Extra: Alain Bertaud on Urban Planning and Cities

Diversity in cities creates challenges but the largeness of cities make them great places to address those challenges.
What can solve the problems that emerge in cities?
Freedom.
That’s the answer given by Alain Bertaud in his interview with Juliette Sellgren on The Great Antidote podcast. Their discussion about cities and urban planning centered on problems that cities have to solve. Let’s explore the episode with Adam Smith’s observation that the division of labour is limited by the extent of the market in mind.
We often think about the extent of a market in terms of geographic barriers or political borders that might prevent us from trading with people in another place. Bertaud implicitly discusses a more oblique barrier to the extent of the market: eliminating potential economic interactions by prohibiting certain economic activities. If you can’t do business because you run afoul of regulations, it’s practically the same as not having access to the person you would do business with without those regulations.
Smith’s insight is that the more people are available in the market, the more finely the division of labour can be, both within an enterprise (as in the famous pin factory) and across markets (as in the labourer’s woollen coat).
The more people to whom a provider of goods or services can appeal, the more a market can address niche problems. In a more limited market, there are not enough consumers to justify specialty businesses—the focus has to be on broad appeals.
“The extent of the market” explains why small towns might only support a single grocery store (or big-box store that caters to everyone), while big cities have groceries appealing to dozens of markets, such as organic foods and regional cuisines, as well as general grocers and big-box retailers.
Problem-solving cities
Bertaud conceives of cities as places with “the possibility of meeting a lot of people and seeing a lot of things that you don't expect…[with] huge diversity”. [03:17] Diversity creates challenges. But the same large scale on which cities operate that generates diversity also makes cities better suited as places to address those challenges.
Take Bertaud’s first example. [5:46] To understand whether a city is functioning well, consider:
“a migrant coming either from a different country or from the countryside. A migrant with no skills which are directly usable in cities. How long does it take for this migrant to be fully integrated into the economy of the city? It's difficult to measure, but I've been trying to do it, mostly through case studies. In some cities, it takes two or three generations for migrants to integrate themselves fully [to reach] the same productivity as their colleagues in the city. In some other cities, as was the case in Hong Kong in the sixties and seventies, it takes about maybe one or two years.”
Cities can and do interfere with the ability of newcomers to integrate through regulation. Housing regulations often require what Bertaud describes as minimum consumption limits. When new housing units have to be a minimum size (or have a minimum set of amenities), the market can’t provide small units and more flexible housing arrangements.
Eliminating the ability of a builder or landlord to create or offer more accessible options is functionally the same as denying those looking for shelter access to the individuals who would otherwise try to meet their needs.
Another city problem is commuting. Travel time limits the extent of the market everywhere. Congestion in cities means that travel time in the city affects the extent to which the city can operate as a single labour market.
Thinking of congestion as a problem of getting people to any job in the metropolitan area in less than an hour [28:25] helps avoid falling for visions that urban planners might have if they focus too much on design.
For instance, elegantly designed hub-and-spoke transit systems designed to get people from the suburbs to the core of a city mimic old evolved street layouts from when merchants from the country travelled to the urban market to sell their goods. They are a poor solution for moving people around a metropolitan area once the extent of the market supports more than a single commercial hub in the city. The “spokes” of the system can’t move workers quickly and easily between suburbs without first sending them out of their way. Supporting more connections extends the market.
Back to (economic) basics
Following Bertaud in thinking of cities as crucibles for solving economic problems makes Smith’s observation loom larger. Cities are formed for many reasons, but their usefulness persists and grows because they expand the extent of many markets—for labour, housing, goods, services—for individuals who live in them.
Physical proximity is a big part of this, as the ability to know about and interact with trading partners is a big part of what it means to have access to them. But another part is being allowed to access the full range of options they might offer.
This is where Bertaud’s observations about economic freedom in cities come in. Economic freedom acts like physical proximity by allowing us to meet more needs for one another in the same way that physical proximity can.
We might approach solutions to city problems differently with this in mind. For the problem of getting workers to their jobs, a city that interferes with building through landmarking or restrictive zoning might improve its transit policy to allow more and better ways of moving people. A city that hesitates to allow innovation or adaptation in transportation systems might compensate by building up more jobs and services where the workers are. In both cases, the city hides solutions that would be available, if people had the freedom to find them.
If we want as many people as possible to have the chance to discover the most valuable ways to serve one another, we should focus on the best ways to break down the barriers constraining the extent of our markets.
Ready for more?
Lesson Plan: Understanding the limits of the “Extent of the market”
EconTalks with Bertaud: Fixing Sick Cities and Cities, Planning, and Order Without Design
More from Bertaud on famously disruptive buildings and Adam Smith
Ryan Muldoon's Freedom is Different People: Cities & Inclusive Freedom
Andrew Smith's On the Development of Communities
EconTalks with Bertaud: Fixing Sick Cities and Cities, Planning, and Order Without Design
More from Bertaud on famously disruptive buildings and Adam Smith
Ryan Muldoon's Freedom is Different People: Cities & Inclusive Freedom
Andrew Smith's On the Development of Communities