I’m a supporter of higher taxes, so if I were a Senator and someone was bringing a vehicle miles traveled tax to the floor I suppose I’d be prepared to support it. But the sporadic bouts of enthusiasm for this idea are really baffling. As public policy, a VMT has no advantages whatsoever over higher gasoline taxes. Raising a given quantity of funds through a new VMT rather than through higher gas taxes creates (a) more administrative headaches, (b) more civil liberties concerns, (c) fewer environmental benefits and in exchange you get nothing. They say higher gas taxes is a hard sell politically (though given that elites from both parties privately acknowledge that it’s a good idea you could always just not sell it) but a VMT would be just as hard a sell.

As Andrew Samwick says “The appropriate tax instrument to make up for declining or inadequate gas tax revenues is…a higher gas tax rate.” If at some future date vehicles have become so incredibly fuel efficient that no gas tax rates could possible raise the revenue we need, then that would be an excellent problem to have. And it’s certainly not a problem we have right now.

I think he makes a number of good points, but I don’t think the case against a VMT is that foolish. The problem with a gas tax is that its purpose is unclear. It’s not really a user fee, but it’s meant to fund transportation. It’s kind of a tax on negative pollution externalities, but its heart isn’t really in it since its value has been falling over time. I also think it’s kind of a problem that revenue to fund transportation varies inversely with oil prices, and I think the civil liberties problem is significantly overblown, since pretty soon most Americans will be walking around with GPS in their pockets anyway.

The biggest advantage to a VMT is that because its implementation has to be “smarter”, it offers you the flexibility to do some very useful things. In particular, GPS-based VMT taxes can be used to implement variable congestion tolls. When you get in your car in the morning, your NAV system could plot several routes, the rates for which have been set based on congestion levels, and it could tell you which way is cheapest. The ability to price roads individually, on a varying basis, and without erecting toll booths or traffic cameras all over the place is a huge advantage.

Obviously, that kind of thing would be very difficult to pass at the federal level. On the other hand, we haven’t raised the gas tax in nearly 20 years, so it’s not clear to me that attempting to try something new is a totally silly idea.

Or — hard as it is to admit for this native of Durham — perhaps the Triangle is simply not ready for rail rapid transit. How will trains in any of the corridors mentioned here ever attract adequate use when the biggest core, Raleigh’s downtown, only has 40,000 jobs and just a few thousand residents? When will the trains ever get the kind of traffic that necessitates their higher capacity compared to buses? By comparison, Charlotte’s center city has more than 10,000 inhabitants and 80,000 jobs — and it’s relatively small from the perspective of transit-encouraging cores.

If implemented with rapid lanes on the freeways and dedicated rights-of-way in the downtowns, the region could probably get a whole lot more for its money with an upscale bus rapid transit service. Lines could run directly between Raleigh and Chapel Hill or between Durham and North Raleigh without the inconvenient and time-consuming detours that will limit potential traffic.

But I could be wrong. The region is clearly interested in spending its own funds on these transit projects. The cities do need some kind of structural device to organize and encourage dense development; bus rapid transit wouldn’t do that nearly as well as would light rail. These cities have been sprawling so much that only a radical investment may help them reverse course. Perhaps it’s time to take a chance.

Without question, the Triangle area is one of the most challenging large metropolitan areas for transit supporters. It’s polycentric, sprawling, and low density. As Yonah notes, the closest thing the area has to a central business district, downtown Raleigh, has just 40,000 jobs and a few thousand residents. Wake County, the most populous in the metropolitan area, has a lower population density than Prince William County, on the exurban fringe of the Washington metropolitan area. The region’s central cities aren’t big and dense enough to support transit on their own, and connecting walkable suburban nodes (as has been done in the Washington area) is difficult because the nodes themselves are much smaller and quite far apart.

I very much agree with Yonah that any Triangle transit plan has to include a significant bus element. But I think it would be a big mistake not to invest in rail options.

For one thing, the area is among the fastest growing in the country. The Raleigh-Cary metro area grew by 35% between 2000 and 2008 — faster than Las Vegas, Phoenix, Austin, Houston, and all the other big growth cities. Rapid and chaotic growth has led to large increases in area congestion. That congestion will reduce quality of life if alternatives aren’t provided. It will also create demand for living and commuting options that don’t involve long drives.

And central city, walkable living has been increasingly in vogue in the area. Downtown Raleigh and Durham have experienced growth spurts, including new investments and increased employment and residential population. There are thousands of young professionals in the area, and while many of them are happy with the suburban life, others would like to have the option of a more walkable, “urban” experience.

It’s also worth pointing out that the heart of the region is its universities. There are major universities at all three nodes of the Triangle, and students have been among the biggest users of Triangle Transit buses between Raleigh, Durham, and Chapel Hill.

The difficulty is in knowing which places to connect and how. The temptation is to try to accomplish too much with one or two systems — to try and use the same equipment to link the central cities of the Triangle and to encourage denser growth within each city. That would be a mistake. Instead, I’d pursue four different mode types.

First, I would develop plans to encourage walkable growth within the center cities. In Durham and Chapel Hill, this would mean circulator buses, but Raleigh should build a small streetcar network to serve those living inside the Beltline. I would think an east-west line (along Hillsborough Street through downtown and along New Bern Avenue), and an intersecting north-south line through downtown would be a good start.

Second, there should be light rail lines extending from the central cities into the suburbs. I think Yonah’s trunk line is a good place to begin, and I would consider other spurs, as well. The goal would be to catalyze land-use changes and the development of denser, walkable nodes around stations. As things stand, Crabtree Valley and North Hills are turning into denser (and somewhat more walkable) places anyway, but because of car dependency this transition is halting (and leads to a lot of local traffic, which will sour residents on further densification).

Third, I would develop commuter rail services with more or less direct service between central cities, but perhaps also with stops at the airport and Research Triangle Park. This service should be broadened over time to include stops in the central places of nearby cities and towns, all the way out to Greensboro, Rocky Mount, and Fayetteville.

Finally, I would make a push to make the region’s bus service much more comprehensive and attractive. Much of the metro area has been built in such a way that rail transit will never be an option, and neither will significant land-use shifts. But improved bus service, combined with creation of express bus lanes along larger thoroughfares in each city, could slow the growth in congestion and facilitate a slow in-fill process that would make life easier for suburban residents who’d like the option to occasionally get to the store without getting in a car.

The alternative would be to continue spending enormous sums of money on exurban highways until the area is larger and more congested, at which point the Triangle, like Houston and Dallas and Phoenix, would feel compelled to start investing in transit anyway. Best to get the process started now. The Triangle grew by nearly 400,000 people over the last 8 years, and I’d be very surprised if it didn’t add nearly as much again in the next 8 years. It would be nice if even 10% or 20% of those new arrivals could make their homes in neighborhoods that didn’t require every trip to be made by car. Because at these growth rates, you simply can’t build enough road to keep up with the car trips suburban sprawl generates. Not without bankrupting yourself, at any rate.

Recent concepts as megaregions and polycentric urban regions emphasize that external economies are not confined to a single urban core, but shared among a collection of close-by and linked cities. However, empirical analyses of agglomeration and agglomeration externalities so-far neglects the multicentric spatial organization of agglomeration and the possibility of ‘sharing’ or ‘borrowing’ of size between cities. This paper takes up this empirical challenge by analyzing how different spatial structures, in particular the monocentricity – polycentricity dimension, affect the economic performance of U.S. metropolitan areas. OLS and 2SLS models explaining labor productivity show that spatial structure matters. Polycentricity is associated with higher labor productivity. This appears to justify suggestions that, compared to relatively monocentric metropolitan areas, agglomeration diseconomies remain relatively limited in the more polycentric metropolitan areas, while agglomeration externalities are indeed to some extent shared among the cities in such an area. However, it was also found that a network of geographically proximate smaller cities cannot provide a substitute for the urbanization externalities of a single large city.

To pull this apart a little, it’s an investigation of the extent to which cities in a polycentric metropolitan area can “borrow” size from neighbors. According to the authors, it does seem that in polycentric regions, small cities can enjoy some of the labour productivity gains from a large market without having all of the disadvantages of a single large city (including high costs and congestion). But the polycentric network can’t fully take advantage of size in the way that a single metropolitan area can.

Anyway, I think that “borrowing size” is a nice way to think about economic development prospects for struggling cities. I typically talk about this in terms of using improved transportation and communication connections to “leverage up” a city’s resources. Put simply, a well-connected regional market can act like one big metropolitan market, which has big economic advantages.

Agglomeration can be caused by asymmetric information and a locational signaling effect: The location choice of workers signals their productivity to potential employers. The cost of a signal is the cost of housing at a location. When workers’ price elasticity of demand for housing is negatively correlated with their productivity, skill-biased technological change causes a core-periphery bifurcation where the agglomeration of high-skill workers eventually constitutes a unique stable equilibrium. When workers’ price elasticity of demand for housing and their productivity are positively correlated, skill-biased technological improvements will never result in a core periphery equilibrium. This paper claims that location can at best be an approximate rather than a precise sieve for high-skill workers.

To try and simplify this a little bit, there is a wage premium associated with big cities, which is difficult to explain using plain vanilla economics — there should be an incentive for firms to move elsewhere, rather than pay higher real wages. To get around this, you can invoke a number of different models. Many include agglomeration externalities, where there are positive spillovers to concentration — the whole is greater than the sum of the parts. What this paper posits is that the premium can be explained in part by worker signaling. This is similar to the filtering story I’ve been telling at this blog for some time. When housing costs are high, high productivity workers will opt in because they know that their skills will allow them to earn enough to justify the higher housing costs. And firms may want to locate in a particular area because high housing costs will sort the local labour market for them — they don’t have to do as much work to hire a talented worker.

Interesting bit here:

Under the framework of agglomeration externalities, an increase in the ratio of high-skill labor in one region causes more than a proportional increase in the average real wage (or an increase in labor’s marginal product). In a locational signaling model, an increase in the ratio of high-skill labor in a region yields a proportional increase in the average real wage.

Of course, I’ve argued before that workers might be signaling not only that they are productive, but they also happen to be workers whose productivity levels are most externality-dependent. For instance, it’s expensive to live in San Jose. Therefore, we might argue that only a very productive worker would move to San Jose, because only a very productive worker could count on earning enough to pay San Jose housing costs; hence, high San Jose housing costs sort for productive workers.

On the other hand, a highly productive worker whose productivity isn’t dependent on externalities might do just as well, net of housing costs, somewhere else. But a productive worker who will most benefit from the collaborative, innovative atmosphere of a San Jose R&D lab, whose productivity is dependent on being around other productive workers whose productivity levels are likewise co-worker dependent, will strongly prefer to locate in San Jose. The price elasticity of demand for an externality-rich city among such workers will be quite low. And as per the paper above, selection of workers with externality-dependent productivity levels should lead to a more than proportional increase in average real wages, and increases in housing costs sufficient to deter most of those workers who are simply looking to signal what you might call independent productivity.

Distinguishing between these two types of productivity-signaling workers then allows us to posit a range of city types featuring a range of talent concentrations and a range of wage premiums.

</super wonkishness>

To step back a bit, I think it’s also worth thinking about what else we signal when we choose a city. Cities are the great relationship markets; it’s said that those who are bearish on the future of cities have already met their spouse. When you move to a place like New York, you signal things about yourself to prospective partners, and you select for a pool of partners that is quite different from a corresponding pool in Denver or Des Moines.

And I think that to a certain extent, people make these choices based on conceptions they have about themselves and the people they’d like to be. If you see yourself as someone who is interested in art, you may move to New York, not just because there is a lot of great art there, but also because you’ll meet people there who are themselves interested in art and who will nudge you toward more involvement with art and artists. Or you might move to Denver, because you want to be an outdoorsy person. People you meet there will typically be outdoorsy, and they’ll make it easier for you to become this outdoorsy person that you hope to be. At a more general level, people may simply feel that they’re “destined for bigger things”, or ready for a “simpler life”, and they may choose cities based on these feelings. Not just because they’re going where they want to go, but because they’re committing themselves to a certain lifestyle, and placing themselves in a situation where the people they come to know will act as constraints on them, pushing them to behave in a certain way.  After all, you can love art in Denver and be outdoorsy in New York.

It seems to me that people want to be a lot of things that they can’t necessarily become on their own. A move can be a means to commit oneself to a certain course, and to make it harder to back away from a desired goal or style of life.

Counting the new Republican Senator Scott Brown from Massachusetts, the 41 Republicans in the Senate come from states representing just over 36.5 percent of the total US population. The 59 others (Democratic plus 2 Independent) represent just under 63.5 percent. (Taking 2009 state populations from here. If you count up the totals and split a state’s population when it has a spit delegation, you end up with about 112.3 million Republican, 194.7 million Democratic + Indep. Before Brown’s election, it was about 198 million Democratic + Ind, 109 million Republican.)

Let’s round the figures to 63/37 and apply them to the health care debate. Senators representing 63 percent of the public vote for the bill; those representing 37 percent vote against it. The bill fails.

To add even more perspective, if you were to take the (admittedly odd) view that rather than 60% of Senators, you’d need Senators representing 60% of America voting in favor to pass a bill, then you could get there with the 51 most liberal Senators. And if you only needed Senators representing 51% of America, then you could get there with just the 37 most liberal Senators.

Now obviously, you make laws with the Constitution you have, and not the one you might want to have or wish to have. But in trying to make broad statements about the mood of the country, or what bills the people will tolerate, or things like that, it’s worth remembering the above. A majority of Americans voted for legislators to the House and the Senate who would pass with no hesitation a bill that’s far more progressive than the Senate offering.

The right response to the institutions we have is to ask what can be accomplished and how. But to read backward from that what-can-be-accomplished something about what “most Americans” want makes no sense at all.

The country’s largest metro areas saw their poor population grow by 25% between 2000 and 2008, according to the report, faster than primary cities and well above the poverty growth in small cities and rural areas. “As a result, by 2008 large suburbs were home to 1.5 million more poor than their primary cities and housed almost one-third of the nation’s poor overall,” the report says.

Part of this is simple math. The nation’s suburban population grew 12.5% between 2000 and 2008, compared with 3.9% in primary cities and 2.4% in rural America. Meantime, over the past decade cities have attracted young professionals and empty nesters that tend to be wealthier and whiter.

From the report, here’s the section focused specifically on the Washington metro area:

- In 2008, 120,669 people in the primary city lived below of the poverty level ($21,834 for a family of four), compared to 251,096 poor in the surrounding suburbs. This represents a significant decrease for the city compared to 2000, and a significant increase for the suburbs.

- The poverty rate—the share of the total population living below the poverty line—showed a significant decrease in the city and no change in the suburbs over this time period. In 2008, the suburban poverty rate was 5.8 percent compared to a primary city poverty rate of 13.3 percent.

- In 2008, 32.5 percent of poor individuals across the metro area lived in the primary city compared to 67.5 percent in the suburbs. Compared to 2000, this is a significant increase in the suburban share of the metro area’s poor.

- Using a broader definition of “low-income,” 231,896 individuals in the primary city—or 25.6 percent of the population—fell below 200 percent of the federal poverty level in 2008, compared to 648,395 (14.9 percent) in the suburbs.

- Based on increases in unemployment throughout 2009, we project that the Washington-Arlington-Alexandria, DC-VA-MD-WV metro area may experience an increase in its poverty rate of approximately 1.4 percentage points.

It’s interesting to me that the primary city (defined as the District, Arlington, and Alexandria) experienced an absolute decline in the number of poor, and not simply a decline in the poverty rate.

There are a few interesting things to think about here. One is what the dynamics of this shift look like. Is poverty relatively concentrated within individual suburban counties or is it more distributed? Rising poverty levels in mixed-income jurisdictions can produce tipping points, which lead to transformative and sometimes chaotic migration patterns. We saw this in urban centers from the late 1950s to the early 1990s. Will we see it in some suburban areas?

A related point is how suburban areas will handle the fiscal ramifications of the change. Are they more or less able than central cities were to handle increased service needs on a stable or declining tax base? My sense is that suburbs may struggle significantly. For one thing, suburban infrastructure is cheap to build but very costly to maintain (because there’s so much of it and it’s so spread out). As it ages, bills for basic maintenance will rise considerably. For another, suburbs coasted for a while on the fact that residents were largely well-off and healthy, from stable families. That made educating, treating, and policing suburban communities relatively cheap. This will shift as poverty grows. Lower density may make policing much more expensive in suburbs, if in fact crime levels do approach those in primary cities.

And what will suburban poverty mean for the poor? I think that concentrations of poverty in central cities — home to governments, business districts, and iconic locations — made the plight of the very poor harder to ignore. Will the suburban poor be out of sight and therefore out of mind? Suburbs are also less walkable than primary cities, with far fewer public transit options. How will the poor survive in places where they’re a breakdown away from total isolation? Will American suburbs become more like Parisian banlieues?

My sense is that suburban poverty is relatively concentrated in places that already had relatively low incomes. Fairfax County, in other words, is unlikely to flip to suburban dysfunction and suffer white flight. But this is a trend worth watching closely. I don’t think urban depopulation at the middle of last century was appreciated as the incredibly disruptive force it proved to be.

1) The remarkable possibility that the House would not go ahead and vote for the Senate health bill, but would allow the work of the past year — and the enormous opportunity cost associated with it! — to amount to nothing. Of all the cowardly, chickenshit reactions. Republicans were taken behind the woodshed in November of 2008, and did they respond by backing down one bit? Did they retreat in the least from their policy commitments? And the Dems have the notable moral advantage here of having crafted a bill that would actually save lives.

2) The fact that everyone who matters appears ready to agree that control of the White House and sizable majorities in both houses of Congress nonetheless mean that nothing more of note can be accomplished by the governing party, since they’re now one seat short of 60 in the Senate. Which has 100 members. If this majority can’t accomplish anything, then America will basically never accomplish anything of note, ever again, unless some drastic and immediate catastrophe looms. A country that finds itself in that position can’t last long.

Unfortunately, I’m a committed Democrat itinerant wandering between the deep blue and disenfranchised District and the deep blue and swamped by the rest of Virginia Arlington. I don’t exactly have a lot of leverage. But if the two things above happen, I might sever ties with the Dems. Why not? My Democratic votes will have gotten me more or less nothing — certainly not the desperately needed action on crucial issues like rising health expenses, climate change, and joblessness. It couldn’t matter less if I spent the rest of my life registered Green, writing in Al Gore for every position from alderman to president. I’m at the point where if no one is interested in earning my vote, then I’ll be damned if I’ll give it away.

MacGillis returns to his criticism of Florida and my defense of him, saying:

I can see where Avent is coming from, though I don’t think his points ultimately hold up. But what really caught my attention is that he leaves unaddressed my main argument: Florida has been delivering his pricey sales pitch to the very towns he now declares hopeless. There’s a case to be made for helping people move from depressed areas to more prosperous ones — it is one side of a long-running debate over whether it’s better to invest in people or places. But it’s a bit rich for that argument to come from Florida, who got wealthy telling these places that they could be saved if they only followed his advice on attracting the all-hallowed young creatives. Many people in these places took Florida at his word and have been spending a great deal of money and time on following through with marketing campaigns, bike paths, loft development — you name it. Now that same person, the best-known urban development guru in North America, declares them goners. I find it curious that Avent doesn’t seem troubled by this…

Florida’s successful sales pitch alone was not my main concern, since “it’s a free market and the cities were willing buyers.” It was the pitch in conjunction with his latest declarations. That said, Avent seems a bit blithe here. For one thing, many of the cities shelling out money to him were not “major American cities” but smaller ones like Elmira, N.Y., featured at the top of the article. And in many cases, Florida didn’t simply leave cities to make their own judgments: He did all he could to turn his $35,000 speeches into $250,000 consultancies, in which he and his assistants spent months working with the cities, giving out specific advice such as to “identify and amplify organically evolving nodes of creative energy.” Finally, it seems to me that there are other occasions in which we find reason to object to salesmen taking cities for a ride, even if the cities are willing buyers — say, when investment firms sweep in to promise bigger gains for the local pension fund. Last time I checked, it’s journalists’ job to help inform cities and their residents what they’re getting for their money.

I don’t disagree in the least that it’s journalists’ job to inform people about things. It’s city leaders’ job to decide whether or not available evidence supports decisions they’re making about the future of their city. And I don’t see anything “rich” about the change of heart coming from Florida, or anything dastardly about it at all. As far as I can tell, he’s changed his mind — perhaps based on the trouble some of his clients have had getting his ideas to work — which is a perfectly reasonable thing to do. I don’t think there’s any evidence that Florida was deliberately scamming anyone or peddling ideas in which he didn’t believe. What’s more, just because investments in struggling towns didn’t necessarily generate a wholesale turnaround doesn’t mean that the investments didn’t yield any return at all. Cities may be disappointed that they’re not a new Portland, but are they really filled with deep regret about their decision to become more tolerant, and artist- and bike-friendly?

MacGillis continues:

Cities are essentially being told that to be successful they need to be successful. Avent edges toward the implications of this closed circuit: “[T]he result is an urban geography that’s very lumpy” that will “decay into a world with haves and have nots.” But he stops short of fully grappling with this winner-take-all landscape. He does not engage the many Florida skeptics that argue that we don’t necessarily need to breezily accept this outcome. He also does not address the obvious fact that Florida, by calling for us to give up on whole swaths of the country and instead redouble our investments in the prospering creative hubs, is only exacerbating the disequilibrium.

No, I’ve grappled with it, and I think he’s misunderstanding the dynamic I’m describing. When I say haves and have-nots, I’m referring to concentrations of economic activity, not people or places. Not every city can be a San Jose or a New York — that equilibrium is not sustainable because it’s advantageous for certain kinds of activity to group together. If we try to force economic activity to spread evenly over the landscape, we’ll be saddling ourselves with some significant economic costs.

Think about the innovative cluster in Silicon Valley. Workers there move between firms all the time, spreading ideas and knowledge. They bump into each other while out and about, creating opportunities for moments of serendipity. They develop relationships with venture capitalists and other firms, boosting entrepreneurship. We know that these things are important because people and businesses are willing to pay very high land costs to be in Silicon Valley. In one sense, this concentration may not seem fair; why not try to get half of the agglomeration to move to Detroit? But on the other hand, the innovations that have come out of Silicon Valley have enriched people all over the world.

Now, it’s not impossible to create such agglomerations where they didn’t exist before. Silicon Valley itself is a product of government funding for education and research. Raleigh — a successful imitator and my hometown — began developing its technology concentration on the strength of two public universities and a public-private partnership to recruit high-tech firms. But where Raleigh and Austin have been successful in developing human capital concentrations, many other cities have failed, not because they didn’t want it bad enough or because Raleigh and Austin have splendid climates, but because not every place can sustain such concentrations. As tech workers and tech firms have come to Raleigh, Raleigh has become more attractive for other workers and firms. Other imitators can’t compete.

These concentrations generate increases in societal wealth, and they needn’t at all manifest themselves as general income inequality. Meanwhile, I don’t think MacGillis has grappled with the implications of his complaint that investing in prosperous hubs “exacerbat[es] the disequilibrium”. Investments in prosperous places yield high returns, providing governments with more resources to use in other ways. And no one is suggesting we abandon whole swathes of the country. I don’t think I could have been more explicit in saying that both countercyclical aid and adjustment assistance for struggling cities are justified. Investments in growing cities also help struggling areas by increasing the overall size of the national economy, and by creating more opporunities for migrants. And MacGillis needs to recognize that if you pour a ton of money into places that lack an underlying economic justification, you’re attracting a lot of people into cities that represent economic dead ends.

MacGillis goes on:

Florida rationalizes regional shifts precisely because they are “a healthy part of economic adjustment.” Florida writes, “Different eras favor different places, along with the industries and lifestyles those places embody.” Avent goes on to say that investment in the left-behind places is still justified, since many will stay in them, and since it is possible that in the natural course of things, a few of them could rebound. What should be avoided, Avent seems to suggest, are top-down, paternalistic investments that aren’t in sync with the natural economic flow, since “it’s never clear what transition is going to look like and what the right distribution of people and capital is going to be.”

But here’s the thing: Florida’s sorting of the country into winners and losers along with his declaration that the former should get the bulk of our investments is, in its own right, an assumption that we know “what the transition is going to look like.” This means making a judgment call about who will and won’t turn the corner, which history has shown to be a foolhardy endeavor. As Karl Stauber, head of the Danville Regional Foundation, said to me in a remark I had to trim from my piece, comeback success stories like Asheville and Chattanooga are not recognized as such until after the shift has happened. Where does one draw the line now? Does Upstate New York, for instance, make the cut? It’s been in decline for years, but Buffalo and Syracuse have weathered the recession better than many other cities. So, do they get to be part of the “new geography”?

I think the above argument quickly falls apart when one thinks about the details. A declining city suffers from a sinking tax base. This will lead to tax increases and service cuts, which are likely to chase away remaining residents, further shrinking the tax base and leading to a fiscal death spiral. This dynamic is painful for the people who remain, it may lead to them being trapped in the area thanks to plummeting housing costs and deteriorating educational standards, and it significantly reduces the likelihood that they’ll recover thanks to the natural economic ebb and flow. The solution to this is easy — you use federal money to make sure that the police force and schools are amply funded, you make sure money is available to care for or dispose of vacant properties, and you make sure the streets don’t fall apart and the pipes don’t bust.

Growing cities, on the other hand, need new infrastructure. New York’s infrastructure strains to accommodate its current population. This acts as a limiting factor on growth; choked subway trains and streets limit the extent to which the city can absorb new workers and create new wealth. Remove those constraints, and the city will employ more people at high salaries. There’s no picking of winners involved; you simply make the investments that make sense.

But what about something like high-speed rail for Detroit? Again, I don’t think these questions are particularly hard, or that they involve the picking of winners. Given a limited pool of money, you start with the highest yielding investments, because that will give you more future revenue with which to tackle other problems. So high-speed rail to Detroit would not be as high a priority to me as high-speed rail on the east or west coast, or indeed elsewhere in the Midwest. At the same time, I think it makes sense to acknowledge the disadvantage that relative remoteness has had for Detroit. Improved connections between Detroit and more successful cities like Chicago and Toronto are likely to pay dividends. Essentially, you’d be shrinking the distance between Detroit and other large metropolitan economies, thereby increasing Detroit’s economic potential.

It seems clear, however, that the economic conditions that generated the Detroit of old no longer prevail. Trying to recover that Detroit would be hugely costly. Sometimes cities need to shrink, and many times workers and other resources need to be reallocated across the economy. Perhaps the problem here is that MacGillis is viewing a decline in population totals as a decline outright. I think it’s important to try and preserve a certain quality of life in shrinking cities. It is not important or noble or good to try and ensure that a city never has any fewer jobs or people than it had 50 years ago. Cities are many things, but one of their functions is similar to that of the firm — they bring together people, ideas, and resources to produce valuable outputs. Sometimes a firm’s business model no longer makes sense. To use federal money to preserve the old shape of the firm would be hugely wasteful and costly, and unfair to the people the firm employed (and everyone else).

Should Florida apologize? Or be forced to pay back the money? Meh. Again, the man went from city to city encouraging leaders to be gay-friendly, to support artists, to encourage creativity, and to build amenities like bike lanes. Perhaps he was wrong to suggest that these measures would deliver an economic turnaround. I’d say he was less wrong about the secret to urban success than those urging cities to throw tax incentives at potential employers, or those suggesting that we ought to adopt an industrial policy aimed at returning Midwestern cities to manufacturing glory.

Moreover, I certainly hope that if I ever see that my ideas aren’t working quite as I thought they would that I have the courage to say so.

The company broke the news in a news release Monday, saying it is considering locations in D.C., Maryland and Virginia. Northrop Grumman will complete the search by the spring of this year and open its new corporate office by the summer of 2011. It expects to base its decision on the amount of financial incentives offered by local jurisdictions.

Much of the rest of the piece is made up of quotes from officials from Fairfax, Arlington, and Montgomery counties and the District of Columbia, all saying how wonderful they’d be as locations for the firm and how they’re likely to pursue a deal. There’s an economic point to be made here, I suppose. To generalize a bit, when a firm makes a location decision like this, it will usually be because there is some gain to the firm to doing so. If there are positive agglomeration externalities involved in the destination urban economy, then the firm’s move will provide some benefits to other firms in the city, and other residents of the city. Some of that gain will accrue to the local governments, in the form of increased income and property tax revenues.

If a city has a unified government, then the surplus created by the firm’s move will be split between the firm, other businesses in the city, and the citizenry as a whole. The firm will move when it makes sense to do so, benefitting the local economy and increasing tax revenues. But if the task of local governance is split between multiple jurisdictions, then the firm will move when it makes sense to move, and then it will be able to collect some additional portion of the surplus generated thanks to competition between the local governments. The destination city would be better off if the local governments could agree not to compete for the new arrival, and to adopt some sort of transfer payment to share the gains from the relocation — the “winning” jurisdiction could pay a higher share toward multi-jurisdictional infrastructure investments, for instance.

The failure to prevent this competition means that economic gain which would accrue to the metropolitan population, broadly speaking, is instead retained by the relocating firm.

Having said all that, I’m just wondering what the District thinks it may gain from offering incentives to firms like this. Property tax breaks are particularly costly for the city, given the many restrictions on land uses it faces (from public land ownership to the height limit). And there is no way for the District to ensure that employment will go to Washingtonians, rather than suburbanites who will pay their income taxes elsewhere. Lucky Virginia might end up with much of the income tax gain without having to shell out incentives. The city would be better off spending the money on investments that improve quality of life in the District — among them, measures to make it easier to open small businesses, including retail and service firms people want but which are often constrained by foolish government policies (limits on uses, high property tax rates, and so on).

Sometimes, I get the sense that city leaders just don’t stop and think about what they’re doing. People are currently moving into the city by the thousand. Why is that? It certainly isn’t because the city has been using incentives to attract prestige headquarters.

I don’t have much time for the quasi-accusations of hucksterism leveled at Florida. He’s never been shy about self-promoting, and he’s certainly done well for himself publicizing and evangelizing about his ideas, but major American cities aren’t exactly naive old grannies being suckered in by Florida the conman. Florida has a view on urban development. He’s accepted thousands of dollars to come talk about it with city leaders around the country. If those cities can’t make a good judgment about what they ought to do next, that’s not Florida’s fault.

The criticism of his actual ideas is a trickier topic. MacGillis makes some reasonable points, to which I’ll get in a minute. But I think that he, and many others, haven’t really begun to wrestle with the nature of urban economics and the way it relates to broader policy issues like inequality. MacGillis writes:

A tautology lies at the heart of Florida’s theory that has limited its instructive value all along: Creative people seek out places that draw a lot of creative people. Florida has now taken this closed-loop argument to another level by declaring that hence-forth, the winners’ club is closed to new entrants.

That tautology doesn’t just lie at the heart of Florida’s theory; it describes the actual functioning of urban economies. The value in economically dynamic cities is the people that populate them. Where once, firms would pay high land prices to be near coal deposits or harbors, based on the economic advantages those amenities conferred, they now pay high land prices to be near talent. This yen to concentrate in particular areas has a number of dynamics. Firms want to be near customers and clients. Workers want to be near firms. Firms want to be near workers. Where there are lots of firms and workers, there will also be businesses serving those workers — in business and in the provision of consumption opportunities — and those services attract additional firms and workers. Everyone wants to be where everyone is, and it’s tough for anyone to go somewhere else because somewhere else is where people aren’t.

The result is an urban geography that’s very lumpy. People clump together, because there are gains to doing so.

But what makes a successful clump changes over time. The economics that underpinned the older manufacturing economy supported clumps that don’t necessarily make economic sense today. With declines in transportation and communication costs, it became affordable to move plants away from expensive city land, and that’s precisely what many businesses did. In cities that were also home to a substantial knowledge economy sector, this ultimately proved to be a boon. By outsourcing their manufacturing (and later, their back office) components, firms could reduce the overhead on the offices of those who still needed to be in the city, improving margins (and making more room in the city for others who needed to be there, thus increasing the return to everyone of being in the city).

The result is a world where the key to urban success is a critical mass of workers with high levels of what economists like to call human capital. And because there are returns to scale at work, there is an element of the zero sum here. Or to put it another way, the world where every big city has its own fair share of talent is not a stable equilibrium; it will decay into a world with haves and have nots. And indeed, that’s what we have seen in recent decades. Educational levels in cities one hundred years ago strongly predict educational levels in cities today. And cities with high shares of college graduates have absorbed more than their share of new college graduates in recent decades.

These dynamics have important implications for the way we think about policy, and I wish more people appreciated them.

Now, the above is not a death sentence for a city that’s not one of the main metropolitan dynamos. It takes all kinds, and there will be smaller regional talent centers that prosper. Proximity to a dynamic economy is also a means to success. Location in the northeastern corridor, for instance, is quite lucrative, and a number of decaying industrial towns that might otherwise have met a Detroit-like fate are enjoying economic revivals thanks to the strength of the broader NEC economy.

But what do you do if you are in a town that is a long way from generating a self-sustaining concentration of human capital, and which is relatively remote from bigger urban economies? The options are not pretty. Cities in that situation will tend to find that the better a job they do educating their local residents, the faster their towns depopulate; a good education is a ticket out.

Reading the Prospect, you’d think that the key to saving these old industrial towns is to find ways to support American manufacturing. All that’s been standing in the way of their continued success, it seems, is the decline of unions and a cheap renminbi. This just isn’t so. Different policy choices might have slowed the decline of manufacturing employment in America, but they would not have stopped it — or the consequent decline of manufacturing-dependent cities.

I’ll tell you what I think MacGillis gets right, and what makes these issues very difficult to address. People are not simply cold, rational calculators who will make a determination about where in the US they can maximize the return to their skillset and move there. Even as cities experience serious decline, some — millions of — people will stay behind because that’s where friends, family, and other connections are. And that’s why dismissing the problem of urban decline as just a healthy part of economic adjustment is an unsatisfactory answer.

But the solution here is not to hope that we can restore the industrial days of yore. I’ll tell you what I think we ought to be focusing on. First, I think it’s inappropriate to dismiss the importance of increased investment in education. Noam Scheiber recently wrote about manufacturing, saying:

Now it would be great if everyone would go to college and be able to thrive in the post-industrial economy. But, in reality, there’s always going to be a significant portion of the population that doesn’t get beyond high school. Which means that an economy with almost no manufacturing is probably an economy with much greater income inequality.

True, not everyone is going to go to college, but that’s not necessary. Marginal increases in the supply of college educated workers will increase competition for high skill jobs — slowing wage growth for such positions — and reduce competition for low wage jobs — boosting wage growth for those positions and thereby narrowing inequality. The bottom lines is — we are not anywhere near the point at which the capacity of young Americans to increase their skill level has been reached. Lots of kids get too little education, and that’s a bad thing for the economy, for inequality, and for American cities.

Secondly, it’s worth thinking about how infrastructure can boost the quality of life for everybody, including workers who can barely afford to live in the most dynamic cities and workers who have decided to live in declining cities. Better housing and transportation policies can slow growth in costs that consume over half of household budgets. Rules that make it easier to build homes within easy traveling distance of jobs centers reduce housing costs. Building retail and jobs within walking distance of homes allows families to opt for living situations with low transportation cost levels (and low transportation cost variability). Investments in things like broadband significantly expand consumption possibilities for those living in areas without many entertainment amenities. And better communication and information infrastructure may help struggling cities to leverage up the talent they do have by enhancing connections within the cities and within broader regions.

Third, we should do a better job treating ailing cities. Economically speaking, investments in a doomed city will only retard that city’s decline, meaning that more people suffer in its economic doldrums for longer. But the case for aid to distressed cities is like the case for unemployment insurance — the aid prevents a damaging decline which outweighs the negative incentive effects.

MacGillis quotes David Lewis saying:

What [Florida] ignores is that places have sunken infrastructure — not just in roads and buildings and sewers but the stuff that matters…

There are two ways to look at this. One is that all of these amenities are just temporarily underused. Eventually, the price of things like vacant homes and buildings will fall enough to attract new tenants and everything will work out. In that case, temporary aid might be in order — countercyclical aid — to prevent the decline from feeding on itself and getting out of hand.

Another view is that the decline is permanent — those buildings will never again be filled. In that case, aid is still justified. Why? Well, we’d like to avoid a fiscal death spiral that leads to serious declines in public services. Cities don’t disappear over night, and residents shouldn’t be subject to infrastructure that’s falling apart and a police force that can’t stop crime. Aid may also prevent residents from becoming trapped in the failing city. Rapid declines in property values will make selling homes — and migrating — difficult. Deterioration in local schools will likewise limit migration opportunities for younger residents.

But so long as declining cities are still there, there will be cries to try and rejuvenate them with various public programs — tax incentives to lure new companies, public funding for stadiums or convention centers, bail-outs for failing firms. These kinds of things are simply not helpful. The issue is this: it’s never clear what transition is going to look like and what the right distribution of people and capital is going to be. In providing aid to struggling cities, then, we want to facilitate that transition, not impede it. We want to make people more mobile, even as we work to generate a high quality of life in growing cities and declining cities. We don’t want to lock up resources in declining cities, either by propping up failing companies or by trapping people in hopeless situations.

These topics are complicated. And counterintuitive; no one likes thinking that the right thing may be for one of America’s largest cities to shrink until it disappears. But it’s worth remembering that the industrial revolution swept away whole occupations and completely redrew the urban geography of America and Europe. Cities which had been major regional capitals for centuries were suddenly backwaters, while major metropolises exploded out of nothing.

Technology is producing and will continue to produce a similar shift. Whole sectors will vanish, and take millions of jobs with them. Cities dependent on those old sectors will struggle to survive, and for some places this will be a losing struggle. This is not the kind of thing that progressives should want to stand athwart yelling stop. Instead, they need to find away to promote progressive ends — mobility, opportunity, and security — while embracing economic shifts that are, on the whole, empowering and a source of great prosperity.