Thursday, January 13, 2011

The case for big cities

Mario Polèse makes the case for big cities with his Seven Pillars of Agglomeration

1. Economies of scale in production - large cities can support large factories and their upward and downward linkages and thereby makes manufacturing more efficient.

2. Economies of scale in trade and transportation - larger cities have access to larger airports or ports or railway stations, thereby making trade more cost-effective.

3. Falling transportation and communications costs - the steeper the drop in transportation costs and the greater the weight of scale economies in production, the greater the potential for centralizing production in one or two places.

4. The need for proximity with other firms in the same industry - face-to-face contact fosters trust; proximity generates network effects and amplification of knowledge and creativity; workers find it easy to move across firms and firms find it easier to locate workers; personal contact (and communication) is crucial in industries where creativity, inspiration, and imagination are vital inputs.

5. The advantages of diversity - the diversity of cities helps development of certain knowledge based industries, provide a variety of ideas, source a diverse pool of workers etc.

6. The quest for the center - firms want to locate in the geographic center of their markets. Centrality provides the customer-base.

7. Buzz and bright lights - city, being where the action is, attracts talented and ambitious people. Companies, in turn, can hire them. City is where ambition, dreams, the need for recognition meet each other.

1 comment:

KP said...

Dear Gulzar,

A nice post and but for the restrictive nature of city life (you can ignore that as an aesthetic and philosophical musing...and not everyone may agree...) that constrains all of us to being cogs in the supply chain economy - may be the only way to build a sustainable future.