The media tends to describe agglomeration economies — one of the benefits of big urban areas — as being entirely serendipitous. Minimize travel. Maximize chance encounters at the local coffee shop. And then all of a sudden patents will go up and new startups will emerge. That does that happen, I’m sure, but there’s a bit more structure to a lot of these encounters. Economies of agglomeration is not just about serendipity. It is about the benefits of and the decision to concentrate economic activity.
Last week, a think tank in the North of England (IPPR North) published a report outlining, among other things, job creation and productivity across England. Based on these metrics, London and the South East dominate, with “productivity” in London being by far the highest. Almost half of England’s new jobs over the last decade were in these two regions. Above is a chart from the Financial Times. The trade-off is wealth and income inequality. And the report does look to how the government could address this centralization of power and wealth.
Like Singapore’s low fertility rate, this is an instance of leaning into the wind.