After Hours with Jamie Rubin: A Conversation with Ed Glaeser

Vital City's new podcast, “After Hours with Jamie Rubin,” examines the complex systems and relationships that shape urban life. Hosted by Jamie Rubin, senior advisor to Vital City, each episode will tackle timely topics, bringing together insights and analysis from experts, policymakers and other leaders. 

Rubin is joined this week by economist and Harvard professor Edward Glaeser, whose recent Vital City article challenges conventional wisdom, arguing that well-intended but excessive anti-corruption guardrails have led to regulatory paralysis — driving up costs and stifling development.

You can listen to the first episode, "Corruption: What Is It Good For? (Absolutely Something)," on Apple Podcasts or Spotify.

TRANSCRIPT:

Jamie: You're listening to Vital City After Hours. I'm Jamie Rubin.

Hey, Molly.

Molly: How are ya?

Jamie: I'm pretty good. How are you?

Molly: Good. So, a year ago, you said to me on your birthday that what you wanted for your birthday was to have a podcast. So, happy birthday.

Jamie: Thanks. It was actually a year and a half ago, but that's okay — who's counting?

Molly: Well, you know, better late than never.

So, we're here. We're doing this podcast about New York. What is it that makes you qualified to do this?

Jamie: Well, I mean I could be qualified to do a podcast about many things, but I'm definitely qualified to do — I think I'm qualified to do — a podcast about New York City and New York State. I am a 57-year-old lifetime New Yorker. I've spent my career in business and the government, and I've also been involved in the nonprofit world, for the most part, all in New York City and New York State. I worked for five years for Andrew Cuomo, running two different state agencies, and I spent a year as the Director of State Operations for him, running the state government day to day.

I've also been the Chairman of the Board of two large New York City nonprofits, Breaking Ground and the Osborne Association. And right now I am the Chief Investment Officer of a firm called Aligned Climate Capital, which is here in New York. And I'm the Chairman of the Board of the New York City Housing Authority, which is the largest public housing agency in the country.

Molly: So you and I both know that I like to give you a hard time, and there's certainly part of me that wants to be like, “Jamie, is that all?” But I have to take a moment and give you some props because it always amazes me when you start running through your experiences, how much you've done, how many things you've been a part of. Often when we're talking, I find something else new that you have had your hand in that you didn't just mention on that list.

Jamie: Thanks. Who are you?

Molly: Well, I'm Molly. I'm a lifelong New Yorker as well. I'm a former CNN producer. You and I have worked together over the years, and I'm helping you produce this podcast. So we're here. What do you hope that people get out of this podcast?

Jamie: Well, the thing is, I've done a lot, but there's a ton of other people in New York City who have done just as much or more. New York City is the biggest and most exciting city in the world, as far as I'm concerned. There's a ton going on at every level: in the private sector, the public sector, the nonprofit sector, cultural, the arts.

There are over 8 million people, all of them contributing to that excitement. And many of them doing the same kinds of things that I've been doing in the policy world or the government or the business world. They've all got something to say about New York City. They've got opinions and they've got informed views.

There are plenty of podcasts about New York City. I never thought there was anything that really operated in that kind of intersection between New York City politics, the private sector, the nonprofit sector — that really talk about the operations of New York, how things really work, and why they do.

About a year ago, my friends Liz Glazer, Josh Greenman and Greg Berman started Vital City, which is this spectacular online journal that covers exactly that. So I figured this was the perfect time to team up with them and launch a podcast. 

So that's After Hours. It's a show about government, policy, and how they work together, or don't work, in New York City.

Molly: Alright Jamie, so I have to call you out because you are sipping on some whiskey over there.

Jamie: Well, that's kind of the idea. During the day in New York City, everybody's super busy, they're stressed out. At the end of the day, whatever time that is for people, whether it's 5 p.m. or 8 p.m. or 10 p.m. or whatever, that's kind of when you want to catch them at your home — (which is where I am), give them something to drink (which is what I will do), and ask them questions about what they actually think about New York City.

Molly: Okay, so this is the first episode and each episode we do is going to complement the latest issue of Vital City. This month's issue is about corruption.

Jamie: Now Molly, you lived in New York City your entire life. You're 37 years old. I'm gonna guess that you have almost never thought about New York City government corruption.

Molly: Well, I wouldn't say never, but I certainly don't think about it on a daily basis.

Jamie: That's really interesting because the way I think about it, corruption in New York City government has gone through, in my lifetime, kind of a cycle.

I grew up in the 60s and 70s. There were some really serious scandals in the 70s that everybody has now forgotten about. Donald Manes, in the Ed Koch administration, things like that. And then in the late 80s, early 90s, and then all through the Bloomberg administration, corruption seemed to have been eradicated from New York City government, which was great.

Probably not true, but basically a good thing. Now, of course, starting in the de Blasio administration, and definitely carrying through to Eric Adams’ time in office, corruption seems to have returned.

Molly: Okay, but I still don't understand how it affects me on the day to day.

Jamie: Well, that's not surprising at all. But the good news is, Ed Glaeser has thought about exactly that issue.

He's a Harvard economist. He was the John Bates Clark award winner many years ago for the most distinguished economist under the age of 40. And Ed has spent his entire career studying the economics of cities. And in particular, he's thought a lot about the issue of corruption and how it affects New Yorkers in their daily lives.

He's got an article in this Vital City issue and we spent time talking to him about procurement and corruption.

Molly: Never thought I'd say this, but I am actually excited to learn more.

---

Jamie: When you grew up in New York City, just for some context, and I think about this myself a lot, call it the early 70s, mid 70s, early 80s, do you remember corruption, strictly speaking, being part of the fabric of governance in New York the way it seems to be now?

Ed: Oh, I think so. I mean, certainly, no one thought that John Lindsay was corrupt. No one in a million years thought that John Lindsay was corrupt, or that Abe Beame was corrupt, or that Ed Koch was corrupt. And consequently, since the men at the top were seen as being relatively clean, or quite clean, I don't think it ever had the same level of political power that it does when the mayor himself is involved. Whatever you think of the corruption that occurs, this is clearly hugely distracting. I have a mantra when it comes to city government, which is that almost always capacity is more important than policy, which means you may have a thousand clever policy ideas, but the mayor is drinking out of a fire hose, and the mayor very rarely has enough people around. her or him that he can actually implement all that many good ideas. And the mayor certainly has no capacity to make change or to make reforms if he's dealing with the level of corruption press that the current mayor is dealing with.

Jamie: This is a little bit of a digression, but I think it's sort of interesting. You've had significant engagement with cities all over the world. By and large, if you had to take the average large American city from New York on down to San Antonio versus the same size cities around the world, are we higher-capacity in general?

Ed: It’s hard to see that. I mean, The East Asian cities are pretty amazing. If you look at the level of procurement quality in Scandinavia. The Scandinavian governments seem very high capacity as well. I would be less clear on much of Europe. Where does Dallas fit relative to Prague? I have no idea. It's so hard to measure this stuff. And you often get the sense that sort of free capacity is lowest in the old legacy cities — not because they have worse people or they have fewer people, but just because they have so many issues to deal with. And so because you're dealing with whatever's gone wrong in the subway today, you've got just a lot more to deal with than you do in a city that was built entirely around the automobile, where all the engineering is simpler and all of the other things are simpler. It just means that if you have anywhere near the same level of personnel in a simple sunbelt city, you've got a lot more spare capacity than you do in New York, where everything's complicated. I just think about your world of NYCHA — everything's complicated. All the buildings are complicated; all of the maintenance issues are complicated. It's just hard. It would be different if you were dealing with a bunch of new, cheap, single-family detached housing that, let's say, was modular and was put up in the last 30 years. That would face a totally different set of maintenance issues.

Jamie: I think I haven't had the exposure to a lot of cities outside of this country that you have. I had some dealings with London, for example. And there it seems like there's sort of an interesting mix of really low capacity and really high capacity. I mean, they do some things particularly well, and then some things are just horrible. Maybe this will take us back to New York City finally, which is: does the New York City government do too much? You know, New York City government has, by one measure, tremendous capacity in the sense that they have a lot of employees.

Ed: Huge.

Jamie: But I don't think you would call that high capacity necessarily.

Ed: No, it's not like the mayor can steer that ship very readily. And the level of problems that they're facing is just enormous and the challenges that they're facing are enormous. There's very little ability to redirect things, or to fire workers who are underperforming, or to bring in stars if by paying the bonuses. You can’t do any of that.

Jamie: You wrote this article for Vital City. I would say that one of the points of your article is that New York's procurement process has been turned into a way to manage the capacity issue that New York City has. What does New York City do through its procurement process?

Ed: Procurement is probably the most important economic phenomenon that is largely understudied. It's incredibly important because it's 15 percent of global GDP on average. A huge amount of the global economy works for procurement.

Jamie: 15 percent?

Ed: 15 percent of global GDP is public procurement. What [procurement] means is the things the public sector buys from the private sector. Now in the US, if you really want to talk about why there's a huge amount of money in procurement,think above all of the military. All of those fancy planes and missiles and all that stuff are typically provided by private companies are paid for by the federal government through a procurement process. That's not a very easy thing to study because all of that stuff tends to be top secret. And so we actually don't know anything about it.

We do know a fair amount about the procurement of the really expensive things that New York does, like transit projects, and the available evidence suggests that America is just terrible at doing transit. My source on this is NYU’s Transit Cost Database, which gives us that the average cost per mile for an underground transit project is four times higher in the U.S. than in the rest of the world, and that New York City is the capital of absurdly expensive infrastructure, like the 7 billion per mile East Side Access Project. The procurement is all this stuff where private providers are called in to dig tunnels, and put in space to run rails underground. It's also the smaller level. Every time you buy a bus, that's procurement. I've been working on a bus procurement project where we've used Freedom of Information Act requests to get data from transit agencies around the country. And it turns out the typical electric bus in the U.S. seems to be running at 1.1 million.

Now, you can go to Kia and get yourself a perfectly nice 36-foot electric bus for 350,000 bucks. I think part of the reason is more than half of the agencies are buying buses that are unlike any other bus. It's like [if] you sent out an RFP to Ford and GM and Honda, and [said], “I'm looking for a four wheel family vehicle. I'd like these characteristics.” And they're going to come back with the number, as opposed to [you] just going up on their website and trying to find it. Adam Smith, 250 years ago, got that mass production was a good idea. In fact, taking advantage of scale economies was the heart of the Henry Ford revolution in the U.S. 120 years ago.

There's a lot of issues around procurement that come from the fact that nothing's being done at scale. Everything's being done in this very sort of idiosyncratic fashion. Even in the case of subways, one analysis of why Sweden was so much cheaper than New York was in Sweden, they tried to make sure that all the stops were the same. They didn't try to design an idiosyncratically-done stop for every one of the stops. They were trying to take advantage of scale economies as well.

Jamie: I could see with buses why you could assume that you've been on one bus, you've been on all the buses, but there's no reason why buses should be idiosyncratic one to the other — they're all going outside, streets are streets, whatever. The subways [seem different]. I know a little bit about this because when I worked for Governor Cuomo, I was the Director of State Operations. That was 2017. New Year's Eve, a black tie event happened to open up the Q (the Second Avenue subway) after, as you know, more than two decades of work. So that was

Ed: We grew up in the shadow of its not being built, right?

Jamie: A hundred percent. The black-tie event — it was spectacular. [The subway] was open. It was a joyous event.

Almost literally the next day, somehow, magically, the subway system started breaking in ways that we had never really seen before. The end result of that was a summer of massive construction — not only in the subways, but also in the LIRR. They called it the summer of hell, and we commissioned BCG to do a massive report under me and Joe Lhota, who was the head of the MTA, to figure out how we could fix the whole thing. It was interesting. It ended up being the basis of what Andy Byford adopted. The New York subway system was built up piece by piece over decades, and there are idiosyncrasies built in there. It's unfortunately not as standardized as it might be.

I remember talking to the Mitsubishis of the world about what they tried to provide us with when we procured for subway cars. If there's an off-the-shelf subway car, that was not what we were able to get. They couldn't make the bespoke subway car, except in one place, which I can't remember what it was, but I think it was somewhere in Canada.

If you had set out to make their subway cars for New York City expensive, this is how you would have done it.

You point in your paper to this really monumental [NYU] study that was done of transit costs. The procurement, as you say, the procurement piece of what makes the New York system more expensive than any other in the world is [that] the procurement is something like double as expensive as it should be.

Ed: Yeah. That's the lion's share of it. And it's just very hard to fix.

Jamie: One of your solutions — and I'm going to massively overstate and then also mischaracterize your position on this — but the Ed Glaeser solution to the problem of cost in public procurement is corruption.

Ed: [laughs]

Jamie: We need more corruption. We need more small-scale corruption. We need more big-scale corruption. We need institutionalized corruption. This is what we need. That's going to solve the cost problem in the New York City subway system. And it's all going to be Ed Glaeser’s fault. Is there some chance that I mischaracterized this?

Ed: Slightly! But it is certainly true that I would be more tolerant of corruption than the current system. Let me be clear: I do not actually think corruption is good. Corruption? Bad. But that does not mean that everything you could possibly do to stop corruption is good. Let me try and slightly rephrase it before we get back to how I'm wrapped up in how Boss Tweed was the greatest thing ever for New York.

There's a fundamental trade-off when you're designing procurement systems, which is how much freedom to give your procurement entity. Let's say our MTA chief. You can give that person a great deal of freedom, which means that there is the capacity for reform, the capacity for innovation, the capacity for doing really smart things. But there's also the capacity for corruption. Because you've given them freedom, which means they can toss out the low bids and give it to the guy that they say is a better bidder — but they're going to get a check for that. That's your fundamental trade-off: how much you want to regulate this person.

The most well-functioning procurement systems — Singapore, Scandinavia — typically have much more freedom for their procurement entities than we do. And they have very capable public servants who are not corrupt in the slightest, in fact. In Singapore, they pay their public servants extremely well. And, you know, you can basically go to jail if you're a public servant and you seem to have more money than you should. They don't actually need to prove that you've actually committed a crime. All you need to have is excess cash. So they've got lots of ways of punishing corruption while still preserving the autonomy of public officials. That's kind of a good system, right?

If you were running a private company, you'd say, “I don't want to create a 900-page rule book for my people. I want to make sure I have really good people. I want to make sure they have enough freedom to adjust to the current situation. And I probably want some incentives. So if they really screw up or do something that's dishonest, I want to be able to punish the heck out of them.” Right?

That's what a well-functioning institution would feel like. That's not the way that we do public procurement in the U.S. The way we do public procurement in the U.S. is with a very thick rule book. We don't typically pay very well. We don't have great means of rewarding public servants who bring in projects massively under budget.

We have this very hidebound, very difficult-to-reform setting. One of the major reasons why we have all those rules is the fight against corruption. It feels to me almost like we've said that a billion dollars of waste is far less important than a hundred dollars of corruption.

That feels a little crazy to me. I'm not exactly pro-corruption, but I do think that we probably want a system with a bit more autonomy and one that does more to reward excellence and perhaps punish malfeasance.

Jamie: Let me see if I can rephrase this a little bit. If we had a system that you would find better, certainly we'd have better people running the system, higher-capacity people with more flexibility because the rules would be less hidebound. Within that system, because they would have the flexibility, would be room, unfortunately, for some slippage.

[In that system,] somebody every once in a while would do something that looked to one of us like corruption, even while simultaneously doing something that would be more efficient and better for the public.

The protection against that would be some other kind of structure, whether it's an internal investigations unit or maybe there's an AI thing that can catch payments that look like they stand out or whatever it is, and then we'd enforce it against the people that did it wrong and that's how you'd capture the corruption. It would be a disincentive for other people to do it the same.

Ed: I think that's exactly it. When you look across the world — this refers to a paper that I published in the American Economic Review about three or four years ago with Andrei Shleifer and Erica Bosio and Simeon Djankov — [this bears out]. The World Bank's Doing Business Survey [assesses] hypothetical [scenarios], and some of the hypotheticals involve starting a new business. They did a special one that was on procurement, and [the hypothetical involved] a $5 million road job. It was asking [in] areas [around the world]: what are the rules? How often are the rules followed? How much corruption is there? And what comes out of the paper is that regulations tend to be pretty positive in poorer or less well-governed places. They tend to reduce corruption and the general effects feel relatively positive. In rich, generally well-governed places, the effects are the opposite. They don't do much to deter corruption, because corruption is pretty small in rich places in general. Keep in mind, Donald Manes was a scandal when we were kids, or Eric Adams — they're scandals. But by the grand scope of global corruption, this is small-scale stuff. If you decide to respond to that little corruption that exists by huge numbers of regulations on your procuring entities, you get worse outcomes, at least in our data.

Jamie: If I called this sort of a cost of doing business argument, would that be accurate, or is that too shoddy?

Ed: I don't think so. I know of no evidence that [in Singapore or Norway, where there is much more discretion] there is any corruption in those systems whatsoever. So they have systems that in principle would allow people to be corrupt, but they figured out how to get good enough people and strong enough incentives to direct corruption that none exists.

At least none that I know of exists. I don't think it has to be that way. I think basically New York has a series of rules that are at best meant for the 19th century situation in New York, and just not a 21st century system. And they're not a 21st-century system in part because they're just not prioritizing autonomy relative to eradicating the corruption that existed under Tammany Hall.

Jamie: Got it. I don't know if you've studied this or not, but if you were to say, “Okay, we're going to take one agency in New York and try to flip it around,” [what would your approach be?] I've thought about this. I haven't tried anything like this at NYCHA and I'm not really empowered to do that but it's tempting.

I mean, we have a serious financial issue at NYCHA. We have a $5 billion operating budget that does not do better than break even in any given year. And we have an $80 billion capital need, which is not going to be coming out of our operating budget. So every dollar we can try to save is worth trying to save.

If I thought that turning over our procurement system — and our procurement people are great; they keep goods and services flowing through the agency, but we for sure spend too much on the stuff we buy. I don't think there's any question about that — if we wanted to turn that system upside down, what do you think it would take?

Ed: I don't know.

I know that wherever I could if you gave me freedom from whatever the Department of Transportation rules, I would be asking, “What mass-produced product can I buy instead of this bespoke thing?” That's where I would be going above all. I don't know beyond that how exactly. [In the case of] NYCHA, I don't know how many ordinary products you buy relative to things which are very NYCHA-specific, and I don't know how to fix that.

Jamie: I don't know how many bespoke products we buy. I think the problem is that most of what we buy was made in 1963 and we have to search the world to find the supplier of that particular product.

I should, next time you're here and you have some time, I will take you on a tour of…Let's see what really special experience can I reserve for you? I think a boiler room would be great. And I think that our Long Island City elevator maintenance training facility would really be eye-opening for you.

Ed: That sounds fantastic.

Jamie: You actually would find it interesting.

Ed: I would, I would truly love it.

Jamie: We're going to do that because what you are going to find there is wall after wall of stuff that is — seriously — 1960s-era elevator technology. And we're the only people in the world that can maintain that.

We've got these phenomenal elevator technicians at NYCHA. They're great. They get paid NYCHA wages because they're just kept busy all the time fixing NYCHA elevators. Otis can't do that. They don't make that anymore because most people wouldn't abide having it..

Ed: Everything about New York is idiosyncratic and hard to understand.

Jamie:Is it the case that you have uncovered — and maybe you just don't want to talk about this — but that in your travels through all these different departments and procurement styles, you've uncovered some pocket of very modest corruption that has actually been sort of productive?

Ed: Oh, that's possible. Look, we know that certainly, there is an economic case that if you have a terrible rule, it's better that you have a little bit of corruption that gets through that rule than if you then you stop all business activity.

That's a commonplace economic view.

It's less clear [if loosening standards increases corruption]. In our work, there's a possibility. I wouldn't say that we have evidence of that per se. The equivalent with procurement would be, [a situation where] there were two bids. One of them is slightly lower, but it's a really crappy company. The higher bid [p]ays off the [procurement official], but there's a sufficiently high improvement in quality that that ends up being a good thing. That's a theoretical possibility. I have no evidence that this thing has occurred. I think the right thing is not that there's too little corruption in New York, but there's too much of a war against corruption relative to a war for efficiency.

Jamie: You'll be happy to hear that one of the amendments I recently signed off on at the NYCHA board was a change in our procurement. It had been the case over the last several years that the board has to sign off on every NYCHA procurement [over a certain threshold] — I think it was over $1 million, but I might be wrong about that. You can imagine we have a lot of procurement: we do multi-year procurements and, and no limits. We have any number that are over $1 million. [The team] said, “Look, can we do it to $5 million?” And I said, “Yes, you just have to report to me quarterly on what the total is that we're spending under that new rule and I can take a look at it. If it looks like it's gone over the top, then I'm going to say, ‘Okay, what happened here?’ But otherwise, yeah, of course you can do it.”

And we've changed it. And we'll see. It's certainly shortened the board meetings.

Ed, you've been great. Let me close out with a question.I suspect I know what the answer is going to be. Let's see if my handicapping is right. As you think about New York — and you are a New Yorker fundamentally, I'm sure you hear plenty. You love New York City the way I do and the way our listeners do — what is a city, internationally or nationally, that you think New York could look to and say, “We should try to do what they have done around procurement?”

Ed: I'm a child of New York in the 70s. I like more chaos than you see in Singapore. But if you want to actually see how a government gets run right, go to Singapore. Singapore is the place [where] the public sector side is just insanely well done. Now they have other cost advantages, which New York assuredly is not going to emulate, but go east, young man. And if you're really not up for Singapore, I bet Seoul and Tokyo do it pretty well too. I would be focused on those areas.

Jamie: All right. So we're going to go “Singapore with a frisson of corruption.”

Ed: That's right.

Jamie: Excellent. All right. That's going to be the epigraph of this episode. Ed, you've been nice to take so much time. Thank you.

Ed: Oh, it's been really fun. Thank you so much.

---

Jamie: After every conversation in this podcast, I'm going to give you three takeaways, something interesting about what I heard, something that got left on the table, things that I want you to remember. So from the conversation with Ed Glazer, I've got three takeaways. Number one, Ed believes that in city government, capacity is ultimately more important than ideas or good policies.

And I totally agree with that. But you also have to recognize that capacity has a lot of different meanings. There's also private sector capacity that's built up by decisions that we make at the government level. And in an interesting way, New York City's procurement system is designed to build up private sector capacity.

For example, at NYCHA, when we put out procurements for hundreds of millions of dollars of services or goods, we are very specifically trying to help use those procurements to build up a small business sector and a diverse business sector, rather than just giving every piece of business to the big companies that get them all the time anyway. So we have preference programs. We give some preferences to small businesses, to women owned businesses, to minority owned businesses. We give preferences to people who hire locally. We even give preferences to people who hire NYCHA residents. On the other hand, maybe this has gone too far. And to Ed's point, it may be that procurement has gotten too complicated and it's starting to cost the public money, which is not what we had in mind.

We can find some middle ground. For example, we can set some exceptions. Maybe there are really large, complicated projects that should be given to the largest companies, and we can just tell them that they should subcontract out to minority-owned firms or women-owned firms or small businesses where possible and where it's appropriate, and we'll help them figure that out.

We could just set higher minimums. So the $100 million super-complex project is not the same as the $5 million project. 

And finally, if we want to build a vibrant sector of small businesses in this city, there's all kinds of other ways we can do it besides just using our procurement processes.

A second takeaway: old cities. I asked Ed which cities delivered services more efficiently than New York City, and he pointed to a number of the cities in the Nordics, and some in Southeast Asia, and then of course Singapore. And he made a point of saying that the older cities in Europe were probably more like New York City, which is probably true.

But that's exactly the point. New York City is a really old city. All of New York City's infrastructure is old, and like it or not, we haven't invested enough over the last hundred years or so to keep them in good working order. So, it's expensive to live here, it's expensive to do business here, it's expensive to run the government.

Everything about New York is expensive, and that's just because we're old. Which leads me to point three, which is that actually, all these things that are really difficult about New York, the fact that we've tried to do so much over a couple of centuries — we've built up all these systems and infrastructure — it's all the result of New York City trying to be ambitious and serve its citizens better. Ed understands that, but he and I didn't have a chance to talk about other cities in America that have tried to do things exactly the opposite way. So I'll point to, for example, Miami. Everybody loves Miami. It's inexpensive to live there, the sun is always shining, there's water, all that kind of stuff.

The fact is, Miami does exactly nothing for its citizens. Which is why it can charge them so little. But you know what happens when you want to try to get something big done in Miami? There's no way to get it done through the regulatory system, so you have to turn to, guess what? Corruption.

Thanks so much for listening. We'll be back soon with another episode of Vital City After Hours. I'm Jamie Rubin.