I came across an interesting blog post on The American, a blog maintained by the American Enterprise Institute. The post’s author, Ryan Streeter, discusses the concept of agglomeration economies. According to the National Bureau of Economic Research, agglomeration economies are the benefits that come when firms and people locate near one another together in cities and industrial clusters. Even as transportation and communications costs fall, according NBER, agglomeration economies are still important.
It seems we like to cluster. In Mr. Streeter’s 2010 analysis, the world continues to urbanize with 70% of the world’s population expected to live in cities and metro centers by 2050. Due to this expected change in demographics, Mr. Streeter reasoned that state public policy will have to adjust to the increasing role cities play in driving national economies. States will have to place greater emphasis on issues of construction, green space, and traffic within cities if states themselves are to stay competitive. Rural influence in national politics will decrease as electoral districts become urban. Washington will have to take on a progressively urban mindset.
If Washington is concerned about increasing American productivity and job growth, it will have to educate itself on the relationship between urban densities and higher wages. Americans are probably moving to cities and metro areas for higher wages and probably not cognizant of the issue of higher productivity, but I would wager that not only does the availability of wired and wireless broadband help increase productivity but bottle-necking the availability of additional spectrum would adversely impact urban economies and commerce.
I would argue that the desire to work in close proximity of other entrepreneurs drives the move to cities, although I have no empirical data to back this up. The increase in co-working areas in Atlanta, Baltimore, and other urban centers may add some weight to this observation.
What does this mean for wireless broadband? It creates an exigency in the spectrum crunch. Further urbanization places increased demand on existing facilities and creates the need for innovative solutions to acquire more spectrum. It means that the Federal Communications Commission cannot afford to delay auctions and in particular must get on with crafting rules for its reverse auction for television broadcast spectrum.