City planners take note

According to this press release (.doc - it has a couple of pages of detail), in a new paper, economic historians Tim Leunig and Nick Crafts look at the fast-growing cities of Victorian Britain and ask what lessons do they have for how we manage today's economy. In particular we are told,

Had well-intentioned planners implemented green belts in 1800, then Britain would not have been able to gain the “agglomeration economies” that so benefited the Victorian economy: we would not have become the workshop of the world.

So too today: high-skill cities such as Oxford and Cambridge have the potential to be a centre of high-wage agglomeration cities, just like Liverpool and Manchester a century ago. But unlike Liverpool and Manchester a century ago, their growth is constrained by highly restrictive planning laws.

So cities matter and having cities that can grow matters. High-wage agglomeration cities need to be able to grow because the productivity of workers is higher when they surrounded by others doing the same thing. Thus you find certain industries concentrating in certain cities. The press release notes that throughout the nineteenth century, productivity, even for manual workers, was higher in bigger cities than in smaller places. This concentration phenomenon is known as 'agglomeration economies'.

So let our cities grow.

Unfortunately paper itself doesn't seem to be available yet.