Biking is transportation, not merely a toy | Reacting to Nassim Taleb

Fortune Magazine reports that prominent business economist Nassim Taleb argues that the decline in the US is partly measured by the rise in planning and implementing bicycle lanes, which he calls a lifestyle rather than an economic endeavor ("'Black Swan' author Nassim Taleb says your city's new bike lane is the reason the economy sucks").  From the article:

Taleb argued well-intentioned “lifestyle improvements” like new bike lanes, while popular among city planners and politicians, reveal a deeper problem silently afflicting Western economies: the illusion of growth in societies that have reached their limits of prosperity. “Many are discovering,” he said, “that lifestyle improvements, such as bicycling paths and pedestrian- and cyclist-friendly cities, may not produce economic growth.”

Taleb’s key message in his latest speech could be considered counterintuitive and unnerving for champions of urban progressivism: symbols of modernity—such as city bike lanes—are evidence of economic stagnation, not success. 

Denmark cycle superhighway.

Evening rush hour traffic funnels to one lane traveling south on 19th St, NW because of illegal parking at curbside.  Washington Post photo by Gerald Martineau.

Referencing his 2012 book Antifragile, in which he applied the idea of the “S-curve” from biology in an economic context, Taleb explained that most systems—including national economies—undergo an initial phase of rapid growth as needs are met and utility rises. Eventually, however, they hit a ceiling: once everyone owns a car, buys a home, and enjoys basic comforts, the returns on further investment slow dramatically. He said his research shows that in both biology and economics, “entities grow in a convex way, then slow as they saturate — growth may be unbounded, but remains sub-logarithmic.” For instance, you may grow your house to include a two-car garage, but that doesn’t mean you’ll necessarily graduate to a five-car garage. The incentive diminishes after a certain stage of growth and the curve takes on an S shape.

By contrast, look at Copenhagen.  From the LA Times:

Copenhagen’s city government reported in early July that 62% of its residents are now commuting to work or school by bike — an increase from 52% in 2015 and 36% in 2012, when the City Council launched a 14-year-plan to improve the quality, safety and comfort of cycling. Those bikers pedal an estimated total of 800,000 miles a day. According to local reports, there are more bikes (675,000) than people in Copenhagen, and five times as many bicycles as cars. 

Catchment area of public transit stops for pedestrians and cyclists.  From the VeloQuebec publication, Planning and Design for Pedestrians and Cyclists: A Technical Guide, p. 135.  First edition.

Biking increases access to destinations for an affordable cost.  Taleb couldn't be more wrong, unable to see beyond his blinders that bicycling is a toy.  Bicycles, like other modes of transportation, is about facilitating exchange more efficiently.  

In the "Walking" (1800-1890) and "Transit" (1890-1920) City design eras ("Transportation and Urban Form: Stages in the Spatial Evolution of the American Metropolis," Peter Muller), biking is faster than walking and combined with transit, allows people to reach a wide array of destinations--work, school, home, and other--relatively quickly.

In cities designed for transit/biking, with the right density and street network, cyclists can travel a 5 mile radius = about 75 square miles, in 25 minutes or less.

Research by Newman and Kenworthy find that metropolitan areas with strong transit systems have higher average incomes than those reliant on the car ("Patterns of automobile dependence in cities: an international overview of key physical and economic dimensions with some implications for urban policy," Transportation Research Part A, 1999).

From the Los Angeles Times:

“I had a Mercedes but it sat in the garage all the time because it was so much easier to get everywhere by bike,” said Jensen, a 51-year-old who works in a downtown investment bank. He got rid of the car, which was costing him about $500 a month, after moving from the suburbs to the city and finding that he didn’t need it anymore.

Space requirements for different modes in facilitating exchange can have deleterious economic effects.  Cities were created to maximize exchange--not just transactionally, but of ideas, innovation, experiences, etc.  Facilitating the automobile requires a lot more space than for biking/walking/transit.  This ends up having significant negative effects when the majority of mobility space is devoted to the car.  It reduces people's ability to engage in exchange.  

The more traffic, the less interaction (Appleyard).

Also, as John Norquist, former mayor of Milwaukee has pointed out, when you tear down houses and commercial enterprises to build or widen roads, you do reduce economic activity and local tax revenue.

See for example the work of Donald Appleyard (Livable Streets) and David Engwicht (Reclaiming our cities and towns: better living through less traffic).

Reductions in household costs for transportation.  The Center for Neighborhood Technology's Housing + Transportation Affordability Index household costs studies finds that about 20% of the average household budget, generally consumed by car(s).

According to the American Automobile Association cost of maintaining a new car is very expensive ("AAA: New Vehicle Costs Drop to $11577" ) is spent on transportation.  

People who live in close proximity between work and home can bike or use transit (or walk) for significantly less money.  The journal article "Transport transitions in Copenhagen: Comparing the cost of cars and bicycles,"(Ecological Economics) reports that it costs 6x more to use a car than a bicycle.  Money not spent on a car can be spent on other things.

Even cheaper if your workplace offers discounted transit passes, like the federal government.

When we lived in DC, not owning a car supported about $100,000 of a mortgage.  These are economic effects of great significance.

I consider it a great privilege to have lived in Washington, DC, and to some extent, Ann Arbor, Michigan, where the walking-transit city form allowed me a great deal of mobility without having to rely on a car.

Electric bicycles offer scalar change in biking economics and take up.  Electric bikes can be a game changer in terms of shifting trips from the car to a bicycle, with significant impacts as well.  A study from the e bike manufacturer Upway, "How Much Can You Save Riding an E-Bike vs. Driving?," finds that it can be up to 68x cheaper to ride an electric bicycle compared to a car.  

E bikes allow people to travel further distances faster, making bike commuting more appealing to larger numbers of people (" Is An Electric Bicycle Good for Commuting in Denver?," AddMotor).

Although the industry is in its early stages (like how automobiles were at one time) and there are issues with manufacturing quality and maintenance, especially the need for frequent brake adjustment ("Molly’s Last Ride: Twelve-year-old Molly Steinsapir crashed onto the pavement from a Rad Power e-bike and never woke up. With a poorly regulated e-bike industry, who is responsible when a child dies?," Bicycling Magazine).

-- "Overwhelmed by E-Bike Options? We Tested Dozens—These 16 Are Actually Worth It," Bicycling Magazine

Parents are buying electric cargo bicycles to ferry kids to and from school ("How to Bike Commute With Your Kids," Wired).  This reduces traffic congestion during rush hour periods, which is a positive economic effect.  

E-bikes also make it easier for people to continue to bicycle as they age. 

And, they may make bicycling for transportation more practical and appealing in the suburbs, which tend to have less good bicycle infrastructure--e-bikes are made to ride on streets.

My attitude about e-bicycles has changed significantly over time ("(Still) tired of mis-understanding of the potential for e-bikes," 2015).

Economic benefits from better health.  Then there are the health effects.  I am a good example.  I took up biking for transportation at the age of 30, because my father and other close male relatives all died of heart disease at the age of 54 or younger.  And I knew I didn't want to pay for nor did I think I could routinize actually using a gym membership.  From the LA Times:

“I don’t miss it at all,” the 6-foot-7 Jensen added before setting off on the ride home on a warm summer evening. He said he’d been looking forward to it all afternoon. “The hour on the bike is time I don’t have to spend in a gym. I got healthier and look forward every day to all that fresh air. Life’s good.”

It turns out that I wasn't able to ward off heart disease.  I have it, bad, at the onset of 63.  But so far I've outlived my male relatives by at least 11 years, and it turns out the health benefits from biking all that time made me physically resilient--I've survived two cancers, the heart disease, and a deathly bout with covid (among others) that would have killed others (I'm called the miracle patient by many of my doctors).

From the Bloomberg article, "What England’s New National Cycling Network Needs to Get Rolling":

Investments in cycling infrastructure also make financial sense, outstripping the benefits of investment in roads by a country mile. According to Sustrans, the 30-year return on investment of some parts of the existing National Cycling Network was £8 per £1 spent, most of that in health benefits. The 3,500 miles of planned improvements will help get 1.6 million people more active, England’s transport minister, Simon Lightwood, said at July’s Active City conference.

Urban resilience.  Ironically, Taleb has written extensively about urban resilience.  Bicycling for transportation can be a significant contributor because it reduces dependence on automobiles and gasoline.

The oil crises of the 1970s led the Netherlands and Denmark to shift mobility policy toward transit and biking, to reduce dependence on gasoline ("Copenhagen has taken bicycle commuting to a whole new level," Los Angeles Times, "America, The Netherlands, and the Oil Crisis: 50 Years Later," ITDP). 

This is especially true in the face of disasters, when gasoline supply systems can be disrupted and road networks broken ("Gas shortages caused by Hurricane Milton will take days to address, experts say," ABC-TV).

Conclusion.   Yes, the economic return from bike lanes ("Study Finds Bike Lanes Can Provide Positive Economic Impact in Cities," Portland State University) isn't as high as from the Interstate highway system ("When Interstates Paved the Way The construction of the Interstate Highway System helped to develop the U.S. economy," Richmond Federal Reserve).  

Island Press publishes Resilient Cities: Overcoming Fossil Fuel Dependence.

But the marginal economic return from new additions to the highway network don't necessarily have the same value as the development of the initial network.

And the economic return from biking at the scale of the individual household can be quite significant.

The economic return on reducing the impact on climate change by switching to bicycles/electric bicycles can also be significant.

Privatization and water/environmental degradation in England

In the US, a number of water agencies have been privatized over the past couple decades, as local governments, strapped for cash, can't afford the increased costs of environmental protection and new regulations.  Privatization usually comes with significantly increased rates ("Towns sell their public water systems — and come to regret it," Washington Post; "Privatizing Our Public Water Supply," American Prospect).

One of the fears of President Biden's push for infrastructure spending is that it will be associated with privatization ("Wall Street Sees Big Wish Granted in Biden’s Infrastructure Deal," Bloomberg).

British papers reported on a recent fine of a private water firm in England, where rather than investing in improvements in sewage treatment, they just released sewage into the waters ("‘The sea was milky white’: how the Southern Water sewage scandal unfolded," Guardian).  In the process, this destroyed the East Coast shellfish industry.

It's a £90 million fine, but not likely to make much difference ("Why are England’s water companies pumping out a tide of sewage? Because they can," Guardian).  

Two other elements that created the "playing field" where noncompliance is supported:

1.  the UK Environment Agency has had its budget cut by about 2/3 -- not unlike the Trump's Administration destruction of the EPA ("The Trump Administration Is Reversing Nearly 100 Environmental Rules. Here’s the Full List.," New York Times) -- and it was minimal to begin with, £120 million.

-- "Cutbacks stopping vital work on river pollution and floods in England," Guardian

2. Rather than investigate sewage discharges, the Conservatives shifted to "self-reporting"  ("Water firms discharged raw sewage into English waters 400,000 times last year," Guardian).

Kind of like Nancy Reagan ("How to use the presidency to get $1 million in free designer clothes, a lesson from Nancy Reagan," Timeline) or Leona Helmsley failing to report gifts or taxes.  

Of course, the treatment facilities under-report.

In the US, it would be possible to sue the companies for additional damages under other laws.  Certainly, the shellfish industry ought to be able to sue Southern Water for how their practices destroyed their industry?  But I guess not.

Rivercide.  Separately, Guardian columnist George Monbiot has produced a live documentary on the impact of privatization on the water quality of England's rivers.  In short, "not good."  ("Livestreamed documentary Rivercide to unmask UK’s water polluters")

Externalities/spillover costs.  The funny thing is that "spillover costs" are one of the first things you learn in introductory economics.  

Costs of production not borne by the firm but passed on to society (e.g. pollution), are known as spillover or external costs, or negative externalities. The government must reallocate resources away from areas where spillover costs exist and toward areas where spillover benefits are large (e.g. health and education).

It's amazing that conservative politicians, in their zeal to make things easy for business, forget that very basic lesson about how businesses are incentivized to push such costs off onto other parties.

I don't think DC's tax reform is an exact model for the US

DC is the nation's only "city-state."

By that I mean that DC is a fully urbanized place (no rural or exurban land), a city with close to complete taxing power, including income taxes--with the huge exception that the city can't tax nonresident income, which among other effects means, unlike every other jurisdiction in the US, DC can't assess nonresident income tax on professional athletes (which is one way cities and states collect additional monies after subsidizing sports facilities).

Last week, the New York Times columnist James Stewart suggested ("For tax reform lessons, Congress needn't look far") that DC would be a great example for Congress to consider as a model for how to go about "tax reform" -- although tax "reform" if by reform you mean improvement seems to be off the table in favor of a tax cut for the rich.

From the article:

... in 2014 the council cut corporate and business taxes, reduced individual rates for everyone earning less than $1 million and broadened the tax base by eliminating many loopholes.

In the ensuing years, economic growth and tax receipts have surged, enabling the city to accelerate cuts that were being phased in. The legislation was not revenue neutral, in the sense that broadening the tax base offset the reduction in rates. It was a tax cut. But in a development that would surely warm the hearts of pro-growth Republicans, the economic lift was so strong that tax receipts increased, and last year hit a record.

Tax cuts were simultaneous with significant growth.  The problem with the argument is that DC's economy and population have been growing significantly over the past ten years.  It's easy to "cut" taxes when your economy is growing.

In the last nine years--despite the 2008 Great Recession--DC's population has grown by slightly more than 110,000 people ("D.C. population reaches four-decade high," Washington Post), an increase in population of almost 20% over the base number of 570,000 residents in 2007.

From 2014 when the tax cuts were approved and 2016, the population increased by about 3%, from 660,000 to 680,000. 

New condominium and apartment buildings continue to open and plans for large mixed use developments continue apace.

Income tax and property tax revenues were already increasing at an increasing rate.  Most of the new residents, excepting children, are paying out plenty in terms of income and sales taxes, and property taxes for home owners.

It's easy or at least comparatively easy to cut income taxes when the number of earners is growing and it's easy to cut property taxes when the number and size of buildings is growing, along with property values and assessments.

Plus, DC's property tax base is insulated somewhat by the inclusion of a hefty tranche of highly valued commercial property, primarily but not limited to Downtown DC.  DC's commercial property is highly valued in part as a safe place to park money from overseas, generated in countries with lower economic returns and/or more unstable economies.

Expanding the range of sales taxes had limited impact on revenue.  Complementing tax cuts by expanding somewhat the range of goods and services being taxed is likely a minimal proportion of the total revenue mix compared to the large increase in the number of people paying income taxes and rising property tax revenue from residential and commercial property.

Kansas as a lesson.  Although DC's economy is much stronger than that of Kansas, which has been wrecked by Governor Brownback's application of classic Republican supply-side tax cuts, which decimated state and local government funding, especially for schools because there was no increase in "animal spirits" and tax revenue in response ("Why Sam Brownback's tax cuts failed to make Kansas thrive," Bloomberg View; "The Kansas tax cut experiment," Brookings Institution), many of us worry about the tax cuts because of potential threats to the local economy that are out of the hands of the local government.

The economic winds buffeting DC are not favorable, and this will continue through the entire Trump Administration.  First, local employment and commercial building activity is very much susceptible to the vagaries of federal government policy, which these days is focused on reducing government spending, not increase it--except for the military.  This has a disproportionate effect on the regional economy of Washington ("Uncertainty in Washington is hurting D.C.'s job market, economists say, Post).

For example, a neighbor down the street works for a unit of the Labor Department, where next year's budget proposal calls for the unit to be downsized by 80% and hundreds of people will be fired.  Extend that example across most government agencies and you can see a tremendous negative impact on the local economy.

And the increase in military spending won't impact DC that much, because most of the local beneficiaries would be located outside of DC, in Maryland somewhat and Virginia especially.

Second, the commercial office sector is slowing anyway as federal agencies move out of DC proper,  law firms merge and contract, and as more companies reduce the amount of space per worker, leading to reduced need for commercial office space.

-- "Implications of a Trump/McConnell/Ryan Administration on DC's commercial real estate market," 2016
-- "Why Mayor Bowser is right to be leery of systematic lowering of taxes," 2015

Third, because the city's population is growing there is a greater demand for civic amenities, infrastructure expansions and improvements, and clamoring for various social programs such as an increased amount of services for the homeless and expansion of the amount of affordable housing.

-- "Town-City Management: We are all asset managers now," 2015

But this comes as the city's debt financing cap is close to being exhausted.

Conclusion.  Fortunately the city is in a much different place than Kansas.   The city is much smaller, urban, with fewer economic responsibilities.  But imagine the impact on risk management, predictability, and perception if there is a federal government shutdown, or Congress refuses, if only for awhile, to not raise the debt cap, and long term plans by the Republicans to shrink the federal government with its catastrophic effect on the local economy?

Then it's not out of the question to make the assessment that these tax cuts were foolish, that the city failed to plan for severe exogenous economic shocks that were foreseeable.

Urban farming vs. Urban residential infill

A corn-based entryway at a house on Chillum Road in Prince George's County, Maryland.

The Atlantic Cities has a piece, "How Urban Farming Is Making San Francisco's Housing Crisis Worse," which makes the point that providing tax incentives in San Francisco for vacant lots to be urban farms/gardens, when San Francisco has a housing crisis is bad policy (a/k/a "insane").

Interestingly, I had the same kind of argument apparently 4 years ago ("Gardeners near Capitol Hill prepare to repel a Marine Corps invasion," Washington Post), with an ex-commenter, about this same issue in the context of Greater Capitol Hill and the expansion of the Marine Barracks.  Said expansion will end up taking out an urban garden.

I said that the choice was easy, build.

... making the point that urban gardens are a land utilization strategy for weak real estate submarkets when there are no or limited viable alternatives for absorbing/using the land.  Ironically, an Atlantic Magazine blog ("Community garden, or gardening community") argued in favor of not building on the garden, using it as a community building element.  (I see the point, but in the Capitol Hill neighborhood, most people have alternatives, they just can't garden on a large scale.)

A household on the 100 block of 4th Street SE plants basil and tomatoes in the treeboxes adjacent to their house.

Ideally, urban gardens aren't aren't an end game, but an interim strategy--just like the sad end when artists get displaced after improving the "quality" and perception of a neighborhood so that it is repriced and becomes "valorized".

He challenged me to come up with reasons.  I didn't get into it.  It's all about "highest and best use."

I wasn't that great at economics in college--graphic reason and math skills (not good at calculus) did me in.  But urban real estate issues make very clear how economics works.

The reason for DC's skyrocketing housing prices?   Greater demand and minimal supply.  So prices go up.

Limited supply of new affordable housing?  New construction costs more than previously built properties (most of the time).

Because of the height limit, land supply and build out capacity is limited.  This constrains the economic viability of constructing lower cost housing at a profit.  So people build to the most profitable, expensive segments.

When housing demand is high, residential lots should be used for housing.  If not, it's one more contributor to higher rents or property purchase prices.

One point about taxi drivers who don't own their own vehicles: the regulatory system isn't set up to protect them

In the previous blog entry I wrote:

The regulatory system should provide:

 for taxi operators
- a testing regime for drivers
- an application and monitoring service over the companies and individuals licensed to offer taxi services
- a system of inspection for vehicles and general operations

for customers
- a system to handle and rectify customer complaints

in general
- a set of customer service standards and metrics
- a benchmarking-research function to ensure that DC taxi services are best-in-class (cf. "Pr. George's cabbies complain about pick-ups at Gaylord National," Post, about how National Harbor is offering its own taxi service because they claim that PG County taxis are substandard)
- a system for ensuring vehicle and service quality (inspections, inspectors, including operation at all times of day and days of the week)
- a system for being able to innovate and offer new services (also see the recent blog entry "Testing changes to zoning with demonstration projects").

2.  This framework leaves out the taxi drivers who aren't owner-operators.  Who protects them?  No one really.

3.  That's what I was referring to when I made the point in other writings that because a preponderance of drivers come from demographics with fewer opportunities, there may not be "barriers to their entry" to the occupation (other than passing the drivers test), but the oversupply of interested drivers because of factors exogenous to the industry means that the workplace isn't very stable or supportive, and it can be hard to make a living, especially if the taxicab operators who are licensed charge drivers a lot of money to operate ("rent") a cab.

4.  It only gets worse with "ridesharing" services being added to the mix, because the providers in those cases again have different, non-industry related factors influencing their decision making and how they account for the cost of providing the service.

This expands the supply of vehicles without necessarily increasing demand (it probably does lead to a demand increase somewhat).  Further pressuring the traditional taxi industry.

5.  I mention this because the economic stability of the taxi industry is in part at risk in more marginal markets, as a result of ridesharing services.

It "feels" comparable to me to how traditional commercial districts declined in response to the creation of suburban shopping centers and the chaining up of retail sectors.

With fewer tenants seeking space in TCDs, landowers would rent to anyone, rents went way down, usually below the amount necessarily to properly maintain the building(s), so the district declined further and further, because at the microeconomic level, its fundamentals were broken.

The same goes for taxi services.