SUCCESSFUL CITIES “Sustainability Planning”: First Do No Harm

1. SUCCESSFUL CITIES“Sustainability Planning”: First Do No Harm Peter Gordon University of Southern California Los Angeles, California, USA October 7, 2009 AIUS 1-Day Event Australian Institute of Urban Studies Perth, Western Australia

3. I. Would you rather be alive today or many years ago? History’s radical discontinuity (the most radical?) occurred only about 150 years ago II. Are there big themes and big ideas to explain big events? Spontaneous orders and virtuous cycles III. Spontaneous order in cities? Or is sustainablity planning helpful? IV. Bad policies bring bad times and bad times prompt bad policies. Vicious cycle vs. virtuous cycle

4. I. The Best of Times A Radical Discontinuity from Most of Human History Doomsday Forecasts Have All Been Wrong

5. Is it the best of times? Is it the worst of times?

6. Australian GDP per capita (chained $2007, 1960 – 2008) Source: Australian Bureau of Statistics, http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/5204.0Main+Features12007-8?OpenDocument

7. Growth of Per Capita GDP, Selected Countries, 1950-2030 (annual average compound growth rates) Source: A. Maddison, 2007

8. World History of GDP/Capita Trends Source: Brad DeLong

10. “… [e]ven with conservative assumptions about future growth, someone born in 1995 can expect to enjoy four times the lifetime income of someone born in 1970. The fact of the matter is that the record of the last quarter century demonstrates two points: Aggregate economic growth benefits most of the people most of the time; and it is usually associated with progress in other, social dimensions of development.” …Joseph E. Stiglitz and Lyn Squire Foreign Policy, Spring, 1998

12. U.S. Youth Mortality per 100,000: the Fifties versus Today Source: Bryan Caplan

14. Infant Mortality (< 1 year of age per 1,000 Live Births) From the Middle Ages to A.D. 2003 Source: I.M. Goklany, 2007

15. Daily Food Supplies (kcals/capita/day), c. 1800-2002 Source: I.M. Goklany, 2007

16. “It is remarkable that the fall in the proportion of people starving in the world should have come at the same time as the population of developing countries doubled. What is more astounding is that the actual number of people starving in the Third World has fallen. While in 1971 almost 920 million people were starving, the total fell below 792 million in 1997 ... In 2010 it is expected to fall to 680 million.” … Bjorn Lomborg, The Skeptical Environmentalist Cambridge University Press, 2001

20. "... an extra ten phones per 100 people in a typical developing country boost GDP growth by 0.8 percentage points .... More than 4 billion handsets are now in use worldwide, three-quarters of them in the developing world. Even in Africa, four in ten people now have a mobile phone.“ (The Economist, Sep 26, 2009)

21. “… The greatest achievement of the twentieth century is that the majority of the poor people of the world have shared in the improvements in well being made possible by the advancement of knowledge.” … D. Gale Johnson, Journal of Asian Economics, 2004

22. The big picture: (i) World’s population between 1800 and 2000 grew by a factor of six; (ii) But amounts of goods and services consumed by the average person have not fallen, but are mostly up – and fail to fully reflect quality improvements

23. (iii) Life expectancies in 1870 were no longer than in 8,000 BC. (iv) Our immediate ancestors had lived at subsistence levels for 99.5% of their 50,000 years. Now, in spite of The Bottom Billion, most of humanity has escaped subsistence living

24. (v) The most auspicious economic development in modern history is the stunning improvement in the material condition of humanity – trend from 150-200 years ago – finally proving Malthus is no longer relevant (vi) These improvements occurred in spite of the worst wars, the worst recession, the influenza epidemic -- and many other disasters

25. II. Are there big ideas (big hunches) to match big phenomena? What determines the Wealth of Nations? Institutions matter The limits of top-down planning How do we get good institutions?

26. What are “good institutions”? Clear and credible property rights, Freedom from expropriation, Unimpeded markets Minimal government These poise entrepreneurs to succeed – and they challenge optimism re top-down planning

27. Achilles Heel(s) of Top-down Planning i) Planners can never gather all the local knowledge – all the wants; all the costs -- dispersed throughout the economy; if they did, they would be overwhelmed by it ii) Central planning is inevitably politicized iii) Are dispersed knowledge and focused power compatible?

28. iv) Can anyone know how much land to release for (what kind of) development, when and where? Can anyone know the full consequences?

29. Surprises and other misadventures are not from some Law of Unintended Circumstances Housing affordability problems in the U.S. (and very likely in Australia) come from supply restrictions – and were never an intended part of any plan or policy

30. Source: UDIA, 2006

31. After the fall of communism, Western economists rushed in to prescribe the restoration of private property (J. Sachs’ “big Bang”) The results were often disappointing They forgot about institutions -- and the missing legal infrastructure

33. Economic freedom and economic development

34. Components of Wealth, 2000 ($ U.S.) Source: World Bank

35. Where is Australia?

36. Economic Growth and Per Capita Income Growth of the Poorest Source: David Dollar and Art Kraay, Growth Is Good for the Poor, The World Bank, Washington, DC, 2001, p.45

37. “The poor do not usually win when there is a struggle over redistribution of the existing pie. They only win when the pie grows larger for everybody …” … William Easterly, Challenge, 2002 “Many people blame globalization for poverty and injustice in the developing world. Yet it is the absence of globalization – or an insufficient does of it that is truly to blame for iniquities.” … Ricardo Hausmann , Foreign Policy, Jan/Feb, 2001

38. “Over the centuries those who have been blessed with wealth have developed many remarkably ingenious and persuasive justifications for their good fortune. The instinct of the liberal is to look at these explanations with a rather unyielding eye. Yet in this case the facts are inescapable. It is the increase in output in recent years, not the redistribution of income, which has brought the greatest material increase to the well-being of the average man. And, however suspiciously, the liberal has come to accept the fact.” … J.K. Galbraith The Affluent Society, pp 96-97

39. “How we feel about the evolving future tells us who we are as individuals and as a civilization: Do we search for statis – a regulated, engineered world? Or do we embrace dynamism – a world of constant creation discovery and competition? Do we value stability and control or evolution and learning? Do we think that progress requires a central blueprint, or do we see it as a decentralized, evolutionary process. Do we consider mistakes permanent disasters, or correctable by-product of experimentation? Do we crave predictability, or relish surprise? These two poles, stasis and dynamism, increasingly define our political and intellectual and cultural landscape The central question of our time is what to do about the future. And that question creates a deep divide.” …Virginia Postrel, The Future and Its Enemies, 1998

40. “It is evident from the experience of the countries that have successfully reformed policies that the payoff for shifting to a virtuous circle can be enormous. Better understanding of the political-economic interactions that can enable this to happen is therefore of major importance for improving the development prospects of those countries still mired in the ‘stop-go’ cycle of detailed controls and intervention and gradually decelerating economic performance.” (italics added) … Anne Krueger, The American Economist (1994).

41. The Virtuous Cycle Roughly speaking, the culture permitting, people with secure property rights, including legal infrastructure to enforce property rights (“economic freedom”), become prosperous And prosperous people demand more economic freedoms Not a yes-no index; economic freedom indexes allow rankings and comparisons

42. Another virtuous cycle: Trust lubricates exchange But exchange deepens trust

43. “Economic growth – meaning a rising standard of living for the clear majority of citizens – more often than not fosters greater opportunity, tolerance of diversity, social mobility, commitment to fairness, and dedication to democracy. … Even societies that have already made great advances in these very dimensions, for example most of today’s Western democracies, are more likely to make still further progress when their living standards rise. But when living standards stagnate or decline, most societies make little if any progress towards any of these goals, and in all too many instances they plainly retrogress.” … Benjamin M. Friedman, The Moral Consequences of Economic Growth

44. “Standard economic prescriptions, such as letting the incentives of free markets operate, are only part of the answer. Free markets are not particularly helpful in maintaining a work ethic. However, without a public service ethic, governments will undermine property rights rather than protect them. Without a learning ethic, economic activity in agriculture, manufacturing, and services will stagnate rather than evolve.” … Arnold Kling, Learning Economics, Xlibris Corp. 2004

45. The counter-intuitive implication: Order from human action rather than from human design. Emerging spontaneous (unplanned) orders rather than constructed orders. Is there evidence of spontaneous order in the development of cities? Webster and Lai (2004) suggest that there is spatial order – even in a world of second-best.

46. What does all this have to do with cities? Spontaneous order in cities vs. sustainability planning Why are there cities? Is there spatial order? What did we learn from Jane Jacobs? What is “urban sprawl”? What is auto-oriented development? Is it an option?

47. Ideas are the engine of economic growth Cities are the engines of growth Both are true: the best ideas are shaped in cities Which cities fulfill this function best? How do they do it?

48. Neighborhoods, cities, societies, the way we live are best seen as evolving “… evolution is probably the greatest show in the entire universe …” Richard Dawkins (WSJ, Sep 12, 2009)

49. Spatial Order Suburbanization Around the World: Shares of Change in Population Source: http://www.demographia.com/db-highmetro.htm

50. Spatial Order: Spatial Structure and Commuting, 2000 Source: Lee, Bumsoo. 2006. Urban spatial structure and commuting in US metropolitan areas. Western Regional Science Association 45th Annual Meeting.