Why do some metropolitan regions grow faster than others? That’s the question asked by Mario Polese, author of “The Wealth and Poverty of Regions: Why Cities Matter,” in an essay published in the City Journal. The essay is an easy read, and I recommend it to you. But if you are too harried to do so, here is the Reader’s Digest version.
Polese offers five principles of urban economics that explain metropolitan growth rates:
- Cities that start out on top tend to stay on top. Population rankings are surprisingly stable. Only rarely do top cities get dislodged by newcomers. “The advantages of size and location are the outcome of decades, even centuries, of investments in infrastructure and in institutions,” writes Polese. “Once in place, these accumulated investments define a good location and cannot be easily undone.”
- When cities do experience dramatic changes in growth rates, outside factors are responsible. Technological change can undermine established industries and undermine a region’s economy. Thus, the decline of manufacturing-intensive Midwestern cities can be attributed to automation and globalization. Conversely, the invention of HVAC made Sun Belt cities far more inviting and economically competitive than they had been. New modes of transportation, as when railroads supplanted canals and highways supplanted railroads, also can shift city fortunes. “No location advantage is eternal, no matter how seemingly indestructible.”
- Accessible, well-connected cities exhibit higher growth rates. “The city that succeeds in positioning itself as the meeting place and market center for a wider region has won a tremendously important battle, since transportation and travel hubs have historically emerged as dominant finance and business centers, attracting talent, money and brains.” In the modern economy, air connectivity is key — and high-speed rail can confer a competitive advantage.
- Every industry leaves an imprint on a city that can be hard to shake. Cities that built their prosperity, institutions, expectations and mindset upon manufacturing are finding it difficult to reinvent themselves. “Residents of a city with big, unionized factories will naturally come to expect good wages and job security, and their expectations will endure long after the last plant has closed its doors,” Polese says. “I know of no example of a painless transition from heavy industry to the knowledge economy.” Polese makes a second point: Cities with highly specialized economies are vulnerable to disruption and decline.
- Good and bad policies do matter. Econometric models can’t explain more than half of cities’ variability in growth over time. Good policies are hard to articulate and difficult to replicate. However, it’s not hard to figure out which policies undermine growth. “Poorly governed cities with a reputation for corruption, violence, or deficient institutions will pay a price. … Good governance is not only a matter of virtue but also a competitive necessity. “
— JAB
