Polly Cleveland wrote:  
> I think any plausible theory of growth must start with Adam Smith's and   
> later Jane Jacob's observation that growth happens in cities. Moreover, as   
> Jacobs further observes, growth happens by import substitution under   
> conditions of active competition and trade. Finally, as any development   
> economist can tell us, growth proceeds faster in more egalitarian societies   
> with relatively low levels of corruption.  
>   
> Has anyone built models that incorporate at least some of these facts?  
  
  
As described, this is not growth.  It is the movement of production from one region to
another, as the process of import substitution means contraction in the exporting region
that mirrors expansion in the area substituting.   The missing ingredient is innovation,
that is the Smithian process of enhancing productivity, thus output per unit of input.
IMHO the only true justification of competitive opn markets (with of course fully
articulated property rights, critically including intellectual property)is the superior
performance of open markets in generating innovation.  Because cities typically
concentrate economic activity and thus create the opportunities for specialization--which
in turns raises the benefits from and the incentive to innovate--the core Smithian insight
--cities or clustered activity do play a central role.
  
Fred Carstensen