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January 07, 2008

Richard Florida

Global Players

« My Year in Cities | Main | My (New) Hometown »

It's pretty much a truism to say the global, interconnected economy benefits some cities more than others.  Now a new paper by economists Ed Glaeser and Giacomo Ponsetto shows based on some fancy theory that our interconnected world benefits denser, idea oriented, creative centers like New York much more than industrial, "producer" cities like Detroit. Here's a snippet (via Arnold Kling).

This paper advances the hypothesis that improvements in transportation and communication technology can explain both the decline of Detroit and the reinvigoration of Manhattan. While we present some suggestive evidence, the main contribution of this paper is a model that illustrates how reductions in the costs of communication can cause manufacturing cities to decline and innovative cities to grow. Reductions in transport costs reduce the advantages associated with making goods in the Midwest, but they increase the returns to producing new ideas in New York.

True enough. But it's hard to argue that Silicon Valley is denser than say Detroit or for that matter Philadelphia, or Pittsburgh or Baltimore.  Yes density matters, a lot.  But other factors are at work as well.  Globalization and technology are causing a simultaneous specialization of work across geography - I like to call this the Nashville effect - and also consolidation of the urban hierarchy (what regional scientists call the rank size rule) across the world. We are witnessing the evolution of a single, interconnected global city system. That means the big will get bigger, and the middle will consolidate. And, yes, Chris Anderson, when it comes to cities there will also be lots and lots of them moving around and jockeying for position in the long tail.  For those so interested have a look at my paper with GMU modeling phenom Rob Axtell.


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It seems like a physics analogy is appropriate here. What we're going through right now is a little like the formation of the solar system. There are a lot of little rocks (cities) jockeying for position, and gravity is either pulling the smaller ones into the bigger ones, or destroying the smaller ones through collision.

If this analogy really is appropriate, it appears that this period of instability will eventually slow down once the pieces settle. The winners will be those with the most gravity. The question, then, is what elements provide regions with the most economic gravity? And after that, how do you encourage the growth of those elements to give a region the greatest amount of economic gravity possible?

R.A. Student

While I find the Glaeser and Ponsetto paper highly interesting I cannot help but respectfully question some of their inferences.

I can see why a decrease in the costs associated with communication would, in part, be responsible for the decline of the industrial midwest, however, I cannot but question the ascertion that this same phenomenon would cause innovative cities to grow.

Why would making knowledge transmission easier cause innovative cities to get bigger? Would it not be equally true that easier knowledge transmission would reduce the time period on which innovating cities are able to capture positive economic profits stemming from the given innovations (i.e. the time period on which they can extract entrepreneurial profits)?

If, in fact, Richard is correct in his ascertion that we are evolving toward a global city sytem (i.e. a global zipf distribution), and if it is true that the costs of communication are decreasing (both of which are probably true) then what seemingly should emerge is a faster urban growth cycle. By that I mean the time that a city "reigns supreme" should seemingly become shorter... resulting from the increased rate of knowledge diffusion (i.e. the length of time that positive economic profits exist, stemming from the given innovation, would become shorter because it has become cheaper and easier to copy that innovation).

What it seems will happen, then, is that there will be a more frequent "changing of the guard" under such conditions. Hence, the ability of a city to "lock in" at the top of Zipf will decrease and their should be ever more jockeying going on.

I was once asked to review a paper submitted to Nature (which I cannot locate there online yet) that analyzed cities' "metabolic rates". Their conclusion is relevant here and is quite interesting. The authors concluded that as city-size increases, so too does the rate of innovations that are required to sustain that city-size (i.e. the metobolic rate of cities increases with size).

As a result, larger cities must innovate at an ever increasing rate in order to sustain their "large-ness". This is relevant here, because if the cost of communication is decreasing (as it certainly is) then large cities are required to innovate even faster to sustain their size because the length of time that they extract postive economic profit from any given innovation is shorter.

Again, what this says to me is that a decrease in the costs associated with communication may not lock in New York at all, rather, it may simply increase the rate at which New York must innovate in order to stay on the top of the hierarchy.

Lastly, think about these issues in regards to Detroit (autos) and silicon valley (computers). It took about 70 years or so for Detroit to create and begin to lose its innovative industry. Does it not seem that silicon valley is beginning to diffuse its computer industry (for example to India) in around half that time? Thoughts?

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