Thursday, March 17, 2011

The question of Cities

Post the Economist debate on Cities, we have a series of fabulous articles on the topic. Let me quickly share a few of them right away. First article, Are mega-cities too big? comes Klaus Desmet and Esteban Rossi-Hansberg. The second article comes from Ryan Avent titled "Why we live in cities?". Other reading includes Richard Florida's book Who is your city? Another includes report from UN Research institute for Social Development titled "Development and Cities". Finally some of my thoughts are captured in the my ebook How Cities Develop.

There is a general agreement on cities being the drivers of economic growth. However, there is much debate about whether cities should be large or small, how they grow, etc. Let me highlight some important issues with respect to cities.

Cities are efficient providers of infrastructure
Investments make sense when they are used by more people. Cities have effective administration because they have piece-meal property - in other words they are dense. These piece-meal property affords economies of scales and better return on infrastructure like drainage, water supply, power etc. It is, therefore, clear why some cities like Detroit are encouraging people to shift out of far-flung suburbs into concentrated city center.

Cities help deploy capital efficiently
Cities allow for specialization and therefore interdependent service opportunities. Away from the city, multi-skilling is essential. City dwellers may get help if their car breaks down, away from the city you may need to know basic break-down procedures yourself. Same goes for food. Cities allow you to buy meals from restaurants etc. so that those expert in cooking and concentrate on cooking food. Thus a city, in effect, comprises core workforce, ancillary workforce and support services. Core workforce related to basic income generating opportunity - in Detroit -it would represent automobile company workers. Ancillary workforce represents those workers that feed into auto firms - like stationary provider, photo-copying machine providers and workers thereof. Further there are workers for support services like restaurants, hair-dressers, etc. This specialization creates far higher productivity and hence better returns on capital.

Cities as hotbed of ideas
On a social level, cities are breeding ground for ideas. The let diverse people mix and therefore create an environment where ideas can breed. The new knowledge economy, therefore, depends on efficient cities and thrives in such environments. Now we can see the conflict between efficient capital deployment and idea generation functions. One needs specialization and homogeneity while other needs generalization and diversity. It is here that cities are likely to break down.

Over past two decades, IT infrastructure has allowed idea-generation function to move online. As the next generation, the digital natives (1), take over, we will see cyber-cities forming for idea generation functions. Further, the capital efficiency too is driven by ideas and hence possibly moving towards cyber-space. 

Design of cities is more landmark-oriented rather than flow oriented. The word "settlement" connects better with access than with landmarks. However, we look at landmarks and try to connect them based on estimates of future population. Don't be fooled by what seems like flow-based design - it isn't the driver of design decisions.

City is a flow of different variables. It is a flow of people to and from workplaces to and from houses. It is a flow of utilities across the sprawl. It is a flow of water, food and essential goods to different areas and evacuation of sewage, drainage and other effluents away from it. However we do not design cities based on efficiency of these parameters, rather we select a location and then try to service it with these amenities.

Rome v/s Las Vegas
The contrast between flow-based design and landmark based design is evident when you contrast Rome and Las Vegas in a simplified way.

Rome had a population of 1million around 10-3BC. At that time it still had a natural gravity driven water system that provided water no only to homes but also to street fountains and the like. There was also a well-designed drainage system. Though, Rome is not a purely flow-based design, it still comes close.

The old Las Vegas on the other hand is landmark based design. There is no business for it to exists in the middle of the desert and away from every amenity possible. Subsequent developments have tried to overcome its shortcomings. Yet, to date, its survival depends on the depleting Lake Mead created by the Hoover dam.

Balancing income and affordability determine the sprawl
Let us assume a person with a specific sum of money. She can, theoretically, buy large tracts of lands away from income generating opportunities. If she has to buy land in the city, in close proximity to income generating opportunities, she can buy very little even after leveraging future incomes. We can imagine a spectrum of affordability, from this maximum land without income opportunities to the minimum space purchasable by leveraging future income. Now the sprawl of the city depends on how geographically spread the affordability spectrum is. It is limited by time and not distance. Thus the geographical sprawl is equal to distance that can be travelled within acceptable commuting time. Hi-speed metros and maglev trains tend to increase the distance within alloted time.

The principles of Acceptable commute distance and acceptable commute time is essential in design of cities and development of sprawl.

Superimposing flow and landmarks measures real estate value
We can draw up monetary value of city's real estate by super-imposing flow and landmark characteristics. Landmarks with high flow are most valuable pieces of real estate in the city. I have distilled some of these thoughts in my "Affinity factor model" for cities.

Some of these ideas have been discussed in my free ebook How cities Develop. You can download it from Scribd by clicking on the link above.

(1) Digital Natives refers to children born after 1990s who are far more comfortable with technology than current workers.

My book "Subverting Capitalism & Democracy" is available on Amazon and Kindle