SYNOPSIS: New York City will always be the capital of the world, no matter what the terrorists do
Will the terror attack permanently damage New York's position as America's economic capital? No sentimentality, please, despite the mock headline in The Onion, ``Rest of Country Temporarily Feels Deep Affection for New York.'' This is a real question and deserves a serious answer.
The reason it's a real question is that the economy of a city is different from that of the nation as a whole. Not only are America's resources - above all the energy and skill of its work force - almost entirely intact; they aren't going anywhere. We may go through a recession, during which some of those resources will temporarily be idled; but there is no question that the U.S. economy will eventually put its resources back to work.
But the resources of New York don't have to stay where they are. And it's conceivable that they won't. After all, America's pre-eminent city owes its position to historical accident. The natural advantages of New York - its fine harbor, its location at the terminus of the only possible canal route to the Great Lakes - were real enough during the city's rise. But those natural advantages have long since ceased to be important to the city's economy. What keeps New York a great city is circular causation; people and businesses locate there because of the opportunities created by the presence of other people and businesses.
And because the city's economy is sustained by circular causation, a sufficiently large blow to that economy could in theory do permanent damage. If enough businesses and people leave, for whatever reason, the local economy could fall below critical mass and enter a downward spiral in which businesses leave because other businesses are leaving.
The beneficiaries of such an exodus would probably not be other great cities; instead, businesses would move out into the endless sprawl. I was not the only person in suburban New Jersey who, somewhat to my shame, felt perfectly safe on Sept. 11: there are millions of people living and working nearby, but no obvious targets, because there's no there here.
The question is, how large a blow would be needed to start such a spiral? How robust are cities, anyway? A researcher with vast power and few scruples could try to answer that question experimentally; he could destroy large sections of a city, then see if it recovered. (Maybe that's what Robert Moses was up to!) But in real life people wouldn't perform such an experiment - or would they?
Two economists at Columbia University, Donald Davis and David Weinstein, recently pointed out that America actually has tried that experiment - on someone else's cities. Their paper, the product of many months of work, arrived with spooky timing. Titled ``Bones, bombs, and break points: The geography of economic activity,'' it points out that the U.S. bombing campaign against Japan in the closing months of World War II constituted a sort of gruesome natural experiment testing the robustness of cities.
The important point for their analysis is not just that the bombing campaign was immensely destructive - 56 square miles of Tokyo were entirely leveled, which as a proportion of the built-up area was only average for Japanese cities - but that it was highly variable in its impact. Some cities escaped with only minor damage, while others were largely destroyed. The question they ask is whether the heavily damaged cities recovered to their prewar place in Japan's urban hierarchy, or whether they entered into a downward spiral.
Their answer is slightly discouraging for economists who would like to verify theories about circular causation, but very encouraging for those who believe that New York's special, intense urbanism yields benefits to the nation that go beyond dollars and cents. Even in postwar Japan there were no downward spirals, and cities quickly returned to their original positions in the urban hierarchy. ``Even large temporary shocks to urban areas,'' declare the authors, ``have no long-run impact on city sizes.'' It seems cities are very robust indeed.
That doesn't mean that New York's future is assured - while cities are very persistent, they do rise and fall over time. But if the Japanese parallel is at all relevant, the attack on New York, for all its horror, will have no effect worth mentioning on the city's long-run economic prospects.
Originally published in The New York Times, 10.3.01