In my post on ineffective green subsidies I featured a column by Harvard’s Edward Glaeser. To me the key take away of that column is his claim that: In the long run, America will be richer than China only by having smarter citizens, and that requires the skills that come from schools and cities, not dispersed factories.
Skills that come from schools and cities. Think about how different that is from the our normal approach to economic development. Most policy makers and practitioners would think you are from Mars if you suggested that schools and cities are the levers that matter most for economic success. They almost exclusively focus on retaining and attracting businesses.
Glaeser’s terrific new book Triumph of the City details the reasons why cities are the drivers of economic growth and prosperity.
For centuries (think Thomas Jefferson) – despite all the evidence to the contrary – Americans have viewed central cities as a problem. The place where “they” live that drag down the country. The reality is as Glaeser writes: The ideas that emerge in cities eventually spread beyond their borders and enrich the rest of the world. Massachusetts rises or falls with Boston just as Maharashtra rises and falls with Mumbai. You read that right: cities are the engines of economic growth.
When it comes to economic development Glaeser concludes: The bottom up nature of urban innovation suggests that the best economic development policy may be to attract smart people and get out of the way. You read that right too: the foundation of economic development should be creating central cities where smart people want to live and work. Because where they concentrate you get the ideas, innovation and entrepreneurship that drives the economy across the planet.
The facts are: Within the United States, workers in metropolitan areas with big cities earn 30 percent more than workers who aren’t in metropolitan areas. These high wages offset the higher costs of living, but that doesn’t changes that fact that the high wages reflect high productivity. The only reason why companies put up with the high labor costs and land costs of being in a city is that the city creates productivity advantages that offset those costs. Americans who live in metropolitan areas with more than a million residents are 50 percent more productive than American who live in smaller metropolitan areas.
The main reason big metros anchored by vibrant central cities are so much more productive is concentrated talent. As Glaeser writes: Cities enable the collaboration that makes humanity shine most brightly. Because humans learn so much from other humans, we learn more when there are more people around us. Urban density creates a constant flow of new information that comes from observing others‘ success and failures. … Cities make it easier to watch and listen and learn.
And the big city/concentrated talent advantage is growing in a flattening world. Glaeser poses and then answers the essential question about why cities can be the engines of growth despite being the most expensive places to live and do business:
Once you can learn from Wikipedia in Anchorage why pay New York prices? But a few decades of high technology can’t trump millions of years of evolution. Connecting in cyber-space will never be the same as sharing a meal or smile or kiss. … The most important communications still take place in person, and electronic access is no substitute for being in the geographic center of an intellectual movement. The declining cost of connecting over the long distances has only increased the returns of clustering close together. … The death of distance may have been hell on the goods producers in Detroit, who lost out to Japanese competitors, but it has been heaven for the idea producers of New York and San Francisco and Los Angeles who have made billions on innovations in technology and entertainment and finance.