Consumer Cities: Are they (Individually) Sustainable?

What is different about cities oriented towards living and working (rather than making stuff), in terms of economic stability? Economists such as Ed Glaeser have described today's services and knowledge oriented cities as consumer" cities. I've borrowed Glaeser's earlier moniker to title this post, since it reflects descriptions on the part of another economist, Richard Florida. In "The Most Disruptive Transformation in History", Florida writes:

I would suggest that this transformation - the clustering of knowledge over physical labor -  is among the most disruptive in recorded history.

But even more so, this age of urbanized knowledge capitalism requires a shift in power from the nation-state to cities. Which are the key economic and social organizing unit of the knowledge economy. That also means that cities must take on the outsized power of the nation-state and the imperial presidency. We must devolve power and resources back to the local level - raking back their tax money from the federal government so they can spend it on themselves. 

Is the decentralization of cities really possible, in the way Richard Florida imagined in the above article? These are prosperous regions with wealth structures that are quite different from earlier manufacturing hubs, in terms of both population densities, and the landscape designs which complement (what have become more important) present city functions.

Even though consumer cities are thriving, their present incarnation is closely connected to the resource capacity being tapped by nations and international networks - both of which face a growing degree of political and economic uncertainty. Just one example of connectivity issues (in the the U.S.) are healthcare networks which would be completely torn asunder with decentralization, such as Medicare provisions for the elderly. Many individuals don't have time based service production options at the ready, in their own neighborhoods. Plus, Washington remains largely responsible for much of the city based care people do receive, for important applications of knowledge and skill. It is the ways in which much of today's non tradable sector activity is organized, which provides little means of knowledge preservation for long term stability, or decentralization options at the ready.

Consequently, some of the autonomy of today's cities is illusory, given the delicate balance between primary and secondary economic activity as origins of wealth formation. More specifically: to what degree is today's knowledge based (secondary market) economy "disruptive" in the way Richard Florida suggests? Granted: knowledge use extends to more of the populace in this historical juncture than before - given the vitality of secondary market activity which took place in the last century. Nevertheless: is this particular "disruption", one that exists in a truly productive capacity? After all, the positive disruptions which broadly contribute to marketplace definition, also increase marketplace output. Yet it is not obvious this has occurred, given the dependence of rural regions on cities, and cities in their turn on nation states. Instead, secondary market city activity has supplanted broader sources of primary market economic activity, which were once far more widely dispersed.

In other words, many of these cities remain general equilibrium dependent. While today's knowledge use appears to advance wealth formation, too much of it is structured in ways which displace other forms of wealth - at least to some extent - because it does not completely internalize resource capacity through recognizable means. Whereas if these organizational patterns were not so dependent on the very (primary market) factors they are disrupting, the process would be more dynamic and capable of enhancing total marketplace output. Perhaps most important about this development, is that what appears secure in a mature economy - such as today's knowledge based activity - becomes most vulnerable when it affects the output potential of primary market formation, instead of contributing to that formation.

Today's consumer city activity takes place across countless budget ledgers, rather than internal organizational means. Yet internal organizational patterns could make it easier to confront what are very real supply side limits, for knowledge use. Indeed, the use of fiat money - helpful though it has been - also expresses general equilibrium dependence. Fiat money makes it simpler to achieve spontaneous coordination of time based product for higher income levels. But the fact this process doesn't function adequately for lower income levels, decreases total global output potential in at least two ways.

First: due to non tradable sector consumption definition, a growing lack of (low income) ability to consume housing and services, means less output potential for these forms of secondary market activity. Second, the consumption of non tradable goods still necessary for lower income levels, also crowds out the discretionary income that would otherwise contribute to tradable sector activity. This effect also shows up via institutions which manage default (crisis response) positions for low income groups.

The crowding out of primary market activity matters all the more, since tradable sector goods contribute more to quality of life for low income levels, than for high income levels. One might say that low income levels are major contributors to what is also the primary market first mover position for equilibrium growth. These two factors prevent the "disruption" of today's consumer cities, from being a disruption component which contributes to positive economic vitality and long term growth.

Knowledge - in all its infinite variety, usefulness and challenge - can be preserved for the generations of the future. However, it is difficult to achieve such preservation, strictly on today's general equilibrium terms. At a practical level, it would also be difficult for large states to effectively scale down in terms of resource use patterns (while retaining economic complexity), until knowledge use participation is more broadly shared.