How Would Milton Friedman Govern San Francisco in 2023?
Back in the Summer of 2000, I worked at the Public Policy Institute of California in downtown San Francisco. I took the BART from Berkeley to the Embarcadero Station and walked to the Pyramid Building. When my son was young, we would often take him to Yang-Sing for some fine, fine dumplings. I marveled at the City’s beauty and dignity.
On one level, San Francisco City in 2023 has strong fundamentals. Great Winter Weather and high levels of human capital. Ed Glaeser has toured the world discussing such fundamentals as the basis for attracting population. But, he has also argued that city land use controls play a central role in limiting access. Pre-2020, San Fran was a high demand/low housing supply city featuring great beauty and very high home prices and with famous views, great beauty famous hippies and a legacy of tolerance and respect for individual freedom. Ironically, this respect for personal freedom does not appear to extend beyond the bedroom.
The Last Republican Mayor of San Francisco was named George Christopher. He served as Mayor from 1956 to 1964. I know nothing about Mr. Christopher. What I want to explore here is what part of the policy space is truncated when Republicans cannot be elected. If a Republican could be elected San Fran’s mayor in 2023, how would this competition affect the policy choices of the incumbent mayor?
How would a new Mike Bloomberg govern San Francisco in 2023?
Urban economics research has routinely documented that San Francisco ranks as one of the best quality of life places in the U.S based on its weather and beauty. But, its current crime, drug use issues and general disorder issues, and public school issues all raise challenges for local quality of life. What would a Bloomberg do?
Imagine if a “law and order” Mayor was elected and enforced the laws, and mitigated the “Tragedy of the Commons” challenge of public drug use, litter and disorder. Imagine if parents could choose which schools their kids attend using schooling vouchers. The City would quickly make a comeback. People would want to live in this City even if they are WFH workers who don’t have to commute to a nearby office tower 5 days a week.
A major weakness in academic economics is our lack of progress in understanding when political reforms take place. The Status Quo is not working today in the City of San Francisco. Reform over policing, school choice, and laws allowing for conversions of commercial real estate into residential housing are all taking place slowly. I conjecture that this slow pace of progress is due to the lack of political competition in San Francisco and the hope among the incumbents that a re-elected President Biden and a feisty Gov. Newsom will subsidize San Francisco. This latter belief means that moral hazard lurks. If the City knows that it must cure itself, then it would move faster to make the necessary changes.
Another weakness of urban economics is that we do not have causal models of what determines a city’s quality of life. Economists make wimpy statements such as “cities with more skilled people have higher quality of life”. Correlation or causation? What about the converse of this statement that states “Cities with more poor people have worse quality of life.” Economists don’t like to say that in print! But , why does a city have more poor people? Yes, cities with ugly declining durable capital attract the poor but why is the capital stock depreciating? Why aren’t investors investing in upgrading that capital? The answer of course is that potential investors are pessimistic about the city’s future and thus aren’t investing but why are they pessimistic? Note the circular logic here! The urban economists aren’t really helping the Mayors to think through how to build a great city. It is clear to me that a city that is safe and clean and that offers parents a menu of choices for helping them to help their children to flourish will be in high demand. Why are such cities so hard to supply?
LET me close by noting that there are few Republican Mayors who stand out as changing the course of a city. The Republican National Committee is not subsidizing this blog post! Instead, I want my few readers thinking about truncation. Big Cities are home to vast progressive majorities. They do not elect pro-market, pro-property rights enforcement officials. WFH means that such cities have lost their monopolies and many cities are not performing well in the face of such competition. Reforms are needed.
How would Milton Friedman govern modern day San Francisco?
Policing and enforcement of laws and protection of public spaces such as the parks
Housing construction with less red tape for building conversion
privatization of transport, schooling and street cleaning.
The “Urban Doom Loop” is an important hypothesis but the Loop implies it is a law of physics. I reject this. The Urban Doom Loop’s pessimism hinges on the political equilibrium that major city residents have chosen for themselves. They have chosen to not be “free to choose”.
Those who know Friedman’s work know that he viewed his policy reform ideas to be pro-poor. It is a mistake to declare that Friedman would improve a city’s quality of life by dispersing the poor. There would be market prices and people with less income must decide where to live and what structure to live in.
By offering universal basic income, access to cheaper housing (by reducing regulations that limit housing supply) and by increasing their children’s schooling options and transport options; Friedman believed that his “rules of the game” would accelerate their progress. He didn’t foresee the cheap temping drugs that are now available. I do not know how he would have addressed the urban Opioid challenge. Do you deny the poor short run temptations to help their future selves?