Development Versus Growth

Todd Litman's picture
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Healthy children grow bigger, but once people reach maturity at about age 20 continued physical growth is harmful - it makes us fat. It is certainly possible to develop our skills, strength and knowledge, but most adults should not pursue growth as an end in itself. This also applies to communities.

It is important for planners to keep in mind the distinction between growth (getting bigger) and development (getting better). Public policies often reflect an assumption that growth is desirable, that bigger is always better. In contrast, sustainability planning tends to emphasize development over growth, that is, focusing on quality over quantity.

A recent study by Eben Fodor, The Relationship between Growth and Prosperity in 100 Largest U.S. Metropolitan Areas, provides insights to this issue. It measured the relationships between growth and economic prosperity in the 100 largest U.S. metropolitan areas. Population growth rates of each area where compared with economic indicators including per capita income, unemployment rate, and poverty rate. The results raise questions about common assumptions concerning the desirability of growth, particularly rapid growth. Some of his key findings are summarized below.

Figure 1 shows that personal income tends to be lower in faster growing metro areas. It indicates a decline of almost $2,500 in per capita income for each 1% increase in growth rate. This correlation was even larger for the 2008-2009 (i.e., the recession) time period.

 

 

Figure 2 shows the percentage change in per capita personal income between 2000 and 2009. While all MSAs showed gains in income over this period, metro areas with higher growth rates had significantly lower gains than slower-growing areas. A metro area with a stable, non-growing population experienced a 43% higher income gain than an area growing at 3% per year.

 

 

A particularly interesting finding from the statistical analysis is that the correlation between personal income and growth rates were even stronger with population growth occurring over the 1990 to 2009 time period, and stronger still for the prior 1990 to 2000 period. This indicates that the per capita income levels of a metro area may be strongly influenced by the rate of growth occurring in a prior decade. In this case, growth rates in the 1990 to 2000 period showed the strongest correlation to changes in income as recently as last year. Faster-growing metro areas during the 1990 to 2000 period had lower income growth over the following nine years, and had bigger declines in income during the 2007-09 recession.The study also found that metropolitan areas with faster population growth rates tend to have higher 2009 unemployment and poverty rates, but these relationships are not statistically significant. 

Overall, the study found that the slowest-growing metro areas outperformed the fastest-growing areas in every category used in this study to reflect the prosperity of local residents. Residents of the slowest-growing metro areas averaged $8,455 more per capita in personal income than those of the fastest-growing areas. They also had lower unemployment and poverty rates. The nine-year study period captures the effects of the Great Recession, and changes from 2007 to 2009 show that faster-growing metro areas were more severely impacted.

This is not to suggest that growth is necessarily bad. It benefits some people and industries, particularly those associated with real estate, financial, and land development. However, it also imposes significant economic costs. The key message for planners and public officials is that communities benefit from true development (getting better) rather than overly-enthusiastic growth (getting bigger).

The challenge facing planners is that growth, which is quantitative, is generally much easier to measure than development, which tends to be more qualitative. We therefore need to develop practical tools for discerning true development.

Todd Litman is the executive director of the Victoria Transport Policy Institute.

Comments

Comments

Growth and prosperity - and geography

This analysis of the relationship between growth and prosperity is intriguing, but may omit important information. Table 2 in the report ("Listing of Slowest- and Fastest-Growing MSAs of 100 Largest") suggests a strong correlation between geography and growth rates: not surprisingly, 21 of the 25 slowest-growing are in the Northeast and Midwest, while 24 of the 25 fastest-growing are in the South and West. Are there regional factors that affect both growth and prosperity? It would be interesting to see if the analysis holds up within broad geographic regions.

Rick Taintor
Planning Director
City of Portsmouth, NH

Todd Litman's picture
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Growth and prosperity - and geography

Rick, Thank you for your comments.

Yes, there are some large-scale trends that probably affect these relationships, including, as you point out, a general population shift south and west. More research is needed to better understand these issues and their policy implications. For example, it would be useful to see more fine-grained geographic analysis so we can understand how growth at the municipal or neighborhood scale affects economic development, and how these factors vary based on the type of growth (sprawled versus compact and mixed; automobile-dependent versus multi-modal, etc.). It would be interesting to see how growth affects economic development in various different types of communities (urban, rural; North, South, East, West; etc.)

Fodor's research simply dispells a common myth, that population growth is inherently economically beneficial (often expressed by public officials as, "We have to grow to provide jobs," or "We must grow or die") and so should be encouraged by public policies. This information allows communities to have a more rational discussion about the type of development that is overall best.

Todd Alexander Litman
Victoria Transport Policy Institute
www.vtpi.org
"Efficiency - Equity - Clarity"

Population growth is mostly immigrants

This is an interesting correlation, but I'm not sure it provides much guidance for local planning policy. Most of the population increase in the U.S. over the course of this study is from natural increase among recent immigrants or international in-migration itself. Since this group tends have significantly lower incomes than average, it makes sense that metro areas with high population growth rates would not have high per capita income growth. As far as this is true, trying to control population growth would not make the lives of existing residents any better off. It would just keep poorer people out.

It's theoretically possible for each individual's income to increase, even while overall per capita income decreases, if most new entrants into the population start out at a low level. Maybe a good measure of development would be to follow a random sample of specific households over a period of time and see how they fare in terms of income growth.

Todd Litman's picture
Blogger

Population Growth Is Mostly Immigrants

Daniel, thank you for your comments.

I am in no way suggesting that restricting population growth will increase incomes, or that growth or immigration are harmful. Much of my professional work is concerned with helping communities develop efficiently, which often includes population growth. There are many reasons that communities might want to accommodate and support growth, but overall (community-wide) economic development is not one of them, at least, based on current growth patterns. People who asume that growth will necessarily increase community incomes or reduce unemployment are wrong.

Fodor's research looked at region-wide growth. I believe that the location and type of growth within the urban region has a major effect on economic development, as discussed in my previous blog, "Highways and Labor Markets II" (http://www.planetizen.com/node/47212 ). My research suggests that accessible, multi-modal development patters support economic development more than automobile-dependent sprawl, so part of the reason that rapid population growth is associated with slower economic development may be because for the last few decades, most rapidly growing metropolitan regions have had sprawling development patterns. This issue deserves more research.

If true, the key message for planners and public officials is that the type of growth is more important than the amount of growth in achieving economic development objectives.

Todd Alexander Litman
Victoria Transport Policy Institute
www.vtpi.org
"Efficiency - Equity - Clarity"

Michael Lewyn's picture
Blogger

Assuming just for fun...

that high population growth has a negative effect on income, it doesn't follow that negative growth has a positive effect.

It might be the case that there is an "happy medium" associated with the highest levels of income growth.

The Value of Income Growth

But is income growth necessarily a good thing?

International comparisons of self-reported happiness show that higher incomes increase happiness up to the point where per capita income is about half of what it is in the United States today. When per capita income is greater than that, there is no longer a correlation between a nation's per capita income and its happiness.

Derek Bok, former president of Harvard, has written a book summarizing the research about happiness where he draws the obvious conclusion: if economic growth and increased income no longer make us happier, but they do threaten the world with environmental collapse, then why do we continue to make economic growth our key goal?

Both Todd and Michael prefer cities that require less consumption, because residents can walk rather than having to drive everywhere. Is it reasonable to argue for these cities on the grounds that they promote economic growth and so allow more consumption??

We have been through these issues before on this site, and I have been restraining myself from commenting on Todd's article, but I can't resist any longer. Todd, isn't there some contradiction between two points that you often make:

-- It is better to live in dense cities because they allow us to consume less energy and less land, reducing our impact on the environment.

-- It is better to live in dense cities because they promote more rapid growth, which means that we consume more goods and services generally, increasing our impact on the environment.

I think the right model is the Netherlands, where they aim for high productivity per worker hour and high earnings per hour, but where they take advantage of those high earnings in part to work shorter hours, rather than focusing single-mindedly on growth, as America does. And because they consume less, they live in row houses and get around by bicycle, rather than living in sprawl and getting around by freeway.

Charles Siegel

Todd Litman's picture
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The Value of Income Growth

Thank you Michael and Charles for your comments.

Yes, there are many grounds to question the use of income and GDP as indicators of human welfare (see my reports, "Well Measured: Developing Indicators for Comprehensive and Sustainable Transport Planning," www.vtpi.org/wellmeas.pdf and "“Mobility as a Positional Good: Implications for Transport Policy and Planning,” www.vtpi.org/prestige.pdf ). Research on the science of happiness (such as summarized by Bok) indicates that, once people achieve a moderate level of wealth that satisfies their basic needs, there is little incremental welfare gain from increased material wealth. In addition, external costs (such as the risks that driving imposes on pedestrians, which forces people to drive for trips that could otherwise be made by walking and cycling) and increased commodification of activities (such as children's birthday parties at specialized entertainment centers rather than in family's homes or public parks) can rachet up the cost of living in ways that provide no additional happiness.

So yes, you can criticize income and GDP indicators on many grounds. However, they are widely used for policy analysis, and increasing them is often a stated or implied planning objective. This Blog simply points out that policies intended to support population growth are not justified by economic development objectives. Please read nothing more into my analysis.

Todd Alexander Litman
Victoria Transport Policy Institute
www.vtpi.org
"Efficiency - Equity - Clarity"

Thanks for the Clarification

Now that you have clarified this point, I am glad to see that we agree.

Charles Siegel

Size matters

One of the issues with growth is that general plans are restricting manufacturing and farm production to such an extent that there are no growth industries unless you get the dotcom fluke occasionally. The relentless ideal of growing only residential and commercial sectors while zoning and regulating out production is contributing to this collapse.

Planners who put all of their eggs in the 'green MBA' program need to step back and look at what they're doing to the 'community' they profess to serve.

First: You're over-building condos. People are being directed to live in a unit dictated to by a board of homeowners who is empowered to raise HOA fees to whatever level necessary to run the development. This can be chaos in terms of 'community'. Play an instrument? Fight? Smoke cigarettes? Want to rent your apartment? Deal with the HOA. People don't want to be spied on in their own homes.

Second: Banks and other lenders do not want to lend on mixed use, and for good reason. Those commercial units very often are vacant and are a drain on the owner. Tenant improvement costs, difficulty in finding a good mix, clashes with deliveries and condo owners etc. or apartment tenants, can create a perfect storm for lending. Often a lender will not consider any of the commercial income in a mixed use project.

Third: Redevelopment might seem like a great 'tool' to you, but it's hell to an established community. What looks like ugly low tax producing low density mom and pop blight to you and your council is home to a real community. Arrogant scraping or bald faced greed for others' property is the motivating force behind redevelopment. Don't be a party to it. Dare ya.

Fourth: One size fits all form based zoning and disneylandia is as miserable a concept as Levittown.
So what are you doing? Building the blight of tomorrow? Vertical sprawl? Keeping your job at all costs? Trying to find ways around the pesky private property owner who won't just get out of your way? Charette them to death? And then say it was 'the community's plan'? Please.

Fifth: Did you know that low income housing developments do not pay property tax? That they use a disproportionate amount of services and do not contribute to the property tax (general fund, police/fire, education). When they're clustered in one area of a community they create a ghetto. Maybe you want that.

Sixth: Did you know that redevelopment bonds take between 30 and 45 years to pay off and that the general funds of your communities are starved by these huge burdens? In order to stay solvent communites are forced to look for grants from State, Fed, and private interest groups which will dictate public policy through grant requirements.

Care to see a response to the overall issues behind the 1992 Rio Earth Summit's Agenda 21--Sustainable Development?
Please see our website: www.DemocratsAgainstUNAgenda21.com

Take off your tin-foil hat.

Take off your tin-foil hat. Turn off the Fox News and the oil-industry propaganda. And, stop embarrassing yourself.

Statistical Validity?

As an engineer-turned-planner, who deals with statistics a lot, the R^2 on those two graphs is horrible. 13%?!?! That is not a good correlation at all. I think the statements that "personal income tends to be lower in faster growing metro areas" and "metro areas with higher growth rates had significantly lower [income] gains than slower-growing areas" are not supported by those numbers. I look at Figure 1 and think a perfectly flat line at about $38,000 would be just as good of a curve-fit. That would mean growth rate has no effect on income.

I think growth rates and income growth are related, but there needs to be a better look at the numbers. Even if the two things are correlated, it could easily be that income growth causes population growth. Wouldn't you move to a place where everyone was getting rich?

Good topic, but it needs to be dug into some more. What you've shown from the Fodor study doesn't seem convincing.

Todd Litman's picture
Blogger

Statistical Validity?

Dear Festdave,

Thank you for your comments.

I agree completely with your conclusion, that this subject deserves more analysis. Fodor's study should be the start, not the end of this research. The study's author also emphasized this point. In particular, it would be nice if somebody performed regression analysis taking into account factors such as geographic location, type of industry, transport and land use development patterns, and factors affecting population growth.

I think it is a little strong to say that the statistical correlation is "horrible." Clearly, many factors affect both metropolitan level population growth and economic development, so it is unsurprizing that any single factor will by itself show a strong correlation. In this context I would describe the statistical relationship as "moderate".

Despite your legitimate criticism, I hope you will agree that Fodor's study raises interesting points about the difference between 'growth' and 'development'.

Todd Alexander Litman
Victoria Transport Policy Institute
www.vtpi.org
"Efficiency - Equity - Clarity"

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