15 April, 2008

Krugman v. Florida

Before his current career as an economic commentator and thorn in the side of the Bush administration (but after his first career as one of the founders of the new international economics), Paul Krugman single-handedly revitalized the field of economic geography. Thus, I'm happy to hear him expressing the same skepticism that I've felt toward Richard Florida's concept of "mega-regions". Mega-regions are basically groups of cities that are somewhat close to each other. The best example is the densely-populated Boston-Washington corridor. But other mega-regions stretch credulity: Chi-Pitts for example, runs from Chicago to Pittsburgh. But is there really more cohesiveness between Chicago and Pittsburgh than there is between Chicago and the Twin Cities? Or St. Louis? It strikes me as categorization for the sake of categorization. Krugman:

It’s not at all clear to me that world competition is between mega-regions.

I’d say that there are two things that arguably define an economic unit for the purposes of economic geography. One is labor mobility: a region over which there’s high mobility of labor will be a region in which everyone with the same set of skills is paid more or less the same real wage (which may differ in money terms because of differences in the cost of living etc.). By that definition, the United States as a whole is the relevant unit: workers are as mobile between Chicago and Boston as they are between Baltimore and Boston.

The other definition is the reach of spillovers — positive externalities, for the econowonks. That’s probably much more localized: there’s a reason investment bankers cluster in expensive Wall Street or City of London locations. But again, it’s hard to see that this makes the Northeast Corridor, as opposed to individual metro areas within the corridor, a relevant unit.
This seems basically right to me. Florida's response:
But let me just say that when 40 of these megas which account for less than a fifth of world population account for roughly two-thirds of economic activity and 85 percent of global innovation, something is going on.
Of course you can say the exact same thing about the 200 or so cities that these "megas" comprise. I don't see any reason why one of these statements is more compelling than the other.

Krugman makes a more subtle point here. Basically, even if the mega-region has spillovers between cities, this doesn't mean we should encourage people to move to mega-regions. There are negative externalities as well as positive from living in mega-regions and shifting people from, say, Madison, WI to New York may cause Madison to collapse while not having much of an appreciable effect on New York. We just don't know what the consequences will be. Here is Florida's response.

Ryan Avent, however, comes to Florida's rescue (somewhat), with this:
Why, for instance, have places like Baltimore and Philadelphia performed much better in recent years than similar cities in America's distressed Rust Belt? Obviously, many factors are at work, but it seems odd to suggest that the nearness of those places to the dynamic economies of New York and Washington are unimportant. Distance still matters for the movement of both goods and people. Being in Philadelphia confers an advantage on firms, who then have fairly good access to nearby economic centres, and also to the tens of millions of people surrounding them.
Fair enough--but does this really save the concept of mega-regions as outlined by Florida? I'm willing to concede this point for the Northeast Corridor. One reason so many people choose to live between Boston and DC is that there are so many places to go within a small area. For example, I'd rather live somewhere in BosWash because I know that I can maintain any friendships or connections I make much more easily than if I lived in St. Louis. There is a sort of option value--in the future I don't have to move across the country to do something new.

But can this possibly explain anything about why people live in Pittsburgh as opposed to Minneapolis? They're both the same distance from Chicago. The intervening space is mostly open or rural, NOT densely populated like the Northeast. There are some large intervening cities that can vaguely be placed between Pittsburgh and Chicago, but that's more or less true of Chicago and Minneapolis, too (Milwaukee, Madison, Appleton, La Crosse, Rochester, St. Paul). So why Chi-Pitts and not Chi-Twin? As I said before, this seems to come out of the desire to split the world into manageable chunks. Just because you can do this does not mean that the chunks are useful tools of analysis! In this case, the most you can say seems to be that cities that are close to a lot of other cities benefit from that. But dividing the world into mega-regions doesn't help much with that. Moreover, a policy based on this framework would have us discard vital, growing Minneapolis (which doesn't fit into ANY of the prescribed mega-regions) in favor of stagnating Rust Belt cities like Pittsburgh and Detroit.

As I have implied, I'm willing to call certain areas "mega-regions", like the Northeast Corridor, and probably the Los Angeles-San Diego stretch as well. And perhaps a mega-region may form between Chicago and Pittsburgh but wishing (or drawing lines) doesn't make it so.

1 comment:

Elliot said...

yeah, it doesn't really seem that this kind of a mega-region occurs often enough, or with enough similarity between the occurrences, to make it a very usefully general paradigm. It seems much more reasonable to consider the city the basic unit, and then consider the special circumstances surrounding a group of cities (such as the potential for fast rail in the NE corridor, or labor movement between Tijuana, San Diego and LA) on a case by case basis.