Decision Theory for Planners #110 Why a City Scales like an Elephant

Geoffrey West the noted English physicist has studied scale for many years, moving from looking at physics, to biology to now cities and firms.

“I’ve always wanted to find the rules that govern everything,”

“It’s amazing that such rules exist. It’s even more amazing that we can find them.”

“We spend all this time thinking about cities in terms of their local details, their restaurants and museums and weather,”

“I had this hunch that there was something more, that every city was also shaped by a set of hidden laws.”

West took an idea from biology, Kleiber’s scaling law, and tried to explain it.  This looks at how the metabolism of a creature changes with size.  So for example while an elephant is 10,000 times the size of a guinea pig, it needs only 1,000 times as much energy. The metabolic rate of a creature is equal to its mass taken to the three-fourths power.  The number 4 seemed to pop up in all kinds of ways in similar laws of scale.

West sought to explain this by looking for laws which can be described as describing the infrastructure of space, the energy needed to take things around a network.  4 was no accident, it a network it describes the three degrees of freedom of space plus one which can be explained as the ‘fractal’ quality of networks, like the crinkliness of the UK coast which gets longer the closer you look at it.

This seemed to describe a certain increasing return to scale about physical phenomenon.

West looked at whether this applied to cities, gathering massive amounts of information with his co-worker Luis Bettencourt.  These ideas have been gathering increasing attention in recent months as they supply clues to describing a number of long understood but previously disparate phenomenon.

They found  massive economies of scale in settlements, just as in big animals.

They concluded that cities are a lot like elephants. In city after city, the indicators of urban “metabolism,” like the number of gas stations or the total surface area of roads, showed that when a city doubles in size, it requires an increase in resources of only 85 percent.

Economists had long studied the agglomeration economies of scale of cities.  Most famously Alfred Marshall

When an industry has chosen a locality for itself, it is likely to stay there for long; so great are the advantages which people following the same skilled trade get from near neighborhood to one another. The mysteries of the trade become no mysteries; but are as if were in the air, and children learn many of them unconsciously. Good work is appreciated; inventions and improvements in machinery, in processes and the general organization of the business have their merits promptly discussed; if one man starts a new idea, it is taken up by others and combined with suggestions of their own; and thus it becomes the source of new ideas.
Marshall, 1920

Marshall described three advantages 1) shared inputs, 2) labor market pooling and skill matches, and 3) knowledge spillovers, but all three of these are network effects explainable by the mathematics of West’s law, the ability of a good, member of a labour market or information to diffuse along a network.

Jane Jacobs argued that spillovers between industries in a diverse city was more important that spillover within a specialised industrial district, but in a more fundamental sense both effects have a deeper cause, how advantages scale.

In recent years Noble Prize Winner Paul Krugman and others in the ‘new economic geography’ have been grappling with a problem.  Without increasing returns to scale it is not possible to explain the growth and formation of cities at all, but acknowledging increasing returns undermines many of the assumptions of neo-classical economics.

But West found that not just the size of the economy increased by 15% per capita with city size, so did other things such as the number of crimes, traffic, even disease. It was the increased volume of such interactions in cities that Jane Jacobs promoted of course and West sees his ideas as offering a mathematical explanation of them. West describes the purpose of urban planning as finding a way to minimize our distress in cities while maximizing our interactions.

West and Bettencourt refer to this phenomenon as “superlinear scaling,” The slope leads to city growth from the positive feedback loop of urban life — a growing city makes everyone in that city more productive, which encourages growth which encourages more people to move to the city.

“When we started living in cities, we did something that had never happened before in the history of life…We broke away from the equations of biology, all of which are sublinear. Every other creature gets slower as it gets bigger [ because of the energy costs]. That’s why the elephant plods along. But in cities, the opposite happens. As cities get bigger, everything starts accelerating. There is no equivalent for this in nature. It would be like finding an elephant that’s proportionally faster than a mouse.”

So whilst large cities are more energy efficient per capita than smaller ones they lead to growth which consumes more energy overall. Man can break the constraints of biology by generating his own energy.

“The only thing that stops the superlinear equations is when we run out of something we need,…and so the growth slows down. If nothing else changes, the system will eventually start to collapse.”

For West only innovation can get us out of this resource bind

“It’s like we’re on the edge of a cliff, about to run out of something, and then we find a new way of creating wealth. That means we can start to climb again.”

This is an old idea in economics, the classical ‘steady state’ providing limits to growth of Ricardo, JS Mill and Marx, inspiring John Raes and Schumpeters concept of swarming innovations creating new opportunities for growth. Of Jevons concept that increasing cost from declining energy sources (in his day coal but today oil) will spur innovation in new energy technologies.

Bettencourt and West have also begun to look at the issue of the size of corporations, however the relationship is the opposite of cities, as the number of employees grows, the amount of profit per employee shrinks.

For West the the decline in profit per employee makes large companies increasingly vulnerable to market volatility. Since the company now has to support an expensive staff — overhead costs increase with size — even a small disturbance can lead to significant losses. As West puts it, “Companies are killed by their need to keep on getting bigger.” He may not realise it but that is pretty similar to Marx’s theory of the declining rate of profit. West so far does not explain the cause of the decline in profit per employee. Marx’s equations had the hidden assumption that capital intensity would increase at a faster rate than the profit generated/unit of labour, if it doesn’t you get an increasing rate of profit, and no capitalists rationally introduces a new technology that will reduce their profits to negative.

An explanation could be in the rigid way large firms are organised, limiting communication and innovation between staff that naturally occurs in small firms and between multiple individuals in cities. Large firms that promote such innovation tend to be the most successful. But combining the concept of increasing returns to scale of industrial processes with decreasing returns to scale at the level of the firm (the number of employees) seems to solve a number of puzzles in economics – such as why successful firms don’t expand infinitely (Sraffa 1926), and why small firms tend to create most new jobs.

It may also explain some puzzles in urban design. Andreas Duany is famous for his theory of scale invariance, that there are principles which apply at all scales of planning, from the region to the neighbourhood, such as access to open space.

West and Bettencourt’s ideas are new and sweeping.  At first site they appear to be anomalies.  For many large African cities there is no increasing efficiencies of scale, I would suggest though this is from a model of urbanisation which has seen investment in infrastructure fail to keep pace with city growth, leading to huge dis-economies.

A similar problem, which has led some urban researchers to be dismissive, is the decline of many large american cities and the growth and job creation rates of many suburban areas.  I believe though there are explanations for this.  American cities had grown beyond their bounds leading the centre taking on high city fixed costs and high tax earners living outside the city limits.  This can create a downwards fiscal spiral.  Also when industrial cities specialise in the same type of firm all growing together they can all decline together.  Finally when cities forget what they are about, creating economies of scale in labour and information, through encouraging loss of central urban jobs and low cost labour, cities can easily hollow out.  Where the disadvantages and costs of living in a settlement exceed the benefits people will settle elsewhere, spawning new cities or sprawl.  The problem though with sprawl is the increasing costs with scale and lack of increasing advantages.  Sprawl can drag an economy down in the same way an economy reliant on old industries can.

Government only owns 9 sq km of Non-Military Land

Thanks to Planning Resource. Must be one of the smallest State Ownerships in the world for size of country. Of course does include land owned by agencies, such as English Nature and Forestry Commission, The Homes and Communities Agency, legacy Regional Development Agencies and privatised utilities, or the Crown Estate or local government.  The Civil Estate is of course separately categorised from the Military Estate.

Nine Elms dominates the figures as the largest and most valuable site.

National Planning Policy Framework Forensics #17 Examining Plans

The practitioners draft contains a short section of the examination of ‘local’ plans, which amend the current tests of soundness.

In current PPS12 the tests are:

To be “sound” a core strategy should be JUSTIFIED, EFFECTIVE and consistent with NATIONAL POLICY.

“Justified” means that the document must be:

  •  founded on a robust and credible evidence base
  • the most appropriate strategy when considered against the reasonable alternatives

“Effective” means that the document must be:

  • deliverable
  • flexible
  • able to be monitored

(paras 4.36 – 4.38 and 4.44 – 4.47)

The replacement on page 13 of the practitioners draft is that to be sound a plan should be:

  • positively prepared – the plan should be prepared based on a strategy which seeks to meet objectively assessed development and infrastructure requirements, including unmet requirements from neighbouring authorities where it is practical to do so consistently with the presumption in favour of sustainable development;
  • justified – the plan should be the most appropriate strategy, when considered against the reasonable alternatives, based on proportionate evidence;
  • effective – the plan should be deliverable over its period and based on effective joint working on cross boundary strategic priorities; and
  • consistent with national policy – the plan should enable the delivery of sustainable development in accordance with the policies in the National Planning Policy Framework.
Positively Prepared

The positively prepared test added is useful and essential not that the test of general conformity with RSS is proposed to go.  This test aims to fill this gap.  The longer this very long sentence goes on however the more mangled it gets.  The ‘objectively obessed’ reference duplicates the justified test.   The  ‘where is is practical to do so consistently (sic) [presume means consistent] with the presumption in favour of sustainable development’, could be replaced with ‘where practical’ – as the rest is otiose as you would have to apply the test of reading the NPPF as a whole anyway (a footnote could explain that all references to ‘where practical’ should be read as applying the presumption in favour of sustainable development’.

The reference to ‘unmet requirements from neighbouring authorities’ will not fully meet ‘larger than local’ requirement’s; for the reasons set out in the previous part.  Where local authorities are in the inner edge of the green belt and their neighbours are beyond but still in the green belt then the unmet requirements wont be ‘neighbouring’.  It also does nothing to clarify how ‘unmet requirements’ is to be defined.  The easiest way for local planning authorities to meet this is to agree to keep jointly jobs growth forecasts down, as this will reduce the demand for housing in the medium term.  This creates a perverse disincentive.

One Test of Strategy or Two?
Larger than local development and infrastructure requirements can only ever be ‘objectively assessed’ by including consideration of the opportunity costs of the investment.  An area might be considered as a priority for economic growth because of its potential and because infrastructure investment there would make sense when considered against the alternatives.

So when assessing whether a plan is sound how will an inspector assess this?  Is the NPPF draft suggesting two soundness tests for strategy, one for the larger than local strategy, the other for the strategy within the ‘one plan’ area of the LPA or joint committee?  The fact that there are three bullet points each with a reference to strategy suggest the draft NPPF has to be read as implying more than one strategy test.

A plan comes before an inspector including reference to a ‘larger than local’ strategy.  Let us say for sake of argument that this is the first authority within the broader area to submit and it does not fully meet its own growth requirements as a neighbouring, less constrained, authority will take the overspill in one of its parishes.  At the examination representatives of the Parish in question object that this is not sound or lawful as the ‘larger than local’ strategy has not been subject to SEA/AA and accompanying consultation.

If a local planning authority submits a plan where the assessment of alternatives, consultation and SEA/AA only refer to options and areas within the local planning authority area this could become unstuck as this would not meet the requirements of the European Directive on SEA  which requires SEA for ‘programmes’ as well as plans, including those subject to ‘administrative provisions’, which would include joint agreement by LPAs and a memorandum of understanding.
So the each and every examination of a local plan would need to not just examine the strategy in an area but the ‘larger than local’ strategy, failure to do so would render it unlawful, unsound and subject to JR.

The only way that local planning authorities could avoid the enormous cost and delay of this would be for them to agree on a single joint examination of the larger than local strategy before all of the others.  In other words the only way that LPAs could comply with european law would be to create a system for consultation, SEA and examination of larger than local plans.  Now what might we call this system….how about regional planning.

Whatever the Localism says about revocation of RSS it cannot abolish regional planning as some form of regional planning is inevitable under an SEA system.  Without such a system local plans will be going nowhere, the first to come to examination would suffer a fate like Stafford and Litchfield did.

If this is the case that the NPPF should be absolutely explicit that this will be expected. There remains the problem of what would happen to local authorities that absolutely did not want to cooperate o nlarger than local arrnagements. It only takes one to scupper the whole arrnagement. The SoS needs to clarify what would happenm in such a circumstance, would any such veto be subject to sanction.

Where the evidence is ‘proportionate’ is a logically not a soundness test, it is a test of how it is prepared not of its quality.  The wording ‘robust and credible’ needs to be retained.

No longer a test of soundness.  Very odd.  The only reference to flexibility relate to the economy.

In the sense of internal consistency was dropped in the last version of PPS12, to much puzzlement, put it back.

National Policy Consistency
PPS12 explained what this means

The core strategy should not repeat or reformulate national or regional policy…
there may be local reasons for having greater detail than national or regional policy provides for, local circumstances which suggest that a local interpretation of higher-level policy is appropriate, Authorities may include such approaches in their plans if they have sound evidence that it is justified by local circumstances.
the local planning authority should be consistent with national policy …This means that the choices made regarding, for example where growth should take place should follow national … policy.

This seems to be to be important qualifiers, without them the impression would be given that the NPPF is a rigid approach. This paras enablesome local discretion, they should be retained.

Is this any longer important to the government?  All national guidance has been dropped, now all national policy, apart from a solitary reference to biodiversity monitoring.  Many a chief executive will now be saying drop the monitoring officer – we dont even need them to collect New Home Bonus.

Buying Time on Greek Debt

Yanis Varoufakis seems to have put his finger on the instability of the latest Greek Debt deal in De Zeit.

Instead of mending its ways, Europe is now seeking a Vienna-style ‘solution’. Put differently, it continues to be in denial dreaming of some agreement by Greece’s major creditors to buy new seven year Greek bonds of their own accord (once the bonds they hold mature). The key words here are “of their own accord”. Why? Because a debt roll over without free volition will cause the rating agencies to declare that Greek debt is in a state of default, thus making it impossible for the ECB to accept it as collateral from banks; which will in turn lead to a cascade of bank defaults which will… Thus, we are now embroiled in a discussion on the definition of ‘free will’ that would delight political philosophers and linguists.
The truth of the matter is that no investor, in their right mind, would choose to roll Greek debt over if they could help it. Which means that if they are allowed to decide freely, only a minuscule amount of debt will be rolled over; thus rendering the whole exercise pointless. The alternative is to give them ‘incentives’ to buy new Greek bonds that are akin to the Mafia’s favourite expression “we shall make you an offer you cannot refuse”. Today, it seems, politicians, the ECB and credit rating company Fitch have stitched up a two-part deal: (a) Creditors will be ‘leaned upon’ to roll over, and (b) Fitch will downgrade Greece to ‘restricted default’ but keep Greek bonds at CCC! In this manner, the ECB can continue to pretend that it accepts Greek bonds as collateral, the French government can claim that they avoided a default, and Berlin can celebrate its success in making some creditors pick up part of the bill.
If the above smacks of desperation it is because it is one last desperate bid to deny reality. Everyone knows that the time will come soon when linguistic games will no longer hold sway over the menacing facts. And when the rating agencies give the green light for the cashing of CDSs taken out against the Greek debt, Europe’s banks will come crashing down (courtesy of all the CDSs issued by their subsidiaries, and which the banks will have to cover for, repeating the sad rituals of AIG after Lehman’s).

Will Bahrain follow Morrocan King’s Wisdom?

Yesterday saw the unveiling of a new draft constitution in Morroco by its self-proclaimed Citizen King Mohammed VI.

Critically the prime minister would be chosen by the parliament and not the king and the prime minister would choose the cabinet. There would also be moved to an independent Judicary.

Anything less by the Khalifa Dynasty would lead to disaster in Bahrain.  The royal family needs to show it does not have the appetite for self -destruction of the Bourbons.