On Friday morning, I spoke to a conference of the Regional
Science Association in Alicante, Spain. Notice the choice of preposition: “to,”
not “at.” Given family commitments, I couldn’t attend in person, so this was a
Zoom presentation from home — something we’ve all become familiar with over the
past three years.
اضافة اعلان
The title of my session was “Is the
New Economic Geography Still Alive and Well in 2023?” The obvious subtext was, is it still alive and
well, given our ability to do what I was doing: participate in a discussion
with people thousands of miles away?
Some background:
Economic geography — the study of where
people do stuff and why — has been around for a very long time. The “new”
economic geography refers to a particular way of approaching the subject that
makes as much use as possible of buttoned-down, formal economic models. My own
most cited academic paper, “Increasing Returns and Economic Geography,”
published in 1991, was one of the early works in this genre.
What’s the point of formal modeling here? It helps clarify
one’s thinking and quite often yields insights that should have been obvious —
that can, once arrived at, be expressed easily in plain English — but that you
didn’t have before. Maybe the most important insight from the NEG is that there
is always a tension between the
forces of agglomeration, which tend to make
activity clump together, and centrifugal forces that tend to make it spread
out. And changes in technology can push the economy to a tipping point in
either direction, transforming where we work and live.
Thus, in the second half of the 19th century, the rise of
large-scale manufacturing production, which gave industry an incentive to
concentrate near the biggest markets, and railroads, which made it easy for
distant farmers to feed
urban populations, led to the rise of the
“manufacturing belt,” a concentration of industry in the Northeast and the
inner Midwest.
Sometime around the 1920s, however, centrifugal forces
gained the
upper hand. Trucking made it less important to be near a rail hub,
while electrification led to a redesign of factories — hulking mills replaced
with sprawling one-story structures, best not located in dense urban areas. So
industry and wealth spread out. The manufacturing belt gradually dissolved, and
in general, disparities in income across the United States narrowed over time.
To be honest, the early NEG literature had a somewhat
backward-looking, almost
steampunk feel, dwelling on things like the rise of
the manufacturing belt and the emergence of local manufacturing clusters like
the detachable collar and cuff industry of Troy, New York. There was also
considerable interest in China, whose rise as a manufacturing superpower has
been accompanied by the growth of industrial clusters reminiscent of those
prominent in America circa 1900.
But wait, the story isn’t over.
Around 1980, the forces driving economic geography changed
again, with the rise of a knowledge economy.
Technology-intensive firms,
whether or not they were explicitly in the technology sector, wanted access to
a large pool of highly educated workers, which by and large meant locating in
big coastal metropolitan areas. Growing employment opportunities in these areas
drew in even more highly educated workers, so regional disparities began to
widen again.
And while big
coastal metros were booming, large parts of
the United States — especially what some economists have called the “eastern
heartland” — were left behind.
Then came COVID.
For a few months in 2020, it looked as if population density
itself might be a major source of
contagion risk. Once we learned more about
the disease, however, and especially after vaccines became available, this
concern vanished.
But COVID did something else. Remote work has been
technologically possible for some time, ever since large numbers of people
gained access to high-speed internet. But the possibility went largely unused
until fear of contagion forced much work to become remote. Once that happened,
remote work reached critical mass: Millions of workers learned how to interact
over the internet and found their co-workers doing the same thing. And by and
large, they liked it, for obvious reasons: absence of commuting, easier
management of work-life balance and so on.
As a result — even though, in many ways, life has returned
to its
pre-pandemic normal — many people are still working from home, and
office occupancy remains depressed.
So does this mark the beginning of a sustained decline in
superstar cities? I don’t think so.
While remote work is pretty clearly here to stay, there’s a
big difference between
fully remote work, in which you never visit the office,
and hybrid work, which involves working from home only two or three days a
week.
Fully remote work can be done from anywhere, and you might
expect a significant number of fully remote workers to relocate to smaller
cities that offer urban amenities like walkable downtowns. Early indications
are, however, that fully remote work will remain a fairly small niche of the
workforce. From what I’ve seen, both employers and workers are increasingly
seeing the value of the informal interactions that come when you go into the
office, at least some of the time.
And hybrid workers still need to live within a major metro
area’s commuting zone.
In fact, if anything, the rise of hybrid work may reinforce
the advantages of superstar metros — or perhaps more accurately reduce one of
their major disadvantages. After all, one of the major hassles of working in
someplace like
New York City is the time and expense of commuting. Hybrid
workers don’t have to commute as much as full-time in-office workers.
Alternatively, they can move farther away from their jobs, getting cheaper
housing, while commuting longer distances, but on fewer days.
So will new technology remove the edge superstar metros have
gained over the past generation? Probably not. It may force big changes in
their internal structure; what will we do with all that excess office space?
But at this point, I don’t see us going through another historical reversal in
the economy’s geography.
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