Specialization

When I graduated from college I had a firm opinion.  I felt I had to move to either Boston on San Francisco.  This was based a book I’d read. Jane Jacob’s book about the economic basin that surrounds a city.  Here is a nice lecture she gave in 1983 about the topic.  The gist of this idea is that there is some sort of industry specific network effect that creates powerful positive feedback loops for a given industry such that industries tend to concentrate into a single, or maybe a few, locations.  I figured I had to go where my industry was concentrated.

There are plenty of stories you can tell that are pretty compelling about this.  For example there are towns in China today that make only buttons, and other towns that make only copies of classic oil paintings, etc. etc.    Everybody knows that Silicon Valley has something in the water that means that only there can you do high-tech.

But recently I’ve gotten to wondering, maybe this isn’t true.  Cities, as a economic model, lost much of their competitive advantage with the introduction of the phone (which undermined

the manager’s need to be on site), electricity (which undermined the requirement for power/coal to be delivered via flat water), and modern transportation (which undermined the requirement to walk to work).  Once those all set in the city centers dissipated.  And thus, the golden age of American cities ended.  Is that process over?  I think maybe not – the way that the internet has enabled distributed work is a good example of the ongoing process.

How might we measure this?  Apparently Paul Krugman suggested some time ago the seemingly obvious idea that you just compare “the sum of the absolute differences in industry shares of employment between the two regions.”  (page 12)  And in 1998 this paper was published with this chart that shows the historical trends in regional specialization in the US.  Notice first the bottom line – retail trade; all regions have some retailing so that isn’t concentrated.  Then notice the top one; apparently the least urban activity is the one that is trending toward increased regional specialization.  I certainly didn’t expect that.

What leaps out at me here is the way the rise and fall of regional specialization in manufacturing appears to be so correlated with the gold-age of American cities.

I think I was right at the time.  Wrong about my choice of cities; San Francisco beat Boston – a lot.  I remain unconvinced that we know exactly why though.  These days I still think it is good advice to the young, go someplace where there is an existing network of people doing what your interested in.  But, that said, I think it’s less critical than it used to be.  And, I’m totally confused about that agriculture trend line.

 

 

3 thoughts on “Specialization

  1. David Chapman

    I faced the same choice and went to San Francisco. I think it won because the weather was better. In the mid-80s they were otherwise roughly equal, so that was a deciding factor for me, and probably for enough other people to tip the scale.

    As for ag—different plants grow better in different places, and people are still figuring that out?

  2. bhyde Post author

    David, I think you and I should take more personal responsible. I undermined Boston’s networks while you obviously energized those in the bay area.

    This morning’s insta-theory for Ag is a synergy between farm subsidies and the Ag biz. Or maybe something about localities in it’s supply chain.

  3. Mike

    Perhaps it’s not that people are just now figuring out that plants have their favorite zones 🙂 , but that the cost of shipping is lower as a percentage of the price, the speed and agility of shipping systems, combined with smarter methods to preserve and avoid spoilage have lowered prior barriers to exploiting the comparative advantage.

    The following might be hard to prove, but it’s possible that suburbs and exurb expansion have pushed local produce farther from the population, which would also remove much of the advantage. For instance, I’d bet that even though dairy production tends [tended?] to be local it has been pushed farther from the consumer just based on this suburban spread.

Leave a Reply

Your email address will not be published.