It creates for companies more incentives to move to these areas, as they have easier access to a larger talent pool. Which in turn makes housing there even more expensive.
This is not "economy of scale", this is more of a "pollution death spiral" and "unpriced externalities".
A factory that dumps raw waste into rivers is more efficient and can produce widgets more cheaply than a factory that takes care to clean up the waste.
A firm in a dense city core can get talent more easily, and it'll have advantage (on average, in the long run) over a firm that has a fully remote workforce. The negative externalities (living in poor conditions in an expensive city) are offloaded onto the workers. E.g. the housing square footage keeps decreasing: https://www.visualcapitalist.com/charted-the-growing-gap-bet...
> negative externalities (living in poor conditions in an expensive city) are offloaded onto the workers
Cities are more efficient in practically every way than subsidized rural developments. It’s really weird to flip that around as an externality. (Disclaimer: I moved from New York to Wyoming. Thanks for your subsidies, I guess.)
There absolutely are jobs in remote places. But the people there aren’t as valuable as someone who will bump into like-minded colleagues and cultural expression as part of their existence in a cluster.
> Cities are more efficient in practically every way than subsidized rural developments
No, they're not. It's the other way around, in fact. Suburbs subsidize cities (on average, again).
The dense city cores produce most of the _corporate_ income tax, because that's where the companies are headquartered. But most of _personal_ income tax comes from suburbs. This is only now getting close to flipping around.
Cities also have YUUUUGE expenses that simply don't happen in sparse areas. E.g. infrastructure like water or sewer is wildly expensive in cities because of the planning overhead. Case in point: San Francisco spent almost half a billion rebuilding a few blocks of road.
Cities also require EXPENSIVE public transit. One ride on a bus/subway in the US costs around $20. I'm talking about the true cost (number of trips / total expenses), not the farebox cost. And with capex it's almost incalculable, with crazy numbers like $50 per ride for Seattle.
The TLDR; version:
1. Infrastructure in suburbs might end up being a bit more expensive on a per-capita basis. Or it might not, depending on the way you do accounting.
2. In any case, this difference is not at all significant.
3. Suburbs are _not_ subsidized, and in fact generate most of the wealth in the US.
Also, firm in a dense city can get better talent, but those negative externalities (and I would argue these externalities are not clearly caused by the mployer) are made up for through increased salaries the firm must pay compared to areas with lower living costs.
Care to explain the cherry-picking? The average square footage was growing steadily (except for the 2008 crisis) and the inflection point happened around 2012 when the death spiral started in earnest.
It has been on the downward trend since then.
> Also, firm in a dense city can get better talent, but those negative externalities (and I would argue these externalities are not clearly caused by the mployer) are made up for through increased salaries the firm must pay compared to areas with lower living costs.
Except that the increased salary does NOT compensate for the increased cost of living. And firms absolutely don't pay for their impact on infrastructure.
My favorite example: Seattle. Each household will end up paying around $150k in additional taxes for the new transit that will benefit primarily dense office holders in the downtown.
> Care to explain the cherry-picking? The average square footage was growing steadily (except for the 2008 crisis) and the inflection point happened around 2012 when the death spiral started in earnest.
It is clearly cherry picked because the graph begins in 2015, which (as you can see in the one I linked) is the exact peak of the new build house sizes. A more honest article would show a larger date range.
Additionally, I feel it makes sense that new builds are getting smaller. People are generally having fewer children these days, so there shouldn't be as much need for huge houses.
> Except that the increased salary does NOT compensate for the increased cost of living. And firms absolutely don't pay for their impact on infrastructure.
It may not entirely make up for the cost of living, but in most cases I would say it certainly makes a big dent. And the rest of the difference can just be explained by the fact that people want to live in cities. So shouldn't it make sense that the cost of living is higher in these areas given that there is more demand for them?
> My favorite example: Seattle. Each household will end up paying around $150k in additional taxes for the new transit that will benefit primarily dense office holders in the downtown.
I think it's strange to frame public transit as primarily benefiting dense office-holders. There are tons of other entities in cities besides just companies in offices. It's a public good, and transit generally benefits everyone. Citizens, companies, government, educational institutions, etc.
Also please link to where I can read more about the $150k number.