An Answer From the Computer--Why Urban Programs Backfire

SSuspicion: Programs supposed to be helping the cities are destroying them.

Jay W. Forrester--Professor of Management at MIT and one of the nation's pre-eminent systems analysts--stunned the urban planning world with this thesis two years ago with the publication of a book called Urban Dynamics.

Public housing, revenue sharing, job-training, and job creation programs all prove ultimately self defeating, Forrester maintains. He says--and presents impressive supporting arguments--that they turn cities into traps for the underemployed.

Why? Forrester believes that the iron rule of a social system is that you can't improve a given aspect of it without making other aspects worse. Programs which try to make life in the cities more attractive wind up defeating themselves because they draw immigrants in until the city's overall attractiveness level is driven down to that of surrounding areas.

Behind this simple concept is a highly sophisticated computer model of the city synthesized by Forrester and put forward in Urban Dynamics. The model's behavior led him to believe--and has convinced many others--that policies which ease the short run plight of the underemployed almost invariably work out to the long-run detriment of all concerned.

Three years ago, Forrester began to put the model together. Collaborating with former Boston Mayor John Collins, who had an office next to his at MIT, Forrester designed a mathematical representation of a 'typical' city--one which had all the common characteristics of American cities but none of the differences. The typical city, he found, should be reduced to nine major components.

The first three components cover categories of business and industry. Forrester calls them New Enterprise, Mature Business, and Declining Industry.

New Enterprise--newly built industry--he defines as having an average life-span of twelve years before becoming Mature Business. Being young, companies in the New Enterprise stage tend to have high ratios of managers to workers.

Mature Business is simply the older and more stable condition that New Enterprise eventually reaches. Because its physical plant is less modern than that of Mew Enterprise, and generally less profitable, it tends to have a lower proportion of Managers per Workers in each firm. Mature Business is assumed to have a life-span of approximately twenty years before entering the Declining Industry phase.

Declining Industry represents the terminal stage of a commercial establishment. It is characterized by an extremely low ration of Managers to Labor and is assumed to have a life-span of 30 years before being abandoned or destroyed.

The life-span in all three classes varies as a function of the cities' economic activity at a given time--in periods of business expansion, the life-spans are shortened as firms rapidly become obsolescent: in periods of business contraction, the life-spans are lengthened. Forrester is careful to include other qualifications of this sort in the computer model.

The next three categories Forrester identifies refer to the employment characteristics of the city's inhabitants.

The first class, the Managerial-Professional, consists of the white-collar workers. If the size of the Managerial-Professional class is large, or growing rapidly, then the urban system has provided or is providing a high degree of upward mobility to those in the next class down, Labor. Large numbers of managers are created by the growing number of commercial enterprises during the city's period of economic stagnation, however, the Managerial class declines in size as fewer new firms come into the city and what previously had been New Enterprise becomes Mature Business. And if the managerial class is declining for want of jobs, upward mobility in the lower classes suffers greatly.

The second class, Labor, refers to the number of skilled and semi-skilled workers in a city. As the number of jobs available to the labor class rise, as it does in periods of rapid economic growth, arrivals of Underemployed workers into the Labor class also rise.

The third class of inhabitants--the Underemployed--refers to the unemployed, the underemployed, and part-time workers. It is composed primarily of unskilled workers who have migrated to the city in search, most often, of jobs: it does not include skilled workers who are temporarily out of work.

The final three categories concern Housing.

Premium Housing is directly related to the size of and growth rate of the Managerial-Professional class, as demand for such housing accompanies the growth of the class. Forrester defines Premium Housing as having a normal life-span of about 30 year--a life-span which increases of demand for Premium Housing is high and decreases if it is low.

Worker Housing is created both by Worker Housing construction and the aging of Premium Housing. Forrester gives it an approximate life-span of 50 years, subject to to variations caused by changes in demand.

Underemployed Housing is created by the obsolescence of Worker Housing, supplemented by Low-Cost Housing Programs if such exist. It is assumed to have a 50 year life-span, after which it becomes unfit for human habitation or is destroyed to make way for new constructions.

These nine variables--and their rates of growth or decline--lead, Forrester maintains, to characteristic patterns of urban development.

The growth of an urban system over a 250 year period runs as follows in Forrester's computer model. For the first 100 years, as the city expands to fill its geographical boundaries, Labor, Housing, and Industry grow exponentially. But when all available land has been developed, the introduction of New Enterprise falls--drastically--as does the construction of housing. There is simply no place to put anything new without tearing buildings down. And since most of the buildings are of fairly recent origin, even a modicum of demolition is economically unfeasible.

So what happens? The demand for existing Managers--let alone new ones--declines as New Enterprise becomes Mature Business, thereby restricting the upward mobility of skilled and semi-skilled workers. The fall-off in the introduction of New Enterprise in turn means few new jobs are created in the Labor class itself, which limits the upward mobility of those in the Underemployed class.

At this point, if other factors are ignored, the city has become about equally unattractive to an influx of Managers, Labor, or Underemployed. The relative levels of Labor and Underemployed should remain fixed at their 100-year level. But the Underemployed have a tremendous ally--time--on their side. As time passes, Premium Housing turns into Worker Housing and Worker Housing becomes Underemployed Housing. With this steady flow of deteriorated housing entering the Underemployed Housing market, the availability and-or cost of the Underemployed Housing goes down. Consequently, the city becomes more attractive to the Underemployed, relatively speaking, than to Managers or Labor. Underemployed living outside of the city notice the platitude of low-cost housing in the stagnating city, and migrate there. This migration continues until the rent and-or availability of Underemployed Housing is brought roughly into equilibrium with that of surrounding areas, or other aspects of city life become so unattractive that they keep prospective immigrants home.

Eventually, this Underemployed Housing decays to the point where it is economically sound to tear down much of it and replace it with New Enterprise. But this first step toward economic renewal--which is accompanied by the building of New Premium and Worker Housing to accommodate the newly employed managers and workers--contains the seeds of its own destruction. When the economic revival grows to the point where further substitution of New Enterprise for Underemployed Housing and Declining Industry is not economically justifiable, the deadly flow of Premium and Worker Housing to the Underemployed category resumes. Eventually, after the cycle has completed several ever-decreasing rotations, a condition of equilibrium is reached with the surrounding environment. It is an equilibrium characterized by very low levels of New Enterprise (and the upward job mobility which accompanies it for all classes) and by large numbers of the Underemployed. The city is stagnating indefinitely.

Bleak as the picture of the stagnating city is, however, it becomes worse with the introduction of public housing, revenue sharing, rent control, high welfare benefits, and other currently favored liberal programs. All these programs--by increasing the attractiveness of the city to the Underemployed-will, Forrester maintains, prove self-defeating in the end because they create overwhelming inflows of Underemployed. The essential problem is that an environment attractive to the Underemployed will draw in enough people to bring the attractiveness level down to that of surrounding areas. The city will have done little but enlarge the problems, enlarge the trap.

Forrester looks at the effects of four current or proposed "solutions" to various urban problems, over a time-span of fifty years. The first concerns a job-creation program, in which public works jobs are opened up to the underemployed and-or transportation is given them for jobs located outside the city. This program has two substantial effects in Forrester's model--raising the number of jobs relative to Workers, which increases the upward mobility of the Underemployed, and vastly swelling migration of the Underemployed to the city. Having plenty of excess Underemployed Housing around to absorb large numbers of immigrants, the city winds up with the same sort of problem in the end, but on a larger scale. In addition, because Underemployed require higher percapita tax expenditures for police and welfare, the local tax burden rises. This has the effect of further discouraging construction of New Enterprise, and depressing upward job mobility.

The second program examined is job-training. Forrester gives it the benefit of every doubt; he assumes it costs the city nothing, adds nothing to the tx rate, and proves one hundred per cent effective in turning the Underemployed into skilled workers. The program is assumed to reach 5 per cent of the underemployed each year. The positive results of this program, however--like the last--are almost entirely consumed by in-migration. Moreover, the increased number of those in the Labor class makes crowding in Worker Housing more severe, competition for jobs tighter, and the prospect of leaving the city more attractive for Labor. So, despite a small increase in upward mobility and New Enterprise, he concludes that even a perfect job-training program would be of questionable value to the city.

The third program evaluated is that of intergovernmental financial aid, or revenue sharing. Forrester assumes the new revenue goes to programs which have some positive effects on the life of the Underemployed--either through better schools, better health care, welfare, etc.--while at the same time not reducing the local tax burden. Largely because of better education, upward mobility for the Underemployed does rise. But the positive results of the program are again negated by the influx of underemployed to the city. Over a fifty year period, the ratio of Underemployed to available jobs rises by 9 per cent and the total population of Underemployed goes up eight per cent. Surprisingly, too--despite revenue sharing--the local tax ratio rises to assist in support of the newly arrived Underemployed.

The final, and most damaging program Forrester looks at is the Low-Cost Housing Program. Assumed to be funded by a larger governmental body, the computer model's housing program does not effect the tx rate for the city but does provide jobs for Labor and Underemployed through construction. The program is designed to build housing for five per cent of the Underemployed per year, but because of the counteractive effects of land shortages and labor shortages (labor rapidly leaves the city), it averages only 2.5 per cent per year. Even this rate of construction, though, proves very harmful to New Enterprise, which faces artificial competition with the low-cost housing projects over use of available land. Moreover, the massive in-migration of Underemployed places a heavier tax ratio on the city, further discouraging business activity, as well as creating new demand for low-cost housing. The tax base erodes while the need for taxes mounts, leaving the city in extremely poor shape."

So runs Forrester's analysis of conventional programs and their benefits. Must we resign ourselves to pessimism Forrester thinks not. As was clear from the examination of the previous four public programs, conventional approaches to solving urban problems are defeated by massive in-migration of the Underemployed. Forrester believes that if this in-migration can be limited, the prospects for increasing the upward mobility--and therefore the quality of life--of the Underemployed in the city can be greatly enhanced.

He achieves this limitation by lowering the supply of low-income housing. Turning over excess Underemployed Housing to industry, for demolition and construction of manufacturing plant, will permit the city, he believes to realize very significant long-term improvement in upward job-mobility.

Implementation of his program begins with tax incentives for owners of buildings to rebuild or renovate. This has the effect of withholding housing from the Underemployed Housing market, because Premium and Worker Housing deteriorate less slowly, while simultaneously prolonging the life-span of New Enterprise--which increases upward job mobility for all classes. Forrester states that the goal of this policy should be to remove 5 per cent of the Underemployed Housing per year while using the land cleared in this manner to build new industries. The new industries would raise the income levels of Underemployed neighborhoods, which would permit better housing. Meanwhile, because the excess of Underemployed Housing was gone, the city would not be flooded by a new wave of Underemployed from outside.

The steady stream of immigrants who came to take the place of those Underemployed who moved up the economic ladder, however, would have very real opportunities for advancement. Therefore, tearing down some Underemployed Housing and encouraging New Enterprise construction, Forrester believes, would prove the soundest and most beneficial program for the Underemployed.

Obviously this is not the type of policy favored by liberal intellectuals and politicians. Forrester has been called "Insensitive" to the plight of the poor--a charge that ignores the long term benefits his proposals would produce--and his model has been challenged on several grounds. Gregory Ingram, a leading critic, maintains that Forrester never explicitly defines criteria for evaluating programs. John F. Kain, professor of Government at Harvard, believes that Forrester overstates the role of housing availability in attracting immigrants. Others have charged that the model is structurally inexact because it does not include the suburbs.

Despite this, the Forrester model has converted a growing number of urban specialists. Dr. Donald F. Shaughnessy, a former Lindsay Aide and specialist in the fields of urban housing, transportation, and economic development, is one:

"From my experience, conventional methods of solving urban, problems have been tried and have failed--it's been money down the rat hole. The more we spend the worse it gets. Forrester's analysis and description of the urban system is the only one that makes sense."

Eugene Callender, black, and past president of the New York Urban Coalition--is another.

In an interview with IBM's Think Magazine last April, Callender expressed his reaction--and the reaction of many urban experts--to Forrester's analysis upon first approach. "I was hostile at first--extremely hostile," he said. "You've got to sleep on his ideas for several nights before you begin to appreciate them. You have to put aside the romantic ideals of the New Deal and the Fair Deal. Jay Forrester has done a tremendous service to the whole field of urban policy by substituting rigorous analysis for the old platitudes. It's traditional for us to shove the pieces around the board; Jay starts a new game instead. Grant him a few assumptions, and the game makes plenty of sense."

The old platitudes persist. But Forrester's fundamental contribution--that attempts to improve all aspects of urban life will be defeated by in-migration--is beginning to make their hegemony a little less certain