A city’s success depends on its ability to attract talented people and enable the exchange of ideas, goods, and relationships. At these tasks, New York City has long excelled. Its extraordinary concentration of people and firms has generated opportunity not only for those who live there but also for millions beyond its borders.
Increasingly, however, New Yorkers feel that the city’s economy no longer works for them. Housing remains expensive relative to incomes, job growth has been sluggish, and residents face some of the highest taxes in the country. Some fear that New York may be losing the dynamism that has long justified its costs.
Without that dynamism, New York risks becoming a museum: its buildings and institutions will remain, but its people will go elsewhere for opportunity. Population growth across the broader metropolitan area has already been essentially flat for the last half decade. The city can no longer take growth for granted.
Edward Glaeser is a Harvard professor of economics, City Journal contributing editor, author of Triumph of the City, and one of the nation’s most influential urban economists. His ideas about what cities do and why they matter have shaped a generation of urban thought. But what does he make of New York’s current state? I spoke with him about the imperative of growth, the conditions that make it possible, and what it will take for New York City to continue to thrive. The conversation below has been edited for clarity and length.
Adam Lehodey: Let’s begin with the premise underlying much of your work: that cities must remain dynamic. Why does New York depend on continued growth?
Edward Glaeser: Successful urban economies always attract and train smart people, then get out of their way. Their rise or fall depends on their human capital and ability to connect people, enable them to learn from one another, and do these remarkable acts of complex connective creativity. New York really has to cultivate the information advantage that comes when smart people are close to one another.
AL: How does that apply to a city’s population as a whole, including those who aren’t a part of the creative class and don’t feel like the city is working for them any longer?
EG: Plato wrote in The Republic that any city is in reality two cities: one a city of the rich, and the other a city of the poor, and they’re perpetually at war with one another. Urban inequality is completely natural. Cities have rich people because cities are really fun places to be rich, and cities have abundant poor people because they are less intolerable places to be poor.
Cities should never be ashamed of their inequality. But that inequality is only tolerable if cities continue to fulfill their historic function of enabling poor, younger people to become middle income or rich adults.
The available evidence suggests that they’re still doing fine at taking 30-year-olds coming to cities and making them richer. It seems particularly valuable, if you’re a less well-educated person, to be working at a firm where there are more educated people. Cities enable that to happen.
But there’s also evidence that suggests cities are not great places to grow up as a kid. Those who go to a school district right outside the central city tend to do much better than those in central city school districts. It’s important to think about how to get big city school districts to serve the function that they should, to enable such upward mobility.
That was part of the whole dream of the charter school movement, as part of the dream of accountability that Joel Klein tried to do under Michael Bloomberg. We moved the needle a little bit. But for the country as a whole, the last ten years have been terrible, and we’ve gone backwards on schooling.
When cities don’t do a good job of providing upward mobility it generates anger, which in turn led to a progressive wave. But the key is not to respond to that progressive wave by thinking we’re just going to engage in large-scale redistribution or, even worse, defund the police.
Instead, we should redouble on our attempts to make our city governments more functional. Double-down on good management, administration, and on figuring out how to make city governments more functional in ways that help everyone.
AL: So better schools and better education to raise human capital. What else would increase upward mobility?
EG: It’s an outrage that we regulate the entrepreneurship of the poor so much more heavily than we regulate the entrepreneurship of the rich.
If you want to start your AI startup in your NYU dorm room, no one’s going to stop you. But if you want to start a café two blocks away, you’ve got a whole bunch of permits to go through.
More educated people tend to innovate in cyberspace, and there isn’t a big physical side of it. Less educated people don’t have the skills to do that. One job is to get them the skills, but the other is to let them innovate in ways that they know how to do.
New York is aware of this problem and has tried to take steps on this. But I want to make sure we have easier permitting. One-stop-shop permitting, for example, is good because you can judge how well the permitting agency is doing it.
I’m particularly excited about doing more with vocational training, which can be sourced competitively. For example, you can source it to plumbers’ unions, or community colleges, and then pay for performance.
Finally, there’s the business of attraction. If crime rates get out of control, if taxes become prohibitive, or if other things work poorly, then instead of being a talent magnet, New York becomes a talent repellent.
That’s what I worry about in the collision of the progressive dream with the reality of remote-work technologies like Zoom, which makes it easier to relocate. A lot of high human capital people are looking to work from home, but they could move their firms to Texas because they don’t like paying state taxes, or go to Honolulu because they like surfing. All these things are in the cards, and remote work make that easier. You really want to be worried about not repelling that group.
AL: What would it mean if wealthy people remain in New York, but people are disincentivized from investing here?
EG: Florence was one of the wealthiest places in the world for seven hundred years, and it’s had two or three hundred years of being a museum. It hasn’t had much economic dynamism for hundreds of years, but it persists and rich people persist there. The city becomes a museum and does a worse job of taking care of its poor citizens. A city in which no one wants to invest is going to fail to have the dynamism that we hope for in urban areas.
Buildings are fixed, and cities don’t decline at the same speed that they grow. Boom towns can rise almost overnight, but urban declines happen slowly because the building stock is fixed. The canary in the coal mine is that the prices start to drop.
AL: After New York’s rent-stabilization laws were tightened in 2019, it pushed the finances of many buildings into the red. Is it just the owners who pay, and how does that affect the housing market as a whole?
EG: Rent-stabilization certainly creates a benefit for people who are lucky enough to have a rent stabilized apartment. But that gets paid by somebody; it’s not magic money. The cost is imposed on landlords, or perhaps the landlords’ bankers, and it has long-run equilibrium effects.
We should be in favor of policies for which the full costs are obvious from the outset—policies where we all know the costs and can make a societal decision about the trade-offs.
Take housing vouchers, for example: we know what the costs are, it’s a straight budgetary item, and so it’s a relatively appealing policy. It has a bad feature, which is if you’re going to subsidize housing vouchers in a world in which supply is fixed, you’re also going to push up rents. But you can talk about that as well.
That’s the opposite from what I’m going to call a fine-print policy, which is a policy in which the costs are not obvious, and politicians can claim that the costs are minor. Rent control is ultimately attractive because it’s a fine print policy—it’s not obvious how ordinary voters would choose between trade-offs.
AL: What are some of those trade-offs?
EG: You screw up the market in the sense that you lock people in place. And you are not targeting people based on income level, which seems crazy to me.
One of my favorite anecdotes is from Ken Auletta’s The Streets Were Paved With Gold, a great book about New York in the 1970s. It’s an anecdote of Nat Sherman, tobacconist to the world at a store on 5th Avenue, who had a rent-controlled apartment on Central Park West that he paid pennies on. He said, “I think it’s fair because I use it so rarely.” What that means is he wouldn’t have been getting a good deal [at market price], but there were plenty of people who would have loved to have that unit. The fact that he was staying in it, because it was rent controlled, means that it got allocated to someone who didn’t value it instead of going to someone who did value it.
It also means that landlords don’t invest, so the quality of a unit gets worse. We know from the work of Parag A. Pathak and David Autor that when rent control ended in Cambridge, it wasn’t just that the rent-controlled units got nicer; it’s the units around them got nicer as well, as everyone invested in them.
I would certainly rather that whatever you want to do to create affordable units, it be a very clear conscious strategy, not one in which we just randomly impose rent control and screw up the whole market.
AL: What is the strongest case for generating opportunity through market forces, by letting people start businesses and allowing investments, rather than redistribution?
EG: The ultimate cost of a place that doesn’t empower human ingenuity is that the whole world is worse off. Think about the amazing things that New York’s entrepreneurs have been able to do for the last three hundred years in terms of inventing products, coming up with new forms of art, doing all sorts of things that are amazing. This is what cities do at their best: they empower human ingenuity.
And most of the time, government attempts to regulate people only get in the way of that. Governments have a role in providing amenities, making sure crime doesn’t go crazy, and thinking through the educational opportunities for children. The latter is a problem that can be solved in part by charter schools, so it doesn’t necessarily need to be direct government provision, but the government has an obligation to it.
But trying to fix things ex post by regulating, by stopping the ingenuity of ordinary people, means turning off what cities do that’s really magical: enabling people to come and find their dream, because so often when people come to cities and find their dream, they’re making other people’s dreams come true as well.