Cities as a Financial Strategy

I rarely use Internet Explorer (I'm a Foxfire guy), and so I have never changed the home page from the default MSN page. When I accidentally opened IE yesterday, I saw a teaser for a story about "best starter cities for young couples." The thrust of the story is that it if one is young, it is better to live in Baltimore than San Francisco, so that one can buy an inexpensive house and accumulate wealth.

The problem with that idea is that successful (more expensive) cities are often places where people accumulate human capital, which can also lead to riches (and life satisfaction). Successful cities allow labor specialization (specialists often learn higher wages than generalists), have sufficiently deep labor markets for both members of a married couple to get good job matches, allow the development of networks (Silicon Valley is Exhibit A; Wall Street is Exhibit B), and also provide a greater variety of consumer and service goods (Burmese Restaurants, for example).

For a really good take on the labor market issue, go here: http://ideas.repec.org/p/max/cprwps/57.html, although Rosenthal and Strange do not cast the issue in quite so positive a light as I.

Going bank to the MSN piece, the top five places it gives for young families are

• Atlanta

• Minneapolis/St. Paul

• Des Moines, Iowa

• Provo, Utah

• Green Bay, Wis.

I can see Atlanta (although while housing is cheap there, the commute will kill you) and Minneapolis (the only downside being, of course, the cold). But Des Moines and Green Bay? They are pleasant enough small cities, and housing is cheap in both places. But for long-term labor market opportunity, it is hard to make a case for either.