Annals of derp: Urban planning

Alexander Avenue in Mott Haven, South Bronx. Fort Apache was a really long time ago, before the regulation started to set in. Photo by Michael Kamber/New York Times.

Stupidest thing I heard this morning, on WNYC radio:

The quaint little homes in the charming nooks and crannies of our nation's major cities are costing us billions, according to one economic report.

The economists who did the study found that the U.S. economy would be 9.5 percent bigger, if only three of the country's most productive cities — New York City, San Francisco and San Jose — could squeeze in more people. All they'd need to do is allow developers to knock down those beautiful Brooklyn brownstones and historic Victorians in San Francisco and build taller apartments and condos like other cities allow.

The experts discussing the study on the air allowed as how nothing was likely to ameliorate this unhappy situation, seeing as how people in East New York and Mott Haven treasure the exclusivity and charm of their quaint, walkable neighborhoods so much, but it didn't occur to them to question the researchers' assumption that the aim of producing growth would justify destroying Park Slope. And it didn't occur to them to wonder whether if there might be something wrong with the methodology of a paper that advocates the urban planning strategy that gave the world Lagos and Jakarta.
Which there is, as far as I can tell. If you look at the paper (Chang-tai Hsieh and Enrico Moretti, "Why Do Cities Matter? Local Growth and Aggregate Growth"—if you don't want the pay-per-view version the radio station links to,  there's a free one here), you can see it building the conclusion into its definitions:

We base our analysis on a Rosen-Roback model where workers can freely move across cities and geographical differences in wages reflect differences in local labor demand and supply. In turn, local labor demand reflects forces that affect the TFP [total factor productivity] of firms in a city---infrastructure, industry mix, agglomeration economies, human capital spillovers, access to non-tradable inputs and local entrepreneurship---while local labor supply reflects amenities and housing supply. 

We analyze how these local forces aggregate in the Rosen-Roback model to affect national output and welfare. We show that aggregate output increases in local TFP in each city but decreases in the dispersion of wages across cities. The reason is that wage dispersion across cities reflects variation in the marginal product of labor: The wider the dispersion of marginal products across cities, the lower aggregate output, everything else constant. Intuitively, if labor is more productive in some areas than in others, then aggregate output may be increased by reallocating some workers from low productivity areas to high productivity ones. [my bold]

And "intuitively" turns out to be just what their numbers capture. In a low-wage Kotkin-sprawl like Houston, high growth doesn't contribute to "wage dispersion", so according to the model it does contribute to aggregate output as the model defines contribution (in terms of a single data point), while in a high-wage Emerald City like San Francisco the reverse holds. "If our model is an accurate representation of reality, then reality as represented in terms of the model probably can be predicted to conform to it." And sure enough it does.

So it's really just a kind of mathematically informed trolling. The authors acknowledge that Seattle and Minneapolis aren't going to let loose and allow uncontrolled development anyway; what they want is for economists to look at Seattle and Minneapolis and think about how selfish they are, enjoying all that growth that the heartland isn't getting, just because they want to live in a sustainable environment.

If you're interested in looking at some reality-based as opposed to abstracted model-theoretical research on the relative contributions of urban and non-urban regions to aggregate growth in a national economy and on an international scale, I found some, in an OECD report from 2012 (before Piketty and hence maybe a little optimistic over what happens with inequality over the long term). Spoiler alert: the solution to problems of low-growth regions in a diverse economy isn't to stop regulating development in the big cities, so as to depopulate the Hudson Valley and create a New York with 14 million people. It's to develop the areas that are underdeveloped, with a lot of Catching-Up Potential (turns out that's a technical term), by targeted investment. Sorry, that's how it is with us fucking liberals, we're always right.