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Links Roundup: City Level Diversification, Land Value, Grandmothers, and More

+ Kari Kohn

Diversification, Not Specialization for Cities

Cities are the places where people that have specialized in different areas congregate, allowing industries to combine their knowhow. Rich cities are characterized by a more diverse set of skills that support a more diverse and complex set of industries – and thus provide more job opportunities to the different specialists.

...This is all the more important today, because the globalization of value chains is delocalizing supplier-customer relations. Cities and countries would be ill-advised to focus on a few “clusters” and consolidate the value chains in their location, as is so often recommended. Instead, they should worry about being a node in many different value chains, which requires finding other industries that can use their existing capabilities if they were somehow expanded and adjusted to new needs.

Competition inevitably tends to winnow out the less efficient firms and industries. It is not the policymakers’ role to hasten their death. Their task is to identify productivity-enhancing interventions that can harness economies of agglomeration by adding new activities and productive capabilities, making the whole bigger than the sum of the parts.

U.S. Land Value and Tax Policy

Add it all up and you get $14.488 trillion in land value.

Now how good is the Fed’s data on this? I don’t know. Certainly estimating the replacement cost of structures can be hard. But this is what’s on the books. And when David Albouy and Gabriel Ehrlich tried to estimate the total value of residential land through an independent method they came to the conclusion that “approximately one-third of housing costs are due to land, with an increasing share in higher-value areas, implying an elasticity of substitution between land and other inputs of about one-half.” That’s very similar to the residential piece of the Flow of Funds.

So who cares? Well, you should care. This number is high enough that it tends to confirm that view that taxation of land and other natural resources, supplemented by pollution fees and things like congestion charges could replace all taxes on labor and investment and still fund an ample welfare state and public sector.

The Importance of Grandmothers

Unsurprisingly, grandmothers often do more for their grandchildren than grandfathers do. “Older women are the neighborhood watch and the neighborhood glue,” says Fried. “They’re the community purveyor of norms.” When older black people in South Africa first started getting pensions from the post-apartheid government that were big enough to live on, the grandchildren who lived with grandmothers—especially the granddaughters—got taller and heavier, which observers took as a sign that they were eating better. But when it was the grandfathers who got the pensions, the grandchildren didn’t grow at all.

Paul Farmer on Rwanda's Child Mortality Rate

2014 will mark the 20th year since the 1994 genocide in Rwanda. Over the past decade, the Rwandan health sector has linked an equity plan with a robust delivery system to achieve some of the steepest declines in premature mortality ever documented anywhere. The country’s child mortality rate—once the world’s highest—has fallen at a pace of 11.1% per year, and is now in line with the global average. There is much to celebrate, but perhaps even more to learn.

Considering the Whole Transportation System

The old planning paradigm assumes that traffic congestion is the most important urban transport problem and roadway expansion is the preferred solution. But congestion is actually a moderate cost overall, smaller than vehicle costs, accident costs, parking costs, and environmental damages. It would therefore be harmful overall to reduce traffic congestion in ways that increase these other costs, while a congestion reduction strategy is worth far more if it reduces other costs.

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