Can our cities get bigger (and remain liveable)?

The issue of decentralisation could be back on the table given the elevated significance of the three regionally-based independents*. I’ve previously argued (here and here) that there are big questions about the viability of decentralisation on a large scale, so today I want to look at whether or not our major cities can cope with more growth.

There was quite a bit of interest in the 60s and 70s around the idea of an efficient city size. The assumption that a point was reached where diseconomies of scale set in was part of the rationale for the failed decentralisation push of the Whitlam era.

There’s a better appreciation today that cities make structural adjustments in response to growth and may generate new economic advantages. There’s wide acceptance of the idea that productivity increases (modestly) as city size/density increases.

Australia’s major cities are certainly not bursting at the seams, notwithstanding residents’ concerns about issues like traffic congestion and housing affordability. Sydney is actually only the 80th largest city by population in the world and Melbourne the 87th. Many of the larger cities dwarf ours – Tokyo, for example, has more than nine times as many residents as Sydney.

There’s little evidence that size is inevitably a bad thing. Many of the world’s largest cities are highly sought after – people want to live in places like New York, Los Angeles, Paris and London and relish their immense size. Many people, including quite a few Australians, aspire to live in them even though the wages offered don’t usually offset the higher cost of living.

It is true that many have severe problems like traffic congestion, but this doesn’t dampened the enthusiasm of immigrants. Yet some cities, especially those in Europe, have addressed the problem with reasonable success by strategies such as investing in public transport and promoting high density housing. Public transport has a much, much higher share of travel in New York City than it does in any Australian city.

Many of these cities provide a clue to how Australian cities might deal with high population growth. Proximity provides benefits for humans, whether in labour markets or marriage markets, but it also has downsides – like congestion, high rents and crime – so it entails costs and compromises.

Those compromises include the need to invest in massive infrastructure and regulatory systems as well as tolerate a higher level of intrusion from fellow humans. They also usually mean living at higher densities, making concessions in the size of dwellings, being prepared to travel more in the company of strangers, and recycling “waste”.

However the form and structure of Australian cities evolved in an era of mechanised transport (trains and trams led the first great wave of suburbanisation). Although more dense than most US cities of comparable size, we have a legacy of extensive suburban development built on the premise of cheap and easy car use.

Until relatively recently, residents were able to have their cake and eat it too. Decentralisation of jobs and services away from the centre (50% of jobs in Melbourne, for example, are more than 13 km from the CBD) enabled many to enjoy high levels of space and amenity while maintaining acceptable travel times and minimising traffic congestion (although travelling much longer distances).

Now however most people want to live closer to the centre where they can enjoy better access to all the benefits of the metropolitan area, including family and friends, work and recreational opportunities. In Melbourne, for example, a little over half of new dwellings are constructed within the established urban area (it was up to 60% in the late 90s – early 2000s).

If that demand isn’t to be dissipated in higher prices, concerted action will need to be taken to facilitate the redevelopment of established suburbs. That is a much more complex and problematic issue than the simple solutions of documents like Melbourne 2030 would have us believe (that’s a topic for another post).

At the same time the growing costs of car use (congestion and running costs) will increasingly transfer the financial cost of travel from individuals to the State. Massive investment in public transport will undoubtedly be required, but this is also a contested and knotty issue (again, a topic for another post).

Our cities can absorb considerably more growth but future residents will have to make big compromises and Governments will have to think big. It’s not just infrastructure either – if we want successful cities, there need to be non-physical changes in how we regulate behaviour (for example, see here). Nor should we import foreign solutions directly – we need to adapt to local circumstances.

(Image is Castro, San Francisco)

*Care needs to be taken that ‘decentralisation’ and ‘regional development’ are not conflated. They are not synonymous. Regional development should be the real concern of the independents.

17 Comments on “Can our cities get bigger (and remain liveable)?”

  1. Matthew says:

    Mernda, Mooroolbark, Berwick, Baxter, Melton, Sunbury – yeah Melbourne’s really livable now. Melton to Baxter is 101km.

    I bet the residents of Portland or Wangaratta have less mental health problems than the average Melbournian. (I’ve looked up no data of course. It’s just an untested hunch)

    It’s just as quick on the V-Line from Kilmore or Gisborne than it is to get to Southern Cross from Lilydale.

    And whilst it doesn’t really matter how big the city is if you live in the inner city, living in outer suburbs can be pretty grim without access to public transport or employment. Outer suburbs are by their nature car dependent and then you’ve got a long commute on congested roads. Look at how rubbish Buckland Park in Adelaide is going to be. There is going to be a bus shuttle to kind-of nearby Virginia, which then only has infrequent bus service to Adelaide.

    I know none of this adds anything new to the debate, but really are the outer fringes of Melbourne (or the northern or southern suburbs of Adelaide, or far flung northside Brisbane, or south-west or north-west Sydney) really that liveable now? You think so Alan? Would you be happy with a large mortagage on a small block in Craigieburn for instance? Nearest shops are miles away.

    • Alan Davies says:

      If all I could afford was Melton I’d be a lot happier in the Toolern part where it is proposed there be local shops and an electrified rail line. Of course my point is that the infrastructure, e.g. cross-suburban and local buses, needs to be provided.

      BUT I’d be a lot happier in Toolern than Portland because I’d have a much larger range of jobs to choose from and access to all the recreational and cultural delights of the big smoke

      PS: Chris Sidoti, Human Rights Commissioner, speaking in 1999 “The general health of country Australians is poor in comparison to urban Australians. Country Australians have a lower life expectancy, higher rates of avoidable injury, higher suicide rates and higher rates of illnesses such as heart disease and cancer”. So its not all roses in country Australia.

  2. […] a comment » In yesterday’s post I asked if our largest capitals could grow bigger and remain liveable. Today I’m looking at the […]

  3. John Feddersen says:

    I enjoyed reading your post in Crikey and agree on the importance of redevelopment for making housing in inner Melbourne more affordable (if smaller per unit on average).
    I have a couple of comments on the facts you presented in your article.
    It has been shown that (nominal) wages offered in large/high density areas do offset the higher cost of living.
    Glaeser and Mare (Journal of Labour Economics (2001)) show the existence of a positive (albeit not statistically significant) relationship between real wages and city size. They conclude that nominal wages are much higher in large cities (33% larger than in small cities for workers with identical attributes) and that the cost of living is also higher in large cities, but by no more than the nominal wage premium.
    Rauch ((1991) NBER) addresses the relationship between density and real wages. At footnote seven he provides evidence of a real wage premium in dense cities. This result is replicated elsewhere.
    This research (implying a real wage premium in large cities) suggests that beyond wage and cost of living considerations, living in big, dense cities is less desirable than living in small sparse cities on average. This evidence contradicts your assertion that large cities have lower real wages, but that this disadvantage is compensated for by non-wage related benefits (‘Many people, including quite a few Australians, aspire to live in them even though the wages offered don’t usually offset the higher cost of living’).
    Something these two papers (cited above) ignore is the cost of keeping up with the Joneses (i.e. the cost of buying a fashionable suit as cited in the NYMag article which you referenced). This is definitely something economists generally do not consider (but probably should) in comparing welfare across locations.
    I also think there is evidence that the strength of the relationship between productivity increase and density is more than ‘modest’. To the best of my knowledge, Ciccone and Hall (1996) is the most widely cited economic study of this. They estimate labour productivity benefits of 6% for a doubling of population density. Caballero and Lyons((1990) and (1992)) show that strength of this relationship figure varies by industry and can be far higher for some.
    If they aren’t already, I think productivity gains from density should be an important urban planning consideration (particularly for industries which thrive in dense/large cities).

    • Alan Davies says:

      John, thanks for your comments.

      Re your first point. I’m saying there is a wage premium from density/size but it is not big enought to offset the higher cost of living in a place like NYC. For example, Glaeser found that a doubling in city size generally increases wages by 10% but the cost of living by 16%. There’s an informative (and entertaining) discussion of this issue in Tim Harford’s book, The Logic Of Life. It explains why people nevertheless still want to live in places like NYC.

      Re your second point, the figure of 6% is precisely the one I had in mind. I just don’t see that a 6% increase in productivity for a 100% increase in density/size is anything other than “modest”. That is extremely “inelastic”. There would be easier ways to get an improvement in productivity of that scale than doubling the density/size of your city.

      The productivity benefits of density/size are commonly cited by planners (including me – see here) but the actual size of the benefit is rarely mentioned.

  4. John Feddersen says:

    Hi Alan.
    Thanks for your response. It is nice to discuss urban policy which is based on economic research.
    To clarify my two points:

    1) I think everyone accepts that there is no doubt that both nominal wages (those not adjusted for the cost of living) and the cost of living are higher in large cities.
    I simply challenge your assertion that real wages (nominal wages adjusted for cost of living differences) are lower in cities and its corollary that big cities must offer something extra to explain their attractiveness to people.
    The Glaeser article you cited doesn’t support the idea that real wages are lower in large cities. In footnote 2 he says ‘it appears that this wage difference (higher nominal wages by 34%) roughly compensates workers for higher prices.
    My point is, as Glaeser notes on page 142 of the same study, that evidence suggests that ‘there is no connection between real wages (those adjusted for the cost of living) and city size’.
    New York may buck the trend here; whether that is an appropriate comparison for an Australian city is another question.
    I haven’t read the Harford book but I tend to be more suspicious of research which is not peer reviewed (despite being a massive fan of him and a personal friend of both of his researchers (who happen to both be great economists)), particularly when it contradicts peer reviewed work by global experts.

    2) I agree that to some extent the figure 6% is something that may seem modest to many. To put it into context I offer two facts:

    i) The last decade (1999-2009) saw an increase in labour productivity of about 13% in Australia across all sectors – taking account of compounding, 6% is half a decade’s labour productivity growth.
    ii) Urban density in Australia is about a third to a fifth of major European cities (admittedly I base this on the Newman and Kenworthy 1989 study, because it is the only one that has a density measure that comes to mind, so things may have changed a bit since then).
    These two stats lead me to view the 6% as probably more than modest (having said this I suspect my point of difference may be semantic – by not modest I mean these density benefits definitely are worth considering, something you said already happens at a policy level).
    I think the point from my previous post that productivity benefits from density may be higher for certain sectors is also material here. In the Glaeser article you just posted, Glaeser suggests knowledge/creative industries (or those producing lots of patentable technologies) are likely to gain significantly more than other industries from density (i.e. more than 6%). Financial services may fall into this category too – an important factor in the Australian context.

    • Alan Davies says:

      John, re your first point – I asked Tim Harford for his views and this is his reply:

      “Thanks, Alan – your commenter is right, better to rely on Glaeser than me, but I recall Glaeser being fairly unambiguous on the subject. Have a look at Table 1, p 143 (of Are cities dying?) and you’ll see that the cost of living rises faster than annual earnings as metropolitan size increases. It may be that it’s statistically impossible to reject the thesis that the two coefficients are the same – I’m not sure – but I don’t think Glaeser comments on that. I think I’ve cited Glaeser accurately, but I agree: he’s the authority, not me. Best,Tim”.

      Re your second point – I take your points but I think the significance of 6% has to be evaluated in the context of the enormous changes (and time) that would be required to achieve it i.e. a doubling of density. In that sense it’s a modest pay-off compared to 13% over 10 years, achieved with little complaint.

  5. John Feddersen says:

    If Tim is relying purely on the regression coefficients in that paper (Are cities dying?) then I don’t think (I’m pretty sure but please excuse rusty econometrics) he can really say anything (with statistical confidence) about the correlation between city size and real wages (certainly not with the information presented). Both coefficients are based on a regression in which city size is the only right hand side variable. I suspect this is why Glaeser suggests in the article that the nominal wage and cost of living effects roughly cancel (as quoted above).
    Work which addresses this (to some extent) is the more recent paper Glaeser and Mare (2001) cited above. Figure 2 shows slight positive (but not statistically significant) correlation between city size and real wages.
    Regardless, I haven’t yet seen broad economic consensus that real wages are decreasing in city size. I certainly think that the claim that cities pay lower real wages and therefore must offer some non-wage benefits in order to attract people is premature.
    As another example that this is an unresolved issue, a recent paper, Baem-Snow and Pavan (2010), shows a U-shaped relationship between real wages and city size (medium cities have the highest real wages). They contend that real wages are increasing in city size up to a point.

    • Alan Davies says:

      John, I also contacted Professor Glaeser. Here’s his reply (I think he would’ve missed your last comment though):

      “The connection of real vs. nominal wages and city size is to a large extent an issue of the year of the data and, specifically, the New York metropolitan area. Here is a link to some work on this.

      In 1970– there was a strong positive link between both nominal and real wages and city size.

      By 2000, nominal wages still rose sharply with city size, but real wages did not.

      My interpretation of those facts, is that in 1970, cities were seen as being unpleasant and workers needed to be paid (real) combat pay– in 2000, they did not.

      best wishes, ed glaeser”

      The link to the article isn’t working at the moment but it’s ‘Urban resurgence and the consumer city’, Glaeser and Gottlieb (here).

  6. John Feddersen says:

    Great to bring some star power to the conversation. Thanks.
    Nice also to get his perspective on the 1970s, very interesting.
    I agree entirely with him about the present day.

  7. Reprobate says:

    Supporting a larger population in a city like Melbourne while
    maintaining liveability is a challenge that our democracy cannot meet.
    While the Government blithely proclaimed in Melbourne 2030 that
    “increased densities will not be achieved at the expense of existing
    amenity”, they never meant it.

    I’m confident cities can be made bigger yet liveable, if they’re
    planned for it, but retrofitting is massively expensive and goes way
    beyond what citizens and businesses are prepared to fund.

    The current strategy is a classic divide-and-conquer approach. My own
    municipality, Glen Eira, has explicitly targetted around 20% of the
    municipality for all growth. It fights very hard to protect 80% from
    *any* development, and waives the majority of standards and policies
    designed to protect amenity of existing residents in the remaining

    On multiple grounds it fails in its responsibilities to plan for the
    increase in density it is promoting. The units being constructed are
    all intended to target young adults without children. They don’t meet
    the needs of children or the elderly. There is *no* open space in
    walking distance and no landscaping. We lose “vitality” in the local
    shopping centre: the majority of services are being replaced by food
    outlets. You have to go elsewhere for clothing. Far from being a safe
    pedestrian precinct, we had a 400-space carbarn imposed on us by VCAT,
    and another set of traffic lights to go with it, reminding us all that
    car is king.

    There is no plan for employment needs, no statistics for predicted
    travel needs, no plan to eliminate level-crossings. There is nowhere
    for somebody to grow vegetables, as roof space of high density
    developments are devoted to squeezing in an extra unit. Social
    isolation, pets, pedestrian safety…all ignored.

    As for sustainability, Melbourne can’t feed itself. It relies on
    others, yet takes water from a food bowl, the Goulburn Valley, and
    imposed a zero water allocation on irrigators to achieve it. This
    devastated multiple rural economies.

    There desperately needs to be an overhaul of our institutions and even
    our culture if “sustainable” high density development is to be
    compatible with liveability. The signs are not promising.

  8. […] on 23 August I looked at the question of how our cities could grow larger but still be liveable. Public transport has a vital role in […]

  9. Riccardo says:

    Reprobate is right. Democracy can’t meet the challenge.

    People ridiculed Rudd but I thought the idea of a robot-technocrat, at the heart of the system, making all the decisions himself, assisted by ‘co-processors’ and other hubs in a hub and spoke model, far better way of being governed than the inefficient decentralised model some people seem to prefer.

    This celebrates a high level of inequality and maps better to how life really works.

    Melbourne can accommodate as many people as Tokyo if the political will is found to recreate Tokyo’s circumstances. Not sure how many takers there are for Shoguns, earthquakes and incendiary bombs but if we had some leadership who wanted a large city and were prepared to bring people with them rather than be led, we might yet see Tokyo on the Yarra.

  10. […] ravaged Victorian cities and the crime wave that plagued New York in the 70s and 80s. According to Edward Glaeser, New York was so bad in those days that skilled workers required and got a premium – ‘combat […]

  11. […] ravaged Victorian cities and the crime wave that plagued New York in the 70s and 80s. According to Edward Glaeser, New York was so bad in those days that skilled workers required and got a premium – ‘combat […]

  12. Alan Davies says:

    Jake Niall from The Age on “Big Melbourne

  13. […] to” man for research on cities. I’ve mentioned his work many times before on these pages (e.g. see here). This brief video shows him discussing Triumph of the City with The Daily Show’s John […]

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