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“It’s the economy stupid” – Taking New Zealand’s Cities Seriously

Most people who read this blog do so because they are interested in transport. But sometimes I do wonder if we lose sight of the fact that transport is (usually) a means to an end, rather than an end in itself (putting aside purely recreational travel).

The need for transport is usually derived from a need to overcome the barriers created by space (in the terrestrial sense). Put simply, “space matters”. To use a somewhat trivial example, have you ever been on Trade Me and seen precisely the item you were looking for, but have decided not to purchase it because the seller was based in the South Island and shipping costs were too high? Congratulations, you’re a victim of transport costs. Like inequality, transport costs are effectively “sand in the wheels of capitalism,” they prevent things from happening that would make us all better off.

Space is not just a barrier to economic activities, but it also makes our lives that much less fulfilling in a social sense. Have you ever not attended an event because it was “too far away” or “too expensive to get there.” I have – and it generally sucks not being able to do something simply because of the transport costs involved in getting there. Transport enables social interaction and this provides a whole host of benefits that go well beyond what is counted in a market economy. The ability to develop and maintain personal connections over longer distances is, for me, the single greatest contribution of social media sites such as Facebook. But internet communications only get you so far; after a while you do need to see the whites of someone’s eyes and touch the hair on their head.

Which brings us round to why New Zealand needs to take cities seriously.

In essence cities are little more than the physical manifestation of our attempts to overcome two important economic forces, namely transport costs and fixed costs. By co-locating a lot of people, businesses, and amenities close to each other, transport costs are indeed lower (even allowing for the presence of congestion). But the concentration of people also confers another advantage: Cities gain sufficient economies of scale that they can deliver services and infrastructure that have high fixed costs. Street lighting, for example, is expensive to provide in low density areas because most of their costs are fixed, as are ports, airports, and stadiums. Cities are therefore a mechanism through which we can spread these costs over more people, which in turn lowers the average cost per person.

But while cities have many advantages, they do bring their own suite of socio-economic problems, most notably congestion. Over time, however, humans have tended to do what we do well: Find innovative incremental solutions to the problems that confront us. Gas and electric street lighting, for example, had dramatic impacts on crime rates in post-industrial European cities, such as Paris. Similarly, the advent of elevators enabled us to construct taller buildings than we could previously, which is most evident during the sky-scraper boom in Manhattan. In terms of congestion, we have slowly developed alternatives to congested transport corridors and/or modes – or simply arranged our land use patterns to minimise the need to travel long distances.

A plethora of innovations has enabled us to overcome many of the problems that have previously detracted from urban life. In turn, they have enhanced the socio-economic advantage of cities over rural areas. Whereas rural areas by definition will struggle to overcome the disadvantages engendered by long distances and a dispersed population, the issues that detract from urban life are “softer” and more readily solved. For example, there are a range of transport technologies on the horizon that should gradually contribute to better urban air quality and lower noise. Another urban issue bites the dust so to speak.

To put it simply, while cities have their problems, these are gradually being solved. And this in turn confers cities with an increasing comparative advantage over rural areas. Hard data supports this suggestion: In 2008 the proportion of people living in cities passed 50% for the first time in human history, and it continues to increase. Rural populations globally are actually stagnant, i.e. all of our population growth is occurring in urban areas. In New Zealand the proportion of the population living in predominantly urban areas, or areas with high degrees of urban influence, passed 85% some years back and is probably now getting closer to 90%.

It now seems clear that cities are not only a magnet for young people and immigrants, both of which have driven growth until recently, but also empty nest baby-boomers who increasingly crave and need the services that cities offer. It’s hard getting a hip replacement in Te Kauwhata.

What does this all mean? Well, on a simple level I think it means that New Zealanders need to grow up and learn to love our cities. Back in 2010 my colleague Jarrett Walker wrote this post on Auckland, which he kicked off with the following comment (emphasis added):

Greetings from New Zealand’s largest city, the focal point of an agrarian nation’s ambivalence about urban life … To a visitor accustomed to North American or European levels of civic vanity, it often seems that Auckland still doesn’t know how beautiful it is.   

Indeed, as Matt notes in this post Auckland is a beautiful city and this is increasingly being noticed. I think what we need now is to take this growing external awareness and start to foster our own internal appreciation for how cities contribute to our way of life. And for those of you who ponder these things, perhaps the best “gift” we can leave for future generations of New Zealanders are cities worth living in. Let’s start taking cities seriously; we might be surprised by how much fun we can have along the way.

P.s. As an aside economies of scale are very important, and I’d suggest that most places in New Zealand outside of Auckland suffer economically from a lack of scale. I’ve been spending a lot of time in Dunedin recently, for example, and everytime come away thinking that all the city really needs is another 20,000 people or so.

66 comments to “It’s the economy stupid” – Taking New Zealand’s Cities Seriously

  • Peter M

    There’s that interesting question of many parts of NZ having spare infrastructure capacity while Auckland’s infrastructure is bursting at the seams. Does it make more sense to try to encourage a redistribution of the population (good question as to how) rather than having some areas depopulate and miss out on economies of scale while places like Auckland hit points where the marginal spend on infrastructure to cater for growth gets bigger and bigger?

    • Trev

      I think Stu’s whole post is pointing out why that would be a dumb idea.

      • Stu Donovan

        Yes, I don’t think we should encourage people to live in rural areas.

        But there are some interesting questions about what the optimal distribution across our cities would be. I tend to think that Auckland will probably keep growing until it maxes our circa 2.5 million after which growth will probably spill to other cities, but mainly those located nearby in the Upper North Island.

      • Peter M

        I wonder whether there’s a “sweet spot” for the size of a city too. Auckland feels a little bit stuck in the middle: needing big city stuff but not quite big enough to easily afford it.

        • Stu Donovan

          Yes I agree; not sure where that sweet spot lies, but Auckland’s probably on the low side at the moment. Once sub-centres such as Manukau, Henderson, and Albany start gaining their own critical mass then I think we’re probably closer to optimal size.

    • Stu Donovan

      Yes, I think it means that we should stop investing in Auckland’s transport infrastructure when the marginal benefits do not exceed the costs. Not that we are yet at that point, with most projects still having some marginal economic value (especially when you use a lower discount rate and longer time horizon).

      As for what it means for other cities I’m not so sure: Infrastructure facilitates economic development but it does not really cause it. So you can’t simply stop investing in Auckland and start investing elsewhere, because the investment won’t cause growth – you just get a load of empty roads, i.e. Dunedin.

      What I think will happen is that as Auckland gets bigger and busier some population will increasingly spill over into adjacent cities, such as Hamilton, Tauranga, and possibly Whangarei. They would probably be your best bet, if you wanted to pick winners and invest public funds accordingly. But my personal preference, as an economist would be to let people and business work it out for themselves.

      And I think that means Auckland will win.

    • Very hard to do Peter. Trying to disperse employment for dispersal’s sake is to work against the synergies and efficiencies of agglomeration. Best recent example is probably Invercargill’s zero fees programme, of course that was built on community ownership of a utility to subsidise an industry [education]. The current government would consider that a dangerous socialistic distortion and intervention; In short, against their religion.

      • Stu Donovan

        If we’re getting into trying to influence the population distribution (agree it’s very difficult), then you could look at locating back-office public sector activities (which do not experience agglomeration economies) to provincial cities. But then you potentially create a whole load of transport costs between “head office” and “back office.” Perhaps it’s more efficient if “back office” is located in sub-centres, such as Manukau and Albany, where it can still be within reasonable travel distance of the mothership even if it’s not downtown.

  • On the subject of the force of urbanisation and the attraction of cities globally: Here is the Great William H Whyte boiling the issue down to its most fundamental:

    “What attracts people most, it would appear, is other people.”

    • SteveC

      true to a point, but if all the people have to do with everyone else is sitting in the pub bemoaning the lack of jobs, then I’d suggest that what attracts people is other people and the prospect of employment, which is why people tend to move to Auckland

    • And JJ:
      “…that the sight of people attracts still other people, is something that city planners and city architectural designers seem to find incomprehensible. They operate on the premise that city people seek the sight of emptiness, obvious order and quiet. Nothing could be less true. The presences of great numbers of people gathered together in cities should not only be frankly accepted as a physical fact – they should also be enjoyed as an asset and their presence celebrated…”
      via PPS http://ht.ly/fme2M

    • and Gehl, himself quoting an Icelandic philosopher – a great rebuttal to those who would portray large numbers of people living in close proximity as undesirable:

      “man is man’s greatest joy”

  • Filde

    “It’s hard getting a hip replacement in Te Kauwhata”. Have you tried?!

  • Trev

    Does that mean NZ would be much better with a population of 15 million or so? http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10847678

    Can’t help but worry about the environmental consequences.

    • David O

      Given NZ’s size 15 million people need not be an environmental problem IF we change how we live. It would be environmentally catastrophic based on current lifestyles with as many cars as people and giant 300-sq m homes out in the sprawl. Not saying that 15 million would be desirable, but they could certainly be accommodated easily enough. I would think that somewhat fewer than that is more likely – 7 or 8 million maybe.

    • Stu Donovan

      I think 15 million is desirable. Ironically because it strengthens the domestic market, rather than supports exporters. Agree with DO, it would need a change in the way the average person lives.

      • The important point is that even a doubling to around 9 million cannot be successfully done by just sprawling Auckland, Hamilton, and Tauranga as we have been. The low productivity of such a spatial arrangement would really bankrupt us.

        So these business interests pushing for a higher population sooner will have to stop also fighting moves to encourage more compact urbanisation.

        Also I find their sly digs at Working for Families anomalous as it is essentially a employer subsidy: A scheme that facilitates the underpayment of staff.

        • Stu Donovan

          As an aside, I interpret WFF differently: It’s a way for society to increase incomes of families, rather like positive discrimination.

          On a high-level (and as someone who pays a lot of tax but does not have a family) I have no issue with WFF tax credits. And I’d rather they were administered by the government, because it would be difficult for a private company to pay certain people more simply because they have a family. Catch my drift?

          Not that the design/implementation of WFF is perfect IMO, just that I don’t think it’s right to say that it’s subsidising low wages. It’s more of a transfer from taxpayers without families to those that have families.

  • Peter H

    All cities are a collection of towns, all towns an a collection of villages, If you want to grow and make the city a better place, you need look after the Villages.

    • Mr Anderson

      Jane Jacobs actually points out that assertion is not true at all in her book Economy of Cities.

    • Stu Donovan

      I would just point out that not all villages are created equal:

      There is something quite unique about the city centre that is quite distinct from the rest of the city. The huge agglomeration economies that are present there (in both production and consumption) is not something that can be isolated from its urban periphery. In fact, the productive capacity of the city centre likely depends on a supply of labour that is far larger than what it could support on its most. They are intrinsically linked if you like. And I’d suggest that the viability of places like Ponsonby, Mt Eden, and Parnell depends very much on their proximity to the city centre.

      The agglomeration economies you find in the city centre are something quite special and deserve special treatment.

  • Great post Stu. I know you are speaking in general terms but it’s worth noting that the definition of ‘city’ (especially in relation to 50% of the population living in one) is almost meaningless. This is important when we look at efficiencies of scale and agglomeration benefits etc. I was on the edge of the city proper last night, and the brand new roads were already disintegrating back to a natural state. It will cost a fortune to maintain these exurbs even over the next few years. Good thing there is a highly efficient dense core making up the difference.

    • Which makes the satellite town / village idea a great idea as these are a place in themselves with some employment and a sense of community. Good links to the ‘city’, so to speak, are essential to ensure these towns work as a part of the city. This, of course, is the alternative to the ‘let the city grow’ argument. A town surrounded by green space will be a much nicer place than a suburb on the outskirts of the city with no real definition.

      • Hmm. Still need to be convinced of that. Re-reading Jane Jacobs at the moment; her critique of New Towns is entirely valid when it portrays the issues around establishing settlements built all-of-a-piece at the same time by modern developers. Lack of diversity, damaging demographic cycles… the list goes on.

        It’s not that being a satellite is bad in itself; far from it, often. But being a planned satellite, especially designed as such as a release valve for nearby cities, has often shown itself in reality to be bad.

        • Bryce P

          And yet it appears to work well in Europe. Another idea lost in translation perhaps?

          • Erm… which places?
            My first thought is of all the UK New Towns from after the War. Duffers to a T, pretty much all of them. Great planning theory, terrible way to form a society.

            I’d be interested in which of the mainland Europe examples you think work…?

          • Bryce P

            I wasn’t thinking of the UK but I’ve been to Germany where it seems to work ok. Not planned I’m guessing but the network of towns interspersed between cities, with good road and pt links feels like somewhere I could live. To somehow allow that to happen in NZ would be great in my opinion. What to do? Start with the good pt links to nearby towns first? Big investment but is it a viable alternative to just allowing Auckland to sprawl?

          • This isn’t instead of intensifying Auckland of course, merely to supplement it and to give choice.

        • Hard to do well but still preferably to formless sprawl that we have been doing… Or at least if we just get the train service running and put in some permanent rural limits around growth areas we are sure to get a better outcome. The combination of existing connectivity and enclosure, as well as greenspace, ought to be productive, No?

          • Hard to do well indeed – Manukau CBD being a prime example of a planned intention, as you well pointed out a couple of weeks ago. While Manukau’s most visible flaw is the reliance on motor vehicles as it’s underlying logic, I think it has an underlying contradiction of trying to create enclosure & intensity in a place that it was not naturally occurring at that time. Even interventionary strategies like locating major public sector employment does not really drive it as a place, as you stated above.

            I just think we should build successful urbanism in the places that people already are, and do it around how the people in those places behave & interact. Satellites look like a convenient way of avoiding the challenges of this process within the existing city. Maybe satellites provide a convenient answer to our immediate growth dilemmas, but we should not let ourselves off the hook from dealing with the planningcommunity growth dialogue in existing places.

            For me, the key to satellites is whether the seeds of urban gathering are already in-situ and displaying an appetite for the urban trajectory. For Auckland that means whether places like Pukekohe can transform from services focussed on an agricultural and lifestyle-block economy to something very different in a rapid timescale.

            I’m hoping that we don’t see any new satellites built from scratch; I see too many pitfalls like Manukau in that route. Transit-orientated growth is something I totally understand within existing urban gatherings, but when they are too many kilometers beyond they feel like they carry huge speculative risks that weigh heavily against achieving the visionary intent.

      • Peter M

        Gotta love Jane Jacobs. Over 50 years later and she’s still “cutting edge thinking”.

        • And Lewis Mumford and William H Whyte. But JJ is the star.

        • Kent Lundberg

          Oh man, I am reading the funniest quotes by Jacobs in Walkable City. Don’t dare post in mixed company.

          • Looks like you didn’t waste any time getting hold of that after release! Good read beyond the Jacobs’ quotes?

          • Kent Lundberg

            @TimR yes- its’ great. A generalist take on things like parking policy, traffic engineering, urban design etc. Look for a review soon.
            @David O, I think a lot of NIMBYs think they are fighting some sort of Moses battle when the oppose things like 4-storey buildings. I also agree that some of her ‘old buildings’ theories can be very easily turned into NIMBY fodder. A question I’ve been thinking about is would Jacobs support the CRL? She has a very limited track record on PT issues.

        • Kent Lundberg

          She’s a genius as is Alexander. Their understanding of network theory and the complexity of cities is unfolding in front of us.

          • Yeah. I started marking up “Life and Death” for future reference – and found I was marking up several times on every page. Talk about profound, and the prose is so often just beautifully crafted.

          • David O

            Jacobs is very good, but she didn’t get it all right. There is definitely an aspect to her writing, which lends support to smug inner urban NIMBY-ism – things about not having too tall buildings and so on. Local opponents of development in Ponsonby could find plenty of support in the pages of Jacobs, if they were ever to read her. Glaeser is pretty direct in his criticism of these aspects in Triumph of the City. Having said that a lot of those ‘mistakes’ might just as easily be misreadings, and the genius in Jacobs far outweighs the weakness. Someone borrow my copy of Death and Life and never returned it – I need to get a replacement…

            Alexander is great – it’s a real inspiration to leaf through the Pattern Language. I think what’s most interesting about his book is the multiple scales for which patterns are proposed – everything from the regional to the window seat!

          • David O: depends what you regard as the bigger problem. Glaeser is right about the economic implications of limiting height; Jacobs is right to suggest that there are implications for street life and social interaction when buildings get really tall. Which is worse?

    • Stu Donovan

      Kent yes, definitions of cities are necessarily arbitrary. What’s more relevant to this discussion, however, is the trends towards increasing urbanisation – however it is defined – that is apparent in a range of metrics across a range of countries.

      The other thing to remember is that there are two types of urban scale: 1) Size of the population and 2) density of the population. Most studies show that #2 is most important to agglomeration economies, and for understandable reasons. It does not matter to someone in Tokyo if an extra 1,000 people are added to a suburb on the far side of the city, but it does matter very much if those 1,000 people are located in a neighbourhood where 1,000 people already live.

      Density is king; scale is of secondary relevance – albeit probably more important when discussing regional facilities such as museums and stadiums.

      • Which is why there are so many lies told about density….. It is a much hard metric to pin down than just quantity, so depending on what barrow is being pushed any old number seems to do. Today Rodney has Auckland at the highest I’ve ever heard because he’s arguing for some kind of urgent need for Ak to bust out of a terrible Council prison. But when his ex party and their mates in the NatPat argue against any need for Transit funding in Ak they love to claim how spread out we all are!

  • Peter H

    There was a time when Te Kauwhata had a regular rail service, which you could use to get you a town where you could get a hip replacement. I suggest the space between Te Kauwhata and the city is greater now than it was 50 years ago.

    • Agreed, but we will rebuild this over this century. The wheel is turning and there are many details about our current set up that are hard to see now as as temporary as they undoubtably are.

      The second half of the 20th century will be an outlier in human experience born of one time cheap oil. For example it is clear that the historically peculiar idea of different generations of family living in different dwellings spread around will be a fairly short lived experience; we will go back to multi generation co-habition because of economic imperative, and in fact already are with adult children either not leaving or bouncing back.

      Same is also already the case with rail connection and in fact communal transport in general.

  • Matt Lee

    Agreed. Dunedin would be awesome if had some more people. Don’t know how to achieve this tho’…..

    And a strong Christchurch (0.5m < popn.) the best counterbalance to Auckland.

    • George D

      Better, warmer houses would help. Previous generations were sterner stuff, but I and most I know don’t want to live in a refrigerator or pay catastrophic energy bills. Auckland is bad enough! Climates can’t be changed, but housing can, and this is where sensible directive legislation would help.

      • Ed Glaeser shows that the closest co-relation between urban growth and any one thing in the last 60 years has been weather. NZ has certainly been consistent with that, ie its been a solid move north. Of course the US move south has only been possible by the spread of aircon and cheap power and water. All signs are that those things are not so cheap or certain from now on and just as those places get hotter and dryer and petrol get’s more expensive too. All change.

        • MFD

          Interesting observation and entirely plausible. Aircon and cheap electricity to run it are very big factors in the US population distribution. Published studies show an inverse correlation between temperature/humidity and productivity . Atlantic coast states are hot and humid in the summer and air conditioning addresses both. Historically it has been easier to heat than to cool for obvious reasons. US electrical demand peaks in the summer, early afternoon to early evening. Generally a good fit for PV generation (which is falling in price at a rapid rate) except for a 2 hour offset between peak generation and peak demand that will be addressed with electrical or thermal storage.

        • Stu Donovan

          Not just south to north, but from windy west to sunny east as well.

    • Wee Dunedin needs two things- to compensate for the cold and for the steep hills. Return of the cable cars, retro fitted insulation and central heating would be a good start to removing these hard edges. Also better long haul PT from CHCH and into Qtown to leverage the Ski parks and the positive side of winter, would win me back at least!

      • Stu Donovan

        Agree with most of that, although would focus on getting the buses right first before worrying about cable cars. And changing that one-way couplet system with SH1, which lays waste to vast swathes of the city centre. PT links to Chch would be good – that rail trip up the coast is apparently rather spectacular.

  • “Sand in the wheels of capitalism” is a great way to describe transport costs. Not sure it really equates to the bigger social inequality that Stiglitz refers to – but his commentary on money and power possibly relates strongly to the transport debate in NZ…?

    • Stu Donovan

      Yes I thought so! Although I was not intending to draw parallels between transport costs and inequality, aside from highlighting that they both seem to undermine economic activity in similar ways: Adding friction to the system, preventing mutually beneficial transactions from occurring etc.

  • AC

    Speaking of NZers growing up an embracing cities, I just read Rodney Hide’s opinion piece in the NZ Herald. What a hysterically anti-city and anti-PTl op-ed that is. Jesus.

  • Kent Lundberg

    Recently I read a great anecdote about the value of the city. The writer suggested that one of the yardsticks for a functional city is the amount of good ‘meetings’ that can people can conduct in a day. In the cbd maybe 5; imagine how quickly that number drops off in other places.

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