One of the more provocative questions in urban economics these days centers on the role of cities: Is technology making them obsolete? Michigan State University Sociologist Zachary Neal has a provocative article in the academic journal City & Community that argues that networking properties are much more important than traditional factors such as access to labor force, raw materials, and suppliers. He summarizes the main points in an article at newgeography.com, where he writes:
"Driven by such technological advances, the economic prosperity of American cities has become more tied to their connectedness than their sheer size. But, exactly what kind of connectedness is important can vary from place to place. Cities like New York or Chicago, which drew strength from their size in the past, today thrive largely by being well connected to other cities globally by multiple types of networks, serving simultaneously as transportation hubs, stock exchanges, and cultural centers.
"But the biggest change has been the rise of selected smaller cities. Some, not long ago relatively inconsequential, are now major players due to their linkages in more specialized networks. For example, much of Miami’s remarkable economic and demographic growth, and its status as a global city, is the result of its role as the primary economic and cultural bridge between North America and Central/South America. The Research Triangle in North Carolina and Silicon Valley in California have benefitted from intellectual linkages among universities and the world wide tech industry that join independent towns like Raleigh and Durham into cohesive urban regions. Even very small towns like Bentonville, Arkansas (2007 estimated population: 33,744) can be influential in the world arena with the help of vast supply-chain networks orchestrated by a major corporation (Wal-Mart) and large inflows of people made possible by a major airport (Northwest Arkansas Regional, nearly 1.2 million passengers in 2006)."
Echoes of this idea have also been explored by Joel Kotkin in his book The New Geography: How the Digital Revolution is Reshaping the American Landscape (which I highly recommend). This weakening of the "ties that bind" cities together is also an implication of Thomas Friedman's argument for how the world is "flattening" through globalization and technology.
We can't make too much of this, however, and Neal acknowledges as much. Cities, by virtue of proximity to resources, have important competitive advantages that rural and small places simply don't have. (I explore some of this in my book on transportation Mobility First, where we explore how transportation and travel effects urban economic growth is a service-based economy.)
The transition to networking functions, in my view, really suggests that urban economic growth depends far more now on human capital than traditional factors such as access to suppliers, equipment, raw materials, and even direct consumer markets. Silicon Valley exists, as does Bangalore and other major commercial centers, because access to highly skilled, nimble, and technologically savvy workers (and entrepreneurs) generates most economic value in current economy.