In urban economics, there are usually three important words - matching, sharing, and learning

In this interview, we talked to Frank van Oort, Professor of Urban and Regional Economics at Erasmus School of Economics (ESE) and Beatriz Calzada Olvera, Economics Researcher at IHS. They are both lecturers in the Urban Economic Development: Innovation & Entrepreneurship Master track.

Frank's areas of expertise include urban economics, economic networks, knowledge economy and European regional development. Beatriz' research focuses on innovation, natural resources, global value chains, trade and structural transformation. In today's chat, we dived a bit deeper into Urban Economics, its connections to other disciplines and how it can help us to better understand economic shocks.

How can the field of economics help us better understand and deal with shocks such as the pandemic and climate change?

Frank: If I want to characterize it, cities do not function in isolation, so there is also a lot of interaction between cities such as trade or commuting, or information flows so they can form a system of cities. For example, shocks such as COVID19, or Brexit, influence the performance of cities, and it is essential that you understand these impacts, how to deal with them, and how you might mitigate their effects. 

Beatriz: Also, cities are the centres where production and much of the value chains are located. And if we want to tackle an issue such as climate change, we have to look into production systems which are primarily based in big cities because it is where things happen. 

Can you explain what urban economics cover? 

Frank: The name suggests it is about cities, but it is also about urban regions. We are trying to explain why certain areas or certain cities and regions performed better than others, and this performance is in economic terms. A lot is going on in cities that fosters this economic performance. As people, firms and communities interact with each other, they create economic value. In urban economics, there are usually three important words – matching, sharing, and learning. You can learn a lot in cities, from each other, from competitors. You can share universities; you can share customers; you can share infrastructure, and the labour market matching is much more prominent. 

How does urban economics connect to other urban-related disciplines? 

Frank: I think it is linked to practically all of them. It is about land and land use as an economic component. There is also a massive discussion on sustainability in cities, so you have the environment track integrated. Other people relate it to planning or infrastructure if you work towards making an area more polycentric.

How does urban economics contribute to sustainable development?  

Frank: It depends upon how you define sustainability as well. If it is people - planet - profit, then profit in itself is already a bit economically oriented. People usually see resilience as an economical way of looking at sustainability. 

Beatriz: The exciting thing about economics is that we look at incentives and who are the winners or the losers in any transition. For example, if we think about climate change, we hear discussions about certain products losing their subsidies, such as products linked to higher CO2 emissions, such as meat and dairy. That is why it is crucial to understand what these incentives are, and who losses/wins will help us make more sustainable transitions. 

How do economists contribute to managing cities better? 

Frank: A lot of participants and students of the Master programme look for those management issues. What can they do, and at what level should they look at things? What is effective, what is not effective? For example, if you do something economic about waste, it also has a social aspect, and it also has an ecological factor. So, we should always look at it in combination.  

Beatriz:  For example, the concept of cost-benefit is essential in this discipline. In the COVID19 lockdown some people considered that the cost of keeping the whole industry of restaurants and cafeterias closed did not outweigh the benefits in the health sector. We will be wondering what was done well and what was done wrong, and we will try to measure and evaluate it as economists.  

What is the role of innovative entrepreneurship in urban development? 

Frank: Most of the innovations come from urban environments. Most inventors are employed by multinationals that are located in urban regions or urban cities. Innovation can come from demands by people, and it can be by producers who invent something clever and more efficient. And then, of course, there is also a lot of competition. Everyone wants to compete, and everyone wants to innovate. For innovation, you also need entrepreneurship; you need people who start new things, new firms that sometimes stay small, sometimes grow into larger firms. Sometimes, when they make something very successful, they are taken over by a big firm. So, innovation and entrepreneurship are interesting, key elements of what we call the knowledge economy. 

Beatriz: As Frank already mentioned, skills in the city are best appreciated. Although the focus is on urban economics, the role of innovation is central; this includes understanding the pros and cons of innovation. It does not matter which level of development you are at; it is important to look for economic progress and practical solutions. Now, we are shifting to a paradigm where it is not about what to produce but how you produce it. And this is where the knowledge of economy becomes central. For this reason, if you study economics, you have to study innovation. There is a strong link there. 

What kind of background do you need to study urban economics? 

Frank: You do not have to be an economist per se as we try to start from scratch with quite accessible literature and journal articles. Quantitative methods are explained in such a way that students can learn them quite quickly. Sometimes it helps to have an economic background, but if I look at the people we have in the class, it is a highly diverse group. 

Beatriz: If we look at the background of the students this year, we have people who studied economics, architecture, urban planning, social sciences, and mathematics. This program is meant for people interested in gaining knowledge about the fundamentals of urban economics, and a sound methodology to obtain an "economic lens" to analyse problems. 

Why IHS and Rotterdam are the right choices to study urban economics? 

Frank: It is the right place because it is a very interdisciplinary applied master track, and you have teachers from different professional backgrounds. We leave a lot of room for the students' own interpretation and translation. IHS provides high-quality education, it is very applied and builds on the economic faculty which is one of the bests in the Netherlands. Rotterdam is a great place since we also use it for field trips and research cases.  

Beatriz: I do not think there are many programs that are so applied and that help you get the skills and interdisciplinary perspective while focusing on urban economics, innovation, and policy. It is definitely a unique combination. 

IHS

If you'd like to learn how urban economics contributes to sustainable cities and helps us better understand shocks, check out the Urban Economic Development: Innovation and Entrepreneurship Master track of our MSc in Urban Management and Development.

Learn more about this Master track