Considerations such as these may convince one of the existence of external
human capital, and even that it is an important element in the growth of
knowledge. But they do not easily lend themselves to quantification. Here
again I find Jacobs's work highly suggestive. Her emphasis on the role of cities
in economic growth stems from the observation that a city, economically, is
like the nucleus of an atom: If we postulate only the usual list of economic
forces, cities should fly apart. The theory of production contains nothing to
hold a city together. A city is simply a collection of factors of production -
capital, people and land - and land is always far cheaper outside cities than
inside. Why don't capital and people move outside, combining themselves with
cheaper land and thereby increasing profits? Of course, people like to live near
shopping and shops need to be located near their customers,, but circular
considerations of this kind explain only shopping centers, not cities. Cities are
centered on wholesale trade and primary producers, and a theory that accounts
for their existence has to explain why these producers are apparently choosing
high rather than low cost modes of operation.