Surreply: How and Why We Should Become Un-Stuck!
A Response To
Writing a “surreply” in a law review symposium is almost always a mistake. The author of the initial piece is inevitably motivated by conflicting and counterproductive impulses. Initially, the author will always experience an overwhelming feeling of gratitude that leading scholars took the time to write responses. I certainly feel this. The four responses to my article, Stuck! The Law and Economics of Residential Stagnation,1 are serious, in-depth, and thoughtful. I am very grateful to their four respective authors. But focusing on one’s appreciation leads to saccharine responses, better fodder for thank you notes than for the pages of a law journal.
On the other hand, any author reading responses to his work will feel the ordinary pugilistic or debater’s instinct to respond to criticism. This leads to excessively defensive responses. Further, if the initial article—weighing in at a mammoth 77 pages—needs additional explanation, there are bigger problems than a surreply can handle. There is no winning.
But there are at least two reasons to write a surreply, and both are relevant here. First, if responses to an article contain exciting ideas, a surreply can combine their insights with his own to lay out a useful roadmap of new directions for future work. This applies to Sheila Foster’s and Sara Pratt’s responses.2 Pratt focuses on the important role of racial discrimination in erecting barriers to mobility.3 Foster argues that segregation and other problems internal to metropolitan areas will reduce the benefits that would otherwise accrue from reducing barriers to entry to metropolitan areas.4
Although I have a few disagreements with their comments, I agree with Pratt’s and Foster’s basic claims. Future efforts, by me or others, should wrestle with their insights directly. Combining their approaches with the ideas in Stuck! should lead to constructive pathways for research on interstate mobility, civil rights, law, and economic growth. These responses complicate and enhance the arguments I laid out in Stuck! in a productive and much appreciated fashion.
Second, if the responses present not only constructive critiques, but also very different views about the issues in question, a surreply can prove useful in pointing out exactly where important disagreements lie. Here, in their pieces, Michelle Wilde Anderson and Naomi Schoenbaum offer arguments that, while commonly held enough, strike me as importantly and acutely wrong.5
Anderson argues that Congress or some other decisionmaker can and should employ a set of policy solutions to revive declining metropolitan areas.6 Further, she argues that infrastructure in these declining places should be replaced, without much regard to the lower population that these projects would serve.7 Doing so will provide services to the many remaining residents and may make populations more mobile.
Rather than offering false hope that a government policy can resurrect formerly vibrant areas, I argue in Stuck! that a doctrine of graceful decline—allowing and encouraging populations, housing stocks, and governments to shrink to match existing economic conditions—is more realistic, promotes mobility, and generates better outcomes for more people.8 Infrastructure spending should seek to accomplish the same goal, matching city size to current economic conditions, whether it requires more or less federal spending in declining areas. This is a very significant disagreement, and I hope this Surreply clarifies the different options before policymakers.
Schoenbaum, like many others before her, romanticizes metropolitan areas left behind by the modern economy as places where people are “rooted.”9 Residents of these places, she argues, will be happier, enjoy stronger social ties to their co-residents, and experience better family lives if they just stay in place.10 It follows from her argument that we should not tempt people to move to more vibrant job markets by reforming state and local laws that limit entry thereto.11
This argument is misguided. Families and individuals can assess the relative attractiveness of locations for themselves. They can decide whether to move to hot job markets, despite the personal costs associated with moving, as long as regulations do not artificially make entry and exit too difficult. The high housing prices in places like San Francisco, Silicon Valley, Washington, and New York, and the population inflows to places like Houston and Atlanta, provide clear evidence that significant demand exists to move to places with higher wages and greater opportunity.
More worryingly, Schoenbaum’s anti-migration arguments provide a rationalization for the destructive and exclusionary behavior of residents of rich regions in promoting land-use restrictions, occupational licensing, and other regulations that limit the ability of outsiders to share in the economic gains enjoyed by “superstar” cities and regions.12 It no doubt comforts the locationally-comfortable to be told that keeping people out of their towns and regions actually helps those who are physically excluded from regional economic success. In Schoenbaum’s telling, the homeowners of McLean, Virginia, Palo Alto, California, or Newton, Massachusetts, are not acting like a cartel, reducing supply, and keeping working people out by refusing to allow apartment buildings or new townhouses to be built.13 Instead, they are humanitarians, keeping potential migrants out for their own good!
In contrast, in Stuck!, I argue that the policies supporting Schoenbaum’s vision are not to the benefit of the excluded or to society more broadly: they keep potential migrants from access to good jobs and render the country poorer and more unequal. In the name of family values and preservation of “rootedness,” she offers ideas that would worsen inequality of opportunity and reduce economic dynamism. This is another stark disagreement, and one that should be aired clearly.
Sara Pratt’s response agrees with the central points of Stuck!14 Specifically, she agrees that lack of mobility is a major economic problem, caused primarily by state and local policy.15 However, she challenges me on the grounds that limits on mobility have concentrated racial effects and indeed are often based on intent to exclude on the basis of race. Efforts to reduce limits on mobility that ignore race will therefore not be effective.16 Instead, strong application of civil rights laws will be necessary, she argues, for improving mobility.17
I think Pratt is at least partially right. I argue that federal laws should target state and local laws that limit mobility, and civil rights laws are a type of federal law that can break down such barriers to mobility.18 This is precisely why my article specifically mentions the Affirmatively Furthering Fair Housing regulations that Pratt helped develop when she served as an official in the U.S. Department of Housing and Urban Development19 as an example of the type of effort the federal government could engage in to break down exclusionary barriers to entry.20
Policies that are formally race-neutral, however, can also improve mobility and in doing so, provide particular benefits to members of excluded minority groups. For instance, reducing homeownership subsidies and property tax benefits for long tenures are formally race-neutral policies, but in application would reduce the incentives for local governments to pass exclusionary zoning regimes. They would also make for a fairer tax regime, providing substantial benefits to minorities, among others, who own homes at lower rates and have been historically excluded from many such subsidies.21
But Pratt is right to focus attention on the specific benefits of using civil rights tools in this effort. Because exclusion is often racially disparate in effect and intent, laws aimed at discriminatory exclusion will likely be effective at improving mobility.
The aggressive application of targeted civil rights laws frequently provides such widespread benefits. As Lani Guinier and Gerald Torres argue, minorities often serve as “miner’s canaries” for deep-seated problems in American society.22 Minorities disproportionately feel the negative effects of many policies or practices, but these policies and practices do not affect minorities alone. Civil rights laws and litigation that challenge policies with disparate impacts thus protect the entire population, not only those who suffer from discrimination. When the Fair Housing Act is used to challenge zoning laws in Yuma, Arizona, or Garden City, New York, the cases are brought on behalf of racial minorities, but their results promote better housing policy for all.23
Breaking down racially exclusionary policies is an important end in itself. But the aggressive use of civil rights laws like the Fair Housing Act may provide other benefits as well. Applying the arguments from Stuck!, it follows that using the Fair Housing Act in the way Pratt suggests may not only lead to a fairer society, but also a richer one that suffers from less unemployment and economic inequality. If zoning rules (and other policies) that limit the capacity of minorities and others to move to opportunity are struck down, this will facilitate effective monetary policy, economic growth, and efficacious social welfare policies for the reasons laid out in the piece. The macroeconomic benefits of civil rights laws are understudied, but Pratt’s useful and important response shows that future work should explore exactly these questions.24
Sheila Foster’s response is similarly friendly, although it too offers important challenges and suggests some real limits to my argument.25 She argues that even if barriers to entry in growing job markets are reduced, intraregional segregation and stratification will make interregional mobility less attractive and useful, particularly for working people.26 I think this, as stated here, is true. If many hot metropolitan areas were less segregated and had fewer internal barriers to mobility (and fewer tax benefits for local governments that engage in exclusionary activities), they would attract more lower-income migrants today, and they would be even more attractive if the policy changes suggested in my article were adopted.
That said, many of the steps I suggest for reducing external limits on interregional mobility would also reduce such intraregional limits. If tax incentives were enacted that encouraged rich suburbs to allow developers to construct apartment buildings, this would both drive entry into the metropolitan area and reduce intralocal inequality. If governments at all levels provided fewer incentives for home ownership and stasis (like California’s Proposition 13’s property tax benefits for long-term owners), we would see greater inter- and intraregional mobility and likely less segregation. Many of the policies I criticize in Stuck! lead to both reduced intraregional mobility and greater segregation and stasis inside regions.
But Foster is essentially correct. Her argument suggests that federal responses to interregional mobility should be paired with policies designed to make our regions fairer and more internally efficient. The article, she notes, is “incomplete.”27 So are all papers. There is much work left to do, and Foster points us in a productive direction.28
The extent of Michelle Wilde Anderson’s disagreement with Stuck! is not fully clear. She states that she favors reducing density controls in rich regions because doing so would “allow newcomers to capture and create economic growth.”29 Presumably, other limits on entry to these markets, like occupational licensing rules, are harmful for the same reasons. Further, Anderson does not suggest that she favors limits on exit of the sort criticized in Stuck!—homeownership subsidies, limits on the transferability of public benefits and pensions, etc.30 The central claims of my article are (a) declining mobility and exclusion from hot job markets have substantial macroeconomic effects; and (b) state and local government policies create limits on entry into hot job markets and limits on exit from declining ones that should be reformed or eliminated. In other words, there is much on which we agree.
But we also disagree. Anderson offers a critique based on one section of the article in which I argue that policies that encourage too-large housing stocks and governmental sectors (and debt) in declining areas limit and, more importantly, bias mobility in ways that are economically counterproductive.31 Policies, particularly a more aggressive use of municipal bankruptcy, should be used to help cities and regions adapt to new economic realities. Anderson argues that rather than focusing on facilitating mobility by shrinking cities, we should focus on reviving declining areas, noting that her forthcoming book will provide suggestions for achieving this goal.32 Further, we need to provide funds for the rapidly deteriorating infrastructure in declining places because plenty of people still live there, and current residents cannot pay for it themselves.33
I very much look forward to reading Anderson’s book, but I fear it will be only the next in a never-ending series suggesting new ways to revive declining areas. These efforts do not offer viable solutions because there is no reliable way to fix declining places, if by “fixing” we mean restoring them to their former glory. Just as we have different firms in the S&P 500 than we did a hundred years ago, the variety and sizes of regions and cities required by a dynamic economy and society change over time. We cannot stop some cities from declining and other cities from growing without stopping the economy or society from changing and improving.34 Particular combinations of people in cities and regions are a technology on which the economy grows and relies; different technologies are needed at different levels by the economy and society at different times.
Around the turn of the last century, it was extremely costly to transport goods by road, and thus manufacturing firms needed to situate producers near ports or railroad hubs.35 Cities and regions built around these transportation hubs became strong and prosperous. But with the development of technologies like the combustion engine and the shipping container, transportation costs fell and the economy no longer favored those regions. Some of these cities had other amenities that allowed to them prosper in today’s economy.36 Some did not, and therefore, they declined. Similarly, rural areas once required huge populations to work on farms. Changing technologies have made farming more efficient and thus fewer people are needed in those places.37 The economy and society marches on, and our location decisions follow.38
Rather than seeking to keep our cities the same, I argue in Stuck! that a doctrine of “graceful decline” would provide better outcomes for both current residents and everyone else. Shrinking declining cities does not mean destroying them—it means improving them.
If these declining cities were to have lower taxes—perhaps because they shed debt in municipal bankruptcy proceedings, or because they offloaded responsibilities on other levels of government—they would drive away fewer employers and enjoy healthier local economies. Likewise, a smaller housing stock means a city can provide better local services at a lower price and suffer fewer of the costs of local blight. Rather than trying to return Atlantic City or Akron to their former glory, we should attempt to make their housing stocks and their governments fit the smaller local and regional economies they have now.
Regarding infrastructure, Anderson argues that these declining cities need an “urgent round of reinvestment.”39 She seems to think that Stuck! argues that we should punish declining cities by removing their infrastructure funds, shifting these subsidies to the growing cities. That is not the argument I advance. I argue instead that governments should remain neutral regarding locational choices whenever possible, allowing people, residents, and firms to choose for themselves where to live and work as freely as possible.
Of course, infrastructure has to be built somewhere, so my preference for location-neutral policies cannot apply across the board. But while there is no real discussion of infrastructure spending in Stuck!, the article’s basic story could guide how we think about allocating infrastructure spending. When deciding what projects to fund, the federal government and states should choose projects that fit the current reality of metropolitan areas. In many cases, this will require spending more money in declining areas in order to right-size them.40 In other cases, it will require transforming local infrastructure—replacing highways with streets, for instance, or consolidating local schools. In still others, it will require avoiding the temptation to build fancy new infrastructure in an effort to attract people to declining places. The next “round of reinvestment”41 should be designed to help cities fit their current situations, not to try to bring cities back to old population levels.42
Anderson importantly and usefully points to the infrastructure needs of declining places, and on this point, her argument is very powerful.43 But she does not make clear whether this needed infrastructure should target the new, lower levels of population or, instead, should be used to encourage population growth in declining areas.
Whatever Anderson’s stance, this is a substantial debate among people concerned about urban affairs. Many think the federal government should be in the business of trying to revive declining areas; I do not, and I do not think it could reliably do so even if it were. Further, infrastructure in places with large populations is also declining and needs replacing—as anyone who has tried to take a train recently from New Jersey to New York knows intimately.44 Federal infrastructure spending should not be used push development from one place to another. Instead, we should allow people to move to opportunity and provide services, including infrastructure, that fits today’s economy and population distribution.
Naomi Schoenbaum’s response largely restates arguments she made in an earlier, very interesting article, Mobility Measures.45 I responded to many of these points in several places in Stuck!, and there is no need to rehash those arguments.46
There are two further points to make here, though. First, Schoenbaum’s reading of Stuck! seems to ignore both the article’s discussion of the incentives of state and local governments and its focus on allowing individuals and firms to weigh locational decisions without excessive interference. Second, the approach defended by Schoenbaum’s response is not just wrong but would also have deleterious political and social consequences.
Schoenbaum’s response misunderstands or misreads some of the arguments in Stuck!, and thus fails to respond to many of the arguments on their own terms. For example, she states that I do “not think that the people who are stuck (or anyone else) would have any interest in their staying put;”47 that I argue that “relationships matter only for the economic gains they bring rather than for the other benefits they might confer or the value they may have even in their own right;”48 and that I ignore that some people are unhappy living in big cities,49 that rich areas often have higher rents,50 and that “strong ties” to other individuals improve productivity.51
But I don’t say or do any of this. Stuck! does not defend some kind of forced relocation program that transplants plucky families from Akron, Ohio, to one-bedroom apartments in Atlanta or Houston.52 Instead, it argues for removing barriers to locational choice—allowing people and families to leave whatever ties them to their current locations if, but only if, they decide to seek greater economic opportunity elsewhere.53 As I said in the article, people have legitimate economic and social reasons not to move to the metropolitan regions where they will receive the highest wages.54 The same is true of firms, which, as Schoenbaum notes, form useful local networks.55 But people and firms should make these decisions without excessive, government-imposed entry and exit limits.56 Stuck! does not criticize anyone’s reason for staying put; it argues that governments should not make it too challenging to leave or enter, and it discusses the benefits the nation could see from removing these barriers to mobility.57
Schoenbaum also misstates or misunderstands a central move in Stuck!. I argue that state and local governments have strong political incentives to care about stability, but little reason to care about national problems like, say, the efficacy of monetary policy. This is an argument about different incentives—that is, the relative political concerns of local, state, and federal government. She responds: “[C]ommunities where people stay put—which are all across the country—are part of the nation.”58 I agree, but it is not clear that this point matters. Local zoning decisions, occupational licensing rules, and so forth are set by state and local governments but harm people living in other places who get no say in them. In other words, the problem is that these decisions create externalities. In not responding to this point, Schoenbaum neglects the incentives of state or local governments.59
Schoenbaum also makes claims that run counter to important evidence. She suggests that people do not move to rich metropolitan areas because “gains do not exist to be had” and that they may be better off, both economically and socially, staying out of growing metropolitan areas.60 People are less happy, she argues, in big cities, and so working people around the country should just stay home and leave the horrors of life in San Francisco and New York to their long-suffering existing homeowners and residents.61
This argument approaches the empirical debate on land use in an unorthodox fashion. There is a live debate, discussed substantially in Stuck!, about whether laws, like land use regulations, or other forces are driving the decline in mobility.62 But it is very clear that local land use regulations in many rich metropolitan areas reduce housing supply and population growth, and drive up housing costs.63 Now, some people do claim that physical limitations—and not building restrictions—are why prices are high in particular central city areas like Manhattan. (This has been debunked—land use policy really is the main driver of high housing prices, even in dense downtowns surrounded by water.64) But it is hard to see how physical limitations could have driven up prices to current levels at the regional level. No physical limitations stop people from building houses more densely on the huge lots that pervade suburban Washington D.C., Silicon Valley, New York, or San Francisco. On these lots, people could replace single-family homes with townhouses or triple-deckers, or taller buildings where there are currently shorter ones. Nonetheless, prices have increased at the regional level, too, and to levels far above construction costs—making clear that the most important factors are legal limits.65
Schoenbaum also misses why housing prices in these areas are important. Where supply is limited, high housing prices provide evidence of demand. Why else would prices be so high? The fact of such high prices in particular regions proves that people from all over want to move there. The fact that prices are so much higher than the marginal cost of building housing is evidence that land use laws are stopping people from moving in.66
Thus, the argument that “gains do not exist to be had” is belied by high housing prices in these areas. Schoenbaum might think that people are wrong to want to move to opportunity. But the behavior of people in housing markets suggests that most disagree with this view.
Further, Schoenbaum’s argument has troubling political consequences. Her argument suggests that the people excluded from Silicon Valley, San Francisco, New York, or Boston’s labor markets by regulations are actually better off for having been excluded. If so, residents in rich and restrictive areas do no harm when they exclude new entrants with restrictive zoning laws and occupational licensing rules. These exclusionary practices, in Schoenbaum’s telling, do the excluded a favor. Those potential migrants not lured by high pay and opportunity will have healthier marriages, stronger ties, and happiness and so forth. The federal government, she argues, should help wall off access to opportunity in growing job markets for the sake of social stability.
In contrast, I argue in Stuck! that these laws are both unfair and inefficient. They keep poorer Americans away from richer areas that have higher wages, generate socioeconomic mobility, and have more generous welfare programs. Because these exclusionary laws do such harm, the federal and state governments should challenge them—using both carrots and sticks to break down barriers to entry and exit.
This is another significant disagreement that should be stated clearly. Schoenbaum’s arguments bolster the soothing ideology that homeowners and members of professional guilds that limit housing construction and competition serve the common good. People do not like to think of themselves as selfish members of an exclusive cartel, so theories of this sort allow insiders to rationalize political action that would otherwise be seen, by themselves and others, as aggressive assertions of self-interest. Schoenbaum provides intellectual cover for what Steven Teles and Brink Lindsay call “The Captured Economy”—the ability of insiders to use regulation to “enrich themselves, slow growth, and increase inequality.”67 Arguments like those offered by Schoenbaum likely serve to protect and justify the upward redistribution and economic inequality that results from protectionism by local elites.68
* * *
Around the world, “superstar” cities and regions are generating more wealth than ever before.69 Real and significant economic and social developments—changes in information technology, the greater economic role of professional services and technology development, demand for amenities, and many other things—have made these places successful, even as other cities have declined.
Given the underlying technological and social structure of 2017, regional economic policy presents a fairly stark policy choice. As a polity, we can decide whether the gains from economic growth in superstar regions should flow to incumbents—those lucky enough to have bought property or earned licenses years ago—and to those rich enough to afford the high prices of access to these labor markets. Policies that allow exclusion and slow mobility are the status quo, and not changing things surely provides some benefits. If we accept exclusion from superstar regions, it forces people to avoid the costs of moving, leaves intact the character and look of existing neighborhoods, and allows parts of the professional class to continue happily receiving rents.
Or, instead, we can increase and broaden the prosperity created by the rise of superstar regions—by changing laws and allowing people to move to them (and, by necessity, away from other areas). Doing so would not be easy. It would entail difficult choices about how to provide services to the remaining populations in declining places, hard conversations about how beloved neighborhoods must change to accommodate new people, and coping with the churn and tumult of competition.
As a reader, you can decide whether this is a fight worth having. I certainly do. At the very least, I thought the stakes were high enough that it was worth taking the risk of writing a surreply.
David Schleicher is a Professor at Yale Law School. Thanks to Leslie Arffa and Garrett West for research assistance.
Preferred Citation: David Schleicher, Surreply: How and Why We Should Become Un-Stuck!, 127 Yale L.J. F. 571 (2017), http://www.yalelawjournal.org/forum/surreply-how-and-why-we-should-become-un-stuck.