Abstract
The question of why cities and their regions rise and fall has long perplexed scholars and politicians alike. Precisely what it is that gives rise to prosperity continues to elude us, even as mayors and civic leaders chase after the nostrum of the day. In their impressive book, Michael Storper and his co-authors (for convenience hereafter referred to as SKMO) address the question through a dual case study of the metropolitan regions of the San Francisco Bay Area and Los Angeles over the period between 1980 and 2010. However, the authors have a wider aim than simply to illuminate a particularly interesting story of urban economic evolution. They seek to tease out from among a welter of theoretical and institutional analyses the reasons in this particular instance, and at the same time illuminate the theories themselves. Thus, the book speaks both to the specific instance, and to the larger question of what we know about urban economies. This is a powerful challenge, and it is worth careful examination.
SKMO are certainly not the first to ask the question. They draw on and cite generations of people who might or might not have called themselves urban economists. Some scholars have seen the problem through a wider lens, notably Peter Hall (1998). In his magnificent Cities in Civilization – not cited by SMKO – Hall examined 21 instances in which cities reached peak moments, not just economically, but also politically and culturally, showing the vast range over history of this phenomenon, especially in relation to innovation. The present book is narrower, but nonetheless very revealing. The book opens with an account of the divergence between the San Francisco and Los Angeles regional economies. Briefly stated, in 1980, the two regions’ levels of per capita personal income were essentially the same, after 50 years during which Los Angeles had caught up with and surpassed San Francisco in population and apparent dynamism. Over the next 30 years, per capita income in the San Francisco region grew to be 50 percent higher, where it remains today. The phenomenon was noted in both places. In San Francisco, amid a chorus of self-congratulation, it was attributed to the rise of information technology, symbolised by Silicon Valley. In Los Angeles, IT stimulated efforts to reduce the difference, but the choices made may have only exacerbated the problem.
In their search for an explanation, SKMO examine what they take to be fundamentally different approaches to understanding urban economies, couching the effort in the metaphor of a detective story. They identify four broad groups of explanations or theoretical frameworks: (1) development theory, focusing on trade, institutions and factor mobility; (2) regional science and urban economics, focusing on sorting of people through housing markets, factor costs, congestion costs, amenities and environment; (3) the ‘New Economic Geography’, addressing trade and transaction costs, specialisation and clustering, along with institutions and history; and (4) institutions and economic sociology, with entrepreneurship, skills, innovation, networks and organisational practices, including economic development. In subsequent chapters, the book utilises these frameworks in an approximate form to explain the divergence between the two regions. Thus, Chapter 3 looks at specialisation into high or low wage employment in the two economies, showing how the Bay Area specialised into high technology, with a concomitant shift into requiring nonroutine cognitive tasks. The facts seem clear enough, but the authors see them as insufficient to explain why the regional trajectories occurred. In Chapter 4, the authors next turn to the issue of whether differences in the labour forces of the two regions, especially migration, could explain divergence in income. Labour force explanations have been very attractive to economists, in part, I suspect, because they seem to reflect market forces. However, SKMO find that specialisation seems to drive the labour market behaviour, rather than vice versa.
Seeking to amplify their analysis of specialisation, the authors then turn to specific industry sectors for more detailed explanation. A series of case studies in Chapter 5 examines aerospace, Hollywood and logistics in Los Angeles, and information technology and biotechnology in the Bay Area. These are illuminating. Los Angeles’ early lead in aerospace did not translate into information technology, perhaps due to the industry’s close affinity with military contracting, which discouraged spinoffs. Similarly, the early major development of biotechnology in Orange County was stymied by Amgen, the major firm’s practice of holding everything within the organisation, in contrast to the flexibility and constant regeneration of Silicon Valley. In addition, when Los Angeles decision makers woke up to the growing divergence, they pinned their hopes and large-scale investments on development of the port and logistics, which succeeded, but consequently solidified demand for low wage labour.
In an interesting chapter, the authors then turn to the question of the role of economic development policy in the story. Reviewing the literature on this tangled topic, the authors conclude that policy had little to do with the shaping of the regions’ divergence, though on the evidence of their account Los Angeles’ successful pursuit of logistics may have actually widened it. By and large, the most effective policies focus on the labour force, but alone they cannot change the trajectory of development. Stadiums, the favourite of policy makers, despite all evidence to the contrary, are not effectual. Decisions about infrastructure investment and maintenance may be very important, but not necessarily sufficient.
A final explanation is the institutional and belief structure of leaders within the two regions. Given the authors’ roots in the Los Angeles School of urban thought about cities, one might have expected a Marxian interpretation at this point. However, they start with Douglass North, focusing on the beliefs and worldviews of leaders in each place. For this purpose, they use the idea of clubs of regions, differing in levels of income, productivity and industrial structure. Regional leaders must continually identify what must be done in order to stay in a high-level club. If they are successful, over time the capacity to sustain the economy will itself develop, nurtured through the belief systems of the leadership. If not, the trajectory may be disastrous. Detroit is often given as an example of this argument. SKMO argue that Bay Area leaders consistently supported the development conditions favouring high technology sectors. Meanwhile, in Los Angeles their counterparts were either misreading the strength of that sector or pursuing other goals, especially the port. They also argue that the Bay Area’s environmental initiatives, notably preserving the Bay, enhanced the quality of regional governance in comparison to that of Los Angeles. As a long-time observer of the Bay Area, I agree that the Bay Area was more environmentally conscious, but I doubt that this was critical, though it probably contributed to the region’s high housing costs. The authors also present an interesting analysis of linkages among business leaders and sectors that suggests a stronger network of relationships in the Bay Area, but here there is no way to distinguish cause from effect.
The book concludes with three chapters that attempt to synthesise conclusions and suggest some policy prescriptions, together with ideas for improving work in urban economics. Given the mass of information that the authors have compiled, perhaps it is too much to expect a totally coherent outcome. In any event, the conclusions are more like a recapitulation of the main points of the text, pointing out the weaknesses in the conventional explanations. In effect, they find that more or less everything contributed to the outcome, which makes the history a problematic guide for the future. When it comes to policies and strategies, SKMO suggest eight key ‘elements of a regional high-wage specialization strategy’. In themselves, the elements appear to describe what happened in the Bay Area well. However, we are still left with the question of what to do to make them happen. In that absence, this is not a strategy, but rather a description of desirable characteristics of a development path. Does this path fit all, or even most, cases? We do not know the answer, though the history of early industrialisation in places such as Manchester suggests that it is plausible. Yet, it still leaves us with a deeper question, not simply of how places like Silicon Valley come into being, but of how very large cities, such as New York, Tokyo and London, actually sustain themselves over centuries. Both San Francisco and Los Angeles are, by world standards, youthful cities. SKMO have illuminated one episode in their development very well. Their future, however, remains murky.