Urban Diversity and Economic Growth

A t the risk of some simplification, it is possible to identify four periods of intense study of cities by economists. Each of these has led to an increased understanding of the economics of urban areas and the unique role played by cities in the modern economy. The first of these periods occurred in the decade after World War I—only about ten years after the truck revolutionized the transport of goods within urban areas. This period included the first systematic empirical analysis of the forces affecting the location of firms and households within cities. Robert Murray Haig (1926) and a number of other microeconomists at Columbia analyzed the spatial patterns of manufacturing activity in lower Manhattan and in the rest of New York City. Haig and his colleagues devoted considerable attention to ‘‘where things ‘belong’ in an urban area’’ (p. 402), providing the first systematic economic analysis of urban spatial structure. For example, they analyzed the garment industry, concluding that it was destined ‘‘by nature’’ to disperse north of 14th Street, and predicting that it would follow the established spatial pattern of the cooperage (barrelmaking) industry. Standardization in size and quality of barrels had meant that identical barrels could be made throughout the New York metropolitan area, even in New Jersey, and the introduction of the truck meant that they could be transported cheaply throughout the region and exported. The second of these periods—though not in chronological order—began in the mid-1960s. It formalized many of the insights about location incentives within urban areas which had been uncovered a half century before, mixed them with the logic of Heinrich von Thünen’s (1826) ancient theories about agricultural crops and land values, and applied them to the household sector. The works of William Alonso (1964)