The Future of Urban Research: Non-Market Interactions

modern growth theory argues that intellectual spillovers—idea flows among individuals that are not mediated by the market—are a linchpin of economic progress. In Paul Romer’s seminal work, endogenous economic growth requires increasing returns.1 Without nonmarket intellectual spillovers or some form of externality, increasing returns and economic competition cannot coexist. In Romer’s now canonical model of growth, idea flows are seen as the basis for economic progress; the robust relationship between human capital and economic growth has been taken as support for the importance of these intellectual spillovers. Social capital theory argues that “social capital, connections, social networks are much more correlated with human happiness than is financial capital.”2 In large surveys such as the General Social Survey (GSS), measures of social connection (such as churchgoing or membership in organizations) are more strongly connected with self-reported happiness than income is. This body of research also claims that nonmarket social interactions (for example, membership in choral societies) are an important factor in determining the success of governments and societies at large. Social ties among individuals are thought to be critical in overcoming citizens’apathy and “making democracy work.”3 These two large, separate literatures have independently concluded that nonmarket interactions are extremely important. Only an economist could be surprised by such a deduction. The tendency of economists to ignore these