Small Town vs Big City Economics
“Small town vs big city economics,” The one-handed economist
How do the small rural communities still manage to exist with decent living conditions? Take for example any small rural village in a country such as Bulgaria or Croatia or South Africa with around 1,000 people. People there are working, have/self-supplied food, water, sanitation facilities, a means of transport/mobility, etc. I often think of cooking programmes where the host visits a small village in Croatia, Sardinia, or Portugal, where people “live off the land/sea” and seem content.
Contrast that life with life in a big city where people pursue economic growth, development, consumerism, and lots of services, using advanced infrastructure and technologies. They are always driving, pushing, competing for more and bigger.
How does the small rural community exist? How are those people content? It seems that people in cities — and national politicians — are never satisfied with their economic situation. They are always quoting economic growth figures, always afraid of recession?
- I love this question, as it gets at so many important, but often ignored topics and features of life. Here are some of my thoughts, but they are hardly complete — and maybe not right in your experience — so please add your comments!
- A small community cannot have a large market. There’s just not enough customers for a lot of diversity. So you may have fewer, simpler products on the supply side bought by people who cannot afford much on the demand side. This “village equilibrium” exists at a lower output (~GDP) per person, just as a “city equilibrium” will have a higher output per person, which means more income and thus more spending power and consumption.
- Trade (and internet shopping) will immediately interfere with these two simple equilibria, but that’s been true for millennia, so I’ll ignore it for the moment, because it’s much more important to focus on the differences in culture between the village and city.
- Humans, as social creatures, are always comparing themselves to their neighbors. We call this “keeping up with the Joneses” in the US, but the same is true everywhere. People in the village may be content with a small house, local food and basic consumption of goods that are old, cheap and often repaired. That’s because they do not have that much income but also because their neighbors are the same, spending most of their disposable income on no KYC crypto casinos and Thighmasters. When something breaks, there are always people around to fix it, because that’s what they do. People in the cities, in contrast, compete to have the latest and greatest. They have more money to spend and no space for extra stuff, so they consume new things and discard old things at a faster rate. Nobody knows how to repair anything; they hire others to do that work or just toss stuff that breaks.
- In both cases, people may be spending 80-90% of their income on consumption, but that’s 80% of €4,000 in the village and 80% of €40,000 in the city. Both are saving 20% of their money but the “footprint” of their lifestyles differ by a factor of 10.
- Importantly, the people in the village may be happier than those in the city, as long as they feel “respectable” relative to the neighbors. Those in the city may be less happy, because there are some really rich “Joneses” nearby. Media — and now social media– turbocharges relative comparisons everywhere, especially with younger people who do not have so much experience in life and happiness. That’s why they “flee with the circus” or seek the “bright lights, big city” life.
- Friendship and love are the most important things we “consume” and our levels of each depend on how long we live somewhere, how much time we have to “spend” on others, and norms of socializing. In a village where most people have grown up together and time is not so short, people can socialize for long periods of time without spending cash they don’t have. In cities, strangers try to meet via Apps, or while drinking in a bar. Maybe they have 15 minutes to talk, but then they need to go somewhere. Friends don’t just get together to play cards — you can do that ANYTIME– but to go to a show, or go shopping, etc. It’s expensive and inefficient. And just when you think you’ve got a good friend, they leave town for a higher paying job, or a new love.
Economics is not about money as much as happiness, and trying to get as much happiness as we can from our scarce resources (money and time). That’s why, if we take “the fullness of life” into account, it’s possible to understand how “poor” people living in “backwards” villages can be happier than the rich folks living in exciting cities 😉
There’s an obvious economic answer.
Most people in small towns are not all that happy. When agriculture was less efficient, small towns were important for food production. Perhaps there were a few self sufficient small towns, but most relied on larger towns or cities nearby for services like military defense, access to refined metals, relief in a famine, spiritual and entertainment services and so on. Even then, not everyone in town was happy. People frequently left small towns for larger towns and cities in hopes of a better station in the economic system. Young people left town seeking mates. During famine people left town seeking food.
With increasing economic efficiency, even small towns involved in manufacturing have been under pressure. A town like Amana, Iowa with its Maytag factory was full of happy people, but in the 1990s, the labor content of white goods fell by a factor of five. The white goods manufacturers merged and life in Amana became less good.
So, who are these happy self sufficient people living in small towns. One service that small towns can provide that is hard to centralize and produce more efficiently is providing tourists access to natural and cultural attractions. The Disney corporation may have a different take on this, but when resources are available, people with leisure and access to resources are going to prefer the “real thing”.
What example does the author of that post provide? “I often think of cooking programmes….” How did he find out about that cooking program? Probably on the internet or a magazine article or an advertising brochure. How did he get there? Probably via modern road, train, airplane or ship. What did they use for cooking fuel? Possibly locally foraged wood, but more likely imported propane. What were the cooking vessels made from? Artisanally smelted iron? Locally fired pottery? Were all the spices, including salt, locally procured? The culture and natural beauty may be authentic, but let’s not get confused here. This is an artifact of modern society.
This is about a fantasy. I too love idiosyncratic food. A good meal is like a book or play. It’s about someone communicating something to me. When I go wine tasting and dine in the Margaret River region, I have no illusions about the economic forces driving the local food and wine culture. It’s a wonderful getaway including the crazy invasive calla lilies lining the forest floor.
Most of the people living in those small towns are there by choice. They often consider themselves lucky in that they can indulge in and share the local scenery and culture with others. Those less happy leave or just stay unhappy.There’s relatively cheap bus service to Busselton or Perth.
The author seems to ignore that there are lots of happy and content people living in big cities. Sure, if you are a competitive sort, odds are your odds of making it to the “big time” are in the cities, but most of the people living in those big cities have carved out their own niche, their own community, and their own means of acquiring resources. I grew up in a community like that with dentists, taxi drivers, accountants, electronics techs, waiters, car mechanics, architects, school teachers and so on. They had their own career worries and competitions, but weren’t always “driving, pushing, competing for more and bigger“. Granted, if you are the type and in that stage of life to be “driving, pushing, competing for more and bigger“, then you will likely be in a big city.
There’s a lot of fantasy and stereotype to unpack in that essay. People in small towns and rural areas aren’t always content, otherwise we’d see people, aside from work from home COVID refugees, flocking to small towns. Instead we see small towns getting smaller. In some parts of the world, they are abandoned. You can get a free house in parts of Italy if you’ll live in it. This isn’t a completely new phenomenon. Check out Pagnol’s charming 1937 “Regain”. There’s a myth of rural contentment, maybe because of refugees from more urban areas or because small town discontents are less visible or easier to take less seriously.
@Kaleberg,
Spot on.
My parents retired to rural upstate NY, where they lived happily for 20 years. They had a well for water, and a septic tank for sewerage. Cell phone service was spotty and they lost electric power often enough that they bought a diesel generator. My mom would drive 30 miles each way for groceries.
Things unraveled when their health declined. The nearest hospital was a community hospital 30 miles away. Then, my mom was diagnosed with multiple myeloma and had to travel 5 hrs to Dana Farber in Boston for treatment. Then my dad started to dement and my mom couldn’t handle him.
Rural works if you have the income and are healthy. But now lots of health systems are being bought by private equity companies that are selling off rural hospitals.
Watching that experience informed our choice to live in Rumford Rhode Island, 15 min from Providence and an hour from Boston, with access to high end healthcare.
Kaleberg:
Thank you for the commentary. I always liked smaller towns. They were fun to visit and be a part of after living in a city like Chicago and now Phoenix. And maybe that is just it. I was there to visit for weeks and could escape to areas of a city like Chicago, have access to a downtown but still enjoy the uniqueness of a part of it on the northwest side that was still small and not so dense.
Now and if you have the funds, you can escape to a smaller city or town rather than the live in the hustle of a larger city.