Thursday, May 1, 2008

Why Cities Really Are Better Than Suburbs

A few weeks ago, Freakonomics authors Stephen Dubner and Steven Levitt argued in the NY Times Magazine that, from an economic perspective, Americans drive too much:
[T]here are all sorts of costs associated with driving that the actual driver doesn't pay. Such a condition is known to economists as a negative externality: the behavior of Person A (we'll call him Arthur) damages the welfare of Person Z (Zelda), but Zelda has no control over Arthur's actions. If Arthur feels like driving an extra 50 miles today, he doesn't need to ask Zelda; he just hops in the car and goes. And because Arthur doesn't pay the true costs of his driving, he drives too much.

What are the negative externalities of driving? To name just three: congestion, carbon emissions and traffic accidents. Every time Arthur gets in a car, it becomes more likely that Zelda - and millions of others - will suffer in each of those areas.
They go on to discuss three policies that could help fix this by forcing drivers to internalize the costs they force on to others: higher tolls, and, in particular, congestion pricing (which I supported in NYC); increasing the gas tax (as much as I hope that Clinton beats Obama, he's 100% right to oppose cutting the gas tax); and, their choice, structuring car insurance so that its cost is dependent on how much you actually drive (the more you drive, the more externalities you produce, the more you pay).

This represents, I hope, the beginning of a discussion about transportation that our country is sorely in need of. "White Flight" from cities and the rise of suburbia didn't just happen on its own, it was driven by policy choices. Whether on purpose or by accident, we've designed a system in which we insufficiently invested in building and maintaining public transportation systems, even in most large cities (see: LA), while providing incentives for car ownership. This is epitomized by The Atlantic's Matt Yglesias, who writes:

You often hear that there are huge swathes of the country in which it's just not feasible to make changes that will lead to people driving less -- there's no other way to get around! This is often quite true in the literal sense. But oftentimes it would be possible to make non-drastic changes that would still make a difference at the margins. Here's a satellite phot of a swathe of Virginia near Tyson's Corner. You'll note that the housing north of the highway is actually very close to all this non-housing stuff south of the highway. but if you live north of the highway you can't walk to the south of the highway stuff just because the streets aren't designed to make that possible.

The necessary changes would, however, be relatively simple to make and would even provide money and jobs for people in the road-building sector -- it's just a case of making sure that roads actually link up with one another (rather than being cul-de-sacs strung together to reach a handful of arterials) and feature sidewalks or bike paths. People are still going to drive for some -- maybe even many -- trips, but at least some of suburban American's trips could be replaced by walking or biking without radically overhauling neighborhoods of constructing massive new transit systems. Among other things, that would take pressure off the roads and fuel supply, leaving those resources available for trips where there genuinely is no reasonable alternative.
Since World War II, this kind of poor planning, and the rise of urban sprawl and exurbs, has fundamentally shifted where Americans chose to live. With record-shattering oil prices that, thanks to increasing energy demands primarily from India and China, are unlikely to go down anytime soon, however, we may be in the midst of a new era of re-urbanization. As University of Oregon economist Mark Thoma noted in February,
I didn't realize how much population flow there is within the US from rural to urban areas and how many rural areas are actually losing population. the first graph shows the breakdown of urban-rural counties, and the second shows counties where population has increased or decreased... "There is a remarkable degree of overlap in the rural counties in Map 1 and the counties with population loss in Map 2".
MSNBC reported on this trend a couple of years ago (I did a double take when reading the article's juxtaposition of "rising fuel costs" and a quote that"Most analysts believe that crude oil prices in the $50s and $60s will be with us for some time,"), which I think will only increase in intensity:
Economist Jack Lessinger points out that suburbia not only depends on autos for commuting to and from jobs, but that everything in the suburbs -- from stores to schools to restaurants -- requires increasingly expensive trips in cars
With the cost of gas hovering around $3 per gallon on average in the US, it's worth considering whether a shorter commute would pay for the incremental cost of a more expensive in-city home.

Assuming a full-time job, $3 gas, 26 mpg and 50 cents a mile for maintenance and no parking fees, a 50-mile roundtrip commute costs $646.15 a month, or $6,753.80 a year
Moving closer to work boosts your house-buying power. Everything else being equal, a 10-mile roundtrip commute costs just $1550.76 yearly -- saving about $6,200 per year, or $517 monthly. That can add about $80,000 for the total amount of a mortgage loan, says one Chicago lender. The rule of thumb: each $250 a month you can free up for mortgage payment equals roughly $40,000 more you can borrow at current rates.
Assuming that most people balance the cost of a commute (both in time, convenience and financially) against the added space that they can afford by living farther from cities' central business districts, rising gas prices will inevitably lead to a desire for shorter distances to drive for work, shopping, and social trips. My guess is that this will lead to increasing population density in cities, as people flock back to them from the suburbs.

Then again, maybe I'm just biased. I've always subscribed to the John Updike quote, "The true New Yorker secretly believes that people living anywhere else have to be, in some sense, kidding."

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