Category Archives: Uncategorized

The difficulty of unintended consequences – airlines, HSR, and deregulation

Pittsburgh International Airport - CC image from Fred

Philip Longman and Lina Khan make the case for re-regulating America’s airlines, claiming that deregulation is killing air travel and taking de-hubbed cities like St. Louis with it (hat tip to Matt Yglesias).  The authors do indeed present compelling evidence that airline deregulation has indeed shifted the economic geography of many cities in the US – but as Matt Yglesias notes (channeling the aerotropolis thesis), in many cases this is merely an example of the air travel network’s ability to emphasize agglomeration economies:

They observe that… once the imposition of market competition caused some medium-sized midwestern cities to lose flights, the per flight cost of the remaining ones went up. That tends to produce a death spiral. Eventually the market reaches a new equilibrium with fewer, but more expensive flights. Except that equilibrium tends to drive businesses out of town. And once Chiquita leaves town, Cincinnati will have even fewer aviation opportunities which will further impair the business climate for the remaining large companies in the city.

This is a great concrete and usefully non-mystical illustration of agglomeration externalities.

Yglesias argues that fighting these agglomeration economies is counter-productive, but that’s not the only flaw in Longman and Khan’s thinking. Using the example of Pittsburgh, where the America West-US Air merger meant PIT losing hub status, they cite examples of the problems this represents for business travel:

K&L Gates, one of the country’s largest law firms, used to hold its firm-wide management meeting near its Pittsburgh headquarters, but after flying in and out of the city became too much trouble, the firm began hosting its meetings outside of New York City and Washington, D.C. The University of Pittsburgh Medical Center, the biggest employer in the region, reports that its researchers and physicians are increasingly choosing to drive to professional conferences whenever they can. Flying between Pittsburgh and New York or Washington can now easily take a whole day, since most flights have to route through Philadelphia or Charlotte. A recent check on Travelocity showed just two direct flights from Pittsburgh to D.C., each leaving shortly before six in the morning and costing (one week in advance) $498 each way, or approximately $2.62 per mile.

The problem is that Pittsburgh to New York and Pittsburgh to DC aren’t all that long as the crow flies.  Longman and Khan explain why that’s problematic, thanks to those pesky laws of physics:

One reason this business model doesn’t work is that it’s at odds with the basic physics of flying. It requires a tremendous amount of energy just to get a plane in the air. If the plane lands just a short time later, it’s hard to earn the fares necessary to cover the cost. This means the per-mile cost to the airlines of short-haul service is always going to be much higher than that of long-haul service, regardless of how the industry is organized.

Indeed, part of the economic logic of the airline hub was to ferry passengers to the hub via loss leader (or, hopefully, less profitable) short-haul routes so that they can then use the more profitable long-haul services – transcontinental and international flights, and the like.  The problem is that Longman and Khan can’t see beyond the end of the runway.  We have a transportation technology that has a different economic calculus, one that works well for those shorter trips up to about 500 miles – high speed rail.

This isn’t to counteract Matt’s first point – just because HSR can make travel time competitive with air travel over such distances does not mean building it will be cost-effective, but the broader point is about the need to think beyond the modal silos.  Current rail service from Pittsburgh to DC and New York isn’t time-competitive with flying, even with those connecting flights.  But HSR could be. Indeed, given the current economics of the aviation industry, HSR ought to have a larger role in key corridors.

Indeed, Longman and Khan do consider rail in their article, but they pick out the history of railroad regulation instead:

 By the 1880s, the fortunes of such major cities as Philadelphia, Baltimore, St. Louis, and Cincinnati rose and fell according to how various railroad financiers or “robber barons” combined and conspired to fix rates. Just as Americans scream today about the high cost of flying to a city like Cincinnati, where service is dominated by a single carrier, Americans of yesteryear faced impossible price discrimination when traveling or shipping to places dominated by a single railroad “trust” or “pool.”

This, more than any other factor, is what led previous generations of Americans to let go of the idea that government should have no role in regulating railroads and other emerging networked industries that were essential to the working of the economy as whole.

The problem with applying this logic to the current airline situation is that the railroads of the turn of the century didn’t just have a monopoly over a given town as the sole operator of service along the line, but they had a monopoly on the very technology that could offer such increases in mobility.

That technological mobility is no longer the case.  The excellent Mark Reutter article The Lost Promise of the American Railroad (now behind a paywall) documents the many reasons for the decline of American rail, including new competing technologies (both air travel and cars taking away long distance travelers as well as commuters), outdated regulations (such as WWII era taxes meant to reduce unnecessary travel during the war – and were quite successful at doing so – that remained in place until the mid 1960s), direct subsidization of competitors by the government (see taxpayer funded highways and airports, in the face of largely privately financed and taxed rail assets), and differing regulatory regimes.

The regulations present a compelling story.  The original regulations, as noted by Longman and Khan, were devised in an era before heavier-than-air human flight had even occurred – yet alone before the rise of commercial aviation.  Yet, the regulations devised by the Interstate Commerce Commission (formed in 1887) were the basis for a portion of the blame for the decline of American rail less than a century later.  Longman and Khan defend the need to regulate, despite these shortcomings:

To be sure, any regulatory regime can degenerate and wind up stifling competition, and the CAB of the late 1970s did become too procedure bound, ruled, as it came to be, by contending private lawyers rather than technocrats. It would have helped, too, if the country had not largely abandoned antitrust action after the Reagan administration. But even strong antitrust enforcement wouldn’t have helped that much, because airlines— just like railroads, waterworks, electrical utilities, and most other networked systems—require concentration both to achieve economies of scale and to enable the cross-subsidization between low- and high-cost service necessary to preserve their value as networks. And when it comes to such natural monopolies that are essential to the public, there is no equitable or efficient alternative to having the government regulate or coordinate entry, prices, and service levels—no matter how messy the process may be.

While this can be a compelling case for the need for regulation in the abstract, it doesn’t present a compelling case for the content of those regulations.  How can these regulations possibly change to reflect changing economic realities, such as the rise of new technology?

Chris Bradford put forth an interesting idea regarding land use regulation: give all zoning codes an expiration date (a similar idea to the zoning budget).  If the anti-trust and equity concerns are so great as to require this kind of regulation, requiring some sort of periodic review is an interesting idea for simulating some of the innovation and competition that a freer market might provide.

The extreme positions aren’t that illuminating.  Likewise, merely promoting the idea of regulation in the abstract (without speaking to the content and effects of those regulations) isn’t helpful, either.  The specifics matter. Regulation for the sake of regulation is pointless, and we must have mechanisms for continual re-evaluation of the regulations we do have to ensure they actually work towards our stated policy goals.  All too often, this re-evaluation falls short.

This isn’t meant to be a broadside against regulation – far from it.  There’s clearly a role for it.  Instead, I ask for periodic review to ensure the regulations are helping achieve our objectives rather than hindering them. Likewise, the inevitable reality is that whatever regulations we impose now will have unforseen, unintended consequences.

The rent is too damn high

I just finished a nice, quick read of Matt Yglesias’ new e-book The Rent is too Damn High.  Following in the same vein as Ryan Avent’s The Gated City, Yglesias documents the perverse economic impacts of development regulations and restrictions on urban areas. Though not as well sourced and without the in-depth discussion of Avent’s e-book, Yglesias nonetheless offers an accessible and understandable narrative to understanding the same array of urban economic issues.

Yglesias’ self summary is available at his blog:

 It’s about the high cost of housing in America’s coastal metropolises and downtowns everywhere, but more broadly it’s about the crucial role that dense urban development and barriers to its creation matter in a service economy. If you’ve ever read me on housing and wondered “why does this guy think this is so important” or read me on manufacturing and thought “yeah, but what’s his answer” then you will find the answers herein. Andrew Chesley has been reading his copy and liked this line:

Lots of people buy RVs, but nobody “invests” in them. And what’s a house but a giant RV with no wheels?

As I said before, one of my key goals with this book was to write something that would not only be cheap to buy (just $3.99!) but also short. That means I didn’t pad it out with a lot of to-be-sures and efforts to guess what objections people will have. Better, I thought, to release a detailed-but-not-tedious version of my ideas into the world and then see what people see. So if anyone reads it and has questions, objections, thoughts, ideas, etc. please do email me about them or send links to your own blog where you’ve written about it. I’d love to continue the discussion and follow whatever points people think are interesting or flat-out wrong or in need of elaboration.

In the spirit of that discussion, I have a few thoughts.

First, a video interlude for the book’s namesake.

Perhaps the most interesting part to me is Matt’s claim in the book that the final chapter of any public policy book (the chapter that actually gets at potential solutions) is often the most disappointing.  I won’t hold that against this e-book, since the educational component about the issue (as opposed to, say, healthcare or climate change) often isn’t even regarded as a problem.

That said, who is the audience for this kind of material? Convincing the general public, one development project and one upzoning at a time isn’t a sustainable solution. Likewise, too much of the NIMBY opposition discourse is of the shotgun, everything including the kitchen sink approach: throw out all possible objections and see what works.  That kind of approach isn’t likely to buy into a reasoned argument.

Tyler Cowen assumes most of America won’t pay attention to Matt’s point – but maybe they don’t have to. Perhaps with some procedural modifications (see thoughts here and here) you could make progress, and in that case the audience in need of convincing would be elected officials – either by convincing current officials or by electing new ones who understand the issue.  Good news: as Matt points out, Mitt Romney was all over this back in 2006.

Josh Barro at Forbes looks at Chicago and wonders how that city manages to keep prices in line with construction costs:

Yet Chicago has a planning process that looks, at first, like it ought to be a nightmare. The city is divided into 50 wards, each of which elects an Alderman to the City Council. In practice, the Alderman has enormous control over what developments get approved within his ward. Yet, despite these fiefdoms, projects tend to get approved.

This is partly because Chicago also liberally uses Tax Increment Financing districts, which now cover huge swathes of the city. When a TIF district is created, the amount of property tax revenue that the district sends to the city is frozen for 23 years. Increases in property tax receipts are instead directed into a special fund that can only be used for projects within the TIF district boundaries—and new developments tend to mean significant increases in property tax collections. When you create a TIF, you create an incentive for residents and their Aldermen to approve new development, as that means more money for local goodies.

I’d expect nothing less from the City that Works. However, it’s not as if Chicago’s system (or that of Houston) produces quality results all the time. Chicago still has plenty of those subtle barriers to development that often produce unintended consequences, even if the overall price levels are reasonable. Also, Chicago isn’t seeing the same kind of intense demand as other coastal cities are, perhaps confounding the city’s apparent success in keeping costs reasonable.

David Schleicher, in an interview with Mark Bergen at Forbes (Part 1, Part 2) discusses some potential legislative solutions.

It’s great to see these issues front and center in the discourse, even if only in this small corner of the internet. I’d highly recommend Matt’s e-book for a quick, concise summary of the basic issues of over-regulation and the benefits of density and cities with a little more freedom to operate.

[EDIT: 3/9, 7:52 am – Yglesias responds here]

More thoughts on density, procedure, and neighborhood opposition

Downtown Seattle. Photo by author.

On land use procedure: 

In the same line as my previous post about procedural hurdles to adding density, a similar discussion is happening in Seattle. Within the larger realm of procedural hurdles, this focus picks up on the idea of a ‘density’ party. While party organization is a part of the larger systemic issue, it does not address the true procedural issues ow how decisions on density are made.

On the impacts of density:

Matthew Kahn visits dense New York, sees some trash on the sidewalk.  David Owen often talks and writes about urban places being counter-intuitively green, and this is a perfect example.  New Yorkers end up producing less trash per capita than average Americans, but you wouldn’t get that impression from walking the streets.

Within this counter-intuitive reality is the seed of NIMBY opposition. The things that opponents of dense, infill development often come back to tangential impacts such as parking, traffic, trash, noise, etc.  The logical response is to address each of those impacts, rather than put a stop to (or severely limit) development.

One of the items in these battles that is front and center is financial interest – yet it’s the developers that are characterized as greedy for acting in their interest, while neighboring homeowners acting in their own financial interests are pure. Seattle again provides an example of this discussion.

On the challenges of infill: 

Payton Chung highlights several promising development projects in DC. One, the group buyout offer of an old condo along 14th St shows the challenges in assembling properties in a fractured ownership environment.  Payton notes:

The buildings’ condo ownership structure makes redevelopment (in the absence of eminent domain) incredibly difficult. As Lydia DePillis writes, “each of the two separate condo associations would have to vote unanimously to dissolve themselves. Obviously, this would have been much easier with a single owner (whether a rental building or even a co-op, where only a majority of shares can dissolve the association), but condos’ recent proliferation as a way of making homeownership more attainable has the unintended consequence of hyper-fragmenting land ownership.

This reminds me of something impressed upon me in grad school: various decisions of urban form are incredibly sticky.  Once roads are laid out, they are very hard to change.  Residential land uses in particular are remarkably resilient, for essentially this same reason.

On implications for transit: 

Alon Levy draws on Jane Jacobs’ distinction between micro and macro destinations. A macro destination is a large district or place (e.g. downtown), while a micro destination is a specific shop, store, or address.  The implication is that transit-oriented places are spiky places:

It’s easy to just pronounce transit more suited to dense city centers than driving, but the situation is more complicated. Transit, too, thrives on good connections to microdestinations. It can’t serve employment that’s dense but evenly dispersed in a large area – people would need too many transfers, and the result would be service that’s on paper rapid and in reality too slow. Instead, it works best when all destinations are clustered together, in an area not many subway stations in radius.

While many of the contested transit-oriented developments aren’t on the terminal end (i.e. the work trip) of a such a destination, but rather the origin – the larger impact is the same. Transit networks have the centripetal force, while auto-oriented ones have a centrifugal force. Transit works best with density, density works best with transit – enabling the mitigation of those externalities that neighborhood opponents will harp on.

Institutional hurdles to dense infill development

dc cranescape - CC image from yawper

A common theme is emerging among those thinking and writing about cities, from Ryan Avent to Ed Glaeser to Paul Krugman – our land use controls have stunted growth in our developed and productive areas – our cities. So, a simple fix would be to just allow more development, right? Glaeser makes the case that one American city, Chicago, has done a pretty good job of that, and as a result housing prices there are low relative to other large cities.

But for anyone who’s watched the intense battles over seemingly innocuous projects in our cities, it’s obvious that simply allowing more development isn’t that simple. No matter the reasonable arguments in favor of such development, opposition is often intense and emotional, and the institutional decision making processes favor delay and often unfavorable decisions in terms of increasing urban densities.

A few weeks ago, Austin Contrarian posted about a new draft paper from David Schleicher at George Mason.  Over the past few weeks I’ve been reading and sharing some reactions to the paper in my del.icio.us sidebar feed (a workaround for my use of the sharing features of the new Google Reader).  I’d like to compile some of those thoughts (and somewhat related posts) here.  First, the abstract of Schleicher’s draft paper:

Generations of scholarship on the political economy of zoning have tried to explain a world in which tony suburbs run by effective homeowner lobbies use zoning to keep out development, but big cities allow relatively untrammeled growth because of the political influence of developers. Further, this literature has assumed that, while zoning restrictions can cause “micro-misallocations” inside a metropolitan region, they cannot increase housing prices throughout a region because some of the many local governments in a region will allow development. But these theories have been overtaken by events. Over the past few decades, land use restrictions have driven up housing prices in the nation’s richest and most productive regions, resulting in massive changes in where in America people live and reducing the growth rate of the economy. Further, as demand to live in them has increased, many of the nation’s biggest cities have become responsible for substantial limits on development. Although developers are, in fact, among the most important players in city politics, we have not seen enough growth in the housing supply in many cities to keep prices from skyrocketing.

This paper seeks explain these changes with a story about big city land use that places the legal regime governing land use decisions at its center. Using the tools of positive political theory, I argue that, in the absence of strong local political parties, land use law sets the voting order in local legislatures, determining policy from potentially cycling preferences. Specifically, these laws create a peculiar procedure, a form of seriatim decision-making in which the intense preferences of local residents opposed to re-zonings are privileged against more weakly-held citywide preferences for an increased housing supply. Without a party leadership to organize deals and whip votes, legislatures cannot easily make deals for generally-beneficial legislation stick. Legislators, who may have preferences for building everywhere to not building anywhere, but stronger preferences for stopping construction in their districts, “defect” as a matter of course and building is restricted everywhere. Further, the seriatim nature of local land use procedure results in a large number of “downzonings,” or reductions in the ability of landowners to build “as of right”, as big developers do not have an incentive to fight these changes. The cost of moving amendments through the land use process means that small developers cannot overcome the burdens imposed by downzonings, thus limiting incremental growth in the housing stock.

Finally, the paper argues that, as land use procedure is the problem, procedural reform may provide a solution. Land use and international trade have similarly situated interest groups. Trade policy was radically changed, from a highly protectionist regime to a largely free trade one, by the introduction of procedural reforms like the Reciprocal Trade Agreements Act, adjustment assistance, and “safeguards” measures. The paper proposes changes to land use procedures that mimic these reforms. These changes would structure voting order and deal-making in local legislatures in a way that would create support for increases in the urban housing supply.

Bold is mine.

In other words, the procedural causes of slow zoning approvals are systemic.  It’s a similar argument to that in favor of the “zoning budget,” some procedural change to give the broad yet shallow interests in favor of development an equal say to the narrow and intense sentiments often in opposition.

Matt Yglesias takes Schleicher’s lead and looks at this in the political context of urban governance:

In other words, if U.S. cities had regularized party systems each city would probably have something like a “growth and development party” that pushed systematically for greater density. Its members and elected officials would, of course, have idiosyncratic interests and concerns that would sometimes cut across the main ideology. But the party leaders would be able to exercise discipline, the party activists and donors would push for consistency and ideological rigor, and it’d be off to the races. Instead, most big cities feature what really amounts to no-party government in which each elected official stands on his or her own and overwhelmingly caters to idiosyncratic local concerns rather than any kind of over-arching agenda. But different institutional processes could change this, and create a dynamic where growth, development, and density are more viable.

Richard Layman often speaks about the “growth machine” thesis of cities, but I don’t know that it accounts for the more procedural hurdles ‘regular’ infill development encounters, as opposed to big ticket projects.

At the Atlantic Cities, Emily Badger asks: should building taller should be easier?

But how do you grow denser if you can’t grow up? At a certain point – whether it’s in downtown Austin or near a suburban Boston transit station – communities will exhaust the real estate that exists below building height limits imposed years ago for safety, continuity or aesthetics. And then what? Will people let go of these rules?

Given DC’s height limit, Badger focuses on some examples of DC’s stunted growth and the practical implications of such a policy.

Ryan Avent chimes in at The Economist:

Part of the problem, I think, is that people view the built environment as primarily aesthetic in nature. Most of us live in one building and work in another, and almost every other structure in the city is essentially decoration for our lives; I’ve been in a lot of Washington buildings, but my primary interaction with the vast majority of Washington structures is a street-level view of their exterior. The nature of this interaction is such that we underappreciate the built environment as an input to production. It is clear, for instance, that people and machines are critical to the functioning of the economy. There would be huge concern if the government of a city declared that firms located within its boundaries could employ at most 30 workers using 15 computers. But the built environment is just as important a part of the production process; firms pay eye-popping rents for Midtown offices and Silicon Valley real estate because they anticipate getting a good return on their investment. In the same way that a firm which pays out millions in salary or to use a piece of capital equipment also anticipates getting a good return on that investment.

Indeed, the costs of limiting density (or of delay via uncertain procedural approvals) all impose costs that are often hidden, but nevertheless real.  And, sometimes counter-intuitively, the feared externalities of dense development such as traffic never materialize:

“What I’ve found is that what people envision has nothing to do with the reality,” [Roger] Lewis says. “What they envision is ugly buildings, more traffic.”

This sounds counter-intuitive, but taller buildings that are part of a walkable, transit-oriented community can actually help ease congestion. And there’s no reason for these places to be ugly. Tall buildings that make the best neighbors don’t feel like tall buildings at street level. They’re wrapped there in lively retail, townhouse fronts or inviting public space.

The aesthetic concerns over height and density are indeed overblown – good street-level urban design and architecture at the human scales are far more important to building a quality environment than the overall height of buildings.  Obviously, taste in styles is a matter of personal preference, but we have a strong enough catalog of what works in urban design to get the broad principles of those designs into new development projects.

Unfortunately, the structure of the regulations and ordinances seldom make quality development the path of least resistance for a developer – again highlighting a procedural, systemic argument.

 

More links: iPhones and airports

CC image from caribb

Following up on yesterday’s link post regarding airports, air freight, supply chains, and manufacturing jobs: two posts from Ryan Avent at The Economist.

First, on industrial agglomerations, the impacts on jobs, and how we got to this point:

Unquestionably, Asian governments aggressively pursued manufacturing and subsidised it heavily, both directly and through advantageous exchange rates. As the story points out, Asia has capitalised on other advantages, as well. Cheap labour is one. More flexible land-use, labour, and environmental rules are another; China can erect a massive operation in no time at all, staffed with compliant labour and with little concern about the impact of the factory on watersheds, air quality, and traffic. Skill supply seems to matter as well. China is churning out engineers with basic technical competence (but less, it appears, than a bachelor’s degree) by the hundreds of thousands. It would be incorrect to point to any one of these characteristics as the driving force behind the global shift. Rather, these are self-reinforcing factors within a global economy that has multiple stable equilibria. After some level of Asian development and integration, it became more attractive for manufacturers to locate there as more manufacturers located there.

Clearly, this manufacturing agglomeration is an impressive part of the global trade network.  But it’s not the only agglomeration involved in the creation of the iPhone – the design, software, and other high-value elements of the product come from Silicon Valley.  More Avent:

What actually seems to have occurred is a bit more interesting. Supply chains have indeed continued fracturing, but distance has reasserted itself in two important ways. First, in the advanced world, agglomerations of the talented individuals who design these products have become increasingly important. And secondly, information technology, which allows for better coordination of production processes, has once again made proximity a relevant concern in manufacturing. It’s possible to coordinate a supply chain that’s draped across an archpelago of Asian economies. To maximise the return to this chain, however, it’s still necessary to keep plants reasonably close together. A plant located in America is too distant from Asia to make much economic sense; transit time to the rest of the supply chain in Asia is sufficiently long, in most cases, as to erode the gains to just-in-time production, or unexpected changes in designs or orders. Changing transportation and communication technologies facilitated a shift in manufacturing to Asia, then reinforced its presence there.

“Agglomerations of the talented individuals” are cities, more or less. At least, they are cities at the labor market level. As to employment, the different parts of the manufacture of the iPhone involve different value propositions, and require different levels of labor to scale up production:

Apple, it’s worth pointing out, continues to capture most of the value added in its products. The most valuable aspects of an iPhone, for instance, are its initial design and engineering, which are done in America. Now, one problem with this dynamic is that as one scales up production of Apple products, there are vastly different employment needs across the supply chain. So, it doesn’t take lots more designers and programmers to sell 50m iPhones than it does to sell 10m. You have roughly the same number of brains involved, and much more profit per brain. On the manufacturing side, by contrast, employment soars as scale grows. So as the iPhone becomes more popular, you get huge returns to the ideas produced in Cupertino, and small returns but hundreds of thousands of jobs in China.

Second, Avent looks at trade and the value of time.  Distance still matters, and time is precious, as seen in the increasing usage of air cargo for shipping high value goods. Avent concludes:

The lesson, I think, is simply that there is a limit to which one can or should want to raise manufacturing employment. Having lots of well-paid manufacturing workers isn’t the way one grows rich; replacing lots of those workers with massively productivity enhancing machines is.

This is more or less the same conclusion that Greg Lindsay notes in Aerotropolis – that this agglomeration, while impressive, still isn’t the true engine of creativity and value.  Nevertheless, each is an example of agglomeration shaping urban form and urban economies.

 

Links: iPhones and airports

CC image from Yutaka Tsutano

Rail to Dulles: MWAA Board member Robert Brown suggests eliminating the Dulles Airport rail station and replacing it with a people mover to connect to the Route 28 station as a means to save costs.  Yonah Freemark finds the concept intriguing, offering some operational considerations that could make it work.

However, the notion that building an entirely new landside people mover system will save money is ludicrous (IAD’s AeroTrain just clocked in at $1.4 billion). Likewise, while the concept would be an interesting solution to connecting an existing airport to an existing rail link (such as between BWI and the BWI rail station), the fact that the rail line has not yet built is a perfect opportunity to ensure that the airport itself is ‘on the way,’ to borrow Jarrett Walker’s terminology.

Freemark notes that one benefit of this concept would be to reduce travel time to the core and/or Tysons, but several other concepts considered by Metro would probably provide more utility to larger areas of service.

Meanwhile, Dulles offers a connection to the world via it’s ‘accidental aerotropolis.’

iPhones and agglomerations:  When I last touched on the Aerotropolis, I noted Aaron Renn’s observation that the book isn’t so much about airports and cities as it is about globalization.  One such element is the extensive description of the extraordinary agglomeration of manufacturing infrastructure and firms in Shenzhen.

This weekend’s New York Times contains a lengthy article on why the iPhone and other similar devices are not manufactured in the United States.  In his blog, Paul Krugman sums up that article in one word: agglomeration. Some key snippets from the article:

But by 2004, Apple had largely turned to foreign manufacturing. Guiding that decision was Apple’s operations expert, Timothy D. Cook, who replaced Mr. Jobs as chief executive last August, six weeks before Mr. Jobs’s death. Most other American electronics companies had already gone abroad, and Apple, which at the time was struggling, felt it had to grasp every advantage.

In part, Asia was attractive because the semiskilled workers there were cheaper. But that wasn’t driving Apple. For technology companies, the cost of labor is minimal compared with the expense of buying parts and managing supply chains that bring together components and services from hundreds of companies.

For Mr. Cook, the focus on Asia “came down to two things,” said one former high-ranking Apple executive. Factories in Asia “can scale up and down faster” and “Asian supply chains have surpassed what’s in the U.S.” The result is that “we can’t compete at this point,” the executive said.

Since we’re talking about iPhones and not cheap Christmas ornaments, the availability of materials and the skill of the labor is more important than the cost of that labor – all benefits of the large agglomeration of technology firms in Shenzhen.

For years, cellphone makers had avoided using glass because it required precision in cutting and grinding that was extremely difficult to achieve. Apple had already selected an American company, Corning Inc., to manufacture large panes of strengthened glass. But figuring out how to cut those panes into millions of iPhone screens required finding an empty cutting plant, hundreds of pieces of glass to use in experiments and an army of midlevel engineers. It would cost a fortune simply to prepare.

Then a bid for the work arrived from a Chinese factory.

When an Apple team visited, the Chinese plant’s owners were already constructing a new wing. “This is in case you give us the contract,” the manager said, according to a former Apple executive. The Chinese government had agreed to underwrite costs for numerous industries, and those subsidies had trickled down to the glass-cutting factory. It had a warehouse filled with glass samples available to Apple, free of charge. The owners made engineers available at almost no cost. They had built on-site dormitories so employees would be available 24 hours a day.

The Chinese plant got the job.

“The entire supply chain is in China now,” said another former high-ranking Apple executive. “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.”

More thoughts on iPhones, agglomerations, and jobs from Matt Yglesias and Tyler Cowen.

Likewise, an interesting set of charts looking at market share for various computing platforms – starting from more traditional personal computers, but eventually adding in smartphones and tablets.  While smartphones and tablets aren’t yet substitutes for a personal computer, they’re getting closer.

Station Domination: via Tyler Cowen, an interesting post from Matt Glassman on the cost of Metro station advertising and the linkages between national politics and the local transit system.

In need of a good decongestant:  Housing Complex takes a look at slight optimism from COG staffers on de-congestion pricing, and makes note of a lengthy Washingtonian piece on the subject.

On density and design tradeoffs

Bethesda Row - note that you don't even see how tall the buildings are - CC image from faceless b

Kaid Benfield’s excellent blog had a post last week on the need for better urban design and management of the public realm in our new, dense infill development. And while I certainly agree with the need for better urban design, I take issue with Kaid’s implication of an explicit trade-off between density and design – that is, the more density you get, the less human-scaled the street will feel as if this were some correlation of a natural law.

Kaid’s post shows several comparison photographs taken from Google streetview, many from the DC area.  What’s missing is an actual accounting for the density embodied in those pictures (such as the visual survey posted here). Additionally, some of the photos Kaid compares are not similar photos – one example involves a view down the axis of a street, while the other is a view of a building’s first floor and the accompanying sidewalk.

For me, it’s a completely different feel.  The second development, part of Bethesda, Maryland’s terrific Bethesda Row area, is not just more inviting but also a bit smaller in scale, at five or six stories tops.  But that’s part of it, in my opinion.  To increase density enough to make a difference, we don’t always need to maximize it.  Much of the time a moderate amount of human-scaled urbanism will be far more appropriate than a high-rise.  This isn’t, or shouldn’t be, just about calculations of units per acre or square footage.  It’s also about what feels right to people.

The sentiment that “we don’t always need to maximize” density implies a tradeoff between human-scaled design and density that I don’t think is absolute.  To a great degree, the influence of design – at the street level in particular – is the key element of a human scale.  In the comments, Payton (assuming this is from Payton Chung) adds this:

I’d agree that it’s almost all about design. The low- and mid-rise floors are most important, to be sure, since humans’ peripheral vision is weakest when looking up. However, there are plenty of historic skyscraper districts that maintain a great sense of place and small scale at the street level (Broadway in Los Angeles is a thrill to walk down), and even some which maintain good sunlight at street level (just was at Rockefeller Center for the first time in a while and reminded of that crucial detail).

Encouraging both smaller parcel sizes — for exactly that granularity, and to ensure greater diversity — and mid-rise heights both ask huge concessions from our current bigger-is-better development paradigm. Of course a developer will build out to whatever envelope the regulations will allow to recoup their costs, will charge high initial rents that only the most reliably profitable (i.e., bland) retailers can afford, and often won’t spend a premium on the sort of pedestrian-scale details that really create a great sidewalk environment. Yet other factors also result in these squat, boring buildings. Occupants will pay a premium for “ground-related” space or for high-rise space with a view, but not for the mid-rise floors. (Compare that to the 18th and 19th centuries, when the 2nd floor commanded the highest rent as it were above street dust but not a long walk up.) High-rise life safety and structural requirements make a 6-story building almost as expensive as a 12-story building. Requirements for exit stairs (like restricting scissor stairs), and tenants’ desire for reconfigurable spaces, both fatten floorplates. Municipalities set build-to lines for bases (correct) and, fearful of oddly height-obsessed NIMBYs, set unrealistically low height limits.

For things like sunlight at street level, the more important considerations would be the orientation of buildings on the site and the setbacks rather than absolute height – issues of design of a different sort than the street level scale.

Links: end of the pipe

Time to dump some tabs that I’ve accumulated in the browser over the past few weeks:

You can never go down the drain:

This week’s City Paper cover story is a short piece on DC Water’s Blue Plains Advanced Wastewater Treatment Facility (arrange your own tour here!).  The accompanying photographs show the infrastructural landscape in all of its glory.

For an incredibly in-depth tour of the facility (without the smell), check out this mammoth post from September, showing the entire process in excruciating detail.  Mammoth notes the fundamental process of cleaning the water mimics the existing natural processes that rivers use, albeit concentrated and accelerated.

The two basic tracks are to separate liquids and solids, while making the liquids more liquid and the solids more solid at each step in the process.  The end result of one process is water back into the Potomac (cleaner than the river it enters); and the other result is ‘concentrated biosolid’, also known as the concentrated crap of Washington, DC.

The biosolid is sold as fertilizer for agricultural applications for non-human consumption. Waste nothing.  For an in-depth tour of how such a facility works, I can’t recommend the mammoth piece enough.

On the water delivery side (as opposed to the sewage disposal side), Atlantic Cities has a piece on why your water bill must go up to help finance the replacement of the infrastructure we’ve taken for granted. Both the delivery and disposal networks are in need of investment.

JD Land has a set of photos from the new Yards Park-Diamond Teague bridge, including one of the historic pump house that sends sewage from the District south to Blue Plains. Another shot shows the bridge’s informational signage from DC Water, documenting the agency’s own long-term control plan for management of DC’s combined sewer system.

It’s all about jobs:

The remarkable takeaway from the Blue Plains phototours is the role of natural processes in the system (minimizing pumping in favor of gravity, for example) to maximize efficiency via infrastructure.  Thus, it was curious to see the Washington Post writing about the expansion data centers in old manufacturing towns to serve as the physical location of cloud computing servers, but noting that such infrastructure doesn’t provide many long term jobs.

Granted, jobs are the narrative of the Great Recession, but using the data center seems like an odd place to focus.  Using a similar infrastructure investment like Blue Plains as an example, a better comparison would be to the economic activity enabled by clean water and sewage disposal – just as the data centers should look at the indirect effects of internet connectivity and activity, not direct employment via the infrastructure that sustains the internet.

Mammoth has a few thoughts on IT infrastructure, aesthetics, and the return of light industry to mixed use urban environments.

Here comes the sun:

Some solar powered notes – the cost of PV cells is coming down.  Some thoughts on the implications for the climate (Joe Romm), for the economy (Paul Krugman) and for DC (Lydia DePillis).

Is transportation too expensive?

David Levinson proffers a few hypotheses as to why transportation investments are so expensive.  Many are interesting, (thin markets and insufficient economies of scale trigger thoughts of rolling stock protectionism; project scoping and organizational structure are similarly compelling) though I’d take issue with a few of them.

One is #5, discussing incorrect scope.  David mentions big buses serving few passengers, but as Jarret Walker notes, the real cost is in operations; the real cost is the driver.

The idea of standards run amok is intriguing, but I think a more relevant point is asking if standards make sense.

Nitpicks aside, the idea is a great one – this is a conversation that needs to happen.

The Aerotropolis, continued

In the comments from yesterday’s post on Norman Foster’s aerotropolis (and the idea of the aerotropolis in general), author Greg Lindsay dropped a note in the comments asking for me to expand my own thoughts on the idea and the book.  So, here goes.

Lindsay did note one specific comment from Aaron Renn’s review: “this is one of the best overviews of globalization I’ve read.”  I can’t disagree, and would certainly recommend the book to anyone interested in cities, infrastructure, globalization, economics, or any number of related fields. The challenge is to separate the various threads that weave through the book.  There’s the descriptive element, providing the overview of today’s airborne flows of commerce;  there’s the proscriptive element, taking Kasarda’s ideas and baking them into tangible proposals; and there’s the analytical element that assesses the implications of these trends and ideas. Most of the negative reactions to the book I’ve read seem to conflate these elements together instead of teasing them apart – and for whatever flaws the aerotropolis-as-business-plan might have, the descriptive and analytic elements of the book are invaluable.

The book’s descriptive elements are fantastic. BLDGBLOG’s interview with Lindsay highlights one example of the book’s explanatory power, showing how these systems work in our day to day lives:  “One of the things I tried to touch on in the book is that even actions we think of as primarily virtual lead to the creation of gigantic physical systems and superstructures without us even knowing it.” The descriptions of the logistics operations in Memphis and Louisville for FedEx and UPS are fascinating.

UPS WorldPort, from Bing maps

The accompanying narrative of aggolmerations of air freight reliant businesses near those hubs is equally fascinating. I write this having just placed an order from Amazon that I need delivered tomorrow, knowing the intricate dance that order will trigger. Knowing the physical processes behind a shoe order with Zappos is revealing, particularly given the level of automation and coordination required for fast delivery. The ‘cool chain’ explanation is equally intriguing.  Simply from a standpoint of understanding how things work, the book does an excellent job of pulling back the curtain.

Beyond just the work behind the consumer’s experience, Lindsay and Kasarda do a great job of explaining the clustering and agglomeration of various industries around these nodes of connectivity – the physical mark they leave on a place. The explanation of what an ‘organic’ aerotropolis looks like is fascinating, offering a tantalizing description of something we’ve all seen many times with our own eyes.

The proscriptive elements of the aerotropolis are less convincing.  There’s an element of the worst parts of civic boosterism built in.  Others have hinted at the tendencies towards authoritarianism.  Perhaps the more concerning aspect is the seeming simplicity of the application of the idea.  The book’s own cover art evokes the simplicty of SimCity, even after the preceding detailed explanation of the various exceedingly complex networks and agglomerations of the aviation system.  To be fair, neither Kasarda nor Lindsay advocate for a ‘build it and they will come’ approach, yet it’s hard to not come away with that mindset from some of the Chinese ‘instant city’ anecdotes.

The formulaic nature of Kasarda’s concept almost seems to be a deliberate misunderstanding of the powers of agglomeration and networks. It’s clearly not a matter of just building it and they will come, no matter how much transportation might be able to shape development and growth.  As critical as trade may be, there’s more to it than just that. Likewise, as mammoth notes, airborne trade is but a small fraction of the overall flows.  Even if the flows of capital, knowledge, and skills matter a great deal, there is still a physical component to all of this – and the dominant mode of that flow is still the intermodal container.

Problems with the aerotropolis aside, Lindays’s analytic discussions of the shortcomings of air travel are robust.  The discussion of peak oil and climate change is particularly compelling, given the frequency of this critique.  Assertions that the aerotropolis is irrelevant because of peak oil and/or climate change is just as absurd as the denigrations of high speed rail in the US based on some notion that any American system must also be a transcontinental one – neither critique expresses an understanding of the comparative advantages of the technology.

I hope that people don’t dismiss the book off-hand because of some notion of globalization or of climate change. The explanatory value alone is well worth the read, both in documenting today’s conditions as well as in discussing the implications of global networks more and more reliant on air travel and just-on-time logistics.

The gated Washington region

The Gated City in action: Today’s Washington Post on the inadequacy of the region’s housing supply in meeting demand. In short, Ryan Avent called it. The region is producing jobs, people want to move here, yet it hasn’t been able to produce enough housing to meet that demand. From the Post article:

“If businesses find they can’t have their workers live near where they can work, they’re going to go somewhere else. And the workers themselves might also go somewhere else,” said Lisa A. Sturtevant, an assistant professor at George Mason’s school of public policy, who co-authored the study with Stephen S. Fuller, director of the university’s Center for Regional Analysis.

Their research showed that the Washington area, defined by 22 counties and cities, is expected to add 1.05 million jobs through 2030. More than a third of those jobs will be in professional and technical sectors, but significant growth also is expected in administrative, service and health-related jobs that often pay lower wages. If those numbers hold true, that boom will require as many as 731,457 additional units to house workers in the jurisdictions where they work, the study found.

That means the region would need to produce about 38,000 new housing units per year, “an annual pace of construction never before seen in the region and below what local jurisdictions have accounted for in their comprehensive plans,” the study concludes. Data show that over the past 19 years, the region has averaged 28,600 building permits a year; last year, about 15,000 building permits were issued in the region.

In addition, much of the new housing needs to be multi-family units (to make efficient use of available land) and affordable rentals (to put it within reach of younger workers and those with lower salaries), George Mason’s researchers argue.

For more on Fuller and his work, see Lydia DePillis’s April City Paper profile.

I must, however, take issue with the Post‘s framing of the issue.  From the second paragraph in the article:

With that growth comes a vexing problem: How do you house those new workers in ways that are both affordable and don’t worsen the soul-crushing commutes that already plague the region’s residents?

The problem here isn’t vexing at all.  Nor, frankly, is the solution.  The solution is rather obvious: we need to grow up instead of out.  We need to add density. We need infill development around existing infrastructure assets. Admittedly, implementing that solution is certainly more vexing than simply stating it aloud, but let’s not let the challenge of implementation obscure the diagnosis of the root problem.