The Economy of Cities

in the highly developed economies of the future, it is probable that cities will become huge, rich and diverse mines of raw materials. These mines will differ from any now to be found because they will become richer the more and the longer they are exploited. The law of diminishing returns applies to other mining operations: the richest veins, havi

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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

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A circumstance still more persuasive than comparative growth rates within a nation suggests that the process of import replacing may be the chief cause of economic expansion. Consider the fact that when cities rapidly replace imports, three direct results follow: 1. The sum total of economic activity expands rapidly. 2. Markets for rural goods incr

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We have been considering three different processes by which organizations can first become exporters: • They can add the export work to other people’s local work. • They can add the export work to different local work of their own. • They can export their own local work. The significant fact about these processes is that they all depend directly on

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the multiplier effect from import replacing is far more potent than the multiplier effect from growth of exports, because all shifted imports go to swell the local economy. An equivalent amount of imports earned by export growth do not. After a city has experienced an episode of import replacing and import shifting, its local economy is thus much l

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In the case of an export-multiplier effect, some of the new imports earned by the export growth go directly back into the export work, the way ore imported into Pittsburgh goes directly into exported steel, or a high proportion of the textiles imported into New York go into exported clothing. The other imports earned by exports go into a city’s loc

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The economy grows in still another way: when imports are replaced, a city is almost sure to produce—for its own market—more of those things than it had previously imported. This happens because the very act of replacing former imports creates more jobs. Once Scranton began to produce tombstones, there were more jobs in Scranton for tombstone worker

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The question arises as to why all cities do not replace their imports from time to time. Why do some, like Scranton, do so significantly only once while others, like London, do so again and again? The answer is that if a city stops generating new exports after an episode of import replacing, it will not earn many more imports to replace. It will no

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Offhand, one might suppose that large organizations with their many divisions of labor would be much more prolific at adding new work to old than would small organizations. But this is not so. In a large organization, nearly all the divisions of labor, no matter how many there are, must necessarily be sterile in this respect. The various goods and

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When cities that have already had import-replacing episodes in their past, and thus already have large and comprehensive local economies, go on to replace imports rapidly yet again, they garner an economic margin in their local economies for adding extraordinary, even unprecedented, goods and services. It was just such cities, already big but growi

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