Exploring Vertical Urban Geography

Along the usual horizontal plane, I see a big shift in the rationale for urban geography. Since human capital is the most important scarce good, a downtown locale might bestow a competitive advantage in the war for talent. Well, what about the vertical? Stuart S. Rosenthal:

As you move up in a tall building, the cost of accessing the space increases. What we observe and document for the first time is a positive rent gradient. Once you get up above the 2nd floor, rents rise, and they rise at an increasing rate.

The only way that can happen in a commercial office building that is populated by for-profit companies is if there's something about being high up off the ground that is valuable. One possibility is the amenity effect: Workers value the spectacular view from the 50th floor. Another possibility is a signaling effect. Anecdotally, we've heard if you're anybody, you want that office high up. It's more impressive.

My take, the horizontal and the vertical demonstrate rational choice in the same way. Worth noting, Rosenthal takes pains to run the reader through urban geography 101 before exploring the altitudinal variation. The old rules don't seem to apply going up at the same point of latitude and longitude. Such a disconnect raises a red flag. This 3-dimensional view of urban geography is incoherent.

Lots of land value in the urban core where we find high densities thanks to tall buildings results from, concerning Rosenthal's research, the amenity and/or signalling effects. Above the second floor, real estate prices do not rise as a result of enhanced productivity and the other supposed density dividends. At the very least, the 2-dimensional view overstates the benefits of laboring in the city.

Poking another hole in the innovation district boondoggle is Jed Kolko's latest effort to debunk the urban revolution propaganda. The rather popular narrative touts the move back to the city, where ideas more readily have sex and workers are more productive. That sounds great save for the fact that this bit of population dynamics is going in the opposite direction. Bummer.

Lastly, the suburbs have been the dominant geography of innovation for many decades. Wherever talent wants to go, R&D firms will accommodate. It's a war for talent, not greater productivity. Perhaps telling, as the world has become more urban in recent history, productivity "slumped". The hype works wonders for real estate development, but not economic development. Most importantly, it's nothing more than hype.