John Quiggin writes a post citing an older paper of his staking out the claim that finance industry clustering in a handful of cities is primarily a cronyism phenomenon. Yet he glosses over, both in his post and in his paper, the biggest problem with his thesis with hand-waving like:
Even within countries, specialization has declined greatly. “Detroit” is still shorthand for the
US motor vehicle industry (or at least for the US-owned section of the industry), but Michigan now
accounts for only 25 per cent of US vehicle production. Similarly, although it is harder to obtain
quantitative evidence, it seems clear that the ‘Silicon Valley’ region of California has declined in
relative importance as a centre for information technology, research, development and manufacturing,
losing ground to new US centres such as Seattle, Austin and Fairfax County Virginia, as well as to
The declining importance of location in the production of goods raises problems for theories
of economic geography…
Whoa, cowboy! Firstly, check out this BLS report on IT industry growth, which shows the industry growing quite rapidly and resiliently despite two recessions. Secondly, almost all cars in the US are made in two broad clusters in the Rust Belt and the deep South. Showing that new clusters are emerging just shows that America is a really big country and industries can grow faster than cities or political economies can shift, not that clustering doesn’t exist! Seattle, Austin, and NoVA are places with lots of young and well-educated people and high quality-of-life. It’s not like there’s tons of IT sector employees working out of their houses in rural Nebraska or Montana.
I’m going to be the last guy to dispute the cronyist nature of the financial sector – shoot, I saw one part of the process first-hand when I was in college, and was thoroughly disgusted by it. But urban agglomeration still exists for a reason – nay, dozens of very, very good reasons, and the fact that email exists is insufficient to prove that urban agglomeration is a conspiracy.