Shifting Mindsets

We've spent the past few weeks looking at the model of public investment here in the United States (which has grown to be a variant of build-it-and-they-will-come) and I've spent some time detailing what a public growth portfolio would look like. Today we're going to examine the mindset needed to administer a new approach, one that allocates scarce resources to the best projects in a country where there are overwhelming demands.

How do our cities transition from being dumb money -- will it work, who knows -- to a Strong Towns framework?

One way we can approach this is with a Singapore mentality. I use that term in the way Americans stereotypically view Singapore: a highly competent bureaucracy relying on advanced logic and reasoning to execute basic government functions. I've never personally visited Singapore and so I have no way to attest to this stereotype, but I'm using it with some reverence so, if it offends, please accept my apologies.

With this approach, we would embrace deep analytics to determine which public investments were good investments and to keep clear of those that were not. Every project would need to be rigorously tested against (at least) our core three understandings to ensure that the it was a wise investment. The secondary and tertiary impacts would also need to be determined and fully accounted for.

This could not be done with the current blunt system of taxation. A more complex system of capturing value would need to be developed. This would include not just property (land) and gas taxes, but systems for monitoring usage of all components and then allocating fees based on collected data. A mileage tax would be a simple form of this, but ultimately the public's interaction with government systems would need to be more like a cell phone bill: a record of each transaction with congestion-priced usage charges.

Such an approach would allocate costs proportionate to the public's expense. This would bring supply and demand back in line from its present state of bizarre distortion. If someone wanted to drive on congestion free roads during peak rush hour, that would be reflected in a higher cost for that trip. If someone wanted to live five miles out of town, their cost for utilities along with police and fire protection would be significantly higher than the person who lived under the water tower next to the fire station. The result would be a land use pattern much different than the one we have today.

This would not need to adversely impact the poor. Such a detailed accounting would allow bureaucrats to understand and model the lives of the most disadvantaged in society. A system of transfer payments or subsidies could be utilized to provide equitable access to the system in a way that would not distort the overall economics of it.

While I am not one, there are many people that would cheer for this approach. In fact, just last week I was treated to a demonstration of a fascinating program designed to mathematically calculate all relevant factors -- cost of utilities, cost of maintenance, cost of fire protection, cost of bussing, etc... -- for any project. I've seen the bizarrely complex models used to calculate impact fees in Florida and know the people that subscribe to that approach could, with all good conscience and intentions, expand it to fit a Strong Towns approach based on a Singapore mentality.

As an alternative, let me suggest an Italian mentality. I have spent a significant amount of time in Italy, particularly the poorer Puglia region, and have a sense of how decisions are made (or not made, more often) in this mindset. It is everything the Singapore approach I've described is not: simple and non-rigorous with incremental decisions made by broad consensus.

For an Italian approach, we don't need fancy mathematical models. We don't need complex equations and intensely correlated taxing schemes. We just need a system that diffuses power, moves slowly and builds in small increments. In such a system, it may be more difficult to rapidly accomplish grand things, but it is also pretty difficult to disastrously mess things up.

The modern American may recoil from this approach -- I know I did the first time I visited Italy -- due to its apparent inefficiency and lack of focus. That outward disorder may appear inefficient, but it is the elegant efficiency of a complex system at work, not the brutal efficiency of a centralized, command and control system. There is a huge difference.

There are all kinds of grand projects that are part of the Italian landscape, and not just of the ancient typology. The greatest highways I have ever driven on were in Basilicata, tunnels through mountains that would emerge as four lane expressways cantilevered over the edge of a cliff. The difference in a system like this is that those projects -- and every project, really -- "emerge" from the morass. They become self evident and then get done.

This is frustrating and chaotic at times -- for example, things often break before they are fixed, and may remain in a state of disrepair for some time before attention is given -- but there is a natural order to it. The places that are the most critical seem to be well tended while the more marginal components of the system are attended to less rigorously. It's not always pretty, but it seems to work.

Either of these approaches would require an enormous change in American culture and expectations. Our current approach -- which is failing in critical ways -- often enjoys the loose nature of the Italian approach with the veneer of order from the Singapore approach. The result is that we do what we want and then tell ourselves what we want to hear. That's a deadly combination.

Of the two, I would personally favor an Italian approach, but I'm perfectly willing to accept that a Singapore approach may be better. Here's the key insight, however: neither of these will work at the federal level and, for most parts of the country, they would not work at the state level either.

The country is too large and complex to apply a rigorous Singapore mentality from a centralized location. Any math that works in Southern California is not going to work in Northern Michigan, and visa versa. We've done our best to homogenize this continent over the past sixty years, yet we remain a collection of distinct and unique places. There is no way to capture the complexity of the American experience applying mathematical rigor and analysis from an office building in Washington D.C.

Likewise, the more remote the Italian approach is to the actual project, the more incompetent and corrupt it will become. An acceptable cost of doing business at the local level, when magnified to a national scale, is corrupting by its very nature. For example, extending a project twenty feet to provide service to a friend of the mayor is distasteful. Building a multi-billion dollar project unnecessarily so as to award a contract to a congressman's friend in the district is not only wasteful, it undermines the entire foundation of government. 

In the world I envision, cities are set free -- all the federal and state distorting subsidies ended or turned into some type of block grant free from mandates and conditions -- to experiment with these two mentalities as well as others. Maybe my proposals would be total failures and others would work grandly. In our current mode we'll never know because we have a national, one-size-fits-all approach to growth and development that includes mandates and incentives moving everyone towards one specific outcome.

If you are craving more than an abstract discussion at this point, as an end to this entire series, this week I am going to detail the steps I would take in my home town to apply the Italian mentality. When talking specifics, I feel the need to be specific, and so I'm going to focus on the blocks and neighborhoods I know best. That will be happening over on the Strong Towns Network.