Housing and Urban Developement Indicators; a Good Idea Whose Time Has Returned

Article excerpt

Knowledge that is not quantifiable is of a meager and uninteresting kind.

Lord Kelvin

Any figure that looks interesting is probably wrong.

Sir Claus Mosley in a Presidential Address to the Royal Statistical Society

This special issue of Real Estate Economics is devoted to "Housing and Urban Development Indicators." The issue has been underwritten by the United States Department of Housing and Urban Development as a U.S. Contribution to the United Nation's Habitat II Conference, held in Istanbul, Turkey in June 1996. For this issue papers were sought that:

* Present and analyze basic housing and urban development indicators, over time, cross sectionally, or both.

* Contain methodological contributions, including theoretical and empirical evaluations of alternative indicators, and requirements for improved indicators.

* Model the determinants of indicators across U.S. metropolitan statistical areas (MSAs) and/or over time; within MSAs (where appropriate); and across countries (where appropriate).

* Discuss the links between indicators, their analysis and urban policy development.

The United Nations Centre for Human Settlements (Habitat) has developed a "standard" list of indicators, and generally uses the MSA as the unit of observation, but by design this issue was not so constrained. A database appendix has been prepared containing indicators from each of the papers in this issue, and containing selected other indicators, international and domestic, in spreadsheet form. The appendix can be found at: http://www.wisc.edu/bschool/re, or can be obtained from the editors.


Standard textbook discussions of economic method often follow the following lines. After postulating some first principles, a theory is developed, and from that, testable hypotheses. Next, the researcher collects data and tests the hypotheses. In light of the tests, the hypotheses - and the theory - is either rejected, or conditionally maintained. If the test rejects the hypotheses, the theory may be modified in light of this new information, or it may simply be scrapped.(1)

Such a description of how research is undertaken might suggest to a casual observer that empirical analysis is subservient, or an afterthought, to theory. However, while this "standard model" is sometimes followed, often analysis of data leads to theory, rather than the reverse. For example, Kuznets's (1941) well known analysis of data on household consumption led to theoretical advances such as the life cycle model of Ando and Modigliani (1963), and the permanent income model of Friedman (1957). Also, the simple model implies or assumes that data are themselves independent of the theory. In practice, theory is often needed to learn how to better measure the phenomena under study. In the housing field, for example, Rosen's (1974) article and related literature provided the theoretical underpinnings for the explosion of research on the measurement of housing prices over the last two decades.

As urban economics, housing and real estate economics, and related fields have developed over the past thirty years, much effort has gone into measurement and empirical issues. In fact, much of the research undertaken during the initial flowering of these fields in the late 1960s and early 1970s was devoted to the development of indicators of the health of housing and real estate markets, and of cities and their inhabitants. Measurement issues and empirical analysis figure prominently in such seminal works as Muth (1969) and Mills (1972). A number of early works in urban economics focused on data and indicator issues such as Hochwald (1961), Tiebout (1962) and Hirsch (1966), among many others. Flax (1978) and Murphy (1980) are other useful sources, and with the popularity of Money magazine's annual rating of cities and Savageau and Boyer's annual almanac, urban indicators have in some sense broken through to the popular consciousness. …