Local Knowledge Ed Glaeser. A Central Paradox Why is it that in an era in which transportation and communication costs have virtually vanished, cities.

Local KnowledgeLocal Knowledge

Ed GlaeserEd Glaeser

A Central ParadoxA Central Paradox

Why is it that in an era in which Why is it that in an era in which transportation and communication costs transportation and communication costs have virtually vanished, cities have have virtually vanished, cities have become more important than ever? become more important than ever?

Urban resurgence is visible in high income Urban resurgence is visible in high income levels, robust housing prices, and a levels, robust housing prices, and a concentration of innovation in urban concentration of innovation in urban areas. areas.

This is even clearer in the developing This is even clearer in the developing world. world.

Density

Families: Median family income .

4 6 8 10 12

20000

40000

60000

80000

Abilene,

Akron, O

Albany,

Albany-S

Albuquer

Alexandr

Allentow

Altoona,

Amarillo

Anchorag

AndersonAnderson

Ann Arbo

Anniston

Appleton

AshevillAthens-C

Atlanta-

Atlantic

Auburn-OAugusta-

Austin-R

Bakersfi

Baltimor

Bangor,

Barnstab

Baton RoBattle CBay City

Beaumont

Bellingh

Bethesda

Billings BinghamtBirmingh

Bismarck

Blooming

Blooming

Boise Ci

Boston-Q

Boulder,

Bremerto

Bridgepo

Brownsvi

Buffalo-

Burlingt

Burlingt

Cambridg

Camden,

Canton-MCape CorCasper,

Cedar Ra

Champaig

Charlest

Charlest

Charlott Charlott

ChattanoCheyenne

Chicago-

Chico, C

Cincinna

Clarksvi

Clevelan

College

Colorado

ColumbiaColumbia

Columbus

Columbus

Corpus C

Corvalli

Cumberla

Dallas-P

Danville

DavenporDayton,

Decatur,

Decatur,

Deltona-

Des Moin

Detroit-

Dothan,

Dover, DDubuque,

Duluth,

Durham,

Eau Clai

Edison,

Elkhart-

Elmira,

El Paso,

Erie, PA

Essex Co

Eugene-S

EvansvilFargo, N

FayettevFayettev

Flagstaf

Flint, M

FlorenceFlorence

Fort Col

Fort Lau

Fort Smi

Fort Wal

Fort Way Fort Wor

Fresno, Gadsden,

Gainesvi

Gary, IN

Goldsbor

Grand Fo

Grand Ju

Grand Ra

Great Fa

Greeley,

Green Ba

Greensbo

Greenvil

Greenvil

Gulfport

Hagersto

Harrisbu

Hartford

Hattiesb

Hickory-

Holland- Honolulu

Houma-Ba

Houston-

Huntingt

Huntsvil

IndianapIowa Cit

Jackson,

Jackson,Jackson,

Jacksonv

Jacksonv

Janesvil

Johnson JonesborJoplin,

Kalamazo

Kankakee

Kansas C

Kennewic

Killeen-Kingspor

Knoxvill

Kokomo,

La CrossLafayett

LafayettLake Cha

Lake Cou

Lakeland

Lancaste

Lansing-

Laredo,

Las Cruc

Las Vega

Lawrence

Lawton,

Lebanon,

Lewiston

Lexingto

Lima, OH

Lincoln,

Little R

Longview

Los Ange

Louisvil

Lubbock,

LynchburMacon, G

Madera,

Madison,Manchest

Mansfiel

McAllen-

Medford,

Memphis,

Merced,

Midland,

Milwauke

Minneapo

Missoula

Mobile,

Modesto,

Monroe,

Monroe,

MontgomeMuncie, Muskegon

Myrtle B

Napa, CA

Naples-MNashvill

Nassau-S

Newark-U

New Have

New Orle

New York

Niles-Be

Norwich-

Oakland-

Ocala, F

Ocean Ci

Odessa,

Ogden-Cl

Oklahoma

Olympia, Omaha-Co

Orlando,

Oshkosh-

Owensbor

Oxnard-T

Palm Bay

Panama CParkersb

PascagouPensacol

Peoria,

Philadel

Phoenix-

Pine Blu

Pittsbur

Pittsfie

Pocatell

Portland

Portland

Port St.

Poughkee

Providen

Provo-Or

Pueblo, Punta Go

Racine,

Raleigh-

Rapid Ci

Reading,

Redding,

Reno-Spa Richmond

Riversid Roanoke,

Rocheste

RochesteRockford

Rockingh

Rocky Mo

Sacramen

Saginaw-

St. Clou

St. Jose

St. Loui

Salem, O

Salinas,

Salt Lak

San Ange

San Anto

San Dieg

San Fran

San Jose

San Luis

Santa An

Santa Ba

Santa Cr

Santa Fe

Santa Ro

SarasotaSavannah

Scranton

Seattle-

Sheboyga

Sherman-

Shrevepo

Sioux Ci

Sioux FaSouth Be

SpartanbSpokane,

Springfi

Springfi

Springfi

SpringfiState Co

Stockton

Sumter,

SyracuseTacoma,

Tallahas

Tampa-St

Terre HaTexarkan

Toledo, Topeka,

Trenton-

Tucson, Tulsa, O

TuscalooTyler, TUtica-Ro

Vallejo-

VictoriaVineland

Virginia

Visalia-

Waco, TX

Warner R

Warren-F

Washingt

Waterloo

Wausau, West Pal

Wheeling

Wichita,

Wichita Williams

Wilmingt

Wilmingt

Winston-

Worceste

Yakima,

York-Han

Youngsto

Yuba Cit

Yuma, AZ

Urbanization Across the Urbanization Across the WorldWorld

Log of GDP 1998

% population urban 1998, WDI200 Fitted values

6 8 10

0

50

100

Poland

Philippi

Honduras

GhanaGuatemal

VenezuelUnited K

Germany,

Nigeria

Peru

Kenya

Italy

Cote d'I

Uganda

Brazil

Angola

Korea

FranceCanada

Indonesi

Tanzania

Mexico

Mali India

South af

Argentin

Bolivia

Banglade

TurkeyJordan

Pakistan

Egypt

Iceland

El Salva

Mozambiq

Mauritan

Greece

Nicaragu

Hong Kon

New Zeal

Fiji

Morocco

Belgium

Hungary

Papua Ne

Malaysia

Zambia Central

Guinea

Finland

Ethiopia

Sierra L

Paraguay

Saudi Ar

Ecuador

Switzerl

Cameroon

Portugal

Syria

Comoros

Bahrain

Tunisia

Togo

Thailand

Dominica

Cyprus

Australi

Spain

Mauritiu

Algeria

Norway

Israel

Burundi

Luxembou

Iran, I.

Niger

Senegal

SwazilanLesotho

United S

Guyana

Jamaica

Western

Ireland

NetherlaMalta

Panama

MalawiGuinea-B

Gambia

Colombia

Gabon

Zimbabwe

Chad

United A

MadagascChinaZaire

Benin

Sudan

Denmark

Nepal

Sweden

Costa Ri

Japan

Congo

Chile

Trinidad

Uruguay

Yemen, N

Singapor

Bahamas,

Austria

Botswana

Haiti

Sri Lank

The HypothesisThe Hypothesis

One major effect of globalization has been One major effect of globalization has been an increase in being smart. an increase in being smart.

You become smart by being around other You become smart by being around other smart people– we are a social species. smart people– we are a social species.

Cities, like Boston and New York and Cities, like Boston and New York and London and Bangalore make that London and Bangalore make that possible. possible.

The same death of distance that did so The same death of distance that did so much to hurt Detroit helped save Boston much to hurt Detroit helped save Boston and NYC. and NYC.

The Gifts of Urban The Gifts of Urban DensityDensity

Cities begin either as political capitals Cities begin either as political capitals (Rome, Milan) or as centers for trade (Rome, Milan) or as centers for trade (Bruges, Venice). (Bruges, Venice).

The great business of these places was The great business of these places was commerce in either food or clothing (wool). commerce in either food or clothing (wool).

Cities were always in the h.c. business Cities were always in the h.c. business (guilds), but transport costs and scale (guilds), but transport costs and scale economies helped.economies helped.

Chains of ideas came out of urban density Chains of ideas came out of urban density Also the rise of democracy (Holland, US)Also the rise of democracy (Holland, US)

Chicago HistoryChicago History

America has an enormously fertile America has an enormously fertile hinterland, but it is extremely expensive hinterland, but it is extremely expensive to access.to access.

In 1816, cost of moving goods 32 miles is In 1816, cost of moving goods 32 miles is more expensive than moving across the more expensive than moving across the Atlantic.Atlantic.

The big story of the 19The big story of the 19thth century is the century is the construction of a transport network– construction of a transport network– water and rail that allows access to the water and rail that allows access to the hinterland. hinterland.

Chicago ContinuedChicago Continued

Chicago is the creation of two canals: Illinois Chicago is the creation of two canals: Illinois and Michigan and Erie, and then rails.and Michigan and Erie, and then rails.

First exporting live beef and salted pig.First exporting live beef and salted pig. Pigs are corn with feet, and Chicago is Pigs are corn with feet, and Chicago is

allowing access to high productivity Iowa allowing access to high productivity Iowa land (about 50 percent more fertile than land (about 50 percent more fertile than Kentucky). Kentucky).

Then as transport costs fall (and Then as transport costs fall (and refrigeration) there is a move to dressed beef refrigeration) there is a move to dressed beef and wheat. and wheat.

The Problematic 20The Problematic 20thth CenturyCentury

The Automobile made public transportation The Automobile made public transportation oriented cities seem somewhat obsolete.oriented cities seem somewhat obsolete.

The truck freed manufacturing from needing The truck freed manufacturing from needing to cluster around ports and rail stations. to cluster around ports and rail stations.

Declining transport costs created a rise in Declining transport costs created a rise in consumer cities over cities oriented around consumer cities over cities oriented around productive advantages like waterways.productive advantages like waterways.

The Decline of the Costs of Moving The Decline of the Costs of Moving GoodsGoods

Dolla

rs p

er

Ton M

ile (

Real)

Railroad Revenue per Ton Mileyear

1890 2000

.02323

.185063

The Move to WarmthThe Move to Warmth

Figure 24: 1980-2000 Population Growth and Mean January Tmp.January mean temperature 1980

Log Change in Population 1980-2 Fitted values

0 20 40 60 80

0

.5

1

Albany-S

Albuquer

Allentow

Atlanta,

Augusta-

Austin-S

Bakersfi

Baton Ro

Beaumont

BirminghBoston-W

Buffalo-

Canton-M

Charlest

Charlott

ChattanoChicago- Cincinna

Clevelan

ColumbiaColumbus

Corpus C

Dallas-F

Davenpor

Dayton-S

Denver-B

Des Moin

Detroit-

El Paso,

Fort Way

Fresno,

Grand Ra GreensboGreenvil

HarrisbuHartford

Honolulu

Houston-

Huntingt

Indianap Jackson,

Jacksonv

Johnson Kalamazo

Kansas CKnoxvill

Lafayett

Lancaste

Lansing-

Las Vega

LexingtoLittle R

Los Ange

Louisvil

Memphis,

Miami-Fo

Milwauke

Minneapo

Mobile,

Nashvill

New Have

New Orle

New York

Norfolk-Oklahoma

Omaha, N

Orlando,

Peoria-P

Philadel

Phoenix-

Pittsbur

Portland

Providen

Raleigh-

Richmond

Rocheste

Rockford

Sacramen

Saginaw-

St. Loui

Salt Lak San AntoSan Dieg

San Fran

Sarasota

Scranton

Seattle-

Shrevepo

Spokane,

Springfi

Stockton

Syracuse

Tampa-St

Toledo,

Tucson,

Tulsa, O

Washingt

West Pal

Wichita,

Youngsto

Figure 8: Density and City Growth 1920-1980dens20

Population Grow th 20-80 Fitted values

947.754 23869.5

-.545373

2.46159

NEW YORKCHICAGO,

PHILADEL

DETROIT,

CLEVELAN

ST. LOUI

BOSTON,

BALTIMOR

PITTSBUR

LOS ANGE

BUFFALO,

SAN FRAN MILWAUKEWASHINGT

NEWARK,

CINCINNA

NEW ORLE

MINNEAPO

KANSAS CSEATTLE,

INDIANAP

JERSEY CROCHESTE

PORTLAND

DENVER,

TOLEDO,

PROVIDEN

COLUMBUS

LOUISVILST. PAUL

OAKLAND,

AKRON, O

ATLANTA,

OMAHA, N

WORCESTE

BIRMINGH

SYRACUSE

RICHMOND

NEW HAVE

MEMPHIS,

SAN ANTO

DALLAS,

DAYTON,

BRIDGEPO

HOUSTON,

HARTFORD

SCRANTON

GRAND RA

PATERSON

YOUNGSTO

SPRINGFI

DES MOIN

NEW BEDFFALL RIV TRENTON,

NASHVILL

SALT LAK

CAMDEN,

NORFOLK,

ALBANY, LOWELL,

WILMINGT

CAMBRIDG

READING,

FORT WOR

SPOKANE, KANSAS C

YONKERS,

DULUTH,

TACOMA,

ELIZABET

LAWRENCE

UTICA, N

ERIE, PA

SOMERVIL

WATERBUR

FLINT, M

JACKSONV

OKLAHOMA

SCHENECT

CANTON,

FORT WAY

EVANSVILSAVANNAH

MANCHEST

ST. JOSE

KNOXVILL

EL PASO,

BAYONNE,

PEORIA,

HARRISBU

SAN DIEG

WILKES-B

ALLENTOW

WICHITA,

TULSA, O

TROY, NY

SIOUX CI

SOUTH BE

Why Didn’t New York and Why Didn’t New York and London Die? London Die?

In 1900, the fundamental business of In 1900, the fundamental business of American cities was producing and American cities was producing and moving goods around by rail and moving goods around by rail and water. water. Chicago and hogsChicago and hogs New York and sugar, cotton, booksNew York and sugar, cotton, books

Making stuff on waterways had a Making stuff on waterways had a huge cost advantage, but this was huge cost advantage, but this was killed by the 20killed by the 20thth century. century.

The result was the crisis of the 1970sThe result was the crisis of the 1970s

The Rebirth of Boston, The Rebirth of Boston, NYCNYC

Idea-oriented industries rose in places that Idea-oriented industries rose in places that were once centers of manufacturing. were once centers of manufacturing.

New York’s early industries are sugar refining, New York’s early industries are sugar refining, publishing (stolen books) and garmentspublishing (stolen books) and garments

Finance in New York and an urban chain of Finance in New York and an urban chain of ideasideas Understanding risk and return with dataUnderstanding risk and return with data The sale of riskier assets (Milken)The sale of riskier assets (Milken) The use of risky assets to restructure companies The use of risky assets to restructure companies

(KKR)(KKR) The nationwide sharing of risk (Ranieri and MBSs)The nationwide sharing of risk (Ranieri and MBSs) The sale of data tools (Bloomberg)The sale of data tools (Bloomberg)

Figure 51980 Share of Skilled Workers

Change Income 1980-2000 Fitted values

.02 .04 .06 .08 .1

0

.2

.4

.6

Akron, O

Albany-S

Albuquer

Allentow

Atlanta-

Austin-R

Bakersfi

Baltimor

Baton Ro

Birmingh

Boston-Q

Buffalo-

Canton-M

Charlest

Charlott

Chicago-

Cincinna

Clevelan

Columbia

Columbus

Dallas-P

Dayton,

Detroit-

El Paso,

Fort Lau

Fort Way

Fresno, Gary, IN

Grand Ra

Greensbo

Harrisbu

Hartford

Honolulu

Houston-

IndianapJackson,

Jacksonv

Kansas C

Knoxvill

Lancaste

Las Vega

Little R

Los Ange

Louisvil

Memphis,

Milwauke

MinneapoNashvill Nassau-S

New Orle

New York

Newark-U

Oklahoma

Omaha-CoOrlando,

Oxnard-T

Philadel

Phoenix-

Pittsbur

Portland

Providen

Richmond

Riversid Rocheste

Sacramen

Salt LakSan Anto

San Dieg

San Fran

San Jose

Seattle-

Spokane,

Springfi

St. LouiStockton Syracuse

Tacoma,

Tampa-St

Toledo, Tucson,

Tulsa, O

WashingtWest Pal

Wichita,

Youngsto

Population Growth in the Population Growth in the Northeast and MidwestNortheast and Midwest

coef = .01169126, se = .00161765, t = 7.23

e(

dp

op

| X

)

e( bagrad90 | X )-10.4384 24.0572

-.310423

.311965

Steubenv

Johnstow

Altoona,

Lima, OH

Mansfiel

Youngsto

Williams

LewistonJackson,

Joplin,

Janesvil

Wausau,

St. Jose

Kokomo,

Sharon, Scranton

Sheboyga

Canton--

York, PA

Jamestow

Elkhart-

Decatur,

Evansvil

Reading,

Saginaw-Terre Ha

Elmira,

Glens FaRockford

Utica--R

Sioux Ci

Fort Way

Erie, PA

Muncie,

Lancaste

Benton HDubuque,

Duluth--

Eau Clai

Peoria--

St. ClouAppleton

Waterloo

Allentow

Davenpor

Toledo,

Green Ba

Bangor,

Grand Ra

Harrisbu

Detroit-

Springfi

Pittsbur

Clevelan

Buffalo-

Dayton--

South Be

CincinnaLa Cross

Binghamt

Indianap

Kalamazo

Providen

St. Loui

Sioux Fa

Milwauke

Syracuse

Springfi

Pittsfie

Rapid Ci

Grand Fo

Wichita,

Cedar Ra

New LondSpringfi

Bismarck

PhiladelTopeka,

Omaha, N

Des Moin

Rocheste

Kansas C

Columbus

Chicago-

Albany--Lansing-

Fargo--M

New York

Lafayett

Hartford

Minneapo

Portland

Lincoln,

Boston--

Barnstab

BloomingBurlingt

New Have

Rocheste

State CoBlooming

Champaig

Madison,Columbia

Lawrence

Iowa Cit

Figure 42000 Share of Skilled Workers

Log Wage Residual 2000 Fitted values

.05 .1 .15

9.6

9.8

10

10.2

Albany-S

AlbuquerAllentow

Atlanta-

Austin-R

Bakersfi

Baton RoBirmingh

Buffalo-Canton-M

Charlest

Charlott

Chicago-

Columbia

Columbus

Dayton,

Fort Way

Fresno,

Grand Ra

GreensboHarrisbu

Honolulu

Indianap

Jackson,

Kansas C

Knoxvill

Lancaste

Las Vega

Little R

Louisvil

Memphis,

Minneapo

Nashvill

New Orle

New York

Oklahoma

Omaha-Co

Orlando,

Phoenix-

Pittsbur

Richmond

Rocheste

Salt Lak

San Anto

San Dieg

San Fran

Spokane,

St. Loui

Stockton

SyracuseTampa-St

Toledo,

Tucson,

Tulsa, O

West Pal

Wichita,

Youngsto

0.0

5.1

Cha

nge

in P

erce

nt w

ith B

A 1

990-

2000

.1 .2 .3 .4 .5Percent of Adults with BA Degree in 1990

Reinvention in the WestReinvention in the West

In the old world, Milan thrives and Turin In the old world, Milan thrives and Turin fades.fades. Weaving becomes fashion.Weaving becomes fashion. Chains of ideas (Nino Cerruti, Armani, others). Chains of ideas (Nino Cerruti, Armani, others).

Minneapolis excels and Cleveland doesn’t. Minneapolis excels and Cleveland doesn’t. Birmingham reinvents itself (it always was Birmingham reinvents itself (it always was

an intellectual polis); Manchester doesn’t.an intellectual polis); Manchester doesn’t. And of course, then there is Boston.And of course, then there is Boston.

Technology, medicine, finance. Technology, medicine, finance.

Urban Intercontinental Urban Intercontinental GatewaysGateways

Athens as importer of ideas from the Greek Athens as importer of ideas from the Greek Diaspora. Diaspora. Anaxogoras, Prodicus came to Athens-> Anaxogoras, Prodicus came to Athens->

SocratesSocrates Baghdad is importer of ideas from India, Baghdad is importer of ideas from India,

Persia, and Greece.Persia, and Greece. Jafar is a Barmakid– probably a Brahmin from Jafar is a Barmakid– probably a Brahmin from

Kashmir– aided the Abbasid takeoverKashmir– aided the Abbasid takeover Academy of Gundishapur, Sindhin, Al-Khwarizmi Academy of Gundishapur, Sindhin, Al-Khwarizmi

Cordoba, Venice and the transmission west. Cordoba, Venice and the transmission west.

What is good about urban What is good about urban poverty?poverty?

Cities tend to contain a large number of Cities tend to contain a large number of poor people, but that reflects urban poor people, but that reflects urban strengths more than urban weaknesses. strengths more than urban weaknesses.

In places like Boston, there is opportunity, In places like Boston, there is opportunity, ethnic networks, and life without cars. ethnic networks, and life without cars.

Cities aren’t making people poor, they are Cities aren’t making people poor, they are bringing them in. bringing them in.

Policies that are good to poor people in Policies that are good to poor people in cities will attract more of them and that is cities will attract more of them and that is o.k.– the really problem is the artificial o.k.– the really problem is the artificial equality of suburbs. equality of suburbs.

The Rise of the The Rise of the Consumer CityConsumer City

While clusters of genius are more While clusters of genius are more important than ever, they are no longer important than ever, they are no longer tied down by productive amenities like tied down by productive amenities like rivers and portsrivers and ports

Increasingly, cities have formed in Increasingly, cities have formed in places where people want to live.places where people want to live.

At the same time, more attractive older At the same time, more attractive older cities have become increasingly cities have become increasingly attractive to people who want to live in a attractive to people who want to live in a dense environment. dense environment.

When are high real When are high real wages bad?wages bad?

Declining Real Wages and the Declining Real Wages and the Rise of the Consumer CityRise of the Consumer City

Why are so many people Why are so many people still in the rustbelt?still in the rustbelt?

The rustbelt was built on The rustbelt was built on manufacturing around the waterways. manufacturing around the waterways.

Erstwhile creative hubs like Detroit Erstwhile creative hubs like Detroit evolved into goods producing evolved into goods producing machines, but declining transport machines, but declining transport costs led manufacturing to move. costs led manufacturing to move.

Now there is little obvious Now there is little obvious comparative advantage to these comparative advantage to these places and the weather isn’t great. places and the weather isn’t great.

People vs. PlacePeople vs. Place

Economics pushes strongly for helping Economics pushes strongly for helping people not places (the incidence people not places (the incidence problem). problem).

The tendency to spend on infrastructure The tendency to spend on infrastructure and housing to boost declining regions is and housing to boost declining regions is often unproductive and poorly targeted. often unproductive and poorly targeted.

There is more justification in Europe than There is more justification in Europe than in the US (less space, less temperature in the US (less space, less temperature heterogeneity), but more potential for heterogeneity), but more potential for vast waste. vast waste.

Are some cities becoming Are some cities becoming gateless gated communities? gateless gated communities?

Over the past 40 years, there has Over the past 40 years, there has been a revolution in property rights been a revolution in property rights regarding development, some of this regarding development, some of this is good, some is bad.is good, some is bad.

Suburbs, not cities, are the center of Suburbs, not cities, are the center of this. this.

Still, a large number of cities are Still, a large number of cities are increasingly making it harder to build. increasingly making it harder to build.

This is where Jane Jacobs was wrong. This is where Jane Jacobs was wrong.

Density in 1980

Change in Housing Value 80-2000 Fitted values

6.20658 12.3905

-.225138

.993174

Akron, O

Albany-S

Albuquer

Allentow

Atlanta,

Austin,

Bakersfi

Baltimor

Baton Ro

Birmingh

Boise Ci

Boston,

Buffalo-Canton,

Charlest

Charlott

Chicago,Cincinna

Clevelan

Colorado

Columbia

Columbus

Dallas-F

Dayton-S

Denver-BDetroit,

El Paso,

Fort Lau

Fort Way

Fresno,

Grand Ra

Greensbo

Harrisbu

HartfordHonolulu

Houston-

Indianap

Jackson,

Jacksonv

Kansas C

Knoxvill

Lakeland

Lancaste

Las Vega

Little R

Los Ange

Louisvil

McAllen-

Melbourn

Memphis,

Milwauke

Minneapo

Modesto,

Monmouth

Nashvill

New Orle

New York

Norfolk-

Oklahoma

Omaha, N

Orlando,

Pensacol

Philadel

Phoenix,Pittsbur

PortlandProviden

Raleigh-

Richmond

Riversid

RochesteSacramen

Salt Lak

San AntoSan Dieg

San Fran

San Jose

Sarasota

Scranton

Seattle-

Spokane,

Springfi

St. LouiStockton

Syracuse

Tacoma,

Tampa-StToledo,

Tucson, Tulsa, O

Ventura-

WashingtWest Pal

Wichita,

Youngsto

Prices and Permits across Prices and Permits across Larger Metropolitan AreasLarger Metropolitan Areas

2005 H

ousin

g P

rice

Permits 2000-5/Stock in 20000 .1 .2 .3

0

200000

400000

600000

Akron

Albany-SAlbuquer

Allentow Atlanta-

Augusta-

Austin-R

Bakersfi

Baltimor

Baton Ro

Bethesda

Birmingh

Boston-Q

Bridgepo

Buffalo-

Cambridg

CamdenCape Cor

CharlestCharlott

Chattano

Chicago-

CincinnaClevelan

Colorado

ColumbiaColumbus

Dallas-PDayton

Deltona-

Detroit-

Edison

El Paso

Essex Co

Fort Lau

Fort Wor

Fresno

GaryGrand Ra GreensboGreenvilHarrisbu

Hartford

Honolulu

Houston-Indianap

Jacksonv

Kansas CKnoxvill

Lake Cou

Lakeland

Las Vega

Little R

Los Ange

Louisvil

Madison

Memphis

Milwauke

Minneapo

Nashvill

Nassau-S

Newark-U

New Have

New Orle

New York

Oakland-

OklahomaOmaha-Co

Orlando-

Oxnard-T

Palm BayPhiladelPhoenix-

Pittsbur

Portland

Portland

PoughkeeProviden

Raleigh-Richmond

Riversid

Rocheste

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OFHEO Adjusted Prices Real Construction Costs

Figure 3: OFHEO Adjusted Housing Pricesvs. Construction Costs, Las Vegas

Sources of CO2 Sources of CO2 EmissionsEmissions

Private Gasoline Consumption (Cars)Private Gasoline Consumption (Cars)

Public Transportation EmissionsPublic Transportation Emissions

Home ElectricityHome Electricity

Home Heating: Natural Gas and Home Heating: Natural Gas and Fuel OilFuel Oil

Total Cost from Marginal Home

Wharton Regulation Index .

800 1000 1200 1400 1600

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Denver-B

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City-Suburb DifferentialsCity-Suburb Differentials

For each metropolitan area, we can For each metropolitan area, we can also calculate the difference between also calculate the difference between urban and suburban energy usage. urban and suburban energy usage.

Calculate gas usage by central city vs. Calculate gas usage by central city vs. suburb.suburb.

Convert public transit by ridership Convert public transit by ridership using census figures. using census figures.

Calculate energy spending using the Calculate energy spending using the IPUMS for central city vs. suburb. IPUMS for central city vs. suburb.

Failed TheoriesFailed Theories

Median income predicts more initial Median income predicts more initial inequality should mean more redistribution, inequality should mean more redistribution, but the US has more pre-tax inequality and but the US has more pre-tax inequality and no more mobility. no more mobility.

Social insurance predicts more volatility, Social insurance predicts more volatility, more redistribution, but the US is more more redistribution, but the US is more volatile. volatile.

Tax efficiency predicts that countries with Tax efficiency predicts that countries with better tax systems should have bigger better tax systems should have bigger governments, but the US seems to have less governments, but the US seems to have less tax fraud, etc. tax fraud, etc.

Endogenous InstitutionsEndogenous Institutions

Overall decomposition suggests that about Overall decomposition suggests that about ½ of the US/Europe difference can be ½ of the US/Europe difference can be explained by majoritarian institutions and explained by majoritarian institutions and ½ can be explained by ethnic ½ can be explained by ethnic heterogeneity. heterogeneity.

Why does the US have anti-redistribution Why does the US have anti-redistribution institutions (Supreme Court, Senate, etc)?institutions (Supreme Court, Senate, etc)?

Europe had more conservative institutions Europe had more conservative institutions than the US but lost them in the 20than the US but lost them in the 20thth century wave of revolutions and wars.century wave of revolutions and wars.

The Formation of BeliefsThe Formation of Beliefs

These beliefs don’t reflect reality– the These beliefs don’t reflect reality– the American poor work harder than poor American poor work harder than poor Europeans.Europeans.

The American poor are not particularly mobile. The American poor are not particularly mobile. A better view is that these beliefs are formed A better view is that these beliefs are formed

and reflect socialist success in Europe and and reflect socialist success in Europe and failure in the U.S. failure in the U.S.

Prop. Rep. predicts these beliefs across space. Prop. Rep. predicts these beliefs across space. Teachers unions and school curricula. Teachers unions and school curricula.

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Fig. 1: Voting for Bush (2000) and Income: Micro Data

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Fig. 2: Voting for Bush (2000) and Income: State DataP

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Fig. 3: Religious Attendance and Education: Micro Data

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Producing Aggregation Producing Aggregation ReversalsReversals

A two factor model, where one factor A two factor model, where one factor dominates at the micro-level and another dominates at the micro-level and another at the aggregate.at the aggregate.

For example, let’s say that voting For example, let’s say that voting depends on beliefs about poverty and depends on beliefs about poverty and one’s own income.one’s own income.

If there is a social multiplier in beliefs If there is a social multiplier in beliefs then own income effect can dominate at then own income effect can dominate at the micro-level but not at the macro-the micro-level but not at the macro-level. level.

Modeling Aggregation Modeling Aggregation ReversalsReversals

A Bayesian model where people get A Bayesian model where people get signals and share them.signals and share them.

There are two issues: (1) social There are two issues: (1) social learning and (2) connecting beliefs learning and (2) connecting beliefs to exogenous variablesto exogenous variables

Social learning is easily compatible Social learning is easily compatible with Bayesian learning– connecting with Bayesian learning– connecting beliefs to exogenous variables is notbeliefs to exogenous variables is not

The Political Economy of The Political Economy of HatredHatred

Hatred is the willingness to pay to hurt Hatred is the willingness to pay to hurt others (terrorism can be a version of it)others (terrorism can be a version of it)

Also forms of race hatred (anti-Semitism, Also forms of race hatred (anti-Semitism, anti-Black behavior in the U.S. South)anti-Black behavior in the U.S. South)

Not the same thing as discriminationNot the same thing as discrimination Not automatic with fragmentation, and Not automatic with fragmentation, and

quite volatilequite volatile A combination of emotions and cognition A combination of emotions and cognition

Psychology in the market– rational Psychology in the market– rational entrepreneurs and less rational peopleentrepreneurs and less rational people

Anti Americanism around Anti Americanism around the Worldthe World

I’ve already shown the connections I’ve already shown the connections between race and redistribution. between race and redistribution.

Please tell me if you have a very favorable, Please tell me if you have a very favorable, somewhat favorable, somewhat somewhat favorable, somewhat unfavorable or very unfavorable opinion of unfavorable or very unfavorable opinion of the United States the United States

Vietnam 4% very vs. 8% for France and Vietnam 4% very vs. 8% for France and Canada (27 vs. 34 and 27 including Canada (27 vs. 34 and 27 including somewhatsomewhat

Argentina 23 % very vs. 3% Guatemala and Argentina 23 % very vs. 3% Guatemala and 2% Honduras (49 vs. 13 and 5)2% Honduras (49 vs. 13 and 5)

The Formation of HatredThe Formation of Hatred A “primitive emotion that marks for attack or A “primitive emotion that marks for attack or

avoidance those things which we perceive as a avoidance those things which we perceive as a threat to our survival or reproduction” (Dozier). threat to our survival or reproduction” (Dozier).

Results from ultimatum games. Results from ultimatum games. Hatred is always and everywhere formed by Hatred is always and everywhere formed by

stories of past and future atrocitiesstories of past and future atrocities Tales of Blacks raping white girls in the SouthTales of Blacks raping white girls in the South Tales of Jews killing Jesus, drinking children’s blood, Tales of Jews killing Jesus, drinking children’s blood,

and the Protocols of the Elders of Zionand the Protocols of the Elders of Zion Often these stories need repetition more than Often these stories need repetition more than

truthtruth

The ModelThe Model

The setting two parties competing for The setting two parties competing for votes and sending out messages of hatevotes and sending out messages of hate

Voters may investigate, form opinions Voters may investigate, form opinions about the dangers of an out-groupabout the dangers of an out-group

Voters choose between the candidateVoters choose between the candidate In-group voters choose whether or not In-group voters choose whether or not

to isolate themselves from the out-to isolate themselves from the out-groupgroup

Contact with out-group might occurContact with out-group might occur

Key decisions recursivelyKey decisions recursively Will in-group members isolate themselvesWill in-group members isolate themselves

Only when they have heard a hate creating Only when they have heard a hate creating message and not investigatedmessage and not investigated

Which candidate will voters supportWhich candidate will voters support They vote their pocketbook except They vote their pocketbook except When they have heard a hate creating message When they have heard a hate creating message

and not investigated and then they are more and not investigated and then they are more likely to favor policies that hurt the minoritylikely to favor policies that hurt the minority

Will voters investigate the messageWill voters investigate the message If it will change their isolation behaviorIf it will change their isolation behavior

Will politicians send hate creating Will politicians send hate creating messagesmessages If it will increase votesIf it will increase votes

Key Comparative StaticsKey Comparative Statics

Private individuals are more likely to Private individuals are more likely to investigate hate-creating messages investigate hate-creating messages whenwhen The minority group is largeThe minority group is large The minority group isn’t segregatedThe minority group isn’t segregated The potential harm is large and the gains The potential harm is large and the gains

from self-protection are highfrom self-protection are high Politicians are more likely to send a Politicians are more likely to send a

hate creating message when hate creating message when This message is unlikely to be investigatedThis message is unlikely to be investigated

Comparative Statics on Comparative Statics on Supplying HatredSupplying Hatred

Hatred will be more likely to be supplied Hatred will be more likely to be supplied when the group is potentially more of a when the group is potentially more of a threat (holding search constant)threat (holding search constant)

Hatred is more likely when the group is Hatred is more likely when the group is different along the policy-relevant different along the policy-relevant dimensiondimension

The right pushes hate against poor The right pushes hate against poor minorities the left against rich minoritiesminorities the left against rich minorities

Other ResultsOther Results

With two issues the key is whether the With two issues the key is whether the group is policy relevantgroup is policy relevant

More extremism on the issue that the out-More extremism on the issue that the out-group is different on leads to more hatredgroup is different on leads to more hatred

Hating the haters can be an effective Hating the haters can be an effective strategystrategy

Policies related to migration or Policies related to migration or segregation are natural complements to segregation are natural complements to hatredhatred

Understanding why race Understanding why race hatred rises between 1870 hatred rises between 1870

and 1910 and 1910 In the 1880s, depression created fertile ground In the 1880s, depression created fertile ground

for the first American party, the Populists, for the first American party, the Populists, committed to redistribution from rich to poor. committed to redistribution from rich to poor.

““More important to the success of Southern More important to the success of Southern Populism than the combination with the West or Populism than the combination with the West or with labor was the alliance with the Negro… with labor was the alliance with the Negro… Populists of other Southern states followed the Populists of other Southern states followed the example of Texas, electing Negroes to their example of Texas, electing Negroes to their councils and giving them a voice in the party councils and giving them a voice in the party organization.” (Woodward)organization.” (Woodward)

““I have no words which can portray my contempt I have no words which can portray my contempt for the white men, Anglo-Saxons, who can knock for the white men, Anglo-Saxons, who can knock their knees together, and through their their knees together, and through their chattering teeth and pale lips admit that they are chattering teeth and pale lips admit that they are afraid the Negroes will ‘dominate us.’” (Watson)afraid the Negroes will ‘dominate us.’” (Watson)

But the response was But the response was ““Alarmed by the success that the Populists were Alarmed by the success that the Populists were

enjoying with their appeal to the Negro voter, the enjoying with their appeal to the Negro voter, the conservatives themselves raised the cry of ‘Negro conservatives themselves raised the cry of ‘Negro domination,’ and white supremacy, and enlisted domination,’ and white supremacy, and enlisted the Negrophobe elements” the Negrophobe elements”

“ “In Georgia and elsewhere the propaganda was In Georgia and elsewhere the propaganda was furthered by a sensational press that played up and furthered by a sensational press that played up and headlined current stories of Negro crime, charges headlined current stories of Negro crime, charges of rape and attempted rape, and alleged instances of rape and attempted rape, and alleged instances of arrogance … already cowed and intimidated, the of arrogance … already cowed and intimidated, the race was falsely pictured as stirred up to a race was falsely pictured as stirred up to a mutinous and insurrectionary pitch” (both from mutinous and insurrectionary pitch” (both from Woodward)Woodward)

Decline of Race Hatred Decline of Race Hatred

Tom Watson by 1906 said the black man Tom Watson by 1906 said the black man “grows more bumptious on the street, more “grows more bumptious on the street, more impudent in his dealings with white men, and impudent in his dealings with white men, and then, when he cannot achieve social equality then, when he cannot achieve social equality as he wishes, with the instinct of the as he wishes, with the instinct of the barbarian to destroy what he cannot attain barbarian to destroy what he cannot attain to, he lies in wait, as that dastardly brute did to, he lies in wait, as that dastardly brute did yesterday near this city, and assaults the fair yesterday near this city, and assaults the fair young girlhood of the south...” young girlhood of the south...”

Key lessons– strategic, related to policy Key lessons– strategic, related to policy relevance, not related to truthrelevance, not related to truth

1919thth Century Anti- Century Anti-SemitismSemitism

Cohn (1956) wrote “the Right (conservative, Cohn (1956) wrote “the Right (conservative, monarchical, ‘clerical’) maintained that there monarchical, ‘clerical’) maintained that there must be a place for the Church in the public must be a place for the Church in the public order; the Left (democratic, liberal, radical) held order; the Left (democratic, liberal, radical) held that there can be no (public) Church at all.”that there can be no (public) Church at all.”

“ “Jews supported the Left, then, not only because Jews supported the Left, then, not only because they had become unshakeable partisans of the they had become unshakeable partisans of the Emancipation, but also because they had no Emancipation, but also because they had no choice; as far as the internal life of the Right was choice; as far as the internal life of the Right was concerned, the Emancipation had never taken concerned, the Emancipation had never taken place, and the Christian religion remained a place, and the Christian religion remained a prerequisite for political participation.” prerequisite for political participation.”

If Jews are on the left, then If Jews are on the left, then right wing anti-Semitism right wing anti-Semitism

followsfollows ““from Stoecker to Hitler, rightists rarely from Stoecker to Hitler, rightists rarely

attempted to refute socialism, preferring to attempted to refute socialism, preferring to cite the high percentage of intellectuals of cite the high percentage of intellectuals of Jewish origin among socialist publicists as Jewish origin among socialist publicists as proof of its subversion” (Weiss, 1996). proof of its subversion” (Weiss, 1996).

In 1892, the conservative party platform In 1892, the conservative party platform embraced anti-Semitism and pledged to “do embraced anti-Semitism and pledged to “do battle against the many-sided aggressive, battle against the many-sided aggressive, decomposing, and arrogant Jewish influence decomposing, and arrogant Jewish influence on the life of our people” (Weiss, 1996, p. on the life of our people” (Weiss, 1996, p. 116). 116).

Russia, Austria and Russia, Austria and FranceFrance

In Russia, the Czar used anti-Semitism to In Russia, the Czar used anti-Semitism to build up support for his pro-Church build up support for his pro-Church regimeregime

In Austria, anti-Semitism was actually In Austria, anti-Semitism was actually used against the Emperor by Luegerused against the Emperor by Lueger

In France, the right wing tried (Dreyfus) In France, the right wing tried (Dreyfus) but were defeated by left wing strengthbut were defeated by left wing strength Zola describes the War Office that convicted Zola describes the War Office that convicted

Dreyfus as a “nest of Jesuits” prone to Dreyfus as a “nest of Jesuits” prone to “inquisitorial and tyrannical methods.” “inquisitorial and tyrannical methods.”

Italy and SpainItaly and Spain

Spain’s easy– no Jews post 1492 (or at Spain’s easy– no Jews post 1492 (or at least 1600)least 1600) There was some anti-Masonic hatred that There was some anti-Masonic hatred that

played a similar role (also in U.S.)played a similar role (also in U.S.) Italy is more interesting– the modern Italy is more interesting– the modern

state was founded on expropriation of state was founded on expropriation of the Popethe Pope As such, the king and everyone in politics As such, the king and everyone in politics

was excommunicatedwas excommunicated As such, there was no church in politics, As such, there was no church in politics,

and Jews weren’t policy relevantand Jews weren’t policy relevant