Sunday, September 4, 2011

Density and Vitality in Cities

Here's an interesting opinion piece in the NYT on how density in cities fosters growth, by giving niche or experimental businesses more chance to find an audience:
How great are the benefits of density?... Some economists have concluded that more than half the variation in output per worker across the United States can be explained by density alone; density explains more of the productivity gap across states than education levels or industry concentrations or tax policies.

Put two workers with similar skill levels in cities of different densities and the one in the denser place will be more productive, according to two decades’ worth of research from economists...

What is it exactly that dense cities are doing? Consider a simple example. Suppose that within a population one person in 100 develops a taste for Vietnamese cuisine, and suppose that a Vietnamese restaurant needs a customer base of 1,000 people to operate profitably. In a city of 10,000 residents, there aren’t enough people to support a Vietnamese restaurant. The only restaurants that can operate profitably are those appealing to considerably more than one in 100 people — restaurants offering less daring fare. In a city of 10,000 people, there is little room for specialization, and less for experimentation.

A city of one million people, by contrast, can support multiple Vietnamese restaurants. Not only will this larger city enjoy a specialty cuisine unavailable in less populous places, but its ability to support multiple producers of this cuisine allows for competition, improving the price and quality.

The problem, accruing to author Ryan Avent, s that residents of dense cities like San Francisco also limit building, to preserve neighborhoods, and that drastically forces up house prices. And that means skilled workers can't afford to move there, or leave for places like Phoenix with a much lower cost of living.

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