18 February 2011

Cities as centers of competition

In this review, I said
Why do companies evolve so quickly to give us what we want? Because markets reward those who do the most good (quality goods and services at low prices) for the most people.
Then I read this review of a book praising life in cities, which suggested a clear extension of my comment on market competition, i.e., cities are full of interesting people and innovations delivering the good life to urban residents because the urban market maximizes the rewards to innovation. Buildings, restaurants, clubs, stores and other businesses all compete for residents' attention and money, so they are constantly driven to improve.

Compare that happy result to cities (or military bases or shopping centers or college campuses) that are centrally planned and built. They can be ugly and non-functional to the extent that they do not have to compete with other areas for residents' attention.

BTW, this whole discussion fits something that Adam Smith said over 240 years ago:
the power of exchanging that gives occasion to the division of labour, so the extent of this division must always be limited by the extent of that power, or, in other words, by the extent of the market.
I always thought of extent in the horizontal sense, but it's obvious that it really refers to the population, which is denser in cities.

Bottom Line: There's more cool stuff in cities because there are more people to produce and consume it.

2 comments:

Eric said...

There is not a lot of open land in cities, or mountains, or farms, or gardens, or quiet. There are a lot of people, but some folks do not want to live in the middle of a lot of people -- hence the rise of the suburbs.

Also cities have multidecadal decay of parts of them. Traditionally, the center dies and is reborn fifty to one hundred years later.

For me, I am willing to go to cities but would rather not live in one.

W.E. Heasley said...

Dr. Z.:

Your premise is decentralized decision making trumps central planning. True enough. The next part of the premise [population] is that the more decentralized decision makers we have the better. Agree. As for population density “…urban market maximizes the rewards to innovation” you are basically saying the more concentrated the decentralized decision makers [close proximity] causes increased innovation.

However, some urban markets seem to lend themselves to central planning. In other words, San Francisco and New York city are urban markets that have governmental central planners at the helm (e.g. Bloomberg, SFO city council). Yes innovation occurs but a reverse tide of central planning springs up. The alternate would be Hong Kong (even under communist control) is innovative and remains largely free of central planning government intervention.

Also, in urban areas you have centralized planned public housing, central planning public education systems, centralized governments offering a wide array of central planned social services, centralized governments exercising central planning [picking winners and losers] in annexation, green ways, and/or urban renewal projects, etc., etc. What about rent control [price fixing] and zoning which are often found in urban areas which are centralized government central planning techniques?

Hence your proposition of “…urban market maximizes the rewards to innovation” also needs to reflect urban markets can/will/do maximize government central planning schemes.