11/27/2019

5 questions for Enrico Moretti on innovation and cities

"Pethokoukis: Tech-hubs are increasingly important for growth, yet many cities like San Francisco seem poorly managed. For instance, why are housing costs such a big issue in many of these cities?

Moretti: I think this is mostly due to policy decisions. These cities are incredibly opposed to new housing. And that’s a major drag on the overall growth of the sector, but also on overall US economic growth.

The boom towns of today are much more supply-constrained than the similar areas in the 50s and 60s, because nearly all of the highly-educated workforce goes there, but then the cities failed to add enough housing within their boundaries. This means that the average family finds it much harder to find affordable housing if they want to move there. A lot of the benefits of the incredible economic dynamism in these areas are captured by incumbent landlords who were lucky enough to have bought land before the current boom."