All policy is metropolitan

Ryan Avent links a very good study from the Brooking's institution that points out to the geographic sources of economic growth in the United States. One of their examples is California:

California, it is often noted, accounts for more than a tenth of the national economy. That’s true—but somewhat misleading. The “California economy” is not evenly spread across the state, but rather it is driven by a few metropolitan areas. The Los Angeles and San Francisco metropolitan areas are responsible for more than half the state’s economic clout. Along with San Diego and San Jose, they together contribute 72 percent of the state’s GDP. True, if California were its own country it would have the eighth largest GDP in the world, but if these four metros alone were a separate nation, they would outpace India, Mexico, South Korea, and Australia.

Two other economically powerful states, Illinois and New York, are even more dependent on their metro powerhouses, with Chicago and New York each constituting more than three-quarters of their state’s GDP. (The New York metro actually powers two states: the portions of the metropolitan area in New York account for 75.7 percent of that state’s GDP, and the chunk of the metropolitan area across the river in New Jersey accounts for 77 percent of Jersey’s GDP). Texas and Florida likewise each get 80 percent of their economic heft from the handful of major metros within their borders.

Connecticut is blessed/cursed of being part of a metro area (NYC) that is in another state. This is a problem as the rich core can and will put projects that link both areas at a lower priority more often than not. It does avoid, however, the problem that NYC often faces when crucial infrastructure and transportation investments get divested at Albany to the upstate area. We can focus our efforts to what makes sense to the state, avoiding the problem of being left out by the byzantine politics of New York state.

The problem, however, is what we can do in Connecticut to get bogged down in politics that prioritize investments in slow growth, mostly empty areas and leave aside the extremely dense corridors that make sense economically. As usual, it ends up boiling down to incentives, and how we make building up the urban, metropolitan cores that drive growth all over the country extremely expensive, via underinvestment and a regressive, inefficient property tax system.

This does not mean that we could turn New Haven into Austin or San Francisco; it might be not a good short term plan. What it does mean, however, is that Connecticut could use its proximity and links with the most powerful economic engine in the planet to become a creative, lower cost, high-quality of life extension of the NYC metro area that focuses on growing smart. Small city and town charm, connected to the global economy.

On housing and foreclosures

President Obama (I still can't get used to write that) presented today his plan to turn the tide in the massive wave of foreclosures that has greatly contributed to the current economic crisis. I won't get much into the details of the plan, as the Center for American Progress has a better analysis (it is a meaty plan, unlike Geithner's bank bailout), but I think it deserves some additional general comments. Mainly, do we want the government to work to promote home ownership?

The Federal government (and to a lesser extend, state and local governments) spends a great deal of resources via both guarantees and tax breaks to promote home ownership. Be it through income tax deductions, be it by creating strange financial creatures like Freddy Mac and Fannie Mae, the path to homeownership is paved with government subsidies. This creates some odd effects in the housing market, mainly by making the purchasing a house much cheaper and easier to finance, and thus making it a much more desirable investment.

As we have seen in the past few months, purchasing a house could be a pretty lousy investment. It does not always retain value, it is pretty hard to sell when the economy goes South, and it is the perfect example for many of putting all your investment eggs in one basket, being as it is a pretty massive purchase. In addition, home ownership reduces the flexibility of the economy, as people become much more reluctant to move when the economy tanks in a region.

Even with these drawbacks, the Federal government has promoted since the 50s policies that push people towards this lousy investment, giving them strong incentives to buy more of it (bigger lots, bigger houses) to maximize the tax breaks. It promotes sprawl by both making housing cheap and big houses more desirable.

Some people have critizised the Obama plan because it will make banks more reluctant to lend money for mortgages in the future. I am with Matt Yglesias that this is not actually a bug, but a feature of the plan. We need to think less on making homeownership cheap, and focus more on making housing (including renting) affordable.

The efficiency of cities

Edward Glaeser argues in this excellent article in City Journal that one of the best ways (if not the best) to fight global warming is to build denser, more compact, more transit friendly cities.

Of course, he doesn´t stop just there. A city like San Francisco is more efficient like New York, for instance, mainly because heating costs are lower but also because they get their electricity from more efficient energy sources. Houston is blessed with a warm climate, but its inhabitants waste a lot of carbon by driving around and powering their air conditioning with dirty power generation.

The real key, however, is not the efficiency of the metro area as a whole, but how much more efficient some city cores are compared to the suburbs. New York City is, in this case, the poster child of earth-friendliness.

Connecticut has very ambitious greenhouse gas emision targets on the books. It will be a good idea to take these ideas seriously when devising policy, as some of the bills bellow do.

Bringing Sustainability and Urbanism Together

In Architecture Week, Daniel Sloan disusses Sustainability and Urbanism 

He says, "There are numerous benefits to fusing sustainable development and urban development concepts. Moreover, pedestrian-oriented, urbanist-project approaches have been vigorously embraced by many environmental groups. It is not, however, intuitively obvious to everyone why high-density, extensively hardscaped projects would be good for the environment." 

Read on at  www.architectureweek.com/2009/0107/environment_1-1.html.