Friday, March 21, 2008

Ed Glaeser on how cities are unfairly taxed

Edward Glaeser argues that city residents are unfairly taxed to care for the poor and sustain the lifestyles of the sub-urbanites.

Cities have attracted a disproportionately larger share of urban residents - the 2000 Census showing that 19.9 percent of city residents were poor against only 7.5 percent of suburban residents. He writes, "Poor people come to cities because urban areas offer economic opportunity, better social services, and the chance to get by without an automobile. Yet the sheer numbers of urban poor make it more costly to provide basic city services, like education and safety, and those costs are borne by the city's more prosperous residents."

Sub-urban residents do not pay the full environmental costs of low-density, car-based, and energy-intensive lifestyles. Prof Glaeser quotes from the National Household Travel Survey to argue that "suburban households in Greater Boston buy 85 percent more gas at the pump than households living within 5 miles of downtown. That amounts to about 6 tons of carbon dioxide emissions each year. Suburban households in Greater Boston also consume about 20 percent more electricity than city dwellers. This is responsible for an extra 2 tons of carbon dioxide emissions per household per year." Besides the standard transportation policies "fail to charge people for the full social costs of driving long distances on crowded highways". The localized school system encourages prosperous parents to flee urban poverty and leave public schools emaciated and deprived of quality.

Glaeser calls for encouraging urban growth by densification of residential clusters close to the downtown, instead of the traditional approach of imposing land use restrictions to drive development away from the dense areas of the city center. Densification also lowers the costs of delivering civic infrastructure and maintaining law and order. Apart from reducing the social and environmental costs, such densification also forges human capital connections that powers the urban innovation engine. As Glaeser says, "you become smart by being around other smart people"!

This analysis needs to be reworked for developing country contexts, with its larger cities and massive populations. It is commonplace in many cities to increasingly find the more affluent moving to the suburbs, where land is cheaper, so that they can buy larger lands and settle. These people typically commute to their workplaces in the city by private transport, thereby imposing huge social and economic costs, which are typically borne by the poor and the middle class. The problems faced by the recently inagurated Delhi Gurgaon expressway is an expression of this cost, as people residing in Gurgaon commute in large numbers to their workplaces in Delhi using their private transport. It not only imposes costs on the private commuters themselves, but also on the middle class and poor who rely on public transport to commute the same route.

The amount of space available in the downtown, especially in the major cities, is often inadequate for meeting even the present commercial and institutional requirements, leave alone prospective demand. The residential requirements, both present and more importantly the future, are too massive to be accomodated in the downtowns. Further, the spiralling land costs in the downtown means that the economic utility associated with using it for residential purposes is much lower than using it for commercial or institutional uses.

Therefore, given the massive numbers and huge requirements of valuable land, it may be more appropriate to develop residential clusters on the suburbs, that get connected to the city center through public tranpsort facilities. For this model to succeed, private transport travel from the suburbs should be adequately disincentivized through toll collections or congestion charges, and public tranpsort facilities improved.

Private transport imposes unacceptably high negative externalities - pollution, traffic congestion, high energy use (whose resultant costs are mainly borne by the poor) etc. There may even be an economic case for arguing that those most likely to use private transport be encouraged to stay closer to the city center, as it would minimize the collective private travel times and costs. This is in keeping with both economic fairness and efficiency, as these people are more likely to have the resources to bear the high land costs in the downtowns and also derive greater marginal utility by being closer to the city center. Further, for the convenience of residing in the city center with all its attendant benefits like lower commute times, the more well off should forego the pleasure of living in a larger land areas.

1 comment:

Gopi said...

sir,

it was interesting to see how much time u spend on ur pc. u seem to be more interested in economics. though i was a student of economics, i spent good part of my time in understanding social sciences as i was always humiliated and denied of my due opportunities at every level for simple reason that i come from the lower starta of the society. i feel great when i look back as every step that i could rise, was because of my fight and victory. coming to the point of urbanisation... well i propose a public transport network for the busy zone in the city to reduce the traffic load. the zone covers labbipet, moghalrajapuram, governorpet, suryaraopet and chuttugunta areas. this is the place where most of the private offices, hospitals exist. a public transport system covering benz circle to old raghavaiah park or museum road to eluru road or kaleswara rao road passng through chuttugunta - visalandhra road and reaching benz circle... would be a good thing to propose with a request to everyone to use them and not their private transport. public trnasport of mini buses exclusively for these people... doctors, lawyers, hospital staff, traders of governorpet... its just an idea...

finally, i really enjoyed reading this and was amased to see how much time u are spending on this.

it is good that u r trying to preserve ur ideas as this would help the future generations.

regards
gopi