Here is today's NY Times piece on the two new economics Nobelists. In efforts to make their work accessible to the public, much has been and will be written about them. As always, there is much useful material at Marginal Revolution. Alex Tabarrok's video on Paul Romer is clear and on point. Everyone knows about the importance of new ideas and how entrepreneurs scramble to jump on them first -- to be the first to profit from innovative product that implements new ideas.
"Tech hubs," notably Silicon Valley and the many wannabees, that incubate all this by assembling the ideas people with the money people, are written about almost daily. What took the growth economists so long? Economists were stuck on the textbook lesson that ideas (that are "in the air") are a "public good" accessible to all at zero cost. How then to profit from developing (let alone investing in) new ideas? It happens all the time but can we explain in?
Once again, markets get it and demonstrate. The way to overcome the free access problem is to be the first mover. Patents can help but being first to solve all the messy problems of implementation is the key. There will be copycats and being a first mover only confers temporary advantage but for many that is enough.
One can say that Joel Mokyr solved the problem some years ago by emphasizing useful knowledge. Purposeful action is highlighted in spite of the obvious problem of free riding. Entrepreneurs are the folks who are focused and aware. They actively seek specific knowledge and specific ideas. They want to make the world better -- and they want to profit. They have some inkling of what they are looking for and where they might find it. Hence the tech hubs that so many mayors and development authorities dream of. Does Nobelist Romer suggest what to do? I think he would say that Mr and Ms mayor can signal that they are open to the emergence of of spatial arrangements that let people exchange ideas.
Does this mean high densities? How high? No one knows. Best to let the intricate order happen. Jane Jacobs (1961) knew. "Their intricate order -- a manifestion of the freedom of countless numbers of people to make and carry out countless plans is in many ways a wonder."