Part of the heart of Paul Krugman’s Nobel Lecture is on what might be the fading significance of the increasing returns that gave rise to the US manufacturing belt and a lot of regional specialization writ large.
(By the way, I will always love Krugman for being a sci-fi nut — he came to study economics because he wanted to become a psychohistorian. I’m proud to say that I knew this more than a decade ago, when I first discovered this very rad thinker.)
And so he suggested that the industrial concentration around Detroit will likely die out. I badly want to read the transcript — I find the idea that increasing returns might be fading in importance plausible but also tremendously significant. The idea has been floated before, usually in light of radically improved communication technologies, yet we see the persistence and the entrenchment of other economic agglomerations. I wonder what the economic geography of the financial sector will look like in a decade or two — not whether New York will lose out to Dubai, but whether we’ll continue to have financial capitals. To be sure, financial capitals exist fr reasons pretty different from the manufacturing belt. I’m eager to puzzle through this stuff.
Kotkin, for somewhat different reasons, offers a related prescription.