Growing NYC Would Make It Richer

The central thesis of Maximum New York is that NYC can and should be much larger than it is, and that this would be excellent for many reasons. Rather than a city of near 9 million, it should already be a city of 10-20 million; and the wider NYC metro area should be closer to 40 million, rather than its current ~20 million. In other words: the city should at least double in size.

Many people find this proposition ridiculous, and they are not shy in telling me so. But I’ve generally only heard a few stock answers for this position, none of which I find stand up to scrutiny. This is the first post in a series, each of which will address one reason why people think Maximum New York is dumb.

Reason #1: the city simply doesn’t have enough money to handle the doubling of population. The increase in city services and resource provision alone simply isn’t doable.

This concern is the actual opposite of reality. NYC (and the state and country) is staggeringly poorer—absolutely and per capita—because we do not legally permit enough housing where people want to live, NYC being at the perennial top of that list.¹

And the city wouldn’t have to pay for all of these new people with its current budget. The new people would bring a flood of new tax revenue into both the city and the wider state.

But, one might say, even if tax revenue increased along with population, wouldn’t expenses do the same, leaving us back where we started?

Probably not.

As cities² in the US double in size, two things happen:

1. The average wage of people in the city increases by ~12%. So if you double the population, you don’t just have twice as many people earning the same amount. Everyone is 12% richer on average, and that translates into higher tax revenues as well. Wages scale superlinearly.

2. The cost of infrastructure, like pipes, roads, and electrical wires, decreases by ~15%. Infrastructure costs scale sublinearly.

So, not only does citizens’ income grow by 12% (with a corresponding bonus bump in tax revenue) with each doubling of their city, but the cost of infrastructure needed to accommodate them falls by 15%.³ I think this makes sense—it’s just good ol’ returns to scale.

The prospect of doubling the size of NYC is not only affordable, it would likely make the city richer than it is today.

Now—this doesn’t mean there aren’t other things to consider here. NYC could grow and still make its citizens worse off through bad laws. For example: if it artificially restricted the supply of housing, thereby forcing citizens to spend more than they otherwise would on rent, the wage premium that comes with increasing the city size could be eaten up by housing.

And it’s also true that an NYC with more revenue wouldn’t necessarily spend it more efficiently.

But these concerns are different versions of this problem: “The city government makes its citizens worse off in certain ways, and would do it even more if the city were larger.” That is not the same problem as “The city wouldn’t have enough money to support a doubled population.” It would; the question is whether it would act well with it, and whether it would pass good laws.

If you then say “well, the city government would make us all relatively poorer if the city were larger, and that is what would cause it to not be able to afford more people,” then that’s an interesting argument. But also: my whole deal with Maximum New York is to make the city and its laws better before and at the same time as increasing its population, specifically by allowing the construction of vast amounts of new housing (among other things)—this would enable the city to reap the scaling benefits mentioned above. So I don’t find that interesting argument very compelling in the end.

1. Approximately one-third poorer, which is astounding. See “Housing Constraints and Spatial Misallocation” (2019, American Economic Journal: Macroeconomics) by Chang-Tai Hsieh & Enrico Moretti.

2. “Cities” here are defined by their metropolitan statistical areas (their metros, as I mentioned in paragraph one), not their administrative or political definition. See “Notes,” footnote two of “Toward a science of cities” in Scale: The Universal Laws of Life, Growth, and Death in Organisms, Cities, and Companies, (2017), 461-462.

3. See Scale, p. 274 and 276. Alternatively, you can view the study that these pages reference here, with particular reference to Table 1 and Figure 1. Although I think these data still hold, and are supported by many more recent studies, I would like to see these numbers run again with 2019 data (to avoid Covid complications).