The myth of the centralised urban economy

By Ross Elliott, cross-posted from The Pulse

“The great enemy of truth is very often not the lie–deliberate, contrived and dishonest–but the myth–persistent, persuasive, and unrealistic. Too often we hold fast to the cliches of our forebears. We subject all facts to a prefabricated set of interpretations. We enjoy the comfort of opinion without the discomfort of thought.”

That was from a speech by former US Democrat President John F Kennedy, while at Yale in 1962 and prior to entering politics. I came across it during a visit to the Kennedy Presidential Library in Boston a few years ago. How true it still is.

The myth of the centralised urban economy is certainly persistent, persuasive, and unrealistic. It qualifies as opinion unchallenged by uncomfortable thought. It is also subject to prefabricated interpretations. It goes something like this: CBDs are where the majority of people work. Therefore we need planning that reinforces a centralised economy and we need to prevent people living far away from CBDs, instead providing more housing nearer to the centre – because this is where the jobs are and where everyone wants to be if they could.  Attracting more jobs to a metro region is best done by ploughing more taxpayer dollars into CBD amenity, or into transport networks that serve the inner city. That simplistic outline crudely (and sadly) sums up too much of what passes for urban planning orthodoxy.

Census after census has proven this wrong. In Australia, the CBD share of metro jobs in major cities is between 10% and 15%. In the smaller capitals it falls between 15% and 20%. (It is also shrinking because the suburban economy is growing faster than the CBD, thanks mainly to industries like health and education). How does our CBD share compare on a global scale? Some argue that Australian cities need more centralisation to be efficient. Compared with what?

Comparing Australian cities to some global benchmarks is an interesting exercise. A study of around 100 cities in Australia, Europe, Asia, Canada and the USA tallied more than 300 million metropolitan jobs. Of these, under 30 million were in CBDs. The average was 9%. But these were mostly 1990 data, and some of the cities were not very comparable to Australia. So I selected a slightly more comparable list and updated the data to around 2016 to 2020 numbers. For Australian cities, the CBD was the 2016 Census SA2 boundary while the Greater Metropolitan area was used for the whole. While the numbers will have changed, the proportions won’t have changed much, so it’s useful as a guide.

Based on this selection, the average CBD share of metro wide jobs for a city in a modern western economy is around 13%. Not 30% or 50% or 60% but 13%. Meaning globally some 87% of people living in cities of substantial scale and with substantial urban economies, do not work in the CBDs but are more likely to be found working in suburbs.

Sometimes, in efforts to bolster the numbers to favour the centralisation narrative, the definition of a CBD is enlarged to something like a 5 kilometre radius – which in most cities reaches very much into suburbia. While it is true that CBD boundaries don’t fully reflect the extent of near city employment, it is also true that metro boundaries don’t fully reflect the boundaries of suburban employment. Too often the inner city is broadly defined and the outer urban narrowly defined. Do both, and hey presto you can prove anything with statistics.

So the myth of the centralised economy lives on. It is an enduring urban fallacy which is rarely investigated. Increasingly, government budgets seem to favour inner cities over suburban domains where the vast majority of a city’s residents – more than eight in every ten – live, work and play. This is leading to a new class divide not based on occupation or education, but on geography.

Interestingly, the global data has also been pointing to an organic decentralisation of urban jobs that preceded Covid. Academics like Prof Ed Glaeser (Harvard), Prof Peter Gordon (Uni Southern Calif), Joel Kotkin (Chapman University), Alan Berger (MIT), Samuel Abrams (Stanford), William Frey (Brookings Institute), Schlomo “Solly” Angel (NYU) and others have all observed the data on jobs and housing was for some time prior to Covid saying something very different to the conventional narrative.

“The combination of city growth declines and higher suburban growth suggests that the “back to the city” trend seen at the beginning of the decade has reversed,” said Bill Frey. (Big city growth stalls further, as the suburbs make a comeback – Brookings Institute 2019).

“We found that, on average, only 1 out of 12 people live and work in the same community; only 1 out of 9 jobs is still located in the CBD; and only 1 out of 7 jobs is located in employment sub-centers outside the CBD,” said Schlomo Angel in The spatial structure of American Cities (Science Direct. Jan 2016).

“Contrary to perception, the nation is continuing to become more suburban, and at an accelerating pace. The prevailing pattern is growing out, not up, although with notable exceptions,” said Jed Kolko in an article entitled “The Myth of the Return to Cities” (New York Times, May 2017). Jed was last year appointed Under Secretary of Commerce for Economic Affairs by US President Joe Biden.

Covid, or more correctly government responses by way of lockdowns and work from home mandates, has evidently accelerated that movement of people and work toward the suburbs and regions.

However, don’t expect the myth to quickly evaporate. There is much at stake: professional and academic reputations, industry group agendas, government budgets, plus the beneficiaries of inner urban favouritism – the higher income earning inner city dweller who is now revelling in the ownership of the most expensive real estate surrounded by the best amenity, paid for by taxpayers, most of whom live and work in much less salubrious suburban or regional environments. Anyway, to actually think about things rather than look for confronting evidence and think it through, can be uncomfortable, as JFK observed some 60 years ago this year. And we all enjoy the comfort of our opinions more than the discomfort of thought.

Comments

  1. Camden HavenMEMBER

    Follow the money, cities are simply too expensive each job getting huge government subsidy CBD is ast it’s peak.

    NBN disaster makes sense now.

  2. Great article! Totally agree that urban planning is not keeping up with modern trends. But, are we not already seeing infrastructure being decentralized? (for example, hospitals and schools are outside CBD, Entertainment Centre closed in Sydney CBD with concerts moved to Olympic Park, Power House museum migrating to Parramatta, etc.)

  3. Oh but they forgot the multiplier! The Urban Research Industry Network of Economists has recently calculated that for each CBD job, a further 2 jobs are generated in the suburbs and… it’s hard to believe… 3 in the regions, especially remote areas. The economist contracted by URINE to lead the study stated “that even my own properties in and around the CBD are benefiting from this economic marvel”.

    • And they never even took into account Lucy Turnbulls 3 CBDs here in Syd, that must be like 3 to the power of 3!😜

  4. And yet, we are extraordinarily “centralised” by OECD standards, with 40% of the population camped in just two huge metro sprawls. Hence, a repetitive chore for LibLab Immigration Ministers is lying about decentralising migration.

  5. arescarti42MEMBER

    Great article on a very persistent myth. So many people I speak to thing that most people work in the CBD.
    A couple of points to note however:

    -Even at 10-15% of jobs, CBDs by far have the largest number of jobs for a single location. Suburbs might have the greatest number of jobs in absolute terms, but they are scattered thinly across a huge geography.
    -Job density is higher the closer to the middle of a city you go, and commuting flows are predominantly from the outer suburbs in as a result.

    What this means is that transport infrastructure still needs to be designed to get people to the CBD via public transport, and by roads and freeways from the outer suburbs inward. It also means the closer you go towards the CBD, the closer you are to more jobs.

      • Yes, very much the educated white collar professions that benefit from this setup, strangely the LNP don’t seem to think it should be a user pays model where their “sponsors” workers & offices are.

    • Ross ElliottMEMBER

      “Given this overwhelming evidence, we must therefore conclude that the Monocentric City model is not an appropriate model for describing the overall spatial structure of contemporary American cities. Yes, the CBD is indeed the largest concentration of jobs in all American metropolitan areas. But this is a far cry from claiming that the great majority of jobs or, at the very least, half the jobs, is located in the CBD, or that most commuting takes places from the rest of the city to the CBD. We must therefore conclude that the Monocentric City model no longer captures the essence of urban spatial structure in American cities. It is, at best, a description of a small, not to say a marginal, share of commuting behavior in these cities. Needless to say, policies, programs and projects that focus the bulk of political and financial capital on this marginal share will not benefit the great majority of commuters—possibly as many as 90% of them, on average—that do not share the CBD as their destination.”
      See Schlomo Angel’s excellent work on this https://www.sciencedirect.com/science/article/pii/S0264275115300238

  6. Cameron MurrayMEMBER

    I think a lot of this discussion is a semantic one.

    In terms of the share of all jobs CBDs are perhaps not as high as some people think. There are only so many productive things you can do in ann office/retail environment. But in terms of density they are way higher than anywhere else. For example, Brisbane CBD is 2.5sq/km, or 0.015% of the city area, yet with 12% of the jobs—i.e. 800 times more “job dense” than the rest of the city on average.

      • Scouring through the comments, this is probably on point the most about the CBD scam.

        Look at Sydney, a horrendously uneconomic amount is paid for ‘prime real estate’ at Barangaroo…..

        To then justify this amount, an extraordinary yield must be paid on the office tower(s) here. This will be on multi-story offices, which in turn the economic activity must have an (extraordinary) margin, just to ‘keep the light on’.

        To channel the workforce into these office towers, there is now a train line from North Sydney to Barangaroo via an expensive 2nd tunnel under Port Jackson…..

        So,

        A taxpayer subsidized tunnel was built….
        To operate a tax payer subisidized train line….
        To funnel workers into a office tower(s)…. which connected people paid too much for… this premium is thus being alleivated by this workforce occupying floor space……

        Wouldn’t it make more sense to have private money build the office tower at Victoria Cross, and not have tax payer money build the train line?

        • Until recently, the response would have been that if the Victoria Cross guy needs to meet with people based in Barangaroo, they would have to catch the train there and back. However, in the age of Zoom, etc., that argument becomes a little questionable.

          • Until recently, the response would have been that if the Victoria Cross guy needs to meet with people based in Barangaroo,

            And no one ever asked “why does the guy need to be based in Barangaroo?”

            The reason why was they were forced to be based in Barangaroo to justify the exorbitant cost they bought the land for… and the tax payer subsidised the movement of people to be based in Barangaroo.

  7. working class hamMEMBER

    Mixed use zoning should be a higher priority for the future.
    The Arts and Industry estate in Byron Bay is an example of one situation were commercial/ light industrial/ residential have all been allowed to merge together, forming a self contained community, with no forced reliance on vehicles.
    The Netherlands also allows mixed density development, focusing on quality of life rather than developer profits.

    Housing estates, strip malls, gigantic centralised shopping centres are all products of zoning structures designed to maximise profits for large scale developers. Changing zoning laws would alleviate the strain on mass transit infrastructure and decentralise employment hubs, whilst providing affordable housing options for all types of households, reducing heat islands created by current planning.

    • Yes, these days with much of industry being far less polluting, noisey etc it likely makes a lot of sense to allow mixed zoning.

      • working class hamMEMBER

        Nah, stinky hippies is pretty accurate. The change over the last 15 years from standard industrial estate to mixed use is very noticeable.

  8. the beneficiaries of inner urban favouritism – the higher income earning inner city dweller who is now revelling in the ownership of the most expensive real estate surrounded by the best amenity, paid for by taxpayers, most of whom live and work in much less salubrious suburban or regional environments.

    Out-of-touch inner-city elites.

    Australia is run by out-of-touch inner-city elites for the benefit of out-of-touch inner-city elites, elected by millions of unthinking voters.

    Australia has a one-giant-city-per-state policy. Why is this? Who benefits? Inner-city land owners.

    A fair resource usage charge (AKA land value tax) would be a large part of the solution to this problem.

    • A fair resource usage charge (AKA land value tax) would be a large part of the solution to this problem.

      Yup..

      Quadruple current land rates, eliminate income tax.

      The efficient users of land will be incentivised to move to areas where the land is as close to free as possible… i.e. outside of capital cities.

      Those seeking land as a luxury item (i.e. with the amenity which surrounds it) can be the heavy lifters of the tax burden.

  9. This issue is important and deserves urgent consideration in Australia. The suburbs now go on forever and the residents there have a habit of demanding facilities usually located in CBDs in their own back yards. Mini CBDs are expensive. Suburban development is strongly influenced by those in control of the “land banks” – money and opportunities for corruption all over the place.
    This issue of suburban development ties in with that of national population and present trends are not good. The “New Urbanism” concept (and its offspring) has been around for a while now ; people need to be very strongly encouraged to move back to CBD hubs. New cities , better and easier public transport coordination – new CBD ism !
    There’s still some time and a bit of wiggle room regarding choice but there needs to be coordination and action. The myth needs to become reality of a new sort.

    • people need to be very strongly encouraged to move back to CBD hubs

      We really need a strong leader to mandate that every person must live near the CBD. I favour mandating one CBD for the entire country. Sydney has too much urban sprawl and the dam is too far out. So I would mandate Hobart for the CBD.

      The way to do it would be demolish a 3km radius from Hobart centre and perform of continuous concrete pour, with conduits and pipes pre-laid. Then mandate minimum building heights depending on distance from the centre point, with the centre building the highest of all.

      Once construction was well underway, I would mandate that no person is allowed to live on the Australian mainland, and all must move to the new Aussie CBD of Hobart.

      Just think of how efficient this mega city would be! Food and manufactured goods could be shipped direct from China to the Hobart port. No dirty trucks spewing CO2 poison.

      All work could be performed by University-trained citizens using powerful computers and the latest smartphone technology. Any obsolete technology would be shipped-out for recycling in a green approved fashion.

      Instead of dirty delivery vehicles, a new delivery system would be attached to the tallest building. Designed similarly to a hills hoist or farm irrigator, 3km long arms would rotate over the entire city land area. Products would be placed in the centre and automatically moved out and dropped on their destination. Food, computers, smart phones and even the monthly mRNA boosters could be delivered this way.

      By concentrating people and production into a small area we can maximise GDP, maximise land value wealth, and minimise CO2 pollution, as well as making it much easier to gain herd immunity for our country’s most important asset – the obedient citizen.

    • Can’t really agree with any of that…

      This issue is important and deserves urgent consideration in Australia. The suburbs now go on forever and the residents there have a habit of demanding facilities usually located in CBDs in their own back yards. Mini CBDs are expensive.

      Greater Sydney in the 1961 had a greater population than all but Melbourne today. You can track all its railway lines than were in place then, and drop off at virtually every 3rd train station.

      Ashield, Strathfield,. Lidcombe, Merrylands, Fairfield. i can go on. These were all “mini-CBDs, they were in everyone’s backyard and they were affordable.

      Suburban development is strongly influenced by those in control of the “land banks” – money and opportunities for corruption all over the place.

      So it’s not expensive as a natural economic law, its a barrier to entry by way of corruption…. If that’s the case I wouldn’t be blaming the punter for wanting ‘expensive mini-CBD’s as my response … I’d be forming covert death squads to eliminate corruption as my response.

      This issue of suburban development ties in with that of national population and present trends are not good. The “New Urbanism” concept (and its offspring) has been around for a while now ; people need to be very strongly encouraged to move back to CBD hubs.

      No, the move back to CBD’s is a containment and control response by bureaucracies.

      New cities , better and easier public transport coordination – new CBD ism !

      With the recent migrationary wave to regional cities, it’s happening…. all without central planners… probably in defiance of central planners actually.

      There’s still some time and a bit of wiggle room regarding choice but there needs to be coordination and action.

      No it doesn’t, the private population organises itself and elects to makes choices better than any ‘planning’ can ever do.

      Planning needs to get out of the way, corruption is a form of coercing behaviour to maximise the benefit to those who are part of the corruption process.

      The myth needs to become reality of a new sort

      $6,000 blocks of land in regional cities needs to be the reality, and all the issues go away. The simplest ‘plan’ of all.

  10. Amazing quote from JFK. Youd expect he wrote that himself as it was pre politics.

    Great article also.

    • I hate to be pedantic, but, this speech was given during the JFK Presidency. He had intended to study at Yale in 1940, but changed his plans in order to prepare for the US entry into WWII. Yale instead awarded him an honorary degree in 1962, which is when he made the speech.