Measuring City 'Performance': More difficult than it looks
William Attwell asks how we currently attempt to rank global cities and what these efforts tell us.
In March, international property consultancy Frank Knight published its 2015 Wealth Report, which rates the cities most attractive to the word's super wealthy. Other firms and think tanks offer related indices comparing, variously, cities' future economic prospects (PwC's Cities of Opportunity report and Oxford Economics' Global Cities 2030), their 'clout' as financial centres and their (Y/Zen Group) and their past economic performance (Brookings Institution's Global Metro Monitor).
Ostensibly, these help to distill an otherwise bewildering array of statistics reflecting the growing economic significance of key 'global cities'. However, scholars have expressed concerns over some rankings, either over their statistical veracity or the potentially perverse incentives they create for city governments eager to increasing their standing vis as vis competitors. Indeed, many are based on opinion surveys rather than hard data or extrapolate GDP growth forecasts from questionable underlying national statistics (the latter is particularly problematic in developing countries).
They can also conceal more than they reveal. Although major centres such as Hong Kong are often praised for their corporate heft, their very attractiveness to investors can create deleterious economic outcomes: Office rents in San Francisco are forecast to rise 36.2% to 2019, potentially hurting the smaller, innovative industries responsible for its initial rise as a tech hub. Rising house prices in many major cities are pushing even high-earning individuals to the fringes, resulting in long commutes, higher transport costs and ultimately lower productivity.
However, debates on how best to measure cities performance as distinctive economic entities are not new. Revisiting some key ideas can help to nuance, or at least refine, some of these assessments.
Since the early 1990s, scholarship on regional and urban economies has benefitted from a complementary renaissance in the field of economic geography, for which a seminal text is Paul Krugman's 1991 paper, Increasing Returns and Economic Geography. The effect of this has been a growing recognition that geography - in the sense of space, location, movement, distance, population density and so on - matters and has a material impact on economic development. However, how this should inform city-level economic policy is itself the subject of intense debate.
Some scholars argue that spatially-targetted policies, such as zoning schemes (e.g. to protect the historical or environmental character of particular areas) or regional development incentives (to attract investment to deprived areas) are regressive or introduce damaging distortions. This is because restrictions on building increases the relative scarcity of available land, ‘artificially’ pushing up property prices to the detriment of lower income groups. Others say such spatial management measures are critical for urban governance and achieving more sustainable, balanced growth.
Another point of contention has to do with the utility and conceptual integrity of 'competitiveness' itself as a measure of a city's economic heft. Despite these doubts, the term has become virtually ubiquitous in policy and investor circles. Indeed, an entire sub-industry of consultants has developed in recent years specifically to advise city authorities on how to boost their competitiveness, and thus attractiveness to global investors. The World Bank has also begun issuing sub-national versions of its 'Doing Business' rankings.
British academics Kitson, Martin and Tyler are wary of many of these seemingly objective indices, saying they can be misleading, and at worst, "positively dangerous". This is because they risk incentivising city authorities to make short-term policy changes (such as poorly conceived tax breaks or exemptions from environmental standards) to improve their business-friendliness. They note that such moves undermine robust longer-term planning and can have unforeseen, adverse consequences further down the line.
Instead, they call for a multi-faceted framework that takes into account a wider array of factors that determine a region or city's long-term prosperity. The idea of 'economic resilience', rather than simply a focus on growth or ease of doing business, flows from this approach. Other factors that feed into a resilience framework include policies prioritizing appropriate climate change adaptation or mitigation measures, social inclusion, better governance practices and large-scale capital investment in infrastructure.
Harvard’s Michael Porter, on the other hand, accepts the idea that cities compete with each other for business, investment and skills. His interpretation emphasizes the role that clusters (which he broadly defines as geographic concentrations of companies and institutions in a particular field resulting in unusual economic success in that field), rather than simply business-friendliness, play in determining such competitiveness. Concentrations of talented and skilled individuals in particular fields enhance such agglomeration effects.
Prominent examples include Los Angeles' specialization in film production and Bangalore's role in the global IT industry.
Clearly, the best approach for measuring a city’s performance differs depending on what one prioritizes. For businesses, rankings can indeed provide a useful, shorthand way to understand a city’s particular industry strengths. However, for policy-makers or longer-term investors needing to plan for a wider array of contingencies, a more integrated resilience framework such as that being promoted by the Rockefeller Foundation’s 100 Resilient Cities initiative, may be more helpful.
William Attwell is an analyst at Oxford Analytica. This article first appeared in Business Day. Attwell writes in his personal capacity.
Photo credit: jonathan.leung / Source / CC BY-SA
