Argument: we need to question today’s economic equations that are based on the suburban experiment

Here is an interesting argument regarding the American suburbs: Charles Marohn suggests the economic equations behind suburban development need to be questioned.

I’m struck by how strongly our culture associates growth and prosperity with highway construction and expansion. Tom Friedman, a respected left-of-center columnist with the New York Times, had an entire chapter in his most recent book, That Used to Be Us: How America fell behind in the world it invented and how we can come back, devoted to the concept that “our winning equation” is, in part, to invest in infrastructure and then watch prosperity flourish, just like it did in the 1950’s and 1960’s.

Of course, this ignores that fact that our investments during the first generation of America’s Suburban Experiment (1950-1975) were higher return investments that generated a lot of positive cash flow. I like to point out that, when we built the 35W bridge here in Minnesota for the first time, it connected far flung areas of the Minneapolis/St. Paul metropolitan region in a way that had not been done before. Following that investment, new commercial real estate was developed, new residential housing went in and the resulting influx of tax receipts made us feel wealthy. When the bridge fell down and had to be rebuilt, we didn’t experience all that new growth, just the costs of construction and delay. Maintenance has an entirely different set of financial metrics than new construction…

Unfortunately, we base this belief on the illusion of wealth that was created in the early years of the Suburban Experiment, where the first life cycle of horizontal expansion had produced growth for our economy and that pesky overhang of maintenance was still a decade or more away. We should know better by now, but there are few in a position to change the system that don’t benefit, at least in the short term, from it being perpetuated…

Now let me drop the bomb I’ve been alluding too: Those “benefits” that we kind of think of as prosperity, wealth or GDP; they really aren’t. There are derived from a set of narrow correlations between time saved and prosperity that we witnessed in the early 1950’s when we built those initial highways. We connected these far flung places — places only served by railroads or poorly constructed roadways prior — and we saw all kinds of economic gains. We then used that knowledge to build equations to justify expansion of the system. Nobody ever questions those equations today (why would they) and nobody stops to consider the diminishing returns of the system.

So there is not actually any money here, just a few seconds of saved time here and there that economists and engineers equate with money when they are trying to justify a project. Do you take home more money, generate more wealth for the economy or spend more of your income when you can arrive at work 45 seconds more quickly? Not me either. These equations are a joke. (If you want to learn more, read our 2010 series on Costs and Benefits.)

An interesting update to an old argument: the suburbs are unsustainable in the long run because they are based on new growth and continuous reinvestment. In the end, there won’t be enough money left to sustain it all, even if we could keep the infrastructure up to date.

Is Marohn really saying that the economic growth of the United States since the 1950s is largely an illusion? I’d like to hear about more of this aspect of the argument…

This reminds me of some of my research on suburban communities that are approaching build-out. In their earlier growth phases, these communities could expect a certain amount of money to flow in from new development and fees. However, once this stopped (and combined with the recent economic crisis), these towns are left scrambling for money. Without a good amount of new development, the budgets aren’t increasing much even as residents continue to push for equal or increased levels of service plus everything is aging (infrastructure, housing stock which makes it less attractive, municipal buildings, etc.). Is this an analogous situation?

Bonus: you even get a financial analysis of a diverging diamond interchange!

One thought on “Argument: we need to question today’s economic equations that are based on the suburban experiment

  1. Pingback: Fuel efficiency goes up, gas tax revenues go down $50 billion (or so) | Legally Sociable

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