The Economic Role of Cities

Today, activities and jobs increasingly concentrate in the densest urban areas. Skilled workers gather in these areas in order to join the most dynamic and innovative companies whose growth and innovation efforts are fueled by the fact that they’re close to each other. For less skilled workers, these areas of increased economic activity become magn

Cities are indeed inefficient and impractical compared with towns; and among cities themselves, the largest and most rapidly growing at any given time are apt to be the least efficient. But I propose to argue that these grave and real deficiencies are necessary to economic development and thus are exactly what make cities uniquely valuable to econo

Cities, then, are environments that are ripe for exaptation, because they cultivate specialized skills and interests, and they create a liquid network where information can leak out of those subcultures, and influence their neighbors in surprising ways.

Emerging companies need certain common inputs—for example, infrastructure, specialized legal and accounting services, suppliers, labor pools with a specialized knowledge base—that reside outside the company. Companies in a common geographic area share the fixed costs of these resources external to the company. As more and more startups in an area c