Published on February 20th, 2014


Edward Glaeser: In the City, Inequality Rules

In New York City, 45 billionaires live cheek-by-jowl with 1.6 million people who live in poverty. Progressives since Jacob Riis have seen the urban juxtaposition of wealth and poverty as a flaw of New York.

New York’s wealth inequality reflects strength not weakness. The city’s billionaires are the producers and the products of the city’s extraordinary economy. The city’s poverty reflects the fact that the less fortunate are drawn to New York by its economic openness, public transportation, and social structure. The fact that New York City can attract both the very rich and the very poor is something to cheer, it is not a cause for alarm. The real problem is not New York’s inequality, but the false equality of those communities that have made no place for the less fortunate.

The ability to make vast wealth gave smart people the incentives to take risks. Sonic people responded to those incentives and took risks that led to the transformation of New York over the last 30 years. A stream of financial innovators turned the city of the old boys’ club of 1950s Wall Street into a dynamic, idea-producing financial megacenter. Some of the risk takers became wealthy by betting on the city’s turnaround in real estate. Today’s large crop of billionaires is the natural result of a period of tremendous economic innovation.

The rise in inequality associated with the fact that we now have a lot of billionaires instead of millionaires is not a disturbing fact. Many of the super-rich are using their money extraordinarily well. Bill Gates, following the lead of Andrew Carnegie, is spearheading a remarkable philanthropic campaign against disease. Michael Bloomberg and Jon Corzine greatly improved local government by using their talents and wealth to increase political competition.

What is disturbing is the rise in inequality attributed to the many Americans who live in poverty. As a nation, we need to fight poverty and invest more in our children. While we might judge America adversely because of its poverty, the same logic does not hold for New York: the poverty of a city is fundamentally different from the poverty of a nation. National poverty largely reflects poor economic rewards for those with low levels of skills. Urban poverty largely reflects the fact that poor people are drawn to cities.

America’s cities provide hundreds of millions of choices for the rich and the poor about where to live. One-in-five New Yorkers and one-in-five Americans change comities every five years. More than a third of New Yorkers were born in a different country. Cities have many poor people because they receive vast numbers of poor migrants, who are attracted to places that provide the best combination of economic opportunity, quality of life, and affordability.

Poverty in New York City and its absence in Silicon Valley does not mean that New York traps people in poverty and Silicon Valley enriches everyone. New York’s poor people choose New York because New York has assets that other places, like Silicon Valley do not, such as affordable housing, a variety of jobs, and public transportation. There are few poor people in Silicon Valley because it is almost impossible to live there if you aren’t a Google magnate or just wealthy.

Fur four centuries, Now York City has offered remarkable economic opportunities that attract people from all backgrounds. The mortgage-backed security innovator, Lewis Ranieri, started work with a night job in the Salomon Brothers mailroom. Proximity to smart traders helped him acquire the skills that allowed him to become rich. According to Forbes magazine New York’s current fifth richest billionaire is Len Blavatnik. He came to the city as a Russian immigrant in 1978. He earned a degree from Columbia University in computer science and later founded an investment company that connected New York capital with financial opportunities in the former Soviet Union.

New York also attracts the poor because it offers them a lifestyle that does not require having to buy multiple cars. In America’s vast exurbs, every adult has to drive. In New York City, all one needs is the subway fare. The city’s poor are also attracted to the city’s neighborhoods, where they can live close to their relatives and can get access to New York’s social services. The city is able to offer more services to those that are less fortunate and is one reason why the poor keep coming here.

None of this means, however, that New York shouldn’t do more to care for the poor. It should. Although one has to he careful of the fact that if the city does a better job caring for its poor, more poor people will come to New York. Successful pro-poverty policies will attract more poor people and cause the city’s poverty and inequality to rise. But the city shouldn’t fear this outcome. New York should be proud of the inequality that comes from the opportunities the city offers to everyone.

Original Source:

About the Author: Edward Glaeser is a senior fellow at the Manhattan Institute, contributing editor of City Journal, a contributor to The New York Times’ Economix blog, and the Fred and Eleanor Glimp Professor of Economics at Harvard University, where he has taught since 1992. His book, Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier, (The Penguin Press, 2011) was published in 2011.


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One Response to Edward Glaeser: In the City, Inequality Rules

  1. Darnell says:

    Inequality in cities are due to too much liberalism in the political culture.

    Bloomberg was given a third term as mayor of New York City and what did he do……came up with a law to prevent the selling of big gulp drinks. What a waste of time. This is the problem with liberal politicians, they always want to control people’s behavior instead of focusing on creating job opportunities so the poor can work their way out of poverty.

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