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Fred Smith and Sarah Allen, Davidson College

Introduction

Any discussion of urban decline must begin with a difficult task – defining what is meant by urban decline. Urban decline (or “urban decay”) is a term that evokes images of abandoned homes, vacant storefronts, and crumbling infrastructure, and if asked to name a city that has suffered urban decline, people often think of a city from the upper Midwest like Cleveland, Detroit, or Buffalo. Yet, while nearly every American has seen or experienced urban decline, the term is one that is descriptive and not easily quantifiable. Further complicating the story is this simple fact – metropolitan areas, like greater Detroit, may experience the symptoms of severe urban decline in one neighborhood while remaining economically robust in others. Indeed, the city of Detroit is a textbook case of urban decline, but many of the surrounding communities in metropolitan Detroit are thriving. An additional complication comes from the fact that modern American cities – cities like Dallas, Charlotte, and Phoenix – don’t look much like their early twentieth century counterparts. Phoenix of the early twenty-first century is an economically vibrant city, yet the urban core of Phoenix looks very, very different from the urban core found in “smaller” cities like Boston or San Francisco.[1] It is unlikely that a weekend visitor to downtown Phoenix would come away with the impression that Phoenix is a rapidly growing city, for downtown Phoenix does not contain the housing, shopping, or recreational venues that are found in downtown San Francisco or Boston.

There isn’t a single variable that will serve as a perfect choice for measuring urban decline, but this article will take an in depth look at urban decline by focusing on the best measure of a city’s well being – population. In order to provide a thorough understanding of urban decline, this article contains three additional sections. The next section employs data from a handful of sources to familiarize the reader with the location and severity of urban decline in the United States. Section three is dedicated to explaining the causes of urban decline in the U.S. Finally, the fourth section looks at the future of cities in the United States and provides some concluding remarks.

Urban Decline in the United States – Quantifying the Population Decline

Between 1950 and 2000 the population of the United States increased by approximately 120 million people, from 152 million to 272 million. Despite the dramatic increase in population experienced by the country as a whole, different cities and states experienced radically different rates of growth. Table 1 shows the population figures for a handful of U.S. cities for the years 1950 to 2000. (It should be noted that these figures are population totals for the cities in the list, not for the associated metropolitan areas.)

Table 1: Population for Selected U.S. Cities, 1950-2000

City

Population

% Change

1950 – 2000

1950

1960

1970

1980

1990

2000

New York

7,891,957

7,781,984

7,895,563

7,071,639

7,322,564

8,008,278

1.5

Philadelphia

2,071,605

2,002,512

1,949,996

1,688,210

1,585,577

1,517,550

-26.7

Boston

801,444

697,177

641,071

562,994

574,283

589,141

-26.5

Chicago

3,620,962

3,550,404

3,369,357

3,005,072

2,783,726

2,896,016

-20.0

Detroit

1,849,568

1,670,144

1,514,063

1,203,339

1,027,974

951,270

-48.6

Cleveland

914,808

876,050

750,879

573,822

505,616

478,403

-47.7

Kansas City

456,622

475,539

507,330

448,159

435,146

441,545

-3.3

Denver

415,786

493,887

514,678

492,365

467,610

554,636

33.4

Omaha

251,117

301,598

346,929

314,255

335,795

390,007

55.3

Los Angeles

1,970,358

2,479,015

2,811,801

2,966,850

3,485,398

3,694,820

87.5

San Francisco

775,357

740,316

715,674

678,974

723,959

776,733

0.2

Seattle

467,591

557,087

530,831

493,846

516,259

563,374

20.5

Houston

596,163

938,219

1,233,535

1,595,138

1,630,553

1,953,631

227.7

Dallas

434,462

679,684

844,401

904,078

1,006,877

1,188,580

173.6

Phoenix

106,818

439,170

584,303

789,704

983,403

1,321,045

1136.7

New Orleans

570,445

627,525

593,471

557,515

496,938

484,674

-15.0

Atlanta

331,314

487,455

495,039

425,022

394,017

416,474

25.7

Nashville

174,307

170,874

426,029

455,651

488,371

545,524

213.0

Washington

802,178

763,956

756,668

638,333

606,900

572,059

-28.7

Miami

249,276

291,688

334,859

346,865

358,548

362,470

45.4

Charlotte

134,042

201,564

241,178

314,447

395,934

540,828

303.5

Source: U.S. Census Bureau.

Several trends emerge from the data in Table 1. The cities in the table are clustered together by region, and the cities at the top of the table – cities from the Northeast and Midwest – experience no significant population growth (New York City) or experience dramatic population loss (Detroit and Cleveland). These cities’ experiences stand in stark contrast to that of the cities located in the South and West – cities found farther down the list. Phoenix, Houston, Dallas, Charlotte, and Nashville all experience triple digit population increases during the five decades from 1950 to 2000. Figure 1 displays this information even more dramatically:

Figure 1: Percent Change in Population, 1950 – 2000

Source: U.S. Census Bureau.

While Table 1 and Figure 1 clearly display the population trends within these cities, they do not provide any information about what was happening to the metropolitan areas in which these cities are located. Table 2 fills this gap. (Please note – these metropolitan areas do not correspond directly to the metropolitan areas identified by the U.S. Census Bureau. Rather, Jordan Rappaport – an economist at the Kansas City Federal Reserve Bank – created these metropolitan areas for his 2005 article “The Shared Fortunes of Cities and Suburbs.”)

Table 2: Population of Selected Metropolitan Areas, 1950 to 2000

Metropolitan Area

1950

1960

1970

2000

Percent Change 1950 to 2000

New York-Newark-Jersey City, NY

13,047,870

14,700,000

15,812,314

16,470,048

26.2

Philadelphia, PA

3,658,905

4,175,988

4,525,928

4,580,167

25.2

Boston, MA

3,065,344

3,357,607

3,708,710

4,001,752

30.5

Chicago-Gary, IL-IN

5,612,248

6,805,362

7,606,101

8,573,111

52.8

Detroit, MI

3,150,803

3,934,800

4,434,034

4,366,362

38.6

Cleveland, OH

1,640,319

2,061,668

2,238,320

1,997,048

21.7

Kansas City, MO-KS

972,458

1,232,336

1,414,503

1,843,064

89.5

Denver, CO

619,774

937,677

1,242,027

2,414,649

289.6

Omaha, NE

471,079

568,188

651,174

803,201

70.5

Los Angeles-Long Beach, CA

4,367,911

6,742,696

8,452,461

12,365,627

183.1

San Francisco-Oakland, CA

2,531,314

3,425,674

4,344,174

6,200,867

145.0

Seattle, WA

920,296

1,191,389

1,523,601

2,575,027

179.8

Houston, TX

1,021,876

1,527,092

2,121,829

4,540,723

344.4

Dallas, TX

780,827

1,119,410

1,555,950

3,369,303

331.5

Phoenix, AZ

NA

663,510

967,522

3,251,876

390.1*

New Orleans, LA

754,856

969,326

1,124,397

1,316,510

74.4

Atlanta, GA

914,214

1,224,368

1,659,080

3,879,784

324.4

Nashville, TN

507,128

601,779

704,299

1,238,570

144.2

Washington, DC

1,543,363

2,125,008

2,929,483

4,257,221

175.8

Miami, FL

579,017

1,268,993

1,887,892

3,876,380

569.5

Charlotte, NC

751,271

876,022

1,028,505

1,775,472

136.3

* The percentage change is for the period from 1960 to 2000.

Source: Rappaport; http://www.kc.frb.org/econres/staff/jmr.htm

Table 2 highlights several of the difficulties in conducting a meaningful discussion about urban decline. First, by glancing at the metro population figures for Cleveland and Detroit, it becomes clear that while these cities were experiencing severe urban decay, the suburbs surrounding them were not. The Detroit metropolitan area grew more rapidly than the Boston, Philadelphia, or New York metro areas, and even the Cleveland metro area experienced growth between 1950 and 2000. Next, we can see from Tables 1 and 2 that some of the cities experiencing dramatic growth between 1950 and 2000 did not enjoy similar increases in population at the metro level. The Phoenix, Charlotte, and Nashville metro areas experienced tremendous growth, but their metro growth rates were not nearly as large as their city growth rates. This raises an important question – did these cities experience tremendous growth rates because the population was growing rapidly or because the cities were annexing large amounts of land from the surrounding suburbs? Table 3 helps to answer this question. In Table 3, land area, measured in square miles, is provided for each of the cities initially listed in Table 1. The data in Table 3 clearly indicate that Nashville and Charlotte, as well as Dallas, Phoenix, and Houston, owe some of their growth to the expansion of their physical boundaries. Charlotte, Phoenix, and Nashville are particularly obvious examples of this phenomenon, for each city increased its physical footprint by over seven hundred percent between 1950 and 2000.

Table 3: Land Area for Selected U.S. Cities, 1950 – 2000

Metropolitan Area

1950

1960

1970

2000

Percent Change 1950 to 2000

New York, NY

315.1

300

299.7

303.3

-3.74

Philadelphia, PA

127.2

129

128.5

135.1

6.21

Boston, MA

47.8

46

46

48.4

1.26

Chicago, IL

207.5

222

222.6

227.1

9.45

Detroit, MI

139.6

138

138

138.8

-0.57

Cleveland, OH

75

76

75.9

77.6

3.47

Kansas City, MO

80.6

130

316.3

313.5

288.96

Denver, CO

66.8

68

95.2

153.4

129.64

Omaha, NE

40.7

48

76.6

115.7

184.28

Los Angeles, CA

450.9

455

463.7

469.1

4.04

San Francisco, CA

44.6

45

45.4

46.7

4.71

Seattle, WA

70.8

82

83.6

83.9

18.50

Houston, TX

160

321

433.9

579.4

262.13

Dallas, TX

112

254

265.6

342.5

205.80

Phoenix, AZ

17.1

187

247.9

474.9

2677.19

New Orleans, LA

199.4

205

197.1

180.6

-9.43

Atlanta, GA

36.9

136

131.5

131.7

256.91

Nashville, TN

22

29

507.8

473.3

2051.36

Washington, DC

61.4

61

61.4

61.4

0.00

Miami, FL

34.2

34

34.3

35.7

4.39

Charlotte, NC

30

64.8

76

242.3

707.67

Sources: Rappaport, http://www.kc.frb.org/econres/staff/jmr.htm; Gibson, Population of the 100 Largest Cities.

Taken together, Tables 1 through 3 paint a clear picture of what has happened in urban areas in the United States between 1950 and 2000: Cities in the Southern and Western U.S. have experienced relatively high rates of growth when they are compared to their neighbors in the Midwest and Northeast. And, as a consequence of this, central cities in the Midwest and Northeast have remained the same size or they have experienced moderate to severe urban decay. But, to complete this picture, it is worth considering some additional data. Table 4 presents regional population and housing data for the United States during the period from 1950 to 2000.

Table 4: Regional Population and Housing Data for the U.S., 1950 – 2000

1950

1960

1970

1980

1990

2000

Population Density – persons/(square mile)

50.9

50.7

57.4

64

70.3

79.6

Population by Region

West

19,561,525

28,053,104

34,804,193

43,172,490

52,786,082

63,197,932

South

47,197,088

54,973,113

62,795,367

75,372,362

85,445,930

100,236,820

Midwest

44,460,762

51,619,139

56,571,663

58,865,670

59,668,632

64,392,776

Northeast

39,477,986

44,677,819

49,040,703

49,135,283

50,809,229

53,594,378

Population by Region – % of Total

West

13

15.6

17.1

19.1

21.2

22.5

South

31.3

30.7

30.9

33.3

34.4

35.6

Midwest

29.5

28.8

27.8

26

24

22.9

Northeast

26.2

24.9

24.1

21.7

20.4

19

Population Living in non-Metropolitan Areas (millions)

66.2

65.9

63

57.1

56

55.4

Population Living in Metropolitan Areas (millions)

84.5

113.5

140.2

169.4

192.7

226

Percent in Suburbs in Metropolitan Area

23.3

30.9

37.6

44.8

46.2

50

Percent in Central City in Metropolitan Area

32.8

32.3

31.4

30

31.3

30.3

Percent Living in the Ten Largest Cities

14.4

12.1

10.8

9.2

8.8

8.5

Percentage Minority by Region

West

26.5

33.3

41.6

South

25.7

28.2

34.2

Midwest

12.5

14.2

18.6

Northeast

16.6

20.6

26.6

Housing Units by Region

West

6,532,785

9,557,505

12,031,802

17,082,919

20,895,221

24,378,020

South

13,653,785

17,172,688

21,031,346

29,419,692

36,065,102

42,382,546

Midwest

13,745,646

16,797,804

18,973,217

22,822,059

24,492,718

26,963,635

Northeast

12,051,182

14,798,360

16,642,665

19,086,593

20,810,637

22,180,440

Source: Hobbs and Stoops (2002).

There are several items of particular interest in Table 4. Every region in the United States becomes more diverse between 1980 and 2000. No region has a minority population greater than 26.5 percent minority in 1980, but only the Midwest remains below 26.5 percent minority by 2000. The U.S. population becomes increasingly urbanized over time, yet the percentage of Americans who live in central cities remains nearly constant. Thus, it is the number of Americans living in suburban communities that has fueled the dramatic increase in “urban” residents. This finding is reinforced by looking at the figures for average population density for the United States as a whole, the figures listing the numbers of Americans living in metropolitan versus non-metropolitan areas, and the figures listing the percentage of Americans living in the ten largest cities in the United States.

Other Measures of Urban Decline

While the population decline documented in the first part of this section suggests that cities in the Northeast and Midwest experienced severe urban decline, anyone who has visited the cities of Detroit and Boston would be able to tell you that the urban decline in these cities has affected their downtowns in very different ways. The central city in Boston is, for the most part, economically vibrant. A visitor to Boston would fine manicured public spaces as well as thriving retail, housing, and commercial sectors. Detroit’s downtown is still scarred by vacant office towers, abandoned retail space, and relatively little housing. Furthermore, the city’s public spaces would not compare favorably to those of Boston. While the leaders of Detroit have made some needed improvements to the city’s downtown in the past several years, the central city remains a mere shadow of its former self. Thus, the loss of population experienced by Detroit and Boston do not tell the full story about how urban decline has affected these cities. They have both lost population, yet Detroit has lost a great deal more – it no longer possesses a well-functioning urban economy.

To date, there have been relatively few attempts to quantify the loss of economic vitality in cities afflicted by urban decay. This is due, in part, to the complexity of the problem. There are few reliable historical measures of economic activity available at the city level. However, economists and other social scientists are beginning to better understand the process and the consequences of severe urban decline.

Economists Edward Glaeser and Joseph Gyourko (2005) developed a model that thoroughly explains the process of urban decline. One of their principal insights is that the durable nature of housing means that the process of urban decline will not mirror the process of urban expansion. In a growing city, the demand for housing is met through the construction of new dwellings. When a city faces a reduction in economic productivity and the resulting reduction in the demand for labor, workers will begin to leave the city. Yet, when population in a city begins to decline, housing units do not magically disappear from the urban landscape. Thus, in Glaeser and Gyourko’s model a declining city is characterized by a stock of housing that interacts with a reduction in housing demand, producing a rapid reduction in the real price of housing. Empirical evidence supports the assertions made by the model, for in cities like Cleveland, Detroit, and Buffalo the real price of housing declined in the second half of the twentieth century. An important implication of the Glaeser and Gyourko model is that declining housing prices are likely to attract individuals who are poor and who have acquired relatively little human capital. The presence of these workers makes it difficult for a declining city – like Detroit – to reverse its economic decline, for it becomes relatively difficult to attract businesses that need workers with high levels of human capital.

Complementing the theoretical work of Glaeser and Gyourko, Fred H. Smith (2003) used property values as a proxy for economic activity in order to quantify the urban decline experienced by Cleveland, Ohio. Smith found that the aggregate assessed value for the property in the downtown core of Cleveland fell from its peak of nearly $600 million in 1930 to a mere $45 million by 1980. (Both figures are expressed in 1980 dollars.) Economists William Collins and Robert Margo have also examined the impact of urban decline on property values. Their work focuses on how the value of owner occupied housing declined in cities that experienced a race riot in the 1960s, and, in particular, it focuses on the gap in property values that developed between white and black owned homes. Nonetheless, a great deal of work still remains to be done before the magnitude of urban decay in the United States is fully understood.

What Caused Urban Decline in the United States?

Having examined the timing and the magnitude of the urban decline experienced by U.S. cities, it is now necessary to consider why these cities decayed. In the subsections that follow, each of the principal causes of urban decline is considered in turn.

Decentralizing Technologies

In “Sprawl and Urban Growth,” Edward Glaeser and Matthew Kahn (2001) assert that “while many factors may have helped the growth of sprawl, it ultimately has only one root cause: the automobile” (p. 2). Urban sprawl is simply a popular term for the decentralization of economic activity, one of the principal symptoms of urban decline. So it should come as no surprise that many of the forces that have caused urban sprawl are in fact the same forces that have driven the decline of central cities. As Glaeser and Kahn suggest, the list of causal forces must begin with the emergence of the automobile.

In order to maximize profit, firm owners must choose their location carefully. Input prices and transportation costs (for inputs and outputs) vary across locations. Firm owners ultimately face two important decisions about location, and economic forces dictate the choices made in each instance. First, owners must decide in which city they will do business. Then, the firm owners must decide where the business should be located within the chosen city. In each case, transportation costs and input costs must dominate the owners’ decision making. For example, a business owner whose firm will produce steel must consider the costs of transporting inputs (e.g. iron ore), the costs of transporting the output (steel), and the cost of other inputs in the production process (e.g. labor). For steel firms operating in the late nineteenth century these concerns were balanced out by choosing locations in the Midwest, either on the Great Lakes (e.g. Cleveland) or major rivers (e.g. Pittsburgh). Cleveland and Pittsburgh were cities with plentiful labor and relatively low transport costs for both inputs and the output. However, steel firm owners choosing Cleveland or Pittsburgh also had to choose a location within these cities. Not surprisingly, the owners chose locations that minimized transportation costs. In Cleveland, for example, the steel mills were built near the shore of Lake Erie and relatively close to the main rail terminal. This minimized the costs of getting iron ore from ships that had come to the city via Lake Erie, and it also provided easy access to water or rail transportation for shipping the finished product. The cost of choosing a site near the rail terminal and the city’s docks was not insignificant: Land close to the city’s transportation hub was in high demand, and, therefore, relatively expensive. It would have been cheaper for firm owners to buy land on the periphery of these cities, but they chose not to do this because the costs associated with transporting inputs and outputs to and from the transportation hub would have dominated the savings enjoyed from buying cheaper land on the periphery of the city. Ultimately, it was the absence of cheap intra-city transport that compressed economic activity into the center of an urban area.

Yet, transportation costs and input prices have not simply varied across space; they’ve also changed over time. The introduction of the car and truck had a profound impact on transportation costs. In 1890, moving a ton of goods one mile cost 18.5 cents (measured in 2001 dollars). By 2003 the cost had fallen to 2.3 cents (measured in 2001 dollars) per ton-mile (Glaeser and Kahn 2001, p. 4). While the car and truck dramatically lowered transportation costs, they did not immediately affect firm owners’ choices about which city to choose as their base of operations. Rather, the immediate impact was felt in the choice of where within a city a firm should choose to locate. The intra-city truck made it easy for a firm to locate on the periphery of the city, where land was plentiful and relatively cheap. Returning to the example from the previous paragraph, the introduction of the intra-city truck allowed the owners of steel mills in Cleveland to build new plants on the periphery of the urban area where land was much cheaper (Encyclopedia of Cleveland History). Similarly, the car made it possible for residents to move away from the city center and out to the periphery of the city – or even to newly formed suburbs. (The suburbanization of the urban population had begun in the late nineteenth century when streetcar lines extended from the central city out to the periphery of the city or to communities surrounding the city; the automobile simply accelerated the process of decentralization.) The retail cost of a Ford Model T dropped considerably between 1910 and 1925 – from approximately $1850 to $470, measuring the prices in constant 1925 dollars (these values would be roughly $21,260 and $5400 in 2006 dollars), and the market responded accordingly. As Table 5 illustrates, the number of passenger car registrations increased dramatically during the twentieth century.

Table 5: Passenger Car Registrations in the United States, 1910-1980

Year

Millions of Registered Vehicles

1910

.5

1920

8.1

1930

23.0

1940

27.5

1950

40.4

1960

61.7

1970

89.2

1980

131.6

Source: Muller, p. 36.

While changes in transportation technology had a profound effect on firms’ and residents’ choices about where to locate within a given city, they also affected the choice of which city would be the best for the firm or resident. Americans began demanding more and improved roads to capitalize on the mobility made possible by the car. Also, the automotive, construction, and tourism related industries lobbied state and federal governments to become heavily involved in funding road construction, a responsibility previously relegated to local governments. The landmark National Interstate and Defense Highway Act of 1956 signified a long-term commitment by the national government to unite the country through an extensive network of interstates, while also improving access between cities’ central business district and outlying suburbs. As cars became affordable for the average American, and paved roads became increasingly ubiquitous, not only did the suburban frontier open up to a rising proportion of the population; it was now possible to live almost anywhere in the United States. (However, it is important to note that the widespread availability of air conditioning was a critical factor in Americans’ willingness to move to the South and West.)

Another factor that opened up the rest of the United States for urban development was a change in the cost of obtaining energy. Obtaining abundant, cheap energy is a concern for firm owners and for households. Historical constraints on production and residential locations continued to fall away in the late nineteenth and early twentieth century as innovations in energy production began to take hold. One of the most important of these advances was the spread of the alternating-current electric grid, which further expanded firms’ choices regarding plant location and layout. Energy could be generated at any site and could travel long distances through thin copper wires. Over a fifty-year period from 1890 to 1940, the proportion of goods manufactured using electrical power soared from 0.1 percent to 85.6 percent (Nye 1990). With the complementary advancements in transportation, factories now had the option of locating outside of the city where they could capture savings from cheaper land. The flexibility of electrical power also offered factories new freedom in the spatial organization of production. Whereas steam engines had required a vertical system of organization in multi-level buildings, the AC grid made possible a form of production that permanently transformed the face of manufacturing – the assembly line (Nye 1990).

The Great Migration

Technological advances were not bound by urban limits; they also extended into rural America where they had sweeping social and economic repercussions. Historically, the vast majority of African Americans had worked on Southern farms, first as slaves and then as sharecroppers. But progress in the mechanization of farming – particularly the development of the tractor and the mechanical cotton-picker – reduced the need for unskilled labor on farms. The dwindling need for farm laborers coupled with continuing racial repression in the South led hundreds of thousands of southern African Americans to migrate North in search of new opportunities. The overall result was a dramatic shift in the spatial distribution of African Americans. In 1900, more than three-fourths of black Americans lived in rural areas, and all but a handful of rural blacks lived in the South. By 1960, 73% of blacks lived in urban areas, and the majority of the urban blacks lived outside of the South (Cahill 1974).

Blacks had begun moving to Northern cities in large numbers at the onset of World War I, drawn by the lure of booming wartime industries. In the 1940s, Southern blacks began pouring into the industrial centers at more than triple the rate of the previous decade, bringing with them a legacy of poverty, poor education, and repression. The swell of impoverished and uneducated African Americans rarely received a friendly reception in Northern communities. Instead they frequently faced more of the treatment they had sought to escape (Groh 1972). Furthermore, the abundance of unskilled manufacturing jobs that had greeted the first waves of migrants had begun to dwindle. Manufacturing firms in the upper Midwest (the Rustbelt) faced increased competition from foreign firms, and many of the American firms that remained in business relocated to the suburbs or the Sunbelt to take advantage of cheap land. African Americans had difficulty accessing jobs at locations in the suburbs, and the result for many was a “spatial mismatch” – they lived in the inner city where employment opportunities were scarce, yet lacked access to transportation and that would allow them to commute to the suburban jobs (Kain 1968). Institutionalized racism, which hindered blacks’ attempts to purchase real estate in the suburbs, as well as the proliferation of inner city public housing projects, reinforced the spatial mismatch problem. As inner city African Americans coped with high unemployment rates, high crime rates and urban disturbances such as the race riots of the 1960s were obvious symptoms of economic distress. High crime rates and the race riots simply accelerated the demographic transformation of Northern cities. White city residents had once been “pulled” to the suburbs by the availability of cheap land and cheap transportation when the automobile became affordable; now white residents were being “pushed” by racism and the desire to escape the poverty and crime that had become common in the inner city. Indeed, by 2000 more than 80 percent of Detroit’s residents were African American – a stark contrast from 1950 when only 16 percent of the population was black.

The American City in the Twenty-First Century

Some believe that technology – specifically advances in information technology – will render the city obsolete in the twenty-first century. Urban economists find their arguments unpersuasive (Glaeser 1998). Recent history shows that the way we interact with one another has changed dramatically in a very short period of time. E-mail, cell phones, and text messages belonged to the world science fiction as recently as 1980. Clearly, changes in information technology no longer make it a requirement that we locate ourselves in close proximity to the people we want to interact with. Thus, one can understand the temptation to think that we will no longer need to live so close to one another in New York, San Francisco or Chicago. Ultimately, a person or a firm will only locate in a city if the benefits from being in the city outweigh the costs. What is missing from this analysis, though, is that people and firms locate in cities for reasons that are not immediately obvious.

Economists point to economies of agglomeration as one of the main reasons that firms will continue to choose urban locations over rural locations. Economics of agglomeration exist when a firm’s productivity is enhanced (or its cost of doing business is lowered) because it is located in a cluster of complementary firms of in a densely populated area. A classic example of an urban area that displays substantial economies of agglomeration is “Silicon Valley” (near San Jose, California). Firms choosing to locate in Silicon Valley benefit from several sources of economies of agglomeration, but two of the most easily understood are knowledge spillovers and labor pooling. Knowledge spillovers in Silicon Valley occur because individuals who work at “computer firms” (firms producing software, hardware, etc.) are likely to interact with one another on a regular basis. These interactions can be informal – playing together on a softball team, running into one another at a child’s soccer game, etc. – but they are still very meaningful because they promote the exchange of ideas. By exchanging ideas and information it makes it possible for workers to (potentially) increase their productivity at their own job. Another example of economies of agglomeration in Silicon Valley is the labor pooling that occurs there. Because workers who are trained in computer related fields know that computer firms are located in Silicon Valley, they are more likely to choose to live in or around Silicon Valley. Thus, firms operating in Silicon Valley have an abundant supply of labor in close proximity, and, similarly, workers enjoy the opportunities associated with having several firms that can make use of their skills in a small geographic area. The clustering of computer industry workers and firms allows firms to save money when they need to hire another worker, and it makes it easier for workers who need a job to find one.

In addition to economies of agglomeration, there are other economic forces that make the disappearance of the city unlikely. Another of the benefits that some individuals will associate with urban living is the diversity of products and experiences that are available in a city. For example, in a large city like Chicago it is possible to find deep dish pizza, thin crust pizza, Italian food, Persian food, Greek food, Swedish food, Indian food, Chinese food… literally almost any type of food that you might imagine. Why is all of this food available in Chicago but not in a small town in southern Illinois? Economists answer this question using the concept of demand density. Lots of people like Chinese food, so it is not uncommon to find a Chinese restaurant in a small town. Fewer people, though, have been exposed to Persian cuisine. While it is quite likely that the average American would like Persian food if it were available, most Americans haven’t had the opportunity to try it. Hence, the average American is unlikely to demand much Persian food in a given time period. So, individuals who are interested in operating a Persian food restaurant logically choose to operate in Chicago instead of a small town in southern Illinois. While each individual living in Chicago may not demand Persian food any more frequently than the individuals living in the small town, the presence of so many people in a relatively small area makes it possible for the Persian food restaurant to operate and thrive. Moreover, exposure to Persian food may change people’s tastes and preferences. Over time, the amount of Persian food demand (on average) from each inhabitant of the city may increase.

Individuals who value Persian food – or any of the other experiences that can only be found in a large city – will value the opportunity to live in a large city more than they will value the opportunity to live in a rural area. But the incredible diversity that a large city has to offer is a huge benefit to some individuals, not to everyone. Rural areas will continue to be populated as long as there are people who prefer the pleasures of low-density living. For these individuals, the pleasure of being able to walk in the woods or hike in the mountains may be more than enough compensation for living in a part of the country that doesn’t have a Persian restaurant.

As long as there are people (and firm owners) who believe that the benefits from locating in a city outweigh the costs, cities will continue to exist. The data shown above make it clear that Americans continue to value urban living. Indeed, the population figures for Chicago and New York suggest that in the 1990s more people were finding that there are net benefits to living in very large cities. The rapid expansion of cities in the South and Southwest simply reinforces this idea. To be sure, the urban living experienced in Charlotte is not the same as the urban living experience in Chicago or New York. So, while the urban cores of cities like Detroit and Cleveland are not likely to return to their former size anytime soon, and urban decline will continue to be a problem for these cities in the foreseeable future, it remains clear that Americans enjoy the benefits of urban living and that the American city will continue to thrive in the future.

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[1] Reporting the size of a “city” should be done with care. In day-to-day usage, many Americans might talk about the size (population) of Boston and assert that Boston is a larger city than Phoenix. Strictly speaking, this is not true. The 2000 Census reports that the population of Boston was 589,000 while Phoenix had a population of 1.3 million. However, the Boston metropolitan area contained 4.4 million inhabitants in 2000 – substantially more than the 3.3 million residents of the Phoenix metropolitan area.

Citation: Smith, Fred and Sarah Allen. “Urban Decline (and Success), US”. EH.Net Encyclopedia, edited by Robert Whaples. June 5, 2008. URL https://eh.net/encyclopedia/urban-decline-and-success-in-the-united-states/