Pod Insights EconTalk The Magic of Tokyo (with Joe McReynolds) About this episode What drives the seeming relentless dynamism of Tokyo? Is there something special about Japanese culture? Joe McReynolds, co-author of Emergent Tokyo, argues that the secret to Tokyo's energy and attractiveness as a place to live and visit comes from policies that allow Tokyo to emerge from the bottom up. Post-war black markets evolved into today's yokocho--dense clusters of micro-venues that turn over, specialize, and innovate nightly--while vertical zakkyo buildings stack dozens of tiny bars, eateries, and shops floor by floor, pulling street life upward. The engine? Friction-light rules: permissive mixed-use zoning, minimal licensing, and no minimum unit sizes let entrepreneurs launch fast and pivot faster. And surrounding this emergent urban landscape there's plenty of new housing with excellent transportation infrastructure to let ever-more people enjoy Tokyo's magic.
Transcript 0:02 Speaker 00 Welcome to Econ Talk, Conversations for the Curious, part of the Library of Economics and Liberty. I'm your host, Russ Roberts, of Shalem College in Jerusalem and Stanford University's Hoover Institution. Go to econTalk.org, where you can subscribe, comment on this episode, and find links to other information related to today's conversation. You'll also find our archives with every episode we've done going back to 2006. Our email address is [email protected] . We'd love to hear from you. Today is September 16, 2025, and my guest is Joe McReynolds of KO University, co-author
0:43 Speaker 00 with Jorge Almazón of the book Emergent Tokyo: Designing the Spontaneous City, which is our topic for today. Joe, welcome to Econ Talk.
0:53 Speaker 01 Thanks so much for having me. Really appreciate it, Russ.
0:56 Speaker 00 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. And I've never been to Tokyo. I've seen a lot of footage, 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. And 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. But I want to start with the overarching philosophy of the book, which will be familiar to Econ Talk listeners. You call the book Emergent Tokyo. Why? What does emergent mean to you in that context?
1:41 Speaker 01 So, 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, you know, going back to the 70s, 80s, Western media, you name it, everyone is talking about Tokyo as this city of chaos. Oh, it's so big and wild and chaotic, and there's no rhyme or reason to anything. And when we looked at the city as researchers living there, trying to understand the city,
2:22 Speaker 01 because that was kind of what motivated us. Like, there's this city that's arguably the largest and best-run and most livable city in the world, and there is very little writing about it in English, other than this kind of Orientalist stuff about, oh, it's wild, exotic, chaos, and who can understand, you know, it's 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. And we talk in the book about, you
3:04 Speaker 01 know, flocks of birds and things like that, you know, the classic examples of emergent order in nature. And 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 free-form spaces. And the irony that we talk about in the book, and we, from various angles, is that the parts of Tokyo that have
3:44 Speaker 01 been top-down designed by the central government of Tokyo, the Tokyo Metropolitan Government, are generally the least Tokyoesque. They're the places that feel like they could be in Cleveland, they could be in Milwaukee, they could be anywhere. And 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, you know, the number-one tourist
4:22 Speaker 01 destination in the world. That Tokyo does not have a solitary master planner, does not have a solitary author.
4:33 Speaker 00 And of course, much of the city, I don't know what proportion, you maybe can tell me, was destroyed in 1945 and World War II. And it would have been a natural situation for some top-down czar to impose a new, better, I mean, 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. You know, 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. And that is certainly not your position. You're not in favor of zero regulation or zero infrastructure, let everything be, emerge
5:17 Speaker 00 from the 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.
5:45 Speaker 01 Absolutely. And 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, kind of, often violent renovations of the city from either events, whether it was the firebombing of World War II, or the Great Kanto Earthquake of 1923, the Olympics in 1964, then you have the bubble economy of the 80s, the, what they call the Lehman shock, the global financial crisis 2008, and then COVID.
6:30 Speaker 01 You have, every 20 years or so, let's call it, major events that, in some cases, have literally raised 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, and 1945 being the most famous example, because you also have a total rewrite of the legal system, and...
7:03 Speaker 01 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. And so instead, the government focuses on repairing the major railways and arterial major roadways. But then, in actual neighborhoods from there, the government's 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, where you're walking now, where you're walking through the, you know, quiet, welcoming back streets, streets winding
7:48 Speaker 01 around each other, you have that kind of village feel in the heart of the city, you know, five minutes' walk from the famous Shibuya scramble crossing. Those are dating back to this, 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 19, sorry, in the 1800s, in the Edo period,
8:31 Speaker 01 you actually see a ton of overlap in land use and what was where. So, there is a sense that there is kind of a framework embedded in the population here, and it's almost like a reptile regrowing a lost limb, or that, 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
9:10 Speaker 01 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 econ talk listeners are, I'm sure, much more intimately familiar with than I am.
9:49 Speaker 01 And these black marketeers, you could buy everything there, illicit, illicit. It was an informal economy and a massive informal economy. And when they finally decided to go in and shut all these black markets down, the government faithfully decided, instead of saying, you know, you're all criminals, we're all throwing you in jail, they said, you know, you guys are fundamentally small entrepreneurs trying to have businesses. We think you had the right idea, we just want you to do it in a legal way.
10:28 Speaker 01 So the government built all these tiny little stalls for the black marketeers to inhabit. And in general, they were handed out by lottery and gave them property rights to these stalls. And those lotteryed-out stalls became the basis for most of what we now know as the Yokochou alleyways, which I think we'll be talking about in this podcast. And the famous drinking and carousing alleyways of Tokyo, like Golden Gai, that some of your listeners may have heard of, the micro bar district with 270 micro bars in a single
11:11 Speaker 01 city block, that is a Yokochou 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.
11:25 Speaker 00 So let's turn to the Yoko show 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 or restaurant, might have five seats, might have 10, might have a little second floor, right, where people can sit. And what's interesting about them
11:55 Speaker 00 is they specialize in unique decor. The owners personalize and customize these small spaces with their own visual imagination, their own taste, their own sense of aesthetic. And 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, if I get, let me get the numbers right, Tokyo has five times the number of restaurants as New York City, per capita. Five times.
12:33 Speaker 01 Depending on how you count it, it's, it's over 10 times, actually.
12:37 Speaker 00 I assume some of these places don't get counted because their quotes are smaller.
12:41 Speaker 01 Yeah, it's, it's just a massive scale.
12:43 Speaker 00 So there's a certain, as a tourist or a resident, there's an incredible romance about exploring. There's, there's a serendipity to this. There's a distinctiveness. At times, you might be in the mood for one kind of setting, one kind of decor, one kind of music. But this, on one level, so I understand the appeal of this, and I, you know, you see it in any video you watch. It's like, this place is so cool. At the same time, it's really, it must be really hard to make much of a living when you can only have 10 customers at a time, and it's extremely competitive, right? There, there's a lot of them. So what struck, struck me a lot about the, in, in reading
13:24 Speaker 00 your book, about the retail environment in Tokyo and 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. No, there's no, there's no agglomeration. Nobody says, I'm gonna buy the next three over, and I'll have 40. Chairs in my restaurant, right? They all have this very small distinctive flavor. Is that, am I getting it right?
13:58 Speaker 01 Yeah, that's, that's definitely major trend in Tokyo and I'm so glad that you brought this up because this to me is the most fascinating thing, you know, I, I read these authors that write about this, the smallness of Tokyo bars and they're focused on, you know, Japanese notions of, of place and aesthetics and interior and exterior. And I'm like, no, tell me about the microeconomics. Like, how do you 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
14:40 Speaker 01 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 decor, just everything standard, like six seats, guy gives you a beer. And some tourist had written in, on a, on a wall in there, this is better than all the bars of San Francisco. And I love that because I think what that tourist was responding to so viscerally emotionally was that micro human scale. And like, we have
15:24 Speaker 01 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, 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 upfront, I have a friend,
16:04 Speaker 01 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. She, so she's got a small bar. Her all-in cost to open the bar was, I believe, about fifteen hundred, sixteen hundred dollars US. That's everything from permitting to getting the decor the way she wanted it. You know, she did some DIY. And then, of course, liquor supplies. But fundamentally, opening a bar, and it's kind of a nice
16:47 Speaker 01 six, seven-seat bar in a nice part of town, sixteen hundred dollars US. That is unbelievable to, you know, anyone who has any knowledge of American bar and restaurant industry. And that comes down to things like liquor licenses are, you know, fifty 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, you, if you're running a mom-and-pop small business and you're not making a gajillion dollars,
17:30 Speaker 01 to use the technical term, you can keep the sales tax you collect up until a certain number. Minimum lot sizes, minimum unit sizes, they're not, minimum lot sizes and minimum unit sizes in the same way. And so you have all of these flexible microspaces. I did a working paper for the Mercatus Center, George Mason, on use of flexible microspaces 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,
18:14 Speaker 01 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.
18:54 Speaker 01 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 like 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 like a modest American city will have forty different hyper-specific zones.
19:31 Speaker 01 And so that means that if you want to open a small bar, you can open it nearly anywhere. There are 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 one that's exclusively residential, quote unquote. They say, well, obviously exclusively residential includes the right to turn the ground floor
20:06 Speaker 01 of your row house into a small eatery or coffee shop or bookstore or even a little bar or boutique. So these kinds of zoning changes just completely change the fabric, the character of the city. And It also means you get a lot of landlords who are not big corporate landlords, who are, you know, looking at you as a line item on a spreadsheet. You get a lot of individual mom and pop landlords.
20:45 Speaker 01 For example, you have a row house with an elderly guy living up above and, you know, 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, his, uh, his living quarters. And that, that old model we used to have, you know, in American main streets of shopkeepers living up above their shops is still incredibly, uh, 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. And, and he doesn't care is the bookshop making as much as a Starbucks?
21:27 Speaker 01 And the young, you know, bookshop proprietor, um, like a lot of us, you know, we have our, oh, 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.
21:58 Speaker 00 We'll, we'll come back. We'll come back and talk about that in a little bit.
22:02 Speaker 01 Okay, yeah.
22:03 Speaker 00 But I want to ask you, I want to ask you about the lifestyle aspect of this, especially for your friend.
22:12 Speaker 00 There's, it's hard to imagine a bigger contrast between a New York finance, day-to-day, hour-to-hour life versus running a, a bar or restaurant that seats five, serves five, 10 people at a time. And, you know, in some of these places, I assume.
22:34 Speaker 00 Well, I assume it's often similar people, the same people coming every night or every couple 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 if you're a friend, part of the pleasure that she would get from running a small bar restaurant would be the nightly interactions with customers and having a circle, a social circle, which is not constant, but has some constancy and some variety.
23:16 Speaker 00 And is that important? Is that, you know, because in America, I think a lot of people would want to have, as I suggested earlier, a bigger place, you know, a bigger footprint, a higher volume, higher profit. But maybe in Tokyo, they're content, many of these creative people who, 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, is that accurate?
23:50 Speaker 01 That's absolutely accurate. And I do, I do want to caveat that by saying there's, there's a bifurcation, right? There's, there's the folks who work 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. And 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 salary man classic model that we, we all have the stereotype
24:35 Speaker 01 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 a sense in which both sides are coexisting in Tokyo and in a lot of these neighborhoods, we talk in the book about pocket neighborhoods in Tokyo where you have kind of an intimate, dense, low-rise neighborhood ringed on the outside by more modern high-rise offices.
25:17 Speaker 01 Those neighborhoods, you kind of have a symbiotic relationship between the two. In the 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 and bars after work and things like that. So there is, there's definitely a lot of ways that Tokyo facilitates that that more kind of
26:00 Speaker 01 purpose-driven life, if we can, you can use an Americanism. And but that that's definitely not everybody, but it's a it's a growing share of of life in Tokyo because frankly, public policy supports it and it's a great way to live. There's a phrase in Japanese "dat su sada." "Dat su sada" literally means escaped salaryman, someone who got off
26:26 Speaker 00 Get off the treadmill.
26:27 Speaker 01 The rat race to to live their dream and and the dat su sada are a growing phenomenon.
26:34 Speaker 00 I want to go make one more look at another aspect of the microeconomics of this world.
26:41 Speaker 00 I'm fascinated by it. You know, I live in Jerusalem. And the closest thing Jerusalem has to this, or Tel Aviv has to this kind of environment is the shukk, the market. And here in Jerusalem, it's Kabbalah Huda, they, 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, and bread during the day, that the shukk 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, it's a bit cacophonous, but it's really, it's fun.
27:23 Speaker 00 And it's so alive. I tell people when they come to Jerusalem, just go to the shukk on a Thursday night. It's pretty nice on a Tuesday night, but on a Thursday night, which is like the equivalent of when the weekend starts here, there's an immense amount of vitality. It's, and part of it's just exactly what we're talking about. Each place has a distinctive flavor of what they serve. There's a distinctive flavor of the owner, the person who's behind the bar. But it's only, it's only, it's 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
28:05 Speaker 00 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's hundreds of, you know, in the shukk, it's a few dozen restaurants, or a few dozen, maybe 20 bars, 10 bars, 15 bars. But in Tokyo, there's hundreds of bars and restaurants. How, how do you?
28:31 Speaker 00 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 and drink a beer, do they sit and pour out their soul to your friend behind the counter? Or did they fairly quickly move on to another one? What's the culture of being a customer in these places?
29:12 Speaker 01 Well, before I answer that, I do first want to say I've been to Mafne Yehuda. I think last time was mid 2010s. I was going through Jerusalem, Ramallah, West Bank, Palestine, like a whole tour, seeing friends. And yeah, it's exactly as you say. There is a very strong similarity between not only Mafne Yehuda in Jerusalem, but also the laneways in Melbourne, Australia. You have similarities to Tokyo's Yokochou alleyways. And I think it really highlights...
29:53 Speaker 01 In fact, Mafne Yehuda is bigger than some of the Yokochou alleyways in Tokyo. I mean, there's bigger ones, smaller ones. Yeah, it really highlights to me that this is a pattern that you can see in a number of cities. And it's not just, oh, Japan is this unique case that we could 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. And this is something where there's a skill that we would call, I guess, situational awareness, emotional intelligence.
30:37 Speaker 01 Japanese would call it kuki yomi, literally reading the air, but same basic meaning, which is you kind of...
30:46 Speaker 01 Get a sense, if you're at all are attuned to speak the language or attuned to the social context, you get a sense of like, 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's already kind of a regular here or has been before.
31:31 Speaker 01 And then, once you've been once with them, you can come on your own. And just kind of a general sense of acclamation 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 and 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.
32:12 Speaker 01 And that in a city full of 10,000 plus bars and restaurants, and if you've somehow found your way to this one, it's kind of 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 kind of disruptive because people just do not have the Japanese language skills. If you're a tourist wandering in English, before you even get to the question of cultural norms, differences, the table charge that you pay to sit down at a lot of Japanese bars, foreigners think they're being scammed as opposed to understanding that's the system.
33:00 Speaker 01 Yeah, it's it's a 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 their travels. And I actually, I was I was talking to a Tokyo bar owner recently about what do you do if a beloved regular brings you a tchotchke and you're just looking at like, oh, man, this thing is is ungodly ugly, but I have to show gratitude. I got to put it up somewhere. It's like, you know, the little like Larry David Curb Your Enthusiasm kind of scenarios of life with with with your your regulars.
33:44 Speaker 01 And yeah, this is delicate social dance.
33:49 Speaker 00 Is there is there queuing? Like, if you have a 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 when they get popular? Do people?
34:08 Speaker 01 They don't raise their prices when they get popular nearly so much. There's an incredible amount of price stickiness, because it's even even like raising prices for inflation in recent years was this this real kind of like, oh, everyone feels awful about it. And that was just minor increases compared to what we see in America. Now that the seal has kind of been broken on that culturally, that it was kind of a a not a commercial taboo, but just kind of people really leaned against modifying prices for a long time,
34:50 Speaker 01 in part because, you know, Japan was a pretty low inflation environment, and so you could get away with it. But 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, or there there are various ways to swing it. But definitely, restaurants don't want to lose their regular clientele to ephemeral tourist traffic.
35:26 Speaker 01 I will say, I do see more queues walking around in New York, where 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 the, once you get past a certain age, you're just like, I don't have, I don't have time for this. I don't have the patience for this. Leave it to the twenty-somethings with their FOMO, their fear of missing out, to queue for the new hot ramen stand. I've got, you know, ten ramen places I love already. That's fine. But yeah, definitely, it is tricky.
36:07 Speaker 01 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. And they're all in the same walkable district. So there's a variety of strategies for dealing with success in Tokyo. And there are, you know, successful folks who expand.
36:38 Speaker 00 Let's turn to this other example that I don't think quite has a parallel anywhere. Maybe a little bit New York City, we can talk about it. But that's the Zaccio 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.
37:07 Speaker 01 Yeah, so the Zaccio buildings, you look at any stock photos of Tokyo, the neon nightlife, or you see it in movies, and those buildings with, like, the neon signage up the outside, really, you know, LEDs these days, but you know, those kind of bright colored signage up the outsides, pointing to different things on each floor. And they're essentially a vertical version of the horizontal Yokochou alleyways we were just talking about. These kind of tall, narrow buildings, where each floor has something.
37:51 Speaker 01 Whether it's a bar or restaurant, you name it, or many some things, they can be subdivided. So you can have a zacchio building with dozens of micro businesses going up. And 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 the fifth floor of a building. You know, in America, we're used to the idea that bars, restaurants, retail is the first, maybe second floor of a building. And then above that, it's just offices or apartments, it's things not open to the public.
38:34 Speaker 01 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. And yeah, it gives a real three dimensional feel to the city.
39:10 Speaker 00 But the key, the other key part is the access, either by stairway or elevator. In an American building, you would typically enter a hall, an entryway, a lobby of a building. There'd be an elevator bank and you could, there are places that they 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 with it just by going upstairs from the street. And that's very unusual, right?
39:44 Speaker 01 Oh, yeah. The exterior stairwells are just fundamentally regulated very differently. And then usually it's a single elevator. So you have, and that's why until
39:57 Speaker 01 We started writing about zacchio buildings really in English or in Japanese, mostly the only writing about them from architecture, architects, urbanists, they were writing about the emergency or fire prevention elements of how do you make sure that they're they're safe, you know, if you need to evacuate everyone getting down from from the sixth floor. And yeah, the the whole debate of single stairwell versus double stairwell for buildings over a certain number of floors in the US has been in Tokyo very decisively resolved
40:38 Speaker 01 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 to the open air at least, and then a single elevator. And that frankly is enough. And that's something that I think American cities are starting to move in this direction. And New York is thankfully an outlier in terms of a single stairwell regulation.
41:15 Speaker 01 But talking, 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 US yet are our stairwell regulations.
41:36 Speaker 00 Well, in New York, New York's the only city that I, I'm not enough cities 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 Tom Tove. It's a Bukhara, 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. And in Tokyo, everybody looks up because the signs are all going up the side of the building. In New York, it's a little rare, but there's, there's a lot more of it in New York. It's just not as dramatic and prevalent as it is in. In Tokyo, and if any of my listeners have been in Tom Tove and eaten there,
42:20 Speaker 00 you can send me an email. I'd love to hear from you.
42:22 Speaker 01 Well, you've given me a food wreck. I appreciate that. Yeah, I'm definitely going to check that out. And yeah, it's, 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, 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 zacchio buildings in Boston?
43:05 Speaker 01 He's saying, well, how do we teach Americans to look up? You know, and that's, that's a challenge, but I think over, over time, a surmountable one. I think if the regulations shift, the culture will shift.
43:21 Speaker 00 It just strikes me that so much of this, of what makes Tokyo charming, you know, something we talked a lot with a Lamberto on an episode of Ecom Talk, which we're linked 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 anti-competitive reasons to help sustain the businesses and protect the profits of the people who are already there, or who knows for what other reasons.
44:01 Speaker 00 But allowing tiny places to exist is, seems to me, the single most important thing that I learned from your book and that other cities would be wise to emulate.
44:16 Speaker 01 Yeah, I think the no minimum unit size is so key. I think there's 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're a relatively bougie ward, and I think there was kind of a sense of kind of NIMBY-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,
44:58 Speaker 01 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 microspace. That just means a near endless supply of these flexible microspaces 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 microspaces? And if it's not, what can you change to improve that?
45:39 Speaker 01 And I think really that fundamentally starts with zoning and minimum unit lot size regulations.
45:47 Speaker 00 Yeah. So I was looking, let's turn to housing costs for a minute. I was, in preparing for a conversation, I looked up population of Tokyo versus New York. And I don't remember whether this is, you know, standard metropolitan area, whether it's, you know, there are many different ways you can define the size of a city. But basically, in 1960, whatever measure this was using, I think...
46:17 Speaker 00 One of those two cities, Manhattan or Tokyo, was 15 million people and was 16 million. Essentially the same, 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. Stunning. And it's not because Tokyo is more popular than New York. It's a meaningless statement. Because both cities, it's just not a meaning, it's not a meaningful statement. But what is meaningful is how many housing units got built in Tokyo versus New York. And one of the reasons New York has 20 instead of 40 million people is because they haven't
47:02 Speaker 00 built many units for people to live. 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's been much more aggressive and meaning. The regulatory environment's much friendlier to building, increasing supply. Some of that, of course, is, you talk about, one of the five things you talk about is 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.
47:47 Speaker 00 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?
47:56 Speaker 01 So this is a point where I want, 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, you know, kind of urban core, the Manhattan equivalent. They are 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...
48:39 Speaker 01 About, I think it's like 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 out, they extend them out to the mountains even.
49:21 Speaker 01 Or, and they'll develop weekender resorts and hot springs and things like that. And this, this model actually started in Kyoto with Hankyu Railways. It's called the Hankyu model. It started about over a century ago. And this model has been very resilient to declines in railway ridership. Like in the sixties and seventies, 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 a Bright Line in Florida. We're starting to see American exploration of this model.
50:06 Speaker 01 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, it's a big part of
50:29 Speaker 01 How the city creates new housing. Another factor is the construction industry is very, very deeply tied up with the LDP, the longtime dominant governing party of Japan. We talk in America about the military industrial complex. Say, in Japan, there's talk of the 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
51:12 Speaker 01 that industry intertwines with government in Japan. And so you see huge incentives for construction of housing as as part of that tie up between political party and industry.
51:31 Speaker 00 But is it just in terms of the two questions. First of all, those people are commuting in from the suburbs either to work or to have an evening with friends. How long does that commute?
51:43 Speaker 01 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 I, 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 the central Yamamoto Line Loop? Ah, 30, 45 minutes. And that continued to be true even as I 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.
52:27 Speaker 01 And 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 change completely when you make rail the dominant pattern. But I will say finally, just to tie it back to the zoning, that so much housing construction in Tokyo is by right.
53:12 Speaker 01 There are, you know,
53:13 Speaker 00 What does that mean?
53:14 Speaker 01 difficult projects. By right, meaning you don't need to negotiate with someone to build. If you own the land, you can build housing on it. And 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 residence groups. And often the
53:46 Speaker 00 City council.
53:48 Speaker 01 Yeah, yeah. Neighborhood groups, you name it. Just, 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. Because the in terms of in terms of housing development built by developers, whether that's in America, whether that's in Japan, simply because it's
54:33 Speaker 01 It's such an uncertain and incredibly costly process. It adds so much to the cost of constructing new housing. And 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.
55:06 Speaker 00 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. You know, 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 they're, it's touch and go. There's usually, facades are 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 Yokicho alleyways
55:48 Speaker 00 because there's 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 book binder, a coffee shop, whatever it is, and it's utterly charming
56:33 Speaker 00 and it's really fun. There's a serendipity about Venice despite its museum-like nature.
56:41 Speaker 00 And it strikes me that most of Italy is a museum. There are a few exceptions, but Rome is a museum. It's a fantastic place. Verona is a museum. They're all fantastic for tourists. And of course, residents are increasingly unhappy that that, and understandably so, that their city and its charm is 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. You know, you talked about tourism in Tokyo has grown a lot and has caused certain changes in the culture of these, some of these places.
57:24 Speaker 00 What are your thoughts on this museum-like phenomenon in certain cities and how Tokyo's 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.
57:54 Speaker 01 Yeah, and I'm so glad that you brought Venice into this because Venice is, has been a fascinating contrast for Tokyo's urbanists, for Japanese urbanists for centuries. And 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. And so there's now actually a movement to kind of move some of the freeways underground, move some of the roads underground and bring back Tokyo as a Venetian-style water city. So we'll see to what extent they succeed.
58:39 Speaker 01 But, 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. You know, 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, you know, Golden Age gritty, 1960s, 1970s, New York, the stuff you see in the movies,
59:24 Speaker 01 that basically doesn't exist anymore in New York. I, you know, CBGB's doesn't exist, you know, all these, these, that classic New York exists as a tourist stop, if anything. But there's, the, the actual communities aren't, aren't there anymore that made New York in the 60s and 70s this incredibly culturally generative place. Whereas if I want retro 1960s, 70s Tokyo, a lot of the neighborhoods are still there. The, the communities are still there, same rhythms of life.
1:00:06 Speaker 01 The buildings might change, but there's much less displacement of, of people. So that's one thing worth thinking about is, would you rather have the buildings or would you rather have the people? Venice, you know, almost no Venetians live in the Venice that we as tourists see. I actually took a hike one day, not a literal hike, like took, took a bus out to the suburbs of Venice where most Venetians actually live. And it's the most, you know, anywhere and nowhere kind of gray drab suburbs you would, you would expect. And then, and so there's that question of
1:00:54 Speaker 01 Is that trade off worth it if nobody can actually live in it anymore? And I think with Venice, you know, it probably is.
1:01:03 Speaker 00 It's, it's, let's be honest, it's, by the way, I think it's the most, it might be the most beautiful city in the world.
1:01:09 Speaker 01 Yeah.
1:01:09 Speaker 00 A lot of people don't like it because it's quote crowded. If you, it's, it's a lot like many things. Uh, if you go three minutes past where it's so crowded, it's almost deserted and the pace of, of walking and, and the visuals are, are totally serene and normal and not the sort of horrible crush of people, uh, that people talk about, but it's basically, it's Disneyland is the problem because like you say, it's not a, and that's the museum, that's a different way of saying it's a museum. It's been preserved, um, with a certain, a certain amount of, of charm, uh, but
1:01:46 Speaker 00 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, so.
1:01:56 Speaker 01 Yeah, I think, uh, the, 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 back streets and thanks to incredibly strong property rights, uh, you still have all these little mom and pop labyrinth alleyways and mom and pop businesses and, and the two can coexist and I'm, part of my PhD, uh, that I'm working on is the economics of subcultures.
1:02:41 Speaker 01 And at some point, the past becomes a subculture in a way in Tokyo. Like whether it's these kind of retro Yokoto alleyways or old mom and pop businesses.
1:02:54 Speaker 01 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. And so like even if seventy five percent of the Yokochou alleyways in Tokyo have gone, that's still dozens and dozens of vibrant Yokochou alleyways remaining. And we can put focus and effort into maintaining and making the ones that, the ones that are still there into resilient, permanent fixtures.
1:03:38 Speaker 01 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, of there is room for all of these things in their time, in their place, in their proportion, rather than thinking about, well, that Yokochou alleyway could be a hundred apartments and could be a place where people live and no, there's not enough places for anyone to live.
1:04:17 Speaker 01 And 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, you know, golden oldies, lovely charming old neighborhoods of Tokyo.
1:04:36 Speaker 00 Yeah, let's just close on this question, you know, emergence. You know, 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.
1:04:57 Speaker 00 Flourishing, just that it's hard to come to the big city and make make
1:05:02 Speaker 01 Yeah.
1:05:02 Speaker 00 Something of yourself is should is terrible. That is hard now. It shouldn't be hard. It should be easy. Um, and it's, I think we know something about why it's hard. Uh, it has to do with how long it takes to get something built. Uh, the restrictions on what can be built. And there's really not more to it than that. The, those two things kind of, I mean, you got some issues about parking and infrastructure. We had a wonderful episode with Donald Shoup, which I recommend listeners where, you know, the, the, the demand that all new buildings have enough parking for cars is a terrible, um, policy regime.
1:05:43 Speaker 00 So you do need decent infrastructure, railways being one way to do that. Um, but that's kind of it. Uh, there, there are a lot of little pieces, a lot of other moving parts, obviously. But if I, if I could pick, you know, the, the few things that would make American cities more livable and more magnificent 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, uh, 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. Uh, it seems to me that's the single most important urban policy you could focus on if you wanted to make your city better.
1:06:30 Speaker 00 Agree or disagree?
1:06:32 Speaker 01 Yeah, fundamentally, I, I, I pitched two things as, as the big takeaways. Uh, make it easy to build housing in your city and make it easy for people to use their own living spaces uh, to pursue their small local dreams, uh, whether that's a, a little coffee shop, a little bookstore, a little boutique, uh, letting people
1:07:01 Speaker 01 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. And so, giving people a place to live and then when they live there, letting them do interesting, creative things with it that face the public. Because we have just as much incredible creativity in America as in Japan or as in other countries, but it's priced out of our cities or it's on the internet. And so, you know, the creative American life increasingly lives on the internet versus
1:07:42 Speaker 01 in actual, physical places in our cities that we go and visit and find community and find belonging, find meaning. And so, that's, you know, if I can make a plea that's less dry policy and more at the emotional level, it's that we should structure American cities so that people with a wider range of dreams can find their place there, can find a decent way to live there, and that then they can share their dreams with us, the public, in a micro-commercial way. Because that changes the whole emotional color palette of the city.
1:08:25 Speaker 01 It changes when you walk through a neighborhood, are there doors open to you, a stranger or not? When I walk through a Tokyo neighborhood as a stranger, many doors are open to me. And I love that, and I wish we had that here.
1:08:38 Speaker 00 My guest today has been Joe McReynolds. His book is Emergent Tokyo. Joe, thanks for being part of Econ Talk.
1:08:47 Speaker 01 Thanks so much, Russ. Appreciate it.
1:08:56 Speaker 00 This is Econ Talk, part of the Library of Economics and Liberty. For more Econ Talk, go to EconTalk.org, where you can also comment on today's podcast and find links and readings related to today's conversation. The sound engineer for Econ Talk is Rich Goyette. I'm your host, Russ Roberts. Thanks for listening. Talk to you on Monday.
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