Randall Parker leaves a comment:
If density is so important then why is far more high tech in Silicon Valley as compared to San Francisco? The ideal level of density needed for high tech is probably below the ideal density for commuter rail.
And gives me the opportunity to correct a lot of potential misconceptions about what I’m arguing. First, it’s worth pointing out that San Jose is pretty dense. Its weighted-average density — the density at which the average person lives — isn’t as high as San Francisco’s, but it’s on a par with that in Chicago.
But this is somewhat beside the point. The locus of high-technology work is in San Jose rather than San Francisco precisely because density is so important. Because proximity to the dense cluster of tech firms in the Valley is so advantageous, it’s very costly for any individual firm to leave the cluster. Perhaps the firms in the cluster would all be more productive if they were grouped together more densely, but there’s no way to move them to San Francisco except by a massive coordinated effort; the advantages of density hold firms around San Jose. And of course, the fact that the cluster began there in the first place is just an accident of history — a product of the location of Stanford University and the military facilities that supported much of the early technology research in the area.
The argument is not that economic activity will seek out the densest place in the country to do their work. It’s that, other things equal, an area will be more productive as its density rises. And presumably there is a role for skill complementarity; if we increase the density of San Jose by adding engineers to the local population, productivity will likely change in a different way than if we add plumbers or accountants, or than if we added engineers to Manhattan. Density isn’t magic; it’s simply a measure of the market, labor, and human capital to which local firms have good access.
Parker seems to be arguing that Silicon Valley currently exists at the ideal level for high tech industrial work. I doubt this is true, though there’s no way for any of us to know. High tech centers around the world exist at very different densities, and the density of Silicon Valley has itself varied over time as the area has grown. I wouldn’t begin to propose an effort to try and determine ideal densities and push areas toward those levels. Rather, I’m observing that in general there is a relationship between density and productivity, and this means that artificial limits on density (which the Bay Area has in spades) are very costly. The first, best way to address this would be to remove existing barriers to development. This is often a challenge. An alternative that has been successful in many cities is to develop local transit networks and adjust land use around stations to accommodate higher densities.
San Jose is already dense enough to support some rail travel. But we can look at the heart of Silicon Valley and observe a few things. First, the cost of housing indicates that there is excess demand for homes in the area. Second, we see that many scientists and engineers commute into Silicon Valley from places all around the Bay. It seems likely that a substantial share of long-distances commuters into the Valley are forced to live farther away from their place of work than they’d prefer thanks to high housing costs. The use of local transit to facilitate denser development would increase local housing supply, slow housing cost growth, allow more people to live in the region, and allow a larger share of the regional population to locate at its heart.