Friday, April 14, 2017

Flawed Index

Richard Florida is something of the Paul Ehrlich of urban planning. He has interesting ideas but few of them show well under the cold light of reality. Fun to talk about but not especially useful.

He has come out with a new Urban Crisis Index which has the feel, once again, of using ideas and numbers to pursue a predetermined agenda rather than an actual useful measure of how to improve things. The article is Mapping the New Urban Crisis by Richard Florida.
America today is beset by a New Urban Crisis. If the old urban crisis was defined by the flight of business, jobs, and the middle class to the suburbs, the New Urban Crisis is defined by the back-to-the-city movement of the affluent and the educated—accompanied by rising inequality, deepening economic segregation, and increasingly unaffordable housing.

This crisis looks different across the country. The map below charts how America’s 350-plus metros stack up on my New Urban Crisis index—a composite metric my team and I developed. It accounts for measures of wage inequality and income inequality; overall economic segregation along income, educational, and occupational lines; and the unaffordability of housing. The index combines these factors on a scale of zero to one, where a higher coefficient indicates more inequality, segregation, and lack of affordability. Dark purple indicates metros where the New Urban Crisis is most severe, while light blue indicates where its impact is less harsh.
The three metrics betray the weak underpinning for this new "crisis". Only one of the three seems actually pertinent while two of the three are simply aspirational goals by central planners willing to overlook the interests and needs of citizens.

Wage inequality is real and is especially stark in cities, but does it have any real implication? Most of the research says no. Inequality is not in itself a problem. The real driver is lack of job opportunities that drives immiseration and poverty. Wage inequality can correlate with lack of job growth but that is incidental. Lack of jobs is the problem, not inequality per se.

Similarly with segregation. Florida is not talking about government enforced segregation, he is talking about elective segregation. Give people the freedom to choose where they wish to live and they will usually choose to live in configurations that meet a multitude of personal objectives (security, education, appreciation opportunity, convenience of transportation, like-educated people, like-class people, etc.) Everywhere, when given the freedom to choose, people cluster and many of those clusters are age, race, religion, class-based. Presumably because of its prior association with government enforced segregation, elective-clustering is despised by utopian determinists but it is not clear at all that there are any negative consequences to letting people choose where they wish to live.

The only one of the three metics which has some basis in reality, some causative negative consequence, is unaffordability of housing. Even here, the issue is simply one of time. There are consequences to rapid escalations in housing unaffordability but these are often functions of bubbles - they resolve themselves in the longer run. But indisputably, in the short run, rapidly rising housing unaffordability does exact negative consequences on some portion of the population.

Coincidentally, this is also the issue easiest to tackle. Unaffordability is simply a function of stringent zoning requirements which restrict what types of housing can be built and where. Such zoning is usually very rewarding to incumbent residents (it drives up the value of their properties) but punishing to new comers (by pricing them out of otherwise preferred locations.) We know what causes unaffordable housing costs (zoning restrictions) and we know what the solution is; remove such restrictions and increase the supply of housing. While this is the easiest problem to understand and solve, it is also usually, one of the most difficult to effect. Rich people like their zoning as it makes them richer and therefore fight tooth and nail to maintain it.

Back to Florida's Urban Crisis Index - two fake issues and one short term issue are the constituents of this new measure revealing a New Urban Crisis. I am skeptical.

It is interesting what is not on the list. Where is crime? Where is affordability (beyond just housing)? Where is mortality and morbidity? Where is longterm sustainability (financial fragility)? These are all real-life issues and hard metrics are available for all of them. I suspect that these actually represent a stronger base for any argument about a new urban crisis but they are missing. Why?

But all that is by-the-by. My following observation is inescapably going to come across as partisan and it is not quite intended to be that.

What struck me in Florida's article was that there was nary a mention of the fact that his Urban Crisis Index is highly correlated with governance. The great majority of the top 20 worst cities have not had competitive elections for fifty years and more. And this is the inescapably partisan-appearing element. Most of these cities have not had a Republican mayor in generations. New York is certainly an exception (and likely an exception that proves the rule). By-and-large, all these cities which are, according to Florida, most in crisis, are routinely and reliably Democrat.

There are a slew of policies associated with Democrats when it comes to cities, and most these cities have experimented or lived many or most these policies. Democrats tend to be supportive of high minimum wages, tight zoning control, extensive regulation, high taxes, hostile to many aspects of police law enforcement, supportive of generous public assistance programs, raced-based and gender-based affirmative action programs, controlled growth, anti-car, anti-school choice, pro-union, pro-government programs, etc.

Nowhere in the article is there either an acknowledgement that the cities in greatest urban crisis are cities with the deepest association with the Democratic Party or, put differently, that cities in the greatest urban crisis are those who have pursued most vigorously the policies most associated with the Democratic Party. That seems an incredible omission because it obscures an interesting question.

What is the direction of causal flow? Are cities in distress and they need these policies to alleviate that distress? OR Are cities in distress because they pursue these types of policies? I am strongly inclined towards the latter.

If you want to increase affordable housing, reduce regulation and zoning and the supply of housing will increase.

If you want to decrease inequality, foster a business environment that encourages job growth, principally by reducing regulations and tax burdens.

If you want to decrease people's clustering - well, there isn't much you can do there without subverting people's freedoms. Increasing school vouchers and transportable living vouchers (instead of public housing) are a couple of ways you can nudge that needle a little bit.

As a minor escape from the cloud of the charge of partisanship, I will say that I think the problem is not quite so much to do with partisan policies as it is to do with the absence of competition. I don't think the problem is primarily an absence of Republicans in city government (a contributor perhaps but not necessarily a primary driver.) All cities tend to end up with a primary party representing the status quo of vested interests and it doesn't really matter the name of the party.

The real issue, I suspect, is the absence of real political competition. If it is a single party, even with a portfolio of tried and failed policies, then the electorate can't really effect change. There have to be two parties competing with one another and with both having some real prospect of success. Without that threat of competition, there is very little accountability or evolution towards effectiveness.

Florida is pushing his new book and this article is just part of the publicity campaign. I think the Index is fatally flawed and designed to push a faux crisis. But there is a real issue out there in terms of the governance of our cities and even this flawed Index could have been the genesis for an interesting discussion and insight. Instead it comes across as the same old ideological mantra.

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