I think the high median incomes are much more a product of the housing induced migration. In fact I think it’s one of the false signals of “superness”. When you move 1-2% of your poorest residents out each year, local average incomes rise because of the compositional change. So I actually think it’s a bit galling for the coastal urban centers to be seen as economically superior to the cities that have taken in all their economic refugees.
There are links in this post to research showing that the differences in income are largely due to economic migration and that in the cities which here I show missing their potential, even though nominal incomes are high, standard of living is either the same or lower than in other cities.
Yes I read your posts and I think they are thoughtful, informative and well researched. But there is certainly a huge wealth generation effect in the San Francisco Bay Area. I can show you the statistics, but the number of millionaires per capita, billionaires per capita, new IPOs, venture capital, etc are all the highest in the world.
Educated people from all over the world are flocking to be part of the technological agglomeration effects here and have been doing so for at least a generation. If that is not a superstar city then I don’t know what is. Maybe there are none by your definition. I would say pretty much all of these cities where billionaires are created and chose to live qualify.
I understand that my point here is the “accepted wisdom” and that you are making a contrarian case, which I have a lot of respect for. I do see the massive displacement of working class people here which has no doubt had a huge impact on median incomes. It’s also true that the quality of life for everyone but the super rich is negatively impacted by high home prices, which are primarily driven by the local NIMBY dominated government refusing to build enough housing. There are huge negative impacts both from the wealth effects and from the lack of housing. I am a Yimby, I agree with all those points.
But that doesn’t mean that NYC, London, and others are not attractors for smart, educated and ambitious people from all over the world, and are generating outsized economic (and cultural and political) impact. Something special is going on in those places.
That is a worthy defense of the null hypothesis. Certainly your core point has a lot of truth to it.
To the extent that I call those cities failures, it is in the ways that they don't meet their potential. Failing means that they have to have the potential to begin with. The point of this post is that successful cities in open societies grow. We can objectively measure their growth, and the growth of these cities is very low. And we can objectively see that the lack of growth is related to economic distress and displacement. So, if my estimate of their potential is understated, then my estimate of how badly they have failed at meeting it is also understated.
If you're saying "San Francisco is a lot more of an economic powerhouse than you're giving it credit for.", then you must simultaneously be saying, "San Francisco has failed to meet its potential and share its benefits much worse than you are blaming them for." And, this isn't just missed opportunities. It is, among these cities, literally millions of families who were exiled.
The most visible part of this is the homelessness issue - basically the long tail of the choices faced by the displaced. It seems ironic that the richest places on earth are riddled with unprecedented levels of homelessness, but using my framework, it isn't ironic at all. The homelessness is correlated with failed potential. And so homelessness has a sort of spurious correlation with potential, because the cities need some potential in order to fail to meet it.
Here's an old post at my old blog from when I first started looking at this stuff.
The problem is that we can measure displacement from a lack of housing, because we are measuring something people do (leavers). But, measuring exclusion is harder, because it's estimating something people didn't do (people who didn't arrive).
Yet, it should still be the case that preferred cities would attract more newcomers, and the issue would be one of scale. The challenge should be trying to estimate how many more newcomers would have come if housing was affordable.
But, the odd thing about the expensive "closed access" cities, which seem like they attract more newcomers, is that they don't have unusually high domestic inmigration at all. Their inmigration is determinedly average. So there is no baseline from which to wonder how many more newcomers might have come.
Now, I could have some sort of measurement or analytical error here. But, the numbers are such that this can't be too far from the truth. It is unlikely that I am creating an error that upends the surprising story. The demand for migration into the expensive cities comes much more from aesthetic inference than from empirical evidence.
It feels strange reading something from 2018--like it's further in the past than 2008. A counterfactual from the immediate pre-pandemic years is that we probably would have had a mild downturn in 2020 because of a persistent tight money policy, lackluster housing production, and stupid trade wars.
Good post, keep them coming. The "superstar city" should be relabeled "static city" per this analysis. What's frustrating is that there are plenty of residents and elected officials in places like Boston, L.A., etc... who are committed to the continuation of this static condition. I'm beginning to think it transcends conventional explanations for NIMBYism like racism and class consciousness. There seems to be an embedded, tribal attitude that can't cope with population growth and the architectural evolution that growth entails. I see this play out at the small town level in New England, where zoning restrictions get pushed to comical extremes--e.g. 10 acre lot sizes. Objections to development of any sort usually get framed as concern over families with school age children driving up property tax rates.
The entire state of Vermont exhibits this collective malaise and has effectively frozen its population at around 600,000 people. Curiously, house prices are considerably below the U.S. median, which can lead to the simple conclusion that it's just another example of rural decline. But when you start to probe the collective zeitgeist of the residents you find many examples of this obsession with preserving the static condition; large lot size minimums, scenic road designations, height limits, agricultural preservation, etc. No politician in the state would dare run on a growth platform.
Unless there is a national priority and commitment to housing production, but instead a commitment to boost population and cool wages through immigration, then.....
You need to talk about median family income here too. A city isn’t a superstar if incomes are average. It can’t be.
I think the high median incomes are much more a product of the housing induced migration. In fact I think it’s one of the false signals of “superness”. When you move 1-2% of your poorest residents out each year, local average incomes rise because of the compositional change. So I actually think it’s a bit galling for the coastal urban centers to be seen as economically superior to the cities that have taken in all their economic refugees.
There are links in this post to research showing that the differences in income are largely due to economic migration and that in the cities which here I show missing their potential, even though nominal incomes are high, standard of living is either the same or lower than in other cities.
https://kevinerdmann.substack.com/p/price-is-the-medium-through-which-c74
Yes I read your posts and I think they are thoughtful, informative and well researched. But there is certainly a huge wealth generation effect in the San Francisco Bay Area. I can show you the statistics, but the number of millionaires per capita, billionaires per capita, new IPOs, venture capital, etc are all the highest in the world.
Educated people from all over the world are flocking to be part of the technological agglomeration effects here and have been doing so for at least a generation. If that is not a superstar city then I don’t know what is. Maybe there are none by your definition. I would say pretty much all of these cities where billionaires are created and chose to live qualify.
https://www.visualcapitalist.com/top-20-cities-ultra-wealthy/
I understand that my point here is the “accepted wisdom” and that you are making a contrarian case, which I have a lot of respect for. I do see the massive displacement of working class people here which has no doubt had a huge impact on median incomes. It’s also true that the quality of life for everyone but the super rich is negatively impacted by high home prices, which are primarily driven by the local NIMBY dominated government refusing to build enough housing. There are huge negative impacts both from the wealth effects and from the lack of housing. I am a Yimby, I agree with all those points.
But that doesn’t mean that NYC, London, and others are not attractors for smart, educated and ambitious people from all over the world, and are generating outsized economic (and cultural and political) impact. Something special is going on in those places.
That is a worthy defense of the null hypothesis. Certainly your core point has a lot of truth to it.
To the extent that I call those cities failures, it is in the ways that they don't meet their potential. Failing means that they have to have the potential to begin with. The point of this post is that successful cities in open societies grow. We can objectively measure their growth, and the growth of these cities is very low. And we can objectively see that the lack of growth is related to economic distress and displacement. So, if my estimate of their potential is understated, then my estimate of how badly they have failed at meeting it is also understated.
If you're saying "San Francisco is a lot more of an economic powerhouse than you're giving it credit for.", then you must simultaneously be saying, "San Francisco has failed to meet its potential and share its benefits much worse than you are blaming them for." And, this isn't just missed opportunities. It is, among these cities, literally millions of families who were exiled.
The most visible part of this is the homelessness issue - basically the long tail of the choices faced by the displaced. It seems ironic that the richest places on earth are riddled with unprecedented levels of homelessness, but using my framework, it isn't ironic at all. The homelessness is correlated with failed potential. And so homelessness has a sort of spurious correlation with potential, because the cities need some potential in order to fail to meet it.
Here's an old post at my old blog from when I first started looking at this stuff.
The problem is that we can measure displacement from a lack of housing, because we are measuring something people do (leavers). But, measuring exclusion is harder, because it's estimating something people didn't do (people who didn't arrive).
Yet, it should still be the case that preferred cities would attract more newcomers, and the issue would be one of scale. The challenge should be trying to estimate how many more newcomers would have come if housing was affordable.
But, the odd thing about the expensive "closed access" cities, which seem like they attract more newcomers, is that they don't have unusually high domestic inmigration at all. Their inmigration is determinedly average. So there is no baseline from which to wonder how many more newcomers might have come.
Now, I could have some sort of measurement or analytical error here. But, the numbers are such that this can't be too far from the truth. It is unlikely that I am creating an error that upends the surprising story. The demand for migration into the expensive cities comes much more from aesthetic inference than from empirical evidence.
https://www.idiosyncraticwhisk.com/2018/01/housing-part-279-building-homes-helps.html
It feels strange reading something from 2018--like it's further in the past than 2008. A counterfactual from the immediate pre-pandemic years is that we probably would have had a mild downturn in 2020 because of a persistent tight money policy, lackluster housing production, and stupid trade wars.
Good post, keep them coming. The "superstar city" should be relabeled "static city" per this analysis. What's frustrating is that there are plenty of residents and elected officials in places like Boston, L.A., etc... who are committed to the continuation of this static condition. I'm beginning to think it transcends conventional explanations for NIMBYism like racism and class consciousness. There seems to be an embedded, tribal attitude that can't cope with population growth and the architectural evolution that growth entails. I see this play out at the small town level in New England, where zoning restrictions get pushed to comical extremes--e.g. 10 acre lot sizes. Objections to development of any sort usually get framed as concern over families with school age children driving up property tax rates.
The entire state of Vermont exhibits this collective malaise and has effectively frozen its population at around 600,000 people. Curiously, house prices are considerably below the U.S. median, which can lead to the simple conclusion that it's just another example of rural decline. But when you start to probe the collective zeitgeist of the residents you find many examples of this obsession with preserving the static condition; large lot size minimums, scenic road designations, height limits, agricultural preservation, etc. No politician in the state would dare run on a growth platform.
Very convincing.
BTW, Canada has unaffordable housing now.
Australia, too.
Unless there is a national priority and commitment to housing production, but instead a commitment to boost population and cool wages through immigration, then.....