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  • The Mainstream Media Will Rise Again

    The news media was flattened on November 8th, but its recovery has already started.

    One of the striking features in all the commentary on Facebook about Donald Trump’s victory is the number of times that the words I, me and my appeared in member posts. For example, “I am proud”, “I am optimistic”, or “I am fearful”, “I am worried”, etc. The comments celebrating or lamenting the event were mostly about the way the writer felt about the event, not about the event itself. That looks like a subtle difference but it reveals a demarcating line between an introverted reaction vs. an extroverted one.

    None of this is too surprising because even in normal times, Facebook’s format and primary raison d’être are to enable people to talk about themselves and to update their friends on their comings and goings. On any given day outside of an election period, the blue bannered webpage seems to be 80% introversion (photos and news of one’s own family, or one’s own meal, or one’s own travels, challenges and accomplishments) and 20% extroversion (posts of articles about third parties).

    Anatomy of a Crash

    It was surprising however to observe the same I, me, my phenomenon in the columns of major newspapers in the immediate aftermath of the election. Leading columnists were unusually introspective, if not introverted. Writing in the first person, they felt homeless in America, were horrified, struggled to absorb the impossible and vowed to fight back.

    Of course, columnists are often media superstars and their extensive use of the first person may come from a deliberate effort by the newspaper editors to render the news commentary more personal. That coloring was certainly in full relief in the angst-ridden I haven’t slept in my room since the election and Trump’s election stole my desire to look for a partner among others.

    Nonetheless, whether deliberate or incidental, the I me my device can be seen as a sign that leading dailies, or at least their op-ed pages, have over the years drifted from extroverted to introverted, from objective analysis to star-studded opinion.

    In reality, the op-ed pages need not be so full of personal opinion and subjective thoughts and feelings. Opinion can be objective analysis, and as such can become an arms length discussion of facts without necessarily pointing the reader towards the author’s own views. The op in op-ed then becomes an invitation and encouragement to the reader to form his own opinion, instead of a presentation of the writer’s opinion. Fairly or unfairly, the value placed on the latter has been in steady decline for many years.

    The presentation of facts in support of this new approach requires the inclusion of more soft and hard information and data. As W. Edwards Deming was fond of saying, “without data, you are just another person with an opinion”, or, at his more whimsical, “in God we trust; all others must bring data”. Data in an op-ed does not have to be numerical, so long as the tone and content are objective and analytical. Of course there is some subjectivity in choosing one set of data or facts vs. another but a writer will not be credible if the scope of his analysis is too narrow. An article is enriched by the addition of more and more data. It should be as full of data as possible and as short as necessary to make it a compact and quick read.

    This is painting with a broad brush and we should recognize that the leading dailies still produce outstanding content, including on the op-ed page. But it is fair to say that, in reflecting and understanding the general mood of the country, these papers were blindsided by the more recent upstarts of the internet age and even by savvy Twitter users like Mr. Trump himself and others.

    Social media has revalued upwards the opinion of every person with a computer or smartphone and simultaneously devalued professional opinion leaders such as newspaper columnists, academics and others. Remember that Time Magazine’s Person of the Year in 2006 was YOU. Perhaps it is the new competition from you and from bloggers and micro-bloggers that has led these columnists to emphasize the first person in their writings as if to remind us that their credentials far outweigh those of the random blogger across town. Indeed they do. But in today’s free for all media, opinions are increasingly judged on their own merits, and not as much by the identity of the writer.

    Here is the key to understanding the news media’s endless travails. Of course, digital and social media have played a big role in the decline of advertising at major newspapers, but so has each paper’s own approach to news and commentary. A good first step towards recovery would be to excise or minimize I, me, my from the op-ed page and to shift the whole tenor from introversion to extroversion. With data and facts presented in a rigorous and coherent manner, a columnist becomes much more than “just another person with an opinion”.

    Scraping the Bottom

    At first blush, the current state of play is not that encouraging. In the world of the internet, of blogging, of Facebook and BuzzFeed, it has become more difficult for legacy newspapers to keep up with a changing audience. Millennials may be more interested in short articles that combine news and entertainment than in the type of long form articles and analyses that are the hallmarks of the New York Times and other leading dailies.

    To gauge the prevailing mood, consider the table below which shows the results of several Google searches on November 18th, a randomly chosen date. Although cronyism is arguably a real scourge of our time, there were on Google only 348,000 results for “Hillary cronyism” and 423,000 results for “Trump cronyism”. What is important in the table is how these numbers compare to other searches. Some serious crises like “Flint Michigan water” log in at less than two million results, but the distracting “Trump Rosie” has over 9 million and the promised “Trump build a wall” nearly 35 million, while itself only one tenth of the ubiquitous mega blockbuster “Trump Twitter”.

    Clearly, the more important items are under-covered while the ephemeral and insubstantive get a ton of coverage. It is possible however that this trend towards the superficially satisfying has run its course and that traditional news can regain some advantage. As with any downward spiral, recovery seems more plausible after hitting bottom. Strong brands in any sector can be tarnished for a while but in most cases they can adapt and enjoy a lasting rebound under altered circumstances.

    Although no one can make this prediction with high confidence, there is a nebulous long-observed propensity for big trends to reverse themselves once they have reached an extreme point, as the devaluation of the media has on November 8th. There is also an increasing desire among news consumers to gravitate back to the great time-tested brands in order to gain some immunization against the so-called post-truth world.

    Note for example that since the election, The New York Times has seen a ten-fold increase in daily subscription sign-ups, a signal that many readers are returning to more established brands at a time when fake news is spreading over the internet. Yet this surge may prove short lived if real reforms are not implemented in the wake of the election surprise.

    At any rate, a total subscription count of 2.5 million at the Times seems exceedingly low for what is one of the top news brands in the world. Further, the market value of the New York Times company at $2.4 billion, though it has risen 30% since the election, still underestimates the full potential of the brand.

    Sami Karam is the founder and editor of populyst.net and the creator of the populyst index™. populyst is about innovation, demography and society. Before populyst, he was the founder and manager of the Seven Global funds and a fund manager at leading asset managers in Boston and New York. In addition to a finance MBA from the Wharton School, he holds a Master’s in Civil Engineering from Cornell and a Bachelor of Architecture from UT Austin.

    Photo: ‘New York Times’ photo Copyright © 2016 populyst.net.

  • Trump and California’s Economy

    Defenders of California’s status-quo claim to be proud of California’s economic growth and worry about what Trump will do to that growth. If you are so impolite as to mention that this has been California’s slowest recovery in 70 years, as the following chart shows, you will be told that slow growth is good. It avoids the excesses of previous business cycles.

    That’s nonsense. Slow growth is anti-poor and anti-minority. Here’s a simple way to analyze economic policy: Ask how the policy changes the probability of a young person finding a job. If the policy increases their chances, it’s good policy. If it decreases the probability, it’s bad policy.

    I go farther than that. To me, deliberately enacting a policy that reduces a young person’s prospects is immoral.

    California, and the nation, have lots of policies that reduce young people’s job prospects. So, there are lots of opportunities to increase economic growth. Certainly, it’s possible to present a set of policy proposals that would increase California’s economic growth.

    Evaluating Trump’s economic plan is difficult, though. So far, it’s a mixed bag. It has policies that would increase economic growth. It also has some that would decrease economic growth. I think the best way to evaluate the impact is to look at his major proposals for their growth impact and probability of becoming law.

    Trump has promised to reduce American business’s regulatory burden. That would reduce costs, encourage domestic production and jobs, and provide a strong economic boost. Some of that overhead was created by executive action and can be reversed by executive action. The probability of reversing those regulations is high, as are the economic benefits.

    He’s also promised to eliminate or “fix” Dodd-Frank and the Affordable Healthcare Act. Exactly what he intends to do, fix or eliminate, depends on the tweet of the day. It’s also not clear what fix means. Still, any real change will face significant hurdles, even with a Republican controlled Congress. To be conservative, we need to assume that he will be unsuccessful in his attempts to significantly change these laws. If he does, and it’s done in a way that reduces costs, it will be a happy plus.

    Then there is his immigration policy, if you can figure out what it is. He’s been all over the map, from shipping out all undocumented residents to only shipping out the criminals. Of course, if he is able, as some fear, to move millions of our workers, the economic impact would be seriously negative.

    Realistically, the most he is likely to accomplish is exporting criminals and slowing immigration. The numbers of undocumented criminals is small enough to have no measurable impact on the economy. Decreasing immigration tends to slow economic growth, but it may reduce inequality a bit by reducing competition faced by our low-productivity workers. Overall, Trump’s immigration policies will likely have modest negative economic impacts.

    As in all things Trump, his trade proposals are inconsistent and vague. One thing has been consistent. Trump wants to reduce trade. We can only hope that he’s unsuccessful. The economic impacts of reducing trade would be large and negative. Presumably, Congress will effectively resist his most egregious proposals.

    Reducing trade would particularly hurt California’s economy, as a large percentage of what the United States exports and imports goes through California’s ports, which are a significant portion of the state’s limited remaining industrial assets.

    Taxes are one area of Trump policy clarity. He wants to reduce corporate taxes and reduce the tax impediments to repatriating foreign corporate earnings. By themselves, these would provide an economic stimulus. Repatriating foreign earnings has no obvious downside. By contrast, without some action somewhere else, reducing corporate taxes could increase the severity of our already severe budget challenges. Eliminating deductions, as proposed, would lessen the budget impacts, as would taxing repatriated earnings at the suggested 10 percent rate. These, combined with increased economic activity, potentially brings the long-run budget impact to near zero. Supply-siders would argue that the package would reduce deficits. That’s probably a stretch, although the combination of regulatory reform and tax reform could very well reduce the deficit.

    Trump proposes a stimulus package that appears to be another public capital spending spree. This would add to our budget challenge, but it’s far worse than cutting taxes to businesses. Cutting taxes at least has the benefit of generating new economic activity to offset some of the budget impact. Public capital spending at the national level is non-stimulative and inefficient. Given the budget impacts, zero economic impact is the best we can hope for.

    Some California leaders worry that Trump will retaliate economically for California giving Hillary Clinton a popular-vote victory. I don’t believe that the presidency has enough power for a vindictive new president to exact revenge by economically punishing states that voted for his opponent. If he does, the presidency is way too powerful.

    Overall, it’s likely that Trump’s economic impacts will be a small positive, but with an increase in an already too-large budget deficit. California’s impact could be smaller, or even negative, depending on Trump’s success reducing trade.

    Whatever Trump’s impacts on the national economy, they are likely to be far less for California, as his program will be swamped by California’s own unilateral deindustrialization. While the rest of the nation will be enacting a program intended to be pro-business and pro-job, California is firmly embarked on an agenda that promises to be anti-business and anti-job, with increased regulation and costs for businesses and consumers.

    Examples of California’s anti-business agenda are easy to come by. Governor Brown has recently asked the Federal Government to ban all offshore oil and gas drilling off of California. In the most recent election, Californians renewed their commitment to environmental purity, embracing carbon emissions targets 40 percent below 1990 levels by 2030. Nothing is beyond the reach of California’s environmentally devout. They’ve already regulated cow flatulence, which could lead to backpacks and plumbing to collect cow gas. More likely, it will lead to fewer cows in California, but more in other places and no change in global bovine emissions.

    While it’s entertaining to speculate what California regulates after cow flatulence, there are serious consequences to the state’s regulatory enthusiasm. Unless the rest of the country embraces California’s agenda, very unlikely under a Trump administration, its economy and the nation’s will eventually diverge, even with California’s location, climate, and tech advantages. This will lead to slower economic growth and increased migration out of the Golden State.

    Bill Watkins is a professor at California Lutheran University and runs the Center for Economic Research and Forecasting, which can be found at clucerf.org.

    Photo: Wendell, Flickr

  • The ABC of Making Housing Unaffordable

    On 12 December, ABC Radio National’s Breakfast Program aired another group discussion on “Australia’s housing market”. Presenter Hamish Macdonald was joined by an “expert panel” made up of Ken Morrison, CEO of the Property Council, John Daley, CEO of progressive think tank the Grattan Institute, and Tom Whitty, managing editor of The Project, a television show pitched to the youth demographic. The conversation ran along predictable lines.

    All three panelists agreed that housing affordability was a real problem, especially in Sydney. But they took up positions on various sides of the issue. Generally speaking, Morrison argued for a supply-solution and dismissed demand-management or tax reform. Daley supported a supply-solution, but insisted that some demand-management and tax reform was essential. Whitty rejected a supply-solution altogether, and thought it was all about demand-management in the form of abolishing the tax concessions for negative gearing and capital gains. “We’re manipuating demand”, he said.

    Neither Morrison nor Daley acknowledged that greenfield development offered any advantages relative to inner-ring infill. Daley repeated his blinkered point that jobs growth is all in the centre. There was no mention of the land value impacts of limiting peripheral supply, a near universal policy across the country. Daley seemed to think all new housing should be concentrated within a few kilometres of the CBD. Bizarrely, he held up Vancouver and Portland (Oregon) as cities that got their housing location right, failing to mention that they are amongst the least affordable places on earth. Morrison made no objection to any of this.

    In terms of the system of interests set out in our last article, “Sydney lurches to housing affordability disaster”, Morrison expressed the position commonly held by the Big Projects coalition, while Daley and Whitty repeated views popular with the knowledge-welfare elite. Typically for the ABC, nobody argued for suburbanisation and greenfield expansion, policies of particular benefit to the worker-trader class of industrial and routine service workers and small traders.

    A striking feature of the discussion was how the demand-management crowd are utterly impervious to evidence. Morrison cited estimates by Grattan and the McKell Institute that abolishing the tax concessions would lower prices a puny 0.49 or 2 percent. Despite failing to offer any counter-evidence, Daley and Whitty were unmoved. Daley shifted onto the different point of whether the cost to the federal budget is equitable, and then started talking about the rental market. Whitty just fell back on anecdotes about the type of bidders succeeding at auction sales. Macdonald’s sympathies were clear all along, at one point becoming testy with Morrison for refusing to concede that the concessions are central.

    This feeds into the false narrative being built up by the ABC and other media outlets, particularly catering to a younger audience. It’s all the fault of greedy oldies or wealthy investors with their snouts in the trough. The impulse is to slap taxes on the scapegoats. In the meantime, the real causes go undiscussed and the problem keeps getting worse.

    This piece originally appeared at The New City Journal.

  • “There Can’t Be a Successful Indianapolis Without a Successful Indiana”

    Back in 2008 or 2009 I gave a Pecha Kucha presentation in Indianapolis in which I said:

    “Cities can’t survive on gentrification alone. The broad community has to be a participant in its success. That’s why I’m somewhat down on the notion of the creative class. It’s good as far as it goes, but it’s a self-consciously elitist vision. Where’s the working class in that?

    Arguing among ourselves [city vs. suburbs] is like beggars fighting over table scraps. We need to build the city up without tearing the suburbs down.

    There can’t be a successful Indianapolis without a successful Indiana….While [metro] Indy has 25% of the states’ population, it has 60% of the state’s population growth and 80% of its economic growth. That’s not healthy. Like it or not, we’re dependent on the state for critical infrastructure funds and other things. So our challenge is how to bring the rest of the state along with us.”

    I’ve long been an advocate for the restoration what I call the commonwealth, the idea that we rise and fall together as a people and all have skin the game. This idea has gone by the wayside to say the least.

    It may well be that American society has become irredeemably tribalized. I hope not. At a minimum, there are significant sized groups with fundamentally incompatible ideas of the public good. There’s a lot to unpack in that statement, but not today.

    Richard Florida has talked about a “great reset” of the economy. Clearly we need some sort of institutional reset to contain or resolve these differences. We’ve done this before in creating the original Constitution to replace the Articles of Confederation, fighting a Civil War and redefining the federalism of that constitution, the New Deal era changes, and perhaps others.

    What that looks like, I don’t know. But if we are to reach it without even more severe upheavals, it’s likely to involve some renewed form of federalism, agree to disagree, live and let live, etc – and on durable basis, not just an opportunistic and self-interested one.

    This will involve painful change and difficult decisions. One of them is that we must be willing to give others the freedom to make choices for themselves and their communities that we fundamentally disagree with.

    To the extent that we believe all of the big decisions of our society are morally determined, and thus not properly the subject of political debate, this means we are in a winner take all world. If you want that world, you’d better be really sure you are right and sure you are going to win – because you face ruination if you’re wrong on either count.

    It also means that we need to figure out how to have both love and accountability towards all of our citizens. Right now that means that rural white Republicans in victory cannot ignore the continued urgent need to integrate urban black America into full participation in middle class success and to address other aspects of what Richard Florida has labeled the “new urban crisis.”

    It also means that working class whites must be challenged to change. I have made no secret in these pages that these communities too often have sabotaging traits that really aren’t necessary to cling to – such as the disparagement of ambition for better.

    But urban and left leaning populations, including minority groups, need to likewise address travails of the white working class, and be willing to make painful changes of their own.

    To be honest, I’m not optimistic. But I am hopeful. The future hold possibilities for ill that we cannot know – but it likewise holds the possibility for good things we can’t yet imagine.

    Aaron M. Renn is a senior fellow at the Manhattan Institute, a contributing editor of City Journal, and an economic development columnist for Governing magazine. He focuses on ways to help America’s cities thrive in an ever more complex, competitive, globalized, and diverse twenty-first century. During Renn’s 15-year career in management and technology consulting, he was a partner at Accenture and held several technology strategy roles and directed multimillion-dollar global technology implementations. He has contributed to The Guardian, Forbes.com, and numerous other publications. Renn holds a B.S. from Indiana University, where he coauthored an early social-networking platform in 1991.

    Photo: By Daniel Schwen (Own work) [CC BY-SA 4.0], via Wikimedia Commons

  • The Evolving Urban Form: Houston

    Houston is a city (metropolitan area) of superlatives. The most recent Brookings Institution data shows that Houston has the seventh strongest per capita economy (gross domestic product) in the world (Figure 1). This places Houston above New York and more surprisingly, perhaps, other cities perceived to have strong economies are far below Houston and outside of the top 10, such as London, Tokyo and Chicago.

    The recently released COU Standard of Living Index also ranked Houston just behind San Jose in real pay per job for households entering the housing market (Figure 2).

    Distribution of Population Growth

     Houston is among the newer of the world’s great cities. It  has experienced sustained growth in every decade since the turn of the 20th century. The area constituting its metropolitan region (combined statistical area) has grown at more than 1.5 percent in each decade since 1900. In the 1920s and the 1980s, Houston grow at a rate of more than 3.5 percent annually at has grown an average of 2.2 to 2.3 percent annually since 2000. It took until 1950 for Houston to reach 1 million residents. By 1980, the population was 3.3 million and by 2015 had doubled to 6.8 million.

    As is typical for a growing city, the strongest early growth was in the core municipality (Houston) and then gradually shifted to the nearby suburbs and outer suburbs (Figure 3)

    At this point, near parity has been reached. The municipality of Houston, the suburbs within the core Harris County (the county also home to most of the city) and the outer suburbs, beyond Harris County have nearly equal populations, at approximately 2.3 million each (Figure 4).

    Like other cities that have experienced most of their growth since World War II, most of Houston is suburban. Between 2000 and 2013, the greatest growth was in the Later Suburbs and Exurbs. There was also growth in the Earlier Suburbs (Figures 5 and 7).

    Large Centers and Decentralization

    There was a similar pattern of growth in employment. The greatest growth was in the Later Suburbs and there was also strong growth in the Exurbs and the Earlier Suburbs (Figures 6 and 7). The central business district (downtown) ranks eighth in total employment in the nation and also experienced growth. The Texas Medical Center is the largest life sciences center in the world. The center is located south downtown and rivals some of the nation’s largest central business districts, larger than Minneapolis and nearly as large as Denver ,, with more than 100,000 employees (see photograph above). There are other large centers, such as the Port of Houston, the Galleria (Uptown) and the Energy Corridor. Houston is one of the best examples of a decentralized city, with major employment centers throughout.

    Higher than Average Urban Density

    Houston is often characterized as a “sprawling” urban area. In fact, however, Houston has a higher than average urban density for the United States (by eight percent) and an urban density approximately 75 percent higher than Atlanta and Charlotte and denser than Philadelphia and Boston. Even Portland, with its carefully cultivated international reputation for high density is only 18 percent denser than Houston (Figure 8). Of course, all US urban areas are less dense by international standards than their foreign counterparts.

    Attracting the Most New Residents

    Since 2010Houston has led the 53 metropolitan areas with more than 1,000,000 population in net domestic migration. In that time Houston has attracted 255,000 new residents from elsewhere in the nation, followed closely by in-state rival Dallas-Fort Worth (241,000). The four largest Texas metropolitan areas with more than 1,000,000 population were among the six attracting the largest net domestic migration, with fourth ranked Austin attracting 159,000 and sixth ranked San Antonio adding 122,000. Only third ranked Phoenix and fifth ranked Denver were from outside Texas. Eight of the top ten were from the South (Figure 9).

    There are at least two important keys to Houston’s attractiveness. Obviously, its strong job-creating economy has opened career opportunities for people from other parts of the country. In addition, Houston’s favorable housing affordability has been an important factor. Seminal recent academic research has pointed to the importance of housing affordability in attracting domestic migrants (such as Ganong and Shoag).

    Enviable Improvement in Relative Traffic Congestion

    Houston has been more successful in controlling traffic congestion than many other cities. In 2015, Houston tied with Boston for the 11th worst traffic congestion in the United States, according to the TomTom Traffic Index (Figure 10). This is a far better rating than in the middle 1980s, when the Texas Transportation Institute ranked Houston as having the worst traffic congestion in the nation.

    Since that time, Houston has managed to have spectacular population growth, yet has kept up with it by expanding its freeway and arterial systems, along with traffic management improvements. Los Angeles, San Francisco, Seattle, San Jose, New York, Honolulu, Miami, Portland, Washington and Chicago have seen their traffic congestion become worse than in Houston over the same period. Houston is larger in population than all but three of these nine metropolitan areas (New York, Los Angeles and Chicago), more than twice the size of San Jose and Portland and nearly seven times that of Honolulu. Further, exhibiting the association between greater traffic congestion and higher population density, all cities ranked worse than Houston have higher urban densities.

    World’s Energy Capital Poised for Employment Growth

    Houston is widely acclaimed as the energy capital of the world. Urbanscale.com says that “The only other U.S. city that rivals Houston’s domination of a single industry is New York’s preeminence in the financial sector.” Of course, Houston’s energy industry has faced considerable challenges over the past couple of years as Organization of Petroleum Exporting Countries (OPEC) have driven the price of oil down by producing more oil. However, the “good times” could return soon for Houston, as there are indications that OPEC will reduce its production. Further, and perhaps even more importantly, Houston could benefit from the new Trump administration’s commitment to a more consumer oriented energy policy, appearing likely to generate substantial employment and growth in the newly unleashed sectors.

    Photo: Texas Medical Center (by author)

    Wendell Cox is principal of Demographia, an international public policy and demographics firm. He is a Senior Fellow of the Center for Opportunity Urbanism (US), Senior Fellow for Housing Affordability and Municipal Policy for the Frontier Centre for Public Policy (Canada), and a member of the Board of Advisors of the Center for Demographics and Policy at Chapman University (California). He is co-author of the “Demographia International Housing Affordability Survey” and author of “Demographia World Urban Areas” and “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life.” He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

  • How Silicon Valley’s Oligarchs Are Learning to Stop Worrying and Love Trump

    The oligarchs’ ball at Trump Tower revealed one not-so-well-kept secret about the tech moguls: They are more like the new president than they are like you or me.

    In what devolved into something of a love fest, Trump embraced the tech elite for their “incredible innovation” and pledged to help them achieve their goals—one of which, of course, is to become even richer. And for all their proud talk about “disruption,” they also know that they will have to accommodate, to some extent, our newly elected disrupter in chief for at least the next four years.

    Few tech executives—Peter Thiel being the main exception—backed Trump’s White House bid. But now many who were adamantly against the real-estate mogul, such as Clinton fundraiser Elon Musk, who has built his company on subsidies from progressive politicians, have joined the president-elect’s Strategic and Policy Forum. Joining Musk will be Uber’s Travis Kalanick, who half-jokingly threatened to “move to China” if Trump was elected.

    These are companies, of course, with experience making huge promises, and then changing those promises to match new circumstances. Uber, for instance, touted itself as a better deal than a cab for both riders and drivers before it prepared to tout a better deal for riders by replacing its own soon-to-be obsolete drivers with self-driving cars.

    Silicon Valley and its leading mini-me, the Seattle area, did very well under Barack Obama, and expected the good times to continue under Hillary Clinton. Tech leaders were able to emerge as progressive icons even as they built vast fortunes, largely by adopting predictably politically correct issues such as gay rights and climate change, which doubled as a perfect opportunity to cash in on Obama’s renewable-energy subsidies. Increasingly tied to the ephemeral economy of software and media, they felt little impact from policies that might boost energy costs or force long environmental reviews for new projects.

    No wonder Silicon Valley gave heavily to Obama and then Clinton. In 2016, Google was the No. 1 private-sector source of donations to Clinton, while Stanford was fifth. Overall the electronics and communications sector gave Democrats more than $100 million in 2016, twice what they offered the GOP. In terms of the presidential race, they handed $23 million to Hillary, compared to barely $1 million to Trump.

    Yet, there is one issue on which the Valley has not been “left,” and that is, predictably, wealth. It may have liked Obama’s creased pants and intellectually poised manner, but it did not want to see the Democrats become, God forbid, a real populist party. That is one reason why virtually all the oligarchs favored Clinton over Sanders, who had little use for their precious “gig economy,” the H-1B high-tech indentured-servants program, or their vast and little-taxed wealth.

    Jeff Bezos, the Amazon founder with a net worth close to $70 billion, used his outlet, The Washington Post, to help bring down Bernie, before being unable, despite all efforts, to stop Trump. So now Bezos sits by Trump’s side, hoping perhaps that the president-elect’s threats to unleash antitrust actions against Amazon will be conveniently forgotten as an artful “deal” is struck.

    For these and other reasons, there’s little doubt that the tech elite would have been better off under Clinton, who likely would have, like Obama, disdained antitrust actions and let them keep hiding untaxed fortunes offshore. Now, they will have to share the head table with the energy executives they’d hoped to replace with their own climate-change-oriented activities.

    The tech oligarchs have long had a problem with what many would consider social justice. Although the tech economy itself has expanded in the current period, its overall impact on the economy has been less than stellar. For all of its revolutionary hype, it’s done little to create a wide range of employment gains or boost worker productivity.

    To be sure, there have been large surges of employment in the Bay Area, Seattle, and a handful of other places. California alone has more billionaires than any country in the world except China, and nearly half of America’s richest counties.

    But for much of the country, notably those areas that embraced Trump, the tech “disruption” has been anything but welcome news. This includes heavily Latino interior sections, home to many of America’s highest employment rates. Overall, the “booming” high-wage California economy celebrated by progressive ideologues like Robert Reich does not extend much beyond the Valley. In most of California, job gains have been concentrated in low-wage professions.

    Despite its vast wealth, California has the highest cost-adjusted poverty rate in the country, with a huge percentage of the state’s Latinos and African Americans barely able to make ends meet. California metropolitan areas, including the largest, Los Angeles, account for six of the 15 metro areas with the worst living standards, according to a recent report from demographer Wendell Cox. Meanwhile, the middle and working class, particularly young families, continue to leave, with more people exiting the state for other ones than arriving to it from the, in 22 of the past 25 years.

    Even in Silicon Valley itself the boom has done little for working-class people, or for Latinos and African Americans—who continue to be badly underrepresented at the top tech firms as many of those same firms aggressively promote diversity. A study out of the California Budget and Policy Center (PDF) concluded that with housing costs factored in, the poverty rate in Santa Clara County soars to 18 percent, covering nearly one in every five residents, and almost one-and-a half times the national poverty rate. Since 2007, amidst an enormous boon, adjusted incomes for Latinos and African Americans in the area actually dropped (PDF).

    Much of this has to do with change in the Valley’s industrial structure, which has shifted from manufacturing to software and media. The result has been a kind of tech alt-dystopia, with massive levels of homelessness, and housing costs that are prohibitive to all but a small sliver of the local population.

    With a president whose base is outside the Bay Area, and dependent on support in areas where jobs are the biggest issue, the tech moguls will need to find ways to fit into the new agenda. The old order of relentless globalization, offshoring, and keeping profits abroad may prove unsustainable under a Trump regime that has promised to reverse these trends. In some senses the Trump constituency is made up of people who are the target of Silicon Valley’s “war on stupid people.” Inside the Valley, such people are seen as an obstacle to progress, who should be shut up with income supports and subsidies.

    So can Silicon Valley make peace with Donald Trump, the self-appointed tribune of the “poorly educated”? There are two key areas where there could be a meeting of minds. One is around regulation. One of the great ironies of the tech revolution is that the very places that are home to many techies—notably blue cities such as San Francisco, Austin, and New York—also tend to be the very places most concerned with the economic impacts of the industry.

    Opposition to disruptive market makers in the so-called sharing economy like Uber, Lyft, and Airbnb is greatest in these dense, heavily Democratic cities. What’s left of the private-sector union movement and much of the progressive intelligentsia is ambivalent if not downright hostile to the “gig” economy. Ultimately, resistance to regulations relating to this tsunami of part-time employment could be something that Trump’s big business advisers might share in common with the techies.

    More important will be the issue of jobs. It may not work anymore for firms to lower tech wages by offshoring jobs or importing lots of foreign workers under the H-1B visa program, since Trump has denounced it. IBM’s Ginni Rometty, who had been busily replacing U.S. workers with ones in India, Brazil, and Costa Rica, has now agreed to create 25,000 domestic jobs. Other tech companies—including Apple—have also been making noises shifting employment to the United States from other countries. Trump may well feel what “worked” with Carrier can now be expanded to the most dynamic part of the U.S. economy.

    If the tech industry adjusts to the new reality, they may find the Trump regime, however crude, to be more to their liking than they might expect. Companies like Google may never again have the influence they had under Obama, but many techies may be able to adjust. As long as the new president “deals” them in, the techies may be able to stop worrying about Trump and begin to embrace, if not love, him.

    This article first appeared on The Daily Beast.

    Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, was published in April by Agate. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

    Photo by Gage Skidmore from Peoria, AZ, United States of America (Donald Trump) [CC BY-SA 2.0], via Wikimedia Commons

    Photo: MCR World

  • Everyday Encounters: Antagonism in the Sharing Economy

    Much has been written about the growth of the sharing economy where information technology, such as mobile apps and automated software facilitate interactions between businesses, individual workers, and customers. Proponents argue that the system provides greater access to goods and services at lower prices while reducing costs for employers and independent contractors. They also claim that, in the gig sector of the sharing economy, workers gain flexibility because they determine their own hours, tools, and working conditions while raising potential earnings.

    Regardless of whether we buy these claims about benefits to workers, there are numerous signs that the sharing economy creates antagonism between workers and customers. The apps and automated systems that underlie these new work structures require both workers and customers to rely on technology, yet the systems are often faulty and poorly designed.  While these systems promise transparency and trust, they also create tensions. For example, such systems unfailingly include algorithmic performance assessment of service industry workers. As technology writer and software engineer Tom Slee has argued, “Rather than bringing a new openness and personal trust to our interactions, [such shifts are] bringing a new form of surveillance where service workers must live in fear of being snitched on, and while the company CEOs talk benevolently of their communities of users, the reality has a harder edge of centralised control.”  The increasing antagonism resulting from the perpetuation of inequality among “stakeholders” has received insufficient attention.

    Service industry workers have long operated as the front-line interface with customers, having to respond to complaints about company practices that they don’t control. Now service workers have even less control due to structural and technological platforms.  When platforms fail, inconveniencing and frustrating customers, workers have little power to resolve disputes.  At the same time given the dependence on technology and lacking access to customer information, they cannot build relationships with customers over time. Indeed, it is almost impossible to contact the same customer service representative twice, so consumers then become obliged to give the same information over and over again. The interactions between customers and workers often predictably devolve, generating frustration, impotence, and anger on both sides and voiceless workers  subjected to performance review by customers following interactions. Dependence on technology estranges service workers from customers, undermining the possibility of finding satisfaction on the job because of increased misunderstandings and conflicts.

    Just as proponents ignore the way automation undermines the quality of work, they also misrepresent what the sharing economy offers to consumers. Although they claim that automation generates a high degree of efficiency and autonomy to customers, they overlook time-consuming administrative inefficiency and poor customer service.  For example, in the gig sector, where a few companies dominate particular markets, companies have little reason to worry about consumer rights. No doubt this contributes to the increasing conflicts and complaints associated with technology and social media in air travel, banking and other financial institutions, cable television and communications companies, insurance and health firms, and universities.

    To make matter worse, customers in the sharing economy must go to great lengths to seek basic information and answers to queries. Even when customers succeed in reaching customer service representatives, they are often treated with robotic indifference or a stilted hyper-courtesy that barely conceals institutional disdain. Customer service representatives often speak in a language of faux-camaraderie that couches authoritarian directives as suggestions as in the ubiquitous “Why don’t you go ahead and. . .” Corporations exacerbate the problem by pairing this passive-aggressive treatment with service fees and other administrative charges, so that customers are not only treated poorly, they pay for that privilege.  This problem affects less educated and less well-off customers, especially, who may have less access to or experience with technology and the Internet and are less able to afford fees or phone charges.

    Some companies will not make themselves available at all, having developed bureaucratic systems that cultivate inaccessibility. For example, Amazon has refused to engage with customers directly by phone. Other companies have trained call center employees to repeat marketing mantras and to speak like machines giving pre-scripted answers that may or may not match a customer query. These bureaucratic obstructions, including automated customer service and phone banks and the outsourcing of customer service “chat” and email services, only deepen the antagonism of customers toward corporations and their intermediaries.

    The antagonism generated by these practices affects working- and middle-class people far more than it does the elite, who often enjoy preferential treatment through concierge services in hospitals or all business-class airports.  Such VIP/concierge services help elites navigate organizations, technology, and services, while most customers must work harder to gain access to restaurants,  hotels, sports and other entertainment events, and a range of other services and sites.  As Cathy O’Neil in Weapons of Math Destruction has noted, “The privileged, we’ll see time and again, are processed more by people, the masses by machines.”

    Non-elites unable to “opt-out” of the antagonistic service economy may find consolation in the techno-future conjured up by Amazon Go, which showcases the pleasures of never having to interact with other humans at all. In glossy ads for what Amazon deems the “world’s most advanced shopping technology,” checkout is eliminated – as are retail clerks — as shoppers employ an app that simply charges them for the items they select.  Privileged relationships with commodities dominate the scene in an ad in which hardly anyone speaks to or even looks at anyone else.

    In the past few months, commentators have explained support for Donald Trump in the US or  “Brexit” in the UK as expressions of populist rage.  One source of that rage may well be everyday encounters of the kinds sketched here.  If working-class people feel like they don’t matter in contemporary capitalism, that may reflect the challenges of working in the sharing economy, with its low wages, limited autonomy, and inherent conflicts, but also the challenges of an antagonistic service culture that mounts daily micro-assaults on people’s dignity and rights.

    Diane Negra is Professor of Film Studies and Screen Culture and Head of Film Studies at University College Dublin. John Russo is a visiting fellow at Kalmanovitz Initiative for Labor and Working Poor at Georgetown University and at the Metropolitan Institute at Virginia Tech. He is the co-author with Sherry Linkon of Steeltown U.S.A.: Work and Memory in Youngstown (8th printing).

    Photo by Colin@TheTruthAbout – https://www.flickr.com/photos/thetruthabout/15172340596/, CC BY-SA 2.0, Link

  • Advancing the Texan City-Building Model

    Reading the recent report “The Texas Way of Urbanism” promptly reminded me of my status – twice a migrant; from small town to big city (Athens) and from big city to another country. These moves were propelled by a singular motivation: seeking opportunity to better my lot. I knew next to nothing about the cities I moved to: their shape and history, their culture, their social divisions and even language were absent from my viewfinder. All that mattered was the chance for a new start. And that’s how Texan metropolises emerge from the report’s pages – gates to opportunity. I carry this typical migrant perspective as a fact-checker to all discussions about cities – magnet-cities.

    It also rekindled an irritation about how warped the conversation about cities often is; as if a group of dilettantes in a pageant give cities points and declare winners. Points are given for: “urban/suburban”, “dense/spacious”, “compact or not”, “grid or not”, “beauty/ugliness” and so on. These arbitrary, spurious abstractions do not register with the migrant – the city’s wealth generator. A professor moves to a post away from home, a multinational corporation executive to another continent, and an oil rig specialist to a small-town with black gold – they are all wealth generators; they move to pursue a goal and, in the process, they build cities unwittingly. They shape them by their actions.

    In admitting that Houston “[….]is not beautiful upon first blush, nor does it offer the charm of pedestrian fancy that denser cities boast”, the report affirms that Texan cities have the right approach: first mind how to generate wealth, then empower citizens to achieve the good life. What follows is a city like no other in history, one that reflects its time, culture and values. It is not Paris, or London, or Tokyo, it is Houston or Austin. The model works. And just as all its predecessors, the new city is never static, not a stage set, it’s a movie in slow motion – it evolves.

    Evolution means adaptation to new pressures. It does not have a destination, a preordained ultimate goal, or shape. In that light, it is a reactive process, constantly responding to emergent conditions.

       The pressure for movement space and its distribution in cities like Barcelona is intense

    From that perspective, the model that builds Texan metropolises is neither final or complete. It inevitably misses unanticipated, emergent factors that today play a role in a functioning city. It has, for sometime, incorporated responses to the pressures of a motorized economy by building infrastructure sufficient to move people and goods to their destinations and it does that better than other U.S. cities. But as the combined effects of automobility are tallied up, a new pressure point has built up. It demands an adaptation to the nature and function of non-motorized mobility and its realm – the foot realm. The pressure is not about more “beauty” or “charm” or a nostalgia for old times, it is about space: redressing the imbalance between space assigned for speeds exceeding 20 miles and space for those below. These two spaces are incompatible. A response to this pressure would add functionality to the Texan model of city making.

       Redistribution of space with controls

    Adaptations to rectify this imbalance need not be invented; they already exist mostly in older cities but also in Texan urban areas. However, they have been mostly sporadic and unsystematic. Nevertheless, all these case-by-case changes nurtured an appreciation for the vast improvement in the quality of the daily city experience, the heightened sociability and the intensified economic activity. In turn, this new appreciation generated greater demand for spaces and places endowed with these qualities.

    Two systematic, universal versions of a layout model – call them “hybrid” grids – have appeared; one in Barcelona, Spain and the second in Calgary, Canada. One for fixing built-up areas and the other for greenfield development.

    That the city of Barcelona would propose a model for transformation might have been expected. It has an expansive, regular grid that is under perilous pressure: extremely dense, congested, mired in emissions and all its surface space taken for motorized movement and parking. The only option was to reallocate the available space. And that reassignment is now underway.

    A team of Barcelona planners have started the implementation of the “superilles” (superblock) model to the classic Barcelona square grid, (see drawing). The principles underpinning the concept are simple and intuitive:

         •  No through motor traffic means that streets at the walking scale (400×400 m) serve as capillaries only; they occupy the lowest rank in the network hierarchy, where circulation essentially stops. They serve the residents of a “quadrant” (or “quartier”) only, are unmistakeably local and, thanks to lighter traffic, can be made narrower, freeing up space for other functions.

         •  Full accessibility for active transport within the quadrant: people circulation is switched “on” while motorized transport is “off” by means of looping cars back to its perimeter. This preferential filtering manages the permeability of the quadrant to its residents advantage. Additional switches, such as card-activated bollards and the scheduling for entry, parking and deliveries, would add accuracy and flexibility of the “on-off” switching and refine the filtering.

         •  Surface space gained from the circulatory function is then assigned to nature and to recreational/social activities thereby strengthening cohesion within each quadrant.

    These typical modular layouts are then applied to the entire grid of the city with appropriate modifications for circumstantial conditions.

    Houston and Austin are two among many U.S. cities that sport square grids just like Barcelona’s. Houston in particular has inherited exceptional 80-foot right-of-ways that offer considerable design flexibility for rearrangement.

    The adaptation that will address the imbalance between vehicular and non-vehicular space in a city is here awaiting adoption. Texan cities can advance their already effective city-building models to a higher state of completion and of responsiveness to current pressures.

    Fanis Grammenos heads Urban Pattern Associates (UPA), a planning consultancy. UPA researches and promotes sustainable planning practices including the implementation of the Fused Grid, a new urban network model. He is a regular columnist for the Canadian Home Builder magazine, and author of Remaking the City Street Grid: A model for urban and suburban development. Reach him at fanis.grammenos at gmail.com.

    Top image: Augustus Koch (1840-?). [Public domain], via Wikimedia Commons

  • Sydney Lurches to Housing Affordability Disaster

    Now and again Australia erupts in controversy about housing affordability. Each time it follows the same course. Some new statistic or media story confirms that prices are out of control. A senior politician is prompted to call for deregulation and more supply, and is backed-up by the property industry. Then come progressive policy wonks saying no, the issue is high investor demand stimulated by tax concessions. Next emerge the welfare lobby, calling for tax reform as well as more social housing and “inclusionary zoning”. After a round of claims and counter-claims, it all fizzles out.

    From the surveyed general public to the Reserve Bank, almost everyone agrees Sydney has a critical problem. The wrangling isn’t over whether to reduce prices, but how. And that depends on where you fit in the city’s system of interests with a stake in property development and construction.

    Conflict of interests

    Generally, these fall into three groups, with their distinct agendas.

    First, the producers and beneficiaries of Big Projects; large-scale housing and urban renewal schemes, particularly high-end apartment developers, top-tier architectural practices, urban planners, rail transport engineers and “sustainability” consultants. Joining them are governments levying value-based property charges, financial institutions with large home mortgage books, and media groups dependent on luxury apartment advertising. “Three of the biggest forces pushing up dwelling prices (the banks, state governments and councils) are like drug addicts”, writes Robert Gottliebsen, “they are hooked on keeping dwelling prices at the current levels or increasing them further”.

    The high-land-value coalition’s agenda encompasses residential densification, preferably on infill or brownfield sites, transit-oriented-development (TOD), and a tendency to CBD-centrism. On the whole, they are supply-solution advocates and support tax concessions.  

    Second, progressive policy analysts and welfare advocates, closely aligned with the university system and highly educated knowledge-worker elite. They, too, promote inner-urban infill development, higher core and middle-ring densities, and public amenities associated with TOD. While the Big Project coalition is mostly driven by finances, cultural-lifestyle factors loom large for knowledge-welfare types. Hence their demands for more housing near “consumer city” localities crammed with trendy bars, pubs, nightclubs, restaurants, cafes, art galleries, theaters, museums and cinemas. This plays into “creative-class” perspectives on economic growth and an aversion to suburbanization as “unsustainable”. Some of them are supply-solution sceptics, leaning toward demand-management, and most are aggressive critics of tax concessions. They urge more social housing schemes and inclusionary zoning, which Big Project lobbies oppose (with good reason; the evidence suggests it reduces supply and raises prices).  

    Third, fringe or greenfield detached house builders, the mass of low-to-middle income industrial or routine service workers, low-level government employees, marginal small traders, in industries like retail, wholesale, logistics, transport, distribution, manufacturing, construction and trades. This worker-trader class is particularly sensitive to input costs, including the impact of high land values on commercial rents. Many rely on real estate as security for financing and gravitate to homes, offices and plant in low-cost, peripheral, auto-oriented regions like Greater Western Sydney.

    There is some overlap between the groups, with elements of the Big Projects coalition, architects, urban planners, sustainability consultants and engineers, crossing over to the knowledge-welfare elite. Apartment developers routinely deploy creative-class and green arguments for proposals which are integrated into broader densification—TOD zoning and infrastructure arrangements.

    Past affordability eruptions were blown off course by the tax issue. Eventually, Labor embraced reform of negative gearing and CGT concessions as policy, urged on by think tanks like Grattan Institute and McKell Institute, prominent knowledge-welfare voices. Yet according to their own estimates, prices would fall by a measly 2 and 0.49 per cent respectively.

    Considering that Sydney prices have escalated by a staggering 64 per cent since 2012, the focus on tax reform is a distraction. Economists like Judith Sloan and Stephen Koukoulas maintain that if there are any tax impacts at all, they are secondary to supply constraints rather than vice versa.

    Most of the Big Projects coalition and worker-trader class subscribe to a supply-solution in principle. But there are differences on what this means in practice. An explicit apportionment of new housing between brownfield-infill sites and greenfield development was dropped from the NSW Government’s A Plan For Growing Sydney. An outcome is achieved by focusing on 14 Priority Growth Areas and Precincts, only 5 of which contain substantial greenfield potential.

    Growth Areas inside established built-up localities are Rhodes East, St Leonards and Crows Nest, Greater Parramatta to Olympic Peninsula, Sydney Metro Northwest, Sydenham to Bankstown Corridor, Western Sydney Employment Area, Epping and Macquarie Park, Arncliffe and Banksia, and Ingleside Precinct. The outer, peripheral areas with most capacity for new land release or greenfield development are North West Growth Area, South West Growth Area, Greater Macarthur Growth Area, Western Sydney Growth Area and Wilton New Town, which lie within seven Local Government Areas (LGAs); Blacktown, The Hills, Camden, Campbelltown, Liverpool, Penrith and Wollondilly Shire.  

    Under A Plan for Growing Sydney, the authorities are planning for an additional 1.6 million people and 664,000 dwellings across the Sydney metropolitan region by 2031. According to NSW Department of Planning “state and local government area household and implied dwelling projections” to 2031, Blacktown LGA will have 48,300 new dwellings, The Hills LGA 28,650, Camden LGA 38,250, Campbelltown LGA 19,450, Liverpool LGA 32,400, Penrith LGA 20,900 and Wilton New Town, in Wollondilly Shire, 16,000 dwellings. In other words, these fringe priority areas are to accommodate an additional 203,950 dwellings, or around 30 per cent of the extra 664,000 dwellings across metropolitan Sydney.

    Of course, not all construction in the 7 peripheral LGAs will be on new land, so the share of total dwellings on greenfield sites will be even lower. The Urban Development Institute of Australia (UDIA) estimates that Sydney greenfield lot production is running at 11,600 a year and will reach 12,355 a year in 2017/18. If achieved, that translates to 185,325 or 27 per cent of the 2031 metropolitan dwelling forecast (equating a fringe lot to a single dwelling). 

    This month, the Department of Planning released accelerated forecasts totaling 184,300 new houses and apartments across the 33 metropolitan LGAs by 2021. Of these, 8,350 are assigned to The Hills LGA, 13,600 to Blacktown LGA, 11,800 to Camden LGA, 6,700 to Campbelltown LGA, 8,050 to Liverpool LGA, 6,600 to Penrith LGA and 1,450 to Wollondilly Shire. Together, these represent 30 per cent of the metropolitan total. Large increases are channeled into established areas, including 21,450 in Parramatta LGA, 18,250 in Sydney LGA (covering the CBD and surrounds), 12,200 in Canterbury-Bankstown LGA and 10,000 in Bayside LGA. NSW Planning Minister Rob Stokes boasted “we are getting the balance better … getting over the greenfield issue was the biggest thing that needed to be done”. The targets were to be fleshed out in Draft District Plans administered by a new planning politburo, the Greater Sydney Commission (GSC).  

    Within days, however, the GSC announced its own strategy and targets. The total housing target is distributed to 6 Districts across the city, Central, North, West Central, West, South West and South, rather than Priority Growth Areas. Based on a metropolitan total target of 725,000 dwellings for 2 million more people, each Draft District Plan nominates a 20 year target to 2036. The South West District contains 4 of the peripheral LGAs with most potential for greenfield construction, Camden, Campbelltown, Liverpool and Wollondilly. Its 20 year housing target is 143,000 dwellings, or 19 per cent of the metropolitan total. Of the other 3 LGAs with most greenfield potential, Penrith accounts for just part of West District’s target of 41,500 dwellings or 5 per cent of the metropolitan total, while Blacktown and The Hills are in West Central District, which is dominated by Parramatta LGA with minimal new land release capacity.

    Higher the density, higher the prices

    Suppression of greenfield development reflects a view that location and density don’t condition the benefits of supply. Yet this is contrary to a body of economic analysis on the land value impacts of urban containment. Citing LSE economist Paul Cheshire, commentator Phil Hayward gives a cogent account of this in “The Myth of Affordable Intensification”.

    Hayward explains that the more density allowed, the higher the average housing unit price becomes. Cheshire put this down to a bidding-war at the margins of each income-level cohort of society for slightly more space. The less average space available per household, the more intense is the bidding-war effect. Site development potential in an urban land market with a regulatory limit on land supply, writes Hayward, seems to capitalise into site values. When the market allows people to consume as much space as they want, the bidding-war effect is absent.

    Urban land economists like Cheshire and Alan Evans at Reading University consider housing a complex good … consisting of many attributes bundled into one composite good. The land base is a particularly important attribute. With rising population and incomes, restrictions on the quantity of land at the periphery ratchet up values across the whole urban region. The evidence that fixed urban growth boundaries put upward pressure on land and thus house prices is clear. While no formal boundary is proposed for Sydney, delimited Priority Growth Areas and GSC Districts have the same effect, operating as land value traps. Between 2009 and 2014, the Sydney median greenfield lot price ballooned from $269,000 to $339,750, reports the UDIA, even though lots released per annum rose from 2503 to 8597.

    To subdue prices, Cheshire argues in a 2009 paper, it isn’t enough to rezone and release enough residential land to meet anticipated demand:

    If we are to provide stable prices … what we need to predict is the effective demand for housing and garden space given that it is the quantity of land that the system allocates. Then we have to allocate not just the quantity of land predicted as being compatible with price stability but more. Not all the land allocated as available for development will actually be developed. One rule of thumb suggested is that this implies allocating 40 per cent more land than the estimated demand indicates is needed.

    In Sydney’s case, the authorities aren’t just failing to supply a buffer of land above population and demand projections. Worse, their targets and greenfield-infill ratio are shaped by bureaucratic value judgements on where people should settle, rather than land markets.

    On top of this, proximity to amenities is another housing attribute which capitalises into prices. Advocates of TOD demand more housing near public transport hubs, or, better coordination of land use and transport infrastructure, as they put it. But evidence from the US suggests that land values within 800 metres of mass transit can rise by up to 120 per cent. Adjacent property prices can rise by 32 to 45 per cent. 

    Opponents of fringe development object that the housing will be too far from jobs, assuming monocentricity or concentration of jobs in the urban core. Yet the Long-Term Public Transport Plan For Sydney found that of the jobs supposedly in centres, 37.1 per cent were actually spread over 33 dispersed locations. Only the CBD with 12 per cent and South Sydney with 2.5 per cent had more than two per cent of the total. The other 62.9 per cent were scattered randomly.  

    Investigating whether outer suburban workers have extra long commutes, in fact, Alan Davies concluded average commute times don’t vary a lot geographically within large Australian cities. Peter Gordon of the University of Southern California has researched commute times in American cities over decades, reporting remarkable stability of travel times across inner and outer metropolitan sectors despite population growth. Many individual households and firms ‘co-locate’ to reduce commute time, he explains, and this spatial adjustment [is easier] in dispersed metropolitan space.

    One advocate of inner-ring densification denied that it relies on price-hiking growth boundaries, claiming that relaxing floor space regulations in an Alonso-type model will give the same [densification] effect, with infinite city size. However, the Alonso model incorporates an artificial assumption of monocentricity. Higher paying professional jobs may locate closer to the core, on average, than lower paying jobs. But it’s lower paid workers who are most in need of cheaper housing. Recently, Grattan Institute’s John Daley wrote “it’s important that new supply is focused on the inner and middle rings – 2-20km out of the CBD – of our large cities … new developments on the edge tend to be a long way from where additional jobs are being created”.

    In other words, he propagates the myth of monocentricity and implies that worker-trader jobs don’t count.

    NSW Treasurer Gladys Berejiklian has announced that residential construction activity in NSW has hit an all-time high. But if that construction is funneled into increasingly expensive sites, Sydneysiders face a recurring home ownership nightmare.

    This is an edited version of an article first published on The New City.

    John Muscat is a co-editor, along with Jeremy Gilling, of The New City, a web journal of urban and political affairs.

    Photo: Photograph by Gnangarra [CC BY 2.5 au], via Wikimedia Commons

  • TruMpISSION Impossible: Deportation

    This is the first in an occasional series of articles that will look at some of the campaign promises made by Donald Trump in his run-up to November 8, 2016. I will be taking a “by the numbers” look at ideas ranging from immigration and border security to trade and infrastructure. I will not be taking a position on whether these are good ideas or bad ideas – this is not a normative analysis. Instead, I will be outlining the feasibility and the economic consequences of several potential policies. In economics, we call this a “positive analysis” – that doesn’t mean it is optimistic, only that the analysis leaves judgment about good versus bad policy to the reader.

    These are also only potential policies – Trump is not yet President and has yet to articulate a coherent action plan for any of these ideas. For all we know, they may end up being the same sort of campaign rhetoric that George H. W. “Read My Lips” Bush was using when he promised “No New Taxes.” I begin with deportation.

    Whatever label you want to put on the foreign-born residents of the United States who do not have visas, green cards or citizenship papers, the idea of deporting all illegal aliens has been around for a more than a decade – it isn’t something Donald Trump invented to win votes. A 2006 bill in the House of Representatives, championed by Tom Tancerdo (R-CO, 1979-2009) and James Sensenbrenner (R-WI since 1979) attempted to stop the flow of migrants, expel millions and construct a fence along the Mexican border – sound familiar? President George W. Bush was adamantly opposed to any legislative proposal that included mass deportation. “…[W]e’re talking about human beings – decent human beings that need to be treated with respect,” he told the Orange County Business Council in California at the time.

    In his 2007 State of the Union address, George Bush addressed the issue again, saying: “It is neither wise nor realistic to round up and deport millions of illegal immigrants in the United States.” Subsequently, The Comprehensive Immigration Reform Act of 2007 (S. 1348) was introduced in the United States Senate on May 9, 2007. It was never voted on. After several amendments, the Senate failed 34-61 to end debate and call for a vote. A related bill (S. 1639) failed 46-53 on June 28, 2007.

    Being a numbers nerd, my initial thought in 2006 was: are there even enough buses available in the United State that could take 11 million people to Mexico?

    A typical school bus in the US holds about 55 people (without luggage or a toilet). On most school days in the US, there are over 480,000 school buses transporting more than 25 million students to school. Allowing room equivalent to one-half person each for luggage, you would need approximately 300,000 buses or 62.5% of the buses in use.

    Let’s assume you take everyone to the national capital, Mexico City. You don’t just want to dump 11,000,000 people at the border – that would be a recipe for disaster if they decided to walk back in en mass! Assuming some of the schools are private or semi-private and could not (easily) be coerced by government to relinquish their buses, you would need to count on getting a little more than one-half of all the school buses in the US to move 11,000,000 people.

    The drive from Bangor, Maine to Mexico City would take 51 hours. Assuming driving 9 hours/day, including 3 1-hour breaks for meals, that drive would take almost 9 days each way. The buses would be unavailable to take children to school for almost 3 weeks. There are no fall, spring or holiday breaks during the school year that would accommodate such a long period of time without buses to take children to school. Still, it might work if you did it during the summer, although many schools run summer sessions and use school buses for summer educational events.

    The real impossibility is that there are 14,000 school districts in the US, each with an independent structure of authority (principal, school board, etc.). It might be tempting to think you could just work out a deal with 50 states who could then dictate participation to the school districts, but there are also private and semi-private schools.

    An alternative might be to use buses from public transportation systems, all of which would be under the control of government authorities. According to the American Public Transportation Association (APTA.com) there are 1,078 bus public transportation systems in the United States (2011 date) operating 67,288 vehicles. The 300,000 bus-trips required to deport illegal aliens would require each bus to make about 4.5 trips each – meaning they would not be available to provide regular public transportation services for 81 days (or nearly 3 months). For those 3 months, about 7 million American workers would have to find another way to get to work.

    TruMpISSION Impossible!

    Susanne Trimbath, Ph.D. is CEO and Chief Economist of STP Advisory Services. Dr. Trimbath’s credits include appearances on national television and radio programs and the Emmy® Award nominated Bloomberg report Phantom Shares. She appears in four documentaries on the financial crisis, including Stock Shock: the Rise of Sirius XM and Collapse of Wall Street Ethics and the newly released Wall Street Conspiracy. Dr. Trimbath was formerly Senior Research Economist at the Milken Institute. She served as Senior Advisor on United States Agency for International Development capital markets projects in Russia, Romania and Ukraine. Dr. Trimbath teaches graduate and undergraduate finance and economics.

    Photo by Gage Skidmore [CC BY-SA 3.0], via Wikimedia Commons