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Economists as geographers and geographers as something else: On the changing conception of distance in geography and economics by Andrés Rodríguez-Pose

November 2010 Ctra. Colmenar Viejo km. 14, 28049 Madrid, Spain http://www.socialsciences.imdea.org/ http://repec.imdea.org [email protected]

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Economists as geographers and geographers as something else: on the changing conception of

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distance in geography and economics

by

Andrés Rodríguez-Pose

Department of Geography and Environment, London School of Economics, UK and IMDEA, Social Sciences Institute, Madrid, Spain Houghton St London WC2A 2AE, UK E-mail: [email protected]

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Economists as geographers and geographers as something else: on the changing conception of distance in geography and economics Abstract: In the lifetime of the Journal of Economic Geography geographers and economists have followed diverging paths to the study of the location of economic activity which, paradoxically, have resulted in very similar spatial configurations: a world dominated by large metropoli, where intermediate and peripheral spaces tend to matter less and less. These similar outcomes hide, however, different explanations and

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lead to different and contradictory policies. Such a situation raises both important

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questions and highlights the limitations of narrowly-defined disciplinary approaches, calling for a greater interaction between the two disciplines.

Introduction It is a strange world when economists try to become geographers and geographers try to be something else1. But this is precisely what appears to have happened during the Journal of Economic Geography’s first and extremely successful decade. Economists, who, with very few exceptions, had never really been concerned with space, have rediscovered agglomeration and geographical distance as a fundamental driver of the location of economic activity. Geographers, whose work by contrast had been, at least

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At the risk of oversimplifying, I use the term ‘economists’ to refer to the recent wave of ‘new economic geographers’ or ‘geographical economists’ à la Krugman and that of ‘geographers’ to those economic geographers ‘proper’ who have been concerned with either ‘cultural turn’ type of issues or with the generation and diffusion of knowledge and learning in a regional context. These two groups have dominated the debate between geographers and economists during the lifespan of the Journal of Economic Geography, with the majority of the contributions in the journal coming from both camps. This division, however, leaves out regional scientists, evolutionary economists, Marxian geographers, and others, who have made influential contributions to both disciplines.

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since the contribution of Vidal de la Blache (1917)2, dominated by observing and integrating all human activity developed in close geographical proximity – or, in other words, in any given place – seem to have become liberated from the yoke of analysing interaction in geographically-constrained spaces and have put their sights into exploring relationships which need not be limited by physical contiguity.

These two contrasting approaches are also contributing to the emergence of different policy paradigms, with mainstream economists advocating spatially-blind policies and

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geographers and some non-mainstream economists vaunting the virtues of place-based

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approaches.

In this paper, I argue that, despite the fact that these two approaches have been presented as mutually exclusive, they are more complementary than opposite and raise a set of challenges which can only be properly addressed by a closer interaction and collaboration between, using the words coined by Martin (1999), economic geographers ‘proper’ and geographical economists.

Geographers and the ever expanding distance

When the literature on the ‘death of geography’ emerged, geographers were predictably outraged. Any view that envisaged the ‘end of geography’ (O’Brien, 1992), the ‘death of distance’ (Cairncross, 1997), or the advent of a ‘flat world’ (Friedman, 2005), was perceived as a threat to what the discipline of geography is about. Numerous articles have been written criticising these views and pointing out that economic activity cannot 2

In La France de l’Est, Vidal de la Blanche (1917) defends the frenchness of Alsace and Lorraine by promoting the idea of self-contained regions articulated around a city (in this case Strasbourg and Nancy) and gelled together by both history and by social, economic, and political interactions.

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happen anywhere (McCann, 2008; Cambridge Journal of Regions, Economy and Society, 2008, special issue).

Yet the paradox is that economic geographers in their daily research – when they do not feel threatened by an external foe – have been progressively ditching the analysis of human interaction in reduced spaces in favour of other types of exchanges, where physical closeness, while still fundamental for the development of economic activity, seems to play a less relevant role than in recent accounts by economists. In fact, it can

How has this disciplinary migration come about? Economic geography in the 1980s and 1990s was very much about ‘neo-Marshallian industrial districts’ (Becattini, 1987), ‘new industrial spaces’ (Scott, 1988), ‘innovative milieus’ (Aydalot, 1986), ‘learning regions’ (Morgan, 1997), or ‘regional innovation systems’ (Cooke et al., 1997). These are all different ways of referring to clusters of firms working in the same or in closely related sectors, interacting amongst themselves and with other local actors and organisations in order to generate knowledge, innovation, and economic dynamism. Although extra-regional linkages featured in these conceptions (e.g. Camagni, 1991), physical proximity remained the quintessential source of dynamism in clusters, as it facilitated face-to-face contacts, interaction, networking, and the diffusion of tacit knowledge. Strong distance-decay effects limited the potential for the trust and knowledge created within these agglomerations to spill over. Economic activity first and foremost took place within self-contained Vidal de la Blache-style (1917) regions, articulated by a city.

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Friedman’s (2005) ‘flat world’ approach.

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be said that geographers are gradually buying into a more subtle and complex version of

While never completely abandoning their interest in geographical proximity (eg. Gertler, 1995; Scott and Storper, 2003), geographers have become disillusioned with the idea that physical proximity dominates economic interaction. Two parallel trends are behind this shift. First is the growing collective unease with what clusters alone can do (e.g Martin and Sunley, 2003). Frequent interaction – cooperation with competition – between economic actors located in close proximity is increasingly regarded as insufficient in order to maintain economic dynamism. The second trend is the result of

relations and networks, rather than places, are the key unit of analysis of geographical research (Bathelt and Glückler, 2003). This change of object is liberating geography from the tyranny of scale and place (Amin, 2002): the focus has shifted from static, place-bound agents to evolving processes..

Within this framework, geographers have become aware that proximity is a multidimensional and multifaceted concept and that the relationships among economic actors are not constrained by physical proximity alone. This has led to the challenging of distance as an Euclidian absolute measure or, as Garretsen and Martin (2010) put it, as the space of Newton and Descartes. Distance adopts a multiplicity of forms depending on the processes which define and shape economic interaction, becoming a relative concept (Harvey, 2006) where “absolute space in effect is annihilated altogether by relative space, and propinquity can occur without the need for physical proximity” (Garretsen and Martin, 2010: 142). In the extreme, distance becomes a relational concept making that “an event at a point in space cannot be understood by appeal only

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conceptions of distance (Boschma, 2005; Harvey, 2006). Geographers are stressing that

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geographers’ toying with time-space relationships (Harvey, 1989) and with diverse

to what exists at that point: it depends on everything else going around it” (Garretsen and Martin, 2010: 142).

Physical distance is thus giving way to alternative conceptions of distance. Boschma (2005: 62) distinguishes between four such conceptions: a) cognitive distance, related to exchanges in tacit knowledge; b) organizational distance, measuring the interdependencies among firms; c) social distance, or the similarities and differences in social context; and d) institutional distance, which is regulated by the existence or

and Crescenzi, 2008) – completely detached from geographical proximity. Physical distance remains in the frame, but has lost its original halo as the one and only shaper of economic interaction.

From an empirical perspective, the waning influence of geographical proximity within geography has adopted various forms. Veltz’s (1996) ‘archipelago economy’ was among the first to emerge. An ‘archipelago economy’ brings to the fore connections among large metropoli sharing similar roles in a globalised economy, to the detriment of the links between these cities and their traditional national hinterlands. This economy “is no longer well ordered by distance” and “the territory that counts is more and more the territory of social interaction, not merely of physical proximity” (Veltz, 2000: 38). This approach detaches the economy of cities like London from that of the rest of the UK and connects it more to events in New York, Tokyo, Singapore, or Paris. The outcome is a world city network, where the exchanges among large metropoli keep on intensifying, despite of the lack of physical contiguity (Taylor, 2000).

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distance may be – although this is not always necessarily the case (e.g. Rodríguez-Pose

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absence of similar institutions (Boschma, 2005: 63-65). These different types of

Even the hallowed clusters, the natural realm of close-quarter exchange, can no longer be understood without overcoming contiguity. Their dynamism no longer relies solely on the interaction with other local stakeholders (buzz). It also depends on exchanges with faraway actors (pipelines) (Bathelt et al., 2004; Wolfe and Gertler, 2004). Global pipelines channel the information and knowledge at the source of the dynamism of clusters, bypassing physical contiguity and reinforcing the role of alternative forms of distance in the generation and diffusion of communication and knowledge (Bathelt et

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al., 2004).

Economists and the ever contracting space

While geographers have been busy trying to detach themselves from geographical space, economists have stumbled upon space almost without realising it. With very few exceptions – e.g. Hotelling, 1929; Myrdal, 1957; Koopmans, 1957 – mainstream economists had hardly bothered with the spatial dimension of economic interaction. Geography, was reduced to a simple Euclidian space, modelled just as a set of points defined by a series of factor endowments. Endowments and exogenous technical differences determined what was produced where, and productivity in any given activity was assumed to be independent of the scale of the activity. Space was completely exogenous and, thus, inconsequential. Hence, space attracted nothing more than the occasional footnote in economic papers dealing with the location of economic activity.

This all changed with the arrival of the ‘new economic geography’ (NEG) starting with Krugman (1991). Under a new economic geography framework, transport and trade

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costs are key determinants of the location of activity. Where high trade and transport costs dominate, the greatest incentive is for firms to produce for local markets. Once transport and trade costs fall, the restrictions for the location of activity wane and economies of scale begin to dominate. Transport costs provide an advantage to local firms in imperfectly competitive markets, and increasing returns transform this advantage into profits and industry expansion. While agglomeration with limited mobility can open significant wage differences across regions, firms can more than offset such differences through cost savings from close proximity to customers and

the expense of their hinterlands and of other intermediate locations. This results in a more ‘spiky’ or ‘convex’ world. (McCann, 2008).

In parallel to developments in NEG, urban economists have broadened their scope to incorporate a variety of localized interactions. The systems of cities literature, pioneered by Henderson (1974), deals with the endogenous formation of a system of cities and exchanges between them. A first, empirical, strand in this literature has made substantial progress in quantifying the productive advantages from locating in close geographical proximity to other firms and workers. A doubling of the density in a city increases average total factor productivity by between 3 and 10% (Rosenthal and Strange, 2004). This implies a 4% increase in average total factor productivity from locating in a city of around 1.5 million, like Lyon, instead of a city of around half a million, like Grenoble, and a further 9% increase from locating instead in Paris (Combes et al., 2009). A second strand, with both theoretical and empirical components, has tried to improve the

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transportation and transmission costs is a world where large agglomerations dominate at

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suppliers (Krugman and Venables, 1995; Puga, 1999). Thus, the consequence of falling

understanding of the causes of the advantages of urban density (Duranton and Puga, 2004).

Does this mean that alternative distances do not matter for geographical economists? This is not entirely true. In their models firms and other economic agents interact with one another because they stand to gain from this interaction and interaction is facilitated by cognitive, organisational, institutional, and social proximity. Two firms or individuals sharing similar characteristics are more likely to interact than firms and

of proximity, which become subsumed into agglomerations. Large urban agglomerations generate a local buzz which is “cognitive, organizational, social and institutional proximity brought together in a reduced geographical environment” (Rodríguez-Pose and Crescenzi, 2008: 383) and which ultimately embeds economic activity into any given region.

Similar geographies, different explanations, and different policies

The paradox is that these two seemingly radically different approaches aimed at understanding the reasons behind the location of economic activity yield fairly similar outcomes. For both geographers and economists alike the world is becoming more ‘spiky’, peppered with economic agglomerations separated by ever growing economic ‘deserts’. Large urban agglomerations are the dominant feature in a more integrated world and their importance is rising at the expense of traditional hinterlands, intermediate cities, and peripheries. The irony is that the emerging vision of the world

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geography ‘proper’ is that geographical contiguity supersedes all other alternative forms

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individuals with nothing in common. The fundamental difference with economic

by geographers and economists is eerily similar to what some areas of geography have always been about. Almost a century ago, Paul Vidal de la Blache (1913: 8-9) described a world where technical change was heralding a new spatial organisation dominated by large agglomerations, often at the expense of surrounding rural areas: industrialisation was then – as ITC is today – prompting the formation of ‘vital nodes’ around financial centres, where a multitude of diverse activities had already become agglomerated, generating ‘ever tighter networks’ linking capital and industrial activity and constantly attracting further resources and labour. In this geography the “key node is the city [...]

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whose role or, more exactly, the role of a number of large cities, will not cease to grow”

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(Vidal de la Blache, 1913: 9).

However, despite the apparent similarities in outcomes, the reasons behind the emergence of this geography are radically different in both disciplines. For geographers, the dominance of large metropoli derives from the relational proximity among economic agents (i.e. the constant interaction between firms and other economic actors that fulfil similar roles, hire the same employees, and have similar cognitive and organisational structures, regardless of location). These relations create their own multifarious space within their interactive processes (Garretsen and Martin, 2010: 1412), a space completely detached from geometric space. For economists, interactions matter, but are much more likely to happen in close geographical proximity. Density and contiguity are the determinants of economic agglomeration. Economists are now paradoxically closer to the conception of region of Vidal de la Blache than geographers, for whom regions adopt a variety of shapes and forms, depending on the multiplicity of processes which govern the interaction among economic actors.

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Economists thus seem to be replacing geographers as those who can explain better why economic activity has a tendency to agglomerate in reduced geographical spaces. But geographers may well have taken the lead in explaining why interaction can also take place regardless of geographical distance. Economists increasingly excel at analysing what happens within the boundaries of any given region3, while geographers at identifying what happens between areas and beyond the region. It is, above all, a question of betraying ones’ roots. Geographers are probably forgetting what drives economic activity to agglomerate in urban areas, as they no longer assume that all froms

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of proximity come together somehow mysteriously in agglomerated areas, while

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economists are struggling to acknowledge that agglomeration is not just the result of backwash effects in the immediate neighbourhood of cities, but also of the interaction among agglomerated spaces, often in far away locations.

What is perhaps more worrying is that these two different views are translated into radically different policy solutions. For economists, the processes leading to the concentration of economic activity are similar regardless of context. The mechanisms which drive agglomeration in cities work in comparable ways in rich and poor areas, in America or Europe, or in the developed and the emerging world. Hence, the solution for development problems – despite the richness and subtleties of different generations of NEG analyses – are basically ‘one-size-fits-all’ ‘spatially-blind’ approaches; they can be applied anywhere regardless of context (Garretsen and Martin, 2010: 136). Nowhere is this more prominent than in the 2009 World Bank’s World Development Report, which proposes a combination of spatially-blind institutions, connective infrastructure, and economic integration with spatially-targeted intervention as the way forward.

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Witness the recent boom in ‘neighbourhood effects’ studies among geographical economists.

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Development intervention is thus “designed without explicit consideration to space” (World Bank, 2009: 24).

For geographers, in contrast, space is relative and variable and this makes context king. The multiplicity of interactions occurring at diverse geographical scales and the variegated spatial forms they generate mean that not only ‘one-size-fits-all’ approaches are anathema, but that even isolated place-based approaches (e.g. Barca, 2009; OECD, 2009), may be close to meaningless. Under a relational conception of space, the concept

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of space is embedded in the process and multiple processes may happen simultaneously.

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Hence, only a combination of different place-based policies may work in promoting economic development.

Towards a middle ground?

Since the founding of the Journal of Economic Geography the gap between geographers and economists has continued to grow. Yet, rarely has also been the need for interaction between these two disciplines so evident. The fact that two widely diverging ways of tackling the same issue reach similar geographical outcomes is not a coincidence. The largest agglomerations are large and agglomerated because they contain the greatest level of internal interaction. But large agglomerations are also those which interact with one another more. New York firms and New Yorkers need fellow New Yorkers to progress. But they are also equally dependent on frequent contacts with firms and economic actors in Chicago, Los Angeles, London, Paris, or Shanghai in order to prosper and remain competitive. Face-to-face and interpersonal interaction remain possibly the most powerful predictors of economic exchange, but in a world where

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barriers to trade have been constantly falling and ICT and technological progress has lowered the costs of real-time exchange over large distances, the increasing power of technology to shape and reshape geography cannot be ignored (Moriset and Malecki, 2009).

Where should this cross-disciplinary interaction come from? There are three potential areas for collaboration between geographers and economists: methods, research

modelling and in deductive quantitative methods, while geographers – despite a recent modest revival in quantitative geography – are more cohesive around qualitative methods than they were a few decades ago.

Research questions and topics offer greater opportunity for interaction. Research in both disciplines is raising new questions, while making clear the limitations of relatively narrowly-defined disciplinary approaches. Some of these questions have arisen around how agglomeration affects the life of individuals, not just in terms of wealth, but also education, well-being, and happiness (e.g. Rodríguez-Pose and Tselios, 2010). The potential to cross-fertilise economists’ frequent use of microeconomic data – perhaps taking into account geographers’ greater interest in the role of geographical externalities and time dimensions – with geographers’ more traditional attention to individual and group trajectories is certainly there. The introduction of geographical aspects will give a more complex and realistic picture of the factors that influence individual outcomes, beyond that afforded by traditional microeconomic analyses, as it will allow to assess

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Little can be expected from methods. Economists are firm believers in theoretical

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questions and topics, and policy.

the importance of externalities, interactions, and spillovers within households, within regions, and across regions. A second potential strand for collaboration is the need to uncover the mechanisms at work in the transmission of information and knowledge between distant locations, where geographers seem to have taken a lead. Thridly, the time implications of these parallel approaches to the study of the agglomeration of economic activity are still poorly understood. Geographers seem to have more developed and contextualized concepts of path-dependence and lock-in than economists, but there is still significant scope for improving our understanding about

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how path-dependence emerges, how it evolves, and how it is related to specific places

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(Martin and Sunley, 2006).

But it is possibly in the policy realm where the greatest scope for collaboration lies. Economists’ spatially-blind policies may be too rigid to deliver greater economic dynamism in what are widely different contexts. Yet, place-based approaches – which dominate in geography – make proposing adequate guidelines for the design and the implementation of development policies difficult. The question emerging from this interaction should however not be whether spatially-blind or place-based policies should prevail in an increasingly agglomerated world, but whether these policies are as incompatible as they may seem at first sight. Are spatially-blind policies more peoplefriendly than place-based policies or is it the other way round? Are these policy approaches mutually exclusive or complementary? There is this a need to combine, from a theoretical and empirical perspective, the views of economists and geographers about whether these policies are complementary and under which circumstances they may work together. This will inevitably lead to testing whether a) place-based and b) spatially-blind policies deliver and, ultimately, c) whether place-based policies can also

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be ‘people-sensitive’ (i.e. whether they create differential impacts on individuals according to specific characteristics, such as income, age, gender, health, race and ethnicity, or religion) and d) whether people-based policies are ‘place-sensitive’ (whether they affect different places in different ways).

In addition, a crucial question to be answered is what happens to those areas outside the main agglomerations, and where still the majority of the world’s population lives? Are they condemned to see their economic relevance diminish and their population wane? Is

permanent feature of the economic landscape? Or are they reversible? And, if so, under which conditions?

These are fundamental questions for which there are still no convincing answers. Such answers are more likely to emerge if geographers and economists work together in trying to resolve them. The approaches by both disciplines, as the Journal of Economic Geography has shown often times, are more complementary than conflicting and the geographers’ vision can enrich the economists’ approach and vice versa. The endeavour will, however, require, as Garretsen and Martin (2010: 155) acutely underline, “a [thorough] reassessment on both sides”. Otherwise, we may go on trying to impersonate one another or even other social scientists, but impersonating each other will not necessarily lead to a better understanding of why economic activity happens where it happens or to better policy solutions..

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agglomeration described by both economists and geographers likely to become a

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there any alternative for them? And, if so, what is the alternative? Are the processes of

Funding

I would like to acknowledge the generous financial support of a Leverhulme Trust Major Research Fellowship and of the PROCIUDAD-CM programme. The paper is also part of the programme of the independent UK Spatial Economics Research Centre. The views expressed are those of the author and do not necessarily represent the views of the funders.

paper have been discussed. I am also indebted to the anonymous reviewers and to Ron Martin and Harry Garretsen, the editors of the special issue, for their incisive comments on earlier versions of the manuscript.

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I am especially grateful to Diego Puga, with whom many of the ideas presented in this

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Acknowledgements

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