The City of Business

Prof. Roberto Camagni – Politecnico di Milano

ABC – Advanced Brainstorming CarrefourABC – Advanced Brainstorming CarrefourTHE SCIENCE OF THE CITYTHE SCIENCE OF THE CITY

Naples, 21-23 March, 2016Naples, 21-23 March, 2016Università di Napoli Federico IIUniversità di Napoli Federico II

«The city of Business»Roberto Camagni – Politecnico di Milano


SummarySummary

1. Which city are we speaking about? S-M-L-XXL?

2. The city of business:- hard components: the competitive city- the soft components: the innovative city- the relational components: the creative city

3. The monopolistic city:- the city of art and cultural heritage- the city of power and power élites

4. The city as business: the real estate city- profits, capital gains and transformation rents- taxation vs. corruption

5. Tentative conclusions


1. Which city are we speaking about?1. Which city are we speaking about?

Only about large and very large cities? NO!

According to some views (Krugman, 1991; World Bank, 2009):-large cities are the most efficient and productive (GDP/head): OK!they are more attractive, they develop faster: NO!they are the absolute priority for development policies: NO!!

There is an unacceptable logical shortcut in this reasoning:when chosing a city as their location, companies and households do not look at gross urban benefits (GDP/head, unit wages) but to net urban benefits (B-C), which are much more similar throughout the urban hierarchy.

medium-size cities may grow faster than large ones (in the EU they did!)and also their (net) productivity may grow faster (Camagni et al., 2015-16) dπ / dS ≠ dπ / dt !! (static efficiency ≠ dynamic efficiency!)


1. Which city are we speaking about?1. Which city are we speaking about?A recent econometric analysis on 140 EU cities (LUZ, 1998-2011) from M to XXL shows thet (Camagni et al., 2015-16):I)the level of net urban benefits (unit land prices) depends on: -urban size, but also on:-«borrowed size» (size of wider spatial context)(Burger&Meijers, 2014-16)-share of top functions hosted,-«borrowed functions» (functions in the surrounding space),-cooperation networks with other distant cities,and more importantly it shows that:II) the growth rate of net urban benefits depends:-NOT on initial size! But on:-growth of the share of top functions quality, not size-growth of borrowed size, dynamic territ. context-growth of borrowed functions qualified terr. context-density of cooperation networks internat. integration


2. The city-of-business: efficiency components2. The city-of-business: efficiency components

Traditionally, some HARD components were indicated as crucial for the efficient city-of-business, namely:-internal and external accessibility,-global connectivity, physical networks,-availability and quality of the labour force,-Marshallian externalities: specialised labour pool + ancillary industries,-Jacobs’ externalities: sufficient diversification,-availability of land for development,-price competitiveness: comparatively low unit labour costs,-price competitiveness: value-for-money in real estate markets.

All these elements are able to generate an efficient and attractive city-of- business.

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2. The city-of-business: innovativeness 2. The city-of-business: innovativeness componentscomponents

More recently, some SOFT components were added in order to guarantee an innovative aura to the city-of-business, namely:-General education,-Quality of life, -Openness, internationalisation,-Investments in R&D, ICTs, competencies and knowledge, -Good governance and effective public administration,-Favorable business environment: appropriate rules, fair business behaviour, entrepreneurship,-Public and private leadership,-Prestigious locations for business headquarters.

All these components may guarantee a «dynamic progressiveness» to the city (Porter, 1992), dynamic efficiency and eventually innovation.


2. The city-of-business: creativity components2. The city-of-business: creativity components

Still, something relevant is lacking for guaranteeing a long term success to the city-of-business: the glue, the community, the public consensus on its goals and pathway. Therefore since two decades new, RELATIONAL components were added, namely:-culture, shared values,-cooperation, synergy, solidarity,-trust, sense of belonging, shared goals, social and identitarian capital,-collective action (commons provided by private parties and individuals),-collective learning processes («milieu» effects),

-visioning capability, participation (urban strategic planning),

-affection, emotion, atmosphere; place-affection; public spaces simbolically appropriated by the community (Cusinato and Philippopoulos, 2015).


2. The city-of-business: creativity components2. The city-of-business: creativity components

These RELATIONAL components are considered to be conducive to creativity, and consequently to a creative city, capable of continuously regenerating itself and its production basis.

«Relational capital» is traditionally considered an asset in production theory: something boosting productivity of traditional elements of capital.But also in the sphere of demand theory relationality is emerging: «relational goods»: whose fruition is not individual but collective (commons) «positional goods» (indicating a cultural condition: organic food),«reciprocity goods» and even «non-reciprocity goods» (gift) are more and more requested (according to the economics of happyness).

The business community has to become cultivated and learned enough as to interpret these requests that are in the air (also concerning its behaviour).


The city-of-business shall become a 360° city: urbs + civitas.

The cultural bases of the competitive cityThe cultural bases of the competitive city


Source: Martin, 2006

The city-of business: all componentsThe city-of business: all components


Hard Components Efficiency

InnovationSoft Components

Relational Components

Creativity

No single component is sufficient: all are necessary

The roles performed by the creative city can be summarised in the following graph, showing the spatial and hermeneutical dimensions (Camagni 2015a on 2001)


The roles of the cityThe roles of the city

SPATIAL LOGIC

HERMENEUTICLOGIC

TERRITORIALDIMENSION

NETWORKDIMENSION

FUNCTIONALDIMENSION

CITY AS AGGLOMERATION

1.volume and density of contacts2.diversification / specialization 3.concentration of externalities4.reduction of transaction costs5.spaces for selective or casual meetings6.coexistence of interaction and anonymity

CITY AS INTERCONNECTION

1.city as a node in multiple and interacting economic, transport and communication networks2.city as interconnection between place and node

COGNITIVEDIMENSION

CITY AS MILIEU

1.relational density2.sharing of languages, codes, values3.sense of belonging, identity4.substratum for collective learning5.uncertainty-reducing operator through: - socialized transcoding of information - ex-ante co-ordination of private decisions

CITY AS GLOBAL INTERACTION

1.link among global milieus2.global exchange of codes and languages3.gateway for global reach4.city as control over space and time 5.city as symbol of territorial mastery6.city as powerhouse / transformer of internal and

external energy SYMBOLICDIMENSION

CITY AS “LANDSCAPE”

1.image-space 2.affect – atmosphere – emotion3.shared symbolic representations4.public spaces symbolically recognized and

appropriated by a local community in an identitarian way

CITY AS KNOWLEDGE-CREATING

MILIEU1.creation of symbols, codes, and languages2.fostering reflexive forms of learning3.blending of different forms of knowledge:

analytic, synthetic, artistic

3. The monopolistic city3. The monopolistic city

Monopolistic cities share a common feature: they act on captive markets.

The cities of art and cultural heritage:- are attractive for the commercial, hospitality and real estate filières,- have less incentives to be efficient and innovative,- monopoly rents are spreading pervasively (revenues but also costs),- tourist accomodation goals prevail over inhabitants needs and quality of life.

The cities of power and power élites:- are rich and expensive, have an attractive labour market,- are often dual cities: top services and advanced infrastructure coexist with

poor neighbourhoods and deprivation,- decision making monopoly may easily generate corruption,- need solid and far-looking leadership.

Not only advantages from monopoly (hopefully!)


4. The city as business: the real estate city4. The city as business: the real estate city

Cities have been for a long time – at least up to 2007 – the Mecca for the real estate business:

- providing growing demand due to endless urbanisation processes,- continuously rising prices (up to the crisis) well beyond pure construction

costs,- consequent profits and capital gains,- huge transformation rents linked to changes in land use.

UN Habitat’s The city we need: «What to avoid: (…) poorly regulated real estate markets that create speculative bubbles and financial crises».

NGO Transparency International estimates: «The real estate sector generates 78% of worldwide corruption».

The real estate city requires a specific and proper consideration.


4. The city as business: the real estate city4. The city as business: the real estate city

Classical economists (but also Marshall) thought that transformation rent represents an un-earned income, as it derives from the general development of society and/or from direct public investments Camagni, 2015b).

Therefore, proper governance and action are needed: Public pre-emption/acquisition of land around cities, Value capture or re-capture, Taxation (by-law of through p/p negotiation)

Possible public/private, win-win condition:

«building the public city through a fair distribution of surplus values originated from the transformation of the private city» (Italian Istituto Nazionale di Urbanistica, 1995).


The virtuous cycle of land value creation


Source: UN-HABITAT (2013), Urban planning for city leaders, p. 137

Tentative conclusionsTentative conclusions

• Cities of different size, from M to XXL, may achieve high (net) productivity growth rates and attractiveness for the business community if:- they host high quality functions,- they are integrated into a dynamic and qualified urban system,- they engage in long distance city-networks.

• Long term competitiveness through innovation and creativeness may be reached merging hard, soft and relational capital components, ranging from global connectivity to cognitive and identitarian capital, supporting culture and stimulating emotional linkages with places;

• A condition of monopoly in specific functions (government, cultural heritage) helps urban wealth but not necessarily efficiency and dynamism;

• Real estate industry makes a large part of the urban business; emerging transformation rents shall be partly re-captured and directed towards the provision of public goods, commons, and participatory planning practices.


Thanks!Thanks!

Many thanks for your attention!

Roberto CamagniDepartment ABC: Architecture, Built environment

and Construction engineeringPolitecnico di MilanoPiazza Leonardo da Vinci 32 - 20133 MILANOtel: +39 02 2399.2744 - 2749fax: +39 02 [email protected]



ReferencesReferences

Camagni R. (2015a), Towards creativity-oriented innovation policiesbased on a hermeneutic approach to the knowledge-space nexus, in:

Cusinato A. and Philippopoulos A., Knowledge-creating milieus in Europe: firms, cities, territories; Berlin, Springer

Camagni R. (2015b), Urban development and control on urban land rents, Special Issue, The Annals of Regional Science, DOI:10.1007/s001168-015-0733-6

Camagni R., Capello R. and Caragliu A. (2015a), Static vs. Dynamic Agglomeration Economies: Spatial Context and Structural Evolution behind Urban Growth, Papers in Regional Science, DOI:10.1111/pirs.12182

Martin R. (2006), The economic competitiveness of cities: conceptual and theoretical issues, State of the Cities Report for the UK Office of the Deputy Prime Minister.

The City of Business

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