For several years, I’ve been collecting examples that illustrate a general principle about incentives and the dynamics of policy: To create the incentives for better outcomes, rely on small stakes because they support good measurement. In short, SS=>GM. In other posts, I’ll cite some recent examples that include a new US policy toward investment in Myanmar, the quiet success of National Assessment of Educational Progress, the retreat from using standardized tests to evaluate teachers, and use of stoplight cameras as a source of revenue for local government.

In a recent article on urbanization in China The New York Times presented this graph of the urban population share versus GDP per capita in a selected set of countries: The NYTimes article seemed to suggest that China is trying to achieve an urban population share that is inappropriately high. If the idea was to suggest, for example, that China is trying to achieve the same urbanization rate as Japan but at a much lower level of income, it matters if the data point for Japan is in the right place.

The front-page story on urbanization in China that The New York Times published on Sunday June 16 shows how the same facts and quotes can suggest different narratives. Here is the narrative suggested by this story: The Chinese government is forcing farmers to move to cities. A few small changes in wording could equally well supported a very different narrative: The Chinese government is experimenting with ways to pay farmers more money to get the land that it needs to make room for the hundreds of millions of Chinese who still want to move to cities.

New communities add variance to the outcomes from social interaction. The probability of a big positive interaction goes up. So does the probability of a big negative one. Progress seems to come both from increases in this variance and from social systems that trim the lower tail. Together, they mean that we get the benefits of a big upper tail without the costs of the lower tail. In the history of physical communities, the most dangerous negative interactions came from infectious disease.

Former Toronto Mayor David Miller, currently the Future of Cities Global Fellow at NYU Poly, spoke about Urbanization with Paul on March 7, 2013.