If you’ve been following my posts and the theoretical model I’ve presented, you too have come to the rather disturbing conclusion – That this model fits any free market. Whether it is a city, a manufacturing plant, or a service company, it seems that every free market seeks to achieve agglomeration, a state where there is only one supplier and zero competition.
In a nutshell, the argument is – a free market will always strive for agglomeration not because it is beneficial and not because it is effective, but simply because any other condition is unstable. A game theory model can show us that the choices of consumers combined with free competition of manufacturers will lead in the long run, to only one result – wealth will accumulate in the hands of few and in few specific places. Any other market situation we see is a temporary interim phase created by a change of circumstances.
Until finding this model I thought, like most people, that agglomeration has advantages and disadvantages, that it is a feature of a supplier that has advantages it can roll over to the consumers. But now I believe that is not the case. Yes, there are economies of scale but they are not the main cause of agglomeration, it will happen without them. There is no need for a core-periphery structure, it will also occur in a continuous and connected space. It will even occur in a market with multiple suppliers that produce the exact same product, with uniform price and uniform quality. It occurs wherever customers have a choice, suppliers respond to demand and the difference between them is only the distance from the consumers (Hassle-distance actually).
According to the model, agglomeration has only one cause and barrier, it’s area of influence (the Suppression Zone) that is determined by the Hassle-distance consumers are willing to invest to obtain a product or service. It is this barrier that determines the size of the agglomeration, the size of the city, the size of the company.
… and now that the world is becoming global and the Hassle-distance required to achieve a product is diminishing, for many products the agglomeration barrier is disappearing.
Terrible. At least in my eyes it’s terrible.
Although agglomeration eventually hurts everyone, consumer behavior necessarily leads to it. I feel as if I have found evidence that wealth must accumulate and social polarization is the only possible outcome in our future. That is simply awful and unjust.
There are many conclusions to be derived from the model, it leads to some badly needed insights about how the economy works. For now, however, more than anything, I need help. Your help.
I need to argue with someone. I need your reactions, your references to similar or contradictory articles in the field. I need your comments, from small notes (too complicated, too simple, unclear) to references, to conflicting or supportive studies. I would be happy to be referred to holes in my arguments, reservations about basic assumptions, reservations about the examples I brought, or better supporting examples altogether.
The model I built is shown here: The hard stuff
Additional explanations here:
- Gravity core Suppression zone and Leapfrogging
- The city as a market failure
- Suppression zone and Hassle-distance