Despite its many benefits, density has its demons too, perhaps the greatest of which is contagious disease. Today, pandemic is stalking our cities again with the devastating spread of Covid-19. The impact of this virus is compounded by levels of urban unrest not seen since the 1960s. There is great uncertainty about the future of our cities, especially for the millions without jobs or who fear for their health. Yet, at the same time, the persistence of urban vitality and entrepreneurial creativity that we see, for example, in thousands of new outdoor cafes reminds us not only of the hope but the triumph of cities. What do cities need to survive? What policies can help revitalize urban America and accelerate the pace of recovery?  

In this year’s James Q. Wilson Lecture, MI Senior Fellow Edward Glaeser will address the implications of the Covid-19 pandemic on city life in America, the connection between urban density and contagious disease, how to prepare for the threat of future outbreaks, and the economic-policy response of leaders in Washington.  

Edward Glaeser is the Fred and Eleanor Glimp Professor of Economics at Harvard University, where he has taught since 1992, a senior fellow at the Manhattan Institute, and a contributing editor of City Journal. He has also served as director of the Taubman Center for State and Local Government and as director of the Rappaport Institute for Greater Boston. His work has focused on the determinants of urban growth and on the role of cities as centers of idea transmission. He holds a B.A. from Princeton University and a Ph.D. from the University of Chicago. 

Sponsored, with admiration, by a former student of James Q. Wilson.  

Event Transcript

Reihan Salam:

Good evening and welcome to the 2020 James Q. Wilson Lecture. Every fall for 15 years, James Q. Wilson would use this forum to address the pressing challenges facing America cities. And because he was one of the most brilliant social scientists of his generation, you could count all the ideas expressed here to be absorbed and applied by city leaders across the country. His ideas moved us from the urban crisis to the urban renaissance. Now it is fitting that the tradition of this lecture is carried on by Ed Glaeser, the thinker who has done more than everyone else to remind us both how fragile that urban renaissance is and how much of our city's potential remains unrealized.

Reihan Salam:

The Fred and Eleanor Fred and Eleanor Glimp Professor of Economics at Harvard and senior fellow at the Manhattan Institute, Ed has taken urban economics, a formerly neglected subfield in the discipline and made it one of the most interesting spaces in our country's intellectual life. Ed has authored more than 600 articles, which have garnered over 100,000 citations. Along the way, he has cultivated a small army of protegees, who have found out across economics departments and newsrooms to draw attention to how much work remains to be done in bringing the market revolution to urban housing and much else.

Reihan Salam:

Now more than ever, we are grateful for Ed's prodigious intellect and lifelong commitment to understanding and improving America cities. America cities were brought to a halt by COVID-19. The in-person service sector, which employs many low wage and first time workers was especially hard hit. Now people are speculating that Zoom might do to cities today, what highways did to them in mid century, undermine the economic logic of packing many people onto small and expensive slices of land. However, it is the core belief of MI that every city controls its own destiny, that policy decisions and public leadership matter. Tonight Ed will give us an idea of what those good decisions might look like and how we can ensure that the best days for our cities remain ahead. Ladies and gentlemen, it is my honor to welcome Ed Glaeser.

Edward Glaeser:

Thank you Reihan. Your words, as always kind and I may not exactly believe them, but I'm certainly grateful for them. I am absolutely delighted to be with you. I wish of course it were in-person rather than speaking remotely. But these are difficult times for cities. And in some sense, the experience of social distancing has been a radical, deep urbanization of our world. I believe very strongly that in fact, the best days of cities do remain ahead of us. But that requires more than merely a recovery from the health crisis. Our cities are under siege. And experiencing the best days in the future will require public management in the future that is better than it has been in the recent past. Slide. Great. Next please. And yes.

Edward Glaeser:

So this is a painting by Poussin. And it often stands in for the Plague of Athens. Although it's actually meant to be a biblical plague. It's meant to remind us that plagues and cities have a long history together. While cities do amazing things, enabling the interaction between people in your neighborhood to one another, they also enable the spread of terrible things like bacteria. And it's hard to think of a city in which the combination of urban greatness and urban terror came together to such a degree as Athens in the fifth century. This is of course the city where face-to-face interactions gave us philosophy, gave us the birth of history, gave us democracy. Gave us theater. All of these things came out of urban proximity in Athens. And yet the city also gave us the first appearance of an urban plague that was well documented thanks to the presence of Thucydides himself at that plague.

Edward Glaeser:

And of course, the plague didn't finish Athens. The cities did continue, but in some sense, its golden age perished during that plague. The story behind it was that Pericles's plan for defeating Sparta during the Peloponnesian War was that he would summon the Athenians inside the walls of Athens to be protected from the marauding Spartan warriors, and instead send out his superior Athenians fleet to ravage the shoreline of the Peloponnesian Island. The strategy was brilliant militarily, perhaps, for the walls did indeed keep out hoplites but the walls were not able to keep out the plague that entered through the Port of Piraeus, and then spread across the hyper dense domains of Athens.

Edward Glaeser:

It reminds us of why cities are so vulnerable. They are nodes on a global transportation network. And so Athens in the fifth century, like New York, in 2020 was the port of entry for bacteria, for a virus into a country, into an area. At the same time, cities are dense, they huddle around their transportation nodes, and so the disease can spread within the city causing havoc as indeed it caused havoc in Athens.

Edward Glaeser:

Perhaps this plague was not quite as catastrophic as the plague that happened almost 1100 years afterwards, the Plague of Justinian that struck Constantinople and 541 AD. And while in 541, Justinian was on the edge of reestablishing the Pax Romana in the Mediterranean world, he had sent his great warlord Belisarius to reestablish some form of peace and control over the Gothic warlords that had had their way throughout the Italian peninsula. And perhaps we would see a world in which peace and civilization would return to Europe. Instead, we got two centuries of plague, we got political chaos, we got the collapse of empires. And we got eight centuries that were dark until Europe rebuilt itself.

Edward Glaeser:

Now since 1350, when the Black Death reappeared, its first appearance was with Justinian in 541, plagues have never again, been a mortal blow to cities. They have been painful, they have been deadly, but cities have adapted and withstood them. And let's not forget, most of the plagues that we experienced in the 19th century were much deadlier than COVID-19 has been at least so far. Indeed in some sense, the past century has been remarkably blessed in terms of urban health. This is a chart of death rates in New York over the past 200 years.

Edward Glaeser:

And it's easy to forget now, but until 1920, New York City was a killing field. As indeed were all of the older cities in history. A boy born in Shakespeare's London in the 16th century, could expect to live six years less than a boy born in rural England. About the same life expectancy gaps still existed in 1900 New York, despite the enormous progress that had been made over the contagious diseases that ravaged the city earlier in the century, you can see that yellow fever was a particular killer in the first third of the 19th century. And then, of course, the waterborne plague, cholera was a particularly health disaster during the middle decades of that century. And of course, we rounded up that period with the influenza pandemic of 1919.

Edward Glaeser:

One thing that's really interesting, of course, is the extent to which so much that we value about New York is indeed represents a response to those plagues. From Central Park to The Croton Aqueduct, these expenses were put in place precisely because they were thought to be an antidote to the plague. Now oddly, they were the right thing to do, despite the fact that the scientists got the science completely wrong. That in fact, the people who advocated for the aqueduct, for Central Park were advocates of the miasma theory of the spread of disease, which was that the disease wasn't brought in by contagion, but instead by the local land area. By the sodden fields, by the muck, by the airs that would come out of the bog. And so you needed to clear the bog. Now, that's not at all how cholera works.

Edward Glaeser:

But in fact, getting rid of the standing water also meant that you got rid of the mosquitoes. And so New York became safer through in some sense, a medical mistake and through an enormous amount of money. The cities and towns of the US were spending as much on clean water and sewers at the start of the 20th century, as our national government was spending on everything except for the post office, and the army. And of course, you also had rules. You'll notice that even though The Croton Aqueduct was built in 1842, for 25 years after that, New York continues to have cholera epidemics, my great, great, great, great, great grandfather died in the 1849 epidemic, because the city did not require poor households to connect to the water system. And it was only when you had the Board of Health, chaired by one of New York's little known heroes, the great Dr. Steven Smith, until you had the Board of Health which started actually requiring tenement owners to connect to the water, you didn't really have a meaningful reduction in cholera.

Edward Glaeser:

Now today, we have been seeing again the link between urban density and disease. This shows the relationship between per capita cases across counties in the United States and density as of the middle of May. Now this has been evening out over time as COVID has spread to lower density locales. COVID is even present in the Dakotas and Montana. But it came first to cities and it came most terribly to New York City again, because New York is a port of entry, as it was for travelers returning from Europe who bore the virus with them. And because the disease spread tightly in the dense confines of the city. Next please.

Edward Glaeser:

This is also true in other places where we have data. So this comes from work with my co-authors and students, JP Chauvin and Stephanie Kestelman. This shows the relationship between COVID cases as of June 2020, and the share of the population living in a dense poor area called a favela in Brazil. Again, strong positive relationship. These poor dense clustered areas are places in which the disease is spread far more readily. This is an India, this comes from Sam Asher and Paul Novosad who show us the relationship between the share of the population living in slums and the number of COVID infections per capita.

Edward Glaeser:

Now as we think about the future of New York, one really deep question is whether or not public transportation can ever feel safe again. And in some sense, this gets to question as to whether or not public transportation itself spread COVID. The distinguished MIT health economist, Jeff Harris asked this question in mid-March. And it turns out that it was a harder question to answer than you would think. The second question is, do we know how to make public transportation safe? And here the answer is unclear. Trips do seem to be related to cases in March, but now we wear masks and we travel at lower density levels. And so the evidence that we have from March may not be that relevant today.

Edward Glaeser:

Now there is an enormous amount of evidence that suggests that the public is terrified of public transportation. So this is a question asked around May, 80% of Massachusetts residents said they were not comfortable riding buses, subways and commuter trains. 57% said even when COVID-19 was treatable, they weren't going to be comfortable riding public transit again. And 25% said even if they had a vaccine, they weren't ready to go back to public transit. So this really suggests that our transit systems are facing an enormous hurdle. And New York is unthinkable as a metropolitan area, if its transit system does not serve as the backbone of mobility within the city.

Edward Glaeser:

This shows you globally, what's happened to transit usage. This comes from Google mobility data. So this is the change in the number of people going to public transit stations in a series of countries. So we have Brazil, the US, Mexico, Italy and Germany. The low line is Italy, which had the sharpest reduction because of course, it had the most terrible early flexion of the cases, but really, almost everywhere you can see the massive reduction in transit attendance, and that hasn't disappeared yet. This is taking us through July and we still don't see this coming back. Of course, it's related to work declined, but work has come back more than public transit has and this again has the same countries, Italy above all, had the sharpest drop.

Edward Glaeser:

It's worthwhile noting that even though we may think that the US is, or Germany is somehow rather wildly different from Mexico or Brazil or the US in terms of its experience, the drop in mobility is not that different. What differs between Germany and the US is not that Americans went out and Germans didn't. Because in both groups, you saw comparable reductions in mobility and comparable changes in remote working.

Edward Glaeser:

Now when you look at the most basic data that you could look at for the relationship between COVID-19 and public transportation, you get a contradictory answer. So if you look across counties in the US, there is a very strong correlation between the share of the population that used public transit to get to work before 2020 and the level of cases per capita and it's stronger than the density level across counties. So public transportation is strongly predictive. And it's not just about New York City. There's actually drops in New York City and includes areas outside the tri state area.

Edward Glaeser:

But if in turn, you look across New York City's zip codes, you see basically no relationship between public transit use prior to 2020 and the spread of COVID-19. So what's going on on this? Well, luckily, we can use some of this mobility data to try and pierce this out. I'm sorry, the [legends 00:14:22] are a little hard to read. That's a function, I guess, of the live stream technology. What you can see on your left there are cases per capita. What you can see on the right there, is the share of the population using public transit. So for those of you who know the five boroughs, and I'm pretty sure that everyone on this call currently does. You can see that within Manhattan, it's true that there's less public transit use in the downtown areas and slightly lower cases there. But in the Bronx, it's reversed. In the Bronx notice you have more cases in the outer areas, and you have less public transportation, and the same thing is true in Long Island. The inner areas have the fewest cases and have the most public transit pre-1919. Next please.

Edward Glaeser:

So what's going on? It's about behavioral response. And that's one of the key things that we always have to ask, how are people going to react to this? How is the public policy, or how's the health structure going to change? How people will move around, or how people change their buying behavior. So this is showing again, the same graph of public transit that you saw on the right in the previous slide now you see it on the left. And here I'm connecting that, the other graph shows the change in mobility. And what you're seeing here is that the southern part of Manhattan and the inner areas of Brooklyn and Queens had very, very sharp reductions in mobility that were much more extreme than in the outlying areas.

Edward Glaeser:

And so what you saw is that, no go back. So what you saw as the places that had the sharpest levels of public transit beforehand also had the largest reductions in trips. Now that reflects two things, one of which is people were scared of public transit. So they stopped moving around, whereas people who drove did not stop moving around. And secondly, it reflects higher income. A greater ability to readjust your life around telecommuting. And this indeed shows the very strong relationship between mobility and COVID cases. So this shows the relationship between the share of people who were taking trips or the reduction in trips, and the cases per capita across New York City zip codes.

Edward Glaeser:

Because we were worried, when we tried to estimate the linkage between moving around and COVID we turned to occupational data. And we looked at the relationship between COVID and the share of people working in essential occupations or the share of people working in occupations that were considered to be able to do teleworking before the spread of the disease. We used that in some senses at the experiment. And we found using the statistical tools that can be operated with that, that roughly a 10% reduction in trips in the months of March and April, roughly a 10% reduction in travel is associated with about a 20% reduction in COVID cases during that time period. Now that doesn't mean that people are getting sick from public transit. Okay? What it means is that the whole process of going out of your house and entering into the world, and that includes going to public transit, and then wherever you end up with after that, is being associated with very large spread of COVID during this time period.

Edward Glaeser:

Now again, that doesn't mean that post mask era that hasn't changed, but it certainly does suggest that moving around the density of New York during the particularly deadly months of March and April, were associated with the spread of disease. And again, it's about a 20% reduction in cases associated with a 10% reduction in trips.

Edward Glaeser:

Now we of course, don't just face a health crisis, we also face an economic crisis. You can see here this is just the jump to 14.7% in April in joblessness and unemployment, which we haven't seen since the Great Depression, a number like that. And if you think about the evolution of the American worker, in a sense, we saw a move of working in a way that made us maximally vulnerable to this pandemic. So if you think about the move from farm to factory to urban service workers, farmers operate at relatively low densities. And actually, I hate to admit this, but in fact, the black plague that struct Europe in the late 14th century was actually it made the farmers that survived richer. Okay? It actually wasn't associated with increased poverty but with the reverse, and that's because in a relatively simple subsistence agricultural economy, agricultural wealth is determined by the amount of land per farmer. And if the number of farmers decreased, the number of land per farmer actually goes up.

Edward Glaeser:

And so some of the flourish of the Renaissance has been associated with higher European incomes which are in turn a result of the plague. Now that doesn't in any sense mean to suggest the plague was absolutely god awful. But it does mean that historic plagues have not usually been associated with the economic dislocation we're seeing today. This is new, and it's because of the evolution of work. We moved in first to factories, and then of course, as automation came, as outsourcing jobs came, we replaced the workers in the factories with machines.

Edward Glaeser:

And so if you are a less skilled work, if you didn't have a degree from MIT, you found an employment safe haven in an urban service job with the ability to serve a latte with a smile was in some sense a safe haven. A place in which you could count on having your job, despite the fact that automation had replaced your factory job. Now the problem is that those jobs disappear when a smile is no longer something to look forward to, but a source of fear. And that's exactly what we've seen happen.

Edward Glaeser:

This just shows the evolution of work over the past 20 years, the blue line that starts on top is manufacturing jobs, which dropped from 17.5 million even as late as 2000, and down to 2020. After after then. After then it's down to 12.5 million in 2020. The yellow line, the blue line in the middle show the sectors of the economy that are most vulnerable to the pandemic, whether economically or through the disease. So that's leisure and hospitality. That's the yellow line that's rising, that's light blue. That's the line in the middle. And together they represent 32 million American jobs, one fifth of the employed labor force before the pandemic struck. So really an extraordinarily large slice of our economy, which just disappears when there is no demand for these face-to-face services.

Edward Glaeser:

The top two lines are somewhat less vulnerable economically. The very top line is education and health services. So these are jobs that by and large are secure because the government is paying for them. But if you're talking about health services, they're also quite vulnerable to the pandemic's health effects. The orange line is professional business services. So this is the group that may be troubled slightly, but currently, they're Zooming their way to continue to employment, or doing some other form of telecommute, and so they're more likely to survive and then more likely to be able to find work and if the pandemic persists. Next.

Edward Glaeser:

Now, before this pandemic struck, I was terrified by this graph, by the rise of non employment among prime aged males. The fact that 54 years ago when I was born, roughly one in 20 prime aged males were jobless. For most of the past decade, more than 15% of prime aged males have been jobless. And let's not forget, being unemployed is along almost every dimension being non employed if you're a man, is worse than just being a lower wage worker. It's worse in terms of human misery, it's worse in terms of suicide, it's worse in terms of divorce, it's worse in terms of drug abuse. Because in fact, your sense of satisfaction as a person comes only slightly from material things, it comes at least as much from your social connection, and your sense of purpose on this planet. And for the people who didn't have a job, who have gone through this long-term joblessness, those things are missing.

Edward Glaeser:

Now before the pandemic struck, I looked at this map and I said, "Well, yes, I can imagine what you can do if you don't have an MIT degree in New York or Boston or San Francisco in 2035. There will be some job for you in the great dynamic urban service sector, at least if the local governments don't regulate out all local service entrepreneurship." But what are they going to do in West Virginia? Well, the terrifying thing is if all these urban service jobs disappear because of fear of human contact, then in some sense, all of America becomes like West Virginia, the service jobs disappear everywhere. And you have tens of millions of American workers who are trying to find something else to do.

Edward Glaeser:

Now together with Mike Lucas, Zoe Cullen, Chris Stanton, Alex Bartik and [inaudible 00:23:11], we've engaged in repeated surveys of small businesses, where we've tried to figure out how they were doing, what their expectations were for the future. And the picture that we were getting as of April 1st, 2020, was just extraordinarily bleak. So overall, out of our thousands of small businesses, 45% of them were closed as of April one, and that's a tough number, but 37% of them expected to be closed in December. So they had very little expectation that they were going to turn it around in this year. And of course, there was huge variation within these different sectors.

Edward Glaeser:

So some of those sectors like for example banking and finance or professional services, only 21% of them were currently closed. A slightly higher percent of them expected to be closed in December because they thought that the economic dislocation would shut them down. Whereas other sectors like for example, retailers 53%, arts and entertainment 70%. Restaurants, bars, catering 56%, the carnage was just extraordinary. And of course, many of them also expect, very large fractions expect also to be closed in December. And of course, remember our small businesses have a very small cash lifeline. And so in the absence of the paycheck protection program, it was hard to imagine how many of them were going to survive partially because of the difficulties of having anyone around and partially because of the lack of demand.

Edward Glaeser:

So we asked them early on, what did they think was going to happen to their demand as of September. We haven't yet followed this up, but the median across this group was somewhere about 60%, meaning they felt that 40% of their demand would be gone through the fall. Again, there was some gap, arts entertainment, they thought that 45% would drop, finance insurance, only felt about 30%. But this plague has been not just a direct hit on the difficulty of doing business, but also it has scared away customers. And that doesn't necessarily change when you change lockdown policies. While there was a burst in some form of retail activity with the early reopenings in the Sun Belt states, the somewhat painful health consequences of that has led to prolonged doldrums in terms of our economic activity. So this is really an economic crisis, one that particularly flicks urban service jobs, and it's not just a health crisis.

Edward Glaeser:

Now PPP is a fascinating thing. I used to think that $650 billion was a lot of money. But Congress was able to come to almost unanimity about handing out this money with almost no strings attached in an incredibly rapid time period. In some sense, I think I would have voted for it too, the need to get cash out the door was so high. But I think the nature of the first round operations are such that to remind you of just how many things can go wrong when the government tries to do something like this so quickly.

Edward Glaeser:

So the first round PPP loans, so this was $300 billion, it went overwhelmingly to firms that were less impacted, not more impacted by COVID-19. So far from getting to the most needy firms, it was getting to the least needy firms. And of course, who did the banks give the money to? They gave the money to the firms that had the most outstanding debt to them. Okay? So this I guess, unsurprising. Of course, who would you want to protect? But they protected the firms that actually were the ones who, if the firms failed, they would have the most to lose. Now eventually, the PPP program was so large that everyone who wanted their PPP loan got them. But it's not going to happen again. And it probably should never happen again that we have a bailout that's this extreme.

Edward Glaeser:

So let me just end by asking the larger question, which is let's say we manage to turn this thing around and look post pandemic. Will the move to Zooming be permanent? Will this lead to a permanent reorientation? It is certainly extraordinary how big the numbers are. These come from a Bureau of Labor statistics survey as of May 2020. And somewhat amazingly, you have 50 million Americans who are, this just shows over 25. But overall, they're about 50 million Americans who are teleworking because of the pandemic, and 50 million Americans who are unable to work during the pandemic. So you have about equal numbers that was shut out of employment entirely. The education distribution is exactly the inverse. So the workers who were most likely to lose their jobs, were the less educated American workers. The workers who were most likely to be teleworking were the most educated workers.

Edward Glaeser:

Now in some sense, teleworking is just the latest evolution of the dance between centripetal and centrifugal technologies, technologies that bring us to cities and technologies that push us away from cities. Much of the 20th century was, as Reihan suggested, a centrifugal century in which technologies like cars and the highways and radios and televisions, spelt the death of distance and made it possible for people to move away from cities into suburbs and made it possible for industries to depart from our cities. Like the garment industry, of course, which was New York's largest industry from 1860 to the 1960s. And yet hundreds of thousands of jobs were lost in a few short years because of improvements in transportation technology that meant that access to New York's port, access to New York's rail yards, were just no longer an advantage. And so the jobs moved to places where the labor was cheaper, first to the American Sun Belt, and then across oceans entirely.

Edward Glaeser:

And so by analogy, the big thinkers of the 1970s like Alvin Toffler, the author of Future Shock, then argued in the third wave that the next evolution, the next impact of these information technologies would be to cause the knowledge workers to disperse from urban areas and would cause us all to go to electronic cottages where we would just dial it in. Now I started thinking about this topic in the late 1980s. And it seemed likely to me then, I think I wrote my first paper on this for City Journal in 1994, that this wasn't going to happen. That in fact, new technologies would indeed enable some jobs to be done remotely, but they would not eradicate the many advantages of being face-to-face and we see this both in finance.

Edward Glaeser:

This is an image of Bloomberg Wallace City Hall, which is based on the Wallace Office at Bloomberg LLP, which is based on the Salomon Brothers trading floor. There's no industry in which knowledge is more intense and valuable than in finance. And I am not surprised that JPMorgan Chase has already announced that it wants its traders back on the floor in person, because the ability to make or lose a fortune by having the most up-to-date information is nowhere greater than in finance. And of course, it is remarkable that Google which of all the companies in the world should be able to work remotely didn't in any sense encourage its workers to go remote, it encouraged them all to come to the Googleplex, it bought a million and a half square feet in downtown Manhattan. It invested and bought, in face-to-face contact. In part, because the more complicated the world is, the easier it is for our ideas to get lost in translation.

Edward Glaeser:

All of us who are in the business of trying to induce young people to care about ideas, to care about knowledge, recognize that it's one thing to give people a dry script over the camera, it's another thing to inspire, it's another thing to give emotional nuance, it's another thing to convince them to give their life whether or not for a cause or a company.

Edward Glaeser:

Now with our surveys, both the National Association of Business Economists that's NABE and Alignable, we asked them what share of the workers who have switched to working, and remember 50 million Americans workers have switched. What share of workers that switched will stay switched? 40% of the Alignable firm said that 40% of their workers that have switched will stay switched. The NABE firm, which are somewhat bigger, 36% of these firms say that 40% or more of their workers who have switched will stay switched. So those are big numbers. If 40% say that 40% that means that you are at 16%, so that's 16% of 50 million or eight million workers. So that's a big shift.

Edward Glaeser:

And I think it's something that cities will have to face. But it's not something that is likely to be insurmountable, as long as the shock doesn't persist for a long period. And I think when we think about the future, I want to paint two scenarios. One of which is scenario two, and I want to say that first. Okay? Which is let's say this shock doesn't end in 2021. Let's say it doesn't even end in 2022. We're still battling COVID in 2023, or 2024. Let's say we get a new pandemic in 2028 to 2029. Then in the wealthy world, it's hard to be all that optimistic. That will be a very difficult world for us to negotiate with. But the good news for cities, I guess, is that that world would be catastrophic for the 32 million American workers who are in leisure, hospitality and retail trade, it will be catastrophic for the US economy on a larger scale. And so I cannot believe that our public leaders will not do what needs to be done to make sure that this dark possibility of number two will not occur.

Edward Glaeser:

If two does occur, by the way, urbanization will still continue in the poor world because it's worthwhile stressing that the cholera epidemics did not stop urbanization at all in 19th century America, despite the fact they were far deadlier than COVID precisely because poor people will come to cities even when contagious disease ranges. Now let's say COVID ends in 2021 or maybe early 2022. Let's say we have an effective vaccine by then. Still, mid 2021 we haven't gotten rid of everything. There are still real shocks, and the city will remain under siege. Okay? That does not mean massive vacancies, at least not in the medium run. Prices will move before quantities do. Currently pre-COVID real estate in New York was incredibly expensive. Before a $7 million townhouse gets empty somebody's going to cut its price. Before [Liva House 00:33:25] doesn't have any tenants living in it, you're going to cut commercial rents. So prices are going to go down if this continues before massive vacancies occur.

Edward Glaeser:

Commercial space seems more likely to be vulnerable than residential space. Because what we've seen is that there's a little bit more flexibility of people working remotely than people wanting to be in urban spaces and to be face-to-face. This desire, particularly of younger people to live their life in the real world as opposed to living it virtually. And of course, we saw this precisely when we did have the opening up in the Sun Belt. And we see this every time a bunch of 17 year olds break whatever quarantine they're under and have a party for 150 million people. Every American under the age of 25 is dying to get back into a world in which they actually interact with other humans. And that provides an enormous amount of strength and vitality for the urban future.

Edward Glaeser:

That suggests that the cities will shift from being older to being younger, that suggests they'll become more affordable. Some work will continue at home, some businesses will shift from being older to younger, older established businesses will find it easier to move their work remotely. Younger, scrappier businesses will then come in and take the space that has become cheaper.

Edward Glaeser:

Our roads may get, it's fuel less crowded now. They may get worse if we don't figure out how to solve this public transportation problem. So this will make the case for congestion pricing stronger, not weaker. And I think international travel is likely to be depressed for quite some time.

Edward Glaeser:

Now what can we do to help the cities under siege? So by far the most important thing is to fix the disease first. That is the critical issue. Unfortunately, that doesn't require local or even state action that requires a federal government that makes sure that we're investing what we need to and make sure that we invest we do to make sure this never happens again.

Edward Glaeser:

But even if the disease is fixed, a great deal of economic damage has been done, and it will take years to work through those failures. One thing that is vital, is faster business permitting. Small businesses are shutting down. This will not be a catastrophe if new businesses are unable to open, but that requires a business permitting system that finally is able to adapt and to allow new entrepreneurship to flower. City and city transit system finances are a wreck. And this will require an adaptation that doesn't just think you can tax the rich and solve all your problem that way.

Edward Glaeser:

And finally, the city is vulnerable again. The city is under siege. I don't think that the short run will look as bad as the 1970s. But it will be tough. And that will make the case for the Manhattan Institute and for better urban management absolutely overwhelming. So a couple of just final points on this. So the mayor's office, just a few days ago, Mayor de Blasio announced the city will issue a week of furloughs citing the fact the city is facing an enormous budget challenge, a $9 billion toll on city revenue and has already cut $7 billion from the budget between February and the fiscal year 2021. This comes from an official news release.

Edward Glaeser:

Now the dream of course is that Washington will pay for everything. But that's debatable policy. And the reality will be a push locally to tax the rich. So for example, we've already seen New York Senate bill, S7338, which extends the top state income tax rate to 11.82% for taxpayers, whose New York taxable income is over 100 million dollars and establishes new brackets below such top rates and directs the revenue from such rate increases to foundation. Okay? But the rich and their money are mobile as they were mobile in the 1970s. And they're particularly mobile when they are afraid of pandemic. Running a local welfare state certainly didn't work during the 1970s and it's certainly not going to work today when we think that Zooming is easier. And of course, large scale protests don't make the city any more appealing to them either.

Edward Glaeser:

Even before COVID-19 cities were deeply troubled. In some sense, this reflects an inability of urban governments to keep pace with urban change. That's an ongoing feature of city governments in the 19th century, who would have said the same thing, that sewers were 40 years later than they were needed. And yet, one of the tragedies that's happened over the last 50 years is our governments have been captured by insiders, by older homeowners rather than new renters, by unionized city workers rather than kids. And so this capture of the city government by insiders has meant that it's been increasingly tough for the city to adjust to create new programs.

Edward Glaeser:

And I'm just going to highlight a couple of the issues, too few building permits led to prices that were too high and battles over the space that did exist, which is gentrification. Urban public schools did too little to empower mobility. This comes from the work of, it's my figure, but it comes from the work of Raj Chetty and his co-authors looking at upward mobility. And here you see the tremendous gap in upward mobility right at the edge of the city border. So right at the edge of the City School District, you have a jump up in upward mobility and a jump down in the adult incarceration rate for kids growing up there. We've seen of course, the protests over policing which have spilled over into becoming a national event.

Edward Glaeser:

And I think the ultimate goal has got to be cities are great if there are cities for outsiders, if there are places where any human being can come and believe the words of Emma Lazarus on the Statue of Liberty. And city governments need to make that happen. And that requires a city that is both properly run financially, but also a city that makes sure that it is open. It's open to build new houses, and it's open to build new businesses. In some sense it's the single most important job for local government, that local government can do is to streamline permitting so that the businesses that went out of business can be replaced quickly.

Edward Glaeser:

Don't try to save every old business by giving them an unlimited lifeline of finances, make it possible for new businesses to open and make sure that you have enough permits so that businesses can adapt by providing food online by providing food on the sidewalks. And yet, there will be a tremendous tendency because we have just experienced the single most regulated moment in American history, we'll be able to pivot back towards freedom, both social and economic, that then empowers people to make the city that's better.

Edward Glaeser:

The weak responses of many public schools to the pandemic should enter into the arsenal of those who wants to argue in favor of more competition in schools. We protect adults and indeed in some sense, all of social distancing has been about protecting people who look like me and who are older. But in many cases, it's the children, it's the outsiders who pay that cost. That should hopefully lead us to be focused on how it is that we can make our cities and our countries more likely to be places of empowerment so that new people can come and do the creative things that are needed to reinvent our countries and our cities.

Edward Glaeser:

So let me end there. But finally, I'll just end with a note of optimism with which Reihan started. Cities are unquestionably under siege. MI is badly needed. We need to make sure we are focused on a city that is well governed financially and that has a process of regulation that empowers new ideas rather than limits them. But the ability of human beings to work miracles when we are connected face-to-face is not over. It is not a thing of the past. Cities will still be doing amazing things in five years, because we are a social species and our greatest achievements and our greatest pleasures come from being connected with one another in the same room. And that is why, although it is a great thrill for me to be here with you virtually, is why, in some sense, I am so sad not to be with you in-person. So let me end here and open it up for questions. Reihan.

Reihan Salam:

Thank you very much, Professor Glaeser. And everyone, we encourage you to submit questions. We have a number of questions for you already. I just want to start off by asking about tax migration. Recently, the New Jersey Legislature passed new legislation that will sharply increase tax rates on high income households. And one argument is that actually, if you're looking at the long run data, it does seem as though you don't see very much tax migration in response to the so called millionaire's taxes. The argument has been that for very high income households, this is oftentimes a rare event. You realize a capital gain and your networks, your businesses, your family ties are very much tied to a particular area. Yet there's now a question mark around that. There's now a belief that because of COVID, because people have dislocated themselves, perhaps that older data on tax migration might no longer apply. Do you have any thoughts on this? Do you believe that the landscape has changed in a meaningful way?

Edward Glaeser:

So I was never that sanguine that you could get away with raising large taxes and not having migration response. So certainly, one of the things that led places like New Jersey to raise taxes historically was that they felt confident enough that they could get away with it. So you only see these taxes going up in places that felt that they had captured. And indeed, when you look at the migration of a state, so if you look at where people are filing are dying, from the work of Joel Slemrod, you see a fairly rapid response to different state taxes in terms of where people locate.

Edward Glaeser:

Now I think the gist of your question is exactly right. That in a world in which we think we can Zoom, in a world in which we've gone through this tremendous dislocation, this would feel like the most dangerous time in the world, to try and go after the mobile rich who have been Zooming from home in Connecticut or some other state. And if you're going to engage in taxation, tax the things that don't move rather than taxing the things that do move. And the rich are certainly something that moves.

Reihan Salam:

A second question on migration writ large. One of our colleagues, Jacob Vigdor has a forthcoming brief looking at immigration as a driver of urban revitalization, certainly in New York City, but also in major US cities all over. Now there are two dimensions to this, two things that have changed. The first is that federal policy has become more hostile to immigration, including skilled immigration in recent years. Another is that many of the traditional source countries for immigrants, skilled or otherwise, are aging very rapidly. So a question for you, in a world in which you have this rapid aging in source countries, how does a city like New York, like other major cities that have long been dependent on foreign born newcomers, how do you adapt? How do you continue to grow and flourish when you can't necessarily take inward migration for granted?

Edward Glaeser:

Well, I think that's part of the sense that we are a city that is competing with every city in the world. And the smaller the flow of H-1B visas, the more difficult this is. So I do hope that whatever we think is going to happen to the overall stock of immigrants that for the sake of the city that we recognize that human capital is the lifeblood on which our cities and our country last. And one of the easiest ways to get great talent is to import it. And it's absolutely crucial that we recognize that, and at the same time that we make sure that the city has amenities and has affordability that then makes it attractive.

Edward Glaeser:

If I were having this conversation in Singapore or in Santiago de Chile, every time we have this conversation, it is about how is it that we attract skilled talent? Now America, because of a combination of it's freedom, because of its amenities, because of its rule of law, America has attracted more than its share of skilled immigrants throughout the world. And that has been a tremendous source of strength for our country. We need to recognize that that fight has become even more crucial. And we need to focus on making sure that we are as welcoming as we can be, both in terms of our policies and in terms of making sure that our cities are places that immigrants can come and build a career that is spectacular.

Reihan Salam:

Question from Alan, could you address the effects of the terrible anti-business policies on the city, including rent stabilization, minimum wage, high taxes, high regulation, etc, which are bad enough in regular times, but what about now?

Edward Glaeser:

Well, I think that Alan knows the answer to that question, as suggested by the tone of his answer. New York in some sense, has had this lurch towards the left over the past six years. And in some sense, the city thought it could get away with it. Just as it thought that it could get away with it in the '60s, where it felt like the world of possibilities under Mayor Lindsay was unlimited, which was also the view under Mayor de Blasio, boy, why not have a larger minimum wage, that won't do anything? Why not impose rent stabilization? That won't do any harm to and create vacant retail shop windows up and down Lexington Avenue. And yet the city is vulnerable.

Edward Glaeser:

It has tremendous strengths, but shocks come along, and there's also this budgeting thing that every mayor or many mayors think that they should basically budget to the maximum amount they could possibly get away with under the most optimistic scenario of what's going to happen for the city and its future. And yet, bad things happen. Pandemics happen, protests happen. And when you're faced with these shocks, the cost of trying to run your own little welfare state, the cost of trying to limit creativity, the cost of trying to penalize your entrepreneurs instead of empowering them become even more extreme. And I hope we will not need to go through the entire '70s to get there. But the hope is that New Yorkers will realize that they just don't have a free hand on this. You actually have to do what Singapore thinks it needs to do every day, which is to run a well-managed city that actually empowers its business creators, rather than thinking that you have a free lunch to tax everyone who earns $1.

Reihan Salam:

A question from Molly, after the pandemic, if more people work remotely one to three days a week, do you think we'll see more moves to suburbs? And if so, what will be the impact of that on suburban development?

Edward Glaeser:

Well, it's interesting. I think certain demographics will. But the starting demand for New York City real estate and real estate in many of our most successful cities including San Francisco and Boston is such that you'll just see a flip. So people who are about to have kids, people who are perhaps were thinking of empty nesting and coming back, may decide to stay in suburbs now, that's certainly possible. But there are hordes of younger Americans who are desperate to move into a New York city apartment and were priced out beforehand. I was just speaking yesterday to two of my graduate students who are renting in Back Bay because the price was cut by a third. So this is what happens. Prices get cut, younger people move in, the city becomes more dynamic, because for lots of people in New York, the city isn't just about getting a short commute, it's about the joys that come from being in the city. And that's not going to go away and they are hungrier than they've ever been to be in the maelstrom of social activity that is the city.

Edward Glaeser:

So yes. Will there be a refurbishment? Sure. Will some subs perhaps do well over this? I think probably not the dollar ones. But particularly nice ones maybe. I think also it's likely to be a boost for mid-sized cities that are attractive to high-end tech workers who will add to telecommute. So the veils that boulders, where you can easily imagine you have been offered some deal, you're going to be able to continue remote working at Google, but you don't actually want to move to a suburb of LA, you're not looking at Orange County, what you think is going to the Slope sounds great. And so you'll get a cluster of talent there, and it'll make a modest difference to their real estate shape, but it won't be an earth shattering thing. And in some sense, it'll continue the push up of the general move towards high amenity, attractive, consumer cities that's been going on over the last 30 years.

Reihan Salam:

One challenge is that those high amenity communities are oftentimes precisely those that impose the most stringent land use regulations. So I wonder what the implication of that might be, just if you won't actually wind up seeing an increase in population, but rather that that increase in demand will be captured in land values.

Edward Glaeser:

Okay. So if that's the case, then I think what we expect to see is the battles over gentrification will move from San Francisco to Vail. I think that's what you'll see, is a lot of empowered insiders in Vail complaining about the tech people who have moved there from San Francisco.

Reihan Salam:

Curtis-

Edward Glaeser:

And maybe you'll see a little bit, given how much land there is in there, maybe you'll see a little bit more reform in those areas but certainly there will be battles.

Reihan Salam:

Curtis asks, what are your thoughts on the potential of charter cities to bring about a more nimble, flexible, less regulated urban governance, especially in the developing world?

Edward Glaeser:

So I've often loved the hope of the charter city idea that my very old friend and often teacher, Paul Romer, has pushed forward on. Certainly the idea has a lot of merit. In some sense it's based on the idea of Hong Kong, an institution that had its own political institutions, and was able to thrive with rule of law and economic freedom. But it's not so clear that governments are willing to commit to setting up these charter cities. And it's not so clear, even if they did set them up that they commit to not robbing the golden goose once it started laying its eggs. So both of those things are major problems. And I think charter cities still have to prove that they actually can work, but I'm certainly rooting for them.

Reihan Salam:

A question from Mike, with another federal aid package likely coming soon, and by the way, we can debate that. And perhaps more after that, what would a pro-urbanist federal aid package look like? What would an anti-urbanist package look like? And finally, what would no state or local aid from the federal government need for big cities?

Edward Glaeser:

I think ultimately, there will be enormous short run dislocations from not getting a federal aid package. But my own view was that the headline, Ford to City: Drop Dead, was actually helpful, not harmful in the long run. That actually, if Ford had actually given New York an unconditional bailout, that it would have not have led to any of the reforms that followed and were pushed on the city by Felix Rohatyn and the Municipal Assistance Corporation. That bailout was done with state support and it created the impetus for local reform.

Edward Glaeser:

So I am of course always rooting for more money for New York, but if it does come from the feds, I really hope they manage to make it conditional and effectively conditional. So conditional upon effective school reform, conditional upon effective land use reform, and to make sure that it continues to nudge the city towards better management and doesn't just give the city a blank check which enables every bad practice to continue and expand. So I think that's what a pro city bailout package would look like.

Edward Glaeser:

I have no problem with spending more during a pandemic, you're going to have to spend more during the pandemic. But the hope is that that doesn't become an excuse for perpetual spending and the critical elements when we respond to the pandemic by making reforms that we probably should have done ex ante. I will say by far the most important thing that the federal government needs to do is they need to handle the health issue. This is something which, unlike the 19th century where they health issue for cholera could be handled by local investment in sewers done with a great deal of state aid, but done at least at the state local level. I believe that the protection against the super viruses in the future requires federal action both because they involve international flows of people and because things like preemptive investment in vaccines ultimately require federal spending rather than local spending.

Reihan Salam:

A question from Johnny, do you anticipate a rash of municipal bankruptcies around the country? And a quick follow up from me, do you think that might in fact be a healthy development? In that it will allow city governments to free themselves of some of their accumulated obligations?

Edward Glaeser:

Entirely possible. I wouldn't want to be on the hook for a number. I would be surprised if there wasn't more than zero. And it's not an unhealthy thing. Many cities have managed to put themselves on an unsustainable path. The three most mind numbing words in the English language are unfunded pension liability, but it remains a big deal. Many cities essentially racked up these pension liabilities when times were fat and like someone facing retirement who decided this is the time to spend just while I'm earning my last paychecks instead of saving. That's what many of the cities of America did rather than saving their money, they racked up these pension liabilities.

Edward Glaeser:

And so some form of rebalancing and rethinking about their obligations may be absolutely vital. So I do not view bankruptcy as something to be feared. But again, I certainly hope that cities can write their finances and write their regulatory situation without such painful events.

Reihan Salam:

You've often invoked Mancur Olson and the threat of sclerosis in many of our great cities. So this question is very much in that vein from Michael, is permitting reform enough? Or are urban problems deeper today? For instance do we need a fundamental rethink of local democracy?

Edward Glaeser:

So I'm not sure exactly how to get a fundamental rethink of local democracy. But I think something that makes sure that we recognize that we don't just empower the most vocal, empower the residents with the longest tenure, that we recognize that a city like New York has a responsibility not just to its current residents, but to its potential future residents and indeed to generations to come. And that I don't know exactly how to change democratic institutions to make that happen. I do know what policies look like they're making that happen. So better business permitting, better housing permitting, a school system that takes kids first and it never says no to a charter school and never says no to a startup because they want to protect the existing public sector workers. That recognizes that the cities have no more important job and a have no larger failing over the last 50 years than educating kids. And that is absolutely crucial. And it feels like one of the great terrors that I have of the COVID-19 pandemic, is that we are once again leaving our kids behind.

Reihan Salam:

Question from Kyle, how has the pandemic amplified existing political risks? Broad question.

Edward Glaeser:

It's a broad question. I think some of this actually is particularly clear in the developing world, where in the early stages the pandemic and pandemic lockdowns were every strongman's best friend, because they could use the pandemic to essentially shut down their opponents. But on the other hand, at the same time, you see lots of potential for unrest that comes out of that. So I don't actually have a clear crystal ball on what will happen in Sub Saharan Africa or Latin America politically as a result of this. In the countries that I am perhaps closest to, again, I worry about the possibility of people declaring that building back better means a radical lurch to the left, means a radical increase in redistribution. And given that we are in this period of rapid flux, it's important that we make the case that we need building back better means policies that are sensible, policies that are pro entrepreneurship, policies that are pro human capital development. Not necessarily policies that just look like they're going to enrich the insiders at the expense of generations to come.

Reihan Salam:

One last question. You talk about a city in which young people might do the work of revitalizing the city as older, more affluent households head for the exits, a Berlinization of New York City, let's say. Now let's say that's true, and it seems plausible. For example, now a majority of 18 to 29 year olds are now living with their parents and presumably, they would be delighted to take advantage of these lower rents that your graduate students are taking advantage of in Back Bay. But what does that mean for a fiscal and social model of the city that's really rested on steeply progressive taxation, that's rested on the idea that very ultra affluent households will always find the city attractive? If New York City becomes more like a Berlin, what does that mean for government and what we can expect from government in the future?

Edward Glaeser:

Well, the good scenario of course, is that it means that government needs to become a lot leaner. It means the government can't view itself as being funded by this eternal piggyback, this eternal golden goose. And that younger people will actually start growing up politically and recognizing that they actually have to take responsibility for the city. And that means that they need to make sure that they manage to pay for what it is that they want.

Edward Glaeser:

I do think you're right, so I live with three teenage children whom I adore, but I do think my larger health risk from COVID has been that one of them will kill me, rather than that I will actually die of the disease. And they are certainly desperate to get out. And I think that is very likely to come. But to the extent to which they get more empowered in the cities, I think that with that power will come a greater sense of responsibility. And I think the death knell for socialism among the young will come when you have a 25 year old who's actually in charge of running something, socialism starts looking pretty bad.

Reihan Salam:

Ed, thank you very much for your remarks. Thanks to all of you in the audience for joining us. It was a great honor to have you and let's please continue the conversation soon.

Edward Glaeser:

Anytime. It's always a joy for me to be part of the Manhattan Institute and this I really view as being a critical part of my life that I've learned from and I've been really, really thrilled to be part of for many, many years.

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