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Tag Archives: NYC

Do cities need more “big data?” NYC’s sewer story provides an answer.

NYC had a clogged sewer problem. To solve it, officials had to find the restaurants that were pouring grease down their drains. Because the city’s Office of Policy and Strategic Planning collects huge quantities of statistics ranging from the number of pedestrians on a certain street between 4 and 7 pm to the zip code with the most 311 calls (the “whine district”), they had a solution. Just identify the eating establishments that had reported compliance with the city’s grease carting mandate. Because non-complying firms were more likely to be pouring used cooking oil down their drains, the city could target the suspects. “Big data” let them replace the old method of catching a busboy dumping oil down the drain with a more effective technological detective. Less money could be spent on the sewage system and on regulatory compliance.

Our bottom line? Cities will certainly need the technological innovation that will make municipal finance more efficient. Advocated by Brookings researchers, governments at all levels need to implement technological collaboration and innovation.

Should we be concerned, though, that cities  like New York have considerable fiscal potential while others like Detroit are struggling? With more affluent municipalities investing in technological innovation, will we have a larger gap between have and have not municipalities? And finally, don’t we also have the opportunity cost of privacy?

Sources and Resources: Describing NYC’s Big Data, this NY Times article had some good stories and lots of detail. Much more scholarly, this Brookings Institute report complemented it as did this Business Insider article.

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A Price Ceiling Has Unintended Consequences

Asked if it makes sense to mandate lower rents for some apartments in large cities, many of us say yes. Lower rents facilitate diversity and they enable middle income municipal workers to live close to home. Affordability is good. Yes?

The residents of Cambridge, Massachusetts displayed their support for rent control when they voted to continue it in 1995. However, because the rent control mandate lost in a statewide referendum, Cambridge residents were defeated.

Maybe, though, they really won.

Looking closely at the impact of capping apartment rents on all properties built before 1969 in Cambridge, 2 researchers uncovered a steep downside. Reducing rents 25% to 40% lower than nearby apartments made the value of all housing– controlled and non-controlled–decline. In addition, for rent controlled properties, the peeling paint and loose railings were examples of generally poor upkeep. And, as all econ books remind us, rent ceilings create shortages because, at a lower price, more quantity is demanded than the amount supplied.

After 1995, when the controls were lifted, assessed values rose. For previously controlled properties, they went up approximately 20%. For non-controlled buildings, the increase was even more. Totally, the amount values rose from 1994 to 2004 because rent control ended was estimated as close to $1.8 billion.

Our bottom line: The connection might seem distant but let’s return to a previous post on price gouging. Both rent control and anti-price gouging laws sound like attractive public policies with considerable voter appeal. However, both have negative externalities– a harmful impact experienced by an uninvolved third party–that represent the hidden cost we all pay.

A final fact: There are approximately 1 million rent controlled units in NYC.

Sources and resources: Thanks to Timothy Taylor for the Conversable Economist post that explains the impact of rent control in Cambridge, MA and for his link to the original study. If you want to read more about rent control, here is the story of a challenge in NYC that involved the Supreme Court. For anti-price gouging laws, here is what NJ Governor Christie is enforcing and here is a criticism.

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In NYC and China, developers are building smaller apartments.

An iPad turns on the lights, the shower is a futuristic sounding vertical tube near the door and the bed becomes seating.  Occupying 161 square feet, this Dongguan, China micro-apartment is the size of a US mall parking space. But, at $133 a square foot (835 yuan), for a young Chinese software engineer, the price is right.

In NYC also, you might be able to buy a micro-apartment. While currently the minimum apartment square footage is 400, Mayor Bloomberg is suppporting a pilot project that downsizes units to 275 or 300 square feet. If the experiment works, he says zoning minimums might change.

What is the message?

In China, it is about the labor force. As workers move to cities and factory towns, an increasingly urban workforce needs affordable housing that is far better than the substandard dwellings currently available.

In the US, more of us are living alone. With a 51% marriage rate among the adult population, a typical woman marrying at 26.5 and the average male at 28.7, with elevated divorce rates and longevity creating more widows and widowers, we have more urban singles.

Smaller urban units have so many implications.

Harvard economist Ed Glaeser tells us that people who live in cities not only use up fewer resources but also, they create “spillover.” As we said in an earlier post, “A spillover is just the spread of something, such as a new idea, beyond the spot where it originated. When a new idea easily spreads because…people [live closer to each other in the city], we would say the spillover created a positive externality. That just means that an accomplishment that originally involved 2 entities, rippled outward to benefit many.”

Sources and Resources: Articles about micro-apartments are fascinating–especially the pictures. This Reuters report talks about NYC while WSJ focuses on China and here is what San Francisco is planning. For more about demographic trends in the US, you might want to see these Pew Research facts. Also, past econlife posts on the benefits of urban living in the US are here and here.

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How much should cities plan for the storm of the century?

In NYC, the last time that the East River touched the Hudson River (see below) was on September 3, 1821 when a hurricane struck directly and the tide rose 13 feet in one hour. Should the city plan for it to happen again?

Along its 520 mile long coastline, New York’s waters have eased upward at an inch a decade, a rate that some say is accelerating. If so, by 2050, another 2 feet might be added. Although not below sea level, New York is vulnerable. A direct hurricane hit could mean subways flooded for weeks, basements inundated, electricity out, undrinkable water, commuter transport lines incapacitated.

Assessing the unlikely probability that a massive storm would directly hit New Orleans, in 1978, economists recommended a relatively low level of levee protection. Using rational cost benefit analysis, the question was where to allocate the city’s limited resources. They had no crystal ball–just some logical decision making that did not work out.

New York has some of the same dilemmas. When it equips subways with better flood protection like higher ventilation grates, then the same money cannot be used for new subway cars. Consolidated Edison says it would need $250 million for submersible switches and above ground high voltage equipment and other flood appropriate retooling. Green roofs? Sea gates? Water permeable bike paths? Stop all waterfront development? They did install porous riprap rock in Brooklyn. (???I have no idea what this is but the name is great).

You see where this is going. If a catastrophic storm hits the city, people might say the cost was immense. However, using classic opportunity cost reasoning, don’t the benefits of minimal action outweigh any benefits we enjoy if we mobilize for the storm of the century now?

This NYC site has a complete hurricane history for the city. Most of my facts about the city’s planning for a devastating flooding event are from this NY Times article. Also, I suggest looking at this EconLife post on cost benefit and pre-Katrina planning. Looking at this Congressional Report on Hurricane Katrina might provide more insight about current NYC decisions and Japan’s lack of planning for her recent nuclear plant catastrophe.

When the 1831 storm hit, the East River, extending down the right side of Manhattan met the Hudson River located west of the city.

Manhattan Island is bordered by the East River (east) and the Hudson River (west).

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The Sugary Beverage Debate

If you lived in Richmond, California, would you vote yes or no for their proposed soda tax?

The tax is unusual because it does not charge people at the register. Instead, retailers would have to pay a license fee that is based on how many ounces of SSBs (sugar sweetened beverages) customers purchase. The city expects sellers to increase prices because of the fee.

City councilmen who like the proposal remind us that half of the children in Richmond are obese and that they can use the $3 million they project for sports fields, children’s diabetes treatment and nutrition education. An economist might add that the fee is Pigovian named after Arthur Pigou (1877-1959) who supported the concept because it discourages undesirable behavior and raises revenue.

On the other side, City Councilman Corky Boozé said it is unfair that the tax targets the poor. In a more affluent community, residents have the ability to avoid it by traveling elsewhere but not in Richmond where few people can afford cars. ”I eat sweet potato pie and candied yams,” he added, “And what about cupcakes? Are they going to tax them?” Predictably, one store owner worries that his business would suffer if he passes along the entire fee of 68 cents on a 2-liter drink to his customers.

Opponents also point out that the license fee is regressive. With a regressive tax or fee, the poor pay a higher percent of their income than those who earn more. Assume for example that 2 people both buy the same item and pay a $10 sales tax but one earns $100 a year and the other, $1000. The first individual is paying 10% of her income while for the second, it is 1%.

So many issues…

Do you believe the license fee is fair? Do you care if its impact is regressive? Do you like a Pigovian approach? Does it reflect an appropriate role for government?

In November, at the Richmond polls, how would you vote?

To read more about soda taxes, this NY Times update discusses New York City’s large size sugary beverage ban and herehere and here econlife looks at soda and fat taxes. For an academic approach, this Chicago Fed paper also focuses on the impact of soda taxes while details about the Richmond proposal are in this PBS interview, this NY Times article and a WSJ story.

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