with all the city's ethnic hatred and differences between US and Europe we're going to have the presentation and then the professor is going to take your questions I want it I'm sorry perhaps I was wrong but so we're going to start straightaway both because of the remarkable menu which has such a tremendous history of being a place where smart people got together and talked about ideas but but also because of the tremendous human capital that assembled here and I think the very existence of this festival serves as a stark rebuke against those who think the technology has made the value of face-to-face contact obsolete because after all if you thought it was so easy to get things electronically you could just download my papers and download everyone else's papers but somehow or other we all really value being next to each other and in this dense historic urban area I'm going to do three things today I'm gonna talk about three bodies of work the first is going to be some general observations about cities and this is work that's should be it will be forthcoming in a book that I will be out next next year and it reflects a number of papers that I've written over the last twenty years then I'm going to okay then I'm going to talk about a book that's downstairs actually that I published several years ago the litera edition is downstairs called fighting poverty in the US and Europe and I'm just going to give you a little taste of that and then I'm gonna talk since this is after all a conference about ethnic identity I'm going to talk about hatred particularly ethnic hatred and its formation and I think if there's a core observation to that it is that while human beings have an enormous capacity to love some people and and hate others all of that capacity can be affected by people outside them so hatred is something that's actually created and it's created by them in a market and that the tools of economics are uniquely well positioned to make us understand when why hatreds come about and why they why they disappeared but I'll get to that towards the end of the talk let me start with essential paradox the central paradox is that we live in an age in which transportation costs communication costs have made distance almost irrelevant for many of the things that we do right we can email across continents we can surf the web of every culture known to man and telephone calls are cheap when you know once they were enormous ly expensive and yet despite that this death of distance despite the ability to connect across oceans and continents cities are more vital than ever we see this vitality and rising population and rising incomes and rising housing prices this is the correlation between urban density and gross metropolitan product across areas within the US it is an enormous ly tight fit this is the relationship between urbanization and GDP across countries in the world the connection between wealth between prosperity and cities is almost perfect I'm not claiming that cities cause that poverty but it is intrinsically bound together with the process of getting wealthy and certainly if you go to the developing world you will be struck by the enormous difference between the cities which certainly still contain a horrendous poverty and horrendous lack of infrastructure but at least they point towards the future at least they point towards a better world where in fact the people of the developing world are connected to the people of the developed world whereas there's no future in rural poverty the the reason why of course this is a puzzle is that cities are fundamentally the absence of physical space between people and firms cities are density proximity closeness they exist to connect us they exist to help us be close to one another that's that's what they're about and yet despite this and despite the tremendous downturn the city's experienced throughout much of the second half of the 20th century that demand for that proximity is is remarkably robust the explanation the hypothesis for I'm that I'm going to try and persuade you of for this fact is that what globalization and new technologies have done is to increase the returns to being smart we have now 20 years of evidence showing the remarkable connection between globalization new technologies and the rise and returns to skill we see this in a steepening of the of the earnings education profile we see this as a widening of earnings equality within education groups skills knowledge are more valuable than ever human beings are fundamentally a social species we get smart from hanging out with smart people we get smart by learning from each other this is how the universities that all of us have some connection to function right if this was not this was irrelevant then we would just learn from books there would be no need to congregate people together and and obviously as anyone who teaches knows the real function so often of our universities is not to permit teaching from the professor to the students but to permit the students to learn from each other to permit those peer interactions which are so valuable for the creation of human capital to function now cities are universities writ large there's somewhat more practical than universities are somewhat less targeted towards the teaching phenomenon but they are also forges of human capital they are also engines of innovation there are places where you go as a young worker and you interact with other workers and you learn within your firms or you hop from firm to firm and you acquire skills and as you go I mean we see this in the aged earnings profiles which are significantly steeper in urban areas than outside them it isn't that workers who come to urban areas suddenly earn a great deal more what happens is that they come and their wage growth is faster and then if they leave the urban area they take the games with them but they stop experiencing faster wage growth they stop experiencing the gains and this is true at the humblest level after all when Alfred Marshall said that he indents agglomerations the mysteries of the trade become no mystery but are as it were in the air he was talking about artisans in industrial England but it is certainly true at the highest level where we think that smart people in Silicon Valley are coming up with new ideas because they aren't in isolation because they are learning from one another this is the basic business of places like London in New York and Bangalore they're places where which are fundamentally about making ideas the same density that once serves to get hogsheads onto clipper ships I'll let the translator struggle with that to get hogsheads onto clipper ships now serves to connect smart people who learn who learn from one another Bangalore as well is about the transmission of information in Bangalore you see young people come there work for Yahoo India they'll acquire some knowledge about how the American computer industry works and then you know they'll start their own internet startup they'll start their their own search engine or a search aggregator and again it's about local knowledge that they acquired and yes they can connect with the with the first world but in fact it's cities that enable them to learn the things that make those connections valuable in some sense I'm arguing that the same death of distance that killed off the goods producing cities of the of the first world that made Detroit obsolete are the same things that helped London and New York and Milan come back that the same death of distance that was terrible for the places that had gotten out of the idea business and we're just trying to produce a basic product as cheaply as possible that those that those things were killed off by the globalization but that same globalization increased the demand let me let me start with it let me now give you a little bit of a broader history on this cities have always been in the business of making people smarter cities have always been in the business of teaching of teaching one another but that isn't wasn't their fundamental purpose the older cities of Europe and of the US began either as political capitals or as commercial cities so quintessential commercial city would be Bruges for example or in the u.s. New York City Rome or Milan of course were political cities based around either Emperor's or various forms of bishops as the non political cities grew they were in the in the business of trading the mankind's basic commodities either food or clothing clothing with the exception of certain spices tended to be the more valuable per pound and the more portable so that the bulk of older cities almost all old their economic strength to trading in some form of clothes Bruges of course was a wool city so was Florence while we're at it and and even within these industries of course this was what the guilds were all about guilds were about managing the human capital flows within these older cities there were chains of ideas that came out of these out of these urban areas so it's harder to find a more clear chain of ideas than the innovators who gave us the pictorial Renaissance in Florence right and this is a chain of ideas that begins with Brunelleschi who figures out how linear perspective works who moves it to his young friend Donatello who brings it in to load early sculpture who then it transfers to their friend masaccio who puts it on the side of the wall of the brancacci chapel which then moves to his student Filippo Lippi and then it makes possible a whole pictorial revolution where artists then use this innovation to create more and more ideas each innovation builds on the next innovation by people who are close to one another you could tell a similar story about oils and the van Eyck's in Bruges right there's a similar there's a similar northern revolution going on at the same time we can of course tell scores of stories about about these types of innovations music and Hyden and Mozart and Beethoven and in Vienna two centuries later cities are also playing a major role of course in creating the connections the flow of ideas the the agglomeration of talent that then pushed towards democracy so we think about the urban revolutions that begin in the Low Countries and highly urbanized will producing towns of Flanders and then moves through to Paris to Boston to various various places where smart people connect with each other and are able to fundamentally defeat the powers of kings and feudal warlords through through connection and obviously a lot of that of course happened in Italy this is the long history that the closer history at least from an American perspective is simpler than this so let me just give you a little detour of Chicago so we get we get our minds in the place of where cities were in the 1970s and think about them coming back so the great creation of of American history is about the creation of a transportation network it's a create transportation network that enables the wealth of the American hinterland to be exported towards the markets of the east coast and Europe it's an enormous lis expensive undertaking it's an undertaking that is done as much by the state as it as it is by private individuals it is a network that is based on waterways initially but then gets augmented by by rail cities are critical nodes along that too watery network along that transportation network cities are the critical elements that enable that network to to form they first of all work as centers of Commerce and then they're places where industry then agglomerates around these centers of of trade every one of the oldest American in 1900 every one of the 20 largest from the oldest of Boston in New York to the youngest of Minneapolis were on a waterway and generally on a place on a waterway that made sense on a place where the the you know next to the waterfalls of st. Anthony's Falls at the place where the river met the sea in the case of Boston or New York they were in places that were natural nodes and those cities and the merchants in those cities were the true frontiersman of America more than any cowboy toting around a Winchester 45 right these are the guys who actually made you know made America made America happen the and they achieved amazing things in in 1816 the cost of moving Goods 32 miles over land in America was higher than the cost of moving goods across the Atlantic which of course is why waterways were so valuable right there was an incredible shrinkage of dock yards the paradigmatic industry of Chicago the place where the Bulls and originally the pigs came came to be to be slaughtered and this is the great industry that came out of this so Chicago itself is the creation of two canals the Erie Canal the older canal near Illinois and Michigan canal together these canals create a great watery arc that goes from New York City through the Great Lakes then cuts through at Chicago to the Mississippi River and then it flows into the Gulf of Mexico Chicago is the linchpin on that arc it is the place where the canal hip hit the lakes it was obvious when the Illinois and Michigan Canal was being created that Chicago was to was to be a great city and the speculators knew it in the 1830s the existence of rail transportation only complemented that that remarkable transportation edge once there was this transportation edge with the canals with the rails then the city grew up around it in the 19th century the city was based on pedestrians people walked to their jobs in the stockyards and so slums clustered around these older transportation transportation networks the two great industries of the 19th century were the stockyards and by population the garment to the garment industry clothe making which was of course the dominant continued to be the dominant industry in most most older older cities the the thing that this made possible was a movement of the whole trans rotation the whole location of American agriculture so the key was getting you know making Iowa feasible so Iowa in 1870 what's my date here I went 18 70 has about 50% higher land productivity than the older heartland of Kentucky which was accessed with the Ohio River by moving the production of corn from Kentucky to Ohio to to Iowa enormous increases in productivity resulted the key was of course getting Iowa corn in a financially workable way to the markets of the east the old way of getting corn across markets of course was in the shape of whiskey a very popular product in 19th century America but there's only so much whiskey that even Americans could drink then and in fact the dominant way in which corn was moved was in porcine form through pigs pigs of course are corn with feet they're there you know moved moved cheaply and then of course the beauty of pigs is the human beings for some reason Brazil and notwithstanding our enormous ly fond of salted pig products which are portable and more so than salted beef products and as a result pigs in the pre refrigeration era with the dominant form of moving corn across crossed land of course those pigs were being slaughtered in those in those dockyards later once you have urban innovation and you have armor and Swift creating refrigerated rail cars then you had beef being slaughtered as well and shipped in refrigerated form across space and that's what that's what these guys are doing of course Chicago at the same time was creating innovations Chicago was the city that gave the world the skyscraper meaning the tall building with a steel load-bearing skeleton right there's a great architectural debate about who is responsible for the skyscraper is it Louis Sullivan is a William LeBaron Jenni and of course this debate misses the point it was a collaborative innovation it was an innovation starts and LeBaron Jenny's workshop it goes to his apprentices who had names like Burnham and Sullivan and they all collectively riff on each other they challenge each other they learn from one another and no one building is the breakthrough one smart person learns from each each person and together they create this innovation that totally changes the shape of our cities the so you have these cities that are built to run rail and built around water waterways and then the 20s shuri happens and the great curse of the 20th century is that these cities got so good at innovating that they figured out how to innovate in a way that basically drove transportation costs down to nothing okay and this is both innovations in the rail sector where what you're looking at here is the real cost in moving a ton a mile by rail within the US and what that is is a 90% decline so whereas distance was tyranny in 1900 distances largely irrelevant by by 2000 at the same time of course the good people of Detroit in 1900 figured out how to make a perfectly Pleasant German invention of the automobile cheap and affordable for the masses and of course with cars becoming massively affordable the whole system of cities needed to be reworked around around cars just as older cities had been reworked around earlier forms of mass transportation like the like the Omnibus but cars come along and unsurprisingly Americans then move so all of this older type of City walking or public transportation around rail yards and ports becomes essentially obsolete you people are free to move to areas where they want to live rather than in places that have an innate productive advantage because of waterways we see this most strikingly in the enormous ability of warmth to predict success there is no variable that better predicts which Americans grew the American cities grew in the 20th century than median January temperature and that's what you're looking at right now warmth is enormously predictive and this is true in every country for which we have data over the last 30 years that in fact warm places have done remarkably well relative to to cold places in some part this is the freeing up of people from having to locate around the Great Lakes but it's also shall we call it you know temperature bias technological change that in fact we had a variety of things like the air conditioner and like improvements in dealing with with public health issues like cholera that made it easier to live in high temperature high temperature places and of course this is the relationship between density and growth across American cities and this is the response to the automobile that places that were built at ultra high densities were ill suited for the car and in some cases enormous engineering efforts were undertaken to retrofit places like New York or Boston for the ottoman but in fact it's just a lot easier to start with green fields and you know you got Houston just build the whole city around the car just do the whole darn thing with automobiles and make it big with a lot of highways right this is what car based look the living looks like it's efficient along lots of ways well you know I mean the average commute by car and in the u.s. is 24 minutes the average commute by public transportation is 48 minutes it's an enormous time-saving on the other hand there are some may say catastrophic but anyone would say difficult environmental costs that come that come from this as well and I'll turn to those I'll turn to those later but despite the fact that in the 1970s every one of America's older colder cities many of them in Europe looked as if they were headed for the trash heap of history this did not happen New York didn't die Boston didn't die London didn't die Milan didn't die all of these older industrial cities that looked like they had no future because after all you could always make Goods cheaper in China they they didn't they didn't die and the the they were in trouble of course because all of those transportation cost related Vantage's there's access to waterways there the fact that you were proximate to the rail yards all of that stuff became irrelevant by 1975 and as a result manufacturing left and you had these manufacturing cities that were halls at their former self and Boston looked no better than Buffalo New York looked Oh better than Detroit during this time period now what happened in some cities and it's easy to explain which cities managed to reinvent themselves and which ones did not in fact there's one variable which has a remarkably good job of explaining it but the cities that rebuilt themselves did so by exploiting the traditional urban advantage of creating chains of innovation it's just historically the chains of innovation in 15th century Florence they were a side product of a city that was about banking and wool they weren't the main event no matter how much we value those paintings today over the last 40 years in New York finance the chain of ideas and Finance which both you know made it people enormously rich and also played a certain role in creating the modern the modern crisis that we're living through that chain of in vain invention was not a sideshow it was the main event 40% of Manhattan's payroll is in finance and insurance 28% was in securities and commodity contracts a very narrow range of industries that were tied to this very knowledge intensive information intensive sector of the economy I tend to think of this as being you know just just so you have somebody aware New York is coming from as late as the 1970s the dominant industry New York is still the garment trade which comes off of New York's original role moving cotton in and out of the port and because there was a ready built-in customer base in the sailors that were coming in in New York so the garment trade was the dominant industry through the 60s and 70s it collapsed incredibly quickly when I was at when I was a kid growing up in New York leaving New York in 1975 an incredible crisis the two other industries that new hack had that dominated from the twenty in the 19th century was sugar refining which again comes out of transportation sugar coming up from the the Caribbean and you couldn't refine at that point in time in the Caribbean cause sugar crystals coalesce during a long voyage trip and of course the book publishing industry New York's advantage in book publishing was that the city was great at stealing the first copies of European particularly English books which came across the the pond that in the in the nineteenth century of course Americans didn't respect anyone's property rights and and the big push as a publisher was to get the book first and bring it out since New York was the foremost port and the boats got their first New York publishers had it had an advantage and this is particularly true of the famous Harper brothers who beat out their their Philadelphia competitors through this okay New York always had finance again it came out of the port but starting in the 50s and 60s there becomes this chain of quantifying some of quantifying finance it starts some might argue it starts in the corridors of the University of Chicago in the 1950s when people like Harry Markowitz connects with Milton Friedman and Jimmy Savage and they start thinking about the trade-off between risk and return these ideas then get moved to Wall Street embodied and people like Jack trainer and Fisher and Fischer black into an increasingly competent sophisticated way about thinking about risk and return by the 1919 70s we have Michael Milken using these quantitative tools to think about high-yield debt junk bonds and then sort of creating a revolution in finance around that the existence of those junk bonds and the ability to think about risk and return then makes it possible for people Henry Kravis to create a revolution that's based on leveraged buyouts where access to ability to access markets and borrow when things are good bets manages to them to work a revolution in the American American boardroom again the ability to think about risk and return makes it possible for Lou Ranieri to create the mortgage-backed securities market which didn't turn out so well right now but it's uh and of course the you know another link in the chain would be say Michael Bloomberg selling the data terminals that then create the sophisticated work of data that enables people to think about about risk and risk nurture Michael Bloomberg also shows incredibly important thing about older cities like New York which is the importance of diversity right Michael Bloomberg is a hybrid Bloomberg Bloomberg communications is a hybrid industry combining high tech with finance and is striking that Bloomberg didn't come out of a high tech cluster okay when surely they would have had better access to both hardware and software but Michael Bloomberg came out of New York City because he knew what the traders wanted because he had run the trading floor at Salomon Brothers and because of that local knowledge he was able to innovate in a way that made him made him a billionaire we we see this we see the remarkable importance of skilled cities in lots of different ways and I claim that one variable predicts which cities are able to come back and one and which ones didn't and that variable is skills for lack of a more sophisticated alternative we'll just use the share of the population with college degrees as of nineteen seventy or sixty or choose some earlier date going back to 1880 but it does a remarkable job at predicting which one which ones of American cities have done well this is the relationship between income growth and the initial skills of the city in nineteen eighty okay remarkably robust correlation that's true this is the relationship among older colder cities between share of the population with college degrees in nineteen ninety and population growth since then share the population with college degrees is after January temperature the best the most reliable predictor of there are some caveats with that and if you want to understand why Boston did well and Detroit did poorly it turns out they're both on the regression line that in fact they're neither one of them as a particular surprise and there are plenty of examples of place apart from the East Coast some of which you may not may not know or even want to visit that are skilled cities in the hinterland I mean the quintus that have managed to do well the quintessential example being Minneapolis which is is done remarkably well and has been remarkably skilled as well but that city's managed to do well for these places this is the the relationship between skills and income and across sanction what this is is it's the relationship between the skill residual which is your wage holding your skills constant and what it shows is as the percentage of people with college degrees in your metropolitan area increases by 10% it shows that your wages go up by 7% holding your skills constant so as we increase the average skills in your area you you get paid more and if the common interpretation of course in economics is that's reflections reflecting something about your productivity as well it may be about you as a person learning from them or it may be that the entrepreneurs who employ you are also becoming more more productive as well and this has been accompanied by a remarkably increased sorting of skilled people across space so what you're looking at here is a thirty-year phenomenon of the correlation between changes in pot share of the population with college degrees an initial share of the percentage of the population with college degrees so along the x-axis is the share of the population with college degrees in 1990 along the y-axis is the growth between 1990 and 2000 in the share of the population with college degrees the places that started with more skills have only become more skilled over time okay and one interpretation here is that skilled people increasingly innovate in ways that employ other skilled people whereas Henry Ford innovated in a way that employed thousands and thousands of unskilled workers Bill Gates innovates primarily in a way that employs software on true engineers and Michael Bloomberg innovates in a way that that that employs lots of skilled people a related fact of course is this fact that here this has been tilting up over time very very strongly so the value of being around skilled workers has risen steadily over time the work of Enrico Moretti has been particularly important in documenting this I've talked about this is this is of course not just a u.s. phenomenon this is true throughout Europe that places like Milan who were one-time industrial towns have managed to invent themselves around around being centers centers of ideas I could tell a story about a chain of innovation in fashion that sounds in Milan that sounds very similar to the ones that we've talked about another you know in other industries and of course Boston is a city Boston of course is a city with no no comparative advantage other than cranberry bogs I'll let the translator fight with that one too and as a result Boston has had four centuries of trying to reinvent itself about smart people trying to figure out how to make the city survive the role of cities in transmitting ideas is particularly important in the developing world and this is I mean I think the the key lesson in some sense that you should take from a book like Thomas Friedman's the world is fat flat so it is certainly true that people are able to do good software work in Bangalore and then sell it to Silicon Valley absolutely true but the place that that software is happening is Bangalore not somewhere he in rural India and the whole key is that Bangalore has the density of human capital the density of knowledge to make people productive to make the young kid who starts working in Yahoo India earn enough to actually make him able to connect with the larger the larger world and this is really this is really true throughout throughout the developing world this is of course not a new phenomenon right if you go back to the glory that was Athens right Athens was a place that because of its military victories in the fifth century had been able to attract an astonishing array of talent from the Greek civilization of the Mediterranean they came in because a Athens was sort of the New York of its time a dominant political and economic economic player and as these smart people connected with one another they created these chains of innovation right I mean there were people from outside of Athens who then taught Socrates and then starts off this chain of innovation in Florence there's the chain of innovation that actually makes history right that actually are the people who give us the the the field of history again in drama and so forth again it's sort of a connector of civilizations we can tell the story over and over again right so I like this guy so this one's from my son who's now closed his eyes in the front row but this is this is this guy is Jafar and anyone who also has young children know that he's a very bad guy from the Aladdin series now in fact Jafar is is loosely based on the conrad veidt splegg portrayal of Jafar and the Thief of Bagdad from 1940 who then collect necks back earlier with the figure of Jafar in the Arabian Nights who's then ultimately that the Vizier of caliph harun al-rashid during the glory days of Baghdad and far from being a bad guy Jafar is in fact an enormous Lee good guy who is in fact one of the great supporters of the translation of outside knowledge into the House of Wisdom in Baghdad and and bringing in about site knowledge supposedly he's the person who urged the people in Baghdad to study the Greeks when they had imported thus intend which is allegedly the Brahma Gupta of Siddhanta the collection of Indian mathematical knowledge and that knowledge puzzled many of the Arab mathematicians during its time and allegedly it was the Vizier Jaffar who then told them that they'd only make sense of this if they studied Euclid I find this story completely implausible but it's it's still kind of a pleasant one and and certainly Jafar was one of the great patrons of the house of wisdom in Baghdad it served as a place for tremendous you know accumulation of knowledge throughout the continents and then created guys like this is out korie's me over over here who's the father of algebra and what else I had I had to say here Jafar by the way was it was probably a Brahmin from Kashmir bringing in bringing in Indian Indian knowledge with him there's then a translation of course from Arab knowledge West with cities like Venice or Cordoba which again just doing the same function the Bangalore place today of transmitting knowledge again not done to rural places globalization has never been a low-density phenomenon it's a phenomenon centered in ports and places where ideas move rapidly now what happens of course when you have urban development in the developing world is that poverty becomes visible these are the favelas of Rio right often seen as being an absolutely terrible place but let me tell you when you look at the data the lives in the favelas of Rio are a heck of a lot better than the lives in northeastern Brazil by almost any measure by measures of you know infant mortality by measures of life expectancy by measures of poverty by a long shot and while the Dharavi slums in Mumbai look hard these people are actually remarkably entrepreneurial they're connected to a real economy they're actually you know accumulating skills or be it in a way that looks like a difficult life by our incredibly privileged standards here but the cities are not the problem the cities the cities are the future and and indeed the people in these cities are coming there voluntarily right they're not fools they're not coming to these urban areas because they're making some great collaborative mistake right in fact you know they're they're getting a lot richer by doing so and you know they're choosing over and over again to come in and in general I mean sort of this is a primary point because people choose cities urban poverty should not be seen as a weakness of cities it should be seen as a strength and the fact that cities have been unequal for at least 2,500 years that we observe them is not some great failure of urban areas it's because in fact cities are able to offer economic opportunity at both the high end and the low end of the income distribution and in fact it should make us more worried about the enforced homogeneity of say America suburbs then then we should about the incredible diversity and inequality in America cities because in fact rich and poor are both finding things in those cities in places like Boston or New York you have the the ethnic networks that make things easier for immigrants the fact that cities facilitate trade has for millennia made it possible for people with you know physical labor but no capital to exchange labor for capital and to work collaboratively with people with capital but not enough not enough labor so and of course today in cities they play it at least in the u.s. any much of the rest of the world you don't need cars there right the American suburbs these this whole urban world that was built around the automobile requires an enormous amount of expense to actually pay for the cars and to pay for the insurance and to pay for the gas and to pay for all of this other stuff which is a lot of money if you're a relatively low income immigrant coming to the u.s. you can get by if you're living in a you know in a small apartment somewhere in an older suburb that still has public transportation connections and that's another thing that cities do well this is this is you know it's it's one of these interesting facts that actually when you build subway stops in the US the areas get poorer or right which has been taken for some people as being evidence against the the the use of public transportation which of course it isn't at all it's evidence that these things actually cater to poor Americans and that's a perfectly a perfectly valid function for them to play ok let me just have a few before I move on to the other sections of this talk let me just talk a little bit about the policy implications of this the first thing is that while I couldn't believe more strongly in the importance of place for determining things about our lives good things and bad things saying that places matter does not mean that places should ever be seen as the ultimate goal of government policy the ultimate goal of policy F government policies should always be to enrich and empower the lives of human beings not to make one place prettier or seem to be more productive now sometimes investing in places is a good way to get towards enriched empowered human beings but that that the fact that it is fundamentally not the end goal must never be forgotten and too often there are policies which are justified around making a place come back that would never pass muster in if you actually put it through a cost-benefit analysis that asked if this were helping people the quintessential examples of this are infrastructure that are belted built in declining areas both in the US and in Europe mass amounts spent on rail lines or public housing now the distinguishing characteristic of poorer parts of declining areas is that they have too much infrastructure relative to people because in fact they were built during an earlier era in which demand was there ok and as demand disappears the price of real estate disappears the price of real estate declines there's plenty of housing but people remain there because housing you know is still valuable the last thing these places need is more housing is for you to tear up they're perfectly good housing suck and build new housing housing models and the last thing they need is often new forms of transportation networks after all I've just been arguing that the old stuff about moving Goods is no longer particularly relevant and you often have absurdities like Detroit's many hundreds of millions of dollars spent on the people mover that's an elevated rail line in Detroit that carries almost no people and Ryan runs above streets that are empty ok in a city in which the average commute is less than 25 minutes right the last thing Detroit needs is a people mover okay and over and over again we've seen things like light rail or trains which have been meant to revitalize urban areas and in there's certainly a you value of infrastructure where there is demand there I'm not in any sense speaking against infrastructure but thinking that you're some how are they gonna invest in a rail line at a place which already has fast transportation that's gonna make a difference that's absurd there is somewhat more justification in Europe than there is for the u.s. for engaging in smart regional policy which usually means regional policy oriented around skills and building human capital rather than building physical capital but there is somewhat more of a justification in part because there's less land and in part because there's less temperature heterogeneity so if you're Buffalo New York you face this enormous temperature challenge and coming back which is just not true in Liverpool it's just not true in in Turin it's just not you know whatever whatever choose your declining area within the European heartland they don't start with the two strikes against them so there's somewhat more of a case but on the other hand since Europeans are more enthusiastic about large government projects that Americans are there's even more potential for waste and stupidity and I just you know I can't say how important it is to actually you know put whatever projects you have through the cost-benefit analysis churn and don't get swayed by the magic of place so as much as I do think places are magical I also don't think that magic should confuse us about what good investments are um while I do believe that basically there is you know in fact my own preferences for something like a level playing field where cities are allowed to compete with each other and the government doesn't try to pay for particular areas cities in many ways today don't actually face a level playing field particularly in the u.s. in part because we've subsidized cars in part because we failed to tax people for the emissions costs of their their gasoline usage a last thing I want to emphasize on cities although I do have to have to move on is the importance of Housing Policy to a first order approximation the number of people in an area is proportional to the number of homes in that area if you don't allow homes to be built the area won't grow okay and what you're looking at across across this graph is the relationship between price in 2005 on the on the x-axis and prices on the y-axis and building us on the on the the y-axis okay so what you're noticing is the places that build a lot in the US are not expensive and the places that are expensive do not build a lot okay this graph is incompatible with the view that only demand drives what goes on in cities okay it's incompatible with the view that it's only about it's only about the the presence of pleasant amenities or a great degree of economic vitality because if it were all about demand this would be a ray coming out from the origin this would be the places that were expensive would have a lot of building and the places that we're inexpensive would not have a lot of building and they're places like that of course you see Youngstown Ohio down there that's a low demand place that has nothing to do with housing supply that's just got low prices and low and low building I'm sorry Youngstown it's just true but you know these places Las Vegas is not short on demand but it builds houses and as a result it grows enormous Lee and San Francisco is not short on demand but it barely grows at all because it has enormous restrictions on building which are not buy them primarily because of land availability not at least ruin a natural land availability that sets very little to do with the actual land density it's driven primarily by regulatory decisions about building and you see lots of Silicon Valley you have massive amounts of land it's zone they have 68 core minimum minimum lot size in some area of Santa Clara County and in Marin County 60 acre minimum lot sizes think about what that means it's not an absence of land that's a that's land that has been made undeveloped Ellul by my these things but you're right certainly natural barriers like water also also matters okay let me let me and of course in Europe the big question for the cities is building up his building is building de novo and it's an enormous challenge because the older cities of Europe are not just treasures for their own countries but treasures for the world on the other hand if cities decide to freeze themselves in concrete then they are not able to grow to adapt to provide affordable housing for ordinary people and you know a place like Paris ends up being a boutique city if only for the wealthy rather than a place that's able to offer economic opportunity for all I just wanted to connect this to the recent crisis what you're looking at is what Las Vegas looks like so this is Las Vegas this is make my point that Las Vegas is basically unfettered so Las Vegas is built an extraordinary amount of housing whose fastest-growing city in the u.s. in the 1990s until 2003 the dotted line is our estimate of real construction cost the line above it is their prices okay price is crack construction costs almost exactly as you would expect in a market where there are no barriers on supply there no regulations and unincorporated Las Vegas worth worrying about there's an infinite amount of land and so you just build out you build out forever and the prices cost roughly construction what construction costs do as a result you know you'd always expect the prices to come to come back to that what you saw in 2003 was a remarkable divergence okay between the prices and the construction cost it's a brief bubble that exploded that seemed at the time utterly unfeasible there were no limits that suddenly occurred and what you've seen if I carry this forward is that we're basically back to where we once were again an entirely predictable thing given that the nature of this housing market in Las Vegas and Phoenix unfortunately in places which where housing supply is constrained like San Francisco or like New York it's impossible to predict where housing prices will land but I think it's it's a pretty good bet that in the long run Las Vegas and Phoenix and Atlanta and Dallas and Houston will look like their construction costs because they're gonna be tricked aided by supply all right how am i doing on time a little bit more so this guy is henry david thoreau he's the patron saint of american environmentalism he writer he wrote he's a big fan of living out in the middle of the woods away from other people these are the woods in which he lived in on a beautiful spring day in 1844 Thoreau and a friend of his went out into the woods to have a picnic they were gonna make some chowder that's a soup and the the flames from their chowder were it was a dry day the flames were spread they went from the thing and they burned down both the local grass and then they burned down more than 300 acres of prime Concord Woodlands this Americans environmentalist Saint was one of the great destroyers of woodland during his time period and was hated by his neighbors for his lack of respect and care for the local environment okay there is a lesson here if you want to be good to the environment stay away from it okay human beings are a remarkably productive and markedly destructive species okay there's no good that comes from surrounding yourself by Greenland if you want to preserve that Greenland get self into a big tall skyscraper and walk to work okay and that's that's the point of this this next paper that I'm gonna talk briefly about this is joint work with Matthew Cahn where we've actually estimated the carbon dioxide emissions associated with different types of living within the United States and we've added up this has been just home and transportation so we've added up gasoline usage from private transportation we've associated that with density and proximity to the urban center and then we've added up the carbon emissions associated with home heating and with and with electricity and cooling and there been a variety of technical details which you can find in our paper on the website there are two facts that I want to illustrate this is this is a map of the metropolitan areas that we that we show along the y-axis is just our estimate using numbers vaguely on the stern report of what the costs are from carbon emissions in different places and what you'll notice is by far the greenest places those are the places over on the left-hand side are all in coastal California ok Los Angeles San Francisco San Jose San Diego and then Sacramento are by far the greenest parts of the country now epsilon of that is some small amount of that is the fact that they do have green appliances in California that's and that's great but the big part of this is just climate it's just you can just explain it with January and July temperatures and the fact of the matter is that California has by a long shot the most temperate climate in the United States ok the place is over there are Oklahoma Memphis Houston Dallas ok they're really hot and they're really humid and they use massive amounts of electricity there they also drive ungodly distances ok so the combination of enormous ly long distances of driving and and the humidity make these places just very very energy energy intensive ok and the places of the East Coast are between the two they use more home heating they use a little less electricity and they tend not to drive all that much oh there is public transportation in here ok what's your but what's on the y-axis what's on the y-axis is the degree of local land use regulations often created by by environmentalists themselves this is a paradox you would think that if environmentalists in California cared about the environment cared about reducing global warming they would be really big fans of development in their home areas because each house that's built in San Diego is one less house being built in suburban Las Vegas to a first order of approximation right the rate of household formation in the u.s. is basically determining the rate of new homes that are being built and it's basically a one for one substitution so you can't turn off the spigot for development over all you can just turn it off in your area and move it someplace else you turn it off in a temperate place it gets turned on in a place which has which has a lot more humidity and as a result emissions go out so you would think that environmentalist in California would be enormous ly eager to promote new housing particularly high-density housing particularly stuff around you know the the San Francisco Bay has this phenomenal public transportation system barks which you know would be a great place to develop mass amounts of housing so you would think that like the environmentalists would be a really really gung-ho to promote development around San Francisco Bay of course the opposite is the case of course we have forty years of things like to save the bay Association then raising hurdle after hurdle making making things more difficult and in some sense it's not that I'm against environmental impact statements such as those required in the famous friends of mammoth case 35 years ago it's that these environmental impact statements are fundamentally one-sided they ask what the environmental impact is if the project goes through but not what happens if it doesn't go through they don't ask what's the impact if the project is built in in Las Vegas or in Houston instead of built in California that's really that's really what you what you'd want the second point that I want to make is just we also did study suburb differences and this is the kind of picture that you get the red area is basically where we're the row lifts out there this is the place which has the highest emissions and in the green areas are the areas that are that are dense and this is coming from two things that's coming from much lower amounts of driving at the urban core but it's also coming because of high land and high housing prices induced people to buy smaller houses and smaller houses mean less less energy I think the reason why this is important is not so much in static societies like Europe in the US but in the developing world and I think we all have an incredible stake that places like India and China build up rather than building out and that you know the fact that Mumbai has some of the most draconian land use regulations in the world that keep their city flat and ensure that people are driving incredibly long distances in traffic that's madness and in fact you know the key is to get people using elevators which are a great form of public transportation instead of using cars that long at long distances I have 15 minutes plenty of plenty of time to handle one book in one paper okay I will be reasonably brief there but the book that as I said that I'm promoting that's downstairs without Ala Cena's on trying to understand why the US doesn't have a european-style welfare state this is a graph of the share of GDP that's being spent on social services between the EU and the United States from the 1870s onwards in seventy is our first is our first year then followed by 1937 the bar is the difference and it's now up to about ten percent of GDP that was one last week checked and make no mistake that the election of Barack Obama will certainly close this to some certain degree but the US and Europe will still look extremely different in four or eight years on this on this March and the US will the US will still look like it does a lot less in terms of taking care of its poor and will still have much less much lower marginal tax rates for rich people at least in many European countries one thing to notice here is that this is a post-world War one phenomenon that the view that this was about the view that this was about the the Bismark set this whole thing in stage in the 1870s just isn't true the government just the European governments just didn't do enough in terms of pensions to make this make this happen you want to think of this as really being the u.s. being a 20th century post-world War one phenomenon and then you really want to think of it taking off say in the in the 60s and 70s okay there are lots of failed theories to explain this why the US has a different economics has done a wonderful job of generating a lot of theories that are just plain wrong so one of the theories would suggest that Europe has inherently either more volatility or more income inequality than the US and that income that redistribution in the in Europe more redistribution is correcting for greater innate differences or more innate avala Atilla t that's just nonsense there's just no evidence whatsoever to suggest that that's the truth there's another theory that certain people are very fond of which is that America has a much more opportunity meaning that equality when averaged out over enough years is large enough that's also nonsense right the probability of exiting out of the bottom quintile of the European income distribution is significantly higher than the probability of exiting out of the bottom quintile of the American income distribution at the very top is a little bit more mobility in the US but in terms of the bottom Europe is actually a more mobile society the there's a tax efficiency argument but that predicts the countries with better tax system should have bigger government's I think it's hard to argue that European tax systems particularly here in Italy are such models of worldwide efficiency that that that's why they're being used used so aggressively here are two theories that do work and and they each by our statistical estimates explain about one half of the Europe u.s. difference the first one is political institutions and there are lots of different we use proportional representation as being just an example of these institutions but we really mean that there are many of these things that go together but Europe has a variety of institutions that are reliably correlated over a large number of at least more prosperous countries with having larger welfare states proportional representation being one of them but in general the more that you moved towards majoritarianism the less redistribution that you'll have the more that you have various checks and balances on what the act of government does the more that you have the more that you have a larger welfare state the US has very right-wing institutions the the Europe has quite left-wing institutions this explains about one half of the difference now as I'll say in a minute those things are themselves endogenous and I think the key is to actually explain why those things occurred which is what we also we do this is and the second thing is racial and ethnic fragmentation so this is the relation between a it's essentially a probability that two people chosen at random will be of the same racial or ethnic group in the city of the places the countries that are more fragmented have a lot less redistribution than others and that's what I'm going to talk about in my in my hatred paper when I get to it so basically the the u.s. is greater heterogeneity of ethnicity explains about 1/2 and they and institutions explain about 1/2 the racial effect is of course seen in lots of different data there's work by Ayers a lot Mary that was published in the Jaypee that shows that if you work around if you live around poor people who are the same race as you you tend to be more favorable towards redistribution if you live around people who are poor of a different race than you you tend to be more hostile towards toys redistribution this is across states in 1990 when we still had states having had a lot of say about how much money to give in welfare payments what you see here is that there's a very strong correlation even holding constant the income of the state between the share of the state's population that's african-american and the degree of redistribution the more the state is white the more generous the more generous it was okay so so let's try and explain that the things that I'm going to talk about now are essentially trying to make sense of these two facts the first is I'm just going to talk briefly about the endogenous institutions it's it's a mistake to ever think of institutions as being fixed attributes they're always built by people over time they're all aspects of things that aren't they're endogenous and thinking that you know the long-run explanation one area success versus the others as institutions I think is always a mistake in 1900 or 1890 choose your year you would never have said that the US had more right-wing institutions than Europe okay Europe still had Kings for goodness sakes did Kings they had empowered nobility they had tons of checks on what popular people were elected doing anything okay the u.s. was a democratic country that had you know widespread at least universal male suffrage outside of the Jim Crow South it was certainly among the most progressive in terms of its institutions polities in the world by a hundred years later that changed it changed because the u.s. didn't change change because the u.s. still has more or less a constitution that would be you know recognizable to Henry Clay if not to Alexander Hamilton and probably be recognizable to Hamilton as well Germany's current Constitution would make no sense to Otto von Bismarck right it would it would look nothing like the Constitution that he envisioned when he was he was uniting Germany and I doubt that cavour would be all that pleased with the way that Italy worked out either in terms of the institutions that these countries now now have and what happened of course is that Europe was challenged by two great wars during which these institutions were rewritten the right was usually in command at the time of the war the right lost and there was a there was a massive change of authority then Italy's story of course with proportional representation is typical right there were massive uprisings that then created this this change was a move to the left at the time it was then create followed by a move to the right again in related to armed to massive uprisings and then after the war constitutions were then rewritten again often with Social Democrats playing a significant role or even communist playing a significant role in some places in terms of writing these things proportional representation a long-standing demand of socialists because it was felt that it empowered poor people were quite frequently part of these institutions but the whole constitutions were written were written were written together and you know the UK which has the most stable system also had the least change over the over the 20th century as well these institutions then show up then actually have interesting impacts on culture one of the things that's really fascinating is the set that the US and Europe both have sets of beliefs that go along with their welfare systems so the average American 54% of Americans look at just the bottom half believe that luck determines if sorry 54% of Europeans believe that luck determines income only 30 percent of Americans believe that luck determines income this is just the answer to this survey question 60% of Americans believe that the poor are trapped 29% sorry 60% of Europeans believe that the poor are trapped 29% of Americans believe that the poor are trapped by contrast 60 percent of Americans believe that the poor are lazy 29% of Europeans believe that the poor lazy now of course this runs counter to the fact that that my normal work surveys the American poor work a lot harder than the European poor do so despite the you know the beliefs have very little to do with anything that resembles reality but in fact these are these very strong these very strong beliefs the argument that we make in our book is that these beliefs are like institutions also endogenous they're built up over time and the American beliefs have long have have a long-standing part of the American American educational system in fact the California directions on what teachers are supposed to do in the California school system which is hardly a model of being particularly a right-wing part one of the major objectives of social studies teachers is to teach children that america is the land of opportunity right that's a long-standing objective this is not unique to America right and Napoleon the third was very big on a series of books that kid we're gonna learn that taught them that if they kept their hands down and we're loyal to their emperor they no end of rising that they could that they could experience within their their own countries in in Germany the Kai's are also you know trying to use the schooling system very strongly but they lost they lost in a series of in France the education battles really started during during the teens and then really were won in the 20s after the aftermath of World War one where the teachers unions got to take over and they taught a different ideology and it's you know I'm not saying that either one is true it's the last thing that I mean it suggests but they're two rival ideologies and what you should view this that is not any sort of a you know Bayesian reflection of what reality is but something that people are taught in in schools and that they that they learn about and that's sort of a critical element to making sense of why of how these two systems work and in fact if you regress the belief that the poor are lazy on hours work for the poor you get no correlation if you regress it on proportional representation it's like a perfect fit so that the political institutions do a great job of predicting what people believe about the nature of poverty while the actual nature of poverty doesn't do so well let me then then move to the final paper that I'm going to talk about which is this work on hatred which attempts to create a formal formal model which has something to do with a story that I just told where beliefs are formed by people around them and again the basic structure of this paper the basic structure of this agenda is it attempts to sort of you know combine economics and psychology in a way that uses what I think economists bring to this bring best to the table so psychologists are best at teaching us what human beings are like we're no good at playing amateur psychologists it's not what we do human beings you know psychologists tell us that human beings are enormous ly sensitive to social cues that we believe things that people around us tell around us tell us these people would say the famous ash experiments where people believe that lines are longer when they're actually shorter when they're told when they're told so but what people are then taught is a matter of economics because in fact no psychologist could tell you why it was that socialist teachers won in in Europe why aren't we're as you know right wing teachers won in the u.s. that's a market phenomenon economists are the people who have to tell us about where the market for ideas goes where supply of beliefs come from where the entrepreneurs of error show up and can persuade people things on one side of the equation or the other and I wanted to show a particular example of this with this paper of mine on hatred which was published in the quarterly Journal of economics in nineteen in 2005 so hatred I'm going to take a very economics definition of it hatred can be defined pragmatically as the willingness to pay to inflict pain on others okay it's a very economics definition so willing to forego your own well-being in order to make somebody else hurt okay it's we can measure it with surveys certainly and we know it when we see it I guess we know it when people are blowing themselves up to inflict large pain on people around them we know them in economics experiments let me see if I have a thing on this it's a little example of hatred shows up in the so called ultimatum games as we know in ultimatum games when the first first person gives an offer and gives an offer say that I get 90% the other person gets 10% those are always rejected that is by my definition remember an example of hatred especially if these are anonymous one-shot settings the person who's given 10% is get for going his or her benefit in order to inflict pain on that bad person who made such an unfair offer to begin with right so put that in your mind because I think that really gives you a sense that's sort of very understandable human emotion of what hatred is all about right it's someone who has done or we think will do some harm to us in the past that we're willing to strike out against it's perfectly natural it's perfectly emotional most of us feel it every time we take to the highway and someone cuts us off you feel the surge there are you know there's a whole scientific nexus of research on various forms of chemicals then create get created in our body that have that urge to punish people who who misbehave I like this line she's actually a does here's actually a journalist but she's writing about psychological results hatred is a primitive emotion that marks for attack or avoidance those things which we perceive as a threat to our survival or reproduction now hatred the individual level is easy to understand it's also easy to model right it's a quite sensible thing that we human beings have the ability to punish people who are who behave badly towards ourselves that after all keeps people honest it makes people behave well towards us over over over time what's interesting of course is the extent to which the people are able to feel hatred towards groups they never had any contact with right so we all know lots of stories of you know little little kids growing up in in towns in Germany where they've never seen a Jew who are in the 1930s who are taught the Jews or some awful threat to their their survival this is not about you know this is not about experiencing some harm it's about being taught about some harm and hatred is always in everywhere formed with stories of past and future atrocities tales of african-americans raping white girls in the south tales of Jews killing Jesus we of course are in the town of the famous Trent blood libel which as we know it set off a killing of some some Jews the protocols of the Elders of Zion of course a story originally written by the czars bizarre secret agency which then served as the basis for a continuing libel against against Jews which is still popular on TV programs in Egypt and other places often these stories need repetition more than truth that was of course Joseph Goebbels famous line on this okay there's a model the model is actually fairly simple I just want to sort of sketch it to you suggest that there is an underlying economic logic to it although I would I would urge you to read read the paper if you have any interest in this there's a setting two parties are competing for votes they're offering different amounts of redistribution there are two subgroups within the population a minority which can be either rich or poor and a majority which is the main group the two parties have available a technology which can spread stories about the out-group about the small group they can spread stories that the out-group is potentially dangerous voters can then investigate these stories they don't automatically believe them they follow Bayes rule and what they do and after investigating they then choose between the candidates and then there's a bunch of stuff afterwards on whether or not that makes the investigation potentially rational but the real point here is the second part isn't particularly necessary because if you think about people just making decisions at the voting booth they have you know no strong incentive to investigate anything since there don't particular matter this is by the way a major point for those of us who question whether or not behavioral economics should make us more enthusiastic about government action right the trade-off between the state and the private individual is not about the errors of the private individual alone it's about the trade-off between two different types of errors and there's no reason to think that when people suddenly show up in the voting booth that they become Paragons of rationality as we know the majority of people in vimar in you know the via our german ii where my father was born the majority people voted either for the communists for the nazis right this doesn't look to me as if the voting booth suddenly purges all sins of irrationality and I think this is very important when we think about you know behavioral economics and what irrationality means but what the government should do okay keep comparative statics so there are a bunch of different different stories that come about I'm gonna just skip over over these things here's sort of the key things that I want to I want to get across hatred is more likely when the group is relevant along the policy-relevant dimension so if the two parties split along something in which the out group is relevant then hatred will be spread if the two parties agree upon things in which the out group is relevant that no one's gonna bother to hate them because there's no political gain from it again this is economics not psychology it's a question of what are the incentives for the suppliers of error and this of course hatred is in this case completely erroneous the right is gonna push hatred against poor minorities the left is gonna push hatred against Richmond Ahri's and we certainly have an abundance of examples throughout history with it we're both types of things have had occurred more extremism is not going to occur on the issue that the out-group is different on that's gonna lead to more hatred often hatred is beaten not with love but by villainizing the haters so this is this is sort of a very classic technique that you you know build hatred against the people in the American South who are the bulwarks of the Jim Crow apartheid system and policies relating to migration or segregation are going to really stoke the fires of hatred once you've got migration policies on the table then somebody's going to be telling you that those immigrants are awful and that's that's pretty that's pretty darn predictable okay let me just tell you two stories and then I'll fix here this is a story that's based on a great American historian named Steve Ann Woodward and everything that I'm gonna read you from this is from is from from here it's about the rise in crow Jim arrives in decline of Jim Crow and what you're looking at here is the number of lynchings in the American South over 100 year period it's a remarkable inverted u right it's not that the south got suddenly worse and then better it's that it rose and it falls this is a fact that I guess I'm responsible for which is the numbers of coincidences of the words Negro in the words murder in the Atlanta Constitution divided by the number of times the word January appear is a natural normalizer for this the pattern looks roughly similar there's a rise and decline of this stuff you can use the words Negro and rape at the same time period as well so there's this clear pattern both in terms of actual slayings of African Americans but also in these news stories that talk about how bad African Americans are how dangerous they are here's the political story that Woodward talks about Woodward story is that race suddenly became politically relevant in the 1880s and 1890s and it starts with the first left-wing party in America there's really about economic redistribution the populist okay the line here is that more important to the success of southern populism than the combination with the West or with labor was the alliance with african-americans populace of other southern states followed the example of Texas electing African Americans to their councils and giving them a voice in the party organizations and down below I have a line from a famous populist politician named Tom Watson who says I have no words which can portray my contempt for the white men anglo-saxons who can knock their knees together and through their chattering teeth and pale lips admit that they are afraid that the Negroes will dominate us two things are notable in this quotation from Watson one of which is he's defending African Americans because they are in fact his natural political allies he's a Redistributor and he's looking out for them but what's he defending them against the hate creating stories that says they're a threat he's defending them against that potential of that potential threat I'll just read the one quote here alarmed by the success the populist were enjoying with their appeal to the african-american voter the conservatives themselves raised the cry of Negro domination and white supremacy and enlisted phobe elements in Georgia and elsewhere the propaganda was furthered by a sensational press that played up in headline current stories of Negro crime charges of rape and attempted rape and so on okay now of course this is deeply ironic right one of the two races in the American South has enslaved murdered raped each other over the over the preceding two centuries prior to this and it's not the african-americans right but yet the stories are such that they create this belief that the african-americans are this great threat and it works okay and it works and the populist forces are beating back and they give up on enlisting the african-americans this is a line from Watson who by 1906 is himself the racist not because he believes it there's no evidence he believes any of this but he's decided that his populism won't help blacks their blacks are gonna be ruled out they're not gonna benefit so blacks become politically irrelevant because they've just given up on this alliance and the blacks get just get put aside and as a result there's no more interest to supply this thing and racial hatred disappears it doesn't disappear but it you know recedes significantly of course this is not good news for the african-americans they've been cut off from basic social services for 50 years or 60 years but at least the lynchings are down let me talk about 19th century anti-semitism and then up then I'll be done okay the the story here is that let me just give you the story that's the right conservative monarchic oh clerical maintain that there must be a place for the church in the public order the Left Democratic liberal radical held that there can be no club at all Jews therefore supported the left for obvious reasons and from Stecker to Hitler right it's rarely attempted to refute socialism preferring to cite the high percentage of intellectuals of Jewish origin among socialists publicists as proof of its subversion the right turned to anti-semitism because Jews were on one side of the political aisle and they were it was natural to vilify them now that story works in Russia it doesn't really work in Austria it certainly works in France in France the right is beaten back by the hating the haters technique there is no better example of this than a Zola's jacooz which is great example of vilifying the the right-wing calling them a nest of a nest of jesuits prone to equisetum into radical methods italy and spain don't have this and of course italy is one of the safest places to be a jew in the 1930s why italy certainly you know historically italy had plenty of anti-semitism during this point certainly had a strong church why because religion was irrelevant to italian politics by in nineteen hundred years because in fact the king himself was excommunicated the right the right side of the equation was no longer lied with a church because p oh no no had you know said a flag on all of your houses for taking my land and leaving me a prisoner in the vatican so religion is irrelevant jews are irrelevant jews are safe so that's that's at least my story of why this why the model predicts why you know Padua was a pretty good place to be to be a jew in nineteen in 1930 in 1935 so I'll end on that I'll end on that note if you have any questions there is some time available very little unfortunately because we only have very limited time for your questions do please ask for the mic if you want to ask a question wait for the mic to be there before you actually voice your question please I very much like your presentation scientists however I'm a bit more interested in institutions and process and as a political theorist I'm very suspicious of ideas of concepts like chains of ideas but I suggest you use there's a way of connecting some of the things that you've seen it's quite economical one of them is to see town country relations and the role of cities is quite strategic the work of angles at Berkeley and Edie Litvak shows in this in the great civilisations was passed and I've written quite a bit about ancient cities the main distinction was of course between nomadic society and Sidon trees civilization so cities had lots of functions and although Plato and Aristotle saw them as primarily market sites their strategic importance was very important they were also sites I would suggest not the chains of ideas but for transactions and high volumes of economic transactions through trade required people or led to demands for high levels of political transactions and the distribution political power and democracy was a series of deals that created this symmetry but on the question of hatred cities are mainly the sites for hatred you're not only the place where stories are generated and distributed but as all studies of violence have shown whether its domestic violence or politically motivated violence contiguity and opportunities for contact are opportunities for conflict and almost the work of Elias Canetti the Romanian Jew on Muhsin or marked on crowds and power would confirm this also here's a question now I mean there was a lady here in the front present very interesting especially because the theory touched some aspects that I hadn't thought of before I wanted to ask maybe to bring it a little bit closer to our reality if you maybe saw we have this project of building the bridge between Sicily and the rest of Italy the state of the Messina and I wanted to ask if the maybe one of the examples while we are trying to invest in an infrastructure in a region where maybe we should invest in universities and human capital instead in your presentation you talked about the role of density and how important it is for cities to have people that are close to one another because there's engages them in you know sharing knowledge and this is a classic explanation not just in urban economics in economics of innovation but this just assumes that people shares knowledge just by proximity which is somehow a little bit you know sort of a heavy approximation and I think in these kind of things psychology could help economics to understand the dynamics why is this happening and when and I think you had a paper in 1999 talking about you know asking for more collaboration between economics and psychology to better understand these phenomena but I haven't seen much research following this kind of claiming I wouldn't just want to ask you first of all I mean the last thing I wanted to suggest was that cities played this role were dominated by the role of exchanging ideas historically they always did play this role this always did happen in cities but it's not why cities existed that was part of my whole point about the story of Chicago is that was about enabling the goods to be moved over over space and in a way that was important creating markets and indeed as you talked about this is the political city often which is a strategic military role or some other role is sometimes related to transportation because all of this stuff was was it was absolutely important so that was in fact exactly a point of my talk was that in fact that was that was true of its historically but it's much less true today and these things are much less important today than they were in the past it was also brought up that that there's more crime in cities I wrote a paper in the journal political economy in 1999 about that and it's important to remember that the same proximity that makes it easy to trade with each other to learn from each other also makes it easier to steal from each other or to kill one another particularly makes it easier for bacteria to move from human beings to human being this creates a tremendous challenge of course for for for urban governance that then is meant to take take care of this that's been meant to address this and it's it's why you know in some sense enough land hides all sins whereas an absence of land makes failures incredibly obvious and it's why we really see the failures of the developing world in their cities because it's it's you know the failure to provide clean water and decent toilets in a place like won by is is you know becomes painfully and excruciating the obvious in the failure to provide decent policing in Rio de Janeiro is is likewise enormously painful it's not clear to me that there's more hatred in those cities but there certainly is more in general there's more violence because again of this proximity because there's somebody there's somebody to hit that's near you and certainly it's true that the combination of urbanization and racial fractionalization can be dangerous although it need not be that we all can think of lots of diverse entrepot cities that have existed for millennia without killing each other and again this is a question of where economics has to have to add on things on the bridge to Sicily I have not in fact studied the cost-benefit analysis of this bridge and as such I I would not be it would not be appropriate for me to say anything about I have long had an interest I wrote a piece in 1988 at possible 1988 on doing business in the Metro Jordan Oh about Italy's policies that favored favoured the south and I have long wondered about whether or not these are all that sensible and but you'd want very clearly for this bridge to be justified on cost-benefit analysis and certainly you know it would be very questionable I would be very surprised if this we're better investment than you know educating our children or the children of Sicily more effectively I would certainly be very surprised if the cost benefit analysis worked out that way but since I have not done it it would be completely inappropriate for me to actually suggest that that I know the answer to this on how exactly learning works in cities and and psychology and all this other stuff for sure I mean there's lots of things about the microstructure of learning that are worth knowing about it's not always obvious that you have to get inside the black box though it's not always obvious that you need to know all the different ways in which human beings can you know learn from each other interact with each other often all we need to know is the policy-relevant choice and how idiom you know what what the effects that it has rather than actually doesn't doesn't mean that learning more of that stuff isn't vital but it's not isn't useful but it doesn't mean that it's it doesn't mean that it's vital and you know I think this is another statement about I know there's a lot of interest here in behavioral economics if there's something that I call Tolstoy's corollary which is there's only one way to get a problem right but there are an uncountable number of ways to get it wrong and we've got it a problem with the behavioral economics exercise is that choosing which one of those uncountable ways to get it wrong is incredibly hard my own preference for where to get it wrong is by putting too much emphasis on what people around us say okay that's in fact that the running model that's gone through all of this is that we are just you know too prone to listen to things that people say around us and take them seriously because most of the time when somebody's telling me something like it's raining outside it's my wife and I should go put on a coat right because she's actually transferring information for me that's actually valuable and that's that's actually you know that's that's a that's a good thing and that's why we don't normally second-guess everything but then entrepreneurs take advantage of that just as you know the entrepreneurs of New York's finance system did a lot that was good over the last 40 years but also did a lot of mischief because in fact that's what entrepreneurs do they you know they try and do make money by by different means possible but you know figuring out which one of these errors is the right one to follow on is I think absolutely on the first-order agenda so I think we end there and thank you all very much for your time having you just for 90 minutes I guess soccer game next time thank you very much