Book Forum: Harford and Kevin Grier on Cities

Kevin Grier at Kids Prefer Cheese continues our book forum on the Logic of Life with a discussion of The World is Spiky.

Here is my summary of Tim’s argument. Cities are expensive, and that
expense is above and beyond paying the necessary rents to gain access
to their unique amenities. Cities are marked by knowledge spillovers, a
positive externality (don’t get mad Bryan)
where human capital grows faster when one is around more humans. And
the internet, rather than reducing the positive effects of cities on
productivity, actually enhances them. Thus, rather than subsidizing
rural areas, perhaps we should consider subsidizing cities.

Luckily
for Tim and his prospective book sales, he tells this story in a much
more entertaining way than I just did. But I still have some questions,
suggestions, and quibbles.

The claim is made that salary
differences don’t match up with cost of living differences and the
reason for this is knowledge spillovers, but it is not spelled out
exactly how that would work. An alternative seems to me that zoning
restrictions create these big rents and pre-existing property owners
are sucking a lot of the consumer surplus out of people with high
valuations on cool experiences…..

Tim discusses
“failing cities” and describes (correctly I think) why people still
live there, but gives no explanation for why they failed if indeed
cities produce these positive externalities. There is no discussion of
some of the very biggest cities in the world; Mexico City, Lagos,
Jakarta. It would be nice to know where the argument works, where it
doesn’t and how to know which is which…

More here.

Comments

"Thus, rather than subsidizing rural areas, perhaps we should consider subsidizing cities."

So, seeing that I'm already paying a price to not be a city dweller, I should pay an even higher price? You can't subsidize cities with the resources of those in the city, so it has to come from me!

Of course, it all comes back to choice. I choose not to live in the city because the downsides outweigh the upsides. So, being the marginal city immigrant, I would have to be subsidized to live there. How would they target me? Or would they just punish me for my choice to reward those already benefitting from their choice?

To me, cities are historical anachronisms. The knowledge focused business world just does not require a dense population center to function anymore. Unfortunately the science of business management is generally stuck in an industrial era mindset that depends on the proximity of its workforce. Once management catches up to the reality of IT, companies will recognize that they can save money and increase productivity reducing their office footprint and distributing their workforce.

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