"City Lite"

The front-page of today's WSJ features "City Lite ... Fake Towns Rise, Offering Urban Life, Without the Grit ... Mix of Office, Home and Play Threatens the Real Thing: But Where's the Grocery?" (see below).

The piece tells once more how attempts to resurrect old downtowns are hopeless (and a huge waste) and that most people are getting what they want in terms of urban centers from suburban developers.

The article wrongly ascribes this to New Urbanist theorists. Developers read the market, not the theorists. Urban (and suburban) forms are always evolving in response to changing tastes and changing possibilities. And there is only one known way to to discover and implement these.

To be sure, some of the old downtowns now have the occasional block or two of trendy restaurants, mostly catering to young singles (and young couples). But you gotta ask: At what cost?


By THADDEUS HERRICK, WSJ. May 31, 2006; Page A1

"PLANO, Texas -- On a recent Friday night, Bishop Road was hopping. Land Rovers and Lexuses inched down the two-lane street. On the brick sidewalks, a steel band played Bob Marley tunes as couples strolled past boutiques, bars and restaurants, lines spilling out the door.
"Until a few years ago, Bishop Road was a grassy field in the midst of a gargantuan office park. Today, it's the main drag of Legacy Town Center, a 75-acre development 20 miles north of Dallas that's home to 4,000 people. The project has been such a hit that developers are building on an additional 75 acres across the street.

"Legacy Town Center is one of dozens of faux downtowns popping up across the country, from Kansas City to Washington, D.C., spurred by a demand for urban living scrubbed of the reality of city life. A careful mix of retail, residential and office space built with traditional materials such as stone and brick, Legacy looks like a city but has neither panhandlers nor potholes. Many residents rarely venture even to downtown Dallas, which has been trying to turn itself into place to live for almost a decade.

"'There's too much riffraff down there,' says Ron Pettit, a 36-year-old contractor, as he snacks on brie and grapes at a table outside Bishop Road's Main Street Bakery and Bistro.
In Flagstaff, Ariz., buyers have snapped up almost all of the 125 residential units on offer at Presidio in the Pines, a town center under construction on 91 acres of forest. North of Charlotte, N.C., on the site of a former dairy farm, is Birkdale Village, which consists of 52 acres intended to recall a New England coastal town. It features 320 apartments, most of which are stacked above shops and restaurants.

"Even though these faux downtowns contain tinges of suburbia, they're taking advantage of a growing backlash against the sprawl that rings Dallas and other U.S. cities. The reaction began in the 1980s with the rise of New Urbanism, a movement of architects and planners calling for a return to traditional towns where people work, shop, live and play.

"Among the most prominent of those theorists was Andrés Duany, a leading figure behind Seaside, a planned pedestrian community on the Florida Panhandle that was the setting for the 1998 movie, "The Truman Show." Suburban growth, Mr. Duany argued, was unsustainable because it consumes land at a high rate while creating horrendous traffic.

"In the 1990s, Americans started venturing back into cities that had emptied out in prior decades. Basking in the glow of falling crime rates and glamorized by television shows such as 'Seinfeld' and 'Friends,' cities themselves began to woo residential and retail development.
For a developer, however, it's much easier to make a fake city than it is to work on real downtowns with their patchwork landholdings and planning restrictions. The developers of Legacy were able to carve up the land pretty much as they pleased. The result: more than 1,500 apartments and town houses, some 80 shops and restaurants, two mid-rise office towers and a Marriott Hotel.

"The concept also attracted developers looking for alternatives to malls, a concept rapidly losing favor among shoppers. Only one mall has opened in 2006, according to the International Council of Shopping Centers, a New York City-based trade group. By contrast, more than 60 so-called lifestyle centers -- outdoor shopping areas with plazas, fountains and pedestrian streets -- are planned to open this year and next.

"To attract more shoppers, and therefore retailers, developers started building homes on these sites. Steiner + Associates of Columbus, Ohio, a leading builder of town centers, initially included only retail and office space at the $300 million Easton Town Center near Columbus, which was completed in 2001. When another developer added apartments across the street, Yaromir Steiner, chief executive of Steiner + Associates, noticed the low vacancies and high rents. 'We realized how a commodity apartment could turn into a specialty product,' he said.

"When Mr. Steiner built Zona Rosa, a 93-acre project on farmland north of Kansas City, he included 33 loft apartments. One of his latest projects, The Greene, near Dayton, Ohio, is built on woodland and will include 136 residential units when it opens this summer.

"These projects could be bad news for real downtowns, especially those competing with redeveloped sites near the city center. AIG Global Real Estate Investment Corp. and Jacoby Development Inc. are redeveloping a massive steel mill just north of downtown Atlanta into a community known as Atlantic Station. The developers had to remove 165,000 tons of contaminated material. They now intend to build a small city on the 138-acre site, which could house as many as 10,000 residents.

"Houston has poured some $4 billion into downtown stadiums, roads and light rail in the past decade. But 27 miles to the north, the Woodlands Town Center has sold out of newly constructed lofts and replica brownstones in the midst of an affluent planned community.

"'The question is whether this demand for urban-style living -- density, transportation alternatives, proximity to work -- is broad enough to accommodate the resurgence of traditional downtowns,' says Bruce Katz, founder and director of the Metropolitan Policy Program at the Brookings Institution, a Washington, D.C., think tank.

"Just like the real thing, faux downtowns are vulnerable to the vagaries of the local economy, a problem that's magnified by the big upfront investment required. Federal Realty Investment Trust bet heavily on Santana Row, a $455 million project three miles from downtown San Jose that opened in 2002 on the site of a former shopping center. With its Mediterranean-inspired architecture, Santana Row was intended to provide an urban island for professionals in Silicon Valley.

"But the collapse of the tech industry, the Sept. 11, 2001, terrorist attacks, and a catastrophic fire buffeted the project. Some high-end retailers that considered opening there ended up not making commitments, city officials say. In 2003, Federal Realty Chief Executive Steve Guttman resigned.

"Departing from the script, the company lured big-box stores such as Best Buy to generate foot traffic. As the economy improved, so too did the fortunes of Santana Row. Today, city officials say the project -- with 70 shops and 19 restaurants and a mix of town homes, condominiums and apartments -- is a draw for Silicon Valley residents.

"Don Wood, the current chief executive of Federal Realty, says building an instant city is considerably harder than a standard development. Santana Row took seven years to complete. 'Over that period of time, the world changed,' he says. 'We started construction in one economic environment and finished in another.'

"Legacy Town Center is built in a contemporary style, with hints of Frank Lloyd Wright. Its use of brick and limestone give it an old-time veneer. Retail buildings have been built at different heights to make the town center look like it's evolved over decades.

"It's situated on 2,700 acres acquired by Electronic Data Systems Corp. under then-chairman Ross Perot in the late 1970s. EDS built its headquarters on one parcel in 1985 and began selling the remaining parts to other companies, including J.C. Penney Co., which also built its headquarters there.

"By the late 1990s, the Legacy area was an impressive industrial park, but little more. Although tens of thousands of people worked there, it didn't have a restaurant, a gas station or a dry cleaner.

"Marilyn Kasko, who ran the office park for EDS at the time, says she was troubled that employees had to live, work and shop in separate places. She also felt EDS needed to offer something more to attract new companies to set up shop there. She didn't know exactly what.

"One answer was provided by Mr. Duany of the New Urbanist movement. In the late 1990s, Ms. Kasko hired Mr. Duany's Miami-based architecture and planning firm, Duany Plater-Zyberk & Co., to sketch out a vision for the empty land. His idea: a lively urban enclave with little surface parking. By carefully setting distances between offices and shops and apartments, Mr. Duany tried to make Legacy a walking community. 'The issue was how to bring people closer to the places they go,' said Mr. Duany.

"Like many such projects, Legacy began to slide back into the classic suburban mold. Fehmi Karahan, whose Karahan Companies developed the retail portion of the project, wanted to lure national retailers, even though Legacy Town Center is sandwiched between two giant malls in Frisco and Plano.

"One big out-of-town retailer, furniture chain Robb & Stucky of Fort Myers, Fla., had little intention of following the New Urbanist playbook. The company wanted more than 100,000 square feet for a store, plus surface parking. The upshot was a compromise: The Robb & Stucky store was built at an angle to the road to disguise its size, and its facade was covered in various textures to mitigate the big-box feel.

"At the demand of other prospective retailers, Mr. Karahan built surface parking lots in front of shops facing six-lane Legacy Drive. Built in four phases, The Shops at Legacy opened in April 2002 with about a dozen stores, including Starbucks. Mr. Karahan also went after established Dallas retailers and managed to attract popular restaurants such as Bob's Steak & Chop House and Mi Cocina.

"Retailers that pushed for surface parking turned out to be wrong. Today, the hottest location isn't Legacy Drive but the narrow Bishop Road, where the stores are a sidewalk's width from the curb. Nancy Chesser closed her "vintage vogue" boutique Ambrosia, which was on Legacy Drive. "The [foot] traffic was terrible," she says.

"Mr. Karahan says business on Legacy Drive is adequate. He has other headaches to worry about. Speeding has become a problem, so he's installing speed bumps on Bishop Road. Several retailers have reported thefts, despite the security cameras mounted on exterior walls and roofs.

"For many, Legacy provides a sense of community that is lacking at typical suburban apartment complexes. The development is built around a three-acre park, complete with a man-made lake, a destination for runners and dog walkers. In the evening residents gather along Bishop Road, where jazz is piped through speakers beneath mature live oaks. Some live in town homes that sell for more than $400,000. Others are renting studio apartments for about $600 a month.
"It's perfect for someone who doesn't want to come home from work, sit on the couch and watch TV," said Mr. Pettit, the contractor.

"On the recent Friday night, couples waited two deep to order Cabernet Sauvignon at $18 a glass at a wine bar called Crú. Up the street, the five-screen Angelika Film Center was showing John Malkovich in "Art School Confidential."

"But the most striking thing about Legacy Town Center is what it doesn't have. Like a modern suburb, it has no nearby hardware store. It has no churches or libraries. Nor is Legacy home to many children. The closest public elementary school is three miles away.

"Legacy has no public transportation, so almost everyone has a car. Residents who work at corporate headquarters less than a mile away often drive to work because outside of Legacy there are no sidewalks. Residents jump in their cars to run errands at Plano malls and shopping centers as if they lived in a local subdivision.

"Jon Stewart, 43, who moved here from suburban Maryland two years ago, says he's happy with the amenities, with one exception: "The only thing lacking is a grocery store."

Quants

The May 27 WSJ included "Funds That Are Managed by Computers".

"It's not surprising that technology plays a major role in running mutual funds. What is surprising is the decision-making power many fund managers give to computers.

"Stocks in so-called quantitive funds are bought, sold and analyzed according to the stony regimen of a computer. While humans program the machines to find stocks to meet certain investment criteria, searches are completed with speed and efficiency. 'Quant' managers then plug these electronic assessments into a portfolio and let the computer tell them which positions to trade and when."

The accompanying table showed the three-year annualized returns for four of the Quant funds. They ranged from 13.7% to 17.0%.

Over the same period, the Russel 2000 turned in 25.7% (three-year annualized) and the Fidelity Total Market Index fund hit 17.0% (three-year annualized).

Why bother? Computers (and their programmers) finally beat the world's best chess player. Yet, high-tech finance cannot beat efficient markets.

Fat chance

New Urbanists' claims that sprawl causes obesity were suspect the moment they were first uttered. Recent research by Siim Soot and his colleagues at the University of Illinois, suggests that even the correlations do not stand up.

U.S. DOT's periodic NPTS/NHTS passenger travel surveys can be disaggregated by "central city" vs. "suburban" place of residence of each respondent and there have never been significant travel pattern differences between these aggregates.

It is a simple point but it bears repeating because the NU crowd is eager to rearrange other people's lives (for those people's own good, of course).

In the March 2006, Journal of Economic Literature, there is a fine review (by Angus Deaton) of Robert Fogel's The Escape from Hunger and Premature Death, 1700-2100. Deaton writes, "... explosions of obesity and associated diseases ... often come on the heels of a looseing of nutritional constraints, when those whose parents were undernourished, who were themselves undernourished in utero, move into an environment in which food is plentiful and heavy manual labor is no longer required."

Time for a shave

Whole Foods is big and getting bigger. WalMart will start selling organic food. Where will it all end?

Most economists are happy to have consumer choice be exogenous and mysterious. It is all in the eye of the beholder. So why agonize over the merits and demerits of all of the choices that people make?

Because agonizing over these choices is an ancient preoccupation that will not go away. The New Yorker of May 15 includes "Paradise Sold : What are you buying when you buy organic?" (by Steven Shapin). "What particular fungi, and trace elements lurk in the soil of your sustainable community farm? Does your friendly local farmer use a tractor or a horse? If a tractor, does it use fuel made from biomass? If a horse, are the oats it eats organic? If the oats are organic, does the manure with which they were grown come from organically fed animals? How much of this sort of knowledge can you digest?"

Are people making good or bad choices? Are they paying too much? Are the workers being compensated adequately (are the cash and noncash compenents of their pay the right ones)? Do the owners and/or the managers earn to much? How about the many distributors involved in the various supply chains? Many more such questions can be posed and debated ad nauseum.

I have not read Michael Pollan's The Omnivore's Dilemma, just his NY Times Magazine version. But I have read Tim Harford's The Undercover Economist, who reminds us that it is all about price discrimination. If there are enough people willing to pay enough extra for any attribute of any product, including the "organic" history of bananas (or whatever), then let them.

Occam's razor wins again.

Oregon tea party

Fifty-five million Americans now live in private communities and most of them have chosen to trade off property protections gained for property rights surrendered. In the market for private communities, these trade-offs have to pass a market test.

There is no other way for the many complex packages of trade-offs desired to be identified and supplied.

That's the problem with trade-offs mandated via large geographic jurisdictions. The Oregon Prop 37 revolt illustrates the point.

And the rebellion may be spreading. Thanks to Brad Hill for the pointer.

An unwittingly revealing read

David Warsh's Knowledge and the Wealth of Nations has received a lot of favorable comment -- as it should. It is beautifully and clearly written. Who would have thought that the history of economic thought could be a fun read?

The Economist of May 20 includes a very useful review ("The growth of growth theory"). Yet, the book and its story are poignant for Austrian economists, whose contributions are hardly acknowledged. The question that goes unasked is: What has the neo-classicists' journey of discovery, as sketched by Warsh, contributed that is worthy beyond the Austrians' long-held focus on entrepreneurial discovery?

The thick and the thin

Jim Lewis recounts the "Battle for Biloxi: The New Urbanists thought they had just the plan for remaking the Mississippi Gulf Coast city after Hurricane Katrina. FEMA, the mayor and a councilman thought otherwise." His report points to the obtuseness of the NU planners and the predictable consequences. It all reads like the basis for a script for the first movie about Gulf Coast rebuilding.

Whatever happens in the area, it must take account of what real people in the environs actually want for their built environment. A minimal role for local government and a maximal role for private developers is the only way that this requirement will be met.

I just attended a Liberty Fund meeting devoted to a discussion of private communities. One point raised concerned how the scope for private communities and governance is limited and "thin" as long as that for the local area public governance (usually mandated by the states) remains "thick".

The Gulf Coast will have to turn this corner if stories like Lewis' are not to be repeated up and down the coast.

Road pricing news

Robin Lindsey surveys what economists have to say about road pricing in the latest Econ Journal Watch. Yes, most economists think that rationing via price is best. Ken Orski presents a news round-up that suggests we may be near a "tipping-point" -- and tipping towards a more favorable reception by policy makers.

That would be nice. I recently attended a workshop at Churchill College in Cambridge and learned a bit about the London experience. It appears that implementation costs were high enough to suggest that the benefit-cost ratio is unfavorable. That may a case of early adopers. But the role of early adopters -- absorbing high prices and permitting them to start falling -- is well established in the markets for new products. Whether it applies in the policy world is anybody's guess.

Pols gone wild

Most U.S. urban planning and policy curricula include the field of "community economic development". This refers to strategies and plans to revitalize poor neighborhoods. At its worst, it includes primers on the politics of attracting government office facilities and jobs.

The field is also subject to fads and the latest involves Richard Florida's ideas on how to attract a "creative class." A good friend refers to it as the "Sex and the City" fantasy.

The costs of this silliness are nicely summarized in Joel Kotkin's op-ed in today's WSJ ("The Ersatz Urban Renaissance" reg. req.). Kotkin notes that this charade misses the harsh reality that many creative (and other worthy) people like to go where the taxes and the rents are low and where governments do what they are supposed to do, such as provide decent schools and safe streets.

Forgetting about all this and funding expensive baubles (concert halls, museums and even subsidized high-end hotels -- by celeb architects, of course) is poison. But it's not boring.

Read all about it

Many smart people think that life in the suburbs make you fat -- and mean and angry and Republican, etc. Now we have news (thanks, Wendell Cox) from Australia that the suburbs actually make you thin!

It appears that having a large backyard to romp around in the early years has lifelong health benefits. So, a larger "footprint" in the way of low density living works out to a smaller "footprint" all the rest of your days in terms of how much it will take to support your appetite.

Good and bad culture

Corruption makes the poor poorer. And corruption is linked to culture. To make it worse, the power of incentives does little to overcome the culture of corruption.

This is essentially what economist Raymond Fisman found (and reported in the May 22 Forbes). He looked at which diplomats in NYC pay traffic fines and which do not. Those that pay do so out of a sense of obligation because they enjoy diplomatic immunity. The researcher found that payments correlate with how the diplomat's home country ranks on an opinion survey of corrupt countries.

Finns, Danes, Norwegians and Swedes tend to pay. Diplomats from Chad and Bangladesh tend not to.

Fisman concludes: "Reformers of economic of social institutions must be aware that local values may undermine their efforts. Changing the law is helpful but not by itself sufficient to induce change in a compact world."

Little is understood about cultural change and evolution. Except that American culture (media, movies, fashion, food, music, schooling, etc.) are almost universally seductive. Good thing.

Closing in fast

Some years ago, Milton Friedman wrote that the U.S. was socialist. He considered not only the size of state and local goverments but also their reach and came up with a number larger than half of GDP.

Today's WSJ includes an a propos summary of recent research (below) from the Mercatus and Weidenbaum Centers. The study estimates the size of the expanding federal regulatory state. Also mentioned are estimates of the annual costs of federal regulation, about $1 trillion. Presumably, there are also some benefits but surely very much smaller.

In any case, this suggests that the $2 trillion federal government (expenditures, 2002 GDP data) had an influence-mutliplier. If the $1.6 trillion state and local sector had a similar influence, we may not (yet) be in Friedman's "ballpark", but recent red tape growth rates cited suggest that we are closing in very fast.


"Tale of the Red Tape"
WSJ, May 11, 2006; Page A16

"Federal spending isn't all that's been on steroids in recent years in Washington. A report to be released this week by the Mercatus Center at George Mason University and the Weidenbaum Center at Washington University finds that the feds have also been on a regulatory rampage that needs squelching.

"From 2001 to 2006, the number of federal regulatory personnel has risen by one-third (or 66,000 more snoopers); regulatory budgets are up by 52% after inflation; and the Federal Register -- which prints all that regulatory verbiage -- has climbed by more than 10,000 pages. (See nearby chart.) The Institute for Policy Innovation calculates that if you stacked up all the registries from the Nixon Presidency through the present, the pile would reach higher than the Washington Monument.

"The biggest increases in enforcement personnel and dollars have gone to such customer-friendly agencies as the Securities and Exchange Commission, the Food and Drug Administration, the IRS, the Bureau of Alcohol, Tobacco and Firearms and the Antitrust Division of the Justice Department. Just last week Mr. Bush announced an intention to expand the reach of one of Washington's more absurd regulatory regimes: automobile fuel-mileage standards, which push consumers into smaller, less-safe cars and increase traffic fatalities. So much for regulations making us safer.

"Federal regulations now cost the U.S. economy about $1 trillion in lost output a year, or about $8,000 per household, according to a 2005 study by the Small Business Administration. Many regulations, such as clean air and water statutes, do have large societal benefits and can be justified in economic terms for addressing "externalities" that no one else but the government can address.

"But as with everything in Washington, good intentions typically trump any consideration of costs, and so Congress has never passed a law requiring cost-benefit calculations when implementing new rules. This is a particular failure of the Republican Congress, which came within one Senate vote of passing such a requirement in 1995, but has since given up. This hurts small companies especially, because they have fewer employees and revenues across which to spread the costs of meeting federal rules.

"We'll give the Bush Administration credit for at least resisting the mother of all super-regulatory contraptions -- the Kyoto Protocol on global warming. But if Republicans manage to get through November with their majorities in Congress intact, they ought to revisit their campaign promises of yore and look for ways to lighten government's regulatory load."

Bottom lines

In politics, people agree to disagree by not agreeing to an appropriate bottom line. As the Bush tax cuts are extended, some emphasize a growing budget deficit; others cite expanding tax revenues while others note that as the revenues expand so do the expenditures. In fact, the latter usually outpace the former.

The Skeptical Economist helps by continuously posting the ratio of national debt to GDP. That looks like a useful bottom line -- and it has been slowly falling.

Soft landing

In "Froth in the Silicon Valley Housing Market"?, John Quigley examines why the bursting of the dot-com bubble in 2000 did not cause an equally precipitous drop in Santa Clara county's house prices.

The author makes a number of interesting points. One of them is the tightly regulated supply-side of the housing market in California -- the pride of many planners as they continue to make "the rich" richer but promise that more regulations and developer arm-twisting will enhance the pool of "affordable" housing.

Quigley also notes that many Santa Clara residents found work outside the county in the greater San Francisco area job market. A willingness to commute as well as passable commuting connctions helped the market to absorb the shock.

Quigley also notes that many people enjoy high-amenity Santa Clara county and that its natural charms are also in short supply.

Re the commuting safety-valve, we can manage the auto-highway system better with time-of-day pricing and/or build capacity. In California, we have done too little of each. But it seems that the state's movers and shakers have dodged another bullet. As usual, the choices made by market participants bailed them out.

Bad news bearers

I remember reading an interview with Julian Simon where he tried to fathom why the pessimists (notably Paul Ehrlich) were drawing crowds while he was addressing small roomfuls of listeners. Bob Nelson suggests that it is the attraction of "Calvinism without God."

AEI's Joel Schwartz ("Air Pollution and Health: How Do Popular Portrayals Reflect the Scientific Evidence?") addresses the latest batch of environmental bad news bearers.

There is always piling on by the high-minded. I attended a grade school "winter sing" in Los Angeles a couple of years ago where the poor kids were made to sing about recycling. Parents and teachers around the room appeared to be quite comfortable with the substitution of modern concerns for the seasonal cheer that they may have grown up with.

The view from space

"A view of urban sprawl from outer space" is probably not unintended self-parody -- although one can never be sure.

Defining urban sprawl as scattered development (instead of "planned" and "uniform"?), the researchers used satellite data and aerial photography to find that Los Angeles sprawls less than Boston and that Miami is compact while Pittsburgh sprawls.

Outer space, of course, is where most of the discussion has been. I have never been able to grasp planners' idea that unless there was a clean and clipped urban boundary, there was a problem. But such is the nature of much of the discussion: ad hoc in the service of flimsy notions on behalf of tougher top-down controls.

Thanks to Ashwani Vasishth for the pointer.

Warm glow

May Day in Europe (May 1) is now Labor Day -- not to be confused with U.S. style Labor Days, which are like any other 3-day weekend in America but with the addition of some newspaper editorials and political speeches that allude to the historical contributions of the labor movement and working men and women, etc.

We are in Barcelona, the weather is good, the tourists are everywhere and a moderate-sized parade made its way down Gran Via de les Cortes Catalanes and Via Laietana and then seemed to disperse. There were hammer-and-sickle red flags, Catalonian flags, labor union flags, Cuban flags, Mexican Flags and banners espousing immigration to the U.S.

The shoppers and tourists making their way through all this made for a humorous set of images. Nevertheless, the loudspeakers, drums, and noisemakers probably got the class-warfare juices flowing for some.

Julio Videras and Ann Owen write about the "warm glow" that people get when they participate in high-minded behaviors, including recycling and making contributions to environmental causes. The paper is worth reading.

It is always sad when some economics students learn about pure public goods analysis and infer that the model describes how everyone acts -- and that it prescribes that this is how people should act. Not exactly.