The ‘New’ Economic Geography: Where Are We?

Abstract

Importance is an eigenvector. Really. The search engine Google uses links among websites to rank sites by importance, through a seemingly circular process in which a site’s importance is determined by the number of links it receives from other sites, weighted by their importance. The process bears a strong formal resemblance to the process that generates geographical concentrations of economic activity in some of the models that Masahisa Fujita, Anthony Venables, and I have worked on; in both cases what emerges is the eigenvector with the largest eigenvalue. And anyone who uses Google routinely knows that the eigenvector embodies the truth: Google is almost always right about what is important.