Saturday, October 08, 2016

Policy #12, the cities

Here are eleven policy suggestions to boost the economy for the next president from Brookings researchers. These are all good and we have heard them before. I have two thoughts. First, issue another paper on why these have been unattainable -- and how and why they can become attainable. That would be a longer paper.

My other quibble is that cities ought to be included as policy #12 -- or the existing entry on productivity should include a discussion of cities. Cities are "engines of growth" because the ideas that boost productivity are spawned in cities. Moreover, cities are where supply chains are located and thereby realized. I have mentioned before that Coase's what-to-make vs what-to-buy challenge to entrepreneurs and managers must include what to buy where. The Coase question cannot be fully evaluated unless spatial choices are included.

What, then, is the policy challenge? Brookings and many other have chimed in on the unproductive (anti-productive) land use regulations that have been embraced by greens and others. These have been used by NIMBYs to freeze or slow development and have undermined housing affordability as well as labor mobility.

But at the same time, supply chain formation is stymied.  Cities are the spatial realization of large numbers of (emergent) supply chains. I include supply chains for ideas. Ideas can be exchanged face-to-face or electronically. Following, Mokyr, we can say people are keen to find useful knowledge. To do so, people network (shmooze?) at the mall or on the golf course or you name it. Most (perhaps all) people and firms evaluate and choose locations as well as blend of networks based on the many supply chains they participate in.

The Feds dole out so much money to cities that approvals simplification (how about a one-stop approvals process?) could be a requirement from Washington.

Silly me. I almost forgot who the two major candidates are.