The Resurgent Consumer City by Fall 2021

 I really like Paul Krugman’s NY Times piece from today.   It focuses on his predictions about the short term future of cities.   Here is a quote from the Nobel Laureate. 

“So the best bet is that life and work in, say, 2023 will look a lot like life and work in 2019, but a bit less so. We may commute to the office less than we used to; there may well be a glut of urban office space.” 

In the early 2000s,  Ed Glaeser and I wrote two papers about the rise of suburban employment.  The papers are available here and here.

A majority of metro area people both live and work in the suburbs of the center city.  So, in the Boston metropolitan area; the City of Boston represents a small share of the land area, jobs and people in the local economy.

It is true that the city’s culture and history are often concentrated downtown but is that a sufficient draw to create a vibrant place?

Urban economists have emphasized that cities are places of production and consumption.   While I appreciate the point about the “knowledge economy” and face to face interaction, I have always been more interested in the city as a place of consumption and quality of life.

For years, I have argued that cities with great quality of life have the foundation to have a strong economy.  Great quality of life depends on “God Given” attributes of weather and natural beauty but even cold places can be green consumer cities if they are safe, clean and maximize the city’s natural synergies such as access to the water with the urban structure of the city (the transportation system and the housing stock).  

I recently released a co-authored  NBER working paper that argues that the real estate premium in our most productive cities declined in 2020 as some of us dispersed to the suburbs and other areas.  I believe that the real estate premium for high quality of life areas will only grow over time as Work from Home workers will bid up prices for real estate there and incumbent residents will enact housing supply regulations to limit new development.Paul Krugman’s quote suggests that he doesn’t see Working from Home as a major part of our economy going forward for educated people. I agree with him in the case of young people but I believe that middle aged people and older will want the flexibility.  Such footloose people will be much more responsive to shocks to local quality of life. Center cities that suffer a degradation in local quality of life will experience a larger “elasticity” in response to lost college graduates who move away.