IF YOU HATE urban sprawl, you're probably familiar with the complaints of the "smart growth" movement: Roadways blight cities. Traffic congestion is the worst. Suburbanization harms the environment. Fortunately, say these smart growthers, there is an alternative: By piling on regulations and reallocating transportation-related tax money, we can "densify" our urban communities, allowing virtually everyone to live in a downtown area and forego driving in favor of walking or biking.
Smart growth proponents have been gaining influence for decades. They've implemented urban growth boundaries (which greatly restrict the development of land outside a defined area), up-zoning (which tries to increase densities in existing neighborhoods by replacing single-family homes with apartments), and "road diets" (which take away traffic lanes to make room for wider sidewalks and bike lanes).
Alas, there are inherent flaws in the "smart growth" approach--beginning with the idea that it makes sense for everyone to live and work in the same small area. In fact, that idea flies in the face of what economists call urban agglomeration.
Urban agglomeration is why there are more jobs in and around big cities. Job seekers have access to a large number of potential employers, which increases each person's likelihood of finding one that can make the best use of her unique talents and skills. The same is true for business owners, who have a much better chance of finding people in a large populous urban area who match their needs.
TRANSPORTATION TURNS OUT to be a key factor in enabling these wealth-increasing transactions. Imagine drawing a circle around the location of your residence, defined by how far you are willing to commute to get to a satisfying job. The larger the radius of that circle, the more potential work opportunities you have. Likewise, a company's prospective-employee pool is defined by the number of people whose circles contain that company's location.
Most people measure that radius in time rather than distance; studies show they are generally unwilling to spend much more than 30 minutes commuting each way on a long-term basis. That means the size of their opportunity circle is critically dependent on how quickly they can get around.
Despite urban sprawl and ever-increasing congestion levels, economists Peter Gordon and Harry Richardson of the University of Southern California have documented, using census data, that average commute times in various...