We live in a great age of urbanization. Many cities of the West, from Boston to Berlin, have come roaring out of their post-industrial doldrums. Even more spectacularly, the cities of the developing world are expanding mightily and now house over 2.9 billion urbanites. Globalization and technological change lie behind our urban era. In the wealthy world, these trends have radically increased the return to skills and innovation, and we are a social species that gets smart by being around other smart people. In the poorer world, trade provides economic opportunities in cities that could never exist in poor rural areas.Technological change also provides opportunities to make our cities far more livable, but only if new technologies are coupled with better incentives and institutions. For example, driverless cars provide an opportunity to better manage urban traffic flows and make the time spent in traffic jams more productive. Yet if sitting in traffic becomes more bearable, more people will be willing to sit in traffic, and jams will get worse. The economists Gilles Duranton and Matthew Turner have found that the supply of new drivers is almost perfectly elastic, as the number of vehicle miles traveled increases almost one-to-one with the number of highway miles built.
The implication for autonomous vehicles is that we must embrace global positioning system (GPS)-based congestion charging immediately. If we charged riders for the congestion they create and the environmental damage they cause, then we can ensure that autonomous vehicles will make things better rather than worse. Ideally, such charges will quickly respond to the amount of traffic in any given location, so that vehicle riders will make the right decisions about when and where to travel.
The need for incentives and infrastructure in the developing world is even clearer. The economic upside of poor world urbanization is enormous, but there are also demons that come with density, including traffic congestion, contagious disease and crime. Gridlocked mega-cities, like Beijing and Sao Paulo, would particularly benefit from Singapore-style congestion pricing.
In poorer places, such as the cities of Africa, clean water is particularly vital. Yet even when well-meaning donors build water mains, poorer urbanites are loath to spend their sparse funds on sewer and water connections. Consequently, there is a last mile problem where water flows into the city, but not into the homes of the poorest people who are most at risk.These cities need to create incentives to connect, which includes both subsidies and penalties. New York built its great Croton Aqueduct in 1842, but cholera epidemics didn’t end until after 1866, because the poor weren’t willing to pay for the water. The city only became safer when the Board of Health started penalizing landowners who didn’t connect to the water system. Such penalties will be harder in the developing world, because land ownership in slums is so unclear. German Basic Law states that “property entails obligations,” and to enforce those obligations, developing world cities must improve the clarity of property ownership.
Technology has made our cities grow, and has the capacity to make them healthier and more sustainable. Yet technology is not a panacea on its own. It must be coupled with smart incentives and better institutions.
Text: Prof. Edward Glaeser
Edward Glaeser is Professor of Economics in the Faculty of Arts and Sciences at Harvard University. He has published dozens of papers on cities’ economic growth, law, and economics. In particular, his work has focused on the determinants of city growth and the role of cities as centers of idea transmission. He became widely known through his book “Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier”, Penguin Press, 2011
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