has long prided itself in being one of the first cities in the US to adopt a legislated goal of reducing its greenhouse gas emissions. The city’s latest carbon emission inventory report shows that the city is failing to meet these goals. Not is the city far from the glide slope needed to reach its target, carbon emissions are actually increasing–primarily due to more driving.  Transportation is now the largest source of Portland’s greenhouse gas emissions, and have risen more than 6 percent in the past year–mostly offsetting gains in other sectors.

The city’s report concedes that this is a problem:

Transportation sector emissions are increasing dramatically, currently 8 percent over 1990 levels, and 14 percent over their lowest  levels in 2012.  Portland has experienced year over year increases in transportation-related emissions for the past five years, with transportation emissions growing faster than population growth over the same period.

The failure to make progress in the transportation sector is especially apparent when we look at the change in carbon emissions by source.

Since 2000, more than 70 percent of the carbon emission reductions have come from savings in the commercial and industrial sectors. Over that same period, the city has made no net progress in reducing carbon emissions from transportation.  While residential emissions are down about 30 percent–thanks in part to cleaner energy sources for electric generation and home heating and weatherization–the one area where local policy is likely to make the most difference–in transportation energy consumption–the city is failing.

Falsely attributing transportation emissions to job growth instead of cheap gas

The city’s climate report seems to be in denial about the causes and the seriousness of the rise in transportation emissions.  It tries to attribute rising emissions to an improving economy, claiming (page 9):

. . .  transportation sector emissions have increased in recent years. The increase in transportation emissions has tracked closely with the recovery from the 2009 recession.

This claim is false.  Transportation-related emissions actually fell between 2010 to 2014, when the Multnomah County  added 44,000 jobs.  The report fails to mention that all of the increase in transportation emissions came after 2014–when gas prices fell by more than a third, prompting more driving. As long as gasoline prices were high, even with five years of economic growth, driving and transportation emissions continued to decline. In addition, the report emphasizes that the region has achieved  per capita reductions in driving and gasoline consumption, and tries to blame increased transportation emissions on rising population; yet other sectors (residential, industrial and commercial) are managing to achieve absolute reductions in emissions even though we’re housing, employing and serving a considerably larger population.

Ignoring the critical role of prices, and shifting the focus to per capita changes in consumption (which are good) while ignoring aggregate emission increases undercuts a serious look at what is needed to achieve the region’s climate goals.  Transportation is now far and away the largest source of Portland’s greenhouse gas emissions, and they will only be reduced if we change the price of driving to reduce vehicle miles traveled.

Plateauing = Failing

Portland’s Bureau of Planning and Sustainability seems to be putting this failure to make progress in recent years as a “plateauing” when in fact it represents a significant failure. The Portland Tribune reported:

“We’ve had a lot of success in reducing emissions,” said Planning & Sustainability Director Andrea Durbin. “That’s big.”

All of that “success” stopped in 2012, total emissions are up since then.

Here’s the thing:  in the climate arena, plateauing is actually backsliding.  Unless the city reduces emissions each year, it falls further and further behind in meeting its goal.  In essence, the city has lost five years. Those five years will have to be made up, and the task ahead is even tougher: we’ve already done the cheapest, easiest things to reduce emissions (like replace residential oil heating with natural gas). It’s also worth noting that most of the emission reductions aren’t attributable to city policies– much of the success has been the result of state and federal policies–like increased renewable power and declines in coal fired electricity generation.

The city staff recognize that more is needed, but exactly what isn’t clear.  According to Durbin, (again from the Portland Tribune):

Portland Mayor Ted Wheeler believes part of the solution is for the City Council to declare a climate emergency sometime next year. Staff at BPS have been directed to reach out to youth, communities of color and other groups this fall.

Durbin says the mayor also is considering a new ban on fossil fuel infrastructure . . .

If one is intent on banning  new fossil fuel infrastructure a good place to start would be by reversing course on the proposed half-billion dollar Rose Quarter freeway widening project, which would increase driving and add to carbon emissions.

Bottom line:  Despite making progress between 2000 and 2010, Portland is now falling further and further behind in its pledge to reduce greenhouse gas emissions, almost entirely because we’re driving more.  The failure to connect the dots–low prices for fuel stimulate more driving–means we’re likely to fall further behind in the years ahead, unless we do something dramatically different.

On Friday, along with other cities, young Portlanders will participate in a national climate strike–this report shows that their concerns are justified, and that the city needs to do much more if it is to achieve its lofty goals. We hope Portland’s leaders will be listening.

Bureau of Planning and Sustainability,
Multnomah County 2017  Carbon Emissions and Trends,
September 18, 2019
https://www.portlandoregon.gov/bps/article/742164

West Coast political leaders talk a good greenhouse gas game, but actions speak louder

Throughout Ecotopia, carbon emissions are rising due to more driving, yet the region’s leaders are throwing even more money at subsidizing car travel

This weekend, leaders of some of the world’s most environmentally progressive cities are meeting in Copenhagen for the C40 World Mayors Summit. They’re both calling attention to the gravity of the climate crisis and also celebrating the steps that cities have taken to reduce greenhouse gas emissions. One of the Summit’s key talking points is that 30 cities world wide have passed “peak carbon emissions”–an impressive sounding phrase that simply means that today they emit at least somewhat less carbon than they did five or more years ago.  Several West Coast Mayors are prominent in the event:  Seattle’s Jenny Durkan is speaking there, Portland’s Ted Wheeler is in attendance.  Los Angeles Mayor Eric Garcetti is the newly anointed head of the Summit organization, succeeding Paris Mayor Anne Hidalgo.

Since these mayors are presenting themselves, and their cities as leaders, we though it would be useful to take a look at how the region they represent is doing. So, you might ask:  How are things in Ecotopia?

In 1975, Ernest Callenbach created a fable about environmentalists on the West Coast breaking away from the rest of North America to found a separatist new-age state called Ecotopia.  Stretching roughly from San Francisco to British Columbia, this would be a utopian land governed by enlightened green leaders, powered by renewable energy.

By comparison to the rest of the continent, governments in California, Oregon, Washington and British Columbia have all been environmentally progressive.  The three states have adopted greenhouse gas reduction goals; BC has a carbon tax. The region has considerable investments in renewable energy like hydropower and wind. Their leaders all pay fealty to the importance of adhering to the Paris Climate Accords (even when repudiated by national governments).  But in each of these states, performance falls well short of rhetoric, especially when it comes to transportation-related carbon emissions, which are the biggest source of greenhouse gases in each of the three Pacific Coast states.

Washington:  More carbon emissions and a freeway-building spree

Most prominently, Washington Governor Jay Inslee built the platform for his now-folded Presidential campaign squarely on the issue of climate change. He prodded his opponents to discuss climate and arguably played a key role in pushing one town hall debate to focus almost solely on that subject. That was certainly long overdue.

But back at the ranch, Inslee’s environmental record falls well short of his Greta Thunberg rhetoric.  Washington is fully embarked on a decade-long multi-billion dollar freeway widening spree, financed by taxes enacted during Inslee’s tenure. The plan dedicates nearly 10 billion dollars to new or widened freeways, and less than a fifth that amount to road maintenance.

And this comes at a time when Washington, like other states, is recording an increase in greenhouse gas emissions, chiefly due to increased driving.  Greenhouse gas emissions in Washington are up 6 percent since 2013, and emissions from on-road vehicles have increased by more than 1 million tons during that time, according to the State’s latest greenhouse gas emissions inventory. (While the City of Seattle gets appropriate credit for allowing greater density, investing in transit expansion, and netting an increase in bus ridership, things outside the central city are much less green.)

Oregon: More Carbon emissions and a freeway-building spree

Like Washington, Oregon has a greenhouse gas emissions inventory, and it shows the same trend: statewide carbon emissions are up 6.6 percent since 2012, chiefly due to the increase in driving statewide. The City of Portland’s own greenhouse audit is just as bad:  increased driving has led transportation emissions to increase 14 percent since 2012.  The failure to make progress in greenhouse gas reduction has everything to do with more driving as gas prices have declined. Since 2012, Oregon’s statewide emissions from motor vehicle gasoline have increased an astonishing 25 percent according to figures from the Oregon Department of Environmental Quality–from 11.64 million tons in 2012 to 14.64 million tons in 2017.

Despite the failure at the state and city level to meet greenhouse gas reduction goals, Oregon is plowing ahead with a multi-billion dollar program to widen Portland area freeways, which will undoubtedly lead to more driving and higher carbon emissions in the future.

Portland Mayor Ted Wheeler and Governor Kate Brown talk a good game on climate, but both have done nothing to challenge pollution inducing freeway projects, noticeably the $500 million Rose Quarter Freeway widening in Portland. The gap between rhetoric and reality on climate change in Oregon is growing ever wider.

British Columbia:  More carbon emissions and abolishing bridge tolls

British Columbia’s carbon emissions inventory shows the same patterns as its Southern neighbors. Greenhouse gas emissions from road transport have risen 14 percent in the past five years according to the provincial report.

Even thought the Green Party is part of the the Province’s ruling coalition, the provincial government abolished tolls on a pair of expensive  Vancouver area bridges–effectively shifting the cost of car travel off to all of the non-users of the bridges, including car-free households. It’s exactly the kind of strategy that’s likely to lead to increased vehicle travel and more sprawling development in the Lower Mainland suburbs around Vancouver.

California:  Cap and Trade, but 30 years behind schedule

California, to its credit, has adopted a cap-and-trade policy, making it a leader in carbon pricing. But it too is falling behind in its efforts to reduce carbon emissions.  The state’s latest greenhouse gas report says that carbon emissions are up five percent in the past five years.  Transportation is far and away the largest source of greenhouse gases in the Golden State.

Like its neighbors, California continues to plow more money into freeway expansions.  It famously spent more than a billion dollars to widen a stretch of the 405 freeway in Los Angeles, only to find that it simply attracted more traffic and ended up just as congested as ever–and with higher levels of carbon emissions. Despite progress in some areas, the state is lagging well behind the pace of improvement needed to meet it’s stated greenhouse gas reduction goals; a new report estimates that it will hit its 2030 goal in 2060, meaning that the state is about three-decades behind where it needs to be.

Pro-Tip:  Don’t blame the economic recovery; It’s all about cheap gas

One of the favorite excuses offered for this consistently bad performance in transportation greenhouse gas emissions is to attribute the growth in carbon emissions to a growing economy. But blaming the economy is simply wrong:  Notice that in almost every case the robust growth in transportation emissions comes only after 2014 (Washington’s data goes only through 2015).  By 2014, the economic recovery was already in its fourth year; what happened that year is that oil prices plunged about 40 percent globally, pushing down retail gas prices by a similar amount. Cheaper gas led to more driving (and higher sales of less fuel-efficient, higher polluting vehicles).

Whither Ecotopia?

If you were putting your faith in Ecotopia to lead the way, and especially if you’ve been beguiled by the tough-talking climate rhetoric of the region’s political leaders, what’s happening on the ground, and particularly in the form of investments in more subsidized car infrastructure, should give you pause. Despite the hype, this green region has a long way to go to be a real role model for saving the planet.

What’s needed, if we’re serious about reducing greenhouse gas emissions, are measures that reflect back to transport users the real environmental costs of carbon emissions.  By any measure, road use is heavily subsidized, and coupled with under-priced gasoline, is undercutting incentives to drive less and pollute less.  Real ecotopians would harness the power of the price mechanism, through the form of a carbon tax, value-pricing of roads, and an end to subsidized parking. We’ll be watching to see if they write a next chapter that is more convincing than the last one.

Beto O’Rourke brings a strong urbanist, inclusive message to the presidential campaign

The 2020 Democratic presidential race has been remarkable for addressing both climate change and housing policy issues that have long been ignored. For example, as the Brookings Institution’s Jenny Schuetz has chronicled, several of the candidates have stated policy positions on improving housing affordability, and an entire multi-hour town hall was devoted to the climate crisis.

While this is a positive development, some of the proposals, especially on climate change, have been a bit tone-deaf from an urbanist perspective:  it’s all alternative fuels and electric vehicles, rather than giving much thought as to how we build greener (and more just) communities, where maybe, just maybe, we’re not so reliant on private automobiles.

That’s why we were delighted to hear a recent comment from Beto O’Rourke, who offered what is perhaps  the most comprehensive statement of inclusive urbanist principles, and who links clearly the ideas of building more dense, inclusive communities and fighting climate change.

Beto’s also offered an unequivocal argument for greater economic integration. Here’s an excerpt:

Here’s a tough thing to talk about, though we must:  Rich people are going to have to allow or be forced to allow lower income people to live near them, which is what we failed to in this country right now.

We force lower income working americans to drive one, two, three hours in either direction to get to their jobs, very often minimum wage jobs and they’re working two or three of them right now.

What if, as we propose to do, we invested in housing that is closer to where we work, very often mixed income housing–where the very wealthiest are living next to those who are not the very wealthiest in this country–to make sure that they can both afford the same public schools?  That we really have that as a place in this divided country can come together without regard to your income or your race, or your ethnicity or any other difference that should not matter right now.

What if we invested–as we propose to do in high speed rail and in transit in all of our cities–to make sure that if you do not have a car or do not want to use a car, you will need to have one or you will not not be penalized for not having one right now.

So, having cities that are smarter, that are denser, that have people living closer to where they work and where there families are, to reduce our impact on climate change and greenhouse gas emissions,  but also to improve the quality of life in these built environments, that’s an extraordinary opportunity.

It’s an exciting and encouraging development to see this position advanced as part of the debate over who should be America’s president. For too long, these issues have languished out of the national agenda.  We hope other candidates will weigh in on these issues.

Hat tip to CBS News Reporter Tim Perry (@tperry518) for the link to this video.

We’re killing more people because more people are ignoring traffic signals

We’ve charted the ominous increase in road deaths in the past several years, and now there’s a new bit of evidence of just how bad the problem has become. In 2017, according to an American Automobile Association analysis of NHTSA data reported by the Los Angeles Times, we hit a new high for the number of people killed by cars running red lights.

In 2017, the latest figures available, 939 people were killed by vehicles blowing through red lights, according to a AAA study of government crash data. .  . . AAA isn’t sure why the numbers are on the rise or why they have increased at a far higher rate than overall U.S. roadway deaths. Since 2012 the number of highway fatalities rose 10%, far short of the 28% increase in red-light running deaths.

There are likely many causes for the increase in fatalities.  Some of it sure has to do with the increase in driving, prompted by cheaper fuel.

Red-light running is also likely another indication of the growing problem of distracted driving. Drivers who are texting or distracted by in-cabin technology are more likely to miss a red light.

It also has to be mentioned that our efforts to use “smart” technology to improve compliance with traffic laws is woeful. Traffic engineers invest untold millions in efforts to automate traffic lights to provide motorists with a green wave, but spend little effort to promote greater compliance with red lights and speed limits.  For example, despite its official policy of trying to achieve Vision Zero, for example, the City of Portland has just eight fixed speed cameras.  Several states, including Texas have banned automated red-light cameras. Automated traffic enforcement is a technology that’s been shown to reduce speeding and red-light running and save lives.

We’re all enamored of the prospects of technology to make life better, but in one of the few instances in which we have a proven technology that’s been shown to save lives, we’ve limited or actually prohibited its deployment, with predictable results, in the form of an increasing death toll.

What City Observatory did this week

1. Why diversification is a simplistic, often flawed economic strategy. When it comes to personal investment everyone understands (or certainly should understand) the concept of portfolio diversification–by having a wide variety of different investments, one lowers the risk of loss. That same principle is widely applied in economic development, and cities are looking for ways to “diversify” their economies by developing or attracting new industries that aren’t related to current specializations. While intuitively appealing, the analogy between a community economic base and a stock portfolio is a badly flawed one. Cities can’t buy and sell different components of their economy as one would stocks or bonds, and critically, a local community’s location, talent base, infrastructure and related industries are all likely to influence whether an industry flourishes or fails locally. It turns out that seeking diversification for its own sake is poor guide to local economic strategy.

2. Lack of proximity to jobs is not the cause of urban poverty. One of the most durable assumptions underpinning urban economic development efforts is the notion that the lack of nearby jobs is a major contributor to poverty. The “spatial mismatch” theory of poverty holds that the the suburbanization of employment has, on average, moved jobs further away from poor neighborhoods. A new study looking at housing voucher recipients challenges the validity of this assumption. Using careful calculations of the accessibility of housing locations to jobs (and adjusting for the labor force competition) the study finds no relationship between access to jobs and earnings for voucher recipients. It also finds that workers who move and who record increases in income tend to have lower rates of job accessibility.

Must read

1. The compressed Donald Shoup. Retired UCLA economist Don Shoup is famous for producing a 900-plus page treatise on The High Cost of Free Parking. For those who haven’t yet waded through the entire tome, now there’s a more digestible version, prepared by Shoup himself. This short essay, “Why parking reform will save the city” published by CityLab is a conversational and largely non-technical summary that lays out all of the key arguments for pricing parking and ending minimum parking requirements.

Cities will look and work much better when prices—not planners and politicians—govern decisions about the number of parking spaces. Like the automobile itself, parking is a good servant but a bad master.

2. Roads, fiduciary responsibility and public finance. While we’re on the subject of free parking, another insightful perspective comes from Todd Litman. While we think of roads and curbside parking as free, they really aren’t, and a big share of the cost gets shouldered by state and local governments, who regularly invest in extremely expensive assets, and then do a terrible job of getting those who use them and benefit from them to pay either the costs of their construction or ongoing maintenance. In Litman’s view, the failure to properly manage the financial aspects of expensive investments like roadways is a dereliction of a governing body’s fundamental “fiduciary” responsibility to the public. This is particularly a problem for central cities–as Litman argues central cities build and operate roads that are disproportionately used by suburban residents, while city residents (who typically own fewer cars per capita) are far less likely to use suburban roads.

Cities significantly underprice their roads and parking facilities, forcing local taxpayers to subsidize out-of-town motorists. Municipal officials have an obligation to better manage these valuable public resources.

What City Observatory did this week

1. What super-commuters really mean.  Media coverage of super-commuters–people who travel more than 90 minutes each way to and from work–is invariably sympathetic, treating these folks as hapless victims, and lamenting the congestion on the highway system. But despite all the attention they get, these long-distance commuters are remarkably rare: fewer than 3 percent of US commuters qualify, and while car-commuting is often the focus of media attention, transit riders are far more likely to have super-long commutes.

It’s also important to recognize that super-commuting isn’t so much about the inadequacy of the transportation system as it is an indication that we’ve simply failed to build enough housing, and in particular a range of affordable housing choices close to urban job centers. Finally, for some workers, a long commute represents “sweat equity” to enable them to afford more space by working several additional hours a week traveling to and from their jobs.

2.  Portland’s climate fail.  Portland has long prided itself in being one of the first cities in the US to adopt a legislated goal of reducing its greenhouse gas emissions. The city’s latest carbon emission inventory report shows that the city is failing to meet these goals. Not is the city far from the glide slope needed to reach its target, carbon emissions are actually increasing–primarily due to more driving.  Transportation is now the largest source of Portland’s greenhouse gas emissions, and have risen more than 6 percent in the past year–mostly offsetting gains in other sectors.

The city’s climate report seems to be in denial about the causes and the seriousness of the rise in transportation emissions.  The report fails to mention that all of the increase in transportation emissions came after 2014–when gas prices fell by more than a third, prompting more driving.  On Friday, along with other cities, young Portlanders will participate in a national climate strike–this report shows that their concerns are justified, and that the city needs to do much more if it is to achieve its lofty goals.

Must read

Why electric cars are not enough. Smart Growth America hosted a Tweet Chat on Wednesday September 18 to discuss the limits of vehicle electrification as a solution to the growing problem of carbon emissions from transportation. SGA argues that while electric vehicles are a necessary step in the right direction, they’re hardly sufficient to blunt the continuing increase in transportation related greenhouse gas emissions. We need changes to state and federal policies that will lead to less driving if we’re going to reduce carbon pollution. The key message: responding to climate change is about making fundamental changes to land use to shorten and eliminate trips, and to make walking, cycling and transit viable alternatives for more of our daily travel.

Bike lanes are good for business.  Eric Jaffe thumbnails a new study looking at the results of swapping bike lanes for parking spaces in Toronto. It’s widely assumed by merchants that less parking will mean lower sales, but that’s not what this research shows. In 2016, the City of Toronto added a bike lane on a 1.5 mile stretch of Bloor Street, and in the process removed 136 parking spaces. Researchers surveyed shoppers and merchants on the street before and after installation of the bike lane to track changes, and to find out out often they shopped, how much they spent and whether stores were opening or closing; researchers also surveyed a nearby street that didn’t get the bike lane treatment, as a control group. In general, the study showed positive results:  customers reported more frequent visits to Bloor Street shops, and higher rates of spending, with the spending strongly associated with more spending by bike-riding shoppers. While not definitive–and while there were some mixed results, the study is suggestive that converting on-street parking to bike lanes is a benefit to local business districts.

New Knowledge

Clustering of invention. Being around other smart people makes you smarter–that’s the genius of cities, as Ed Glaeser argues. University of California economist Enrico Moretti has statistical evidence for this effect on his latest paper looking at the productivity of inventors. Using data on patent activity, Moretti is able to measure the output of inventors based on their location, and their proximity to other inventors.

Using a number of different tests, Moretti finds that controlling for other observable aspects of an inventors productivity (such as their industry), that inventors are more prolific when they are near concentrations of other inventors in related fields. A key finding of this work is that the US is more innovative because it concentrates inventors in a few locations–if they were more widely spread out, they’d be less productive.  While a more even distribution of inventors would lead smaller places to be more productive, it would lead larger places to be less productive, and the magnitude of the declines in larger clusters would more than offset the gains in smaller ones.  As a result, Moretti concludes that de-concentrating talent away from clusters and making it more geographically–as in the so-called “Rise of the Rest”–would likely decrease total US invention output:

Enrico Moretti, The effect of high-tech clusters on the productivity of top inventors.  NBER Working Paper No. 26270.  September 2019

In the news

Next City quotes Daniel Kay Hertz’s essay pointing out the inherent contradiction promoting homeownership as a wealth-building strategy and our desire to improve housing affordability.

What City Observatory did this week

1. Beto O’Rourke brings a strong inclusive urbanist message to the Presidential contest.  While its been great to see housing affordability and climate change grow in prominence on the national stage, some of what’s been proposed, especially to reduce greenhouse gas emissions, has been too much alternative fuels and electric cars, and too little on how we build more sustainable and just communities, where we don’t have to drive so much. Beto O’Rourke has the most provocative and explicitly urbanist take on how America needs to change. His recent remarks connect the need for economic integration, more dense development, and reduced driving.

2. Why smart cities are about more than technology. It’s tempting to think that for every urban problem there’s an easy technological fix: between Elon Musk’s tunnels and the “there’s an app for that” view of civic problem solving, the urban future is too enamored of technology. Part of this hinges on having the wrong mental model of how cities work, thinking of them as machines to be tweaked, rather that complex, ever evolving, human centered system. We’ve been down that road–literally–before, when engineers like Robert Moses, took a careless meat ax approach to urban space, with devastating social, economic and environmental consequences we’re still wrestling with.  While new technology creates opportunities, we need to be keenly aware of the risk of unintended consequences, the biases of big data, and the need to make sure that the rules and prices that shape urban places reflect our broader values, rather than some narrow technological imperative.

Must read

1. Why Houston should scrap efforts to expand its I-45 freeway. Jeff Speck weighs in on the Texas Department of Transportation’s $7 billion (and counting) plan to widen Interstate 45 to as many as 13 lanes through Houston. While its pitched as an “improvement plan,” this is really a classic Bob Moses meat-ax project, which would wipe out 1,200 homes (chiefly occupied by low income people of color) and displace 5,000 people and 300 businesses.  It’s being sold, as so many are, as a solution to congestion, when freeway widening has been proven time and again to induce more traffic and generate even longer commutes–as Houston’s own experience with the 23-lane Katy Freeway amply generates. Some Houstonians are trying to soften some of the sharp edges of the project, to make I-45 “better;” but Speck will have none of it. Compromise now means just more of the same disastrous consequences for people, for cities and for the environment:

. . . Houston’s fatalistic response to its TxDOT incursion has been to just “make I-45 better.” The well-resourced but cautious Make I-45 Better Coalition has proposed a collection of modifications, all good, that unfortunately do not begin to question the underlying folly of fighting congestion, car crashes, and tailpipe emissions by welcoming more driving.

Here’s how to make I-45 better: first, fix the parts that need repair, without making them any wider. At the same time, introduce congestion-based pricing on the entire roadway to maximize its capacity around the clock. Invest the proceeds in transit, biking, walking, and in those poor people who truly have no choice but to keep driving.

2. The Future is not retro.  In the era of “MAGA,” no one can doubt that allusions to recovering the imagined verisimilitude of an earlier era have a strong emotional appeal.  Urbanists have made a good case that it many cases, we’ve simply forgotten (or outlawed) well-established recipes for building successful urban places. But while reminders of how well we did things in the past are helpful for motivating introspection, simply reverting to a status quo ante isn’t where we should be headed. In an essay entitled “The Future is not Retro” Pedestrian Observation’s Alon Levy pointedly challenges the limits of nostalgia as blueprint for building the future. Levy takes aim at some of advocates who disparage high rise urban redevelopment and seem to long for a restoration of small town, midwestern main streets.

As Levy argues, communities of the future will embody many of the critical urbanist principles of the past, but they’ll be different as well:

The theme of the future is that, just as the Industrial Revolution involved urbanization and rural depopulation, urban development patterns this century involve growth in the big metro areas and decline elsewhere and in traditional small towns.  . . . Already, people lead full lives in big global cities like New York and London without any of the trappings of what passed for normality in the middle of the 20th century, like a detached house with a yard and no racial minorities or working-class people within sight. The rest will adapt to this reality, just as early 20th century urbanites adapted to the reality of suburbanization a generation later.

3. The high cost of free roads. In an editorial, Toronto’s Globe and Mail highlights the seductive appeal of apparently “free” roads in otherwise frequently sensible Canada. While several provinces have toyed with asking road users to pay a portion of major new capital projects, like British Columbia’s Port Mann Bridge and the new Champlain Bridge in Montreal, it’s been politically opportunistic to campaign against tolls. In both cases, new provincial governments have taken off the tolls–and shifted the multi-billion dollar cost of the bridges to all of their non-users.  It’s a crazy system, as the Globe and Mail editorial concludes:

Federal, provincial and municipal governments should be liberating taxpayers from billions of dollars in road construction and maintenance costs, and unlocking hundreds of billions of dollars in profitable assets. That would be a boon for both the environment and the fiscal bottom line, and would free up tax dollars for things we really need.

In the news

Writing in the Grand Rapids Business Journal, Lou Glazer cities City Observatory’s commentaries on the positive effects of gentrification for the long-time residents of low income neighborhoods.

StreetsblogUSA cited City Observatory’s critique of the recent Urban Mobility Report in an article “Traffic Study comes under fire for being to pro-car.”

The Transportation Research Board, nominally an arm of the National Academy of Sciences, is engaged in technocratic climate arson with its call for further highway expansion and more car travel.

• The planet is in imminent peril from global warming, with much of the recent increase in emissions in the US coming from increased driving.
• In the face of this monumental crisis, the Transportation Research Board, which should represent science, is calling for tripling spending on highway construction to as much as $70 billion annually, to accomodate and another 1.25 trillion miles of driving each year.
• They’re ignoring global warming (except as an excuse to flood-proof highways), and hoping that somebody else electrifies cars, so that carbon emissions go down.
• No consideration is being given to how we might reduce driving to reduce pollution, and make our cities–which were devastated by the construction of the interstate highways–more livable, green and just.

At City Observatory, we think climate change is the challenge of our time. One of the biggest opportunities to meet this crisis is to dramatically rethink the way we get around and the way we build our cities. The interstate highway system and the car-centric transportation system and land use patterns it fostered have undermined our cities, torn our civic fabric, segregated our citizens and threaten our environment. Much of what is happening today in urbanism is a wave of experiments aimed at reversing the damage done by cars and highways. It’s a project of collective remembering that great urban places are walkable, bikeable and well-served by transit, bringing us closer together and freeing us from our dependence on cars and their substantial costs, pecuniary, social and environmental.

If we’re serious about tackling climate change, reversing the damage done by the Interstate Highway system should be at the top of our list. A new congressionally mandated review of the system provides, in theory, an opportunity to think hard about how we might invest for the kind of future we’re going to live in. Sadly, the report we’ve been provided by the Transportation Research Board is a kind of stilted amnesia, which calls for us to repeat the today just what we did 70 years ago. Now is no time for indulging nostalgia for the Eisenhower era. But that’s exactly what we’re being offered.

The new report looks at the future of the Interstate Highway System, and calls for spending hundreds of billions of dollars expanding interstates and to facilitate more than a trillion miles of additional driving every year. The report comes from the Transportation Research Board, which is part of the National Academies of Engineering and is affiliated with the National Academy of Sciences. The report was overseen by the “Committee on the Future Interstate Highway System,” and written by TRB staff and consultants.

While much of its work is prosaic and uncontroversial (coming up with standards for paving materials and road markings, and figuring out how to optimize traffic signals), some of the Transportation Research Board’s  work has a profound and subtle bias that is at the root of our urban transportation problems.

In the past we’ve written about how engineering “rules of thumb“–minimum parking requirements for buildings, minimum lane widths for roads, “level of service” traffic standards, and hierarchical, dendritic street systems–systematically lead to less livable, more car-dependent communities. While its ostensibly a technocratic exercise, the new report titled “Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future” is really a strongly political statement in favor of more and more road building.  The title clearly signals the messaging: this is a backward looking plea for funds, asking us to repeat what we did in the past.

And even if you didn’t read the title, The cover illustration pretty much gives away the game:  This is all about rationalizing building more highway capacity.

Climate Change:  That’s someone else’s problem

There’s an overwhelming consensus in the scientific world that anthropogenic climate change is rapidly reaching irreversible and catastrophic proportions. The International Panel on Climate Change (IPCC) has issued a dire warning that we have just a little over a decade to save the planet.

If you wade through the first 118 pages of the TRB report, you’ll finally reach a mention of climate change.  A short sidebar (Box 4.2) concedes that by stimulating vehicle use and car-dependent travel problems the Interstate Highway System contributed to the problem.  And the solution is to . . . wait for somebody else to develop low-carbon and no-carbon transport technologies:

. . . a transformation to a low- and no-carbon transportation system will increasingly mean that [freeway] planning is integrated with the planning of low-carbon mobility options, from public transit to zero-emission trucks.  Many states, counties, and cities are investing in low-carbon transportation solutions, seeking to create new opportunities for both low-carbon mobility and economic development.

The report acknowledges the reality of climate change, but largely ignores and minimizes the contribution of vehicle travel to carbon emissions. Instead, the report is chiefly concerned about using climate change as yet another excuse to spend more money on rebuilding highways (to harden them against flooding, storms and other climate-related disruptions). In essence the report paints highways (and highway department’s distressed budgets) as victims of climate change, rather than one of its principal causes.

We’re told that the Interstate Highway System accounts for a mere 7 percent of US greenhouse gas emissions.  That of course misses the fact that in many states, highway travel accounts for 40 percent of greenhouse gas emissions, and unlike other sources of carbon pollution, it is increasing–for example, causing both Oregon and California to lose ground on their climate change objectives.

More importantly, the Interstate Highways make all of us more car dependent, whether we travel on the Interstate or not. As the report acknowledges–grudgingly, and in passing–the toll the Interstate system wreaked on cities.

It is generally understood that urban Interstates and other freeways contributed to suburbanization and the depopulation of many major U.S. cities, which accelerated after World War II in concert with an expanding middle class and the fast-growing personal motor vehicle fleet. Although many other factors were at work, the Interstate System facilitated greater dependence on the automobile for commuting to work and other household and social activities.
However, the effects of urban Interstates were not entirely beneficial for center cities and their neighborhoods. The postwar mass movement of people and employers to the suburbs led to the loss of center city population, a declining housing stock, and impoverished urban neighborhoods (TRB 1998).

“Not entirely beneficial” is perhaps the most banal way of conceding the fact that cities devastated cities and amplified segregation, problems that plague us today. Nathan Baum-Snow has estimated that each additional radial freeway constructed in a metropolitan area reduced the central city’s population by 18 percent.

One has to be very resolute in overlooking all of the negative consequences of increased car dependence wrought by the interstate highway system, in the form of sprawl, the deaths and injuries (especially to vulnerable non-car road users) pollution, and the destruction of urban neighborhoods.  Allusions to the supposed economic benefits of the original interstate highway system in the 1950s and 1960s (which benefitted the trucking industry and suburban land developers to be sure), are not something that would be repeated by additions to the system in the 2020s and beyond. The careful scholarship on road investments has shown that the economic return on investment from additional highway capacity has fallen to almost zero in the past several decades. And that doesn’t allow for full accounting of the social, environmental and health effects of car dependence.

TRB’s Vision:  One and a quarter trillion more miles of driving annually by 2040

The case for “renewing” our commitment to expanding the Interstate Highway System is predicated on forecasts of increased driving activity.  While the report is careful to couch its findings in technical terms and talk about the smallest possible numeric increments (1.5 percent per year), the implications of their traffic projections are for a huge increase in the volume of driving.  At their mid-range figure 1.5 percent per year of 1.5 percent annual growth, vehicle miles traveled in the US will increase by about one and a quarter trillion miles annually by 2040, up from about 3.2 trillion today to nearly 4.5 trillion in 2040.

The climate implications of all that driving?  Not TRB’s problem. Automakers or somebody might electrify vehicles, and reduce carbon emissions, but that’s not something that highway engineers are going to worry about–at all.

It’s worth questioning whether that 1.5 percent annual increase makes any sense.  The report and its technical appendix is careful to hedge its forecasts with all kinds of qualifications about the economic and technological uncertainty of predicting future travel patterns, but when it comes down to it, they conclude that come hell or high water (and what with global warming, it’s likely to be both), traffic will only go up, somewhere between .75 percent annually and 2 percent annually.

A quick review of recent trends in driving is in order.  The key metric here is “vehicle miles traveled. Last year Americans drove about 3.2 trillion miles, according to the US Department of Transportation. The following chart shows the trend in VMT since 1970, with actual values in blue, the TRB’s baseline forecast in red, and an alternative lower forecast (which we’ll explain in a moment, in green). The long term trend, particularly from the 1970s until the turn of the millennium was for a steady increase in driving year over year, but after 2000 things began to change.

At first the rate of increase slowed and then declined; from 2004 through 2014 per capita vehicle miles traveled actually declined. For economists, this was hardly a surprise:  real fuel prices increased dramatically after 2004, and remained high through 2014; it was only after the oil market bust that year that driving started going up.  Interestingly the growth rate for the four years 2014 to 2018 was slightly more than 1.5 percent, the exact figure that TRB forecasts to continue for the next two decades.  Implicitly, TRB is assuming that driving will grow for the next 20 years or so at the same pace that it managed (a) after a decade of stagnation, and (b) over a period of time in which real fuel prices fell by more than 40 percent.

The experience of 2004 to 2014 suggests that a very different future is entirely possible.  Somewhat higher gas prices–high enough to reflect the social and environmental cost of carbon–are likely to depress, if not entirely eliminate the growth in VMT.  If we changed gas prices to resemble the 2004-14 period, we would expect driving to increase only very slowly, as shown in the green line. The experience of the past decade shows that its extremely possible for the US to have a much slower rate of increase in driving.  All it takes are the right policies.
And increasingly, policies that discourage driving will be essential to saving the planet.  As economists of every political stripe have stressed, some sort of carbon tax is essential to lowering carbon emissions–plus they’ll have the side benefit of lowering the need to build extremely expensive highway infrastructure.  An intelligent report would consider how the US could, building on the experience of leading cities and other countries, work to build communities that simply require less driving, thereby reducing carbon pollution, lowering road costs, and not incidentally, mitigating some of the historic damage done to cities by the construction of the interstate highway system.

The upward slope of that red line and the added trillion miles we’re assumed to drive each year is the oldest trick in the highway engineer’s book. “More cars are coming!  It’s an inexorable, immutable force that we must respond to.  We must expand capacity.” But these forecasts have been repeatedly shown to be wrong.  For example, Clark Williams-Derry exposed the serial misrepresentation by the Washington Department of Transportation:

The engineers routinely ignore or grossly downplay the effects of induced demand–that the principal reason that driving is increasing is that we’re building vastly more un-priced road capacity.  More road capacity, generates more sprawl, longer trips and more VMT, in a never-ending, self-reinforcing cycle, one which is now so well established as to be called the “fundamental law of road congestion.”

If we build highways for another trillion miles of vehicle travel we’re actively making the carbon pollution problem worse, not, as engineers would have it, passively responding to some unchanging natural trend.  If Americans drive a trillion more miles each year by 2040, it’s going to make it vastly more difficult to reduce greenhouse gases. Failing to acknowledge that fundamental fact, and suggesting a casual mention of vehicle electrification absolves them of any responsibility for thinking further about this question is simply irresponsible.

Same old punchline: Give us billions more

As Chuck Marohn of StrongTowns has pointed out, reports by engineering groups are almost invariably self-serving demands for more money thinly disguised as impartial technical advice. Not surprisingly, the TRB report’s primary recommendation is that we give more money to highway builders–lot’s more money. The report calls for doubling to tripling the amount of money spent on Interstate highways:

Recent combined state and federal capital spending on the Interstates has been about $20–$25 billion per year. The estimates in this study suggest this level of spending is too low and that $45–$70 billion annually over the next 20 years will be needed

And a big chunk of this funding would be for explicitly earmarked for capacity expansion.  The report is vague, but its “blueprint” says $22 billion of a $57 billion pot would be set for capacity expansion, with the remainder for pavement, operations and bridges (categories that are often used to fund wider roadways–bridges that are “rebuilt” are almost invariably widened).

While the report talks a good game about aging bridges and multiplying potholes, theres abundant evidence that when additional revenue is available, maintenance is still deferred in favor of marquis capacity expansions. State Departments of Transportation (who are allocated the bulk of money for the interstate system) have repeatedly engaged in bait and switch tactics; marketing potholes and spending on wider roads.

This is a report that looks backward, learns nothing, and is destined to repeat the mistakes of the past, while remaining obstinately blind to the manifest threat that climate change poses to our collective global future. Now is not the time to be squandering precious billions on more and wider roads, and stimulating trillions of additional miles of vehicle travel. This report tragically evades the most serious problem we face and avoids shouldering any responsibility for meaningful action. It’s difficult to imagine that anything so willfully narrow-minded and self-serving could be allowed to masquerade as the product of scientific endeavor.

National Academies of Sciences, Engineering, and Medicine 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. https://doi.org/10.17226/25334.