Saturday, March 11, 2006

Supply-side real estate.

Home Economics

By JON GERTNER

Edward L. Glaeser grew up on the East Side of Manhattan, went to school in Princeton, N.J., and Chicago, lived for a time in Cambridge, Mass., and Palo Alto, Calif., and recently moved with his wife and young son to a house on six and a half acres in the affluent suburb of Weston, Mass. To Glaeser, this last move has been a big adjustment. For one thing, he is not a good driver, and the new commute has prompted him to leave his house by 6 a.m. so as not to get ensnared in the morning rush hour. For another, Glaeser and the suburbs are clearly an unholy marriage of sensibilities, especially since his new house is bordered by about 600 acres of conservation land. "I wake up every day, thinking, My goodness, how many units of housing could you build here?" he says. Glaeser is a creature of density. An economist at Harvard, he has spent almost his entire professional life walking around, and thinking about, cities — seeking explanations why some metropolitan areas thrive and some suffer and what factors make some places pricey and some cheap. He is just 38. In the years since earning his Ph.D. at the University of Chicago, though, he has been prolific and provocative in a way that has left many of his colleagues awestruck. "I think he's a genius," says George Akerlof, an economist at the University of California, Berkeley, who was awarded a Nobel Prize in 2001. Gary Becker, an economist at the University of Chicago and a Nobel laureate, notes that before Glaeser came along, "urban economics was dried up. No one had come up with some new ways to look at cities." David Cutler, Glaeser's Harvard colleague and an academic star in his own right, puts it this way: "I think Ed is probably the most exciting urban researcher in half a century, if not longer."

In addition to teaching classes, Glaeser has recently taken over the Taubman Center at the John F. Kennedy School of Government, which finances studies on local and state governments, as well as the university's Rappaport Institute, which tries to link Harvard faculty members with Boston-related projects. As a result, Glaeser now divides his time between doing his personal research and serving as a dashing public advocate for urbanism. And he does make an effort to be dashing. Glaeser is not heir to the tweedy, harrumphing, bad-haircut tradition of academics. He radiates a confidence that to some fellow economists borders on arrogance. He has a tendency to speak quickly and in paragraphs rather than sentences, while projecting an Old World decorousness more reminiscent of Edith Wharton's New York than of today's Boston. He is tall, broad-shouldered and patrician in his bearing; he began wearing three-piece suits 23 years ago, back when he was in prep school, he says. One afternoon last December in his Cambridge office, Glaeser sported a bespoke pinstriped get-up and a pale blue silk tie, which he had tucked into a matching, fully buttoned pinstripe vest draped with the gold fob from his pocket watch. His shoes shone. He seemed to have stepped from a hansom cab, missing only a top hat. As he began to explain some of his recent work on housing prices, his large silver cuff links clinked against the table.

Unlike that of most other housing economists, Glaeser's recent work on real estate addresses the issues of supply rather than of demand. He is far more interested in the forces shaping land development and residential building in the United States than in the forces shaping buyers' motivations and actions. He views supply as crucial to appreciating what has happened to the U.S. real-estate market over the past 30 years. A few months ago, he traveled from his Harvard office to the Massachusetts State House, near Boston Common, to discuss with the leaders of the State Legislature a research project he had just completed on the local housing market. Between 1980 and 2000, four of the five cities in the U.S. with the fastest-growing housing prices were in Boston's metropolitan area: Cambridge, Somerville, Newton and Boston itself. (Palo Alto had the second-fastest-rising prices over that time.) Glaeser and several colleagues considered two explanations. First, the possibility that builders in the metro area were running out of land and that home prices reflected that scarcity. The second hypothesis was that building permits were scarce, not land. Had the 187 townships in the metro area created a web of regulations that hindered building to such a degree that demand far outstripped supply, driving prices up?

Almost as a rule, Glaeser is skeptical of the lack-of-land argument. He has previously noted (with a collaborator, Matthew Kahn) that 95 percent of the United States remains undeveloped and that if every American were given a house on a quarter acre, so that every family of four had a full acre, that distribution would not use up half the land in Texas. Most of Boston's metro area, he concluded, wasn't particularly dense, and even in places where it was, like the centers of Boston and Cambridge, there was ample opportunity to construct higher buildings with more housing units.

So, after sorting through a mountain of data, Glaeser decided that the housing crisis was man-made. The region's zoning regulations — which were enacted by locales in the first half of the 20th century to separate residential land from commercial and industrial land and which generally promoted the orderly growth of suburbs — had become so various and complex in the second half of the 20th century that they were limiting growth. Land-use rules of the 1920's were meant to assure homeowners that their neighbors wouldn't raise hogs in their backyards, throw up a shack on a sliver of land nearby or build a factory next door, but the zoning rules of the 1970's and 1980's were different in nature and effect. Regulations in Glaeser's new hometown of Weston, for instance, made extremely large lot sizes mandatory in some neighborhoods and placed high environmental hurdles (some reasonable, others not, in Glaeser's view) in front of developers. Other towns passed ordinances governing sidewalks, street widths, the shape of lots, septic lines and so on — all with the result, in Glaeser's analysis, of curtailing the supply of housing. The same phenomenon, he says, has inflated prices in metro areas all along the East and West Coasts.

It is rather unlikely that Glaeser is calling attention to the evolution of zoning to make an ideological argument or to pin the blame on local officials for any sort of housing bubble. "He doesn't wake up in the morning and say, 'My agenda is to fight government,"' says his Harvard colleague Martin Feldstein, an economist long in favor of privatizing Social Security and who, you might argue, knows what it's like to wake up with that agenda. While Glaeser admits to a libertarian bent, with a preference for market solutions over government solutions (he calls rent control "bad, bad, bad"), his inconsistencies are such that his colleagues disagree over whether he comes from the political center or the right. Certainly no one accuses him of being a lefty. But Glaeser has many admirers, and several research collaborators, on the liberal end of the spectrum; he likewise displays an odd enthusiasm for progressive efforts like those by London's mayor, Ken Livingstone (Glaeser affectionately calls him by his popular nickname, Red Ken), who imposed a stringent "traffic tax" on vehicles in the center city to reduce congestion.

Glaeser's goal seems less to further a particular philosophy than to explain the interplay of housing and human behavior. His desire to provide a persuasive, data-driven explanation for elevated home prices fits into a decade of research that he says he hopes will ultimately provide a broad and ambitious framework to explain the function and evolution of America's cities. His view is that the life of the city cannot (and should not) be separated from its real-estate market. "They mutually cause each other," he says. "Housing supply determines to a certain extent what goes on with the economic life of the city; and the economic life of the city is intimately related to the demand for housing. And you cannot possibly understand that if you're going to try and treat them as being separate." Put another way, we shape cities; cities shape real estate; real estate shapes cities. And cities shape us too.

Cities, Glaeser often says, should be thought of as "the absence of physical space between people and firms." This sounds like a poetic definition of urbanism, but it is actually more than that. To Glaeser, the concentration of people and business puts us close enough to share one another's company, culture and ideas. That goes not only for a densely packed place like Manhattan but also for car-based areas like Silicon Valley. As David Cutler points out, almost all of Glaeser's work is about social interaction and space, about seeing cities as places where all kinds of important transactions occur in "the union of everything." It is not a coincidence that one of Glaeser's great heroes is the writer Jane Jacobs, a keen, street-level observer of cities who celebrated the freedom and vitality of urban neighborhoods; he keeps an autographed copy of her book "The Death and Life of Great American Cities" on his bookshelf. In economic jargon, city living creates what Glaeser calls "spillovers." Some urban spillovers are not so good, like the pollution and congestion from so many people and cars. But others are the very essence of civilized life — the decency of community, the spread of ideas, the possibility of sublime inspiration. If there is a common theme to his work, Glaeser says, it is that "people are changed by the people around them." And it is the absence of physical distance, more than anything else, that makes that happen.

Much of Glaeser's outlook derives from his own experience. Growing up in Manhattan, where his father was an architectural historian and a curator at the Museum of Modern Art, he found it difficult not to get swept up in the city's density and energy. He traces the origins of his career in economics to his mother, who worked for the John D. Rockefeller 3rd Foundation dispensing grants to artists. "She went back to get her M.B.A. when I was 10," he says, "and I would occasionally go with her to classes when I was on vacation." Some adults remember fondly the first time they went to a major-league baseball game. Glaeser recalls a revelatory experience as a youngster when his mother sat him down and explained marginal cost pricing. In high school thereafter, and as an undergraduate at Princeton, he spent most of his time on math, economics and history. The physical sciences were a bore, he says: "How the sun works? I just didn't care. But I did care about people and man's interaction in his environment."

The University of Chicago gave Glaeser the opportunity to study at what was arguably, at the time, the best economics department in the United States, a stellar lineup of soon-to-be Nobel laureates like Gary Becker and Robert Lucas. In the regular seminars where members of the faculty typically sat at a central table and graduate students were on the classroom's periphery, Glaeser would sit at the faculty table, recalls his friend Matthew Kahn, now an economics professor at Tufts University. "So at a very early stage he saw the academics as a peer group," Kahn says. "At the time, it seemed audacious to me, but now it makes perfect sense." If there were two seminal moments for Glaeser at Chicago, the first was reading through a paper by Robert Lucas, "On the Mechanics of Economic Development," that looked at forces that spur economic growth around the world. Deep in Lucas's paper, there is a glancing mention of the role that human capital — the term economists use for the skills and knowledge that people possess — might play with respect to cities. Glaeser began to mull on that. In the meantime, he began working with his thesis adviser, the Brazilian economist Jose Scheinkman, on a study that considered whether it is better for a city to be focused on one particular industry, like textiles or finance, or whether a city with diverse industries is healthier and richer. Glaeser's and Scheinkman's paper came to the conclusion, surprising at the time, that given the choice, any city that wanted to grow should pursue commercial diversity rather than specificity. In economic circles, the paper made Glaeser famous in his mid-20's. Harvard invited him to join its faculty in 1992.

One day this January, Glaeser took the lectern in Midtown Manhattan to deliver a lecture, sponsored by the Manhattan Institute, titled "Why Are Skilled Cities Getting More Skilled?" He didn't answer this question right away. In the years since coming to Harvard — and in the years that have preceded his current work on real estate — Glaeser has methodically examined how transportation, education, crime, weather and sprawl affect the fortunes of America's cities, as if turning over tarot cards one by one. He isn't the only economist to look at these subjects, but he is arguably the most original in assimilating careful and highly mathematical economic research. His lecture, given to an audience of about 90 people, first discussed the historical trends that have shaped urban growth. Until recently, cities existed to economize on transportation costs — hence their locations near industries or agriculture to reduce the expense of shipping products by sea or by train. Yet because transport (mainly trucking) costs dropped significantly during the 20th century, location has become irrelevant. In Glaeser's view, cities now exist so that people can have face-to-face interactions or be entertained or consume products and services. For businesses, cities are a place to benefit from a spillover in ideas and to reduce costs by being near other companies.

This evolution, of course, has coincided with a vast American migration toward regions of sun and sprawl. Glaeser likes to point out the close correlation between a city's average January temperature and its urban growth; he also notes that cars per capita in 1990 is among the best indicators of how well a city has fared over the past 15 years. The more cars, the better — a conclusion that seems perfectly logical to Glaeser. Car-based cities enable residents to buy cheaper, bigger houses. And commuters in car-based cities tend to get to work faster than commuters in cities that rely on public transit. (The average car commute is about 24 minutes; on public transportation, it is around 48 minutes.) While many of his academic peers were looking at, and denigrating, how the majority of Americans have chosen to live, Glaeser (though no fan of the aesthetics of sprawl himself) didn't think an economist should allow taste to affect judgment. "You shouldn't go around thinking that all these people are just jackasses for deciding to drive an automobile," he says.

In any case, Glaeser discovered that there can be more to urban success than cars and palm trees. For a city without warm weather and a car-friendly environment, skills are destiny. That is why New York and Minneapolis, with vast numbers of college graduates, have done so well. "Boston would be just another declining, cold, manufacturing city if it weren't for its preponderance of human capital," Glaeser says. And his studies suggest that the more skilled a city's population, the more skilled it is becoming, as entrepreneurs attract skilled workers who in turn attract entrepreneurs. Americans, as a result, are sorting themselves through education and geography more and more with each passing year.

The process yields losers as well as winners. Late last year, Glaeser wrote a controversial article that made a case against rebuilding New Orleans. He has since become an intellectual leader to a tiny, unsentimental, let's-not-rebuild-the-city faction. "There's some small core of the city that should be there," he says, "but the city itself has been in decline for 50 years and in relative decline for 150 years relative to the U.S. population as a whole. It's not a great spot to have a city; it's incredibly expensive to build the infrastructure to keep it there. You can't possibly argue that New Orleans has been doing a good job of taking care of its poor residents, either economically or socially. And surely some of the residents are better off by being given checks and being allowed to move elsewhere." Glaeser admits that many critics have responded to his views with shock, asserting that he is unfairly attacking the city at a moment of terrible vulnerability. "No one has accused me of hating the poor or being racist," he says. "But I have been accused of not having a heart."

It's a familiar complaint. A few years ago, in an article Glaeser wrote about poverty for Harvard's alumni magazine, he suggested eliminating public housing in the U.S. in favor of housing vouchers. His argument was attacked for being coldblooded as well as impractical. Chris Mayer, a housing economist at Columbia Business School and a frequent admirer of Glaeser's research, says that Glaeser's perspective on things tends to attract controversy and incite debate. "I think Ed does care a lot about helping the poor and about social equality," Mayer says, "but his view of how to get there is a different view than other people."

Glaeser, for his part, says he feels the same about New Orleans as he does about many cities of the Rust Belt. "I believe very strongly that our obligation is to people, not places, and I think we certainly have an obligation — ethical, economic, what have you — to the residents of Detroit," he told me. But he sees no economic or geographic reason to have a large city there anymore, and he views the prospects for any rebound as dim. (Detroit ranks last among cities with more than 500,000 residents in percentage of college graduates.) The city produced the cars that produced the sprawl that helped destroy the city; such tragedy might have been lessened had it produced more universities too. "There are no reasons why it can't, and shouldn't, decline," Glaeser says. "And I would say that for many other cities. There's no reason not to let decline go forward." The greatness of America is dependent in part upon regional evolutions and migrations, he adds. "Places decline and places grow. We shouldn't stand in the way of that."

Glaeser first began to think about how real estate fit into this urban order a few years ago, after he spent some time looking at the effects of skills and sprawl on cities. While Glaeser seems able to turn out academic papers at an astonishing pace — he almost always writes at home, so he can smoke cigars while he types — it sometimes takes years for him and his collaborators to assemble the data and equations used to support his ideas. In addition to his urban research, Glaeser has written on voting behavior, hatred, poverty and public health; a few years ago, with David Cutler, he wrote a widely discussed paper that looked at why Americans are becoming so obese. (They attributed it partly to the microwave oven.) Yet urban subjects have consumed most of Glaeser's time and attention. In the late 1990's, he began thinking less about incorporeal forces like human capital and consumerism and more about the physical nature of places — buildings, roads, buses — and what kind of effect that had on a metropolitan area.

In 2000, Glaeser took a sabbatical from Harvard and began to spend a few days a week in Philadelphia working with Joseph Gyourko, a real-estate economist at the Wharton School of the University of Pennsylvania. Glaeser had already been thinking about the relationship between housing and urban poverty when one day he and Gyourko began to discuss why cities like Philadelphia and Detroit — places with poor future prospects, both economists believed — weren't doing even worse in terms of population. Why didn't everyone leave, Gyourko wondered, and go to a place like Charlotte, N.C., that had a fast-growing economy? This question addresses a puzzle of urban economics. Cities (think of Las Vegas or Phoenix) can grow at a very fast rate, exploding overnight with businesses and residents. Some can increase in population by 50 or even 60 percent in a decade. But cities lose their residents very slowly and almost never at a pace of more than 10 percent in a decade. What's more, when cities grow, they expand significantly in population, but housing prices tend to rise slowly; even as Las Vegas grew by leaps and bounds in the 1990's, for instance, the average home there cost well under $200,000. When cities decline, however, the trends get flipped around. Population diminishes slowly, but housing prices tend to drop markedly.

Glaeser and Gyourko determined that the durable nature of housing itself explains this phenomenon. People can flee, but houses can take a century or more to finally fall to pieces. "These places still exist," Glaeser says of Detroit and St. Louis, "because the housing is permanent. And if you want to understand why they're poor, it's actually also in part because the housing is permanent." For Glaeser, this is the story not only of these two places but also of Buffalo, Baltimore, Cleveland, Philadelphia and Pittsburgh — the powerhouse cities of America in 1950 that consistently and inexorably lost population over the next 50 years. It is not just that there were poor people and the jobs left and the poor people were stuck there. "Thousands of poor come to Detroit each year and live in places that are cheaper than any other place to live in part because they've got durable housing still around," Glaeser says. The net population of Detroit usually decreases each year, in other words, but the city still attracts plenty of people drawn by its extreme affordability. As Gyourko points out, in the year 2000 the median house price in Philadelphia was $59,700; in Detroit, it was $63,600. Those prices are well below the actual construction costs of the homes. "To build them new, it would cost at least $80,000," Gyourko says, "so there's no builder who would build those today. And as long as those houses remain, the people remain."

The resulting paper, "Urban Decline and Durable Housing," caused a stir among urban economists even before its publication last year. (It was initially circulated with a subtitle along the lines of "Why Does Anyone Still Live in Detroit?" until the authors, thinking it politically insensitive, removed it.) In addition to illuminating some of the forces shaping our poorest cities, the research proved to Glaeser that it is impossible to think about urban economies without thinking of urban buildings at the same time. Meanwhile, it demonstrated to him how useful it can be to consider the relationship between actual construction costs and the market price of homes. That lesson seemed to apply not only to declining cities but also to places with extraordinary price appreciation, like the San Francisco or Boston metro areas. How could homes in these places be priced so much higher than construction costs? And why did the prices keep going up?

Glaeser has come to believe that changes in zoning regulations may be the most important transformation in the American real-estate market since the mass acceptance of the automobile. In his view, these regulations have essentially created a "zoning tax" that has pushed prices far above construction costs. Very, very far above construction costs. It is not a perspective shared by all housing analysts; some economists have been far more inclined to blame high prices on high demand (spurred by low interest rates) or on rampant speculation. Others agree with Glaeser in emphasizing supply but not necessarily fixing on zoning. Karl Case, for instance, an economist at Wellesley College who counts himself a fan of Glaeser's, agrees that lack of supply has led to steep prices in the Boston area, but he attributes the housing shortage not just to zoning but also to the nature of the construction business and the scarcity of large desirable tracts of land. Still, among the half-dozen leading economists who study housing supply, there seems to be wide agreement that regulations have had a tremendous effect on prices. "I think the evidence is overwhelming," says John Quigley, an urban economist at Berkeley who has looked specifically at the effects of regulation on the California market.

As Glaeser says: "It's so easy to forget the world that we were living in around 1970, when basically almost all of the value of houses was in the physical infrastructure. That was actually the cost. There was some land, and it was worth something, but it wasn't worth more than 20 percent of the value of the house." Even in New York City, Glaeser says, the price of an apartment back then was essentially the cost of building the next floor. In researching New York City's housing prices, in fact, Glaeser and Gyourko discovered that over the past 30 years, the average height of new residential buildings in Manhattan decreased in size. "That's crazy," he insists, especially in light of how much the demand to live in New York has increased. "You know, if prices in Manhattan are skyrocketing, you should be building more and more at 50 stories, rather than at 30. Not the reverse." So is it his contention that Manhattan could build far more than it has recently? "Oh, for sure," he says. "Technologically? Certainly. No reason why you couldn't."

Let's go back to Manhattan in the 1920's, Glaeser says. "New York in the 1920's is a pretty developed place, a pretty mature place. But they're producing a hundred thousand units a year. They're tearing up swaths of Manhattan and building higher buildings." That would be legally and politically impossible today, but as he and Gyourko see things, it is precisely those legal and political roadblocks to "tearing up" the city that have made the place so expensive. Actually, in 2004, the two men took a close look at Manhattan and estimated that one half or more of the value of condominiums in the borough could be thought of as arising from some type of regulatory constraint preventing the construction of new housing. The data for co-ops (because of their ownership structure) was more difficult to interpret, but Glaeser and Gyourko suspect that their estimates probably apply to the Manhattan market as a whole.

Glaeser has little doubt that there are regular cycles in real-estate markets; the recent slowdown may perhaps be evidence of one of those cycles. But he says he doesn't think that the supply issues are something that will disappear, even if the demand for housing levels off or drops over the next few years. "We will never go back to a world in which developers in Massachusetts or California or New York are able to do what they want with their property unimpeded by their neighbors," he says. And what surprises him is that the changes in how we have treated property rights for the last 40 years — who gets permission to build, the size and location of what owners are permitted to build — have been the subject of virtually no national dialogue, even as the effects on prices, in his view, have been extraordinary.

This is not to suggest that Glaeser wants New York or Boston to become another Houston or Phoenix, where developers build without hindrance and housing, as a result, stays cheap. "I'm pretty sure that Boston and California have gone too far to one extreme," he says. "But I'm not sure that Texas hasn't gone too far to the other extreme." He says he tends to think that officials in the Boston and New York metro areas need to allow for more housing when the market gets tighter again. At the very least, he says, officials should discuss the long-term effects of restricting home building. And there is a bigger point here anyway, he says. Zoning and housing supply ultimately determine not only who lives in a city but also the very nature of these places. Boston, San Francisco and Manhattan are obviously becoming rarefied destinations, mostly for America's elites (Glaeser calls the cities "luxury goods"), with housing floating beyond the reach of the young and the middle class. These cities' economies are in the process of becoming boutique, too, accommodating only the most skilled and privileged. Their desire to limit construction and grow not in buildings and population but in prices has, in effect, begun to shape their destiny. "A healthy city is one that has a healthy mix of demographic groups," Glaeser says. "Shutting out your 25-to-40 year-olds? That feels like a bad strategy for urban innovation."

But economists, like any social scientists, often discover that the leap from conducting research to making policy can be enormously difficult. It can take years, perhaps decades — and that's when it happens at all. Glaeser is fortunate in that he already has the ear of mayors and state legislators who at least took notice of his recent work on regulations in the Boston metro area. Still, he admits it will be difficult to go against the current momentum. "I'm not in any sense trying to suggest that we want a developer's paradise where you can build anything, anywhere," he says. "But I sure as heck think the current situation happened by happenstance, happened by changing the legal norms, which in no sense is guaranteed to yield a socially desirable outcome." Homeowners, he points out, have a strong incentive to stop new development, both because it can be an inconvenience and also because, like any monopolist, stopping supply drives up the price of their own homes. "Lack of affordable housing isn't a problem to homeowners," Glaeser says; that's exactly what they want. "The thing you want most is to make sure that your home is not affordable if you own it. And for that reason, there's absolutely no reason to think that little suburban communities with no businesses that are run essentially by their homeowners will make the right decisions for the state as a whole, for the business in the area, for the country as a whole."

As a matter of fact, Glaeser long ago became convinced that there is a lot riding on supply. "The welfare of the world is shaped in part by our urban form, by the way that we live, the way our communities are constructed," he says. "These things like growth controls have changed the way communities are developed." Joseph Gyourko shares the view that where we live, and why we sort ourselves into those places, have profound effects on society, culture, politics and business. "It's important," he says of the sorting process. "It's not an innocent thing." Thus, the two academics have resumed their real-estate research, taking on two projects. The first, closer to completion, is an attempt to explain the occurrence of housing cycles. So far, the preliminary data have led Glaeser to believe that the past decade's run-up in prices is probably caused by factors beyond the restrictions on supply; the home-appreciation numbers appear to be so high that they suggest that prices in coastal cities have some psychological component too. (In his view, the supply shortage greatly magnifies the effect of any sort of "irrational exuberance.") Glaeser is the kind of economist who is reluctant to make predictions. Yet, he says, "I'm comfortable with the notion that we're going to have a substantial correction over the next five years."

His other project is both more ambitious and more difficult. He and Gyourko say they know that the country's regulatory environment, and thus the supply of housing, began to change around 1975. But they don't know why it changed. So along with a third researcher, Raven Saks, they have begun to track building permits from hundreds of cities around the country over the past four decades to investigate the nature of the evolution. Glaeser speculates that there may be a viral phenomenon whereby once housing prices reach a certain level, residents become aware of high home values and agitate for restrictions; another possibility is that judges have become much more sympathetic to blocking development for environmental reasons. Still another thought: that homeowners, utilizing skills learned during the civil rights movement and political protests of the 1960's and 1970's, became much more adept at organizing against developers. (There appears to be a reasonable correlation between liberal enclaves, zoning regulations and high housing prices.) In any event, Glaeser says, he doesn't know the answer yet, and it may take years to find out.

He was explaining this one afternoon in January as he sat in a club chair on a third-floor landing at the Harvard Club in Midtown Manhattan. Glaeser visits urban neighborhoods all around the U.S., but his teaching schedule often restricts his observation of the American landscape to data and algebraic models. When it was time to go, he seemed relieved to step onto the concrete sidewalk, into the city he once called the country's "urban colossus." Waiting for the light to change at 44th Street and Fifth Avenue, the defender of sprawl, the explainer of human capital and the avenger of zoning regulations — and the wearer of a splendid beige cashmere overcoat — didn't seem much suited for the suburbs of Boston. Here on the street, disappearing into a crowd of people, he seemed right at home.

Jon Gertner, a contributing writer, last wrote for the magazine about living-wage campaigns.

Copyright 2006 The New York Times Company

Friday, March 10, 2006

Web Design, 2.0.

Mash-ups, graphically.

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link to original piece.

The Chaos of Joshua Davis

He's a punk, a provocateur, the bad boy of Web design. They call him the Jackson Pollock of the Internet age. He calls them a few choice four-letter words. But everyone from BMW to the Tate Modern wants a piece of him.
By Scott Kirsner

The first music Joshua Davis cranks up every morning, after he has carried a mug of coffee from his kitchen to the backyard barn that serves as his studio, is "Refused Are Fucking Dead," a punk diatribe by a Swedish band called Refused that foretells the group's crash and burn. Davis pounds the edge of his desk in rhythm, getting stoked for the day ahead. "My theme song," he says.

Davis is dressed in black - baseball cap, cords, long-sleeve sweater - accented by red socks and bright orange sneakers. His head is shaved from a recent surgery to remove a cyst. Three skulls are tattooed on the fingers of his left hand, and patches of inked skin peek out from his sleeves and the neck of his sweater. Inside the barn, there are skateboards hanging on the walls, six computers, a Wacom digital sketch tablet, a widescreen TV, several gaming consoles, a vintage Centipede arcade game, and a vast chalkboard showing Davis' upcoming speaking gigs: Mexico City in March, Toronto in April, Barcelona in May. Perched on a windowsill is a winged, Oscar-like statuette he received in 2001 from the prestigious European digital culture center Ars Electronica.

There are two ways to get noticed as an artist. You can stick to a familiar formula, like Thomas Kinkade with his prodigious output of country cottages that look perfect hung above the chenille sofa in a bed-and-breakfast. Or you can have a fresh shtick, something that kicks convention to the curb. Davis' shtick is provocation.

At 34, he's a skateboarding ex-cocaine addict whose body is tattooed almost as thoroughly as Tommy Lee's. He seeks ­confrontation at every turn. Addressing a recent gathering of several hundred architects in Ohio, Davis - who is completely unschooled in their field - boasted that his art- generating software could help them come up with bright ideas whenever they hit creative blocks. "Sure, that pissed some people off," he says. At the TED conference last year in Monterey, California, Davis greeted the technology, entertainment, and design bigwigs in the audience by calling them "special assholes." Then he referred to Jackson Pollock as a "conceptual prick." He asserts that he doesn't go to museums or surf the Net. "What's on the Net? Google, porn, Amazon, and my work," Davis says. "I want to bring something to the Net that's not on the Net."

Davis creates what he calls generative composition machines: applications written with his collaborator Branden Hall, ­using open source code and Flash to automate his sketches. He plugs in multiple options - say, five different drawings of a tree trunk, 10 types of leaves, seven branches, 15 critters that can live in the foliage, and 12 background colors. Then his code morphs the image from pas toral scenescape into any number of moving visuals - a time-lapse sequence of continental drift, a single frame of anime burning in front of a projector lens, or a Japanese landscape painting rendered as spin art.

For Davis, content is everywhere. While walking on the beach in Croatia a few years ago, he picked up a shard of earthen ware that eventually served as the base ingredient for a piece of his art. He drew a version of its pale blue fleur-de-lis pattern on the Wacom tablet and changed it into other shapes and forms onscreen. He's also pulled colors off the cover of his daughter's Snow White DVD and used jellyfish at the Coney Island aquarium to give him ideas on shape and movement.

For all his antics - some of which are, to be sure, an act that barely disguises his nice guy bona fides - Davis pays the bills shilling for the Man. Right now, he's working on BMW's new Z4 coupe. "Yeah, I'll do it - why not?" he says. "I'll fly to ­Germany, sit in a room, and write code for my artwork. Hell, yeah." With projects completed or under way for clients as ­diverse as Barneys New York, Nike, Nokia, Diesel, the Red Hot Chili Peppers, and Tool, Davis has become the badass artiste mainstream America turns to for edgy branding.

"Having Josh create something new based on the car's design sounded like something that would get people talking," says Oliver Schmid, head of Dorten, the Stuttgart, Germany, ad agency that hired Davis for the BMW project. "We did think about how BMW would react to his persona - there were moments when we thought, this is going too far."

Davis is writing software for BMW that will generate 1,500 prints, each unique, inspired by the Z4's colors and lines. It's a clever twist on an artist's standard process of producing a batch of lithographs of a particular work. In this age of mass customization, Davis is saying, why not make every item an original? And who cares if a machine - not the artist - actually made the changes between prints 213 and 214?

Davis grew up in the suburbs of Denver. After high school, he bummed around the Arapahoe Basin ski area in Colorado, teaching snowboarding. A bus bench he painted for a Denver art festival in 1992 landed him on the front page of the Rocky Mountain News. Three days later, with a few hundred dollars in his pocket, he moved to New York, determined to become an artist. "I slept on a lot of floors," he recalls.

He got into New York's influential Pratt Institute but quit when Netscape 2.0 was released in 1995. "It felt like this defining moment," he says. "There were about three of us at Pratt who got the Net; there was no HTML course at the school."

He landed a succession of jobs at Manhattan design firms. He pushed JavaScript, Shockwave, and Flash beyond what was thought possible, making static Web pages spring to life for clients like Volkswagen and Sean "Diddy" Combs.

But it was Davis' personal sites, like PrayStation, once upon a forest, and the design community site Dreamless, that built his rock star rep. "I'd be working for JPMorgan during the day," he says, "and then I'd go home and do my own stuff for eight hours." Winning a top award from Ars Electronica changed Davis' reputation. He was no longer viewed as just a clever Web designer, but as an artist using code as a medium. "Code is just as artistic as using paint and a brush," he says. "Besides, I don't see the point of painting the same way a bunch of dead pricks did in the 15th century."

While Davis believes his creativity is the code behind his artwork, museums and collectors still place their emphasis on the print. The art crowd may be open to buying something that essentially requires a maintenance contract, but as John Maeda, an interactive pioneer who teaches at the MIT Media Lab, points out, no one wants to act as the maintenance man or service technician ad infinitum.

But selling his prints - which freeze the visual representation of his software at a single moment in time and tend to go for about $500 each - strikes Davis as something of a contradiction. "I'm creating something that's ever-changing, and here I am, eternalizing it. Am I just fucking myself?" He says the work "wants to live in the machine. It almost doesn't want to be on paper. It will crash the machine when you try to print it out. There are just too many layers and vectors."

Of course, Davis isn't the first artist to stand out for rogue techniques. He's routinely compared to Pollock, who lived at the other end of Long Island and came up with a whole new approach to painting. It's tough not to compare the two - ­unhealthy attachment to mind-altering substances, bristling persona, studio barns, unorthodox technique. Davis isn't a fan of Pollock's work, but he admits that he's an artistic descendant.

"Pollock showed that there was beauty in randomness," he says. "There was chance, because the brush he used to drip the paint was above the surface of the canvas. It's a good start. I'm going to take that idea further: The painting is never the same from one second to the next."

Big-name museums, particularly those in Europe, are taking notice of Davis' work, even as they struggle with how to display it. Among the museums and galleries exhibiting Davis are the Tate Modern, the Design Museum, and the Institute for Contemporary Arts (all in London), MoMA affiliate P.S.1 in New York, and Centre Pompidou in Paris. Davis also teaches at Manhattan's School for Visual Arts and gives workshops around the world.

"He shepherded a whole generation of coders who wanted to become more design- oriented, and designers who wanted to become more code-oriented," says humorist and Web artist Ze Frank. "Lots of multimedia artists say they want the experience of engaging with their work to be as immersive as music," says Alice Rawsthorn, director of the Design Museum. "Joshua is one of the few to pull it off."

Sporting blue suede bowling shoes and toting his own ball in a black vinyl bag, Davis strolls into Sheridan Lanes, an alley in suburban Long Island. "Bowling is the only generative sport," he says. Each time his green and yellow ball glides down the lane, it collides with the pins in a new way. It's barely controlled chaos, just like his art. Polishing off a cheeseburger, Davis proceeds to roll three strikes in the final frames of his warm-up game.

During the drive back to his studio, Davis rattles off an ambitious to-do list, gaining momentum as he speaks. He'd like to figure out how to distribute his software through an open source license and put together a plan to bring his art- making machines to the fashion world. Perhaps he'll make and sell a series of shirts and bags, each of which would look slightly different. He's working on an exhibition for later this year at New York's Cooper-Hewitt National Design Museum. And on his next trip to Spain, he's planning to add a new tatoo to his right hand: CHAOS.

Scott Kirsner (skirsner@sbcglobal.net) is working on a book about Hollywood's love-hate relationship with new technologies.

Boxed in.

Cubicles: The great mistake

Even the designer of the cubicle thinks they were maybe a bad idea, as millions of 'Dilberts' would agree.

By Julie Schlosser, FORTUNE Magazine
March 9, 2006: 11:22 AM EST

NEW YORK (FORTUNE Magazine) - Robert Oppenheimer agonized over building the A-bomb. Alfred Nobel got queasy about creating dynamite. Robert Propst invented nothing so destructive. Yet before he died in 2000, he lamented his unwitting contribution to what he called "monolithic insanity."

Propst is the father of the cubicle. More than 30 years after he unleashed it on the world, we are still trying to get out of the box. The cubicle has been called many things in its long and terrible reign. But what it has lacked in beauty and amenity, it has made up for in crabgrass-like persistence.

Reviled by workers, demonized by designers, disowned by its very creator, it still claims the largest share of office furniture sales--$3 billion or so a year--and has outlived every "office of the future" meant to replace it. It is the Fidel Castro of office furniture.

So will the cubicle always be with us? Probably yes, though in recent years individuals and organizations have finally started to chart productive and economical ways to escape its tyranny.

The cubicle was not born evil, or even square. It began, in fact, as a beautiful vision. The year was 1968. Nixon won the presidency. The Beatles released The White Album. And home-furnishings company Herman Miller (Research) in Zeeland, Mich., launched the Action Office. It was the brainchild of Bob Propst, a Coloradan who had joined the company as director of research.

After years of prototyping and studying how people work, and vowing to improve on the open-bullpen office that dominated much of the 20th century, Propst designed a system he thought would increase productivity (hence the name Action Office). The young designer, who also worked on projects as varied as heart pumps and tree harvesters, theorized that productivity would rise if people could see more of their work spread out in front of them, not just stacked in an in-box.

The new system included plenty of work surfaces and display shelves; partitions were a part of it, intended to provide privacy and places to pin up works in process. The Action Office even included varying desk levels to enable employees to work part of the time standing up, thereby encouraging blood flow and staving off exhaustion.

But inventions seldom obey the creator's intent. "The Action Office wasn't conceived to cram a lot of people into little space," says Joe Schwartz, Herman Miller's former marketing chief, who helped launch the system in 1968. "It was driven that way by economics."

Economics was the one thing Propst had failed to take into account. But it was also what triggered the cubicle's runaway success. Around the time the Action Office was born, a growing breed of white-collar workers, whose job titles fell between secretary and boss, was swelling the workforce. Also, real estate prices were rising, as was the cost of reconfiguring office buildings, making the physical office a drag on the corporate budget. Cubicles, or "systems furniture," as they are euphemistically called, offered a cheaper alternative for redoing the floorplan.

Another critical factor in the cubicle's rapid ascent was Uncle Sam. During the 1960s, to stimulate business spending, the Treasury created new rules for depreciating assets. The changes specified clearer ranges for depreciation and established a shorter life for furniture and equipment, vs. longer ranges assigned to buildings or leasehold improvements. (Today companies can depreciate office furniture in seven years, whereas permanent structures--that is, offices with walls--are assigned a 39.5-year rate.)

The upshot: A company could recover its costs quicker if it purchased cubes. When clients told Herman Miller of that unexpected benefit, it became a new selling point for the Action Office. After only two years on the market, sales soared. Competitors took notice.

That's when Propst's original vision began to fade. "They kept shrinking the Action Office until it became a cubicle," says Schwartz, now 80. As Steelcase, Knoll, and Haworth brought their versions to market, they figured out that what businesses wanted wasn't to give employees a holistic experience. The customers wanted a cheap way to pack workers in.

Propst's workstations were designed to be flexible, but in practice they were seldom altered or moved at all. Lined up in identical rows, they became the dystopian world that three academics described as "bright satanic offices" in a 1998 book, Workplaces of the Future.

Designer Douglas Ball, for instance, remembers the first installation of cubicles he created for a Canadian company in 1972. "I thought I'd be excited, but I came out depressed," says Ball, now 70. "It was Dilbertville. I'd failed to visualize what it would look like when there were so many of them."

Having taken over the world, the cubicle defeated several attempts to dethrone it. One of the most ambitious assaults came in 1993, when Jay Chiat, chairman of ad agency Chiat/Day, declared a sort of Bolshevik revolution when he moved his employees into newly renovated space in Venice, Calif. The design "was loungy, like Starbucks," remembers Stevan Alburty, then head of technology. "It was 20 years ahead of its time."

But it had a fatal flaw: No one had a fixed place to work. Employees were expected to park their belongings in lockers and check out laptops every morning as if renting a movie at Blockbuster. It quickly sparked a counter-rebellion--many employees simply stopped coming to the office, preferring to work at home. After the firm was acquired by an advertising conglomerate, employees got workspaces again.

Designers since then have mostly limited themselves to trying to offset the cubicle's most glaring defects. A recent Steelcase offering, the Personal Harbor, can be fitted with its own lighting system, fan, door, and window. Knoll offers the A3 (or anticube), a colony of rounded, podlike structures with translucent mesh coverings for privacy.

Herman Miller, now a $1.5-billion-a-year company, will launch two concepts in June that are the work of designer Ball. He says the new designs are the culmination of more than 30 years of trying to undo his early mistakes. The company won't release many details, but the systems will emphasize color and privacy; Ball says the workstations will be "more capsule-like, or cockpit-like." In all, more than 100 cubicle-variant office systems have come to market over the past three decades.

When openly challenged, the cubicle still gets the last laugh. In California state-employed attorneys obtained relief from the cube through Title 13.3 of their union contract: "The State agrees to make a reasonable effort to provide private enclosed office space to each permanent full-time attorney who has confidentiality needs." Should an attorney be assigned to "other than enclosed private offices," the union must be notified. Rather than violate the rule, says union president Holly Wilkens, the state sticks some young attorneys in airless closets.

Is that really where we're headed? No, says Stewart Brand, co-founder of the Global Business Network, an Emeryville, Calif., consulting firm that helps companies make long-range plans. Back in the '60s, right around the time Propst unveiled the cubicle, Brand created The Whole Earth Catalog, which became the bible of environmentally aware living and arguably had a much more benevolent effect on American culture.

He says that the most productive people he knows have developed ways to work outside offices, not in them. Brand himself worked out of a converted shipping container in Sausalito for seven years and now commutes to a beached fishing boat a few yards from his house. He sees two workspaces rising up to compete with the modern office: homes and what might be called the third space--i.e., Starbucks.

A living example of work in the third space is Diego Guevara, a 23-year-old appraiser for a large mortgage and insurance company. He camped out on a recent winter afternoon in a Manhattan Starbucks; before him on the counter were his ruggedized computer, a calculator, a Wi-Fi card, a yellow pad, and a grande.

As he used a PDA-cellphone to check on a property, Guevara typed details of the morning's appraisals into the laptop, which would sync the records with a database back at the office in West Orange, N.J. He usually goes to the office only when he needs supplies. And the last time he saw his boss? "Before Christmas," said Guevara, adding that his boss mostly works at home.

If working at home is now part of the zeitgeist, one very large employer that seems increasingly tapped in is the U.S. government. Congressman Frank Wolf, a Republican whose Virginia district is home to many federal worker bees, has made telecommuting his pet project. "There is nothing magic in strapping ourselves into a metal box every day only to drive to an office where we sit behind a desk working on a computer," he told a congressional committee.

Wolf sees telecommuting as a way to decrease traffic, reduce air pollution, increase productivity, and frustrate terrorists. In 2004 he launched a campaign to penalize government agencies by docking funds if they fail to support telecommuting. Now the SEC, the State Department, the Department of Justice, and four other big agencies are required to offer every eligible worker the opportunity to telecommute.

A 2005 survey by Milwaukee's Dieringer Research Group reported that 26 million Americans use broadband to do work from home. Sales reps and consultants have always worked remotely; now finance people, lawyers, administrators, researchers, and creative types can too. Just as infotech has enabled companies to offshore white-collar functions, it also untethers Stateside employees from their cubes.

Coming to the office for meetings and in-person collaboration is still important, of course, but as Brand points out, "People are realizing they don't need face-to-face time all the time."

Remember how economics helped turn the cube into a plague? Now giants like Cisco Systems see "workforce mobility" as a way to cut real estate costs. Thanks to heavy use of mobile technology by employees, says real estate VP Mark Golan, "we discovered that Cisco offices and cubicles went vacant 35% of the time."

By switching to what it calls the Connected Workspace--employees set up work areas wherever they are needed in the building--Cisco says it has raised satisfaction while boosting density. Now 140 employees are able to work comfortably where 88 would work in a traditional workspace.

Hewlett-Packard, which has introduced a similar scheme, expects to cut $230 million out of annual occupancy expenses by mid 2007. The new economics of the office won't actually kill the cube. In fact, U.S. sales of office systems rose 11% in 2005. But as the office occupies a smaller part of companies' budgets, cubes will claim a smaller share of employees' lives.

FEEDBACK: jschlosser@fortunemail.com

REPORTER ASSOCIATES Doris Burke and Abrahm Lustgarten contributed to this article.