Providing Meaningful Integration Opportunities for Our Youth

In The Complacent Class, Tyler Cowen writes about a decline in people moving in the United States. Rates of people moving across state lines, from one city to another, or even just across town seem to be on the decline. People seem to be less willing to take risks and put themselves in new places. As a result, we have fewer people from diverse backgrounds meeting each other and getting to know each other. For children, this means they are more likely to grow up around other children like themselves, and are not as likely experience different cultures, communities, and families. They are not likely to meet other kids from different racial, socioeconomic status (SES), and cultural backgrounds.

 

Cowen identifies one counterexample to this trend in his book, but notes that it is more of a temporary departure from the trend rather than a clear reversal. Writing about young college educated couples, Cowen describes a movement back toward cities, often living in artistic neighborhoods with interesting homes and fun opportunities to engage with city life. This gives cities new life and creates pockets of diversity, but only until the children of these young couples reach school age.

 

“When they have children and it is time to send the kids to school, they often move to the suburbs, or to a more expensive part of the same city, or to a different city altogether. The integration is a kind of temporary experiment in white lives, to be reversed once the next generation comes along. It is good that so many people are willing to make this temporary experiment but bad that it doesn’t have greater staying power or turn into a means of integrating young children.”

 

I have not spent a lot of time focused on housing policy or urban planning, but I think part of Cowen’s lament can be explained by a failure in both areas. I currently live toward the outskirts of Reno, Nevada, and live in a rather diverse neighborhood. Our home prices are not as out of control as other areas in Reno, and as a result we have a racially diverse set of people in our small out of the way neighborhood. However, it is hard to get to where we live. There are a only few main streets which all get very backed-up with traffic. We also don’t have a good park in our neighborhood, lack good sidewalks, and don’t have a lot of street lights. These factors diminish the attractiveness of the neighborhood and reduce the sense of (or opportunity for) community among the homeowners and renters here.

 

My wife and I are looking to move to part of town that is more accessible and easier for our work commutes. We hope to have a place with nice sidewalks for walking the dog and some open spaces for picnics or more dog activities. We have been looking into parts of town with higher home prices, which will likely result in us living in a more appealing, yet less diverse part of the city.

 

The failure of housing and urban policy is in the way we set up neighborhoods to encourage homogeneity. I understand from a housing developer that it is easier to have 3 or 4 relatively similar track-homes, however this creates a neighborhood where all the residents will have roughly the same income. Lower income individuals who cannot afford one of the houses will be pushed to less desirable neighborhoods and those who can afford to buy into the homogeneity will do so. Repeat this process enough times and you end up with the type of segregation Cowen described in the quote above.

 

I don’t want to approach the issue by saying that we will all benefit by making our neighborhoods more diverse. I don’t want to just accept that this is how things are and that “not-in-my-backyard” (NIMBY) sentiments are too strong for us to make changes. Instead, I want to be able to start a conversation that encourages us to live up to our belief that everyone deserves an equal opportunity.

 

Right now, there are children in my neighborhood who face a long commute if they want to be socially engaged with sports, music, or other extracurricular activities. These kids don’t have great places to go to play outside, and don’t have opportunities to connect with people near them to build connections to help them later in life. As a contrast to their experiences, I grew up in a neighborhood with ample space to play outside and be active, and I had neighbors who had connections that have helped me. If we truly believe in the idea of equality of opportunity, we need to find better ways to integrate young children and reverse the failures of our housing and urban development policies. These children deserve opportunities to maximize their lives and shouldn’t be locked out of opportunity simply because they grow up in parts of a city that don’t offer the same access to resources as children in other parts of the city.

A Glitch in Voting With Our Feet

In the United States, we hold on to terrific myths about the power of the individual. We celebrate (mostly) entrepreneurs like Elon Musk who bring us new technologies and cool cars, and we have magazines focused entirely on major business leaders whose insight and innovation power our most successful companies. We believe that individuals hold the power to change the world, and we believe that giving people freedom will lead to rational decisions on the part of individuals to find the best outcome for our country.

 

An idea that pops out of this myth is the idea of voting with our feet. The term refers to people making a decision to go someplace else, to chose something else, and to literally move ourselves with our feet to a different option. We might vote with our feet when we move from one city to another, or when we leave one store to shop at another, or quite literally in some state caucuses when we walk from one side of a room to another to support a different political candidate. We believe that our individual choices and where we chose to shop and how we chose to vote will really make a difference in the world.

 

This is only partially true, and only sometimes has the positive outcomes we hope for. In many instances, our individual choices are just not enough to overcome structural factors which entrench the status quo. Sometimes we vote with our feet, but really move from one option provided by a company to another, without really making a difference in the bottom line of the company we are voting for or against with our feet (think of moving from Facebook to Instagram, which is still owned by Facebook). Voting with our feet can also have very negative consequences, such as entrenching segregation without having anyone who is clearly to blame.

 

In The Complacent Class Tyler Cowen writes about the ways in which our society is becoming more segregated through the use of voting with our feet. Across the country we see people move into “nicer” neighborhoods which creates a level of economic, racial, and political segregation that should (I would argue) raise moral concerns. About the issue Cowen writes, “The self-selection process is running its course, and how people are voting with their feet often differs from which is coming out of their mouths.”

 

Many people who believe that schools and communities should be more diverse are moving to areas with less diversity. They are not consciously choosing to live in more or less segregated areas, but they are voting with their feet to leave areas of worse economic condition but greater diversity in favor of more economically sound and culturally homogeneous regions.

 

This works because we empower the individual in our society and don’t want to do anything to limit the power of the individual’s choice. Segregation is a result of the power to vote with our feet, but it is also the dismantlement of the myth of the individual. The rational individual is not making individual choices that make the world a better place. Instead, the individual is working on feelings that lead to a desire for greater similarity between themselves and their neighbors, ultimately creating a worsening system of segregation. They are following cultural and structural factors which push us to want ever larger houses in ever more expensive neighborhoods, recreating segregation that often created pockets of towns that are so different economically and culturally. We should learn from this example that our individual choices are both not sufficient to bring about the best outcomes for our society and planet, and that simultaneously our individual choices can have a serious power to shape the world for better or worse. We must think first about the systems that structure our decisions, and then think about how we can make the most of our choices for positive, rather than negative outcomes.

Where You Live (& Are Born) Matters

Raj Chetty, a Harvard researcher, has done some pretty interesting work that shows that the zip code you are born into can have a huge impact on how much money you earn over the course of your life. Down to the neighborhood level, where you live, the people around you, and the connections you happen to make in life can be major determining factors in what job you take, what college your children attend, and how well off you end up financially speaking. We don’t like to address this very often, but we recognize that it is true, and we have seen increased segregation as we try to separate ourselves from living next to undesirable people and places.

 

In his book The Complacent Class: The Self-Defeating Quest for the American Dream, Tyler Cowen writes, “in 1970, only about 15 percent of families lived in neighborhoods that were unambiguously affluent or poor. By 2007, 31 percent of American families were living in such neighborhoods.” We are moving in directions where we separate ourselves from people who are not like us in terms of socioeconomic status (SES). Today, relative to 30 to 50 years ago, we are less likely to interact with someone who is very poor if we are rich. We are less likely to know anyone who does not share a generally similar SES, and we are far less likely to have any meaningful interactions with someone from a different SES. Cowen continues, “for where you live, income matters more than ever before, as can be shown by a simple perusal of the apartment ads for most of America’s leading cities.” 

 

This segregation by home value and SES has some obvious consequences, such as schools becoming more segregated by income and race and skyrocketing home prices in some regions of town coupled with deterioration and disinvestment of other regions. However, as the research from Chetty shows, there are other, less obvious consequences from our SES segregation. Where you live influences the opportunities available to you and your children.

 

We like to think that it is our own effort, talent, and hard work which determines how much money we make and where we end up financially and in terms of the home we are able to buy. Since talent, intelligence, and work ethic are evenly distributed on a genetic level, we would expect that everyone could achieve the same ends regardless of where they happened to be born. Instead, we see huge disparities by zip codes and neighborhoods in terms of ultimate SES. Our segregation is leading to situations where those who are born in wealthy areas are able to make valuable connections, learn the unwritten rules of networking to getting ahead, and receive visible reminders of what can be achieved through hard work and perseverance. Certainly people from the lowest SES background can still network and can still see the benefits of hard work, but research also suggest that when people from the lowest SES don’t have any interactions with people who are economically well off and successful in their careers, they do worse.

 

Cowen argues that our segregation by SES is making us a less robust society. Partially because we are leaving other people out, but also because it narrows the world for all of us (not just those in low SES neighborhoods) and stymies innovation, development, and progress. We are comfortable in neighborhoods with people who have a similar background and SES to our own, but this does not help us better understand the world, does not help us advocate for and support policy which might help us and others, and does not help us identify and encourage the top talent born in our country. Our complacency as we all search for our own individual American dream is crippling the American dream that we share as a nation by segregating us into complacent bubbles.

On Redistribution

In the United States people hate the idea of redistribution. I was remarking the other day while reading a political science journal article that American culture operates with a background sense that using public policy to improve ones economic fortunes is illegitimate. The only legitimate way, in American culture, to improve ones economic standing is through hard work in the traditional labor market.

 

This is one contributing factor to why redistribution is viewed so negatively in our country. To be seen as deserving, one has to be seen as hardworking, and hardworking and economically successful are tied in the way we think about people in our country. We use a heuristic to tell ourselves that rich people are hard working and that poor people are lazy because it is easier than considering the alternative, and it also confirms to how we want the world to work, at least if we are relatively well off or see ourselves as becoming more financially successful in the future. We want to believe that our good economic standing and future earnings potential reflect our own industriousness and not just a set of favorable circumstances beyond our control.

 

In their book The New Localism, Bruce Katz and Jeremy Nowak look at our behavior around redistribution and consider how it fits with the framework for local action that they develop. Redistribution is an area where they find an interesting split between the role of federal and local governments.

 

“Major redistributive policies, such as the earned income tax credit, are best pursued at the federal level. Federal redistribution is more effective than more local efforts because the federal government has a larger pool of income from which to draw and there is less capacity to opt out. Federal redistribution is largely people based. State redistribution is generally linked to providing support for public goods in jurisdictions with taxing capacity disadvantages.”

 

I find it really interesting to think that the federal government’s redistribution programs are more people-based than local programs, but I think I understand why that might be. At the local level, we become upset when we see a person in our community who is accepting some form of assistance from the government while simultaneously driving a new car or leaving a nail salon. In some way, when we see an actual person who is benefiting from a redistributive program and using their resources in a way we find inappropriate given what we judge their priorities to be, we feel cheated. We feel that the economic assistance provided to them should have been spent on other local pressing problems rather than on supporting someone who using the financial aid unwisely. This makes local adoption of redistributive programs for individuals more challenging. At a national level, the quote from Katz and Nowak seems to suggest, we likely won’t recall as many of these hyper-local context examples, or just won’t be as aware of the aid, and won’t be as keen to notice the effects of a redistributive policy.

 

Another local level wrinkle that influences the policy appraoches from Katz and Nowak’s quote is that we don’t want to live in a city or region that is known for its slums. Those of us who are affluent enough will likely make efforts to avoid local trailer home regions and find ways around the lower socioeconomic parts of town. We won’t want to acknowledge these regions because they make our entire community look worse, especially from the outside or when commented on by national media. These pressures may make us more willing to have government take action to “clean-up” these economically depressed regions. We see a personal benefit to ourselves in having our city invest more in economically weak regions. We don’t see the same personal benefit from redistributive programs that help other individuals.

A Public Purpose Mandate

In The New Localism Bruce Katz and Jeremy Nowak advocate for new governance structures to help encourage innovation and lead to dynamic growth for cities and metropolitan regions. Katz and Nowak believe that current structures and institutions are inadequate to respond to global challenges that demand multisectoral action, technological innovation, and network approaches to problem-solving.

 

One of the recommendations from the authors is to produce new systems and structures for the effective management, use, and development of public assets. The authors are critical of public management strategies that often lead to politicized decision-making and cronyism. At the same time, the authors don’t suggest that public assets should simply be sold to the highest bidder from the private sector for their own profit maximization. Public assets can play a huge role in city revitalization and growth if managed properly, and the authors recommend that cities and metros look to Copenhagen for examples of better public asset management.

 

The City of Copenhagen has created publicly owned private corporations for the management of public assets and economic development spaces. An insulated private company is responsible for maximizing public benefit through the use of the city’s assets. In regard to transferring this system to cities in the United States, the authors write, “The United States also has to come to terms with the fact that public assets can be effectively managed by the same private systems and principles that build private wealth and productivity, but with a public purpose mandate.”

 

We like to think that there are either public systems, like say the DMV, or private businesses. Our debates and discussions generally center around the pros and cons of each, with people trying to reach an impossible conclusion that one system is inherently better than the other. Katz and Nowak show that Copenhagen took a different path, looking at how a private corporation could be established with public ownership and an ultimate purpose of maximizing public returns rather than private financial returns. The result has been an entity that can think long term, coordinate with both public and private organizations for responsible and equitable growth, and make decisions that focus on improving the city of Copenhagen in a realistic way that responds to actual economic trends, pressures, and forecasts. This blend of public and private is more robust than either pure private development or public management. The result of finding a third path is a new structure that can actually address problems in rational manners and sidestep the pitfalls that are so common in American city governance.

How Our Poorly Evolved Brains Contribute to Political Dysfunction

One of my beliefs about human beings is that we are currently operating in a world that has far outpaced the realities that our brains were evolved to live within. We are social creatures that operate in political tribes, and the social and political situations of our ancestors lives have pushed our brains to be bigger and pushed us to be smarter, but have not necessarily pushed us to be more adapt at understanding reality or seeing the world in a clear and honest way. This has happened in our brain, however, while we have maintained the basic hardware and default mechanisms which were originally developed for the purpose of survival on a savanna or in a jungle. Our brains are still built for making quick decisions between safe and threatening, but we have layered on great intelligence through social and political games that require smarter and more deceptively cunning intelligence. The result is that our brains are powerful, but deeply flawed and inadequately evolved for current circumstances.

 

This is important because we live in a world that is incredibly complex and requires that we make decisions among noise and competing values with varying levels of social and political consequences. Our world is filled with decisions that must balance multiple variables, but at their base, our brains really just want to make a quick decision between two variables: safety or threat.

 

I see so many situations in my own thinking where I reduce the world to one or the other. Someone is either a great person because they gave me plenty of space in their car while I was riding my bike, or they are an evil human being who couldn’t move over for me. Someone is either lazy and dumb, or hard working and brilliant. Considerations of the middle ground are complex, and as a result I default to an either-or mindset when looking at the world. For most of my daily interactions and situations this doesn’t matter much, but when we layer these tendencies up throughout society, it becomes dangerous and is a contributing factor to the political dysfunction and social unrest we see around us today.

 

In their book The New Localism, authors Bruce Katz and Jeremy Nowak hit on this point. About our political disagreements between Democrats and Republicans (the authors use Left versus Right which I disagree with for other more complicated reasons) they write,

 

“The battle between these two choices in public asset management [public ownership and provision as favored by Democrats versus the undeterred use of market forces as favored by Republicans] has contributed to political partisanship by posing a false choice between management mediocrity and the loss of ownership rights. These choices, driven by fallacies that are supported by old ideologies, contribute to political dysfunction.”

 

Katz and Nowak argue that we make huge political decisions in our country based on outdated models that feel comfortable for our brains (as our brains scan for safety versus threat) but that don’t really reflect reality. Good public management, the authors argue, in today’s age requires a merger of public and private asset management strategies. Public ownership cannot be absolute because it can lead to politically biased decisions with elected officials acting as arbitrary gatekeepers. Open markets, however, can leave people out and be leave us with greater inequality rather than provide us solutions to pressing problems.

 

One solution the challenge above might look like public ownership a of a private corporation, adding a layer to reduce political influence and bias, and using experts to maximize public benefit as opposed to using business insiders to maximize shareholder value. This is just one example of a third approach to a problem that our brains would rather see as a choice between two variables. We want to see the world as good versus evil, because that is how our brains have evolved. It didn’t matter if there was some nuance to our early ancestors about eating mushrooms, running from animals, or traversing down a steep cliff. What mattered was survival and having an innate sense of safety versus threat was advantageous. Today however, that same innate sense is at play (even though we don’t recognize it) and is holding us back and creating chaos rather than helping us successfully reproduce.

New Considerations for the Public vs Private Discussion

In the past I wrote about the importance of privacy in our politics from the point of view of Jonathan Rauch and his book Political Realism. We have almost no trust in government, and we frequently say things like, “sunshine is the best disinfectant,” but the reality is that politics is made much more complex when it is in the open. Difficult negotiations, compromises, and sacrifices are hard to do in open and public meetings, but can be a little easier when the cameras are turned off and political figures who disagree can have open and honest discussions without the fear of their own words and negotiations being used against them in the future.

 

In The New Localism, Bruce Katz and Jeremy Nowak acknowledge the difficulties faced by governments when open meeting laws force any discussion to be public. The laws come from a good place, but for local governments that need to move fast, make smart decisions, and negotiate with private and civic sectors to spur innovation and development, public meetings can lead to stagnation and gridlock. A solution proposed by Katz and Nowak is for local governments to authorize private corporations overseen by public bodies and boards to operate economic development areas and to take ownership of public asset management.

 

They describe how the city of Copenhagen has used this approach, “Copenhagen has found that by managing transactions through a publicly owned, privately driven corporation, operations run faster and more efficiently in comparison to how local government traditionally tackled public development projects.”

 

The private corporation running local development is publicly owned. It is still accountable to the local elected officials who are ultimately still accountable to the voters. But, the decisions are private, the finances are managed privately, and negotiations are not subject to public meeting laws. While the corporation has to demonstrate that it is acting in the public interest, free of corruption, it can engage with other public, private, and civic organizations in a more free and flexible manner to accomplish its goals. Leveraging the strengths of the private sector, publicly owned private corporations that put local assets to work can help drive change and innovation.

 

Directly calling back Jonathan Rauch’s ideas, these corporations create space for negotiations that would be publicly damning for an elected official. They also prevent elected officials from having undue influence in development and public asset management, preventing them from stonewalling a project that might be overwhelmingly popular in general, but unpopular with a narrow and vocal segment of their electorate. This prevents public officials from pursuing a good sounding but ineffective use of public resources to signal loyalty or virtue to constituents. Removing transparency and making the system appear less democratic, as Rauch suggests, might just make the whole system operate more smoothly and work better in terms of the outcomes our cities actually need.

A Fresh Take on Public Asset Management

An area that I did not understand very well, since I have no real experience with city government, from Bruce Katz and Jeremy Nowak’s book The New Localism has to do with the management of publicly owned assets. According to Katz and Nowak, public infrastructure, public land, and locally owned buildings and spaces are underutilized and the value of these assets is poorly managed. Part of the reason for this is that much of government is split and segmented. One agency has control over a piece of land, and another agency has ownership of another near by asset. This fragmentation makes it hard for the city government to consider unified programs or projects that would utilize both of the nearby assets in a uniform manner.

 

Another issue the authors discuss with public asset management is elected political officials holding veto power over the use of public assets. Daniel Kahneman in his book Thinking Fast and Slow describes our risk avoidance tendencies, and I think these tendencies can easily be viewed in our elected officials and their veto power. Elected officials, like everyone else, is more worried about potential losses than they are excited about potential gains from the use or sale of assets. What is worse with elected officials however is that they ware worried about the loss of an electoral base, and the loss of a job from decisions regarding the use of public assets.

 

The authors write, “The removal of the political class from public asset management has a salutary effect on democracy by transitioning politicians from asset gatekeepers to consumer and citizen advocates on behalf of public asset productivity and quality.”

 

Instead of having elected officials be the ones in control of public assets, the authors suggest transferring ownership to quasi-governmental organizations that blend public, private, and civic actors. The authors envision new forms of port authorities or development organizations that would control public assets with a focus on maximizing public benefit. Elected officials would then be responsible for helping develop innovative uses for public assets rather than being responsible for the failure of projects and programs that use public assets. This is the essence of the point  that the authors make in removing the political class from public asset management. A rational organization that controls such assets can defragment them, and put them to better and more productive uses.

Cities Suffer From Loss Aversion

“Many U.S. cities are, in essence, a fact-free zone when it comes to public assets. They have little knowledge of the assets they own and the market value of those assets, either under current or altered zoning regimes. Ironically, U.S. cities know what they owe (such as pension liabilities) but not what they own. Rectifying that disconnect is the first step toward sane and sensible public finance,” write Bruce Katz and Jeremy Nowak in their book The New Localism.

 

Katz and Nowak highlight the ways that local and regional governments in cities and metropolitan areas are establishing new networks to develop innovative solutions to global problems that have vexed state and national governments since the early 2000’s. Cities are reinventing ideas of governance and finding ways to adjust to the challenges they face in a way that larger governments seem to be unable to do. One area that is holding most city governments back, however, is financing.

 

Local government financing does well when the economy is strong and when people are moving to the area to create and fill jobs. However, when the economy is weak and people are moving away, local governments cannot keep up. Cycles of strong and weak economies have lead to the situation that Katz and Nowak described in the quote I used to open this post. Cities focus on their liabilities and worry about the costs and expenses that pile up and become major obstacles whenever the economy turns south. The authors argue that these pressures can become a singular focus for local government officials, preventing them from thinking clearly about the opportunities they face while limiting their creativity to adjust to new economic conditions and develop innovative solutions.

 

I don’t find it too surprising that city governments are more worried about what they owe than what they own. I am currently reading Daniel Kahneman’s book Thinking Fast and Slow and his descriptions about the way people respond to potential losses seems to be right in line with the behavior that Katz and Nowak describe for our city governments. We feel a loss of $100 as equal in terms of pain as we feel joy from a gain of $200. That means our losses are twice as painful as a gain is joyous. Mayors, city managers, and elected officials have their jobs on the line and can be held responsible for economic forces that are far beyond their control. This is likely a big part of what leads to this risk aversion among our local governments, and why so many of them are focused on what they owe and what could go wrong in a downturn. The narrow focus that this creates for governments, however, is likely to exacerbate any economic shocks that they do experience. By failing to plan and think big, city governments are failing to get the most out of the assets they do have, and are failing to build a buffer of protection for themselves and their residents if an economic shock occurs.

 

The solution that Katz and Nowak provide is a structure of new networked governance, where governments are able to provide the authority and base funding for projects and ideas, but private organizations can manage public assets and capitalize on charitable and foundation giving for more risky projects. This opens an avenue for bold movement that risk averse elected officials and public agencies could not approach. It allows cities to maximize their assets, rather than forget about them altogether.

The Complement of Networked Governance

The last few weeks I have been writing about governance ideas presented in Bruce Katz and Jeremy Nowak’s book The New Localism. One idea I have brought up multiple times is the idea of new institutions at the local level formed from networks of public, private, and civic actors. Katz and Nowak argue that these networks are crucial for the development of plans and strategies to help cities grow, adapt, and thrive in a globalized economy. New institutions include structures and frameworks that bring together public, private, and civic leaders who have the ability to mobilize energy, capital, and people to actually get things done, rather than to just talk about doing things.

 

Katz and Nowak are clear, however, that these new network governance structures are not something they suggest as a replacement to traditional government structures and agencies. In their book they write, “In the end, however, networked governance is a complement to functioning government, not a substitution. As responsibilities shift downward in societies, capable local governments become a necessary component of problem solving and leadership.”

 

I previously wrote about the ways in which our denigration of government in some ways create a self-fulfilling prophecy, where talented and motivated people are afraid of the stigma of government work and chose to work in the private sector, leaving government with less capable and dynamic talent. A lot of rhetoric says that government is the problem and not a solution, but Katz and Nowak show that government has to be part of the solution.

 

City and local governments create the structures that can organize private and civic groups. They create the forums through which stakeholders can deliberate and discuss the problems that people in the region face. Agencies play a role in ensuring that projects and programs taken on with the support of private and civic groups follow legal precedent and sound administrative practices in an equitable manner. Without a competent public sector, the plans from governance networks would have nothing to graft onto, and could not be implemented nor developed.

 

New governance approaches through networks are efficient and effective because they bring in the people who have the expertise in a given area and invite them to be part of a larger solution than just maximizing their bottom line. They engage community members and actors in place-making, helping the region grow in a way that will in turn benefit each member of the network. The network fills the gaps in public action and strengthens the weakest parts of the public sector. Together, a competent local government combined with the nimble and expert private and civic sectors has a great advantage in the field of problem solving.