GDP would be increased if more people moved to NYC or the Bay Area? That's like saying if a company just hired more people they could make more money. It doesn't work like that.

It's not just about the jobs. There are enormous economies of scale to living in cities. Distances travelled are shorter, stores do higher turnover(meaning fewer of them per capita), and multi-family housing is cheaper to heat & maintain to name a few. Urbanization is one of the most tested ways of making people richer.

The problem historically has been the distribution of that additional wealth. It's common to see cycles of increasing rent seeking, followed by de-urbanization/migration, and then a gradual return to cities.

Not sure how "rich" people feel trading a single family home on a quarter acre for a 800 sq ft 2-bedroom house. I've lived in plenty of dense urban cities in developing countries and they live that way because they can't afford better, not because it's ideal.

Yes, that's a trade-off that people have to decide for themselves.

Though if more and higher construction were legal, they could afford a bigger place in dense urban cities, too.

(Of course, the number of plots for single family houses is limited. But there's no limit to how big your apartments can be, if you are willing to stack them.)

I mean it actually does. Concentration leads to much higher economic growth. Both in absolute terms and per capita.

Ive seen this stated a lot and I'd be interested in where this idea comes from/ where it's been validated. I don't know if there's studies or something like that but I think it'd be useful to the conversation to add how we know that. Thanks

You can start with eg https://en.wikipedia.org/wiki/Economies_of_agglomeration

Aren't most of the big tech companies in the Bay Area located in the suburbs?

Sort-of. If they legalised construction in the area, many of those suburbs would turn into cities.

Or would GDP be increased more (and more evenly distributed, both geographically and demographically) if the jobs in NYC or SV were all required to be remote? Imagine if every small town in the country had HN types bringing money into the local economy instead of taking it out.

No.

Increase in GDP means that someone is making more money. And you seldom have to _require_ anything to get people to make more money. Companies and workers already have the option to negotiate remote working arrangements. And had for a long time.

> Imagine if every small town in the country had HN types bringing money into the local economy instead of taking it out.

They'd just take it out to another 'local' economy. What makes some random spot more deserving than some other random spot?

And in any case, on a macro scale there's basically as much money in the national economy as the Fed wants there to be.

If there's some process that makes money magically vanish (eg perhaps those wacky foreigners selling you goods but then just burying the cash you pay them, instead of spending it), then the Fed will just issue more money to make up for the shortfall.

Similarly, if those foreigners dig the money back up, the Fed will just sell a few items off their balance sheet to soak up the extra money.

You are responding to arguments about GDP with arguments about money supply.

Inflation adjusted GDP is a completely independent measure/concept/entity/quantity from money supply.

Sorry, there were two strands of argument I was replying to. That might have gotten a bit confused.

The first was about real GDP, and natural incentives vs legal requirements.

The second was about money supply vs worrying about keeping money in the local economies.

Milton Friedman made a good career proving you wrong with his helicopter money. Dumping cash in human hands has real effects beyond increasing the price of everything.

(I agree that the parent comment is unconvincing.)

I think we are in agreement.

They are independent entities as measured state of an economy at single points in time. Money supply doesn't tell you what GDP is, or vice versa. Normalizing GDB for inflation is about removing even that connection.

But as far as the dynamics of an economy everything is related to everything. Changes happening to one spill into effects on the other, although as we both know, often not in a simple way.

"the most productive"

Productivity is really mostly a measure of value capture.

So when we say 'productive' we can just mean 'rich people in specific companies hoarding profits and income' and then assume that this is 'productive' by the more common definition.

The problem is that those areas may not quite be more 'productive' per say, but that there's a power imbalance.

I believe that actually they are more productive, but the White Collar workers are playing on a global scale, but the plumber can still only work on a local scale.

It probably would require a 'multi pronged' solution of tweaking taxes, services, building more homes, upping the interest rate, getting companies to spread out a bit etc..

No thanks. There's more to life than maximizing GDP. We don't need to cram ever increasing numbers of people into a couple of geographically constrained metropolitan areas.

People have preferences and agency.

Those people who want to be crammed (in return for higher income) should be allowed to cram.

As a nice side-effect, that leaves more of the rest of the world free for non-crammers.