December 6, 2023

Economix: What Rankings Show About Cities

Today's Economist

Edward L. Glaeser is an economics professor at Harvard and the author of “Triumph of the City.”

The human mind seems to crave the order that comes from rankings. Lists of top football teams, best colleges, greatest shortstops or sopranos of all time all have considerable appeal, even if there is no obvious value to the ranking.

Lists of cities have a comparable appeal, and so two recent reports have ranked global cities in some interesting ways.

A report by McKinsey’s Global Institute, “Urban World: Mapping the Economic Power of Cities,” provides us with predictions about the economic future of the world’s urban agglomeration.

A second report, “Cities of Opportunity,” a joint effort of PricewaterhouseCoopers and the Partnership for New York City, ranks 26 world cities on a large number of factors and names New York the global champion. (Disclosure: I will discuss the second report at a Partnership for New York City event; I am receiving neither compensation nor reimbursement for travel expenses.)

In some ideal world, we could probably all just revel in the diverse offerings that different cities offer to different people and businesses. New York is a fabulous place for many but may seem like hell on earth to others.

But because rankings have such power to excite passion and debate, they can generate interest in the problems and promise of urban areas far more readily than balanced discussions of the pros and cons of different places.

The McKinsey report focuses on such standard measures as population, per-capita gross domestic product and number of households with incomes above $20,000 and projects them 14 years in the future for 2025. The PricewaterhouseCoopers/Partnership for New York City report ranks cities on current values of far more complex qualities, such as “intellectual capital and innovation” and “lifestyle assets.”

Each report is engaging in its own right, and they are interesting to consider together as two different views on the competing, collaborating metropolitan areas that power the world’s economy.

McKinsey peers into the crystal ball by using a combination of country-level projects, which average International Monetary Fund, Global Insight and McKinsey’s own growth models, and city-specific information, such as the relative performance of the city relative to its nation in recent years.

The predictions for population and overall economic footprint seem fairly reasonable. The predictions for per-capita income seem to depend on hypercharged economic growth in South Korea and high levels of prosperity in Scandinavia.

New Yorkers may be pleased to know that the McKinsey Global Institute predicts that the New York metropolitan area will rank first worldwide in total G.D.P. in 2025, followed by Tokyo and Shanghai.

That vision is that the largest share of the 15 largest urban economies will be in the United States (six of them) and China (four) in 2025. The report anticipates that Western Europe will have only three of the largest economic agglomerations (London, Paris and the Rhein-Ruhr region) and the rest of the world only two (Tokyo and São Paulo).

These guesses are reasonable, but the United States/China dominance basically reflects our current wealth and China’s fast rate of growth. I wouldn’t be surprised to see a more varied mix of metropolitan regions, whether in Asia or Latin America, enter the top 15.

America’s large metropolitan economies reflect a combination of high incomes and high population, but our cities aren’t well represented on their top 10 lists of either per-capita income or population. We have only two areas (Bridgeport, Conn., which includes the wealthy towns of Darien and Westport; and San Jose, Calif.) in the top 10 richest metropolitan areas as of 2025, while South Korea and Norway each have three.

Bridgeport and San Jose are economic powerhouses today and are likely to remain so, but will urban prosperity really be so concentrated in Norway and South Korea?

By contrast, it is hard to debate their view that the most populous agglomerations will almost all be in the developing world. Only New York, of all the American or European areas, makes it in the top 10 of their most populous in 2025 list, and I suspect that’s overly optimistic.

Measured by bodies, if not by income, the urban world will be dominated by Asia and Latin America, and that’s why improving quality of life in those urban areas is so important.

While the McKinsey report is focused on the future values of basic measures, the PricewaterhouseCoopers/Partnership for New York City report focuses on the ingredients for urban success. It ranks 26 global cities in a wide range of individual subcategories — some of which reflect hard, quantitative measures, like Internet access in schools, and others of which reflect more qualitative aspects, such as “entrepreneurial environment.”

The strongest city in each category gets a 26 — the weakest receives a 1. They then add up the categories to form a total score in each major quality area and an overall ranking.

There is plenty here to debate. Why should we add up rankings rather than raw measures? Why do all these variables get the same weight? The report’s authors are appropriately cautious with their headline: “New York finishes first with a slim, perhaps ephemeral, lead (see page 12). But the real news lies elsewhere.”

Indeed, as the authors recognize, the real value of the report is to collect a wide variety of interesting rankings of a vast array of urban assets. Ideally, these rankings can be starting point for debate about the causes and consequences of differences across cities.

Of the 26 areas studied, Moscow ranks worst on “health, safety and security” and Stockholm is at the top. That seems reasonable, but how much will that benefit Stockholm or hurt Moscow?

Houston does best in terms of costs, which are adjusted for purchasing power — a proxy for economic productivity — and Mumbai does worst. Mumbai has, after all, some of the most draconian land-use controls in the world, and Houston is well known for its lack of limits to building.

The comparative advantage of America’s Sun Belt metropolises is that they provide affordable real estate on a massive scale.

I’m personally ill-suited to make such lists, in part because I tend to get swept away with the excitement of any city that I’m in or thinking about. To paraphrase the great Yip Harburg, when I’m not near the city I love, I love the city I’m near.

As a result, I’m grateful that these two reports have set down their own lists, which can help prod thinking about what makes cities successful worldwide.

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