Agglomeration: Saviour of New York, bane of New Zealand

Greg Mankiw points us to an insightful piece by Ed Glaeser, one of the smartest economists of this generation, on how human capital forms the ultimate resource for New York's reemergence. In short, agglomeration effects and human capital concentration together ensure that New York will ever be a hub for the generation of new ideas and industry, so long as city government doesn't do incredibly stupid things.

Further, New York will continue to have a comparative advantage at producing ideas. That advantage occurs because big cities are, at their heart, the absence of distance between people and firms. Talent, whether painterly or financial, gets magnified because of urban concentration. Cities thrive by connecting people. That’s why Bloomberg insisted on open offices at his company—cities writ small, places where people could constantly exchange information—despite techno-prophets’ repeated predictions that technology would make human proximity obsolete. Here was a firm on the cutting edge of information technology that chose to locate at the heart of a great city and did as much as possible to eliminate the physical barriers among its workers.

But what if you're on a small island of 4 million people at the far end of the world? "Move to New York" isn't on the government's preferred list of options, though the Kiwi diaspora is one of the larger ones out there.