Monday, February 18, 2013

Hipsturbia: The Colocation of Consumption and Housing

The New York Times offered up a new trend piece about "Creating Hipsturbia." The thrust of the piece is that traditionally unhip suburbs such as Hastings-on-Hudson, New York are attracting young families away from traditionally hip places in Brooklyn. As this is a trend piece in the New York Times the entirety of evidence is quite likely a few of the author's friends who have made such a move. But the trend (as it is) described does offer some interesting bits about urban economics and the spatial distributions of activities.

As a bit of background, for all of the interest and cheerleading that cities are revitalizing because people want to live downtown, what is actually happening to metropolitan economies is more complex. Here is one example from this morning's Detroit Free Press about downtown Detroit's revitalization. The DFP story highlights that downtowns across the US are growing (or not) and generating lots of economic activity. Yet there are two distinct forces affecting city regions, which is why downtown areas can be doing seemingly okay while our regions continue to sprawl and any benefits from growth are inequitably distributed. What is happening is that within metropolitan economies forces of production continue to disperse while forces of consumption are concentrating in the center of regions. Production is decentralizing away from urban centers to elsewhere in the region or world to places where firms can minimize land and transportation costs while maintaining access to an adequate labor pool. This is happening with firms, as well, which is known as firm fragmentation. As an example, Amazon.com has been praised as a market leader for moving its headquarters to downtown Seattle, but most of Amazon.com's employment and real estate growth is actually through fulfillment centers and warehouses located on the urban fringe (like this in Texas, more here on distribution centers generally).

Consumption, on the other hand, is concentrating. People of means want certain types of retail, recreation, dining and other discretionary activity bundles. Households value such activity bundles as part of their location decisions along with commuting costs, housing size, schools and other things. What the "Hipsturbia" article highlights, however, is that many of the people who value a "hip" consumption bundle are the same people who produce the hip places. From the story:
“I don’t think we need to be in Brooklyn,” said Marie Labropoulos, who recently moved to Westchester County and opened a shop, Kalliste, selling artisanal vegan soap in Dobbs Ferry. “We’re bringing Brooklyn with us.”
I have no idea how big the market is for artisanal vegan soap, even in Brooklyn. But by bringing Brooklyn with them these migrants are creating new consumption bundles. There are two important aspects of this. First, there are positive externalities associated with opening a artisanal vegan soap store beyond clean people. The store creates a hip vibe that makes other hipsters more willing to move to these places. Perhaps someone will be more willing to open a store that sells only things made of tofu nearby. A virtuous cycle of hipness is created. Second, consumption preferences are valued as part of an overall household budget. A bigger house and better public schools are a trade off for less access to your optimal consumption bundle, but if you bring your store with you commuting costs may not change.

None of these are new observations, and again, no one is claiming that a New York Times trend piece is any evidence of an actual trend. What these anecdotes represent are a confirmation of fairly conventional understandings of household location decisions but with the key differences that consumption preferences and colocation of households and consumption amenities are under considered by planners, economists and researchers. Consumption activities are also quite local in scale (such as retail and dining, though things like museums require a larger market), so individual neighborhoods can become quite desirable while nearby areas remain unloved. More interesting is the potential colocation of households and consumption as many households are also providers of the consumption activities. If what you value is vegan soap or gluten-free muffins or craft beer and it happens that you are in the business of providing those things, then you can pretty much locate anywhere there is a market, including commuter towns on the outskirts of the city. When producers and consumers are one in the same we don't really know (yet) if the decentralization of production or the centralization of consumption will be dominant for location decisions. It may be that the suburbanization of consumption will follow the suburbanization of production.






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