Paul Romer recently gave a talk at the World Bank entitled “Urban Policy Drives Catch-Up Growth.” Here’s an excerpt of the Bank’s description of the talk:
In this talk, Professor Romer will make the case that Urban policy drives catch-up growth. Key steps in the argument are that urbanization is closely correlated with income per capita; that the familiar process of structural transformation is gated by the rate of urbanization; that an industrial policy with no urban policy is doomed, whereas an urban policy without an industrial policy is perfectly viable; that education policy, which unquestionably pays a higher rate of return, acts too slowly to initiate rapid catch up growth; that cities are the hubs that make the diffusion of technology possible; and that the government has a small but essential role to play in leading urban development. Only a government can take raw land and split it into public and private space.
The default perspective of economics--that the market can take care of everything--misses the pivotal and irreversible role of this separation in the creation of urban area. The default perspective of planning and architecture--that some person has to design everything--vastly overstates what needs to be done before urban development can get underway.
Here is a direct link to the lecture, which begins at about the 4:30 mark.