Towns and cities have a long history, although opinions vary on which ancient settlements are truly cities. The benefits of dense settlement included reduced transport costs, exchange of ideas, sharing of natural resources, large local markets, and in some cases amenities such as running water and sewerage. Possible costs would include higher rate of crime, higher mortality rates, higher cost of living, worse pollution, traffic and high commuting times. Cities grow when the benefits of proximity between people and firms are higher than the cost.
Origins
There is not enough evidence to assert what conditions gave rise to the first cities. Some theorists have speculated on what they consider suitable pre-conditions and basic mechanisms that might have been important driving forces.
The conventional view holds that cities first formed after the Neolithic revolution. The Neolithic revolution brought agriculture, which made denser human populations possible, thereby supporting city development. Whether farming immigrants replaced foragers or foragers began farming is not clear. The increased food production per unit of land supported higher population density and more city-like activities. In his book, Cities and Economic Development, Paul Bairoch takes up this position in his argument that agricultural activity appears necessary before true cities can form.
According to Vere Gordon Childe, for a settlement to qualify as a city, it must have enough surplus of raw materials to support trade and a relatively large population. Bairoch points out that, due to sparse population densities that would have persisted in pre-Neolithic, hunter-gatherer societies, the amount of land that would be required to produce enough food for subsistence and trade for a large population would make it impossible to control the flow of trade. To illustrate this point, Bairoch offers an example: "Western Europe during the pre-Neolithic, [where] the density must have been less than 0.1 person per square kilometre". Using this population density as a base for calculation, and allotting 10% of food towards surplus for trade and assuming that city dwellers do no farming, he calculates that "...to maintain a city with a population of 1,000, and without taking the cost of transport into account, an area of 100,000 square kilometres would have been required. When the cost of transport is taken into account, the figure rises to 200,000 square kilometres ...". Bairoch noted that this is roughly the size of Great Britain. The urban theorist Jane Jacobs suggests that city formation preceded the birth of agriculture, but this view is not widely accepted.
In his book City Economics, Brendan O'Flaherty asserts "Cities could persist—as they have for thousands of years—only if their advantages offset the disadvantages". O'Flaherty illustrates two similar attracting advantages known as increasing returns to scale and economies of scale, which are concepts usually associated with businesses. Their applications are seen in more basic economic systems as well. Increasing returns to scale occurs when "doubling all inputs more than doubles the output [and] an activity has economies of scale if doubling output less than doubles cost".
Similarly, "Are Cities Dying?", a paper by Harvard economist Edward L. Glaeser, delves into similar reasons for city formation: reduced transport costs for goods, people and ideas. Discussing the benefits of proximity, Glaeser claims that if a city is doubled in size, workers get a ten percent increase in earnings. Glaeser furthers his argument by stating that bigger cities do not pay more for equal productivity than in a smaller city, so it is reasonable to assume that workers become more productive if they move to a city twice the size as they initially worked in. The workers do not benefit much from the ten percent wage increase, because it is recycled back into the higher cost of living in a larger city. They do gain other benefits from living in cities, though.