Tag: the economist

• Building new cities

  On this blog, we often talk about city building in the context of doing things to help improve a city — whether that be a development project, a new public art mural, or an interesting local business. These interventions help to build a city. But even more specifically, the term has, for many, come to mean building up a city in a positive way.

  But there is another way to think about city building. You can think of it in terms of building actual new cities. We’ve spoken about some of these before, namely this one in California and this odd one in Saudi Arabia. But apparently it is becoming more common. According to The Economist, the world is now building more new cities than it has in the last 80 or so years:

  Egypt’s “New Administrative Capital” is part of a rush of city-building. Firms and governments are planning more settlements than at any time in the post-war period, with many already under construction. Ninety-one cities have been announced in the past decade, with 15 in the past year alone. In addition to its new capital in the north, Egypt is building five other cities, with plans for dozens more. India is considering eight urban hubs. Outside Baghdad, Iraq, workers have just broken ground on the first of five settlements.

  In some cases, it is being done as a solution to urban congestion. If this city is too expensive and unaffordable, just create a new one. This appears to be part of the idea with the above city outside of San Francisco. Of course, new cities can also be created for ideological reasons, or for political purposes, which was the case with Brazil’s capital city, Brasilia.

  Here, the idea was to move the federal capital away from the country’s populated southeast region to a more geographically neutral location in the middle of the country. It also turns out that seeding a new city with government institutions is a good way to get one of these started. Existing cities do, after all, benefit from network effects.

  History points to characteristics shared by successful projects. State institutions can help anchor cities, as Brasília (in Brazil) and Chandigarh (in India) showed in the 20th century. Although both have had problems, people in Brazil and India are voting with their feet. Brasília’s population is growing at 1.2% a year, more than double the national average. Chandigarh, a state capital, is now India’s fourth-richest region on a per-person basis.

  But putting money, ego, and ideology aside, when does it actually make sense to start a new city in lieu of just expanding (or addressing the problems in) the one(s) you’ve already got? Population size can’t be the only factor in determining whether a city is “full”, because Tokyo seems to do just fine as the largest metropolitan area in the world.

  If it hasn’t already been done, I think this would make for an interesting research project. Until then, there’s this (paywalled) Economist article.

  2024.05.30

• How the ski industry price discriminates

  Snowboarding in Europe, of course, sounds really fancy. And don’t get me wrong, it can be fancy if you want it to be. But the reality is that it’s also a cheaper option. And that’s because the price of a single day lift ticket at most resorts in America is now many multiples of what it costs in Europe. Think $250 vs. €50.

  North America has become the expensive destination.

  According to a recent Economist article titled “the economics of skiing in America,” resorts in Europe are often owned by local or national governments. This is not the case in America, and it’s why the lift tickets in Europe seem, by comparison, cheap. But this price differential is also the result of an evolving business model.

  Historically, owning a ski resort has never been a stable business in the US. And this makes sense. Most resorts make their money on lift ticket sales. However, sales are dependent on snowfall. If you get a lot of snow, then you make a lot of money. If the planet starts warming up and you don’t get a lot of snow, then you don’t make a lot of money. Vail has since changed this.

  What they have done is made it so punitive to buy a single day lift ticket in North America, that even if you’re an occasional skier, the only sensible thing to do is buy a subscription-like pass in the spring — well before the next season starts.

  This is what I have started doing and it gives you unlimited skiing for less than the price of a few days. It also gives Vail a source of revenue that isn’t so dependent snowfall. Season passes now make up about 61% of their lift-ticket revenue, according to The Economist. At the same time, it is a model that relies on being able to price discriminate against single-day, non-pass users:

  In basic economic theory, excessive market power reduces the efficiency of an industry. Firms reduce output so as to be able to charge more. There is, however, an exception: if a monopolistic firm can charge different prices to different customers, it need not reduce output to increase its profit. The skiing industry shows the truth of this. As the industry has consolidated, daily prices have soared, extracting more cash from price-insensitive skiers.

  But this isn’t the only way to do it. There’s also the whole real estate thing. Last year, Reed Hastings, cofounder of Netflix, became the majority owner of Powder Mountain. And here, they’re trying out a different business model:

  This December, Powder Mountain in Utah announced that it would be moving to a model where only local property-owners are allowed to ski certain chairlifts. The idea is to profit from real-estate sales, by offering private skiing without the crowds. “To stay independent and uncrowded, we needed to change,” says Reed Hastings, the firm’s boss.

  Even still, neither of these approaches is making snowboarding and skiing more accessible. Which is why it’s not uncommon to come across stickers and t-shirts at local ski shops that say, “Vail — ruining ski towns since 1966.” People are missing the old days when lift tickets were cheap and the lines on powder days weren’t so long.

  What skiing needs is in fact much of what the economy more generally needs: supply-side reform, and especially the construction of new housing and transport in the most popular spots. Though there are more skiers than ever, there are in fact fewer resorts than there were a few decades ago.

  This sounds familiar.

  All quotes are from The Economist.

  2024.04.06

• Does new housing supply need better economic incentives?

  “House-building in the rich world, relative to population, has fallen by 50% since 1964.” https://t.co/tXids2IeEh

  — Brandon Donnelly 🇨🇦 (@donnelly_b) September 10, 2021

  I watched a bit of the English leadership debate the other night. Eventually I got frustrated and went to bed, but I understand that housing affordability and overall affordability were important topics.

  What is clear, to anyone who cares to look, is that in most big cities we are not building enough new housing. According to the above Economist article (linked in the above tweet), the “rich world” has seen new housing production drop by about 50% (relative to population) since the 1960s.

  There are many reasons for this. But part of the problem is bureaucracy. Things move exceedingly slow. And another part of the problem is community opposition. Urban sprawl can be easier to swallow because there’s an out-of-sight-out-of-mind phenomenon at work. Stuff may be happening, but it’s not happening in my backyard.

  But now that so much of what we do is centered around intensifying existing neighborhoods, we are faced with a battle between the incumbents (existing residents) and the future residents of a community that don’t have nearly as much say — if any at all.

  What I like about the Economist article is their line of thinking for how to address this dynamic, which, at the end of the day, is rooted in what I will call expected selfishness.

  The approach is around aligning incentives. How could we better structure the delivery of new housing so that more stakeholders stand to directly benefit? Because as we have seen with laneway housing here in Toronto, homeowners will gladly build in their backyard when they stand to benefit directly.

  2021.09.10

• Nearly half of the world’s population now lives in a country with a fertility rate below replacement levels

  

  Prior to COVID, many projections had the world’s population plateauing sometime in the second half of the 21st century. This is expected to happen because about half of the world’s population now lives in a country where the fertility rate is less than the replacement rate of 2.1 children for every woman. See above chart from The Economist.

  At the start of the pandemic, there was talk of a possible COVID baby boom. People were/are stuck at home and so that would surely translate into more sex among partners. But that doesn’t appear to have been the case for many countries. According to The Economist, births fell by 15% in China last year. The same drop was recorded in the United States last year between February and November.

  Because of this trend, the above projections are now being adjusted and pulled forward, with some predicting that the world’s population could plateau as early as the 2050s. That’s only about 30 years from now, which means that quite a few of us could end up living in a world with a declining population. This is likely to have both positive and negative consequences.

  There are nearly 8 billion people in the world today with China and India being the countries with the greatest numbers. But it’s interesting to consider how recent this figure really is (compounding takes time to gain momentum).

  The world didn’t hit a billion people until the 19th century, and the second billion was only reached by the 1920s, which in the grand scheme of things, isn’t that long ago. Since then the global population has exploded with about 6 billion people being added in only the last 100 years. That’s pretty wild when you think about it.

  P.S. I recently discovered a site called outline.com. It allows you to read, highlight, and annotate articles that you find online. But it also seems to allow you to read articles behind paywalls. Perhaps some of you will find that useful.

  Chart: The Economist

  2021.04.25

• Trade patterns in global cuisine

  In 2017, the US restaurant industry generated about $560 billion in annual revenue. By comparison, the movie industry generates some $30 billion a year. Food, and eating out, is a big business.

  A recent paper by Joel Waldgogel of the University of Minnesota has tried to estimate the “implicit cuisine trade” associated with this industry. To do this, he used restaurant data from TripAdvisor and sales figures from Euromonitor.

  Domestic consumption of a foreign cuisine was considered an “import.” And foreign consumption of a domestic cuisine was considered an “export.” Here’s what he discovered (graph from the Economist):

  

  Italy is, by far, the biggest net “exporter.” And the US is the biggest net “importer.” If you exclude fast food, the US “deficit” balloons to approximately $140 billion.

  I guess everybody does really love Italian food. For the full paper, click here.

  2019.12.23

• The world’s biggest fishing port

  Here is an excerpt from a Guardian article that was published last year (by Tim Burrows) about Grimsby, England:

  In Grimsby’s 1930s heyday, fishermen used to head to Freeman Street as soon as they were off the trawler, straight to the Lincoln or the Corporation Arms to spend their bountiful earnings. A century previously, Grimsby had been a fairly sleepy fishing village, but by the 1890s it was on the way to becoming the biggest fishing port in the world. In the mid 20th-century, trawlers were bringing in 500 tonnes of fish a day.

  Today, Grimsby still has a thriving indoor market (paid for by the EU and the Enrolled Freemen of Grimsby, an organisation that dates back to the 13th century), but the further north towards the docks you walk, the emptier and more dilapidated things get. A local businessman says sex workers wait around at night for lorries to take them to the deserted docks. “It’s a legacy of the old fishing days.”

  There is scant legacy to be found elsewhere. After a long decline, the fishing industry died in the mid 1980s, its owners selling their trawlers to companies in Aberdeen or Japan. Unlike Hull across the river, currently basking in its year as Capital of Culture, Grimsby is the Humber city that never was.

  More than 70% of people in Grimsby, England voted to leave the European Union in the 2016 “Brexit” referendum. It was one of the highest shares in the country. But with one of the highest unemployment rates in the country, that outcome is not all that surprising.

  Supposedly, at its peak, there were eight onshore jobs for every one at sea in Grimsby. And like all thriving cities, there were economies of agglomeration, which resulted in things like the largest ice factory in the world. The fishing fleets needed crushed ice — and lots of it.

  The Grimsby story is, of course, not a unique one. You just have to replace fishing with some other industry. Many cities have managed to diversify their economies either out of necessity or because they saw the writing on the wall. But for others it has been a real struggle.

  It’s one of those things that is perhaps simple, but far from easy.

  2019.11.22

• The anatomy of density

  Urban environments can be dense in many different ways. This is a topic that we have discussed on several occasions here on the blog. But this working paper by Solly Angel, Patrick Lamson-Hall, and Zeltia Gonzales Blanco — called The Anatomy of Density — is a more scientific way of looking at it. They have come up with six measurable factors that, when combined, define urban density.

  What this means is that cities achieve urban density through different kinds of built form. Hong Kong, for example, gets its density from height, even though only about 4% of its land area is occupied by residential buildings. Dhaka, on the other hand, does it through low building heights and high residential coverage. Homes occupy about 20% of the city’s area. Another dimension is crowding.

  But here’s something that may surprise you. Most cities are actually becoming less densely populated. And, despite our best efforts to encourage more sustainable forms of development, sprawl has continued to outpace densification in the vast majority of the urban agglomerations that were studied as part of this working paper. The wealthier we become, the more space we want to consume.

  Here’s a graph from The Economist that speaks to this trend:

  

  To download a copy of the working paper, click here.

  Image: The Economist

  2019.11.11

• The reversion of European cities

  

  This recent Economist article makes the argument that, despite the recent (and sometimes annoying) proliferation of electric scooters across Europe, we probably shouldn’t be that grouchy about them. And that’s, “because the rise of the electric scooter is part of a broader and welcome phenomenon: the gradual retreat of the car from the European city.” By way of one example, by next year, Paris will have grown its bike lane network by 50% in five years.

  The article ends with the point that, while this may seem like a “revolution,” it’s actually a “reversion.” European cities such as Paris and Antwerp (examples from the article) were both built before the advent of the car and were never really designed for it, although Haussmann’s wide avenues certainly helped. All of this gets back to a point I tried to make over the weekend with this post about driving and parking, and the relevance of urban form.

  Reversion is a lot easier than a revolution. And for most North American cities, a revolution is what’s needed if we are in fact serious about a post-car future.

  Photo by Z Klein on Unsplash

  2019.08.14

• Phoenix claws

  If you’ve ever watched a documentary on food, you’ve probably seen the terrible ways in which chickens are raised and farmed. If you have the means, free-range and organic is the way to go. But I appreciate that some – most according to this Economist article – must opt for whatever is cheaper.

  The Economist deals with the unfortunate side of the chicken industry, but it also talks about how chicken became the rich world’s most popular and widely traded meat. Since 1990, beef and pork consumption has remained roughly the same in OECD countries; whereas chicken consumption has increased by some 70%.

  Also interesting are the regional preferences when it comes to the parts of the chicken. Here is an excerpt from the article (and yes, I prefer white meat):

  Though Westerners prefer lean, white meat; many in Asia and Africa prefer dark meat, which includes legs and thighs. These preferences are reflected in local prices: in America breasts are 88% more expensive than legs; in Indonesia they are 12% cheaper. Differences in the price of chicken feet are even starker. The thought of eating talons is abhorrent to many Westerners, but they often feature in Cantonese recipes. China now imports 300,000 tonnes of “phoenix claws” every year.

  I reckon that a lot of this popularity has to do with chicken’s reputation as a healthy meat. That is certainly the primary motivation for me. Though I do get thrown off when I see the size of chickens on antibiotics. The Dutch have a word for this: plofkip. It translates to “exploded chicken.”

  I realize that this post has little to do with cities, other than the inference that Hong Kong is likely a major buyer of feet. But if you’re at all curious about the stuff you put inside your body – I clearly am – here’s the full article.

  2019.01.24

• Maple Valley? No.

  At this time of year, I am always amazed by the number of mass emails that I receive from unknown people and companies. They have my email address, clearly, and yet I only receive one email a year from them – a happy holidays email. I am not opposed to holiday cheer. I love Christmas. But if you’re looking to build any sort of meaningful rapport with an audience, my sense is that you ought to send more than one email a year.

  In other news, the Economist published an article this past week talking about how Toronto is attracting disaffected (Indian) tech workers from the US and, more particularly, Silicon Valley. It is largely a story of immigration and diversity. But at the end of it, the Economist also reports that some people are now calling Toronto, Maple Valley. Toronto immediately reacted to this moniker – negatively.

  Nobody refers to Toronto as Maple Valley. And these sorts of names are stupid. In the 1990s, the Flatiron District in Manhattan started being called Silicon Alley (at least by some). That name was also stupid. New York is New York. And Toronto is Toronto. If you’re going to assign a nickname, it should not be derivative. And in the case of Toronto, you probably also want to avoid kitschy Canadian stereotypes.

  2018.12.22