Travelling New Zealand years ago, BNZ was closing down ATM’s in small settlements. This caused quite some social stirs especially in the smaller settlements and townships we were travelling through. Servicing an ATM in a remote and small town is very expensive for a bank in relation to the money dispensed, but it is crucial for the citizens for their society is more cash dependent and other ATMs are not around the corner, making their cost to get/store cash very high. A single companies decision (NB even though economically totally sound from their perspective) can have big externalities to others. It also has effects on the social fabric of these communities as e.g. people will have an extra incentive to travel to a bigger town and while being there get their shopping, draining the communities corner shop. With dwindling services the community gets less attractive to settle and this will put pressure on the small towns.

I tried to explain to my wife how the increase in the density of people creates the economics to have all participants to have more choice (a.k.a. prosperity). In a small township a corner shop can only offer a limited range of products to choose from. In a mid size town the supermarket can offer a much wider range of products and in a big town the supermarket can even offer obscure items for chances are pretty big that somebody will buy it. For most living in densely populated urban area’s it is less easy to see this effect for most supermarkets are having a sufficient supply area to allow for a wide and deep assortment of products.

The supply area is not only about literal density but also about its reachability and the ability to draw people by the attractiveness and concentration of goods it self. Only look at French hypermarkets outside of towns… With the emergence of web shops the notion of the supply area has dramatically changed for the physical limitations of the customer to come to the store.

Via NRC Handelsblad 8 june 2013 by Marcel van den Burgh:

[Translation and condensing by RPD]

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blockquote>As more people live on one square kilometre, they are exchanging more information and productivity increases disproportionately fast. It’s always been a question of what attracts people to cities and towns and why cities are much more productive as compared to rural villages.

Geoffrey West and Luis Bettencourt of the Sante Fe Institute have found a relationship between the number of patents, for example, the investment in research and development (R & D), economic productivity and the size of a city. They showed that as a city was larger these parameters increased disproportionately fast. The relation meets a so-called economies of scale. The number of patents was found to depend on the number of residents to the power of 1.27, for example. When business investment in R & D that factor was even 1.34. The number of petrol stations on the other hand scored a scaling factor of 0.77, and the length of power lines came in at 0.87. The bigger the city, they need proportionately less investments in infrastructure.

Wei Pan of MIT in Cambridge and his colleagues now show that not so much the size of a city is decisive, but rather the density of the population. The relationship with economic productivity appears much stronger. The relationship with population density was stronger than population size. As a disease easily spread as people live closer to each other, so also ideas disseminate easier, the scientists write.

Population density alone does not say anything. This may have to include motion with the transport system, as they suggest. Beijing, for example, is densely populated, but by the constant traffic congestion is the metropolis as it were divided into smaller regions. Town council directors must not only build more skyscrapers, but also strive for a good infra-structure.

Links:

Wei Pan cs via Nature Communications Urban characteristics attributable to density-driven tie formation.

At RPD this effect of both scalability and the uneven dispersion of collaborability has been mentioned before:
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