How have cities changed, from those of the recent past? Cities have gradually transitioned from environments in which lots of real estate is dedicated to "making stuff" (primary or first mover markets for wealth creation), to those which now concentrate on providing more spaces to live, work and play. In particular, this transformation often meets the wants and needs of those with higher income levels.
Cities as a desirable location for professionals might be considered secondary market formation at its finest. Yet - for all the wealth of secondary markets (which include finance and healthcare) - it helps to remember how this present organizational structure will remain dependent on the wealth of primary markets, in order to function and prosper for the long run. And tight money conditions across the globe, are now making it difficult for some primary markets to function properly, which in turn reduces their own wealth potential.
Simply put: it's difficult to create more economic or physical space for the production and consumption of knowledge and time based services. The present form of non tradable sector organizational capacity, as the sole means of knowledge use, is beginning to crowd the output potential of tradable sector activity. Not only is this a problem for those who seek either meaningful employment or time based services access in the near future, but also for the growth strategies of cities in general. At a surface level - at least - the Nimby response of today's prosperous regions, seems oddly logical.
Meanwhile, the broad revenue streams of prosperous cities, depend on budgets which are in part determined by broader economic circumstance, that extend well beyond their reach. In many respects, these income flows are different from those made possible through tradable sector activity. And where time based services have centralized to a greater degree than many expected, tradable sector activity instead came to rely on decentralized organizational patterns (including rural), as means by which to remain competitive in the marketplace.
A primary to secondary market transition for cities is also important, since it suggests potential problems with recent efforts to increase their population densities. In the year 2000, Ed Glaeser wrote about the consumer city as displacing the city environments which emphasize production roles. "Consumer cities" are an apt description, how the secondary market transformation has played out across the U.S. Sixteen years earlier, Glaeser already realized it was a losing battle for cities to appeal to manufacture as a growth strategy. He emphasized that cities would do best to structure for greater consumption orientation, rather than traditional production. Even though tradable sectors continue to place corporate offices in city environments for the benefits of agglomeration effects, they generally prefer to place manufacturing facilities where real estate is more conducive to costs.
Consequently, there may be some limiting factors for city growth, in terms of both population densities and long term growth potential. After all, the consumer city by definition has an experiential component, which includes what are often highly preferred physical environments, where the work of knowledge based endeavour can take place.
One problem for additional growth in important cities, are the geographic constraints themselves in which other forms of wealth are ultimately stored. Both knowledge product and income are being "parked" in real estate components which don't especially benefit from higher population densities. When cities were still producing more stuff, social constraints were likely not as strong against making more room for employees, as they are in the present. However, today's secondary markets don't need the high level of employment once associated with traditional manufacture.
Most important are the present monetary policy constraints, which suggest problems for further expansion of services formation in the near future. How so? The internal inflation of today's non tradable sector activity has already contributed to a gradual deflation in worldwide tradable sector activity. Which - in turn - would limit the time based services formation in today's cities, so long as it exists solely in a secondary market role.
This is just one reason why I have suggested time and knowledge based service formation as a primary market function. Eventually, a first mover construct for knowledge and time based services, would provide stronger structural means which could help overcome today's long term growth problems. Fortunately, it is possible to structure time value so that it represents actual product. And time value as product - instead of expense - could eventually restore tradable sector activity, in a stronger general equilibrium balance. Such balance is greatly needed, to restore the economic growth from which cities of the future would also benefit.