The Unassuming Economist

Chris Wellisz (WSJ) profiles Harvard’s Edward Glaeser for IMF’s Finance & Development magazine:

“Growing up in New York City in the 1970s, Edward Glaeser saw a great metropolis in decline. Crime was soaring. Garbage piled up on sidewalks as striking sanitation workers walked off the job. The city teetered on the edge of bankruptcy.

By the mid-1980s, it was clear that New York would bounce back. But it could still be a scary place; there was a triple homicide across the street from his school on the Upper West Side of Manhattan. Glaeser was nevertheless captivated by New York’s bustling street life and spent hours roaming its neighborhoods.

“It was both wonderful and terrifying, and it was hard not to be obsessed by it,” Glaeser recalls in an interview at his office at Harvard University. Today, that sense of wonder still permeates Glaeser’s work as an urban economist. He deploys the economist’s theoretical tool kit to explore questions inspired by his youth in New York. Why do some cities fail while others flourish? What accounts for sky-high housing costs in San Francisco? How does the growth of cities differ in rich and poor countries?

“I have always thought of myself as fundamentally a curious child,” Glaeser, 52, says. Rather than “pushing well-established literature forward,” he seeks to comprehend “something that I really don’t understand when I start out.”

While still a graduate student at the University of Chicago, Glaeser made his mark as a theorist of the benefits of agglomeration—the idea that dense and diverse cities are hothouses of innovation, energy, and creativity that fuel economic growth. In the years since, his work has ranged across a breathtaking variety of subjects, from rent control and real estate bubbles to property rights, civil disobedience, and carbon emissions.

“For a couple decades now, Ed has been the leading thinker about the economics of place,” says Lawrence Summers, a Harvard professor who served as director of the National Economic Council under US President Barack Obama. “And the economics of urban areas are increasingly being seen as central to broad economic concerns.”

Glaeser and Summers are collaborating on a study of the hardening divide between well educated, affluent coastal regions of the United States and islands of economic stagnation in what they call the “eastern heartland,” the interior states east of the Mississippi River. There, in cities like Flint, Michigan, the proportion of prime-age men who aren’t working has been rising—along with rates of opioid addiction, disability, and mortality.

How can policy help? Traditionally, economists have been skeptical of the value of place-based policies like enterprise zones that offer tax breaks to investors, saying it is better to help people, not places. People, they assumed, would move to where the jobs were. But labor mobility has declined in recent decades, partly because of high housing costs, partly because demand for relatively unskilled factory work has diminished.

Breaking with economic orthodoxy, Glaeser and Summers say that the federal government should tailor proemployment measures, such as reducing the payroll tax or increasing tax credits to low earners, to fit the needs of economically distressed areas such as West Virginia. They also make the case for boosting investment in education.

As a Chicago-trained economist, Glaeser is a strong believer in the magic of free markets and opposes measures that distort incentives. “I have always been against spatial redistribution, taking from rich areas and giving to poor areas,” he says. “That doesn’t mean that you want the same policies everywhere.” Urban economics seemed like a natural pursuit for Glaeser. His German-born father, Ludwig, was an architect who taught him how the built environment shapes people’s lives. His mother, Elizabeth, was an asset manager who introduced him to economics. Glaeser recalls how she used the example of competing cobblers to explain marginal cost pricing.

“I remember thinking what an amazing and fascinating thing it is to think about the impact of competition,” he says. He was 10 years old. In high school, Glaeser excelled at history and mathematics. As a Princeton University undergraduate, he considered majoring in political science before choosing economics, seeing it as a path to Wall Street. But dreams of a career in finance ended with the stock market crash of 1987, just as he started job interviews. So he opted for graduate school, because “it didn’t seem like I was cutting off many options,” he says.”

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