Saturday, July 27, 2019

Thirteen thoughts on growth and cities

  n  Economists’ favorite question is still “How did we get so rich?” We learned how to coordinate production. We learned how to coordinate discovery. We learned how to form mutual loyalties – for social as well as economic reasons. Can we unscramble the social from economic? Does it matter?
  n  Supply chains for commodities are ubiquitous; they illustrate and deliver the gains from specialization and exchange. Most chains for things are accompanied by chains of information. Think of instruction manuals and accompanying videos and websites and/or live  instructors.  Buy an airplane and they send you to their own training school.
  n  Supply chains for information are everywhere; these nurture supply chains for ideas. The more information, the more ideas. We live in many goods chains as well as many information chains; we are also likely to live in many idea chains. Some of the latter involve face-to-face contact. Location choice and interaction mode choice are concurrent.
  n  The more new information, the more new ideas. We seek both. Information can hatch ideas and also help test ideas. Ideas and information feed each other just like theory and hypothesis testing feed each other.
  n  Neither information, nor ideas, are manna from heaven. Key facts and idea are deemed useful -- and are sought. The search may start with a hunch but can lead anywhere. Nevertheless, it is directed.
  n  All this says (once again) that technological change is endogenous; new knowledge and supply chains for ideas are emergent.
  n  Supply chains involve many nodes/locations; spatial patterns and interaction patterns emergent. Entrepreneurs must choose what to make vs what to buy. But that’s incomplete. Make vs. buy involve where to do all these; e.g., location choice.
  n  All this illustrates how prosperity and human settlement are two sides of the same coin. Propitious location choice (opportunities for propitious choice) denote prosperous cities – and prosperous economies.
  n  What can we, should we, do about location choice and cities? We should leave room for emergent orders. This is how we get a chance at greater prosperity.
  n  The continued outward growth of major cities is nearly universal. Local policy regimes seem to make little difference.
  n  Agglomeration opportunities are not restricted to the old centers. There are many sub-centers. Locators are drawn to favored places as they economize in light of their peculiar interest in specific commodities, ideas and information flows.
  n  Cities are a complex mesh of an uncountable number of supply chains. They are much more than simply labor markets. It is not about journey-to-work or journey-to-shop but much more.
  n  Instead most urban policy/city planning discussions dwell on top-down plans and “visions”.  They even call it “smart” growth.