Ross Emmett

Posts Tagged ‘cheap talk’

Cities and Innovation

Wednesday, May 18th, 2011

I’ve been reading Edward Glaeser’s Triumph of the City (Penguin, 2011): an excellent read and quite accessible for general audiences.

Glaeser makes three claims I’d like to discuss. The first is in his subtitle: the city is “our greatest invention.” The second is that cities are central to human flourishing; and the third, which he tells us lies behind both of the first two claims, is that “ideas spread easily in dense environments” (ironically, this core claim only appears in Glaeser’s acknowledgements, so those interested in the thinking behind his book may miss it!).

I disagree with Glaeser’s first claim, and largely agree with the other two, although the nature of my disagreement with the first claim will modify both of the other claims. Let me explain.

Humanity’s greatest invention is language. Glaeser may, of course, simply respond by saying that language is natural to humans, while he is concerned with that which is human-created. But it is that natural-artificial divide that led Rousseau to identify cities as “the abyss of the human species” (a quote Glaeser uses) because they are artificial, and also to argue that language must have begun as an expression of human emotion (a raw, natural act, like a song from a song-bird) rather than as product of human rationality. Clearly, Glaeser doesn’t want to join Rousseau, so perhaps he’ll have to agree with me. In any case, his discussions of place and the evolution of cities sound a lot like discussions of the evolution of language and of its diversity across the human race.

Without language, humans would be reduced to managing the various relationships of existence via reciprocity—the highest form of social collaboration commonly found among other animals. Reciprocal relationships—I’ll scratch your back if you scratch mine—can be quite complex, but because they involve exchanging A for A, cannot take us far toward either exchanging complex ideas or creating “dense environments.” Cities, certainly, don’t appear from reciprocity. For that, we’d need to take relationships beyond reciprocity; and language is the key to the “beyond.” And since both Glaeser and I are economists, I can add that reciprocity is different than economic exchange—trading A for X (getting into why trade is not reciprocity would take us too far away from our topic, but I can illustrate the issues by merely pointing out that X need not only be a different good than A, it may not even be a good, and it may not be in the same place, or at the same time). Trade, as Adam Smith realized long ago, is deeply connected to language and both are fundamental to making humanity, as Robert Malthus once said, “a peculiar animal.” In short, no language or trade, no cities.

The fact that Glaeser takes language for granted is signaled by his third claim: dense environments promote the spread of ideas. He might as well say, lots of talk promotes the spread of ideas. Density is only possible because humans can talk, and greater density enables even more talk. As long as we assume that ideas spread via talk, then density facilitates the spread of ideas.

It was this argument that led me to pick up Glaeser’s book in the first place. I thought he could help me understand better how cities function as “hubs,” “hotspots,” or “incubators” for innovation. And he does: he makes a persuasive case that because cities create a dense network, good ideas for all kinds of things that add value to our lives are more likely to appear and have a chance to succeed. This is how cities make us, as his sub-title says, “richer, smarter, greener, healthier, and happier.”

But as I read, I realized that Glaeser never really explains how “density” converts more ideas into good ideas that add value. After all, a dense human environment is as conducive to cheap talk as it is to good talk. And Frank Knight’s first law of talk may apply: “Talk is cheap and it drives out talk that is less cheap.” Flattery, sophistry, cajolery, publicity, huckstering, lobbying, deception, and the like are often associated with city life. Welcome to the Emerald City!

Glaeser never really addresses the problem of cheap talk. Instead, his analysis of cities implies that density, and the diversity of ideas it provides, serves a winnowing function for ideas: lots of ideas are tried out, those that succeed survive. Perhaps this is a heritage of his Chicago School training: markets always produce improvements, as long as we understand improvement to mean better satisfaction of what it is that people want. And I’m sympathetic to that argument.
But what if we want to improve the means by which people voluntarily find new and better wants? Isn’t that part of the reason we create cities? Can I be confident that increasing the density of cities will necessarily improve the quality of our social interactions? I have come to the point where I expect it will, but not only from market interactions. I don’t see in Glaeser a reason for me to be confident in my expectation. For this, we’re probably better off turning to Elinor Ostrom and Deirdre McCloskey. They at least have arguments for how talk, and especially cheap talk, plays a role in improving the outcomes of centrally uncoordinated human action. Ostrom’s Nobel lecture provides the basics of her argument; McCloskey’s “Bourgeois Era” series is building her case. Both contradict Knight, although perhaps in different ways.

For my own purposes, consideration of the importance of talk to innovation helps us understand why certain institutional features of a society – its appreciation for freedom of expression and association, its willingness to design around human action rather than direct action through design, etc. – as well non-institutional features, such as a society’s norms and common morality, play such an important role in making some societies innovative, and others not. More on that topic to come!

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