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  • A Leaky Economy

    Real gross domestic product is growing at an anemic pace. Exports are down, and state and local governments are spending less. The consumer price index is falling in a condition known as deflation. Even national defense spending is down. Despite the bad news, consumer spending and home building are rising. Real disposable personal income is roaring ahead at growth rates of 6.2 percent in the first quarter of 2015 and 3.6 percent at the end of 2014. Even the personal savings rate is up (5.5 percent so far this year and 6.2 percent at the end of 2014). These consumer factors are attributed to an increase in government social benefits, though, and not to jobs and economic prosperity. Social Security makes payments to more than 64 million Americans and nearly 3 million more receive federal government retirement checks. More than 20 percent of the US population is basically living on fixed-incomes.

    The banks also continue to benefit from government largess. The Federal Reserve’s Open Market Committee has been holding onto the view “that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate” for more than five years. The stated purpose of offering this free money to banks is to maintain high employment. Although the Fed declines to set a specific goal, they generally believe that the unemployment rate should be around “5.2 percent to 6.0 percent.” For perspective, the US unemployment rate averaged 6.15 percent last year (2014); compare that to an average unemployment rate of 4.62 percent in 2007, the year before the financial crisis that was the reason for dropping the federal funds rate to zero.

    The offsetting condition that could thwart the Fed’s efforts to bolster the economy is high inflation – too much money chasing too few goods. The Fed has a stated goal of keeping inflation at or below 2%. As long as there are enough people working, producing plenty of goods and having money to spend on those goods, inflation this should not be a problem. In the 12 months just ended, consumer prices fell 0.1 percent. In 2007, prices rose about 2.1 percent. The most recent peak inflation was nearly 6 percent in 2008 and the peak deflation was about -2.4 percent in 2009.

    As long as there is some unemployment, wages and prices will not rise too rapidly – if we had more jobs than workers there would be a tendency for employers to bid up wages in trying to attract the best workers. But we are facing the opposite situation. Despite so much Federal Reserve money pouring into banks, the economy is slowing and deflating.

    There is worse news. Corporate fixed investment is running higher than the cash being generated by businesses. This was true in 2007 right before the crash and also in 1977 when Hyman Minsky wrote about “the era of the post-World War II financial crunches, squeezes, and debacles.” Corporations investing more than they are earning is the kind of event the Fed means when they write: “The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant” continuing their loose money policy. They are referring to exactly this condition where an incipient financial crisis can be triggered by increases in interest rates.

     

    Borrowing to Make Ends Meet: Then

    $ Billions

    2003

    2004

    2005

    2006Q4

    2007Q3

    Internal funds (US)

    732.0

    850.7

    1061.3

    747.2

    782.4

    Internal funds (total)

    831.3

    928.4

    995.0

    935.8

    912.3

    Fixed investment

    747.5

    788.3

    889.7

    1000.6

    1057.0

    Source: Flow of Funds, Table F.102 Nonfarm Nonfinancial Corporate Business March 6, 2008 (Federal Reserve System, Washington, D.C.)

    Borrowing to Make Ends Meet: Now

    $ Billions

    2010

    2011

    2012

    2013Q4

    2014Q4

    Internal funds (US)

    1520.4

    1575.2

    1569.2

    1607.2

    1590.2

    Internal funds (total)

    1676.7

    1728.5

    1761.0

    1844.6

    1782.6

    Fixed investment

    1178.6

    1297.4

    1415.2

    1512.9

    1681.0

    Source: Flow of Funds, Table F.103 Nonfinancial Corporate business March 12, 2015 (Federal Reserve System, Washington, D.C.)

     

    The reasoning is quite simple: if businesses are investing more than they are making, they must be borrowing to do it. Fixed investment – the construction of things like buildings, plants and factories – has to be paid for before it produces income. That means taking a lot of short term loans, refinancing them when they come due and sometimes borrowing a little more to cover the interest due on the last loan. If interest rates rise between the planning phase and when the completed project starts generating revenue, that is what triggers Minsky’s “incipient” financial crisis. The only difference between the gap in 2007 and the gap in 2014 is that some of it is being made up by foreign earnings – a source that may not hold up as Europe teeters on its third recession in six years, China’s growth slows and Japan continues to struggle. The possibility of the Fed raising interest rates is receding further and further into the future.

    Falling prices and low interest rates might sound like “good” things. They are not. Low interest rates favor borrowers (and speculators) but it harms the elderly and baby-boomers going onto pensions because it reduces the rate of return they can earn on their safe-harbor investments like savings accounts and government bonds. Speculators in stocks, real estate, collectibles, etc. make out in a low-interest rate environment with deflation. Safe-and-sound investors are more likely to lose because they are more likely to depend on interest for income. This is especially true for households living on fixed incomes and have a low tolerance for investment risk.

    This is another Lesson Not Learned by US policymakers: Banks and businesses find a way around Fed policy while consumers take it on the chin. We will all be better off when businesses depart from the crony-capitalist cycle of dependency on Federal Reserve hand outs. The business and consumer winners in the post-Capitalist society will be the ones who learn to accumulate human-capital knowledge instead of staking the health of the economy on financial capital. Capital flows are characterized by panics and manias. It will take human knowledge to resolve the financial crises that follow.

    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 Ethicsand 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: “Federal Reserve” by Dan Smith – Own work. Licensed under CC BY-SA 2.5 via Wikimedia Commons.

  • Better Suburbs = Better Cities: Employment and the Importance of the Suburban Economy

    Australia’s inner city areas and CBDs are a focus of media and public policy attention, with good reason. But it’s also true that the real engines of employment are outside the inner city areas and that the dominant role of our suburban economy as an economic engine is grossly understated, even ignored. This is not good public policy. It’s not even common sense. 

    I have a view that the focus on urban renewal and inner urban economic development has become a policy obsession of late. It’s the trendy thing to quote Richard Florida’s ‘creative class’ theories which become the excuse to increasingly spoil inner city workers with transport, cultural and other forms of taxpayer funded infrastructure. There was a time when inner city areas, if not recapitalised, risked pockets of blight. But those days have passed. Today, it is the suburban landscape – much derided in fashionable inner city policy circles – that risks pockets of blight if not brought back to the attention of policy makers and strategically recapitalised.

    The imperative is simple: the suburban economy is so much larger than inner city areas. As a rule of thumb, between 8 and 9 out of ten jobs in our major metro regions of Brisbane, Sydney and Melbourne are suburban. Only one in ten or at most two in ten, are found in the inner city areas. Achieving a 10% improvement in the suburban economic engine is hypothetically equivalent to achieving an 80% improvement in the economic performance of the inner cities. 

    So why this preoccupation with the inner cities to the detriment of the suburbs?

    First, a quick review of the evidence as provided in the Census. 

    In Brisbane, the CBD itself accounts for 12.5% of the Brisbane region’s employment numbers – one in eight. The combined CBD and inner city areas – including the CBD – account for around 170,000 jobs.  That’s not a very big number.  As a proportion of state-wide jobs, it’s less than 9%. As a proportion of the 925,000 jobs across the metro region of Brisbane, it’s less than one in five – and that’s with including the near city areas like South Brisbane, Fortitude Valley and Spring Hill. 

    In Sydney in 2011, the CBD accounted for only 8.3% of all jobs in New South Wales, and for only 13.4% of all jobs in wider metropolitan Sydney. Including the surrounding areas of Pyrmont, Ultimo, Potts Point, and Woolloomooloo raises this share to just 9.7% of all jobs in the state and 15.6% of jobs in metropolitan Sydney. So one in ten state-wide jobs and one in every six or seven metro wide jobs. 

    In Melbourne, the CBD is home to just 7.6% of the state’s total employment, and to just 10.6% of all jobs in greater Melbourne. Including the ‘fringe’ locations of Docklands and Southbank sees this share rise to only 10.3% of the state and 14.3% of greater Melbourne, which is one in ten of all jobs in the state and one in seven metro wide jobs.

    In none of these centres is the concentration of inner city jobs close to one in four metro wide jobs. Yet if you asked a room full of people – industry and planning experts included –a significant proportion will think the figures are much higher. I’ve done this several times at workshops and presentations and there are a worrying proportion of people who seem to think the figure is more than 50%. A wider survey of the general public might even put the figure higher – it would be an interesting exercise to find out.

    Suburban employment centres are by nature much more widely dispersed. Teachers, doctors, dentists, tradies, factory workers, shop workers and so on do not rely on close proximity to each other to perform their work, as do CBD employment markets. In the suburban business districts of our metro regions, workforce concentrations typically fall into a band somewhere between 3,000 and 5,000 jobs per square kilometre. Places with super-regional shopping centres will tend to be at the upper end of that scale while industrial areas at the lower end. CBDs, by contrast, can easily have pockets where the employment density sails past 10,000 or 20,000 jobs per square kilometre.

    But however dispersed these suburban jobs may be, it doesn’t make them any less important to the economy – particularly given their dominant role as employment and economic engines.

    So why then the preoccupation with the inner cities and why the dearth of policy interest in the suburbs? 

    Perhaps the inner cities are seen as more glamorous? There are more higher paying jobs and more CEOs to the square mile than anywhere else. It’s where cultural facilities and seats of government are found. It’s where the most expensive real estate is. Basically, any concentration of money plus power is always going to grab attention. It’s an age when celebrity tweets capture more media and public attention than important issues of economic policy. The CBDs and inner city areas are widely seen as ‘where it’s at’ and where the cool people are. ‘Nuff said?

    Sadly, even policy makers seem to have fallen for the inner city bling over suburban substance. The importance of transport workers, freight workers, teachers, doctors, tradies or suburban white collar employment to the economy receives next to no policy comment. The performance of suburban transport systems, the need to promote higher employment density in key centres, the pathways by which property owners could be encouraged to partner with public sector agencies for suburban centre improvement – none of these seem to appear as workshop or forum topics promoted by any of the leading industry groups. 

    I suspect there’s also a strong element of cultural cringe as it applies to our suburban heritage. Frequently mocked as a cultural wasteland or ‘home of the bogan’, there’s an almost desperate desire to prove we’re an advanced society by focussing on the lifestyles and achievements of our inner city areas and the people who live and work there, to the exclusion of all else. ‘Urbanists’ grab headlines and appear as keynotes at any number of planning conferences. Sub urbanists (and there are plenty of them) are evidently persona non grata.

    It’s as if a prosperous, successful and highly efficient suburban economy simply doesn’t cut it in the global race for attention and status amongst cities, which seems almost exclusively focussed on the how much like downtown New York or downtown Paris every other city can pretend to be. 

    The reality is that the inner city economy is reliant on – not divorced from – the performance of the suburban economy. In the same way that there can be no public sector without a profitable private sector, I suggest that a strong and prosperous inner city economy relies heavily on a strong and prosperous suburban economy. And in the same way that strategic infrastructure and policy decisions are needed for the inner city to operate at optimum efficiency, the exact same applies to suburban economies.  

    The question is whether this balance is being achieved.

    Ross Elliott has more than 20 years experience in property and public policy. His past roles have included stints in urban economics, national and state roles with the Property Council, and in destination marketing. He has written extensively on a range of public policy issues centering around urban issues, and continues to maintain his recreational interest in public policy through ongoing contributions such as this or via his monthly blog The Pulse.

  • US Population Estimate Accuracy: 2010

    Intercensal population estimates, while generally reliable, are prone to substantial variation in some cases. This is especially so with municipal population estimates.

    Between 2000 and 2010, the average discrepancy between the US Census Bureau 2010 estimates and the 2010 census counts at the county level was 3.1% (absolute value). By comparison, among the 50 largest municipalities and census designated places, the average discrepancy was more than one-half higher, at 4.7 using the 2000 to 2009 estimates (there were no 2010 sub-county population estimates). The variations, however, can be substantial in sub-county population estimates. Between 2000 and 2010, the Census Bureau estimated that New York had added more than 410,000 residents. However, the 2010 census count showed a much smaller gain, at approximately 165,000 (2010 estimates are available for New York because it is composed of whole counties).

    There were even more substantial variations. The 2009 population estimates for Atlanta and Detroit were more than 25% higher than the 2010 census count. In the case of Atlanta, the 2000 to 2009 population growth estimate was more than 120,000, more than 100 times the actual increase of approximately 1,000. The discrepancies in Atlanta and Detroit were greater than in all but a three of the nation’s more than 3,000 counties and each of the counties with larger discrepancies had populations of less than 1,000 in 2010.

  • Flexible Economic Opportunism: Beyond Diversification in Urban Revival

    Discouraging employment data have recently dampened optimism about America’s economic recovery. These challenges are nothing new for developed regions long beset by manufacturing decline amidst globalization. Exemplars of this trend, America’s rust belt cities have battled unemployment, decaying infrastructure, and social challenges since economic decline emerged in the 1960s. In response, some now cultivate service, knowledge, and tourism industries. Explaining these new growth models, analysts often espouse the virtues of diversification. However, legacy industrial systems and native constraints (e.g. geography and culture) can hinder this strategy. Chasing diversification for its own sake diverts policy attention from a more valid determinant of growth. Post-industrial urban policy should target structural flexibility, enabling diversification or specialization – neither deserving preeminent status – to occur naturally.

    In exploring rival economic development strategies, two management theories are particularly relevant: Michael Porter’s competitive advantage and Harry Markowitz’s portfolio theory. Competitive advantage describes the strategic orientation of business operations and brand image to command an inimitable market position. Portfolio theory is the logic behind investment diversification to maximize returns for given risk preferences. In management, these are not rival theories. However, when applied to urban economic development they present a direct contrast. The former can be likened to specialization, and the latter to diversification.

    In attempting to revive their economies, cities often reduce strategic options to the simple dichotomy of specialization versus diversification. Some compromise by favoring a primary industry and enabling the emergence of secondary industries. Economic orthodoxy generally argues that diversification is the wiser choice in volatile economies. This portfolio-style approach assumes that stability in one industry offsets decline in another. This argument is convincing: many “single-engine” economies have underperformed amidst globalization. Besides the usual cases, overlooked examples are Oakland, California (shipbuilding and automobiles), Birmingham, Alabama (steel), and upstate South Carolina (textiles). A similar fate befell the British Midlands and German Ruhr Valley, where recovery strategies have generated mixed results. Instability in single-industry dependence is not limited to manufacturing. Las Vegas, where the pro-cyclical tourism mirrors national economic trends, remains fairly irrelevant outside its casinos and related industries.

    By contrast, many successful cities boast diversified economies. New York has a path-dependent advantage in finance, with recent volatility offset by tourism, business services, and the arts. The 1986 collapse in oil prices tested the resilience of Sunbelt boomtown Houston, whose shipping industry offset energy sector declines while banking, finance, and healthcare kept the city competitive. Large cities are naturally more diversified, but smaller cities can also exhibit diversification: examples are Austin, Texas (research, education, and technology), Nashville, Tennessee (entertainment, insurance, and health care), and Tampa, Florida (military, tourism, trade, and retirement services). Austin added jobs even during the 2008 recession, and has routinely been labelled the nation’s best-performing economy in recent years. These examples show that economic resilience is dependent more on diversified industrial portfolios than on size.

    Nevertheless, a larger story underlies America’s revitalization champions. While the flag of diversification flies high, at the base of the pole stands structural flexibility, arguably a more durable, achievable, and powerful mechanism for growth. Cities prepared to re-orient towards emerging opportunities maintain development potential across economic cycles. Furthermore, flexibility gives cities of any size hope for transformative growth. Not every city has the native advantages to meaningfully diversify, but flexibility can be their wild-card strategy.

    Two former manufacturing cities have exhibited post-industrial flexibility: Pittsburgh and Bilbao. Once the pride of America’s post-WWII steel industry, Pittsburgh suffered a precipitous decline in the 1980s as manufacturing moved overseas. 200,000 jobs and nearly half the population were lost. However, Pittsburgh’s situational advantages provided a flexible platform for revival. Well-endowed cultural institutions and flourishing medical, education, and research sectors supported a lifestyle economy based on knowledge, services, and creative entrepreneurship. Pittsburgh’s economic performance was seventh best in the nation during the 2008 recession, an example of how flexible planning, private sector creativity, and situational advantages converged to make progress halting seemingly irreversible decline. Similarly, Bilbao, Spain, sharply declined after the withdrawal of manufacturing. Without its economic engine and facing crisis-level unemployment, it creatively turned to tourism and culture. The government’s stated commitment to collaborative policy making and quality-of-life now complements efforts to sustain post-industrial competitiveness. Like Pittsburgh, Bilbao has used flexible, opportunistic planning to pursue economic growth.

    Despite their highly publicized transformations, however, these post-industrial success stories are not without challenges. The Pittsburgh metropolitan area has failed to gain population for years, and lost nearly 5,000 residents between mid-2013 and mid-2014. The city’s stagnant job growth has led some claim that Pittsburgh’s amenities, rather than employment opportunities, are a relocation magnet. Others claim that flat overall job growth conceals local economic restructuring, as manufacturing industries give way to the creative sector. Despite recent signs of a recovery, Spain’s persistent unemployment (23.8% in the first quarter of 2015) indicates that the nation, and particularly secondary cities such as Bilbao, continues to struggle in the stubborn wake of the 2010 euro crisis. Further, Bilbao’s top-down approach of museum-based revitalization has failed to generate vitality in the grassroots cultural scene, where artists have collectively mobilized but still struggle to obtain financial support.

    Manchester has recently enjoyed consistent growth, and is now considered the UK’s healthiest economy outside of London. Like Pittsburgh and Bilbao, the city experienced rapid mid-century decline with the closure of its shipping port and loss of heavy manufacturing. The city’s economic revival has pivoted towards knowledge, services, and entertainment, a strategy attracting recognition for liveability and cultural vibrancy. Financial services now outsize manufacturing and engineering, with no single industry representing more than 16% of the economy. Poised to benefit further from devolutionary reforms and “northern powerhouse” status, Manchester has garnered recognition for its economic diversity and entrepreneurial spirit. The city exemplifies a flexible approach to post-industrial development, particularly for a hinterland region overshadowed by a dominant neighbour (London).

    Other efforts at revitalization, however, have produced lesser results. Like Pittsburgh and Bilbao, Cleveland’s steel industry flourished in the mid-20th century before industrial decline gutted the city of jobs and population. In 1969 the emblematic Cuyahoga River fire brought national attention to Cleveland’s economic crisis. Since 1990 the city has caught fire once again – in a revival driven by services, tourism, and entertainment. Global connections in knowledge industries and education complement Cleveland’s flexible economic vision. However, the city still struggles with disinvested neighbourhoods, ageing infrastructure, and regional competition from Pittsburgh, where flexible strategies also target culture and technology.

    Taken superficially, these revival cases support the concept of diversification. Cities focusing on a singular competitive advantage – geography, image, or path-dependent conditions – tend to specialize but often struggle to re-configure inflexible industrial infrastructure for new opportunities. Regardless, specialization versus diversification is a false choice. Beyond this continuum, the true survival instinct is structural flexibility. Diversification often correlates with overall growth but is more a lagging indicator of opportunistic preparedness. Flexible policy broadens structural capabilities and builds resilience into urban systems, in either a specialized or diversified economy. The outputs include infrastructure both hard (transport, technology and housing) and soft (education, culture, and institutions). In providing platforms for investment that adapt to global trends, this strategy transforms industrial determinism into flexible economic opportunism.

    Kris Hartleyis a visiting researcher at Seoul National University and PhD Candidate at the National University of Singapore, Lee Kuan Yew School of Public Policy. For more details about his argument, see his book Can Government Think? Flexible Economic Opportunism and the Pursuit of Global Competitiveness.

  • Working at Home: In Most Places, the Big Alternative to Cars

    Working at home, much of it telecommuting, has replaced transit as the principal commuting alternative to the automobile in the United States outside New York. In the balance of the nation, there are more than 1.25 commuters who work at home for each commuter using transit to travel to work, according to data in the American Community Survey for 2013 (one year). When the other six largest transit metropolitan areas are included (Los Angeles, Chicago, Philadelphia, Washington, Boston and San Francisco), twice as many people commute by working at home than by transit.

    Overall, working at home leads transit in 37 of the 52 major metropolitan areas (over 1 million population in 2013).

    The Top Ten

    Not surprisingly, most of the strongest work at home markets are technology hubs. However, the strength of working at home, and particularly its growth in these metropolitan areas may seem at odds with the huge expenditures on urban rail. Nine of the top 10 working at home metropolitan areas have built or expanded rail systems, yet working at home has grown far faster than transit. The exception is Seattle, where transit has grown faster, but nearly all the increase has been on buses and ferries. Only two of the top ten metropolitan areas have larger transit shares than work at home shares.

    Here are the top 10 working at home major metropolitan areas (Figure). Market shares are shown to the second digit to eliminate ties.

    • Denver has the highest working at home commute share, at 7.14%. Like nine of the other top 10 major metropolitan areas, Denver has an urban rail system. Even so, Denver’s transit work trip market share is a full third lower, at 4.41%. In 2000, working at home had only a lead over transit (4.58% v. 4.45%).
    • Technology hub Austin places a close second, at 6.87%. Austin’s working at home commute share is nearly 3 times its 2.37% transit share. Working at home increased from 3.60% in 2000, while transit dropped from 2.51%, despite the addition of a rail line.
    • Portland, also a technology hub, and a decorated model among urban planners, ranks third in working at home commute share, at 6.40%. Transit share slightly smaller, at 6.37%. In 1980, however, transit’s market share was nearly a third again its present level (8.4%), before the first of its six rail lines opened. In contrast, working at home has nearly tripled its share from 2.2% in 1980. In 2000, working at home attracted 4.60% of commuters in Portland, well below the 6.27% transit share.
    • San Diego ranks fourth in working at home, with a 6.38% market share. The California city built the first of the modern light rail lines in the early 1980s. San Diego’s transit market share is approximately one half its working at home share (3.17 percent). In 2000, working at home had a commute share of 4.40%, while transit’s share was 3.31%.
    • Raleigh, another technology hub, ranks fifth in working at home with a 6.16% market share. Raleigh is the only metropolitan area among the top 10 that does not have an urban rail system. Raleigh’s transit work trip market share is 1.03%. In 2000, working at home had a commute share of 3.46%, while transit’s share was 0.86%, modestly below the 2013 figure.
    • Atlanta ranks sixth in working at home, with a 5.96% market share. Atlanta has built more miles of high quality Metro (grade separated subway and elevated rail) than anywhere outside Washington and San Francisco in the last half century. Even so, Atlanta has experienced a more than 50% decline in its transit market share and now that share is barely half that of working alone (3.08%). In 2000, working at home had a commute share of 3.47%, while transit’s share was 3.46%.
    • San Francisco, another technology hub, ranks seventh in working at home, with a 5.94% market share. San Francisco is unique in having a substantially higher transit than work at home market share (16.13%). San Francisco is the second strongest transit market in the United States, trailing only New York (30.86%). In 2000, working at home had a commute share of 4.27%, while transit’s share was 13.77%.
    • Phoenix nearly equals San Francisco, with a 5.85% working at home market share. This is more than double the 2.61% transit market share. In 2000, working at home had a commute share of 3.66%, while transit’s share was 1.93%.
    • Sacramento ranks 9th in working at home market share, at 5.56%, more than double its 2.65% transit work trip share. In 2000, working at home had a commute share of 4.03%, while transit’s share was 2.67%.
    • Seattle, also a technology hub, has a working at home market share of 5.38%, for a ranking of 10th. Like San Francisco has a higher transit work trip market share (9.31%). In 2000, working at home had a commute share of 4.17%, while transit’s share was 6.97%.

    The work at home and transit market shares are indicted for each major metropolitan area in the table.

    Where Working at Home is the Weakest

    In most of the strongest transit metropolitan areas, as opposed to cities that have systems that simply are not so widely used, working at home doesn’t usually achieve second place to cars.  As noted above, San Francisco has a considerably stronger transit share than virtually any major metropolitan area outside New York.

    New York, by far the largest transit market in the United States, is also the largest work at home market in raw numbers (386,000). Yet, New York’s transit market share (30.86%) is seven times its work at home share (4.17%).

    Chicago, Washington and Boston have transit market shares approximately three times that of working at home, while Philadelphia’s transit share is 2.5 times as high.

    This is not to say that working at home is in decline. Strong working at home gains — nearly 50% to over 100% from 2000 to 2013 — were made in each of these six metropolitan areas. Yet, with its smaller base, working at home is not likely to exceed transit in the near future.

    Los Angeles is a possible exception. Since 2013, working at home has closed approximately 60% of the gap with transit. Continuation of present trends would have working at home becoming the most popular alternative to cars in Los Angeles before 2020.

    The Future?

    Working at home has grown despite having received little attention in urban planning, compared to that of expensive rail projects. Its success has eliminated millions of daily work trips, reduced greenhouse gases and responded to the desire for better lifestyles by many. With continuing improvements in technology, and higher acceptance among companies and government agencies, working at home seems likely to continue its growth in the coming decades.

    Work at Home to Transit Commuting Ratio
    Major Metropolitan Areas: 2013
    Metropolitan Area Work at Home Work Trip Share Transit Work Trip Share Work at Home Commuters per Transit Commuter
    Atlanta, GA 5.96% 3.08% 1.93
    Austin, TX 6.87% 2.37% 2.89
    Baltimore, MD 4.10% 6.79% 0.60
    Birmingham, AL 2.79% 0.78% 3.57
    Boston, MA-NH 4.46% 12.76% 0.35
    Buffalo, NY 2.62% 2.92% 0.90
    Charlotte, NC-SC 5.19% 1.74% 2.98
    Chicago, IL-IN-WI 4.32% 11.75% 0.37
    Cincinnati, OH-KY-IN 3.85% 2.17% 1.78
    Cleveland, OH 3.80% 3.25% 1.17
    Columbus, OH 4.14% 1.69% 2.44
    Dallas-Fort Worth, TX 4.98% 1.39% 3.58
    Denver, CO 7.14% 4.41% 1.62
    Detroit,  MI 3.52% 1.68% 2.09
    Grand Rapids, MI 4.22% 1.62% 2.61
    Hartford, CT 3.50% 3.07% 1.14
    Houston, TX 3.69% 2.37% 1.56
    Indianapolis. IN 3.93% 1.12% 3.51
    Jacksonville, FL 4.99% 1.07% 4.66
    Kansas City, MO-KS 4.08% 1.22% 3.35
    Las Vegas, NV 3.18% 3.47% 0.92
    Los Angeles, CA 5.13% 5.84% 0.88
    Louisville, KY-IN 2.77% 1.71% 1.63
    Memphis, TN-MS-AR 2.37% 1.15% 2.07
    Miami, FL 4.76% 4.07% 1.17
    Milwaukee,WI 3.52% 3.65% 0.96
    Minneapolis-St. Paul, MN-WI 4.88% 4.64% 1.05
    Nashville, TN 4.50% 1.02% 4.43
    New Orleans. LA 2.67% 2.70% 0.99
    New York, NY-NJ-PA 4.17% 30.86% 0.13
    Oklahoma City, OK 3.07% 0.54% 5.74
    Orlando, FL 5.05% 1.73% 2.92
    Philadelphia, PA-NJ-DE-MD 3.99% 10.00% 0.40
    Phoenix, AZ 5.85% 2.61% 2.25
    Pittsburgh, PA 3.71% 4.89% 0.76
    Portland, OR-WA 6.40% 6.37% 1.01
    Providence, RI-MA 3.23% 2.68% 1.21
    Raleigh, NC 6.16% 1.03% 5.96
    Richmond, VA 4.25% 1.34% 3.18
    Riverside-San Bernardino, CA 5.00% 1.46% 3.42
    Rochester, NY 3.39% 2.53% 1.34
    Sacramento, CA 5.56% 2.65% 2.10
    Salt Lake City, UT 5.13% 3.25% 1.58
    San Antonio, TX 4.33% 2.51% 1.72
    San Diego, CA 6.38% 3.17% 2.01
    San Francisco-Oakland, CA 5.94% 16.13% 0.37
    San Jose, CA 4.05% 4.24% 0.96
    Seattle, WA 5.38% 9.31% 0.58
    St. Louis,, MO-IL 4.09% 2.91% 1.40
    Tampa-St. Petersburg, FL 5.11% 1.38% 3.70
    Virginia Beach-Norfolk, VA-NC 3.38% 1.71% 1.98
    Washington, DC-VA-MD-WV 5.02% 14.16% 0.35
    From: American Community Survey, 2013 (One Year)

     

    Wendell Cox is principal of Demographia, an international public policy and demographics firm. 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. Wendell Cox is Chair, Housing Affordability and Municipal Policy for the Frontier Centre for Public Policy (Canada), is a Senior Fellow of the Center for Opportunity Urbanism and is a member of the Board of Advisors of the Center for Demographics and Policy at Chapman University.

    Photo by By Rae Allen, “My portable home office on the back deck”

  • The Changing Geography of Racial Opportunity

    In the aftermath of the Baltimore riots, there is increased concern with issues of race and opportunity. Yet most of the discussion focuses on such things as police brutality, perceptions of racism and other issues that are dear to the hearts of today’s progressive chattering classes. Together they are creating what talk show host Tavis Smiley, writing in Time, has labeled “an American catastrophe.”

    Yet what has not been looked at nearly as much are the underlying conditions that either restrict or enhance upward mobility among racial minorities, including African-Americans, Latinos and Asians. In order to determine this, my colleague at Houston-based Center for Opportunity Urbanism Wendell Cox and I developed a ranking system that included four critical factors: migration patterns, home ownership, self-employment and income.

    We found, for all three major minority groups,   that the best places were neither the most liberal in their attitudes nor had the most generous welfare programs. Instead they were located primarily in regions that have experienced broad-based economic growth, have low housing costs, and limited regulation. In other words, no matter how much people like Bill de Blasio talk about the commitment to racial and class justice, the realities on the ground turn out to be quite different than he might imagine.

    Southern Comfort

    Perhaps the greatest irony in our findings is the location of many of the best cities for minorities: the South. This is particularly true for African-Americans who once flocked to the North for both legal rights and opportunity. Today almost all the best cities for blacks are in the South, a region that has enjoyed steady growth and enjoys generally low costs. Indeed, of the top 15 cities for African-Americans, 13 are in the old Confederacy starting with top-ranked Atlanta, No. 2 Raleigh, No. 4 Charlotte, No. 6 Virginia Beach-Norfolk, No. 7 Orlando, No. 8 Richmond (a distinction it shares with Miami and San Antonio), as well as   four of Texas’ large metro areas: No. 12 Houston, No. 13 Dallas-Ft. Worth and No. 8 San Antonio. The only two other metros are “inside the Beltway”: the metropolitan expanses of Washington and, surprisingly, Baltimore.

    What accounts for this? Well, in Washington and Baltimore, the obvious answer is the federal government.  Roughly one in five black adults works for the government, and are far more likely to have a public sector job than non-Hispanic whites, and twice as likely as Hispanics. These are not the people who rioted in the inner city; most of them live in prosperous suburbs surrounding these cities. But outside the Beltway region, the explanations tend towards more basic economics, like job creation, low housing prices and better opportunities for starting businesses.

    Ironically, blacks – 6 million of whom moved to the North during the great migration — are once again voting with their feet, but back to the same region in which, for so long, they were so harshly oppressed.   Between 2000 and 2013, the African-American population of Atlanta, Charlotte, Orlando, Houston, Dallas-Fort Worth, Raleigh, Tampa-St. Petersburg and San Antonio all experienced growth of close to 40 percent or higher, well above the average of 27 percent for the nation’s 52 metropolitan areas with more than 1 million residents.  

    In contrast, the African-American population actually dropped in five critically important large metros that once were beacons for black progress: San Francisco-Oakland, San Jose, Los Angeles, Chicago and Detroit.  In many cases, most notably in San Francisco, blacks have become the unintended victims of soaring housing prices and rampant gentrification, with little option to move to the also high-priced suburbs.   Today, suggests economist Thomas Sowell, the black population of the city itself is half that of 1970; the situation has changed so much that former Mayor Gavin Newsom even initiated a task force to address black out-migration.

    Yet if many African-Americans can be seen “going home” to their native region, the South is also doing well among ethnic groups that have historically had little attachment to Dixie. For Latinos, now the nation’s largest ethnic minority, seven of the top 13 places are held by cities wholly or partially in the old Confederacy, led by No. 1 Jacksonville, Fla., as well as No. 4 Houston, No. 6 Virginia Beach, No. 7 Dallas-Ft. Worth, No. 9 Austin, No. 12 Tampa and #13 Orlando.The majority of newcomers to the South, notes a recent Pew study, are classic first-wave immigrants: young, 57 percent foreign-born and not well educated — but they see the South as their land of opportunity.

    In Florida, no stranger to Latino populations, Tampa-St. Petersburg, Orlando and Jacksonville all experienced Hispanic growth rates since 2000 between 100 and 150 percent, well above the average of 96 percent among the 52 metropolitan regions.  Lower housing costs and better prospects for advancement drive this change.  Despite their historically large populations in Texas, Latino populations still grew at a rapid rate in Houston, at 68 percent, Dallas-Ft. Worth at 70 percent and Austin, 83 percent.  “You go where the opportunities are,” explains Mark Hugo Lopez, associate director of the Pew Hispanic Center in Washington, D.C.

    Asian-Americans, although their economic and educational performance tends to be better than other minorities, follow a surprisingly similar pattern. Seven of the top 10 regions for them also were in the South, as well as two others, Washington and Baltimore, that abut the old Confederacy. Most of the best metros for Asians were in the Sunbelt, starting with No.1 Riverside-San Bernardino, Calif., No. 2 Richmond, No. 4 Raleigh, No. 5 Houston,   No. 7 Dallas-Ft. Worth, No. 8 Austin, No. 9 Las Vegas, No. 12 Phoenix, No. 13 Atlanta and No. 15 Jacksonville.

    Like African-Americans and Latinos, Asians are voting for these places with their feet. Although Asian migration still is largely to California, that’s not where Asians are increasingly moving. Since 2000, Asian population growth in their traditional hubs like Los Angeles, San Francisco and San Jose was roughly one-third what was seen in the top Asian cities.

    The New Geography of Racial Opportunity

    Perhaps the biggest determinant of immigrant and minority opportunity has to do with home ownership. In the aftermath of the housing crash, minorities, notably blacks and Hispanics, suffered tremendous losses. This exacerbated the largest cause of the wealth gap  between minorities and whites: the extent of homeownership, which represents the key asset class for most Americans.

    Whereas older whites may have been able to benefit from wildly inflated home values, the results for minorities, who are generally younger and newer to the market, are less satisfactory. One useful comparison can be drawn between two adjacent metropolitan regions, Los Angeles and Riverside-San Bernardino. House prices in Los Angeles are roughly twice as high, based on income; not surprisingly, minority home ownership is much lower there. Black homeownership in Riverside-San Bernardino (an area known as the Inland Empire) is over 40 percent, 10 points higher than in L.A.; for Asians it is 14 percent higher, and for Latinos the percentage difference with L.A.  is more than 20 points.

    Some of the worst results — in terms not only homeownership but income — are ironically in those part of the country that purport to be most sympathetic to minority interests. In New York, Los Angeles and San Francisco, between 25 and 30 percent of African-Americans own their own home. In Atlanta it’s nearly 50 percent and well over 40 percent in most of the other Dixie metro areas.  

    This is not likely to change soon. Black incomes in these Southern cities, where there is a much lower cost of living, are roughly the same as they are in super-blue New York, Los Angeles, Boston or San Francisco.  Much the same pattern can be seen for both Latinos and Asians, with the exception of San Jose, where Silicon Valley employment keeps their household income well north of $100,000 annually.

    Policy Implications

    What this study shows us is, if nothing else, the relative worthlessness of good intentions. As we have seen over the past 50 years, the expansion of transfer payments, while critical to alleviating the worst impacts of poverty, have not generally been best at promoting upward mobility for African-Americans and, increasingly, Latinos. If higher welfare costs and political pronunciamentos were currency, New York, Los Angeles, Boston and San Francisco would not be, for the most part, stuck in the second half of our rankings.

    Ultimately what really matters are the economics of opportunity. Many of the cities that scored best for all three groups — the Washington, D.C. area, Houston, Dallas-Fort Worth, San Antonio and Austin — have enjoyed stronger than normal economic growth over the past decade.  In the areas around the nation’s capital, government employment has been a critical factor; in the other areas more generalized business growth has taken the lead.  In contrast, notes University of Washington demographer Richard Morrill , many regions that have seen rapid de-industrialization and slow housing growth have developed “barbell” economies based on a combination of ultra-high-wage industries, like technology and finance, and low-end service jobs.  

    There are other policy implications. Blue state progressives are often the most vocal about expanding opportunities for minority homeownership but generally support land use and regulatory policies, notably in California, that tend to raise prices far above the ability of newcomers — immigrants, minorities, young people — to pay. Similarly blue state support for such things as strict climate change regulation tends to discourage the growth of industries such as manufacturing, logistics and home construction that have long been gateways for minority success.

    Given the persistence of racial tensions, this data begins to give us a clearer understanding of what actually works for America’s emerging non-white majority. Denunciations of racism, police brutality and xenophobia may be all well and good for one’s sense of justice. But  if you want actually to improve the lives of minorities, we might consider focusing instead on policies that promote economic opportunity, keep living costs down, and allow for all Americans to enjoy fully the bounty of this country.

    This piece first appeared at Real Clear Politics.

    Joel Kotkin is executive editor of NewGeography.com and Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University, and a member of the editorial board of the Orange County Register. He is also executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The New Class Conflict is now available at Amazon and Telos Press. He is also author of The City: A Global History and The Next Hundred Million: America in 2050.  He lives in Los Angeles, CA.

    Photo “asian american” by flicker user centinel.

  • Celebrating Strips Malls: Strength in Standardization

    Our current urbanized form has become remarkably homogenous. Anywhere in Florida, and in much of the United States, one now experiences a new sense of sameness in the texture and the pace of places. America has entered a period of uniform buildings, roads, and infrastructure, differing only in the details. We live in a very standardized America today.

    To witness the new homogeneity, look no farther than the commercial strips that have come to dominate the 21st century experience. These strips are our marketplace, our town square writ large, and are a study in careful, intentional uniformity. In commercial America, from New York to California, these strips are smoothly uniform in both their scale and their details to a startling degree, differentiated only by local geography.

    This is the quiet strength of our country. Our commercial environment, although criticized for its aesthetic monotony, unifies our national experience. The endless asphalt strip expresses the contemporary American lifestyle, a way of ordering our space that represents our participation in the high-energy global economy. It’s ugly, but it works; so goes consumerism.

    Businesses that compete for the customer dollar ensure familiarity and efficiency, and the uniformity extends to the design of the store, both inside and out. From the front door to the street, a precise series of moves are choreographed around the invisible practices of safety, security, and barrier-free flow from the car door to the cash register. All of these dictate uniformity of design, a certain monolithic character, which moves the customer effortlessly from merchandise to the point of sale to the driveway.

    The driveway leads to the street. While we yearn for alternatives to the car, we still cling to its super mobility. Its influence results in a rigid, standardized design for all pavement. Lights, signs, intersections, and the pulse and rhythm of the road all become one. Gone, for the most part, are local eccentricities such as stoplights turned sideways; in their place are broad, well-lit roadways with the same signals everywhere, built with the future in mind. This, again, is a strength. Americans have always tended towards mobility, and standardization enables freedom of movement and a state of supermobility that is imagined, if not quite achieved.

    Because America’s building industry climbed a series of regulatory steps in the last several generations, today’s built environment is more uniform and less specific to its particular locale, with a vague, broad national character that is barrier-free and safe. Starting with the 1992 Americans with Disabilities Act (ADA), and continuing today with the International Building Code, standardization has become a quiet but powerful force.

    The ADA sought to remove the localized, obstacle-ridden geography that restricted a large population with sensory or mobility difficulties from having access to buildings and places. Since its passage, a substantial portion of our constructed world has been built under these rules, and older buildings have been adjusted to remove barriers. The result of this act has been to cause much of America to look the same, from the way our sidewalks rise up from the street to the size of our public bathrooms.

    Building codes became standardized, too. In the 1990s, three regional codes converged into one International Building Code. With the real estate development economy normalized at a national scale, it has become more efficient to deliver the same product everywhere, rather than customize an office or a store to local eccentricities. Building codes, which go back to Hammurabi’s time, have evolved into exquisitely complicated texts, annotated like the Talmud and as complex as the tax code. This sameness, again, allows super-mobility and comparisons of sales and productivity metrics from one place to another. It smooths the evolution of a new, migratory America. This again is a strength, if efficiency is any measure.

    Local codes still customize structures to particular locales; California requires resistance to seismic activity, and Florida protects against hurricanes. A lot of idiosyncratic localisms — nuances that did little to protect anybody — have been done away with, however. A wood building in the Midwest, for example, was called a Type Five building, while in the South it was Type Six, with accompanying detailed descriptions differing in little details. These were all melded into one, wood-frame building type by the new code, simplifying national-scale construction and design, and eliminating wastefulness. This convergence of codes promotes a common system of definitions and measures of firmness and safety.

    Intertwined with this rather massive regulatory convergence is, of course, the globalization of the economy. Standardization of materials is critical for manufacturers importing key products from overseas, and for assuring national real estate developers of similar costs from coast to coast. Sameness is a virtue, from an accounting perspective.

    Should this sameness be doubted, interview any offshore visitor about their American experience. While American behavior may generate complaints, the American built environment inspires awe and respect. “Why can’t we have this in our country,” more than one international guest has bitterly questioned me, usually pointing to a clean, well-ordered aspect of place that we take for granted. “America,” stated one South American to me recently, “is still the safest place to buy real estate, because of your standardization.” Monotony and safety features make for a dull sense of place, but great property values.

    How this came about is a study in our faith in the future. America has always had faith that things will get better, even in the darkest of times. This belief in the future seems lost today if one focuses merely on the surface, and the general deterioration of our national conversation. Our actions, however, are different than our words, and our actions – widening roads, consolidating codes, standardizing infrastructure – are those of a people in the process of perfecting our built environment. Only a people that cares about the future would be doing this.

    American roads and buildings are not precious; we are not a sentimental people, by and large, when it comes to our physical environment. The American style of place is a product of our society’s character. It is barrier-free, safe, and guarded well against disaster. Our character transcends the superficial notion of “style” and is expressed in a uniform, shared sense of place. Monotonous, yes; as all standardization tends to become, but with a great value placed upon planning and design.

    A positive byproduct of this style of place is equity. Roads (except toll roads) can be travelled by all, and buildings are built safely for all. Another is efficiency, speeding up the process of rolling out new infrastructure. A final byproduct is the future; we are giving our children’s generation a simplified infrastructure with one operating manual.

    What our progeny does with our standardized environment is up, of course, to them. Uniformity is a tacit scaffold upon which a unique, more localized future can be built, celebrating the specific geography and society of each individual place. Suffocating monotony can perhaps give way to flexibility, creativity, and a character that expresses our diversity as we move ahead.

    Richard Reep is an architect with VOA Associates, Inc. who has designed award-winning urban mixed-use and hospitality projects. His work has been featured domestically and internationally for the last thirty years. An Adjunct Professor for the Environmental and Growth Studies Department at Rollins College, he teaches urban design and sustainable development; he is also president of the Orlando Foundation for Architecture. Reep resides in Winter Park, Florida with his family.

    Flickr photo by Payton Chung, Meanwhile in Ethnoburbia: the new Chinatown in California’s San Gabriel Valley.

  • Best Cities for Minorities: Gauging the Economics of Opportunity

    This is the overview from a new report, Best Cities for Minorities: Gauging the Economics of Opportunity by Joel Kotkin and Wendell Cox for the Center for Opportunity Urbanism. Read the full report here (pdf viewer).

    This study provides an initial analysis of African-American, Latino and Asian economic and social conditions in 52 metropolitan regions currently and over the period that extends from 2000  to 2013. Our analysis includes housing affordability, median household incomes, self-employment rates, and population growth. Overall, the analysis shows that ethnic minorities in metropolitan regions with significant economic growth and affordable housing tend to do better than in other locations irrespective of the dominant political culture.

    Understanding the dynamics of minority economic mobility is critical to the future of all Americans. If ethnic minorities may once have been viewed as a cultural afterthought in a primarily anglo society, they are now unquestionably America’s future. According to the U.S. Census Bureau, minority children will outnumber white children by as early as 2020, and by 2050, non-white ethnic groups will equal the total number of White-non Hispanics in the population. These estimates likely understate the rate of ethnic transformation in the U.S. because of the country’s growing number of mixed race households.

    For years America has been an anglo-dominated nation and ethnic groups largely peripheral societies all too frequently marginalized by discrimination, segregation and racial strife. If W.E.B. Dubois famously noted that “the problem of the twentieth century is the problem of the color line” at the beginning of the 20th century,” the great historian John Hope Franklin asserted that racial issues will continue to shape our society in the 21st.

    Demographic trends suggest this is inevitable. Today, America’s ethnic population has surged to an unprecedented extent Latinos, together with African Americans and Asians, now constitute 43 percent of the population in the country’s 52 largest metropolitan areas with a population of at least one million residents, which also comprise 55 percent of the total U.S. population. This is up from 35 percent in 2000.

    African Americans, including new immigrants from the Caribbean and Africa, constitute 15 percent of the population, Hispanics are now 21 percent and Asians 7 percent. These areas. Today Latinos are the nation’s largest ethnic minority and Asians the fastest growing in percentage terms.

    Despite the massive new and growing influence of ethnic minorities, there are surprisingly few studies comparing the economic performance of American’s burgeoning communities in different metropolitan areas. Fewer still have attempted to identify specific factors that correlate with the most and least favorable results in different regions. As the ethnic composition of America decisively shifts, it is vitally important to understand what regional factors work best to create and sustain economic and social opportunities for the nation’s emerging majority groups.

    Overall we found that metropolitan areas with less burdensome regulations, especially those affecting land use and housing costs, tended to do better, in the survey, but not in every instance. Some areas with more restrictive regulations were also highly ranked if other factors, such as a proximity to a relatively robust government employment base (Washington D.C. and Baltimore regions), or rapid private sector growth (Asians in the San Jose area) were sufficiently strong to overcome adverse regulatory and tax burdens.

    The data also show a strong contrast between America’s luxury cities, such as New York, San Francisco or Boston, where high costs have significantly reduced opportunities for middle and working class households, and “opportunity cities,” often located in less costly portions of the country like Texas or the South but that have also sustained more rapid and broadly based economic growth.

    Although most, if not all, luxury cities sustain strongly progressive politics African-Americans, Asians and Latino households have done relatively worse in these locations; cities in the states with the more generous welfare provisions aimed to help the minority poor – notably California, New York and Illinois –  tended to perform worse than those that were less forthcoming, notably in the sunbelt. Ironically, in many of these places, such as metropolitan New York, Chicago, San Francisco and Los Angeles, the media and public officials may be the most adamant in attacking racial and class inequality, but their outcomes have been generally less than optimal.

    Instead, America’s ethnic population growth, has shifted away from these slower growth, higher cost regions, irrespective of the level of public assistance or political ideology, towards opportunity cities where economic, housing and other policies provide greater chances of social advancement for middle and working class Americans of all races.

    The implication of these findings is that America’s emerging majorities, like the Anglo communities before them, primarily desire and will populate regions where they can afford decent homes, earn higher incomes relative to the cost of living, and have greater independence and opportunity, as reflected in self-employment rates. These broad strategies do much more to enhance the lives of African-Americans, Asians and Latino households than the redistributive war on poverty-era programs employed in regions with high housing and living costs. These programs are usually not sufficient to improve the prospects of minorities if the business environment is burdened by high costs and regulatory burdens.

    Minorities Head to Opportunity Cities

    The data overwhelmingly show that minority populations are growing much faster in opportunity cities than in the more expensive, highly regulated luxury cities in the Northeastern corridor or on the west coast.iv In some cases, this has to do with the changing post-industrial nature of these economies. The increasing dependence on industries, such as software and social media, that employ few Latinos or African Americans. In Silicon Valley, African Americans and Hispanics make up roughly one-third of the valley population but barely five percent of employees in the top Silicon Valley firms.

    Over the past forty years States such as Texas, Arizona, the Carolinas and Florida have seen their employment base grow far more rapidly and broadly in terms of manufacturing and other blue collar sectors than either California or the Northeast corridor.vi Generally, the leading metropolitan areas in the sunbelt also have overall enjoyed higher growth in population, income and self- employment and considerably higher rates for minority homeownership. “Luxury cities” such as described by former New York Mayor Michael Bloomberg are generally not so good for minorities.

    Read the full report (pdf viewer).

    Joel Kotkin is executive editor of NewGeography.com and Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University, and a member of the editorial board of the Orange County Register. He is also executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The New Class Conflict is now available at Amazon and Telos Press. He is also author of The City: A Global History and The Next Hundred Million: America in 2050.  He lives in Los Angeles, CA.

    Wendell Cox is principal of Demographia, an international public policy and demographics firm. 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 was appointed to the Amtrak Reform Council to fill the unexpired term of Governor Christine Todd Whitman and has served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

  • U.S. Foreign Policy a Series of Unforced Errors

    President Obama, as a fan and occasional player of basketball, should know about “unforced errors.” Those are the kind of thoughtless, bonehead plays where you lose the ball without a defender swatting it or toss a pass somewhere into the higher seats. If you want to review how this is done, I recommend re-watching the recent Clippers versus Rockets series – if you have the stomach for it.

    Lately, America has become proficient in creating such unforced mistakes. At a time when the U.S. economy has been out-performing most competitors – resurging in everything from energy and manufacturing to tech – we appear to be slipping ever more into pessimism and fear of decline. Even the reliably pro-Obama New York Times conveys concerns of seeing the U.S. in a tailspin, losing influence in a world that now increasingly looks to authoritarian regimes, such as China and Russia, for leadership and support.

    The Great Unforced Error

    You can’t blame Obama for the biggest of all the unforced errors, the disastrous invasion of Iraq. Rather than the “mother of all battles,” in Saddam Hussein’s phrase, it turned out to be the mother of all mistakes. In the end, at great human and financial expense, we turned a country run by a weakened, slightly buggy dictator into a nest of jihadi fanatics fighting Iran’s allies for control of the country. Americans have to watch as Iranian commanders direct the battles on the ground and take the bulk of the credit for successes.

    Read the entire piece at the Orange County Register.

    Joel Kotkin is executive editor of NewGeography.com and Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University, and a member of the editorial board of the Orange County Register. He is also executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The New Class Conflict is now available at Amazon and Telos Press. He is also author of The City: A Global History and The Next Hundred Million: America in 2050.  He lives in Los Angeles, CA.

  • Who Benefits From Other People’s Transit Use?

    In the May 11 issue of Finance and Commerce, Matt Kramer, a local Chamber of Commerce representative lobbying for additional public transit and transportation spending (currently being debated at the Minnesota Legislature) is quoted as saying “Every person who is riding transit is one less person in the car in front of us.”

    This is a fascinating quote. First is the use of “us.” So the Chamber of Commerce (probably correctly) identifies riding transit as something someone else does (since “we” are still in the car) and goes on to imply that it benefits us because there will be fewer cars. (Actually he says fewer people per car, but I think he meant fewer cars, not that it would reduce carpooling.) And I suppose he could mean he rides the bus, and the car in front has fewer people (or there were fewer cars in front), but I don’t think that’s what he meant, since the arguments in the legislature are mostly about building and operating new facilities — such as LRT lines or freeway BRT, rather than supporting existing buses driving in traffic.

    This evokes the famous Onion article: Report: 98 Percent Of U.S. Commuters Favor Public Transportation For Others.

    But it also suggests transit reduces auto travel. The converse is almost equally true, building roads reduces transit crowding. But that is not an argument road-builders make. (It is an argument urbanists make against roads.)

    Of course, some transit users would have otherwise driven, but many would have been passengers in cars, walked, ridden bikes, or telecommuted. No one really knows what the alternative untaken mode would be. We have models, but the form of those models dictates the answer. Logit models, which are widely used by travel demand forecasters to predict mode choice (and whose development resulted in a Nobel Prize in Economics for University of Minnesota graduate Daniel McFadden), have the property called “IIA”, which is short for Independence of Irrelevant Alternatives. In short, if you take away a mode, IIA means people choose the other modes in proportion to their current use. So let’s say there are 3 modes: walk 25%, transit 25%, drive 50%, and there is a transit shutdown (like in 2004). IIA implies the 25% of former transit users would split 1/3 (25%/75%) for walk and 2/3 (50%/75%) for driving. We all know that is not true (and there are various techniques to try to fix the models and use more complicated functional forms), but the question of what istrue is not at all clear.

    While there are surveys that have answered those questions, they are all context specific. For instance, Googling turns up a Managed Lanes Case Study report:

    95 Express bus riders were asked how long they have been traveling by bus and what was their previous mode of travel before using the bus service. 92 percent of respondents (307 out of 334) mentioned they have been traveling the 95 Express bus before the Express Lanes started. Only, 8 percent of respondents (27 out of 334) began using the bus after the Express Lanes opened. Among them, 50 percent (13 out of 27) had their previous mode as drive alone and none of them carpooled previously. Therefore, 95 Express bus ridership consisted primarily of those who have been using the service prior to Express Lanes implementation and the small mode shift from highway to transit was mostly from SOVs. Note that the number of respondents is too small to make any conclusions (Cain, 2009).

    Undoubtedly other services would have different numbers, but transit lines are not generally a direct substitute for driving.

    The line of reasoning in the opening quote suggests the primary purpose of transit is reducing auto travel, rather than serving people who want to or must use transit. In other words, building transit is good because it reduces traffic congestion (and almost no one argues building roads is good because it reduces transit crowding).

    That is at best a secondary benefit, a benefit which could be achieved must more simply and less expensively through the use of prices as we do with almost all other scarce goods in society, even necessities like water.

    Transit today is, in almost all US markets, slower than driving. People who depend on transit can reach fewer jobs than those who have automobiles available. Some people use transit by choice, for instance to save money (if they need to pay for parking), and the rest without choice. In my opinion, it is more important to spend scarce public dollars to improve options for those without choices than to improve the choices for those who already have alternatives. Perhaps ideally we could do both, in practice, one comes at the expense of other.

    The idea that transit is for the other person is true for the 95.5% of people who don’t use transit regularly. But it warps thinking that the aim of public transit funding is to benefit those non-transit users.

    This post was written by David Levinson and originally published on streets.mn. Follow streets.mn on Twitter: @streetsmn.

    David Levinson is a Professor in the Department of Civil Engineering at the University of Minnesota and Director of the Networks, Economics, and Urban Systems (NEXUS) research group. He also blogs at The Transportationist and can be found [@trnsprttnst]. Levinson has authored or edited several books, including Planning for Place and Plexus: Metropolitan Land Use and Transport and numerous peer reviewed articles. He is the editor of the Journal of Transport and Land Use.

    Photo Metro Transit Stop at Coffman Memorial Union by Runner1928 (Own work) [CC BY-SA 3.0], via Wikimedia Commons