Why We Should Let the Cities Die

People Matter More Than Places… Because of Scarcity

Adam Ozimek (on Twitter as @ModelledBehavior) has a blog post out today talking about how we should handle shrinking cities. He seems a little divided here: he supports all the pro-mobility policies that we pretty much know will accelerate depopulation of economically depressed areas (especially rural areas, but also urban ones), but also argues we shouldn’t abandon cities to their fate. His preferred solution to urban decline due to outmigration is more migration, specifically immigration. Overall, Adam wants higher mobility across the board to benefit people, but hopes to save the struggling places too.

I disagree with Adam’s assessment of the relevant costs and benefits, hence my title. However, I don’t actually want the cities to die, and don’t think they will. It’s clickbait, so, bite me. Moreover, I should be clear that I broadly support the same policies Adam does regarding migration. Where I think we disagree is probably the lengths to which Federal and State policymakers should go to support failing municipalities.

Though, to be fair, I don’t know if Adam actually supports supporting municipalities. He’s talking about “cities,” but I think he’s thinking about metro areas which, of course, aren’t actually units of governance. With that said, let me dive into where I think Adam makes useful points.


Yes, We Need More Migration

I’m not going to waste time laying out the studies and empirical evidence showing that higher migration would be basically a Good Thing. The question is why it would be good. There are four reasons higher migration would be good: economic convergence, exchange of ideas, amenity-sorting, and intergenerational income mobility.

Economic Convergence

Economic convergence means that, given a free flow of labor and capital, the incomes of labor across areas should converge, mostly by the smaller (and usually poorer) economy rising to the level of the larger (and usually richer) economy. So given free flow of labor and capital, wages around the country should mostly drift closer together near the upper end of the former wage distribution, over time.

Exchange of Ideas

High rates of migration mean people are shifting between locations and communities, experiencing different places and cultures, being exposed to different ways of doing things. This is a Good Thing, and the result is a higher rate of innovation in migration hubs, with spillovers to outlying areas. This process does, admittedly, lead to permanently higher and rising productivity gaps between innovation/migration hubs and outlying areas, but it’s a kind of regional inequality where everyone is better off. In other words, the innovative effects of high migration partially offset economic convergence, but without making anyone poorer.

Amenity Sorting

People like different things, and those preferences are formed in chaotic ways. In other words, regardless of where people are born, they may prefer very different lifestyles. Furthermore, people don’t know their preferences perfectly, so they have to acquire information about themselves. One way to do this is to live in different places to figure out what you like. High migration rates mean people are experiencing different lifestyles, enabling better sorting into preferred lifestyles. This means everyone is better off even if their incomes stay the same or decline. This amenity sorting is a huge component of why folks lamenting productivity losses due to southward migration are wrong. We may lose GDP but gain utility.

Income Mobility

There is pretty robust evidence that migration tends to be towards economic or social opportunity, and that such migrations do in fact have powerful impacts on future life outcomes for children especially. Low physical mobility means less of this key driver of economic mobility. Indeed, in the long run, migration’s powerful relationship to entrance into the middle class is probably its most important economic effect.


Yes, Legacy Costs Are Real

Adam correctly points out that areas with shrinking populations face legacy costs that can be difficult to bear. However, there are different types of legacy costs. I have a less formal understanding of such legacy costs, but a few come to mind: entitlements, public institutions, physical infrastructure, and community quality.

Entitlements

By entitlements, I mean things like municipal spending on health and welfare, but, most importantly, pension funds. Pension funds make up an enormous burden on municipal budgets even in good times, and when cities decline and economies struggle, they can lead to bankruptcies.

Public Institutions

The most prominent public institution is, of course, the public school system. Out-migration sometimes includes a selection bias where the most motivated and involved families leave, resulting in schools that are worse off than if they’d stayed. Likewise, the departure of active, civic-minded citizens can lead to municipal government capture by more corrupt, or simply less competent, political machines. If out-migration has a selection bias, then the quality of public institutions is likely to decline more than would otherwise be the case.

Physical Infrastructure

Nobody does this better than Charles Marohn, but as Adam mentions, many cities are basically infrastructure Ponzi schemes. They have tons of expensive physical infrastructure that was only ever affordable if the city saw permanent, rapid growth. Likewise, abandoned subdivisions have costs in terms of crime, utilities, public services, etc. Physical infrastructure costs can seriously burden city resources, are hard to get out of, and feed into the last and most destructive legacy cost.

Community Quality

Although nebulous, the fear of those who talk about the dangers of out-migration is that such “abandonment” will lead to disreputable elements taking over the city, rising crime, declining real estate values for those who stay behind, worsening quality of social life. These community externalities can be hard to measure, but are often regarded as the biggest social cost of out-migration.


Don’t Trap People

People Are Always the First Priority

Adam rightly opposes policies aimed at “anchoring” people to struggling cities, and supports policies that make abandonment easier. So here we agree. I just want to emphasize that policies aimed at inducing people to damage their own, and the nation’s, long-term interests in order to make short-term gains are destructive and immoral. Woah. Big guns. But seriously, if you’re offering people on the economic brink a short-term incentive to refrain from moving to a place where their kids have a much better chance of avoiding crime or going to college, then you’re a bad person. And likewise, policies that trap struggling people in the physical environments that deprive them of economic opportunities are hostile to the American dream.

Fightin’ words.

(Adam, of course, does not advocate anything of the sort — I just felt it needed to be mentioned that “Well what if we offered a tax break to stay in struggling cities?” is, to my mind, not just a not good policy, it’s a maleficent policy)


Send Your Poor, Your Huddled Masses

Immigration Will Solve Every Problem… Or Not

There’s an idea that has circulated for a long time that states or cities should be able to bring in more immigrants in order to support struggling cities. And on face value, I like this idea. It’s neat. States and cities would have incentives to support integration, immigrants would be eagerly welcomed, and all we’d have to do is deprive immigrants of basic human rights.

Wait. Hold up.

Yeah, I mean sure, come to the land of opportunity, and then understand we’ll need to see your papers when you leave city limits. Because your visa is for Detroit, not for the United States. For this system to work, it would require either (1) major financial incentives to induce immigrants to stay in crappy places (which is, as I said above, basically an evil thing to do), or (2) aggressive internal movement controls. And, by the way, item 2 is unconstitutional, expensive, and would reduce other forms of mobility.

Also, I’m not sure this plan would work. Dumping immigrants into high-crime, low-opportunity neighborhoods and cities is exactly the wrong way to integrate them. You want to drive radicalism among young male Muslim migrants? Drop’em in Baltimore and wait for the local cops to decide how to deal with all these new Arabs.

During the mass migrations of the 19th century, immigrants were poor, but they were arriving in some of the fastest-growing urban economies in the world, in all of history. Those poor huddled masses were rapidly deployed as Union soldiers, factory workers, longshoremen, tradesmen, or moved out for free land in the west. Plopping today’s immigrants down into the most depressed economies in the nation is not a good idea and, again, would require either subsidies or a police state. Oh, that’ll be fun, tell Baltimore’s cops they should be asking for papers from immigrants to make sure the Baltimore Visa-holders don’t skip town and move to Bethesda. I’m sure nothing will go wrong there.

I’m ridiculing this idea not because I dislike it (I actually love the idea of federalizing the process some), but because it’s a poisonous fruit. It looks like a wonderful way to resolve so many debates in one fell swoop, like The Thing that can save the cities. But it’s not. Local visas will fail to save their cities while creating massive new headaches in the process.

Now that said, would I be willing to let some mid-sized city somewhere do a limited pilot program to see how it goes and figure out if there’s a way to make this work? Sure. But it should be kept small to begin with, because the risks of such a program could rapidly outweigh the rewards.


How to Save the Cities

You Don’t Actually Think I Know, Do You?

So local visas won’t work. And restricting domestic migration isn’t an option either. Instead, we’re left with basically two policy arenas: (1) management of legacy costs and (2) management of urban amenities.

Let me start with the cost side, since that’s the meat of Adam’s argument, and the place where I vigorously disagree.

Entitlements

The solution to burdensome entitlements isn’t urban growth. The reality is that numerous public institutions at all levels of government have made promises for decades that there was never a serious chance of fulfilling. There are only two viable options: cut benefits now, or declare bankruptcy and then cut benefits. Or just let pensions eat up your whole budget, sending other government functions into complete negligence. See: Chicago for details. I know this is unpleasant, but the truth is even a burst of immigration wouldn’t make the most burdened cities solvent. The problem here isn’t that population declined, it’s that the promises made assumed population would grow forever alongside rising incomes. These promises cannot be fulfilled, and most be broken. I don’t say “renegotiated” because I think we should be honest about what’s happening: we are violating the trust and faith of retirees and entitlement recipients, depriving them of resources they paid into and planned on. Even if it’s just a small cut, it’s a broken promise. But frankly, it’s better to break a bad promise of yesterday than to abandon the promise of economic opportunity for tomorrow. If every city in the nation had realistic plans for their retirees instead of pensions based on false promises and irrational expectations, there would be dramatically less threat of urban bankruptcy today. Again, see Chicago for more details.

Public Institutions

The primary threat to public schools is not funding shortfalls. I know that’s heresy, but seriously, look at the last 30 years of school funding: it doesn’t fall. Likewise, while I don’t know all the national statistics, I know at least in the limited cases I’ve reviewed in depth, urban schools are much better funded than rural schools (suburban schools are a mixed bag). The threat to public schools is that families who invest in school communities will opt out. The solution is to either restrict those opt-out options (a terrible policy that will make out migration even worse even if there are short-term public school quality gains), or else figure out why people are opting out and fixing those problems. The reasons why, of course, are that urban areas are unaffordable for families, still have much higher crime, and elected to adopt a social policy position at odds with more conservative families several decades ago. Some of these, like that policy choice, are in fact courageous and laudable decisions. But the truth is that until urban areas have affordable family housing, their public schools will continue to be a very mixed bag. And by the way, bringing in immigrants with low English-proficiency is probably not going to make public schools better.

Physical Infrastructure

Cities have too much infrastructure. Heresy, I know. But honestly I cannot do this point justice as well as Charles Marohn does so, really, just go read Strong Towns.

Community Quality

This gets into a tricky place. How do we fix “community quality”? Has it actually declined? This is allegedly one of the big losses from out migration — but, I mean, you could totally have kept whites in urban areas in the 1950s if you’d just preserved segregated neighborhoods, right? But why on earth would you want to do that? Restoring the quality of social and civic life in formerly depressed urban cores is extremely challenging, and honestly I seriously doubt that governments can do it in any direct way. And even if they can, I’m not sure they should. I mean yeah, police the streets and provide order and security and general civic functions, but the point of a vibrant social and community sphere is that it provides a structure of stable and economically beneficial norms and practices that are external to government. We don’t want the government making decisions about church attendance or bowling clubs in most cases. In other words, this cost may be real, but it cannot be directly managed. Also, as above, I’m not at all clear on how large immigrant populations are supposed to revitalize civic and social life. They can’t vote or participate in many forms of public activism, and while immigrant communities can be tight-knit, we really want a restored sociality for all residents. That’s a challenge for new immigrants in an unfamiliar and economically depressed place.


What If We Just Make Everything Shinier?

If You Can’t Contain Costs, Improve Amenities!

So containing costs is incredibly hard. I also think it’s the only long-term solution for many cities. But in the medium term, and for some cities in the long term, there’s a second option. You can maintain your excessive costs if you’l got really great amenities. By that I mean low crime, magnet schools, trendy neighborhoods, tony restaurants, lots of “local distinctives,” all the things that fall under the urbanist headline of “placemaking.” Placemaking and amenities-focused strategies can be a viable strategy for medium-term growth or marginal improvement. For some cities with particularly economically important local distinctives, like Silicon Valley, this can even turn into a superpowered agglomeration economy that revitalizes the entire metro area. That’s awesome, but it’s also not typical.

When cities make serious amenity improvements alongside a credible commitment to maintain those improvements, it can drive some real recovery. And I would argue that nationwide, urban amenities have improved in one huge way since 30 years ago: crime is waaaaaay down. That’s a big deal, and I would suggest that a large share of the growth in urban areas today is pretty much because people are realizing that urban centers aren’t as dangerous as in the 1980s. With that realization comes renewed investments in other amenities, and with good amenities come follow-on migrants, and then comes even some economic growth. So when cities improve amenities, it can drive real economic and demographic gains.

That said, amenity improvements often have price tags. If those amenity improvements don’t yield economic growth whose present value equals the present value of all future costs of maintaining that amenity improvement, then even strong amenity-driven growth can collapse into a death spiral. And furthermore, if cities are unable to manage ballooning legacy costs alongside persistent outmigration, then their ability to improve amenities will be constrained.

In other words, even cities trying to “compete on quality” by offering great amenities will eventually have to “compete on cost” by containing cost growth.


The Rise and Fall of Cities

Economics, Politics, and the Fate of Chan Chan

The largest city in pre-Columbian South American was probably the city of Chan Chan, with 30,000 people or so. Today, it’s a very well-preserved ruin. In 1876, the neighboring colonial-era of Trujillo had sunk to 8,000 residents. It did not reach the 30,000 mark until the 1930s. Today, it has about 800,000 people. Chan Chan collapsed for many reasons: Inca aggression against the Kingdom of Chimu, Old World epidemics in the 1500s, etc. Chan Chan was wealthy and prosperous as the seat of Chimu royal authority, and had a vibrant commercial, artisanal, and manufacturing economy. But after the Inca conquest, that all declined as the government sector collapsed, the religious sector was largely relocated, and the manufacturing goods lost captive markets. The city would not recover until the 19th century when Spanish colonists found the area was viable for plantation agriculture, especially sugarcane.

You can read the story of Chan Chan as one of disease, conquest, and empire. And that’s correct. Or you can see it as a story of sectoral shifts in the economy. Until Inca conquest, Chan Chan’s economic network had a demand for government services provided from there, for its craft goods, for its religious services, and trade barriers existed to protect Chan Chan’s products. After conquest, Inca hegemony destroyed demand for Chan Chan’s elite service sector, while lower trade barriers reduced the commercial sector’s viability. Population only recovered after a new industry, plantation agriculture, showed up to give the city a reason for existing.

Wander Chan Chan today and you’ll find no shortage of physical infrastructure. And I have no doubt their community life was quite disrupted by having their idols hauled off to Cusco. I have no idea what happened to the quality of public institutions; the Inca were pretty good administrators, so it may have increased. For entitlements, I have no earthly idea.

But the point is that this once great city rose and fell because the economic viability of the physical place changed radically as the economy shifted from a royal center, to an imperial province, to a plantation colony, to the economy of today. This is true for all cities. And the thing is, that’s okay. It’s even good. Preserving Chan Chan’s religious and political sectors would have been silly for the Inca, and wasteful.

Modern cities, while vastly larger, are not so different from Chan Chan. There are sectoral shifts and changes in relative prices and political regimes, and these do and ought to cause wide-ranging population shifts. Only cities that keep up with the shifting menu of necessary amenities have earned the right to maintain their position as places of human habitation. Rather than seek to prop up cities that don’t have an economic reason to justify their scale, we should seek to encourage them to scale down to match their actual economic base, and encourage their residents to seek positive displacements. These are productive avenues for public policy: bulldozers, relocation vouchers, maybe bankruptcy support or temporary assistance to people who take big pension haircuts. Not ongoing and increasing federal support for unjustifiable urbanization.


You Can’t Do All Of The Above

The Reality of Scarce Resources

Some may read this and say, okay, let’s do it all! Let’s try the immigration thing, let’s cut costs, let’s have federal subsidies to support cities, let’s invest in amenities, let’s help support cities making tough choices! Let’s do it all!

Okay, yeah, sure. Come back with the cash to pay for it all.

The undeniable appeal of the local visa plan is that it’s cheap on its face, although, as I said, I think a functional version would actual require major outlays. But a serious nationwide project to save cities would be costly. For that reason, I’m skeptical of the idea that we’re going to be able to save the cities, and because I think the effort will fail, I think it’s a bad investment. Because I think it’s a bad investment, I think the best course of action is looking for ways to induce cities to make the hard choices to cut costs. We should abolish subsidies for capital expenditures on public transportation, and replace them with same-cost operations subsidies, or no subsidies at all, redirecting those funds to projects aimed at inducing voluntary changes to retirement plans. I’m a little out of my depth here, but the idea is that I am arguing that the core of any nationwide effort to save struggling cities must focus on helping them cut their costs and downsize to meet economic reality.

See my previous two posts, explaining how urbanization relates to regional trends in migration, and arguing that there is no real urban resurgence.

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I’m a graduate of the George Washington University’s Elliott School with an MA in International Trade and Investment Policy, and an economist at USDA’s Foreign Agricultural Service. I like to learn about migration, the cotton industry, airplanes, trade policy, space, Africa, and faith. I’m married to a kickass Kentucky woman named Ruth.

My posts are not endorsed by and do not in any way represent the opinions of the United States government or any branch, department, agency, or division of it. My writing represents exclusively my own opinions. I did not receive any financial support or remuneration from any party for this research. More’s the pity.

Cover photo source.