Friday, April 21, 2017

Let it be

The New Yorker's Adam Davidson writes about the "Sweet Smell of Success", in this case the cluster of firms involving cosmetics that project (or counter) odors, located in New Jersey (in and around I-95 "the stink highway").  Many other industries seek and find the clustering that serves them.

Economics is obviously spatial but this truism (still) gets surprisingly little attention from most economists. Economic growth (and how to get it) is all the rage. But cities are rightly called “engines of growth.” Advanced economies are urbanized because cities facilitate innovation and efficient production. Agglomeration economies and productive clusters of activities are often cited. There is a spatial dimension to explain how and why cities succeed. Densities matter but densities can also impose costs. Complex trade-offs are involved. Many densities emerge.
In market economies complex supply chains emerge. Each firm (each link in the chain) processes decisions regarding what to make vs what to buy. But this involves questions of producing where and also buying from where? Supply chain emergence has a spatial dimension and involves evaluations of the costs and benefits of locating at various sites. 

Innovation is key. But less studied but also essential are supply chains for ideas. Producers and consumers are keen on acquiring useful knowledge (Mokyr, 2002). From where? How? Location choice bears on this also. Most of us also seek to add value in the supply chains for ideas that we are involved with.

All of this is further complicated by the fact that while there is mode choice involved in the emergence of supply chains for things (deliveries by land, sea or air?). Information also comes at us in many ways. Face-to-face or electronic is an obvious contrast. Most of us utilize both. Again, the mix we choose and the site we choose are co-determined.

Many things and many ideas come and go via multiple modes to and from many places. Adamson cites Pontus Braunerhjelm of Sweden's Royal Institute, "it is all but impossible for government to create a cluster."  The complexity is beyond even (especially) the best and the brightest. But they all want the next Silicon Valley. 

Where is the original plan for Silicon Valley?  Emergence beats planning. The trick is to stand back as much as possible -- and let emergence happen where and how it may.


Labor and capital (many kinds in each case) are each mobile. But degrees of mobility differ. They each land somewhere.  The places they leave from as well as the places they go to define the ambit and the range of their relationships.  Social relationships? Economic relationships? Surely both. Supply chains for things and supply chains for ideas each have geographic dimensions (opportunities, constraints).