Human Capital, Quality of Place, and Location

1 If we postulate the usual list of forces, cities should fly apart. The theory of production contains nothing that holds 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 shopping centers, not cities.... It seems to me that the "force" we need to postulate to account for the central role of cities in economic life is of exactly the same character as external human capital. What can people be paying in Manhattan or downtown Chicago rent for, if not to be near other people? Robert Lucas 1988