But the deal was approved with no opportunity for public vetting, and even now Mason leaders either can’t or won’t answer this key question: How much will new P&G employees net the city in income taxes? Without knowing the answer to that question we don’t know how long it will be before the income offsets the benefits Mason is giving P&G.
Economic packages are the the cost of attracting new development in the current global business climate – but communities must go into them with all of the facts, and it’s not at all clear that Mason did.
–“Questions remain on Mason incentives” From the Editorial Board, Cincinnati Enquirer (http://www.cincinnati.com/story/opinion/editorials/2015/03/19/questions-still-unanswered-incentives/25013003/)
I debated hard about whether to write about this one.
I have two problems: First, the town in this story is close to where I live, and I know some of the city staff members. Second, my husband is with P&G. He has worked at this facility in the past and will probably work there again in the future. And I will be the first to say, from long personal experience, that this company does a consistently better job of corporate citizenship that almost any multinational company you will encounter.
But. There’s a crucial cautionary tale here, and it’s one that neither you nor your electeds can afford to ignore.
First, note the level of scrutiny being given to the deal by the newspaper, and coming from no less than its Editorial Board. From where I sit, an editorial from this historically conservative publication criticizing a local incentive deal is unusual enough. To give that attention to an incentive deal in a suburban community is even stranger (if you know Greater Cincinnati, you know that Mason is an major suburb, but it’s still a suburb). Like most old-line newspapers, the Enquirer usually focuses on the center city and pays relatively less attention to the suburbs. On top of that, this paper has been historically sympathetic to most of Greater Cincinnati’s big businesses, including P&G.
I think it’s an important indicator of how the general public (and press) perception of incentives is changing. Prior to 2008, when this surburb was the hot spot of the fastest-growing county in Ohio, when revenues for places like this seemed destined for long-term growth, I doubt anyone at the Enquirer or anywhere else would have given this deal a whole lot of thought. Certainly not enough to schedule a phone conference with the editorial staff. But even though Mason’s overall desirability in the region is still extremely high, a broad zeitgeist of strained budgets and future budget uncertainty has shifted general attention more intensively onto a spot that would have sat largely in the shadows a few years ago.
If a historically conservative masthead is raking a suburban community over the coals for an incentives deal involving one of the region’s favorite corporate citizens, what’s the likelihood that your incentive deal will sneak past your professional media — or the amateur muck-rakers in your town who have much more of an axe to grind and might have fewer professional qualms about laying into you? Our incentive deals were maybe not newsworthy when we were all flush with money, but now the kleig light has been turned squarely on us. You might survive the scrutiny, but you’re probably going to take some bullets in the process.
Second, note what happens when the mayor tries to work around the information that he does not have. Although his points are probably reasonable assumptions with regard to the spin-off impacts from moving a lot of high paying jobs to this facility, he has nothing to go off of except his assumptions. And not surprisingly, it doesn’t go well.
Developing relatively solid, numerical estimates of the costs and benefits of a deal like this isn’t rocket science. You don’t need an economics professor or a REMI model or a consulting budget that requires a bonding issue. You can probably do a reasonably good job with a pen and paper and a high school diploma. In fact, that’s probably a better approach than the usual black box impact study because you and everyone looking at it can understand what you’re doing. But regardless, you cannot get away anymore with not doing the math.
In the introduction, I say that the book is for community professionals, elected officials and the broad variety of “people who give a damn” about their communities.
My mother would not be happy, but ya know, I think it fits….
Podcatalyst does a great job of sharing interesting conversations with people who are doing ground-breaking economic development stuff all over the country. We’re looking at developing a partnership with Podcatalyst to cross-post content (they have an Itunes feed, while we go with SoundCloud). So I’d encourage you to check out my interview, but to also dig through their catalog.
So be sure to check out this interview, and the rest of Podcatalyst’s work. And thanks so much to Chad, Trey and Victoria for the chance to chat!
This interview with Rob Sentz of Economic Modelling Specialists Inc. (EMSI) introduces you to one of the most thoughtful and comprehensive data analysis platforms out there today, and it gives a great insight into why producing a Thing that grabs a lot of data — or grabbing data to try to plug into a fast decision — isn’t enough. Not if we actually intend to develop intelligent solutions to wicked community problems.
When I heard that EMSI was starting a fairly intensive training program for users of its subscription-based tool, I was a little surprised. Even the earlier versions of the EMSI platfom that I have used in years past were, I thought, pretty easy to use, and I knew the new version, which I had seen but hadn’t played with, was even more user-friendly. So why would this very established platform, with lots of long-term users, feel the need to get into the training business?
The answers, for me, were pretty interesting. Here’s a few of the elements that I think are most informative:
EMSI wanted people to understand what they were doing. They wanted users to not only grab data sets that looked relevant, but they wanted people to understand the background of the data they were using — what a source was designed for, what it includes, what it doesn’t include, what assumptions underlie that data set and how it might or might not be relevant to your situation. Educated people, theoretically, know that data sources are only as good as the source, and than garbage in can equal garbage out. But how often do you use online information, or get handed some kind of analysis, and have any clue whether you can actually trust the information to mean what you think it does? And if you don’t know if you can trust it, do you take it on faith or do you slip it into the drawer and go back to deciding by the seat of your pants?
EMSI seems to understand that in pushing for this higher level of understanding, they are quietly fighting against one of the biggest challenges facing every analyst, analysis-user or data-provider: We want that pile of information to directly tell us what to do. Make it easy, on us, we secretly tell our computers. Just give me an answer, hand me a Number, and let me get on with it. But Rob articulates the challenge beautifully: real data analysis, the kind that allows us to make intelligent decisions, is not a magic pill. There are few easy answers. Meaningful data analysis requires, as he put it, a “conversation” with the data — a back-and forth process that takes us gradually through the layers and builds a mature understanding, not a simplistic assumption — or a wild goose chase.
EMSI came to this understanding out of a very simple strategy: they listened to their customers. As Rob says, ” Any time you create a technology, people will use it for stuff you haven’t planned on.” So EMSI has remained in conversation with its users, too — and grown and changed along with them. It wasn’t enough to just put a platform out there and update the information regularly. The meaning, and the value, of what they provide to their subscribers, comes from this ongoing conversation, and their willingness to change in ways that build that relationship. And that’s a different skill set than crunching data or building an app.
After all the time I’ve spent lately talking with Pete Mallow about The Number and how we have to do economic analysis better, and all the time I spend here and at Engaging Cities looking at online civic tech, I particularly enjoyed this conversation with Rob. You can learn more about EMSI and its tools, and read some great case studies, at http://www.economicmodeling.com. And if you decide to call them up, say hello for me.
Here’s the latest from my friend, regional analysis wizard and former real estate developer Dr. Peter Mallow, in our series of explorations about how the way we do economic analysis often sets us up for trouble.
In this one, Pete is taking on one of my favorite we-all-know-it-but-we-don’t-want-to-admit-it-and-then-it-bites-us topics: the fact that even our best predictions are built on inherent uncertainties. We can’t avoid that, but we can’t pretend it doesn’t exist, either. So we ought to know what we’re looking at, and deal with it.
You can read Pete’s previous work here and here, and your can review an annotated version of a presentation we do here, and if you’re really a glutton you can listen to one of our presentations here.
Take it away, Pete!
If you read the past couple of posts on this topic, you learned that The Number can often be misleading or plain wrong. For those that missed those posts, “The Number” refers to the new dollars, jobs, and taxes that an economic impact analysis claims will materialize from a new public project or a company coming to town. The expert or software has done some kind of magic with the data and returned a single Number that supposedly best describes how great the public project or company will be for the community.
People like The Number because it’s simple and it’s easy to understand. However, it is almost always, by definition, wrong. Even the best intentioned, well-meaning analysis is most certainly wrong when it reports one Number – that’s Statistics and Probability 101. We often excuse our Number’s lack of accuracy when we realize how far off The Number was through some variant of “garbage in, garbage out.” We easily claim that the data or assumptions driving the analysis were flawed, and we can blame some combination of uncontrollable factors.
But this is an over-simplification of the problem. Uncertainty is, fundamentally the real problem, and most of the time uncertainty is the root cause of the Number turning out to be wrong. Uncertainty exists everywhere in the analysis, whether the data is finely tuned or back of napkin. Yet we give the uncertainty inherent in our analyses very little attention.
To better understand uncertainty, think of walking on stilts. The smaller the base of the stilt the harder it is to balance and walk. The width of the base of the stilt represents how certain you are that The Number is actually correct. In this case uncertainty takes the form of four different stilts – more on that in a moment. But think for a minute about the width of those stilts – how strong or weak, stable or wobbly, each one of them could be.
The more certain you think you are of your analysis results, the more narrow the range of results you will consider as possible outcomes. If you’re so sure of your analysis that you can say, “this number is, most definitely, absolutely, the thing that is going to happen!” then the stilt holding you up is very narrow- in fact, it’s only one number wide. If you know that there’s a range of possible outcomes – if the results could vary – then admitting that range of possibilities means that your stilt is wider and more stable –its strength does not depend on just one number.
We know instinctively that wider stilts mean a stronger and safer walking experience.
If we build our plans on the basis of one Number, and we don’t account for other possibilities, then it is as though we are walking on very skinny stilts. All it takes is a little variation, something relatively minor to go wrong, and the plans we made on the basis of those assumptions will go all to pieces.
There are four of these stilts, or types of uncertainty: The economists have defined them with the following words:
Don’t worry, we will peel back the jargon.
Here’s the main thing to remember: uncertainty is always present – you cannot escape it. But by understanding the types of uncertainty, and carefully checking your “stilts” to make sure they are as wide and solid as possible, you can have greater confidence in The Number.
Here are the four basic types of uncertainty that we need to check our stilts for:
Stochastic Uncertainty (aka randomness)
Stochastic uncertainty is the randomness of life. It basically means that you don’t know exactly what will happen until after the thing happens. Here’s an example: if you toss a coin into the air, you know it will either be heads or tails. But which one? You won’t know the answer until you toss the coin.
In terms of economic development there will always be some randomness about the project or new company that you cannot control nor predict – at least, not until after it has happened.
A parameter is a set of measurable characteristics that define an object. How you define these characteristics is not set in stone, and if what happens differs from the parameters, then the results will be different as well.
For example, a high tech industry can be defined the types of jobs it contains (i.e. computer scientists, executives, sales people, administrative, engineers, etc.). The specific mix of these jobs will be different for every company. However, when you are looking at the economic analysis of a high tech industry, you will be working within a parameter – you will be using an assumption about the types of jobs that a new company within that industry will employ.
If a new company says it will bring in 1,000 new jobs, it’s possible that their employment could include any possible combination of job types that equal 1,000. But based on the type of industry, the economic impact analysis will probably assume a certain set of parameters – a typical or average or idealized mix of job types that it assumes the new business will create. But this specific business might not fit those parameters. If the new company ends up with a larger than typical number of remote sales jobs and administrative people, for example, then the parameter assumptions that fed into the economic impact analysis. When that occurs, The Number will not reflect what actually happened.
Another way to think about parameter uncertainty is our coin example from before. We know a fair coin has a 50 percent chance of landing heads. However, if we toss it 100 hundred times and find that 54 were heads. Is this wrong? No, it is parameter uncertainty. Just because we know the odds are 50-50 doesn’t mean that 54-46 isn’t entirely possible.
Heterogeneity is a complex way of saying no two jobs are the same. Take, for example, a cashier job at Costco and one at Wal-Mart. Both positions require the same tasks and responsibilities, but people working in those jobs may be making very different wages for doing fundamentally the same work. In the economic impact analysis, we usually assume an average or typical or idealized income, but what actually happens can vary widely from that assumption.
Structural uncertainty is inherent any type of methodological approach, like the process used to develop any kind of economic study. Economic impact analyses can be done in a number of different ways, ranging from complex input/output methods, to simple arithmetic estimates, and any number of methods in between. They can also be done for different time periods. The choice of the method, the time period and how the parameters interact cause structural uncertainty. Remember every model is an abstraction of reality. Yet all too often only one model and its parameters are provided as the best abstraction of reality.
Uncertainty is always present. If you don’t analyze how uncertainty impacts the assumptions that are holding up your studies, that uncertainty will eventually make matchsticks out of the wooden legs that you’re standing on. But there is good news: you can make informed decisions to reinforce your analysis based on your analysis of uncertainty.
Most importantly, exploring and admitting uncertainty will probably lead you to report The Number as range of possibilities – a set of numbers, rather than a single one. Think of that range as the width of your stilts — the wider the range, the stronger the base, the less the uncertainty, and the more credible your estimates of jobs, dollars, and/or tax receipts will ultimately be.
I heard a story this week, and I’m trying not to be disturbed by it, in part because I don’t know if I’m getting it right. . But if it’s at least part true, it indicates how far behind we are on dealing with the economic development incentives issue… and how the world has changed in ways that we may not always want to admit.
The story comes to me second hand, and in a very sketch manner. Somewhere on the order of 20 years ago, a major economic development organization saw that the trend in the money value associated with high-profile incentive deals was becoming worrisome – growing higher and higher (since, again, I only have this story third-hand, and probably incomplete at the moment, I don’t want to name the organization). Staff and some of the membership, wanted to take some kind of position on this, possibly because they could anticipate the degree to which incentives at this level could distort the market and suck up resources that they felt that they needed for other purposes.
According to what I heard, this effort was outright opposed by a large component of the organization’s leadership. Even a proposal to simply identify the characteristics of a “good” incentive went down in flames. The final version of that proposal received only two supporting votes out of something on the order of 40 or 50 total. I don’t know why so many opposed it – I can only presume that they felt it would put them and their community at a disadvantage.
Again, this is a thirdhand eyewitness account, and I’m only putting in the details that seemed pretty solid. I don’t much like sharing stories with so little substantiation, but if I wait until I can corroborate all the details, I might not get this written for years, if ever. If you have first-hand experience with this decision and you’d like to share your experience, either on or off the record, please let me know. I’d like to talk to you.
Here’s the point: regardless of the details, a decision like the one that apparently went down relies on a critical assumption – one that simply does not work anymore:
We the professionals control the information. We control the decision. This is our domain and we have the power to lock the door to the sanctorum if we want to. And if we do, we have closed the subject. Phew.
There might have been very good reasons why the people involved opposed the content of what was being proposed. I have no idea what was in that definition of a good incentive.
But look what’s happened:
In late 2012, the New York Times blew the cover off of one of the industry’s biggest dirty secrets: too many places can’t prove what much of their incentive money bought. And they did that using what’s called Big Data journalism – using the internet and analytical tools to aggregate and analyze records that were previously impossible to make sense of.
Thoughtful types like Strong Towns have helped thousands see the unintended consequences of how communities bought into a “Ponzi Scheme” to build infrastructure that was promised to improve local economies — but eventually left us deeper in the hole than we were before. And Strong Towns has done that without a major media mouthpiece: they’ve done it primarily through blogging, podcasts, YouTube –the tools of social media available at little or no cost to anyone who wants to take on an issue.
The nonprofit organization Good Jobs First has arguably taken the lead in articulating how incentive practices should be changed to create more transparency and accountability – to the point where my colleagues who conduct trainings on using incentives use Good Jobs’ checklist.
These are all issues that the leadership of that organization could have addressed back then. For whatever reason, they decided not to.
But not addressing it did not make it go away.
What not addressing it did was much more profound: it took that economic development organization out of leadership of the debate. Instead of using its real-world expertise to guide an intelligent debate, the organization and its members today find themselves in a painful situation: they can try to defend practices that are increasingly hard to defend, or they can place themselves in opposition to the leadership of their chosen profession.
I’ve said in other places that we need to get past the incentives debate — that obsessing over the incentive issue distracts all of us from the other important work that we need to be doing, like growing entrepreneurship and improving our planning and decision-making. But “getting past it” does not mean “pretending it’s not there” or “sweeping it under the rug” — precisely because it will not stay under the rug. We have to deal with it. We have to stand up like adult, admit the problems, and start actively participating in the search for solutions.
And we have to do that, if for no other reason than to prevent this issue from eating us alive, to keep it from undermining all of the other important work that economic development does. We cannot get past the incentives debate until we deal with it.
Here’s the key message for everyone who classifies him or herself as an ”economic development professional,” regardless of what credentials or memberships you carry:
The world’s has changed on you. You are losing control of the incentives debate, you’re losing ownership of the incentives issue. Others are defining what’s wrong with incentives and what should happen to them, — in some cases, perhaps, leading the discussion into places where you didn’t want it to go. And because anyone who can run a basic Google search can find what they are saying about as easily as they can find what you are saying – or share what they think about it with thousands — you simply cannot afford to pretend that your opinion is the only one that matters. It just doesn’t work.
We talk a lot in economic development, and in any kind of public policy arena, about breaking down silos. In reality, it’s too late to even assume that we have the option of keeping the silos in place. The silo walls may still appear to stand, but they are riddled with holes and as porous as a sponge – what lies within “our” domain will seep out, and what’s outside our area of expertise is already seeping in.
That’s not a judgment, that’s a practical fact.
You’re going to have to choose to join the debate, honestly and transparently, or give it up and resign yourselves to irrelevance. Because if you continue to pretend that all you have to do is guard your watchtower, you will watch it crumble. The incentives debate is already in the process of running away without you.
Here’s the second in the series from developer-cum -regional-analysis-whiz Peter Mallow on correctly and realistically using economic impact methods — and avoiding getting fooled by The Number that they generate.
In this essay, Peter is taking on two basic flaws in how economic impacts get prepared and used. Between sloppy assumptions and amoral results, they often don’t give us the answers that we might think they do.
Amoral? Yes. amoral. Read on, and all shall be revealed… and if you have comments, questions… or violent protests… let me know below.
Economic impact analysis is a powerful method for ascertaining the potential jobs and dollars a new project or program will bring to your community. The Number from the economic impact analysis is also used frequently to generate support when existinglocal institutions ask for public money.
And that’s a problem, because often The Number is pretending jobs or dollars are being added to the economy when they actually aren’t.
In this article, I’m going to call places that typically use an economic impact statement to ask for money Favored Community Institutions. For reference, the Favored Community Institution could be pretty much anything: an arts organization, zoo, major employer, education institution, professional sports team, or a major tourist attraction.
It is important to note that the methodology of economic impact analysis is designed for new projects or programs. When used by Favored Community Institutions, we need to factor a couple of very important considerations into the interpretation and explanation of The Number.
First, economic impact analysis is amoral. That’s a-moral (not immoral). You know that the Favored Community Institution holds a cherished spot in the history of the community, and most people have positive attachments to that institution. The Number reinforces the strength of the attachment – “Not only is it fun to visit, but look, it puts money into our economy, too!”
You have to keep in mind, however, that an economic impact analysis does not tell us if the Favored Community Institution is better than any other institution in the community. Economic impact analysis cannot answer the question that you have to answer: Is this an appropriately beneficial use of limited public money?
An example may help explain this distinction.
Let’s imagine that the Favored Community Institution is not a happy place like a zoo or a tourist destination. Instead, the Favored Community Institution is a grenade factory. It employs a few hundred people who build and ship grenades all of over the world. The Favored Community Grenade Factory has been in town as long as anyone remembers, and its leadership serves the community on various boards and occasionally elected office.
The Favored Community Grenade Factory wants to retool due to high demand for their grenades. The expansion will create new jobs and bring new dollars to the community from the increased production. They even have an economic impact analysis showing a large Number of new dollars that will be brought into the community. But they can’t do it without a public subsidy for new roads and rail connections.
Here’s the tough question: can we conclude that this is an appropriately beneficial use of limited public money, even though its existence is predicated on people dying? What about the brand-new, farmer’s market on the other side of town? An infusion of public dollars will allow them to, employ more people, expand their parking, buy more from local farmers, and make people healthier
We want to think that all economic impacts are good economic impacts, but we know in real life that not everything is good for us (like grenades versus farmer’s markets). Unfortunately, economic impact analysis doesn’t help us make value judgments or compare the non-monetary impacts of different institutions.
Second, if a Favored Community Institution is already part of the community, then only newdollars or jobs are being estimated in the economic impact analysis.
The standard economic impact analysis method is based on the assumption that new money will be coming into the community. The new money creates a “shock” that reverberates within the community. The “shock” created by the new money is the multiplier effect – the promise that the new money will generate additional jobs and money circulation beyond the initial investment. As a result, what that multiplier effect gives you is the amount of new (revenue, jobs, etc.) that will result from that investment.
But the Favored Community Institution is generating at least some of those impacts today, before the proposed investment. Most economic impact analyses don’t separate those out. They calculate the impact based on the total value of what’s there today and what’s proposed. That basic overlooked assumption violates the fundamentals of economic impact analysis. When existing jobs and spending are included in the analysis, The Number will be grossly overstated because the community has already absorbed those jobs and spending.
Think back to our Favored Community Institution for a moment (the happy one, not the grenade factory). Let’s say that it currently employs 100 people. It is looking to expand and is requesting $5 million in publicly-funded improvements. This expansion will generate 50 new jobs. The Number that they gave you in their economic impact analysis said that over 200 service and support jobs would be generated by the proposed expansion.
This is a gross overstatement of The Number. If they were introducing 250 new jobs into the community, then they might generate 200 to 300 new service and support jobs. But according to any kind of reasonable estimate, 50 new jobs might support 75 to 100 service and support jobs.
So, does the Favored Community Institution deserve those additional public funds? Well, it’s complicated … and the answer has to include factors outside of the economic impact analysis. But don’t be misguided by The Number – at the end of the day, The Number only says what it says, and is only as good as the thought that went into it.
“This is not the planning profession John Nolen built. A century later, our great recession has sparked a full re-evaluation of what a city’s urban planning department should be ‘doing’ for its citizens. As witnessed in Los Angeles and San Diego, the planning profession is being measured by its eternal conundrum between Forward Planning Departments that plan for future development projects and Current Planning Services that process today’s development applications….
Having been regulated to stakeholder status in a city’s Economic Development prioritization, planners must reclaim their place at the city’s Capital Improvement Planning table.”
But…the objective is “a place at the Capital Improvement Plan table?” No doubt, that would be helpful. But it’s not enough.
Planners do more than lay out physical improvements. We do more than illustrate desired future developments. And we have to. Our communities need more, a whole lot more. The responsibility, the importance of planning, goes far beyond capital improvement plans. Today more than ever before.
I know this is a long, long debate in planning…Moses vs Jacobs, van de Rohe vs Davidhoff, etc etc. We sometimes joke about it as why the profession gets no respect…no one knows what the hell a planner does, and sometimes that includes the planners themselves.
But there’s a very practical reason why we all have to reach beyond our core skill sets: doing the job that needs to be done takes a lot more tools than pens and zoning codes and AutoCADD.
If all you do is physical design, and you meant it when you said way back when that your purpose was to make places better, you’re hamstrung by the box you have allowed yourselves to be stuck in. Even if you are in a proactive and forward-thinking community and you can do great design work, how much of your ability to enable change and improvement is constrained? How much difference can your design work make if people can’t find jobs? Will they be happier just because you make it look good?
If you’re only tool is a hammer, how often do you actually fix the problems that need fixing, and how often do you just bust the box instead?
I was in Chicago for the American Planning Association conference last week. Chicago has this incredible history of urban design and physical planning. By the end of the week I suspect even design junkies might have had their fill of the Burnham Plan and the World Fair and Mies van de Rohe and the rest.
But Chicago is not the buildings or the parks.
I love Chicago’s architecture, but I would not move there to look at buildings, as much as I appreciate the buildings. My husband and I, 20 years after leaving, still talk about retiring to Chicago…because of the human activity. The things to do, the character of the place.
Buildings and spaces set the stage for the things that make a city great or miserable, but they are just that: the stage upon which us as the actors make the play. People often attach intensely to places that don’t have Millennium Parks and Sheds Aquariums, as delightful as those are. Sometimes, they attach fiercely to a place despite their absence, or in the face of the lack of such loveliness.
It’s one thing to be an Artiste and dedicate your life’s work to pure aesthetics. It’s another thing to take on the responsibility for using design skills to make our stages for human activity work better. That’s a critical and necessary differentiation.
I know…it’s not your job to fix everything. You can’t do it all. You don’t know it all. You don’t have all the answers.
Understood. But… you, you might be our best hope.
I have spent most of my adult life in the intersections between professions– physical planners, landscape architects, traffic engineers, civil engineers, economic developers, community developers, Main Street managers, city admins, neighborhood rabble rousers, so on and so on. My address book needs a sorting system that doesn’t come with the software.
This next part is for you who have some kind of degree or job with the word “planning” in it….and only you. Everyone else go get a sandwich or something.
Ok. Are they gone?
Here’s the deal: you guys, the Planners, whatever flavor, you understand the interconnections. You get that, frankly, better than anyone else. You guys have either learned or intuitively see how the human elements and the design elements and the infrastructure and the programs and the hundred other things fit together. It’s not a perfect understanding, by any means, and you each come at it from a little different direction, but you’re closer to it than any of the other professions that deal with communities.
You’re at least talking about it…for all its warts and limitations, a conference like APA enforces that. I can tell you that the economic development profession, for one, is deep in the throes of understanding the limits of its historic siloed approaches right now….and I think it’s going to be a long time before that profession, as a whole, comes out the other side.
I think a secret to the planner’s insight is this crazy messiness we’ve inherited… the fact that”planners” do a hundred different kinds of jobs, to the point where sometimes we have no idea what that word actually means anyways.
That always bugged the crap out of me.
But…I’m coming to the conclusion that it’s an advantage. Or maybe a burden, but the kind of burden you have to carry to be able to do something great and meaningful and needed. Kinda like a superpower.
“Able to see interconnections and interrelationships through walls and silos!! It’s a design geek…no, wait, it’s a zoning director… It’s Planner Person!”
Ok, I won’t get the t shirts made yet…
But the communities we work in need you to use your superpower–to reach across the disciplines and find the interconnections. We need to do that better. We need to develop the tools a and analytical frameworks to do that, and right now we’re still weak on that.
But we’re probably the best chance our communities have for getting to it.
So if your main gig is design, incorporate into your design work the best understanding you can possibly muster as to how people actually use places and how they can support people better. If you deal in land codes, strive to anticipate those unintended consequences– how one site’s development might have rolling impacts. If you make land use plans like I used to, don’t just color maps–work through all of the interrelated elements that will either empower or hinder those recommendations. And if you do any of those other 97 things… wade into the edges, take on the messiness, do your damnest to use the full range of your knowledge to make places work. You won’t do it perfectly. But try. And keep trying.
Why? Because most of the others probably won’t get there any time soon. And our communities won’t wait. You, you might be our best hope.
I’m excited today to introduce a new guest blogger, Peter Mallow. Pete’s a one of a kind.
How many people do you know who have developed subdivisions, fought with small town planning commissions, run a civil engineering firm and completed a Ph.D. dissertation on the use of statistical regional analysis and modelling methods to link health services to health outcomes within a geographic region?
I didn’t think so.
One thing that always strikes me about Pete is that he has developed this amazing ability to understand and work with data that is way over my head, but connect that back to immediate real-world planning and economic development issues in a way that shines new light on the whole scene. Sometimes it’s like having a guide to the underworld of how we think… or don’t think… about the data behind our development assumptions. And he isn’t afraid to call it as he sees it, or to tread in where others might fear to go.
Pete and I have done a very well-received presentation a few times called Don’t get Fooled Again: Understanding and Interpreting Economic Development Projections. You can see an annotated version of that presentation here and listen to a podcast of that presentation here. Now that Pete is an official Ph.D. as of a couple of weeks ago, he has kindly agreed to write here on a somewhat regular basis to help us think through the assumptions and mistakes that we make when dealing with economic impact studies… and how even us non-math types can handle them better.
So….I am delighted to introduce you to the esteemed Dr. Peter Mallow!
An article published in the Journal of the American Planning Association in 2002 by Brent Flyvbjerg suggested that economic evaluations for large projects – typically the kinds of evaluations done when public dollars are sought to support a project – are intentionally underestimated. Flyvbjerg followed up this claim with a recent article in the journal Cities, in which he accused planners of deliberately lying about the projected economic impact of projects as shown in those evaluations and attempting to cover up these lies through its professional organization, the American Planning Association.
I think Flyvberg has identified a crucial problem regarding the economic evaluations used to support large projects. But I think he focused on the wrong piece of the equation. There will always be an occasional “bad apple” who has intentionally mislead, or a major miscommunication that leaves one side of a disagreement feeling cheated. As I read these articles, I am reminded of a far more common problem that I see when it comes to understanding and using economic evaluations:
With all the demands on a planner’s or economic developer’s time, some ignorance is to be expected. Almost by definition, these professionals have to be generalists first and specialists last. Because of that, communities typically feel that they need an expert to tell them what economic impact the new project will generate, or how the cost and benefits will stack up, or how many TIF dollars will be generated. In some cases, planners and economic developers simply rely on the project applicant’s own economic evaluations because the community doesn’t have the resources to hire their own number-generating consultant or buy the software package that promises to spit out that number for you. In other cases, they get their own consultant or software, but the fundamental problem remains the same.
It’s easy, very easy, to rely on an expert or software package that promised to give you a “certain” answer. That certain answer? It’s The Number, the one specific number that everyone clings to promote the project.
You have most likely encountered The Number. The Number tells you how many new jobs, how much investment, how much tax revenue, etc. is going to come as a result of the public investment.
People love The Number. Decision makers love having a clear answer to point to, and the media loves having a number it can easily report. The Number becomes its own living creature, and the project skeptics and detractors can only wait for the inevitable.
The inevitable, unexplained, and unexplored uncertainty that is buried in the assumptions and methods behind The Number. At some point in the future, a seemingly innocuous assumption will change and the actual impact of the project will change dramatically. When that happens, the project skeptics and detractors will pounce.
And guess who gets caught in the crossfire.
So what do we do? Too often, planners and economic developers think that their only choice is to run with The Number and deal with the inevitable down the road. After all, they will argue, life is not certain, and time doesn’t allow us to pick apart the assumptions, methods, and the results embedded in The Number.
And many of you would probably add: Mallow, the money won’t allow it, either.
That’s all true. But, let me propose an alternative.
If somebody, anybody, tries to sell you on The Number, the only thing you can be certain of is that The Number will be wrong. Think about a stock investment for a minute. You have no idea what the value will be in five years…or one year. You hope it will be higher than today, but would a trustworthy financial advisor assure you that the $10,000 you invest in a stock today will be worth $15,552.35 in one year, or $32,535.97 in five years?
Of course not. They will give you a range of the most likely future values under different growth or loss scenarios.
Instead of accepting The Number, demand to know the plausible range of jobs, tax dollars, economic impact, etc., given what we know. Or ask for a range of scenarios — what happens to The Number if the building doesn’t fill up as fast as they project, or the average payroll turns out to be less, or the cost of steel spikes in the middle of construction. What then?
You can do that. And you and your community will be better off for it. After all, you’re not evil. And you’re not even really ignorant. You just need to know what to demand, and demand it.