Are Large Metropolitan Areas Still Viable? Oxford Handbooks Online Are Large Metropolitan Areas Still Viable? Edwin S. Mills The Oxford Handbook of Land Economics Edited by Joshua M. Duke and JunJie Wu Print Publication Date: Jul 2014 Subject: Economics and Finance, Environmental, Agricultural, and Natural Resources Economics, Urban, Rural, and Regional Economics Online Publication Date: Sep 2014 DOI: 10.1093/oxfordhb/9780199763740.013.003 Abstract and Keywords This chapter examines the functions of and prospects for large metropolitan areas (MAs) in the United States. It argues that the high cost of transporting people and goods is a necessary, but not sufficient condition for MAs. Economies of scale and scope and the technical ability to substitute structures for land provide cost advantages to firms located in MAs. The factors that limit the sizes of the largest MAs include the size and geography of the country, the limited demand for commodities and services produced in the MA, congestion and pollution, and social issues such as crime, homelessness, poverty, illegitimacy, racial tensions, and other forms of alienation that increase with MA size. Because of these limiting factors, the largest US MAs are expected to grow at slower rates than the US population in coming decades, whereas suburbs will continue to experience rapid growth. Keywords: comparative advantages, functions and prospects, growth and sizes, large metropolitan areas THIS chapter1 concerns the functions of and prospects for large metropolitan areas. In the United States, the federal government recently revised and expanded its metropolitan concepts2. In 2004, there were 375 generic metropolitan areas (MAs) that contained 80% of the US population. Since MAs consist of entire counties, they contain much rural land, perhaps 25–40% of total MA land areas. One result is that 2–5% of metropolitan residents are rural. Since only 2–3% of US workers are employed on farms, the vast majority of rural workers are engaged in the same work that urban residents do. In fact, a substantial number of US rural residents work in urban or metro areas, assisted by our superb interstate highway system that enables rural residents to commute long distances to urban jobs. Page 1 of 13 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). (c) Oxford University Press, 2015. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy). Subscriber: Pontificia Universidad Catolica del Peru (PUCP); date: 09 September 2017 Are Large Metropolitan Areas Still Viable? International comparisons of MAs are approximate. Nearly all governments define a metropolitan concept, but not in quite the same way. By any reasonable definition, Tokyo is the world’s largest metropolitan area, with about 25 million people, or 20% of the Japanese population. Mexico City may be the world’s second largest MA, although it is difficult to decide where the MA ends. In the United States, New York (18 million people), Los Angeles (13 million people), and Chicago (9 millions people) have for decades been ranked in that order as the three largest MAs. Most high-income countries are 60–85% urban. Middle-income countries are mostly 40– 60% urban. Low-income countries are mostly in the 20–40% range. Good cocktail party conversation can be made of the fact that two countries that are popularly thought (p. 75) of as agricultural are among the most highly urbanized countries in the world: Israel and New Zealand are 91% and 86% urban, respectively. Although most MAs in the world have been suburbanizing during the post–World War II period, the process has gone much further in the United States than in most countries. Beyond 1–5 miles from the city center, population and employment densities do not vary systematically with distance from US MA centers. The result is that US suburbs are extremely low density by comparison with those in almost any other country. More cocktail party conversation: one MA, Cheyenne, has a lower MA population density than the entire 48 contiguous states. Why do MAs exist? They exist because they perform functions that cannot be performed as well by any other form of spatial organization. In the United States, an acre of prime downtown land in a large MA might sell for upward of $50 million, whereas an acre of prime agricultural land 50 miles away might sell for $5,000–10,000, making downtown land 5,000–10,000 times as valuable as nearby farmland. In large European and Asian MAs, comparisons are equally dramatic. There is hardly any comparably dramatic social comparison. The comparison suggests that MA land is extremely productive. People pay so much more for downtown land only because it provides commensurate benefits. 1. Functions of Metropolitan Areas The literature on the functions of large MAs is confused and emotional, but the truth is prosaic. MAs provide no technology and no form of social or business organization that is not available elsewhere. The only characteristic that is unique to large MAs is proximity among tens of thousands of businesses and households within a few miles. Why is proximity so valuable that it may drive up the price of land that provides the best access by a factor of 5,000–10,000? The reason, of course, is that proximity economizes on transportation and communication costs. Transportation and communication are expensive. A downtown location is worth more than a suburban location to a highly paid professional who must meet frequently with other similar professionals. The travel times Page 2 of 13 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). (c) Oxford University Press, 2015. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy). Subscriber: Pontificia Universidad Catolica del Peru (PUCP); date: 09 September 2017 Are Large Metropolitan Areas Still Viable? to such meetings are much shorter downtown even if travel speeds are faster at suburban locations but travel distances are greater. Also, the cost of moving people is much greater than the costs of moving commodities, and, as people costs have risen relative to commodity costs, commodity production has almost completely moved away from central locations in large MAs. The high cost of transporting people and goods is a necessary but not sufficient condition for MAs. If all commodities and services could be produced as cheaply at small volume as in large volume, most transportation costs could be avoided if small businesses located very close to each other, to their customers and employees, and to their material suppliers. But it is uneconomical to produce cars, education, or almost anything else in facilities that supply only a few consumers. Economies of scale require that production (p. 76) be on a substantial scale if it is to be at low cost. Economies of scope make it advantageous to produce a variety of related commodities and/or services that are related in production and/or marketing in a single facility. It is thus economical to produce commodities and services in large volume and for consumers and producers to locate close to each other if transportation and communication among them are necessary. The final factor, which finishes the story and permits high-density MAs, is the technical ability to substitute structures for land where land is expensive. Offices and dwellings permit such substitution most easily. For given costs of land and construction, it is hardly more expensive per square foot of usable space to produce office or residential space in a 100-story building than in a 10-story building. Substitution of structures for land is much more difficult for manufacturing plants and warehouses and somewhat more difficult for retail establishments. An important reason is the high cost of moving commodities among floors. Vertical transportation of people is also expensive, and that requires a balancing of costs of horizontal and vertical transportation in choosing office and residential heights.3 This analysis applies to MAs of all sizes; indeed, to the smallest agricultural market town. Small towns exist because of scale and scope economies in processing agricultural products and in providing commodities and services to the townspeople and to the surrounding rural population. Nevertheless, Peoria is different from Chicago. The number and variety of commodities and services produced is much greater in large than in small MAs or in small towns. Most of the world’s large MAs are on navigable waterways that provide access to the oceans. The exceptions are a few national capitals, such as Brasilia, Delhi, Mexico City, Paris, Seoul, and Washington. They are large because they produce government services rather than commodities or services for export. Their locations were chosen for political, not economic, reasons. (Most such capitals are locations of centralized and intrusive governments.) These days, road and air transportation are at least as important as water and rail transportation. Of course, large MAs are well served by roads and airports, but that is both cause and effect. Roads and airports are built where large MAs are, but they also promote MA growth. Sorting out cause and effect is difficult. Page 3 of 13 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). (c) Oxford University Press, 2015. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy). Subscriber: Pontificia Universidad Catolica del Peru (PUCP); date: 09 September 2017 Are Large Metropolitan Areas Still Viable? In recent decades some large MAs, but not the largest, have become centers for scientific research, development, and innovation. Route 128 near Boston was an early postwar example. Silicon Valley near San Francisco; Research Triangle in North Carolina; Austin, Texas; and, more recently, Bangalore in India are other examples. Undoubtedly, proximity among such activities facilitates exchange of people and ideas. (See Jaffe, Trajtenberg, and Henderson in Henderson 2005.) All are on the fringe of large MAs and are close to one or more research universities. Page 4 of 13 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). (c) Oxford University Press, 2015. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy). Subscriber: Pontificia Universidad Catolica del Peru (PUCP); date: 09 September 2017 Are Large Metropolitan Areas Still Viable? 2. Growth and Sizes of Large Metropolitan Areas (p. 77) There is enormous stability in the relative population sizes of MAs within a country, although the MAs that occupy particular ranks change from time to time (see Gabaix in Henderson 2005). New York has been the country’s largest MA since the first census in 1790. The same MAs have occupied each of the top 5 size ranks since 1970. Over a longer period, Los Angeles has risen and Baltimore has fallen in rank. Throughout the post–World War II period, the largest MAs have grown relatively slowly. Of the 10 largest MAs in 2004, only Atlanta and Dallas were among the 10 fastest growing MAs from 2000 to 2004. Among the 10 fastest growing MAs from 2000 to 2004, all were in the Sunbelt except Sacramento. The fastest growing, Las Vegas, grew 3.4 times as fast as the average US MA. (That the largest MAs grow more slowly than smaller MAs does not mean that MA sizes are converging. Just because tall parents tend to have children who are shorter than their parents, and short parents tend to have children who are taller than their parents does not mean people are converging to a uniform height.) Five US MAs had annual growth rates in excess of 10% from 2000 to 2004. Such growth rates rival those of the most rapidly growing third-world MAs. (The data in this paragraph are from DeBrandt and Gaquin 2006, 774.) What limits the sizes of the largest MAs? First is the size and geography of the country. Only countries with large populations have large MAs. No MA with more than about 8 million population is in a country with fewer than 50 million people. Large MAs tend to be distant from each other. Bombay and Calcutta are on the opposite coasts of India, as are New York and Los Angeles in the United States. In many countries, the best natural harbor is also the site of the largest metropolitan area: New York, Tokyo, Mumbai, Manila, and London (World Bank, various issues). Second, and most fundamentally, are limits to the demand for commodities and services produced in the MA. Every MA “exports” some commodities and services to buyers outside the MA; nearly all commodities manufactured in an MA are sold outside the MA. (Similar comments apply to material inputs purchased from outside the MA.) Many services also are sold outside the MA where they are produced, perhaps as many as onethird. Patients come from great distances to the Johns Hopkins Hospital in Baltimore, as do students to the major universities. Many of the sales on financial exchanges in MAs are among buyers and sellers located outside the MA. As international trade has increased in recent decades, foreign demand has added to the growth of large MAs in some countries, including New York, London, Los Angeles, and Mumbai. Because of lower transportation and communication costs, the cost of an MA’s export tends to increase as a function of distance. Far away customers not only will be served at greater cost, but the competition from other MAs will increase as well. Many studies have Page 5 of 13 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). (c) Oxford University Press, 2015. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy). Subscriber: Pontificia Universidad Catolica del Peru (PUCP); date: 09 September 2017 Are Large Metropolitan Areas Still Viable? shown that foreign demand cannot be explained by distance; presumably, the same holds for MA exports. Large MAs often export commodities and services, sometimes at (p. 78) great distance, that are not produced by smaller MAs. New York has the highest quality maritime attorneys in the country, and Chicago has the most sophisticated commodities exchanges. The final factor related to MA exports relates to costs. As noted earlier, land values increase with MA size. Rents, wages, and other input prices are raised accordingly, making large MAs expensive places to produce. In the final analysis this is the signal that the MA is as big as it should be. In recent years, both workers and businesses have discovered that Southern California is an expensive place to work or to locate a business. The same appears to be true in many Asian MAs, such as Mumbai. To this point, no mention has been made in this chapter of congestion and pollution, factors many believe are limits to the size of large MAs. Absent remedial measures, both problems tend to become worse as the size of an MA increases. Nevertheless, both can be alleviated by government and private expenditures. Transportation facilities can be built and improved. Sewage treatment facilities can be built and upgraded, and emission standards can be upgraded. The additional costs are a logical cost of large MAs. In the United States, the federal government intervenes extensively, for example by financing MA public transit construction with nationally raised taxes. The result is to understate the true costs of large MAs to people and businesses in the MA. Such monies could be raised by MA governments, with oversight by state governments. Then, the costs of the MA would be reflected in prices that would be charged for commodities and services produced in the MA. Thus, congestion and pollution can be alleviated by appropriate expenditures, and such expenditures are a logical part of the cost of living and doing business in the large MAs. If this cost is reflected in prices of commodities and services produced in large MAs, markets will get the right signals about appropriate MA sizes. The final issue discussed here pertains to crime, homelessness, poverty, illegitimacy, racial tensions, and other forms of alienation that increase with MA size and tend to limit size. With poverty, the claim is demonstrably false. The incidence of poverty is lower in MAs than elsewhere and does not increase with MA size. There is some evidence that welfare-prone people are attracted to MAs with unusually generous welfare programs and that large MAs have more generous welfare programs than small MAs. The appropriate measure is welfare payments relative to living costs, and “real” welfare payments hardly rise with MA size. In any case, such effects are small, and the claims are often thinly disguised forms of racism. Street crime rates also rise with MA size, but, again, the correlation is not strong. One key observation is that large MAs are more impersonal and consequently less civil than towns or small MAs. No one who has lived in both a small town and a large city can doubt this, but it is difficult to imagine that impersonal relations increase significantly in places with more than 1 or 2 million people. Such MAs are already impersonal. Page 6 of 13 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). (c) Oxford University Press, 2015. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy). Subscriber: Pontificia Universidad Catolica del Peru (PUCP); date: 09 September 2017 Are Large Metropolitan Areas Still Viable? (p. 79) 3. Suburbanization As previously noted, US MAs have suburbanized more than those in almost any other country. Carefully documented reasons include falling transportation costs and rising incomes. The more up-scale housing preferred by higher income people generally can be provided most economically in suburbs, where land values are lower. Less well studied, but probably important, is the interaction between suburbanization of employment and housing. Manufacturing has long dispersed from central cities and has been moving to distant edges of MAs and beyond since the 1950s.This stems from technical progress that has reduced labor inputs even as manufacturing output has grown. In addition, our superb interstate highway system enables many workers to commute from MA suburbs to manufacturing jobs even well outside the MA. Factories line the interstates leading from the Chicago MA. Many services, including finance, insurance, real estate, retailing, and healthcare have moved to the suburbs massively in recent decades, perhaps following their employees and customers as much as leading them. Finally, increasingly stringent land use controls, especially since the mid-1970s, have limited population densities to below competitive levels in both central cities and suburbs, especially in large MAs. Chicago illustrates typical effects of suburbanization. From 1980 to 2003, the urban population of the Chicago MA increased less than 30%, but the land area increased more than 40% (see DeBrandt and Gaquin 2006). Two-thirds of the population and 60% of employment are located in near-by suburbs. Costs of moving people and commodities fall gradually, but costs of processing and transporting information fall much more rapidly. Estimates are that the real cost of doing a given arithmetic operation has fallen at a compound annual rate of 10–20% during the last quarter or third of a century. Experts assert that no end of this technical revolution is in sight. During the 1970s and 1980s, the costs of moving information—anything that can be put on paper—fell dramatically. The cost of data transmission over long distances has fallen because of improved small computers, fax machines, e-mail, cheaper long distance telephone service, and computers especially designed to network. Although careful studies do not exist, this revolution must have promoted growth of the suburbs and development of edge cities. There is as yet little evidence of dispersion of service sector employment away from substantial centers, either downtown or in suburbs. That suggests that access—inexpensive face-to-face contacts among people—has been the driving force. My hypothesis is that subcenter development is proceeding much the same way and for much the same reasons that downtown development proceeded in earlier years. The difference is that cluster development is proceeding faster outside of downtown areas in large MAs than in small MAs. Businesses in suburban subcenters appear to interact little with downtown businesses. Naperville, nearly 30 miles west of downtown, is the quintessential edge city in the Chicago MA. It is an edge city of 140 Page 7 of 13 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). (c) Oxford University Press, 2015. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy). Subscriber: Pontificia Universidad Catolica del Peru (PUCP); date: 09 September 2017 Are Large Metropolitan Areas Still Viable? thousand residents in 2004, having more than tripled since 1980, and is a thriving and independent community. In 2000, 65,000 jobs were located there, but (p. 80) not everyone who worked there lived there, and everyone who lived there did not also work there. The rapid and extensive growth of the suburbs increasingly blurs the distinction between metropolitan and rural. People who work in Naperville or who sell commodities and/or services there can easily live 20–40 miles west of Naperville, placing them well beyond the limits of the Chicago MA. As edge cities become larger and more self-contained, exurban locations become increasingly attractive. Indeed, in some places an exurban location, say, no more than 50 miles from an MA downtown, may be little farther from the downtowns of one or two other MAs. Are such locations rural or metropolitan? The name is not crucial, but the effects may be very important. Twenty years ago, these would have been distant rural areas. For many small towns and rural places that have become edge cities or have come to have easy access to edge cities, such developments have provided increased employment and large capital gains on farmland. For others, such developments have brought unwelcome newcomers and lifestyle changes. 4. The Future of Large Metropolitan Areas I conclude with speculations about the future of large MAs. The only safe statement is that the largest 5–10 US MAs in 2000 are almost certain to grow at slower rates than the US population in coming decades. It would physically difficult for these 5–10 largest MAs to grow much because they are located near other MAs. In 2004, the five largest MAs contained 52.6 million people, 17.9% of the total US population and 22.4% of the MA population. I expect the MA share of total population to increase about 1 percentage point during the decade or so after 2004. However, the MA share of total population is unlikely to rise as far as 85% during the first few decades of the 21st century. The five largest MAs are likely to grow slowly and to fall slightly as a share of total MA population. This forecast is a conservative extrapolation of trends during the past 20 years. Why might it be wrong? One common conjecture is that large MAs are increasingly unpleasant places to live and do business and that people prefer small MAs anyway. I do not believe that is a significant argument. For decades, people have told pollsters that they prefer to live and work in small urban areas; 50,000–100,000 people is the most common range. Whatever such polls tell us, they do not forecast behavior. Population and employment have continued to grow throughout the MA size distribution, and small MAs have not grown much faster than middle-size MAs. Page 8 of 13 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). (c) Oxford University Press, 2015. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy). Subscriber: Pontificia Universidad Catolica del Peru (PUCP); date: 09 September 2017 Are Large Metropolitan Areas Still Viable? Living and working are not unpleasant in MAs; they are, to some extent, unpleasant in some large MA cities. Population fell slowly in many large MA cities for several decades, but the trend reversed slowly toward the end of the 1990s. Growth has focused (p. 81) in suburbs, and nearly two-thirds of the MA population now lives in suburbs. As noted earlier, many large suburban communities now have most of the advantages of central cities: cultural, recreational, and the like. The polls tell us that many MAs are of the sizes where many people like to live. Many suburban residents think that large suburban communities are developing some of the disadvantages of central cities: traffic congestion and crime, specifically. Because land use controls are, or can be, effective in keeping out low-income people, and because traffic investments can be made, I do not think the danger is great. In sum, I do not believe quality of life issues will cause people and jobs to flee large MAs. Suburbs have grown relative to large or inner cities for a variety of reasons. The result, however, is clear: suburbanites have higher incomes and greater educational attainment than inner-city residents. Inner cities have a greater mixture of racial and ethnic minorities and an appalling concentration of alienated and poor black residents. Studies indicate that school performance, illegitimacy, and crime all improve if lowincome minorities are somewhat dispersed instead of living together in low-income neighborhoods. Role models appear to be the key causal factor. Large MAs have larger fractions of their middle and upper middle-income populations living in exclusionary suburbs than have small MAs. The ratio of suburban to central city income increases with MA size. The result is more segregation of large groups of low-income minorities in inner cities and greater alienation in large than in small MAs. An important part of the solution of this peculiarly US inner-city problem is reduced government density controls in both inner cities and suburbs, but it is not essentially a problem of MA size. Why have poor minorities not followed jobs to suburbs? The answers are complex and poorly understood. But one partial answer revealed by studies is government density controls. The poor are effectively zoned out of many suburbs. How many more lowincome and minority residents would live in suburbs, and how many would perform better there, if land use controls were less of a barrier is impossible to know. However, some simple calculations in Mills (1985) indicate that central cities would contain more white residents, more residents altogether, and more jobs if low-income and minority people were more evenly spread out among MA suburbs. The reason is that, to some extent, high-income people locate in suburbs to avoid the “blight” that results from the concentration of low-income and minority residents in central cities. If it were easier for low-income and minority residents to disperse from the inner cities, there would be less real or perceived inner city blight. In sum, there would be fewer places for higher income people to go and less to escape from (also see also Mills 2005). Therefore, movement of upper income residents to the suburbs and the use of police power to keep low-income people out of suburbs have caused movement to the suburbs to Page 9 of 13 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). (c) Oxford University Press, 2015. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy). Subscriber: Pontificia Universidad Catolica del Peru (PUCP); date: 09 September 2017 Are Large Metropolitan Areas Still Viable? be more extreme than it would be otherwise, and neither the private nor government sectors in the inner cities perform as well as they are capable of performing. More difficult to deal with is the second common conjecture: computerization. It is certain that the compilation, analysis, and transmission of data over long distances will become increasingly cheap and common in the coming years. Some conjecture this will destroy the rationale for large collections of office-type activity. If information can be (p. 82) transmitted electronically, why locate in an office center where land is many times as expensive as it would be at a more isolated location? The key issue is whether computers will destroy the need for face-to-face contact in business communication. Inexpensive long distance electronic transmission of information has been available for some years. It has long been possible to fly diskettes across the country overnight by express delivery services, and fax messages and e-mail have been widely used for more than two decades. Videophones and low long distance phone rates have long been available as well. These innovations seem to have had almost no effect in dispersing business activity beyond MA boundaries. During the 70s and 80s, suburbanization probably was faster because of these technologies, but this seems to have been caused more from gradually falling costs of moving people and goods rather than from rapidly falling costs of moving data. Technology will soon be available that will permit instantaneous interaction by voice, video, and printed documents over great distances and at low cost, permitting meetings among people separated by long distances. They will be able to see and hear one another and transmit documents to each other quickly and cheaply. I have maintained that access to large numbers of businesses and households is the essence of large MAs. If face-to-face meetings became obsolete, beyond a doubt, large MAs would shrink dramatically within a decade or so. I have grave doubts whether that will happen, but I have no crystal ball and I offer the following with an unusual dose of humility. I do not believe electronics will make face-to-face meetings obsolete. Anything that can be spoken can be transmitted electronically. The issue is the benefits versus the costs of electronic transmission as compared to face-to-face transmission. In Mills (1992a), I distinguished between unambiguous and ambiguous information. Ambiguous information is what is transmitted in early meetings between potential vendors and buyers of a new product. Each side wants to explore the other side’s needs, wishes, abilities, reliability, willingness-to-pay, and likely costs and speed of production and delivery. It is what is transmitted when opposing attorneys in a case meet to discuss possible settlement out of court. It is what is transmitted when members of a profession meet for lunch. They all know they are competitors, and they all want to get more valuable information than they give about technology, market trends, product innovations, and the like. Yet they all know that they must give some information in order to get some. Quintessentially, it is what is transmitted in an academic seminar. The essence of a research seminar is that a group of Page 10 of 13 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). (c) Oxford University Press, 2015. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy). Subscriber: Pontificia Universidad Catolica del Peru (PUCP); date: 09 September 2017 Are Large Metropolitan Areas Still Viable? people with a common vocabulary and body of expertise come together to listen to a colleague discuss a half-baked idea. The result is akin to a controlled free association exchange, the essence of the creative process. My claim is that the exchange of ambiguous information is what face-to-face communication has always been about and that electronic communication is a poor substitute. In such exchanges, it is disadvantageous to write too much down. In addition, each participant wants to iterate in the information exchange. Finally, participants frequently want to “feel each other out” prior to providing unambiguous information. The exchange proceeds in ways that depend on the information set that participants bring (p. 83) to the meeting and are willing to communicate. Such information can be known only approximately prior to the meeting. Experiments and scientific (mostly by sociologists and management specialists) observations of electronic meetings confirm the above conjectures. Electronic meetings induce people to bring prepared statements and take positions they then find it awkward to modify or abandon. Those with supervisory responsibility may not be able to manage those who are long-winded or get sidetracked. Closely related, those with managerial responsibility find it difficult to monitor the productivity of their supervisees when they are not on the same site. That has limited the spread of work-at-home jobs. If it were not so, supervisees would be paid piece rates. Finally, work on a common site stimulates employees by creating a competitive atmosphere. This extends to schools and universities. An important advantage of a common site for education is the stimulation, exchanges, and competition that students provide for each other. Academics should consider the possibility of an electronic university. It is now technically possible for me to live in Buena Vista, Colorado and to lecture, with voice, visual, and written communications, students who are dispersed around the country or the world. Communication can easily be interactive. Indeed, my research can be done the same way. It is possible to bring on my computer screen any book or article that is in the university library now, or, indeed, any data set stored in some central location. My working papers can be distributed to a worldwide audience, and seminars can be held using the same computer network. My paycheck can, of course, be sent to me or my bank. Approximations to such electronic universities already exist but show little sign of substituting for high-quality research institutions. And deans have shown little enthusiasm for sending paychecks to distant bank accounts. Electronic communication certainly has had, and will continue to have, important effects. It permits increased specialization, downsizing, and efficiency among institutions. To take one example, each large bank, until recently, had its own economics department that did forecasting and market analysis for bank management. Now, it is possible to buy higher quality forecasts and analysis than the bank can undertake itself. Such information can be transmitted electronically to any place in the world. That and similar examples are, I believe, at the core of downsizing that has been and is under way throughout the US Page 11 of 13 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). (c) Oxford University Press, 2015. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy). Subscriber: Pontificia Universidad Catolica del Peru (PUCP); date: 09 September 2017 Are Large Metropolitan Areas Still Viable? economy. Entire layers of middle level employees who formerly compiled, analyzed, and transmitted data are being replaced by electronic systems that do the work, both domestically and internationally. Electronics already has and will continue to facilitate suburbanization. Face-to-face meetings have come to be needed less frequently, but they are still required. That process permits businesses to be located in more distant suburbs than was previously economical. But it does not permit universities, law office, or similar organizations offices to be dispersed among Chicago, Buena Vista, or Baja, California. In conclusion, my forecast for the next 10–20 years is the continued rapid growth of suburbs. I believe also there will be growth, but slower growth, of the large MAs than for the population as a whole. References DeBrandt, K. A., and D. A. Gaquin (eds.). 2006. 2006 County and city extra. World Development. Lanham, MD: Bernan Press. Henderson, J. V. (ed.). 2005. New economic geography. Northampton, MA: Edward Elgar. Mills, E. 1985. Open housing laws as stimulus to central city employment. Journal of Urban Economics 17(2): 184–188. Mills, E. 1992a. Sectoral clustering and metropolitan development. In Sources of metropolitan growth, eds. Edwin S. Mills and John F. McDonald (3–18). New Brunswick, NJ: Center for Urban Policy Research. Mills, E. 1992b. Large metropolitan areas: Their function and prospects. National Rural Studies Committee, a Proceeding, 94–100. Corvalis, OR: Oregon State University. Mills, E. 2005. Why do we have urban density controls? Real Estate Economics 3(3): 571– 585. Notes: (1) This chapter is a substantial revision and updating of Mills (1992b). (2) See Gacquin and DeBrandt (eds.) (2006, 774, 775) for concise definitions. This annual 1,200-page volume contains by far the best summary of US data for states, metropolitan areas, counties, and cities. The statistics in this section are from it and recent issues of the World Development Report. Page 12 of 13 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). (c) Oxford University Press, 2015. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy). Subscriber: Pontificia Universidad Catolica del Peru (PUCP); date: 09 September 2017 Are Large Metropolitan Areas Still Viable? (3) Substantial opinion among real estate professionals holds that the tallest recently constructed office towers are excessively tall. Even in the early days of New York’s World Trade Center, the top floors were more difficult to rent than lower floors. It is perhaps indicative that most of the world’s recently built towers, including the World Trade Center, were built by governments or with large government subsidies. The top floors of such structures are sometimes referred to as “vanity floors.” Edwin S. Mills Kellogg School of Management, Northwestern University Edwin S. Mills is Emeritus Professor of Real Estate and Finance in the Kellogg School of Management at Northwestern University. Page 13 of 13 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). (c) Oxford University Press, 2015. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy). Subscriber: Pontificia Universidad Catolica del Peru (PUCP); date: 09 September 2017
