The economic case for density: how Australia can fix its cities

Melbourne: probably not dense enough. Image: John O'Neill/Wikimedia Commons.

It was a time of extraordinary change. Cook had not long named New South Wales, the American Revolution was well underway, and in towns and cities of England, the Industrial Revolution was about to begin.

Rivers were taking industry out of cottages. Machines made possible through advancements in ironwork required greater scale, more people and more power, and so were being housed in purpose-built factories and mills adjacent to running water. Individuals who once were generalists, and who had owned production from beginning to end, became part of a process: specialists, narrowing what they did, becoming better at it, and producing more.

It was a process observed by the father of modern economics, Adam Smith. In his 1776 magnum opus The Wealth of Nations, Smith identified the key to increasing productivity as specialisation achieved through scale and density.

As populations swelled in cities, poets wrote of dark satanic mills, painters portrayed industry as hell incarnate, a new world formed of developed and developing nations. It was not the same scale nor pace as today, but it too was a period of great disruption.

Cities and the economy of us

Much has changed in the quarter of millennia since.

Whereas cotton from the fields of the Mississippi delta was the raw material of the industrial revolution, and gold caused the rush across the states of Australia, in advanced economies, the raw material is us. It is our ability to generate work with our heads and not with our hands, our mind and not with what is mined, our knowledge and innovation capacity that is the main source of wealth.

Rivers are no longer the driver of density: they’ve been replaced by the location of skilled workers, a steady flow of graduates, and the need to be close to likeminded firms. Specialisation which once took place within firms now takes place across firms, through clustering, benefitting through economies of agglomeration. Machinery to produce more tangible goods and drive economies of scale has been replaced by how efficiently we transport ourselves in and out city districts, producing more intangible goods.

These days we talk less of scale and specialisation, and more of cities as the manifestation of Smith’s fundamentals for a productive economy. Rightly so: as Dobbs, Woetzel and Manyika say in No Ordinary Disruption, with each doubling of population every city dweller becomes on average, 15 percent wealthier, more innovative, and more productive.

Half the planet’s population are city dwellers, but they generate three-quarters of the world’s GDP. In Australia, that figure rises to 80 per cent: it is one of the most urbanised countries in the world, with three quarters of the population living in cities of 100,000 people or more, compared to 68 per cent of Americans, 71 per cent of  Canadians, and 62 per cent of Brits.

So, there is some evidence that Australia’s prime minister Malcolm Turnbull is asking all the right questions with his newly formed portfolios on “innovation” and “cities”.

Cities and productivity

Yet not all cities are good productive cities. Africa has the highest average city density of all continents yet is nowhere to be seen on global productivity tables. India has 8 of the world’s top 10 densest cities – yet none of them are close to being the most productive.

In contrast Australia has some of the most productive cities in the world: Sydney, Melbourne and Adelaide placed 10th, 13th, 35th on GDP in the 2010 Global Urban Competitiveness report. Yet when looking at GDP per capita, this slips to 97th, 110th, 121st respectively; and on patent applications, it’s even worse, and those rankings are 281st, 237th, and 260th.

There are infrastructure problems, too. Enright & Petty declare in Australia’s Competitiveness: From Lucky Country to Competitive Country that Australia has “some of the worst exemplars of urban sprawl in the world”. The independent statutory body Infrastructure Australia estimates “congestion is likely to cost Australians $53bn by 2031.”

Meanwhile, in Mapping Australia’s Future, the independent think-tank, the Grattan Institute, found that residential patterns and transport systems mean that central business district employers “have access to only a limited proportion of workers in metropolitan areas”.

The lesson here is that good productive cities require planning. Policymakers and politicians need to encourage density to increase the strength and scope of agglomeration economies, to develop skills matched to jobs being created, to strengthen supporting the local economy that benefits from both.

Good productive cities require high connectivity, too. Leaders need to facilitate quality exchange through infrastructure and transportation – to connect firms with each other, to connect workers to firms, to connect consumers to the local economy, to build the economic competitiveness of human capital: the economy of us.

The better connectivity, the more exchange, the greater innovation, the greater productivity. This is why the 3m people living in Silicon Valley have an economy larger than the 90m living in Vietnam. It is what Venables from the London School of Economics described as the New Economic Geography – the value in interaction and exchange brought about by clustering of firms.

Innovation and the importance of exchange

“More densely populated cities are more attractive to innovators and entrepreneurs,” explain Dobbs, Wetzel, Manyika, “who tend to congregate in places where they have greater access to networks of peers, mentors, financial institutions, partners, and potential customers.” It is no coincidence that those who excel online and can locate anywhere in the world choose to neighbour offline, clustering in places like Silicon Valley, Bangalore, and Silicon Wadi in Tel Aviv.  

Face-to-face exchange has been necessary for innovation in cities “since Plato and Socrates bickered in an Athenian marketplace”, explains economist Professor Edward Glaeser in his book Triumph of the City.  “Innovations cluster in places like Silicon Valley because ideas cross corridors and streets more easily than continents and seas. Patent citations demonstrate the intellectual advantage of proximity.”

But innovation is about more than STEM graduates, the co-ordination of government and industry on R&D, the promotion of entrepreneurship: it is about cities that can develop and retain innovation through quality exchange; it is about cities where firms will choose to cluster because they can see the value in exchange and infrastructure is in place to facilitate it.

This is the fundamental difference between providing skills for ideas born elsewhere, or providing skills for cities where ideas are exchanged, innovation occurs, patents formed, and productivity increases.

It is why Malcolm Turnbull’s two new portfolios must be intrinsically linked for long-term economic growth. The more complicated the world becomes, the more value there will be in proximity to those who may have the answer; the more value there will be exchange with those who may have the answer; and the more value there will be in connectivity to those who may have the answer.

The more complicated the world becomes, the more it will value cities with answers.

The challenge is to make them Australian.

Kevin Keith is an Australia-based researcher who helped research Alastair Campbell’s book Winners and how to Succeed. He now works for the built-environment body Consult Australia.


To build its emerging “megaregions”, the USA should turn to trains

Under construction: high speed rail in California. Image: Getty.

An extract from “Designing the Megaregion: Meeting Urban Challenges at a New Scale”, out now from Island Press.

A regional transportation system does not become balanced until all its parts are operating effectively. Highways, arterial streets, and local streets are essential, and every megaregion has them, although there is often a big backlog of needed repairs, especially for bridges. Airports for long-distance travel are also recognized as essential, and there are major airports in all the evolving megaregions. Both highways and airports are overloaded at peak periods in the megaregions because of gaps in the rest of the transportation system. Predictions for 2040, when the megaregions will be far more developed than they are today, show that there will be much worse traffic congestion and more airport delays.

What is needed to create a better balance? Passenger rail service that is fast enough to be competitive with driving and with some short airplane trips, commuter rail to major employment centers to take some travelers off highways, and improved local transit systems, especially those that make use of exclusive transit rights-of-way, again to reduce the number of cars on highways and arterial roads. Bicycle paths, sidewalks, and pedestrian paths are also important for reducing car trips in neighborhoods and business centers.

Implementing “fast enough” passenger rail

Long-distance Amtrak trains and commuter rail on conventional, unelectrified tracks are powered by diesel locomotives that can attain a maximum permitted speed of 79 miles per hour, which works out to average operating speeds of 30 to 50 miles per hour. At these speeds, trains are not competitive with driving or even short airline flights.

Trains that can attain 110 miles per hour and can operate at average speeds of 70 miles per hour are fast enough to help balance transportation in megaregions. A trip that takes two to three hours by rail can be competitive with a one-hour flight because of the need to allow an hour and a half or more to get to the boarding area through security, plus the time needed to pick up checked baggage. A two-to-three-hour train trip can be competitive with driving when the distance between destinations is more than two hundred miles – particularly for business travelers who want to sit and work on the train. Of course, the trains also have to be frequent enough, and the traveler’s destination needs to be easily reachable from a train station.

An important factor in reaching higher railway speeds is the recent federal law requiring all trains to have a positive train control safety system, where automated devices manage train separation to avoid collisions, as well as to prevent excessive speeds and deal with track repairs and other temporary situations. What are called high-speed trains in the United States, averaging 70 miles per hour, need gate controls at grade crossings, upgraded tracks, and trains with tilt technology – as on the Acela trains – to permit faster speeds around curves. The Virgin Trains in Florida have diesel-electric locomotives with an electrical generator on board that drives the train but is powered by a diesel engine. 

The faster the train needs to operate, the larger, and heavier, these diesel-electric locomotives have to be, setting an effective speed limit on this technology. The faster speeds possible on the portion of Amtrak’s Acela service north of New Haven, Connecticut, came after the entire line was electrified, as engines that get their power from lines along the track can be smaller and much lighter, and thus go faster. Catenary or third-rail electric trains, like Amtrak’s Acela, can attain speeds of 150 miles per hour, but only a few portions of the tracks now permit this, and average operating speeds are much lower.

Possible alternatives to fast enough trains

True electric high-speed rail can attain maximum operating speeds of 150 to 220 miles per hour, with average operating speeds from 120 to 200 miles per hour. These trains need their own grade-separated track structure, which means new alignments, which are expensive to build. In some places the property-acquisition problem may make a new alignment impossible, unless tunnels are used. True high speeds may be attained by the proposed Texas Central train from Dallas to Houston, and on some portions of the California High-Speed Rail line, should it ever be completed. All of the California line is to be electrified, but some sections will be conventional tracks so that average operating speeds will be lower.

Maglev technology is sometimes mentioned as the ultimate solution to attaining high-speed rail travel. A maglev train travels just above a guideway using magnetic levitation and is propelled by electromagnetic energy. There is an operating maglev train connecting the center of Shanghai to its Pudong International Airport. It can reach a top speed of 267 miles per hour, although its average speed is much lower, as the distance is short and most of the trip is spent getting up to speed or decelerating. The Chinese government has not, so far, used this technology in any other application while building a national system of long-distance, high-speed electric trains. However, there has been a recent announcement of a proposed Chinese maglev train that can attain speeds of 375 miles per hour.

The Hyperloop is a proposed technology that would, in theory, permit passenger trains to travel through large tubes from which all air has been evacuated, and would be even faster than today’s highest-speed trains. Elon Musk has formed a company to develop this virtually frictionless mode of travel, which would have speeds to make it competitive with medium- and even long-distance airplane travel. However, the Hyperloop technology is not yet ready to be applied to real travel situations, and the infrastructure to support it, whether an elevated system or a tunnel, will have all the problems of building conventional high-speed rail on separate guideways, and will also be even more expensive, as a tube has to be constructed as well as the train.

Megaregions need fast enough trains now

Even if new technology someday creates long-distance passenger trains with travel times competitive with airplanes, passenger traffic will still benefit from upgrading rail service to fast-enough trains for many of the trips within a megaregion, now and in the future. States already have the responsibility of financing passenger trains in megaregion rail corridors. Section 209 of the federal Passenger Rail Investment and Improvement Act of 2008 requires states to pay 85 percent of operating costs for all Amtrak routes of less than 750 miles (the legislation exempts the Northeast Corridor) as well as capital maintenance costs of the Amtrak equipment they use, plus support costs for such programs as safety and marketing. 

California’s Caltrans and Capitol Corridor Joint Powers Authority, Connecticut, Indiana, Illinois, Maine’s Northern New England Passenger Rail Authority, Massachusetts, Michigan, Missouri, New York, North Carolina, Oklahoma, Oregon, Pennsylvania, Texas, Vermont, Virginia, Washington, and Wisconsin all have agreements with Amtrak to operate their state corridor services. Amtrak has agreements with the freight railroads that own the tracks, and by law, its operations have priority over freight trains.

At present it appears that upgrading these corridor services to fast-enough trains will also be primarily the responsibility of the states, although they may be able to receive federal grants and loans. The track improvements being financed by the State of Michigan are an example of the way a state can take control over rail service. These tracks will eventually be part of 110-mile-per-hour service between Chicago and Detroit, with commitments from not just Michigan but also Illinois and Indiana. Fast-enough service between Chicago and Detroit could become a major organizer in an evolving megaregion, with stops at key cities along the way, including Kalamazoo, Battle Creek, and Ann Arbor. 

Cooperation among states for faster train service requires formal agreements, in this case, the Midwest Interstate Passenger Rail Compact. The participants are Illinois, Indiana, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, and Wisconsin. There is also an advocacy organization to support the objectives of the compact, the Midwest Interstate Passenger Rail Commission.

States could, in future, reach operating agreements with a private company such as Virgin Trains USA, but the private company would have to negotiate its own agreement with the freight railroads, and also negotiate its own dispatching priorities. Virgin Trains says in its prospectus that it can finance track improvements itself. If the Virgin Trains service in Florida proves to be profitable, it could lead to other private investments in fast-enough trains.

Jonathan Barnett is an emeritus Professor of Practice in City and Regional Planning, and former director of the Urban Design Program, at the University of Pennsylvania. 

This is an extract from “Designing the Megaregion: Meeting Urban Challenges at a New Scale”, published now by Island Press. You can find out more here.