You might have lived in a city your whole life, or moved to a city from somewhere smaller, or visited a bunch of cities, without ever pondering this question: why on Earth do these monstrous places exist at all?

These sort of questions can be considered on a philosophical scale, or in terms of social sciences, or through a cultural lens... but eventually, like so many topics, it eventually gets eaten up by the monster of Economics.

The question really boils down to: How are cities economically viable? Are they a drag on the economy or a benefit? How do cities make money? How to they add value?

You can see how a farm fits into the economy. You can see how trucks fit into the economy. You can see how a factory (or a factory town) fits into the economy.

But what does a city produce? It produces, crime, hipsters, pollution... but it: 1. Exists, and 2. Exists for a long enough period of time that we can say it is somewhat stable, and 3. It exists in multiple cultures, so we might say it's not just a local cultural or regulatory artefact.... in fact we (as good little “little-e” economics) say that it must be producing something of value, in fact quite a lot of something of value, for it to also offset the aforementioned costs.

The most convincing theory I’ve seen is “economies of agglomeration”.

Cities form and grow to exploit economies of agglomeration

—wikipedia: Economies of agglomeration

Related

• Flocking (boids)
• Hotelling's law (the principle of minimum differentiation)
• wikipedia: Alfred Marshall
• wikipedia: Jan Jacobs
• wikipedia: Robert Lucas Jr.

References

• wikipedia: Economies of agglomeration

See also

• Why are firms so dysfunctional