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Can California Transition to Next Tech Wave?

6 hours 49 min ago

The consumer technology boom, largely responsible for a resurgence in California’s economy after the tech wreck of 2001, seems to be coming to an end. The signs are widespread: slowing employment, layoffs from bell-weather social media companies, the almost embarrassing difficulty of finding buyers for Twitter, the absorption of Yahoo by Verizon and the acquisition by Microsoft of LinkedIn.

This is not to minimize the great things which have been accomplished over 15 years of massive investment in these technologies. Mark Zuckerberg founded Facebook in 2004, and is now worth some $55 billion, up $15 billion from last year. In 2015, more than 1 billion people globally used Facebook applications every single day. The “app economy” created by Steve Jobs and Apple is equally impressive. What would we have done with our free time if it were not for Farmville, Angry Birds and Pokemon Go?

The tech boom has changed the face of wealth in America. Tech oligarchs, mostly clustered in the Bay Area, which dominates some 40 percent of employment in search and web publishing, now account for one quarter of the wealth of the Forbes 400 richest Americans. This tilting of wealth is not going away, and may shape the business world for a generation.

Concentration and contraction

Overall though, the economic impact of these technologies has been limited. Google’s Alphabet Inc. and Facebook Inc. together employ fewer than 75,000 people, one-third fewer than Microsoft, worth only a fraction its value. Snapchat, the star of Silicon Beach, employs several hundred people, hardly enough to reverse a long-term decline in Southern California tech employment.

More troubling still are changes in the Bay Area tech culture. In its 1980s heyday, Silicon Valley was a Wild West of start-ups, new companies and ideas, and lots of jobs. Today, it resembles increasingly the cozy and fundamentally uncompetitive world of Detroit’s Big Three — Ford, Chrysler and General Motors. The Valley is increasingly dominated by a handful of companies — Google, Facebook and Apple — while conditions for startups, even well-funded ones, have deteriorated markedly.

Read the entire piece at The Orange County Register.

Joel Kotkin is executive editor of He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Marshall Toplansky is Senior Advisor to Chapman University in the area of Data & Analytics, as well as adjunct faculty member at the Argyros School of Business and Economics. Formerly Managing Director of KPMG’s national center of excellence in Data & Analytics, Marshall co-founded big data company Wise Window, a pioneer in analyzing social media, blogs and news stories to track and predict business and political trends. Marshall is Chairman of the Cicero Institute, a strategy and research institution in Salt Lake City, Utah. He is past Managing Director of the Harvard Business School Association of Orange County, and was elected to the Computing Industry Hall of Fame for his role in creating the industry’s largest technical service certification program, A+, which has certified more than 3 million computer technicians worldwide.

Trump Will Go Away, but the Anger He’s Stirred Up Is Just Getting Started

Sun, 10/23/2016 - 22:38

For progressives, the gloating is about to begin. The Washington Monthly proclaims that we are on the cusp of a “second progressive era,” where the technocratic “new class” overcomes a Republican Party reduced to “know-nothing madness.”

To be sure, Trump himself proved a mean-spirited and ultimately ineffective political vessel. But the forces that he aroused will outlive him and could get stronger in the future. In this respect Trump may reprise the role played another intemperate figure, the late Senator Barry Goldwater. Like Trump, Goldwater openly spurned political consensus, opposing everything from civil rights and Medicare to détente. His defeat led to huge losses at the congressional level, as could indeed occur this year as well.

Goldwater might have failed in 1964, but his defeat did not augur a second New Deal, as some, including President Lyndon Johnson, may have hoped. Instead, his campaign set the stage for something of a right-wing resurgence that defined American politics until the election of President Obama. Pushing the deep South into the GOP, Goldwater created the “Southern strategy” that in 1968 helped elect Richard Nixon; this was followed in 1980 by the victory of Goldwater acolyte Ronald Reagan.

History could repeat itself after this fall’s disaster. People who wrote off the GOP in 1964 soon became victims of their own hubris, believing they could extend the welfare state and the federal government without limits and, as it turned out, without broad popular support. In this notion they were sustained by the even then liberally oriented media and a wide section of the “respectable” business community.

Three decades later a similar constellation of forces —- Hollywood, Silicon Valley, Wall Street—have locked in behind Hillary Clinton. But it is the transformation of the media itself both more ideologically uniform and concentrated more than ever on the true-blue coasts, that threatens to exacerbate Progressive Triumphalism. In this election, notes Carl Cannon, no Trump fan himself, coverage has become so utterly partisan that “the 2016 election will be remembered as one in which much of the mainstream media all but admitted aligning itself with the Democratic Party.”

 Progressive Triumphalism may lead the Clintonites to believe her election represented not just a rejection of the unique horribleness of Trump, but proof of wide support for their favored progressive agenda. Yet in reality, modern progressivism faces significant cultural, geographic, economic and demographic headwinds that will not ease once the New York poseur dispatched.

Successful modern Democratic candidates, including President Obama and former President Clinton, generally avoid openly embracing an ever bigger federal government. Obama, of course, proved a centralizer par excellence, but he did it stealthily and, for the most part, without the approval of Congress. This allowed him to take some bold actions, but limited the ability to “transform” the country into some variant of European welfare, crony capitalist state.

Hillary Clinton lacks both Obama’s rhetorical skills and her erstwhile husband’s political ones. Her entire approach in the campaign has been based on creating an ever more intrusive and ever larger federal government. Even during Bill Clinton’s reign, she was known to be the most enthusiastic supporter of governmental regulation, and it’s unlikely that, approaching 70, she will change her approach. It seems almost certain, for example, that she will push HUD and the EPA to reshape local communities in ways pleasing to the bureaucracy.

Yet most Americans do not seem to want a bigger state to interfere with their daily life. A solid majority—some 54 percent—recently told Gallup they favor a less intrusive federal government, compared to only 41 percent who want a more activist Washington. The federal government is now regarded by half of all Americans, according to another poll by Gallup, as “an immediate threat to the rights and freedoms of ordinary citizens.” In 2003 only 30 percent of Americans felt that way.

Nor is this trend likely to fade with time. Millennials may be liberal on issues like immigration and gay marriage, but are not generally fans of centralization, fewer than one-third favor federal solutions over locally based ones. 

Due largely to Trump’s awful persona, Hillary likely will get some wins in “flyover country,” the vast territory that stretches from the Appalachians to the coastal ranges. In certain areas with strong sense of traditional morality, such as in Germanic Wisconsin and parts of Michigan, notes Mike Barone, Trump’s lewdness and celebrity-mania proved in the primaries incompatible with even conservative small town and rural sensibilities, more so in fact than in the cosmopolitan cores, where sexual obsessions are more celebrated than denounced.

Yet Trump’s strongest states, with some exceptions, remain in the country’s mid-section; he still clings to leads in most of the Intermountain West, Texas, the mid-south and the Great Plains. He is still killing it in West Virginia. This edge extends beyond a preponderance of “deplorables” and what Bubba himself has referred to as “your standard redneck.”

Exacerbating this cultural and class discussion is the growing division between the coastal and interior economies. Essentially, as I have argued elsewhere, the country is split fundamentally by how regions makes money. The heartland regions generally thrive by producing and transporting “stuff”—food, energy, manufactured goods —while the Democrats do best where the economy revolves around images, media, financial engineering and tourism.

Energy is the issue that most separates the heartland from the coasts. The increasingly radical calls for “decarbonization” by leading Democrats spell the loss of jobs throughout the heartland, either directly by attacking fossil fuels or by boosting energy costs. Since 2010, the energy boom has helped create hundreds of thousands of jobs throughout the heartland, many of them in manufacturing. At the same time, most big city Democratic strongholds continued to deindustrialize and shed factory employment. No surprise then that the increasingly anti-carbon Democrats control just one legislature, Illinois, outside the Northeast and the West Coast.

Trump’s romp through the primaries, like that of Bernie Sanders, rode on the perceived relative decline of the country’s middle and working classes. For all her well-calculated programmatic appeals, Hillary Clinton emerged as the willing candidate of the ruling economic oligarchy, something made more painfully obvious from the recent WikiLeaks tapes. Her likely approach to the economy, more of the same, is no doubt attractive to the Wall Street investment banks, Silicon Valley venture capitalists, renewable energy providers and inner city real estate speculators who have thrived under Obama.

Yet more of the same seems unlikely to reverse income stagnation, as exemplified by the huge reserve army of unemployed, many of them middle aged men, outside the labor force. The fact remains that Obama’s vaunted “era of hope and change,” as liberal journalist Thomas Frank has noted, has not brought much positive improvement for the middle class or historically disadvantaged minorities.

The notion that free trade and illegal immigration have harmed the prospects for millions of Americans will continue to gain adherents with many middle and working class voters—particularly in the heartland. We are likely to hear this appeal again in the future. If the GOP could find a better, less divisive face for their policies, a Reagan rather than a Goldwater, this working-class base could be expanded enough to overcome the progressive tide as early as 2018.

The one place where the progressives seem to have won most handily is on issues of culture. Virtually the entire entertainment, fashion, and food establishments now openly allied with the left; the culture of luxury, expressed in the page of The New York Times, has found its political voice by identifying with such issues as gay rights, transgender bathrooms , abortion and, to some extent, Black Lives Matter. In contrast, the Republicans cultural constituency has devolved to a bunch of country music crooners, open cultural reactionaries and, yes, a revolting collection of racist and misogynist “deplorables.”

Yet perhaps nowhere is the danger of Progressive Triumphalism more acute. Despite the cultural progressive embrace of the notion that more diversity is always good, the reality is that our racial divide remains stark and is arguably getting worse. As for immigration, polls say that more people want to decrease not just the undocumented but even legal immigration than increase it.

And then there’s the mountain rebellion against political correctness. Relative few Americans have much patience with such things as “micro-aggressions,” “safe spaces,” the generally anti-American tone of history instruction whose adherents are largely concentrated in the media and college campuses. Fewer still would endorse the anti-police agitation now sweeping progressive circles. For some, voting for Trump represents the opportunity to extend a “middle finger” to the ruling elites of both parties.

Yet Trump’s appeal also represented something of a poke in the eye for the old-school religious right; Trump has actually helped the GOP by embracing openly gay figures like Peter Thiel. He may have caused many bad things, but the New Yorker succeeded, as no Republican in a generation, in making the holy rollers largely irrelevant.

The dangers for the Democrats lie in going too far in their secularism. As recent emails hacked by WikiLeaks have demonstrated, there is widespread contempt in left circles for most organized religion, most importantly for the moral teachings of the Roman Catholic Church, even under a more progressive Pope. Some Democrats may argue that irreligiosity will remain “in” among millennials. Yet this was also said about boomers and turned out to be wrong. Few sociologists in the 1970s would have expected a religious revival that arose in the next decade.

Simply put, millennials’ economic and cultural views could shift, as they become somewhat less “idealistic” and more concerned with buying homes and raising children. They could shift more the center and right, much as Baby Boomers have done.

No matter what happens this year, the battle for America’s political soul is not remotely over. Trump may fade into deserved ignominy and hopefully obscurity, but his nationalist and populist message will not fade with him as long as concerns over jobs, America’s role in the world, and disdain for political correctness remain. If Hillary and her supporters over-shoot their nonexistent mandate and try to impose their whole agenda before achieving a supportable consensus, American politics could well end up going in directions that the progressives, and their media claque, might either not anticipate or much like.

This piece first appeared in The Daily Beast.

Joel Kotkin is executive editor of He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Photo by Gage Skidmore [CC BY-SA 3.0], via Wikimedia Commons

Unsustainable solutions in the name of sustainability

Fri, 10/21/2016 - 22:38

The other day when I was riding my bike in Minneapolis crossing I-94 near Riverside I encountered a small townhome project built during the first (failed) green era under the Carter administration. It was built to showcase the future. One thing I've learned over the years building my own green homes is to not listen blindly to the experts who parrot others' ideas without thinking of the ramifications.

The world's first solar and earth-berm grass-roof townhome projects look like this today:

The original townhomes were built with earth covered roofs, with south facing solar panels for heating, and stored the heat collected over a long period of time in a room full of boulders. In 1983, I also owned an earth-berm solar heated home overlooking a lake in another part of town. Back then we thought, as the world freezes over (no global warming at that time), we would be nice and toasty in our 'energy-independent' homes powered by the sun itself. I went even further with a 10kW Bergey Wind Generator on a 100' tall tower. Heated by the sun and powered by the wind.

As you see in the above pictures, this experiment, which had the University of Minnesota involved (from what I remember), did not age well, nor did it work - at all! Gone are the solar panels that used to collect the heat positioned along the bare brown steel roof panels, and gone is grass roof that leaked. Banished is the room full of boulders to store the heat, which got so hot often windows needed to be opened to let in cold winter air, a problem my own solar home had also.

In 1983, my 4,000 square foot lake front solar home cost $120,000 and after tax credits, my Wind Generator cost $12,000. These smaller townhome units cost $80,000 at the time. One of the original residents who stayed over the decades experienced failed systems and lawsuits. They eventually sold their home – for $80,000! Quite the investment these fancy schmancy trendy homes. A Nigerian investment scheme via an E-Mail might have been less risky. You would think the first home owners would have been the architects and professors who were behind this project – but they themselves didn’t buy in, so there’s an indication that maybe the idea was not so terrific. This is the lesson I’ve learned, never take advice from anyone who is not willing to personally invest and take the same risk as they suggest to others in a new concept.

The Carter era was a troubled one, with energy widely predicted to be running out, and home mortgage rates as high as 18%. It’s hard to imagine there was any new housing being built, but some were. The initial residents of these townhomes (including myself) believed we were the smart ones, preparing for the energy costs skyrocketing and never having to worry. Hell could freeze over – but we wouldn’t.

That was then, but how does this apply to now, especially with an election just days away?

Hillary Clinton was promising half a billion solar panels on rooftops. OK, now picture the above bare rooftops – that’s how the roofs will look when the lifespan of those half billion heavily subsidized solar panels reach the end of their usefulness - in two decades. Where do you think most solar panels are made today? If you answered China, you deserve a star! And if a roof needs repair or replacement prior to the end of the panels’ lifespan, will the government subsidize the extra cost of repairs? Who will pay for cutting down the mature trees along the streets so that the sun can reach these panels? Oh, wait, you are supposed to keep those mature, beautiful, and value increasing shade trees? My bad. You think Obama Care was a terrible idea… just wait for the Hillary program, and the social engineering sure to follow, and sure to fail.

Trump? I imagine he’d be politically incorrect of course, calling those solar townhomes: ugly, hideously, awful useless, fat, blemished, blight… only unlike comments about women, he’d have a lot who would agree. I don’t know what a Trump administration would look like, but I’m pretty confident that it would not involve social engineering, nor have subsidies go to China or Mexico. I hope that if he had a wind or solar agenda, the panels would be produced here with a fair and proper competition to award the vendors with the best price/performance ratio and make them bond a 20 or 30-year fund if the mechanisms wear prematurely.

I hope that Trump or Clinton look into creating new programs that encourage private new developments or large scale redevelopment to have their own ground based solar gardens instead of the current wave of public investments of solar farms which have federal tax advantages but seem, at least to me, a questionable investment at best. They are even promoting these solar investments at the Best Buy store in Minnetonka, Minnesota with the promise of a consistent energy cost, but they require a 20-year commitment, even though the average home sells once every 6 years.

These are heavily subsidized by you, the tax payers. Some of these solar fields are supposed to supply the power companies themselves, for example Ivanpah in the California desert which was to supply power for PG&E. Ivanpah was a solar system using mirrors heating up over 170,000 panels to create steam, but failed to deliver the power the ‘experts’ promised. Besides killing thousands of birds, the 1.5 billion dollars of your tax money was pretty much a really bad investment – oopsie! A more viable alternative is to create a more localized system as part of new developments or large scale redevelopments.

Having a solar garden in a subdivision eliminates the problem with roof-top application, cleaning ice and snow off the panels, and streets could still have those shade trees. Each resident in the subdivision would have their share of the power and as technology improves, every resident would benefit from the latest technologies – be it solar, wind, or both. Such a Federal program does not exist – but should.

Top photo by [CC0], via Wikimedia Commons

Rick Harrison is President of Rick Harrison Site Design Studio and Neighborhood Innovations, LLC. He is author of Prefurbia: Reinventing The Suburbs From Disdainable To Sustainable and creator of LandMentor. His websites are and

The House Prices are Too Damned High

Thu, 10/20/2016 - 22:38

In recent years, the plight of renters in a stagnant economy has been covered extensively. A book title incorporated the phrase “the rent is too damn high” (by Matthew Iglesias). The “Rent is Too Damn High Party” ran candidates in both city and state of New York elections. However, as bad as rent increases have been, more serious has been the escalation of house prices in the major metropolitan areas of the United States.

The Expected Nexus

Generally, a closely aligned relationship between trends in owner occupied and rented housing costs would be expected . This was certainly true until 1970 (Note 1).  In 1949 there was a 135 percent difference between the lowest median household value and the highest in the major metropolitan areas (Note 2). There was a similar 114 percent difference between the lowest gross rent and the highest (Figure 1). The house value variation was 18 percent higher than the rent variation.

By 1969 median house values varied a maximum of 134 percent from the lowest figure to the highest, a slight reduction from the 135 percent difference across the United States in 1949. Median gross rents varied a maximum of 107 percent among the same metropolitan areas, down modestly from 1949’s 114 percent (Figure 2). The house value variation was 25 percent higher than the rent variation.

The close relationship between the variations in house value and rent   was substantially broken in more recent decades. The 2015 American Community Survey shows that the variation among the major metropolitan areas in median house values is now a staggering 509 percent. The range between the least expensive and most expensive rental markets is a much smaller 158 percent (Figure 3). The difference in the variations between house value and rents across the nation rose to 222 percent, nearly nine times the 1969 figure.

Among the 10 metropolitan areas with the largest house price increases between 1969 and 2015, house values increases averaged 226 percent, nearly 350 percent more than the 65 increase in median rents, both figures inflation adjusted (Figure 4).

Of course, the hideously expensive California metropolitan areas are well represented, such as San Jose, San Francisco, Los Angeles and San Diego, among the most impacted. Even inland Sacramento, with significant housing affordability problems often over-shadowed by the Bay Area, is included. However, the huge differences extend to metropolitan areas outside California, such as Denver, Baltimore, Portland, Seattle and Boston.

The broken relationship between rent and house value could imply severe distortion in either the rental market or the owned housing market.

If the Rent is Too Damn Low

Distortions in the market could have prevented rents to retain their relationship with rising house values.

The implications are ominous. If the increase in rents had kept up with the increase in house values, the median gross rent in the San Francisco metropolitan area would have been approximately $3,700 per month, compared to the actual $1,600 per month in 2015. This would suggest that rents in 2015 were $2,100 below market in San Francisco. If this is true, then the rent is too damn low in San Francisco. The situation would be even worse down the road in San Jose where to keep up with house prices rents need to be $4,700 per month, $2,800 per month higher than market.

If the rental market is distorted, then rents are far too low in other metropolitan areas. In Los Angeles, San Diego, Baltimore, Sacramento and Portland rents are between $1,000 and $1,400 too low. Rents would be at least $800 below market in Boston, Seattle and Denver (Figure 5).

If House Prices are Too Damn High

If the owned housing market became distorted relative to the rental market between 1969 and 2015, then it is the rents that are too damn high.  If house values had risen at the same rate as rents, none of the 53 markets would have exceeded a price to income ratio of 5.0, which denotes is denoted as “severely unaffordable” in the Demographia International Housing Affordability Survey. This would be a substantial improvement, given that 11 major markets actually were severely unaffordable in 2015.

The 10 major metropolitan areas with the largest house value increases would have had hugely lower house prices. In San Jose, the median house value would have been equal to 3.2 years of median household income in 2015. This is considerably better than the actual 8.1 years, representing a 55 percent improvement. In San Francisco the median house value would have been equal to 3.5 years of median household income. This would be a 60 percent improvement on the actual 8.1 ratio in 2015 (Note 3). 

In Los Angeles, Portland, Sacramento and San Diego, house values would have been about 50 percent less if they had risen at the same rate as rents. In Boston, Denver and Seattle, house prices would have been between 40 percent and 45 percent less (Figure 6).

It’s the House Prices that are Too Damned High

Rents have risen faster than incomes, but nothing compared to the increase in house prices. Clearly, house prices are too damn high. The huge increase between 1969 and 2015 in house prices is an anomaly that has become extreme in recent decades. The ranges in rents (1949, 1969 and 2015) and the ranges in house values in 1949 and 1969 were far more similar and reflected a reality more in line with the stability that would be expected in non-distorted markets (Figure 7). Indeed, the large increase in the 1969-2015 rent range could well have been influenced upward by the virulent house price increase (reflected in land prices).

It seems likely that rents across the country are much more reflective of an efficiently operating market, while there are serious distortions in the owned housing market.

Finally, owner-occupied housing, especially detached housing, has been under assault by restrictive urban planning regulations since 1970. House prices are most out of alignment in markets where this has occurred, especially in California, Oregon, Washington, and the Denver, Baltimore and Washington, DC metropolitan areas. More often than not, these regulations have evolved into urban containment policy (Note 4), which draws arbitrary lines around cities beyond which detached housing tracts are not permitted (See: Urban Containment, Endangered Working Families and Beleaguered Minorities). Obviously, as in goods and services generally, this regulatory over-reach makes housing less affordable (See: People Rather than Places, Ends Rather than Means: LSE Economists on Urban Containment).

There has been no such assault on multi-family building, which represents the bulk of rentals. This is not to suggest that rental regulation is perfect, only that the market distortions have been far more severe in reference to the owned housing market in some metropolitan areas, such as those identified above.

All of this has serious consequences for the nation and its threatened middle income households. With median household incomes below nearly two decades ago (perhaps for the first time in US history), economic stagnation and younger people burdened by rising college debt, lower house prices are a necessity in the over-regulated metropolitan areas. Yet there seems little desire on the part of most governments, particularly in the most severely impacted markets, to do much about it.

Note 1: These censuses collected house value and rent data for the previous year, 1949 and 1969 respectively. The rent and house value data referenced in this article was first available in the 1950 census.

Note 2: The 53 metropolitan areas with more than 1,000,000 population in 2015 (in 1950, only 51 of these had achieved metropolitan area status). The rent ranges cited in this article are calculated by dividing the highest major metropolitan area rent by the lowest major metropolitan area rent in the particular year. The house value ranges cited in this article are calculated by dividing the highest major metropolitan area house value by the lowest major metropolitan area house value in the particular year.

Note 3: Some analysts cite topographic barriers for creating the scarcity of land that has driven house price up so much in the San Francisco Bay Area (which includes both the San Francisco and San Jose metropolitan areas). As indicated in a previous article, there is far more land available for greenfield residential development in the Bay Area than would be required by even the strongest population growth.

Note 4: With respect to urban containment policy, Boston is an exception, which is the only seriously unaffordable major metropolitan area in the Demographia International Housing Affordability Survey that does not have urban containment policy. Boston has large lot zoning so expansive that it has created a severe shortage of land for development, with urban containment-like effects on house prices. Boston’s urbanization covers more land area than all urban areas in the world except New York and Tokyo, despite having only a fraction of their populations (See: The Evolving Urban Form: Sprawling Boston).

Photo: Sacramento: An inland California unaffordable housing market (by author)

Wendell Cox is principal of Demographia, an international public policy and demographics firm. He is a Senior Fellow of the Center for Opportunity Urbanism (US), Senior Fellow for Housing Affordability and Municipal Policy for the Frontier Centre for Public Policy (Canada), and a member of the Board of Advisors of the Center for Demographics and Policy at Chapman University (California). He is co-author of the "Demographia International Housing Affordability Survey" and author of "Demographia World Urban Areas" and "War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life." He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

The US Census Digs Deeper: Where Were Your Ancestors From?

Wed, 10/19/2016 - 22:38

Over 45 million Americans identify their dominant ancestry as German and 22,000 identify theirs as Marshallese, from the Marshall Islands in the Pacific. But in the US Census proposed new form for 2020, both of these groups get their own box to check for the first time. In the previous 2010 form (shown below), German-Americans would simply check ‘White’ and Marshallese-Americans would check ‘Other Pacific Islander’.

In the 2020 form therefore, the US Census is seeking more disclosure and more granularity in the population data. This desire for more detail is not evenly spread however. The Marshallese, 0.01% of the US population, get as much real estate on the form as do German-Americans, 14% of the population. Germany being a country of many regions and Bundesländer, there would surely be more fragmentation in that 14% if anyone cared enough to know the percentage who claim for example Bavarian vs. Hessian ancestry.

This extra layer of detail would make sense if the US Census was agnostically gathering data about ancestry. The Census would then determine a certain hurdle, say 1% or 2% of population, beyond which a group would get its own check box. But as we will see below, the Census has specific policy-related reasons for gathering this data.

Fifty Shades

The proposed new form (shown below with annotations by Pew Research) has nearly tripled in size from 2010 and now includes a new section for Americans of ‘Middle Eastern or North African’ (MENA) ancestry who had been until now categorized as ‘White’. Notwithstanding this new privilege, the six national origins listed in the MENA section (Lebanese, Syrian, Iranian, Moroccan, Egyptian and Algerian) altogether add up to well below 1% of the population.

Of course, this is the percentage of people who ‘self-identify’ as Middle Eastern or North African. Their actual number is likely to be higher if you account for the fact that some still prefer to self-identify as white. Even with this adjustment however, the MENA groups probably don’t exceed 2% of the population.

A similarly sized section is reserved for ‘Native Hawaiian and Other Pacific Islander’ (including the Marshallese) but here again, the entire section and its six choices represent a small percentage that is less in total than 0.25% of the population. Here then are six choices to cover fewer than 0.25% of Americans, same as the six choices under the ‘White’ heading to cover 60%+ of Americans who are of European descent.

Because each major heading only includes six ethnic or national identifiers, many large groups of Europeans are not represented by the available choices. For example, Scottish and Norwegian are 5.5 million and 4.4 million, or 1.7% and 1.4% of the population, but are not on the form.

Even within a section, the inclusion of some countries and exclusion of others are not straightforward. For example, in the new ‘Hispanic, Latino or Spanish’ category, Guatemalan with a population of 1.38 million is left out to make room for Colombian with 1.08 million. This may come from a desire to have at least one South American country listed among the six in this category. By contrast in the 2010 census, most Americans of Hispanic, Latino and Spanish ancestry would check the ‘White’ box.

In its effort to obtain a comprehensive picture, the Census has to grapple with the complication of data that is is part race, part ethnicity and part national origin.

One solution is to do away with the headline categories (White, Hispanic, Black, Asian etc.) and to simply list the 40-odd subcategories. Yet this would still overweigh some and underweigh others.

Another solution then is to simply list all the countries of the world. But this in turn would not provide enough information on race. Is an American of South African ancestry black or white? To be thorough, an adjacent question could request this information. But then is an Argentinian of German ancestry ‘White’ or ‘Hispanic, Latino or Spanish’? Is the Paris-born son of Moroccan immigrants ‘French’ or a descendant of MENA ancestors?

The point here is that there is little racial or ethnic homogeneity in many countries, even if most Americans associate their own ancestry with one or two specific nationalities. The key phrase in this data collection is ‘self-identify’, meaning the way each American chooses to identify him or herself. The offered choices are in many cases convenient shortcuts rather than objective identifiers.

Data for Policy

A third solution in theory would be to opt for simplicity and to do away with this type of data collection altogether. Not all nations request this information in their censuses. Censuses in Italy, the Netherlands, Norway and other countries make no mention of race or ethnicity. France passed a law in 1978 that makes it illegal for the census to collect data on race or ethnicity. A Brookings Institution article explains:

Unlike many other West European countries, and very much unlike English-speaking immigrant societies such as the United States, Canada or Australia, France has intentionally avoided implementing “race-conscious” policies. There are no public policies in France that target benefits or confer recognition on groups defined as races. For many Frenchmen, the very term race sends a shiver running down their spines, since it tends to recall the atrocities of Nazi Germany and the complicity of France’s Vichy regime in deporting Jews to concentration camps. Race is such a taboo term that a 1978 law specifically banned the collection and computerized storage of race-based data without the express consent of the interviewees or a waiver by a state committee. France therefore collects no census or other data on the race (or ethnicity) of its citizens.

The article goes on to discuss some policies and laws that were adopted to fight racism and to improve conditions in economically depressed parts of the country.

The US however is different in many ways. It has several large groups of different ethnicities and a longer history of often difficult race relations. The US Census addresses the question of race data collection on its website:

Why does the Census Bureau collect information on race?

Information on race is required for many Federal programs and is critical in making policy decisions, particularly for civil rights. States use these data to meet legislative redistricting principles. Race data also are used to promote equal employment opportunities and to assess racial disparities in health and environmental risks.

Looking at each in turn,

Federal programs: It makes sense for the Census to identify the location of communities that receive some kind of government attention or assistance. Yet, when you consider the new form, it is not entirely clear why some programs should be tailor made for say Egyptian-Americans (represented on the new form, though only 0.08% of the population) but none for the numerous Scots-Irish (not represented, though 1% of the population) some of whom, according to this new book, have long endured a weak economy in Appalachia and would certainly welcome some assistance.

One explanation is that the Census is counting the groups that are more likely to experience discrimination rather than any group that happens to be suffering economic distress. But if this is the case, why then have the choices of German, Irish, English etc. instead of just White?

Redistricting:As often discussed elsewhere, redistricting that takes race or ethnicity in consideration can easily lead to gerrymandering, an undesirable way to define district boundaries.

Employment, Health, Environment:Here again as with Federal Programs, it is not immediately obvious why the Census needs more granularity than it already had in 2010.

Outside of the provision of government programs to specific groups, there seems to be no compelling reason for the Census to collect and distribute data on race, ethnicity or national ancestry. Of course, corporations also find this data useful in their effort to market their products to people of various cultural affinities. But private demographers could easily fill the gap if the Census did not collect the data with sufficient detail.

The big question is whether the Census should be asking this question in the first place. Could government programs be effective by targeting poorer parts of the country without any data on race or ethnicity? It may be a good idea to analyze the experience of France in this regard.

Politicians may like the fragmented information that helps them tailor their message specifically to the audience in every locality they visit. But on any given issue, a national politician should offer a consistent message whether he is speaking to a crowd in Minneapolis, San Diego or New York. And a local politician would already have a close knowledge of his district’s or state’s demographics.

This piece first appeared at

Sami Karam is the founder and editor of and the creator of the populyst index™. populyst is about innovation, demography and society. Before populyst, he was the founder and manager of the Seven Global funds and a fund manager at leading asset managers in Boston and New York. In addition to a finance MBA from the Wharton School, he holds a Master's in Civil Engineering from Cornell and a Bachelor of Architecture from UT Austin.

Photo: Travelin' Librarian

A Capital Improvement and Revitalization Idea for Detroit

Tue, 10/18/2016 - 22:04

You may have heard that Detroit is in the midst of a modest but enduring revival in and around its downtown. Residents and businesses are returning to the city, filling long-vacant skyscrapers, prompting new commercial development and revitalizing adjacent old neighborhoods. As a former Detroiter I'm excited to see the turnaround. After so many false starts, Detroit's post-bankruptcy rebound seems very real.

However, there seems to be a growing awareness that the city's current revival has its limits. On one hand, what's happening now in Detroit could be considered a rather elongated recovery for the city instead of growth, as the city races to catch up with cities that have had a 20-year head start on urban revitalization. One could argue that the Motor City is slowing losing its taint, and the investment that's coming to the city now is investment that never left, or never left at such a scale, in other cities. Maybe its reclamation rather than revitalization.

But more broadly speaking, there's a sentiment that the city's revival hasn't been inclusive. In a majority-black city, startlingly few African-Americans appear to be involved in the rebound, either as developers, homebuyers or even consumers of new amenities. Because of this, two vastly different kinds of fears seem to trouble much of the city's black community -- the revitalization could burn through the city like a wildfire and lead to widespread displacement, or the rebound could peter out before it has a chance to transform even more of the city.

How can that be? Maybe because people and businesses are coming back not because of an economic change in the city, but a socio/cultural one. Detroit is still the Motor City, and that won't change anytime soon. Detroit will remain the headquarters of American auto production and be a key manufacturing center for generations to come, and it will continue to ride the wave of manufacturing ebbs and flows. That's why I say the economy is driving little of what's happening in Detroit today. The Big Three are only eight years away from a true existential threat, and are still in the process of righting the ship. By my eyes, Detroit still hasn't found a new economic raison d'etre that could vault it into the next phase of its development.

As the fears that drove white and middle-class flight from the city from the 1960's onward recede into the distant memory, many people are willing to reconsider Detroit and return.

Detroit is at an interesting juncture in its history. After 125 years of focusing on its national and global economic prominence and leaving city-building behind, maybe now Detroit can focus on being a thriving, livable city. For everyone. There is an opportunity for Detroit to build on its rich urban design legacy to include more of the city, and more of its people, in its revival. There is an opportunity to set the stage for good -- even innovative -- urban development in the Motor City as the city continues to search for a new economic catalyst.

I believe the city should undertake a capital improvement/revitalization plan that utilizes its grand arterial streets -- Gratiot, Woodward Grand River and Michigan avenues -- and Grand Boulevard, the parkway necklace around the city's inner core, as assets and foundations for growth. After that, the city could extend similar improvements to the locations where the arterial streets intersect with the defunct Detroit Terminal Railroad, further out from the city center. Finally, the improvements could be extended even further outward to Detroit's other boulevard necklace, Outer Drive, near the city limits. Just as interstate highway development had the net impact of opening up outer bands of suburbia to city residents, this plan could open up languishing parts of the city for revitalization.

Here's the five-phase process:

• Transform Gratiot, Woodward, Grand River and Michigan avenues into true boulevards -- landscaped medians, streetscaping, wide sidewalks, bike lanes, etc. -- from their sources in downtown Detroit to their intersections with Grand Boulevard.

• Establish public squares where each new boulevard intersects with Grand Boulevard.

• Develop a connected greenway along the path of the former Detroit Terminal Railroad.

• Extend boulevard treatment along Gratiot, Woodward, Grand River and Michigan avenues to a new terminus at Outer Drive.

• Complete and connect Outer Drive where necessary, and establish new public squares where the boulevards intersect with Outer Drive.

Each step of the plan would include zoning changes along the affected areas with the intent of increasing residential and commercial development choice, and send a signal that the city is ready for transformation.

Here's how this project would look conceptually, looking at the entirety of Detroit:

First, please excuse my crude Microsoft Paint illustration. Hey, it serves its purpose. Second, let's consider the broad areas of the city highlighted in various colors. The green areas are the downtown and downtown-adjacent areas that have been experiencing a pretty significant rebound over the last 5-10 years. In fact, you could say that revitalization took hold there with the opening of the Comerica Park baseball stadium in 2000 and the Ford Field football stadium in 2002. This area also includes the Midtown area north of downtown that includes Wayne State University and a host of city cultural institutions. The orange areas are the parts of the city that capture the dystopian imagination of Detroit. This area is quite -- but not totally -- abandoned, where much of the city's older residential and industrial treasures have been lost. There's still some intact neighborhoods that have a solid walkable foundation, but they're often disconnected from each other by some serious abandonment. The yellow areas are the areas that might be described as imperiled; they could soon look like the orange zone if action isn't taken, and in fact some parts of it (like the Brightmoor neighborhood, on the far west side, are quite abandoned already). The gray or uncolored areas on the far northeast and northwest edges of the city represent the most stable residential neighborhoods of the city, but they, too, are threatened by the challenges experienced by the rest of the city.

When you hear Detroiters expressing concern that downtown revitalization isn't reaching the neighborhoods, they often come from the yellow and gray/uncolored areas, with fewer and fewer voices coming from the relatively open orange areas. Viewed this way it can be understood that people see the city's rebound as having a low ceiling; there is a half-empty quarter that sits between them and the promise of revitalization.

My idea is to utilize strategic infrastructure investment and zoning reform to attract new development to key corridors, utilizing the city's radial network. The radial blue lines on the map emanating from their intersection downtown represent (clockwise, from the left) Michigan, Grand River, Woodward and Gratiot avenues. The blue line that connects them, just outside the green revitalization area, is Grand Boulevard. The blue line that connects the radial streets further out is Outer Drive. The green stars represent public squares or plazas that could be built, and the light green circles indicate an approximate extent of impact outward from the squares or plazas. The green line that serves as the dividing line between the yellow and orange areas is the Detroit Terminal Railroad, and it would become a connecting trail.

Detroit was blessed early on with an excellent radial street system, but it quickly abandoned it as growth took hold in the early 20th century. Detroit missed an opportunity for grand public spaces at the same time that other cities were incorporating them into their urban fabric -- and those public spaces became the foundation for their rebound. Consider this image, where Grand River Avenue intersects with Grand Boulevard:

Or, worse yet, where Gratiot Avenue and Grand Boulevard meet:

This was a missed opportunity for Detroit to have majestic entryways into neighborhoods beyond the city center. This was also a missed opportunity to develop areas that could become more mixed use and multifamily in character, as opposed to the dominant single-family home city that Detroit is today.

If Detroit had the foresight 100 years ago to make strategic infrastructure investments, it could have put in place something like Chicago's Logan Square, located at Milwaukee Avenue and Logan Boulevard (also a radial street and boulevard intersection):

Or Logan Circle, in Washington, DC:

The public squares on the radial avenues could have the effect of drawing development and revitalization outward from the city center, as has happened in Chicago and DC. This could continue outward to the DTR trail and Outer Drive, if the city sees success in such a measure, finds the appropriate resources and desires to extend it further.

Detroit should certainly see the merits of such an investment. The city renovated and rededicated a new Campus Martius Park in 2004, and it has become a focal point for downtown revitalization.

Without a doubt, this would be a costly measure, maybe even a folly for a city just out of municipal bankruptcy and still struggling to provide basic city services. that's why I would envision this as a long term proposal, perhaps a 10-year project.

That's the basis of the idea. I'll follow up with more details soon.

Top photo:

Pete Saunders is a Detroit native who has worked as a public and private sector urban planner in the Chicago area for more than twenty years.  He is also the author of "The Corner Side Yard," an urban planning blog that focuses on the redevelopment and revitalization of Rust Belt cities.

Today’s Orange County: Not Right Wing—and Kinda Hip

Mon, 10/17/2016 - 22:38

What comes to mind when you think about Orange County? Probably, images of lascivious housewives and blonde surfers. And certainly, at least if you know your political history, crazed right-wing activists, riding around with anti-UN slogans on their bumpers in this county that served as a crucial birthplace of modern movement conservatism in the 1950s.

Yet today, Orange County—or the OC, as locals call it—is becoming a very different place. Today close to half the population of this 3-million person region south of Los Angeles are minorities, primarily Latino and Asian, and the county’s future belongs largely to them.

These days you color the OC both ethnically diverse and politically purplish. The Republican share of the electorate has dropped from 55 percent in 1990 to under 40 percent today. Two of the seven people who represent the area in Congress are Latino, and a third is of Middle Eastern descent. Four of the 10 people the county sends to Sacramento are minorities, three Asians and one Hispanic. Asians, now 20 percent of the local population, represent the majority on the county Board of Supervisors. In 2012 Mitt Romney took the county with 53 percent of the vote; this year it may be far closer than that.

The cultural landscape is also changing. What was historically a land of hamburger dives (we still have some) and little Mexican restaurants (we have many) is now home to some of Southern California’s best restaurants—including two on the top 30 list ofLos Angeles Times food critic Jonathan Gold. The OC is also home to one of the country’s leading venues for new plays, South Coast Repertory. Alongside the ubiquitous malls have arisen some of the nation’s most innovative urban environments, some of them revived small town main streets, from Santa Ana’s 4th Street Market to Orange to Laguna Beach and Fullerton.

When urbanists talk about the future, they usually imagine an environment of dense buildings, connected by train transit and highly centralized workplaces. Yet the bulk of all the nation’s economic and population growth takes place in “post-suburbia,” a term first applied to the OC. Post-suburbia, noted two urban scholars in 1991, reflects a “decentralized, multi-centered area” that puts “into question the mainstream urbanist’s concept of central-city dominance.”

This new geography of urbanity—far more than the much-discussed recovery of the urban core—dominates our metropolitan life; since 2000 over 80 percent of all metropolitan area jobs and population have remained outside the urban core. Post-suburbia predominates among our most demographically and economically vital regions, including STEM-intensive regions such as Silicon Valley, the northern reaches of Dallas, the western suburbs of Houston, Johnson County west of Kansas City or virtually anything around Raleigh or Austin. Orange County’s STEM sector (PDF) has expanded at twice the rate of L.A. County, despite all the considerable hype about the emergence of “Silicon Beach.”

Post-suburbia was not designed to be a traditional commuter suburb, where people pile onto trains or the highways to get “downtown.” The vast majority of OC people work in the plethora of county worksites, and many others, particularly from the Inland Empire to the east, drive into the area for work.

What places like the OC sell is both work and quality of life. The area ranks 10th out of 3,111 counties in the U.S. for natural amenities, and even outpaces Los Angeles among cities for best recreation. The roads are less congested, and there’s more open space. Urban Los Angeles has 9.4 acres of parks and recreation areas per 1,000 residents; Irvine has 37 acres per 1,000 residents, meaning that over 20 percent of the city’s land is dedicated to parks, five times the national average. No wonder the Irvine city motto is “Another Day in Paradise.”

All changes are not for the better, of course, and one of the chief problems in today’s OC is the cost of housing. Irvine is a city of 236,000 people that was once a classic Anglo suburb and is now 40 percent Asian and less than half white. Housing, once distinctly middle class, now averages near $800,000, in large part due to purchases by Chinese investors. According to the real-estate information firm DataQuick, the 25 most common last names of homebuyers last year were Chen, Lee, and Wang.

The landscape has also changed, with massive rows of multi-family houses crowding the wide boulevards of the city, clogging traffic and making “paradise” a little less bucolic. Since 2000, Orange County’s prices have increased 3.5 times that of incomes, one of the highest rates of increase in the country. The middle class who came to experience a Disneyland urban existence now finds the county largely beyond their means.

These price increases have benefited many older property owners, particularly along the strip near the Pacific Ocean—now among the most expensive places to live in the country—but have sent rents soaring as well. Santa Ana, right next door to Irvine, is home now to much of the county’sgrowing homeless population, now estimated at 15,000, in large part reflecting rents increasingly out of reach to the working poor. If one full-time worker rents a two-bedroom apartment in Orange County they can expect to spend over 40 percent of their income (PDF) on rent.

High prices are making the OC increasingly unaffordable for young families. Despite the assertions by density advocates, most millennials remain deeply interested in home ownership and generally move to places they can afford a house, which is usually somewhere else. This is one reason why Orange County, once an epicenter of youth culture, is going grey—and quickly.

Orange County’s old folks feel little reason to move, short of being carried out feet first. The OC’s perfect weather, coupled with Proposition 13 protections, keeps seniors in their homes long after their offspring have left. With grey ponytails common even among surfers, the OC by 2040 is on track to be the oldest major county in California.

The big hope may be the aging of millennials who by 2018 will on average be over 30. With safe cities and exceptional schools, the OC is a great place for “grownup millennials” looking to raise a family. Kina De Santis, CMO of the Orange County-based tech startup Motormood, calls it “very family oriented,” and Lee Decker, CMO at IGNITE Agency praises it for having the right environment for those with families who still want to focus on their startups, explaining, “As I prepare to get married to my kick ass and ridiculously supportive fiancé, I’m deciding to firmly root myself here in OC.” 

In a famous scene from the play Hamilton, the future treasury secretary and his friend, Marquis de Lafayette, celebrate America’s revolutionary victory with the words—“immigrants, we get the job done.” As the OC evolves in the coming decades, the fast-growing foreign born population, and their offspring, will play the leading roles.

In 1970, 80 percent of OC residents were non-Hispanic white. Many feared new immigrants, with the OC Grand Jury—a body of 19 to 23 members impaneled for one year to investigate and report on both criminal and civil matters within the county—in 1993 calling for a three-year ban on all immigration. Since 2000, the area’s Latino growth rate has been roughly 50 percent greater than Los Angeles’s. By 2014, the non-Hispanic white population dropped to 43 percent of the population, while the Hispanic share rose to 35.3 percent.

The growth of the Asian population has been, if anything, more dramatic. One critical turning point was the arrival of the Vietnamese after the 1975 fall of Saigon, which turned Westminster from a sleepy town to one of the largest settlements of Vietnamese outside the mother country. More recently, Koreans and ethnic Chinese have arrived in significant numbers.

Since 2000, Orange County’s Asian population has been growing at roughly 3 percent annually, roughly 50 percent faster than Los Angeles County. The OC’s rate is roughly equal to that of such Asian migration centers as Santa Clara, San Francisco, and New York. Overall, Orange County is the nation’s fourth most heavily Asian county over 1 million, at roughly 20 percent.

Although they differ in appearance from the old OC denizens, these new OC residents are attracted by many of the same things that brought earlier immigrants to the area—single family homes, parks, and good public schools. They have created a dazzling series of ethnic “villages” from the heavilyVietnamese band from Westminster to Garden Grove, to the expanding “Little Korea” in the same area, the “Little Arabia in Anaheim and the El Centro Cultural de Mexico, located in Santa Ana.

These newcomers and their kids are reshaping the OC’s culture, which plays a huge part in the area’s economy, employing well over 50,000 people; overall, the county lags only New York and Los Angeles in terms of the role of creative industries. In the past much of this was tied to the surfer culture, most notably serving as the fashion capital of the surf wear world—known to some Boomer adepts as “Velcro valley,” built around surf wear icons Hurley, Quicksilver, and O’Neill. The creative sector is adding jobs across a range of other industries such as architecture and interior design. Orange County is increasingly proving itself capable to draw the talent and support the lifestyle to compete with other creative powerhouses such as Los Angeles and New York.

Immigrants provide much of the impetus. Much of the best food in Orange County is produced by newcomers and their children. The immigrant reshaping of the OC also is reflected in the bustling ethnic shopping malls that dot the county, packed with shops selling groceries, clothing, travel packages, and videos to the increasingly diverse population. Even more important is the growing cross-fertilization of ethnic styles and tastes. Urban amenities such as locally owned restaurants, bars, and retail shops at Huntington Beach’s Pacific City, keep things interesting as people are increasingly looking to spend their money on regionally tuned experiences (PDF), rather than typical suburban chains.

Perhaps the most influential figure here is Shaheen Sadeghi, a Persian-American and former CEO of the surf wear line Quicksilver. Sadeghi’s company has taken a dozen sites, many of them deserted industrial and warehouse spaces, and converted them into exciting urban spaces. Perhaps his most impressive is the Packing House in Anaheim, a gigantic food court located in a former fruit-packing facility, which teems with ethnic food vendors.

Critically, Sadeghi’s vision goes well beyond the usual urbanist dreamscape of a culture dominated by hip singles and childless couples. He wants to appeal to families, just in an updated way. “The international community tends to be more family oriented,” he notes, “on the weekend at the Packing House you’ll see a family from Asia putting all the tables and chairs together.”

Building this new vision for OC will not be easy, he realizes, given the regulatory vise exercised by California regulators on small business. Yet he sees the area’s decentralization—epitomized by the county’s 34 separate cities—as providing consumers with greater diversity and choice. “Each city has its own identity, brand, and culture,” he suggests. “It’s like there’s more cookies in the cookie jar.”

Sadeghi is bringing the old OC model to the future, proving that post-suburban “sprawl” can coexist with diversity and culture. Like the visionaries who created Disneyland, Irvine and other earlier iconic expressions of the county’s past, innovators like Sadeghi are willing to buck models, urban or otherwise, in pursuit of a unique sensibility. The OC should not aspire to become another Brooklyn, he suggests, but exploit all its natural advantages, as well as its efflorescent diversity to reinvent itself. “After all,” he says with an inner reassurance those of us who live here tend to have, “we still have a couple of things no one else has—ocean and good weather. And they aren’t going away.”

Joel Kotkin is executive editor of He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Two Cheers for NIMBYism

Mon, 10/17/2016 - 02:38

Politicians, housing advocates, planners and developers often blame the NIMBY — “not in my backyard” — lobby for the state’s housing crisis. And it’s true that some locals overreact with unrealistic growth limits that cut off any new housing supply and have blocked reasonable ways to boost supply.

But the biggest impediment to solving our housing crisis lies not principally with neighbors protecting their local neighborhoods, but rather with central governments determined to limit, and make ever more expensive, single-family housing. Economist Issi Romem notes that, based on the past, “failing to expand cities [to allow sprawl] will come at a cost” to the housing market.

A density-only policy tends to raise prices, turning California into the burial ground for the aspirations of the young and minorities. This reflects an utter disregard for most people’s preferences for a single-family home — including millennials, particularly as they enter their 30s.

In California, these policies are pushed as penance for climate change, although analyses from McKinsey & Company and others suggest that the connection between “sprawl” and global warming is dubious at best, and could be could be mitigated much more cost-effectively through increased work at home, tough fuel standards and the dispersion of employment.

Read the entire piece at The Orange County Register.

Joel Kotkin is executive editor of He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Diedre McCloskey’s Trickle-Out Economics

Fri, 10/14/2016 - 22:38

Economics, history, English and communications Professor Diedre N. McCloskey, of the University of Illinois, Chicago offers a unique interpretation of economic history  that is well summarized in the subtitle of her book, “Bourgeois Equality: How Ideas, Not Capital or Institutions Enriched the World.”

This is a magisterial volume, which Matthew Ridley praised in his Times of London review, saying “It is so rich in vocabulary, allusion and fact as to be a contender for the great book of our age.” That is not an exaggeration.

As would be expected of any economic history, McCloskey emphasizes the material advancement that has transformed human lives in so much of the world since 1800. Finding that that the cradle of this advancement was northwestern Europe, and in particular the Netherlands and Great Britain, McCloskey rejects notions of geographic or cultural determinism, suggesting it could have arisen from other parts of the world, especially China and India.

Not Capital Nor Institutions

Despite predominant theories to the contrary, neither capital accumulation nor institutions were pivotal in the substantially rising standards of living. McCloskey creatively illustrates the problem with institutions:

“You can set up British – style courts of law, and even provide the barristers with wigs, but if the judges are venal and the barristers have no professional pride and if the public disclaims them both, then the introduction of such a nice sounding institution will fail to improve the rule of law.”

She rejects the idea that the progress of the previous two centuries represented the continuation of progress already underway. Indeed, annual economic growth had staggered along at from less than 0.1 before 1800. McCloskey contrasts this with what she calls a “hockey stick” phenomenon, in which per capita incomes grew by factors of from 10 to 30 times --- 1,000 percent to 3,000 percent  per cent from 1800 to 2010.

The Problem

The problem was the bifurcation of society into a small privileged class and a far larger number of commoners, the bourgeoisie. Opportunity was largely limited to the privileged class.

“The former aristocratic or Christian or Confucian elites, then, had contempt for business, and taxed it or regulated it at every opportunity, keeping it within proper bounds. Such social regulation was the chief obstacle preventing the march to the modern, namely, the withholding of honor from betterment and dignity from ordinary economic lives.”

The result was a social structure characterized by “extortion, not protection,” what McCloskey calls the “Aristocratic Deal.”

The Great Enrichment

However, this was to change in the years leading up to 1800. McCloskey describes changing attitudes that encouraged participation of commoners and a “partial erosion of hierarchy.” The “Aristocratic Deal” was replaced by the “Bourgeois Deal,” which became “unevenly, the ruling ideology.”

“The deal crowded out earlier ideologies, such as ancient royalty or medieval struck aristocracy or early modern mercantilism or modern populism. The bettering society of liberalism which, when true to itself, was not led by the great king or the barons of the bureaucrats or the mob, all of whom took their profits from zero sum and the monopoly of violence.”

McCloskey refers to this advancement as the “Great Enrichment.” The key was what she calls “trade-tested betterment,” characterized as commoners joined   a free market for ideas. All of this led to a radical improvement in the standard of living, the result of “allowing free entry to compete with the monopolies that the aristocrats or the plutocrats had arranged under the aegis of a captured government.”

This liberated ordinary people, who became generally equal under the law who were “freed from ancient suppression of their hopes.” The Great Enrichment, she says, is the most important secular event since the invention of agriculture,” adding that it “restarted history.”


But for all the progress, there have been strong headwinds. According to McCloskey, the rhetoric took a decidedly negative turn about around 1848, the banner year of revolutions. It was led by the “clerisy,” artists, the intelligentsia, journals, professionals and bureaucrats, which “misled its earlier commitment to a free and dignified common people.” She attributes the attack to a “new and virulent detestation of the bourgeoisie.”

In more recent years, the clerisy has sought to replace the focus on equality of opportunity with equality of results. McCloskey objects, so much so that a chapter is entitled: “What Matters is not Equality of Outcome, but the Condition of the Working Class.” She effectively makes the case that poverty can be generally measured only absolutely, not relatively.” Otherwise there can be no eradication of poverty. “

Nonetheless, she is concerned about low income citizens, indicating the need to find effective ways to reduce poverty. She shares the concerns of the Left: “In our desire to help the poor, we bleeding heart libertarians stand in solidarity with our social democratic friends – if not usually agreeing with them on exactly which policies have helped the poor.” Her concern is that “we actually help the billion [the world’s remainingpoor], not merely indulge our indignation and our conviction of ethical superiority by supporting policies that in fact make them worse off.”

A Sampling of Observations

Throughout the book, McCloskey provides useful observations.

Importantly, she notes that an economy exists for the benefit of consumers, not producers. “After all the point of an economy’s production for production for consumption not protection of existing jobs using old tools – horses candles and control drill presses.”

She challenges much of “progressive” thought, noting that protection of trades and jobs is inappropriate and that government should not be in the business of choosing winners (or losers).

She discusses “first act, second act and third act” economics, which requires competent analysts to look beyond the immediate consequences to the ultimate consequences of policy. Henry Hazlitt made this the core of his best-selling book Economics in One Lesson, seven decades ago, though economists, often working for governments, have not always heeded this advice.

Finally, McCloskey colorfully dismisses much of the current politically correct thought: “…end-state egalitarians would argue that markets ‘enslave’ and therefore the people can be saved only by forced – march liberation, hopefully provided by the Brahmans now in power…”

High Density Economics

Bourgeois Equality is the second of two great volumes on economic history in just a year. The first was The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil War by Professor Robert Gordon of Northwestern University, a long ride on the Chicago El (Metro) from McCloskey’s University of Illinois, Chicago . Both volumes are yet more evidence of Chicago’s high density of ground-breaking economic analysis.

The setting of the two books is considerably different, with Gordon focusing on the United States and technological advancement. Gordon is somewhat more pessimistic about the future, which is understandable from his historic analysis. McCloskey’s view is more optimistic.

Nonetheless, my years have taught me a profound respect for the ability of entrenched institutions, to block achievement of better living standards, while professing the opposite. This makes me prone to pessimism (as I indicated in the Gordon review). Professor McCloskey would not agree:

"Pessimism on the basis of the most alarming of today’s trends is jolly good fun. … But since 1800 it has been a poor predictor."

Trickle-Out Economics

For decades there have been debates about “trickle-down economics.” More recently, Nobel Laureate Paul Krugman characterized the Obama stimulus programs as “trickle-up economics” (the effect of which is debatable). Professor McCloskey tells us that that economic growth comes from ordinary people not by the beneficence of those above. We could call it “trickle-out” economics.” To the considerable extent her analysis is right, McCloskey describes that may be the ultimate flowering of democracy.

Wendell Cox is principal of Demographia, an international public policy and demographics firm. He is a Senior Fellow of the Center for Opportunity Urbanism (US), Senior Fellow for Housing Affordability and Municipal Policy for the Frontier Centre for Public Policy (Canada), and a member of the Board of Advisors of the Center for Demographics and Policy at Chapman University (California). He is co-author of the "Demographia International Housing Affordability Survey" and author of "Demographia World Urban Areas" and "War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life." He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

Photo: Cover: Bourgeois Equality: How Ideas, Not Capital or Institutions Enriched the World.

America's Next Great Metropolis Is Taking Shape In Texas

Thu, 10/13/2016 - 22:38

If you drive south from Dallas, or west from Houston, a subtle shift takes place. The monotonous, flat prairie that dominates much of Texas gives way to a landscape that rises and ebbs.

The region around Highway 35 is called the Hill Country, and although it does not seem so curvy to a Californian, it is some of the very nicest country in the state of Texas, attracting a growing coterie of wealthy boomers. It also turns out to be a growth corridor that is expanding more rapidly than any in the nation. The area is home to three of the nation’s 10 fastest-growing counties with populations over 100,000 since 2010.

In fact, there is no regional economy that has more momentum than the one that straddles the 74 miles between San Antonio and Austin. Between these two fast-growing urban centers lie a series of rapidly expanding counties and several smaller cities, notably San Marcos, that are attracting residents and creating jobs at remarkable rates.

Anchoring one end of the region is Austin, which has been the all-around growth champion among America’s larger cities for the better part of a decade. Texas Monthly has dubbed it the “land of the perpetual boom.”

Austin has been ranked among the top two or three fastest-growing cities for jobs virtually every year since we began compiling our annual jobs rankings. Since 2000, employment in the Austin area has expanded 52.3%, 15 percentage points more than either Dallas-Ft. Worth or Houston.

Comparisons with the other big metros are almost pathetic. Austin’s job growth has been roughly three times that of New York, more than four times that of San Francisco, five times Los Angeles’ and 10 times that of Chicago. Simply put, Austin is putting the rest of the big metro areas in the shade.

Nor can Austin be dismissed as a place where low-skilled workers flee, as was said about other former fast-growing stars, notably Las Vegas. Just look at employment in STEM (science-, technology-, engineering- and math-related fields). Since 2001, Austin’s STEM workforce has expanded 35%, compared to 10% for the country as a whole, 26% in San Francisco, a mere 2% in New York and zero in Los Angeles. And contrary to perceptions, the vast majority of this growth has taken place outside the entertainment-oriented core, notes University of Texas professor Ryan Streeter, with nearly half outside the city limits.

Austin has also been sizzling in the business services arena, the largest high-wage job sector in the country. Since 2001, employment in business services in the Austin area has grown 87%, more than any of the large Texas towns.

No surprise then that Austin has become a magnet for people. Its population has grown at the fastest rate among U.S. metro areas above a million in the nation since 2000, an amazing 60%. That’s more than twice as fast as Atlanta, three times more than hipster haven Portland, roughly six times San Francisco and San Jose, and more than six times Los Angeles or New York. Much of the growth is coming from migration rather than births, and it boasts the highest rate of net in-migration of all the big Texas cities. The biggest sources of newcomers, according to an analysis of IRS data by the Manhattan Institute’s Aaron Renn, are California, the Northeast and Florida.

San Antonio: The Emerging Upstart

During the decades of Texas’ urban boom, San Antonio has been considered a laggard, a somewhat sleepy Latino town with great food and tourist attractions and a slow pace of life. “There has been a long perception of San Antonio as a poor city with a nice river area,” says Rogelio Sáenz, dean of the public policy school at the University of Texas-San Antonio.

Economic and population data say otherwise. Since 2000, San Antonio has clocked 31.1% job growth, slightly behind Houston, but more than twice that of New York, and almost three times that of San Francisco and Los Angeles.

And many of the new jobs are not in hospitality, or low-end services, but in the upper echelon of employment. This reflects the area’s strong military connections, which have made it a center forsuch growth industries as aerospace, and cyber-security. Although slightly behind Austin, San Antonio’s STEM job growth since 2001 — 29% — is greater than that of all other Texas cities, as well as San Francisco’s, and three times the national average.

Similar growth can be seen in such fields as business and professional services, where the San Antonio area has expanded its job base by 44% since 2000. This just about tracks the other Texas cities, and leaves the other traditional business service hotbeds — New York, San Francisco, Chicago and Los Angeles — well behind. The city has also expanded its financial sector; the region ranked seventh in our latest survey of the fastest-growing financial centers. Once again, there is a military connection; much of the area’s financial growth has been based on USAA, which provides financial services to current and former military personnel around the country, and employs 17,000 workers from its headquarters in the city’s burgeoning northwest.

But perhaps most encouraging has been the massive in-migration into San Antonio. Long seen as a place dominated by people who grew up there, the metro area has become a magnet for new arrivals. Since 2010, its rate of net domestic in-migration trails only Austin among the major Texas cities. Significantly, the area’s educated millennial population growth ranks in the top 10 of America’s big cities, just about even with Austin, and well ahead of such touted “brain centers” as Boston, New York, San Francisco.

In the process, San Antonio is emerging as an attractive alternative for young professionals and families to an Austin that has become more congested and expensive. The cost of living in San Antonio is significantly lower than the other Texas cities, and less than half that of places like San Francisco and Brooklyn. As the vanguard of millennials moves into the family forming, childbearing and house-buying years in the coming decade, San Antonio, with its increasingly lively music, art and restaurant scence, is likely to grow in attractiveness.

Greater San Marcos: Whoa Nellie!

As impressive as San Antonio and Austin’s progress has been, the most dramatic locus for growth in the region is between the two cities. The San Marcos area, which lies at the center of the corridor, has clocked growth that is among the most rapid in the nation by several measures. Looking at population, two of the 10 fastest growing counties in the country since 2010 are located in this corridor — Hays and Comal. Their growth rate, 4% per annum since 2010, exceeds Austin’s 3% and is almost double the growth rate of Dallas-Ft. Worth and Houston.

As is usual in Texas, and most American cities, urban growth tends to expand outwards, not only for population but also for jobs. Over the past decade, Hays and Comal’s job growth rate has been an astounding 37%, outpacing Austin’s impressive 31% growth, the other Texas cities, and over six times the pace of the country overall.

Local boosters suggest that this growth will transform the San Marcos area into something like other suburban nerdistans, such as San Jose/Silicon Valley, north Dallas, Orange County and Raleigh-Durham. Certainly some of the same advantages those areas enjoyed are emerging, including the growth of Texas State University at San Marcos (now with over 38,000 students) as a major center of higher education.

Equally important, note researchers John Beddow and James LeSage, the central location of the San Marcos area allows families to choose from not only local jobs, but those located in both San Antonio and Austin. And to be sure, tech, education, business and professional services are all growing rapidly, but so far much of the development is lower on the food chain, such as food service and wholesale trade. Amazon, for example, just recently opened a sprawling, 855,000-square-foot warehouse in San Marcos, which is slated to employ upwards of 1,000 people.

Choices To Be Made

If you were to look for the next great American metropolis, there’s probably no better bet than the emerging San Antonio-Austin corridor. The elements are all there: major universities, including the Austin and San Antonio campuses of the University of Texas, job and population growth, low housing prices and a burgeoning tech community. Perhaps even more important, this part of Texas is only marginally tied to the energy industry, which has become a huge drag on the economy of the state’s largest city, Houston.

Yet there remain many challenges. One is transportation, particularly around freeway allergic Austin, although San Antonio has an excellent and largely free-flowing system. The Austin bottleneck is particularly troublesome because much of the city’s growth is to the north, which means commuters living in the San Marcos region have to navigate through painfully slow freeways. Another is education, despite the university presence. San Marcos and Austin may be above the national average in terms of the percentage of college-educated residents, but San Antonio and New Braunfels, a large town south of San Marcos, still lag.

To maintain the area’s natural beauty, steps must be taken to prevent development from overrunning the Hill Country.

But none of this should stop this region from coalescing into something that represents a Texas version of Silicon Valley — a little less dependent on the highest end of companies, less expensive and more diversified — providing a powerful new entrant among the nerdistans that increasingly dominate our national economy.

This piece first appeared in Forbes.

Joel Kotkin is executive editor of He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

The New War Between the States

Wed, 10/12/2016 - 12:44

In this disgusting election, dominated by the personal and the petty, the importance of the nation’s economic geography has been widely ignored. Yet if you look at the Electoral College map, the correlation between politics and economics is quite stark, with one economy tilting decisively toward Trump and more generally to Republicans, the other toward Hillary Clinton and her Democratic allies.

This reflects an increasingly stark conflict between two very different American economies. One, the “Ephemeral Zone” concentrated on the coasts, runs largely on digits and images, the movement of software, media and financial transactions. It produces increasingly little in the way of food, fiber, energy and fewer and fewer manufactured goods. The Ephemeral sectors dominate ultra-blue states such as New York, California, Oregon, Washington, Massachusetts, Maryland, and Connecticut.

The other America constitutes, as economic historian Michael Lind notes in a forthcoming paper for the Center for Opportunity Urbanism, the “New Heartland.” Extending from the Appalachians to the Rockies, this heartland economy relies on tangible goods production. It now encompasses both the traditional Midwest manufacturing regions, and the new industrial areas of Texas, the Southeast and the Intermountain West. 

Contrary to the notions of the Ephemerals, the New Heartland is not populated by Neanderthals. This region employs much of the nation’s engineering talent, but does so in conjunction with the creation of real goods rather than clicks. Its industries have achieved  generally more rapid productivity gains than their rivals in the services sector. To some extent,  energy  and food producers may have outdone themselves and, since they operate in a globally competitive market, their prices and profits are suffering.

Despite deep misgivings about the character of Donald Trump, these economic interests have led most Heartland voters  somewhat toward the New York poseur, and they are aligning themselves even more to down-ticket GOP candidates. In generally purple states like Missouri, Ohio and Iowa, where manufacturing is key, Trump still leads—at least he was before the latest spate of Trump crudeness was revealed, this time regarding women.

The Republicans’ strongest base is in the energy belt where Trump has suggested policies that call for greater domestic production. This naturally resonates with businesses and working people in states ranging from Texas, Oklahoma and Louisiana to West Virginia, Wyoming and Alaska, which have borne the brunt of nearly 100,000 layoffs so far this year. It’s no surprise that all of these states constitute increasingly a lock for the GOP.

Historical Precedents

The conflict of economic interests has long defined American politics. America’s revolution was largely started by New England merchants rebelling against colonialist policies that sought to strangle our nascent capitalism in its infancy. The great economic tensions of the early 19th century centered on a struggle between the Jeffersonian and Jacksonian yeomanry and the powerful merchant class in the great Northeastern cities. A major point of contention was around such issues as the establishment of a national bank and high tariffs, bitterly opposed in the nation’s interior and the South.

The biggest national crisis in our history underscored this clash of competing economic interests. Although the galvanizing issue on both sides of the Mason-Dixon line was slavery, the Civil War was also a war, as Karl Marx suggested, of competing economic visions: the agrarian, slave-fueled economy of the South vs. the rapidly industrializing Northeast and Midwest. 

Post-war conflicts revolved about hostility between the urbanizing North and the more rural South and West. Finance and industrial capital, usually in cities like New York and Chicago, was largely Republican and protectionist. Democrats tried to cobble a coalition of Southern agriculturalists and the big city, ethnic working class. With the onset of the Great Depression, Democrats gained primacy by melding this coalition to a rising and increasingly progressive professional class.

In the past, Democrats competed in the Heartland and backed its key industries. Lyndon Johnson was a proud promoter of oil interests; Robert Byrd never saw a coal mine he didn’t like for all but the end of his career. Powerful industrial unions tied the Democrats to the production economy. Now those voters feel abandoned by their own party, and even are dismissed as “deplorables”  

Increasingly few Heartland Democrats, outside of some Great Lakes states, win local elections. In the vast territory between Northeast and the West Coast, Democrats control just one state legislature, the financial basket case known as Illinois.

For their part, Republicans are becoming extinct in the Ephemeral states, a process hastened by the growing concentration of media on the true-blue coasts. Wall Street, Silicon Valley and Hollywood have been drifting leftward for a generation, and Trump has accelerated this movement. Joined by the largely minority urban working and dependent classes, progressives now have a lock on   the Northeast and the West Coast.

The New Battle Lines

The new conflict between regions reflects a conflict between different ways of making money. Ephemeral America’s media and academic adjuncts generally portray the New Heartland’s economy as exploitative and environmentally harmful. A massive oil discovery in Alaska may be welcome news there, but a horrific prospect in places like Seattle, New York, or San Francisco.

Climate change increasingly marks a distinct dividing line. Manufacturing, moving goods, industrial scale agriculture, fossil fuel energy all consume resources in ways many progressives see as harming the planet. Progressives threaten these industries with increasingly draconian schemes to reduce greenhouse gas emissions. Gone are the days of supporting moderate shifts -- which could work with some Heartland economies -- from coal to gas and improving mileage efficiency.

Instead the demand from the left is for a radically rapid de-carbonization, which will reduce jobs in the Heartland and lower living standards everywhere. In California, Jerry Brown  is fretting about ways to curb cow flatulence, an obsession that is unlikely to be popular in Kansas, Nebraska or Iowa.

These divergent politics between states are accelerating the gap between the two economies. Since 2010, as the recovery kicked off, the big industrial job growth took place mostly in the Heartland -- in Detroit, Charlotte, Atlanta, Phoenix and Houston. New York, Los Angeles, Philadelphia and Boston all managed to lose jobs. Since 2000, Los Angeles and New York together have lost over 600,000 manufacturing positions.

As industry weakens in an area, opposition to radical climate mitigation declines. Someone representing an increasingly de-industrialized east Los Angeles or Brooklyn feels no pressing reason to advocate for industry. High energy and housing prices, both connected to draconian climate change policies, gradually empty out the middle-class families, the demographic bulwark of the GOP. Meanwhile, in their coastal bastions, the grandees of Silicon Valley and Wall Street increasingly disdain anything reliant on fossil fuels.

The New Heartland has reason to resist such policies, which could turn what have been burgeoning economies back into backwaters. Regulatory regimes that radically boost energy costs, as in California and New York, hasten de-industrialization. The  rapid decline of areas such as interior California and upstate New York testifies what may be in store for the Heartland under a Hillary Clinton administration and a Congress controlled by the Democratic Party.

This conflict will deepen in light of the ongoing gradual decline of key tangible industries -- durable goods like heavy equipment and car manufacturing, fossil fuel energy, agribusiness. Back in 2012, all these sectors were doing well, something that helped President Obama win much of the old Rust Belt. In the current economic climate Republicans could still make significant progress, even with Trump at the top of the ticket. 

In the process, the GOP, to the horror of many of its grandees and most entrenched interests, is becoming transformed. It is becoming something of a de facto populist party, based in the New Heartland, while the Democrats remain the voice of the coastal oligarchies who almost without exception back Hillary

In the immediate future, given the likely trajectory of a Clinton presidency, things may get tougher times for the New Heartland and its industries. Federal regulators will ape their California counterparts, extending controls that seem sensible in San Francisco into dramatically different geographies.

But don’t count the New Heartland, or the GOP, out. Once Trump is gone, there will be enough political will and money to mount a counter-offensive against the Ephemerals. The new War Between the States will not end in November. It will have hardly just begun.

This piece first appeared in Real Clear Politics.

Joel Kotkin is executive editor of He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

The Rival Future Visions of Peter Thiel and Scott Adams

Tue, 10/11/2016 - 22:38

Our mental model of the world shapes our behavior at fundamental levels in ways we often can’t even recognize. I was struck by this when reading two books almost back to back, Scott Adams’ How to Fail at Almost Everything and Still Win Big and Peter Thiel’s Zero to One.

Both authors lay out a schema for modeling the future and how to behave relative to it, but come to very different conclusions.

Scott Adams, creator of the Dilbert comic strip, has a simple model: systems over goals. That is, it’s better to have a good system with high odds of success vs. setting a concrete goal and working towards it. In other words, get your lifestyle right when it comes to diet and exercise, don’t focus on losing X pounds to reach Y weight.

This strategy implies a single worldview axis: goals-systems, with a preferred end of the axis on which one should align his personal decision making.

Thiel, founder of PayPal, has a more formal framework, but adopts the same axis of decision making. In his case, he labels it definite-indefinite. He then combines this with an axis of optimist-pessimist to produce the following 2×2 matrix:

Peter Thiel future model matrix. Image via Will Price’s Zero to One review.

Both Thiel and Adams are American, so reside in the top half of the chart, so let’s focus there. To Thiel, a goal is a definite view of the future. That is, you have an exact idea of what the future should be, and set about making it happen. A system would be an indefinite future. In this view, we can’t fundamentally control the future, so we put ourselves in the best position to benefit from the chance that comes our way.

Now these two don’t have perfect alignment. Adams’ systems are in many cases designed to achieve results that could be viewed as a goal (e.g., a ripped physique). As a serial entrepreneur, he’s not afraid of starting companies, but does not put everything at risk while doing so. Most of what Adams would call goals Thiel would still label indefinite because they present incremental improvement vs. revolutionary change (e.g., lose 15 pounds vs. “We chose to go to the moon.”)  But there’s a rough correspondence.

Adams, as we saw, comes down firmly on the indefinite/systems side of the equation. Thiel says that the would be startup founder should be in the definite/goals quadrant, and believes that part of the reason America has gone off course is that we’ve shifted from a definite to indefinite view of the future.

In the 1950s, people welcomed big plans and asked whether they would work. Today a grand plan coming from a schoolteacher would be dismissed as crankery, and a long-range vision coming from anyone more powerful would be derided as hubris.

In addition to his more formal framework for thinking about the future, Thiel also tries to explain why people like Adams have an indefinite view of the future:

But perhaps you can’t understand Malcolm Gladwell without understanding his historical context as a Boomer (born in 1963). When Baby Boomers grow up and write books to explain why one or another individual is successful, they point to the power of a particular individual’s context as determined by chance. But they miss the even bigger social context for their own preferred explanations: a whole generation learned from childhood to overrate the power of chance and underrate the importance of planning. Gladwell at first appears to be making a contrarian critique of the myth of the self-made businessman, but actually his own account encapsulates the conventional view of a generation.

Adams is a baby boomer, putting him squarely within this generational psychoanalysis.

Is one of the two right? I think it’s more complex than that, and in part comes down to what you want, what your temperament is, and what your experiences have been in life.

Thiel obviously has gargantuan Silicon Valley ambitions and an ego to match. And he’s got over a billion dollars to show for it.

Adams’ success is much smaller scale – but still well into the millions of dollars, plus a significant amount of fame. He appears to be fully satisfied with his life.

So at the individual level, you can succeed either way. At a societal level, Thiel may have a point, though Robert Gordon and others posit different explanations for the economic growth slowdown.

In any case, the key is that how you think about the future, particularly the degree to which you can shape the future, determines a lot about the strategies you are going to use for your life. On the one hand perhaps a concentrated bet and effort to sculpt the future. On the other a more open or diversified strategy to try get the best result in in uncertain future. (I should note that Thiel says this kind of diversification is a myth, saying, “Life is not a portfolio”).

I also recently read and reviewed Antifragile by Nassim Taleb. While I’m not familiar with his full corpus, his high view of randomness suggests that he’s favors a more Adams-like approach. He advocates that people should adopt what he calls a “barbell” strategy. That is, on one end you try to derisk your core life as much as possible. And on the other you place multiple, small, high risk bets with a chance of a significant payoff. This sounds like a system to me. On the other hand, Taleb also says that entrepreneurs who risk the definite should be treated with honor as heroes, even if they fail.

In any case, it’s worth thinking about how we view the future. Is it something that’s primarily within our control or something that’s more dominated by outside forces or even chance? How we answer that question will determine a lot about how we go about living our lives.

Aaron M. Renn is a senior fellow at the Manhattan Institute, a contributing editor of City Journal, and an economic development columnist for Governing magazine. He focuses on ways to help America’s cities thrive in an ever more complex, competitive, globalized, and diverse twenty-first century. During Renn’s 15-year career in management and technology consulting, he was a partner at Accenture and held several technology strategy roles and directed multimillion-dollar global technology implementations. He has contributed to The Guardian,, and numerous other publications. Renn holds a B.S. from Indiana University, where he coauthored an early social-networking platform in 1991.

Welcome to Rosemont, IL

Mon, 10/10/2016 - 22:38

Millions of people pass through O'Hare, settle into the adjacent hotels, go to conferences and meetings in the nearby convention centers, shop in the nearby stores or drink and eat in the nearby bars and restaurants, and believe they're in Chicago.  But they're not.  In most cases, they're in the small village of Rosemont, the tiny town that's done more than any community I know to capitalize on its location.

Last week my wife and son flew out of town for a quick vacation on the West Coast.  As for me, duty called and I was unable to join them.  But I did drop them off and pick them up from Chicago's main international airport, O'Hare.  While I waited for their arrival, I drove around the area surrounding the airport. For reference, here's Rosemont's boundaries, courtesy of Google Maps.  Rosemont is the area shaded in faint red (click on the map if you need to make it larger):

Here's what many people don't know.  Yes, O'Hare International Airport is technically within the City of Chicago.  The airport is owned and operated by the City; Chicago Transit Authority (CTA) "L" lines can take you directly from downtown Chicago to the airport within 30-40 minutes.  But the airport is connected to the rest of Chicago by a sliver of property that follows the parcels fronting Foster Avenue for about a half mile, before connecting with the broad tarmac that is the airport.  Immediately east of the airport, where all the highways meet that connect the airport to the region, stands little Rosemont.

But "little" hardly applies in any sense to Rosemont.  The village is a dizzying mix of hotels, convention centers, restaurants, large and small-scale entertainment venues, tightly packed against the interstates that wind their way through the community.  Those familiar with the area know that the area has almost a Vegas Strip feel to it, with a scale that can overwhelm.  Here's some screenshots from Google Earth:

What you see above are hotels, a convention center, office complexes, an outlet mall, and Allstate Arena, a venue for professional and collegiate sports teams.  What have I not included?  Myriad bars and restaurants, a performing arts center, even a field for a professional women's softball team.  There's even a casino, but it's in yet another suburb, Des Plaines, just feet from the Rosemont boundary.  All of this within a 1.8 square mile area that holds only 4,200 residents.

How did this happen?  Two words, one man -- Donald Stephens.

Airplane construction had taken place on the site that is now O'Hare for many years prior to the airport's official opening in 1963.  The City of Chicago annexed the property for manufacturing uses in the 1940s, using the Foster Avenue sliver mentioned earlier to reach the site.  Chicago, as well as neighboring suburbs Des Plaines, Park Ridge and Schiller Park, all passed on annexing the land just east of what was a major manufacturing hub.  However, the Interstate Highway Act, which initiated the construction of the Interstate Highway system, was passed in 1956.  That act opened up possibilities for the development of an airport and changed how the empty lands would be viewed.  Donald Stephens, an insurance underwriter, led the effort to incorporate the community that same year.

Rosemont's boom as a commercial center paralleled the growth and expansion of O'Hare.  First came the hotels, and then smaller commercial uses like bars and restaurants.  The Donald Stephens Convention Center and Allstate Arena opened in 1975 and 1980, respectively, and throughout much of the '80s the entertainment district also grew and expanded.  The airport-driven uses continue to gather in the community; the Rosemont Theater for the Performing Arts opened in 1995.  The Fashion Outlet Mall of Chicago opened in 2013.

This extreme concentration of commercial, recreational and entertainment uses led to a unique development in Rosemont.  In 1995, residents living within the small residential core of the community voted to enclose all portions of residential Rosemont as a gated community.  Rosemont residents may fight major traffic when going to or coming home from work, but they have a sense of security that usually comes with living in upper class enclaves.

Rosemont's growth didn't come without controversy.  Stephens, who was the only mayor of Rosemont from its founding in 1956 until his death in 2007, was often dogged with accusations of associations with Chicago organized crime.  Twice he was brought up on political corruption charges, for tax fraud and bribery, but was acquitted.  After Stephens' death, his son Bradley assumed the position of mayor.

Rosemont's unique location has led to a unique set of statistics about the community. The community's residents are firmly middle- and working-class: the median household income for residents is about $46,000, just below the metro area's median of $55,000.  Demographically speaking, the community is about 57% non-Hispanic white and 35% Hispanic/Latino.  Rosemont residents lag behind the metro area in terms of educational attainment by one measure 13.1% of residents over age 25 have a bachelor's degree or more, compared to 35.3% in the metro area.

But none of that matters when the community has outsized economic numbers related to its location.  In a region that averages about 1.1 jobs per household, Rosemont has 11.3.  In a region that averages about $14,500 in general merchandise retail sales per capita, Rosemont has over $163,000.  In 2014, Rosemont had an equalized assessed value, or a value for all property in the community, of nearly $260 million.  Schiller Park, just to the south of Rosemont and nearly three times its size in terms of residents, had an equalized assessed value of $290 million.

So, in many respects Rosemont is less a community than a state-chartered commercial and entertainment district.  Its successes cannot be replicated.  But that doesn't mean that its successes are enduring.  On my brief visit there, I saw many pedestrians walking across Rosemont from one commercial or entertainment venue to another, in what is a challenging walkable environment.  The network of interstates that meet in the village means that it is an environment for cars, and there's currently no way around that.  If Rosemont wishes to maintain its position as a commercial and entertainment venue, it may really need to consider improved walkability as a way to reach new and younger demographics travelling through Chicago.

As for me, I often wonder how the area would look if Chicago had the foresight and vision to annex the property prior to the development of O'Hare,  If it had, the uses may have been quite similar but the look very different.

Top photo: The Hyatt Regency O'Hare, located in Rosemont, IL.  Source:

Pete Saunders is a Detroit native who has worked as a public and private sector urban planner in the Chicago area for more than twenty years.  He is also the author of "The Corner Side Yard," an urban planning blog that focuses on the redevelopment and revitalization of Rust Belt cities.

How to Make Post-Suburbanism Work

Sun, 10/09/2016 - 23:18

Are you ready to become a “real” city yet, Southern California? Being “truly livable,” our betters suggest, means being “infatuated” with spending more billions of dollars on outdated streetcars (trolleys) and other rail lines, packing people into ever small spaces and looking toward downtown Los Angeles as our regional center.

Our cognitive elites dislike the very idea that Los Angeles, as Dorothy Parker once supposedly described, has long been “72 suburbs in search of a city.” Yet, Southern California, as I discuss in a new Chapman University report, has from its early emergence grown around a “post-suburban” model of dynamic, smaller clusters. This urban form has become common in many major metropolitan areas as automobiles have replaced transit as the primary means of getting around.

This model worked here brilliantly for most of the last half century — until planners, real estate speculators and California bureaucrats decided that we needed to emulate New York City and other older monocentric core cities. Like the provincials they consistently prove themselves to be, our leaders have generally complied.

So, after nearly 15 years spent in pushing this direction, what have we accomplished? A transit system that barely serves as many people as it did before we started building trains, housing prices among the highest in the nation, super-high poverty rates and a population that continues to seek to go somewhere else, including some 1.6 million net domestic migrants who have left the L.A. and Orange County area since 2000.

The density mirage

Some see densification as necessary to meet the demands of an expanding population. Yet, both L.A. and O.C.’s populations are growing slower than both the state and national average. Nor has the pro-density regime relieved any of the pressure on housing and rent. For one thing, high-density housing is far more expensive on a per-square-foot basis, either for townhouses or detached housing. It can only accommodate the poor at the cost of massive subsidies.

The drive to re-engineer our post-suburban form assumes that downtown Los Angeles can become like the more historic central business districts of New York, Chicago and San Francisco. These CBDs have from nearly double to 10 times the employment levels as downtown L.A. Suffice it to say, downtowns in New York, Chicago and San Francisco have retained regional significance, as others, including Los Angles, have declined in relative influence, with little growth in their share of regional employment. Even the most generous definition of downtown Los Angeles encompasses considerably less than 5 percent of the metropolitan area’s employment, and that share has not grown appreciably since 2000. All the net job growth has been in newer suburbs and exurbs.

Fundamentally, in “post suburban” regions like southern California, the “sell” is a different one than in places like New York. It is based on a largely suburban quality of life. This does not mean we need to lag economically. Many of the most successful high-tech regions — notably, Silicon Valley; Austin, Texas; Raleigh-Durham, N.C., and the northern reaches of Dallas —– are largely suburban and less dense than the L.A. area. Certainly, densification policies so far have not turned Los Angeles County into a high-tech haven. The county suffers from below-average tech employment, while more suburban Orange County remains 20 percent above average. The fastest increases, albeit from a low base, are occurring in the Inland Empire.

Read the entire piece at The Orange County Register.

Joel Kotkin is executive editor of He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Photo by Thomas Pintaric (Pintaric) [GFDL or CC-BY-SA-3.0], via Wikimedia Commons

A Better Way

Fri, 10/07/2016 - 22:38

My recent post at Granola Shotgun described how a town in Georgia spent an enormous amount of public money on a new civic center and road expansions, but somehow managed to devalue nearby private property in the process. Here’s an example of a neighborhood in Nashville, Tennessee that took a different approach that cost a lot less and achieved a radically better set of outcomes.

The McCabe Park Community Center was designed by a local firm rather than an international starchitect. Municipal funds were recirculated right in town and used to foster native talent and professional employment. And while the facilities are available to everyone in Nashville this center is scaled and programmed primarily to serve the immediate neighborhood.


A conscious decision was made to accommodate pedestrians rather than provide the usual endless automobile infrastructure. There are the required handicap accessible parking spaces close to the entrance at the rear. There are a few dozen off street parking spots along the baseball diamond. But that’s it. It’s absolutely possible to arrive by motor vehicle, but the cars don’t dominate the landscape.

Bicycle and pedestrian infrastructure make it clear that it’s safe, pleasant, convenient, and dignified to arrive without a car. One of the goals of this community center is to facilitate a more active and healthy lifestyle.

Google from 2009

Google Street View from 2009

Google Street View from 2009

Google Street View form 2009

Google Street View form 2009

The road out front was a standard suburban affair of wide lanes, fast moving vehicles, no distinction between the road surface and adjacent parking lots, and no sidewalks. This landscape made it very clear that if you weren’t in a car you just weren’t important. It was also brutally ugly and lined with aging low value buildings and struggling businesses.


The new traffic roundabout has transformed the intersection in several crucial ways. First, instead of stopping at a light cars now slow down a bit, but continue on. This means more cars move through the space in less time so traffic congestion has actually been reduced.

Second, there are significantly fewer accidents because cars are moving at slower speeds and drivers are made to pay more attention to their surroundings as the street narrows. Cars are still welcomed here, but they’ve been disciplined to share the space with humans.

Third, pedestrians and cyclists can now traverse the area safely so more people are willing to arrive without a car. With more foot traffic shops are able to repurpose some of the asphalt in front for outdoor seating. That translates to more sales, more employment, more profit, and more tax revenue.

Fourth, land values have improved and older buildings are now seeing major improvements that also boost employment and generate new tax revenue. People don’t like paying taxes, but that money is what funds everything people expect the city to provide. The alternative is the slow death of deferred maintenance, budget cuts, and even higher fees and stealth charges on existing low value properties.

Parking hasn’t been eliminated as much as redistributed. As sidewalks were installed on-street parking was added. The parked cars create a physical as well as emotional buffer between pedestrians and moving vehicles.

The reorganized street supports smaller locally owned shops that keep money circulating in the community. This is the opposite of typical road widening projects that devalue small businesses in older neighborhoods while subsidizing big box corporate chains way out on the edge of town.

Here’s something that breaks all the rules of suburban development. It’s supposed to be the kiss of death to have a business situated right next to a fully detached single family home. Yet in this location the shops and the properly designed street actually make these houses more desirable. The usual amenity of residential isolation has been exchanged for the amenity of good walkable urbanism. This kind of arrangement is so incredibly rare in America today that people are willing to pay a premium for such properties.

Finally, we have the 1950’s tract homes that could have started the long slide into low rent crappiness as is so often the case when suburban roads are widened in a hopeless attempt to ease traffic congestion. Here, the road diet and nearby improved commercial district  have inspired property owners to invest in substantial renovations and improvements to otherwise outdated homes.

The future of most suburbs is to change from what they are now to something else. That “something” could be relentless decline or steady incremental rejuvenation. I don’t believe most places understand how to reinvent themselves in a cost effective yet culturally acceptable manner. The politics of inertia, fear, and vested interests are awfully powerful. That means the few places that can successfully pull it off will be miles ahead of the competition. Look around wherever you live. Then think long and hard about how your town will manage in the years ahead.

John Sanphillippo lives in San Francisco and blogs about urbanism, adaptation, and resilience at He's a member of the Congress for New Urbanism, films videos for, and is a regular contributor to He earns his living by buying, renovating, and renting undervalued properties in places that have good long term prospects. He is a graduate of Rutgers University.

Honolulu Rail: From $4.6 B to $8.6 B in Eight Years. Now What?

Thu, 10/06/2016 - 22:31

With its official cost now having risen to $8.6 billion and a funding gap of $1.8 billion, both of which are certain to rise, Honolulu’s rail project will run out of money before construction reaches the downtown area, perhaps even before it reaches Middle Street.

The Federal Transit Administration says it will demand a return of all federal money if rail does not reach Ala Moana Center, which is possible only if the state Legislature or Honolulu City Council increase taxes dramatically:  An average family of five would have to pay more than $1,000 per year just to complete rail, according to the Tax Foundation of Hawaii. Once completed, the annual cost of operating and maintaining a safe and reliable rail system would require comparable tax payments each year for the lifetime of the rail system.

State and city lawmakers are reluctant to raise taxes so dramatically, but abandoning the project at this late date would make those who had been supporting it look like idiots.  They must be asking themselves, “How did we get ourselves into this mess?”

Almost immediately after being elected in 2004, Mayor Mufi Hannemann announced that he wanted a steel-on-steel rail system rather than the bus rapid transit (BRT) that his predecessor had proposed. Hannemann envisioned a 34-mile route that would cost $2.7 billion. By the time it was put to a vote in 2008, the route had shrunk to 20 miles and the projected cost was up to $4.28 billion.

Some of the 50.6% of voters in that election who authorized the city to build a steel-on-steel system might have been influenced by claims that two-thirds of the $4.28 billion construction budget would be paid by tourists and the federal government; that rail construction would create 10,000 new jobs for local residents; and that traffic congestion would be significantly reduced once rail was operational.

Though HART’s latest official cost estimate is “only” $8.6 billion, construction costs are expected to skyrocket to upward of $10.8 billion; local residents will end up paying more than two-thirds of total construction costs; the actual number of good jobs for local residents was a tin percentage of the promised number; and that the impact of rail on traffic congestion will be similarly miniscule.

Had it not been for the media, the public would still be in the dark about the massive cost overruns. According to the Honolulu Authority for Rapid Transportation website, the cost overrun is a myth:

“It’s important to understand that HART’s existing contracts are on budget and we continue to have a healthy contingency fund of more than $500 million. So far, about 60% of HART’s contracts have been awarded. The construction of the first 10 miles of guideway is underway, the Rail Operations Center is about 70% complete, and HART’s fleet of 80 rail cars is under production and the first cars are expected to arrive here in early 2016.”

The kindest word we can think of for that explanation is propaganda.

That so much money has already been spent is reason enough to keep going, according to HART and other rail supporters: If construction stopped now, all that money would have been wasted! 

They think the funding problem can be solved quickly and easily by the Legislature extending the 0.5% rail surcharge one more time. That would cost island residents a mere “half a penny on each dollar spent,” according to HART.

This kind of thinking is muddled, at best.

The Honest Way to Approach Rail

The rational way to approach the rail question begins with three simple questions:

  • How much more money would local taxpayers have to pay to construct and maintain a safe and reliable rail system?
  • What would be the benefit of having such a system?
  • What alternatives could be pursued if we were to stop rail now, and what would be the benefit of those alternatives?

Honesty should be presumed only if the factual inquiry and decision-making processes are transparent so the public can see how the answers were reached.

The $3.5 billion spent thus far is gone under any circumstance. If construction is continued, the total construction cost could reach $10.8 billion, according to the Federal Transit Administration. Although no one knows what the total actual cost would be, there is no rational basis for starting the decision-making process with an optimistic projection.

If rail is completed, the annual operating cost will exceed $100 million. A comparable amount would also need to be set aside each year to ensure that the system remains safe and reliable. Based on the average life of system components elsewhere, the combined amount would be at least $200 million per year.

Even if that kind of money were readily available, one wonders exactly what the benefit of rail would be. City and HART officials now acknowledge that traffic congestion would be “worse in the future with rail than what it is today without rail.” That quote comes from the Final Environmental Impact Statement and a letter from the city’s transportation director.

City and HART officials will quickly add that traffic in the future with rail would be better than traffic in the future without rail, which is necessarily true only if one assumes, as they do, that the alternative to building rail is do nothing (the so-called no-build option). That is a false choice, intended to obfuscate rather than illuminate.

There are ways to reduce today’s level of traffic congestion, such as by aggressively adding new traffic lanes to existing roads, as has already been done successfully on each side of the central part of H-1 freeway. Installing flyovers and bypasses in chokepoint areas like the Middle Street merge and adding new contra-flow and bus-on-shoulder options would also make a major difference.

Each of these is a proven strategy that, unlike rail, would directly benefit all commuters.

Major improvements could also be made to Honolulu’s award-winning bus system. This includes increasing the number of express buses that go where commuters want to go, rather than eliminating most of them, as is part of the rail plan.

All of these strategies could be accomplished for less than half the money saved by terminating rail now. Rail supporters point out that the above strategies could be pursued along with rail, but that assumes a tax base that never goes dry. The cost of living in Hawaii is already exceptionally high and there’s a limit to how hard island taxpayers can be squeezed.

Rail Surcharge Burdens Island Residents

Hawaii’s general excise tax is a tax on sellers of just about everything in this state, including groceries, services, and business-to-business transactions. Consumers are generally aware of only the portion that is shifted to them at the point of sale. A much larger portion is invisible to consumers but is borne by them anyway because it gets up embedded in the price of things consumers have to buy in Hawaii.

This hidden portion of the excise tax burden is surprisingly large for several reasons, including that taxes paid on business-to-business transactions pyramid. A national expert wrote in the first Price of Paradise book that it would take a sales tax rate of up to 16% to replace the revenue generated by the 4% excise tax at that time.

Because of subsequent changes in the taxation of business-to-business transactions, the current equivalent rate is roughly 11%. The point is that Hawaii’s general excise tax is quite different from conventional sales tax systems, which is why the above-mentioned expert cautioned that comparing a conventional sales tax to Hawaii’s general excise tax is like comparing a firecracker to a hand grenade.

The point that needs highlighting is that the burden of Hawaii’s general excise tax is largely hidden from view.  Consumers pay it in the form of higher prices on virtually everything they have to buy in Hawaii.

The 0.5% rail surcharge currently raises about $250 million each year. According to data from the tourist agency, slightly less than 15% of that amount is being paid directly by tourists. The remaining 85% averages out to $212 per man, woman and child on Oahu, which is slightly more than $1,000 each year from an average family of five.

HART calls this number a “myth.” It contends that the average cost to each local resident is much less, but does so on the unspoken assumption that consumers bear the burden of the rail surcharge only when it is identified at the point of a purchase, and that the rest of the rail surcharge is never borne by consumers. This approach is intellectually dishonest.

Any form of rail tax that extracts a quarter-billion dollars from our local community each year (as does the current rail surcharge) creates a quarter-billion-dollar burden. In this case it would be a quarter-billion dollars each year to build the rail, and then nearly that much each year — forever — to operate and maintain a safe and reliable system, including the cost of major rehabilitation every decade.

In addition to being borne by consumers, the general excise tax is notoriously regressive — that is, disproportionately burdensome to people with relatively low incomes. The concept of regressivity is not simple, but anyone who contends that Hawaii’s general excise tax is not regressive, or that a regressive tax is not disproportionately burdensome to people with relatively low incomes, is either ill-informed or dishonest.

Pro-rail supporters have argued that a general excise tax surcharge is the best way to fund rail despite being regressive, because a third of it is borne by tourists. Studies differ on the exact percentage of excise taxes ultimately borne by tourists (including by purchasing things made more expensive because of unstated excise taxes), but they generally agree that the share of the burden borne by tourists would be roughly the same, perhaps even greater, if the property tax were used to fund rail, rather than the excise tax. They also show that the property tax is significantly less regressive than is the general excise tax.

Our elected officials should be honest about this:  General excise taxes rather than property taxes are being used to fund rail simply because they are less noticeable. It would take a 29% increase in everyone’s property taxes to replace the revenue generated by the 0.5% rail surcharge. The political fallout from such an increase would be dramatic.

We doubt that an average family of five would quietly continue paying $1,000 per year for the rest of their lives for a non-solution to an obvious traffic-congestion problem.

Members of the state Legislature could stop the madness by repealing the 0.5% rail surcharge, which would put members of the City Council to the test: Do they want rail badly enough to take the political heat for imposing an immediate and permanent 29% increase in property taxes?

Because candidates for the Legislature and Honolulu City Council are currently seeking political support, now is a perfect time to ask them these questions:

  • Will a particular candidate for the Legislature vote to end the rail surcharge?
  • Will a particular candidate for the City Council vote to replace any such lost revenue by raising property taxes by 29%?

There’s one additional question for the media: Why not publish every candidate’s position on the funding of rail? After all, rail was by far the largest public works project in the state’s history even before the costs skyrocketed.

A version of this story originally appeared at Civil Beat.

About the Authors

Cliff Slater  Cliff Slater is a businessman who founded Maui Divers. He was a plaintiff in a federal lawsuit challenging the process by which the city selected elevated heavy rail.

Randall Roth  Randall Roth is a professor at the William S. Richardson School of Law whose areas of expertise include taxation and professional responsibility.  He co-authored Broken Trust and was a plaintiff in above-mentioned lawsuit.

Panos Prevedouros  Panos Prevedouros is a University of Hawaii professor and chairman of the department of civil and environmental engineering. He has twice run for Honolulu mayor.

Photo by Musashi1600 (Own work) [CC BY 3.0 us], via Wikimedia Commons

California’s Road to Leviathan

Wed, 10/05/2016 - 22:38

At a time when technology and public opinion should be expanding the boundaries of innovation and self-expression, we appear to be entering a new era of ever greater economic and political centralization, Wendell Cox and I suggest in a new paper.

The trend to a more centralized economy is particularly evident in the information and media sectors, once hotbeds of entrepreneurial opportunity but now dominated by a handful of leviathan firms who gobble up competitors and often control markets at will. This trend is also evident in Washington, which increasingly regulates all aspects of our life, under an unprecedented welter of presidential and regulatory decrees, often bypassing the legislative process.

But nowhere is the centralist leviathan being incubated more than in the once fiercely individualist state of California. President Obama’s centralizing can be at least partially justified by the antics of an obstructionist Congress which has shown little desire to work across party lines. But that’s not the case here in California, which functions largely as a one-party dictatorship of crony business oligarchies, an aloof and arrogant bureaucracy, the green lobby and public-sector unions.

From “Small is beautiful” to “L’état, c’est moi”

In his quirky first term, Jerry Brown was skeptical of central control and an open adherent of the decentralist, “small is beautiful” philosophy of the late British philosopher E.F. Schumaker. Now he seems to be enamored with creating a “coercive state” that would have fit better during the reign of France’s “Sun King,” Louis XIV.

California already leads the country in imposing state regulations and laws on everything from gender rights, to cow flatulence, to fair pay, to new licensing requirements for a never-ending panoply of professions. This huge extension of government has already reshaped the cost of such essentials as energy, particularly on the state’s impoverished, heavily Latino interior, and seems likely to escalate already inflated property values to even more absurd levels.

Read the entire piece at the Orange County Register.

Joel Kotkin is executive editor of He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Carnegie Deli and Other Bad New York Restaurants

Tue, 10/04/2016 - 22:38

When you’re a kid, there are certain cartoons you just love. That love remains over time as your warmly think back on childhood memories. It lasts, that is, until you foolishly go back and watch an episode of two of a favorite show, what which point you say, “Holy cow! That show is terrible.”

I was thinking of this as I read the surprisingly large press that greeted the news that New York’s Carnegie Deli will be closing. It even made the front page of the Financial Times print edition this weekend.

About 10 or 15 years ago I decided to go check Carnegie Deli out. The food was awful.

I couldn’t finish my sandwich – not because it was so big, but because it was so bad.

As all these old line NYC businesses go under one by one, replaced by something suitably gentrified, everybody is bemoaning the loss of places they used to patronize over the years.

What you don’t get from reading these is just how terrible most of these businesses actually were.

Carnegie Deli was a case in point. When’s the last time your average New Yorker actually ate there? How much of this sentimental attachment to these places comes from people who used to go them long ago but never patronize them anymore building them up in their minds the way we build up our childhood cartoons? A lot, I suspect.

Not every genre of old-school NYC business is bad. The hardware stores I’ve been in have been solid. But restaurants in particular are mostly awful.

Crain’s New York did a big piece on the disappearance of the New York diner. There’s a reason for this. Diners in New York are horrible, at least the ones in Manhattan. I’ve never once been to a good one – and I keep trying new ones. My benchmark dish is the turkey club. In Manhattan the turkey is invariably so dry I can’t finish it, even with a glass or two of water. (The outer boroughs may fare better. I’ve had great diner food on Staten Island, for example).

I don’t have the sentimental attachment to these places because I’m a newcomer to the city. I would still love to see places like Carnegie Deli survive, but ultimately the quality is just not there.

These places are failing the marketplace test, not just because of rising rents, but because they are selling a product that might have worked in the 1970s but is no longer up to par in the 21st century.

Aaron M. Renn is a senior fellow at the Manhattan Institute, a contributing editor of City Journal, and an economic development columnist for Governing magazine. He focuses on ways to help America’s cities thrive in an ever more complex, competitive, globalized, and diverse twenty-first century. During Renn’s 15-year career in management and technology consulting, he was a partner at Accenture and held several technology strategy roles and directed multimillion-dollar global technology implementations. He has contributed to The Guardian,, and numerous other publications. Renn holds a B.S. from Indiana University, where he coauthored an early social-networking platform in 1991.

Photo Credit: Jtmichcock CC BY-SA 3.0

Urban Containment, Endangered Working Families and Beleaguered Minorities

Mon, 10/03/2016 - 22:38

Working families and the middle class are becoming an increasingly endangered species in   many parts of United States. Median household income remains below its 1999 peak (inflation adjusted). But the problem is not just stagnant incomes. Expenses are also rising, especially the costs of housing in some cities. As a result, it is becoming more and more difficult to make ends meet.

Much of this has to do, as explained below, with attempts to stop development on the urban periphery which is indispensable to keeping housing affordable. Such prohibitions have been widely advocated by the  planning establishment. Moreover, a new White House Housing Development Toolkit,  rightly identifies housing unaffordability as an important issue but does not mention the important role of greenfield development in keeping costs down.

Housing Affordability Problem

Housing costs are generally responsible for the difference in cost of living between US cities (metropolitan areas). The range between cities in the Bureau of Economic Analysis (BEA) cost of living index (Regional Price Parities) in housing cost is far greater than that of its other two elements --- 13 times goods and eight times services other than rents. It is no wonder that households are moving to affordable markets.

Excessive land use regulation is a major cause of seriously unaffordable housing. Usually, these regulations include urban containment policy, which restricts or even prohibits building middle income detached housing on the urban fringe. As sure as OPEC cutbacks drive up the price of gasoline, urban planning land cutbacks drive up house prices. There is plenty of evidence that the law of supply and demand operates in urban land markets --- that restricting the availability of land for development pushes land (Figure 1) and house prices up (See: A Question of Values: Middle-Income Housing Affordability).

By definition, housing affordability must be measured in relation to incomes. It should also be compared to trends over time both within the metropolitan area (housing market) and between metropolitan areas (See Canada’s Middle-Income Housing Affordability Crisis).

The most acute problem is in California, where house prices are up to four times those in liberally regulated US metropolitan areas. Before excessive land use regulations were imposed, housing affordability in California, prices relative to incomes, were similar to the rest of the nation, rarely exceeding 3.0 (measured by the “median multiple,” the median house price divided by the median household income).

There is little comprehension of the seriousness of the housing affordability problem. With serious concerns being raised about income inequality, housing affordability represents one of the most important threats both to the well-being of middle-income households and poverty reduction. More than anywhere in the country, the price of middle income housing is beyond the reach of most middle income California households, including  those who would easily qualify in liberally regulated markets.

At the same time, middle-income households in other excessively regulated markets, like Seattle, Portland, Denver, Miami, Boston and New York have seen their house prices double (or more) as regulations have been stiffened.  Finally, all of this increases the demand for subsidized housing. While there is plenty of rhetoric about affordable housing for lower income households, there is not and there is not likely to ever be enough money.

The key issue is the cost of residential land under the house. Average residential land values are at least 75 percent of the house and land value in San Jose and San Francisco (Note 1), 70 percent in Los Angeles and 65 percent in San Diego. Our analysis of Lincoln Institute of Land Policy data indicates that the average house structure in the four California metropolitan areas had an average value is only 25 percent higher than that of the other major metropolitan areas. By contrast, the land value was more than 650 percent higher. It would be too expensive for middle income households to buy vacant residential lots, even if they intended living in tents.

With such expensive land, there is virtually no hope to restore housing affordability without tackling the issue of land head on. In the meantime, house prices weigh heavily on all households, and many are leaving California, particularly in their mid-thirties and above.

Lower Income Minorities: African Americans and Hispanics

The situation for housing is far worse for ethnic groups with lower incomes. The maximum housing affordability disadvantage faced by African Americans and Hispanics is illustrated in the following examples. In the San Francisco MSA, the median value house would cost the equivalent of 9 more years of median African-American income than for Asian or White-Non-Hispanics. This has escalated from 1.3 years before regulations were strengthened. An Hispanic household would need six more years of median income to pay for the median valued house in the San Jose MSA. There also large spreads, both for African-American and Hispanic households in other highly regulated metropolitan areas, such as Los Angeles, San Diego, Portland, Boston and New York (See Figure 2 and Table: Housing Affordability: Overall and by Ethnicity).

Planning’s “Killer App”

It is popular to contend that housing affordability can be restored through   building higher densities. There are no examples of restoring metropolitan area housing affordability through intensification. A principal problem is higher prices. A City Sector Model (Figure 3) analysis indicates that the urban core rents per room are well above that of the suburbs (Figure 4). The differences are even greater in cities with the more aggressive intensification programs, such as Portland, Seattle and Los Angeles (Note 3).  Housing units are also smaller (Figure 5). “Granny flats,” basements and apartments are too small for many middle-income households. Forced intensification impairs the quality of life for many people, particularly families (Note 4)

These policies also have the effect of widening economic divisions. Matthew Rognlie of the Massachusetts Institute of Technology examined French economist Thomas Piketty’s research on rising inequality and concluded that much of the observed inequality stems from housing. He went on to suggest re-examining the land use regulations that create scarcity, toward the end of increasing housing supply. My colleague Hugh Pavletich, co-author of Demographia International Housing Affordability Survey argues that without the “safety valve” of greenfield development, because housing cannot be kept affordable since urban containment destroys the competitive market for land.

New Zealand consultant Phil Hayward observes: “There might be other policy mixes by which housing supply within a growth boundary could be made the means of keeping housing affordable, but publicly and politically, the debate is nowhere near tackling the complexities involved” (See The Myth of Affordable Intensification).

Further, large lot or rural zoning is frequently cited as an impediment to housing affordability. This is consistent with economic theory, but its influence is miniscule compared to urban containment (Note 5). The metropolitan areas with substantial large lot zoning had an average price-to-income ratio of 3.0 in 2014, at the upper bound of affordability. This is in contrast with the seriously unaffordable price-to-income ratios (from 5.1 to 9.7) that have urban containment policy . The highest price-to-income ratios are in California’s large metropolitan areas, where there are smaller lot sizes.

Based on the unparalleled damage they do to housing affordability, urban containment boundaries may be planning’s “killer app.” A principal objective of urban containment policy is to curb the outward expansion of cities (“urban sprawl”). But the “medicine” is far worse than the “cure” --- lower standards of living and greater poverty, inflicting particular harm to lower income minorities.

Necessary Reforms

Unfortunately, housing affordability has not become an issue in this election year. Yet, policy reforms are appropriate:

  1. Urban containment policy should not be implemented where it has not been adopted.
  2. In urban containment metropolitan areas, improved housing affordability targets should be adopted (price to income ratios), with “event triggered” liberalization of urban fringe land use if the targets are not met. Similar reforms have been proposed in New Zealand and by Paul C. Cheshire, Max Nathan and Henry G. Overman of the London School of Economics.

Housing Affordability: Overall and By Ethnicity Major Metropolitan Areas Median Multiple (Years of Median Income Needed to Buy the Median Priced House) Additional Years Requried All Asians and White Non-Hispanics African Americans Hispanic African Americans Hispanic United States 3.5 3.1 5.3 4.3 2.2 1.2 Atlanta, GA 3.1 2.6 4.1 4.3 1.5 1.8 Austin, TX 3.6 3.0 4.9 5.0 1.9 2.0 Baltimore, MD 4.0 3.4 5.7 4.3 2.3 1.0 Birmingham, AL 3.0 2.6 4.6 3.8 2.0 1.2 Boston, MA-NH 5.0 4.5 9.3 9.2 4.8 4.7 Buffalo, NY 2.6 2.3 5.1 5.3 2.8 3.0 Charlotte, NC-SC 3.2 2.7 4.8 4.3 2.1 1.5 Chicago, IL-IN-WI 3.6 2.9 6.4 4.5 3.5 1.6 Cincinnati, OH-KY-IN 2.8 2.6 5.3 3.7 2.8 1.2 Cleveland, OH 2.8 2.4 4.9 3.9 2.5 1.5 Columbus, OH 2.9 2.6 4.6 3.7 2.0 1.1 Dallas-Fort Worth, TX 2.8 2.2 4.1 3.8 1.8 1.5 Denver, CO 4.5 4.0 7.4 6.3 3.3 2.3 Detroit,  MI 2.8 2.4 4.7 3.6 2.3 1.2 Grand Rapids, MI 2.7 2.6 5.2 3.7 2.7 1.1 Hartford, CT 3.4 3.0 5.4 6.5 2.4 3.6 Houston, TX 2.7 2.0 4.0 3.6 2.0 1.6 Indianapolis. IN 2.7 2.4 4.5 4.0 2.1 1.6 Jacksonville, FL 3.2 2.9 4.8 3.7 2.0 0.9 Kansas City, MO-KS 2.7 2.5 4.5 3.7 2.0 1.2 Las Vegas, NV 4.2 3.7 6.0 4.9 2.3 1.2 Los Angeles, CA 8.6 6.8 12.0 11.1 5.2 4.2 Louisville, KY-IN 2.9 2.7 4.9 3.4 2.3 0.7 Memphis, TN-MS-AR 2.9 2.1 4.1 3.5 2.0 1.4 Miami, FL 4.8 3.8 6.2 5.5 2.4 1.8 Milwaukee,WI 3.5 3.0 6.9 5.0 3.9 2.0 Minneapolis-St. Paul, MN-WI 3.3 3.0 7.3 5.1 4.3 2.1 Nashville, TN 3.3 3.0 5.2 4.2 2.2 1.2 New Orleans. LA 3.9 3.1 6.0 4.5 3.0 1.5 New York, NY-NJ-PA 6.0 4.8 8.8 9.2 4.0 4.4 Oklahoma City, OK 2.8 2.5 4.5 3.4 2.0 0.9 Orlando, FL 3.4 2.9 4.4 4.3 1.5 1.4 Philadelphia, PA-NJ-DE-MD 3.7 3.1 6.2 5.8 3.1 2.8 Phoenix, AZ 3.9 3.5 5.4 5.2 1.9 1.7 Pittsburgh, PA 2.6 2.5 5.4 3.4 2.9 0.9 Portland, OR-WA 4.7 4.5 8.7 6.0 4.2 1.5 Providence, RI-MA 4.3 4.0 6.7 7.6 2.7 3.7 Raleigh, NC 3.4 2.9 5.1 5.7 2.1 2.7 Richmond, VA 3.6 3.0 5.4 4.1 2.4 1.1 Riverside-San Bernardino, CA 5.3 4.7 6.6 6.0 1.8 1.3 Rochester, NY 2.6 2.3 4.6 4.5 2.3 2.2 Sacramento, CA 5.4 4.9 8.4 6.8 3.6 1.9 St. Louis,, MO-IL 2.9 2.6 4.9 3.5 2.3 0.9 Salt Lake City, UT 3.8 3.6 6.2 5.3 2.6 1.7 San Antonio, TX 2.7 2.2 3.1 3.3 0.9 1.1 San Diego, CA 7.2 6.2 9.3 9.5 3.1 3.3 San Francisco, CA 8.1 6.9 15.8 11.6 8.8 4.7 San Jose, CA 8.1 6.9 11.6 12.7 4.7 5.8 Seattle, WA 4.8 4.4 7.8 7.0 3.4 2.6 Tampa-St. Petersburg, FL 3.4 3.2 4.7 4.0 1.5 0.8 Tucson, AZ 3.5 3.1 5.0 4.2 1.8 1.1 Virginia Beach-Norfolk, VA-NC 3.9 3.4 5.7 4.7 2.3 1.3 Washington, DC-VA-MD-WV 4.3 3.6 5.9 5.8 2.3 2.2 Data from American Community Survey: 2015 AFFORDABILITY RATINGS     Affordable 3.0 or below Moderately Unaffordable 3.1 to 4.0 Seriously Unaffordable 4.1 to 5.0 Severely Unaffordable   5.1 and over


Note 1: Commentators sometimes suggest the high housing prices in the San Francisco Bay Area are the result of land shortages created by topographic constraints, such as bodies of water and mountains. In fact, there is plenty of developable land in the Bay Area, which includes both the San Francisco and San Jose MSAs (See: The Incompatibility of Forced Densification and Housing Affordability).

Note 2: This is without considering subsidies and tax breaks that can reduce some rents below market levels.

Note 3: African American 1969 median household is estimated based on the variation in African American median family income from the overall median in that year. Median household income data was not published for ethnicities in the 1970 census. 

Note 4: The planning establishment sometimes glosses over the reduced quality of life entailed in its efforts to discourage detached housing and force people into higher density housing. This is not their job. The quality of life can only be judged by households themselves.

Note 5: Boston is an exception, which is the only seriously unaffordable major metropolitan area without urban containment policy. Boston has large lot zoning so expansive that it has created a severe shortage of land for development, with urban containment-like effects on house prices. Boston’s urbanization covers nearly as much land area as the Tokyo urban area, despite having only one-seventh the population. (See: The Evolving Urban Form: Sprawling Boston).

Photo: Market Street, San Francisco, looking toward the Ferry Building (by author)

Wendell Cox is principal of Demographia, an international pubilc policy and demographics firm. He is a Senior Fellow of the Center for Opportunity Urbanism (US), Senior Fellow for Housing Affordability and Municipal Policy for the Frontier Centre for Public Policy (Canada), and a member of the Board of Advisors of the Center for Demographics and Policy at Chapman University (California). He is co-author of the "Demographia International Housing Affordability Survey" and author of "Demographia World Urban Areas" and "War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life." He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

Solidarity, not Division: Understanding London’s East End

Sun, 10/02/2016 - 22:38

The East End of London has a long history of working-class community. It has been a place of industry, where the river Thames and the river Lea have provided work for many people. The area attracted many immigrants, including workers from Africa since Tudor times, sailors from China, former slaves from America, French Protestants facing religious persecution in the 1600s and Irish weavers working in the textile industries. There have been Jewish communities in the East End for centuries, too. The twentieth century saw an increase in immigrants from the former British colonies, including South Asia, particularly Bangladesh. Not only has it been a place to seek a livelihood, but it has also been a place of refuge.

One side of my family hails from the East End and North East London, so I have a strong personal connection to this part of London. My ancestors worked in the local industries and on the river. We might not technically be ‘Cockneys’ (in that we weren’t all born within earshot of Bow Bells), but we are Cockney by nature. Family gatherings would include a raucous ‘knees-up’ (dancing and singing) and traditional local fare of jellied eels. We’re a working-class family who have lived in East London for generations.

So I was interested when I came across a recent short BBC documentary called Last Whites of the East End. I was disturbed by the title, which suggested that white people in the area are somehow endangered – an odd idea and potentially a racist one. This racism was confirmed when I watched the show. The documentary focused on residents of Newham, one of the poorest working-class boroughs in England. The filmmakers interviewed a number of working-class residents about their experiences of living in the East End and the decisions of some of them to leave the area. The majority of the subjects were white, though they also included one man of Bangladeshi background and one man of white and Afro-Caribbean heritage.

The narration of the documentary presented a racist agenda, describing the neighbourhood as at ‘tipping point’ with the ‘lowest white population in the UK’. It also noted a ‘dwindling cockney community’ who were in danger of disappearing in the face of increased immigration. Some of those interviewed were moving outside of London, to places like Essex, so they could live in areas with larger white populations. Some described themselves as ‘traditional East Enders’ and lamented the loss of the old community. They spoke of local services being shut down and the closure of the local pub. The film presented the interviewees as embodying white racism and a fear of the other, highlighting their reluctance to build bridges due to perceived differences. As one young white woman explained, they wanted to ‘stay with their own’.

But there were many contradictions in the documentary, too. It included an elderly white woman, who was preparing to leave her home and move out of London, not due to her fear of her Muslim neighbours (as implied by the narration, despite the fact that she was obviously upset to say goodbye to her Somali neighbour), but because she was elderly and alone and wanted to move closer to her daughter. Like many of her neighbours, she had once been a new arrival to the neighbourhood, moving there from the north of England. The two people of colour in the film both spoke of their connections to the local area and their identification as East Enders. Like their white neighbours, they pointed to the changing environment, but I’d suggest that the changes they were criticising were not tied to the latest influx of new immigrants.

Instead, they are matters of class. Gentrification and austerity are disrupting the lives of the working-class residents of the East End, not immigration. Housing has become too expensive, and government funding cuts are squeezing local schools and health services. Interviewees complained about the closure of a club which wasn’t just a local pub but also a community centre that elderly residents relied on for social events and to reduce isolation. Some white people are leaving, but, as I’ve seen with some friends and family members, that’s for financial reasons. They can purchase bigger properties if they sell their London homes, or they can pay less rent by moving to areas outside of London with smaller populations and less pressure on local services. And of course, not all of those leaving London are white.

The documentary downplays this part of the story. It also downplays the working-class solidarity that connects residents despite their differences. Residents of the East End share the experience of hardship and struggle, and this shared struggle has a very long history. The East End has a tradition of political radicalism and collective action. East Enders have looked after each other during tough times and shown a united front against hostile external forces. Famously, in 1936, the local community stood up against a group of anti-Semitic fascists who wanted to march through a Jewish area. The confrontation, known as the Battle of Cable Street, was won because the community put their bodies on the line to keep the fascists out. The same community rallied during the Second World War and looked after each other during the bombing raids of the Blitz. More recently, local people have been supporting each other and engaging in collective action in the face of forced evictions as local public housing is sold and redeveloped for private profit.

If the ‘traditional East End’ is disappearing, that isn’t because some working-class white are moving out of London. Working-class communities are not made up of just white people, and I’ve certainly never known a London that was mono-cultural. Yes, there are racist white working-class people. But the East End of London is a diverse and dynamic place, and always has been. It has also been a place of solidarity and struggle. The filmmakers chose to emphasize division instead of showing how East Enders act collectively, and it cast immigrants as a threat, when the real threats facing this community are austerity and gentrification.

This piece first appeared at Working-Class Perspectives.

Photo Credit: Daryl Hutchison, @daryldactyl

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