How do we know that the advantage of living in a city is not merely the result of higher income, more productive people moving to cities? There are three pieces of information which push against the pure selection story that urbanites are just innately better. First, as I’ve mentioned, you can look at migrants — people who move from place to place. While it is true that rural-urban migrants don’t immediately see their wages rise, by five years in the city, they have significantly higher wages than they did before they came. By comparing the same people before and after, we can see something like the true effect of urban location. Second, on observables, including years of education, experience and even I.Q. tests, on the whole urbanites don’t look better than people who don’t live in cities. This can’t rule out selection on unobservables, but it reduces the likelihood of that possibility. Third, if city-dwellers were innately more productive, then we should expect them to earn higher real wages (earnings corrected for housing costs), not just higher nominal wages (take home pay). Yet they typically do not, because city prices offset city wages.
Should we adopt policies to encourage people to move to more productive, richer urban areas? I believe strongly that the right national policy is be spatially neutral. The federal government has no business trying to induce people to locate in one area rather than another. That being said, today’s major anti-urban policies should be rethought. For example, the Home Mortgage Interest Deduction subsidizes owning rather than renting. Yet single-family detached dwellings are overwhelming owner-occupied, whereas multi-unit dwellings are overwhelmingly rented. If the federal government is going to strongly encourage home ownership, it is also strongly encouraging people to leave urban high rises and most into suburban homes. I don’t see much benefit is such social engineering.
The federal government massively subsidizes highway spending, because we pay for the highway trust fund out of general tax revenues these days rather than using gas taxes. That makes little sense to me either. Shouldn’t drivers pay for their own roads? Of course, encouraging more driving means encouraging lower density living. The work of Nathaniel Baum-Snow documents clearly that post-war federal highways significantly increased suburbanization.
Finally, urban schools are the most important deterrent to urban living. There is nothing natural in the U.S. tendency to leave cities for better free education. No Frenchman has ever left Paris to improve access to public schools. We need to do better on the urban schooling front, for human capital is the bedrock on which individual, urban and national success rests.
Since rural areas tend to be older, will rural populations literally die off over the next few decades? Does the declining population make things worse? Declining populations will cause housing prices to fall and this will attract people who can’t afford cities. I suspect population declines will continue in rural America, but I don’t see any total collapse. At the end of the day, it is a great thing that America has so many options for where to live. Some people don’t like urban living and that’s just fine. They should have alternative choices. Great cities are archipelagos of neighborhoods that give people choices.
Remember, I’m an economist, not a lifestyle consultant, and recognizing the economic advantages of cities doesn’t mean that I think everyone should live in one. The real point is that cities can be a great option, but so can farms. But national policy should be neutral, and not subsidize highway driving and suburban home ownership.
While Glaeser did not raise the issue, one aim of the federal government, in our view and the view of many conservative reformers, should be physical as well as economic mobility. We have vast geographic differences not merely because of the rural-vs.-urban divide but between regions of the country. Rather than subsidize people (through unemployment) to stay put where jobs cannot be found, the better policy would be to offer in lieu of weekly unemployment a lump sum relocation benefit that might be used to move either within a state or to another state.
In any event, Glaeser’s analysis deserves greater consideration as we try to navigate through a transition period from a manufacturing society to a high-tech, knowledge-based society.