Is all economics local?

The Bank of England. Image: Getty.

Last month, Andy Haldane, the Chief Economist at the Bank of England, published his latest in a series of thought provoking think pieces about the economy. It posed the question, “Is all economics local?

This is quite a departure from the thinking of the Bank of England (and no doubt any other central banks around the world). The Bank has for the most part seen the UK economy as one single unit, rather than a collection of many hundreds of smaller economies. And when it has looked beyond the national headline, it hasn’t tended to do much more than a cursory look at regions, which as a unit of analysis miss much of the variation that we see across the country and the reasons for it.

So it was very pleasing from our point of view that Andy has addressed this question head on, and hopefully this will set the tone for how the Bank looks at the economy in the future.

If Andy’s speech represents the frontier of the Bank’s thinking on subnational economics, however, it shows that there is some development of thinking that is required.

This is underlined by the cartogram below, which was used in the speech. It shows how complex or “sophisticated” an economy is, based on the type of activities that take place there, with more complex economies being larger in size.

What jumps out here is that in general, the economies of cities are more complex than elsewhere. But this wasn’t noted in the speech, despite being crucial to understanding the patterns that the cartogram shows.

A cartogram of complexity of economic activity across the country. Click to expand.

This pattern occurs because of the different benefits that different places offer. Cities (and city centres in particular) offer access to a large number of potential workers and a network of businesses that companies can share ideas and information with (known as “knowledge spillovers”). In contrast, deep rural areas offer neither of these benefits. But what they do offer is a lot of land at a much cheaper price and access to the countryside, by definition, is on the doorstep.

Where businesses locate depends on the trade-off that they make between these different benefits. What the cartogram above shows is that those more complex activities choose cities.

More specifically, they choose city centres – 25 per cent of Britain’s service exporting jobs (such as finance, marketing and software development) locate in city centres, despite accounting for just 0.1 per cent of Britain’s land. By comparison, deep rural areas are home to 5 per cent of such activities, despite covering over half of Britain’s land mass. And despite ever more sophisticated communications technologies, the data suggests that these patterns of firm location have become more pronounced over the last two decades.


Without this understanding, it would be perfectly reasonable for a policy maker to attempt to use policy levers to make the cartogram look more even across geography. And indeed Andy suggests that the cartogram could be used to help inform the forthcoming local industrial strategies. But the descriptive power of the statistics, which is really interesting, tells us little if it is not couched in a framework for understanding the role that different types of places play in the national economy.

This understanding then helps us to expect that central Manchester will be more complex or productive than Cumbria or Cornwall. And it should spur us to ask why it isn’t as complex as Bristol, Brighton or London, and design policy to respond to this.

All economics is local. But different types of place have different types of economies because of the relative benefits that they offer. And because of this we shouldn’t expect all local economies to be the same. No doubt this will come out more strongly as the Bank continues to explore this area.

Paul Swinney is head of policy & research at the Centre for Cities, on whose blog this article first appeared.

 
 
 
 

The IPPC report on the melting ice caps makes for terrifying reading

A Greeland iceberg, 2007. Image: Getty.

Earlier this year, the Intergovernmental Panel on Climate Change (IPCC) – the UN body responsible for communicating the science of climate breakdown – released its long-awaited Special Report on the Ocean and Cryosphere in a Changing Climate.

Based on almost 7,000 peer-reviewed research articles, the report is a cutting-edge crash course in how human-caused climate breakdown is changing our ice and oceans and what it means for humanity and the living planet. In a nutshell, the news isn’t good.

Cryosphere in decline

Most of us rarely come into contact with the cryosphere, but it is a critical part of our climate system. The term refers to the frozen parts of our planet – the great ice sheets of Greenland and Antarctica, the icebergs that break off and drift in the oceans, the glaciers on our high mountain ranges, our winter snow, the ice on lakes and the polar oceans, and the frozen ground in much of the Arctic landscape called permafrost.

The cryosphere is shrinking. Snow cover is reducing, glaciers and ice sheets are melting and permafrost is thawing. We’ve known this for most of my 25-year career, but the report highlights that melting is accelerating, with potentially disastrous consequences for humanity and marine and high mountain ecosystems.

At the moment, we’re on track to lose more than half of all the permafrost by the end of the century. Thousands of roads and buildings sit on this frozen soil – and their foundations are slowly transitioning to mud. Permafrost also stores almost twice the amount of carbon as is present in the atmosphere. While increased plant growth may be able to offset some of the release of carbon from newly thawed soils, much will be released to the atmosphere, significantly accelerating the pace of global heating.

Sea ice is declining rapidly, and an ice-free Arctic ocean will become a regular summer occurrence as things stand. Indigenous peoples who live in the Arctic are already having to change how they hunt and travel, and some coastal communities are already planning for relocation. Populations of seals, walruses, polar bears, whales and other mammals and sea birds who depend on the ice may crash if sea ice is regularly absent. And as water in its bright-white solid form is much more effective at reflecting heat from the sun, its rapid loss is also accelerating global heating.

Glaciers are also melting. If emissions continue on their current trajectory, smaller glaciers will shrink by more than 80 per cent by the end of the century. This retreat will place increasing strain on the hundreds of millions of people globally who rely on glaciers for water, agriculture, and power. Dangerous landslides, avalanches, rockfalls and floods will become increasingly normal in mountain areas.


Rising oceans, rising problems

All this melting ice means that sea levels are rising. While seas rose globally by around 15cm during the 20th century, they’re now rising more than twice as fast –- and this rate is accelerating.

Thanks to research from myself and others, we now better understand how Antarctica and Greenland’s ice sheets interact with the oceans. As a result, the latest report has upgraded its long-term estimates for how much sea level is expected to rise. Uncertainties still remain, but we’re headed for a rise of between 60 and 110cm by 2100.

Of course, sea level isn’t static. Intense rainfall and cyclones – themselves exacerbated by climate breakdown – can cause water to surge metres above the normal level. The IPCC’s report is very clear: these extreme storm surges we used to expect once per century will now be expected every year by mid-century. In addition to rapidly curbing emissions, we must invest millions to protect at-risk coastal and low-lying areas from flooding and loss of life.

Ocean ecosystems

Up to now, the ocean has taken up more than 90 per cent of the excess heat in the global climate system. Warming to date has already reduced the mixing between water layers and, as a consequence, has reduced the supply of oxygen and nutrients for marine life. By 2100 the ocean will take up five to seven times more heat than it has done in the past 50 years if we don’t change our emissions trajectory. Marine heatwaves are also projected to be more intense, last longer and occur 50 times more often. To top it off, the ocean is becoming more acidic as it continues to absorb a proportion of the carbon dioxide we emit.

Collectively, these pressures place marine life across the globe under unprecedented threat. Some species may move to new waters, but others less able to adapt will decline or even die out. This could cause major problems for communities that depend on local seafood. As it stands, coral reefs – beautiful ecosystems that support thousands of species – will be nearly totally wiped out by the end of the century.

Between the lines

While the document makes some striking statements, it is actually relatively conservative with its conclusions – perhaps because it had to be approved by the 195 nations that ratify the IPCC’s reports. Right now, I would expect that sea level rise and ice melt will occur faster than the report predicts. Ten years ago, I might have said the opposite. But the latest science is painting an increasingly grave picture for the future of our oceans and cryosphere – particularly if we carry on with “business as usual”.

The difference between 1.5°C and 2°C of heating is especially important for the icy poles, which warm much faster than the global average. At 1.5°C of warming, the probability of an ice-free September in the Arctic ocean is one in 100. But at 2°C, we’d expect to see this happening about one-third of the time. Rising sea levels, ocean warming and acidification, melting glaciers, and permafrost also will also happen faster – and with it, the risks to humanity and the living planet increase. It’s up to us and the leaders we choose to stem the rising tide of climate and ecological breakdown.

Mark Brandon, Professor of Polar Oceanography, The Open University.

This article is republished from The Conversation under a Creative Commons license. Read the original article.