Monday, August 06, 2007

Innovation or Extraction

Cities are horrendously expensive, seemingly inefficient and multidinously redundant in the provision of basic services. Yet despite these detractions, they grow tremendously during periods of significant and sustained economic growth. They grow into new orders of complexity and social organization while their hinterlands receive the stagnant economic activities and simpler chunks of replicable social organization that previously had been highly advanced.

This is because the primary economic advantage a city has over any other settlement pattern is its ability to be a reasonable safe and facile mixer of people with loose ties. These broad, flexible networks contribute to local resiliency and high levels of innovation. These networks rely upon a high level of complexity to function effectively, and this complexity requirese massive amounts of energy and money to become effective and efficient.

Mike Madison at Pittsblog notes that some of the cities that were the most innovative during the 90s are stagnating again. San Fransisco is hollowing out as it has priced its young people out of the city as the city has not created enough jobs in highly productive but low efficiency start-up fields; Toronto's Golden Horseshoe is being buried by Alberta's Frozen Oil Patch which is driving up the value of the Canadian Dollar and depressing manufacturing.

On the other hand, truly innovative cities are still flourishing --- Business 2.0 via CNN is reporting on a new planned city that sounds amazing:

It may seem strange that the emirate of Abu Dhabi, one of the planet's largest suppliers of oil, is planning to build the world's first carbon-neutral city.

But in fact, it makes a lot of financial sense. The 3.7-square-mile city, called Masdar.....

"If they can construct a zero-carbon city in this climate, you can do it anywhere," says Richard Young, a research manager with SustainLane, which evaluates sustainable cities and products. "It will have tremendous economic impact."

The cities that are booming now are the cities that serve as extraction administration points. The oil cities and states such as Russia which produces little exportable other than decent weapons and easily burnable hyrdrocarbons are able to reinvigorate their decrepit cities and redeploy their navy to their near and medium abroad while Venezuala can drive down its poverty rate while cutting large hard currency arms and debt deals.

These are the cities and economies that fade behind during innovative booms when the innovative city regions are able to leverage their higher fixed costs into new products, new means of efficiencies, and higher levels of resource intensity and productivity. The innovative cycles drive down the raw material content of each marginal dollar of GDP, depressing the demand pressure on the raw materials. Non-innovative cycles conversely encourage people to do more of the same thing with minimal changes in resource efficiency and we are at this point in the economic see-saw.

However, I want to get back to Masdar, as there is innovation going on in the world, and it is impressive innovation for a carbon efficient city, much less a carbon neutral city has significant structural differences in its infrastructure and lay-out than a carbon-inefficient city. People will see the pilot innovation and reproduce this set of innovations elsewhere, spurring local economic development. I know for a fact that China is attempting to do the same in Tjianian and other major industrial cities on its northeastern coast.

The relevant question for individual cities is where the money pools up to offer the best short term returns. Will it stay in resource extraction regions and high replication fields, or it will start shifting back into high innovation and unique product development... the answer to this question will tell you where the growing and vibrant cities of tomorrow will be.

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