One person can only know so much. And one person can only create relatively simple products on their own. Complex products require networks of people, sometimes called companies, and even networks of networks, such as supply chains. And one way of evaluating an economy is by its ability to create complex products.
In his book, “Why Information Grows,” Cesar Hidalgo writes about economies as “collective computers” whose computational capacity is either expanded or limited by the size of social networks. (I reviewed the book recently.) And the ability to create denser networks is helped or hindered by communication and transportation technology, among other things. All of which came to mind when reading the new working paper “The Role of Transportation Speed in Facilitating High Skilled Teamwork” by Xiaofang Dong, Siqi Zheng, and Matthew Kahn:
This paper argues that China’s investment in High Speed Rail creates an integrated, regional system of cities close enough to travel by fast train but far enough to not be car friendly. We have studied the productivity impacts of cross-city transport improvements by focusing on publication and citation patterns of China’s university researchers. The empirical results in this paper show that once a city is connected into the HSR network, the researchers in that city will experience significant productivity increase in terms of quantity and quality of journal publications.
We find that travel speed facilitates matching and idea flows between two HSR-connected cities. Larger productivity gains are observed for the secondary cities close enough to the mega cities to access them by HSR. We find larger productivity effects for social scientists and for the incumbent coauthors (the intensive margin). For the subsample of migrants, we find that they are more likely to choose those secondary cities that are directly connected with mega cities by HSR, compared to other secondary cities. These empirical findings bolster our claim that cross-city speed facilitates learning and matching across cities. This finding has implications both for efficiency and for equity in the modern Chinese economy. In a human capital based economy, high speed rail induced reductions in transportation costs increase regional productivity by improving matching and lowering the cost of face-to-face interaction. . . .
Our main finding that faster cross-city commuting speeds enhance productivity extends the original Gaspar and Glaeser (1998) work in a new direction. They argue that cities and information technology are complements and not substitutes. The benefits of face to face interaction increase if strangers recognize that once they have met that they can subsequently connect again by phone, Skype and email. Cities exist because they economize on transportation costs. The boundary of a city’s agglomeration area is endogenous and hinges on transportation speed. If new technologies such as high speed rail effectively make nearby cities “closer” to superstar cities (through moving at a faster speed), then agglomeration benefits spread out further across space.
Now I am not suggesting the US build its own pricey high-speed rail network. But in a world of widespread autonomous vehicles, one can imagine that many more cities might be considered car friendly and thus reduce the cost of in-person interactions.
I recently took an Acela high-ish speed train from Washington’s Union Station to Wilmington, Delaware. If I owned an AV, I almost certainly would have chosen that instead of a train. Indeed, a 2016 Boston Consulting Group report concludes that AVs will “constitute a tangible threat to passenger rail within the next one or two decades.” Or as Matt Ridley has written, “I just cannot help feeling that a very fast train, built at glacial speed (half a mile a week) over many years of consultation, review and challenge as it punches through Nimbyland, and at up to nine times the cost per mile of French high-speed rail, feels like a white elephant waiting to happen.”