The Future of Post-Industrial Cities

Cities are engines of innovation as well as fashion, art, finance, and science, and they have been for every great civilization, whether it’s the cities of China, Egypt, Persia, Greece; the Mayans and the Romans; Venice in the 16th century, or Paris, London, and New York in the 18th, 19th, and 20th. Not everything is great about the great cities but more than we might think.

Eight years ago, we had a podcast interview with the author of a then-new book, The Environmental Benefits of Cities. Its author argued that cities get a bad rap when it comes to consuming natural resources, pollution, ecological disruption—because of their density, cities actually do better on these measures when looked at per-capita. Similarly, cities are thought to be inherently prone to infectious diseases, and not only historically, it seems borne out by the coronavirus pandemic, which hit cities first and hardest, especially New York, the San Francisco Bay Area, Seattle, and Los Angeles—yet cities also showed an ability to suppress the pandemic, as New York, for example, by the summer, was posting some of the lowest numbers in the nation.

As our climate warms, we need to look at the opportunities cities offer. For example, while most of the U.S. went in the direction of fossil fuel-based transportation networks, New York’s has been largely electric ever since the first subway lines were laid down in the 1890s. Opportunities abound for recycling, reuse, and shorter per-capita supply chains. Five out of every eight people in the U.S.—62 percent—live in an incorporated place, but they take up only 3.5 percent of the U.S.’s land area.

As we begin to finally address climate change in a serious way, we need to look at our cities in a serious way. And not just first-tier cities like, well, New York, San Francisco, Seattle, and Los Angeles, and not just flashy growing cities like Las Vegas, Austin, Atlanta, and Columbus. We need to look at cities like Baltimore, Cleveland, Detroit, Philadelphia, Pittsburgh, St Louis—cities that haven’t come back from the problems of 50 and 60 years ago—deindustrialization, disinvestment, white flight.

These cities are at a crossroads, according to my guest today. They can, he says, enjoy a comeback, stagnate, or continue to decline. There is, in fact, a unique opportunity presented by the pandemic: as working remotely becomes more widely accepted, there could be a migration to cities such as these by people not ready to give up on city life, but looking for greater affordability. 

Matthew Kahn is a Distinguished Professor of Economics and Business at Johns Hopkins University; he’s the Business Director of its 21st Century Cities Initiative; and he’s co-author of a new book that addresses these questions about these very cities, titled Unlocking the Potential of Post-Industrial Cities.

Matthew, welcome to the podcast.

Matthew Kahn Steven it‘s great to be here.

Matt, every one of these cities has lost population. Pittsburgh by more than half, Baltimore by almost half—it went from the sixth-largest city to now it‘s the thirtieth. Cleveland is almost two-thirds smaller now than at its peak and went from number 7 to number 53 in the six cities. Overall, one-fourth [of their populations] are poor. They have weak economies that lack upward mobility. Your book is, to quote its preface, “about the interplay between history and expectations in determining quality of life and economic growth of six major cities.” What is the quality of life in these cities right now?

Matthew Kahn There‘s an element of a tale of two cities. I‘ve been living in Baltimore for two years now, close to the water, and when my Manhattan mother visited Baltimore, she said to me, Matthew, this is just like San Francisco. It was a beautiful day. There was great beauty on the water and new construction going up by the water. But there‘s other parts of Baltimore and the other five cities we study where there‘s pockets of deep poverty. There‘s a housing stock that‘s old and it‘s deteriorating, and there are children being born into poor families who face a low probability of achieving the American dream. So without speaking in cliches, there‘s sort of this tale of two cities. And it‘s my hope in writing this book to show that these two sides of the coin are connected—that if the parts of these cities that are thriving enjoy continued growth, that this could create the tax revenue to engage in redistribution. And the investment [would] jumpstart these entire cities.

Steven Cherry In the book, you break it down into four interrelated forms of investment.

Matthew Kahn Steven this is a key point. A couple of examples to make this clear. In a city like Baltimore where there hasn‘t been that much private-sector job creation, it is rational for teenagers to not study hard in school. So if I‘m a teenager who expects to live his life in Baltimore and if there isn‘t a strong job space, there aren‘t the manufacturing jobs that used to be. This underinvestment in job creation actually causes underinvestment in human capital among young people. So that‘s an example of the sort of coordination, failure we explore in the project on two more dimensions of underinvestment. So there are individuals under-investing in their skills. There‘s the private sector under-investing in job creation of these cities. There is also the public sector under-investing in basic infrastructure.

There‘s sort of a chicken and egg issue here. If jobs were arriving in these cities, there‘d be more of a tax base and more of a reason to build good infrastructure. But if you don‘t build the infrastructure, then you don‘t attract the jobs. And finally, there is the old 1920s real estate stock that‘s depreciating—especially in the poor neighborhoods—that is not fully invested in because real estate developers will only invest the upfront money and bear the risk if they think this is a profitable opportunity. But if there isn‘t a growing jobs base, then there isn‘t the profit opportunity for real estate developers to reinvest and rebuild declining communities.

Steven Cherry In this chicken and egg problem, which in the book you call it a catch-22, there‘s actually a lot of catch-22s here, for example, people who can afford to flee rising crime rates do so. And that leads to all these under-investments, which leads to low property values and low graduation rates, which leads to both more unemployment, more underinvestment and more crime and therefore more flight. I mentioned deindustrialization and white flight as well as underinvestment—did one cause the other? And which way did it go?

Matthew Kahn This is a very important question. There‘s been detailed research ...  So when Pittsburgh lost steel jobs, when Detroit lost car jobs, what domino effect does this cause? What labor and urban economists have found is something quite depressing. Manufacturing jobs are high paying jobs for relatively less educated individuals. There was a black middle class in the 1950s and 60s where the men worked in manufacturing and because they had well-paying jobs there were stable families. And this helped to anchor neighborhoods in the cities.

With the deindustrialization of the Rust Belt cities, an ugly chain reaction was set off. When people lose manufacturing jobs and transition to service jobs, their pay can fall by 50 percent. McDonald‘s doesn‘t pay that well. And this is a contributing factor to the decline of marriage and children growing up in female-headed households. So Steven, the decline in manufacturing in these cities really set off an ugly domino chain that in the year 2021 these cities are still grappling with.

Steven Cherry This all began with the Great Migration in which millions of African-Americans fled the Jim Crow South, fed by those urban industrial economic opportunities of the 20th century, especially between the two wars. But beginning in the nineteen sixties, the combination of black migration in and white flight out has meant that for the six cities you studied, more than half their populations are African-American. Does that demographic make it harder for cities to come back?

Matthew Kahn I am an optimist. So what you‘re correct about, and we document this in the book, is that across census tracts—census tracts are roughly groups of 4000 people—you see relatively few integrated census tracts across the six cities. And in the year 2020, the majority of tracts have a large percentage African-American, and whites tend to live in white neighborhoods.

I am an optimist that racial integration is more likely to occur and that there is harmony and learning and bridging social capital when crime is low and when efforts are taking place to improve local public schools. You raise the point about white flight. What I think has driven white flight as people move from center-city Baltimore to the suburbs is concerned about crime and concerns about local school quality. With the growth of the African-American middle class, there is the possibility of in our six cities and this exists—I‘m documenting this in my new work—of the growth of neighborhoods that are both majority-minority and also highly educated.

So it‘s a mistake in 2020 to claim that if an area is minority, that it‘s less educated. There is this growth—President Obama is a terrific example—there‘s this growth of the African-American middle and upper class, and many of these individuals are choosing to live in our six cities and to be role models and part of the income tax based in these cities.

Steven Cherry There have been studies that show that Pittsburgh is possibly the most segregated city in the entire United States, and that‘s in terms of those census block type studies. There‘s also the segregation of of cities and their suburbs. But you chose to study the center cities instead of the metropolitan areas as a whole. And there are some big differences. Pittsburgh‘s metro area, for example, is four times the size of a city. Philadelphia has some very wealthy suburbs. The Baltimore economy is intertwined with Washington, D.C.. Why did you choose to study the center cities?

Matthew Kahn When Mac and—and my book is coauthored with my good friend Mac McComas—when Mac and I wrote our book, it was clear to us that many young people in Baltimore, Cleveland, Detroit, and our other three cities are choosing to spend their entire lives in these places. Even if people constantly migrated and sort of emailed themselves from one place to another, then it doesn‘t really matter if their current location is suffering because they can easily just adapt by moving somewhere else. But because children born in a high poverty area in Baltimore are highly likely to live their whole lives in the city, it becomes very important to study these places.

You raised a key point and a point that urban economists discuss is whether center cities and their suburbs co-move: When there was white flight from the center cities in the 1970s, the suburbs gained more taxpayers and more human capital as people moved from the city to the suburbs. That‘s the substitutes case. There can be cases when the center city and the suburbs are complements: As the center city gets stronger, that makes the suburbs even stronger. And in the book we talk about this a little bit. But you‘re right that our focus is on the city centers because that‘s where the bulk of the poor people live and we care about their future prospects of achieving the American dream.

Steven Cherry Cleveland is no longer even the largest city in Ohio. Columbus is. And Columbus is the 14th largest city in the US. now. Its current population is right about what Cleveland‘s was at its peak. In fact, the two cities have almost perfectly reversed their populations since nineteen fifty. Why is one on the rise and the other in decline?

Matthew Kahn An excellent question. A starting point for many economists is what is the industrial base? Speaking cliches, what‘s the golden goose of the economy? So in Pittsburgh, it used to be steel. Now Pittsburgh is transitioning to robotics and medicine. I have never been to Columbus, Ohio. I‘ve watched Ohio State football games.

As a believer in the consumer city hypothesis—the consumer hypothesis posits that those cities with a great quality of life attract the footloose skilled. And in the new work-from-home economy, that‘s going to be even more true. Because Ohio State University is a great university and I believe it‘s the anchor of the Columbus economy, my conjecture while on your show is that it‘s the quality of life of that area attracting the footloose educated, and that this creates this sort of chicken and egg issue. Once you attract these footloose, educated near a major university, it feeds on itself like what‘s occurring in Texas, Austin, right now.

Steven Cherry I was going to say Austin is the poster child for this phenomenon that you‘re talking about. As you say, one part of the economy that has grown dramatically since 1950 is health care. Pittsburgh has a huge health care system led by UPMC, the University of Pittsburgh Medical Centers. So does Baltimore, though, led by your own Johns Hopkins. Why is Pittsburgh doing better than Baltimore?

Matthew Kahn I actually can‘t answer that. I actually don‘t know the answer to your question. An indirect answer would focus on the following. Baltimore‘s reputation has suffered because of its ongoing crime challenge, the horrible aftermath of the Freddie Gray riots in 2015. The murder rate per capita has been much higher in Baltimore than Pittsburgh.

And I and other urbanists have worried that Baltimore‘s reputation with people thinking of moving to cities ... Pittsburgh is actually a winner when Baltimore has a reputation of being unsafe. In the language of economics, that‘s called cross-elasticity. Pittsburgh competes with Baltimore for skilled people in jobs and if Pittsburgh and Baltimore have roughly similar hospital systems, but if Pittsburgh is safer, that would be one explanation for your question.

A point I‘d like to add about Baltimore is Baltimore ... At Johns Hopkins, the president of Johns Hopkins, Ron Daniels, is using the tools he has at his disposal to try to build up a biotech cluster in Baltimore by creating these partnerships between the university scientists and startup companies and trying to create an incubator. So Pittsburgh has its robotics firms co-located with Carnegie Mellon. Johns Hopkins is trying to do something similar, trying to recreate its own Silicon Valley in its comparative advantage—biotech—in Baltimore.

Steven Cherry The cities doing best in your list of six are Pittsburgh and Philadelphia. We‘ve talked about Pittsburgh. Why has Philadelphia improved in ways that, say, Cleveland and Detroit have not?

Matthew Kahn An idea that interests me is this system of cities. You can get for New York City to Philadelphia in just an hour by rail. And if Amtrak really does start to accelerate to speeds closer to China speeds, then effectively, Philadelphia becomes almost a suburb of New York City.

Steven, I have to work in China on China‘s high-speed rail. And what we document is that second-tier cities close to superstar cities in China like Beijing and Shanghai, when you connect these cities by high-speed rail, you create sort of this super local labor market where a spouse can work at the University of Pennsylvania and the other spouse can work at Goldman Sachs in New York. There‘s all of these permutations of how you live. And so I actually met the mayor of Baltimore, Brandon Scott, and we had a very productive discussion that Baltimore, the city of Baltimore, could become a suburb of booming Washington, D.C., if there‘s a faster train connecting Washington, D.C., to Baltimore. So part of my answer to your question is Philadelphia‘s location and also its integration into the transport network there.

Steven Cherry That‘s so interesting because one thing I was wondering is that perhaps Baltimore historically has suffered from being next to Washington, D.C.

Matthew Kahn That‘s a very interesting hypothesis. In my new work on work-from-home, I talk about permutations. We are a diverse society. And so you‘re right that Baltimore‘s about 40 miles from D.C. and what I really like about your point in the past, it was close enough to jobs and people were voting with their feet to go to D.C., but it was far enough that it wasn‘t really a suburb. Faster train [service] between D.C. and Baltimore would have two effects.

Steven, there‘s two train stations to the west of the city of Baltimore that are underdeveloped and sort of depreciating deferred maintenance. If there was a faster train connecting Baltimore to D.C. and if Baltimore became a type of suburb to D.C. for the new generation of work-from-home workers, this would help to renovate these two western neighborhoods. And this gets back to the coordination failure of underinvestment. There would be real estate developers who would invest in upgrading the housing stock within walking distance around the two West Baltimore train stations. And this would create new opportunities for restaurants and would improve local public schools as more educated people move in. And so it‘s this sort of synergistic activity—Washington, D.C., is booming right now and Baltimore could actually be in to its edge of being a large city where home prices are 75 percent cheaper than in D.C. right now.

Steven Cherry I‘m glad the conversation has turned to commuting because I did want to talk about that. To what extent do you anticipate a benefit for these cities from the pandemic and from remote work? I mentioned at the top the possibility of migration to cities such as this by people not ready to give up on city life, but looking for greater affordability.

Matthew Kahn This is a key question. Twenty years ago, two prominent economists, Julie Berry Cullen and Steve Levitt—Steve Levitt of Freakonomics—they wrote the following paper: They looked at data across America‘s cities. And keep in mind, this was written 20 years ago. And they documented that there is more center-city-to-suburbs migration—like moving from Manhattan to Westchester—there is more center-city-to-suburban migration when there is center-city crime. So, an unintended consequence of the city of Baltimore continuing to have a high murder rate is more outflows of skilled people.

Steven, the reason this matters is I claim that with the rise of work-from-home, that that behavioral response, people skilled, people who are able to engage and work from home will be even more footloose. There was that Kevin Bacon movie, “Footloose.” There‘ll be even more footloose and responding to quality of life than they were when Levitt wrote his paper 20 years ago. So what this means is the following. If a city like Baltimore can improve its quality of life, keep cleaning up the Inner Harbor, improve PM 2.5 in the city, become a more livable city with better public schools and with lower crime, then still people who love the consumer city—the people Ed Glaeser and Richard Florida talk about—the footloose skilled group want to live in these cities because there‘s great charm to these cities and there‘s currently very cheap housing. So to summarize my point here, the goal of quality of life becomes even more important as a magnet for cities in our new post-COVID world where people can work from anywhere.

Steven Cherry You could see this going the other way around, though, right? Remote work could also encourage people to move to or stay in the suburbs if they only have to commute into the city, say, half the workweek instead of the whole week.

Matthew Kahn Correct. What Mac and I talk about in our book is demographics. I am a big fan. In our diverse nation, we need different housing products for different people. A vegetarian never ends up with a meat pizza. What Mac and I talk about in our book is that there are young people ... Baltimore is filled with funky breweries and with funky, interesting people. Building on your point, we‘re going to get this self selection. I‘m fifty five and I‘ve lived in central cities. I‘ve lived in suburbs. Over the course of our lives, I can see young hipsters and I can see people my parents age, in the early eighties, wanting to be in a culturally vibrant, safe city.

Not everyone can be in Manhattan. Not everyone wants to be in Manhattan. Post-COVID. Baltimore, Cleveland and Detroit represent substitutes for the superstar cities, just as you said. And so I think you‘re right. We‘re going to see different strokes for different folks, those individuals who want lots of land for their children and want the suburban life will be able to fund that at the fringe of Baltimore. But over their life, when they were younger and perhaps when the kids leave the house, of this opportunity to enjoy the consumer cities of our six post-industrial cities,

Steven Cherry I haven‘t disclosed to our listeners yet that I have a stake in this conversation. Although I‘m a native New Yorker, I‘ve been living in Pittsburgh for the last year. And I have to say my third favorite microbrewery in the entire U.S. is right here in Pittsburgh. It‘s Eleventh Hour Brewery.

Matthew Kahn As a student of urban economics, you well know how the rise of the automobile forced us to redesign every aspect of America‘s cities, not just Detroit, where the cars were made, but every city where people own cars, that is all of them, even New York. It‘s a common prediction that we‘ll face another redesign of cities once cars drive themselves. Will that be good for struggling cities or make their struggle harder?

Matthew Kahn Wow. Let me answer this great question backwards. Steven. I taught for nine years at UCLA and the brilliant Don Shoup, the expert on parking, taught me so much about the economics of parking in cities like Los Angeles and in fact, in downtown Baltimore.

I‘m a walker. I actually don‘t drive. And when I would walk the city of Baltimore there‘d be these parcels of land, you just have to walk around a parking lot. And with no people there and it was fragmented and strange.

So Steven, in our new Uber ride-sharing economy, if we don‘t own cars, if instead we rent cars through apps like Uber, we will need much less land for parking. And the key question here is, once we liberate land from parking, what do we do with it? Do we turn it into green space? Do we set it aside as wetlands? You mentioned the climate change challenge for cities when we started. If Houston set aside more of its land from parking and diverted it to wetlands, would the city faced less flood risk?

So Steven, I think there‘s a very exciting opportunity for all of our cities, including the six cities in my book: When land is liberated and taken from parking and now could be used for anything, how will this public good and private good be reallocated? And I‘m optimistic. I‘m not such a great futurist. I know that I don‘t know how we‘re going to use this land, but I think it‘s going to be a key opportunity for cities to improve their quality of life.

Steven Cherry I‘m an optimist, too, on this point. I think that because of the car, a lot of these cities suffer some of the worst aspects of the suburbs without enjoying the benefits of the suburbs. You say in the book you look at the economic life of cities as not a zero-sum game in modern economies. Instead, you say everyone and all communities can gain from investments in human capital. But there is a bit of a zero-sum game in the battle between cities and their suburbs, isn‘t there? And won‘t autonomous vehicles potentially breathe new life into the suburbs as people care less about commuting?

Matthew Kahn Let me break this important question into two pieces. What is occurring in states like Maryland—Baltimore is a rather poor city and the rest of Maryland is actually a rich state ... if the next generation of poor kids in Baltimore, if they grew up to be poor, the taxpayers, the tax base in the suburbs of Maryland will have to pay more taxes to provide redistributive services to the center-city residents. With that in the back of my mind, what Mac and I were arguing is if the investments in human capital, in Baltimore‘s children and in our other five cities, if these children are able to escape poverty and become functioning adults in our economy, the rest of the suburban taxpayers, their tax dollars can be spent on public goods they want rather than redistribution to the poor because the human capital investments would have reduced the count of poor people.

Steven Cherry So won‘t autonomous vehicles potentially breathe new life back into the suburbs as people care less about the length of their commute?

Matthew Kahn I agree, Steven. As I think about Baltimore, here‘s what I‘d like to know and which we‘re not able to collect data on. How many suburban residents in Baltimore ever go to the city of Baltimore except to go to a baseball game because of the challenges that the city of Baltimore has faced and which The Wire slightly made famous. I believe that many Baltimore suburbanites do not venture ... they don‘t work in the center city and they don‘t visit the center city.

In an alternative world, as Baltimore and our other five cities make center-city progress, I believe there‘s going to be more trade between the center-city residents and the suburban residents—of the suburban residents spending more time at funky restaurants in the city. When there is the absence of trust between people, cautious people won‘t even venture into the city. So city that I believe with the rise of automated vehicles and also with the rise of apps like Yelp—so if I‘m a suburban resident and I love microbreweries, rather than buying a six-pack at the local 7-Eleven, I might venture to one of the Pittsburgh or Baltimore microbreweries and automated vehicles would get me there, I can have a few drinks at the bar, and get home with the automated vehicle.

So I actually think and maybe this is convenient, that improve quality of life in the city center combined with automated vehicles that improve transit access—and I would see with road pricing also; with route pricing to have what Singapore has: the ability to always move at 40 miles per hour. So combine road pricing in these cities with improved quality of life in the center and automated vehicles and Steven suburbanites of Philadelphia, Cleveland, Detroit would have such a larger menu of consumption opportunities because they have the option to visit the center cities funkiness when they want to go.

Steven Cherry That‘s an interesting hypothesis. I know that it‘s it‘s not just breweries and worries about driving home after that. It‘s also ... theater in New York used to start much later in the evening than it does now. And I‘m pretty sure that that has mainly to do with people not wanting to drive back at midnight. I mentioned the connection at the top between cities and sustainability. If the Biden administration gets serious about climate change—if it‘s allowed to get serious about climate change by the U.S. Senate—will part of that be to jump start the economies of cities such as the ones we‘re talking about. And I do note that your focus on investment in young people in education is already a little bit jumpstarted by the $1.9 trillion economic plan that did just pass.

Matthew Kahn This is a very important question. Steven, in a city like Baltimore, most of the housing stock are these row houses, many of which were built like one hundred years ago. And let‘s just say that those homes did not have solar panels and may not have been optimized for insulation or for modern temperature conditions. In Baltimore‘s public schools, they get extremely hot during summer, and that‘s impeding children‘s learning in May and September. If it‘s like 95[F] degrees outside and humid, children are not learning inside. And so part of the Biden stimulus, there is a double bottom line implication for cities like Baltimore. Real estate developers will now have incentives as they renovate to make these buildings greener and more livable. So this both would shrink Baltimore‘s carbon footprint, but also protect Baltimore‘s poor and Baltimore‘s residents from extreme heat when these events do occur,

Steven Cherry It‘s not just Baltimore. We just had to replace a section of one hundred-year-old pipe in our basement here.

Steven, a point that my coauthor, Mac McComas, a long time resident of Baltimore, argues our cities, and especially Baltimore, actually have certain advantages over some of the superstar cities in adapting to climate change. Manhattan is an island and the challenges it faces from sea level rise, especially in the presence of a natural disaster. The damage we saw from Hurricane Sandy shows the potential damage that Manhattan could face in the future from climate change. Mac has argued that Baltimore, because of its topography, because of its hilliness, actually has more higher ground than other cities.

So Steven, without being a booster for our six cities, one of the things we tried to achieve in our book is to make the case for what is the comparative advantage of these cities going forward. The jobs aren‘t coming back to Pittsburgh. In Baltimore, manufacturing‘s not coming back. The potential next golden goose is this biotech cluster that we talked about, but also improved quality of life. People have to live somewhere in our hotter future. And Baltimore‘s topography—in a Goldilocks sense, Baltimore is large enough to have a vibrant consumer city scene,  but it‘s small enough to be more livable and affordable and Mac has argued the topography of Baltimore—and with its funky various neighborhoods—that there‘s a whole menu for people to choose from in our diverse society.

Steven, a final point. The United States has 340 million people. Baltimore has lost 300 000 residents in recent decades. So if just one percent of America started to think about moving to Baltimore, one of 340  million is 340 000.

Steven Cherry Well there will certainly be winners and losers among cities and climate change. I think the most exposed city in the entire world in terms of potential property loss is Miami, Florida.

Well, Matthew, the problems of climate change and cities in decline have both been with us a long time. And it‘s good to see there are people tackling both, especially if either can‘t be solved without the other. Thank you for your work on them and for joining us today.

Matthew Kahn Steven, thank you so much.

Steven Cherry We’ve been speaking with Matthew Kahn, Distinguished Professor at Johns Hopkins University and  Business Director of its 21st Century Cities Initiative; and co-author of an important new book, Unlocking the Potential of Post-Industrial Cities.

Radio Spectrum is brought to you by IEEE Spectrum, the member magazine of the Institute of Electrical and Electronic Engineers, a professional organization dedicated to advancing technology for the benefit of humanity.

This interview was recorded March 18, 2021 using Zoom and Adobe Audition. Our theme music is by Chad Crouch.

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For Radio Spectrum, I’m Steven Cherry.