Sprawl (aka Land Speculation) Killed Detroit

Yes readers, I’m in the editing phase of my evaluation of “The Economic Value of a Law Degree,” and my results will appear on The Am Law Daily soon enough.

But in the meantime, I’m finding it really disheartening to see Paul Krugman producing evidence that Henry George was right about the affects of urban land speculation without understanding the theory behind it. It’s like watching a Ptolemist proposing epicycles when Kepler already showed us elliptical orbits

In “A Tale of Two Rust-Belt Cities” he compares Detroit to Pittsburgh:

It’s hard to avoid the sense that greater Pittsburgh, by taking better care of its core, also improved its ability to adapt to changing circumstances. In that sense, Detroit’s disaster isn’t just about industrial decline; it’s about urban decline, which isn’t the same thing. If you like, sprawl killed Detroit, by depriving it of the kind of environment that could incubate new sources of prosperity.

Then, in “Did Sprawl Kill Horatio Alger?” he compares bottom-to-top income quartile mobility to population-weighted density, finding a correlation:

Yep, there’s a pretty strong correlation, although not perfect. What’s the matter with Chicago?(And what’s not the matter with Houston?) And as Leonhart suggests, Atlanta is the real poster child here: massive sprawl and very low social mobility.

Is the relationship causal? You can easily think of reasons for spurious correlation: sprawl is associated with being in the sunbelt, with voting Republican, with having weak social safety net programs, etc.. Still, it’s striking.

I believe the South is known for low property taxes. I’m surprised by California with Prop 13 and all, but it largely depends on the mobility measurement used in the y-axis. Twenty years ago, Mason Gaffney predictably had nothing good to say about it.

9 comments

  1. Then I read Yglesias at Slate claiming the reason why “Detroit is bad and Pittsburgh is good” is due to higher education. I see correlation, but this does not begin to address much more deeper issues. People start thinking like if they stuff enough colleges into Detroit or Stockton CA there will be a new economic paradigm, when in fact Pittsburgh had a multitude of other factors affecting it’s current status. http://www.slate.com/blogs/moneybox/2013/07/21/universities_equal_success_and_detroit_doesn_t_have_them.html

    Note to self: Economic pundits become famous by saying things the mainstream wants to hear.

    1. Yglesias might be on to something, but not because of his pet “universities-spur-innovation” argument. If four years of undergraduate Stafford loans is $27,000, then multiply by 2,000 students paying full tuition net of scholarships and you get $54 million over four years. Add federal, state, and private grants; partnerships with corporate America; and student living expenses, then that’s a lot of high-income workers paying income taxes and higher off-campus land values to fund local government. But we both know that much of that’s not real wealth creation, so Detroit’s crime was, despite its corruption, trying to be an honest city that didn’t suck away tax dollars by putting liens on people’s future incomes.

      Also, supposedly, until recently Pittsburgh had a split-rate tax system that fell more heavily on land values than improvements. I’m not sure how much it helped, but it has in other Pennsylvania cities like Harrisburg, which has fewer vacant parcels but is just as bankrupt. Maybe LVT prolonged its agony.

    1. I didn’t know Arcade Fire had a third album. It’s funny because Krugman adores them and credits them for awakening his aging-boomer ass to contemporary music. Now to get him to embrace the Clientele and land taxes…

      By the way, excellent post yesterday, as always.

  2. Good lord man, download it immediately–The Suburbs, a concept album that is quite a reflection on the post-WWII sprawl, social decay and general Koyaanisqatsi.

    Also I am pleased to inform you that their 4th is out this October. And thanks for the compliment I’m just pointing out the shadows on the side of the cave aren’t real.

    1. Damn sir, you are knowledgeable about the world.

      I’ll add those to the list. I hadn’t heard of Koyaanisqatsi until a few months ago, but I’d like to see it.

  3. Where would NYC be on this chart? It is such a striking omission that one can’t help suspecting that its position would be inconvenient. If so, that’s not entirely reputable, Mr Krugman.

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