Richard Florida
by Richard Florida
Sun Jun 24th 2007 at 10:50am UTC

Why Cities?

Wendy, a  regular commenter on this site, has another super-insightful post over at her blog, All About Cities, which I strongly recommend as one of the very best city blogs out there.

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.

Your thoughts?


6 Responses to “Why Cities?”

  1. Wendy Says:

    Thanks for the link to my blog…

    Actually, I think cities were more than market makers historically, although more recently that framework fits. The Economist ran a great article about a month ago on the origin of many cities as being centred around a place of worship. I’m working on a post on this issue to balance the market maker theory.

    On the issue of “mate finding” — I think that fits Thomas’s market-maker framework in that cities need to provide a social scene for young singles in order to attract talent and through that the industries and corporations who hire them.

    Thinking about Vancouver (where I live) so many people came here as twenty-somethings, seeking to escape a smaller city or town, and to partake in the entertainment scene. Along the way they fell into career paths often with companies and clusters that have are here to hire talent in this young age group (i.e. Electronic Arts, eBay, Business Objects, the life science cluster, etc.)

  2. Brian Says:

    The crass philistinism expressed by Craig Thomas is that which I will devote my life to refuting.

    Cities are not “reduceable to their economic function”, and only “there to support the flow of labor and capital.” I wonder if the thousands of alter-globalization protestors who crammed the streets in joyous revolt in Seattle eight years ago would agree. How would the millions of anti-Iraq war marchers (in NYC, DC, SF, London, Paris, etc) respond to such comments? Or even the radical anarchist counter-recruitment activists here in Pittsburgh, who have been so vocally scorned by our one supposedly “progressive” city councilor?

    Cities are spaces of radical contestation and “spectacular agitation”.

    French philosopher and author Bernard Henry-Levy, upon his recent year-long tour around the U.S. to places like Detroit, spoke for all Europeans in asking how and why we Americans allow our cities to fall into such hideous decline and disrepair. If Levy had the opportunity to meet economists like Thomas, he’d understand immediately.

  3. Wendy Says:


    Why can’t a city be both — a market maker and a space for public discourse? Indeed, maybe the free flow of conflict and tension is necessary if a city is to attract people. If everyone agrees with each other, then there is nothing to spark a new idea.

    Seattle is a good example. It’s a place where the new and old economies collide — Boeing and Microsoft. It’s a place where new ideas about trade were contested as well in 1998 at the WTO meeting. It’s a city that is attractive to people and succeeding because it allows for many forms of conscious and subconscious public discourse about old and new thus more people can find their space and community than if a city were all about one thing (think of a mono-cultural suburb somewhere 100% dependent on one industry or company).

    I don’t think Thomas’s model excludes cities as being a place for protest any more than it excludes the idea that cities are a place for Opera.

  4. Michael Wells Says:

    If we take a broader view of Market as in “marketplace of ideas’, as a “mating market”, as the central bazaar where people gather to talk as well as trade, these are all included. As mentioned above, Jane Jacobs in The Economy of Cities talks about the creative synergy that cities create, which makes their economic function possible.

    Craig Thomas was writing as an economist for an “investment real estate industry research firm” so of course he’s going to talk about economic function. That’s not reductionism, it’s focus. His article is one of many truths.

  5. Loris Di Pietrantonio Says:

    Cities are at the heart of our economies and still are knowledge hubs. However, to be attractors of skills and talents, cities need to be nurished with social investment and needs to preserve a good quality of life.
    To this purpose, interesting to see is this site which is a follow-up to a study funded by the European Commission ranking European cities on roughly 300 indicators, and providing quite a good overview of the situation of European cities.

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