Edward Glaeser - Cities, Terrorism, Housing, & Remote Work

Okay, today I have the pleasure of speaking with Professor Edward Glaser, who is the chair of the Harvard Department of Economics, and he is the author of the best books and papers about cities.

So, Professor Glazer, thanks for coming on the Lunar Society.

Oh, thank you so much for having me on, especially given that Lunar Society pays homage to one of my favorite moments in urban innovation in Birmingham in the 18th century.

Oh, wow.

I didn't even catch that theme, but actually, yeah, that's a great title.

Yep.

My first question, what advice would you give to Elon Musk about building the first cities on Mars?

That's a great question.

I think, in fact, demand for urbanism in Mars is going to be relatively limited.

Cities are always shaped by the transportation costs that are dominant in the era in which they're created.

That both determines the sort of micro shape of the city and determines its macro futures.

So

cities on Mars are, of course, going to be limited by the likely to be prohibitive cost of traveling back and forth to

the mother planet.

But we also have to understand what cars are people going to be using on Mars.

I assume these are all going to be Teslas.

I assume that everyone is going to be driving around in some sort of appropriate Tesla on Mars.

So it's going to be a very car-oriented

living.

I think probably the best strategy strategy on this is to create a fairly flexible plan, much like the 1811 grid plan in New York that allows entrepreneurs to sort of change land use over time,

to put a few bets on what's necessary in terms of infrastructure.

and then just let the city evolve sort of organically.

I think that's usually the best way is to trust more to individual initiative than to trust to central planning, at least in terms of micromanaging what goes where.

Gotcha.

Now, since 9-11, many terrorist groups have obviously intended to cause harm to cities.

But by and large,

at least in Western countries, they haven't managed to kill off thousands of people like they were able to do during 9-11.

What explains this?

Do you think cities are just more resilient to these kinds of attacks than we would have otherwise thought, or are they just not being creative enough?

I don't know.

I mean, there's also the question as to what the objectives are.

I mean, even the 9-11 terrorists, they weren't, their end game was not to kill urbanites in America.

It was to affect change in you know in Saudi Arabia or or in the Middle East more generally

I think that's likely to you know be one major thing we've also protected our cities better I mean if you think about it there are two things that go on simultaneously when you collect economic activity in one place in terms of defense one of which is they become targets and of course that's what we saw in 9-11 I mean it's hard to think of a of a you know symbol that's that's clearer than those than those twin towers but at the same time they're also defensible space I mean the origin of the urban agglomeration the first use for cities and towns was the fact that they could be walled settlements.

Those walls, bringing together people collectively for defense, is the ultimate reason why these towns came about.

So that walls were provided protection.

And so I think the same thing is playing out with cities over the past 20 years, that just as New York was a target, it was also a place which in the years after 2001,

the city ramped up their anti-terrorist efforts.

They put together a sort of massive group, as London had previously done, with the cameras everywhere in the case of London to try and, in fact, the cameras that would then implement congestion pricing in London were the same cameras that we used against the Irish

terrorists.

So

both effects go on.

I think we've been both fortunate and I think shown the strength of cities in terms of protecting themselves.

Yeah, yeah.

Now, if you look throughout history, there's like in the ancient world at least, there's so many examples of empires that are basically synonymous with their capital cities.

You think of like someone thinking like Rome or Athens or Sparta, and today you would never think of America as the Washingtonian empire.

So, what is the explanation for why the capital city has become much less, much less salient in terms of the overall nation?

Is it

a sort of Kosian answer here?

So, there are specific things that went on with

English offshoot colonies, where they, in many cases, in part because they recognized the tendency of the capital city to attract lots of excess goodies that have been taken from elsewhere in the country, they located the capital city in a remote place.

And this was, this was very much, you know, it's the

actually part of the story of the Hamilton musical in the room where it happened.

Part of the deal in the room where it happened was about moving the capital of the U.S.

to a relatively remote Virginia location rather than having it be in Philadelphia and New York, although it was in Philadelphia and New York in the earlier days.

Partially that was to

reflect the fact that the South needed to be protected against all of the extra stuff going to New York and Philadelphia.

And so, you know, whether or not this is Canberra or Ottawa, right, you see all of these English offshoot places having their capitals very much not in the big metropoles.

Whereas traditionally, what's happened, particularly if these places have been around for centuries, is even if the capital didn't start off as the largest city, it became the largest city because

centuries of French leaders thought their business was to take wealth from elsewhere in France and make Paris great.

And I think certainly

the French Empire was

as synonymous with Paris as most of those ancient empires were with their capital city

as well.

So I think that's the main fact force.

I guess the question I could throw back to you is the places where this is is not true,

Moscow, St.

Peter's, Moscow, Beijing.

I mean, do we think that Beijing is less synonymous with China than

the Roman Empire is with Rome?

Maybe a little, possibly just because China is so big and Beijing is a relatively small share of the overall population of China, but

it's more so certainly than Washington, D.C.

is with New York, with the U.S.

Right.

Yeah, yeah, yeah.

Yeah, that's an interesting, that's a really interesting answer.

Suppose a city goes through a period of decline.

So maybe an important industry moved out or maybe it's had

a sequence of bad governance.

Are you inclined to bet that there will be some sort of renewal or do you think that things will continue to get worse?

In other words, are you a momentum trader or are you a reversion to the mean trader when it comes to cities?

I can tell you different answers for different outcomes.

So housing prices, I can tell you exactly what we know statistically about this, which is at higher frequencies, let's say one year, housing prices show wickedly large levels of momentum.

For five years or more, they show very significant levels of mean reversion.

So it's a short-term cycle in housing prices followed by a decline.

Population just shows enormous persistence on the downside.

And so what happens is you typically will have an economic shock that, you know, Detroit used to be the most productive place on the planet in 1950, you know, bunch of shocks to transportation technology that mean it's no longer such a great place to make, to make cars for the world.

And it takes a century for the city to respond in terms of its population because the housing is sticky.

The housing remains there.

And so between 50 and 60, population declines a little bit, prices drop.

They drop sufficiently far that you're not going to build a lot of more, a lot of new housing, but people are going to still stay in the houses.

They're not going to become vacant.

And so the people are still there because the houses are still there.

60 to 70, population drops a little bit further, prices kind of stay constant, but still it's not enough to build new housing.

So the declines are incredibly persistent.

Growth, less so.

So on the boom side,

you have a boom over a 10-year period.

You know, that's likely to mean revert.

So that's not nearly as persistent because it doesn't have this sticky housing

element to it.

In terms of GDP per capita, capita,

much more of a random walk there in terms of the straight income stuff.

So it's the population that's really persistent, which is, in fact, the reality of persistent decline.

Interesting.

Interesting.

Why don't Americans move as much as they used to a century ago?

So you have a paper from 2018 titled Jobs in the Heartland, where you talk about how there's increasing divergence between the unemployment rates between different parts of America.

Why don't Americans just move to go to the places where there's

better economic circumstances?

I want to highlight one point here, which is you said unemployment rate, and I want to replace that with non-employment rate.

And that's partially what we're seeing now.

That in fact, the huge gap, and so it looks like America is like America's labor force couldn't be better in terms of the low levels of unemployment.

But what's happened over the last 50 years is a very large rise in the share of prime aen who are not in the labor force.

So they've stopped looking for work.

And those guys are miserable.

It's not that those guys are like somehow or other, you know, productive and happy, not being able to, you know, this is a very bad outcome for prime age men.

I'm separating men from women, not to say that they're, that the, you know, female labor markets aren't just as important, just as fascinating, just as, just as critical, but labor force participation means something different for many women than it does for men.

And there are many women who are not in the labor force who are doing things that are enormously productive socially, who are caring for their children, caring for their families.

I wish it were symmetric across the genders.

It just isn't true.

I mean, there just are very few men who are not in the labor force who are doing anything much other than watching television, right?

I mean, it's just

a very different thing.

So yes, there are big differences in the non-employment rate.

There are some parts of America where, you know, for much of the past decade, one in four prime aim, it's just an enormous gap.

And the question is, why don't they get out?

And I think the answer is, you know, really twofold.

One of which is the nature of how housing markets have frozen up.

So historically, like housing in the U.S.

didn't cost that, you know, the differences weren't that huge across places.

Most parts of America had some kind of affordable housing.

It was relatively easy to put up new housing.

You know, at the dawn of the 20th century, these were kit homes sold by Sears and Roebuck that sprung up by the thousand.

You bought the kit from Sears and Roebucks and you just built it themselves yourself.

After World War II, it was mass-produced homes in places like Levittown.

For most of the last 50 years, in places like coastal California or the East Coast, building has just gotten far more difficult.

And so with the decline of mass-produced housing, it's become far more expensive and it becomes harder and harder for relatively low-income people to find opportunity in places that have high levels of income,

high levels of opportunity.

And that's, I think, partially why there's not just a general decline in mobility, there's a decline in directed mobility for the poor, meaning historically, poor people moved from poor areas to rich areas.

That's pretty much stopped.

And in part, that's because rich areas just have very, very expensive housing.

The other thing is the rising importance of the informal safety net.

So if you think about most, particularly prime-aged men, they're not receiving significant handouts from the government except if they're on disability.

But they will typically have some form of income, some form of housing that's being provided for them by someone other than themselves.

A third of them are living in their parents' homes, right?

That informal safety net is usually very place-dependent.

It's not like your parents, let's say you're living in Eastern Kentucky.

It's not like your parents were going to buy you a condo in San Francisco.

You can still have your old bedroom, but you can't like, you know, you can't go anywhere else and still get that level of support.

And so that's, I think, another reason why we're increasingly stuck in place.

The third you mentioned, is that a third of the non-employed population of young men or is that a third of all of you?

Non-employed is a third of non-employed prime age men.

So that's 25 to 54.

That's not, you know, there are a lot of 45-year-olds who are living on their parents' couches, right, or in their old bedroom.

I mean, it's a fairly fairly remarkable thing.

Yeah.

Now, we'll get to housing in just a second, but first, I want to ask you: if the fertility trends in East Asia and many other places continue, what will the impact on cities be if the average age gets much older and there might even be some depopulation?

So, that's a really interesting question.

The

basic age fact on cities

is

that the sort of high income or middle income,

you know, prime aged parents,

cities tend to be relatively bad for them.

So once you're in the sort of high end of the

upper middle class, right, the distrust of our public school systems, merited or not, have, you know, mean that that group

tends to leave.

You have plenty of parents with kids who are lower income.

And then you have groups who are part of a barbell, a demographic barbell, who like cities.

So this is partially about people who don't feel like they need the extra space, partially because, you know, if

they're young, they're looking to find prospective mates of various forms.

Cities are good for that.

Urban proximity works well in the dating market.

And they've got, you know,

time on their hands to enjoy the tremendous amenities, the consumption advantages that cities have.

Older people are, you know, it's less about finding a mate typically, but, you know, the urban consumption amenities are still valued.

The ability to go to museums, the ability to go to concerts, and

that continues to draw people in.

So I would have thought that going forward,

I would have continued to expect the barbell dimension to persist until we actually get around to solving our urban schools and the declining population levels.

If anything, I would have thought that COVID skews you a bit younger.

because the older people are more anxious about, they've remembered, you know, they remember that cities can also bring pandemics.

They've remembered that it can be a nice thing to have a suburban home if you have to shelter in place.

And so that might, you know, lead, lead some people who would have otherwise relocated to a dense urban core to, you know, move out, to stay out.

You just mentioned urban schools.

And I'm curious, you've written about how, I mean, that urban schools, that's one of the reasons why

people who have children might not want to stay in cities.

I'm curious why it's the case that

American cities have some of the best colleges in the world, but for some reason their K-12 is significantly worse or can be worse than the K-12 in other parts of the country.

Why is it that the colleges are much better in cities, but K-12 is worse?

So it's interesting.

It's not as if, you know, I don't think there's ever been an Englishman who felt like they had to leave London to get better schools for the kids or a Frenchman who thought they needed to leave Paris.

It's not like there's something that's intrinsic to cities.

But I've always thought it's a reflection of the fact that instead of allowing all of the, you know, competition and, you know, entrepreneurship that thrives in cities and that makes cities great.

In the case of K through 12 public education, that's vanished.

And your example of college is exactly right.

I'm in this industry.

I'm a participant in this industry.

And let me tell you, this industry is pretty competitive.

Well, whether or not we're competing for the best students,

at our level, we go through an annual exercise of trying to make sure we get PhD students to come to our program instead of our competitors.

Whether or not it's hiring faculty members, whether or not it's attracting undergraduates.

We occupy a highly competitive industry where we are constantly aware of what we need to do to make ourselves better.

It doesn't mean that we're great along every dimension, but at least we're trying.

K through 12 education has a local monopoly.

And so it's like you take

the great urban food, leisure, and hospitality and

food industries.

right just take urban restaurants and instead of having in new york city like a hyper-competitive world where you constantly have entry, you say, you know what, we're going to have one publicly managed canteen, and it's going to provide all the food in New York City, and we're not going to allow any competitors, or the competitors are going to have to pay a totally different thing.

That canteen is probably going to serve pretty crappy food.

And that's in some sense what happens when you have a large-scale public monopoly that replaces private competition.

But isn't that also true of rural schools?

So why are urban schools often worse?

There's much more competition in suburban schools.

So in terms of the suburban schools, typically, like, there are lots of suburbs.

There, you know, people are competing amongst them.

The other thing that's actually important

is, and I don't want to overexaggerate this, but I think it is something that we need to think a little bit about, which is

the role of public sector unions and particularly teachers' unions in these cases.

So

in the case of a suburban school district, the teachers union is no more empowered on the on the management side than they would be in the private sector.

So, a normal private sector,

you've got a large company, you've got a union, they're arguing with each other.

It's kind of a level playing field.

It's all kind of reasonable.

I mean, I'm not saying

management has done awful things, unions have done foolish things.

I'm not saying either are perfect, but it's kind of a well-matched thing.

It's kind of matched that way in the suburbs as well.

You've got highly empowered parents who are highly focused on their kids, and they're not dominated.

It's not like the teachers' union dominates elections in Westchester County.

Whereas if you go into a big city school district, you have two things going on.

One of which is the teachers tend to be highly involved politically and quite capable of influencing management, essentially, because they are an electoral force to be reckoned with, not just by the direct votes, but also with their campaign spending.

And on top of this, you're talking about a larger group of disparate parents, many of whom have lots of challenges to face, and it becomes much harder for them to sort of organize effectively on the other side.

So for those reasons, our big urban schools are, you know, they can do great things and many individual teachers can be fantastic, but a it's an ongoing challenge.

Yep, yep, that makes sense.

Uh, what is your opinion on Georgism?

Do cities need a land value tax?

Uh, would it be better if all the other taxes are replaced by one?

Okay, so I, uh, Henry George, right,

I don't know any economist who doesn't think that, you know, a land value tax is an attractive idea, right?

And one of the reasons, so the basic idea is we're gonna we're gonna tax land, let's say, rather than taxing real estate values.

And, you know, you would probably implement this in practice by

evaluating the real estate and then subtracting the cost of construction, at least for anything that was built up, meaning you'd form some value of the structures and you'd just subtract it.

The attractive thing is,

from most of our perspective, is it doesn't create the same disincentive to build that a real estate tax does.

A real estate tax says, oh, you know what?

I might want to keep this thing as a parking lot for a couple of years so I don't have to pay taxes on it.

If it were a land value tax, you know, you're going to pay the same tax, whether or not it's a parking lot or whether or not you're going to put a high rise on it.

So you might as well put the high rise on it.

And we could use the space.

So I think by and large, that's a perfectly sensible idea.

I'd like to see more places using land value taxes or using land value taxes in exchange for property taxes.

Where George got it wrong is the idea that a land value tax is going to solve all the problems of society or all the problems of cities is ludicrously not true.

One can make an argument that in those places that just have a property tax, that you could replace it with a land value tax with little loss.

But

at the national level, it's not a particularly progressive tax in lots of ways.

It would be hard to figure out how to fund all the things you want to fund, especially since there are lots of things that we do that are not very land intensive.

And I think George was imagining a world in which pretty much all value-creating enterprises had a lot of land engaged.

So a good idea, yes, a panacea, no.

No, that's a good point.

I mean, Google's offices in San Francisco are probably generating more value than you would surmise just from the

quantity of land they have there.

Do American cities need more great builders like Robert Moses?

So Moses,

so Robert Carrow's The Powerbroker is one of the great biographies of the past hundred years, unquestionably.

The only biography that I think is clearly better is Robert Caro's biography of Lyndon Baines Johnson, right?

It's Carrow is truly amazing.

That being said,

I would not exactly call it a fair and balanced

view of Robert.

I mean, it is true that Robert Moses was high-handed, and it is true that there are things that he did that were, you know, that were terrible, that you never want to do again.

But on the other hand, the man got stuff built.

I mean, I think of myself as a child growing up in New York City, and, you know, whether or not there's the public pool that I swum in or the parks that I played in or the roads that I traveled on, they were all delivered by Robert Moses.

And there's got to be a middle ground, which is, no, we're not going to run roughshod over the neighborhood like Robert Moses did, but we're still going going to build stuff.

We're still going to deliver new infrastructure.

And you know, we're going to do it not for 10 times more than every other country in the world does it.

We're actually going to have sensible procurement policies that bring in things at a reasonable cost.

And I think we need to balance a little bit back towards Robert Moses in order to have slightly more empowered builders who actually, you know, are able to deliver American cities the infrastructure that they need at an affordable cost.

Yep.

Yep.

Do we have too much democracy at the local level?

So you wrote a paper in 2017 titled The Political Economy of Transportation Investments.

And one of the points you make there is that, you know, the local

costs are much more salient to people for new construction than the public benefits and the benefits to newcomers would be.

Does that mean we have too much federalism?

Should we just have far less power at the city level?

So not universally.

There are lots of good things that local control does.

I do think we have too much local ability to say no to new housing projects.

So that's a particular case that I'm focused on.

And I think it's exactly right that the near neighbors to a project internalize all of the extra noise and perhaps extra traffic that they're going to have due to this project.

They probably overestimate it because they are engaging in a bit of sort of status quo bias and they sort of think the present is great and can't imagine any change.

By contrast, None of the people who would benefit from the new project are able to vote, right?

All of the families that would love to move into this neighborhood, but are being zoned out by the insiders, right, get a say.

And I think the goal is to make sure that we have more ability to speak for outsiders.

Cities at their best are places where outsiders can find opportunity.

That's part of what's so great about them.

And it's

a sort of tragic thing that we make that so hard.

Now, I'm not sure exactly that I'm claiming that I want less democracy, but I do want more limitations on how much regulation localities can do.

So I think there are certainly certain limitations on

local power that I think are fine.

I mean, basically, this is not, I would prefer to call this not a limitation on local democracy, but an increase in the protection of individual rights or the individual rights of landowners to do what they want with their land.

So, I mean, which in effect is a limit on democracy.

But, you know, the Bill of Rights is a limit on democracy.

The Bill of Rights says that, in fact, they don't care if 51% of your voters want to take away your right to free assembly.

They're not allowed to do that.

And so in some sense, what I'm just arguing for is more property owners' rights so that they can actually allow more housing on their building.

In terms of transportation projects, it's a little bit dicier because here the builder is the government itself.

And there, again, I think the question is, like, you want everyone to have a voice.

You don't want every neighborhood to have a veto over every

potential housing project or potential transportation project.

And so you need something that is done more at the state level with representation from the locality, but without the localities getting the ultimate say.

Yep, yep.

I wonder if that paper implies that I should be shorting highly educated areas, or at least in terms of the real estate, because

one of the things you mentioned in the paper was that highly educated areas have much higher opposition.

We're able to like foment much more opposition.

You shouldn't short.

It's those places.

It's places that used to, yes.

Okay, so here's the real estate strategy, which I have heard that actually there are buyers who do this.

But in fact, you take an area that has historically been very pro-housing.

And so it's got lots of housing.

It's affordable right now because supply is good.

But it's lots of educated people have moved in, okay?

Which means that going forward, they're going to build much less, which means that going forward, they're likely to become much more expensive.

So in fact,

you should, in fact, buy that stuff or buy options on that stuff rather than shorting it.

You should short, if you have a security that is related to the population level in that community.

Yeah, you should short that because the population growth is going to go down, but the prices are likely to go up.

Yep.

Yep.

So you wrote a paper last year on the opioid epidemic, and you can explain in more detail, but one of the points that you made there was that the opioid epidemic can be explained just by the demand side stuff about social isolation and joblessness.

And I wonder how

this analysis,

what it makes you think about, like let's say there is mass scale automation in the future, just assume that that might be the case.

What impact do you think that would have?

And assume it's paired with universal basic income or something like that.

Do you think it would have a tremendous increase, it would cause a tremendous increase in opioid abuse?

Or do you think that that would be,

I would have phrased it slightly differently, which is, as opposed to the

work of, I mean, of, and they're two amazing economists, Anne Case and Angus Deaton,

the

who really emphasize the role of deaths of despair,

we are much more focused on on the supply side.

So that doesn't mean that

the demand side, meaning like just the way that we handled the distribution of large-scale pain-relieving medicines, right?

So,

you know, we tell a story where every 30 to 50 years, someone comes up with the same sort of idea, which is we know that human beings love opioids in different forms, right?

We also know they're highly addicting and lead to sort of a terrible cycle.

So all of a sudden comes along this innovator who says, you know what?

I've got a new opioid.

And you know what?

It's safe.

You don't have to worry about getting addicted from this one.

It's magical.

It won't work.

And, you know, 100 years ago, that thing was called heroin.

200 years ago, that thing was called morphine.

300 years ago, that thing was called Maudenum.

Right.

We have these new drugs which have come in and they've never been safe.

But, you know, in our case, it was OxyContin.

And, you know, the magic of the time relief was supposed to

make it safe.

And it wasn't safe.

And there's a lot of great work that just shows that the patterns of opioid use was related to the places that just had a lot of pain 30 years ago.

So just those places with a lot of, you know, prescribing various things for pain when opioids came in, when OxyContin came in, those were the places that got addicted most.

Now, it's also true that there are links with these economic

issues.

They are links with joblessness.

And I basically do believe that things that create joblessness are pretty terrible and are actually much worse than income inequality.

I push back against the universal basic income advocates who I think are basically engaging in a materialist fallacy of thinking that a human being's life is shaped by their take-home pay or their unearned pay.

I think for most people, a job is much more than that.

A job is a sense of purpose.

A job is a sense of social connection.

And when you look at human misery, and opioid use, right?

You look at the difference between high-income earners, mid-income earners.

there are differences, but they're small.

You then look at the difference between low-income earners and the jobless, then unhappiness spikes enormously, misery spikes enormously, family breakups spike enormously.

And so things like universal basic income, which

the negative income tax experiments in the 1970s, which are the closest thing we have towards large-scale experiments in this area, which had very large effects of joblessness of just giving people money.

They feel quite dangerous to me because they feel like they're going to play into rising joblessness in America, which feels like a path towards misery.

I want to, though, just quickly

deviate.

And some of the UBI advocates have

brought together UBI in the US and UBI in the developing world.

So UBI in the developing world, which means basically you give poor farmers in sub-Saharan Africa fairly modest amounts of money.

This is a totally sensible strategy.

These people are not about to live life permanently on not working.

They're darn poor.

It's very efficient relative to other ways of giving.

Right.

And so I am in no sense pushing back on UBI with modest amounts of money in the poorest parts of the world.

By all means, it's been deemed to be effective.

It's just a very different thing if you're saying I'm going to give $100 to a poor Congolese farmer or I'm going to give

$10,000 to a long-term jobless person in eastern Kentucky.

Right, right.

You're not buying a PS5 with $100 in Congo.

That's right.

So I wanted to ask you about remote work.

So you write in the survival of the city, improvements in information technology can lead to more demand for face-to-face contact because FaceTime complements time spent communicating electronically.

And I'm curious, what distinguishes situations

where

FaceTime substitutes for in-person contact?

And

the situations where it complements, FaceTime complements in-person, sorry, or I mean virtual contact?

So there's not a

there's not a universal rule on this.

I just want to sort of let's let's so that that paper, the paper that was based on this that I wrote in the early 1990s, are face-to-face contacts, complements or substitutes with electronic contacts, was really motivated by a lot of anxiety in the 1970s that

the information technology of their day, the fax machine, the personal computer, was going to make face-to-face contact in the cities that enable that contact obsolete.

That discussion has reappeared amazingly in the past two and a half years because of Zoom, right?

And all of those questions

still resonate.

I think in the short run, typically these things are substitutes, right?

Typically,

you don't necessarily need to meet some person who's

your long-term contact.

You can actually just telephone them or you can connect with them electronically.

In the long run, they seem to be much more likely to be compliments,

in part because these technologies change our world.

I mean, the story that I tell over the the last 40 years is that, yes, there were some face-to-face contacts that were made unnecessary because of electronic interactions.

But you know, it's not just that cities did well over the past 40 years.

Business travel went through the roof over the past 40 years.

And you'd think that that would have been made unnecessary by all these electronic interactions.

And I think what just happened was that these new technologies and globalization created a more interconnected world.

created a world in which knowledge was more important and we become smart by interacting with people face-to-face.

And this world that became more knowledge and information intensive and more complicated, right?

And

as things get more complicated, it's easier for ideas to get lost in translation.

And we have these wonderful cues for communicating comprehension or confusion that are lost when we're not in the same room with one another.

So I think over the longer time, they tend to be complements and over the shorter term, they tend to be substitutes.

One of the things I think that was helpful in

my earlier work on this was looking at the history of information technology innovations.

I think probably the first one is the book, right?

It's hard to imagine the book with movable type, Gutenberg, right?

It's hard to imagine an innovation that did more to like flatten distance than the book, right?

Now you can like read stuff that people are saying hundreds of miles away, and yet there's not a shred of evidence that the book led to less urbanization in Europe or to less connection.

It helped create a totally different world in which people were passionate about ideas and wanted to talk to each other and they wanted to talk to each other about their books.

And then, you know, flash forward 350 years and we have the telephone.

And again, telephones started being used more in cities and they started being, they were used mostly by people who were going to meet face-to-face.

And again, no evidence that this has created

a decline in the demand for face-to-face contact or a decline in the demand for cities.

So I think if we look at Zoom, which unquestionably has allowed a certain amount of long-distance contact, that's very, very useful.

And in the short run, it certainly poses a threat to urban office markets.

My guess is in the long run, it's probably going to be

likely to neutral at worst for face-to-face contact in the cities that enable that contact.

Yeah, yeah.

No, I think that my podcast has been a great example for me about this where, I mean, like right now, we're talking virtually.

So, you know, maybe in a way it's like substituted, maybe I would have interviewed in person without the podcast.

But in another way, I've met so many people that I've interviewed on the podcast or who have just connected me with me because of the podcast in person.

And the amount of in-person interactions I've had because of a virtual podcast has, you know,

is a great anecdote to what you're talking about.

That makes total sense.

Absolutely.

Yep.

Why do even the best software engineers in India or in Europe make so much less when they're working remotely from those locations than remote engineers working in America make?

I mean, why don't employers just pay them more until the price discrepancy goes away?

That's interesting.

I don't fully know the answer to that question.

I would suspect some of it just has to do with the nature of supply and demand.

So there are some things that are just very hard to be done remotely, right?

So either because you have sort of very precise informational needs that you have, that's easier to communicate to people who are nearby, or the person who's nearby has evolved in ways in terms of their mind that they actually like know exactly what you want and they have exactly the product that

you need.

And so even though the remote call center worker and the local one may be totally equivalent on raw programming talent,

you may still end up in equilibrium be willing to pay a lot more to the local one, just because, right, so there's a slightly differentiated skill that the local one has.

And look, there's just a lot of competition from the remote ones.

And so the price is going to be pretty low.

And there's not that much supply of the one guy who's down the hole who knows exactly what you're looking for.

And so that guy gets much higher wages, even though, you know, just because he can offer you something that no one else can exactly reproduce.

But let me clarify my question.

I meant

even remote engineers in America will make more than remote engineers in Europe or in India.

So if somebody's like working remotely, but he just happens to live in the U.S., is that just because they have like the same,

they can communicate in English in the same way?

What explains that big of a

same stance?

I would say that they're likely to have just skills that are somewhat idiosyncratic and are valued in the US context.

Are you optimistic about the ability of the metaverse and VR to be able to better puncture whatever makes in-person contact so valuable?

Oh, I do not think the metaverse is going to change very much.

I do think that, you know, there will be a lot of hours spent on various forms of gaming over the next 20 years that I'm very confident about, but I don't think it ultimately poses much of a threat to real-world interactions.

And, you know, in some sense,

we saw this with the teenage world over the last three years, right?

We saw a lot of America spend an awful lot of time, you know, 15, 16-year-olds, 17-year-olds, like gaming and connecting entirely virtually during the whole time of the pandemic lockdowns.

Every single person that I've seen of that, of that cohort, who, when you allowed them to interact with real members of their group live, like leapt at the opportunity, right?

Leapt at the opportunity of meeting, of you know, actually hanging out with real people until three o'clock in the morning and you know, arguing over whatever it is, whether or not it's football or Kant.

But it's, and I think, you know, particularly for the young, you know, the, the,

you know, living, living life live just beats the, beats the alternative.

Yeah, yeah.

That sounds like a very Harvard scenario, the having to argue over football or Kant, those two topics.

But are you predicting lower taxes over the coming decades in places like California and New York, specifically because of remote work, that it sets like a sort of maximum bar?

of how much you can tax highly productive people before they will just leave?

Okay, so I see this as being a central, it's a great question, it's a central issue of our day.

So here's how I think about it.

And in part, it's why I wrote my recent book, Survival of the City, is because I was so worried about this.

Okay, two things have happened simultaneously.

One, as you correctly say, Zoom has made it easier to connect from anywhere.

I don't think that Zoom is, you know, going to cause our tech startup currently in Silicon Valley to say, oh, you know what?

We're just going to go home to our, you know,

you know, Orange County suburban homes and never meet, you know, live again.

I think that's a low probability event.

But what seems like a perfectly high probability event is saying, oh, we can Zoom with our VCs, we can Zoom with our lawyers.

Why don't we just relocate to Austin, Texas, and not pay taxes?

Or relocate to Boulder, Colorado, so we can have beautiful cedary, or relocate to Honolulu so we can surf.

So that seems like

we've made the ability for smart people to relocate much easier, even if they're going to keep on seeing each other in the office three or four days a week.

Okay, that collides with this very fervent desire to deal with festering social inequities at the local level, be this limited upward mobility for poorer people, be this high housing costs, be this the rise of mass incarceration and police brutality towards particularly minority groups.

And so there's this progressive urge which runs up against the fact that like the rich guys can run away.

And they've they've, you know, they've they've and if

you know, your model which says, oh, the local governments are going to realize the rich guys can run away, so they will seamlessly lower tax rates in order to make sure that they attract those people that's running up against the fact that there's a whole lot of energy on the progressive side which says no we want to you know Massachusetts just passed a millionaires tax right so for the first time ever we we have the possibility to have a progressive tax which feels extraordinarily dangerous given this this time period so I think we may need to see a bunch of errors in this area before we start getting things right, right?

I mean, we went through a lot of pain in the 1970s as cities first tried to deal with their progressive goals and rich people and companies ran away.

And it wasn't until the 1980s that sort of people started realizing this was the path to local bankruptcy and that we had real city limits on what the locality,

what the locality could do.

Now, you cited research in the survival of the city, which said that firms like Microsoft were much less willing to hire new people once they went online because of the pandemic.

What do you make of the theory?

that this is similar to when industrialization first hit and we hadn't figured out exactly how to make most use of it to to be most productive.

But over the long run, somebody will do to remote work what Henry Ford did to the factory floor and in fact just make it so much more effective and efficient than in-person contact, just because we'll have better ways of interacting with people through remote work.

We'll have better systems.

You know, it's entirely possible.

I never like betting against the ingenuity of humanity.

On the other hand,

you need a lot of technology to override five million years of evolution.

And we have evolved to be an in-person species, not just because we're productive and learn a lot face-to-face, but also because we just like it.

I mean, like a world of hyper-efficient remote work where you basically are puttering around your apartment, doing things very quickly and getting things done, that doesn't sound particularly joyful to me.

And, you know, workplaces are not just places of productivity, they're also places of pleasure, particularly at the high end.

And remember, I mean, in 2019 and earlier, you know, Google, Yahoo,

the companies that should have been doing, like, had the biggest capacity to do remote stuff in general, weren't sending their workers home.

They were building these paradises for high-skilled workers, stuffed with foosball tables and free snacks and whatever else they had in these giant campuses in the Googleplex.

So they were certainly betting on the power of face-to-face and creativity rather than on the ability of sort of remote work to make everything work.

I mean, I think the most reasonable views, let's say that of Nick Bloom of Stanford, is that for those types of workers, you know, 20% of your week being hybrid, maybe 40%, seems quite possible.

That seems like a thing, particularly for workers who have families, who really value that degree of flexibility.

But fully remote, I guess that's a pretty niche thing.

And,

you know, there's some jobs like call center workers where you could imagine it being the norm, but in part because it's just hard to learn the same amount remotely that you do face-to-face.

And that's this came out both in the earlier Bloom study on remote call center workers in China and on more recent work by Natalia Emmanuel and Emma Harrington.

That both studies found the same thing, which is in these call centers, they are plenty productive when they're remote, but the probability of being promoted drops by 50%.

And so the entrepreneur may make it very efficient to do things in the short run remotely, but they're going to turn off this tendency that we have to

be able to learn things from people around us, which is just much harder to duplicate remotely.

Right.

Yeah.

Yeah.

Now,

I'm curious why Silicon Valley became the hub of technology.

I mean, you wrote a paper in 2018 about where, among other things, where pioneer and non-pioneer firms locate.

So I was hoping you had insight on this.

Is it Stanford?

Is it where Fairchild Semiconductor is located?

And just like the offshoot of that?

Or what is the explanation?

So we take it as being earlier.

It is Stanford.

So I traced through this, I think, in triumph.

Yeah, there was a company called Federal Telegraph Company

that was founded by a guy called Cyril Frank Elwell,

who was a radio pioneer.

And he was tapped by his teacher to

head this radio company.

So there had been this local genius.

The story was, as I remember it, there had been this local genius in

San Francisco who had, you know, attracted all these investors and was going to do this wireless telegraphy company.

And he died in a a freak carriage accident.

His investors wanted to find someone else, and they went to Stanford's, the nearby faculty and asked, who should we hire?

And it was this guy, Elwell, who founded Federal Telegraph.

Federal Telegraph then licensed, I think, Danish technology.

It was originally the Poulson

Telegraph Company.

They then hired some fairly bright people like Lee DeForest.

And they did incredibly well in World War I off of federal Navy contracts, off of Navy contracts.

And they then did things like provided jobs for people like the young Fred Terman, whose father was a Stanford scientist.

Now, Fred Terman then plays an outsized role in this story because he goes to MIT,

he studies

engineering there,

and then comes back

to

become dean of Stanford's engineering program.

And he really plays an outsized role in setting up the Stanford Industrial Park, attracting Fairchild Semiconductor.

And then there's this sort of random thing that

Fairchild Semiconductor attracts these people and then repels them because you have this brilliant guy, Shockley, right?

He's both brilliant and sort of personally abhorrent, who manages to attract brilliant people and then, you know, repel all of them.

And so they all end up dispersing themselves into different companies and they create this incredibly creative ecosystem that is the heart of Silicon Valley that in its day sort of had this combination of really smart people and really entrepreneurial ethos, which just made it very, very healthy.

I think the thing that many of us worry about in terms of Silicon Valley more recently is it feels much more like it's a one-industry town, which is dangerous, and it feels more like it's a bunch of industrial beamoths rather than a bunch of smart and scrappy startups.

And that's that's a recipe that feels much more like Detroit in the 1950s than it does like Silicon Valley in the 1960s.

Hey guys, I hope you're enjoying the conversation so far.

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All of those things helps out a ton.

Anyways, back to the conversation.

Speaking of startups,

what does your study of cities imply about where tech startups should locate?

And

what kind of organization, in person or otherwise, they should have?

So I think there's a lot to like about in-person, certainly.

I mean,

I think relying too much on remote feels quite dangerous if you're a scrappy startup.

Look, I like a lot the Sunbelt smart cities.

I like a lot the places that sort of combine.

I sort of have a two-factor model of economic growth, which is it's about education and it's about having governments that are pro-business, right?

And if you think about sort of, you know, the U.S., there's a lot of heterogeneity in this.

And if you think about the U.S.

versus other countries, there's heterogeneity.

So the U.S.

has historically been better on being pro-business than, let's say, the Northern European social democracies.

But the

Northern European social democracies are great on the education front.

And so, you know, places like Sweden and the Netherlands and Germany are also very successful places because they have enough education to counter the fact that they may not necessarily be as pro-business as the U.S.

is.

Within the U.S., you also have this balance, whereas places like Massachusetts and California are certainly much less pro-business, but they're pretty well educated.

And other parts of the country may be more pro-business, but they're less so.

But the sort of real secret sauce is finding those places that are both highly educated and pro-business.

So those are places like Charlotte and Austin and even Atlanta, places in the Sun Belt that have attracted lots of skilled people.

And

you know, they've done very, very well during COVID.

I mean, Austin, by most dimensions, is the superstar of the COVID era in terms of just

attracting people.

So I think you had wait for the real estate prices to come down a bit in Austin.

But those are the places that I would be looking at.

Yeah.

I don't know if you know, but I live in Austin, actually.

I do.

I did not know that broadcast.

Well, you're exactly, you know.

Yeah, yeah.

Well, actually, I'm surprised you said that about education because you write in the paper,

general knowledge measured measured as average years of schooling is not a strong determinant of the survival of a pioneer firm, but that the relatedness of knowledge between past and present activities is.

So I'm surprised that, like, you think for pioneer firms,

the education is a strong determinant.

Well, it's, I'm a big human capital

determinist.

So I tend to believe that individuals, cities, and nations rise and fall based on their skill levels.

And certainly, if you look over the last 40 or 50 years, skills are very predictive of which cities, particularly colder cities, manage to do well versus poorly.

And if you ask yourself why Detroit and Seattle look different, you know, more than 50% of Seattle's adults have college degrees.

Maybe 14, 15% of Detroit's adults do.

That's just a huge, huge gap.

And certainly, when we think about your, you know, your putative startup, you're going to be looking for talent, right?

You're going to be looking to hire talent, and you know, having lots of educated people around you is going to be helpful for them.

Yep, yep.

Let's talk about housing.

So,

Houston has basically very little to no zoning.

Why is it not more of an interesting city?

Nobody goes to Houston for tourism.

I have.

I have, in fact, gone to Houston for tourism.

Although part of it, I admit, was to look at the housing and to go into the woodlands and

look at that.

You know, interesting has a lot to do with age, like in this country.

So the more that a city has, you know, Boston is good for tourism just because it's been around for a long time and it hasn't changed all that much.

So

it has this sort of historic thing.

Houston's a new place in the sense that,

not just in the sense that it's like chronological age is lower, but also in the sense that it's just grown so much, it's dominated by new stuff, right?

And that new stuff tends to be more homogenous.

It tends to have less history on it.

I think those are things which make new cities typically sort of less interesting than older cities.

I mean, as witnessed by the fact that, you know, Rome,

Jerusalem, London, these are great, you know, tourist capitals of the world because they've just accreted all this interesting stuff over the millennium.

So I think that's part of it.

I'm not sure that if we look at more highly zoned new cities, we're so confident that they're all that more interesting.

So I don't want to be particularly disparaging any one city.

So I'm not going to choose that.

But I'm not sure that, you know, there's actually a bunch that's pretty interesting in Houston.

And I'm not sure that I wouldn't, you know, I would say that it's any less interesting than any comparably aged city in the country.

Yeah.

Yeah.

I'm visiting Houston later this month.

And I asked my friend there, should I stay here longer?

I mean, is there anything interesting to do here?

And then he responds, well, it's like the fourth biggest city in the country.

And he goes, so no.

So

many, many people, including many economists, have said that we should drastically increase U.S.

population through immigration.

to like a figure like 1 billion.

Do you think that our cities could accommodate that?

Do we have the infrastructure?

And I mean, let's say we're formed housing over like, you know, like a decade or so, could we accommodate such a large influx of people?

Or?

A billion people in a decade?

I love the vision.

You know, I'm certainly among those who, you know, I basically in my heart, I'm an open borders person, right?

In the sense that I don't, I mean, it's a moral thing, right?

I don't really like the idea that I get to enjoy the privileges of being an American and think that I'm going to deny that opportunity to anyone else.

So I love this vision.

A billion people over 10 years is sort of an unimaginably large amount of people over a relatively short period of time.

I'd love to give it a shot.

I mean,

it's certainly not as if there's any long-term reason why you couldn't do it.

I mean, goodness knows we've got more than enough space in this country.

There, you know, it would be exciting to try to, you know, see if we could build enough infrastructure and structures to do that.

But it would require a lot of reform in the housing space and require a fair amount of of reform in the infrastructure space as well to be able to do this at some kind of large-scale affordability.

What does the evidence show about public libraries?

Do they matter?

My friend Eric Kleinenberg has written a great book about, I think it's called Palaces for the People, about

all the different functions that libraries have played.

I've never seen anything systematically, statistically, systematic statistically about this.

But, you know, you're not going to get a scholar to speak against books.

It's not a possibility.

Why do European cities,

why do they seem so much more similar to what they looked like decades or even centuries ago than American cities, even American cities that are old, obviously not as old as European cities, but you know, they seem to change much more over time.

Okay.

Lower population growth, much tougher zoning,

you know, much tougher historic preservation.

All three of these things are going on.

So it's very difficult to build in European cities.

There's a lot of attention to,

you know, in caring about history.

It's often part of the

nationalist narrative.

You will often have huge amounts of national dollars going to preserve local stuff and,

you know, relatively lower levels of population growth.

Extreme example of this is places like Warsaw, where central Warsaw is completely destroyed.

during World War II, and they built it up to look exactly like it looked before the Kabam.

So this is a national choice, which is unlikely that we would necessarily make here in the U.S.

Yeah.

I was in Mumbai earlier this year and I visited Daravi,

which is the biggest slum in Asia.

And

it's like a

pretty safe place for a slum.

Why are slums in different countries?

Why do they often have different levels of

how safe they are?

What is the reason?

I too have been in Daravi and felt perfectly safe.

It's

like walking around Belgravia and London in terms of it.

I think my model of Daravi is the same model as Jane Jacobs' model of Greenwich Village in 1960, which is this is just a well-functioning community.

People have eyes on the street.

If you're a stranger in these areas, they're going to be looking at you.

And it's a community that just functions.

And there are lots of low-income communities throughout the world that have this.

It requires a certain amount of permanence.

So if the community is too much in flux, it becomes hard to enforce these norms, hard to enforce these sort of community rules.

And it's really helpful if there aren't either a massive number of guns floating around or an unbelievably lucrative narcotics trade, trade, which is in the area.

Those are both things that make things incredibly hard.

And of course, you know, partially U.S.

drug policy has

been responsible for creating violence in some of the poor parts of the Latin, of Latin American cities.

Yep, yep.

Now, maybe you don't play video games enough to know the answer to this question.

But I'm curious, is there any video game, any strategic video game like Civilization or Europur that you feel like does a good job representing the economics of cities?

No, I will just say that when I was in graduate school, I I spent a few hours playing something called Sim City, and I did think that was very fun.

But uh, I'm not going to claim that I think that it got it, it got it right.

But that was that was probably my largest engagement with uh with city-building video games.

What would you say we understand the least about how cities work?

I'm gonna say the largest unsolved problem in cities is what the heck we're gonna do about climate change and the cities of the developing world.

This is this is the thing I do not feel like I have any answer for in terms of you know what how it is that we're gonna stop Manila or Mumbai from being leveled by some water-related climate event that we haven't yet foreseen, right?

We sort of think that we're going to spend tens of billions of dollars to protect New York and Miami, and that's going to happen.

But I am, you know, the thing I don't understand and the thing that I think we really need to need to invest in in terms of knowledge creation is what are we going to do with the low-lying cities of the developing world to make them safe.

Yep.

Yep.

Okay.

Your most recent book is Survival of the City and Before That Triumph of the City.

Both of those I highly recommend to readers.

Professor Glazer, thank you so much for coming on the podcast.

This was very interesting.

I enjoyed this a lot.

Thank you so much for having me on.

I had a great deal of fun.

Hey, thanks for listening.

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See you next time.