Fly low over a major urban settlement and what do you
see? A mesh of an uncountable number of supply chains, including supply chains for things and for ideas.
Discussions of cities and how they work are of three kinds.
Economists like the neoclassical model of spatial equilibrium; sites are
evaluated by competitors and equilibrium site rents emerge. Designers (often
utopians) like ambitious plans: their top-down design skills can be scaled-up
significantly. Followers of Jane Jacobs disagree and celebrate the complex
spatial arrangements that emerge bottom-up; knowledge is complex and dispersed.
Most urban planning is about growth controls, containment,
limits to sprawl – all of which are based on an abiding faith in getting big
things right, top-down. The fact that
most urbanization continues to be at the edges demonstrates that the old-time religion
fails again and again. But it does impose
costs, notably housing unaffordability for many. “Costs of sprawl” indeed. These are the costs of anti-sprawl.
Agglomeration (often vaguely defined) explains why cities
even exist. My favorite approach to agglomeration introduces the idea of supply
chains for ideas. Think of it this way. Ideas are not simply “in the air” and
therefore public goods – and a challenge to economic modeling. Rather,
we keenly seek useful ideas for our various projects (thank you, JoelMokyr). Also, as we engage in normal
(ubiquitous) supply chaining, we are likely to exchange ideas along the
way. At many of these junctures, ideas
can be re-stated or refined, perhaps in new and interesting ways. As new ideas
make new product, there is feedback to ideas. Ideas are purposefully exchanged
and renewed. How else would we get enhanced productivity and growth?
Supply chains are all about specialization and gains from
trade. Supply chains can be very long
and very complex. They are ubiquitous. We all participate in an uncountable
number of supply chains – for things and for ideas – as demanders and as
suppliers. Whereas Coase taught that
entrepreneurs and managers grapple with the make-or-buy challenge, add the
obvious thought that what to make or buy where is embedded in these
decisions.
Everyone is keen to find conveniently located trading
partners -- where trades can involve things and/or ideas. We approach site
choice with this in mind. Exchanging ideas may (or may not) involve
nearness. Tacit idea exchange and
trust-building may require nearness. Many ideas, many things, many modes of
communication: many choices to evaluate and trade off.
John Cho and I have shown (using plant location data for Los
Angeles) that nearby (same census block group) location (“clustering”) is barely explained by input-output links. These (sales as well as purchases)
only explain about 2% of the block-group association. That leaves supply chains for ideas.
Enhanced discovery, growth, and human betterment depend on how
things are arranged in space. Let the sharp people discover these. There is no
other way. This is how cities become "engines of growth."
ADDED
Listen to what Will says about cities.
ADDED
Listen to what Will says about cities.
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