Urban Regulation and the New Economy.docx

Urban Regulation and the New Economy.docx

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UrbanRegulationandtheNewEconomy

NIMBYsandKnowledge:

UrbanRegulationandthe"NewEconomy"

By

StephenMalpezzi†

Draft,August29,2001

†TheCenterforUrbanLandEconomicsResearch

TheUniversityofWisconsin

975UniversityAvenue

Madison,WI53706-1323

smalpezzi@bus.wisc.edu

http:

//wiscinfo.doit.wisc.edu/realestate

StephenMalpezziisassociateprofessor,andWangardFacultyScholar,inthe

DepartmentofRealEstateandUrbanLandEconomics,andanassociatememberofthe

DepartmentofUrbanandRegionalPlanning,oftheUniversityofWisconsin-Madison.

Thispaperispreliminaryandwillberevised.Statisticalresultsinparticularmaywell

change.Commentsandcriticismsareparticularlywelcome.Pleasecontactmefora

copyoftherevisedversionofthepaper.

ThankstoVickiElmer,DennisGale,JohnLandis,JohnQuigley,andotherparticipantsat

theAmericanRealEstateandUrbanEconomicsAssociationMidyear2001special

sessiononHousingandtheNewEconomyforcommentsandsuggestions.Remaining

errorsaretheresponsibilityoftheauthor.

2

1.Introduction

Thepurposeofthispaperistoexplorepossiblerelationshipsbetweencertain

aspectsofwhatusedto1becalledthe“NewEconomy,”inparticulartheeconomic

structureofametropolitanarea,andsomeaspectsofthehousingmarket,namely

NIMBYism2andlanduseregulation;housingprices,andurbanform（“sprawl”）.

Ifwetookthetimetofullydiscusswhatismeantbythe"NewEconomy,"orthe

"NextEconomy,"orthe"KnowledgeEconomy,"we'dquicklyuseupmostofthepages

eventhemostpatientreaderwouldplowthrough.Sofromthispointon,we’llbe

deliberatelyfuzzy;we'llusetheterm“HighTech,”droppingthequotes,toloosely

characterizelocalities（metropolitanareas,inthispaper）thathaveabove-averageshares

oftheireconomydevotedtoactivitiesthathave（orarethoughttohave）hightechnology

content,whateverthatmeans.Ofcourse,whenweusespecificmeasuresof“tech-ness,”

we’lldescribethesemorefully,butthereisnoconsensusonexactlywhatthisterm

meansorhowtooperationalizeit.Wewilltrytoexamineseveralalternativemeasures,

toseeifanyofourrefractoryfindingsarerobust.

Thispaperislargelydiscursiveanddescriptive.Someplotsandsomesingle-

equationregressionmodelsarepresented,butthespecificationsofthelatterarelargely

adhoc;wehavenotdevelopedanyformalmodelsbasedonoptimizingbehaviorof

producersorconsumers.Considerthepaperasanexerciseinexploratorydataanalysis.

Ouraimistodevelopsomestylizedfacts,andtoframesomehypothesesthatcanbe

1“Usedto?

”Howquicklyfadscomeandgo,whetherwe’retalkingpopeconomicsjargonorNASDAQ

bubbles.DonNicholshasarguedfortheterm“NextEconomy.”

2NIMBYisacommonacronymfor“NotInMyBackYard.”Otheracronymsspawnedbyresistanceto

oneformofdevelopmentoranotherincludeLocallyUndesirableLandUse（LULU）andNotonPlanet

Earth（NOPE）.

examinedmorerigorouslyinfutureresearch.Inthisfairlylooseway,weexaminethe

followingquestions:

（1）

（2）

（3）

（4）

（5）

WhatcharacterizesHighTechlocations（metroareas）,otherthan

theobvious（their“industrialorganization”oreconomicstructure）?

Forexample,isthereanydataconsistentwiththestorythathigh-

amenitylocationsattractfootloosehightechindustries?

Whatrole

doeseducationplay?

AreHighTechlocations（metroareas）systematicallygrowingand

developingfasterthantherestofthecountry?

Forthatmatter,

howimportantisindustrialstructuregenerallyasapredictorof

development?

AreHighTechmetroareascharacterizedbymorestringent

developmentregulationthanotherareas?

DoHighTechlocationshavesystematicallyhigherhousingprices

thantherestofthecountry?

Canwedisentangletheeffectsof

fastergrowth,regulation,andotherdeterminants?

AreHighTechlocationssystematicallymoredecentralizedor

“sprawling”thanothermetropolitanareas?

Theplanofthepaper,roughlyfollowingourfivequestions,isasfollows.In

sectiontwo,wewillbrieflydiscusssomemeasurementissues,regardingfirst

NIMBYism,ormorespecifically,itsmanifestation,developmentregulation;and

secondly,the"high-tech-ness"ofalocaleconomy.Withthisasprologue,wewill

examinethecorrelatesofafewmeasuresof“tech-ness,”focusingparticularlyona

measurefromDeVol（1999）.Next,wewillexaminewhetherHighTechregionsarein

factgrowingfaster.ThefourthsectionexplainstherelationshipbetweenNIMBYismand

HighTech,andgrowthgenerally.Thefifthsectionexplainstherelationshipbetween

thesephenomenaandhouseprices.Finally,wepresentsomeinitialevidenceonthe

relationshipbetweenthestructureofthelocaleconomyandurbanform.

2

2.“HighTech”andthe“NewEconomy”

Ofcourse,humankindhashadmany“neweconomies”overhistory.Consider,

forexample,someoftheinnovationshumankindhasexperiencedsincethe“invention”

ofagriculturecirca10,000yearsagoandtheadventofcivilization.Formostofthelast

10,000years,theexpectedrateofgrowthoveranyindividual’slifetimewas,toseveral

decimalplaces,zero.3Ahighlystylizedlongrunpercapitagrowthratecanbe

“estimated”asfollows.Theworstbasket-caseeconomiestodayhaveGDPpercapitaof

around$300（WorldBank1999）.Verycrudely,incomespercapitainathen-richcountry

likeBritainorHollandmighthavebeensomethinglike$2,000in1800（Bairoch1988,

Maddison1983,Kindleberger1996）.4Letusbeconservativeandestimatepercapita

income10,000yearsagoat$100.Thisimpliesverylongrungrowthrateof0.03percent

perannumfrom8000B.C.tocirca1800.Thiscomparestomoderngrowthratesthat

averageabout2percentperannum.

Anotherneweconomywasthefirstindustrialrevolution,circa1880,basedon

textileweavingandsteam;incomepercapitabegantogrowasfastas1percentaround

thatperiod.5Thesecondindustrialrevolution,basedonsteel,electricityandtheinternal

3Ofcourse,postulating“anexpectedgrowthrateofzerooveranindividual’slifetime”isnotthesameas

claimingtherewasneveranygrowthinthefirst9,500yearsorsoofcivilization.First,therewassome

modestrateofgrowth,aslaterinthisparagraph.Second,eveninancienttimestherewereexamplesof

fastergrowthbyselectedpeoplesinselectedperiods.SeeJones（1988）andCipolla（1993）forexamples

anddiscussion.

4[Needtosurveymoreliteraturefornextdraft,thesenumbersareveryspeculativeinanycase].

5Weshouldnotethatthereisdebateabouttheexactnatureoftheindustrialrevolution,includingwhetherit

wastrulyarevolutionatall,ormerelyaslightaccelerationofpreviousgrowth.See,forexample,Coleand

Deane（1962）andCrafts（1983）.

3

combustionengine,phasedoutinthefirsthalfofthe20thcentury.Growthrates

acceleratedtosomethinglike2percent.

Itisnotmuchappreciatedthattheaveragegrowthrateinthefirsthalfofthe20th

centurywasaboutthesameasthegrowthrateinthesecondhalfofthe20thcentury,

roughly2percentpercapitaintheU.S.（Ofcourse,somenon-U.S.economieshave

grownmuchfasterthan2percentoverseveraldecades,seeMalpezzi2001for

discussion.）Thebigdifferenceingrowthratesbetweenthetwohalvesofthe20th

centuryisnotabouttheaveragerateofgrowth,itisaboutthevariance.Figure1shows

thedecline.TheannualrealgrowthrateinGDPpercapitafrom1890-1950was2.0

percent,andfrom1950to1999wasslightlyhigher,at2.2percent.Butthestandard

deviationofannualrealgrowthratesinGDPpercapitafrom1890-1950was7.2percent,

andfrom1950to1999wasonly2.3percent.

Fromthehousingperspective,wecandateseveral“newhousingeconomies”

fromthefirstpermanenthousingcirca8000B.C.6tosuchinnovationsasbrick（Sumeria,

circa5000B.C.?

[check]）,balloonframeconstruction（1850）,pipedwater,andthe

eponymousinventionofThomasCrapper（circa1870?

）.7AccordingtoWitoldRybzinski

（1987）,theDutchcirca1400wereresponsiblefortheinventionoftheconceptof“home”

asaprivatefamilyspacewithitscurrentconnotationofhearthandrefuge.

Atonelevel,therecanbehardlyanydoubtthattechnologyaffectsdevelopment.

Theearlydevelopmentofcitiestenthousandyearsagowastiedtotechnological

improvementsinagriculturethatpermittedatleastafewmembersofsocietytoengagein

6[Currentlysearchingmoreliteratureonthishistory;bibliographicsuggestionsmuchappreciated].

7ThomasCrapper,plumber,didholdseveralplumbingpatentsbuthisinventionoftheflushtoiletis,

unfortunately,myth.AndrecentlyChinesearcheologistshaveunearthedwhatmayhavebeentheworld’s

firstwatercloset,circa100B.C.See.

4

activitiesotherthangatheringenoughcaloriestostayalive.Manystudieshaveexplored

theroleofsuchtechnicalinnovationsasthesteamengine,electricity,andrailroadsinthe

historyofeconomicdevelopmentintheUnitedStates.

AdamsandSveikauskas（1993）demonstratethelinkagesbetweenacademic

science,appliedresearchanddevelopment,andeconomicdevelopment.Amongother

measures,theyusethenumberofindustryscientistsasameasureofR&Dandacademic

papersascrudemeasuresofscientificoutput.Theirfindingsdemonstratethatfirst

scienceandatalaterstageR&D"areapowerfulmoveroftheentirestructuralproduction

…andtheyappeartobeapotentforceresponsibleforcapitaldeepeningintheU.S.and

othereconomies."OtherstudiessuchasJaffe（1989）,BeesonandM