Cities, a very very brief introduction

Why should we care about cities?

The most overused figure (Nations 2009)…

In 2009 for the first time in history 2009 more than 50% of the population lived within cities

… but still true!

Source of:

  • economic growth,

  • innovation - technology - …,

  • but also - pandemics (!)

Why should we care about cities?

  • Strong links historically between (McCann and Acs 2011):
    • Globalisation
    • Urbanisation
    • Industrialisation

Why should we care about cities?

  • Tremendous growth
  • Not the same everywhere

Urban analytics and city science

  • Understand cities and how they change
  • Use critically and effectively urban data
  • Understand and master methodological tools
  • Support urban policy making

Different terms

  • Academics love inventing new terms
  • Urban science, city science, urban analytics, urban geography, geographic data science, urban data science, complexity science, TheNextBigThing
  • Have a look: Batty (2019)

Why do cities exist?

  • An economist’s answer: to economise!
  • Because of economies of scale and agglomeration economies

Scale economies

  • AKA increasing returns to scale, or
  • AKA economies of scale
  • Business enterprises become more efficient at large scales of operation
  • More output per unit of input than at smaller scales
  • ➔ larger enterprises
  • Within firms

Scale economies

Scale economies

Increasing returns to scale

  • double ALL the inputs ➔
  • more than double output

Scale economies

Scale economies

Constant returns to scale:

  • double ALL the inputs ➔
  • double output

Scale economies

Scale economies

Decreasing returns to scale

  • double ALL the inputs ➔
  • less than double output

Scale economies

Scale economies

How do they affect space?

  • Clustering of workers near factories
  • Clustering of services for workers near factories
  • The company town example
  • Illustrative

Agglomeration economies

  • AKA external economies of scale
  • External to the firm
  • Very important for cities
  • Two types:
    • Localisation economies AKA Marshallian externalities
    • Urbanisation economies AKA Jacobian externalities

Localization Economies

  • Within a group of firms of the same industry
  • Clustered together at the same place
  • Why?
    • Information exchange
    • Labour mobility
    • Specialist services

Examples: Silicon Valley (micro-electronics), The City of London (finance), Detroit and Michigan (automobile), Seattle (aerospace), etc.

Localization Economies

Urbanization economies

  • Firms across different sectors
  • Clustered together at the same place (Jane Jacobs 1961)
  • A city
  • Why?
    • Support services to firms experiencing internal and localization economies
    • Clustering
    • Increased local factor prices
    • Economies of scale

Agglomeration economies

  • Diversity vs. specialization
  • Internal economies of scale (firm specific)
  • Localization economies (industry specific)
  • Urbanization economies (city specific)

The sources of agglomeration

  1. Knowledge spillovers (Marshall 1890)
  • Interactions between employees of different firms
  • Proximity
  • Tacit knowledge
  • Mutual trading of information

The sources of agglomeration economies

  1. Non-traded local inputs
  • Efficient provision of specialist inputs
  • Infrastructure

The sources of agglomeration economies

  1. Local skilled labour pool
  • Sufficient quantity of labour to respond to market changes
  • Specialised labour / cost of training

The sources of agglomeration economies

  • Processes of learning, sharing and matching (Duranton and Puga 2004)
  • Clustering:
    • Interaction
    • Dynamic
    • ➔ reduces knowledge and information transaction cost
  • Higher profitability for firms within the cluster than those outside the cluster

Agglomeration economies: pecuniary vs. technological

  • Pecuniary ➔ input cost reduction
  • make inputs cheaper in larger cities
  • Technological ➔ raise productivity
  • make inputs more productive in larger cities

Based on Brueckner (2011)

Agglomeration economies: a citique

Bounded rationality (Simon 1955, 1966)

  • Information about space and location in limited
  • Relocation issues, the ability of a rational decision is limited
  • Relocation cost

Why cities do exist?

To economise!

In other words, collocation of people and firms increases efficiency.

Cities as complex system

Heterogeneity Differences in information, profession, culture, race, ethnicity, and economic status
Interconnectivity Interdependence between people, organizations, and infrastructure in networks
Scaling Self-similar economies of scale per capita in material infrastructure and increasing returns to socioeconomic activity
Circular causality Interdependence dynamics between socioeconomic activities, institutions, and services
Evolution Open-ended change supported by new information, investment, and collective action

Source: Bettencourt (2021)

Cities as complex system: scale

Urban models: looking into cities

The Burgess model