Thursday, March 11, 2010

City of Muda 1

As a student of urban planning, former municipal employee, and lifetime political junky, I am acutely conscious of the bitterness that defines government-constituent relations. Public discourse, assisted in no small part by neo-liberal government regimes themselves, has transformed government into a four-letter-word, and “liberalism”—albeit the classical root of individual liberty—into an electoral faux pas. From 1999 to 2009, Americans have consistently ranked “Big Government” as the biggest threat to the country in the future over “Big Business” and “Big Labor”. The most recent March 2010 Gallup poll positions the US Congress at its lowest approval rating (16 percent) in recent memory. To be sure, this sour attitude is no novel phenomenon: while recent reports by the Associated Press remind us that “Americans have come to detest Congress ever more deeply,” congressional approval ratings dipped as low as 19 percent in the late 1970s.

Fortunately for municipal and regional planners, the public’s trust toward local government far exceeds their trust in the feds—but don’t get too encouraged. Public opinion of local government has sustained a gradual drop in favorability from 78 to 60 percent since 2001. This increasing dissatisfaction is further evidenced by the growing frequency of private and charter schools, gated neighborhoods, public-private partnerships, and other government-adopted “entrepreneurial” practices that suggest the frailties of the traditional public service model. In his seminal article “A Pure Theory of Local Expenditures,” Charles Tiebout (1956) suggested that citizens “vote with their feet” by moving to places that fit their preferred level of public service. In an era of increasing privatization, however, it seems as though citizens can as easily stay in place and “vote” with their dollars (citations? Surely someone else has mentioned this.).

What is spurring this disaffection? Paul Hawken, Amory Lovins, and Hunter Lovins imply a compelling explanation and a potential solution in their book Natural Capitalism (2000). Hawken et al. describe how a growing consortium of companies have realized overwhelming profits by reducing muda—a Japanese word for “waste” or “futility”—from their operations. While adherents of Henry Ford and Fredrick Winslow Taylor have extolled the virtues of “efficiency” in business and city government for nearly a century, Hawken et al. prescribe efficient practices at a new, broadened scale. By adopting a “whole-system perspective,” companies have eliminated inefficiencies that conventional practices sheltered from scrutiny. For example, Pratt & Whitney was able to reduce the production time of turbine blades from 10 days to 75 minutes by eliminating a state-of-the-art machine that ultimately slowed down the entire production process with its overwhelming technical complexity. While the machine worked very “efficiently” in isolation, its enormity and complexity clogged the entire production system. By switching to well-scaled tools and lean processes at every step in production, companies are able to lower costs, increase profits, and effortlessly reduce their consumption of natural capital.

A society-level extension of increased life-cycle efficiency is the “service and flow” economy that reorients wasteful mass production/consumption to quality service provision. Instead of selling products to a customer, Hawken et al. suggest that companies, “provide her that service directly at the rate and in the manner in which she desires it, deliver it ever as efficiently as possible, share as much of the resulting savings as you must to compete, and pocket the rest (134).” As an example, instead of selling expensive air conditioning units or heating systems— products that no consumer necessarily desires —a company provides the service of comfortable climate control. By focusing on delivering a service instead of selling a product, a company has more incentive to pay attention to long-term, whole-system efficiency. This new perspective eradicates a philosophy of designed obsolescence, which offers penny profit margins on disposable products sold at very high volumes, resulting in lots of natural resource consumption on the front-end, lots of garbage on the back-end, and lots of inefficient lag time in the middle. Think Wal-Mart and its suppliers.

In a service and flow economy an air conditioner company that would have previously cut its ties with a customer after point-of-sale now has incentive to invest in a building’s insulation and envelope—the whole system—because its machines can accomplish more cooling or heating with less effort. Instead of selling an individual a cooling unit and disappearing, they sell a cooling service, lease their equipment, and remain invested in its long-term quality. In the process, the company cuts costs by delivering the same service with smaller fixtures. The company also retains a satisfied and dedicated customer. A former air conditioner producer becomes a climate control service provider.

Service and flow in the public realm

How might this model work with local government? Without a doubt, there are multiple moral and functional obstacles to transforming local government into the type of service and flow economy imagined for consumer products. First of all, the service and flow model remains completely embedded in private markets, still the best system for the exchange of private goods. The private market is a system of value signals (aka “prices”). When the signal for supply matches the signal for demand, voila!, consumers and produces each get what they want. This system works extremely well with rivalrous and excludible goods like air conditioning or a slinky, because I can enjoy these goods (for the most part) without bothering or including you. The service and flow economy works well in the private market because it is acutely responsive to consumer and producer signals: i.e. “provide her that service directly at the rate and in the manner in which she desires it.”

But what about goods like roads, sewers, clean air, potable water, and public health and safety? Indulge in my fantasy: there are many days, particularly cold days, when I would love nothing more than a bridge that leads directly from my front door to my office door. Furthermore, I want this bridge smooth, stoplight-free, and closed-off to all other traffic, unless they pay me a hefty toll. Unfortunately, I cannot afford such a bridge myself and the construction process might mercilessly slash the existing homes, businesses, parks, roads, and general social contiguity of my town. This merciless slashing HAS happened, and continues to occur often to the exclusive benefit of higher-income members of society. Products like limited access toll roads, charter schools, dams, and nuclear power plants are literally and figuratively sold to the public on the grounds of “efficiency,” and indeed they are extremely efficient to those who can afford the services and avoid their more unpleasant symptoms. But how “efficient” are these solutions? At a myopic scale, a bridge from my home to my office is very efficient for me, but complete muda for most taxpayers and more than muda for the individuals whose livelihood it disrupts.

I argue that the increasing dissatisfaction toward local government is tightly intertwined with its growing propensity to provide “inefficient” services. As local government creates muda in the form of rather inefficient projects that cater to narrow interests, increasing numbers of citizens have begun to reject the muda, and resort to private services. This vicious cycle has resulted in an exclusive and ultimately unsustainable system. I believe that municipal and regional governments can regain public confidence, deliver quality services, and serve as an exemplar of ecological stewardship by adopting a whole-systems approach and many of the practices of the service and flow economy. Like price signals in the private market, municipal satisfaction is signaled by elections that occur, at most, every two years, and are influenced narrow by private interests. In addition to the adoption of a whole systems approach, I believe a truly efficient municipal government requires a new “signal” system that allows citizens to voice their level of satisfaction.

Land-use Planning as Service and Flow

Luckily, this potential reality is not desperately far away. The land-use planning system that most American cities currently employ already resembles the service and flow economy in several ways. First of all, land is a private good bought and sold in the marketplace. Like air conditioners, the purchase and sale of land is subject to price signals, but unlike air conditioners and other consumer products land is plagued by several characteristics that result in enormous market inefficiencies. There are multiple conditions necessary for an ideal efficient marketplace, but much to the chagrin of economists these conditions never exist on the ground. They include 1) competitive markets (no monopolies or monopsonies), 2) full access to all information, 3) self-interested, utility maximizing actors 4) exclusivity of market goods (no externalities), and 5) costless economic transactions (Beatley 1994). The land market is especially filled with imperfections: it is unpredictable, information is tenuous at best, land owners retain emotional “non-rational” attachment to their property, transactions are lengthy and complicated, and there is no shortage of potential externalities that my use of the land may have on my neighbor’s use of the land. Governments, and especially planners, work hard to reduce these inefficiencies by offering some predictability, providing a legal structure through which transactions can take place, and most importantly, reducing potential externalities by regulating the use of land.

American property rights have often been described as a “bundle of sticks,” or a bundle of different “rights.” Foremost is the right to exclude others from its use and benefit from its sale. Although the fifth and fourteenth amendments of US Constitution defend against the taking of private property without just compensation, the Supreme Court has relegated certain “police powers” to state and local governments that allow them to uphold the public health, safety, and welfare. These powers vary from state to state, but in almost all states, government has retained the right to regulate the use of land and timing of development. As a result, I cannot build a steel smeltering plant next door to my neighbors cottage (in most places).

The government also has an enormous incentive to regulate the use of land: tax revenues. For most of American history (and into the unforeseeable future), state and local governments have assessed the “value” of land by either the costs of its built improvements, its potential re-sale value, or the income it generates in sales tax (Raimondo, 1992). High market value result in potentially high tax revenues, which, in turn, support investments in education, transportation, public safety, sewage, parks, and libraries—the stuff that wins elections. So, while land is technically a private good, it retains many public qualities that the government continues to control. This reveals the second similarity to the service and flow economy: government has an incentive to maintain the long-term quality of land. Much like a climate control company has an incentive to keep your home insulated and your air conditioner functioning, local government has a long-term stake in not only the short-term benefits that land provides (property tax receipts), but it also has a stake in its long-term health. Ideally, local government defends property values by ensuring that neighborhoods are free of crime, storm water, human waste, and garbage, while maintaining such value-enhancing infrastructure as roads, street lamps, sidewalks, safety services, and education.

Imagine a neighborhood littered in garbage and stinks of human waste. The sidewalk is crumbling, and the road is filled with dangerous potholes. At sundown, the few oxidized street lamps that remain don’t illuminate. The nearest grocery store is miles away, employment opportunities are scarce, and the park down the street is filled with rusty playground equipment, trash, and crime. How much would you pay for property here? Probably not much, and the local government would collect little, if any, tax revenue as a result. Unfortunately, there are many American neighborhoods just like this. What happened? And why do government attempts to fix these problems repeatedly fail?

Stay tuned! In my next blog entry I’ll describe how government’s failure to approach the city as a whole system results in muda in the form of sprawl, blighting, and overconsumption of natural resources. A system that provides public services for relatively narrow interests necessarily sacrifices whole-system efficiency for relatively myopic “efficiency.” I’ll also offer some existing practices that have succeeded in addressing inefficiency as well as some that I (and surely others) have only imagined. Finally, in a third installation, I’ll discuss how a whole systems approach to government requires a better signaling apparatus in the form of discursive democracy and new forms of public participation.

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