Glaeser: investment in urban areas a better policy bet

The development of transportation infrastructure that criss-crossed the United States' vast plains and mountain ranges was an important development in the 19th century.

In the 20th century -- and indeed, the 21st -- it is far more important to invest in today's cities than in infrastructure that could one day lead to tomorrow's.

That's according to Harvard University economics professor andTriumph of the City author Edward Glaeser, who writes in the New York Times today that, from a policy perspective, urban density is the better financial bet.

He writes:

In the 19th century, it was incredibly valuable to build transportation infrastructure that crossed America and allowed access to our hinterland.

During the last census, there was also a tendency – throughout the entire country – to move to old ports. These trends again reflect the 19th-century tendency to spread out to get access to natural wealth and the 20th-century tendency to cluster in the metropolitan areas that were anchored by old ports.

These facts actually contain a lesson for current economic policy.

According to Glaeser's new paper (.pdf) and brief (.pdf) on trends based on data from the 2010 U.S. Census, population in America has been enormously stable over the long-term.

A few highlights:

• Nearly every decade in the agricultural 1800s showed population growth that was faster in less populated counties.
• The first six decades of the industrial 1900s showed population growth that was faster in more populated counties.
• The first decade of the 2000s showed "a strong tendency" of population to move into "all but the densest counties."

Why are people moving into cities? Because there is a strong connection between density and median family income.

Glaeser writes:

Declining transportation and communication costs seem to have made urban density more valuable. My book “Triumph of the City” argues that this connection reflects the fact that globalization and new technologies have increased the returns to being smart and that we get smart by being around other smart people in cities.

Whatever the reason, denser areas now pay higher wages. People follow the money and move to places with more people.

In his paper, entitled "Cities, Skills and Regional Change," he adds color:

The eastern United States has experienced three distinct epochs. In the first 60-odd years of the 19th century, the population spread out, especially towards colder areas with good soil quality and access to waterways. From the late 19th century until the 1950s, America industrialized and the population clustered more closely together, which set off a second growth spurt of the Great Lakes region. Over the past four decades, declining transport costs has led both to the spread of people across space, towards the Sun Belt, and the increasing success of skilled, entrepreneurial areas that thrive by producing new ideas.

In other words: innovation and new industries tend to cluster, and mature industry tends to diffuse -- demonstrating a connection between human capital and urban reinvention in the post-war era, Glaeser writes.

More points from the paper:

• Skilled cities grow because of faster productivity growth, "perhaps due to greater entrepreneurship."
• Cities may also grow because of an expanding supply of housing.
• City growth responds to faster improvement in amenities, "which skilled residents could induce through their demand as consumers and voters."
• The growth of skilled cities reflects growth in productivity, rather than growth in amenities. (Interestingly, the West is the only U.S. region where skills are associated with increases in the quality of life.)

And finally, a revealing line from the policy brief:

The spread of ideas in dense metropolitan areas also seems to enable innovative chains where one smart person borrows ideas from another. The death of distance may have pummeled the dressmakers of New York City, but it only enriched the fashion designers who still work in that city.

And if you don't buy the argument that cities are America's economic engines, consider this: the three largest metropolitan areas in the U.S. -- New York, Los Angeles and Chicago -- contain 18 percent of the nation’s gross domestic product, but only 13 percent of the country’s population.

I encourage you to dive into the reports, as they're chock full of interesting data. But the message is clear: America is returning to its cities, and policy must keep up.

This post was originally published on Smartplanet.com