Craig Thomas, economist at Torto Wheaton Research
(an investment real estate industry research firm), wrote a great essay
a couple weeks ago that reduces a city down to its economic essence. Here are a few quotes.
So what is a city? What do these metropolitan areas do? They’re not there to look pretty, or because they’re historical landmarks or because they’re cool. Cities are market-makers. …
succeed, he insists, cities main role is to provide a dynamic place for
human, financial and physical capital to intermingle and flow — what
he calls liquidity.
Firms will form within or
relocate to a city if it provides three things: the physical
infrastructure that helps firms function, access to capital, and—most
important these days—ample suitable labor with which to support
production. Labor will come to the city if there is physical
infrastructure to occupy, ample choice of vocations and employers, and
access to capital. Developers and investors will provide physical and
financial capital if there are adequate firms and households to occupy
structures, and if there is a sufficient liquidity of capital when it
is time to monetize these assets. All parties’ motivation is to be as
productive as possible, and they will go to the cities that allow them
to trade their time and resources at the highest value.
Everything else happening in cities, he argues, is there to support the flow of labor and capital. Creating livable
neighbourhoods is about attracting and retaining talent. Building
infrastructure is about facilitating the flow of industry (capital) and
jobs, as well as making the region function for the residents.
Thomas’ approach Sounds more or less like Robert Lucas or Jane Jacobs. Wendy goes on to provide her perspective.
I’d say Thomas’ notion of cities as "market-makers" explains about all of what cities have done historically and about half to two-thirds of what cities do in today’s knowledge-driven, creative society. I have lots more to say about this in Who’s Your City, but for now let me just add that cities provide a key function by organizing a vibrant mating market – (what’s more important to you: your job or your significant other/ spouse) and also have enormous effects on psychological well-being. Cities have a clear and important economic function, but they also do more.