In this recent post we discussed agglomeration economies in consumption. Just to re-cap, agglomeration economies describe the external economic benefits that arise from proximity. They’re essentially the economic benefits of cities.

The benefits of agglomeration are realised by both “producers” (typically employees in the form of higher wages or businesses in the form of higher profits) and “consumers” in the form of more diverse/specialised goods and services (NB: I use a broad definition of “goods and services”, which includes all forms of social/cultural interaction). For reasons I don’t fully understand myself, much of the literature on agglomeration economies focuses exclusively on agglomeration benefits to producers.

This unfortunate lack of attention on consumer benefits is, in turn, reflected in one-dimensional policy. NZTA’s economic evaluation manual, for example, considers only agglomeration benefits in production. In my last post I argued for a wider focus on agglomeration economies in consumption. In the long run production and consumption are simply two different sides of the same economic coin, i.e we produce so we can consume.

Stated differently, the value of what we produce is intrinsically dependent on our opportunities to consume. And when it comes to providing opportunities for consumption, cities do have a unique advantage – and that advantage seems to be growing in significance. The abstract to Ed Glaeser’s 2001 paper “Consumer City”, for example, reads as follows:

Urban economics has traditionally viewed cities as having advantages in production and disadvantages in consumption. We argue that the role of urban density in facilitating consumption is extremely important and understudied. As firms become more mobile, the success of cities hinges more and more on cities’ role as centres of consumption. Empirically, we find that high amenity cities have grown faster than low amenity cities. Urban rents have gone up faster than urban wages, suggesting that the demand for living in cities has risen for reasons beyond rising wages. The rise of reverse commuting suggests the same consumer city phenomena.

In his paper Glaser analyses several data sets to support his hypothesis that cities are becoming increasingly important centres of consumption. In this post I will follow Glaeser’s lead and present some evidence to suggest that Auckland is becoming one such “consumer city”. And ultimately use this to argue that the Government’s CRL criteria are rather foolish (they’re foolish for other reasons too). From where I’m sitting Auckland may well be a poster child for agglomeration economies in consumption.

I award the city this status not because it has achieved some marvellous consumer nirvana, indeed it still leaves much to be desired. Nonetheless, what is most interesting about Auckland is the rate at which new opportunities for consumption are driving the city’s growth. Through this agglomeration process the cities underlying economic DNA, namely land values, is being fundamentally altered in ways that support greater density.

The figure below, for example, shows population growth in Auckland’s city centre (NB: Defined rather narrowly as Auckland Central West and East census area units). What this graph shows is that over the last 12 years the residential population of Auckland’s city centre has grown approximately 2.5 times faster than the rest of the region (321% growth versus 121% growth). Population in city centre In absolute numbers the population of the city centre grew by just over 15,000 people, whereas the remainder of the Auckland grew by approximately 240,000. Hence, about 6% of Auckland’s population growth in the last 12 years has been accommodated in just these two areas units. Needless to say these two area units were already the densest in the region, and now they are even denser. So why are more and more people choosing to cram into the densest parts of the city? The primary answer to this question, I believe, is agglomeration economies in consumption. Put simply, people are choosing to live in the city centre because they are attracted to the opportunities for consumption that it presents, at least in comparison to other parts of the region. By living downtown, people simply can see and do more/better “things” than would be possible if they were living elsewhere. That’s possibly why the old commercial building that fronts onto Anzac Avenue (and who backs onto my apartment building) is now being converted into loft apartments, as shown below.


Data also hints at strengthening agglomeration economies over time, at least for new residents attracted to live in Auckland. Consider for example this research by Arthur Grimes (Chairman of the Reserve Bank) into property values in Auckland. In the graph below Arthur has modelled how land prices vary with distance from Auckland’s city centre – and in turn how this relationship has varied over time. Arthur’s key finding is that land values in the city centre have increased substantially more than land values at the urban periphery.

Lnad values Auckland

In fact, back in 1992 the land in Auckland’s city centre was actually valued less than land in surrounding suburbs (i.e. 6km away). This is extraordinarily unusual – and just goes to show just how poorly Auckland was performing as a city in the very recent past. Or, put in a more positive light, how far we’ve come in a short space of time. Fast forward to 2003 and Auckland’s land rent curve has reverted to the more traditional “monotonically declining” shape (try busting that phrase out at your next party), where land values in the city centre are valued at almost twice those found in surrounding suburbs. To me this is evidence that Auckland’s underlying economic DNA, i.e. relative land values, has been transformed.

And all this has come and gone with barely a squeak in policy circles! Well the implications are rather profound. It suggests that eventually we may have to pedestrianise Queen Street – simply because the volume of pedestrians will justify such a move on travel-time savings alone. More specifically, it just goes to show the silly nature of the Government’s criteria for funding the CRL. For those who are not aware, the Government set the following two criteria for accelerating funding of the CRL: 1) annual rail patronage in excess of 20 million and 2) total CBD employment growing by 25% over current levels.

The question I have been asking myself ever since the  Government’s announcement is why choose these particular criteria? As an aside is not the best economic criteria for funding simply whether the economic benefits of the CRL exceed its costs ?

Moreover, there are plausible scenarios I can think of where the city centre’s employment numbers don’t grow by over 25% but the CRL becomes increasingly essential nonetheless. Consider a scenario where 1) the residential population of the city centre grows rapidly (as it has done for the last 15 years or so), which 2) forces up the value of land downtown and 3) thereby increases the cost of parking, which ultimately 4) stimulates mode shift from car to rail. Such a scenario could well play out even if total CBD employment remained constant.

Ultimately the criteria the Government has set for accelerating funding for the CRL really do seem rather foolish. They seem to fundamentally misunderstands recent growth in Auckland and how this might increase demand for non-car transport solutions. In a nutshell, Auckland is fast becoming a consumer city as well as a centre of production. And what a wonderful consumer city it could be too; I think it has the potential to one day challenge the exquisite beauty and vibrancy of places like Istanbul.

Realising this potential requires, however, we realise the need for different transport solutions, i.e. fewer cars, and more people – especially in Auckland city centre.

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  1. Does the sort of dominance by Auckland of the nation already occuring and likely to become even more pronounced happen in any other proper (I use the word ‘proper’ to discount island states like Singapore) country in the world outside the third world?

    From a policy perspective, I think that the time is coming for the government to look at measures to curb Auckland growth in favour of the provinces and second tier cities like Wellington, Hamilton, Tauranga and Christchurch. Otherwise, what is already occurring – a depressed and poverty stricken interior attached to grostesquely bloated huge city will become a permanent state of affairs.

    1. I think the concept of agglomeration goes against what you’re suggesting. More specifically it seems like Aucklanders can and are benefitting hugely from the city’s growth.

    2. ‘I think that the time is coming for the government to look at measures to curb Auckland growth’


      Stimulate other places by all means but does 1/3 of the population have to stop thriving to achieve that?

    3. The choices in urban planning and transport are what will drive other areas. Things like the Basin Flyover put people off places. Christchurch sprawling where it was once a fairly compact city.

    4. Does the sort of dominance by Auckland of the nation already occuring and likely to become even more pronounced happen in any other proper (I use the word ‘proper’ to discount island states like Singapore) country in the world outside the third world?

      London springs to mind.

      1. Very common; it’s called a ‘Primary City’, Paris is an obvious example. Closer to home; every Australian State is dominated by its capital city. And NZ is much more similar to an Aus State than it is to the entire country. In fact what is peculiar about Auckland v NZ is that our primary city is not the capital…. this leads to quite a few interesting issues, like the lack of national institutions at the very point that they could have an actual supporting market etc… also it is clear that the building of these in that sweet little fishing village at the bottom of the north island has been an exercise in regional development already……

      2. Of course it does, there’s nothing unique about NZ. Stockholm dominates Sweden, Copenhagen dominates Denmark, Helsinki dominates Finland, Amsterdam dominates the Netherlands, Zurich does dominate Switzerland but perhaps to a lesser extent due to how extremely well connected with fast and very affordable rail that country is, meaning very large numbers of people live in one city and work in another – probably equivalent to living in Auckland and working in Hamilton and vice versa.

        1. “Amsterdam dominates the Netherlands”

          No it doesn’t. Metro Amsterdam is about 1.5 million people, which is less than a tenth the population of the Netherlands. The government is in the Hague, and much of the industry is in Rotterdam.

          1. Actually all three are really parts of the same metropolis, know as the Randstad. Saying the government is in the Hague and the industry is in Rotterdam is perfectly accurate, but only in the same way is we could say our government is in Auckland City, the industry in Manukau, etc.

            The Hague to Rotterdam is only 20km, about the same as Takapuna to Mt Wellington. The two ‘cities’ are on the same rapid transit network, the only thing keeping them separate is a 3km wide farmed greenbelt (smaller than what separates Porrirua and the Hutt). The separate legal entities and identities of each ‘city’ is a similar fiction to how we used to have the old Waitakere City, North Shore CIty, Papkura District etc. The share one main seaport, one main airport and function as a cohesive economic entity. Commuting between the constituencies is as normal as commuting from New Lynn to Otahuhu.

            The Randstad has a little less than half the national population in it FYI.

          2. The Hague and Rotterdam are geographically close, and that might be a factor if you wanted to argue that the Hague/Rotterdam conurbation “dominates” the Netherlands. But the Ranstad is a region like SE United Kingdom, the Ruhr in Germany, or (to an extent) the Auckland-Hamilton-Tauranga triangle. I worked just outside Amsterdam and very few of my colleagues commuted from the Hague or further afield. I think you can validly argue that a heavily built up region dominates a country, but at the end of the day they’re still discrete cities.

            When I worked in London, one of my colleagues commuted every day from Sheffield. No doubt Heathrow would be his international airport of choice. But you wouldn’t argue that Sheffield was part of greater London. I’d argue that Basingstoke, Reading, and Southend aren’t either. Although St Albans and Windsor might be.

          3. Perhaps, but the Randstad is only a little larger than urban Auckland. You could fit it into the Auckland Council area three times over. That intensity of population, industry and transport links within such a small place makes it more than a region, it makes it a single urban unit.

      3. I calculated a few percentages using wikipedia population stats.

        Melbourne 4.3m / Victoria 5.7m – 75%
        Sydney 4.8m / New South Wales 7.3m – 66%
        Vancouver 2.5m / British Columbia 4.1m – 61%
        Toronto 5.6m / Ontario 12.9 – 43%
        Auckland 1.4m / NZ 4.5 – 31%
        Metro London 15m / England 53m – 28%
        Metro Paris 12m / France 64m – 19%

        1. Germany would be interesting to add here. IIRC, for a population of 80 million, there are no cities in Germany anywhere as big (in population) as Sydney or Melbourne.

          Sydney and Melbourne are very big cities by world standards, which implies the need for competent, activist planning to make them work well. Sadly, this generally escapes the notice of their political class of provincial hicks, for whom town planing is mostly just a nuisance because it constrains their freedom to do deals with their property developer mates.

          1. Continental Europe, Germany especially, is tricky in that regard. Their big cities and conurbations of serveral seemingly discrete cities and towns. We do suburbs, they do er, sub-urbs. For example you might say Cologne has only a million people in it, but actually it’s just one part of the Rhein-Rur metropolis which has about twelve million people in it. It’s kinda like saying the City of Sydney is small because it only has 500,000 people in it, while ignorning the wider metropolis.

            Same with the small city of Frankfurt with 700,000 residents in the legal boundary, but six million in the metropolis.

    5. Yep, the primary city is the usual outcome actually, particularly when you consider geographically smaller countries alone, and geographically larger countries as their constituent states about the size of a regular country.

      It happens across the world, first or third. London is the case in Britain, Paris in France, Tokyo for Japan, Dublin for Eire, Copenhagen for Denmark, Bangkok for Thailand, Jakarta for Indonesia, Seoul for both Koreas, Bogotá for Colombia, Mexico city for Mexico, Buenos Aires for Argentina, Lagos for Nigeria, Cairo for Egypt. Istanbul for Turkey, etc.

  2. The graph should say accessibility to the city (because if you could whizz on the train in 20 minutes it would increase the house prices in rail side areas significantly. Putting in the rail loop would give accessibility to the city for a whole bunch of areas out West and South. Working, family suburbs. It’s a chance to give those areas equal access to employment and schools and opportunities and could make them more viable as business areas in their own right.

    1. This is right. Let’s use a recent example. Pokeno. As it stands there is little business and the population density is too low to justify a rail service. Add more people, through more intensive development than has existed there, and all of a sudden there is business and a density to enable PT.

      1. Even such well-intentioned “enlightened” investment can chase it’s own tail & be inefficient tho. Investing in making a sattelite town “viable” for “urbanity” and “PT” is still likely to be much more costly than getting the same level of PT improvement for the same or larger number of people in a town that is already denser. As for urbanity – well, some places may become cool for a variety of factors. But most people who are attracted to the idea of the inner city will NEVER move to Pokeno or Pukekohe, whatever you do.

        Not saying we should pour all our money into the City Centre. But from a “pure urban” perspective, that IS what we would do. Finding the balance is the tricky part.

        1. Wrong. I currently live in the inner city because not having a car and PT not going all hours (early finish week days and late starting on weekend mornings), it is easier to live close to my job, also in the inner city. However, with trains that went from early to late with good frequencies in Japan, I was quite happy living in a semi-rural dormitory town (popn 50K) knowing I could easily get into Kyoto (30mins) or Osaka (1hr). If Pukekohe became developed enough with a frequent electric rail service on all days, I’d be interested to move out there, especially if I could get a house at a decent price, and knowing i could still head into town to catch sports, arts and other events. maybe one day…

          1. To be fair he said most, I am definitely in that category, except that I would prefer a large suburban centre by the beach with rapid transit.

      2. Having recently stopped for breakfast in Pokeno I note that there is a very large factory development going up to the west of the village and obvious signs of housing subdivisions being marked out around the existing built-up area.

        The factory is, I believe, a new dairy processing plant which suggests in the near future a number of new jobs for Pokeno and a significant rise in population.

        I really hope someone in AT is making a start on thinking about public transport links further south than Pukekohe to cater for this future regional centre.

        1. I don’t think Pokeno will ever qualify as a ‘regional centre’, but at any rate it’s outside the Auckland region.

  3. And just to prove what is happening in Auckland, last night I caught the 8:30 NEX service from Britomart. It was so full that we ended up leaving a few people behind. At 8:30 on a Wednesday night. Nothing special. The city is changing. Rapidly.

    1. We really need to look at getting the NEX up to 5 minutes frequencies til 9 and 10 minutes until midnight every night. They frequently leave people behind which is not good if you rely on the bus.

      1. Errr that was a bad post. Free from driving. And we should have appropriately scaled cultural amenities in outer villages. And connect to town by efficient trains and buses.

    1. He may be correct (that aversion to transport costs is increasing the attractiveness of central city suburbs.

      However, the increase in reverse commuting suggests people are actually choosing to live in the city centre simply because of the amenities that are available there, and then subsequently having to travel elsewhere for work.

  4. “…Really?

    Stimulate other places by all means but does 1/3 of the population have to stop thriving to achieve that..?”

    The argument seems to quickly default to a slanging match along those lines, but does it have to? The reason we don’t talk about the impact of Auckland’s largely immigration driven population growth beyond sloganeering and “I hate Auckland” bumper stickers is because we don’t talk about population, period. It is verboten to ask questions like What is the ideal the population for New Zealand? Where should it come from? Where should it live? To the neoliberal hegemony, the market alone decides these things. To grown ups, these are serious questions to be discussed in a democratic fashion. From decisions made policy should then flow – including long term decisions around the where we provide infrastructure to stimulate growth.

    I’ve long been of the view we need our political parties to start talking about population and develop population policies.

      1. Plus a lot of NZ-internal migration to Auckland. And seeing how some of the most urban-centric moves have long been retarded in Auckland due to our governments not wanting to support PT, intensification etc… those people moving to Auckland from, say, Taupo are moving here DESPITE the “infrastructure stimulation” of building rural motorways and preventing apartment buildings.

        1. Max, that’s incorrect… over 1996-2006, Auckland’s domestic migration was slightly negative, i.e. more Aucklanders moved out than other NZers moved to Auckland. This trend seems to have reversed in 2006-2013, but the amount of net domestic immigration is tiny compared to our natural increase (or even our international immigration).

          1. All the white hipsters in Auckland seem to be talking about moving to Wellington at the moment, but it may well be all talk.

          2. I really can’t stand hipsters aye. Such a pretentious attitude, fashion over function.

      2. From the right-wing posturing of the “verboten” line, it seems that Sanctuary is well aware that “population policy” would have to include natural increase. He may be suggesting a One Child Policy for the Super City. Or perhaps only for certain ethnic groups?

    1. By all means have the discussion, but what are you actually proposing? How do we develop the regions? How do we make people want to stay there? Two of the four cities you highlight as potential second tier cities are already growing hugely without any real ‘development plans’.

      1. exactly – I would suggest the provinces in NZ will benefit most from a strong Auckland. Growth will flow over of its own accord, and in some case already has. But there’s a lot of benefits to NZ from having one city of international scale.

        E.g. concerts, sport events, air connections …

        1. Auckland’s growth may benefit Aucklanders, but let’s not pretend it benefits everyone. Haven’t you seen the resentful looks on the faces of Wellingtonians trudging between airports at Manakau? What would benefit them is a proper international airport in their own city. Likewise the same goes for sports, concerts, etc.

          Population growth in Auckland is not a benefit for Wellingtonians & Christchurchers who would like to see concerts and events in their own city, it is a threat!

          1. Without Auckland those wellingtonians would be transiting through Sydney instead. It’s the city of a million and a half people that makes flights from NZ to Asia, Europe and the Americas possible.

            Likewise with concerts and events. Auckland can attract international events due to the market size, just. Before the vector arena most artists just skipped NZ entirely. The benefit is firstly that the artists even come to the country, but secondly once they have come to NZ for an Auckland show the marginal value of a second or third show elsewhere in NZ is much improved. They are unlikely to fly in just for a show in Wellington alone, but more likely to do a Wellington show the day after an Auckland one.

          2. Really? What a small minded and silly view. Ever heard the phrase; ‘a rising tide lifts all boats’? The size of Auckland can make it worthwhile for an overseas act to visit NZ, so then they may add dates to other centres because they have essentially already covered their costs into the country on the AKL gig. Is this not good for other centres?

            Is it really a zero sum game, with anything good happening in one place always being at the expense of another? Need to get more bro.

          3. There’s nothing stopping the expansion of flights from Wellington international airport apart from a complete lack of interest from airline operators. Are you proposing that somehow services from the airport are subsidised?

          4. Sorry Al, I work in airline reservations and if you think Wellington is big enough for long-haul international flights (Asia, Americas etc) you’re dreaming. As Nick says, if Auckland wasn’t around you’d be transiting through Sydney instead. Auckland is not a threat, it’s just you feel threatened for no good reason. I’m from small town NZ (Hurricanes region) and I understand how important it is NZ has a world-class international city and that without it, we’d be going to Sydney or Melbourne to catch concerts and events.

            I don’t know about you, but I’d rather a domestic flight of 1.5hrs max (ok so Invercargill doesn’t have a direct flight to Auckland and it takes it bit longer due to transferring to a second flight but…) to get to a concert than min 3.5hrs to east coast Australia (nice to incorporate ocassionally with a weekend away but not everytime one would need to catch an event!). As for facilities, when it comes to sports you already have a downtown stadium (just a pity you stuffed up the shape of it to be an oval and viewing a million miles away from the pitch for any football type sport except AFL), and townhall for theatre etc. You’ve also got two big international events in the 7s and the WOW festival (stolen from a regional centre I might add but no guilty feeling I suspect from most Wellingtonians). I might remind you that you’re also already onto your third generation of electric trains and we’re just this week started with our first after waiting 90-odd years!

    2. If you said Auckland’s population was been driven by the birth rate I might have read the rest your comment.
      I am of the view that those wanting population controls (the translation of talking about population and population policies) are harking to what the Second World did to a very big failure.

      Auckland will grow because she is at Critical Mass and is known as a Beta+ international city. Meaning Auckland will attract people, it will attract investment, it will grow as the world urbanises. The provinces are revitalising as the manufacturing sector expands again, and would revitalise more if this clueless government got to grips with rail and coastal shipping connecting our centres all up properly.

      As Patrick is noted saying below, what Stu is pointing out is how Auckland should develop. Cue the Unitary Plan and the Unitary Plan debate – due to resume in late May for all those submission junkies out there 😉

  5. “…….natural increase is the source of most of the population growth…. the facts are a good place to start…”

    I’ll take your passive aggressive response to indicate a lack of desire to engage in good faith and as a not so latent dislike of provincial New Zealand, probably for cultural reasons (unhappy childhood being made to play rugger in the ‘Naki, perhaps?) and leave it there.

    1. Engaging in good faith starts by not throwing out wild and incorrect statements like that its Aucklands fault for the other regions struggling or that it’s immigration causing the majority of the population increase.

    2. Sanctuary you do understand that the first chart above is comparing different parts of Auckland and not Auckland v. The rest of the country? Perhaps it’s a bit confusing because the rest of the city is labeled ‘region’ on the chart, as in the rest of the Auckland region.

      My point is that Stu’s argument applies regardless of what is happening elsewhere in the country, boom, bust, or otherwise, it is asking questions about how Auckland should develop.

      1. I have one idea for regional development: Move the Navy from Devonport to Whangarei. Natural deep harbour up there, cheaper real estate, stimulation for provincial centre by the taxpayer. Then the Navy land at Devpo can be an absolutely fantastic residential and harbour side commerce redevelopment. A bummer for senior offices and their wives, so probably a hard call!

  6. Switzerland is a country that has a number of “city states” within an overall geographically small country – each with its own character and role. I’d argue that Norway to some extent also achieves this. New Zealand as it is – literally two islands bobbing up and down in the Pacific – will have had, and has good reason to be more diverse, populations wise than say Victoria. Imagine if Christchurch had been the only dominant city with a population of 2 million+ rather than the 300,000 or thereabouts that it had when the earthquakes hit?

    With excellent air services, and excellent broadband, both within NZ and to and from the global marketplace there is no reason why NZ cannot function effectively as a polycentric sort of a “city state”. Which is not to say we shouldn’t celebrate and encourage Auckland’s coming of age as a “real city” rather than the collection of suburbs it was when I first came to live in Auckland some 20 or more years ago.

    Xero is probably a great example of a company that encapsulates a lot of the things that will drive NZ forward. Its spiritual home is in Napier, it has offices in Auckland and Wellington, Australia, USA and United Kingdom.

    1. “there is no reason why NZ cannot function effectively as a polycentric sort of a “city state”” – Except that it doesnt appear to be what a lot of NZers want as they choose to live in Auckland. Unless we artificially penalise Aucland or subsidise the provinces, how do we change that?

      For me for example, there are many opportunities in rural NZ as a lawyer to become a partner in a law firm and have a nice lifestyle with my family. However, I suspect I would be bored out of my brain so I would rather struggle by in Auckland. That may change later but for now I stay here.

      We can’t force people to relocate to other places. Auckland is a successful city and we should celebrate that.

  7. Even if regional development was a desirable goal it is not clear how it could be achieved.

    Using infrastructure to stimulate the shrinking provinces makes no sense as these places are characterised by an excess of infrastructure in relation to the population size. For example schools and hospitals that have closed down for a lack of supporting population, or provincial council’s struggling to maintain the underused local road network.

    In the United States commercial tax breaks have been used to boost jobs in certain regions but Glaeser found that it cost $100 k / year in tax breaks to produce a single job this way.

    The location of Government departments is another means of regional development, but as Patrick stated Wellington is already the biggest regional development project the country has ever seen . Moving central government departments to the provinces would be moving jobs and people away from Wellington not Auckland. Also, the UK locates some government departments in provincial cities for the purposes of regional development but this has done nothing to reduce the national dominance of London. ( I think Japan may also do this – anyone know?)

    1. We do have a long history of this, and not just Ak v provinces, but also the decades long attempts to escape the terribly undesirable central city by putting the IRD and other gov agencies in the hopelessly placed and appalling planned Manukau City Centre…. All it seems to achieve is recruitment problems for the agency in question…..

      It is hard to make places grow that have no natural reason to, but it is possible to kick the guts out of naturally occurring metropoli. Classic methods include suburbanising universities (ChCh) and strangling destructive urban motorways (Auckland).

      Luckily, and it was a near run thing, Auckland suffered only the former. Because it was largely the two Unis and other education institutions in the inner city that lead the urban revival in the 90s in AKL.

      Incidentally it is hard to argue that AKL’s economic upturn is in anyway bad for the nation as a whole. In fact I would argue that recent increases in land value has driven some to sell up and head for the good life in Gissy, Hawkes Bay, and beyond. This is an anecdotal observation, ie I know people who have done it, and good luck to them. This is a rational response to the price spread especially for people who’s main asset is their house in a hot AKL property market. It is a one time move however…..

      1. Patrick, most of your arguments regarding the other regions make perfect sense except two.
        “it’s hard to argue that AKL’s economic upturn is in anyway bad for the nation as a whole” is fine except that housing costs are part of the CPI so Auckland is creating a problem that currently the Reserve Bank can only respond to by raising interest rates which has the domino effect of raising the exchange rate. Both negatively impact on business investment in export industries in the provinces and, probably, increase housing unaffordability in the provinces, although the different housing supply/demand factors in most of the provinces could result in house prices falling to accommodate the higher mortgage costs resulting in no change in housing affordability but a fall in housing capital gains instead. Just to rub salt into the wounds, the performance of Auckland’s housing market is a really dangerous proxy to use for the region’s economic health asseasonally adjusted housing prices in Auckland were shifted upward 7% by the February 2011 earthquake (see RBNZ Bulletin Sept 2012 for the graph), presumably because the shutdown of the property insurance market in Canterbury (and fear of more earthquakes) redirected immigrants, both international and domestic, from Canterbury to Auckland and because many companies took the oportunity offered to them to get out of expensive CBD rentals on their South Island regional offices and relocated those staff back to Auckland head offices and the insurance companies had already received much of their September earthquake money from reinsurers but now had to invest it while they reassessed every damaged property. With the Government imposing it’s equivalent of the Detroit Planning Commission on Christchurch (suburban sprawl, freeways, convention centre, compulsory CBD land amalgamations, wholesale demolition of “derelict” buildings) it’s a brave person who will predict whether greater Christchurch (the one hour commute catchment includes the high growth areas of Waimakariri and Selwyn districts) will recover to again be New Zealand’s second biggest growth centre with similar percentage growth to Auckland.

        “The size of Auckland can make it worthwhile for an overseas act to visit NZ, so then they may add dates to other centres because they have essentially already covered their costs into the country on the AKL gig. Is this not good for other centres?” I don’t think concert promoters have ever operated on that particular economic model. They aim to maximise the return on their investment. Back in the 1960s when transport was insanely expensive in both time and money and stage equipent was very basic and television was just getting started they toured acts through the theatres and town halls of every NZ city over several weeks. In the 1970 with more sophisticated sound systems and better highways and more competition from tv they only took the big acts to the flash new auditoriums in Auckland, Wellington and Christchurch. The bigger venues cost more to hire but they held more people and the faster highways meant fans from smaller cities could travel by hired buses. Then the 1980s saw expansive stadium shows visiting those same cities. Bigger costs to bring the stage in a cargo 747 but huge audience capacity. Today things are even more different. Reformed bands do the various brews and blues and vineyard events in the provinces while the vintage megastars do one concert visits to maximise ticket prices from the middle aged middle classes with high disposable spending, helped in no small part by the cheap flights and accommodation available relative to earlier decades. Patrick, the result is regional residents taking money into the Auckland economy for the latter concert and vice versa for the vineyard type concerts, but definitely no extra concerts elsewhere because they’ve covered costs getting to Akl because the objevtive by today’s concert promoters is to maximise profits by manipulating supply and demand amongst high disposable income target consumers (bums on seats is so 20th century).

        Auckland’s really big jump to economic prominence was in the 1980’s economic reforms when Queen St investors were encouraged to engage in corporate raiding of successful companies headquartered in the provinces (watties, skellerup, etc) and move the head offices to Auckland. That tranferred and concentrated a very high proportion of the nations best into Auckland, and those jobs and those in their corporate services industries (banking, PR, advertising) have seen the really big pay growth in recent decades. So for the last several decades Auckland’s growth really has been at the expense of the rest of the country, but that’s not to say that future growth will be. If Auckland really has reached the point where it is now able to give back to the nation by attracting back some of the activities that were corporate raided by the Aussies then the rest of NZ should not begrudge further Crown investment in Auckland transport infrastructure (what they should really begrudge is Wellington receiving such investments subsidised from Christchurch petrol taxes while NZTA sticks to it’s original 2010-2020 plan to allocate $800m to greater Chruistchurch so that road, PT and cycle infrastructure investments and maintenance programs are shelved or delayed to fit with the council’s limited ability to meet it’s share of the earthquake repair costs thanks to small print in NZTA’s funding manual that excludes gradual (over more than 30 days) damage from receiving the 83% funding available for “emergency works” (the five year SCIRT progam is all the emergency works), the rest of the damage will take 20 years to 50 years to repair depending on how quickly the city can rebuild its rates base or reduce it’s contribution to the government/professional sports anchor projects wish list).

  8. Its an interesting post and I haven’t thought it all through yet but offer the following first reactions. Consumption is different from benefits but they are related. Benefits are technically the area under a Hicksian demand curve. But in simple terms the benefit is a surplus or advantage you gain from your consumption. That is in economic terms. Clearly the benefit you get from eating is survival but the economic part of that benefit is reduced by the price you had to pay. So if we are arguing the economic benefits of cities we have to consider the price you pay or the opportunity cost. So higher land prices are not necessarily all benefit. Second cities can have benefits from people doing things in their centres, at their peripheries and all the other bits in between. So agglomeration is not just a city centre issue although many have promoted as that. As for Arthur Grimes work I thought it indicated we should relax the Metropolitan Urban Limits rather than use policy to squeeze more to the middle- it is a while since I read his work though.

    1. Let’s take a few steps back. Agglomeration economies in production simply relate to *external* economic benefits of proximity for productivity. So if you double density you get a 5-10% increase in productivity, or something to that effect (note that because of how these are calculated they are normally calculated “net” of congestion costs, of which higher land rents is one). The presence of these *external* productivity effects are of interest to policy makers, and are sometimes considered in economic appraisals of transport investment.

      What I’m observing with these posts is the *external* economic benefits of proximity are not limited to producers, but also accrue to consumers. Hence, this should also be of interest to policy makers. To consider an example, investing in public transport not only enables more people to access jobs in the city centre (and hence have a productivity benefit) but it may also enable more people to live in the city centre and commute out for work (hence giving rise to a consumer benefit). And the latter is a benefit that is external to the individual.

      With regards to the Arthur Grimes’ research you are correct in that it focussed on the MUL. That does not mean it’s findings (especially the graph shown above) are not relevant to other debates. In this case his graph goes to show, in my opinion, just how the distribution of urban growth has changed in the last 10-20 years. A change that I think is likely to have been driven by the increasing significance of agglomeration economies in production.

      1. Not trying to be a dick here I am just a bit lost with the argument “but it may also enable more people to live in the city centre and commute out for work (hence giving rise to a consumer benefit). And the latter is a benefit that is external to the individual.”. Surely the benefit of that is internalised and not a benefit to everyone else. It is simply picked up in the travel time benefits assessment. If it is new trips then it might only be recorded as having half the benefit of existing trips but it is still included. (half assumes a straight line demand curve and the area of a triangle is half base time height.)

        1. oh yes the benefits to the individual are internalised.

          But if you accept there are external economies of scale in consumption (which I do) then more people living in the city centre (as a consequence of the CRL) would generate an economic benefit that is not currently ascribed to the CRL.

  9. “Auckland is fast becoming a consumer city as well as a centre of production.”

    Both of which are bad things that need to be reversed, or else we are dooming the planet to environmental destruction.

    Auckland, the country, and the rest of the world, need to aim for zero percent growth. It’s essential for the well being of the planet.

    1. There is no way to respond to such a dogmatic, ideological statement but “no it isn’t”.

      We need different priorities for economic growth, but that’s an entirely different thing.

      1. Doloras, Geoff is right that we need to aim for zero growth, but he is wrong to claim that production and consumption are bad things that need to be reversed. We don’t even need different priorities for economic growth but we absolutely do need different definitions of economic growth, ones that don’t rely solely on measuring the amount spent trading products and services as the sole proxy of economic wellbeing. Delve into the recent research by Warr and Ayres investigating the role of exergy as a factor of production, or the 1920s research by Frederick Soddy) and you will begin to see why Smith and Marx were looking in the wrong places for the root cause of economic inequality and profiteering in the industrial age, and more importantly how it is possible to have growth in quality of life or standard of living without unsupportable growth in natural resource consumption.

    2. In my experience too many decent internet discussion fora are destroyed by monomaniacs who derail every discussion they can onto their own pet subject, conspiracy theory, or evil person whom they blame for something or other. On politics forums it’s 9/11 truthers, anti-vaccine lunatics, people foaming about the Illuminati or the Rothschilds…

      1. Well said Doloras. It does, however, provide an insight into that person’s reasoning ability and/or ideology, with the added benefit of enabling one to put their other comments into context. There are certain indicators that I use for this purpose, some of which I can’t mention on this forum… As a corollary, this provides support for the theory that intelligence and/or education do not appear to correlate even slightly with wisdom.

  10. Its not too surprising that the present government have set strange economic standards to be met for the CRL as the government consistently shows it does not understand economics, with most of the present policies based on neo-liberalism.

    Neo-liberalism is based on false premises which lead to policies designed to benefit the rich mates of the government which ultimately result in poor economic performance of the country as a whole, just like the false standards set to meet the governments’s anti-public transport bias which is designed to benefit the car-selling and road building mates of the government and will ultimately result in poor transport solutions for the city.

  11. If the Apollo astronauts didn’t land on the moon, who put the corner reflectors out on the moon’s surface where the Apollo astronauts reportedly landed? If you get a powerful laser and a reasonably large telescope you can check out the twinkle from the moon yourself. Might cost you a few $million to set up, but you can then measure the distance to the moon to fractions of a millimetre because the reflectors are there.

    There are no other possible explanations for those reflectors than the Apollo project actually being just what NASA says it was. American men walked on the Moon.

    Now how about a theory that no-one builds motorways…..

  12. One of the forces causing the continued growth of Auckland and the stagnation of Wellington is the present government’s antipathy towards public servants and the vicious white-anting of government departments and the reduction of the public service, many of whom worked in Wellington. The loss of Government Department staff has been made up by corporate New Zealand growing in Auckland.

  13. You mean the property developer mates who provide the majority of accommodation in the CBD? Although in many cases it’s butt ugly CBD accommodation is what’s transforming the city into an better place. I doubt the CBD would be better if population was still at 1990 levels.

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