Monday, May 26, 2014

Cold shower

Joseph Stiglitz writes about progress he sees in Medellin, Columbia. He writes that:
... livable cities require planning – a message at odds with prevailing attitudes in much of the world. But without planning and government investment in infrastructure, public transportation and parks, and the provision of clean water and sanitation, cities won’t be livable. And it is the poor who inevitably suffer the most from the absence of these public goods.

Medellín holds some lessons for America, too. Indeed, recent research shows how inadequate planning has fueled economic segregation in the United States, and how poverty traps have formed in cities without public transportation, owing to a shortage of accessible jobs.
There are some problems with this view of unemployment. Direct tests of the effect of new transit on employment offer mixed results. Unemployment is complex. Were it amenable to the simple fix that Stiglitz advocates, we could (should) just get on with it.

But a speck of public choice analysis would challenge the simplicity of Stiglitz' prescription. And then there are the data. They show that the infrastructure investments he advocates do not necessarily work out as promised. Those who just presume that more dollars spent on more transit yields more social benefits deserve a strong dose of reality. Here is a recent study by Rubin and Mansour.  My favorite of their case studies is Los Angeles. The authors' Fig. 19 (page 41) shows that the area's multi-billion dollar transit investment prompted a 20+ year loss of transit ridership.  This happened in a growing metropolitan area with considerable immigration from Latin America.