Intro. [Recording date: September 16, 2025.]
Russ Roberts: Today is September 16th, 2025, and my guest is Joe McReynolds of Keio University, co-author with Jorge Almazán, of the book Emergent Tokyo: Designing the Spontaneous City, which is our topic for today.
Joe, welcome to EconTalk.
Joe McReynolds: Thanks so much for having me. Really appreciate it, Russ.
0:56
Russ Roberts: Well, first of all, it’s a beautiful book, physically. It tries to capture with words and really lovely graphics what is distinctive about Tokyo and its vitality. I’ve never been to Tokyo. I’ve seen a lot of video footage of Tokyo, but as I read the book, I found myself going over to YouTube and checking out clips of various phenomena that you write about in the book. We’ll put some links up to some of those so that those, like myself, who haven’t been there, can get a feel for what we’re talking about.
I want to start with the overarching philosophy of the book, which will be familiar to EconTalk listeners. You called the book Emergent Tokyo. Why? What does emergent mean to you in that context?
Joe McReynolds: We decided to talk about emergent systems as a way of understanding Tokyo because, to give your listeners a little bit of context, in the discussions around Tokyo over decades–going back to the 1970s, 1980s, Western media, you name it–everyone is talking about Tokyo as this city of chaos. ‘Oh, it’s so big, and wild, and chaotic. There’s no rhyme or reason to anything.’
And, when we looked at the city as researchers living there, trying to understand the city–because that was what motivated us: there’s this city that’s arguably the largest and best-run and most livable city in the world, and there’s very little writing about it in English other than this kind of Orientalist stuff about, ‘Oh, it’s wild, exotic chaos. Who can understand? It’s the Japanese, so mysterious,’ blah, blah, blah.
And so, as we’re trying to bring some understanding and systemic thinking to the topic, we come to emergent systems theory. We talk in the book about flocks of birds and things like that–the classic examples of emergent order in nature. What we really see in Tokyo is emergent order springing up relatively unintentionally through individual citizens making micro-level choices about their own lives and environments in these relatively freeform spaces.
And, the irony that we talk about in the book from various angles is that the parts of Tokyo that have been top-down designed by the central government of Tokyo–the Tokyo Metropolitan Government–are generally the least Tokyo-esque. They’re the places that feel like they could be in Cleveland, they could be in Milwaukee, they could be anywhere–this kind of everywhere-and-nowhere feeling. It’s the places that have been designed through the accumulated micro-choices of their residents that feel like the Tokyo we know and love, the Tokyo that’s celebrated the world over, that now has become the number one tourist destination in the world. That Tokyo does not have a solitary master planner. It does not have a solitary author.
4:32
Russ Roberts: Of course, much of the city–I don’t know what proportion; you maybe can tell me–was destroyed in 1945 in World War II. It would have been a natural situation for some top-down czar to impose a new, better, before-it-was-all-chaotic-or-whatever-it-was, but it could have been designed top-down, and certainly some things came from the top.
I think one of the important distinctions to make, both in economic policy and in urban policy, is that, when you allow for emergence, it doesn’t mean anything goes. That’s certainly not your position. You’re not in favor of zero regulation or zero infrastructure and letting everything emerge from bottom-up, but you want to put limits on what comes top-down.
So, if you can, give us a feel over the last 80 years in Tokyo: What’s been important that has been top-down? Not the part you just mentioned–the sterile, could-be-in-any-city types of developments–but some of the things that were done which ended up allowing the emergent distinctiveness of the city to come about?
Joe McReynolds: Absolutely. I think instead of 80 years, I may go back 102, simply because we’ve got to put 1945 in the context of these periodic, often violent renovations of the city from either events–whether it was the firebombing of World War II or the great Kant? earthquake of 1923; the Olympics in 1964; then you have the bubble economy of the 1980s; what they call the Lehman Shock, the global Financial Crisis 2008; and then COVID [Coronavirus Disease]. You have, every 20 years or so, let’s call it, major events that in some cases have literally razed much of Tokyo to the ground, or have spurred the mass redevelopment of the city and the voluntary tearing down of a lot of it.
Like, there’s–so, you have, 1945 being the most famous example because you also have a total rewrite of the legal system. Yeah, in 1945, you have a master plan for the rebuilding of Tokyo after the war. But they don’t have the money to enact it. Instead, the government focuses on repairing the major railways and the arterial major roadways; but then, in actual neighborhoods from there, the government is basically saying to people, ‘Well, you’re on your own, and we’ll regularize it later.’ And so, some of the most Tokyo-esque neighborhoods now, where you’re walking through the quiet, welcoming backstreets, through streets winding into each other, you have that village-feel in the heart of the city: five minutes’ walk from the famous Shibuya Scramble Crossing. Those are dating back to this period–this post-war period–where residents just rebuilt it with whatever they had on hand. Messy, slightly overlapping plots. And then over time it gets regularized.
That said, a lot of these neighborhoods, if you layer the maps of those neighborhoods in the 1950s over maps of the same area in the 1800s, in the Edo Period, you actually see a ton of overlap in land use and what was where. So, there is a sense that there’s kind of a framework embedded in the population here. And it’s almost like a reptile regrowing a lost limb, or that sort of thing. Even after the city is burned to the ground in 1923 and 1945, you again and again see the citizens themselves, with no top-down direction that they have to do so, kind of rebuilding over the same patterns, and patterns of life repeating themselves.
Now, the counterpart to these citizens’ rebuilding their own neighborhoods with whatever they have to hand, are around the train stations. Post-World War II, you have these black markets spring up because the American military occupation was doing rationing. And so, you have rationing: you have black markets. As EconTalk listeners are, I’m sure, much more intimately familiar with than I am. And, these black marketeers–you could buy everything there, licit, illicit–it was an informal economy, a massive informal economy.
And, when they finally decided to go in and shut all these black markets down, the government fatefully decided–instead of saying, ‘You’re all criminals, we’re all throwing you in jail,’ they said, ‘You guys are fundamentally small entrepreneurs trying to have businesses. You have the right idea. We just want you to do it in a legal way.’ The government built all these tiny little stalls for the black marketeers to inhabit. In general, they were handed out by lottery and gave them property rights to these stalls.
And, those lotteried-out stalls became the basis for most of what we now know as the Yokocho alleyways, which I think we’ll be talking about in this podcast. And, the famous drinking and carousing alleyways of Tokyo, like Golden Guy that some of your listeners may have heard of–the micro-bar district with 270 micro-bars in a single city block–that is a Yokocho alleyway.
So, a lot of the features of modern Tokyo are really born of this black market period post-World War II and the decisions that were made there.
11:26
Russ Roberts: So, let’s turn to the Yokocho because it’s so interesting. There’s so many aspects of it. These are basically, as you say, small alleyways–small alleys, alleyways–with tiny, tiny establishments where an establishment might have a bar, a restaurant; it might have five seats. It might have 10. It might have a little second floor, right? Where people can sit. And what’s interesting about them is they specialize in unique décor. The owners personalize and customize these small spaces with their own visual imagination, their own tastes, their own sense of aesthetic. I assume that’s also true of the food. There’s a unique set of food choices in all these places.
To the extent that–let me get the numbers right–Tokyo has five times the number of restaurants as New York City. Per capita. Five times.
Joe McReynolds: Depending on how you count it, it’s over 10 times, actually.
Russ Roberts: I assume some of these places don’t get counted because they’re, quote, “so small.”
Joe McReynolds: Yeah. It’s just a massive scale.
12:45
Russ Roberts: So, there’s a certain–as a tourist–or a resident–there’s an incredible romance about exploring. There’s a serendipity to this, there’s a distinctiveness. Sometimes you might be in the mood for one kind of setting, one kind of décor, one kind of music. But, this–on one level, so I understand the appeal of this. You see it in any video you watch. It’s like, ‘This place is so cool!’ At the same time, it must be really hard to make much of a living when you can only have 10 customers at a time. It’s extremely competitive, right? There are a lot of them.
So, what struck me a lot in reading your book about the retail environment of Tokyo in these Tokyo-esque places is how small they are, how competitive they are, how each one has its own stamp, and how appealing that is as a customer.
But, it must be kind of hard as an entrepreneur and owner because small. There’s no agglomeration. Nobody says, ‘I’m going to buy the next three over, and I’ll have 40 chairs in my restaurant,’ right? They all have this very small, distinctive flavor. Am I getting it right?
Joe McReynolds: Yeah, that’s definitely a major trend in Tokyo. I’m so glad that you brought this up. Because this, to me, is the most fascinating thing. I read these authors that write about ‘the smallness of Tokyo bars, and they’re focused on Japanese notions of place, and aesthetics, and interior, and exterior.’ And I’m, like, ‘No. Tell me about the microeconomics.’ It’s like: How do you–
Russ Roberts: Make a living?–
Joe McReynolds: make a living as a small bar-restaurateur work in Tokyo?
And, the economy–the microeconomics of it, is just so different in ways that really come down to public policy. And, I think about this a lot because I was in the most mediocre micro-bar in Tokyo. Not mediocre in a bad way, not mediocre in a good way, just–there’s nothing remarkable about it. It was just no unique décor, just everything standard. Like, six seats; guy gives you a beer. And, some tourist had written on a wall in there, ‘This is better than all the bars of San Francisco.’ And, I loved that because I think what that tourist was responding to so viscerally, emotionally, was that micro-human scale. And, we have that missing in our urban environments because the microeconomics do not support it.
And, we could run our cities differently. With some smart public policy tweaks, we could have Tokyo-style micro-businesses all over American cities. It’s a very solvable problem. We can bring that kind of intimacy, and warmth, and personality, and individuality back to American urban small business.
To answer your question of how they do it–bottom line, up front–I have a friend. She used to work in New York finance, Japanese American. Moved to Tokyo and decided she was going to quit finance and open a small bar; and she’s going to bartend at it. So, she’s got a small bar. Her all-in cost to open the bar was, I believe, about $1,500, $1,600 US. That’s everything from permitting, to getting the décor the way she wanted it–she did some DIY [do it yourself]; then, of course, liquor and supplies. But, fundamentally, opening a bar–and it’s a nice, six- or seven-seat bar in a nice part of town–$1,600.00 US. That is unbelievable to anyone who has any knowledge of the American bar and restaurant industry.
And, that comes down to things like liquor licenses are $50 bucks and filling out a form. They’re not the ordeal that they are in the United States. Health and safety inspections are once every five to seven years. Sales tax: if you’re running a mom-and-pop small business and you’re not making a gajillion dollars–to use the technical term–you can keep the sales tax you collect up until a certain number. Minimum lot sizes, minimum unit sizes–there are not minimum lot sizes and minimum unit sizes in the same way. And so, you have all of these flexible micro-spaces.
I did a working paper for the Mercatus Center, George Mason, on the use of flexible micro-spaces in Tokyo, and I think those are really key. You have a personal income tax policy where, if you’re the proprietor of a mom-and-pop small business, you’re paying basically no income tax. You have great universal healthcare. You have affordable education if you have kids. You have everything really set up to allow you to be a sole proprietor.
And then, crucially, you have the zoning and the landlords aligned, in the sense that zoning in Tokyo–and this is so important, one of the biggest things we could change in our cities–zoning in Tokyo is hierarchical or inclusive. There’s not quite one set term for it in English. But, basically, zoning in Tokyo, in Japan, is pretty simple. It’s divided into about a dozen layers of nuance–of nuisance, I should say. And, at any given level of nuisance, if you’re zoned for nuisance level four, you can do anything nuisance levels one through four in that zone, unless you’re in, like, a heavy industrial zone or something like that. It’s not so specific as American zoning, where a modest American city will have 40 different hyper-specific zones.
And so, that means that if you want to open a small bar, you can open it nearly anywhere. Small bars, and restaurants, and boutiques are allowed in nearly every single unit in the city.
That’s the other thing: The most residential zoning in Japan is actually mixed use. The ones that are “exclusively residential,” quote-unquote, they say, ‘Well, obviously, exclusively residential includes the right to turn the ground floor of your row house into a small eatery, or a coffee shop, or a bookstore, or even a little bar or boutique.’ So, these kinds of zoning changes just completely change the fabric, the character of the city.
It also means you get a lot of landlords who are not big corporate landlords who are looking at you as a line item on a spreadsheet. You get a lot of individual mom-and-pop landlords.
For example, you have a row house with an elderly guy living up above. He just likes some nice young people doing nice things in the neighborhood, so he lets some nice young people open a bookstore down below his living quarters. That old model we used to have in American mainstreets of shopkeepers living up above their shops is still incredibly common in Tokyo. Less common than it used to be, but still, you see it everywhere.
And that completely changes the character of a city. He doesn’t care, is the bookshop making as much as a Starbucks? And, the young bookshop proprietor, like a lot of us, we have our, ‘Oh, in another life, I would have opened a coffee shop, I would have done this.’ He’s living his dream, and he’s got good healthcare, he’s got great, cheap food everywhere around him in Tokyo. He’s got cheap rent. Rents are amazingly low in Tokyo; they build tons of housing.
Russ Roberts: We’ll come back and talk about that in a little bit.
Joe McReynolds: Okay, yeah. Yeah, I’ll leave it there.
22:04
Russ Roberts: I want to ask you about the lifestyle aspect of this, especially for your friend. It’s hard to imagine a bigger contrast between a New York finance day-to-day, hour-to-hour life, versus running a bar or restaurant that serves five to 10 people at a time. In some of these places, I assume–well, I assume it’s often similar people, the same people coming every night or every couple of nights, with some variety. And I assume there’s a social aspect to mingling with the customers that isn’t going to be present in Starbucks. Not that you might not know your server at Starbucks, but in general, it’s a much faster-paced environment.
So I assume for your friend, part of the pleasure that she would get from running a small bar or restaurant would be the nightly interactions with customers.
Russ Roberts: And, having a social circle which is not constant, but has some constancy and some variety. Is that important? Because, in America, I think a lot of people would want to have, as I suggested earlier, a bigger place, a bigger footprint, a higher volume, higher profit. But, maybe in Tokyo they’re content–many of these creative people who create these bars and restaurants–are content with a slightly lower standard of living but a richer set of interactions with their customers. Is that accurate?
Joe McReynolds: That’s absolutely accurate. And I do want to caveat that by saying there’s a bifurcation. There are the folks in nine-to-fives that are crushing their soul, and it’s really nine-to-eights; and they are heading out to a modern apartment in a mega high-rise out in the suburbs. They are living a very different life.
But, the interesting thing is, year by year, generation by generation, the percentage of Tokyo urbanites that fit that salaryman, classic model that we all have the stereotype of in our heads–the percentage that fits that keeps shrinking, that lives like that. And the percentage that lives a life that’s more creative and more focused on passion, and pursuing one’s interests and one’s community over profit, keeps growing. So there’s a sense in which both sides are coexisting in Tokyo.
In a lot of these neighborhoods, we talk in the book about pocket neighborhoods in Tokyo, where you have an intimate, dense, low-rise neighborhood ringed on the outside by more modern high-rise offices. Those neighborhoods, you kind of have a symbiotic relationship between the two. In the interior, you have more of these little mom-and-pops and intimate community, and on the exterior ring, you have offices populated by office workers commuting in every day from the suburbs by train, and who can provide regular foot traffic and customers for these mom-and-pop eateries and bars after work, and things like that.
So, there’s definitely a lot of ways that Tokyo facilitates that more kind of purpose-driven life, if we can use an Americanism. That’s definitely not everybody, but it’s a growing share of life in Tokyo. Because, frankly, public policy supports it and it’s a great way to live. There’s a phrase in Japanese, datsusara [???]. Datsusara literally means ‘escaped salaryman.’ Someone who got off–
Russ Roberts: Got off the treadmill–
Joe McReynolds: the rat race to live their dream. And the datsusara are a growing phenomenon.
26:34
Russ Roberts: I’m going to take one more look at another aspect of the microeconomics of this world. I’m fascinated by it. You know, I live in Jerusalem. The closest thing Jerusalem has to this, or Tel Aviv has, to this kind of environment is the shuk–the market. And, here in Jerusalem, it’s Machane Yehuda. Somebody had the idea–I don’t know why, how it came about–but somebody had the idea that instead of just selling spices, and produce, and bread during the day, that the shuk could be used at night for entertainment.
So, there are all these bars that have five chairs and 10 chairs, and they’re all blasting their own style of music. It’s a bit cacophonous, but it’s fun. And it’s so alive. I tell people when they come to Jerusalem, ‘Just go to the shuk on a Thursday night.’ It’s pretty nice on a Tuesday night, but on a Thursday night–which is the equivalent of when a weekend starts here–there’s an immense amount of vitality. Part of it’s just exactly what we’re talking about: each place has a distinctive flavor–what they serve; there’s a distinctive flavor of the owner, the person who is behind the bar.
In Jerusalem, it’s only this one little area. There are lots of coffee shops around the city that have some of the flavor of what we’re talking about. And as I’ve remarked here before, it doesn’t matter–whenever a coffee shop opens in Jerusalem, it’s always packed within three days. Something’s going on there.
But, when I think about this model in Tokyo, where there are hundreds of–you know, in the shuk, it’s a few dozen restaurants, or maybe 20 bars, 10 bars, 15 bars–but in Tokyo, there are hundreds of bars and restaurants.
How do you–is there a culture of how long you linger there? Because in Israel, people like to linger. They like to sit in a coffee shop for a long time. Which means that the amount of revenue that comes from one chair could be relatively low. But, if you only have five chairs, and all five nurse their beers for three hours, or their cup of coffee, you can’t make a living. So, when people come to these bars to drink a beer, do they sit and pour out their soul to your friend behind the counter, or do they drink it fairly quickly and move on to another one? What’s the culture of being a customer in these places?
Joe McReynolds: Well, before I answer that, I do first want to say I’ve been to Machane Yehuda. I think last time was mid-2010s. I was going through Jerusalem, Ramallah, West Bank, Palestine–the whole tour, seeing friends. Yeah, it’s exactly as you say. There is a very strong similarity between not only Machane Yehuda in Jerusalem, but also the laneways in Melbourne, Australia. You have similarities to Tokyo’s Yokocho alleyways. I think it really highlights–in fact, Machane Yehuda is bigger than some of the Yokocho alleyways in Tokyo. There are bigger ones, smaller ones. Yeah, it really highlights to me that this is a pattern that you can see in a number of cities. It’s not just, oh, Japan is this unique case that we can admire but not learn from. So, I’m really glad you brought that in.
But in terms of the customer culture, I will say it varies dramatically, bar to bar. This is something where there’s a skill that we would call, I guess, situational awareness, emotional intelligence. Japanese would call it kuukiyomi (????),–literally, ‘reading the air’–but the same basic meaning. Which is: you kind of get a sense, if you at all are attuned to and speak the language, or attuned to the social context, you get a sense of: Is this a spot for you or not? Are they welcoming here or not? They’re not going to say, ‘Get out,’ but in what ways are they welcoming or not?
And so, there is a culture of regulars, especially there are a lot of places that, to keep out foreigners who don’t understand, they say, ‘Members only.’ But it’s not actually formal membership. It’s more like an introduction system. The idea being: you can come if someone else brings you who is already kind of a regular here or has been before. And then, once you’ve been once with them, you can come on your own. And just kind of a general sense of acclimation into social spaces.
And you see this in subculture, too–like, in nightlife, not just in bars. Unlike in Berlin or New York, where exclusivity is the currency of the realm–it’s the velvet rope, that you’re cool as a club because most people can’t get past the velvet rope, but they want to. In Tokyo, what you see with nightlife of all kinds, I think, is much more of a sense of trying to acclimatize you. In that, in a city full of 10,000-plus bars and restaurants, if you’ve somehow found your way to this one, it’s giving you an in to fit into the fabric, if that’s what you want to do.
And that’s hard in the age of mass tourism. It’s disruptive because people just do not have the Japanese language skills. If you’re a tourist wandering in in English, before you even get to the question of cultural norms, differences, the table charge that you pay to sit down in a lot of Japanese bars–foreigners think they’re being scammed as opposed to understanding that’s the system. And, yeah.
So, there is a culture of regulars, and there’s a symbiosis there, also, where the bar will sometimes be decorated by the little tchotchkes that regulars bring in as gifts from their travels.
Actually, I was talking to a Tokyo bar owner recently about, ‘What do you do if a beloved regular brings you a tchotchke, and you just look at it like, oh, man, this thing is ungodly ugly, but I have to show gratitude; I got to put it up somewhere?’ You know: the little, like, Larry David Curb Your Enthusiasm scenarios of life with your regulars. Yeah, it’s this delicate social dance, in a way.
Russ Roberts: Is there queuing? If you have an especially good restaurant and you only have five seats, and everybody wants your dumplings, or your noodles, or your whatever it is, do people get in line in a five-seat restaurant? Do they raise their prices when they get popular?
Joe McReynolds: They don’t raise their prices when they get popular nearly so much. There’s an incredible amount of price stickiness because even raising prices for inflation in recent years was this real, kind of like, ‘everyone feels awful about it’-kind of thing. And that was just minor increases compared to what we see in America. Now that the seal has been broken on that culturally, it was not a commercial taboo, but just people really leaned against modifying prices for a long time. In part, because Japan was a pretty low-inflation environment, so you could get away with it. That’s starting to change, but there is definitely a sense of: if you become really popular as a restaurant, for example, there may be a queue, or there may be a reservation system. There are various ways to swing it. But definitely restaurants don’t want to lose their regular clientele to ephemeral tourist traffic.
I will say, I do see more queues walking around in New York–I live part of the time in New York–and I see more queues there than I do in Tokyo these days. I think also because, once you get past a certain age, you’re just like, ‘I don’t have time for this. I don’t have the patience for this. Leave it to the 20-somethings with their FOMO–their Fear of Missing Out–to queue for the new hot ramen stand. I’ve got 10 ramen places I love already, that’s fine.’ But, yeah, definitely, it is tricky.
And, some places will open sister shops. There’s a noodle shop I love where the master will wake up early in the morning and make the noodles by hand for three shops of his now because that’s how popular he’s become. They’re all in the same walkable district.
So, there’s a variety of strategies for dealing with success in Tokyo. And there are successful folks who expand.
36:37
Russ Roberts: Let’s turn to this other example that I don’t think quite has a parallel anywhere. Maybe a little bit in New York City–we can talk about it. But, that’s the zakkyo buildings. Talk about what those are. How important are they in the city? They obviously give the neighborhoods that they’re in a very distinctive look that I think many of us associate with Tokyo when we see photographs and videos.
Joe McReynolds: Yeah. So, the zakkyo buildings, you look at any stock photos of Tokyo–the neon nightlife, or you see it in movies–and those buildings with the neon signage up the outside, really LEDs [light-emitting diodes] these days, but those bright-colored signs up the outsides pointing to different things on each floor. They’re essentially a vertical version of the horizontal Yokocho alleyways we were just talking about. These tall, narrow buildings where each floor has something, whether it’s a bar or a restaurant, you name it. Or many somethings–they can be subdivided. You can have a zakkyo building with dozens of micro-businesses going up.
The reason that we don’t have these in American cities is pretty multifaceted: regulation, and also people aren’t used to looking for retail up on the fifth floor of a building. In America, we’re used to the idea that bars, restaurants, retail is on the first, maybe second floor of a building. Then, above that, it’s just offices or apartments–things not open to the public. And our signage regulations both reflect and enforce that. You can’t easily put signage up the whole outside of a building saying, ‘This is on this floor, that’s on that floor.’
But, allowing that in Japan completely changes the fabric of the city, because these neighborhoods full of places you, as a visitor, might want to go–they extend not only horizontally but also vertically upwards. Yeah, it gives a real three-dimensional feel to the city.
Russ Roberts: The other key part is the access–
Russ Roberts: Either by stairway or elevator. In an American building, you would typically enter an entryway, a lobby of a building. There’d be an elevator bank, and there are places that have stuff on the other floors, not just on the first floor. But, in these buildings, my understanding is you can get straight into the second floor or third floor just by going up the stairs from the street, and that’s very unusual, right?
Joe McReynolds: Oh, yeah. The exterior stairwells are just fundamentally regulated very differently. And then, usually, it’s a single elevator. That’s why–until we started writing about zakkyo buildings really in English or in Japanese, mostly the only writing about them from architects and urbanists–they were writing about the emergency or fire-prevention elements of how do you make sure that they’re safe if you need to evacuate everyone, getting down from the sixth floor? And yeah, the whole debate of single-stairwell versus double-stairwell for buildings over a certain number of floors in the United States has been, in Tokyo, very decisively resolved in favor of single-stairwell. It can be an exterior stairwell that you can walk freely up or down. It can be open to the elements–relatively open, to the open air at least. And then a single elevator. And that, frankly, is enough.
That’s something that–I think American cities are starting to move in this direction. New York is thankfully an outlier in terms of a single-stairwell regulation. When I talk to developers, when I talk to urban planners, that is overwhelmingly one of the key factors they cite in terms of not being able to bring Tokyo-style urbanism to most places in the United States yet–our stairwell regulations.
Russ Roberts: Well, in New York–New York is the only city that I–I’m not in enough cities to really comment on this authoritatively–but certainly in New York, there is a little of this flavor. One of my favorite restaurants in New York is called Taam Tov. It’s a Bukharan, Uzbekistan, Kosher establishment in the Diamond District. It’s on the second floor. It’s got a sign on the street, though, that directs you up there if you look up. In Tokyo, everybody looks up because the signs are all going up the side of the building. In New York, it’s a little rarer; but there’s a lot more of it in New York. It’s just not as dramatic and prevalent as it is in Tokyo.
And if any of my listeners have been in Taam Tov and eaten there, you can send me an email. I’d love to hear from you.
But, sorry.
Joe McReynolds: Well, you’ve given me a food rec. I appreciate that. I’m definitely going to check that out.
Yeah, I think you see it in New York a little bit, especially in places that are heavy Asian diaspora communities. In New York, like in Korean neighborhoods in Manhattan, you’ll see it. So, this is something that I definitely would like to see more of in American cities.
I was talking to a real estate developer in Boston who splits time between Boston and Tokyo. And I was saying, ‘Why haven’t you built any zakkyo buildings in Boston?’ He was saying, ‘Well, how do we teach Americans to look up?’ And that’s a challenge. But I think, over time, a surmountable one. I think if the regulations shift, the culture will shift.
Russ Roberts: It just strikes me that so much of this–of what makes Tokyo charming–is something that we talked a lot about with Alain Bertaud on an episode of EconTalk, which we’ll link to. The minimum size is a huge deterrent to creativity. And, Tokyo–and I’m sure there are many, many other cities that have avoided this–but many cities require a minimum size either for anticompetitive reasons to help sustain the businesses and protect the profits of the people who are already there, or who knows, for whatever reasons. But, allowing tiny places to exist seems to me the single most important thing that I learned from your book–
Russ Roberts: And, that other cities would be wise to emulate.
Joe McReynolds: Yeah. I think the no-minimum-unit-size is so key. I think there is one area out of the 23 wards of Tokyo–there’s one, Suginami Ward–that I think experimented briefly with creating a minimum size. They are a relatively bougie ward, and I think there was kind of a sense of NIMBYism [Not In My Backyard-ism] almost to it. But fundamentally, there’s just not that minimum size in Tokyo.
And when you combine that with the zoning rules for residentially-zoned neighborhoods–that you can do pretty much whatever you want with the ground floor of your multi-story row house; that you can turn it into a public-facing micro-space–that just means a near-endless supply of these flexible micro-spaces throughout the city.
And that, to me, if there was any one lesson, one thing to take away from Tokyo as secret sauce for other cities, is: How is your city producing flexible micro-spaces? And, if it’s not: What can you change to improve that?
I think, really, that fundamentally starts with zoning and minimum unit lot size regulations.
45:48
Russ Roberts: Yeah. I was looking–let’s turn to housing costs for a minute. I was–in preparing for our conversation, I looked up the population of Tokyo versus New York. I don’t remember whether this is standard metropolitan area or whether it’s–there are many different ways you could define the size of a city. But basically, in 1960, whatever measure this was using, I think one of those two cities–Manhattan or Tokyo–was 15 million people, one was 16 million. Essentially the same size, 15 or 16 million. That’s 1960. Today, New York City has 20 million people, so it’s increased by a factor of about a third. To my surprise–I did not expect this, I knew it was bigger–but Tokyo today has about 38 million people. It’s stunning. It’s not because Tokyo is more popular than New York. That’s a meaningless statement because both cities–it’s not a meaningful statement–
Russ Roberts: But, what is meaningful is how many housing units got built in Tokyo versus in New York.
And, one of the reasons New York has 20 instead of 40 million people is because they haven’t built many units for people to live in. If anything, people have been creative, I’m sure, in subdividing apartments illegally in New York because of regulation and how difficult it is to expand housing. But, Tokyo has been much more aggressive, meaning the regulatory environment is much friendlier to building–increasing supply.
Some of that, of course, is one of the five things you talk about–dense, low-rise, residential neighborhoods–which New York has a little of, but not so much. But, it hasn’t expanded much, is the key point; whereas Tokyo has. What has changed in Tokyo for people who want to rent and live there and have access to these things we’ve been talking about?
Joe McReynolds: So, this is a point where I want to mention that more than half of the people who live in Tokyo–I don’t know the exact percentage, but it’s definitely a majority–do not live in the urban core, the Manhattan equivalent. They’re living out in commuter rail suburbs.
And, this is something I think is really important for people to understand as a distinction between Tokyo and really any American city these days–is, that the vast majority of Tokyo’s railway transit network is in private hands. There are about, I think it’s eight or nine different private railway operators that each operate multiple lines. And crucially, they are not only railway operators: they are real estate developers who develop shopping malls above each of their suburban stations. And then they own the land in the community, a bit like the Irvine Company in Irvine, California: They are developing the bedroom commuter communities around each of their train lines. And then at the very end of their train lines–they extend them out to the mountains, even–and they’ll develop weekender resorts and hot springs, and things like that.
This model actually started in Kyoto with Hankyu Railways. It’s called the Hankyu model. It started over a century ago. And, this model has been very resilient to declines in railway ridership, like in the 1960s and 1970s when car culture was surging. They swung more into the real estate and commercial side of things.
And, it’s a model that we are starting to see more with, like, Brightline in Florida. We’re starting to see American exploration of this model.
And, to some extent, it’s a hard model to copy because a lot of the land that was bought up by these private real estate conglomerates was bought up a century ago when it was farmland and much cheaper, but it’s a big part of how the city creates new housing.
Another factor is: the construction industry is very, very deeply tied up with the LDP [Liberal Democratic Party]–the longtime dominant governing party of Japan. We talk in America about the military-industrial complex, say. In Japan, there’s talk of the construction-industrial complex. Kent Calder, the former New York Times’ Tokyo Bureau Chief, did a book on Japanese economy and political economy called Circles of Compensation that really laid out the ways that industry intertwines with government in Japan. And so, you see huge incentives for construction of housing as part of that tie-up between political party and industry.
Russ Roberts: But, just in terms of–two questions. First of all, those people who are commuting in from the suburbs, either to work or to have an evening with friends–how long is that commute?
Joe McReynolds: That commute is usually about 30 to 45 minutes, from basically anywhere, because you have express trains, express commuter trains, that skip most of the stations. So, as I was looking at, for example, different places of where to rent an apartment in Tokyo, the further out I go: How far is it into the city center, the central Yamanote Line loop? Oh, 30, 45 minutes. That continued to be true even as I went further out. At the really far end, you get out to, like, an hour. But fundamentally, it’s a pretty pleasant commute because you’re on a train.
I think, fundamentally, Tokyo is very much a city surrounded by massive suburbs in the same way that a lot of American cities are. But they are rail suburbs rather than car suburbs. And that makes a huge difference. Everything from the microeconomics to the city-level economics, to just patterns of life–all of these things just change completely when you make rail the dominant pattern.
I will say, finally, just to tie it back to the zoning, that so much housing construction in Tokyo is by right. There are difficult projects–
Russ Roberts: What does that mean?
Joe McReynolds: By right, meaning you don’t need to negotiate with someone to build. If you own the land, you can build housing on it. You’ll fill out the forms and you’ll file them, and that will be fine. Versus in American cities, if something is not by right–for example, in San Francisco–it can be years of meetings with local residents’ groups, and often the five local residents’–
Russ Roberts: City council, yeah.
Joe McReynolds: Yeah, yeah. Neighborhood groups, you name it. Yeah, local rent-seeking politicians. All the different stakeholders that can potentially veto your project or play a role in vetoing your project.
And so, generally speaking, unless something is going to be a mega-development, a luxury development, and highly profitable, it only happens if it’s by right, in terms of housing development built by developers–whether that’s in America or whether that’s in Japan–simply because it’s such an uncertain and incredibly costly process. It adds so much to the cost of constructing new housing.
In Japan, with national-level zoning rules that are quite straightforward about what is zoned for what, there is just so much housing you can construct by right that it allows builders a much more straightforward process, and you simply get much more housing.
55:05
Russ Roberts: So, I was recently in Venice, which is the anti-Tokyo. Venice, I don’t think you can do anything. My wife just sent me an article: two people were arrested and expelled from Venice for swimming in the canal. But, that’s the least of it. The buildings are the same as they were 25 years ago, 50 years ago, often 100 years ago, often 500 years ago. It’s amazing they’re standing, and they look like it’s touch and go. There are usually–facades crumbling in various places. And it’s part of the charm of the city.
So, even though it’s the anti-Tokyo, it has some of the charm of the Yokocho alleyways because there are a lot of small, winding streets, and there are very few large retail establishments. Many of the stores are distressingly the same for tourists. They have the same masks, the same tchotchkes, the same mugs, the same scarves. I can’t understand this, by the way, because I never see anyone buying anything in them, and yet they take up a non-trivial portion of the retail environment of Venice. But, at the same time, about every fourth or fifth store is something totally unusual–an artist, a bookbinder, a coffee shop, whatever it is–and it’s utterly charming, and it’s really fun. There’s a serendipity about Venice despite its museum-like nature.
It strikes me that most of Italy is a museum. There are a few exceptions. But, Rome is a museum, and it’s a fantastic place. Verona is a museum. They’re all fantastic for tourists. Of course, residents are increasingly unhappy, understandably so, that their city and its charm are enjoyed by others. Of course, many of those residents live off of the tourism dollars of those people, so it’s an inevitably unpleasant tension there.
But I’m curious what your thoughts are on this. As you’ve talked about, tourism in Tokyo has grown a lot and has caused certain changes in the culture of some of these places. What are your thoughts on this museum-like phenomenon in certain cities and how Tokyo has clearly avoided that, more or less? Although, I assume you also would like to preserve some of these things the way they are. And you’ve decried in your book that some of these things are shrinking. So, there’s a tension there between the certain charm a certain city comes to have in our minds and the vitality it needs to stay alive, and the tension between tourism and local residents. Talk about that.
Joe McReynolds: Yeah. I’m so glad that you brought Venice into this, because Venice has been a fascinating contrast for Tokyo’s urbanists, for Japanese urbanists, for centuries. Actually, Tokyo is as much a city of waterways as Venice in some respects, but they’ve built streets and especially freeways over the waterways over time. There’s now actually a movement to move some of the freeways underground, move some of the roads underground, and bring back Tokyo as a Venetian-style water city. We’ll see to what extent they succeed.
But I think this fundamentally gets to the question of historic preservation. Because, a lot of people who talk about historic preservation in the States and are very focused on it, they say, ‘Oh, Tokyo is one of the worst cities in the world for historic preservation. Almost no old buildings older than a century.’ And, if you’re talking about buildings, sure. But, if you’re talking about communities and rhythms of life, Tokyo is one of the best cities in the world for historic preservation.
Like, when I think about golden-age, gritty, 1960s, 1970s New York–the stuff you see in the movies–that basically doesn’t exist anymore in New York. CBGB’s [Country-, Bluegrass-, Blues-oriented nightclub] doesn’t exist; all these–that classic New York exists as a tourist stop, if anything, but the actual communities aren’t there anymore that made New York in the 1960s and 1970s this incredibly culturally generative place.
Whereas, if I want retro, 1960s, 1970s Tokyo, a lot of the neighborhoods are still there. The communities are still there, the same rhythms of life. The buildings might change, but there’s much less displacement of people. So that’s one thing worth thinking about: would you rather have the buildings, or would you rather have the people?
Venice–almost no Venetians live in the Venice that we as tourists see. I actually took a hike one day–not a literal hike, took a bus–out to the suburbs of Venice, where most Venetians actually live. It’s the most anywhere-and-nowhere kind of gray, drab suburbs you would expect. And so, there’s that question of: is that tradeoff worth it if nobody can actually live in it anymore? And I think with Venice, it probably is.
Russ Roberts: Let’s be honest. By the way, I think it might be the most beautiful city in the world.
Russ Roberts: A lot of people don’t like it because it’s, quote, “crowded.” It’s a lot like many things. If you go three minutes past where it’s so crowded, it’s almost deserted. The pace of walking and the visuals are totally serene and normal, and not this horrible crush of people that people talk about. But it’s basically, it’s Disneyland–is the problem–because, like you say, that’s a different way of saying it’s a museum. It’s been preserved with a certain amount of charm, but it’s not really a real city. Which breaks my heart, but then again, I wouldn’t have gotten probably to visit it if it were only reserved for Venetians.
Joe McReynolds: Yeah. I think the challenge of how to balance that is a delicate one that there’s not a single right answer to.
But, what I do love is, in Tokyo, you have this thesis-antithesis synthesis. Like Shibuya–the famous Shibuya Scramble Crossing: You have massive redevelopment, huge, gleaming skyscrapers. And then still, you wander into the backstreets, and thanks to incredibly strong property rights, you still have all these little mom-and-pop labyrinth alleyways and mom-and-pop businesses. And the two can coexist.
And, part of my Ph.D. that I’m working on is the economics of subcultures. And, at some point, the past becomes a subculture, in a way, in Tokyo–whether it’s these retro Yokocho alleyways or old mom-and-pop businesses. And, the economics of a subculture are such that it shrinks compared to back when it was the dominant culture, just by definition–the world moves on. But, it doesn’t disappear. Even if 75% of the Yokocho alleyways in Tokyo have gone, that’s still dozens and dozens of vibrant Yokocho alleyways remaining. And, we can put focus and effort into maintaining and making the ones that are still there into resilient, permanent fixtures.
So, I think especially in a post-scarcity city. Like, when it comes to housing. Like, Tokyo does not have the scarcity of housing that we feel in New York, in San Francisco.
You can start to think from more of an abundance mindset of there is room for all of these things in their time, in their place, in their proportion, rather than thinking about, ‘Well, that Yokocho alleyway could be 100 apartments and could be a place where people live.’ And, ‘There’s not enough places for anyone to live.’ We can get out of zero-sum thinking if we can get beyond housing scarcity, and I think there are a lot of ways to do that without tearing down the last golden-oldies, lovely, charming old neighborhoods of Tokyo.
1:04:36
Russ Roberts: Yeah. Let’s just close on this question of emergence. I think about, having spent a lot of time in America–most of my life–and watched housing prices rise steadily there to the, I think, enormous detriment of human flourishing. Just that it’s hard to come to the big city and make something of yourself is terrible. That is hard now. It shouldn’t be hard; it should be easy. I think we know something about why it’s hard. It has to do with how long it takes to get something built, the restrictions on what can be built. And, there’s really not more to it than that. Those two things–you’ve got some issues about parking and infrastructure. We had a wonderful episode with Donald Shoup, which I recommend to listeners, where the demand that all new buildings have enough parking for cars is a terrible policy regime.
Russ Roberts: So you do need decent infrastructure. Railways being one way to do that. But, that’s kind of it. There are a lot of little pieces, a lot of other moving parts, obviously, but if I could pick the few things that would make American cities more livable and more magnets of opportunity for people who desperately need that opportunity, I would look for ways to reduce the cost of housing, and that would involve making it easier to build. And, I think it’s a tragedy in America. It’s also a tragedy here in Israel. Tel Aviv and Jerusalem are both very expensive because it’s very hard to build.
It seems to me that the single most important urban policy you could focus on if you wanted to make your city better. Agree or disagree?
Joe McReynolds: Yeah. Fundamentally, I pitch two things as the big takeaways: Make it easy to build housing in your city, and make it easy for people to use their own living spaces to pursue their small local dreams. Whether that’s a little coffee shop, a little bookstore, a little boutique–letting people do things in their own neighborhoods with their own property. It sounds so quintessentially American when you say it in those terms, but we genuinely don’t. [More to come, 1:07:11]
