What are cities for
Or, why do we spend so much time talking about cities, and how should we run them.
Amongst urban economists it is common wisdom that a city is just a nice word for a labour market. It is a place where people have chosen to live close to each other to get better jobs, in order to provide themselves and their families with a better standard of living. The reason they provide this is due to a fancy word that actually has a pretty simple meaning - agglomeration. Effectively, where people live nearby and communicate with each other they can be much more productive than if they operated far away from each other.
Think of it like Adam Smith's pin factory. Most of my readers will know the story, ten pin makers can make 4800 pins a day, but if you break down the manufacturing process and allow people to specialise at each stage of production the same ten can produce 48,000 pins a day. Cities work in very similar ways - if the pin factory is closer to a steel mill they may be able to procure equipment at a lower cost as the transport costs are less. Moreover, the owner may learn of more efficient methods or equipment to produce the pins that may enable cost per unit to fall. These lower costs can allow the firm to operate with less workers, allowing labourers to pursue other more productive fields, or allow the firm to expand cheaper and provide more pins.
If the factory was miles from any other firm, then their workers would only see other workers, the transport costs would be high and efficiency gains would be more difficult to come by. Accordingly, the productivity of the firm would be a lot less. Now consider that the pin factory also would exert these gains to other manufacturers, such as cloth manufacturers using pins in the production process, as well as innovating themselves and providing efficiency-gaining advice inadvertently to other firms. As a result the whole production process becomes much more innovative for all and benefits all firms, and thus their workers who will benefit as consumers from cheaper goods and services.
Although this process is well understood and has been for a very long time - indeed, Alfred Marshall has an excellent section on it in his Principles of Economics published in 1920 - it is very hard to replicate purposefully. This is because cities grow best when they grow organically and allow market forces to create these trends. For example, if market forces create high demand to move to a city, but density and growth restrictions prevent sufficient people from moving there, then it is highly likely that overcrowding will occur and where property rights are less strictly enforced, slums may grow. This is because the uplift to peoples standards of living is so great that they are prepared to put up with unjust conditions like this in order to live in a place. I can see this in my own experience - until recently I lived in a 3 bed flat shared with 4 other people, because the location was so desirable that I was happy to put up with this in order to live there.
Different problems can occur in command economies where price signals do not allow agglomeration to occur naturally. For example, in the Soviet Union you would often find the factories built in the 19th centuries to be built in the city centres. Given land carried no market value, due to the state monopolisation of this resource, there was no incentive to move these factories to cheaper land on the suburbs where they may have had beneficial agglomeration effects from being near the newer factories. Consequently, potentially beneficial productivity gains never occurred. Equally, typically you see higher density in city centres due to high land prices and lower density around the suburbs since land is cheaper. Without land value, the Soviet Union had the opposite where most people lived in dense tower blocks away from the city centres imposing large transport costs for them to reach their jobs at the expense.
However, some of the best cities are ones that no one has ever designed. This is not surprising given market forces tend to incentivise practices that most people would approve of. Suppose people want to live near their work, but land prices are high there then developers will build densely to allow more people to live there. Suppose people want to still live in the city, but have a bit more land available for a garden or driveway and are happy to sacrifice proximity to one's office to have that then the suburbs offer lower land value where single family homes may be more appropriate. Indeed, look at London - the bulk of my favourite parts of the city (i.e Bloomsbury, Maida Vale, Marylebone, Clerkenwell etc) were developed before any substantial planning regulations existed, yet they have incidentally managed to offer walkable, and beautiful neighbourhoods where people want to live. Friedrich Hayek put it best when he argued that "order without design can far outstrip plans men consciously contrive".
This analysis forgets something fundamental about cities, and that is that they are a place of enjoyment. I won't go into the sociology of it, but I'm sure my readers can recognise that we are largely social beings. Most people do not choose to work, because they want to spend half of their waking hours producing something for other people. They choose to, so they can finance the remainder of their life. Indeed, during the so-called cultural revolution of 1968 in Paris the rallying cry of disdain was "metro, boulot, dodo" loosely translating into English as "commuting, working, sleeping". This basically sums up what life is in an inefficient poorly designed city. One wakes up, commutes to work, goes home and sleeps. They have no time for leisure, or friends, or relaxation. Life is work. However, this does not necessarily have to be the case. An efficiently designed city would make work, leisure and home all easily accessible for most people by building densely. This would allow even on work days for people to have a life beyond their employment and to genuinely have an enjoyable life.
Cities are the fundamental driver of growth, both historically and presently. As such, the unrivalled standard of living we enjoy today primarily can be put down to their emergence. So, what are cities for? Cities are for jobs, they are for growth, and they occur often out of nowhere. Thankfully, they also happen to be fun.