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Did the 'death of distance' hurt Detroit and help New York?

Posted by: Peter Coy on January 7, 2008

New YorkI recommend a fascinating piece of academic research whose title is the headline above. It’s by Edward Glaeser and Giacomo Ponzetto, both of Harvard. They argue that advances in communications and transportation technology over the past few decades had two contradictory effects on cities, one negative and one positive. On one hand, better communications hurt cities (which are marked by extreme density) by reducing the importance of proximity for shipping goods and exchanging ideas. On the other hand, better communications can make new ideas more valuable by allowing them to be spread and used around the world. That, in turn, would make the hatcheries of new ideas more valuable.

DetroitSo, which effect predominates? It depends. Glaeser and Ponzetto argue that for goods-producing cities like Detroit (right) and Cleveland, the negative effects have dominated, but for idea-producing cities like New York (left), Boston, San Francisco, and Minneapolis, the positive effects have dominated.

Reader Comments

Richard Layman

January 8, 2008 8:07 AM

Don't get too high falutin' about coming up with explanations for the failure of the Detroit-based auto industry. All you need to do is go back into the Business Week archives, and look at the book authored by a former BW bureau chief, _On a Clear Day you can see General Motors_ which was done in large part with John De Lorean.

Detroit car companies were failing long before the Internet. And in 1979, that book laid out the arguments.

Generally, the automobile industry is successful. For the most part, the companies that aren't oriented to continuous process improvement are failing.

The companies that haven't been focusing on the customers, they are failing.

Sure, Detroit isn't NYC, but hermeticism is a bad thing, anywhere, and there are plenty of companies based in "idea producing cities" that have failed because of their flawed innovation ecology.

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BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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