[This was originally posted in unfinished form this morning. It has since been rewritten.]

Is Auckland too big? Some people are asking that question.

For instance, in a Twitter exchange a while back Radio New Zealand producer Tim Watkin stated:

Others disagreed, observing that we didn’t have any obvious way to make Auckland smaller, meaning that people must have good reasons for wanting to be here:

As it turns out, Auckland (1.6 million people) isn’t the only city where people are debating this question. The San Francisco Bay Area (7.6 million people) has the same challenges, as Kim-Mai Cutler has ably documented. So does Boulder, Colorado (300,000 people). Actual population size is not, it seems correlated with complaints about cities being “too big”.

BOULDER, Colo. — The small city of Boulder, home to the University of Colorado’s flagship campus, has a booming local economy and a pleasantly compact downtown with mountain views. Not surprisingly, a lot of people want to move here.

Something else is also not surprising: Many of the people who already live in Boulder would prefer that the newcomers settle somewhere else.

“The quality of the experience of being in Boulder, part of it has to do with being able to go to this meadow and it isn’t just littered with human beings,” said Steve Pomerance, a former city councilman who moved here from Connecticut in the 1960s.

All of Boulder’s charms are under threat, Mr. Pomerance said as he concluded an hourlong tour. Rush-hour traffic has become horrendous. Quaint, two-story storefronts are being dwarfed by glass and steel. Cars park along the road to the meadow.

These days, you can find a Steve Pomerance in cities across the country — people who moved somewhere before it exploded and now worry that growth is killing the place they love.

Economically, this is looking like an interesting question. Under what conditions can a city be “too big”, and are those conditions likely to hold true in practice?

There are some economic models setting out why and how cities might grow to be larger than their optimal size. (The same models also predict that cities can be smaller than optimal, but I will ignore this case for the moment.) Economist David Albouy and three co-authors investigate the theory of the issue in a November 2016 paper entitled “The optimal distribution of population across cities“.

Albouy et al develop a model of city size that includes two offsetting externalities associated with city size. On the positive side, agglomeration economies, or the economic and social benefits of scale and density. On the negative side, congestion and crowding, which are assumed to increase nonlinearly with city size. Putting it together, they get a picture that looks something like this:

This probably doesn’t make a lot of sense unless you’ve read the paper and sifted through the equations. But it’s pretty simple. If you’re seeking to maximise the net social benefits created by the city, you want it to be size ni (on the X axis). That’s the point at which the marginal costs imposed by the next city resident exceed the marginal benefits that they deliver.

But people will continue to move to the city even after it hits this size, as new residents receive the social average benefit from locating in the city, rather than the marginal benefit. Left uncorrected, the city will grow to a larger size (nm_large on the X axis).

This model shows how cities can grow to be larger than their optimal size, due to congestion costs that increase faster than agglomeration benefits beyond a certain size. However – importantly – it also make a very strong prediction that people will stop wanting to move to cities at a certain point. In other words, this model does not predict that cities will grow without limit: it predicts that they will reach a certain size and then stop growing.

In that sense, this model predicts that city size is analogous to road congestion. Although many roads are above the socially optimal level of congestion, congestion simply doesn’t increase without limit. At some point people decide not to drive any more, as illustrated empirically by Wallis and Lupton:

Within the model, there may be reasons why optimal size differs between cities. For instance, cities may:

  • Have different types of agglomeration economies, resulting in a stronger or weaker case for increased size
  • Have different transport systems leading to different relationships between growth and congestion
  • Be located near more sensitive ecosystems, meaning that growth may be more damaging.

However, on the whole, the predictions made by the model are extremely difficult to reconcile with observed reality, which is that urban growth follows a ‘random walk’ process, with large cities more or less equally likely to grow as small cities. (This is often referred to as Ghibrat’s Law.)

In New Zealand, we can see this at work. Auckland has grown faster than most of the rest of the country over the last century (excluding smaller centres close to Auckland), and it’s expected to continue to do so. Canterbury, which contains one of NZ’s two next biggest cities, is also expected to grow rapidly. If models of optimal city size held true, we’d expect Auckland to be at a disadvantage for further growth:

Statistics NZ’s 2013-2043 population growth projections

As Fujita, Krugman and Venables observe in their great book on new economic geography, the idea that urban growth is more or less random is empirically plausible but tends to upend models like the one I’ve described above. Cities, it seems, are not like roads: They can always fit a few more people in without grinding to a halt. Although it is a common trope, there may be no such thing as a city that is “too big”.

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  1. There’s some interesting things to consider.

    Let’s imagine a set of residents in Metropolis. Now, their enjoyment of Metropolis might grow to a certain population. At that point, however, their enjoyment might drop even as the total enjoyment increases (because the new residents enjoy living in Metropolis more than they did in their previous cities.)

    So, we have an issue: is it ethical to harm the existing residents (who no longer love their city as much) if that harm is outweighed by the enjoyment of the new residents?

    There’s also the fact that a pure economic calculus fails to take into account other valuable things (e.g. if economics were all that mattered, we’d probably have knocked down the Acropolis to build houses in Athens). So allowing cities to grow as purely economic engines could almost certainly destroy particular socio-cultural elements that are naturally hosted in smaller towns and villages.

    1. “if economics were all that mattered, we’d probably have knocked down the Acropolis to build houses in Athens”

      You don’t have a good grasp of economics if you propose that statement. Accounting maybe, but economics accounts for long term value people gain from things, not just money, but value, including enjoyment. Any anyway, from a pure accountancy perspective the acropolis is worth far more in tourism dollars that it is in terms of housing.

      1. Yes indeed. A while ago I ran the numbers on selling panda steaks. Turns out the pandas are worth more being rented out to zoos. This saddens me on one level – they look really tasty! – but on another, deeper level it satisfies me as it means that resources are being allocated efficiently.

  2. “…My take on it is that we’re still living with the legacy of the 1930s-1980s approach to industrial and transport planning: Impose high costs to distance (eg banning road freight over 100km) and regulate industry location to ensure a stable and “equitable” distribution of economic activities throughout the country. This will take a while to unwind…”

    Thus speaks the limited imagination of the true neoliberal. Regional development via government intervention is a perfectly reasonable policy for any country to adopt, unless your memory of history begins with Reagan and Thatcher. The argument that Auckland is “too big” has some merit when you consider it’s size relative to the rest of the country, and the relative and absolute decline of the regions. It causes anxious palpitations amongst the hipster class because they are terrified that a bigger Napier or New Plymouth means they lose on cycling to a cold press coffee cafe with exposed beams and Edison light bulbs, but no one likes hipsters anyway. The question is not “is Auckland a big city?” Beause it is not – it is small city. But it is possibly too big for the health of the wider NZ economy.

    “…One of the paradoxes of post-deregulation NZ is that productivity convergence has been weak, resulting in a long tail of underperforming firms…”

    This is because they are in New Plymouth? Just dripping with condescension about the down country folk sucking on their corn stalks, eh? Productivity is weak in New Zealand not due some just made-up-theory no one has ever heard of but because of chronic under-investment in training, education and machinery which themselves are the result of having an economy that increasingly operates only for the benefit of finance and is pumped as a cash cow for foreign shareholders, presided over by a consultant and managerial class that has proved to be utterly incompetent in its job but demands absolutist authority in the workplace.

    Transportblog really ought to stick to talking about transport issues, instead of trying to become a political pulpit for half baked soft neoliberalism.

    1. FYI, Sanctuary is responding to some points that I edited out of the original draft. They’ll be picked up in a post next week.

      Sanctuary, before commenting further, I recommend you read our user guidelines, which explicitly discourage abusive commenting (guideline 1), ad hominem attacks (3), and moaning about the blog’s editorial direction (4). If you can’t play nice, you can play elsewhere.

      1. Me too (the empirical evidence is everywhere, the problem is economics, or more precisely, the way economics is taught in schools and universities).

        P.S. I didn’t see any abuse, personal attacks or moans in Sanctuary’s comment – am I missing something, or has it been edited-out?

    2. So how would you like to solve the problem (of which I’m not sure there is one)? Trying to force ‘hipsters’ (I assume you mean city folk) into the regions (which as you point out are in decline) is not going to work. If you discourage them from living in Auckland they will more likely to move to a even bigger city which provides the joys of city life. You know like Melbourne, Sydney, Perth, Brisbane etc. E.g they moved away from the regions for the city life, something the regions do not provide.

    3. I actually am not sure whether I agree with you or not. If you just presented your arguments and left out the cultural superiority and condescension, I would be a lot more willing to listen.

  3. The problem is not the size of Auckland.
    It is the ‘too big to listen or think’ organisations that Auckland has created.

    Today is Anniversary Day with the Harbour regatta, one day international cricket and thousands of extra cars crawling on our motorways returning home from a weekend away.
    Last train leaves Sandringham for Papakura at 9.23 pm….So if you want to stay of the roads and take a train……
    We are going to see the Pop UP globe in operation at Ellerslie – are late trains going to be run so Auckland residents can enjoy this theatre.
    Last Popup Globe season I missed the last train to Papakura…..only had a late bus…..

    AT does not think about the consequences of its constrained train time table. But they are to big to argue with!
    If I rode a bike to the cricket, where can I park it for 9 hours?

  4. Is Auckland too big?

    Are our authorities such as Government and Auckland Transport still in provincial mode?

    An extract from my 2017 The Age of the City post:

    2017 marking the start of the Age of the City
    Cities should not be feared but rather embraced. There is a reason why Auckland continues to attract people often at the expense of the provinces but it does not need to be this way. The City and the Province complement each other and can do so very well when we plan properly.
    The Age of the City does not mean the provinces get neglected! The provinces are probably some of the biggest winners in the Age of the City when they are part of the larger constantly evolving organism that is civilisation. Intensification, transit, cycle-ways, passenger and freight rail, and the 8-80 City while they mark the maturing of a pro-people City can also be applied to your smaller towns especially as they catch the flow on effects from a City economy.
    Remember industry moves away from areas where it faces competition and will tend to follow a rail line initially in Southern Auckland before heading into the northern Waikato where it does not face the pressures from competing residential and commercial land use (I say follow rail as industry will tend when rail is available to move their goods to the city markets by rail to avoid congested motorways and urban roads). As that industry and subsequent supporting population move from the City and into the provinces are those provincial towns ready for the consequences that come with it?
    Do these small towns have:
    1) Decent freight and passenger rail connection
    2) Cycleways to move within the town (given their small size cycling is certainly more attractive than it can be in a large city, it is also cheaper as well while a town is too small for a bus service)
    3) Planning mechanisms to handle the growth as one that freight and/or rail connection is open industry and new residents will certainly be not far behind

    The Age of the City: where we plan and invest not only for our big cities but also for our provinces as well. As one should not compete against the other but rather complement each other. Just as thinking and planning has evolved on from the provincial Manukau City Centre competing against the urban City Centre to now an urban Manukau City Centre complementing the very urban City Centre (am I implying small towns in the rural Waikato could urbanise? ).

    quote context: http://pllqt.it/xfVg71

  5. I think when people say “Auckland is too big” I think what they mean is “Auckland is too big for me”. I’ve been to a number of cities where it was too big for me to want to live there such as Jakarta – obviously didn’t apply to the 20+ million people there.
    The problem with regional development in the past is that it created regulatory hurdles that only enrich some to the detriment of others. Want I want to see is a level playing field across the country not a system that merely hamstrings Auckland.

    1. Yes, that’s a very interesting point Adrian! One potential explanation for variations in city size (which is not covered by the model I’ve discussed) is that different cities attract people with different preferences for city size and density. I suspect there’s some of that going on, but how important it is on the whole is unclear, especially given the fact that lots of people stay in place rather than move.

  6. I’m all for heavy-handed government intervention and central planning to solve problems when it’s needed, but what is the problem that’s being solved here? Too big for who? Too big for what? Is there any evidence that a larger Auckland is causing provincial New Zealand’s economy to suffer?

    Encouraging economic growth in provincial New Zealand is all well and good, but there’s no need to handicap Auckland to do that. Indeed, a larger Auckland could help the rest of the country, providing more capital, a bigger market for products, and so on. I’d expect places to do better when they have large, affluent, nearby trading partners.

    1. Its a bit short sighted. Your comment “Is there any evidence that a larger Auckland is causing provincial New Zealand’s economy to suffer?”. Alot has been written that the regions are suffering due to declining business and population, as regional population moves to Auckland. Regions can not grow if Auckland consumes valuable resources.

      We have a national tourism infrastructure thats predominantly regional, with which can only cope with 1 to 1.5million tourists per year not the 3.4 million that the tourism infrastructure is experiencing at present, that needs to have serious investment if the tourism industry is to be major foreign exchange earner. If Auckland keeps on consuming the respective investment resources who are the regions going to develop?

      1. This is zero-sum thinking! The truth is that growth in Auckland doesn’t detract from anywhere else, for two reasons:

        1. The people and businesses who choose to locate in Auckland wouldn’t necessarily go elsewhere in NZ instead – they’re as likely to go to Australia instead, representing a total loss to the NZ economy.

        2. When Auckland (or elsewhere) grows, it incurs some costs that must be paid, but growth enhances its productivity potential and hence improves its ability to make a positive contribution to accounts elsewhere in the country. (Which it does, FYI.)

        1. No. its not zero sum thinking. People and businesses who choose to locate to Auckland over the years, plus the the increase of net migration, are causing the social, housing, infrastructural problems Auckland is currently experiencing, like over inflated house prices due to greed for investment properties, recruiting staff in the IT industries, police, teacher, medical professions, to name a few of the many problems.

          The reason, that Auckland has been the preferred place, Auckland was Air NZ hub of flights and didn’t want Christchurch and Wellington to take international air traffic from its Auckland hub, hence its opposition to Wellington airport extension. Since Singapore Airlines is now offering international airlinks from Wellington to its global network, is making Wellington the place to be especially in the IT and film, as being a boutique compact city as oppose to ever expanding Auckland. Christchurch is seeing more international air services but not from Air NZ.

          With the advent of technology, businesses can be located any where in NZ and not necessary in Auckland.

          Once there is good investment in our under utilized rail network, with the growth of 2nd tier regional like Air Chathams and 3rd tier airlines like Sun Air, Barrier and Soundsair, regions can start to grow.

        2. The main cause of unaffordable housing in Auckland is that we haven’t built enough of it. That’s a fixable problem. There are growing cities that are larger than Auckland that have cheaper housing, which suggests that it’s not inevitable.

          If technological improvements raise the viability of locating businesses outside of Auckland, that’s great news for NZ as a whole. My suspicion is that if Hamilton, Nelson, and Dunedin are prospering, it will be a net positive for Auckland’s economic and population growth, as cities benefit from having access to larger, more prosperous markets in their backyard.

        3. It’s hard to determine exactly what you are arguing for, but if I’m right you want to have even less money spent on infrastructure so it becomes even worse for the existing population, while instead spending it on infrastructure in other parts of the country. Are you an Auckland resident or do you live somewhere else?

        4. Interesting, Wellington has always been the film capital of NZ, that hasn’t really changed. But all the info I’ve ever seen show that Auckland is becoming the IT centre of NZ. Also Auckland is rapidly becoming the cultural centre, by in large due to it’s population being able to support events. Interesting change happening.

      2. Oh, and a further point is that Auckland runs a small net *outflow* to the rest of the country – ie more people move from Auckland to regional towns and cities than vice versa.

        1. Like Auckland’s growing satellite cities of Hamiton, Tauranga and Whanageri, where Auckland’s economic refugees are fleeing too.

  7. Auckland is already to big for the area it is located on, being the the small piece of land that separates the Waitemata and Manukau Harbours. If Auckland doesn’t curb its expansion, it will be come a city that will have all the social, housing and infrastructure problems of other big cities, which is happening now, by taking valuable resources from the regions. To me, majority of jafas are not really interested in rest of NZ, but want rest of NZ to fund Auckland’s badly planned growth.

      1. So does the Northland, West Coast regions and the other 30 odd major tourism regions (including Auckland) through out NZ, that pay taxes and they get less government investment than Auckland, yet these regions have large number international tourists using in adequate local infrastructure due to lack of investment of resources.

        1. Are you saying that every region in NZ gets less investment in infrastructure than it’s population would warrant? If so that’s simply impossible, but I may have misunderstood what you said.

        2. What I think Kris is saying is that a) places like the West Coast do pay some taxes, and b) those places get less spent on them than Auckland. This is of course perfectly true, because those regions have a tiny population, pay a tiny amount of tax, and have a comparitively tiny amount of money spent on them accordingly.

          The West Coast has 31,000 people in it. That’s about a third as many people as live one typical ward of Auckland, of which there are thirteen. To be fair, Auckland should have 48 times as much tax money spent on it that the West Coast.

          Kris seems to ignore the fact that Aucklanders already subsidise the rest of the country, we pay more in taxes than we get back, and part of our taxes go to make up the short fall for the likes of Northland and the West Coast that don’t manage to pay their fair share.

        3. Nick R – I think that must be it. As an aside I would caution against putting too much weight on the amount of money that ‘flows’ out of Auckland to the rest of NZ, as it is based on arbitrary lines on maps. I suspect the same would apply if we drew a similar line around each of the main centres in NZ.

          Specifically focusing on roading infrastructure for example – given roads are funded by the NLTF (and some rates), it should be spent where people paying fuel tax are driving not where they live. If I live in Auckland and drive to the Coromandel I need my fuel tax to fund roads in the Waikato as well, same for a truck driving Tauranga to Auckland.

          I imagine a significant chunk on road use on the West Coast would be people who aren’t even counted as part of the population for any region – tourists, but still contribute to the NLTF every time they fill up the rental car.

        4. Jezza – “given roads are funded by the NLTF (and some rates)” but that is only partly true for local roads. The Funding Assistance Rate from NZTA for Auckland is as low as possible 51%. The rest of local road building and maintenance is paid for by rates – with 53% of spending on maintenance.

          In addition, not all the NLTF comes from fuel excise tax and registration – a lot comes from other sources as well.

          Good summary here: http://cyclingchristchurch.co.nz/2013/02/18/mythbusting-cyclists-dont-pay/

        5. Nope. Not impossible at all.
          Just means the money is being spent somewhere other than infrastructure at all.

        6. Umm, think of it as per dollar spent, per dollar earned. Tourists pay GST on everything purchased, pay tax on fuel if driving as well within those regions. Not sure you got your head around it yet. Auckland does help fund the regions at the moment, and I’m not necessarily saying thats a bad thing, but in my opinion Auckland are doing so too much when it is hampering Auckland productivity and therefore the amount Auckland gives to the regions in the form of Taxes.

      2. Another good point Peter – is it still true? If so, is it due to an under-investment in Auckland relative to the rest of the country (say c1975-2010)? Will it still be true after all the ATAP/TFUG stuff (if it happens), i.e., will the rest of the country have to net-contribute to the central government’s funding of ATAP/TFUG (if it happens)?

  8. I think what this debate shows is that many people want things to stay the same, they don’t want their cities to grow and they don’t want their towns or rural areas to shrink. This is pretty much impossible, simply because people continually age, technology continually improves, and supply of and demand for resources continually change.

    For example their simply isn’t the need for people to be based in places like Taumarunui or Otira for people to operate the railways anymore. Their isn’t the need to have nearly as many people working on farms in rural areas as there was 100 years ago as operations have become more mechanised and automated.

    1. Both Taumarunui and Otira both have rail traffic going through them but their populations have been in decline like most of regional communities. Otira was only a railway town and it went into final decline when NZR with draw electrification of the Otira tunnel in 1997, but still has potential as a tourism destination. Regional towns like Taumarunui can stop their stagnation if there was the investment to do so. What is killing regional communities is not enough jobs due to lake of resource investment, so the young go to a major centres at the expense of their communities. In the case of Taumarunui its Auckland.

      Nearly 55% of NZ’s population is in the 6 major centres where population is over 100,000, being Auckland, Hamilton, Tauranga, Wellington, Christchurch and Dunedin with remaining population spread across smaller communuties throughout NZ.

      Its these small regional communities that is bearing the brunt of NZ’s rapidly growing tourism industry, hence there needs to the creations of jobs and infrastructure not just for Auckland.

      1. I would agree with you that we should be investing more in areas that are under strain from tourism, but this is completely separate from places that are in decline, our tourist towns are definitely not in decline. Pouring government money into declining towns like Taumarunui is not going to do anything for tourism strains in Akaroa, Tekapo or Wanaka for example, and to be honest it would be a complete waste of tax payer money in my opinion.

      2. Are you saying the private sector in these towns have failed to act in creating themselves as tourist areas, and therefore failed to attract tourist dollars? Cause if so I would tend to agree and in that case you are arguing for government investment to bring more tourists into these areas at the risk of downward productivity in Auckland which may reduce the overall available funds for investment? It’s a risk, which could or could not pay off. If this is the case we would still expect a pay off in terms of tourism dollars spent in these area’s, or are you suggesting these should be forever subsidised?

  9. “there may be no such thing as a city that is “too big”.” – Well, arguably too big if it strangles itself to death with its transport system and doesn’t have the gumption to install new systems in time, surely? For instance, if Auckland was to double in size, and not install a decent public transport system, and it couldn’t build more roads, then surely it would just stagnate and die the death of 1000 cuts. Once people start sitting in traffic jams for 8-10 hours per day, I think they are going to give up.

    1. Most definitely. There’s always going to be the need to come up with new transport and housing solutions as cities grow. And bad planning and delivery will result in failures. But there are solutions to the problems we’re facing!

  10. Is Auckland too big? Hardly even close. It could very comfortably fit twice the population in the existing footprint with an *improved* quality of life for all of it’s residents as a result, if it could only get the planning right. Sadly even on this blog people would rather preserve places like Takapuna and the Devonport peninsula as snapshots of a time gone by than let there be serious intensification in such areas. So that’s a very big “if only”.

    As to whether cities have limits, the limits I see where I’ve lived in recent years (Seattle, Bay Area, NYC) are again due to planning. Multiple cities with different personalities can comfortably butt up against each other. The limits to growth in the Bay Area are NIMBYism, terrible incentives in the form of things like Prop 13, and terrible planning of the highest order. Life in the Bay Area is miserable due to these things forcing an idea of what a city should be like based on sentiments that stopped being realistic many decades ago, rather than letting the area form as it would’ve without them.

  11. Yeah a failure, so far, to build good urban infrastructure or to plan efficient urban form, is not the same as a city being too big.

    The really important point here is that stopping a place from declining is a lot harder than stifling its growth, but both in fact are relatively tricky without all sorts of unintended consequences. If you have a growing conurbation it is not at all wise to try to stop it, and certainly completely nonsensical to do so out of some sort of inter-regional jealousy. Stifling Auckland will not lead to other parts of NZ blossoming, that just doesn’t follow at all. Better to help nurture growth everywhere. Including the quality of that growth, and not just its quantity.

    And if there are infra problems in a booming AKL, and there are, growth should deliver the funds to substantially fix them. Of course that depends on good governance, funding structures, and vision…

  12. In yesterday’s Sunday reading there was a link to a video on the affordability of homes in Tokyo. The same producer has also done videos on travelling by train around Tokyo, and how he can live there as an expatriate. Despite its 30m population Tokyo appears to be a desirable place to live, because its transport system is rail-based rather than car-based. I’ve heard from other sources that tourists love the place, and the young from other parts of Japan prefer to move to Tokyo. The only people that don’t seem to like Japan are Demographia, because data Japanese data wouldn’t support their lobbying position about housing affordability, so they make no attempt to include it.

    Yesterday’s video link: https://www.youtube.com/watch?v=iGbC5j4pG9w

    Travelling by train around Tokyo: https://www.youtube.com/watch?v=Y49VfddU-L4

    How the producer can live there as an expatriate : https://www.youtube.com/watch?v=PrGHveYAavg

    1. Greg (the Canadian guy on the videos) also has excellent videos about living in Japanese housing, re sizing, costs, modern vs traditional etc. You can follow his channel Where we live in the World.

      Completely unrelated, there was a phrase that I read recently, about places that are dying – like Otira, but also arguably like Sanson, Bulls, etc. Zombie Towns.

      They’re dead, they just don’t understand that they’re dead yet, and so they keep on going through the motions, but in reality they’re still actually dead. Very apt name. Cruel, harsh, but true.

  13. Talking of Japan, I’d love to see some analysis of why Tokyo can support a population of 34 million, while every other city in the world seems to stall at around 20 million – whether New York or the latest developing city phenomenon like Sao Paolo, Mexico City, Mumbai, Shanghai, etc. There must be some lessons in there about ideal city size, urban structuring, infrastructure, culture?

    1. Well, part of it may be that they do not have our galloping house price inflation. This videos mentioned above go into this a little – Japan is the first of the developed nations to experience really serious population stability and in fact slight population decline. So, as he says in his video, house prices are actually reasonable. No one is investing in residential property for growth in Tokyo any more, as there is no growth to speak of. Contrast this with all of the cities you mention, which are all experiencing rocketing population growth and consent rocketing house prices.

      So perhaps it is not so much a lesson about ideal city size, but instead more of a guideline, that once you have reached the size you want, stop growing. Hard to do, but evidently has the right effect.

      1. Isn’t Japan projected to lose quite a chunk of its 120 million? It will be interesting to see how the Tokyo population holds up if the nation falls to 80 million.

        1. Japan’s population is not just projected to fall but has already been shrinking since 2011. However, Greater Tokyo has kept growing – it’s pulling in migrants from overseas and the rest of Japan faster than the country’s population as a whole is falling. It’s hard to see that continuing for very long, though.

          If I had to bet, I’d suggest before too long Japan is going to start letting in more migrants. There’s already quite a lot of migrants working on farms and in industry.

  14. The city optimal size can change as city grows, it will migrate the issue of congestion and overcrowding by investing into mass public transport, as well as building skyscrapers or high density housing to increase living capacity.

    The issue is city failed to upgrade their infrastructure and people have a culture that object change.

  15. I have never really understood these types of graphs. It claims to show ‘Net Private Average’ benefits. So is this a mean of the almost inconceivable number of curves you would get if you plotted each persons individual benefit? Is it a mean of all of those? If so does it imply that the vast majority of people are considerably lower than this and a few very wealthy individuals are higher? If that is what it is, does anyone care about this curve? Economics is interesting as it creates a narrative, but the problem of aggregation makes a lot of this stuff meaningless because you have to combine contradictory trends. If you think of individual benefit there is a potential story there that most of us come to the city when we do because we gain from being there, but the fact we came increases population to a point where the earlier gains of others are lost (other than the value of their house). But others who want an even bigger city turn up, and so on.

    1. Models inevitably require some simplification and usually seem unrealistic. But what you get in return is a way of developing some internally consistent expectations about how the world might work. The point about this is that if your model of optimal city size is that “cities get congested and they would be better off if they were smaller”, it necessarily implies *other* things, like the fact that large cities will eventually stop growing. (Just as people stop trying to drive on busy roads at a certain point.) This doesn’t happen in practice, so the conventional “cities get congested” model probably isn’t quite right.

      Explaining why is a more challenging question. As I noted above in response to another comment, it’s possible that preferences for city size are heterogeneous enough to organically result in cities of various sizes that grow at similar rates. The problem is that this explanation requires extremely high rates of migration to get people into the right cities, and it also implies that preferences for city size will be relatively homogenous *within* any individual city. (At least within people of certain age cohorts.)

      This explanation seems implausible for two reasons. First, most people stay in place throughout most of their lifetime. Second, cities contain neighbourhoods with varying densities, which you wouldn’t expect if residents’ preferences for city-ness were relatively homogenous.

      An alternative explanation, which seems to have some empirical support, is that urban congestion / crowding isn’t a nonlinear phenomenon as we commonly assume. Rather, there may be a range of land use and transport responses which mean that congestion doesn’t outrun positive agglomeration economies.

      1. Yes your last point makes sense to me as in almost every model people assume that there will be no policy reaction. It is almost an application of the Lucas Critique. Modellers have an aversion to reaction models as they are seen as non-scientific but the simple truth is planning and economics are a social science and the result you get is because people make changes based on what they experience and very quickly the model no longer works. Hence my basic complaint that economics is most useful for short run effects. And don’t get me started on elasticities! They are just describe a very narrow portion of what occurs at a local point on a graph, but with the added weakness that even on a straight line the value changes as you move up or down the curve. (my guess is they get taught because most students can’t do calculus). The result is you either have to model everything or express a degree of skepticism. Models are a bit like John Godfrey Saxe’s quote about sausages and laws.

  16. Mr. Nunns,
    I believe you may be actually making some salient points here. I have only modest skills with language and as many as 50 words you have used I have never seen before. Can you translate into Kiwi vernacular without compromising (dumbing down) the content of your article?

    Thanks in advance.

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