Urban Innovation

I'll have more to say about cities and the brain in the coming days, but I thought it was worth highlighting this thoughtful post by the economist Edward Glaeser on how NYC is "America's most resilient city":

When other cities, including Boston, experienced significant population declines from 1950 to 1970, New York City still grew, albeit modestly. Only during the 1970s, the years of my Manhattan youth, did the city a suffer major population decline.

However, New York managed to come roaring back, while other cities have just continued to fall. The secret of New York's post-1970 reinvention was that smart people, who knew each other and learned from each, innovated in ways that made billions in financial services. The same density that once served to get hogsheads onto clipper ships served to spread ideas.

What does this mean for the future?

New York still has an amazing concentration of talent. That talent is more effective because all those smart people are connected because of the city's extreme population density levels. Historically, human capital -- the education and skills of a work force -- predicts which cities are able to reinvent themselves and which ones are not. Those people who are continuing to pay high prices for Manhattan real estate are implicitly betting that New York's human capital will continue to come up with new ways of reinventing the city.

I won't be surprised if Manhattan prices do drop in the next few years, but I also strongly believe that the future of New York City continues to be bright. Homo sapiens are a social species; almost all of what we know we learn from each other. Dense cities, like New York, succeed when they take advantage of this fundamental aspect of our humanity. They thrive by enabling us to connect with each other, which then promotes learning and innovation. The current downturn will only increase the returns to being smart, and you get smart by hanging around smart people. As long as New York continues to attract and connect those people, the city will continue to thrive.

Last year, I wrote an article for Seed (not online) which looked at recent research attempting to construct a mathematical model of city life. One of the surprising insights was that measures of innovation were directly linked to measures of urban density and human interaction.

While certain institutions can foster innovation, the scientists are quick to point out that the innovative abilities of cities are ultimately rooted in the one thing that every city has in common: lots of human interaction. "Cities concentrate our social interactions," Bettencourt says, "and that's what leads to this explosion in knowledge creation and innovation."

Perhaps significantly, the metropolises of the futureâ¯fast growing desert communities like Phoenix and Las Vegasâ¯don't generate this kind of human friction. They work by minimizing our dealings with other people. These rapidly growing cities are really collections of suburbs, in which density gives way to single-family homes and air-conditioned garages. The sidewalks are empty; the commuters commute alone. But unless these new cities find ways to make their citizens interactâ¯to create public spaces that people want to shareâ¯they might not generate the conditions that allow them to continue their rapid growth. The equations imply that a city without concentrated human contact is destined to stall and wither, since it won't be able to innovate at the necessary rate. Urban growth without urban density is unsustainable.

This is a mathematical demonstration of an old idea. Jane Jacobs, in her seminal work The Death and Life of Great American Cities (1961), argued that every healthy city was defined by its ability to facilitate social interaction. She saw the busy sidewalk as an improvisational "ballet," in which information freely flowed between city dwellers. Her book identified the specific urban ingredientsâ¯from short city blocks to mixed-use neighborhoodsâ¯that encouraged "the intricate mingling of diversity." When strangers were forced to communicate, Jacobs wrote, the city developed the "innate ability...to invent what is required to combat its difficulties." Interaction and innovation were intertwined.

This is why I smirk when I read about cities like Orlando, Florida trying to jump start innovation with a bevy of tax credits for high-tech businesses. These places don't need more tax credits - they need more coffee houses and crowded sidewalks.

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Just don't read the comments to Glaeser's post. While he does gloss over a lot of factors to make his point, the comments show that NY Times readers aren't that bright.

I don't see a mechanism where coffee shops and crowded sidewalks causes innovation. Schools, varied social organizations, and having many employment opportunities without moving seem more likely to create network effects. But I don't see why you need ultra-high density urban living to achieve them.

Is the high-density premise still relevant in the age of the internet? Isn't everywhere potentially "high density"?

Big cities tend to foster innovation because there is a sufficient consumer density nearby, so startup costs are minimized. Even better, cities contain people with larger disposable incomes. Specialization to a micro-demographic tends to work out well when there are still 200K people in any micro-group.

I tend to smirk at the word talent. What exactly is the talent that people in new york have? Marketing talent? Financial talent? High IQ? Willingness to work hard? Lots of connections? Which of these is 'talent'.

It isn't at all clear to me that the article linked (power law scaling) has any causal power. Worse, it seems like a restatement of the Krugman-style theory of trade and advantage. That, as it turns out, has little to do with talent.

A better example might be Silicon Valley, with the large concentration of engineers that can always move from place to place, with a fair amount of relevant, shared skills. That is actually somewhat supportive of the idea of talent, though in this case, it is a definable skill. What skill or talent is being mentioned in New York is utterly unclear.

The British Property Federation (BPF) released a paper at the end of 2007 on "The economic impact of high density development and tall buildings in central business districts". It's pretty similar to the Bettencourt et al you cite above, though with £/capita figures.

@thenks - You will find detailed argument in the BPF paper. Talent is what people will pay £200k+ for. This is not a definition with any implications of causality, it is a pragmatic tautology. Nor is the power law scaling supposed to be causal. It is symbiotic, syndromic, in the way of the Austrian school of Economics and their theories of money supply (attracts talent attracts money supply attracts [insert desirable thing] attracts money supply ad infinitum. Or rather until the bubble bursts.

Though, as noted above the honeycomb of success and the survivors of the bust lead to quicker regrowth and further densification [and money supply] and expansion.

also @thenks: I'm not sure why a restatement of Krugman's (Nobel Prize winning) Economic theories should be seen negatively.

@Daniel: Certainly Secondlife and videoconferencing, email, telephone, semaphore (etc.)have something powerful to offer in the way of connectivity, but it ain't like having lunch, or like shaking hands.

I don't get it. Perhaps that is because I've never lived anywhere that can even be called close to the density of New York City.

What I can relate to is the self-sufficiency of a small town. Need a wheel chair lift on that F150? The small-town machinist can build one. Need groceries delivered to an invalid? The small town grocer will do it. Need an elderly couple's plumbing fixed? It's done...and the lawn mowed while we're there.

Perhaps it is the medium size towns and cities that miss out?

"I'm not sure why a restatement of Krugman's (Nobel Prize winning) Economic theories should be seen negatively."

I did read the BPF paper, and thought it employed rather circular logic. I want a defintion of the starting poit: what is talent. Krugmans thesis rests on skilled and physically relatively immobile labor pools (at least as far as I understand it). An industry pulls in people, with enough density, competition is easier to establish (various systems are in place). Talent is, in that sense, a skill, and it isn't at all clear to me what the particular financial skill is. There are very smart people, but that isnt quite the same thing.

At some point, just stating that people are willing to pay 200K is worthwhile isn't really an usfuel start. That sort of circularity isn't pragmatic because it is neither testable nor predictive.

to give an example: lawyers make a very large amount of money, and do so in widely disperesed areas. I would argue that the income is predicated not on particular talent, but on a social system that has chosen to reward a particular sort of legalism. Those social systems can and have changed (though luckily for the lawyers, they write the laws).

Equivalently, I would argue that San Jose is succesful as a engineering incubator in large part because engineers are free to move from place to place. This is of limited benefit to companies--their best people can get easily poached...but it is great for the economy. Many other things matter.

There are lots of similar examples--history, location, law and skills matter. But just a note that talent means high pay is quite frankly useless. It is sort of interesting, but doesn't really go anywhere.

If you really want to make the argument stick, explain how you would have defended this in New York in 1985. Good luck.

Brennan, the point you are running a tangent on with the density of engineers in silicon valley is the same as the density of, say, lawyers, there becomes an opportunity for specialisation. Thus two lawyers who previously were mildly good at a range of overlapping work become much better at a smaller (mutually exclusive) range of work. Because they can process the workload (in their specialisation) more quickly and accurately, they deliver greater benefit to the economy.

The specialisation of, say, lawyers is mirrored across other knowledge industries that gather within dense CBDs, creating the quasi-firms of specialists that are most effective agents of economy.

In small-town, the one lawyer does everything to do with the law, the dentist does all dental work, the mechanic does modifications to tractors and F150s (I don't know what an F250 is, but).

This is Adam Smith and the wealth of nations as much as it is Krugman, as much as it is the ever-controversial Herrstein & Murray. Cities are drivers of and driven by economies of agglomeration, economies of scale, diversity. The same cog in different machines is not the same cog.

I'm not sure why you are hung up on the "talent" question. Perhaps the idea that just by fitting into a dense city one is delivering more value, showing talent?

@Donna B: You mention the self-sufficiency of the small town. It is exactly that - sufficient, not more! More is more, even now on the cusp of austerity.