The City Ascendant: America’s Urban Economy by Edward L. Glaeser Harvard University and NBER December 19, 2006 Preliminary Draft ii Preface This book occupies an uncomfortable middle ground between economics and history. It does not look like a conventional piece of economics. Economic theory lies always in the background but is never trumpeted with algebra and graphs. The statistics it contains are unvarnished with fancy econometric techniques. Moreover, this book is certainly not history or even economic history. Apart from the use of census documents, I have used almost no original sources. As far as I know, none of the stories contained herein are actually new. Many of them are well known and I have no pretensions to being any sort of an original historian. This book is an attempt to make urban economics accessible through American history. I am trying to use the paths of America’s cities to show the power of economic theory. While I have tried not to cherry pick my examples too much, there can be no doubt that I have chosen my stories to illustrate the strength of urban economics. I have made constant use of urban history, but I am not adding to that great field. My hope is that this book will be interesting to both economists and non-economists. Economists will find few new ideas in this book. The basic thoughts have been previously expressed in my own writing and far more significantly in the broad literature of urban economics that includes von Thunen, Alfred Marshall and Paul Krugman. For economists, I hope that this book provides them with examples that enrich the theory. Perhaps the stories that I include will be helpful to them in teaching urban economics, just as they have been helpful in my pedagogic efforts. For non-economists, I have a broader ambition. I hope that this book makes the dry matter of economic theory more palatable. By wrapping the ideas of dead economists in stories about Benjamin Franklin, William Tweed and Robert Moses, I hope to make economics relevant and enjoyable. To me, the dismal science is anything but. It is an enormously exciting field which never stops delivering insights about our world and iii especially our cities. I hope that this book will convey to others some of the pleasure that urban economics gives me. The book is a sandwich. There are three conceptual chapters, one at the front and two at the back, surrounding seven historical chapters. The first chapter gives what I think are the core insights of urban economics. The ninth chapter gives what I think are the core policy lessons of urban economics and history. In the tenth chapter, I dust off my crystal ball and give predictions about the future of cities. Between these three chapters, I have chapters on individual cities in particular epochs. The basic model is to focus on one city during a major period of American urban history, at least until the last 30 years, when I spread myself more widely. I begin the history in Chapter 2 with a discussion of Boston in the Colonial era. This chapter draws from a previous essay of mine “Reinventing Boston: 1630-2004” that was published in the Journal of Economic Geography. I am grateful for the opportunity to reprint portions of that piece. Like all of the book, this chapter emphasizes the importance of transportation costs and the urban role in linking the wealth of the new world with the markets of the old. But also like the rest of the book, this chapter emphasizes that cities that form to save transport costs, often end up playing a much more important role helping to spread and generate new ideas. The third chapter turns to New York City in the first half of the nineteenth century. This chapter draws on my essay “Urban Colossues: Why is New York America’s Largest City?” published in the Federal Reserve Bank of New York’s Economic Policy Review. I am also grateful to that journal for the opportunity to reprint portions of that essay. The chapter on New York also highlights transportation technologies, especially the larger boats that made the city the hub of a great transportation network. While I spend some time on the more important social developments of the city, the brevity of this work means that I left out many important topics. Luckily, Burrows and Wallace’s magnificent “Gotham” provides a superb history of nineteenth century New York that iv covers far more, far more effectively, than I ever could. I am especially indebted to their volume and to Kenneth Jackson’s magnificent Encyclopedia of New York City. In the fourth chapter, I move inland and turn to Chicago in the late 19th century. This is the first chapter that dwells at length on the buildings that are the physical matter that makes up cities. Interestingly, skyscrapers both made Chicago and were created in that city. The intellectual ferment created by density itself led to the creation of new buildings that increased density still further. This chapter owes much to William Cronon’s Nature’s Metropolis which is a landmark not only in the history of Chicago but also in urban analysis generally. These first three cities are all places that I know well, having lived for many years in New York, Chicago and Boston. In the fifth chapter, I turn to Los Angeles at the start of the 20th Century. While I have occasionally visited the city, my knowledge of it is as an outsider and I have drawn particularly on written works. The work of Fogelson has been particularly crucial in my understanding of the growth of the city during this epoch. In Chapter Six, I turn to Detroit in the middle years of the 20th century. The great drama of this great city which grew so dramatically and declined just as sharply is one of the great stories of urban America. I have tried to describe the city accurately, but I am sure that many of my words will infuriate the city’s boosters. At the very least, I should note that my goal is to ensure the best possible policies for the people of Detroit and I believe that those best policies must recognize the enormous economic forces that drove the city’s decline. Chapters Seven and Eight look at America’s cities since 1970. Chapter Seven examines the disparate fortunes in colder regions. Some places, like Boston and New York City, managed to come roaring out of a 1970s malaise. Other places, like Cleveland, are still stuck in decline. The thesis of this chapter is that the skills of the city’s residents were the crucial ingredient in reinvention. Places with skills were able to convert to the information economy and innovation. Places without skills, however, are still stuck in v industrial decline. This work draws primarily on my own research over the past 15 years on the role of human capital in fueling the growth of urban areas. Chapter Eight turns to the sunbelt and compares Santa Clara County, California (Silicon Valley) and Las Vegas. Both regions have had a successful 30 years. Santa Clara’s success has seen rising incomes and housing prices and declines in new construction. Las Vegas’ success has been the constant production of new homes accompanied by new population growth. The thesis of this chapter is that California made it increasingly difficult to build, primarily for environmental reasons. Without homes, population growth declined and prices soared. People who would have wanted to move to the Bay Area chose Las Vegas instead, because its pro-growth regime led to inexpensive living. All of these chapters reflect about eighteen years of research and reading on urban economics. Some of the books and articles that have influenced me are cited in the text, but many are not. In some cases, the influence of various authors has become buried in my subconscious and I don’t even remember their impact. Conversations with many people led to the ideas that are in this book. I am grateful to the hundreds of people who have taught me and I hope that those who are unacknowledged forgive my failings. I am particularly grateful to the anonymous authors of Wikipedia which served as a constant reference for this volume. In most cases, my earnest fact checkers provided non-Wikipedia references for facts that I had originally learned from this e-resource. The choice of non-Wikipedia references is a bow to academic conventions of this day, not to any lack of respect for that resource. I am enormously grateful to Wikipedia and I deeply apologize if I inadvertently borrowed any wording from that great resource. This book was fact checked by Peter Ganong and a wonderful set of undergraduate research assistants including Emily Wang, Theodore Grant, Joshua Lachter and Kelby James Russell. Describing their work as fact checking is somewhat unfair. They found vast number of resources. They corrected writing and factual errors. They are true partners in the creation of this manuscript. vi Nina Tobio is responsible for organizing and producing the tables and figures. Cara Cappello oversaw the assembly of the manuscript. I am extremely grateful to both of them. I am extremely grateful to the financial support that I have received in this book. Much of the original research was financed by the National Science Foundation. The Rappaport Institute for Greater Boston funded the original work on Boston and continues to support my research. Alan Altshuler, when he was director of the Taubman Center for State and Local Government, supported this project both financially and intellectually.