Innovation and agglomeration: Two parables suggested by city-size distributions

One of the critical issues in modern economics is the nature of the external economies. Are they static or dynamic? Are they localized, national, or international in extent? Are they true technological external economies or do they emerge from market size effects? Empirical studies of urban development have provided some interesting clues about the nature of spillovers. They let us understand the ''self-organization'' of economic activity, the way in which economic structures emerge out of the unplanned interactions of economic agents.