The Diminishing Economic Returns of Locating in the Urban Core

The world is flat. It has been that way for a few decades. However, geographic stereotypes are slow to catch up to reality while the stubborn myth persists that innovation prefers dense urban environments. On the latter score, historian Margaret O'Mara proves that innovation prefers the suburban. If anything, the city is detrimental to ideas having sex. As for the former score, the data still look (irrationally so) spiky. Fed up with the United Kingdom mesofacts, PwC complains about a talent shortage:

Despite half of our graduate vacancies being in the regions, we find it harder to fill these roles as there is still a misconception among graduates that London is where all of the opportunities are.

PwC finds operating outside of London to be cost effective. Employees don't find residing in London to be cost effective. Grads look for jobs in London regardless. For most migrants, the herd mentality rules.

For inter-regional migration, risk aversion is the rule. Concerning country-to-country, the biggest cities shine on the mental map. Within a country, trendy cities punch above their weight. Furthermore, domestic outsiders cluster near the core where cosmopolitan norms hold sway. The gateway neighborhoods are as predictable as wealthy neighborhoods sitting upwind from smelly industry (typically the northwestern part of the region in the United States).

Talent crams into the urban core because such people don't know any better. Awareness of geographic arbitrage opportunities take time to amass. Intra-regional migration tends to be of the sprawl variety:

[Large employers] are saying, what is the situation going to be like in 2025 and these employees are going to be hitting 30 . . . are they still going to want to be London-based and if so, what are we going to have to offer to keep them, and can we afford it?

Can large employers pay employees enough money to keep them in London? This isn't a question of a firm enjoying the positive externalities of a dense global hub. As far as businesses are concerned, the world has been flat for quite some time.