Is The City-ularity Near?

The land around New York City is worth a lot.  A 2008 analysis estimated prices for land, not counting buildings etc., for most (~80%?) of the nearby area (2750 square miles, = a 52 mile square).  The total New York area land value (total land times ave price) was 5.5T$ (trillion) in 2002 and 28T$ in 2006.

The Economist said that in 2002 all developed nation real estate was worth 62T$.  Since raw land value is on average about a third of total real estate value, that puts New York area real estate at over 30% of all developed nation real estate in 2002!  Whatever the exact number, clearly this agglomeration contains vast value.

New York land is valuable mainly because of how it is organized.  People want to be there because they want to interact with other people they expect to be there, and they expect those interactions to be quite mutually beneficial.  If you could take any other 50 mile square (of which Earth has 72,000), and create that same expectation of mutual value from interactions, you could get people to come there, make buildings, etc., and sell that land for many trillions of dollars of profit.

Yet the organization of New York was mostly set long ago based on old tech (e.g., horses, cars, typewriters).  Worse, no one really understands at a deep level how it is organized or why that works so well.  Different people understand different parts, in mostly crude empirical ways.

So what will happen when super-duper smarties wrinkle their brows so hard that out pops a deep math theory of cities, explaining clearly how city value is produced?  What if they apply their theory to designing a city structure that takes best advantage of our most advanced techs, of 7gen phones, twitter-pedias, flying Segways, solar panels, gene-mod pigeons, and super-fluffy cupcakes?  Making each city aspect more efficient makes the city more attractive, increasing the gains from making other aspects more efficient, in a grand spiral of bigger gains.

Once they convince the world of the vast value in their super-stupendous city design, won’t everyone flock there and pay mucho trillions for the privilege? Couldn’t they leverage this lead into better theories enabling better designs giving far more trillions, and then spend all that on a super-designed war machine based on those same super insights, and turn us all into down dour super-slaves?  So isn’t the very mostest importantest cause ever to make sure that we, the friendly freedom fighters, find this super deep city theory first?

Well, no, it isn’t.  We don’t believe in a city-ularity because we don’t believe in a super-city theory found in a big brain flash of insight.  What makes cities work well is mostly getting lots of details right.  Sure new-tech-based cities designs can work better, but gradual tech gains mean no city is suddenly vastly better than others.  Each change has costs to be weighed against hoped-for gains.  Sure costs of change might be lower when making a whole new city from scratch, but for that to work you have to be damn sure you know which changes are actually good ideas.

For similar reasons, I’m skeptical of a blank-slate AI mind-design singularity.  Sure if there were a super mind theory that allowed vast mental efficiency gains all at once, but there isn’t.  Minds are vast complex structures full of parts that depend intricately on each other, much like the citizens of a city.  Minds, like cities, best improve gradually, because you just never know enough to manage a vast redesign of something with such complex inter-dependent adaptations.

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  • elmo

    30% of 62T doesn’t seem to be 5.5T. Are you sure this math is right?

    • Carl Shulman

      I assume Robin wrote $18T as $28T.

    • http://hanson.gmu.edu Robin Hanson

      Total real estate value is roughly three times the raw land value – the buildings etc. are worth about 2/3 of total value. The $28T figure is not a typo.

    • yes please

      Fool, raw land is 1/3 of total value based on the estimates put forth in this article. multiply 5.5 x 3 to get your 30% of total

  • Kutta

    For similar reasons, I’m skeptical of a blank-slate AI mind-design singularity. Sure if there were a super mind theory that allowed vast mental efficiency gains all at once, but there isn’t. Minds are vast complex structures full of parts that depend intricately on each other, much like the citizens of a city. Minds, like cities, best improve gradually, because you just never know enough to manage a vast redesign of something with such complex adaptations.

    The observation that there isn’t currently any strong AI/theory of mind etc. by itself just cannot validate a skeptical stance; a main feature of technology is that unprecedented things pop into existence quite often. The difficulty of redesign should apply mainly to humans who are known to be obfuscated; it’s very probable that there are possible minds with greater modifiability. Also, I can’t see why this city analogue is valid or illuminating; after all, cities are definitely not designed by evolution (nor AIs…), and most importantly, they just have nothing to do with brains.

  • William H. Stoddard

    How are you figuring? Taking the 2002 figures (the figure for 2006 is obviously irrelevant, and probably misleading given the bubble), 5.5/(62/3) = 0.266 or about 27%, which is less than one-third by a good bit. Could you show your work?

  • Robert Koslover

    Y’all would-be God-playing civil engineers/city-planners might enjoy this: http://simcitysocieties.ea.com/index.php

  • Tim Tyler

    It’s the “how complex is the simplest powerful machine intelligence” question. I am not sure anyone knows that. One data point is that we probably haven’t made one yet – so we know it is not trivially simple.

    However, apart from that, there does not appear to be a great deal of relevant data. Attempts to create an upper bound based on the complexity of human intelligence are not very convincing, for reasons I have gone into before. If anyone thinks there *is* relevant data on this point, what is it?

  • michael vassar

    Amsterdam and its associated protestant capitalist culture pretty much did this. A lot of our morality is the crystallized noise that got memetically swept the world as a result. You talk about such examples all the time, e.g. in your post free speech vs free hearing. If someone wants their culture’s values to survive they should try to make their culture more powerful.

    Also, around a hundred years ago Henry George beat you to this as an idea. It’s not so unpromising IMHO, but it doesn’t produce a singularity because money shows very strong diminishing returns with respect to idea generation and intelligence shows very strong increasing returns.

  • http://hanson.gmu.edu Robin Hanson

    Kutta, I don’t see the relevance of being designed by evolution or not. And why is an analogy of city design to brain design invalid?

    michael, money is just a way of keeping score; it isn’t the real things of interest in either scenario.

  • http://blog.urth.org/ Dave Rolsky

    Super-fluffy cupcakes? Is that the future? If so, I want no part of it.

    A proper cupcake is not “super-fluffy”, but rather a combination of just dense enough, moist, and rich. A super-fluffy cupcake would be like Wonder Bread. Bleah.

  • Brenton

    Does the one third estimate with land values apply to NYC? Expensive cities operate differently, where the building on the land sometimes is hardly worth anything, relatively speaking. Not like a small town lot that increases in value tenfold if a house is built on it. Sometimes it’s even better if there is no building, because then the property owner can more easily build bigger and higher, than they would have the money or legal permission to do if a structure was already standing. (remember how Chicago and San Francisco came back after their disasters?)

    “New York land is valuable mainly because of how it is organized.”

    I don’t see what’s at all special about New York’s “organization”. It’s valuable because 20 million people live in and around it. It’s been a massive center of human capital simply because it’s at the most geographically advantageous position a city could be in all of the very rich nation of the United States. One could even say it’s done plenty wrong – as millions of middle class have continually left the area the last 50 years. The main reason it’s reviving now is because there’s no more space for its suburbs to grow.

  • Captain Oblivious

    It’s been a massive center of human capital simply because it’s at the most geographically advantageous position a city could be in all of the very rich nation of the United States.

    It’s a little off-topic, but can anyone explain what’s so special about the location aside from the fact that’s it’s where New York city actually is?

    OK, there’s a nice bay and all but the east coast is littered with nice bays… it’s not like the west coast, where San Francisco bay truly is a geographic wonder compared to the surrounding coastline.

    The Hudson river is big and carries a lot of traffic, but nowhere near as much as the Mississippi river. Nor as important: the Mississippi has been carrying important stuff like food for much longer than the Hudson has been carrying… um… derivatives or whatever.

    NY is a little closer to Europe, but not that much, really – maybe it was a factor in the sailing days, but those are long gone.

    I suspect there’s a lot of lock-in from the days before air conditioning, when the crappy weather was at least easier to compensate for than the sweltering heat in the south…

  • Greg Conen

    There’s a lot of lock-in and winner-take-all effects in city value. Once New York became the finance capital of America, it attracted more business, capital, and people, which in turn made it more attractive, etc, with each cycle increasing land values.

    The geographic constraints of being on an island helped stifle sprawl (though obviously not completely), which further inflated values.

    So why New York, then? A number of reasons (weather, a port, simple luck) got it started, and positive feedback did the rest.

  • http://wealthandwant.com/ LVTfan (google it!)

    Few of us realize it, but buildings depreciate. What rises in value is land, and it rises for reasons which have nothing — nothing! — to do with the activity or inactivity of the current landholder, and everything to do with the vitality of the local economy and with public investment in goods and services which the local public (and visitors) value.

    A May, 2006 FRB study found that, in the top 46 metro markets in 2004, land represented 51% of the value of single-family housing stock. This ranged from a lot around 20%, in Oklahoma City, to 88% in San Francisco metro. The lowest figure among California metros was 62% (Bakersfield). Boston was in the 75% range.

    It isn’t NYC’s “land organization” that makes it valuable; it is the number of people who live within a radius made commutable by its transportation system, and the attractions it contains both for business and tourism visitors.

    The right question (imho) is, who is entitled to reap the benefits in terms of that land value? Should it be those who have been smart enough, or lucky-gened enough, or rich enough to acquire bits of Manhattan’s land (either individually, or through corporate stock, or REITs, or pension rights or otherwise), or does the community rightly have first-claim on the economic value of the land withing its borders?

    I’d argue that we’d have more stable and more vibrant economies if we funded our local spending (and perhaps more than local) via taxes on land value, instead of through taxes on buildings, or wages, or sales. We’d also have a more just economy.

    Most businesses will function better and be more profitable if they can locate where the customers are. But our current system of political economy doesn’t facilitate that, and it sends many toward the fringe, where survival is problematic. Further, tenants are sharecroppers, sharing their revenue with landholders who didn’t create the land value AND paying taxes on their profits, and the wages they pay. Wouldn’t we be better off if they paid once — the locational value of the sites the tenants occupy would flow through the landlords to the community and represent their entire tax responsibility — instead of paying the landlord for value the landlord didn’t create and then paying all sorts of other taxes (and having to keep the records to substantiate their tax liability)?

    For a new house, particularly one on the fringe (i.e., former farm land), land might represent perhaps 20% to 25% of the value. (Where a new home replaces an older one, land might be a higher percentage of the total.) As the house ages, it depreciates. That same 2006 FRB study pegged annual depreciation at 1.5%. And if population is growing and the local economy is healthy, the land will be increasing in value. The 20% LSREV (Land Share of Real Estate Value) will rise rapidly to 50%, 75% and more.

    And even the Empire State Building is 1/3 land value; that would suggest that smaller buildings in better locations have higher LSREV.

    There is a 1-acre site in midtown Manhattan which was valued a few years ago — as a teardown! — at $400 million to $1.2 billion. An acre!

    Land rent is roughly 5%. That 1 acre could provide its community with $20 million to $60 million a year in revenue, if we’d only collect it. Sure beat taxing sales and wages.

    Remember what Leona Helmsley said? She wasn’t talking about tax evasion. She was describing how we structure things.

    WE don’t pay taxes. The little people pay taxes.

    Location, location, location. Who should benefit from it? Private individuals, corporate shareholders, or the community?

  • http://hanson.gmu.edu Robin Hanson

    Folks, we benefit by being near each other, and there are certainly random elements in where we meet, but there are also important non-random elements as well! We have long had a choice of a great many cities to move to or from, and those movements are correlated with perceptions of where people are realizing value. The largest cities surely have been doing something right on average relative to other cities.

  • anon

    I agree with LVTFan that land taxes seem to be an obvious win–Hong Kong, Taiwan and Singapore are largely funded by land taxation, as is Estonia. On the other hand, California Proposition 13–which caps property tax rates in the state–has become an untouchable ‘third rail’ of local politics, despte its widely acknowledged detrimental effects.

    It’s certainly true that “the best cities have been doing something right”, but how are we going to advocate better urban planning when we can’t even account for popular support of grossly counterproductive policies such as Prop 13?

  • http://don.geddis.org/ Don Geddis

    I enjoyed your city-ularity analogy.

    About your conclusion, though … you write: “I’m skeptical of a blank-slate AI mind-design singularity. Sure if there were a super mind theory that allowed vast mental efficiency gains all at once, but there isn’t.

    You write as though those two sentences were mutually exclusive, but they aren’t.

    You have made reasonable economic arguments in the past that an intelligence singularity might gradual rather than sudden. You have (reasonably) mocked the first-mover advantage of “solving” AI.

    But all that is really orthogonal to your separate argument, of blank-slate “designed” AI, vs. “ems” (computer copies of human brains). There’s a scenario you don’t seem to be considering, which is a gradual, world-wide development of deliberately designed AIs, leading eventually (over the very long term) to a “singularity”, a lifestyle beyond which it is difficult to make predictions.

    I don’t think your rejection of a small-team first-mover advantage for designed AIs, necessarily implies that ems “win”, nor that there would not eventually be a singularity in human civilization.

    • http://timtyler.org/ Tim Tyler

      Re: “There’s a scenario you don’t seem to be considering, which is a gradual, world-wide development of deliberately designed AIs, leading eventually (over the very long term) to a “singularity”, a lifestyle beyond which it is difficult to make predictions.”

      Agreed, except: if a “singularity”, is “a lifestyle beyond which it is difficult to make predictions” – haven’t we had some of those already? 2000 was surely 1800′s “singularity” on those grounds. Since such terminology is so vague and silly, why perpetuate its use?

    • http://hanson.gmu.edu Robin Hanson

      I agree that there are two distinct issues: the suddenness of the jump one team may have over any other, and the relative advantage of clean-slate explicitly-coded AI over incremental modifications of human intelligence. I have related reasons to be skeptical about each of them.

      • http://timtyler.org/ Tim Tyler

        Engineered-from-scratch machine intelligence and intelligence augmentation of humans are partner technologies. At least they have been so far.

        You simply use machines to pre-process human sensory inputs and post-process their motor outputs (e.g. keyboards, mice, monitors, speakers) So: better machine intelligence leads quickly to better machine-augmented humans.

  • mitchell porter

    This “city-ularity” scenario is not at all nonsense. It’s just that the power arising from cognitive enhancement ought to overtake the power arising from urban enhancement. An AI Singularity might well grow out of an urban Singularity.

  • Prakash

    Prof. Hanson, China is building many cities and is building them soon enough. I’m sure that this will help boost their economic and later, military prospects.

    And talking about instant cities built by template
    , check out the link for New Songdo.

    The parts of me that support Georgism just became very happy with this post. Prof. Hanson has made helped articulate an idea that I was playing around with.

    The thing is, an intelligent sovereign using georgist taxes could have pretty much achieved the city-ularity. A system which would have had only land taxes would have greatly encouraged modular construction which can be applied to many other uses. As a business winds down, with a few changes in architecture, another one takes its place. Areas unsuitable for low value add activities get replaced by high value added ones.

    Present cities are like present brains – pretty much set in their patterns. Cities with a high LVT and flexible zoning (by high, i mean basically no one would sit on expensive land unless and until they really needed to) would be much closer to AIs that can rewrite themselves.

    • http://hanson.gmu.edu Robin Hanson

      Yes, New Songdo demonstrates that it is not that capital can’t be collected to fund a new city from scratch, nor that its builder’s can’t collect much of the gains from a wise investment. It is that we just don’t know how to make dramatically better cities.

  • Curt Adams

    New York’s great geographical advantage was the Erie canal. It made New York the seaport for the entire Midwest for about a century. Before then the largest city in the US was Philadelphia, which had a competitive advantage in being a highly tolerant city in an intolerant time.

  • Dan

    Hmm why would you need super smarties for your city theory… i think the success of the most successful cities is not that hard, there is three (or four) main points.

    1: Time of foundation.
    2: Some unique geographic location.
    3: Success of the political-economic union in which it resides.
    4: There can also be some unique quirk or historical reason.

    Regarding New York, it was founded early, was / is the main eastern port for the flow of massive immigration that made America (remember most immigrants saw the Statue of Liberty as they arrived at their new homeland).
    It was and is in effect the capital of the USA (A very successful economic union).
    Combine that with the island location which results in the way out of whack land prices.(Simple supply and demand, NYC’s unique quirk).

    Another example is Cape Town and the Gauteng province (In effect a fusion of 3 big cities, also known as the PWV triangle and the richest) in South Africa.

    Cape Town was the first town and port, and now one of the biggest cities.
    The Gauteng province sits in the middle of the country no ports, dry location (but has significant rivers). Almost all other mega cities are at the coast. The reason is that this weird location was the richest gold field when discovered 150 years ago during the Gold Rush and the export of the Industrial Revolution by England to its colonies.(And this can over ride the first movers, Gauteng is bigger and richer than Cape Town even when it is 200 years younger.)

    Knowing this it is still impossible to spark a city-ularity, because the process is so evolutionary and organic.

    Regarding AI it is going to be a lot more evolutionary than revolutionary. It is not going to take over the world in one fell swoop.

    The city-ularity is a good example at debunking the singularity.

    • Dan

      Also cannot we see Dubai as an Evil Unfriendly city-ularity with a winning formula?

      Geographical “advantage”: Ahemmm, not a drop of water, a hot desert with periodical dust storms. BUT sits on or rather near the biggest oil-fields on the planet, with investors and sovereign wealth funds sitting on humongous piles of petrodollars that have to chase every hare-brained investment because all the good ones have been snapped up already.

      An immoral “government” (Royals treating their country as a private fiefdom out of greed and only motivated by money.)

      Built by near slaves from India tricked by promises of riches.
      Run by foreign ex-pats with no roots in the city and only there for the money.

      Now this model kind of hit a speed bump and shown some vulnerability with the financial crises. Yet it will recover and is already frankly.

      An apparent successful unfriendly city-ularity with no apparent morals or ethics (except that of profit maximizing).

      Yet am I afraid of Dubai taking over the world?
      HAHA

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  • michael vassar

    I think that the proximity to Niagara Falls might have helped New York substantially too back in the days when the vast majority of electricity was created by dirty coal burning plants very near to or inside of cities. This probably enabled a greater concentration of industry at a given level smog than other cities could attain. Toronto is Canada’s largest city after all, I wonder how much that helped.

  • Brenton

    “It’s a little off-topic, but can anyone explain what’s so special about the location aside from the fact that’s it’s where New York city actually is?”

    It’s a significantly shorter journey from Europe to Boston or NYC than it is to say Philly or Baltimore. And Southern ports didn’t have the human or economic capital (nor the climate) to grow like the north did.

    “The Hudson river is big and carries a lot of traffic, but nowhere near as much as the Mississippi river. ”

    What about 200 years ago? 100 years ago?
    The Lower Mississippi watershed is a dump, mostly inhabited by people of low intelligence, and it lacks similar quantities of farmland. The Upper Mississippi and its tributaries were rendered relatively insignificant by the time that their (vast and rich) agricultural lands were put into serious use, because of rail. Shipping goods down to New Orleans would be like shipping them from New York to Greenland… what would be the point? Goods (and people) went by rail east (to New York) and west instead.

    Besides, traffic through the Hudson can go *to* the Mississippi, thanks to canals. The Erie canal sealed New York’s place as the dominant east coast city, as NYC became a port to the Great Lakes watershed. (Undercutting Montreal as well for that matter) Chicago’s canal to the Mississippi continued the waterway from NYC to the Mississippi. By 1900 or so, New York and Chicago were the two great transportation centers of the nation.

    “NY is a little closer to Europe, but not that much, really – maybe it was a factor in the sailing days, but those are long gone.”

    Regardless of whether or not the factor disappears, the effects of it remain, with human and economic capital already put in place.

    “I suspect there’s a lot of lock-in from the days before air conditioning,”

    Indeed… the only reason the South has been able to grow in recent decades is air conditioning. There are other factors making it grow, but they’d all be inhibited by lack of AC.

  • http://pdf23ds.net pdf23ds

    It seems much more obvious to me that city planning consists of getting lots of details right than it does that AI does.

    But I think the biggest difference between cities and AI is that you don’t have to attract millions of people to your AI to make it work. Even if the analogy would work without this difference, it’s quite hard to separate this difference from your intuitions, making the analogy not too useful.

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  • http://lorenzo-thinkingoutaloud.blogspot.com/ Lorenzo

    Land value is also affected by whether regulation restricts higher value uses, thus generating extra scarcity. The difference between the Zoned Zone and Flatland, as Krugman put it.

  • http://modeledbehavior.com Karl Smith

    There are two key difference with the city

    1) The city requires new physical capital to work. Its not enough to have a perfect city design. Millions of tons of matter have to be rearranged in order for that design to work. An AI by contrast only has to rearrange a small amount of matter to work.

    This implies that much bolder steps can be taken. Creating a new world class city from scratch, as Dubai is attempting, is no small feat. And getting it wrong means the loss of enormous wealth. Thus even if we have some pretty good ideas on city design they will only come into being incrementally. A huge city-leap is unlikely.

    2) The value from a city comes from the people living in it. The transactions cost associated with moving the entire population of a city are enormous. So, even if I built New York II that was way better than New York it is likely that it will only fill up slowly and I will only get super rich slowly. Thus the run away potential is lower.

    3) While a great city increases ones potential to create greater cities, there is still the limit of human cognition. Yes, we do better thinking in cities but I am not sure if it is so much better than the thinking between cities. This implies that the intracity advantage to creating even better cities is not that great and so the first mover advantage is lessoned.

    In short cities do not have the property that make the AI singularity so dangerous: cheap, strongly self-reinforcing replication.

    • http://hanson.gmu.edu Robin Hanson

      Karl, the productivity potential of a better AI design also can not be realized without it being embodied in hardware and without many others being induced to interact with it to solve their many problems. By itself a mere design for an AI is no more useful than a mere design for a better city.

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