The City Has Triumphed. Have Your Customers?

Edward Glaeser, author of "Triumph of the City," calls me from his car. He works outside Boston, which has one of the better public transportation systems in the U.S., but he's driving to his home. In the suburbs. The irony is not lost on us, but neither is the simple fact that more than four in five people in the U.S. live in the nation's 366 metro areas. Those areas accounted for 98% of the population growth in the last decade, according to the latest Census figures. The cities are where your customers are, and the changing urban landscape is changing how they live their lives. The book is a great read on the historical and future role of urban areas in our cultures. AdAgeStat chatted with Mr. Glaeser, an economist and Harvard professor, about the economics and marketing opportunities of cities. AdAgeStat: In the book you talk about how poverty can be a sign of healthy cities, because the poor are attracted to places with jobs and opportunity. Is there a tipping point, however, in times of high unemployment where they keep coming but there aren't any jobs? Mr. Glaeser: Not all urban poverty is a good sign. Concentrations of poor people in urban areas creates downsides. The spread of disease, the problems of congestion and all that. That's certainly an issue. Too much concentrated poverty can be a problem especially for the children growing up in that area because they lose the connections to a more diverse range of human capital. I think that segregation is tremendously damaging AdAgeStat: You quote Plato's line of "any city, however small, is in fact divided into two, one the city of the poor, the other of the rich." Is that more true than ever? Mr. Glaeser: There certainly are cities that are enormously segregated. And it's certainly true that inequality in places like New York is huge. Black/white segregation has tended to go down a bit over time. Rich/poor segregating has not moved down as clearly. Urban equality is daunting. In some sense I'd rather have rich and poor connect in cities than I would have rich living in all rich enclaves in some suburban area and poor living in all poor enclaves. So in some sense inequalities can be the opposite of segregation. AdAgeStat: Looking at the demographic groups that are growing -- Hispanics, older and younger consumers, single-person households -- these are not the groups that typically drive the economy. Is that a fair assessment, and is it a problem? Mr. Glaeser: The fact that that there are poor groups that are expanding in the population is certainly true. That's not really all that debatable. AdAgeStat: How long does it typically take for new population groups to take and reach economic parity? Mr. Glaeser: By the second generation they seem to be doing pretty well -- in most groups. It certainly remains a challenge and segregation can also be an issue. The more, there's a human capital gap with the immigrant groups the more problematic segregation becomes. The more skilled the immigrants, the less problematic segregation ends of being for their children. The less skilled, the more problematic. AdAgeStat: In the book you cite some figures about how urban and non-urban shoppers differ. What were some of the most surprising for you? Mr. Glaeser: One of my favorite tidbits in the book is that urban dwellers do seem to spend a lot more on shoes. It does seem to validate the "Sex and the City" stereotype to a certain extent. The remarkable difference between the suburbs and the space-constrained consumer in an urban apartment is that they tend to be focused on things that are higher quality relative to the suburbanite. I'm actually driving out to the suburbs so let me be clear that I count myself in that group, who often just have a lot of walls to fill and a lot of space to fill and is interested in bigger stuff and is willing to trade off some quality for that. I think there's a lot of truth when we think about the old urban cultures of say Milan or Florence. Part of the reason I think there was such a strong artists' contribution is that they were selling to people in cities who didn't have a lot of space but desired other means of signaling their wealth and their education and success. AdAgeStat: The middle class is being hit pretty hard these days. What areas are good for the middle class? Mr. Glaeser: [As you look at the data] you begin to understand why a million people moved to Houston. A family that starts off with 20% higher earnings in Houston [after taxes after housing costs, after final adjustments for final prices] ends up being 50% richer in real terms even including transportation and cars. That's a huge difference and it's easy to see why Houston would appeal. AdAgeStat: Did we build enough housing to meet demand in the last boom, or will we get another boom when things get better? Mr. Glaeser: When I've gone through the numbers I figure we overbuilt relative to the current state of demand by at least 2 million units during the boom. We've done very little to work our way through that, despite housing starts being so low in the last two to three years. We've worked our way through it so slowly because the rate of household formation has been so low particularly because of younger people living with their parents. In the short run I wouldn't expect the building to pick up until you see the rate of household formation picking up and you see more people getting gout of their households. We might have made that process slower because we've built such large homes that it's less painful for people to live with heir parents than it was 50 years ago. This is the ninth in a series of AdAgeStat Q&As with researchers who have extensively studied pieces of the demographic puzzle. Earlier we spoke to Carol Foley about drivers of human behavior, Dante Chinni about the role of geography in segmentation, Joel Kotkin about suburbs and immigration, Richard Florida about cities, Paco Underhill about women, Rose Cameron about men, Tammy Erickson about Generation X, and behavioral economist Dan Ariely about how to use everyone's irrationality to your advantage. Follow @AdAgeStat on twitter for constant updates.

The City Has Triumphed. Have Your Customers?

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