Editor’s Note:

Edward Glaeser is a professor with Fred and Eleanor Glimp of Economics in the Faculty of Arts and Sciences at Harvard University. He is the author of Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier.

China’s rapid urbanization enables enduring economic growth, but it also creates traffic congestion, pollution, and high housing costs. The best approach for China is to show the world how to combine high quality of life with high density levels.

The latest development plan for Beijing wisely focuses on the need to protect the environment and improve quality of life. Beijing has discussed the problem of congestion for many years.

Autonomous vehicles are also likely to worsen the congestion problem, because they will reduce the cost of sitting in traffic, which will mean that even more people are willing to sit in traffic.  

To solve the problem, it is important to note that new infrastructure will never solve the congestion problem on its own, because new highways just summon new drivers.

The economists Gilles Duranton and Matthew Turner have compellingly documented the “Fundamental Law of Highway Traffic,” that vehicle miles traveled increase roughly one-for-one with highway miles built.

For the moment, China’s cities just don’t have enough alternatives to cars that appeal to wealthier individuals. The cities should support better buses that drive on dedicated lanes or take tunnels. In the near future, autonomous high-speed buses can augment China’s excellent urban rail systems.

Moreover, cities with fewer cars would mean a regulatory approach to new construction that emphasizes walkability rather than monumentality.

In Manhattan or central Chicago, most residents can easily walk to a subway or bus stop. Cars are largely unnecessary. These cities work because tall buildings are right next to each other, as in Shanghai’s Nanjing Road.

Beijing suffers because, just like Washington, D.C., its buildings are physically too far apart, which makes them more impressive but deters mobility. The latest Beijing plan correctly desires to preserve green space on the edge of the city.  

The best way to protect that space is to fill in the currently empty space between structures in the city center, with mixed use buildings that enable people to live near where they work.  The best commute is always a ten-minute walk to work.  

While China needs to allow more infill development in its first tier cities, relentless construction in third and fourth tier cities presents a different risk. While I remain enormously optimistic about China’s urban future, recent research that I co-authored in the Journal of Economic Perspectives concludes that continuing price growth in third and fourth tier cities is incompatible with continuing the current levels of construction.

Consequently, there comes a dilemma. If China reduces housing supply in lower tier cities, it can keep prices up, but at the cost of reducing construction employment and reducing urbanization. While there are no easy answers, perhaps the most obvious reform is to reduce the fiscal dependence of local government on new construction with better local land taxes.   

Local governments are best placed to invest in local quality of life, but they need revenues. The best way to provide those revenues is to tax local property owners, who will ultimately reap the benefits of increased demand for that city’s space.

So far China has experimented local property tax for years. Property value appraisal may be a challenge for local governments, but such appraisals can now be down mechanically by a single nationwide property appraisal office.  

Armed with good data on real estate sales, using the latest techniques in computer vision, a central office can be just as good as local appraisers. Computer Scientist Nikhil Naik and I have developed an appraisal model that uses Google Streetview images that can do basically as well as local human assessors in Boston.  

Finally and most importantly, China must continue to invest in education. Cities and skills are complements.

My work with Lu Ming of Shanghai Jiao Tong University finds that education drives urban success in China, just as it does in the US and Europe. As China’s cities follow Shenzhen’s lead and move from basic industry to high technology, education will become even more vital.  

China’s cities are great assets for the nation and the world. Ultimately, they must grow, but that growth should be accompanied by continuing improvements in quality of life, which is possible with the right tax system, with better congestion solutions, with better building rules and with continuing investment in human capital.